Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Fiscal Year 2014 Rates; Quality Reporting Requirements for Specific Providers; Hospital Conditions of Participation; Payment Policies Related to Patient Status, 50495-51040 [2013-18956]

Download as PDF Vol. 78 Monday, No. 160 August 19, 2013 Book 2 of 2 Books Pages 50495–51040 Part II Department of Health and Human Services mstockstill on DSK4VPTVN1PROD with RULES6 Center for Medicare & Medicaid Services 42 CFR Parts 412, 413, 414, et al. Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long Term Care; Hospital Prospective Payment System and Fiscal Year 2014 Rates; Quality Reporting Requirements for Specific Providers; Hospital Conditions of Participation; Payment Policies Related to Patient Status; Final Rule VerDate Mar 15 2010 18:20 Aug 16, 2013 Jkt 229001 PO 00000 Frm 00001 Fmt 4717 Sfmt 4717 E:\FR\FM\BOOK2.LOC BOOK2 50496 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations DEPARTMENT OF HEALTH AND HUMAN SERVICES Centers for Medicare & Medicaid Services 42 CFR Parts 412, 413, 414, 419, 424, 482, 485, and 489 [CMS–1599–F; CMS–1455–F] RINs 0938–AR53 and 0938–AR73 Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the LongTerm Care Hospital Prospective Payment System and Fiscal Year 2014 Rates; Quality Reporting Requirements for Specific Providers; Hospital Conditions of Participation; Payment Policies Related to Patient Status Centers for Medicare and Medicaid Services (CMS), HHS. ACTION: Final rules. AGENCY: We are revising the Medicare hospital inpatient prospective payment systems (IPPS) for operating and capitalrelated costs of acute care hospitals to implement changes arising from our continuing experience with these systems. Some of the changes implement certain statutory provisions contained in the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively known as the Affordable Care Act) and other legislation. These changes will be applicable to discharges occurring on or after October 1, 2013, unless otherwise specified in this final rule. We also are updating the rate-of-increase limits for certain hospitals excluded from the IPPS that are paid on a reasonable cost basis subject to these limits. The updated rate-of-increase limits will be effective for cost reporting periods beginning on or after October 1, 2013. We also are updating the payment policies and the annual payment rates for the Medicare prospective payment system (PPS) for inpatient hospital services provided by long-term care hospitals (LTCHs) and implementing certain statutory changes that were applied to the LTCH PPS by the Affordable Care Act. Generally, these updates and statutory changes will be applicable to discharges occurring on or after October 1, 2013, unless otherwise specified in this final rule. In addition, we are making a number of changes relating to direct graduate medical education (GME) and indirect medical education (IME) payments. We are establishing new requirements or have revised requirements for quality mstockstill on DSK4VPTVN1PROD with RULES6 SUMMARY: VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 reporting by specific providers (acute care hospitals, PPS-exempt cancer hospitals, LTCHs, and inpatient psychiatric facilities (IPFs)) that are participating in Medicare. We are updating policies relating to the Hospital Value-Based Purchasing (VBP) Program and the Hospital Readmissions Reduction Program. In addition, we are revising the conditions of participation (CoPs) for hospitals relating to the administration of vaccines by nursing staff as well as the CoPs for critical access hospitals relating to the provision of acute care inpatient services. We are finalizing proposals issued in two separate proposed rules that included payment policies related to patient status: payment of Medicare Part B inpatient services; and admission and medical review criteria for payment of hospital inpatient services under Medicare Part A. DATES: Effective Date: These final rules are effective on October 1, 2013. FOR FURTHER INFORMATION CONTACT: Tzvi Hefter, (410) 786–4487, and Ing-Jye Cheng, (410) 786–4548, Operating Prospective Payment, MS–DRGs, Hospital-Acquired Conditions (HAC), Wage Index, New Medical Service and Technology Add-On Payments, Hospital Geographic Reclassifications, Graduate Medical Education, Capital Prospective Payment, Excluded Hospitals, and Medicare Disproportionate Share Hospital (DSH) Issues. Michele Hudson, (410) 786–4487, and Judith Richter, (410) 786–2590, LongTerm Care Hospital Prospective Payment System and MS–LTC–DRG Relative Weights Issues. Mollie Knight, (410) 786–7948 and Bridget Dickensheets, (410) 786–8670, Market Basket for IPPS Hospitals and LTCHs Issues. Siddhartha Mazumdar, (410) 786–6673, Rural Community Hospital Demonstration Program Issues. James Poyer, (410) 786–2261, Hospital Inpatient Quality Reporting and Hospital Value-Based Purchasing— Program Administration, Validation, and Reconsideration Issues. Shaheen Halim, (410) 786–0641, Hospital Inpatient Quality Reporting—Measures Issues Except Hospital Consumer Assessment of Healthcare Providers and Systems Issues; and Readmission Measures for Hospitals Issues. Elizabeth Goldstein, (410) 786–6665, Hospital Inpatient Quality Reporting—Hospital Consumer Assessment of Healthcare Providers and Systems Measures Issues. PO 00000 Frm 00002 Fmt 4701 Sfmt 4700 Mary Pratt, (410) 786–6867, LTCH Quality Data Reporting Issues. Kim Spalding Bush, (410) 786–3232, Hospital Value-Based Purchasing Efficiency Measures Issues. James Poyer, (410) 786–2261, PPSExempt Cancer Hospital Quality Reporting Issues. Allison Lee, (410) 786–8691 and Jeffrey Buck, (410) 786–0407, Inpatient Psychiatric Facility Quality Reporting Issues. Sarah Fahrendorf, (410) 786–3112, Conditions of Participation (CoPs) for CAHs Issues. Commander Scott Cooper, USPHS, (410) 786–9465, Hospital Conditions of Participation (CoPs)—Pneumococcal Vaccine Issues. Ann Marshall, (410) 786–3059, Medicare Part B Inpatient Billing: Payable Part B Inpatient and Part B Outpatient Services and Beneficiary Utilization Days; and Physician Order and Certification for Payment of Hospital Inpatient Services under Medicare Part A Issues. Susanne Seagrave, (410) 786–0044, Physician Order and Certification for Payment of Inpatient Rehabilitation Facility Services under Medicare Part A Issues. Jennifer Dupee, (410) 786–6537, and Jennifer Phillips, (410) 786–1023, Medical Review Criteria for Payment of Hospital Inpatient Services under Medicare Part A Issues. David Danek, (617) 565–2682, Medicare Part B Inpatient Billing: Hospital and Beneficiary Appeals Issues. Fred Grabau, (410) 786–0206, Medicare Part B Inpatient Billing: Time Limits for Filing Claims Issues. Brian Pabst, (410) 786–2487, Medicare Part B Inpatient Billing: Coordination of Benefits Issues. Anthony Hodge, (410) 786–6645, Qualification for Coverage of Skilled Nursing Facilities Services Issues. SUPPLEMENTARY INFORMATION: Electronic Access This Federal Register document is also available from the Federal Register online database through Federal Digital System (FDsys), a service of the U.S. Government Printing Office. This database can be accessed via the Internet at: https://www.gpo.gov/fdsys. Tables Available Only Through the Internet on the CMS Web Site In the past, a majority of the tables referred to throughout this preamble and in the Addendum to the proposed rule and the final rule were published in the Federal Register as part of the annual proposed and final rules. However, beginning in FY 2012, some of E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations the IPPS tables and LTCH PPS tables are no longer published in the Federal Register. Instead, these tables will be available only through the Internet. The IPPS tables for this final rule are available only through the Internet on the CMS Web site at: https:// www.cms.hhs.gov/Medicare/medicareFee-for-Service-Payment/ AcuteInpatientPPS/. Click on the link on the left side of the screen titled, ‘‘FY 2014 IPPS Final Rule Home Page’’ or ‘‘Acute Inpatient—Files for Download’’. The LTCH PPS tables for this FY 2014 final rule are available only through the Internet on the CMS Web site at: https://www.cms.gov/ Medicare/Medicare-Fee-for-ServicePayment/LongTermCareHospitalPPS/ index.html under the list item for Regulation Number CMS–1599–F. For complete details on the availability of the tables referenced in this final rule, we refer readers to section VI. of the Addendum to this final rule. Readers who experience any problems accessing any of the tables that are posted on the CMS Web sites identified above should contact Michael Treitel at (410) 786–4552. mstockstill on DSK4VPTVN1PROD with RULES6 Acronyms 3M 3M Health Information System AAMC Association of American Medical Colleges ACGME Accreditation Council for Graduate Medical Education ACoS American College of Surgeons AHA American Hospital Association AHIC American Health Information Community AHIMA American Health Information Management Association AHRQ Agency for Healthcare Research and Quality ALOS Average length of stay ALTHA Acute Long Term Hospital Association AMA American Medical Association AMGA American Medical Group Association AOA American Osteopathic Association APR DRG All Patient Refined Diagnosis Related Group System APRN Advanced practice registered nurse ARRA American Recovery and Reinvestment Act of 2009, Public Law 111–5 ASCA Administrative Simplification Compliance Act of 2002, Public Law 107– 105 ASITN American Society of Interventional and Therapeutic Neuroradiology ATRA American Taxpayer Relief Act of 2012, Public Law 112–240 BBA Balanced Budget Act of 1997, Public Law 105–33 BBRA Medicare, Medicaid, and SCHIP [State Children’s Health Insurance Program] Balanced Budget Refinement Act of 1999, Public Law 106–113 BIPA Medicare, Medicaid, and SCHIP [State Children’s Health Insurance Program] VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Benefits Improvement and Protection Act of 2000, Public Law 106–554 BLS Bureau of Labor Statistics CAH Critical access hospital CARE [Medicare] Continuity Assessment Record & Evaluation [Instrument] CART CMS Abstraction & Reporting Tool CAUTI Catheter-associated urinary tract infection CBSAs Core-based statistical areas CC Complication or comorbidity CCN CMS Certification Number CCR Cost-to-charge ratio CDAC [Medicare] Clinical Data Abstraction Center CDAD Clostridium difficile-associated disease CDC Center for Disease Control and Prevention CERT Comprehensive error rate testing CDI Clostridium difficile CFR Code of Federal Regulations CLABSI Central line-associated bloodstream infection CIPI Capital input price index CMI Case-mix index CMS Centers for Medicare & Medicaid Services CMSA Consolidated Metropolitan Statistical Area COBRA Consolidated Omnibus Reconciliation Act of 1985, Public Law 99– 272 COLA Cost-of-living adjustment CoP [Hospital] condition of participation CPI Consumer price index CRNA Certified registered nurse anesthetist CY Calendar year DACA Data Accuracy and Completeness Acknowledgement DPP Disproportionate patient percentage DRA Deficit Reduction Act of 2005, Public Law 109–171 DRG Diagnosis-related group DSH Disproportionate share hospital ECI Employment cost index EDB [Medicare] Enrollment Database EHR Electronic health record EMR Electronic medical record EMTALA Emergency Medical Treatment and Labor Act of 1986, Public Law 99–272 FAH Federation of American Hospitals FDA Food and Drug Administration FFY Federal fiscal year FPL Federal poverty line FQHC Federally qualified health center FR Federal Register FTE Full-time equivalent FUH Follow-up after hospitalization for mental illness FY Fiscal year GAAP Generally Accepted Accounting Principles GAF Geographic Adjustment Factor GME Graduate medical education HAC Hospital-acquired condition HAI Healthcare-associated infection HBIPS Hospital-based inpatient psychiatric services HCAHPS Hospital Consumer Assessment of Healthcare Providers and Systems HCFA Health Care Financing Administration HCO High-cost outlier HCRIS Hospital Cost Report Information System PO 00000 Frm 00003 Fmt 4701 Sfmt 4700 50497 HHA Home health agency HHS Department of Health and Human Services HICAN Health Insurance Claims Account Number HIPAA Health Insurance Portability and Accountability Act of 1996, Public Law 104–191 HIPC Health Information Policy Council HIS Health information system HIT Health information technology HMO Health maintenance organization HPMP Hospital Payment Monitoring Program HSA Health savings account HSCRC [Maryland] Health Services Cost Review Commission HSRV Hospital-specific relative value HSRVcc Hospital-specific relative value cost center HQA Hospital Quality Alliance HQI Hospital Quality Initiative ICD–9–CM International Classification of Diseases, Ninth Revision, Clinical Modification ICD–10–CM International Classification of Diseases, Tenth Revision, Clinical Modification ICD–10–PCS International Classification of Diseases, Tenth Revision, Procedure Coding System ICR Information collection requirement IGI IHS Global Insight, Inc. IHS Indian Health Service IME Indirect medical education I–O Input-Output IOM Institute of Medicine IPF Inpatient psychiatric facility IPFQR Inpatient Psychiatric Facility Quality Reporting [Program] IPPS [Acute care hospital] inpatient prospective payment system IRF Inpatient rehabilitation facility IQR Inpatient Quality Reporting IVR Interactive voice response LAMCs Large area metropolitan counties LOS Length of stay LTC–DRG Long-term care diagnosis-related group LTCH Long-term care hospital LTCHQR Long-Term Care Hospital Quality Reporting MA Medicare Advantage MAC Medicare Administrative Contractor MAP Measure Application Partnership MCC Major complication or comorbidity MCE Medicare Code Editor MCO Managed care organization MCV Major cardiovascular condition MDC Major diagnostic category MDH Medicare-dependent, small rural hospital MedPAC Medicare Payment Advisory Commission MedPAR Medicare Provider Analysis and Review File MEI Medicare Economic Index MGCRB Medicare Geographic Classification Review Board MIEA–TRHCA Medicare Improvements and Extension Act, Division B of the Tax Relief and Health Care Act of 2006, Public Law 109–432 MIPPA Medicare Improvements for Patients and Providers Act of 2008, Public Law 110–275 E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50498 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations MMA Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Public Law 108–173 MMEA Medicare and Medicaid Extenders Act of 2010, Public Law 111–309 MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Public Law 110–173 MRHFP Medicare Rural Hospital Flexibility Program MRSA Methicillin-resistant Staphylococcus aureus MSA Metropolitan Statistical Area MS–DRG Medicare severity diagnosisrelated group MS–LTC–DRG Medicare severity long-term care diagnosis-related group NAICS North American Industrial Classification System NALTH National Association of Long Term Hospitals NCD National coverage determination NCHS National Center for Health Statistics NCQA National Committee for Quality Assurance NCVHS National Committee on Vital and Health Statistics NECMA New England County Metropolitan Areas NHSN National Healthcare Safety Network NOP Notice of Participation NQF National Quality Forum NTIS National Technical Information Service NTTAA National Technology Transfer and Advancement Act of 1991 (Pub. L. 104– 113) NVHRI National Voluntary Hospital Reporting Initiative OACT [CMS’] Office of the Actuary OBRA 86 Omnibus Budget Reconciliation Act of 1986, Public Law 99–509 OES Occupational employment statistics OIG Office of the Inspector General OMB Executive Office of Management and Budget OPM U.S. Office of Personnel Management OQR [Hospital] Outpatient Quality Reporting O.R. Operating room OSCAR Online Survey Certification and Reporting [System] PCH PPS-exempt cancer hospital PCHQR PPS-exempt cancer hospital quality reporting PMSAs Primary metropolitan statistical areas POA Present on admission PPI Producer price index PPS Prospective payment system PRM Provider Reimbursement Manual ProPAC Prospective Payment Assessment Commission PRRB Provider Reimbursement Review Board PRTFs Psychiatric residential treatment facilities PSF Provider-Specific File PS&R Provider Statistical and Reimbursement [System] PQRS Physician Quality Reporting System QIG Quality Improvement Group, CMS QIO Quality Improvement Organization RCE Reasonable compensation equivalent RHC Rural health clinic RHQDAPU Reporting hospital quality data for annual payment update VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 RNHCI Religious nonmedical health care institution RPL Rehabilitation psychiatric long-term care (hospital) RRC Rural referral center RTI Research Triangle Institute, International RUCAs Rural-urban commuting area codes RY Rate year SAF Standard Analytic File SCH Sole community hospital SCIP Surgical Care Improvement Project SFY State fiscal year SIC Standard Industrial Classification SNF Skilled nursing facility SOCs Standard occupational classifications SOM State Operations Manual SSI Surgical site infection SSI Supplemental Security Income SSO Short-stay outlier SUD Substance use disorder TEFRA Tax Equity and Fiscal Responsibility Act of 1982, Public Law 97– 248 TEP Technical expert panel TMA TMA [Transitional Medical Assistance], Abstinence Education, and QI [Qualifying Individuals] Programs Extension Act of 2007, Public Law 110–90 TPS Total Performance Score UHDDS Uniform hospital discharge data set VBP [Hospital] Value Based Purchasing [Program] VTE Venous thromboembolism Table of Contents I. Executive Summary and Background A. Executive Summary 1. Purpose and Legal Authority 2. Summary of the Major Provisions 3. Summary of Costs and Benefits B. Summary 1. Acute Care Hospital Inpatient Prospective Payment System (IPPS) 2. Hospitals and Hospital Units Excluded from the IPPS 3. Long-Term Care Hospital Prospective Payment System (LTCH PPS) 4. Critical Access Hospitals (CAHs) 5. Payments for Graduate Medical Education (GME) C. Provisions of the Patient Protection and Affordable Care Act (Pub. L. 111–148), the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111– 152), and the American Taxpayer Relief Act of 2012 (Pub. L. 112–240) D. Issuance of a Notice of Proposed Rulemaking E. Public Comments Received in Response to the FY 2014 IPPS/LTCH PPS Proposed Rule F. Finalization of the Proposed Rule on Medicare Part B Inpatient Billing in Hospitals II. Changes to Medicare Severity DiagnosisRelated Group (MS–DRG) Classifications and Relative Weights A. Background B. MS–DRG Reclassifications C. Adoption of the MS–DRGs in FY 2008 D. FY 2014 MS–DRG Documentation and Coding Adjustment 1. Background on the Prospective MS–DRG Documentation and Coding Adjustments PO 00000 Frm 00004 Fmt 4701 Sfmt 4700 for FY 2008 and FY 2009 Authorized by Public Law 110–90 2. Adjustment to the Average Standardized Amounts Required by Public Law 110– 90 a. Prospective Adjustment Required by Section 7(b)(1)(A) of Public Law 110–90 b. Recoupment or Repayment Adjustments in FYs 2010 through 2012 Required by Section 7(b)(1)(B) Public Law 110–90 3. Retrospective Evaluation of FY 2008 and FY 2009 Claims Data 4. Prospective Adjustments for FY 2008 and FY 2009 Authorized by Section 7(b)(1)(A) of Public Law 110–90 5. Recoupment or Repayment Adjustment Authorized by Section 7(b)(1)(B) of Public Law 110–90 6. Recoupment or Repayment Adjustment Authorized by Section 631 of the American Taxpayer Relief Act of 2012 (ATRA). 7. Additional Prospective Adjustments for the MS–DRG Documentation and Coding Effect through FY 2010 Authorized under Section 1886(d)(3)(A)(vi) of the Act E. Refinement of the MS–DRG Relative Weight Calculation 1. Background 2. Discussion and Policies for FY 2014 F. Adjustment to MS–DRGs for Preventable Hospital-Acquired Conditions (HACs), Including Infections 1. Background 2. HAC Selection 3. Present on Admission (POA) Indicator Reporting 4. HACs and POA Reporting in ICD–10– CM and ICD–10–PCS 5. Current HACs and Previously Considered Candidate HACs 6. RTI Program Evaluation 7. Current and Previously Considered Candidate HACs—RTI Report on Evidence-Based Guidelines G. Changes to Specific MS–DRG Classifications 1. Pre-Major Diagnostic Categories (PreMDCs): Heart Transplants and Liver Transplants 2. MDC 1(Diseases and Disorders of the Nervous System): Tissue Plasminogen Activator (tPA) (rtPA) Administration within 24 Hours Prior to Admission 3. MDC 4 (Diseases and Disorders of the Ear, Nose, Mouth and Throat) a. Endoscopic Placement of a Bronchial Valve b. Pulmonary Thromboendarterectomy (PTE) with Full Circulatory Arrest 4. MDC 5 (Diseases and Disorders of the Circulatory System) a. Discharge/Transfer to Designated Disaster Alternative Care Site b. Discharges/Transfers with a Planned Acute Care Hospital Inpatient Readmission 5. MDC 8 (Diseases and Disorders of the Musculoskeletal System and Connective Tissue) a. Reverse Shoulder Procedures b. Total Ankle Replacement Procedures 6. MDC 15 (Newborns and Other Neonates with Conditions Originating in the Perinatal Period) E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations a. Persons Encountering Health Services for Specific Procedures, Not Carried Out b. Discharges/Transfers of Neonates with a Planned Acute Care Hospital Inpatient Readmission 7. Medicare Code Editor (MCE) Changes a. Age Conflict Edit b. Discharge Status Code Updates 8. Surgical Hierarchies 9. Complications or Comorbidity (CC) Exclusions List a. Background of the CC List and the CC Exclusion List b. CC Exclusions List for FY 2014 10. Review of Procedure Codes in MS– DRGs 981 through 983, 984 through 986, and 987 through 989 a. Moving Procedure Codes from MS–DRGs 981 through 983 or MS–DRGs 987 through 989 into MDCs b. Reassignment of Procedures among MS– DRGs 981 through 983, 984 through 986, and 987 through 989 c. Adding Diagnosis or Procedure Codes to MDCs 11. Changes to the ICD–9–CM Coding System, Including Discussion of the Replacement of the ICD–9–CM System with the ICD–10–CM and ICD–10–PCS Systems in FY 2014 a. ICD–9–CM Coding System b. Code Freeze c. Processing of 25 Diagnosis Codes and 25 Procedure Codes on Hospital Inpatient Claims d. ICD–10 MS–DRGs H. Recalibration of FY 2014 MS–DRG Relative Weights 1. Data Sources for Developing the Relative Weights 2. Methodology for Calculation of the Relative Weights 3. Development of National Average CCRs 4. Bundled Payments for Care Improvement (BPCI) Initiative I. Add-On Payments for New Services and Technologies 1. Background 2. Public Input Before Publication of a Notice of Proposed Rulemaking on AddOn Payments 3. FY 2014 Status of Technology Approved for FY 2013 Add-On Payments a. AutoLaser Interstitial Therapy (Auto LITT®) System b. Glucarpidase (Trade Brand Voraxaze®) c. DIFICID® (Fidaxomicin) Tablets d. Zenith® Fenestrated Abdominal Aortic Aneurysm (AAA) Endovascular Graft 4. FY 2014 Applications for New Technology Add-On Payments a. Kcentra® b. Argus® II Retinal Prosthesis System c. Responsive Neurostimulator (RNS) System d. Zilver® PTX® Drug Eluting Stent e. MitraClip® System III. Changes to the Hospital Wage Index for Acute Care Hospitals A. Background B. Core-Based Statistical Areas for the Hospital Wage Index C. Worksheet S–3 Wage Data for the FY 2014 Wage Index 1. Included Categories of Costs 2. Excluded Categories of Costs VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 3. Use of Wage Index Data by Providers Other Than Acute Care Hospitals under the IPPS D. Verification of Worksheet S–3 Wage Data E. Method for Computing the FY 2014 Unadjusted Wage Index F. Occupational Mix Adjustment to the FY 2014 Wage Index 1. Development of Data for the FY 2014 Occupational Mix Adjustment Based on the 2010 Occupational Mix Survey 2. New 2013 Occupational Mix Survey for the FY 2016 Wage Index 3. Calculation of the Occupational Mix Adjustment for FY 2014 G. Analysis and Implementation of the Occupational Mix Adjustment and the FY 2014 Occupational Mix Adjusted Wage Index 1. Analysis of the Occupational Mix Adjustment and the Occupational Mix Adjusted Wage Index 2. Application of the Rural, Imputed, and Frontier Floors a. Rural Floor b. Imputed Floor c. Frontier Floor 3. FY 2014 Wage Index Tables H. Revisions to the Wage Index Based on Hospital Redesignations and Reclassifications 1. General Policies and Effects of Reclassification/Redesignation 2. FY 2014 MGCRB Reclassifications a. FY 2014 Reclassification Requirements and Approvals b. Applications for Reclassifications for FY 2015 3. Redesignations of Hospitals under Section 1886(d)(8)(B) of the Act 4. Reclassifications under Section 1886(d)(8)(B) of the Act Seeking Reclassification by the MGCRB 5. Waiving Lugar Redesignation for the Out-Migration Adjustment I. FY 2014 Wage Index Adjustment Based on Commuting Patterns of Hospital Employees J. Process for Requests for Wage Index Data Corrections K. Labor-Related Share for the Proposed FY 2014 Wage Index IV. Rebasing and Revision of the Hospital Market Baskets for Acute Care Hospitals A. Background B. Rebasing and Revising the IPPS Market Basket 1. Development of Cost Categories and Weights 2. Cost Category Computation 3. Selection of Price Proxies 4. Labor-Related Share C. Market Basket for Certain Hospitals Presently Excluded from the IPPS D. Rebasing and Revising the Capital Input Price Index (CIPI) V. Other Decisions and Changes to the IPPS for Operating Costs and Graduate Medical Education (GME) Costs A. Inpatient Hospital Updates for FY 2014 (§§ 412.64(d) and 412.211(c)) 1. FY 2014 Inpatient Hospital Update 2. FY 2014 Puerto Rico Hospital Update B. Rural Referral Centers (RRCs): Annual Update to Case-Mix Index (CMI) and Discharge Criteria (§ 412.96) PO 00000 Frm 00005 Fmt 4701 Sfmt 4700 50499 1. Case-Mix Index (CMI) 2. Discharges C. Payment Adjustment for Low-Volume Hospitals (§ 412.101) 1. Background a. Original Implementation of the LowVolume Hospital Payment Adjustment b. Affordable Care Act Provisions for FYs 2011 and 2012 2. Provisions of the ATRA for FY 2013 a. Background b. Conforming Regulatory Changes 3. Low-Volume Hospital Definition and Payment Adjustment for FY 2014 and Subsequent Years D. Indirect Medical Education (IME) Adjustment (§ 412.105) 1. IME Adjustment Factor for FY 2014 2. Other Policy Changes Affecting GME E. Payment Adjustment for Medicare Disproportionate Share Hospitals (DSHs) § 412.106) 1. Background 2. Counting of Patient Days Associated with Patients Enrolled in Medicare Advantage Plans in the Medicare and Medicaid Fractions of the Disproportionate Share Patient Percentage (DPP) Calculation 3. New Payment Adjustment Methodology for Medicare DSH under Section 3133 of the Affordable Care Act F. Medicare-Dependent, Small Rural Hospital (MDH) Program (§ 412.108) 1. Background 2. Provisions of the ATRA for FY 2013 a. Background b. Conforming Regulatory Changes c. Expiration of the MDH Program G. Hospital Readmissions Reduction Program (§§ 412.150 through 412.154) 1. Statutory Basis for the Hospital Readmissions Reduction Program 2. Overview 3. FY 2014 Policies for the Hospital Readmissions Reduction Program a. Overview b. Refinement of the Readmission Measures and Related Methodology for FY 2014 and Subsequent Years Payment Determinations c. Expansion of the Applicable Conditions for FY 2015 d. Hospitals Paid under Section 1814(b)(3) of the Act, Including the Process to be Exempt from the Hospital Readmissions Reduction Program and Definition of ‘‘Base Operating DRG Payment Amount’’ for Such Hospitals (§ 412.152 and § 412.154(d)) e. Floor Adjustment Factor for FY 2014 (§ 412.154(c)(2)) f. Applicable Period for FY 2014 g. Refinements of the Methodology to Calculate the Aggregate Payments for Excess Readmissions h. Clarification of Reporting HospitalSpecific Information, Including Opportunity to Review and Submit Corrections H. Hospital Value-Based Purchasing Program (§§ 412.160 through 412.165) 1. Statutory Background 2. Overview of the FY 2013 Hospital VBP Program 3. FY 2014 Payment Details E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50500 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 4. FY 2014 Hospital VBP Program Measures 5. FY 2015 Hospital VBP Program Measures 6. FY 2016 Hospital VBP Program Measures a. Measures Previously Adopted and Removal of AMI–8a, PN–3b, and HF–1 Measures b. New Measures for the FY 2016 Hospital VBP Program c. Future Measures for the Efficiency Domain 7. Performance Periods and Baseline Periods a. Background b. Clinical Process of Care Domain Performance Period and Baseline Periods for the FY 2016 Hospital VBP Program c. Experience of Care Domain Performance Period and Baseline Period for the FY 2016 Hospital VBP Program d. Efficiency Domain Measure Performance Period and Baseline Period for the FY 2016 Hospital VBP Program e. Outcome Domain Performance Periods and Baseline Periods for the FY 2017 through FY 2019 Hospital VBP Programs 8. Performance Standards for the Hospital VBP Program a. Background b. Performance Standards for the FY 2016 Hospital VBP Program Measures c. Certain Performance Standards for the FY 2017, FY 2018, and FY 2019 Hospital VBP Programs 9. FY 2016 Hospital VBP Program Scoring Methodology a. General Hospital VBP Program Scoring Methodology b. Domain Weighting for the FY 2016 Hospital VBP Program for Hospitals That Receive a Score on All Domains c. Domain Weighting for the FY 2016 Hospital VBP Program for Hospitals Receiving Scores on Fewer than Four Domains d. Domain Reclassification and Domain Weighting for the FY 2017 Hospital VBP Program e. Disaster/Extraordinary Circumstance Waivers under the Hospital VBP Program 10. Applicability of the Hospital VBP Program to Hospitals a. Background b. Minimum Numbers of Cases and Measures for the FY 2016 Hospital VBP Program Outcome Domain c. Hospitals Paid under Section 1814(b)(3) of the Act I. Hospital-Acquired Condition (HAC) Reduction Program 1. Background 2. Statutory Basis for the HAC Reduction Program 3. Implementation of the HAC Reduction Program a. Definitions b. Payment Adjustment under the HAC Reduction Program, Including Exemptions c. Measure Selection and Conditions, Including a Proposed Risk-Adjustment Scoring Methodology d. Criteria for Applicable Hospitals and Performance Scoring VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 e. Reporting Hospital-Specific Information, Including the Review and Correction of Information f. Limitation on Administrative and Judicial Review J. Payment for Graduate Medical Education (GME) and Indirect Medical Education (IME) Costs (§§ 412.105, 413.75 through 413.83) 1. Background 2. Inclusion of Labor and Delivery Days in the Calculation of Medicare Utilization for Direct GME Payment Purposes and for Other Medicare Purposes 3. Notice of Closure of Teaching Hospital and Opportunity to Apply for Available Slots 4. Payments for Residents Training in Approved Residency Programs at CAHs a. Background b. Residents in Approved Medical Residency Training Programs That Train at CAHs 5. Expiration of Inflation Update Freeze for High Per Resident Amounts (PRAs) K. Rural Community Hospital Demonstration Program 1. Background 2. FY 2014 Budget Neutrality Offset Amount L. Hospital Emergency Services under EMTALA: Technical Change (§ 489.24(f)) M. Hospital Services Furnished under Arrangements VI. Changes to the IPPS for Capital-Related Costs A. Overview B. Additional Provisions 1. Exception Payments 2. New Hospitals 3. Hospitals Located in Puerto Rico C. Other Changes for FY 2014—Adjustment to Offset the Cost of the Policy Proposal on Admission and Medical Review Criteria for Hospital Inpatient Services under Medicare Part A D. Annual Update for FY 2014 VII. Changes for Hospitals Excluded from the IPPS A. Rate-of-Increase in Payments to Excluded Hospitals for FY 2014 B. Report of Adjustment (Exceptions) Payments C. Critical Access Hospitals (CAHs): Changes to Conditions of Participation (CoPs) 1. Background 2. Policy Changes VIII. Changes to the Long-Term Care Hospital Prospective Payment System (LTCH PPS) for FY 2014 A. Background of the LTCH PPS 1. Legislative and Regulatory Authority 2. Criteria for Classification as a LTCH a. Classification as a LTCH b. Hospitals Excluded from the LTCH PPS 3. Limitation on Charges to Beneficiaries 4. Administrative Simplification Compliance Act (ASCA) and Health Insurance Portability and Accountability Act (HIPAA) Compliance B. Medicare Severity Long-Term Care Diagnosis-Related Group (MS–LTC– DRG) Classifications and Relative Weights for FY 2014 1. Background PO 00000 Frm 00006 Fmt 4701 Sfmt 4700 2. Patient Classifications into MS–LTC– DRGs a. Background b. Changes to the MS–LTC–DRGs for FY 2014 3. Development of the FY 2014 MS–LTC– DRG Relative Weights a. General Overview of the Development of the MS–LTC–DRG Relative Weights b. Development of the MS–LTC–DRG Relative Weights for FY 2014 c. Data d. Hospital-Specific Relative Value (HSRV) Methodology e. Treatment of Severity Levels in Developing the MS–LTC–DRG Relative Weights f. Low-Volume MS–LTC–DRGs g. Steps for Determining the FY 2014 MS– LTC–DRG Relative Weights C. LTCH PPS Payment Rates for FY 2014 1. Overview of Development of the LTCH Payment Rates 2. FY 2014 LTCH PPS Annual Market Basket Increase a. Overview b. Revision of Certain Market Basket Updates as Required by the Affordable Care Act c. Adjustment to the Annual Update to the LTCH PPS Standard Federal Rate under the Long-Term Care Hospital Quality Reporting (LTCHQR) Program 1. Background 2. Reduction to the Annual Update to the LTCH PPS Standard Federal Rate under the LTCHQR Program d. Market Basket Under the LTCH PPS for FY 2014 e. Annual Market Basket Update for LTCHs for FY 2014 3. Adjustment for the Second Year of the Phase-In of the One-Time Prospective Adjustment to the Standard Federal Rate under § 412.523(d)(3) D. Expiration of Certain Payment Rules for LTCH Services—The 25-Percent Threshold Payment Adjustment E. Research on the Development of a Patient Criteria-Based Payment Adjustment under the LTCH PPS 1. Overview 2. MedPAC’s 2004 Report to Congress 3. LTCHs in the Medicare Program 4. CMS’ Research: The RTI Report 5. CMS’ Report to Congress: Determining Medical Necessity and Appropriateness of Care for Medicare Long-Term Care Hospitals 6. Current Practices in LTCHs 7. Identification of Chronically Critically Ill/Medically Complex (CCI/MC) Patients 8. LTCH PPS Payments for CCI/MC Patients IX. Quality Data Reporting Requirements for Specific Providers and Suppliers A. Hospital Inpatient Quality Reporting (IQR) Program 1. Background a. History of Measures Adopted for the Hospital IQR Program b. Maintenance of Technical Specifications for Quality Measures c. Public Display of Quality Measures 2. Removal and Suspension of Hospital IQR Program Measures E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations a. Considerations in Removing Quality Measures from the Hospital IQR Program b. Hospital IQR Program Measures Removed in Previous Rulemaking c. Removal of Hospital IQR Program Measures for the FY 2016 Payment Determination and Subsequent Years d. Suspension of Data Collection for the FY 2014 Payment Determination and Subsequent Years 3. Process for Retaining Previously Adopted Hospital IQR Program Measures for Subsequent Payment Determinations 4. Additional Considerations in Expanding and Updating Quality Measures under the Hospital IQR Program 5. Changes to Hospital IQR Program Measures Previously Adopted for the FY 2015 and FY 2016 Payment Determinations and Subsequent Years a. Previously Adopted Hospital IQR Program Measures for the FY 2015 Payment Determination and Subsequent Years b. Refinements to Existing Measures in the Hospital IQR Program 6. Additional Hospital IQR Program Measures for the FY 2016 Payment Determination and Subsequent Years a. Hospital 30-Day, All-Cause, RiskStandardized Readmission Rate (RSRR) Following Chronic Obstructive Pulmonary Disease (COPD) Hospitalization Measure (NQF #1891) b. Hospital 30-Day, All-Cause, RiskStandardized Mortality Rate (RSMR) Following Chronic Obstructive Pulmonary Disease (COPD) Hospitalization Measure (NQF #1893) c. Hospital 30-day, All-Cause RiskStandardized Rate of Readmission Following Acute Ischemic Stroke (Stroke Readmission) Measure d. Hospital 30-Day, All-Cause RiskStandardized Rate of Mortality Following an Admission for Acute Ischemic Stroke (Stroke Mortality) Measure e. Hospital Risk-Standardized Payment Associated with a 30-day Episode-ofCare for Acute Myocardial Infarction (AMI) Measure 7. Electronic Clinical Quality Measures 8. Possible New Quality Measures and Measure Topics for Future Years 9. Form, Manner, and Timing of Quality Data Submission a. Background b. Procedural Requirements for the FY 2016 Payment Determination and Subsequent Years c. Data Submission Requirements for Chart-Abstracted Measures d. Data Submission Requirements for Quality Measures That May be Voluntarily Electronically Reported for the FY 2016 Payment Determination e. Sampling and Case Thresholds for the FY 2016 Payment Determination and Subsequent Years f. HCAHPS Requirements for the FY 2017 Payment Determination and Subsequent Years g. Data Submission Requirements for Structural Measures for the FY 2015 and FY 2016 Payment Determinations VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 h. Data Submission and Reporting Requirements for Healthcare-Associated Infection (HAI) Measures Reported via NHSN 10. Modifications to the Validation Process for Chart-Abstracted Measures under the Hospital IQR Program a. Timing and Number of Quarters Included in Validation b. Selection of Measures and Sampling of Charts to be Included in Validation c. Procedures for Scoring Records for Validation d. Procedures to Select Hospitals for Validation e. Procedures for Submitting Records for Validation 11. Data Accuracy and Completeness Acknowledgement Requirements for the FY 2015 Payment Determination and Subsequent Years 12. Public Display Requirements for the FY 2016 Payment Determination and Subsequent Years 13. Reconsideration and Appeal Procedures for the FY 2015 Payment Determination and Subsequent Years 14. Hospital IQR Program Extraordinary Circumstances Extensions or Waivers B. PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program 1. Statutory Authority 2. Covered Entities 3. Previously Finalized Quality Measures for PCHs for the FY 2014 Program Year and Subsequent Years 4. Considerations in the Selection of the Quality Measures 5. New Quality Measures a. New Measure Beginning for the FY 2015 Program Year and Subsequent Years— NHSN Healthcare-Associated Infection (HAI) Measure: Surgical Site Infection (SSI) (NQF #0753) b. New Measures Beginning for the FY 2016 PQHQR Program Year and Subsequent Years 6. Possible New Quality Measure Topics for Future Years 7. Maintenance of Technical Specifications for Quality Measures 8. Public Display Requirements for the FY 2014 Program Year and Subsequent Years 9. Form, Manner, and Timing of Data Submission Beginning with FY 2015 Program Year and Subsequent Years a. Background b. Waivers from Program Requirements c. Reporting Periods and Submission Timelines for the Finalized SSI Measure d. Exceptions to Reporting and Data Submission for HAI Measures (CAUTI, CLABSI, and SSI) e. Reporting and Data Submission Requirements for the Finalized Clincial Process/Oncology Care Measures f. Reporting and Data Submission Requirements for the Finalized SCIP Measures g. HCAHPS Requirements C. Long-Term Care Hospital Quality Reporting (LTCHQR) Program 1. Statutory History 2. General Considerations Used for Selection of Quality Measures for the LTCHQR Program PO 00000 Frm 00007 Fmt 4701 Sfmt 4700 50501 3. Process for Retention of LTCHQR Program Measures Adopted in Previous Payment Determinations 4. Process for Adopting Changes to LTCHQR Program Measures 5. Previously Adopted Quality Measures for the FY 2014 and FY 2015 Payment Determinations and Subsequent Years 6. Previously Adopted Quality Measures for the FY 2016 Payment Determination and Subsequent Years 7. Revisions to Previously Adopted Quality Measures a. Revisions for Influenza Vaccination Coverage among Healthcare Personnel (NQF #0431) b. Revisions for Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) (NQF #0680) for the FY 2016 Payment Determination and Subsequent Years c. Revisions for Percent of Residents or Patients with Pressure Ulcers That Are New or Worsened (Short-Stay) (NQF #0678) for the FY 2015 Payment Determination and Subsequent Years 8. New LTCHQR Program Quality Measures Affecting the FY 2017 an FY 2018 Payment Determinations and Subsequent Years a. Considerations in Updating and Expanding Quality Measures under the LTCHQR Program for the FY 2017 Payment Determination and Subsequent Years b. New LTCHQR Program Quality Measures for the FY 2017 Payment Determination and Subsequent Years c. New LTCHQR Program Quality Measure for the FY 2018 Payment Determination and Subsequent Years d. LTCHQR Program Quality Measures and Concepts under Consideration for Future Years Payment Determinations 9. Form, Manner, and Timing of Quality Data Submission for the FY 2016 Payment Determination and Subsequent Years a. Background b. Finalized Timeline for Data Submission under the LTCHQR Program for the FY 2016 Payment Determination c. Timeline for Data Submission for the NQF #0431 Influenza Vaccination Coverage Among Healthcare Personnel Measure for the FY 2016 Payment Determination and Subsequent Years d. Timeline for Data Submission for the NQF #0680 Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short Stay) Measure for the FY 2016 Payment Determination and Subsequent Years e. Timeline for Data Submission under the LTCHQR Program for the FY 2017 Payment Determination and Subsequent Years f. Timeline for Data Submission under the LTCHQR Program for the FY 2018 Payment Determination and Subsequent Years 10. Public Display of Data Quality Measures for the LTCHQR Program E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50502 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 11. LTCHQR Program Submission Waiver Requirements for the FY 2015 Payment Determination and Subsequent Years 12. LTCHQR Program Reconsideration and Appeals for the FY 2015 Payment Determination and Subsequent Years a. LTCHQR Program Reconsideration and Appeals for the FY 2014 Payment Determination b. LTCHQR Program Reconsideration and Appeals for the FY 2015 Payment Determination D. Inpatient Psychiatric Facilities Quality Reporting (IPFQR) Program 1. Statutory Authority 2. Application of the Payment Update Reduction for Failure to Report for the FY 2014 Payment Determination and Subsequent Years 3. Covered Entities 4. Considerations in Selecting Quality Measures 5. Quality Measures for the FY 2015 Payment Determination and Subsequent Years a. Background b. New Quality Measures for the FY 2016 Payment Determination and Subsequent Years c. Maintenance of Technical Specifications for Quality Measures 6. Request for Voluntary Information—IPF Assessment of Patient Experience of Care 7. Request for Recommendations for New Quality Measures for Future Years 8. Public Display Requirements for the FY 2014 Payment Determination and Subsequent Years 9. Form, Manner, and Timing of Quality Data Submission for the FY 2014 Payment Determination and Subsequent Years a. Background b. Procedural Requirements c. Submission Requirements for the FY 2016 Payment Determination and Subsequent Years d. Reporting Requirements for the FY 2016 Payment Determination and Subsequent Years e. Population, Sampling, and Minimum Case Threshold for the FY 2016 Payment Determination and Subsequent Years f. Data Accuracy and Completeness Acknowledgement (DACA) Requirements 10. Reconsideration and Appeals Procedures for the FY 2014 Payment Determination and Subsequent Years 11. Waivers from Quality Reporting Requirements for the FY 2014 Payment Determination and Subsequent Years 12. Electronic Health Records (EHRs) E. Electronic Health Records (EHRs) Incentive Program and Meaningful Use (MU) 1. Background 2. Expanded Electronic Submission Period for CQMs 3. Quality Reporting Data Architecture Category III (QRDA–III) Option in 2014 4. Case Number Threshold Exemption— Requirements Regarding Data Submission X. Change to the Medicare Hospital Conditions of Participation (CoPs) VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Relating to the Administration of Pneumococcal Vaccines XI. Payment Policies Related to Patient Status A. Background B. Payment of Medicare Part B Hospital Inpatient Services 1. Payable Medicare Part B Inpatient Services a. Payment Methodology b. Other Revisions Resulting from Our Review of the Regulations 2. Billing for Part B Outpatient Services in the 3-Day Payment Window 3. Applicability: Hospital Self-Audit 4. Applicability: Types of Hospitals 5. Beneficiary Liability under Section 1879 of the Act 6. Applicable Beneficiary Liability: Hospital Services 7. Applicable Beneficiary Liability: Skilled Nursing Facility Services 8. Time Limits for Filing Claims 9. Appeal Procedures 10. Coordination of Benefits with Supplemental Insurers 11. Public Comments on Other Issues a. Application to Disproportionate Share Hospital (DSH) Payments, Indirect Medical Education (IME) and Graduate Medical Education (GME) Payments, and Other IPPS Adjustments b. Application to Beneficiary Utilization Days under Medicare Part A c. Applicability to the Medicare Advantage (MA) Program 12. Regulatory Impact Analysis: Final Part B Inpatient Payment Policy a. Statement of Need b. Overall Impact c. Estimated Impacts of the Final Part B Inpatient Payment Policy d. Alternatives Considered e. Accounting Statement and Table f. Conclusion 13. Collection of Information Requirements C. Admission and Medical Review Criteria for Hospital Inpatient Services under Medicare Part A 1. Background 2. Requirements for Physician Orders and Physician Certification a. Applicability for All Hospitals b. Applicability to Inpatient Rehabilitation Facilities (IRFs) 3. Inpatient Admission Guidelines a. Correct Coding Reviews b. Complete and Accurate Documentation c. Medical Necessity Reviews 4. Impacts of Changes in Admission and Medical Review Criteria XII. MedPAC Recommendations XIII. Other Required Information A. Requests for Data from the Public B. Collection of Information Requirements 1. Statutory Requirement for Solicitation of Comments 2. ICRs for Add-On Payments for New Services and Technologies 3. ICRs for the Occupational Mix Adjustment to the FY 2014 Wage Index (Hospital Wage Index Occupational Mix Survey) 4. Hospital Applications for Geographic Reclassifications by the MGCRB 5. ICRs for Application for GME Resident Slots PO 00000 Frm 00008 Fmt 4701 Sfmt 4700 6. ICRs for the Hospital Inpatient Quality Reporting (IQR) Program 7. ICRs for PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program 8. ICRs for Hospital Value-Based Purchasing (VBP) Program 9. ICRs for the Long-Term Care Hospital Quality Reporting (LTCHQR) Program 10. ICRs for the Inpatient Psychiatric Facilities Quality Reporting (IPFQR) Program Regulation Text Addendum—Schedule of Standardized Amounts, Update Factors, and Rate-ofIncrease Percentages Effective with Cost Reporting Periods Beginning on or after October 1, 2013 and Payment Rates for LTCHs Effective with Discharges Occurring on or after October 1, 2013 I. Summary and Background II. Changes to the Prospective Payment Rates for Hospital Inpatient Operating Costs for Acute Care Hospitals for FY 2014 A. Calculation of the Adjusted Standardized Amount B. Adjustments for Area Wage Levels and Cost-of-Living C. Calculation of the Prospective Payment Rates III. Changes to Payment Rates for Acute Care Hospital Inpatient Capital-Related Costs for FY 2014 A. Determination of Federal Hospital Inpatient Capital-Related Prospective Payment Rate Update B. Calculation of the Inpatient CapitalRelated Prospective Payments for FY 2014 C. Capital Input Price Index IV. Changes to Payment Rates for Excluded Hospitals: Rate-of-Increase Percentages for FY 2014 V. Updates to the Payment Rates for the LTCH PPS for FY 2014 A. LTCH PPS Standard Federal Rate for FY 2014 B. Adjustment for Area Wage Levels under the LTCH PPS for FY 2014 1. Background 2. Geographic Classifications/Labor Market Area Definitions 3. LTCH PPS Labor-Related Share 4. LTCH PPS Wage Index for FY 2014 5. Budget Neutrality Adjustment for Changes to the Area Wage Level Adjustment C. LTCH PPS Cost-of-Living Adjustment (COLA) for LTCHs Located in Alaska and Hawaii D. Adjustment for LTCH PPS High-Cost Outlier (HCO) Cases E. Computing the Adjusted LTCH PPS Federal Prospective Payments for FY 2014 VI. Tables Referenced in this Final Rulemaking and Available through the Internet on the CMS Web site Appendix A—Economic Analyses I. Regulatory Impact Analysis A. Introduction B. Need C. Objectives of the IPPS D. Limitations of Our Analysis E. Hospitals Included in and Excluded from the IPPS F. Effects on Hospitals and Hospital Units Excluded from the IPPS E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations G. Quantitative Effects of the Policy Changes under the IPPS for Operating Costs 1. Basis and Methodology of Estimates 2. Analysis of Table I 3. Impact Analysis of Table II H. Effects of Other Policy Changes 1. Effects of Policy on MS–DRGs for Preventable HACs, Including Infections 2. Effects of Policy Relating to New Medical Service and Technology AddOn Payments 3. Effects of Payment Adjustment for LowVolume Hospitals for FY 2014 4. Effects of Extension of the MDH Program 5. Effects of Changes under the FY 2014 Hospital Value-Based Purchasing (VBP) Program 6. Effects of the Implementation of the HAC Reduction Program 7. Effects of Policy Changes Relating to Payments for Direct GME and IME Costs 8. Effects of Implementation of Rural Community Hospital Demonstration Program 9. Effects of the Extended Effective Date for Policy on Hospital Services Furnished under Arrangements I. Effects of Policy Relating to the Furnishing of Acute Care Inpatient Services by CAHs J. Effects of Changes to the COPs for Hospitals Relating to the Administration of Pneumococcal Vaccines K. Effects of Changes in the Capital IPPS 1. General Considerations 2. Results L. Effects of Payment Rate Changes and Policy Changes under the LTCH PPS 1. Introduction and General Considerations 2. Impact on Rural Hospitals 3. Anticipated Effects of LTCH PPS Payment Rate Changes and Policy Changes 4. Effect on the Medicare Program 5. Effect on Medicare Beneficiaries M. Effects of Requirements for Hospital Inpatient Quality Reporting (IQR) Program N. Effects of Changes in the PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program O. Effects of Changes in the LTCH Quality Reporting (LTCHQR) Program P. Effects of Changes in the Requirements for the Inpatient Psychiatric Facilities Quality Reporting (IPFQR) Program II. Alternatives Considered III. Overall Conclusion 1. Acute Care Hospitals 2. LTCHs IV. Accounting Statements and Tables A. Acute Care Hospitals B. LTCHs C. Part B Inpatient Hospital Services V. Regulatory Flexibility Act (RFA) Analysis VI. Impact on Small Rural Hospitals VII. Unfunded Mandate Reform Act (UMRA) Analysis VIII. Executive Order 12866 Appendix B: Recommendation of Update Factors for Operating Cost Rates of Payment for Inpatient Hospital Services I. Background II. Inpatient Hospital Update for FY 2014 A. FY 2014 Inpatient Hospital Update VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 B. Update for SCHs for FY 2014 C. FY 2014 Puerto Rico Hospital Update D. Update for Hospitals Excluded from the IPPS E. Update for LTCHs for FY 2014 III. Secretary’s Recommendation IV. MedPAC Recommendation for Assessing Payment Adequacy and Updating Payments in Traditional Medicare I. Executive Summary and Background A. Executive Summary 1. Purpose and Legal Authority This final rule makes payment and policy changes under the Medicare inpatient prospective payment systems (IPPS) for operating and capital-related costs of acute care hospitals as well as for certain hospitals and hospital units excluded from the IPPS. In addition, it makes payment and policy changes for inpatient hospital services provided by long-term care hospitals (LTCHs) under the long-term care hospital prospective payment system (LTCH PPS). It also makes policy changes to programs associated with Medicare IPPS hospitals, IPPS-excluded hospitals, and LTCHs. Under various statutory authorities, we are making changes to the Medicare IPPS, to the LTCH PPS, and to other related payment methodologies and programs for FY 2014 and subsequent fiscal years. These statutory authorities include, but are not limited to, the following: • Section 1886(d) of the Social Security Act (the Act), which sets forth a system of payment for the operating costs of acute care hospital inpatient stays under Medicare Part A (Hospital Insurance) based on prospectively set rates. Section 1886(g) of the Act requires that, instead of paying for capital-related costs of inpatient hospital services on a reasonable cost basis, the Secretary use a prospective payment system (PPS). • Section 1886(d)(1)(B) of the Act, which specifies that certain hospitals and hospital units are excluded from the IPPS. These hospitals and units are: rehabilitation hospitals and units; LTCHs; psychiatric hospitals and units; children’s hospitals; and cancer hospitals. Religious nonmedical health care institutions (RNHCIs) are also excluded from the IPPS. • Sections 123(a) and (c) of Public Law 106–113 and section 307(b)(1) of Public Law 106–554 (as codified under section 1886(m)(1) of the Act), which provide for the development and implementation of a prospective payment system for payment for inpatient hospital services of long-term care hospitals (LTCHs) described in section 1886(d)(1)(B)(iv) of the Act. PO 00000 Frm 00009 Fmt 4701 Sfmt 4700 50503 • Sections 1814(l), 1820, and 1834(g) of the Act, which specifies that payments are made to critical access hospitals (CAHs) (that is, rural hospitals or facilities that meet certain statutory requirements) for inpatient and outpatient services and that these payments are generally based on 101 percent of reasonable cost. • Section 1866(k) of the Act, as added by section 3005 of the Affordable Care Act, which establishes a quality reporting program for hospitals described in section 1886(d)(1)(B)(v) of the Act, referred to as ‘‘PPS-Exempt Cancer Hospitals.’’ • Section 1886(d)(3)(A)(vi) of the Act, which authorizes us to maintain budget neutrality by adjusting the national standardized amount, to eliminate the estimated effect of changes in coding or classification that do not reflect real changes in case-mix. • Section 1886(d)(4)(D) of the Act, which addresses certain hospitalacquired conditions (HACs), including infections. Section 1886(d)(4)(D) of the Act specifies that, by October 1, 2007, the Secretary was required to select, in consultation with the Centers for Disease Control and Prevention (CDC), at least two conditions that: (a) Are high cost, high volume, or both; (b) are assigned to a higher paying MS–DRG when present as a secondary diagnosis (that is, conditions under the MS–DRG system that are CCs or MCCs); and (c) could reasonably have been prevented through the application of evidencebased guidelines. Section 1886(d)(4)(D) of the Act also specifies that the list of conditions may be revised, again in consultation with CDC, from time to time as long as the list contains at least two conditions. Section 1886(d)(4)(D)(iii) of the Act requires that hospitals, effective with discharges occurring on or after October 1, 2007, submit information on Medicare claims specifying whether diagnoses were present on admission (POA). Section 1886(d)(4)(D)(i) of the Act specifies that effective for discharges occurring on or after October 1, 2008, Medicare no longer assigns an inpatient hospital discharge to a higher paying MS–DRG if a selected condition is not POA. • Section 1886(a)(4) of the Act, which specifies that costs of approved educational activities are excluded from the operating costs of inpatient hospital services. Hospitals with approved graduate medical education (GME) programs are paid for the direct costs of GME in accordance with section 1886(h) of the Act. • Section 1886(b)(3)(B)(viii) of the Act, which requires the Secretary to reduce the applicable percentage E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50504 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations increase in payments to a subsection (d) hospital for a fiscal year if the hospital does not submit data on measures in a form and manner, and at a time, specified by the Secretary. • Section 1886(o) of the Act, which requires the Secretary to establish a Hospital Value-Based Purchasing (VBP) Program under which value-based incentive payments are made in a fiscal year to hospitals meeting performance standards established for a performance period for such fiscal year. • Section 1886(p) of the Act, as added by section 3008 of the Affordable Care Act, which establishes an adjustment to hospital payments for hospital-acquired conditions (HACs), or a HospitalAcquired Condition (HAC) Reduction Program, under which payments to applicable hospitals are adjusted to provide an incentive to reduce hospitalacquired conditions, effective for discharges beginning on October 1, 2014. • Section 1886(q) of the Act, as added by section 3025 of the Affordable Care Act and amended by section 10309 of the Affordable Care Act, which establishes the ‘‘Hospital Readmissions Reduction Program’’ effective for discharges from an ‘‘applicable hospital’’ beginning on or after October 1, 2012, under which payments to those hospitals under section 1886(d) of the Act will be reduced to account for certain excess readmissions. • Section 1886(r) of the Act, as added by section 3313 of the Affordable Care Act, which provides for a reduction to disproportionate share payments under section 1886(d)(5)(F) of the Act and for a new uncompensated care payment to eligible hospitals. Specifically, section 1886(r) of the Act now requires that, for ‘‘fiscal year 2014 and each subsequent fiscal year,’’ ‘‘subsection (d) hospitals’’ that would otherwise receive a ‘‘disproportionate share payment . . . made under subsection (d)(5)(F)’’ will receive two separate payments: (1) 25 percent of the amount they previously would have received under subsection (d)(5)(F) for DSH (‘‘the empirically justified amount’’), and (2) an additional payment for the DSH hospital’s proportion of uncompensated care, determined as the product of three factors. These three factors are: (1) 75 percent of the payments that would otherwise be made under subsection (d)(5)(F); (2) 1 minus the percent change in the percent of individuals under the age of 65 who are uninsured (minus 0.1 percentage points for FY 2014, and minus 0.2 percentage points for FY 2015 through FY 2017); and (3) a hospital’s uncompensated care amount relative to the uncompensated care amount of all VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 DSH hospitals expressed as a percentage. • Section 1886(s)(4) of the Act, as added and amended by section 3401(f) and 10322(a) of the Affordable Care Act, respectively, which requires the Secretary to implement a quality reporting program for inpatient psychiatric hospitals and psychiatric units. Under this program, known as the Inpatient Psychiatric Facility Quality Reporting (IPFQR) Program, beginning with FY 2014, the Secretary must reduce any annual update to a standard Federal rate for discharges occurring during a fiscal year by 2.0 percentage points for any inpatient psychiatric hospital or psychiatric unit that does not comply with quality data submission requirements with respect to an applicable fiscal year. 2. Summary of the Major Provisions a. MS–DRG Documentation and Coding Adjustment Section 631 of the American Taxpayer Relief Act (ATRA, Pub. L. 112–240) amended section 7(b)(1)(B) of Public Law 110–90 to require the Secretary to make a recoupment adjustment to the standardized amount of Medicare payments to acute care hospitals to account for changes in MS–DRG documentation and coding that do not reflect real changes in case-mix, totaling $11 billion over a 4-year period of FYs 2014, 2015, 2016, and 2017. This adjustment represents the amount of the increase in aggregate payments as a result of not completing the prospective adjustment authorized under section 7(b)(1)(A) of Public Law110–90 until FY 2013. Prior to the ATRA, this amount could not have been recovered under Public Law 110–90. While our actuaries estimate that a ¥9.3 percent adjustment to the standardized amount would be necessary if CMS were to fully recover the $11 billion recoupment required by section 631 of the ATRA in FY 2014, it is often our practice to delay or phase in rate adjustments over more than one year, in order to moderate the effects on rates in any one year. Therefore, consistent with the policies that we have adopted in many similar cases, we are making a ¥0.8 percent recoupment adjustment to the standardized amount in FY 2014. Although we are not making an additional prospective adjustment in FY 2014 for the cumulative MS–DRG documentation and coding effects through FY 2010, we solicited public comments as to whether any portion of the proposed ¥0.8 percent recoupment adjustment to the operating IPPS standardized amount should be reduced PO 00000 Frm 00010 Fmt 4701 Sfmt 4700 and instead applied as a prospective adjustment to the operating IPPS standardized amount (and hospitalspecific rates) for the cumulative MS– DRG documentation and coding effect through FY 2010. The public comments that we received are addressed in section II.C. of the preamble of this final rule. b. Refinement of the MS–DRG Relative Weight Calculation Beginning in FY 2007, we implemented relative weights for DRGs based on cost report data instead of charge information. To address the issue of charge compression (the hospital practice of applying higher charges to lower cost items and applying lesser charges to higher cost items) when using cost report data to set the MS–DRG relative weights, in FYs 2009 and 2010, we created additional cost centers on the Medicare cost report to distinguish implantable devices from other medical supplies, MRIs and CT scans, respectively, from other radiology services, and cardiac catheterization from other cardiology services. As compared to previous years, we currently have a significant volume of hospitals completing all, or some, of these new cost centers on the Medicare cost report. Therefore, beginning in FY 2014, we are calculating the MS–DRG relative weights using 19 CCRs, creating distinct CCRs from cost report data for implantable devices, MRIs, CT scans, and cardiac catheterization. c. Rebasing and Revision of the Hospital Market Baskets for Acute Care Hospitals In section IV. of the preamble of this final rule, we are rebasing and revising the acute care hospital operating and capital market baskets used to update IPPS payment rates. For both market baskets, we are updating the base year cost weights from a FY 2006 base year to a FY 2010 base year. We also are recalculating the labor-related share using the FY 2010-based hospital market basket, for discharges occurring on or after October 1, 2013. We used the FY 2010-based market baskets in developing the FY 2014 update factor for the operating and capital prospective payment rates and the FY 2014 update factor for the excluded hospital rate-ofincrease limits. We also are setting forth the data sources used to determine the revised market basket costs weights. d. Reduction of Hospital Payments for Excess Readmissions We are making a number of changes in policies to implement section 1886(q) of the Act, as added by section 3025 of the Affordable Care Act, which E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations establishes the Hospital Readmissions Reduction Program. The Hospital Readmissions Reduction Program requires a reduction to a hospital’s base operating DRG payment to account for excess readmissions of selected applicable conditions. For FYs 2013 and 2014, these conditions are acute myocardial infarction, heart failure, and pneumonia. For FY 2014, we are establishing additional exclusions to the three existing readmission measures (that is, the excess readmission ratio) to account for additional planned readmissions. We also are establishing additional readmissions measures to be used in the Hospital Readmissions Reduction Program for FY 2015. In addition, we are specifying that the readmissions payment adjustment factors for FY 2014 can be no more than a 2-percent reduction (there is a 1percent cap in FY 2013), in accordance with the statute. We are making a change in the methodology we use to calculate the readmissions payment adjustment factors to make it more consistent with the calculation of the excess readmissions ratio. mstockstill on DSK4VPTVN1PROD with RULES6 e. Hospital Value-Based Purchasing (VBP) Program Section 1886(o) of the Act requires the Secretary to establish a Hospital ValueBased Purchasing (VBP) Program under which value-based incentive payments are made in a fiscal year to hospitals meeting performance standards established for a performance period for such fiscal year. Both the performance standards and the performance period for a fiscal year are to be established by the Secretary. In this final rule, we are outlining payment details for the FY 2014 Hospital VBP Program. In addition, we are establishing numerous policies for the FY 2016 Hospital VBP Program, including measures, performance standards, and performance and baseline periods. We also are establishing a disaster/extraordinary circumstances exceptions process, domain reclassification and weighting based on CMS’ National Quality Strategy for the FY 2017 Hospital VBP Program, and certain measures, performance and baseline periods, and performance standards for the FY 2017 through FY 2019 Programs. f. Hospital-Acquired Condition (HAC) Reduction Program In this final rule, we are establishing measures, scoring, and risk adjustment methodology to implement the FY 2015 payment adjustment under the HAC Reduction Program. Section 1886(p) of the Act, as added under section 3008(a) VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 of the Affordable Care Act, establishes an adjustment to hospital payments for HACs, or a HAC Reduction program, under which payments to applicable hospitals are adjusted to provide an incentive to reduce HACs, effective for discharges beginning on October 1, 2014 and for subsequent program years. The amount of payment shall be equal to 99 percent of the amount of payment that would otherwise apply to such discharges under section 1886(d) or 1814(b)(3) of the Act, as applicable. g. Counting of Inpatient Days for Medicare Payment or Eligibility Purposes In response to a comment we received on the FY 2013 IPPS/LTCH PPS final rule and consistent with the inpatient day counting rules for DSH as clarified in the FY 2010 IPPS/RY 2010 LTCH PPS final rule, we are providing that patient days associated with maternity patients who were admitted as inpatients and were receiving ancillary labor and delivery services at the time the inpatient routine census is taken, regardless of whether the patient actually occupied a routine bed prior to occupying an ancillary labor and delivery bed and regardless of whether the patient occupies a ‘‘maternity suite’’ in which labor, delivery recovery, and postpartum care all take place in the same room, would be included in the Medicare utilization calculation. We understand that including labor and delivery inpatient days in the Medicare utilization calculation invariably will reduce direct GME payments because direct GME payments are based, in part, on a hospital’s Medicare utilization ratio and the denominator of that ratio, which includes the hospital’s total inpatient days, will increase at a higher rate than the numerator of the ratio, which includes the hospital’s Medicare inpatient days. However, because the Medicare utilization ratio is a comparison of a hospital’s total Medicare inpatient days to its total inpatient days, we believe that revising the ratio to include labor and delivery days is appropriate because they are inpatient days and therefore should be counted as such. We are including labor and delivery days as inpatient days in the Medicare utilization calculation effective for cost reporting periods beginning on or after October 1, 2013. h. Changes to the DSH Payment Adjustment and the Provision of Additional Payment for Uncompensated Care Section 3133 of the Affordable Care Act modified the Medicare disproportionate share hospital (DSH) PO 00000 Frm 00011 Fmt 4701 Sfmt 4700 50505 payment methodology beginning in FY 2014. Currently, Medicare DSHs qualify for a DSH payment adjustment under a statutory formula that considers their Medicare utilization due to beneficiaries who also receive Supplemental Security Income benefits and their Medicaid utilization. Under section 1886(r) of the Act, which was added by section 3133 of the Affordable Care Act, starting in FY 2014, DSHs will receive 25 percent of the amount they previously would have received under the current statutory formula for Medicare DSH payments. The remaining amount, equal to 75 percent of what otherwise would have been paid as Medicare DSH payments, will be paid as additional payments after the amount is reduced for changes in the percentage of individuals that are uninsured. Each Medicare DSH hospital will receive its additional amount based on its share of the total amount of uncompensated care for all Medicare DSH hospitals for a given time period. In this final rule, we are implementing these statutory changes. i. Medicare Part B Inpatient Billing in Hospitals We are finalizing our proposal that when a Medicare Part A claim for hospital inpatient services is denied because the inpatient admission was determined not reasonable and necessary, or if a hospital determines under 42 CFR 482.30(d) or § 485.641 after a beneficiary is discharged that his or her inpatient admission was not reasonable and necessary, the hospital may be paid for the Part B services that would have been reasonable and necessary if the beneficiary had been treated as a hospital outpatient rather than admitted as an inpatient, provided the beneficiary is enrolled in Medicare Part B. We are finalizing our proposal to continue applying the timely filing restriction to the billing of all Part B inpatient services, under which claims for Part B services must be filed within 1 year from the date of service. However, we are modifying what we stated in the preamble of the proposed rule regarding the applicability of the CMS Ruling 1455–R to certain claims. We will permit hospitals to follow the Part B billing timeframes established in the Ruling after the effective date of this rule, provided (1) the Part A claim denial was one to which the Ruling originally applied; or (2) the Part A inpatient claims has a date of admission before October 1, 2013, and is denied after September 30, 2013 on the grounds that although the medical care was reasonable and necessary, the inpatient admission was not. In this final rule, we E:\FR\FM\19AUR2.SGM 19AUR2 50506 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations also describe the beneficiary liability and other impacts of our final policies. j. Admission and Medical Review Criteria for Hospital Inpatient Services Under Medicare Part A To reduce uncertainty regarding the requirements for payments to hospitals and CAHs under Medicare Part A related to when a Medicare beneficiary should be admitted as a hospital inpatient, in this final rule, we are clarifying the rules governing physician orders of hospital inpatient admissions for payment under Medicare Part A. We are clarifying and specifying in the regulations that an individual becomes an inpatient of a hospital, including a CAH, when formally admitted as such pursuant to an order for inpatient admission by a physician or other qualified practitioner described in the final regulations. The order is required for payment of hospital inpatient services under Medicare Part A. We are specifying that for those hospital stays in which the physician expects the beneficiary to require care that crosses 2 midnights and admits the beneficiary based upon that expectation, Medicare Part A payment is generally appropriate. Conversely, we are specifying that hospital stays in which the physician expects the patient to require care less than 2 midnights, payment under Medicare Part A is generally inappropriate. This will revise our guidance to hospitals and physicians relating to when hospital inpatient admissions are determined reasonable and necessary for payment under Part A. We also are using our exceptions and adjustments authority under section 1886(d)(5)(I)(i) of the Act to offset the additional IPPS expenditures under this policy change by reducing the standardized amount, the hospitalspecific amount, and the Puerto Ricospecific standardized amount by 0.2 percent. mstockstill on DSK4VPTVN1PROD with RULES6 LTCH PPS Standard Federal Rate In section VIII.A. of the preamble of this final rule, we present the LTCH PPS standard Federal rate for FY 2014, which includes an adjustment factor of 0.98734 for the second year of the 3-year phase-in of the permanent one-time adjustment to the standard Federal rate. In addition, under the LTCH Quality Reporting (LTCHQR) Program, the annual update to the standard Federal rate will be reduced by 2 percentage points for LTCHs that fail to submit data for FY 2014 on specific measures under section 3004 of the Affordable Care Act. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 l. Expiration of Certain Payment Rules for LTCH Services and Research on the Development of a Patient Criteria-Based Payment Adjustment Under the LTCH PPS In section VIII.D. of the preamble of this final rule, we note the expiration of the moratorium on the full implementation of the ‘‘25 percent threshold’’ payment adjustment to LTCHs under the LTCH PPS for cost reporting periods beginning on or after October 1, 2013. In section VIII.E. of the preamble of this final rule, we discuss the ongoing research being done by a CMS contractor, Kennell and Associates (Kennell) and its subcontractor, Research Triangle Institute, International (RTI), on the development of a payment adjustment under the LTCH PPS based on the establishment of LTCH patient criteria that was described in the proposed rule. m. Hospital Inpatient Quality Reporting (IQR) Program Under section 1886(b)(3)(B)(viii) of the Act, hospitals are required to report data on measures selected by the Secretary for the Hospital IQR Program in order to receive the full annual percentage increase. In past rules, we have established measures for reporting and the process for submittal and validation of the data. In this final rule, we are making several changes to: (1) The measure set, including the removal of some measures, the suspension of one measure, the refinement of some measures, and the adoption of several new measures; (2) the administrative processes; and (3) the validation methodologies. We also are allowing hospitals the option of reporting up to four measure sets electronically for the FY 2016 payment determination. These changes will improve the timeliness and efficiency of the Hospital IQR Program and begin the process of incorporating electronic reporting into the Hospital IQR Program. n. Inpatient Psychiatric Facility Quality Reporting (IPFQR) Program Section 1886(s)(4) of the Act authorizes the Secretary to implement a quality reporting program for inpatient psychiatric hospitals and psychiatric units. Section 1886(s)(4) of the Act, as added and amended by sections 3401(f) and 10322(a) of the Affordable Care Act, requires the Secretary to implement a quality reporting program for inpatient psychiatric hospitals and psychiatric units. Section 1886(s)(4)(A)(i) of the Act requires that, for rate year 2014 and PO 00000 Frm 00012 Fmt 4701 Sfmt 4700 each subsequent rate year, the Secretary shall reduce any annual update to a standard Federal rate for discharges occurring during such rate year by 2.0 percentage points for any inpatient psychiatric hospital or psychiatric unit that does not comply with quality data submission requirements with respect to an applicable rate year. In this final rule, we are establishing new measures and related policies for the IPFQR Program beginning with FY 2016. 3. Summary of Costs and Benefits • Adjustment for MS–DRG Documentation and Coding Changes. We are making a ¥0.8 percent recoupment adjustment to the standardized amount for FY 2014 to implement, in part, the requirement of section 631 of the ATRA that the Secretary make an adjustment totaling $11 billion over a 4-year period of FYs 2014, 2015, 2016, and 2017. This recoupment adjustment represents the amount of the increase in aggregate payments as a result of not completing the prospective adjustment authorized under section 7(b)(1)(A) of Public Law 110–90 until FY 2013. Prior to the ATRA, this amount could not have been recovered under Public Law 110–90. While our actuaries estimate that a ¥9.3 percent recoupment adjustment to the standardized amount would be necessary if CMS were to fully recover the $11 billion recoupment required by section 631 of the ATRA in FY 2014, it is often our practice to delay or phase in rate adjustments over more than one year, in order to moderate the effects on rates in any one year. Therefore, consistent with the policies that we have adopted in many similar cases, we are making a ¥0.8 percent recoupment adjustment to the standardized amount in FY 2014. We estimate that this level of adjustment would recover $0.96 billion in FY 2014, with approximately $10.04 billion remaining to be addressed. We are not making any future adjustments at this time but note that if recoupment adjustments of approximately ¥0.8 percent are implemented in FYs 2014, 2015, 2016, and 2017, we estimate that the entire $11 billion will be recovered by the end of the statutory 4-year timeline. • Refinement of the MS–DRG Relative Weight Calculation. We refer readers to section VI.C. of Appendix A of this final rule for the overall IPPS operating impact, which includes the impact for the refinement of the MS–DRG relative weight calculation. This impact models payments to various hospital types using relative weights developed from 19 CCRs as compared to 15 CCRs. As E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations with other changes to the MS–DRGs, these changes are to be implemented in a budget neutral manner. • Rebasing and Revision of the Hospital Market Baskets for Acute Care Hospitals. The finalized FY 2010-based IPPS market basket update (as measured by percentage increase) for FY 2014 is currently forecasted to be the same as the market basket update based on the FY 2006-based IPPS market basket at 2.5 percent (currently used under the IPPS). Therefore, we are projecting that there will be no fiscal impact on the IPPS operating payment rates in FY 2014 as a result of the rebasing and revision of the IPPS market basket. The FY 2010-based IPPS capital input price index update (as measured by percentage increase) for FY 2014 is currently forecasted to be 1.2 percent, 0.2 percentage point lower than the update based on the FY 2006-based capital input price index. Therefore, we are projecting that there will be a fiscal impact of ¥$16 million to the IPPS capital payments in FY 2014 as a result of this policy (0.2 percentage point * annual capital IPPS payments of approximately $8 billion). In addition, we are updating the labor-related share under the IPPS for FY 2014 based on the final FY 2010based IPPS market basket, which will result in a labor-related share of 69.6 percent (compared to the FY 2013 laborrelated share of 68.8 percent) or 62 percent, depending on which results in higher payments to the hospital. For FY 2014, the labor-related share for the Puerto Rico-specific standardized amount will be either 63.2 percent or 62 percent, depending on which results in higher payments to the hospital. We are projecting that there will be no impact on aggregate IPPS payments as a result of this policy due to the statutory requirement that any changes to the IPPS area wage adjustment (including the labor-related share) are adopted in a budget neutral manner. • Reduction to Hospital Payments for Excess Readmissions. The provisions of section 1886(q) of the Act which establishes the Hospital Readmissions Reduction Program are not budget neutral. For FY 2014, a hospital’s readmissions payment adjustment factor is the higher of a ratio of a hospital’s aggregate payments for excess readmissions to its aggregate payments for all discharges, or 0.98 (that is, or a 2-percent reduction). In this final rule, we estimate that the reduction to a hospital’s base operating DRG payment amount to account for excess readmissions of selected applicable conditions under the Hospital VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Readmissions Reduction Program will result in a 0.2 percent decrease, or approximately ¥$227 million, in payments to hospitals for FY 2014. • Value-Based Incentive Payments under the Hospital Value-Based Purchasing (VBP) Program. We estimate that there will be no net financial impact to the Hospital VBP Program for FY 2014 in the aggregate because, by law, the amount available for valuebased incentive payments under the program in a given fiscal year must be equal to the total amount of base operating DRG payment amount reductions for that year, as estimated by the Secretary. The estimated amount of base operating DRG payment amount reductions for FY 2014, and therefore the estimated amount available for value-based incentive payments for FY 2014 discharges, is approximately $1.1 billion. We believe that the program’s benefits will be seen in improved patient outcomes, safety, and in the patient’s experience of care. However, we cannot estimate these benefits in actual dollar and patient terms. • Implementation of the HAC Reduction Program for FY 2014. We note that there is no payment impact for FY 2014 for implementing the HAC Reduction Program. For FY 2015, we are presenting the overall impact of the HAC Reduction Program provision along with other IPPS payment provision impacts in section I.G. of Appendix A of this final rule. • Counting of Inpatient Days in the Medicare Utilization Calculation. We believe our policy change to include labor and delivery days as inpatient days in the Medicare utilization calculation will result in a savings of approximately $19 million for FY 2014. • Changes to the Medicare DSH Payment Adjustment and Provision of Additional Payment for Uncompensated Care. Under section 1886(r) of the Act (as added by section 3313 of the Affordable Care Act), disproportionate share payments to hospitals under section 1886(d)(5)(F) of the Act are reduced and an additional payment to eligible hospitals will be made beginning in FY 2014. Hospitals that receive Medicare DSH payments will receive 25 percent of the amount they previously would have received under the current statutory formula for Medicare DSH payments. The remainder, equal to 75 percent of what otherwise would have been paid as Medicare DSH payments, will be the basis for additional payments after the amount is reduced for changes in the percentage of individuals that are uninsured and additional statutory adjustments. Each hospital that receives PO 00000 Frm 00013 Fmt 4701 Sfmt 4700 50507 Medicare DSH payments will receive an additional payment based on its share of the total uncompensated care amount reported by Medicare DSHs. The reduction to Medicare DSH payments is not budget neutral. We are specifying that 75 percent of what otherwise would have been paid for Medicare DSH payments is adjusted to 94.3 percent of that amount for changes in the percentage of individuals that are uninsured and additional statutory adjustments. In other words, Medicare DSH payments prior to the application of section 3133 of the Affordable Care Act are adjusted to 70.7 percent (the product of 75 percent and 94.3 percent) and that resulting payment amount is used to create an additional payment for a hospital’s relative uncompensated care. As a result, we project that the reduction of Medicare DSH payments and the inclusion of the additional payments will reduce payments overall by 0.4 percent as compared to Medicare DSH payments prior to the implementation of section 3133 of the Affordable Care Act. The additional payments have redistributive effects based on a hospital’s uncompensated care amount relative to the uncompensated care amount for all hospitals that are estimated to receive Medicare DSH payments. These additional payments will be made through the claims processing system for each hospital discharge. • Part B Hospital Inpatient Payment Policy. In this final rule, we are revising Medicare’s policy for payment of Part B hospital inpatient services following the denial of a Part A hospital inpatient claim on the basis that the inpatient admission was not reasonable and necessary, but hospital outpatient services would have been reasonable and necessary in treating the beneficiary. We estimate that the final policy will result in an approximately $4.6 billion decrease in Medicare program expenditures over 5 years. In section XI. of the preamble of this final rule, we set forth a detailed analysis of the regulatory and Federalism impacts that the policy changes are expected to have on affected entities and beneficiaries. • Admission and Medical Review Criteria for Hospital Inpatient Services under Medicare Part A. In this final rule, we are making changes relating to admission and medical review criteria for hospital inpatient admissions under Medicare Part A. One aspect of these changes is that hospital inpatient admissions spanning 2 midnights in the hospital will generally qualify as appropriate for payment under Medicare Part A. Our actuaries estimate E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50508 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations that the change will increase IPPS expenditures by approximately $220 million due to an expected net increase in inpatient encounters. We are using our exceptions and adjustments authority under section 1886(d)(5)(I)(i) of the Act to make a reduction of 0.2 percent to the standardized amount, the Puerto Rico standardized amount, and the hospital-specific payment rate to offset this estimated $200 million in additional IPPS expenditures. We also are applying that 0.2 percent reduction to the capital Federal rates using our authority under section 1886(g) of the Act. • Hospital Inpatient Quality Reporting (IQR) Program. We are providing that hospitals participating in the Hospital IQR Program will have the option to report a subset of measures electronically in CY 2014 for the FY 2016 payment determination. Under this policy, hospitals may choose to report the measures in four measure sets electronically or as chart-abstracted measures in CY 2014. For the FY 2016 payment determination, we also are removing seven measures (six chartabstracted measures and one structural measure) and suspending one measure. We also are adopting five new claimsbased measures for the FY 2016 payment determination and subsequent years. For the FY 2016 payment determination and subsequent years, we will validate two additional chartabstracted HAI measures: MRSA bacteremia, and C. difficile. We also are reducing the number of records used for HAI validation from 48 records per year to 36 records per year beginning with the FY 2015 payment determination. Finally, we are allowing hospitals to submit patient charts for purposes of validation either in paper form or by means of electronic transmission. We believe the changes to the measure set, processes, and validation methodologies, the electronic submission of records for validation, as well as allowing hospitals to report certain measures electronically for the FY 2016 payment determination will result in improved program efficiency and begin the process of incorporating electronic reporting into the program. We estimate that the combination of these changes and the reduction in measures mentioned above will reduce burden hours by 700,000 hours annually. • Update to the LTCH PPS Standard Federal Rate and Other Payment Factors. Based on the best available data for the 425 LTCHs in our database, we estimate that the changes we are presenting in the preamble and Addendum of this final rule, including VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 the update to the standard Federal rate for FY 2014, the changes to the area wage adjustment for FY 2014, and the changes to short-stay outliers and highcost outliers, will result in an increase in estimated payments from FY 2013 of approximately $72 million (or 1.3 percent). Although we generally project an increase in payments for all LTCHs in FY 2014 as compared to FY 2013, we expect rural LTCHs to experience slightly lower increases than the national average due to decreases in their wage index for FY 2014 compared to FY 2013. In addition, under current law, our moratoria on the full implementation of the ‘‘25-percent threshold’’ payment adjustment policy will expire for certain LTCHs for cost reporting periods beginning on or after October 1, 2013. These regulatory moratoria extended, for an additional year, the 5-year statutory moratorium on the application of the ‘‘25-percent threshold’’ payment adjustment policy as provided by section 114(c) of the MMSEA, as amended by section 4302(a) of the ARRA and sections 3106(a) and 10312(a) of the Affordable Care Act, which expired for cost reporting periods beginning on or after October 1, 2012 (‘‘October LTCHs’’), and for other LTCHs and LTCH satellite facilities for cost reporting periods beginning on or after July 1, 2012 (‘‘July LTCHs’’) (77 FR 53483 through 53484, as amended by the FY 2013 IPPS/LTCH PPS correcting amendment (77 FR 63751 through 63753)), as explained in section VIII.D. of the preamble of this proposed rule. We estimate that the expiration of the regulatory moratoria will result in a reduction in payments of $90 million to LTCHs. Overall, we estimate that the effect of the changes we are making for FY 2014 in conjunction with the expiration of the regulatory moratoria would result in a decrease in aggregate LTCH PPS payments in FY 2014 relative to FY 2013 of approximately -$18 million (that is, the estimated increase of $72 million plus the estimated reduction of $90 million, as described above). B. Summary 1. Acute Care Hospital Inpatient Prospective Payment System (IPPS) Section 1886(d) of the Social Security Act (the Act) sets forth a system of payment for the operating costs of acute care hospital inpatient stays under Medicare Part A (Hospital Insurance) based on prospectively set rates. Section 1886(g) of the Act requires the Secretary to use a prospective payment system (PPS) to pay for the capital-related costs of inpatient hospital services for these PO 00000 Frm 00014 Fmt 4701 Sfmt 4700 ‘‘subsection (d) hospitals.’’ Under these PPSs, Medicare payment for hospital inpatient operating and capital-related costs is made at predetermined, specific rates for each hospital discharge. Discharges are classified according to a list of diagnosis-related groups (DRGs). The base payment rate is comprised of a standardized amount that is divided into a labor-related share and a nonlabor-related share. The laborrelated share is adjusted by the wage index applicable to the area where the hospital is located. If the hospital is located in Alaska or Hawaii, the nonlabor-related share is adjusted by a cost-of-living adjustment factor. This base payment rate is multiplied by the DRG relative weight. If the hospital treats a high percentage of certain low-income patients, it receives a percentage add-on payment applied to the DRG-adjusted base payment rate. This add-on payment, known as the disproportionate share hospital (DSH) adjustment, provides for a percentage increase in Medicare payments to hospitals that qualify under either of two statutory formulas designed to identify hospitals that serve a disproportionate share of low-income patients. For qualifying hospitals, the amount of this adjustment varies based on the outcome of the statutory calculations. The Affordable Care Act revised the Medicare DSH payment methodology and provides for a new additional Medicare payment that considers the amount of uncompensated care beginning on October 1, 2013. If the hospital is an approved teaching hospital, it receives a percentage add-on payment for each case paid under the IPPS, known as the indirect medical education (IME) adjustment. This percentage varies, depending on the ratio of residents to beds. Additional payments may be made for cases that involve new technologies or medical services that have been approved for special add-on payments. To qualify, a new technology or medical service must demonstrate that it is a substantial clinical improvement over technologies or services otherwise available, and that, absent an add-on payment, it would be inadequately paid under the regular DRG payment. The costs incurred by the hospital for a case are evaluated to determine whether the hospital is eligible for an additional payment as an outlier case. This additional payment is designed to protect the hospital from large financial losses due to unusually expensive cases. Any eligible outlier payment is added to the DRG-adjusted base payment rate, plus any DSH, IME, and new technology or medical service add-on adjustments. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Although payments to most hospitals under the IPPS are made on the basis of the standardized amounts, some categories of hospitals are paid in whole or in part based on their hospitalspecific rate, which is determined from their costs in a base year. For example, sole community hospitals (SCHs) receive the higher of a hospital-specific rate based on their costs in a base year (the highest of FY 1982, FY 1987, FY 1996, or FY 2006) or the IPPS Federal rate based on the standardized amount. Through and including FY 2006, a Medicare-dependent, small rural hospital (MDH) received the higher of the Federal rate or the Federal rate plus 50 percent of the amount by which the Federal rate is exceeded by the higher of its FY 1982 or FY 1987 hospitalspecific rate. As discussed below, for discharges occurring on or after October 1, 2007, but before October 1, 2013, an MDH will receive the higher of the Federal rate or the Federal rate plus 75 percent of the amount by which the Federal rate is exceeded by the highest of its FY 1982, FY 1987, or FY 2002 hospital-specific rate. (We note that the statutory provision for payments to MDHs expires at the end of FY 2013, that is, on September 30, 2013.) SCHs are the sole source of care in their areas, and MDHs are a major source of care for Medicare beneficiaries in their areas. Specifically, section 1886(d)(5)(D)(iii) of the Act defines an SCH as a hospital that is located more than 35 road miles from another hospital or that, by reason of factors such as isolated location, weather conditions, travel conditions, or absence of other like hospitals (as determined by the Secretary), is the sole source of hospital inpatient services reasonably available to Medicare beneficiaries. In addition, certain rural hospitals previously designated by the Secretary as essential access community hospitals are considered SCHs. Section 1886(d)(5)(G)(iv) of the Act defines an MDH as a hospital that is located in a rural area, has not more than 100 beds, is not an SCH, and has a high percentage of Medicare discharges (not less than 60 percent of its inpatient days or discharges in its cost reporting year beginning in FY 1987 or in two of its three most recently settled Medicare cost reporting years). Both of these categories of hospitals are afforded this special payment protection in order to maintain access to services for beneficiaries. Section 1886(g) of the Act requires the Secretary to pay for the capital-related costs of inpatient hospital services ‘‘in accordance with a prospective payment system established by the Secretary.’’ VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 The basic methodology for determining capital prospective payments is set forth in our regulations at 42 CFR 412.308 and 412.312. Under the capital IPPS, payments are adjusted by the same DRG for the case as they are under the operating IPPS. Capital IPPS payments are also adjusted for IME and DSH, similar to the adjustments made under the operating IPPS. In addition, hospitals may receive outlier payments for those cases that have unusually high costs. The existing regulations governing payments to hospitals under the IPPS are located in 42 CFR Part 412, Subparts A through M. 2. Hospitals and Hospital Units Excluded From the IPPS Under section 1886(d)(1)(B) of the Act, as amended, certain hospitals and hospital units are excluded from the IPPS. These hospitals and units are: Rehabilitation hospitals and units; longterm care hospitals (LTCHs); psychiatric hospitals and units; children’s hospitals; and cancer hospitals. Religious nonmedical health care institutions (RNHCIs) are also excluded from the IPPS. Various sections of the Balanced Budget Act of 1997 (BBA, Pub. L. 105– 33), the Medicare, Medicaid and SCHIP [State Children’s Health Insurance Program] Balanced Budget Refinement Act of 1999 (BBRA, Pub. L. 106–113), and the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA, Pub. L. 106–554) provide for the implementation of PPSs for rehabilitation hospitals and units (referred to as inpatient rehabilitation facilities (IRFs)), LTCHs, and psychiatric hospitals and units (referred to as inpatient psychiatric facilities (IPFs)). (We note that the annual updates to the LTCH PPS are now included as part of the IPPS annual update document. Updates to the IRF PPS and IPF PPS are issued as separate documents.) Children’s hospitals, cancer hospitals, and RNHCIs continue to be paid solely under a reasonable cost-based system subject to a rate-of-increase ceiling on inpatient operating costs. The existing regulations governing payments to excluded hospitals and hospital units are located in 42 CFR Parts 412 and 413. 3. Long-Term Care Hospital Prospective Payment System (LTCH PPS) The Medicare prospective payment system (PPS) for LTCHs applies to hospitals described in section 1886(d)(1)(B)(iv) of the Act effective for cost reporting periods beginning on or after October 1, 2002. The LTCH PPS was established under the authority of PO 00000 Frm 00015 Fmt 4701 Sfmt 4700 50509 sections 123 of the BBRA and section 307(b) of the BIPA (as codified under section 1886(m)(1) of the Act). During the 5-year (optional) transition period, a LTCH’s payment under the PPS was based on an increasing proportion of the LTCH Federal rate with a corresponding decreasing proportion based on reasonable cost principles. Effective for cost reporting periods beginning on or after October 1, 2006, all LTCHs are paid 100 percent of the Federal rate. The existing regulations governing payment under the LTCH PPS are located in 42 CFR Part 412, Subpart O. Beginning October 1, 2009, we issue the annual updates to the LTCH PPS in the same documents that update the IPPS (73 FR 26797 through 26798). 4. Critical Access Hospitals (CAHs) Under sections 1814(l), 1820, and 1834(g) of the Act, payments made to critical access hospitals (CAHs) (that is, rural hospitals or facilities that meet certain statutory requirements) for inpatient and outpatient services are generally based on 101 percent of reasonable cost. Reasonable cost is determined under the provisions of section 1861(v)(1)(A) of the Act and existing regulations under 42 CFR Parts 413 and 415. 5. Payments for Graduate Medical Education (GME) Under section 1886(a)(4) of the Act, costs of approved educational activities are excluded from the operating costs of inpatient hospital services. Hospitals with approved graduate medical education (GME) programs are paid for the direct costs of GME in accordance with section 1886(h) of the Act. The amount of payment for direct GME costs for a cost reporting period is based on the hospital’s number of residents in that period and the hospital’s costs per resident in a base year. The existing regulations governing payments to the various types of hospitals are located in 42 CFR Part 413. C. Provisions of the Patient Protection and Affordable Care Act (Pub. L. 111– 148), the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111– 152), and the American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112–240) The Patient Protection and Affordable Care Act (Pub. L. 111–148), enacted on March 23, 2010, and the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111–152), enacted on March 30, 2010, made a number of changes that affect the IPPS and the LTCH PPS. (Pub. L. 111–148 and Pub. L. 111–152 are collectively referred to as the ‘‘Affordable Care Act.’’) A number of E:\FR\FM\19AUR2.SGM 19AUR2 50510 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 the provisions of the Affordable Care Act affect the updates to the IPPS and the LTCH PPS and providers and suppliers. The provisions of the Affordable Care Act that were applicable to the IPPS and the LTCH PPS for FYs 2010, 2011, and 2012 were implemented in the June 2, 2010 Federal Register notice (75 FR 31118), the FY 2011 IPPS/LTCH PPS final rule (75 FR 50042) and the FY 2012 IPPS/ LTCH PPS final rule (76 FR 51476). The American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112–240), enacted on January 2, 2013, also made a number of changes that affect the IPPS. We announced changes related to certain IPPS provisions for FY 2013 pursuant to sections 605 and 606 of Public Law 112–240 in a notice issued in the Federal Register on March 7, 2013 (78 FR 14689). 1. The Patient Protection and Affordable Care Act (Pub. L. 111–148) and the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111– 152) In this final rule, we are implementing, or continuing in FY 2014 to implement, the following provisions (or portions of the following provisions) of the Affordable Care Act that are applicable to the IPPS, the LTCH PPS, and PPS-exempt cancer hospitals: • Section 3001(a) of Public Law 111– 148, which requires the establishment of a hospital inpatient value-based purchasing program under which valuebased incentive payments are made in a fiscal year to hospitals that meet performance standards for the performance period for that fiscal year. • Section 3004 of Public Law 111– 148, which provides for the submission of quality data by LTCHs in order for them to receive the full annual update to the payment rates beginning with the FY 2014 rate year. • Section 3005 of Public Law 111– 148, which provides for the establishment of a quality reporting program for PPS-exempt cancer hospitals beginning with FY 2014, and for subsequent program years. • Section 3008 of Public Law 111– 148, which establishes the HospitalAcquired Condition (HAC) Reduction Program and requires the Secretary to make an adjustment to hospital payments for applicable hospitals, effective for discharges beginning on October 1, 2014, and for subsequent program years. • Section 3025 of Public Law 111– 148, which establishes a hospital readmissions reduction program and requires the Secretary to reduce payments to applicable hospitals with VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 excess readmissions effective for discharges beginning on or after October 1, 2012. • Section 3133 of Public Law 111– 148, as amended by section 10316 of Public Law 111–148 and section 1104 of Pub. L. 111–152, which modifies the methodologies for determining Medicare DSH payments and creates a new additional payment for uncompensated care. • Section 3401 of Public Law 111– 148, which provides for the incorporation of productivity adjustments into the market basket updates for IPPS hospitals and LTCHs. • Section 10324 of Public Law 111– 148, which provides for a wage adjustment for hospitals located in frontier States. • Sections 3401 and 10319 of Public Law 111–148 and section 1105 of Public Law 111–152, which revise certain market basket update percentages for IPPS and LTCH PPS payment rates for FY 2014. • Section 5506 of Public Law 111– 148, which added a provision to the Act that instructs the Secretary to establish a process by regulation under which, in the event a teaching hospital closes, the Secretary will permanently increase the FTE resident caps for hospitals that meet certain criteria up to the number of the closed hospital’s FTE resident caps. The Secretary is directed to ensure that the aggregate number of FTE resident cap slots distributed is equal to the amount of slots in the closed hospital’s direct GME and IME FTE resident caps, respectively. 2. American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112–240) In this final rule, we are implementing or making conforming changes to regulation text in accordance with the following provisions (or portions of the following provisions) of the American Taxpayer Relief Act of 2012 that are applicable to the IPPS: • Section 605, which amended sections 1886(d)(12)(B), (C)(i), and (D) of the Act to extend changes to the payment methodology for the Medicare inpatient hospital payment adjustment for low-volume hospitals through September 30, 2013 (FY 2013). Beginning with FY 2014, the preexisting low-volume hospital qualifying criteria and payment adjustment, as implemented in FY 2005, will resume. • Section 606(a), which amended sections 1886(d)(5)(G)(i) and (ii)(II) of the Act to extend the MDH program through September 30, 2013 (FY 2013), and section 606(b), which made conforming amendments to sections 1886(b)(3)(D)(i) and (iv) of the Act and PO 00000 Frm 00016 Fmt 4701 Sfmt 4700 amended section 13501(e)(2) of the Omnibus Budget Reconciliation Act of 1993 to permit hospitals to decline reclassification through FY 2013. • Section 631, which amended section 7(b)(1)(B) of Public Law 110–90 and requires a recoupment adjustment to the standardized amounts under section 1886(d) of the Act based upon the Secretary’s estimates for discharges occurring in FY 2014 through FY 2017 to fully offset $11 billion (which represents the amount of the increase in aggregate payments from FYs 2008 through 2013 for which an adjustment was not previously applied). D. Issuance of a Notice of Proposed Rulemaking On May 10, 2013, we published in the Federal Register (78 FR 27486) a proposed rule that set forth proposed changes to the Medicare IPPS for operating costs and for capital-related costs of acute care hospitals for FY 2014. We also set forth proposed changes relating to payments for IME and GME costs and payments to certain hospitals that continue to be excluded from the IPPS and paid on a reasonable cost basis. In addition, in the proposed rule, we set forth proposed changes to the payment rates, factors, and other payment rate policies under the LTCH PPS for FY 2014. Below is a summary of the major changes that we proposed to make: 1. Proposed Changes to MS–DRG Classifications and Recalibrations of Relative Weights In section II. of the preamble of the proposed rule, we included— • Proposed changes to MS–DRG classifications based on our yearly review. • Proposed application of the documentation and coding adjustment for FY 2014 resulting from implementation of the MS–DRG system. • A discussion of the Research Triangle Institute, International (RTI) reports and analyses relating to charge compression, including a proposal to calculate the MS–DRG relative weights using 19 CCRs. • Proposed recalibrations of the MS– DRG relative weights. • Proposed changes to hospitalacquired conditions (HACs) and a listing and discussion of HACs, including infections, that would be subject to the statutorily required adjustment in MS–DRG payments for FY 2014. • A discussion of the FY 2014 status of new technologies approved for addon payments for FY 2013 and a presentation of our evaluation and E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations analysis of the FY 2014 applicants for add-on payments for high-cost new medical services and technologies (including public input, as directed by Pub. L. 108–173, obtained in a town hall meeting). 2. Proposed Changes to the Hospital Wage Index for Acute Care Hospitals In section III. of the preamble to the proposed rule, we proposed revisions to the wage index for acute care hospitals and the annual update of the wage data. Specific issues addressed include the following: • The proposed FY 2014 wage index update using wage data from cost reporting periods beginning in FY 2010. • Analysis and implementation of the proposed FY 2014 occupational mix adjustment to the wage index for acute care hospitals, including the proposed application of the rural floor, the imputed rural floor calculated under the original and alternative methodologies, and the frontier State floor. • Proposed revisions to the wage index for acute care hospitals based on hospital redesignations and reclassifications. • The proposed adjustment to the wage index for acute care hospitals for FY 2014 based on commuting patterns of hospital employees who reside in a county and work in a different area with a higher wage index. • The timetable for reviewing and verifying the wage data used to compute the proposed FY 2014 hospital wage index. • Determination of the labor-related share for the proposed FY 2014 wage index. mstockstill on DSK4VPTVN1PROD with RULES6 3. Proposed Rebasing and Revision of the Hospital Market Baskets for Acute Care Hospitals In section IV. of the preamble of the proposed rule, we proposed to rebase and revise the acute care hospital operating and capital market baskets to be used in developing the FY 2014 update factor for the operating and capital prospective payment rates and the FY 2014 update factor for the excluded hospital rate-of-increase limits. We also set forth the data sources used to determine the proposed revised market basket costs weights. 4. Other Decisions and Proposed Changes to the IPPS for Operating Costs and GME Costs In section V. of the preamble of the proposed rule, we discussed proposed changes or clarifications of a number of the provisions of the regulations in 42 CFR Parts 412 and 413, including the following: VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 • Proposed changes to the inpatient hospital update for FY 2014, including incorporation of a productivity adjustment. • The proposed updated national and regional case-mix values and discharges for purposes of determining RRC status. • Proposed payment adjustment for low-volume hospitals for FY 2014. • The statutorily required IME adjustment factor for FY 2014. • Proposed changes to the methodologies for determining Medicare DSH payments and proposals to implement the new additional payments for uncompensated care. • Discussion of the extension of the MDH program through FY 2013. • Proposed changes to the rules for payment adjustments under the Hospital Readmissions Reduction Program based on hospital readmission measures and the process for hospital review and correction of those rates. • Proposed changes to the requirements and provision of valuebased incentive payments under the Hospital Value-Based Purchasing Program. • Proposed requirements for payment adjustments to hospitals under the HAC Reduction Program. • Proposal for counting labor and delivery inpatient days in the calculation of Medicare utilization for direct GME purposes and for other payment and eligibility purposes. • Announcement of an additional closed hospital and redistribution of resident cap slots relating to direct GME and IME payments. • Proposed clarifications of policies on payments for residents training in approved residency programs at CAHs. • Announcement of the expiration of the inflation update freeze for high per resident amounts (PRAs). • Discussion of the Rural Community Hospital Demonstration Program and a proposal for making a budget neutrality adjustment for the demonstration program. • Extending the effective date of policies relating to hospital services furnished under arrangements. • Proposed medical review policy that hospital stays in which the physician expects the patient to require a stay that crosses 2 midnights are generally appropriate for payment under Medicare Part A, while hospital stays in which the physician expects the patient to require a stay that does not cross 2 midnights are generally inappropriate for payment under Medicare Part A. 5. Proposed FY 2014 Policy Governing the IPPS for Capital-Related Costs In section VI. of the preamble to the proposed rule, we discussed the PO 00000 Frm 00017 Fmt 4701 Sfmt 4700 50511 proposed payment policy requirements for capital-related costs and capital payments to hospitals for FY 2014 and other related proposed policy changes. 6. Proposed Changes to the Payment Rates for Certain Excluded Hospitals: Rate-of-Increase Percentages In section VII. of the preamble of the proposed rule, we discussed— • Proposed changes to payments to certain excluded hospitals for FY 2014. • Proposed changes to the conditions of participation (CoPs) relating to administration of pneumococcal vaccine and CAH payment for acute care inpatient services. 7. Proposed Changes to the LTCH PPS In section VIII. of the preamble of the proposed rule, we set forth proposed changes to the payment rates, factors, and other payment rate policies under the LTCH PPS for FY 2014. We also noted that the moratorium on the full implementation of the ‘‘25-percent threshold’’ payment adjustment will expire for certain cost reporting periods beginning on or after October 1, 2013. In addition, in this section, we discussed the research being done by Kennell and Associates (Kennell) and its subcontractor, Research Triangle Institute, International (RTI), under a contract with CMS that is intended to inform the development of a payment adjustment under the LTCH PPS based on the establishment of LTCH patient criteria which were described in the proposed rule at 78 FR 27668 through 27676. 8. Proposed Changes Relating to Quality Data Reporting for Specific Providers and Suppliers In section IX. of the preamble of the proposed rule, we addressed— • Proposed requirements for the Hospital Inpatient Quality Reporting (IQR) Program as a condition for receiving the full applicable percentage increase. • Proposed changes to the requirements for the quality reporting program for PPS-exempt cancer hospitals (PCHQR Program). • Proposed changes to the requirements under the LTCH Quality Reporting (LTCHQR) Program. • Proposed changes to the requirements under the Inpatient Psychiatric Facility Quality Reporting (IPFQR) Program. 9. Determining Prospective Payment Operating and Capital Rates and Rate-ofIncrease Limits for Acute Care Hospitals In the Addendum to the proposed rule, we set forth proposed changes to E:\FR\FM\19AUR2.SGM 19AUR2 50512 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations the amounts and factors for determining the proposed FY 2014 prospective payment rates for operating costs and capital-related costs for acute care hospitals. We proposed to establish the threshold amounts for outlier cases. In addition, we addressed the proposed update factors for determining the rateof-increase limits for cost reporting periods beginning in FY 2014 for certain hospitals excluded from the IPPS. 10. Determining Prospective Payment Rates for LTCHs In the Addendum to the proposed rule, we set forth proposed changes to the amounts and factors for determining the proposed FY 2014 prospective standard Federal rate. We proposed to establish the adjustments for wage levels, the labor-related share, the costof-living adjustment, and high-cost outliers, including the fixed-loss amount, and the LTCH cost-to-charge ratios (CCRs) under the LTCH PPS. 11. Impact Analysis In Appendix A of the proposed rule, we set forth an analysis of the impact that the proposed changes would have on affected acute care hospitals, LTCHs, PCHs, and IPFs. capital-related costs for hospitals under the IPPS. We addressed these recommendations in Appendix B of the proposed rule. For further information relating specifically to the MedPAC March 2013 report or to obtain a copy of the report, contact MedPAC at (202) 220–3700 or visit MedPAC’s Web site at: https://www.medpac.gov. E. Public Comments Received in Response to the FY 2014 IPPS/LTCH PPS Proposed Rule We received approximately 721 timely pieces of correspondence containing multiple comments on the FY 2014 IPPS/LTCH PPS proposed rule. We note that some of these public comments were outside of the scope of the proposed rule. These out-of-scope public comments are not addressed with policy responses in this final rule. Summaries of the public comments that are within the scope of the proposed rule and our responses to those public comments are set forth in the various sections of this final rule under the appropriate heading. F. Finalization of the Proposed Rule on Medicare Part B Inpatient Billing in Hospitals On March 18, 2013, we issued in the Federal Register (78 FR 16632) a proposed rule that proposed to revise Medicare’s payment policies under Part B when a Part A hospital inpatient claim is denied because the inpatient admission was not reasonable and necessary, but hospital outpatient services would have been reasonable and necessary in treating the beneficiary. We received 392 timely pieces of correspondence in response to this proposed rule. In section XI. of this document, we summarize and respond to these public comments and discuss our final policies after taking into consideration the public comments we received. 13. Discussion of Medicare Payment Advisory Commission Recommendations mstockstill on DSK4VPTVN1PROD with RULES6 12. Recommendation of Update Factors for Operating Cost Rates of Payment for Hospital Inpatient Services In Appendix B of the proposed rule, as required by sections 1886(e)(4) and (e)(5) of the Act, we provided our recommendations of the appropriate percentage changes for FY 2014 for the following: • A single average standardized amount for all areas for hospital inpatient services paid under the IPPS for operating costs of acute care hospitals (and hospital-specific rates applicable to SCHs). • Target rate-of-increase limits to the allowable operating costs of hospital inpatient services furnished by certain hospitals excluded from the IPPS. • The standard Federal rate for hospital inpatient services furnished by LTCHs. Section 1886(d) of the Act specifies that the Secretary shall establish a classification system (referred to as diagnosis-related groups (DRGs)) for inpatient discharges and adjust payments under the IPPS based on appropriate weighting factors assigned to each DRG. Therefore, under the IPPS, Medicare pays for inpatient hospital services on a rate per discharge basis that varies according to the DRG to which a beneficiary’s stay is assigned. The formula used to calculate payment Under section 1805(b) of the Act, MedPAC is required to submit a report to Congress, no later than March 15 of each year, in which MedPAC reviews and makes recommendations on Medicare payment policies. MedPAC’s March 2013 recommendations concerning hospital inpatient payment policies address the update factor for hospital inpatient operating costs and VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 II. Changes to Medicare Severity Diagnosis-Related Group (MS–DRG) Classifications and Relative Weights A. Background PO 00000 Frm 00018 Fmt 4701 Sfmt 4700 for a specific case multiplies an individual hospital’s payment rate per case by the weight of the DRG to which the case is assigned. Each DRG weight represents the average resources required to care for cases in that particular DRG, relative to the average resources used to treat cases in all DRGs. Congress recognized that it would be necessary to recalculate the DRG relative weights periodically to account for changes in resource consumption. Accordingly, section 1886(d)(4)(C) of the Act requires that the Secretary adjust the DRG classifications and relative weights at least annually. These adjustments are made to reflect changes in treatment patterns, technology, and any other factors that may change the relative use of hospital resources. B. MS–DRG Reclassifications For general information about the MS–DRG system, including yearly reviews and changes to the MS–DRGs, we refer readers to the previous discussions in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43764 through 43766), the FY 2011 IPPS/LTCH PPS final rule (75 FR 50053 through 50055), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51485 through 51487), and the FY 2013 IPPS/LTCH PPS final rule (77 FR 53273). C. Adoption of the MS–DRGs in FY 2008 For information on the adoption of the MS–DRGs in FY 2008, we refer readers to the FY 2008 IPPS final rule with comment period (72 FR 47140 through 47189). D. FY 2014 MS–DRG Documentation and Coding Adjustment 1. Background on the Prospective MS– DRG Documentation and Coding Adjustments for FY 2008 and FY 2009 Authorized by Public Law 110–90 In the FY 2008 IPPS final rule with comment period (72 FR 47140 through 47189), we adopted the MS–DRG patient classification system for the IPPS, effective October 1, 2007, to better recognize severity of illness in Medicare payment rates for acute care hospitals. The adoption of the MS–DRG system resulted in the expansion of the number of DRGs from 538 in FY 2007 to 745 in FY 2008. (Currently, there are 751 MS– DRGs.) By increasing the number of MS–DRGs and more fully taking into account patient severity of illness in Medicare payment rates for acute care hospitals, MS–DRGs encourage hospitals to improve their documentation and coding of patient diagnoses. E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 In the FY 2008 IPPS final rule with comment period (72 FR 47175 through 47186), we indicated that the adoption of the MS–DRGs had the potential to lead to increases in aggregate payments without a corresponding increase in actual patient severity of illness due to the incentives for additional documentation and coding. In that final rule with comment period, we exercised our authority under section 1886(d)(3)(A)(vi) of the Act, which authorizes us to maintain budget neutrality by adjusting the national standardized amount, to eliminate the estimated effect of changes in coding or classification that do not reflect real changes in case-mix. Our actuaries estimated that maintaining budget neutrality required an adjustment of ¥4.8 percent to the national standardized amount. We provided for phasing in this ¥4.8 percent adjustment over 3 years. Specifically, we established prospective documentation and coding adjustments of ¥1.2 percent for FY 2008, ¥1.8 percent for FY 2009, and ¥1.8 percent for FY 2010. On September 29, 2007, Congress enacted the TMA [Transitional Medical Assistance], Abstinence Education, and QI [Qualifying Individuals] Programs Extension Act of 2007, Public Law 110– 90. Section 7(a) of Public Law 110–90 reduced the documentation and coding adjustment made as a result of the MS– DRG system that we adopted in the FY 2008 IPPS final rule with comment period to ¥0.6 percent for FY 2008 and ¥0.9 percent for FY 2009, and we finalized the FY 2008 adjustment through rulemaking, effective October 1, 2007 (72 FR 66886). For FY 2009, section 7(a) of Public Law 110–90 required a documentation and coding adjustment of ¥0.9 percent, and we finalized that adjustment through rulemaking (73 FR 48447). The documentation and coding adjustments established in the FY 2008 IPPS final rule with comment period, which reflected the amendments made by Public Law 110–90, are cumulative. As a result, the ¥0.9 percent documentation and coding adjustment for FY 2009 was in addition to the ¥0.6 percent adjustment for FY 2008, yielding a combined effect of ¥1.5 percent. 2. Adjustment to the Average Standardized Amounts Required by Public Law 110–90 a. Prospective Adjustment Required by Section 7(b)(1)(A) of Public Law 110–90 Section 7(b)(1)(A) of Public Law 110– 90 requires that, if the Secretary determines that implementation of the VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 MS–DRG system resulted in changes in documentation and coding that did not reflect real changes in case-mix for discharges occurring during FY 2008 or FY 2009 that are different than the prospective documentation and coding adjustments applied under section 7(a) of Public Law 110–90, the Secretary shall make an appropriate adjustment under section 1886(d)(3)(A)(vi) of the Act. Section 1886(d)(3)(A)(vi) of the Act authorizes adjustments to the average standardized amounts for subsequent fiscal years in order to eliminate the effect of such coding or classification changes. These adjustments are intended to ensure that future annual aggregate IPPS payments are the same as the payments that otherwise would have been made had the prospective adjustments for documentation and coding applied in FY 2008 and FY 2009 reflected the change that occurred in those years. b. Recoupment or Repayment Adjustments in FYs 2010 Through 2012 Required by Section 7(b)(1)(B) Public Law 110–90 If, based on a retroactive evaluation of claims data, the Secretary determines that implementation of the MS–DRG system resulted in changes in documentation and coding that did not reflect real changes in case-mix for discharges occurring during FY 2008 or FY 2009 that are different from the prospective documentation and coding adjustments applied under section 7(a) of Public Law 110–90, section 7(b)(1)(B) of Public Law 110–90 requires the Secretary to make an additional adjustment to the standardized amounts under section 1886(d) of the Act. This adjustment must offset the estimated increase or decrease in aggregate payments for FYs 2008 and 2009 (including interest) resulting from the difference between the estimated actual documentation and coding effect and the documentation and coding adjustment applied under section 7(a) of Public Law 110–90. This adjustment is in addition to making an appropriate adjustment to the standardized amounts under section 1886(d)(3)(A)(vi) of the Act as required by section 7(b)(1)(A) of Public Law 110–90. That is, these adjustments are intended to recoup (or repay, in the case of underpayments) spending in excess of (or less than) spending that would have occurred had the prospective adjustments for changes in documentation and coding applied in FY 2008 and FY 2009 precisely matched the changes that occurred in those years. Public Law 110–90 requires that the Secretary only make these recoupment or repayment adjustments for discharges PO 00000 Frm 00019 Fmt 4701 Sfmt 4700 50513 occurring during FYs 2010, 2011, and 2012. 3. Retrospective Evaluation of FY 2008 and FY 2009 Claims Data In order to implement the requirements of section 7 of Public Law 110–90, we performed a retrospective evaluation of the FY 2008 data for claims paid through December 2008 using the methodology first described in the FY 2009 IPPS/LTCH PPS final rule (73 FR 43768 and 43775) and later discussed in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43768 through 43772). We performed the same analysis for FY 2009 claims data using the same methodology as we did for FY 2008 claims (75 FR 50057 through 50068). The results of the analysis for the FY 2011 proposed and final rules, and subsequent evaluations in FY 2012, supported that the 5.4 percent estimate accurately reflected the FY 2009 increases in documentation and coding under the MS–DRG system. We were persuaded by both MedPAC’s analysis (as discussed in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50064 through 50065)) and our own review of the methodologies recommended by various commenters that the methodology we employed to determine the required documentation and coding adjustments was sound. As in prior years, the FY 2008, FY 2009, and FY 2010 MedPAR files are available to the public to allow independent analysis of the FY 2008 and FY 2009 documentation and coding effects. Interested individuals may still order these files through the Web site at: https://www.cms.gov/Research-StatisticsData-and-Systems/Files-for-Order/ LimitedDataSets/ by clicking on MedPAR Limited Data Set (LDS)Hospital (National). This Web page describes the file and provides directions and further detailed instructions for how to order. Persons placing an order must send the following: a Letter of Request, the LDS Data Use Agreement and Research Protocol (refer to the Web site for further instructions), the LDS Form, and a check for $3,655 to: Mailing address if using the U.S. Postal Service: Centers for Medicare & Medicaid Services, RDDC Account, Accounting Division, P.O. Box 7520, Baltimore, MD 21207–0520. Mailing address if using express mail: Centers for Medicare & Medicaid Services, OFM/Division of Accounting—RDDC, 7500 Security Boulevard, C3–07–11, Baltimore, MD 21244–1850. E:\FR\FM\19AUR2.SGM 19AUR2 50514 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 4. Prospective Adjustments for FY 2008 and FY 2009 Authorized by Section 7(b)(1)(A) of Public Law 110–90 In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43767 through 43777), we opted to delay the implementation of any documentation and coding adjustment until a full analysis of case-mix changes based on FY 2009 claims data could be completed. We refer readers to the FY 2010 IPPS/RY LTCH PPS final rule for a detailed description of our proposal, responses to comments, and finalized policy. After analysis of the FY 2009 claims data for the FY 2011 IPPS/LTCH PPS final rule (75 FR 50057 through 50073), we found a total prospective documentation and coding effect of 1.054 percent. After accounting for the ¥0.6 percent and the ¥0.9 percent documentation and coding adjustments in FYs 2008 and 2009, we found a remaining documentation and coding effect of 3.9 percent. As we have discussed, an additional cumulative adjustment of ¥3.9 percent would be necessary to meet the requirements of section 7(b)(1)(A) of Public Law 110–90 to make an adjustment to the average standardized amounts in order to eliminate the full effect of the documentation and coding changes that do not reflect real changes in case-mix on future payments. Unlike section 7(b)(1)(B) of Public Law 110–90, section 7(b)(1)(A) does not specify when we must apply the prospective adjustment, but merely requires us to make an ‘‘appropriate’’ adjustment. Therefore, as we stated in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50061), we believe the law provided some discretion as to the manner in which we applied the prospective adjustment of ¥3.9 percent. As we discussed extensively in the FY 2011 IPPS/LTCH PPS final rule, it has been our practice to moderate payment adjustments when necessary to mitigate the effects of significant downward adjustments on hospitals, to avoid what could be widespread, disruptive effects of such adjustments on hospitals. Therefore, we stated that we believed it was appropriate to not implement the ¥3.9 percent prospective adjustment in FY 2011 because we finalized a ¥2.9 percent recoupment adjustment for that year. Accordingly, we did not propose a prospective adjustment under section 7(b)(1)(A) of Public Law 110–90 for FY 2011 (75 FR 23868 through 23870). We note that, as a result, payments in FY 2011 (and in each future year until we implemented the requisite adjustment) would be higher than they would have been if we had implemented an VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 adjustment under section 7(b)(1)(A) of Public Law 110–90. In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51489 and 51497), we indicated that, because further delay of this prospective adjustment will result in a continued accrual of unrecoverable overpayments, it was imperative that we implement a prospective adjustment for FY 2012, while recognizing CMS’ continued desire to mitigate the effects of any significant downward adjustments to hospitals. Therefore, we implemented a ¥2.0 percent prospective adjustment to the standardized amount to partially eliminate the full effect of the documentation and coding changes that do not reflect real changes in case-mix on future payments. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53274 through 53276), we completed the prospective portion of the adjustment required under section 7(b)(1)(A) of Public Law 110–90 by finalizing a ¥1.9 percent adjustment to the standardized amount for FY 2013. We stated that this adjustment would remove the remaining effect of the documentation and coding changes that do not reflect real changes in case-mix that occurred in FY 2008 and FY 2009. We believe it was imperative to implement the full remaining adjustment, as any further delay would result in an overstated standardized amount in FY 2013 and any future years until a full adjustment is made. We note again that delaying full implementation of the prospective portion of the adjustment required under section 7(b)(1)(A) of Public Law 110–90 until FY 2013 resulted in payments in FY 2010 through FY 2012 being overstated. These overpayments could not be recovered by CMS as section 7(b)(1)(B) of Public Law 110–90 limited recoupments to overpayments made in FY 2008 and FY 2009. 5. Recoupment or Repayment Adjustment Authorized by Section 7(b)(1)(B) of Public Law 110–90 As discussed in section II.D.3. of the preamble of this final rule, section 7(b)(1)(B) of Public Law 110–90 requires the Secretary to make an adjustment to the standardized amounts under section 1886(d) of the Act to offset the estimated increase or decrease in aggregate payments for FY 2008 and FY 2009 (including interest) resulting from the difference between the estimated actual documentation and coding effect and the documentation and coding adjustments applied under section 7(a) of Public Law 110–90. This determination must be based on a retrospective evaluation of claims data. PO 00000 Frm 00020 Fmt 4701 Sfmt 4700 Our actuaries estimated that this 5.8 percentage point increase resulted in an increase in aggregate payments of approximately $6.9 billion. Therefore, as discussed in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50062 through 50067), we determined that an aggregate adjustment of ¥5.8 percent in FYs 2011 and 2012 would be necessary in order to meet the requirements of section 7(b)(1)(B) of Public Law 110–90 to adjust the standardized amounts for discharges occurring in FYs 2010, 2011, and/or 2012 to offset the estimated amount of the increase in aggregate payments (including interest) in FYs 2008 and 2009. It is often our practice to phase in rate adjustments over more than one year in order to moderate the effect on rates in any one year. Therefore, consistent with the policies that we have adopted in many similar cases, in the FY 2011 IPPS/LTCH PPS final rule, we made an adjustment to the standardized amount of ¥2.9 percent, representing approximately half of the aggregate adjustment required under section 7(b)(1)(B) of Public Law 110–90, for FY 2011. An adjustment of this magnitude allowed us to moderate the effects on hospitals in one year while simultaneously making it possible to implement the entire adjustment within the timeframe required under section 7(b)(1)(B) of Public Law 110–90 (that is, no later than FY 2012). For FY 2012, in accordance with the timeframes set forth by section 7(b)(1)(B) of Public Law 110–90, and consistent with the discussion in the FY 2011 IPPS/LTCH PPS final rule, we completed the recoupment adjustment by implementing the remaining ¥2.9 percent adjustment, in addition to removing the effect of the ¥2.9 percent adjustment to the standardized amount finalized for FY 2011 (76 FR 51489 and 51498). Because these adjustments, in effect, balanced out, there was no yearto-year change in the standardized amount due to this recoupment adjustment for FY 2012. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53276), we made a final +2.9 percent adjustment to the standardized amount, completing the recoupment portion of section 7(b)(1)(B) of Public Law 110–90. We note that with this positive adjustment, according to our estimates, all overpayments made in FY 2008 and FY 2009 have been fully recaptured with appropriate interest, and the standardized amount has been returned to the appropriate baseline. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 6. Recoupment or Repayment Adjustment Authorized by Section 631 of the American Taxpayer Relief Act of 2012 (ATRA) Section 631 of the ATRA amended section 7(b)(1)(B) of Public Law 110–90 to require the Secretary to make a recoupment adjustment or adjustments totaling $11 billion by FY 2017. This adjustment represents the amount of the increase in aggregate payments as a result of not completing the prospective adjustment authorized under section 7(b)(1)(A) of Public Law 110–90 until FY 2013. As discussed earlier, this delay in implementation resulted in overstated payment rates in FYs 2010, 2011, and 2012. The resulting overpayments could not have been recovered under Public Law 110–90. Similar to the adjustments authorized under section 7(b)(1)(B) of Public Law 110–90, the adjustment required under section 631 of the ATRA is a one-time recoupment of a prior overpayment, not a permanent reduction to payment rates. Therefore, any adjustment made to reduce rates in one year would eventually be offset by a positive adjustment, once the necessary amount of overpayment is recovered. As we stated in the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR 27504 through 27505), our actuaries estimate that a ¥9.3 percent adjustment to the standardized amount would be necessary if CMS were to fully recover the $11 billion recoupment required by section 631 of the ATRA in FY 2014. In its March 2013 ‘‘Report to Congress: Medicare Payment Policy,’’ MedPAC estimates that a ¥2.4 percent adjustment made in FY 2014, and not removed until FY 2018, also would recover the required recoupment amount. It is often our practice to delay or phase in rate adjustments over more than one year, in order to moderate the effect on rates in any one year. Therefore, consistent with the policies that we have adopted in many similar cases, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27504 through 27505), we proposed a ¥0.8 percent recoupment adjustment to the standardized amount in FY 2014. As we stated in the proposed rule, we estimate that this level of adjustment would recover up to $0.96 billion in FY 2014, with at least $10.04 billion remaining to be recovered by FY 2017. If adjustments of approximately ¥0.8 percent are implemented in FYs 2014, 2015, 2016, and 2017, using standard inflation factors, we estimate that the entire $11 billion would be accounted for by the end of the statutory 4-year timeline. As estimates of any future adjustments are VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 subject to slight variations in total savings, we did not propose specific adjustments for FYs 2015, 2016, or 2017 at that time. We stated that we believe that this level of adjustment for FY 2014 is a reasonable and fair approach that satisfies the requirements of the statute while mitigating extreme annual fluctuations in payment rates. In addition, we again noted that this ¥0.8 percent recoupment adjustment, and future adjustments under this authority, will be eventually offset by an equivalent positive adjustment once the full $11 billion recoupment requirement has been realized. We discuss the comments we received on this proposal and our final policy for FY 2014 in the section below. 7. Additional Prospective Adjustments for the MS–DRG Documentation and Coding Effect Through FY 2010 Authorized Under Section 1886(d)(3)(A)(vi) of the Act Section 1886(d)(3)(A)(vi) of the Act authorizes adjustments to the average standardized amounts if the Secretary determines such adjustments to be necessary for any subsequent fiscal years in order to eliminate the effect of coding or classification changes that do not reflect real changes in case-mix. After review of comments and recommendations received in a FY 2012 public comment letter from MedPAC (available on the Internet at: https:// www.medpac.gov/documents/06172011 _FY12IPPS_MedPAC_COMMENT.pdf), we analyzed claims data in FY 2010 to determine whether any additional adjustment would be appropriate to ensure that the introduction of MS– DRGs was implemented in a budget neutral manner. We analyzed FY 2010 data on claims paid through December 2011 using the same claims-based methodology as described in previous rulemaking (73 FR 43768 and 43775). We determined a total additional prospective documentation and coding effect of 0.8 percent through FY 2010 and found that this effect was present for both IPPS hospitals paid with the standardized amount and IPPS hospitals paid using their hospital-specific payment rates. In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27890), we proposed an additional ¥0.8 percent prospective adjustment to the standardized amount to account for this effect. We indicated that this additional prospective adjustment of ¥0.8 percent, when combined with the other prospective MS–DRG documentation and coding adjustments already made or proposed would eliminate the future effect of MS–DRG documentation and PO 00000 Frm 00021 Fmt 4701 Sfmt 4700 50515 coding that did not reflect real changes in case-mix for discharges occurring through FY 2010. As discussed in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53278 through 53280), numerous commenters objected to the CMS proposal to make an adjustment to account for payment increases due to MS–DRG documentation and coding that did not reflect real changes in casemix for discharges occurring through FY 2010. Many commenters continued to assert that our estimates of documentation and coding were overstated, and could be explained by other factors. These commenters also focused on part of the analysis provided by MedPAC in its FY 2012 public comment letter indicating that a slightly smaller additional prospective adjustment of ¥0.55 percent rather than ¥0.8 percent might be required to offset the cumulative MS–DRG documentation and coding effect through FY 2010. Specifically, while MedPAC supported the overall methodology, it suggested that it was possible that changes in documentation and coding to optimize payments under the MS–DRG GROUPERs and relative weights may have resulted in slightly less than optimal payments under the FY 2007 GROUPER and relative weights (the denominator of the documentation and coding change estimate). Many commenters requested that, given the MedPAC analysis, if CMS were to apply an additional prospective adjustment to the MS–DRG documentation and coding effect through FY 2010, it should subtract 0.25 percentage points from its estimate, for an adjustment of ¥0.55 percent. After considering the public comments, we recognized that the issue of the estimate to use for the cumulative MS–DRG documentation and coding effect through FY 2010 may merit further consideration. Therefore, as discussed in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53278 through 53280), we decided not to finalize the proposed ¥0.8 percent adjustment to the standardized amount and the hospital-specific rate until more analysis could be completed. CMS is continuing to consider whether MedPAC’s recommendation that an adjustment to offset the cumulative documentation and coding effects through FY 2010 under section 1886(d)(3)(A)(vi) of the Act is appropriate and supported by a review of the claims data. After further consideration of the MedPAC analysis and the request by many public commenters, if we were to apply an additional prospective adjustment for the cumulative MS–DRG documentation E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50516 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations and coding effect through FY 2010, we believe the most appropriate additional adjustment is ¥0.55 percent. As discussed in section II.D.6. of the preamble of the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27505), because we proposed a ¥0.8 percent recoupment adjustment, we did not propose a prospective adjustment in FY 2014 for the cumulative MS–DRG documentation and coding effect through FY 2010. However, we solicited public comments as to whether any portion of the proposed ¥0.8 percent recoupment adjustment should be reduced and instead applied to a prospective adjustment for the cumulative MS–DRG documentation and coding effect through FY 2010. For example, we could apply a ¥0.25 percent recoupment adjustment, and a ¥0.55 prospective adjustment, for a total FY 2014 adjustment of ¥0.8 percent. Reducing the recoupment adjustment in FY 2014 would require relatively larger adjustments for FYs 2015, 2016, and/or 2017, but making a prospective adjustment of ¥0.55 percent would eliminate future payment increases due to MS–DRG documentation and coding that did not reflect real changes in case-mix for discharges occurring through FY 2010. As we discuss above, because the documentation and coding effect through FY 2010 was found for both IPPS hospitals paid with the standardized amount and IPPS hospitals paid under their hospital-specific payment rate, if we were to apply a prospective adjustment to remove this effect, we also would apply such an adjustment to the hospital-specific payment rate, using the Secretary’s broad authority under section 1886(d)(5)(I)(i) of the Act (77 FR 53276 through 53277). Therefore, if we attribute a portion of the ¥0.8 percent adjustment for FY 2014 to the prospective adjustment, we also would make appropriate adjustments to the hospital-specific payment rates. Puerto Rico-specific rates would not be affected, as we previously found no significant additional MS–DRG documentation and coding effect for FY 2010 that would warrant any additional adjustment to the Puerto Rico-specific rate (77 FR 53279). Comment: The majority of commenters were satisfied with CMS’ proposal to phase in the $11 billion adjustment required under section 631 of the ATRA. Commenters encouraged CMS to continue to implement the required adjustment gradually through FY 2017. Response: We concur with commenters that a gradual VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 implementation of this adjustment is the most prudent course of action. We believe that the proposed level of adjustment for FY 2014 is a reasonable and fair approach that satisfies the requirements of the statute while mitigating extreme annual fluctuations in payment rates. Therefore, we are finalizing a ¥0.8 percent documentation and coding adjustment to the standardized amount for FY 2014. Comment: Many commenters, including a national hospital association, were appreciative that CMS has reduced its original estimate of FY 2010 documentation and coding effects from 0.8 percent to 0.55 percent and believed that the 0.8 estimate was overstated. However, some commenters contended that this overstatement was not limited to FY 2010 alone. These commenters, while continuing to fundamentally disagree with the validity of underlying methodology employed by CMS, as previously described in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53274–53275), requested that a prospective adjustment for any documentation and coding effect determined to have occurred in FY 2010 be partially or wholly offset by any similar overstatement that occurred in the adjustments made for documentation and coding effects that occurred during FY 2008 and FY 2009. Response: In the proposed rule (78 FR 27505), we acknowledged that, after further consideration of the MedPAC analysis of claims data, if we were to apply an additional prospective adjustment for the cumulative MS–DRG documentation and coding effect through FY 2010, we believe the most appropriate additional adjustment is ¥0.55 percent, rather than the adjustment proposed in prior rulemaking of ¥0.8 percent. With respect to our previously finalized recoupment adjustments for documentation and coding effects in FY 2008 and FY 2009, however, we note, as discussed earlier, that section 7(b)(1)(B) of Public Law 110–90 required the Secretary to make the FY 2008 and FY 2009 recoupment adjustments based on estimates and also required that the Secretary make these adjustments for discharges occurring only in FYs 2010, 2011, and/or 2012. The Secretary made the FY 2008 and FY 2009 recoupment adjustments to the standardized amounts for discharges occurring in FY 2011 and FY 2012 based on the best estimates available at the time. We also note that section 631 of the ATRA states that the $11 billion recoupment figure ‘‘represents the amount of the increase in aggregate payments from fiscal years 2008 through 2013 for which an PO 00000 Frm 00022 Fmt 4701 Sfmt 4700 adjustment was not previously applied.’’ Any adjustment to the FY 2008 and FY 2009 recoupment, therefore, is subsumed in the $11 billion recoupment figure. Comment: Many commenters requested that CMS not apply any of the proposed ¥0.8 percent recoupment adjustment as a prospective adjustment to account for any MS–DRG documentation and coding effect that occurred in FY 2010. In addition to overall concerns with CMS’ methodology, commenters indicated that any prospective adjustment in addition to the recoupment required by section 631 of the ATRA would be too financially burdensome, and would be contrary to the agency’s stated goal of mitigating extreme fluctuations in payment rates. MedPAC recommended that CMS implement the full ¥0.55 percent prospective adjustment for FY 2010 documentation and coding in FY 2014, reducing the FY 2014 recoupment adjustment to ¥0.25 percent. While MedPAC acknowledged that such an action would require relatively larger adjustments in FYs 2015 through 2017 to satisfy the $11 billion recoupment requirement, it pointed out that further delay of FY 2010 documentation and coding adjustments would lead to overpayments in future fiscal years, and that, in general, prospective adjustments should be prioritized over retroactive adjustments. Response: We have considered all of the comments received. While we are firmly committed to ensuring that changes in documentation and coding do not lead to increases in payments, we have decided not to apply a prospective adjustment to account for any documentation and coding effect that occurred in FY 2010 at this time. We note that the $11 billion recoupment required by section 631 of the ATRA will require additional documentation and coding adjustments between FY 2014 and FY 2017. If we were to apply a ¥0.55 percent prospective documentation and coding adjustment for FY 2014, we would be concerned that additional larger adjustments will be needed in future years to recoup the $11 billion required by ATRA. We will continue to take into account public input and any future legislation on this issue. Comment: Several commenters opposed the implementation of any prospective adjustment to the hospitalspecific rate. Similar to comments submitted in response to the FY 2013 IPPS/LTCH PPS proposed rule, as summarized in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53277), E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations commenters stated that the broad authority granted to the Secretary in section 1886(d)(5)(I)(i) of the Act is not so broad as to extend the scope of a legislative directive that was specifically limited to hospitals paid under a prospective payment system. Commenters also contended that the plain language of section 7(b)(1) of Public Law 110–90, as amended by the ATRA, provides clear instructions that the documentation and coding adjustment is only intended to apply to the standardized amounts. Response: We continue to disagree that we do not have the authority to make prospective documentation and coding adjustments to the hospitalspecific rates. We do not believe that the language in section 7(b)(1) of Public Law 110–90, as amended by the ATRA, or in section 1886(d)(3)(A)(iv) of the Act creates a limit on the broad authority granted under section 1886(d)(5)(I) of the Act. We have discussed the basis for applying any such prospective adjustment to the hospital-specific rate in our prior rules, beginning with the FY 2009 IPPS/LTCH PPS final rule (73 FR 48448). We also note that the proposed ¥0.8 percent recoupment adjustment for FY 2014 pursuant to section 631 of ATRA, which we are finalizing in this final rule, applies only to the standardized amount and not to the hospital-specific rates. Section 631 of the ATRA does not provide authority for a recoupment adjustment to the hospital-specific rate. However, as discussed in the FY 2010 IPPS/LTCH final rule (74 FR 24098), the FY 2011 IPPS/LTCH PPS final rule (75 FR 50067 through 50071), the FY 2012 IPPS/LTCH PPS (76 FR 51498 through 51499), and the FY 2013 IPPS/LTCH PPS final rule (75 FR 53277 through 53278), we continue to believe that any prospective documentation and coding adjustments applied to the standardized amount should also be similarly applied to the hospital-specific rate. As discussed in the previous response, we are not making any prospective adjustment in FY 2014 to account for FY 2010 documentation and coding effects. Therefore, no documentation and coding adjustment will be applied to the hospital-specific rate in FY 2014. mstockstill on DSK4VPTVN1PROD with RULES6 E. Refinement of the MS–DRG Relative Weight Calculation 1. Background Beginning in FY 2007, we implemented relative weights for DRGs based on cost report data instead of charge information. We refer readers to the FY 2007 IPPS final rule (71 FR 47882) for a detailed discussion of our VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 final policy for calculating the costbased DRG relative weights and to the FY 2008 IPPS final rule with comment period (72 FR 47199) for information on how we blended relative weights based on the CMS DRGs and MS–DRGs. As we implemented cost-based relative weights, some public commenters raised concerns about potential bias in the weights due to ‘‘charge compression,’’ which is the practice of applying a higher percentage charge markup over costs to lower cost items and services, and a lower percentage charge markup over costs to higher cost items and services. As a result, the cost-based weights would undervalue high-cost items and overvalue low-cost items if a single CCR is applied to items of widely varying costs in the same cost center. To address this concern, in August 2006, we awarded a contract to the Research Triangle Institute, International (RTI) to study the effects of charge compression in calculating the relative weights and to consider methods to reduce the variation in the cost-to-charge ratios (CCRs) across services within cost centers. For a detailed summary of RTI’s findings, recommendations, and public comments that we received on the report, we refer readers to the FY 2009 IPPS/LTCH PPS final rule (73 FR 48452 through 48453). In addition, we refer readers to RTI’s July 2008 final report titled ‘‘Refining Cost to Charge Ratios for Calculating APC and MS–DRG Relative Payment Weights’’ (https://www. rti.org/reports/cms/HHSM-500-20050029I/PDF/Refining_Cost_to_Charge _Ratios_200807_Final.pdf). In the FY 2009 IPPS/LTCH PPS final rule (73 FR 48458 through 48467), in response to the RTI’s recommendations concerning cost report refinements, we discussed our decision to pursue changes to the cost report to split the cost center for Medical Supplies Charged to Patients into one line for ‘‘Medical Supplies Charged to Patients’’ and another line for ‘‘Implantable Devices Charged to Patients.’’ We acknowledged, as RTI had found, that charge compression occurs in several cost centers that exist on the Medicare cost report. However, as we stated in the FY 2009 IPPS/LTCH PPS final rule, we focused on the CCR for Medical Supplies and Equipment because RTI found that the largest impact on the MS–DRG relative weights could result from correcting charge compression for devices and implants. In determining the items that should be reported in these respective cost centers, we adopted the commenters’ recommendations that hospitals should use revenue codes established by the PO 00000 Frm 00023 Fmt 4701 Sfmt 4700 50517 AHA’s National Uniform Billing Committee to determine the items that should be reported in the ‘‘Medical Supplies Charged to Patients’’ and the ‘‘Implantable Devices Charged to Patients’’ cost centers. Accordingly, a new subscripted line for ‘‘Implantable Devices Charged to Patients’’ was created in July 2009. This new subscripted cost center has been available for use for cost reporting periods beginning on or after May 1, 2009. As we discussed in the FY 2009 IPPS final rule (73 FR 48458) and in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68519 through 68527), in addition to the findings regarding implantable devices, RTI also found that the costs and charges of computed tomography (CT) scans, magnetic resonance imaging (MRI), and cardiac catheterization differ significantly from the costs and charges of other services included in the standard associated cost center. RTI also concluded that both the IPPS and the OPPS relative weights would better estimate the costs of those services if CMS were to add standard cost centers for CT scans, MRIs, and cardiac catheterization in order for hospitals to report separately the costs and charges for those services and in order for CMS to calculate unique CCRs to estimate the costs from charges on claims data. In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through 50080), we finalized our proposal to create standard cost centers for CT scans, MRIs, and cardiac catheterization, and to require that hospitals report the costs and charges for these services under new cost centers on the revised Medicare cost report Form CMS–2552–10. (We refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through 50080) for a detailed discussion of the reasons for the creation of standard cost centers for CT scans, MRIs, and cardiac catheterization.) The new standard cost centers for CT scans, MRIs, and cardiac catheterization are effective for cost reporting periods beginning on or after May 1, 2010, on the revised cost report Form CMS–2552–10. In the FY 2009 IPPS final rule (73 FR 48468), we stated that, due to what is typically a 3-year lag between the reporting of cost report data and the availability for use in ratesetting, we anticipated that we might be able to use data from the new ‘‘Implantable Devices Charged to Patients’’ cost center to develop a CCR for ‘‘Implantable Devices Charged to Patients’’ in the FY 2012 or FY 2013 IPPS rulemaking cycle. However, as noted in the FY 2010 IPPS/ RY 2010 LTCH PPS final rule (74 FR E:\FR\FM\19AUR2.SGM 19AUR2 50518 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 43782), due to delays in the issuance of the revised cost report Form CMS 2552– 10, we determined that a new CCR for ‘‘Implantable Devices Charged to Patients’’ might not be available before FY 2013. Similarly, when we finalized the decision in the FY 2011 IPPS/LTCH PPS final rule to add new cost centers for CT scans, MRIs, and cardiac catheterization, we explained that data from any new cost centers that may be created will not be available until at least 3 years after they are first used (75 FR 50077). In preparation for the FY 2012 IPPS rulemaking, we checked the availability of data in the ‘‘Implantable Devices Charged to Patients’’ cost center on the FY 2009 cost reports, but we did not believe that there was a sufficient amount of data from which to generate a meaningful analysis in this particular situation. Therefore, we did not propose to use data from the ‘‘Implantable Devices Charged to Patients’’ cost center to create a distinct CCR for ‘‘Implantable Devices Charged to Patients’’ for use in calculating the MS–DRG relative weights for FY 2012. We indicated that we would reassess the availability of data for the ‘‘Implantable Devices Charged to Patients’’ cost center for the FY 2013 IPPS/LTCH PPS rulemaking cycle and, if appropriate, we would propose to create a distinct CCR at that time. During the development of the FY 2013 IPPS/LTCH PPS proposed and final rules, hospitals were still in the process of transitioning from the previous cost report Form CMS–2552– 96 to the new cost report Form CMS– 2552–10. Therefore, we were able to access only those cost reports in the FY 2010 HCRIS with fiscal year begin dates on or after October 1, 2009, and before May 1, 2010; that is, those cost reports on Form CMS–2552–96. Data from the Form CMS–2552–10 cost reports were not available because cost reports filed on the Form CMS–2552–10 were not accessible in the HCRIS. Further complicating matters was that, due to additional unforeseen technical difficulties, the corresponding information regarding charges for implantable devices on hospital claims was not yet available to us in the MedPAR file. Without the breakout in the MedPAR file of charges associated with implantable devices to correspond to the costs of implantable devices on the cost report, we believed that we had no choice but to continue computing the relative weights with the current CCR that combines the costs and charges for supplies and implantable devices. We stated in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53281 through 53283) that when we do have the necessary data for supplies and implantable devices on the claims in the MedPAR file to create distinct CCRs for the respective cost centers for supplies and implantable devices, we hoped that we would also have data for an analysis of creating distinct CCRs for CT scans, MRIs, and cardiac catheterization, which could then be finalized through rulemaking. 2. Discussion of Proposed and Final Policy for FY 2014 As we stated in the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR 27506– 27507), to calculate the proposed FY 2014 MS–DRG relative weights, we proposed to continue our current methodology of using the two most recent data sources: The December 2012 update of the FY 2012 MedPAR file as the claims data source and the December 2012 update of FY 2011 HCRIS as the cost data source. At the time of the development of the proposed rule, we had a substantial number of hospitals completing all, or some, of these new cost centers on the FY 2011 Medicare cost reports, compared to prior years. Specifically, using the December 2012 update of FY 2011 HCRIS, we were able to calculate a valid implantable device CCR for 2,285 IPPS hospitals, a valid MRI CCR for 1,402 IPPS hospitals, a valid CT scan CCR for 1,470 IPPS hospitals, and a valid cardiac catheterization CCR for 1,022 IPPS hospitals. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53281), we stated that prior to proposing to create these CCRs, we would first thoroughly analyze and determine the impacts of the data, and that distinct CCRs for these new cost centers would be used in the calculation of the relative weights only if they were first finalized through rulemaking. Final FY 2013 15 CCRs mstockstill on DSK4VPTVN1PROD with RULES6 Group Routine days .................................................................................................................... Intensive days .................................................................................................................. Drugs ............................................................................................................................... Supplies & Equipment ..................................................................................................... Implantable Devices ........................................................................................................ Therapy Services ............................................................................................................. Laboratory ........................................................................................................................ VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 PO 00000 In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27507), we stated that we believe that there is a sufficient amount of data in the FY 2011 cost reports from which to generate a meaningful analysis of using distinct CCRs for implantable devices, MRIs, CT scans, and cardiac catheterization. In addition, the corresponding charge data on hospital claims for implantable devices, MRIs, CT scans, and cardiac catheterization are available in the FY 2012 MedPAR file. Therefore, in the proposed rule, we provided various data analyses based on comparison of the FY 2014 relative weights computed using 15 CCRs, as we have done in the past, and the FY 2014 relative weights computed using 19 CCRs, with distinct CCRs for implantable devices, MRIs, CT scans, and cardiac catheterization. Specifically, rather than having a single CCR for ‘‘Supplies and Equipment’’ which includes low-cost supplies and high-cost implantable devices, we proposed that a distinct CCR would be carved out of the ‘‘Supplies and Equipment’’ CCR, leaving one CCR for ‘‘Supplies’’ and one CCR for ‘‘Implantable Devices.’’ Regarding the Radiology CCR, which currently is comprised of general radiology ancillary services and MRIs and CT scans, we proposed that the costs for MRIs and CT scans would be separated from general radiology, creating two distinct CCRs, one for MRIs and one for CT scans, respectively. Finally, by separating the costs of cardiac catheterization out of the CCR for general cardiology, we proposed that a distinct CCR would be created for cardiac catheterization. Thus, by breaking out these 4 additional CCRs, the number of CCRs used to calculate the relative weights would increase from 15 to 19. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27507), for comparison purposes, we included the following table to show the final FY 2013 CCRs, the potential FY 2014 CCRs computed with the existing 15 cost centers, and the potential FY 2014 CCRs computed with 19 cost centers, with 4 new CCRs for implantable devices, MRIs, CT scans, and cardiac catheterization. Frm 00024 Fmt 4701 Sfmt 4700 Potential FY 2014 15 CCRs 0.514 0.442 0.199 0.335 n/a 0.370 0.143 E:\FR\FM\19AUR2.SGM 0.502 0.423 0.193 0.327 n/a 0.355 0.133 19AUR2 Potential FY 2014 19 CCRs 0.502 0.423 0.193 0.293 0.361 0.355 0.133 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Operating Room .............................................................................................................. Cardiology ........................................................................................................................ Cardiac Catheterization ................................................................................................... Radiology ......................................................................................................................... MRI .................................................................................................................................. CT Scans ......................................................................................................................... Emergency Room ............................................................................................................ Blood ................................................................................................................................ Other Services ................................................................................................................. Labor & Delivery .............................................................................................................. Inhalation Therapy ........................................................................................................... Anesthesia ....................................................................................................................... In order to model the effects on the relative weights in medical MS–DRGs versus surgical MS–DRGs, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27507–8), we compared a set of relative weights calculated with 15 CCRs and 19 CCRs. Based on the data available at the time of the development of the proposed rule, overall, if the 19 CCRs would be used to calculate the proposed relative weights for FY 2014, relative weights for medical MS–DRGs would be expected to decrease by approximately 1.1 percent, and those for surgical MS–DRGs would be expected to increase by approximately 1.2 percent. In addition, as shown in the table below included in the FY 2014 IPPS/LTCH MDC 08 05 01 06 04 Potential FY 2014 15 CCRs Final FY 2013 15 CCRs Group 0.238 0.145 n/a 0.136 n/a n/a 0.226 0.389 0.397 0.450 0.189 0.109 0.225 0.134 n/a 0.128 n/a n/a 0.207 0.371 0.399 0.445 0.187 0.120 MS–DRG relative weights would likely occur for MS–DRGs associated with traumatic head injury and concussion, which are high users of CT scanning and MRI services. We included in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27508) the table below, which showed, based on data available at the time of Type 0.225 0.132 0.135 0.170 0.091 0.045 0.207 0.371 0.399 0.445 0.187 0.120 Estimated percentage change within MDC Musculoskeletal System And Connective Tissue ............................................................................................ Circulatory System ........................................................................................................................................... Nervous System ............................................................................................................................................... Digestive System ............................................................................................................................................. Respiratory System .......................................................................................................................................... In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27508), we stated that the largest estimated increase in MS–DRG relative weights would likely occur for MS–DRGs associated with cardiac catheterization and implantable cardiac devices. We also stated that the largest estimated reductions in MS–DRG Potential FY 2014 19 CCRs PPS proposed rule (78 FR 27508), at the MDC level, we expected payments to increase by approximately 0.64 percent (0.39+0.25) within orthopedic and cardiac MDCs, with most of the reductions in payment resulting to the medical MS–DRGs in the nervous system, digestive system, and respiratory system MDCs. Description ...................... ...................... ...................... ...................... ...................... 50519 the development of the proposed rule, the top 10 (nonlabor and delivery) MS– DRGs that we predicted would experience the largest increases and decreases in relative weights through use of the expanded 19 CCRs, as compared to previous 15 CCRs. Potential relative weight with 15 CCRs Title 0.39 0.25 ¥0.16 ¥0.10 ¥0.08 Potential relative weights with 19 CCRs Percentage change MS–DRGS THAT WOULD EXPERIENCE THE LARGEST DECREASE IN RELATIVE WEIGHT MED .......................... MED .......................... 087 ............................. MED .......................... 965 ............................. mstockstill on DSK4VPTVN1PROD with RULES6 090 ............................. 084 ............................. MED .......................... 185 089 123 343 ............................. ............................. ............................. ............................. MED .......................... MED .......................... MED .......................... SURG ........................ 053 ............................. 066 ............................. MED .......................... MED .......................... VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Concussion without CC/MCC ....................... Traumatic Stupor & Coma, Coma >1 Hour without CC/MCC. Traumatic Stupor & Coma, Coma <1 Hour without CC/MCC. Other Multiple Significant Trauma without CC/MCC. Major Chest Trauma without CC/MCC ........ Concussion with CC ..................................... Neurological Eye Disorder ........................... Appendectomy without Complicated Principal Diagnosis without CC/MCC. Spinal Disorders & Injuries without CC/MCC Intracranial Hemorrhage or Cerebral Infarction without CC/MCC. PO 00000 Frm 00025 Fmt 4701 Sfmt 4700 0.7614 0.9137 0.7013 0.8516 ¥7.9 ¥6.8 0.7899 0.7369 ¥6.7 1.0450 0.980 ¥6.1 0.7281 0.9959 0.7355 0.9880 0.6845 0.9366 0.6920 0.9517 ¥6.0 ¥6.0 ¥5.9 ¥5.7 0.9355 0.8034 0.8825 0.7579 ¥5.7 ¥5.7 E:\FR\FM\19AUR2.SGM 19AUR2 50520 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations MS–DRG Type Potential relative weight with 15 CCRs Title Potential relative weights with 19 CCRs Percentage change MS–DRGS THAT WOULD EXPERIENCE THE LARGEST INCREASE IN RELATIVE WEIGHT SURG ........................ 455 ............................. SURG ........................ 484 ............................. SURG ........................ 225 ............................. SURG ........................ 223 ............................. SURG ........................ 458 ............................. SURG ........................ 245 849 946 227 mstockstill on DSK4VPTVN1PROD with RULES6 454 ............................. SURG ........................ MED .......................... MED .......................... SURG ........................ ............................. ............................. ............................. ............................. During development of the FY 2014 proposed rule, after computing the analyses described above by comparing both sets of MS–DRG relative weights computed with FY 2011 cost report data, we revisited RTI’s July 2008 final report. We noted that the impacts on relative weight and at the MDC level are generally consistent with those estimated by RTI in its modeling. RTI found that disaggregating the CCRs for medical supplies and devices would have the most impact on reducing charge compression, and that the largest impact was for MS–DRG 227. Similarly, as shown in the chart above, we estimated that the potential relative weight for MS–DRG 227 would experience the largest increase, 6.7 percent. Cardiac implants and spinal fusion procedures accounted for most of the 10 MS–DRGs with the largest incremental increases. In addition, RTI’s July 2008 final report (pages 103 through 107) indicates that among the largest expected reductions are the MS– DRG relative weights for MS–DRGs associated with traumatic head injury and concussion, which are high users of CT scanning and MRI services. RTI’s analyses were highly predictive for many of the MS–DRGs most sensitive to the effects of charge compression. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27508), we indicated that as we stated in prior rulemaking (77 FR 53281 through 53283), once we determined that cost report data were available for analysis, we would propose, if appropriate, to use the distinct CCRs described above in the calculation of the MS–DRG relative weights. We believed that the analytic VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Combined Anterior/Posterior Spinal Fusion with CC. Combined Anterior/Posterior Spinal Fusion Without CC/MCC. Major Joint & Limb Reattachment Procedure of Upper Extremity without CC/MCC. Cardiac Defibrillator Implant with Cardiac Catheterization without AMI/HF/Shock without MCC. Cardiac Defibrillator Implant with Cardiac Catheterization with AMI/HF/Shock without MCC. Spinal Fusion Except Cervical with Spinal Curve/Malignant/Infection OR 9+ Fusion without CC/MCC. AICD Generator Procedures ........................ Radiotherapy ................................................ Rehabilitation without CC/MCC .................... Cardiac Defibrillator Implant without Cardiac Catheterization without MCC. findings described above using the FY 2011 cost report data and FY 2012 claims data supported our original decision to break out and create new cost centers for implantable devices, MRIs, CT scans, and cardiac catheterization, and we saw no reason to further delay proposing to implement the CCRs of each of these cost centers. Therefore, beginning in FY 2014, we proposed to calculate the MS–DRG relative weights using 19 CCRs, creating distinct CCRs from cost report data for implantable devices, MRIs, CT scans, and cardiac catheterization. We welcomed public comments on the proposal and the impacts that it may have. We referred readers to section VI.C. of Appendix A of the proposed rule for the overall IPPS operating impact of our proposal, which modeled payments to various hospital types using relative weights developed from 19 CCRs (as compared to the previous 15 CCRs). In addition, as part of the FY 2014 IPPS/LTCH PPS proposed rule, in addition to providing Table 5, which listed the proposed MS–DRGs and their relative weights using 19 CCRs (available on the CMS Web site at: https://www.cms.hhs.gov/ AcuteInpatientPPS/01_overview.asp; click on the link on the left side of the screen titled ‘‘FY 2014 IPPS Proposed Rule Home Page’’ or ‘‘Acute Inpatient— Files for Download’’), we provided a separate table that listed all MS–DRGs and their relative weights if computed using 15 CCRs (available at the same CMS Web site cited above). We believed that these two formats would allow readers to compare our proposal to PO 00000 Frm 00026 Fmt 4701 Sfmt 4700 7.6399 8.0563 5.5 5.9862 6.3133 5.5 2.1211 2.2380 5.5 5.6298 5.9530 5.7 6.0956 6.4482 5.8 4.8794 5.1630 5.8 4.4627 1.3423 1.1295 5.2193 4.7320 1.4258 1.2024 5.5714 6.0 6.2 6.5 6.7 calculate the MS–DRG relative weights using 19 CCRs with the relative weights of MS–DRGs if computed using 15 CCRs. Comment: Several commenters noted that CMS concluded that there is sufficient data in the FY 2011 cost reports to support a meaningful analysis of using distinct CCRs, but did not share how it arrived at that conclusion. In particular, the commenters were unclear if 1,022 hospitals reporting cardiac catheterization are a representative sample, because they make up less than a third of the total hospitals. The commenters urged CMS to clarify how it determined the level of reporting on these new cost centers is sufficient. Response: In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27507), we stated that, as compared to previous years, we have a substantial number of hospitals completing all, or some, of the MRI, CT scan, and cardiac catheterization cost centers on the FY 2011 Medicare cost reports. For the FY 2014 IPPS/LTCH PPS proposed rule, we used cost report data from the December 2012 update of the FY 2011 HCRIS, and found that ‘‘we were able to calculate a valid implantable device CCR for 2,285 IPPS hospitals, a valid MRI CCR for 1,402 IPPS hospitals, a valid CT scan CCR for 1,470 IPPS hospitals, and a valid cardiac catheterization CCR for 1,022 IPPS hospitals (78 FR 27507).’’ As part of our methodology for calculating the proposed relative weights, we first apply various trims to the cost report data of all IPPS hospitals (we refer readers to the description of the calculation of the relative weights in the FY 2014 IPPS LTCH PPS proposed rule E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations (78 FR 27529 through 27530)). After applying these data trims, the CCRs in the proposed rule were based on data from 2,697 remaining IPPS hospitals. Therefore, our use of the term ‘‘valid’’ CCRs in the FY 2014 proposed rule meant that these CCRs were the ones associated with the 2,697 IPPS hospitals remaining after the usual trims were applied. Although the number of hospitals with valid cardiac catheterization CCRs is less than the number of hospitals with ‘‘valid’’ implantable device, MRI, or CT scan CCRs, it still represented about 38 percent of the available IPPS hospitals after application of our usual data trims (that is, 1,022/2,697 = .38). We note that many smaller hospitals do not separately report cardiac catheterization costs and charges. (This issue was raised in the FY 2011 IPPS/LTCH PPS final rule, (75 FR 50078), where, in recognition of the fact that not all hospitals separately account for cardiac catheterization costs and charges, we stated that hospitals that do not currently maintain distinct departments or accounts in their internal accounting systems for CT scanning, MRI, or cardiac catheterization are not required to create distinct departments or accounts.) Given that not all hospitals would even have a cardiac catheterization CCR, we considered 38 percent to be a substantial number, albeit, not a majority, of IPPS hospitals, from which to base our FY 2014 proposal to calculate the relative weights with a distinct cardiac catheterization CCR. We reviewed our data analyses from previous years and note that typically, because the proposed CCRs for a given year are based on cost report data from the December update of the applicable HCRIS year, the proposed CCRs are based on data from less than 3,000 IPPS hospitals. Then, once the data for each final rule are available, which are derived from the subsequent March update of the applicable HCRIS year, the final CCRs are typically based on cost report data of more than 3,000 IPPS hospitals. This is the case for FY 2014 as well. Although the proposed CCRs were based on data of 2,697 IPPS hospitals, the March 2013 update of FY 2011 HCRIS yields: 3,207 IPPS hospitals (after various trims are applied—we refer readers to the description of the relative weight calculation in section II.H. of the preamble of this final rule); 2,707 IPPS hospitals with an implantable device CCR; 1,717 IPPS hospitals with an MRI CCR; 1,785 IPPS hospitals with a CT scan CCR; and 1,263 IPPS hospitals with a cardiac VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 catheterization CCR. For this FY 2014 final rule, although the number of hospitals with cardiac catheterization CCRs is less than the number of hospitals with ‘‘valid’’ implantable device, MRI, or CT scan CCRs, it still represents approximately 39 percent of the available IPPS hospitals after application of our usual data trims (that is, 1,263/3,207 = .39). Accordingly, we believe it is appropriate to use the cardiac catheterization CCR in the calculation of the FY 2014 relative weights. Comment: Commenters were generally supportive of the proposals to implement additional CCRs for implantable devices and cardiac catheterization. However, many commenters requested that CMS ‘‘reconsider the impact of’’ distinct CCRs for MRIs and CT scans ‘‘before adopting them.’’ Various commenters representing the medical imaging industry opposed implementation of distinct MRI and CT scan CCRs at this point, expressing concern that doing so would result in very low CCRs for these services because of hospital cost reporting practices that allocate capital costs for MRIs and CT scan across the entire hospital, rather than to the appropriate individual radiology cost centers. Specifically, the commenters reported that some hospitals currently use an imprecise ‘‘square footage’’ allocation methodology for the costs of large moveable equipment like CT scan and MRI machines. They indicated that while CMS recommends using two alternative allocation methods, ‘‘direct assignment’’ or ‘‘dollar value,’’ as a more accurate methodology for directly assigning equipment costs, industry analysis suggests that approximately only half of the reported cost centers for CT scan and MRI rely on these preferred methodologies. The commenters expressed concern that ‘‘square footage’’ allocation results in CCRs that ‘‘lack face validity,’’ because the proposed CCRs for CT scans and MRIs are less than the proposed CCR for general radiology, inaccurately reflecting the higher resources used for MRIs and CT scans relative to the less expensive plain film x-rays. Commenters asserted that more time is needed by hospitals to modify their cost reporting practices, and urged CMS to explore how to develop more accurate data without unduly increasing the complexity of the cost report. Some other commenters suggested that if CMS were to finalize the new CCRs, CMS should only use cost report data that meet minimum data quality standards. For example, these commenters recommended that PO 00000 Frm 00027 Fmt 4701 Sfmt 4700 50521 CMS adopt the following standards for assuring validity of CT and MRI cost data: • Check that the hospital uses direct assignment or dollar value allocation of capital costs. • Check that the hospital’s CT scan and MRI cost centers each have total costs of at least $250,000. • Check that there is evidence that the hospital reclassified overhead costs from the diagnostic radiology cost center to the CT scan and/or MRI cost centers. A different commenter’s analysis used cost report data from hospitals that employ ‘‘procedural accounting,’’ also known as ‘‘activity-based costing,’’ which the commenter stated is a more accurate way to determine costs. The commenter’s analysis showed results that were in ‘‘close agreement’’ with CMS’ proposed CCRs, giving ‘‘some comfort that the new cost centers are capturing costs as intended.’’ Nevertheless, the commenter urged caution before proceeding, noting large swings in certain DRG relative weights, and that many of the negatively affected DRGs are trauma related, and many of the positively affected DRGs are cardiac and orthopedic related. The commenter was concerned that specific types of hospitals have more to gain or lose under the policy based on their mix of services, and CMS should consider whether finalizing 19 CCRs ‘‘would unduly incent volume growth’’ in certain procedures. The commenter requested that CMS implement a ‘‘dampening policy’’ or a 70/30 transition blend for FY 2014 to give hospitals an opportunity to budget for such shifts and avoid unintended consequences. Although many commenters expressed concern about the impact of implementing distinct CCRs for MRIs and CT scans under the IPPS, they noted that since MS–DRGs are bundled services, only a fraction of the negative impact would be manifested in the IPPS MS–DRGs, and that payment rates for the Ambulatory Patient Classifications (APCs) under the Hospital Outpatient Prospective Payment System (OPPS) would be affected more dramatically by the use of inaccurate CCRs. The commenters mentioned that the Deficit Reduction Act (DRA) of 2005 sets the technical component (TC) of advanced imaging services to the lesser of: (1) The Medicare Physician Fee Schedule (MPFS); or (2) the OPPS. The commenters stated that, as proposed, the separate cost centers for MRIs and CT scans would result in significant cuts to the MPFS technical component payments. Another commenter noted E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50522 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations that as CMS proceeds with cost center refinement, services become unbundled, and may cause payment swings from year to year. The commenters urged CMS not to use the proposed CCRs for MRIs and CT scans in the IPPS, the OPPS, or the MPFS until the effects on all three systems have been thoroughly analyzed. Response: We thank the commenters for their analyses and suggestions regarding use of distinct CCRs for implantable devices, MRIs, CT scans, and cardiac catheterization. We appreciate the support for our proposal to use distinct CCRs for implantable devices and cardiac catheterization, and we have carefully reviewed the comments objecting to implementation of distinct CCRs for MRIs and CT scans. The new standard cost centers for CT scans, MRIs, and cardiac catheterization have been in effect since cost reporting periods beginning on or after May 1, 2010, on the revised cost report Form CMS–2552–10. Thus, FY 2011, which is the cost reporting year that CMS is using to calculate the CCRs for the FY 2014 MS–DRG relative weights, was either the first or the second opportunity for hospitals to submit cost reports with the new CT scan and MRI cost centers (lines 57 and 58 of Worksheets A and C, Part I of the Form CMS–2552–10), depending on the hospital’s fiscal year end (FYE). (For example, a hospital with a June 30 FYE would have completed these lines on its FY 2010 July 1, 2010–June 30, 2011 cost report, and again on its FY 2011 July 1, 2011–June 30, 2012 cost report, whereas a hospital with a December 31 FYE would have first completed these cost centers on its FY 2011 January 1, 2011–December 31, 2011 cost report). However, simultaneous with first implementing the new CT scan and MRI cost centers in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50077), we also notified hospitals of the need and importance of properly reporting the capital costs of moveable equipment on the Medicare cost report. Specifically, in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50078), we explained that, in accordance with Section 104 of CMS Pub. 15–1, Chapter 1, CT scans and MRIs are major moveable equipment, and the costs should be reported together with the rest of the hospital’s major moveable equipment cost in the Capital-Related Costs—Moveable Equipment cost centers on Worksheet A (lines 2 and 4 on the Form CMS–2552– 96 and line 2 on the Form CMS–2552– 10). The costs in these cost centers are allocated to all the hospital’s cost centers that use major moveable VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 equipment (including CT and MRI), using ‘‘dollar value’’ (which is the ‘‘recommended’’ or default statistical basis, per the cost reporting instructions at CMS Pub. 15–2, Section 4095 for the Form CMS 2552–10). Alternatively, the hospital may have obtained the contractor’s approval under Section 2313 of CMS Pub. 15–1 to use the simplified cost allocation methodology, ‘‘square feet.’’ However, a hospital that historically has been using ‘‘square feet’’ and is concerned that this method of allocation may result in inaccurate CCRs (on Worksheet C, Part I) for the CT scan, MRI, and other ancillary cost centers may request contractor approval in accordance with Section 2307 of the CMS Pub. 15–1 to use the ‘‘direct assignment’’ allocation method, and directly assign the cost of moveable equipment to all of the hospital’s cost centers that use moveable equipment, including CT and MRIs, using the provider’s routine accounting process. This would ensure that the high cost of the CT scanning and MRI equipment would be reflected in the CCR that would be calculated for those departments and that would be used to estimate the cost of CT scanning and MRI services. In any case, hospitals should correct their cost reporting practices to come into compliance with CMS’ longstanding policy regarding the ‘‘Capital-Related Costs—Moveable Equipment’’ cost center, by either using the recommended statistical allocation method of ‘‘dollar value’’ for costs in Worksheet A, Column 2 for CapitalRelated Costs—Moveable Equipment, or by requesting contractor approval in accordance with Section 2307 of CMS Pub. 15–1 to use the ‘‘direct assignment’’ allocation method. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53283), we reiterated this policy, and added that ‘‘Hospitals that still need to correct their cost reporting practices in this regard should do so soon, so that when we propose distinct CCRs for MRI and CT scans, hopefully for FY 2014, these CCRs will represent fairly accurately the cost of these radiology services.’’ Therefore, while the CCRs for CT scan and MRIs may appear to ‘‘lack face validity,’’ as the commenters asserted, these CCRs nevertheless reflect the cost reporting practices of many IPPS hospitals as of FY 2011, the cost reports used to calculate the CCRs for the FY 2014 MS–DRG relative weights. Furthermore, we are unsure of how the cost reporting practices of hospitals that employ the square feet allocation method result in CCRs that ‘‘lack face validity’’ when CCRs are calculated separately for CT scan, MRI, and PO 00000 Frm 00028 Fmt 4701 Sfmt 4700 radiology, but would result in CCRs that are more ‘‘valid’’ when aggregated into a single CCR for all radiology services. We have considered the public comments recommending that if CMS does finalize distinct CCRs for CT scans and MRIs for the IPPS MS–DRG relative weights, CMS should adopt certain minimum quality standards, such as using only cost report data of hospitals that use either direct assignment or the dollar value statistical allocation method, have at least $250,000 of cost in the CT scan or MRI cost center, and have reclassified overhead costs from the diagnostic radiology cost center to the CT scan and/or MRI cost centers. We do not agree with adoption of these minimum data standards because doing so would ignore the fact that many hospitals have chosen (at least up to this point) to employ the square feet statistical allocation methodology, perhaps for reasons unrelated to the costs of MRIs and CT scans, and, therefore, these data reflect, in large part, the best available data that we have. It also is not administratively feasible for CMS to determine, using HCRIS data, whether hospitals have reclassified overhead costs from the diagnostic radiology cost center to the CT scan and/or MRI cost centers. However, we appreciate the one commenter’s analysis of cost reports using procedural accounting (another more precise method) that yielded CCRs that were close to the CCRs that CMS proposed. We took note of the many comments regarding the ramifications of CT scan and MRI CCRs under the OPPS and the MPFS. Specifically, commenters seemed even more concerned about an impending proposal to implement distinct MRI and CT scan CCRs under the OPPS, which, they asserted, when coupled with recent payment reductions to MRI and CT scan services under the Deficit Reduction Act of 2005, are detrimental to hospitals. (We note that at the time of the comment period for the FY 2014 IPPS/LTCH PPS proposed rule, the CY 2014 OPPS/ASC proposed rule had not yet been issued.) We understand that any such change could have significant payment impacts under the MPFS where the technical component payment for many imaging services is capped at the OPPS payment. While we appreciate the concern regarding other Medicare payment systems, we wish to point out that our decision to implement additional CCRs in this FY 2014 IPPS/LTCH PPS final rule does not predict what CMS may finalize for the CY 2014 OPPS/ASC relative payment weights. We will separately evaluate the impacts of E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations implementing any additional CCRs under the OPPS as part of the OPPS rulemaking process. We note that the public comment periods for both the CY 2014 MPFS proposed rule and the CY 2014 OPPS/ASC proposed rule end on September 6, 2013. We appreciate the concerns expressed by the commenters related to the swings in the relative weights of certain MS– DRGs, and the importance of not providing an incentive for hospitals to furnish, or not furnish, certain services. However, we are not convinced that further delay or further trimming of CCR values is necessary in order to implement all of the proposed CCRs. This is consistent with our historical approach to use cost report data from HCRIS that is 3 years prior to the IPPS fiscal year that is under development (that is, for the FY 2014 IPPS relative weights, the CCRs are calculated from FY 2011 HCRIS). Although hospitals have been permitted to use the alternative basis cost allocation (that is, ‘‘square feet’’) under Section 2313 of CMS Pub. 15–1, this methodology does not ensure precise CCRs for CT scans and MRIs. Therefore, we encouraged hospitals over the past several years to use the most precise cost reporting methods in response to the new cost report lines. Specifically, the longstanding cost report instructions at CMS Pub. 15–2, Section 4020 (previously at Section 3617), state that ‘‘The statistical basis shown at the top of each column on Worksheet B–1 is the recommended basis of allocation of the cost center indicated which must be used by all providers completing this form (Form CMS–2552–10), even if a basis of allocation other than the recommended basis of allocation was used in the previous iteration of the cost report (Form CMS–2552–96).’’ Under Table 1 of the Medicare cost report, which lists the Record Specifications for the cost centers on Worksheet B–1, ‘‘dollar value’’ is specified as the recommended statistical allocation method for Column 2, Capital-Related Costs—Moveable Equipment. While the ‘‘dollar value’’ statistical allocation method is more precise than ‘‘square feet,’’ to ensure even more precise CCRs for CT scans and MRIs, 90 days prior to the beginning of their next cost reporting period, hospitals may request permission from their Medicare contractors in accordance with Section 2307 of CMS Pub. 15–1 to use the ‘‘direct assignment’’ allocation method on Worksheet B, Part II, Column 0. Although ‘‘direct assignment’’ is the preferred and most precise allocation method, hospitals that do not have the VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 resources to directly assign the costs of every cost center are strongly encouraged to instead use the ‘‘dollar value’’ statistical allocation method. (We note that, under Section 2313 of CMS Pub. 15–1, hospitals not currently using ‘‘dollar value’’ should notify their contractor of their intention to switch their statistical allocation basis to ‘‘dollar value’’ at least 90 days prior to the end of a cost reporting period.) We also intend to communicate with the Medicare contractors to facilitate approval of hospitals’ requests to switch from the square feet statistical allocation method to the ‘‘direct assignment’’ or ‘‘dollar value’’ allocation method for the costs of major moveable equipment. We believe that by adopting more refined CCRs, we are fostering more careful cost reporting. Therefore, we do not believe that the concerns expressed by the commenters warrant further delay in implementing the proposed CCRs for CT scans and MRIs for the FY 2014 IPPS/ LTCH PPS final rule, nor do we believe that any type of phase-in methodology is warranted. As we have stated in prior rulemaking (77 FR 53281 through 53283), once we determined that cost report data were available for analysis, we would propose, and finalize, if appropriate, the use of the distinct CCRs described above in the calculation of the MS–DRG relative weights. We believe that the analytic findings described in the proposed rule, and the volume of hospitals that have ‘‘valid’’ CCRs described above, computed using the March 2013 update of FY 2011 HCRIS and the March 2013 update of the FY 2012 MedPAR claims data, support our original decision to break out and create new cost centers for implantable devices, MRIs, CT scans, and cardiac catheterization, and we see no reason to further delay implementation of the CCRs of each of these cost centers. Therefore, beginning in FY 2014, as we proposed, we are calculating the MS– DRG relative weights using 19 CCRs, creating distinct CCRs for implantable devices, MRIs, CT scans, and cardiac catheterization. We refer readers to section I.G. of Appendix A of this final rule for the overall IPPS operating impact of our policy, which models payments to various hospital types using relative weights developed from 19 CCRs (as compared to the previous 15 CCRs). The description of the calculation of the CCRs and the MS– DRG relative weights, including the final 19 CCRs used to calculate the relative weights for FY 2014, is included in section II.H. of the preamble of this final rule. PO 00000 Frm 00029 Fmt 4701 Sfmt 4700 50523 F. Adjustment to MS–DRGs for Preventable Hospital-Acquired Conditions (HACs), Including Infections 1. Background Section 1886(d)(4)(D) of the Act addresses certain hospital-acquired conditions (HACs), including infections. This provision is part of an array of Medicare tools that we are using to promote increased quality and efficiency of care. Under the IPPS, hospitals are encouraged to treat patients efficiently because they receive the same DRG payment for stays that vary in length and in the services provided, which gives hospitals an incentive to avoid unnecessary costs in the delivery of care. In some cases, conditions acquired in the hospital do not generate higher payments than the hospital would otherwise receive for cases without these conditions. To this extent, the IPPS encourages hospitals to avoid complications. However, the treatment of certain conditions can generate higher Medicare payments in two ways. First, if a hospital incurs exceptionally high costs treating a patient, the hospital stay may generate an outlier payment. Because the outlier payment methodology requires that hospitals experience large losses on outlier cases before outlier payments are made, hospitals have an incentive to prevent outliers. Second, under the MS–DRG system that took effect in FY 2008 and that has been refined through rulemaking in subsequent years, certain conditions can generate higher payments even if the outlier payment requirements are not met. Under the MS–DRG system, there are currently 261 sets of MS–DRGs that are split into 2 or 3 subgroups based on the presence or absence of a CC or an MCC. The presence of a CC or an MCC generally results in a higher payment. Section 1886(d)(4)(D) specifies that, by October 1, 2007, the Secretary was required to select, in consultation with the Centers for Disease Control and Prevention (CDC), at least two conditions that: (a) Are high cost, high volume, or both; (b) are assigned to a higher paying MS–DRG when present as a secondary diagnosis (that is, conditions under the MS–DRG system that are CCs or MCCs); and (c) could reasonably have been prevented through the application of evidence-based guidelines. Section 1886(d)(4)(D) of the Act also specifies that the list of conditions may be revised, again in consultation with CDC, from time to time as long as the list contains at least two conditions. Effective for discharges occurring on or after October 1, 2008, under the E:\FR\FM\19AUR2.SGM 19AUR2 50524 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations stay, it is considered a HAC and the case is paid as though the secondary diagnosis was not present. However, even if a HAC manifests during the hospital stay, if any nonselected CC/ MCC appears on the claim, the claim will be paid at the higher MS–DRG rate. In addition, Medicare continues to assign a discharge to a higher paying MS–DRG if a selected condition is POA. When a HAC is not POA, payment can be affected in a manner shown in the diagram below. BILLING CODE 4120–01–C included on the CMS Web site at: https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ HospitalAcqCond/HospitalAcquired_Conditions.html. that hospitals in Maryland operating under their waiver are not paid under the IPPS but rather are paid under the provisions of section 1814(b)(3) of the Act. This waiver applies to the amount paid to providers of services, and does not extend to billing requirements and other reporting requirements. In fact, hospitals in Maryland are required to submit Medicare claims for Medicare payment and also to submit the same information on their Medicare claims as hospitals in other parts of the country paid under the IPPS. Therefore, we believe it is inappropriate to continue to exempt hospitals in Maryland from the POA indicator reporting requirement. Under current policy, hospitals in Maryland will continue to be exempt from the application of this HAC provision so long as they are not paid under the IPPS. However, we believe it is appropriate to require them to use POA indicator reporting on their claims so that we can include their data and have as complete a dataset as possible when we analyze trends and make further payment policy determinations, such as those authorized under section 1886(p) of the Act. (We refer readers to section V.I. of the preamble of this final rule for a discussion of our FY 2014 proposals and final policies to implement section 1886(p) of the Act.) Therefore, in the FY 2014 IPPS/LTCH mstockstill on DSK4VPTVN1PROD with RULES6 2. HAC Selection Beginning in FY 2007, we have set forth proposals, and solicited and responded to public comments, to implement section 1886(d)(4)(D) of the Act through the IPPS annual rulemaking process. For specific policies addressed in each rulemaking cycle, including a detailed discussion of the collaborative interdepartmental process and public input regarding selected and potential candidate HACs, we refer readers to the following rules: The FY 2007 IPPS proposed rule (71 FR 24100) and final rule (71 FR 48051 through 48053); the FY 2008 IPPS proposed rule (72 FR 24716 through 24726) and final rule with comment period (72 FR 47200 through 47218); the FY 2009 IPPS proposed rule (73 FR 23547) and final rule (73 FR 48471); the FY 2010 IPPS/ RY 2010 LTCH PPS proposed rule (74 FR 24106) and final rule (74 FR 43782); the FY 2011 IPPS/LTCH PPS proposed rule (75 FR 23880) and final rule (75 FR 50080); the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25810 through 25816) and final rule (76 FR 51504 through 51522); and the FY 2013 IPPS/ LTCH PPS proposed rule (77 FR 27892 through 27898) and final rule (77 FR 53283 through 53303). A complete list of the 11 current categories of HACs is VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 3. Present on Admission (POA) Indicator Reporting Collection of POA indicator data is necessary to identify which conditions were acquired during hospitalization for the HAC payment provision as well as for broader public health uses of Medicare data. In previous rulemaking, we provided both CMS and CDC Web site resources that are available to hospitals for assistance in this reporting effort. For detailed information regarding these sites and materials, including the application and use of POA indicators, we refer the reader to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51506 through 51507). Currently, as we discussed in the prior rulemaking cited above, the POA indicator reporting requirement only applies to IPPS hospitals because they are subject to this HAC provision. NonIPPS hospitals, including CAHs, LTCHs, IRFs, IPFs, cancer hospitals, children’s hospitals, hospitals in Maryland operating under waivers, RNHCIs, and the Department of Veterans Affairs/ Department of Defense hospitals, are exempt from POA reporting. We note PO 00000 Frm 00030 Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2 ER19AU13.000</GPH> authority of section 1886(d)(4)(D) of the Act, Medicare no longer assigns an inpatient hospital discharge to a higher paying MS–DRG if a selected condition is not present on admission (POA). Thus, if a selected condition that was not POA manifests during the hospital Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations PPS proposed rule (78 FR 27510), we proposed that hospitals in Maryland operating under their waiver under section 1814(b)(3) of the Act would no longer be exempted from the POA indicator reporting requirement beginning with claims submitted on or after October 1, 2013, including all claims for discharges on or after October 1, 2013. We invited public comment regarding this proposal. Comment: Commenters supported the CMS proposal. One commenter noted that Maryland hospitals have been required to report accurate and complete POA information on secondary diagnoses in the quarterly discharge abstract data they submit to the state for discharges beginning on July 1, 2007. Response: We appreciate the commenters’ support. Accordingly, we are finalizing our proposal to require hospitals in Maryland currently paid under section 1814(b)(3) to report the POA indicator on their claims beginning with discharges on October 1, 2013. We note that while this requirement will not be effective until that date, hospitals in Maryland may submit data with present on admission indicators before that time with the expectation that these data will be accepted by Medicare’s claims processing systems. As discussed in previous IPPS proposed and final rules, there are five POA indicator reporting options, as defined by the ICD–9–CM Official Guidelines for Coding and Reporting. Under the HAC policy, we treat HACs coded with ‘‘Y’’ and ‘‘W’’ indicators as POA and allow the condition on its own to cause an increased payment at the CC/MCC level. We treat HACs coded 50525 with ‘‘N’’ and ‘‘U’’ indicators as Not Present on Admission (NPOA) and do not allow the condition on its own to cause an increased payment at the CC/ MCC level. We refer readers to the following rules for a detailed discussion: The FY 2009 IPPS proposed rule (73 FR 23559) and final rule (73 FR 48486 through 48487); the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24106) and final rule (74 FR 43784 through 43785); the FY 2011 IPPS/LTCH PPS proposed rule (75 FR 23881 through 23882) and final rule (75 FR 50081 through 50082); the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25812 through 25813) and final rule (76 FR 51506 through 51507); and the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27893 through 27894) and final rule (77 FR 53284 through 53285). Indicator Descriptor Y ....................... W ...................... Indicates that the condition was present on admission. Affirms that the hospital has determined that, based on data and clinical judgment, it is not possible to document when the onset of the condition occurred. Indicates that the condition was not present on admission. Indicates that the documentation is insufficient to determine if the condition was present at the time of admission. Signifies exemption from POA reporting. CMS established this code as a workaround to blank reporting on the electronic 4010A1. A list of exempt ICD–9–CM diagnosis codes is available in the ICD–9–CM Official Guidelines for Coding and Reporting. N ....................... U ....................... 1 ........................ mstockstill on DSK4VPTVN1PROD with RULES6 Beginning on or after January 1, 2011, hospitals were required to begin reporting POA indicators using the 5010 electronic transmittal standards format. The 5010 format removes the need to report a POA indicator of ‘‘1’’ for codes that are exempt from POA reporting. We have issued CMS instructions on this reporting change as a One-Time Notification, Pub. No. 100–20, Transmittal No. 756, Change Request 7024, effective on August 13, 2010, which can be located at the following link on the CMS Web site: https:// www.cms.gov/manuals/downloads/ Pub100_20.pdf. In addition, as discussed elsewhere in section III.G.10. of the preamble of this final rule, the 5010 format allows the reporting and effective January 1, 2011, the processing of up to 25 diagnoses and 25 procedure codes. As such, it is necessary to report a valid POA indicator for each diagnosis code, including the principal and all secondary diagnoses up to 25. 4. HACs and POA Reporting in ICD–10– CM and ICD–10–PCS As we stated in the FY 2012 IPPS/ LTCH PPS final rule (76 FR 51506 and 51507), in preparation for the transition to the ICD–10–CM and ICD–10–PCS code sets, further information regarding VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 the use of the POA indicator with the ICD–10–CM/ICD–10–PCS classifications as they pertain to the HAC policy will be discussed in future rulemaking. At the March 5, 2012 and the September 19, 2012 meetings of the ICD–9–CM Coordination and Maintenance Committee, an announcement was made with regard to the availability of the ICD–9–CM HAC list translation to ICD–10–CM and ICD– 10–PCS code sets. Participants were informed that the list of the current ICD–9–CM selected HACs has been translated into codes using the ICD–10– CM and ICD–10–PCS classification system. It was recommended that the public review this list of ICD–10–CM/ ICD–10–PCS code translations of the current selected HACs available on the CMS Web site at: https://www.cms.gov/ Medicare/Coding/ICD10/ICD-10-MSDRG-Conversion-Project.html. The translations can be found under the link titled ‘‘ICD–10–CM/PCS MS–DRG v30 Definitions Manual Table of Contents— Full Titles—HTML Version in Appendix I—Hospital Acquired Conditions (HACs).’’ The above CMS Web site regarding the ICD–10–MS– DRG Conversion Project is also available on the CMS Web site at: https:// www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/HospitalAcqCond/ PO 00000 Frm 00031 Fmt 4701 Sfmt 4700 icd10_hacs.html. We encourage the public to submit comments on these translations through the HACs Web page using the CMS ICD–10–CM/PCS HAC Translation Feedback Mailbox that has been set up for this purpose under the Related Links section titled ‘‘CMS HAC Feedback.’’ The final HAC list translation from ICD–9–CM to ICD–10– CM/ICD–10–PCS will be subject to formal rulemaking. In the meantime, we continue to encourage readers to review the educational materials and draft code sets currently available for ICD–10–CM/ ICD–10–PCS on the CMS Web site at: https://www.cms.gov/ICD10/. In addition, the draft ICD–10–CM/ICD–10– PCS coding guidelines can be viewed on the CDC Web site at: https:// www.cdc.gov/nchs/icd/icd10cm.htm. 5. Current HACs and Previously Considered Candidate HACs In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27511), we did not propose to add or remove categories of HACs. However, we indicated that we continue to encourage public dialogue about refinements to the HAC list by written stakeholder comments about both previously selected and potential candidate HACs. We refer readers to section II.F.6. of the FY 2008 IPPS final E:\FR\FM\19AUR2.SGM 19AUR2 50526 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations rule with comment period (72 FR 47202 through 47218) and to section II.F.7. of the FY 2009 IPPS final rule (73 FR 48774 through 48491) for detailed discussion supporting our determination regarding each of these conditions. We also refer readers to section III.F.5. of the FY 2013 IPPS/ LTCH PPS proposed rule (77 FR 27892 through 27898) and the FY 2013 IPPS/ LTCH PPS final rule (77 FR 53285 through 53292) for the HAC policy for FY 2013, which will continue for FY 2014. In addition, readers may find updated information on evidence-based guidelines on the CMS Web site at: https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ HospitalAcqCond/HospitalAcquired_Conditions.html. Comment: Some commenters stated they were pleased that CMS did not propose to expand the list of categories or conditions subject to the Deficit Reduction Act of 2005 provisions that would reduce payment for hospital acquired conditions not present on admission. However, commenters made the following suggestions and recommendations: • One commenter recommended CMS expand the HAC list in future IPPS rulemaking to include iatrogenic pneumothorax with paracentesis and thoracentesis. • One commenter requested that CMS reconsider its decision to include ‘‘Surgical Site Infections (SSIs) Following Cardiac Implantable Electronic Device (CIED)’’ under this program. The commenter also urged CMS to explore how information learned from POA coding and other data sources, such as EHRs and clinical data registries, could be used to better understand and prevent HACs. • One commenter suggested that CMS include ‘‘diaper rash’’ as a DRA HAC. • One commenter suggested that CMS include ‘‘Surgical Site Infections (SSIs) Following Hip and Knee Replacement’’ as a DRA HAC. • One commenter suggested that CMS include ‘‘Surgical Site Infections (SSIs) Following Cesarean Section Births’’ as a DRA HAC. • Although existing colon and hysterectomy surgical site infections are not current DRA HACs, one commenter requested that additional consideration be given to include the following exclusions for existing colon and hysterectomy surgical site infections: Chemotherapy for cancer diagnosis, penetrating trauma, obesity, and transplant. The commenter also requested that additional consideration be given to excluding trauma (degloving/avulsion wounds, burns, penetrating trauma), chemotherapy, and transplants from the following HAC categories: post CABG mediastinitis, orthopedic surgery of the spine/neck/ shoulder/elbow and the three existing gastric bypass surgeries. The commenter indicated that these additional exclusions will better meet the intent of identifying appropriate HACs, without unnecessary penalization. • One commenter recommended that ‘‘. . . Where medical technology can play a role in supporting the goals of improving patient care in a cost effective manner, such consideration should be made when reflecting on whether to expand upon the list of preventable HACs, particularly in relation to infection control prevention and management.’’ Response: We value and appreciate these public comments regarding the DRA HACs, and we will take all of the public comments and suggestions we received into consideration in future rulemaking. Comment: One commenter recommended that two titles of the current DRA HACs be revised: that ‘‘Catheter-Associated Urinary Tract Infection (UTI)’’ be revised to ‘‘Symptomatic Urinary Tract Infection due to an Indwelling Urinary Catheter’’ and ‘‘Vascular Catheter-Associated Infection’’ be revised to ‘‘Infections due to Central Venous Catheter’’, with the ICD–9–CM codes shown in the following table. DRA HACs CC/MCC (ICD–9–CM Codes) Catheter-Associated Urinary Tract Infection (UTI) ................................... 996.64 (CC). Also excludes the following from acting as a CC/MCC: 112.2 (CC), 590.10 (CC), 590.11 (MCC), 590.2 (MCC), 590.3 (CC), 590.80 (CC), 590.81 (CC), 595.0 (CC), 597.0 (CC), 599.0 (CC). 999.31 (CC), 999.32 (CC), 999.33 (CC). mstockstill on DSK4VPTVN1PROD with RULES6 Vascular Catheter-Associated Infection ................................................... Response: We appreciate the commenter’s recommendations. However, we believe the titles correctly identify the selected HACs, as reflected in the chart above, particularly because we have included the specified codes within the HAC logic. Comment: One commenter recommended that CMS remove the DRA HAC category ‘‘Falls and Trauma.’’ The commenter stated that ‘‘Falls, particularly for the vulnerable older population, can be reduced through interventions; however, they cannot be completely avoided.’’ Another commenter noted that some patients, particularly high-risk, comorbid individuals, may still develop the conditions on the HAC list. Response: We refer readers to section 1886(d)(4)(D) of the Act which states that a DRA HAC is one that ‘‘(c) could reasonably have been prevented through VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 the application of evidence-based guidelines.’’ We believe in the appropriate use of guidelines that we have adopted to support our DRA HAC policy. These evidence-based guidelines are posted on the DRA HAC Web site at: https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ HospitalAcqCond/Downloads/EvidenceBased-Guidelines.pdf and are reviewed regularly to ensure that if there are any changes in the status of these guidelines, they are reflected in the DRA HAC policy. Comment: One commenter noted that, ‘‘In previous rulemaking cycles, CMS has proposed adding delirium to the list of HACs [FY 2009 IPPS proposed rule]. While we support reasonable steps to provide hospitals with incentives to recognize and treat delirium, we continue to have significant concerns PO 00000 Frm 00032 Fmt 4701 Sfmt 4700 about adding delirium to the list of ‘preventable’ HACs to be excluded from the calculation of a hospital’s MS–DRG reimbursement rate.’’ Response: We note that this comment regarding delirium is outside of the scope of the proposals included in the FY 2014 IPPS/LTCH PPS proposed rule. In the FY 2009 IPPS final rule (73 FR 48482), regarding delirium, we stated that ‘‘After consideration of the public comments received, we have decided not to select delirium as an HAC in this final rule. We will continue to monitor the evidence-based guidelines surrounding prevention of delirium. If evidence warrants, we may consider proposing delirium as an HAC in the future.’’ 6. RTI Program Evaluation On September 30, 2009, a contract was awarded to RTI to evaluate the E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 impact of the Hospital-Acquired Condition-Present on Admission (HAC– POA) provisions on the changes in the incidence of selected conditions, effects on Medicare payments, impacts on coding accuracy, unintended consequences, and infection and event rates. This was an intra-agency project with funding and technical support from CMS, OPHS, AHRQ, and CDC. The evaluation also examined the implementation of the program and evaluated additional conditions for future selection. The contract with RTI ended on November 30, 2012. Summary reports of RTI’s analysis of the FYs 2009, 2010, and 2011 MedPAR data files for the HAC–POA program evaluation were included in the FY 2011 IPPS/ LTCH PPS final rule (75 FR 50085 through 50101), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51512 through 51522), and the FY 2013 IPPS/LTCH PPS final rule (77 FR 53292 through 53302). Summary and detailed data also were made publicly available on the CMS Web site at: https://www.cms.gov/ HospitalAcqCond/01_Overview.asp and the RTI Web site at: https://www.rti.org/ reports/cms/. In addition to the evaluation of HAC and POA MedPAR claims data, RTI also conducted analyses on readmissions due to HACs, the incremental costs of HACs to the healthcare system, a study of spillover effects and unintended consequences, as well as an updated analysis of the evidence-based guidelines for selected and previously considered HACs. Reports on these analyses have been made publicly available on the CMS Web site at: https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ HospitalAcqCond/. 7. Current and Previously Considered Candidate HACs—RTI Report on Evidence-Based Guidelines The RTI program evaluation includes a report that provides references for all evidence-based guidelines available for each of the selected and previously considered candidate HACs that provide recommendations for the prevention of the corresponding conditions. Guidelines were primarily identified using the AHRQ National Guidelines Clearing House (NGCH) and the CDC, along with relevant professional societies. Guidelines published in the United States were used, if available. In the absence of U.S. guidelines for a specific condition, international guidelines were included. Evidence-based guidelines that included specific recommendations for the prevention of the condition were identified for each of the selected conditions. In addition, evidence-based guidelines also were found for the previously considered candidate conditions. RTI prepared a final report to summarize its findings regarding evidence-based guidelines. This report can be found on the CMS Web site at: https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ HospitalAcqCond/HospitalAcquired_Conditions.html. Subsequent to this final report, RTI has been awarded an FY 2014 Evidence-Based Guidelines Monitoring contract. Under the contract, RTI will provide a summary report of all evidence-based guidelines available for each of the selected and previously considered candidate HACs that provide recommendations for the prevention of the corresponding conditions. Updates to the guidelines will be made available to the public. G. Changes to Specific MS–DRG Classifications In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27512 through 27529), we invited public comment on each of the MS–DRG classification proposed changes described below, as well as our proposals to maintain certain existing MS–DRG classifications, which also are discussed below. In some cases, we proposed changes to the MS– DRG classifications based on our analysis of claims data. In other cases, we proposed to maintain the existing MS–DRG classification based on our analysis of claims data. The public comments that we received on each of the proposals and our response, with statements of final policies, are included below. CMS encourages input from our stakeholders concerning the annual IPPS updates when that input is made available to us by early December of the year prior to the next annual proposed rule update. For example, to be considered for any updates or changes in FY 2014, comments and suggestions should have been submitted by early MS–DRG 001 ............................................................................................................................ MS–DRG 002 ............................................................................................................................ MS–DRGs 001 and 002—All cases .......................................................................................... MS–DRG 005 ............................................................................................................................ VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 PO 00000 December 2012. The comments that were submitted in a timely manner are discussed below in this section. 1. Pre-Major Diagnostic Categories (PreMDCs): Heart Transplants and Liver Transplants We received a request from an organization that represents transplant surgeons to eliminate the severity levels for the heart and liver transplants MS– DRGs. The MS–DRGs for heart transplants are: MS–DRG 001 (Heart Transplant or Implant of Heart Assist System with MCC) and MS–DRG 002 (Heart Transplant or Implant of Heart Assist System without MCC). The MS– DRGs for liver transplants are: MS–DRG 005 (Liver Transplant with MCC or Intestinal Transplant) and MS–DRG 006 (Liver Transplant without MCC). We received this comment during the comment period for the FY 2013 IPPS/ LTCH PPS proposed rule. We referred to this comment briefly in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53325), but we did not address the issue because we considered this comment outside of the scope of the proposed rule. However, we addressed this issue in the FY 2014 IPPS/LTCH PPS proposed rule. The commenter stated that there are no ‘‘uncomplicated’’ heart transplants or liver transplants, and indicated that all of these transplant procedures are highly complex, involving numerous complicating conditions, only some of which may be recognized by the MS– DRGs. The commenter expressed concern that the continued bifurcation of the MS–DRGs for heart and liver transplants will result in unsustainable payment for these cases that are assigned to the ‘‘without MCC’’ MS– DRGs 002 and 006. According to the commenter, in light of the relatively small number of Medicare patients involved and the significant cost variation involved, it would be preferable to eliminate the bifurcation of these procedures, thereby increasing the stability of the DRG weights for these procedures. For the FY 2014 IPPS/LTCH PPS proposed rule, we examined claims data from the FY 2012 MedPAR file for heart and liver transplant cases assigned to MS–DRGs 001, 002, 005, and 006. The following table illustrates our findings: Number of cases MS–DRGs Frm 00033 Fmt 4701 Sfmt 4700 50527 1,247 284 1,531 828 E:\FR\FM\19AUR2.SGM 19AUR2 Average length of stay 33.27 18 30.4 19 Average costs $158,556 97,932 147,310 66,746 50528 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Number of cases MS–DRGs mstockstill on DSK4VPTVN1PROD with RULES6 MS–DRG 006 ............................................................................................................................ MS–DRGs 005 and 006—All cases .......................................................................................... The data showed that the majority of the heart transplant cases, a total of 1,247, are assigned to MS–DRG 001, with average costs of approximately $158,556 and an average length of stay of approximately 33.27 days. There were 284 cases assigned to MS–DRG 002, with average costs of approximately $97,932 and an average length of stay of approximately 18 days. This table shows that there are significant differences in average lengths of stay and average costs for the severity level for the heart transplant MS–DRGs that justify the existing split in MS–DRGs 001 and 002. If we were to combine the heart transplant cases in MS–DRGs 001 and 002 as suggested by the commenter, the payment for the majority of cases with an MCC would be lower. The majority of the liver transplant cases, 828 cases, were assigned to MS– DRG 005, with average costs of approximately $66,746 and an average length of stay of approximately 19 days. There were 282 cases assigned to MS– DRG 006, with average costs of approximately $30,873 and an average length of stay of approximately 8.75 days. The data showed that there are significant differences in average costs and average lengths of stay in the severity levels for the liver transplant MS–DRGs. Again, if we were to combine all the liver transplant cases into one MS–DRG as requested by the commenter, the majority of the cases would receive lower payment. Based on these findings, we stated in the proposed rule that we believe that it would not be prudent to eliminate the severity levels for the heart and liver transplant MS–DRGs. Our clinical advisors concurred with this analysis that two severity levels are justified for the heart and liver transplant MS–DRGs. Therefore, for FY 2014, we did not propose to make any changes to the severity levels for heart and liver transplant MS–DRGs 001, 002, 005, and 006. We invited public comments on this issue. Comment: Several commenters agreed with CMS’ proposal to maintain the current structure for heart and liver transplant MS–DRGs. The commenters stated that the proposal seems reasonable based on the data and VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 information provided. One commenter agreed with CMS that creating only one MS–DRG for heart transplants or implants of heart assist systems, regardless of whether or not there is a major complication or comorbidity (MCC) present, would greatly underpay the complex cases which currently represent the majority of the volume and overpay for those less severe cases. Response: We appreciate the commenters’ support for maintaining the severity levels for the heart and liver transplant MS–DRGs based on data and our analysis. After consideration of the public comments we received, we are not making any changes to MS–DRGs 001, 002, 005, and 006 for FY 2014. 2. MDC 1 (Diseases and Disorders of the Nervous System): Tissue Plasminogen Activator (tPA) (rtPA) Administration Within 24 Hours Prior to Admission During the comment period for the FY 2013 IPPS/LTCH PPS proposed rule, we received a public comment that we considered to be outside the scope of that proposed rule. We stated in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53325) that we would consider this issue in future rulemaking as part of our annual review process. The commenter requested that CMS conduct an analysis of diagnosis code V45.88 (Status post administration of tPA (rtPA) in a different facility within the last 24 hours prior to admission to current facility). Diagnosis code V45.88 was created for use beginning October 1, 2008, to identify patients who are given tissue plasminogen activator (tPA) at one institution and then transferred and admitted to a comprehensive stroke center for further care. This situation has been referred to as the ‘‘drip-andship’’ issue and was discussed at length in the FY 2009 IPPS proposed rule (73 FR 23563 through 23564) and final rule (73 FR 48493 through 48495), as well as the FY 2011 IPPS/LTCH PPS proposed rule (75 FR 23899 through 23900) and final rule (75 FR 50102 through 50106). We refer readers to these previous discussions for detailed background information regarding this topic. Similar to previous requests, according to the commenter, the concern at the receiving facilities is that PO 00000 Frm 00034 Fmt 4701 Sfmt 4700 282 1,110 Average length of stay 8.75 16.3 Average costs 30,873 57,632 the costs associated with [caring for] more complex stroke patients that receive tPA are much higher than the cost of the drug, presumably because stroke patients initially needing tPA have more complicated strokes and outcomes. However, because these patients do not receive the tPA at the second or transfer hospital, the receiving hospital will not be able to assign the case to one of the higherweighted tPA stroke MS–DRGs when it admits these patients whose care requires the use of intensive resources. The MS–DRGs that currently include the diagnosis code for the use of tPA are: MS–DRG 061 (Acute Ischemic Stroke with Use of Thrombolytic Agent with MCC); MS–DRG 062 (Acute Ischemic Stroke with Use of Thrombolytic Agent with CC); and MS– DRG 063 (Acute Ischemic Stroke with Use of Thrombolytic Agent without CC/ MCC). These MS–DRGs have higher relative weights than the other MS– DRGs relating to stroke or cerebral infarction. The commenter requested an analysis of diagnosis code V45.88 to determine whether new claims data warrant any change in the MS–DRG structure. For the FY 2014 IPPS/LTCH PPS proposed rule, we analyzed MedPAR claims data from FY 2012. We included claims for patient cases assigned to the following MS–DRGs: • 061 (Acute Ischemic Stroke with Use of Thrombolytic Agent with MCC) • 062 (Acute Ischemic Stroke with Use of Thrombolytic Agent with CC) • 063 (Acute Ischemic Stroke with Use of Thrombolytic Agent without CC/ MCC) • 064 (Intracranial Hemorrhage or Cerebral Infarction with MCC) • 065 (Intracranial Hemorrhage or Cerebral Infarction with CC) • 066 (Intracranial Hemorrhage or Cerebral Infarction without CC/MCC). Our data analysis included MS–DRGs 064, 065, and 066 because claims involving diagnosis code V45.88 also would be properly reported in the data for these MS–DRGs. The following table reflects the results of our analysis of the MedPAR data in which diagnosis code V45.88 was reported as a secondary diagnosis for FY 2012. E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Number of cases MS–DRG mstockstill on DSK4VPTVN1PROD with RULES6 MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG 061—All cases ............................................................................................................ 061—Cases with secondary diagnosis code V45.88 ................................................. 062—All cases ............................................................................................................ 062—Cases with secondary diagnosis code V45.88 ................................................. 063—All cases ............................................................................................................ 063—Cases with secondary diagnosis code V45.88 ................................................. 064—All cases ............................................................................................................ 064—Cases with secondary diagnosis code V45.88 ................................................. 065—All cases ............................................................................................................ 065—Cases with secondary diagnosis code V45.88 ................................................. 066—All cases ............................................................................................................ 066—Cases with secondary diagnosis code V45.88 ................................................. Based on our review of the data for all of the cases in MS–DRGs 064, 065, and 066, compared to the subset of cases containing diagnosis code V45.88 as the secondary diagnosis, we again concluded that the movement of cases with diagnosis code V45.88 as a secondary diagnosis from MS–DRGs 064, 065, and 066 to MS–DRGs 061, 062, and 063 is not warranted. We determined that the differences in the average lengths of stay and the average costs are too small to warrant an assignment to the higher-weighted MS– DRGs. However, the data do reflect that the average costs for cases reporting diagnosis code V45.88 as a secondary diagnosis in MS–DRG 066 are more similar to the average costs of higher severity level cases in MS–DRG 065. Therefore, for FY 2014, we proposed to move cases with diagnosis code V45.88 from MS–DRG 066 to MS–DRG 065, and to revise the title of MS–DRG 065 to reflect the patients status post tPA administration within 24 hours (78 FR 27513 through 27514). The proposed revised MS–DRG title was: MS–DRG 065 (Intracranial Hemorrhage or Cerebral Infarction with CC or tPA in 24 Hours). We invited public comments on our proposal. Comment: Several commenters supported CMS’ proposal to reassign cases reporting ICD–9–CM diagnosis code V45.88 from MS–DRG 66 to MS– DRG 65. The commenters stated this proposal would allow for more appropriate payment and recognition of the resources required to care for stroke patients who are transferred. Several other commenters stated that the proposal was reasonable considering the data and clinical information provided. Response: We appreciate the commenters’ support. We agree that this modification to the MS–DRGs involving stroke patients will better reflect the increased costs of caring for these transfer cases. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Comment: One commenter who supported the proposal to reassign cases reporting ICD–9–CM diagnosis code V45.88 from MS–DRG 66 to MS–DRG 65 also urged CMS to move cases reporting ICD–9–CM diagnosis code V45.88 from MS–DRG 64 (Intracranial Hemorrhage or Cerebral Infarction with MCC) to MS– DRG 62 (Acute Ischemic Stroke with Use of Thrombolytic Agent with CC). The commenter noted that ‘‘It is essential that hospitals are fairly reimbursed for the additional resources associated with caring for patients treated with IV tPA even when the tPA is administered at another hospital before transfer. Without adequate reimbursement through the MS–DRG system, receiving hospitals are financially penalized for accepting patients and giving them advanced stroke care which is detrimental to stroke systems and patients suffering strokes.’’ Response: We also acknowledge the commenter’s concern regarding appropriate payment for the additional resources required in caring for patients treated with tPA and subsequently transferred to another facility. As stated in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27513), we concluded that the movement of cases with diagnosis code V45.88 as a secondary diagnosis from MS–DRGs 064, 065, and 066 to MS–DRGs 061, 062, and 063 is not warranted based on our review of the data. In addition, our clinical advisors did not support movement of these non-tPA cases into the MS–DRGs where tPA is administered as it violates the clinical cohesiveness of these two sets of DRGs. After consideration of the public comments we received, we are adopting as final policy for FY 2014, our proposal to move cases with diagnosis code V45.88 from MS–DRG 066 to MS–DRG 065 and to revise the title to MS–DRG 065 (Intracranial Hemorrhage or Cerebral Infarction with CC or tPA in 24 Hours). PO 00000 Frm 00035 Fmt 4701 Sfmt 4700 3,369 140 5,277 179 1,709 48 64,095 955 101,011 1,259 56,620 493 Average length of stay 7.48 7.51 4.92 5.03 3.45 3.15 6.30 7.06 4.29 4.91 2.92 3.28 50529 Average costs $18,556 19,008 12,935 13,317 10,363 9,372 11,654 14,432 7,414 9,471 5,414 6,682 3. MDC 4 (Diseases and Disorders of the Ear, Nose, Mouth and Throat) a. Endoscopic Placement of a Bronchial Value In response to the FY 2013 IPPS/ LTCH PPS proposed rule, we received a request to modify the MS–DRG assignment for bronchial valve(s) insertion, which we considered to be outside of the scope of that proposed rule (77 FR 53325 through 53326). The requestor asked that cases in MS–DRGs 190, 191, and 192 (Chronic Obstructive Pulmonary Disease with MCC, with CC, and without MCC/CC, respectively) that involve insertion of a bronchial valve be assigned instead to MS–DRGs 163, 164, and 165 (Major Chest Procedures with MCC, with CC, and without MCC/CC, respectively). The procedures are captured by procedure codes 33.71 (Endoscopic insertion or replacement of bronchial valve(s), single lobe) and 33.73 (Endoscopic insertion or replacement of bronchial valve(s), multiple lobes), which are considered nonoperating procedures and do not affect the MS–DRG assignment. When reported without any other operating room (OR) procedure code, the admission would be assigned to a medical MS–DRG. The Spiration® IBV Valve System device, a bronchial valve, was approved for new technology add-on payments in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43819 through 43823) with a maximum payment rate of $3,437.50. In the FY 2012 IPPS/LTCH PPS final rule, the new technology addon payments were discontinued for FY 2012 (76 FR 51575 through 51576). The bronchial valve device is used to place, via bronchoscopy, small, one-way valves into selected small airways in the lung in order to limit airflow into selected portions of lung tissue that have prolonged air leaks following surgery while still allowing mucus, fluids, and air to exit, and thereby reducing the amount of air that enters E:\FR\FM\19AUR2.SGM 19AUR2 50530 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations the pleural space. The device is intended to control prolonged air leaks following three specific surgical procedures: lobectomy, segmentectomy, or lung volume reduction surgery (LVRS). According to Spiration®, an air leak that is present on postoperative day 7 is considered ‘‘prolonged’’ unless present only during forced exhalation or cough. In order to help prevent valve migration, there are five anchors with tips that secure the valve to the airway. The implanted valves are intended to be removed no later than 6 weeks after implantation. New technology add-on payments were limited to cases involving prolonged air leaks following lobectomy, segmentectomy, and LVRS in MS–DRGs 163, 164, and 165 in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43823). This limitation was based on the indications for use approved by the FDA in the FDA Humanitarian Device Exemption (HDE) approval process set forth in section 520(m) of the Federal Food, Drug & Cosmetic Act. A humanitarian use device (HUD) is a device that is intended to benefit patients by treating or diagnosing a disease or condition that affects or is manifested in fewer than 4,000 individuals in the United States per year. Devices that receive HUD designation may be eligible for marketing approval, subject to certain restrictions, under an HDE application. To obtain marketing approval for an HUD, an HDE application must be submitted to the FDA. An HDE application is a premarket approval (PMA) application submitted to the FDA under 21 CFR 814.104 that seeks exemption from the PMA requirement under 21 CFR 814.20 demonstrating a reasonable assurance of effectiveness. A device that has received HUD designation may receive HDE approval if, among other things, the FDA determines that the device will not expose patients to an unreasonable or significant risk of illness or injury and the probable benefit to health from use of the device outweighs the risk of injury or illness from its use, taking into account the probable risks and benefits of currently available devices or alternative forms of treatment. In addition, the applicant must demonstrate that no comparable devices are available to treat or diagnose the disease or condition (other than another device approved under an HDE application or a device under an approved Investigational Device Exemption), and that the device would not otherwise be available unless an HDE is granted. An approved HDE authorizes marketing of the HUD. However, an HUD generally may be used in facilities only after prior approval by an Institutional Review Board (IRB). FDA’s approval of the HDE application limited the use of the Spiration® IBV Valve System device to cases involving prolonged air leaks following lobectomy, segmentectomy, or LVRS. The requested MS–DRG change would initiate the same payment for chronic obstructive pulmonary disease (COPD) cases with a bronchial valve inserted without a major chest procedure as for cases where both a major chest procedure and a bronchial valve insertion were performed. The following table shows the COPD cases that involved the insertion of a bronchial valve as well as data on cases assigned to MS–DRGs 163, 164, and 165. Number of cases MS–DRGs Average length of stay Average costs COPD Cases MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG 190—All cases ............................................................................................................ 190—Cases with procedure code 33.71 .................................................................... 190—Cases with procedure code 33.73 .................................................................... 191—All cases ............................................................................................................ 191—Cases with procedure code 33.71 .................................................................... 191—Cases with procedure code 33.73 .................................................................... 192—All cases ............................................................................................................ 192—Cases with procedure code 33.71 .................................................................... 192—Cases with procedure code 33.73 .................................................................... 133,566 0 2 129,231 0 0 93,507 0 0 5.07 0 14.0 4.18 0 0 3.32 0 0 $7,815 0 47,034 6,245 0 0 4,776 0 0 11,287 16,113 9,280 13.33 6.69 3.94 32,728 17,494 12,209 Major Chest Procedures mstockstill on DSK4VPTVN1PROD with RULES6 MS–DRG 163—All cases ............................................................................................................ MS–DRG 164—All cases ............................................................................................................ MS–DRG 165—All cases ............................................................................................................ Based on our analysis of FY 2012 Medicare claims data, there were only two COPD cases that had bronchial valves inserted in MS–DRGs 190, 191, and 192. While the charges were high, these cases were assigned to the highest severity level MS–DRG (MS–DRG 190 with MCC). Given the small number of cases, it is not possible to determine if the high average costs were due to the bronchial valve insertion or to other factors such as other secondary diagnoses. The average length of stay for these two cases was approximately 14 days compared to approximately 5.07 VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 days for all other cases within MS–DRG 190. Because the additional 10 days cannot be clinically attributed to the bronchial valve insertion, our clinical advisors have determined that other factors must have impacted these two cases. Cases in MS–DRGs 163, 164, and 165 include those cases with a major chest procedure and those cases with both a major chest procedure as well as a bronchial valve insertion as discussed above. Our clinical advisors do not support moving COPD cases that have only a bronchial valve insertion and no PO 00000 Frm 00036 Fmt 4701 Sfmt 4700 other major chest procedure from MS– DRGs 190, 191, and 192 to MS–DRGs 163, 164, and 165. They do not believe the bronchial valve procedures are clinically similar to other major chest procedures that require significantly more resources to perform. Our clinical advisors pointed out that the limited circumstances where this procedure would be used led the sponsor to seek HDE approval from the FDA rather than a standard PMA. The indications for use approved by the FDA are still limited to post-surgery. Our clinical advisors recommended that we not modify the E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations MS–DRG logic so that COPD cases with bronchial valve insertions would be assigned to MS–DRGs 163, 164, and 165. Given the limited number of cases for this procedure and the advice from our clinical advisors, in the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR 27514 through 27515), we did not propose any MS–DRG changes for bronchial valve(s) insertion for FY 2014. We also did not propose to change the MS–DRG assignment for procedures involving bronchial valve(s) insertion (procedure codes 33.71 and 33.73) within MS– DRGs 190, 191, and 192. We invited public comment on this issue. Comment: A number of commenters supported CMS’ proposal not to change the MS–DRG assignment for procedures involving bronchial valve(s) insertion (procedure codes 33.71 and 33.73) which are currently assigned to MS DRGs 190, 191, and 192 and to move them to MS–DRGs 163, 164, and 165. Several of these commenters stated that the proposal not to propose any MS– DRG changes for bronchial valve(s) insertion was reasonable given the data and information provided. Other commenters agreed with the proposal not to change the MS–DRG assignment for bronchial valve insertions. Response: We appreciate the commenters’ support. Comment: One commenter disagreed with the proposal not to change the MS– DRG assignment for bronchial valves. The commenter recommended reclassifying bronchial valve procedure codes 33.71 and 33.73 as operating room procedures rather than nonoperating procedures so that they will map to a surgical MS–DRG for inpatient hospitalizations. The commenter also recommended reassigning cases that currently map to medical MS–DRGs 190, 191, and 192 (Chronic Obstructive Pulmonary Disease with MCC, with CC, and without MCC/CC, respectively) that involve insertion of bronchial valves (ICD–9 CM procedures codes 33.71 and 33.73) to surgical MS–DRGs 163, 164, and 165 (Major Chest Procedures with MCC, with CC, or without MCC/CC, respectively). The commenter stated that currently, bronchial valve procedures are performed under a Humanitarian Device Exemption (HDE) under the Food and Drug Administration (FDA) and indicated for patients with a prolonged air leak, or air leak likely to become prolonged, following lobectomy, segmentectomy, or lung volume reduction surgery. The commenter stated that bronchial valves also are being investigated for emphysema, but this indication has not yet been approved by the FDA. The VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 commenter stated that bronchial valve cases are more clinically complex and costly compared to other types of cases with MS–DRGs 190–192 and are more appropriately assigned to MS–DRGs 163, 164, and 165. The commenter acknowledged that there were only two cases involving bronchial valves within MS–DRGs 190, 191, and 192. However, the commenter stated that other MS–DRGs such as those for deep brain stimulation therapy in MS–DRGs 023 and 024 (Craniotomy with Major Device Implant/Acute Complex CNS PDX with MCC or Chemo Implant and Craniotomy with Major Device Implant/Acute Complex CNS PDX with MCC or Chemo Implant without MCC, respectively) and liver and intestinal transplantation in MS– DRG 005 and 006 (Liver Transplant and/ or Intestinal Transplant with MCC and Liver Transplant and/or Intestinal Transplant without MCC) contain a small number of cases. The commenter believed that the two bronchial valve cases currently assigned to the medical MS–DRG 190 would be better aligned in terms of complexity, length of stay, and costs to a surgical MS–DRG set. Response: As stated earlier, our clinical advisors do not believe the bronchial valve procedures are clinically similar to other major chest procedures that require significantly more resources to perform. We once again point out the limited circumstances where the FDA has approved the bronchial valve are still limited to postsurgery use. The two cases that were assigned to MS–DRG 190 could have had higher costs due to a number of other factors other than the bronchial valve. Our clinical advisors noted the long length of stay for these two cases, which would not have been the result of the bronchial valve. Therefore, we do not believe it is appropriate to reclassify the bronchial valve procedure codes as operating room procedures and reassign the cases from MS–DRGs 190, 191, and 192 to MS–DRGs 163, 164, and 165. After consideration of the public comments we received, we are finalizing our proposal not to change the MS–DRG assignments for procedures involving bronchial valve(s) insertion (procedure codes 33.71 and 33.75) within MS–DRGs 190, 191, and 192. b. Pulmonary Thromboendarterectomy (PTE) With Full Circulatory Arrest We received a request from a university medical center to create a new MS–DRG or to reassign cases reporting a unique approach to pulmonary thromboendarterectomy (PTE) surgery performed with full PO 00000 Frm 00037 Fmt 4701 Sfmt 4700 50531 cardiac arrest and hypothermia. The requestor asked that we move cases from MS–DRGs 163, 164, and 165 (Major Chest Procedures with MCC, with CC, and without CC/MCC, respectively) to MS–DRGs 228, 229, and 230 (Other Cardiothoracic Procedures with MCC, with CC, and without CC/ MCC, respectively). Currently, MS– DRGs 163, 164, and 165 are grouped within MDC 4 (Diseases and Disorders of the Respiratory System) while MS– DRGs 228, 229, and 230 are grouped within MDC 5 (Diseases and Disorders of the Circulatory System). The requestor identified two conditions for which a pulmonary endarterectomy procedure is typically performed. These conditions are identified by ICD–9–CM diagnosis codes 415.19 (Other pulmonary embolism and infarction) and 416.2 (Chronic pulmonary embolism). However, the requestor noted that diagnosis code 415.19 is usually associated with traditional PTE for acute pulmonary embolism while diagnosis code 416.2 is associated with the medical center’s unique approach to PTE performed with full cardiac arrest and hypothermia. Currently, there is not a specific ICD– 9–CM procedure code to accurately describe PTE surgery performed with full cardiac arrest and hypothermia. Rather, a subset of existing ICD–9–CM procedure codes may be used to identify the various components involved in this unique approach to PTE surgery; for example, ICD–9–CM procedure codes 38.15 (Endarterectomy, other thoracic vessels); 39.61 (Extracorporeal circulation auxiliary to open heart surgery); 39.62 (Hypothermia (systemic) incidental to open heart surgery); and 39.63 (Cardioplegia). However, it is not clear if the requestor reports any of these codes or a combination of these codes to identify its unique approach to the procedure. According to the requestor, its approach to PTE surgery is significantly different from traditional pulmonary endarterectomy procedures in terms of complexity, resource use, and the population for which the procedure is performed. The requestor noted that the surgery is ‘‘conducted under profound hypothermia and circulatory arrest which involves placing the patient on cardiopulmonary bypass and cooling the body to 20 degrees centigrade or lower.’’ In addition, the requestor explained that ‘‘during this period of cooling and cardiac arrest, the heart is arrested and all of the patient’s blood is removed from the body.’’ Following this, circulation is stopped completely allowing for ‘‘optimal and extensive dissection of the pulmonary arteries and E:\FR\FM\19AUR2.SGM 19AUR2 50532 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations identification of an endarterectomy plane which can be delicately incised into the deepest pulmonary vasculature.’’ The requestor further noted that ‘‘due to the complexity of the surgical technique, a very high degree of skill is required and the procedure is currently only performed by a handful of surgeons world-wide.’’ Lastly, the requestor stated the average operating time for a traditional PTE is approximately 3 to 4 hours compared to the university medical center’s approach to PTE, which averages approximately 10 to 12 hours. For the FY 2014 IPPS/LTCH PPS proposed rule, we analyzed claims data from the FY 2012 MedPAR file for cases reporting a principal diagnosis code of 415.19 or a principal diagnosis code of 416.2 along with procedure codes 38.15, 39.61, 39.62, and 39.63. As displayed in the table below, there were a total of 11,287 cases in MS–DRG 163 with an average length of stay of approximately 13.33 days and average costs of approximately $32,728. Using the combination of diagnosis and procedure codes as described above, the total number of cases found in MS–DRG 163 was 12, with average costs ranging from approximately $46,959 to $53,048 and an average length of stay ranging from approximately 13.50 days to 16.20 days. We acknowledge that the average length of stay and average costs for these cases are somewhat higher in comparison to the average lengths of stay and average costs of all the other cases in MS–DRG 163. However, the volume of cases was MS–DRG 163—All cases ............................................................................................................ MS–DRG 163—Cases with principal diagnosis code 415.19 with procedure code 38.15 and 39.61 or 39.62 or 39.63 ........................................................................................................... MS–DRG 163—Cases with principal diagnosis code 416.2 with procedure code 38.15 only ... MS–DRG 163—Cases with principal diagnosis code 416.2 with procedure code 38.15 and 39.61 or 39.62 or 39.63 ........................................................................................................... MS–DRG 164—All cases ............................................................................................................ MS–DRG 164—Cases with principal diagnosis code 415.19 with procedure code 38.15 with 39.61 or 39.62 or 39.63 ........................................................................................................... MS–DRG 164—Cases with principal diagnosis code 416.2 with procedure code 38.15 only ... MS–DRG 164—Cases with principal diagnosis code 416.2 with procedure code 38.15 and 39.61 or 39.62 or 39.63 ........................................................................................................... a small number of cases to demonstrate higher than average costs, nor is it unusual for a small number of cases to demonstrate lower than average costs. Upon review of the MedPAR data, our clinical advisors agree that the current 13.33 $32,728 4 3 13.50 14.33 46,959 53,048 5 16,113 16.20 6.69 50,393 17,494 2 0 10.00 0 37,447 0 2 7.00 21,669 MS–DRG assignment for this unique procedure is appropriate. We also analyzed claims data from the FY 2012 MedPAR file for MS–DRGs 228, 229, and 230 as illustrated below. mstockstill on DSK4VPTVN1PROD with RULES6 MS–DRG 228—Other cardiothoracic procedures with MCC ...................................................... MS–DRG 229—Other cardiothoracic procedures with CC ......................................................... MS–DRG 230—Other cardiothoracic procedures without CC/MCC ........................................... VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Therefore, another aspect of this MS– DRG request involved the evaluation of moving ICD–9–CM diagnosis code 416.2 from MDC 4 to MDC 5. Our clinical advisors do not support moving diagnosis code 416.2 from MDC 4 to MDC 5 in order to accommodate this rare procedure performed by only a small number of physicians worldwide. They pointed out that a basic change such as moving diagnosis code 416.2 from MDC 4 to MDC 5 would impact a large number of patients who do not undergo this procedure. It also would disrupt trend data from over 30 years of PO 00000 Frm 00038 Fmt 4701 Sfmt 4700 Average costs 11,287 Number of cases MS–DRG ICD–9–CM procedure code 38.15 is designated as an operating room (OR) procedure code and currently groups to MS–DRGs 163, 164, and 165 in MDC 4 when either diagnosis code 415.19 or 416.2 are reported as the principal diagnosis. As diagnosis codes can only be assigned to one MDC within the GROUPER logic, it is not possible for a patient to have diagnosis code 415.19 or diagnosis code 416.2 reported along with procedure code 38.15 and grouped to MDC 5, which is where MS–DRGs 228, 229, and 230 are assigned. Average length of stay Number of cases MS–DRG As stated in previous rulemaking discussion, the MS–DRG classification system on which the IPPS is based comprises a system of averages. As such, it is understood that, in any particular MS–DRG, it is not unusual for very low. The data reflect similar results for MS–DRG 164. Only 4 cases were identified in the analysis, with average costs ranging from approximately $21,669 to $37,447 and average lengths of stay ranging from approximately 7 days to 10 days. In total, there were only 16 cases reflected in the data using the combination of diagnosis codes and proxy procedure codes. We believe there may be other factors contributing to the increased lengths of stay and costs. (We note that there were no cases found for a principal diagnosis code of 415.19 with procedure code 38.15 only. There also were no cases found in MS– DRG 165 using the combination of diagnosis and procedure codes.) 1,643 1,841 506 Average length of stay 13.26 7.77 5.08 Average costs $46,758 30,432 25,068 DRG and MS–DRG reporting. Given the very small number of potential cases, and the advice of our clinical advisors, we determined that an MS–DRG modification was not warranted for FY 2014. Therefore, we did not propose to create a new MS–DRG or to reassign cases reporting this university medical center’s approach to pulmonary thromboendarterectomy. We invited public comments on this issue. Comment: Several commenters supported CMS’ proposal to not create a new MS–DRG or to reassign cases for this alternative approach to pulmonary E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations thromboendarterectomy. The commenters stated that the proposal was reasonable, given the data and information provided. Response: We appreciate the commenters’ support. After consideration of the public comments we received, we are finalizing our proposal to not create a new MS–DRG or to reassign cases for this alternative approach to pulmonary thromboendarterectomy. 4. MDC 5 (Diseases and Disorders of the Circulatory System) a. Discharge/Transfer to Designated Disaster Alternative Care Site In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27516), we proposed to add new patient discharge status code 69 (Discharged/transferred to a designated disaster alternative care site) to the MS–DRG GROUPER logic for MS–DRGs 280 (Acute Myocardial Infarction Discharged Alive with MCC), 281 (Acute Myocardial Infarction Discharged Alive with CC), and 282 (Acute Myocardial Infarction Discharged Alive without CC/MCC) to identify patients who are discharged or transferred to an alternative site that will provide basic patient care during a disaster response. As discussed in section II.G.7. of the preamble of the proposed rule, we also proposed to add this new discharge status code to the Medicare Code Editor (MCE) software. We invited public comments on this proposal. Comment: Several commenters supported CMS’ proposal to add the new patient discharge status code 69 to the MS–DRG GROUPER logic for MS– DRGs 280, 281, and 282 to identify patients who are discharged or transferred to an alternative site that will provide basic patient care during a disaster response. One commenter noted that this discharge status code would seldom be used. However, the New code Current code 81 82 03 .................... 83 04 .................... mstockstill on DSK4VPTVN1PROD with RULES6 01 .................... 02 .................... 84 05 .................... 85 06 .................... 86 21 .................... 43 .................... 61 .................... 87 88 89 VerDate Mar<15>2010 commenter believed that the code is needed. Response: We appreciate the commenters’ support. We agree that this new discharge status code will be beneficial to identify patients who are involved in those disaster situations. Comment: One commenter expressed concern with the proposal and questioned the purpose of implementing the new patient discharge status code 69 to only MS–DRGs 280, 281, and 282 within MDC 5. Response: We take this opportunity to point out that the new discharge status code 69 was created and approved by the National Uniform Billing Committee (NUBC) for implementation on October 1, 2013. The purpose of adding this discharge status code 69 specifically to the GROUPER logic for MS–DRGs 280, 281, and 282 is to identify those patients diagnosed with an acute myocardial infarction (AMI) who were discharged/ transferred to a designated disaster alternative care site alive. The GROUPER logic for these MS–DRGs differs from the GROUPER logic for MS– DRGs 283, 284, and 285 (Acute Myocardial Infarction, Expired with MCC, with CC, and without CC/MCC, respectively) where the patient has expired. To further clarify, as discussed in section II.G.7.b. of the preamble of the proposed rule (78 FR 27520), this new discharge status code was also proposed to be added to the GROUPER and MCE logic. Therefore, it may be assigned to other MS–DRGs. However, when the logic for an MS– DRG is defined by specific requirements, such as discharge status designation, the logic must be updated if a new discharge status is created to appropriately group a claim. Within MDC 5, for MS–DRGs 280, 281, and 282, the software logic is specifically defined by a patient who has been diagnosed with an AMI and is discharged alive. Assignment of the proposed new 50533 discharge status code 69 would not be valid for MS–DRGs 283, 284, and 285 where the patient has been diagnosed with an AMI and has expired. In other words, an AMI patient who has expired would not be discharged/transferred to a designated disaster alternative care site. Therefore, the addition of discharge status code 69 to the software logic for those MS–DRGs (283, 284, and 285) is not applicable within MDC 5. Alternatively, a patient who has been diagnosed with an AMI and is discharged alive would clearly have the opportunity to be discharged/transferred to a designated disaster alternative care site in a given disaster scenario or circumstance. Therefore, to ensure proper MS–DRG assignment, we proposed to add discharge status code 69 to MS–DRGs 280, 281, and 282 within MDC 5. After consideration of the public comments we received, we are finalizing our proposal to add new patient discharge status code 69 to the MS–DRG GROUPER logic for MS–DRGs 280, 281, and 282. b. Discharges/Transfers With a Planned Acute Care Hospital Inpatient Readmission In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27516), we also proposed to add 15 new discharge status codes to the MS–DRG GROUPER logic for MS–DRGs 280, 281, and 282 that will identify patients who are discharged with a planned acute care hospital inpatient readmission. As discussed in section II.G.7.b. of the preamble of the proposed rule, these new discharge status codes was proposed for addition to the MCE as well. Shown in the table below are the current discharge status codes that are assigned to the GROUPER logic for MS– DRGs 280, 281, and 282, along with the proposed new discharge status codes and their titles. Discharge status code title Discharged to home or self-care with a planned acute care hospital inpatient readmission. Discharged/transferred to a short term general hospital for inpatient care with a planned acute care hospital inpatient readmission. Discharged/transferred to a skilled nursing facility (SNF) with Medicare certification with a planned acute care hospital inpatient readmission. Discharged/transferred to a facility that provides custodial or supportive care with a planned acute care hospital inpatient readmission. Discharged/transferred to a designated cancer center or children’s hospital with a planned acute care hospital inpatient readmission. Discharged/transferred to home under care of organized home health service organization with a planned acute care hospital inpatient readmission. Discharged/transferred to court/law enforcement with a planned acute care hospital inpatient readmission. Discharged/transferred to a federal health care facility with a planned acute care hospital inpatient readmission. Discharged/transferred to a hospital-based Medicare approved swing bed with a planned acute care hospital inpatient readmission. 21:51 Aug 16, 2013 Jkt 229001 PO 00000 Frm 00039 Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2 50534 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations New code Current code 90 63 .................... 91 64 .................... 92 65 .................... 93 66 .................... 70 .................... mstockstill on DSK4VPTVN1PROD with RULES6 62 .................... 94 95 Discharge status code title Discharged/transferred to an inpatient rehabilitation facility (IRF) including rehabilitation distinct part units of a hospital with a planned acute care hospital inpatient readmission. Discharged/transferred to a Medicare certified long term care hospital (LTCH) with a planned acute care hospital inpatient readmission. Discharged/transferred to a nursing facility certified under Medicaid but not certified under Medicare with a planned acute care hospital inpatient readmission. Discharged/transferred to a psychiatric distinct part unit of a hospital with a planned acute care hospital inpatient readmission. Discharged/transferred to a critical access hospital (CAH) with a planned acute care hospital inpatient readmission. Discharged/transferred to another type of health care institution not defined elsewhere in this code list with a planned acute care hospital inpatient readmission. We invited public comments on our proposal to add the above listed new discharge status codes to the GROUPER logic for MS–DRGs 280, 281, and 282. Comment: Commenters supported CMS’ proposal to add the 15 new discharge status codes to the MS–DRG GROUPER logic for MS–DRGs 280, 281, and 282 that will identify patients who are discharged with a planned acute care hospital inpatient readmission. The commenters noted that these new discharge status codes will enable providers to better track AMI patients with planned versus unplanned readmissions. Response: We appreciate the commenters’ support. We agree that these new discharge status codes will assist in tracking patients diagnosed with an acute myocardial infarction who are discharged alive and expect to be readmitted at a later date. Comment: One commenter stated that the addition of these 15 new discharge status codes to MS–DRGs 280–282 is unwarranted and believed that it will create a burden for providers to report and update systems. The commenter questioned if there is a timeframe associated with the use of these new discharge status codes and if this timeframe involves reporting a new discharge status code if the planned readmission is to treat the same condition as the current stay. In addition, the commenter questioned how CMS would verify that providers are applying these proposed discharge status codes appropriately. The commenter stated there are ‘‘plenty of descriptive discharge status codes that describe where the patient is going upon discharge. To add more to clarify what is planned seems burdensome and unnecessary.’’ Another commenter expressed concern with ‘‘targeting only a small number of DRGs for a large increase in applicable discharge status codes.’’ Response: The new discharge status codes related to a planned acute care hospital inpatient readmission were VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 developed and approved by the National Uniform Billing Committee (NUBC) in response to a request by the provider community. The purpose of the new codes is to allow providers to track these types of situations when they occur. According to meeting notes from the NUBC, there is not a designated timeframe (or limitation) in reporting these new codes. With respect to ensuring that providers apply these proposed new discharge status codes correctly, we would like to point out that the American Health Information Management Association (AHIMA) has promulgated Standards of Ethical Coding that require accurate coding that includes the reporting of all health care data elements (for example, diagnosis and procedure codes, present on admission indicator, discharge status) required for external reporting purposes (for example, reimbursement and other administrative uses, population health, quality and patient safety measurement, and research) completely and accurately, in accordance with regulatory and documentation standards and requirements and applicable official coding conventions, rules, and guidelines. In addition, Medicare program integrity initiatives closely monitor for inaccurate coding, as well as coding inconsistent with medical record documentation. In regard to the commenter’s concern with targeting a small number of MS– DRGs with a large increase in discharge status codes, the discharge status codes were proposed to be added specifically to the GROUPER logic for MS–DRGs 280, 281, and 282 to identify those patients diagnosed with an acute myocardial infarction (AMI) who were discharged/transferred to another facility with a planned acute care hospital inpatient readmission alive. The GROUPER logic for these MS–DRGs differs from the GROUPER logic for MS– DRGs 283, 284, and 285 (Acute Myocardial Infarction, Expired with MCC, with CC, and without CC/MCC, PO 00000 Frm 00040 Fmt 4701 Sfmt 4700 respectively) where the patient has expired. Similar to the discussion of discharge status code 69 in section II.G.4.a. of the preamble of this final rule, the planned readmission discharge status codes can also be reported for other MS–DRGs. We reiterate that, as discussed in section II.G.7.b. of the preamble of the proposed rule (78 FR 27520), these new discharge status codes were proposed for addition to the GROUPER and MCE logic as well. When the logic for an MS–DRG is defined by specific requirements, such as a discharge status designation, the logic must be updated if a new discharge status is created to appropriately group a claim. Within MDC 5, for MS–DRGs 280, 281, and 282, the software logic is specifically defined by a patient who has been diagnosed with an AMI and is discharged alive. As such, the GROUPER logic requires that these discharge status codes for planned readmissions be added to the specific AMI DRGs where the patient has been discharged alive. An AMI patient who expired would not have a planned readmission. Therefore, these discharge status codes would not apply to MS– DRGs 283, 284, and 285 within MDC 5. Therefore, to ensure proper MS–DRG assignment, we proposed to add the 15 discharge status codes describing a planned readmission to MS–DRGs 280, 281, and 282 within MDC 5. After consideration of the public comments we received, we are finalizing our proposal to add the above listed 15 new patient discharge status codes describing a planned acute care hospital inpatient readmission to the MS–DRG GROUPER logic for MS–DRGs 280, 281, and 282, effective October 1, 2013. 5. MDC 8 (Diseases and Disorders of the Musculoskeletal System and Connective Tissue) a. Reverse Shoulder Procedures We received a request to change the MS–DRG assignment for reverse shoulder replacement procedures which E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations is captured with procedure code 81.88 (Reverse total shoulder replacement). The requestor did not suggest a specific new MS–DRG assignment, but requested that reverse shoulder replacement procedures be reassigned from MS– DRGs 483 and 484 (Major Joint/Limb Reattachment Procedure of, Upper Extremities with CC/MCC and without CC/MCC, respectively) or that we create a new MS–DRG for reverse shoulder replacement procedures. Biomechanically, the reverse shoulder devices move the center of rotation of the arm laterally and change the direction of the pull of the deltoid muscle, allowing the deltoid muscle to elevate the arm without functioning rotator cuff tendons. The requestor stated that the use of traditional total shoulder devices in patients with a nonfunctioning rotator cuff frequently leads to long-term complications and unsatisfactory functional results. Patients with damaged rotator cuffs or rotator cuff syndrome have poor outcomes with traditional shoulder replacement devices. The reverse shoulder replacement procedure was created to address the clinical needs for patients who would have poor outcomes with a traditional shoulder replacement. The requestor stated that reverse shoulder replacement devices were designed to provide a superior functionality and outcomes for patients with damaged rotator cuffs. The requestor stated that the reverse shoulder replacement procedure is technically more complex and requires a higher level of expertise than traditional shoulder procedures and involves several issues that make the surgery more complex. Patients who have had prior rotator cuff surgery have anchors and scar tissue that must be surgically addressed. Often, there also are severe deformities that must be addressed in order to establish stability. The requestor acknowledged that the reverse shoulder replacement procedure is an upper extremity procedure like other procedures assigned to MS–DRGs 483 and 484. These MS–DRGs include the longstanding total shoulder replacement procedures as well as partial shoulder replacements. While the procedure is similar to other procedures in MS–DRGs 483 and 484, the requestor stated there are significant differences between the technical complexity and indications for usage from the other procedures. The requestor stated there are significant differences in resource usage and clinical coherence between mstockstill on DSK4VPTVN1PROD with RULES6 MS–DRG MS–DRG MS–DRG MS–DRG 483—All cases ............................................................................................................ 483—Cases with procedure code 81.88 .................................................................... 484—All cases ............................................................................................................ 484—Cases with procedure code 81.88 .................................................................... As the above table illustrates, the average costs for reverse total shoulder replacement are approximately $2,000 higher than the average costs for all other procedures within MS–DRGs 483 and 484 and have similar average lengths of stays. While the average costs were higher, each MS–DRG has some cases that are higher and some cases that are lower than the average costs for the entire MS–DRG. We believe the average costs for the reverse shoulder replacement procedures are not inappropriately high compared to other procedures grouped within MS–DRGs 483 and 484. Therefore, the claims data do not support reassigning these cases or creating a new MS–DRG. Our clinical advisors reviewed this issue and determined that the cases are appropriately assigned to MS–DRGs 483 and 484. As stated earlier, MS–DRGs 483 and 484 contain other types of shoulder replacements. Our clinical advisors believe it is appropriate to have all total shoulder replacement VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 procedures within the same set of MS– DRGs. They do not believe it is appropriate to reassign those that use a different technique to accomplish the same goal, a total shoulder replacement. Therefore, our clinical advisors determined that this is an appropriate assignment for reverse shoulder replacement procedures from a clinical perspective. They also do not believe it is appropriate to move these cases to any other surgical, orthopedic MS– DRGs because of differences in the clinical makeup of the other surgical orthopedic MS–DRGs. Our clinical advisors recommended not creating a new MS–DRG for reverse shoulder replacement procedures because they believe the procedures are appropriately assigned to MS–DRGs 483 and 484. Therefore, based on claims data and clinical analysis, in the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR 27517 through 27518), we did not propose to reassign these cases to any other MS– DRGs or to create a new MS–DRG. PO 00000 longstanding approaches to shoulder replacement and other procedures assigned to MS–DRGs 483 and 484 and the reverse shoulder replacement procedure. The requestor stated not only was the resource consumption significantly higher, the individual supply costs for reserve shoulder replacement procedures were higher than the costs of other procedures assigned to MS–DRGs 483 and 484. MS–DRGs 483 and 484 contain the following procedures: • 81.73 (Total wrist replacement) • 81.80 (Other total shoulder replacement) • 81.81 (Partial shoulder replacement) • 81.84 (Total elbow replacement) • 81.88 (Reverse total shoulder replacement) • 84.23 (Forearm, wrist, or hand reattachment) • 84.24 (Upper arm reattachment). As can be seen from this list, MS– DRGs 483 and 484 contain total and partial shoulder replacements, as well as replacement and attachment procedures on the wrist and upper arm. Both the newer shoulder replacement techniques as well as the longstanding shoulder replacement techniques are included in these MS–DRGs. Number of cases MS–DRG Frm 00041 Fmt 4701 Sfmt 4700 50535 13,113 5,690 21,073 7,505 Average length of stay Average costs 3.33 3.30 2.01 2.08 $17,039 19,023 14,448 16,890 Based on the claims data and our clinical analysis, we did not propose to reassign cases reporting procedure code 81.88 from their current assignment to MS–DRGs 483 and 484 or to create a new MS–DRG. We invited public comments on this issue. Comment: Several commenters supported CMS’ proposal not to reassign reverse shoulder procedure cases reporting procedure code 81.88 from their current assignment to MS DRGs 483 and 484 or to create a new MS– DRG. Several commenters stated the proposal was reasonable given the data and information provided. Other commenters disagreed with our recommendation of making no MS–DRG modifications for reverse shoulder procedures. One commenter stated that the procedure is unique enough in approach and cost to justify reassignment, or as an alternative, reassignment of all reverse shoulder cases to MS–DRG 483, even if the cases do not have a CC or MCC as a secondary E:\FR\FM\19AUR2.SGM 19AUR2 50536 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations diagnosis. The commenter stated that it is important to take into consideration the high volume of reverse shoulder procedures cases that have occurred in a very short period of time since this code was created. The commenter stated that, in the first year of this new code, more than one-third of the cases in each MS–DRG (483 and 484) are reverse shoulder procedures. For a newly created code, the commenter believed that this was extraordinary utilization and should indicate the importance of this unique procedure. The commenter stated that, without an examination of each case and the reason why some cases showed lower costs, it does not seem reasonable to dismiss the substantially higher average costs of the procedures. The commenter further stated that while CMS clinical advisors stated that reverse shoulder is a simply a different technique to accomplish the same goal of a total shoulder replacement, the procedure (and the device used in the procedure) is meeting an unmet need, uses significantly different techniques to implant the device, and requires additional skill, experience, and time to implant. Another commenter recommended that CMS create a new MS–DRG for reverse shoulder procedures because the procedure is used to treat some of the most complex patients and use greater resources. Response: We agree with the commenters who stated that the data and our clinical analysis support the recommendation of making no MS–DRG changes for reverse shoulder procedures. Our clinical advisors continue to believe the procedure is a different technique to accomplish the same goal, a total shoulder replacement. We do not believe the data or a clinical analysis would support moving all reverse shoulder procedures into a new MS–DRG or moving all the reverse shoulder procedures to MS DRG 483. The difference in average costs for reverse shoulder procedures with a CC/ MCC versus those without a CC/MCC is $2,133. The difference in average costs for all cases in MS–DRG 483 and MS– DRG 484 is $2,591. Clearly the presence of a CC or MCC has a consistent impact on the average costs of shoulder replacements. Our clinical advisors believe that it is important to maintain the clinical cohesion of MS–DRGs 483 and 484 to maintain severity levels for all shoulder replacement procedures. The commenter who disagreed with our proposal pointed out that this procedure is being adopted at a rapid rate with one-third of the shoulder replacements using this new technique. Any growth in this approach of performing total shoulder replacements will be reflected in our claims data and will impact relative weights. Because the data and clinical analysis support keeping the reverse shoulder procedure in the same MS–DRG as other shoulder replacements, we are not modifying the MS–DRGs for reverse shoulder procedures. After consideration of the public comments we received, we are finalizing our proposal to not reassign reverse shoulder cases reporting procedure code 81.88 from their current assignment in MS DRGs 483 and 484 or to create a new MS–DRG. b. Total Ankle Replacement Procedures In response to the FY 2013 IPPS/ LTCH PPS proposed rule, we received a request to develop a new MS–DRG for total ankle replacements, which we considered to be outside the scope of that proposed rule (77 FR 53325). We are addressing this request as part of the FY 2014 IPPS/LTCH PPS rulemaking. The cases are captured by procedure code 81.56 (Total ankle replacement) and are assigned to MS–DRGs 469 and 470 (Major Joint Replacement or Reattachment of Lower Extremity with MCC and without MCC, respectively). The commenter stated that total ankle procedures are much more clinically complex than total hip or total knee replacement procedures, which have their own distinct MS–DRGs. The commenter also stated that total ankle replacement is surgery that involves the replacement of the damaged parts of the three bones that make up the ankle joint, as compared to two bones in most other total joint procedures such as hip or knee replacement. The commenter stated that average costs of total ankle replacements are higher than those for total knee and hip replacements. Therefore, the commenter recommended that a new MS–DRG should be created for total ankle replacements. As an alternative, the commenter suggested that these cases be reassigned to MS–DRG 469 even if the cases do not have an MCC as a secondary diagnosis. MS–DRGs 469 and 470 include a variety of procedures of the lower extremities including the procedures listed below. This group of lower extremity joint replacement and reattachment procedures was developed because they were considered to be clinically cohesive and to have similar resource consumptions. • 00.85 (Resurfacing hip, total, acetabulum and femoral head) • 00.86 (Resurfacing hip, partial, femoral head) • 00.87 (Resurfacing hip, partial, acetabulum) • 81.51 (Total hip replacement) • 81.52 (Partial hip replacement) • 81.54 (Total knee replacement) • 81.56 (Total ankle replacement) • 84.26 (Foot reattachment) • 84.27 (Lower leg or ankle reattachment) • 84.28 (Thigh reattachment) As the table below shows, there were 1,275 cases reporting total ankle replacements with 21 cases in MS–DRG 469 and 1,254 cases in MS–DRG 470. The 1,254 cases in MS–DRG 470 have higher costs than other cases in MS– DRG 470 (approximately $17,242 compared to approximately $13,984). The 21 cases in MS–DRG 469 had average costs of approximately $23,360 compared to approximately $21,186 in average costs for all cases within MS– DRG 469. While these procedures are higher in average costs than other procedures within the MS–DRGs, we point out that cases are grouped together based on similar clinical and resource criteria. Some cases will have average costs higher than the overall average costs for the MS–DRG, while other cases will have lower average costs. Total ankle replacements represent 0.3 percent of the total number of cases within MS–DRGs 469 and 470. mstockstill on DSK4VPTVN1PROD with RULES6 MS–DRGs Number of cases Average length of stay Average costs MS–DRG 469—All cases ............................................................................................................ MS–DRG 469—Cases with procedure code 81.56 .................................................................... MS–DRG 470—All cases ............................................................................................................ MS–DRG 470—Cases with procedure code 81.56 .................................................................... Total—All cases .................................................................................................................... Total—Cases with procedure code 81.56 ............................................................................ 25,618 21 390,518 1,254 ........................ ........................ 7.33 6.81 3.37 2.19 ........................ ........................ $21,186 23,360 13,984 17,242 416,136 1,275 VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 PO 00000 Frm 00042 Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Our clinical advisors reviewed this issue and determined that the total ankle replacements are appropriately classified within MS–DRGs 469 and 470. They do not support the commenter’s contention that these cases are significantly more complex than knee and hip replacements. They believe that total ankle replacements are clinically consistent with other types of lower extremity joint replacements within MS–DRGs 469 and 470. Our clinical advisors do not support creating a new MS–DRG for total ankle replacements. After considering the results of examination of the claims data, the recommendations from our clinical advisors, and the small number of total ankle replacements, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27518 through 27519), we did not propose to create a new MS–DRG. We also examined the request to move all total ankle replacements to the highest severity level, MS–DRG 469, even when no secondary diagnosis on the MCC list was reported. Moving all total ankle replacements to MS–DRG 469 would lead to overpayments of approximately $3,944 per case because the average costs of total ankle replacements in MS–DRG 470 was approximately $17,242, while the average costs of all cases in MS–DRG 469 was approximately $21,186. After considering the claims data as well as the input from our clinical advisors, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27518 through 27519), we did not propose that all total ankle procedures be assigned to MS–DRG 469 even when the case does not have an MCC reported as a secondary diagnosis. We believe the current MS–DRGs are appropriate for total ankle replacements. In the FY 2014 IPPS/LTCH PPS proposed rule, we did not propose to create a new total ankle replacement MS–DRG or to reassign all total ankle replacements to MS DRG 469. We proposed to maintain the current MS– DRG assignments for total ankle replacements. We invited public comment on our proposals. Comment: Several commenters supported CMS’ recommendation to maintain the current MS–DRG assignments for total ankle replacements. Several commenters stated that the proposal not to create a new total ankle replacement MS–DRG or to reassign all total ankle replacements to MS DRG 469 was reasonable given the data and information provided. Other commenters offered support for our recommendation to maintain the current MS–DRG assignments for total ankle replacements. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Response: We appreciate the commenters’ support. Comment: Several commenters disagreed with the proposal. One commenter stated that total ankle procedures are more clinically complex than total hip or total knee replacement procedures, and that the higher average cost for total ankle procedures should qualify it for reassignment. Another commenter stated that the proposed policy is detrimental to hospitals’ ability to provide in a cost effective manner clinically-proven intervention, and thus jeopardizes beneficiary access to total ankle replacement procedures. The commenter pointed out that CMS suggests that under the MS–DRG system in general, some cases will have average costs higher than the overall average costs for the MS–DRG, while other cases will have lower average costs. However, the commenter believed that, due to the wide variation of procedures that map to MS–DRGs 469 and 470, this is an insufficient rationale to systematically underpay for the average cost of the vast majority of total knee procedures by 28 percent. The commenter stated that total ankle replacement is a complex surgical procedure involving the replacement of the damaged parts of the three bones (talus, tibia and fibula) that make up the articulations of the ankle, as compared to two bones in most other total joint replacement procedures (for example, hip or knee). The commenter stated that establishing a separate MS–DRG for total ankle procedures is the best solution to ensuring that all joint replacement MS–DRGs are clinically coherent, and similar in resource use. The commenter recommended that if a separate MS–DRG could not be created, CMS reassign all total ankle replacements to MS–DRG 469 even if the cases do not report a MCC. Other commenters asked that total ankle replacements be reassigned to higher paying MS–DRGs because the procedures were clinically more complex and have higher average costs than other procedures within the current MS–DRGs. Response: We disagree with the commenters who stated that the clinical complexity of total ankle procedures justifies reassigning the cases. As stated earlier, our clinical advisors reviewed this issue and determined that the total ankle replacements are appropriately classified with other lower joint procedures within MS–DRGs 469 and 470. They do not support the commenters’ contention that these cases are significantly more complex than knee and hip replacements. Our clinical advisors believe that total ankle replacements are clinically consistent PO 00000 Frm 00043 Fmt 4701 Sfmt 4700 50537 with other types of lower extremity joint replacements within MS–DRGs 469 and 470. As we also mentioned earlier, moving all total ankle replacements to MS–DRG 469 would lead to overpayments of approximately $3,944 per case because the average costs of total ankle replacements in MS–DRG 470 was approximately $17,242, while the average costs of all cases in MS DRG 469 was approximately $21,186. Our clinical advisors do not support creating a new MS–DRG for total ankle procedures or moving the cases to MS– DRG 469. After consideration of the public comments we received, we are finalizing our proposal to maintain the current MS–DRG assignments for total ankle replacements captured by procedure code 81.56 and assigned to MS–DRGs 469 and 470. 6. MDC 15 (Newborns and Neonates With Conditions Originating in the Neonatal Period) a. Persons Encountering Health Services for Specific Procedures, Not Carried Out We received a request to evaluate the MS–DRG assignment of ICD–9–CM diagnosis codes V64.00 through V64.04, and V64.06 through V64.43 in MS–DRG 794 (Neonate with Other Significant Problems) under MDC 15. The requestor noted that the assignment of diagnosis code V64.05 (Vaccination not carried out because of caregiver refusal) was addressed in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50111 through 50112). We removed diagnosis code V64.05 from MS–DRG 794 and added it to the ‘‘only secondary diagnosis’’ list for MS–DRG 795 (Normal Newborn). The requestor asked that we consider the reassignment of these diagnosis codes from MS–DRG 794 to MS–DRG 795. The codes under existing MS–DRG 794 include: • V64.00 (Vaccination not carried out, unspecified reason) • V64.01 (Vaccination not carried out because of acute illness) • V64.02 (Vaccination not carried out because of chronic illness or condition) • V64.03 (Vaccination not carried out because of immune compromised state) • V64.04 (Vaccination not carried out because of allergy to vaccine or component) • V64.06 (Vaccination not carried out because of patient refusal) • V64.07 (Vaccination not carried out for religious reasons) • V64.08 (Vaccination not carried out because patient had disease being vaccinated against) • V64.09 (Vaccination not carried out for other reason) E:\FR\FM\19AUR2.SGM 19AUR2 50538 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations • V64.1 (Surgical or other procedure not carried out because of contraindication) • V64.2 (Surgical or other procedure not carried out because of patient’s decision) • V64.3 (Procedure not carried out for other reasons) • V64.41 (Laparoscopic surgical procedure converted to open procedure) • V64.42 (Thoracoscopic surgical procedure converted to open procedure) • V64.43 (Arthroscopic surgical procedure converted to open procedure). In a newborn case with one of these diagnosis codes reported as a secondary diagnosis, the case would be assigned to MS–DRG 794. The commenter believed that these diagnosis codes, when reported as a secondary diagnosis for a newborn case, should be assigned to MS–DRG 795 instead of MS–DRG 794. Our clinical advisors reviewed this request and concur with the commenter that diagnosis codes V64.00 through V64.04, and V64.06 through V64.3 should not continue to be assigned to MS–DRG 794, as there is no clinically usable information reported in those codes identifying significant problems. However, our clinical advisors recommend that diagnosis codes V64.41, V64.42, and V64.43, which identify that a surgical procedure converted to an open procedure, continue to be assigned to MS–DRG 794. These diagnosis codes may indicate a more significant encounter that required a surgical intervention. Therefore, for FY 2014, we proposed to reassign diagnosis codes V64.00 through V64.04, and V64.06 through V64.3 from MS–DRG 794 to MS–DRG 795 (78 FR 27519). Diagnosis codes V64.00 through V64.04, and V64.06 through V64.3 would be added to the ‘‘only secondary diagnosis’’ list for MS– DRG 795. Diagnosis codes V64.41, V64.42, and V64.43 would continue to be assigned to MS–DRG 794. We invited public comments on this proposal. Comment: Several commenters supported CMS’ proposal to reassign diagnosis codes V64.00 through V64.04 and V64.06 through V64.3 from MS– DRG 794 to MS–DRG 795. The commenters stated that the proposed reassignments were reasonable given the data and information provided. Response: We appreciate the commenters’ support. After consideration of the public comments we received, we are finalizing our proposal of reassigning diagnosis codes V64.00 through V64.04 and V64.06 through V64.3 from MS– DRG 794 to MS–DRG 795. b. Discharges/Transfers of Neonates With a Planned Acute Care Hospital Inpatient Readmission In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27519 and 27520), we proposed to add the patient discharge status codes shown in the table below to the MS–DRG GROUPER logic for MS–DRG 789 (Neonates, Died or Transferred to Another Acute Care Facility) to identify neonates that are transferred to a designated facility with a planned acute care hospital inpatient readmission. New code Title 82 ...................... Discharged/transferred to a short term general hospital for inpatient care with a planned acute care hospital inpatient readmission. Discharged/transferred to a designated cancer center or children’s hospital with a planned acute care hospital inpatient readmission. Discharged/transferred to a critical access hospital (CAH) with a planned acute care hospital inpatient readmission. 85 ...................... mstockstill on DSK4VPTVN1PROD with RULES6 94 ...................... Currently, the GROUPER logic for MS–DRG 789 contains discharge status codes 02 (Discharged/transferred to a short term general hospital for inpatient care), 05 (Discharged/transferred to a designated cancer center or children’s hospital), and 66 (Discharged/ transferred to a critical access hospital (CAH)). As discussed in section II.G.7. of the preamble of the proposed rule, these new discharge status codes were also proposed for addition to the Medicare Code Editor (MCE). We invited public comments on our proposal. Comment: Several commenters supported CMS’ proposal to add the three new discharge status codes to the MS–DRG GROUPER logic for MS–DRG 789 (Neonates, Died or Transferred to Another Acute Care Facility) to identify neonates that are transferred to a designated facility with a planned acute care hospital inpatient readmission. The commenters noted the proposal was reasonable given the data and information provided. Response: We appreciate the commenters’ support. Comment: One commenter expressed concern that the addition of these new VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 discharge status codes to MS–DRG 789 would create a burden to providers in updating their systems and was unnecessary. Response: As noted in the previous section, these new discharge status codes related to a planned acute care hospital inpatient readmission were developed and approved by the NUBC in response to a request by the provider community. For the commenters’ benefit, we would like to point out how the GROUPER logic for MS–DRG 789 is designed. When the logic for an MS– DRG is defined by specific requirements, such as a discharge status designation, the logic must be updated if a new discharge status is created to appropriately group a claim. With regard to the burden on providers for updating their systems, effective October 1 of each year, providers have gone through the process of updating their systems based on changes that were approved and finalized for the upcoming IPPS fiscal year. After consideration of the public comments we received, we are finalizing our proposal to add new discharge status codes 82, 85, and 94 to PO 00000 Frm 00044 Fmt 4701 Sfmt 4700 the MS–DRG GROUPER logic for MS– DRG 789 for FY 2014. 7. Medicare Code Editor (MCE) Changes The Medicare Code Editor (MCE) is a software program that detects and reports errors in the coding of Medicare claims data. Patient diagnoses, procedure(s), and demographic information are entered into the Medicare claims processing systems and are subjected to a series of automated screens. The MCE screens are designed to identify cases that require further review before classification into an MS– DRG. a. Age Conflict Edit We received a request to review three ICD–9–CM diagnosis codes currently listed under the age conflict edit within the MCE. The age conflict edit detects inconsistencies between a patient’s age and any diagnosis on the patient’s record. Specifically, the requestor recommended that CMS consider the removal of diagnosis codes 751.1 (Atresia and stenosis of small intestine), 751.2 (Atresia and stenosis of large intestine, rectum, and anal canal), and 751.61 (Biliary atresia) from the E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations pediatric age conflict edit. Generally, diagnoses included in the list for the pediatric age conflict edit are applicable for ages 0 through 17. The requestor noted that diagnosis code 751.1 was removed from the Integrated Outpatient Code Editor (IOCE) effective January 1, 2006. Our clinical advisors agree that patients described with any one of the above listed codes, although congenital anomalies, may require a revision procedure in adulthood. Therefore, we believe that the removal of these codes appears appropriate and also would be consistent with the IOCE. We invited public comments on our proposal to remove diagnosis codes 751.1, 751.2, and 751.61 from the pediatric age conflict edit effective October 1, 2013. Comment: Commenters supported the proposal to remove diagnosis codes 751.1, 751.2, and 751.61 from the pediatric age conflict edit effective October 1, 2013. Response: We appreciate the commenters’ support. After consideration of the public comments we received, we are finalizing our proposal to remove diagnosis codes 751.1, 751.2, and 751.61 from the pediatric age conflict edit effective October 1, 2013. b. Discharge Status Code Updates To reflect changes in the UB–04 code set maintained by the National Uniform Billing Committee (NUBC), in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27520), we proposed to add the following new discharge status codes to 50539 the CMS GROUPER and the MCE logic effective October 1, 2013. One of the new discharge status codes corresponds to an alternative care site. This alternative care site discharge status code is intended to identify patients being discharged or transferred to an alternative site that will provide basic patient care during a disaster response. The new discharge status code is 69 (Discharged/transferred to a designated disaster alternative care site). In addition, 15 new discharge status codes correspond with identifying planned acute care hospital inpatient readmissions. Shown below are the existing ‘‘base’’ discharge status codes and the new codes that will better identify patients who are discharged with a planned readmission. New code Title 01 ............................. 02 ............................. 03 ............................. 81 ........................... 82 ........................... 83 ........................... 04 ............................. 84 ........................... 05 ............................. 85 ........................... 06 ............................. 86 ........................... 21 ............................. 87 ........................... 43 ............................. 88 ........................... 61 ............................. 89 ........................... 62 ............................. 90 ........................... 63 ............................. 91 ........................... 64 ............................. 92 ........................... 65 ............................. 93 ........................... 66 ............................. 94 ........................... 70 ............................. mstockstill on DSK4VPTVN1PROD with RULES6 Base code 95 ........................... Discharged to home or self-care with a planned acute care hospital inpatient readmission. Discharged/transferred to a short term general hospital for inpatient care. Discharged/transferred to a skilled nursing facility (SNF) with Medicare certification with a planned acute care hospital inpatient readmission. Discharged/transferred to a facility that provides custodial or supportive care with a planned acute care hospital inpatient readmission. Discharged/transferred to a designated cancer center or children’s hospital with a planned acute care hospital inpatient readmission. Discharged/transferred to home under care of organized home health service organization with planned acute care hospital inpatient readmission. Discharged/transferred to court/law enforcement with a planned acute care hospital inpatient readmission. Discharged/transferred to federal health care facility with a planned acute care hospital inpatient readmission. Discharged/transferred to a hospital-based Medicare approved swing bed with a planned acute care hospital inpatient readmission. Discharged/transferred to an inpatient rehabilitation facility (IRF) including rehabilitation distinct part units of a hospital with a planned acute care hospital inpatient readmission. Discharged/transferred to a Medicare certified long term care hospital (LTCH) with a planned acute care hospital inpatient readmission. Discharged/transferred to a nursing facility certified under Medicaid but not certified under Medicare with a planned acute care hospital inpatient readmission. Discharged/transferred to a psychiatric distinct part unit of a hospital with a planned acute care hospital inpatient readmission. Discharged/transferred to a critical access hospital (CAH) with a planned acute care hospital inpatient readmission. Discharged/transferred to another type of health care institution not defined elsewhere in this code list with a planned acute care hospital inpatient readmission. We invited public comments on our proposal to add the above listed new discharge status codes to the GROUPER and the MCE logic effective October 1, 2013 (FY 2014). Comment: Several commenters supported CMS’ proposal to add the above listed discharge status codes to the GROUPER and the MCE logic. However, some commenters asked CMS to clarify how it intends to use the new discharge status codes for planned acute care hospital inpatient readmissions. One commenter stated that, based on the description of a planned readmission algorithm in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 27595), it appears that CMS is planning to use an algorithm to identify planned readmissions for part of the Hospital Readmissions Reduction Program, rather than relying on the proposed new planned readmission discharge status codes reported on claims. This commenter suggested that CMS work with the NUBC to develop additional guidance on the proper use of the discharge status codes. The commenter noted: ‘‘for example, it is not clear if there is a limitation on the timeframe when the planned readmission is expected to occur in order to use these discharge status codes. It is also not clear whether these codes are limited to PO 00000 Frm 00045 Fmt 4701 Sfmt 4700 planned readmissions related to the current admission. For example, the plan of care might mention that the patient is returning in the future for scheduled treatment of a condition unrelated to the current hospitalization.’’ Response: We appreciate the commenters’ support. The new discharge status codes related to a planned acute care hospital inpatient readmission were developed and approved by the NUBC in response to a request by the provider community. Currently, the purpose of the new codes is to allow providers to track these types of situations when they occur. E:\FR\FM\19AUR2.SGM 19AUR2 50540 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 According to meeting notes from the NUBC, there is not a designated timeframe (or limitation) in reporting these new codes, and they define a readmission as ‘‘an intentional readmission after discharge from an acute care hospital that is a scheduled part of a patient’s plan of care.’’ The commenter is correct in its understanding that, under the Hospital Readmissions Reduction Program, CMS proposed in the FY 2014 IPPS/LTCH PPS proposed rule, and is finalizing in this final rule, an algorithm to identify planned versus unplanned readmissions and will continue to utilize this algorithm for the program. Therefore, at this time, these new discharge status codes are not related in any way to the Hospital Readmissions Reduction Program and will not be taken into account in the readmissions measures for that program. After consideration of the public comments received, we are finalizing our proposal to add new discharge status code 69 (Discharged/transferred to a designated disaster alternative care site), as well as the 15 new discharge status codes related to a planned acute care hospital inpatient readmission listed above. 8. Surgical Hierarchies Some inpatient stays entail multiple surgical procedures, each one of which, occurring by itself, could result in assignment of the case to a different MS–DRG within the MDC to which the principal diagnosis is assigned. Therefore, it is necessary to have a decision rule within the GROUPER by which these cases are assigned to a single MS–DRG. The surgical hierarchy, an ordering of surgical classes from most resource-intensive to least resource-intensive, performs that function. Application of this hierarchy ensures that cases involving multiple surgical procedures are assigned to the MS–DRG associated with the most resource-intensive surgical class. Because the relative resource intensity of surgical classes can shift as a function of MS–DRG reclassification and recalibrations, for FY 2014, we reviewed the surgical hierarchy of each MDC, as we have for previous reclassifications and recalibrations, to determine if the ordering of classes coincides with the intensity of resource utilization. A surgical class can be composed of one or more MS–DRGs. For example, in MDC 11, the surgical class ‘‘kidney transplant’’ consists of a single MS–DRG (MS–DRG 652) and the class ‘‘major bladder procedures’’ consists of three MS–DRGs (MS–DRGs 653, 654, and 655). Consequently, in many cases, the VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 surgical hierarchy has an impact on more than one MS–DRG. The methodology for determining the most resource-intensive surgical class involves weighting the average resources for each MS–DRG by frequency to determine the weighted average resources for each surgical class. For example, assume surgical class A includes MS–DRGs 001 and 002 and surgical class B includes MS–DRGs 003, 004, and 005. Assume also that the average costs of MS–DRG 001 are higher than that of MS–DRG 003, but the average costs of MS–DRGs 004 and 005 are higher than the average costs of MS– DRG 002. To determine whether surgical class A should be higher or lower than surgical class B in the surgical hierarchy, we would weigh the average costs of each MS–DRG in the class by frequency (that is, by the number of cases in the MS–DRG) to determine average resource consumption for the surgical class. The surgical classes would then be ordered from the class with the highest average resource utilization to that with the lowest, with the exception of ‘‘other O.R. procedures’’ as discussed below. This methodology may occasionally result in assignment of a case involving multiple procedures to the lowerweighted MS–DRG (in the highest, most resource-intensive surgical class) of the available alternatives. However, given that the logic underlying the surgical hierarchy provides that the GROUPER search for the procedure in the most resource-intensive surgical class, in cases involving multiple procedures, this result is sometimes unavoidable. We note that, notwithstanding the foregoing discussion, there are a few instances when a surgical class with a lower average cost is ordered above a surgical class with a higher average cost. For example, the ‘‘other O.R. procedures’’ surgical class is uniformly ordered last in the surgical hierarchy of each MDC in which it occurs, regardless of the fact that the average costs for the MS–DRG or MS–DRGs in that surgical class may be higher than those for other surgical classes in the MDC. The ‘‘other O.R. procedures’’ class is a group of procedures that are only infrequently related to the diagnoses in the MDC, but are still occasionally performed on patients with cases assigned to the MDC with these diagnoses. Therefore, assignment to these surgical classes should only occur if no other surgical class more closely related to the diagnoses in the MDC is appropriate. A second example occurs when the difference between the average costs for two surgical classes is very small. We have found that small differences PO 00000 Frm 00046 Fmt 4701 Sfmt 4700 generally do not warrant reordering of the hierarchy because, as a result of reassigning cases on the basis of the hierarchy change, the average costs are likely to shift such that the higherordered surgical class has lower average costs than the class ordered below it. In the FY 2014 IPPS/LTCH PPS proposed rule, we proposed limited changes to the MS–DRG classifications for FY 2014, as discussed in sections II.G.2. and 5. of the preamble of the proposed rule. In our review of these proposed changes, we did not identify any needed changes to the surgical hierarchy. Therefore, in the proposed rule (78 FR 27521), we did not propose any changes to the surgical hierarchy for Pre-MDCs and MDCs for FY 2014. Comment: Several commenters stated that the CMS proposal to make no changes to the surgical hierarchy seems reasonable given the data and information provided. Response: Based on these public comments and our review of the proposal to make no revisions to the surgical hierarchy using the March 2013 update of the FY 2012 MedPAR file and the revised GROUPER software, we found that the proposal to make no revisions is still supported by the data. Therefore, in this final rule, we are making no changes to the surgical hierarchy for FY 2104. 9. Complications or Comorbidity (CC) Exclusions List a. Background of the CC List and the CC Exclusions List Under the IPPS MS–DRG classification system, we have developed a standard list of diagnoses that are considered CCs. Historically, we developed this list using physician panels that classified each diagnosis code based on whether the diagnosis, when present as a secondary condition, would be considered a substantial complication or comorbidity. A substantial complication or comorbidity was defined as a condition that, because of its presence with a specific principal diagnosis, would cause an increase in the length of stay by at least 1 day in at least 75 percent of the patients. However, depending on the principal diagnosis of the patient, some diagnoses on the basic list of complications and comorbidities may be excluded if they are closely related to the principal diagnosis. In FY 2008, we evaluated each diagnosis code to determine its impact on resource use and to determine the most appropriate CC subclassification (non-CC, CC, or MCC) assignment. We refer readers to sections II.D.2. and 3. of the preamble of the FY E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 2008 IPPS final rule with comment period for a discussion of the refinement of CCs in relation to the MS–DRGs we adopted for FY 2008 (72 FR 47152 through 47171). b. CC Exclusions List for FY 2014 In the September 1, 1987 final notice (52 FR 33143) concerning changes to the DRG classification system, we modified the GROUPER logic so that certain diagnoses included on the standard list of CCs would not be considered valid CCs in combination with a particular principal diagnosis. We created the CC Exclusions List for the following reasons: (1) To preclude coding of CCs for closely related conditions; (2) to preclude duplicative or inconsistent coding from being treated as CCs; and (3) to ensure that cases are appropriately classified between the complicated and uncomplicated DRGs in a pair. As we indicated above, we developed a list of diagnoses, using physician panels, to include those diagnoses that, when present as a secondary condition, would be considered a substantial complication or comorbidity. In previous years, we have made changes to the list of CCs, either by adding new CCs or deleting CCs already on the list. In the May 19, 1987 proposed notice (52 FR 18877) and the September 1, 1987 final notice (52 FR 33154), we explained that the excluded secondary diagnoses were established using the following five principles: • Chronic and acute manifestations of the same condition should not be considered CCs for one another; • Specific and nonspecific (that is, not otherwise specified (NOS)) diagnosis codes for the same condition should not be considered CCs for one another; • Codes for the same condition that cannot coexist, such as partial/total, unilateral/bilateral, obstructed/ unobstructed, and benign/malignant, should not be considered CCs for one another; • Codes for the same condition in anatomically proximal sites should not be considered CCs for one another; and • Closely related conditions should not be considered CCs for one another. The creation of the CC Exclusions List was a major project involving hundreds of codes. We have continued to review the remaining CCs to identify additional exclusions and to remove diagnoses from the master list that have been shown not to meet the definition of a CC.1 (1) No Revisions Based on Changes to the ICD–9–CM Diagnosis Codes for FY 2014 In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27522), we stated 50541 that, for FY 2014, there were no changes made to the ICD–9–CM coding system effective October 1, 2013, due to the partial code freeze. However, we did note that there may be ICD–9–CM coding changes finalized after the proposed rule (78 FR 27526). We are finalizing, for FY 2014, there were no changes made to the ICD–9–CM diagnosis codes. However, there are changes made to the ICD–9–CM procedure codes for FY 2014 due to new technology. (We refer readers to section II.G.11. of the preamble of the FY 2014 IPPS/LTCH PPS proposed rule and this final rule for a discussion of the ICD– 9–CM coding system.) (2) Changes to the MS–DRG Diagnosis Codes for FY 2014 (A) Coronary Atherosclerosis Due to Calcified Coronary Lesion We received a request that we consider changing the severity levels for the following ICD–9–CM diagnosis code: 414.4 (Coronary atherosclerosis due to calcified coronary lesion). The requestor suggested that we change the severity level for diagnosis code 414.4 from a non-CC to an MCC. The following chart shows the analysis of the MedPAR claims data for FY 2012 for ICD–9–CM diagnosis code 414.4. Code Diagnosis description CC level Cnt 1 Cnt 1 impact Cnt 2 Cnt 2 impact Cnt 3 Cnt 3 impact 414.4 ........ Coronary atherosclerosis due to calcified lesion. Non-CC ............. 1,390 1.58 2,174 2.31 2,001 3.11 mstockstill on DSK4VPTVN1PROD with RULES6 We ran the above data as described in the FY 2008 IPPS final rule with comment period (72 FR 47158 through 47161). The C1 value reflects a patient with no other secondary diagnosis or with all other secondary diagnoses that are non-CCs. The C2 value reflects a patient with at least one other secondary diagnosis that is a CC, but none that is an MCC. The C3 value reflects a patient with at least one other secondary diagnosis that is an MCC. The chart above shows that the C1 finding is 1.58. A value close to 1.0 in the C1 field suggests that the diagnosis produces the same expected value as a non-CC. A value close to 2.0 suggests the condition is more like a CC than a non-CC, but not as significant in resource usage as an MCC. A value close to 3.0 suggests the condition is expected to consume resources more similar to an MCC than a CC or a non-CC. The C2 finding was 2.31. A C2 value close to 2.0 suggests the condition is more like a CC than a non-CC, but not as significant in resource usage as an MCC when there is at least one other secondary diagnosis that is a CC but none that is an MCC. While the C1 value of 1.58 is above the 1.0 value for a non-CC, it does not support reclassification to an MCC. As stated earlier, a value close to 3.0 suggests the condition is expected to 1 We refer readers to the FY 1989 final rule (53 FR 38485, September 30, 1988) for the revision made for the discharges occurring in FY 1989; the FY 1990 final rule (54 FR 36552, September 1, 1989) for the FY 1990 revision; the FY 1991 final rule (55 FR 36126, September 4, 1990) for the FY 1991 revision; the FY 1992 final rule (56 FR 43209, August 30, 1991) for the FY 1992 revision; the FY 1993 final rule (57 FR 39753, September 1, 1992) for the FY 1993 revision; the FY 1994 final rule (58 FR 46278, September 1, 1993) for the FY 1994 revisions; the FY 1995 final rule (59 FR 45334, September 1, 1994) for the FY 1995 revisions; the FY 1996 final rule (60 FR 45782, September 1, 1995) for the FY 1996 revisions; the FY 1997 final rule (61 FR 46171, August 30, 1996) for the FY 1997 revisions; the FY 1998 final rule (62 FR 45966, August 29, 1997) for the FY 1998 revisions; the FY 1999 final rule (63 FR 40954, July 31, 1998) for the FY 1999 revisions; the FY 2001 final rule (65 FR 47064, August 1, 2000) for the FY 2001 revisions; the FY 2002 final rule (66 FR 39851, August 1, 2001) for the FY 2002 revisions; the FY 2003 final rule (67 FR 49998, August 1, 2002) for the FY 2003 revisions; the FY 2004 final rule (68 FR 45364, August 1, 2003) for the FY 2004 revisions; the FY 2005 final rule (69 FR 49848, August 11, 2004) for the FY 2005 revisions; the FY 2006 final rule (70 FR 47640, August 12, 2005) for the FY 2006 revisions; the FY 2007 final rule (71 FR 47870) for the FY 2007 revisions; the FY 2008 final rule (72 FR 47130) for the FY 2008 revisions; the FY 2009 final rule (73 FR 48510); the FY 2010 final rule (74 FR 43799); the FY 2011 final rule (75 FR 50114); the FY 2012 final rule (76 FR 51542); and the FY 2013 final rule (77 FR 53315). In the FY 2000 final rule (64 FR 41490, July 30, 1999), we did not modify the CC Exclusions List because we did not make any changes to the ICD–9–CM codes for FY 2000. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 PO 00000 Frm 00047 Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2 50542 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations consume resources more similar to an MCC than a CC or a non-CC. The C2 finding of 2.31 also does not support reclassifying this diagnosis code to an MCC. We also considered reclassifying the severity level of diagnosis code 414.4 to a CC; however, the C1 finding of 1.58 also does not support reclassifying the severity level to a CC. Our clinical advisors reviewed the data and evaluated this condition. They recommended that we not change the severity level of diagnosis code 414.4 from a non-CC to an MCC or a CC. They did not believe that this diagnosis would increase the severity level of patients. They pointed out that a similar code, diagnosis code 414.2 (Chronic total occlusion of coronary artery), is a non-CC. Our clinical advisors believe that diagnosis code 414.4 represents patients who are less severe than diagnosis code 414.2. Considering the C1 and C2 ratings and the input from our clinical advisors, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27522), we did not propose to reclassify diagnosis code 414.4 to an MCC; the diagnosis code would continue to be considered a non-CC. Therefore, based on the data and clinical analysis, we proposed to maintain diagnosis code 414.4 as a nonCC. We invited public comment on our proposal. Comment: Commenters supported the CMS proposal not to change diagnosis code 414.4 from a non-CC to an MCC. Several commenters stated that the changes seem reasonable given the data and information provided. Response: We appreciate the commenters’ support. Comment: Several commenters disagreed with the proposal, stating that these patients are more expensive to treat. Response: The claims data mentioned above do not support that patients with this condition require treatment with average costs at the MCC level. As stated above, the claims data support maintaining this code as a non-CC. Our clinical advisors once again reviewed this issue after reviewing the public comments. Based on their clinical review, our clinical advisors continue to support our proposal not to change diagnosis code 414.4 from a non-CC to an MCC. Comment: One commenter asked CMS to rerun the data but did not provide a reason why it believed the data are in error nor point out any errors in the methodology. The commenter purchased the FY 2012 MedPAR data file and tried to replicate this analysis. The commenter found more cases in its data analysis. The commenter asked for clarification as to whether CMS used average costs or average charges in its computations, and why its findings might have been different. Response: Our analysis is based on average costs. As we stated earlier, the December 2012 update of the FY 2012 MedPAR file is the claims data source for our data analysis. Because the commenter used a later file (the March 2013 update), its data included more cases. However, our data and clinical analysis support maintaining diagnosis code 414.4 as a non-CC and not changing it to a MCC. After consideration of the public comments we received, we are finalizing our proposal to maintain diagnosis code 414.4 as a non-CC for FY 2014. (B) Acute Cholecystitis Diagnosis Code We received a comment recommending that we add diagnosis code 575.0 (Acute cholecystitis) to the CC Exclusion List when reported as a secondary diagnosis code with a principal diagnosis code 574.00 (Calculus of gallbladder with acute cholecystitis without mention of obstruction). We note that there is an mstockstill on DSK4VPTVN1PROD with RULES6 Diagnosis code 440.20 ............... 440.21 ............... 440.22 ............... 440.23 ............... 440.24 ............... 440.29 ............... 440.30 ............... 440.31 ............... 440.32 ............... 440.4 ................. 441.00 ............... 441.01 ............... 441.02 ............... 441.03 ............... 441.1 ................. 441.2 ................. 441.3 ................. 441.4 ................. VerDate Mar<15>2010 ‘‘excludes note’’ under diagnosis code 575.0 which excludes ‘‘that with cholelithiasis (574.00)’’. Therefore, diagnosis codes 575.0 and 574.00 should not be reported on the same claim. However, the commenter stated that there may be double reporting. Our clinical advisors agree with the commenter that diagnosis codes 575.0 and 574.00 capture the same clinical context. Therefore, in the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR 27522), we proposed to add diagnosis code 575.0 to the CC Exclusion List when reported as a secondary diagnosis code with a principal diagnosis code 574.00. We invited public comments on our proposal. Comment: Several commenters stated that the proposal to add diagnosis code 575.0 to the CC Exclusion List when reported as a secondary diagnosis code with principal diagnosis code 574.00 seems reasonable given the data and information provided. Response: We appreciate the commenters’ support. After consideration of the public comments we received, we are finalizing our proposal to add diagnosis code 575.0 to the CC Exclusion List when reported as a secondary diagnosis code with principal diagnosis code 574.00 for FY 2014. (C) Chronic Total Occlusion (CTO) of Artery of the Extremities Diagnosis Code We received a request to consider removing atherosclerosis and aneurysm codes from the CC Exclusion List for diagnosis code 440.4 (Chronic total occlusion of artery of the extremities). For FY 2013, we changed the designation of diagnosis code 440.4 from a non-CC level to a CC level. The CC Exclusion List for diagnosis code 440.4 includes the following diagnosis codes: Code description Atherosclerosis of native arteries of the extremities, unspecified. Atherosclerosis of native arteries of the extremities with intermittent claudication. Atherosclerosis of native arteries of the extremities with rest pain. Atherosclerosis of native arteries of the extremities with ulceration. Atherosclerosis of native arteries of the extremities with gangrene. Other atherosclerosis of native arteries of the extremities. Atherosclerosis of unspecified bypass graft of the extremities. Atherosclerosis of autologous vein bypass graft of the extremities. Atherosclerosis of nonautologous biological bypass graft of the extremities. Chronic total occlusion of artery of the extremities. Dissection of aorta, unspecified site. Dissection of aorta, thoracic. Dissection of aorta, abdominal. Dissection of aorta, thoracoabdominal. Thoracic aneurysm, ruptured. Thoracic aneurysm without mention of rupture. Abdominal aneurysm, ruptured. Abdominal aneurysm without mention of rupture. 21:51 Aug 16, 2013 Jkt 229001 PO 00000 Frm 00048 Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Diagnosis code mstockstill on DSK4VPTVN1PROD with RULES6 441.5 ................. 441.6 ................. 441.7 ................. 441.9 ................. 442.0 ................. 442.2 ................. 442.3 ................. 442.9 ................. 443.22 ............... 443.29 ............... 443.81 ............... 443.82 ............... 443.89 ............... 443.9 ................. 444.01 ............... 444.09 ............... 444.1 ................. 444.21 ............... 444.22 ............... 444.81 ............... 444.89 ............... 444.9 ................. 445.01 ............... 445.02 ............... 445.81 ............... 445.89 ............... 447.0 ................. 447.1 ................. 447.2 ................. 447.5 ................. 447.6 ................. 447.70 ............... 447.71 ............... 447.72 ............... 447.73 ............... 449 .................... Code description Aortic aneurysm of unspecified site, ruptured. Thoracoabdominal aneurysm, ruptured. Thoracoabdominal aneurysm, without mention of rupture. Aortic aneurysm of unspecified site without mention of rupture. Aneurysm of artery of upper extremity. Aneurysm of iliac artery. Aneurysm of artery of lower extremity. Aneurysm of unspecified site. Dissection of iliac artery. Dissection of other artery. Peripheral angiopathy in diseases classified elsewhere. Erythromelalgia. Other specified peripheral vascular diseases. Peripheral vascular disease, unspecified. Saddle embolus of abdominal aorta. Other arterial embolism and thrombosis of abdominal aorta. Embolism and thrombosis of thoracic aorta. Arterial embolism and thrombosis of upper extremity. Arterial embolism and thrombosis of lower extremity. Embolism and thrombosis of iliac artery. Embolism and thrombosis of other specified artery. Embolism and thrombosis of unspecified artery. Atheroembolism of upper extremity. Atheroembolism of lower extremity. Atheroembolism of kidney. Atheroembolism of other site. Arteriovenous fistula, acquired. Stricture of artery. Rupture of artery. Necrosis of artery. Arteritis, unspecified. Aortic ectasia, unspecified site. Thoracic aortic ectasia. Abdominal aortic ectasia. Thoracoabdominal aortic ectasia. Septic arterial embolism. Diagnosis code 440.4 is a CC except if one of the diagnosis codes listed above is reported as a principal diagnosis. If one of the diagnosis codes listed above is reported on a claim as a principal diagnosis and code 440.4 is reported as a secondary diagnosis, code 440.4 would not be counted as a CC. The commenter requested that we remove atherosclerosis codes 440.20 through 440.32, 443.22, 443.29, 443.81 through 443.9, and aneurysm codes 441.00 through 441.03, 441.1 through 441.7, 441.9, 442.0, 442.2, 442.3, and 442.9 from the CC Exclusion List for diagnosis code 440.4. According to the commenter, aneurysm diagnoses are not closely related clinically to peripheral CTOs. Aneurysm physiology, clinical symptomology, and patient risk profile are fundamentally different than CTOs. Aneurysms result from the weakening of an artery wall and manifest in an outpouched pocket of the lumen. Conversely, patients with CTOs present with extended segments of diseased and narrowed vessels and in most cases, complex lesions containing fibrocalcified plaques. VerDate Mar<15>2010 50543 21:51 Aug 16, 2013 Jkt 229001 The commenter stated that CTOs represent a high severity complication, which is not closely related to basic atherosclerosis. Our clinical advisors agree with the commenter that the aneurysm and most of the atherosclerosis codes should be removed from the CC Exclusion List for diagnosis code 440.4. A case with a principal diagnosis of aneurysm with CTO adds substantial complexity and does not necessarily have the same immediate cause. A case with a principal diagnosis of atherosclerosis with CTO reported represents a more severe form of the disease and, therefore, is more complex. Our clinical advisors do not agree with the commenter that diagnosis codes 443.81 through 443.9 (Other and unspecified peripheral vascular diseases) should be removed from the CC Exclusion List. These cases are more likely related to CTO and meet one of the principles for exclusion that we previously outlined above. Therefore, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27524), we proposed to remove the following diagnosis codes from the CC Exclusion List for diagnosis code 440.4 for FY PO 00000 Frm 00049 Fmt 4701 Sfmt 4700 2014: atherosclerosis codes 440.20 through 440.32, 443.22, and 443.29, and aneurysm codes 441.00 through 441.03, 441.1 through 441.7, 441.9, 442.0, 442.2, 442.3, and 442.9. Diagnosis codes 443.81 through 443.9 would remain on the CC Exclusion List for diagnosis code 440.4. We invited public comments on this proposal. Comment: Several commenters supported CMS’ proposal to remove atherosclerosis codes 440.20 through 440.32, 443.22, and 443.29, and aneurysm codes 441.00 through 441.03, 441.1 through 441.7, 441.9, 442.0, 442.2, 442.3, and 442.9 from the CC Exclusion List for diagnosis code 440.4. Several commenters agreed with CMS’ clinical advisors’ assessment on aneurysm and atherosclerosis cases with CTO in that a case with a principal diagnosis of aneurysm with CTO adds substantial complexity and does not necessarily have the same immediate cause, and a case with a principal diagnosis of atherosclerosis with CTO reported represents a more severe form of the disease and, therefore, is more complex. Several commenters stated that this proposed change will compensate hospitals appropriately for the high cost E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50544 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations and resource use associated with CTO treatment. Several commenters stated that the proposal seems reasonable given the data and information provided. Response: We appreciate the commenters’ support and agree that the change is warranted for these cases. After consideration of the public comments we received, we are finalizing our proposal to remove atherosclerosis codes 440.20 through 440.32, 443.22, and 443.29, and aneurysm codes 441.00 through 441.03, 441.1 through 441.7, 441.9, 442.0, 442.2, 442.3, and 442.9 from the CC Exclusion List for diagnosis code 440.4. Diagnosis codes 443.81 through 443.9 would remain on the CC Exclusion List for diagnosis code 440.4 for FY 2014. For FY 2014, we proposed changes to Table 6G (Additions to the CC Exclusion List) and Table 6H (Deletions from the CC Exclusion List) (78 FR 27524). As we discussed earlier, we are finalizing those changes for acute cholecystitis and chronic total occlusion of artery of the extremities diagnosis codes for FY 2014. As we discussed in the FY 2014 IPPS/ LTCH PPS proposed rule, we did not propose any changes to the severity level for diagnosis code 414.4. In this final rule, we are finalizing our decision to maintain diagnosis code 414.4 as a non-CC. These two tables, which contain codes that are effective for discharges occurring on or after October 1, 2013, were not published in the Addendum to the proposed rule (nor are they being published in this final rule) because of the length of the two tables. Instead, we are making them available through the Internet on the CMS Web site at: https://www.cms.hhs.gov/ Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/ index.html. Each of these principal diagnosis codes for which there is a CC exclusion is shown in Tables 6G and 6H with an asterisk, and the conditions that will not count as a CC are provided in an indented column immediately following the affected principal diagnosis. A complete updated MCC, CC, and Non-CC Exclusions List is available through the Internet on the CMS Web site at: https://www.cms.hhs.gov/ Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/ index.html. Beginning with discharges on or after October 1 of each fiscal year, the indented diagnoses are not recognized by the GROUPER as valid CCs for the asterisked principal diagnosis. There are no new, revised, or deleted diagnosis codes for FY 2014. Therefore, VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 there are no Tables 6A, 6C, and 6E published for FY 2014. There are no additions or deletions to the MS–DRG MCC List for FY 2014. There also are no additions or deletions to the MS–DRG CC List for FY 2014. Therefore, there are no Tables 6I.1 through 6I.2 and 6J.1 through 6J.2 published for FY 2014. Alternatively, the complete documentation of the GROUPER logic, including the current CC Exclusions List, is available from 3M/Health Information Systems (HIS), which, under contract with CMS, is responsible for updating and maintaining the GROUPER program. The current MS– DRG Definitions Manual, Version 30.0, is available on a CD for $225.00. Version 31.0 of this manual, which includes the final FY 2014 MS–DRG changes, is available on a CD for $225.00. These manuals may be obtained by writing 3M/HIS at the following address: 100 Barnes Road, Wallingford, CT 06492; or by calling (203) 949–0303, or by obtaining an order form at the Web site: https://www.3MHIS.com. Please specify the revision or revisions requested. 10. Review of Procedure Codes in MS DRGs 981 through 983; 984 through 986; and 987 through 989 Each year, we review cases assigned to former CMS DRG 468 (Extensive O.R. Procedure Unrelated to Principal Diagnosis), CMS DRG 476 (Prostatic O.R. Procedure Unrelated to Principal Diagnosis), and CMS DRG 477 (Nonextensive O.R. Procedure Unrelated to Principal Diagnosis) to determine whether it would be appropriate to change the procedures assigned among these CMS DRGs. Under the MS–DRGs that we adopted for FY 2008, CMS DRG 468 was split three ways and became MS–DRGs 981, 982, and 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively). CMS DRG 476 became MS–DRGs 984, 985, and 986 (Prostatic O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively). CMS DRG 477 became MS–DRGs 987, 988, and 989 (Nonextensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively). MS–DRGs 981 through 983, 984 through 986, and 987 through 989 (formerly CMS DRGs 468, 476, and 477, respectively) are reserved for those cases in which none of the O.R. procedures performed are related to the principal diagnosis. These MS–DRGs are intended to capture atypical cases, that is, those cases not occurring with sufficient frequency to represent a distinct, PO 00000 Frm 00050 Fmt 4701 Sfmt 4700 recognizable clinical group. MS–DRGs 984 through 986 (previously CMS DRG 476) are assigned to those discharges in which one or more of the following prostatic procedures are performed and are unrelated to the principal diagnosis: • 60.0 (Incision of prostate) • 60.12 (Open biopsy of prostate) • 60.15 (Biopsy of periprostatic tissue) • 60.18 (Other diagnostic procedures on prostate and periprostatic tissue) • 60.21 (Transurethral prostatectomy) • 60.29 (Other transurethral prostatectomy) • 60.61 (Local excision of lesion of prostate) • 60.69 (Prostatectomy, not elsewhere classified) • 60.81 (Incision of periprostatic tissue) • 60.82 (Excision of periprostatic tissue) • 60.93 (Repair of prostate) • 60.94 (Control of (postoperative) hemorrhage of prostate) • 60.95 (Transurethral balloon dilation of the prostatic urethra) • 60.96 (Transurethral destruction of prostate tissue by microwave thermotherapy) • 60.97 (Other transurethral destruction of prostate tissue by other thermotherapy) • 60.99 (Other operations on prostate) All remaining O.R. procedures are assigned to MS–DRGs 981 through 983 and 987 through 989, with MS–DRGs 987 through 989 assigned to those discharges in which the only procedures performed are nonextensive procedures that are unrelated to the principal diagnosis.2 2 The original list of the ICD–9–CM procedure codes for the procedures we consider nonextensive procedures, if performed with an unrelated principal diagnosis, was published in Table 6C in section IV. of the Addendum to the FY 1989 final rule (53 FR 38591). As part of the FY 1991 final rule (55 FR 36135), the FY 1992 final rule (56 FR 43212), the FY 1993 final rule (57 FR 23625), the FY 1994 final rule (58 FR 46279), the FY 1995 final rule (59 FR 45336), the FY 1996 final rule (60 FR 45783), the FY 1997 final rule (61 FR 46173), and the FY 1998 final rule (62 FR 45981), we moved several other procedures from DRG 468 to DRG 477, and some procedures from DRG 477 to DRG 468. No procedures were moved in FY 1999, as noted in the final rule (63 FR 40962), in the FY 2000 (64 FR 41496), in the FY 2001 (65 FR 47064), or in the FY 2002 (66 FR 39852). In the FY 2003 final rule (67 FR 49999), we did not move any procedures from DRG 477. However, we did move procedure codes from DRG 468 and placed them in more clinically coherent DRGs. In the FY 2004 final rule (68 FR 45365), we moved several procedures from DRG 468 to DRGs 476 and 477 because the procedures are nonextensive. In the FY 2005 final rule (69 FR 48950), we moved one procedure from DRG 468 to 477. In addition, we added several existing procedures to DRGs 476 and 477. In FY 2006 (70 FR 47317), we moved one procedure from DRG 468 and assigned it to DRG 477. In FY 2007, we moved one procedure from DRG 468 and assigned it to E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 Our review of MedPAR claims data showed that there were no cases that merited movement or should logically be assigned to any of the other MDCs. Therefore, for FY 2014, we did not propose to change the procedures assigned among these MS–DRGs. We did not receive any public comments on this proposal. Therefore, as we proposed, we are not making any changes to the procedures assigned to MS–DRGs 981 through 983, MS–DRGs 984 through 986, and MS–DRGs 987 through 989 for FY 2014. a. Moving Procedure Codes from MS– DRGs 981 through 983 or MS–DRGs 987 through 989 into MDCs We annually conduct a review of procedures producing assignment to MS–DRGs 981 through 983 (Extensive O.R. procedure unrelated to principal diagnosis with MCC, with CC, and without CC/MCC, respectively) or MS– DRGs 987 through 989 (Nonextensive O.R. procedure unrelated to principal diagnosis with MCC, with CC, and without CC/MCC, respectively) on the basis of volume, by procedure, to see if it would be appropriate to move procedure codes out of these MS–DRGs into one of the surgical MS–DRGs for the MDC into which the principal diagnosis falls. The data are arrayed in two ways for comparison purposes. We look at a frequency count of each major operative procedure code. We also compare procedures across MDCs by volume of procedure codes within each MDC. We identify those procedures occurring in conjunction with certain principal diagnoses with sufficient frequency to justify adding them to one of the surgical MS–DRGs for the MDC in which the diagnosis falls. As noted above, there were no cases that merited movement or that should logically be assigned to any of the other MDCs. Therefore, for FY 2014, we did not propose to remove any procedures from MS–DRGs 981 through 983 or MS–DRGs 987 through 989 into one of the surgical MS–DRGs for the MDC into which the principal diagnosis is assigned. We did not receive any public comments on our proposal. Therefore, as we proposed, we are not making any changes to the procedures assigned to MS–DRGs 981 through 983 or MS–DRGs 987 through 989 for FY 2014. DRGs 479, 553, and 554. In FYs 2008, 2009, 2010, 2011, 2012, and 2013, no procedures were moved, as noted in the FY 2008 final rule with comment period (72 FR 46241), in the FY 2009 final rule (73 FR 48513), in the FY 2010 final rule (74 FR 43796), in the FY 2011 final rule (75 FR 50122), in the FY 2012 final rule (76 FR 51549), and in the FY 2013 final rule (77 FR 53321). VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 b. Reassignment of Procedures Among MS–DRGs 981 Through 983, 984 Through 986, and 987 Through 989 We also annually review the list of ICD–9–CM procedures that, when in combination with their principal diagnosis code, result in assignment to MS–DRGs 981 through 983, 984 through 986 (Prostatic O.R. procedure unrelated to principal diagnosis with MCC, with CC, or without CC/MCC, respectively), and 987 through 989, to ascertain whether any of those procedures should be reassigned from one of these three MS–DRGs to another of the three MS– DRGs based on average costs and the length of stay. We look at the data for trends such as shifts in treatment practice or reporting practice that would make the resulting MS–DRG assignment illogical. If we find these shifts, we would propose to move cases to keep the MS–DRGs clinically similar or to provide payment for the cases in a similar manner. Generally, we move only those procedures for which we have an adequate number of discharges to analyze the data. There were no cases representing shifts in treatment practice or reporting practice that would make the resulting MS–DRG assignment illogical, or that merited movement so that cases should logically be assigned to any of the other MDCs. Therefore, for FY 2014, we did not propose to move any procedure codes among these MS–DRGs. We did not receive any public comments on our proposal. Therefore, as we proposed, we are not moving any procedures assigned to MS–DRGs 981 through 983, MS–DRGs 984 through 986, and MS–DRGs 987 through 989 for FY 2014. c. Adding Diagnosis or Procedure Codes to MDCs Based on the review of cases in the MDCs as described above in sections II.G.1. through 6. of this preamble, we did not propose to add any diagnosis or procedure codes to MDCs for FY 2014. We did not receive any public comments on our proposal. Therefore, as we proposed, we are not adding any diagnosis or procedure codes to MDCs for FY 2014. 11. Changes to the ICD–9–CM Coding System, Including Discussion of the Replacement of the ICD–9–CM Coding System With the ICD–10–CM and ICD– 10–PCS Systems in FY 2014 a. ICD–9–CM Coding System The ICD–9–CM is a coding system currently used for the reporting of diagnoses and procedures performed on a patient. In September 1985, the ICD– PO 00000 Frm 00051 Fmt 4701 Sfmt 4700 50545 9–CM Coordination and Maintenance Committee was formed. This is a Federal interdepartmental committee, co-chaired by the National Center for Health Statistics (NCHS), the Centers for Disease Control and Prevention, and CMS, charged with maintaining and updating the ICD–9–CM system. The Committee is jointly responsible for approving coding changes, and developing errata, addenda, and other modifications to the ICD–9–CM to reflect newly developed procedures and technologies and newly identified diseases. The Committee is also responsible for promoting the use of Federal and non-Federal educational programs and other communication techniques with a view toward standardizing coding applications and upgrading the quality of the classification system. The Official list of valid ICD–9–CM diagnosis and procedure codes can be found on the CMS Web site at: https:// cms.hhs.gov/Medicare/Coding/ ICD9ProviderDiagnosticCodes/ codes.html. The NCHS has lead responsibility for the ICD–9–CM diagnosis codes included in the Tabular List and Alphabetic Index for Diseases, while CMS has lead responsibility for the ICD–9–CM procedure codes included in the Tabular List and Alphabetic Index for Procedures. The Committee encourages participation in the above process by health related organizations. In this regard, the Committee holds public meetings for discussion of educational issues and proposed coding changes. These meetings provide an opportunity for representatives of recognized organizations in the coding field, such as the American Health Information Management Association (AHIMA), the American Hospital Association (AHA), and various physician specialty groups, as well as individual physicians, health information management professionals, and other members of the public, to contribute ideas on coding matters. After considering the opinions expressed at the public meetings and in writing, the Committee formulates recommendations, which then must be approved by the agencies. The Committee presented proposals for coding changes for implementation in FY 2014 at a public meeting held on September 19, 2012, and finalized the coding changes after consideration of comments received at the meetings and in writing by November 16, 2012. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27525), we stated that there were no changes to the ICD–9–CM coding system for FY 2014. There were no new, E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50546 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations revised or deleted diagnosis or procedure codes for FY 2014 identified at the time of the publication of the proposed rule. However, we noted that there may be ICD–9–CM coding changes finalized after the proposed rule based on public comments that we receive after the March 5, 2013 ICD–9–CM Coordination and Maintenance Committee meeting. The Committee held its 2013 meeting on March 5, 2013. Any new codes for which there was consensus of public support and for which complete tabular and indexing changes were made by May 2013 are included in the October 1, 2013 update to ICD–9–CM. Any code revisions that were discussed at the March 5, 2013 Committee meeting but that could not be finalized in time to include them in the tables listed in section VI. of the Addendum to the proposed rule are included in Table 6B, which is listed in section VI. of the Addendum to this final rule and available via the Internet on the CMS Web site, and are marked with an asterisk (*). In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27526), we stated that, for FY 2014, there were no changes to the ICD–9–CM coding system due to the partial code freeze or for new technology. However, at the March 5, 2013 ICD–9–CM Coordination and Maintenance meeting, there were two requests for codes for new technology. As discussed below, only codes for new technologies or new diagnoses are being considered during the partial code freeze. After discussions at the March 5, 2013 meeting and public comments we received after the meeting, it was decided that there will be four new procedure codes effective for October 1, 2014. There are no new, revised, or deleted diagnosis codes and no revised or deleted procedure codes that are usually announced in Tables 6A (New Diagnosis Codes), 6C (Invalid Diagnosis Codes), 6D (Invalid Procedure Codes), 6E (Revised Diagnosis Code Titles), and 6F (Revised Procedure Codes). The new procedure codes are listed in Table 6B (New Procedure Codes) for this final rule, which is available via the Internet on the CMS Web site. Therefore, there are no Tables 6A and 6C through 6F published as part of this final rule for FY 2014. Copies of the minutes of the procedure codes discussions at the Committee’s September 19, 2012 meeting and March 5, 2013 meeting can be obtained from the CMS Web site at: https://cms.hhs.gov/Medicare/Coding/ ICD9ProviderDiagnosticCodes/ index.html?redirect=/ icd9ProviderDiagnosticCodes/ VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 03_meetings.asp. The minutes of the diagnosis codes discussions at the September 19, 2012 meeting and March 5, 2013 meeting are found at: https:// www.cdc.gov/nchs/icd.htm. These Web sites also provide detailed information about the Committee, including information on requesting a new code, attending a Committee meeting, and timeline requirements and meeting dates. We encourage commenters to address suggestions on coding issues involving diagnosis codes to: Donna Pickett, CoChairperson, ICD–9–CM Coordination and Maintenance Committee, NCHS, Room 2402, 3311 Toledo Road, Hyattsville, MD 20782. Comments may be sent by Email to: dfp4@cdc.gov. Questions and comments concerning the procedure codes should be addressed to: Patricia E. Brooks, CoChairperson, ICD–9–CM Coordination and Maintenance Committee, CMS, Center for Medicare Management, Hospital and Ambulatory Policy Group, Division of Acute Care, C4–08–06, 7500 Security Boulevard, Baltimore, MD 21244–1850. Comments may be sent by Email to: patricia.brooks2@cms.hhs.gov. In the September 7, 2001 final rule implementing the IPPS new technology add-on payments (66 FR 46906), we indicated we would attempt to include proposals for procedure codes that would describe new technology discussed and approved at the Spring meeting as part of the code revisions effective the following October. Section 503(a) of Public Law 108–173 included a requirement for updating ICD–9–CM codes twice a year instead of a single update on October 1 of each year. This requirement was included as part of the amendments to the Act relating to recognition of new technology under the IPPS. Section 503(a) amended section 1886(d)(5)(K) of the Act by adding a clause (vii) which states that the ‘‘Secretary shall provide for the addition of new diagnosis and procedure codes on April 1 of each year, but the addition of such codes shall not require the Secretary to adjust the payment (or diagnosis-related group classification) . . . until the fiscal year that begins after such date.’’ This requirement improves the recognition of new technologies under the IPPS system by providing information on these new technologies at an earlier date. Data will be available 6 months earlier than would be possible with updates occurring only once a year on October 1. While section 1886(d)(5)(K)(vii) of the Act states that the addition of new diagnosis and procedure codes on April 1 of each year shall not require the PO 00000 Frm 00052 Fmt 4701 Sfmt 4700 Secretary to adjust the payment, or DRG classification, under section 1886(d) of the Act until the fiscal year that begins after such date, we have to update the DRG software and other systems in order to recognize and accept the new codes. We also publicize the code changes and the need for a mid-year systems update by providers to identify the new codes. Hospitals also have to obtain the new code books and encoder updates, and make other system changes in order to identify and report the new codes. The ICD–9–CM Coordination and Maintenance Committee holds its meetings in the spring and fall in order to update the codes and the applicable payment and reporting systems by October 1 of each year. Items are placed on the agenda for the ICD–9–CM Coordination and Maintenance Committee meeting if the request is received at least 2 months prior to the meeting. This requirement allows time for staff to review and research the coding issues and prepare material for discussion at the meeting. It also allows time for the topic to be publicized in meeting announcements in the Federal Register as well as on the CMS Web site. The public decides whether or not to attend the meeting based on the topics listed on the agenda. Final decisions on code title revisions are currently made by March 1 so that these titles can be included in the IPPS proposed rule. A complete addendum describing details of all changes to ICD–9–CM, both tabular and index, is published on the CMS and NCHS Web sites in May of each year. Publishers of coding books and software use this information to modify their products that are used by health care providers. This 5-month time period has proved to be necessary for hospitals and other providers to update their systems. A discussion of this timeline and the need for changes are included in the December 4–5, 2005 ICD–9–CM Coordination and Maintenance Committee Meeting minutes. The public agreed that there was a need to hold the fall meetings earlier, in September or October, in order to meet the new implementation dates. The public provided comment that additional time would be needed to update hospital systems and obtain new code books and coding software. There was considerable concern expressed about the impact this new April update would have on providers. In the FY 2005 IPPS final rule, we implemented section 1886(d)(5)(K)(vii) of the Act, as added by section 503(a) of Public Law 108–173, by developing a mechanism for approving, in time for E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations the April update, diagnosis and procedure code revisions needed to describe new technologies and medical services for purposes of the new technology add-on payment process. We also established the following process for making these determinations. Topics considered during the Fall ICD–9–CM Coordination and Maintenance Committee meeting are considered for an April 1 update if a strong and convincing case is made by the requester at the Committee’s public meeting. The request must identify the reason why a new code is needed in April for purposes of the new technology process. The participants at the meeting and those reviewing the Committee meeting summary report are provided the opportunity to comment on this expedited request. All other topics are considered for the October 1 update. Participants at the Committee meeting are encouraged to comment on all such requests. There were no requests approved for an expedited April l, 2013 implementation of an ICD– 9–CM code at the September 19, 2012 Committee meeting. Therefore, there were no new ICD–9–CM codes implemented on April 1, 2013. Current addendum and code title information is published on the CMS Web site at: https://www.cms.hhs.gov/ Medicare/Coding/ ICD9ProviderDiagnosticCodes/ index.html?redirect=/ icd9ProviderDiagnosticCodes/ 01overview.asp#TopofPage. Information on ICD–9–CM diagnosis codes, along with the Official ICD–9–CM Coding Guidelines, can be found on the Web site at: https://www.cdc.gov/nchs/ icd9.htm. Information on new, revised, and deleted ICD–9–CM codes is also provided to the AHA for publication in the Coding Clinic for ICD–9–CM. AHA also distributes information to publishers and software vendors. CMS also sends copies of all ICD–9– CM coding changes to its Medicare contractors for use in updating their systems and providing education to providers. These same means of disseminating information on new, revised, and deleted ICD–9–CM codes will be used to notify providers, publishers, software vendors, contractors, and others of any changes to the ICD–9–CM codes that are implemented in April. The code titles are adopted as part of the ICD–9–CM Coordination and Maintenance Committee process. Therefore, although we publish the code titles in the IPPS proposed and final rules, they are not subject to comment in the proposed or final rules. We will continue to publish the October code updates in this manner VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 within the IPPS proposed and final rules. For codes that are implemented in April, we will assign the new procedure code to the same MS–DRG in which its predecessor code was assigned so there will be no MS–DRG impact as far as MS–DRG assignment. Any midyear coding updates will be available through the Web sites indicated above and through the Coding Clinic for ICD– 9–CM. Publishers and software vendors currently obtain code changes through these sources in order to update their code books and software systems. We will strive to have the April 1 updates available through these Web sites 5 months prior to implementation (that is, early November of the previous year), as is the case for the October 1 updates. b. Code Freeze The International Classification of Diseases, 10th Revision (ICD–10) coding system applicable to hospital inpatient services was to be implemented on October 1, 2013, as described in the Health Insurance Portability and Accountability Act of 1996 (HIPAA) Administrative Simplification: Modifications to Medical Data Code Set Standards to Adopt ICD–10–CM and ICD–10–PCS final rule (74 FR 3328 through 3362, January 16, 2009). However, the Secretary of Health and Human Services issued a final rule that delays, from October 1, 2013, to October 1, 2014, the compliance date for the International Classification of Diseases, 10th Edition diagnosis and procedure codes (ICD–10). The final rule, CMS– 0040–F, was published in the Federal Register on September 5, 2012 (77 FR 54664) and is available for viewing on the Internet at: https://www.gpo.gov/ fdsys/pkg/FR-2012-09-05/pdf/201221238.pdf. The ICD–10 coding system includes the International Classification of Diseases, 10th Revision, Clinical Modification (ICD–10–CM) for diagnosis coding and the International Classification of Diseases, 10th Revision, Procedure Coding System (ICD–10–PCS) for inpatient hospital procedure coding, as well as the Official ICD–10–CM and ICM–10–PCS Guidelines for Coding and Reporting. In the January 16, 2009 ICD–10–CM and ICD–10–PCS final rule (74 FR 3328 through 3362), there was a discussion of the need for a partial or total freeze in the annual updates to both ICD–9–CM and ICD–10–CM and ICD–10–PCS codes. The public comment addressed in that final rule stated that the annual code set updates should cease l year prior to the implementation of ICD–10. The commenters stated that this freeze of code updates would allow for PO 00000 Frm 00053 Fmt 4701 Sfmt 4700 50547 instructional and/or coding software programs to be designed and purchased early, without concern that an upgrade would take place immediately before the compliance date, necessitating additional updates and purchases. HHS responded to comments in the ICD–10 final rule that the ICD–9–CM Coordination and Maintenance Committee has jurisdiction over any action impacting the ICD–9–CM and ICD–10 code sets. Therefore, HHS indicated that the issue of consideration of a moratorium on updates to the ICD– 9–CM, ICD–10–CM, and ICD–10–PCS code sets in anticipation of the adoption of ICD–10–CM and ICD–10–PCS would be addressed through the Committee at a future public meeting. The code freeze was discussed at multiple meetings of the ICD–9–CM Coordination and Maintenance Committee and public comment was actively solicited. The Committee evaluated all comments from participants attending the Committee meetings as well as written comments that were received. The Committee also considered the delay in implementation of ICD–10 until October 1, 2014. There was an announcement at the September 19, 2012 ICD–9–CM Coordination and Maintenance Committee meeting that a partial freeze of both ICD–9–CM and ICD–10 codes will be implemented as follows: • The last regular annual update to both ICD–9–CM and ICD–10 code sets was made on October 1, 2011. • On October 1, 2012 and October 1, 2013, there will be only limited code updates to both ICD–9–CM and ICD–10 code sets to capture new technology and new diseases. • On October 1, 2014, there were to be only limited code updates to ICD–10 code sets to capture new technology and diagnoses as required by section 503(a) of Public Law 108–173. There were to be no updates to ICD–9–CM on October 1, 2014, as the system would no longer be a HIPAA standard and, therefore, no longer be used for reporting. • On October 1, 2015, one year after the implementation of ICD–10, regular updates to ICD–10 will begin. The ICD–9–CM Coordination and Maintenance Committee announced that it would continue to meet twice a year during the freeze. At these meetings, the public will be encouraged to comment on whether or not requests for new diagnosis and procedure codes should be created based on the need to capture new technology and new diseases. Any code requests that do not meet the criteria will be evaluated for implementation within ICD–10 on or E:\FR\FM\19AUR2.SGM 19AUR2 50548 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations after October 1, 2015, once the partial freeze is ended. Complete information on the partial code freeze and discussions of the issues at the Committee meetings can be found on the ICD–9–CM Coordination and Maintenance Committee Web site at: https://www.cms.hhs.gov/Medicare/ Coding/ICD9ProviderDiagnosticCodes/ meetings.html. A summary of the September 19, 2012 Committee meeting, along with both written and audio transcripts of this meeting, are posted on the Web site at: https:// www.cms.hhs.gov/Medicare/Coding/ ICD9ProviderDiagnosticCodes/ICD-9CM-C-and-M-Meeting-Materials-Items/ 2012-09-19-MeetingMaterials.html. Comment: Several commenters supported the partial code freeze which is limited to the creation of new ICD– 9–CM and ICD–10–CM/PCS codes to capture new technologies and diseases through FY 2015. The commenters stated that if new codes can still be introduced into ICD–10–CM/PCS in FY 2015, it will make the resolution of any issues more complex and costly. Specifically, they stated that successful implementation of ICD–10–CM/PCS will require significant planning, education, and systems modifications. The commenters stated that while the adoption of ICD–10–CM/PCS is welcome and long overdue, implementation of the new system must be carefully orchestrated to minimize the administrative burden on providers. At a time when in the health care field, all payers and other stakeholders are struggling to meet deadlines to change their systems and test their changes with all their trading partners, the commenters believed it would be catastrophic to have to make additional changes during nationwide implementation of ICD–10. Response: We agree with the commenters that the partial code freeze has been extremely beneficial in minimizing the administrative burden on providers that are preparing for the implementation of ICD–10 on October 1, 2014. This partial code freeze has dramatically decreased the number of codes created each year as shown by the following information. TOTAL NUMBER OF CODES AND CHANGES IN TOTAL NUMBER OF CODES PER FISCAL YEAR ICD–9–CM Codes Fiscal Year Number mstockstill on DSK4VPTVN1PROD with RULES6 FY 2009 (October 1, 2008): Diagnoses ......................................... Procedures ....................................... FY 2010 (October 1, 2009): Diagnoses ......................................... Procedures ....................................... FY 2011 (October 1, 2010): Diagnoses ......................................... Procedures ....................................... FY 2012 (October 1, 2011): Diagnoses ......................................... Procedures ....................................... FY 2013 (October 1, 2012): Diagnoses ......................................... Procedures ....................................... FY 2014 (October 1, 2013): Diagnoses ......................................... Procedures ....................................... 21:51 Aug 16, 2013 Jkt 229001 Change Fiscal Year 14,025 3,824 348 56 14,315 3,838 290 14 14,432 3,859 117 21 14,567 3,877 135 18 14,567 3,878 0 1 14,567 3,882 As mentioned earlier, the public is provided the opportunity to comment on any requests for new diagnosis or procedure codes discussed at the ICD– 9–CM Coordination and Maintenance Committee meeting. The public has supported only a limited number of new codes during this partial code freeze, as can be seen by data shown above. We have gone from creating several hundred new codes each year to creating only a limited number of new ICD–9–CM and ICD–10 codes. At the September 18–19, 2013 and March 19– 20, 2014 Committee meetings, we will be discussing any requests for new ICD– 10–CM diagnosis and ICD–10–PCS procedure codes to be implemented on October 1, 2014. We will not be discussing ICD–9–CM codes because we will not be using ICD–9–CM for encounters occurring on or after October 1, 2014. The public will be given the opportunity to comment on whether or VerDate Mar<15>2010 ICD–10–CM and ICD–10–PCS Codes 0 4 FY 2009: ICD–10–CM ...................................... ICD–10–PCS .................................... FY 2010: ICD–10–CM ...................................... ICD–10–PCS .................................... ICD–10–CM ...................................... ICD–10–PCS .................................... FY 2012: ICD–10–CM ...................................... ICD–10–PCS .................................... FY 2013: ICD–10–CM ...................................... ICD–10–PCS .................................... FY 2014: ICD–10–CM ...................................... ICD–10–PCS .................................... not new ICD–10–CM and ICD–10–PCS codes should be created effective October 1, 2014, based on the partial code freeze criteria as to whether they are needed to capture new diagnoses or new technologies, or whether the codes should be created after the partial code freeze ends on October 1, 2015. We welcome public comments on any code requests discussed at the September 18– 19, 2013 and March 19–20, 2014 Committee meetings for implementation on October 1, 2014. Comment: One commenter requested that CMS publish the list of any new ICD–10–CM and ICD–10–PCS codes in the IPPS final rule. The commenter pointed out that annual ICD–9–CM updates are currently included in the IPPS proposed and final rules. The commenter mentioned that the ICD–9– CM Coordination and Maintenance Committee is addressing requests for new ICD–10 codes that would be PO 00000 Frm 00054 Fmt 4701 Number Sfmt 4700 Change 68,069 72,589 +5 ¥14,327 69,099 71,957 +1,030 ¥632 69,368 72,081 +269 +124 69,833 71,918 +465 ¥163 69,832 71,920 ¥1 +2 69,823 71,924 ¥9 +4 created during the code freeze as well as codes that would be created after the code freeze ends. The commenter wanted to receive interim decisions on any new ICD–10 codes that might be created after the code freeze ends on October 1, 2015. The commenter also requested that CMS assign ICD–9–CM codes or temporary Healthcare Common Procedure Coding System (HCPCS) codes to procedures provided in connection with newly approved ICD– 10–PCS codes. Finally, the commenter requested that CMS establish October 1, 2014 as the effective date for all ICD–10 code set updates. Response: We will address the commenter’s last request first. As discussed earlier, October 1, 2014 has been established as the implementation date for ICD–10. This date was established through rulemaking (77 FR 54664). We have provided this information on our ICD–10 Web site at: E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations https://www.cms.hhs.gov/Medicare/ Coding/ICD10/. CMS currently posts updates of ICD– 9–CM procedure codes in June of each year on its Web page at: https:// www.cms.hhs.gov/Medicare/Coding/ ICD9ProviderDiagnosticCodes/ index.html . CMS also includes information on ICD–9–CM code updates within the IPPS proposed and final rules because these codes are used to determine the MS–DRG assignment. Any new, revised, or deleted ICD–9–CM diagnoses or procedure codes are described in Tables 6A through 6F. We include this information along with the proposed and final MS–DRG assignment for new ICD–9–CM codes in our rules because it impacts inpatient payment. CDC posts updates of ICD–9–CM diagnosis codes in June of each year on its Web site at: https://www.cdc.gov/ nchs/icd/icd9cm.html. We do not include new, revised, or deleted ICD– 10–CM/PCS codes in the current IPPS rule because the ICD–10 codes are not currently used with the MS–DRGs. Once ICD–10 is implemented, and the MS– DRGs are based on ICD–10 codes, we will provide information on new, revised, or deleted ICD–10 codes in Tables 6A through 6F. CMS posts annual updates to ICD–10– CM and ICD–10–PCS codes in June of each year on its ICD–10 Web page at: https://www.cms.hhs.gov/Medicare/ Coding/ICD10/. CDC also posts annual updates to ICD–10–CM codes in June of each year on its Web site at: https://www.cdc.gov/nchs/icd/ icd10cm.htm . We believe we provide the public complete and regular updates on any annual updates to both ICD–9– CM and ICD–10 codes. Any new, revised, or deleted ICD–10–CM/PCS codes as part of the FY 2016 (October 1, 2015) updates will be posted on CMS’ ICD–10 Web site in June 2015. No final decisions have been made at this time on the October 1, 2015 ICD–10 code updates. On the issue of CMS assigning ICD– 9–CM codes or temporary HCPCS codes to procedures provided in connection with newly approved ICD–10–PCS codes, we would point out that mapping between ICD–10–PCS and ICD–9–CM procedure codes is provided in the annual updates to the General Equivalence Mappings (GEMs). The GEMs are updated annually based on updates to ICD–10 codes and are posted on our ICD–10 Web site in October of each year. The ICD–10 Web site can be found at: https://www.cms.hhs.gov/ Medicare/Coding/ICD10/. The GEMs map between ICD–9–CM and ICD–10 codes because the ICD–10 codes will replace ICD–9–CM codes. The VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 GEMs do not map between ICD–10 and HCPCS codes because ICD–10 will not replace HCPCS codes. HCPCS codes will continue to be used for reported ambulatory and physician services. c. Processing of 25 Diagnosis Codes and 25 Procedure Codes on Hospital Inpatient Claims CMS is currently processing all 25 diagnosis codes and 25 procedure codes submitted on electronic hospital inpatient claims. Prior to January 1, 2011, hospitals could submit up to 25 diagnoses and 25 procedures. However, CMS’ system limitations allowed for the processing of only the first 9 diagnosis codes and 6 procedure codes. We discussed this change in processing claims in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50127), in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25843), in a correction notice issued in the Federal Register on June 14, 2011 (76 FR 24633), and in the FY 2012 IPPS/ LTCH PPS final rule (76 FR 51553). As discussed in these prior rules, CMS undertook an expansion of our internal system capability so that we are able to process up to 25 diagnoses and 25 procedures on hospital inpatient claims as part of the HIPAA ASC X12 Technical Reports Type 3, Version 005010 (Version 5010) standards system update. We recognize the value of the additional information provided by this coded data for multiple uses such as for payment, quality measures, outcome analysis, and other important uses. We will continue to process up to 25 diagnosis codes and 25 procedure codes when received on the 5010 format. d. ICD–10 MS–DRGs In response to the FY 2011 IPPS/ LTCH PPS proposed rule, we received comments on the creation of the ICD–10 version of the MS–DRGs, which will be implemented at the same time as ICD– 10 (75 FR 50127 and 50128). As we stated earlier, the Secretary of Health and Human Services has delayed the compliance date of ICD–10 from October 1, 2013 to October 1, 2014 (77 FR 54664). While we did not propose an ICD–10 version of the MS DRGs in the FY 2011 IPPS/LTCH PPS proposed rule, we noted that we have been actively involved in converting our current MS– DRGs from ICD–9–CM codes to ICD–10 codes and sharing this information through the ICD–9–CM Coordination and Maintenance Committee. We undertook this early conversion project to assist other payers and providers in understanding how to go about their own conversion projects. We posted ICD–10 MS–DRGs based on Version 26.0 (FY 2009) of the MS–DRGs. We PO 00000 Frm 00055 Fmt 4701 Sfmt 4700 50549 also posted a paper that describes how CMS went about completing this project and suggestions for others to follow. All of this information can be found on the CMS Web site at: https://cms.hhs.gov/ Medicare/Coding/ICD10/ICD-10-MSDRG-Conversion-Project.html. We have continued to keep the public updated on our maintenance efforts for ICD–10– CM and ICD 10–PCS coding systems, as well as the General Equivalence Mappings that assist in conversion through the ICD–9–CM Coordination and Maintenance Committee. Information on these committee meetings can be found on the CMS Web site at: https://www.cms.hhs.gov/ Medicare/Coding/ ICD9ProviderDiagnosticCodes/ index.html. During FY 2011, we developed and posted Version 28.0 of the ICD–10 MS– DRGs based on the FY 2011 MS–DRGs (Version 28.0) that we finalized in the FY 2011 IPPS/LTCH PPS final rule on the CMS Web site. This ICD–10 MS– DRGs Version 28.0 also included the CC Exclusion List and the ICD–10 version of the hospital-acquired conditions (HACs), which was not posted with Version 26.0. We also discussed this update at the September 15–16, 2010 and the March 9–10, 2011 meetings of the ICD–9–CM Coordination and Maintenance Committee. The minutes of these two meetings are posted on the CMS Web site at: https:// www.cms.hhs.gov/Medicare/Coding/ ICD9ProviderDiagnosticCodes/ index.html. We reviewed comments on the ICD– 10 MS–DRGs Version 28.0 and made updates as a result of these comments. We called the updated version the ICD– 10 MS DRGs Version 28 R1. We posted a Definitions Manual of ICD–10 MS– DRGs Version 28 R1 on our ICD–10 MS– DRG Conversion Project Web site at: https://cms.hhs.gov/Medicare/Coding/ ICD10/ICD10-MS-DRG-ConversionProject.html. To make the review of Version 28 R1 updates easier for the public, we also made available pilot software on a CD–ROM that could be ordered through the National Technical Information Service (NTIS). A link to the NTIS ordering page was provided on the CMS ICD–10 MS–DRG Web page. We stated that we believed that, by providing the ICD–10 MS–DRG Version 28 R1 Pilot Software (distributed on CD–ROM), the public would be able to more easily review and provide feedback on updates to the ICD–10 MS– DRGs. We discussed the updated ICD– 10 MS–DRGs Version 28 R1 at the September 14, 2011 ICD–9–CM Coordination and Maintenance Committee meeting. We encouraged the E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50550 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations public to continue to review and provide comments on the ICD–10 MS– DRGs so that CMS could continue to update the system. In FY 2012, we prepared the ICD–10 MS–DRGs Version 29.0, based on the FY 2012 MS–DRGs (Version 29.0) that we finalized in the FY 2012 IPPS/LTCH PPS final rule. We posted a Definitions Manual of ICD–10 MS–DRGs Version 29.0 on our ICD–10 MS–DRG Conversion Project Web site. We also prepared a document that describes changes made from Version 28.0 to Version 29.0 to facilitate a review. The ICD–10 MS–DRGs Version 29.0 was discussed at the ICD–9–CM Coordination and Maintenance Committee meeting on March 5, 2012. Information was provided on the types of updates made. Once again the public was encouraged to review and comment on the most recent update to the ICD– 10 MS–DRGs. CMS prepared the ICD–10 MS–DRGs Version 30.0 based on the FY 2013 MS– DRGs (Version 30.0) that we finalized in the FY 2013 IPPS/LTCH PPS final rule. We posted a Definitions Manual of the ICD–10 MS–DRGs Version 30.0 on our ICD–10 MS–DRG Conversion Project Web site at: https://www.cms.hhs.gov/ Medicare/Coding/ICD10/ICD-10-MSDRG-Conversion-Project.html. We also prepared a document that describes changes made from Version 29.0 to Version 30.0 to facilitate a review. We produced mainframe and computer software for Version 30.0, which was made available to the public in February 2013. Information on ordering the mainframe and computer software through NTIS can be found on the CMS Web site at: https://cms.hhs.gov/ Medicare/Coding/ICD10/ICD-10-MSDRG-Conversion-Project.html under the ‘‘Related Links’’ section. This ICD–10 MS–DRGs Version 30.0 computer software should facilitate additional review of the ICD–10 MS–DRGs conversion. We provided information on a study conducted on the impact on converting MS–DRGs to ICD–10. Information on this study is summarized in a paper entitled ‘‘Impact of the Transition to ICD–10 on Medicare Inpatient Hospital Payments.’’ This paper was posted on the CMS ICD–10 MS–DRGs Conversion Project Web site and was distributed and discussed at the September 15, 2010 ICD–9–CM Coordination and Maintenance Committee meeting. The paper described CMS’ approach to the conversion of the MS–DRGs from ICD– 9–CM codes to ICD–10 codes. The study was undertaken using the ICD–9–CM MS–DRGs Version 27.0 (FY 2010) and converted to the ICD–10 MS–DRGs VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Version 27.0. The study estimated the impact on aggregate payment to hospitals and the distribution of payments across hospitals. The impact of the conversion from ICD–9–CM to ICD–10 on Medicare MS–DRG hospital payments was estimated using 2009 Medicare data. The study found a hospital payment increase of 0.05 percent using the ICD–10 MS–DRGs Version 27.0. CMS provided an overview of this hospital payment impact study at the March 5, 2012 ICD–9–CM Coordination and Maintenance Committee meeting. This presentation followed presentations on the creation of ICD–10 MS–DRGs Version 29.0. A summary report of this meeting can be found on the CMS Web site at: https:// www.cms.hhs.gov/Medicare/Coding/ ICD9ProviderDiagnosticCodes/ index.html. At this March 2012 meeting, CMS announced that it would produce an update on this impact study based on an updated version of the ICD 10 MS– DRGs. This update of the impact study was presented at the March 5, 2013 ICD–9–CM Coordination and Maintenance Committee meeting. The updated paper is posted on CMS’ Web site at: https://cms.hhs.gov/Medicare/ Coding/ICD10/ICD-10-MS-DRGConversion-Project.html under the ‘‘Downloads’’ section. Information on the March 5, 2013 ICD–9–CM Coordination and Maintenance Committee meeting can be found on the CMS Web site at: https://cms.hhs.gov/ Medicare/Coding/ ICD9ProviderDiagnosticCodes/ICD-9CM-C-and-M-Meeting-Materials.html. This update of the impact paper and the ICD–10 MS–DRG Version 30.0 software will provide additional information to the public who are evaluating the conversion of the MS–DRGs to ICD–10 MS–DRGs. We will continue to work with the public to explain how we are approaching the conversion of MS– DRGs to ICD–10 and will post drafts of updates as they are developed for public review. The final version of the ICD–10 MS–DRGs will be implemented at the same time as ICD–10 and will be subject to notice and comment rulemaking. In the meantime, we will provide extensive and detailed information on this activity through the ICD–9–CM Coordination and Maintenance Committee. Comment: Several commenters complimented CMS on making available the Version 30.0 ICD–10 MS–DRGs software and Definitions Manual. The commenters found these tools to be useful as hospitals prepare for ICD–10 implementation. The commenters stated PO 00000 Frm 00056 Fmt 4701 Sfmt 4700 that this information allowed hospitals to analyze the impact of these changes, including thorough financial analysis and modeling, and allowed for hands-on training of medical coders. The commenters stated that information from other payment systems, such as those for CAHs, IPFs, and IRFs would also be helpful as hospitals prepare for ICD–10–CM/PCS implementation. Response: We appreciate the positive feedback on our efforts to develop an ICD–10 version of the MS–DRGs and to use this approach in updating other ICD–9–CM based payment systems from ICD–9–CM to ICD–10–CM/PCS codes. 12. Public Comments on Issues Not Addressed in the Proposed Rule We received two public comments regarding MS–DRG issues that were outside of the scope of the proposals included in the FY 2014 IPPS/LTCH PPS proposed rule. We have summarized these public comments below. However, because these public comments were outside of the scope of the proposed rule, we are not addressing them in this final rule. As stated in section II.G. of the preamble of this final rule, we encourage individuals with comments about MS–DRG classifications to submit these comments no later than December of each year so they can be considered for possible inclusion in the annual proposed rule and, if included, may be subjected to public review and comment. We will consider these comments for possible proposals in future rulemaking as part of our annual review process. a. Intracerebral Therapies One commenter requested that CMS create a new MS–DRG for intracerebral therapies, including implantation of chemotherapeutic agents. b. Porphyria One commenter requested that a new MS–DRG be created for porphyria cases. H. Recalibration of the FY 2014 MS– DRG Relative Weights 1. Data Sources for Developing the Relative Weights In developing the FY 2014 system of weights, we used two data sources: Claims data and cost report data. As in previous years, the claims data source is the MedPAR file. This file is based on fully coded diagnostic and procedure data for all Medicare inpatient hospital bills. The FY 2012 MedPAR data used in this final rule include discharges occurring on October 1, 2011, through September 30, 2012, based on bills received by CMS through March 31, E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 2013, from all hospitals subject to the IPPS and short-term, acute care hospitals in Maryland (which are under a waiver from the IPPS under section 1814(b)(3) of the Act). The FY 2012 MedPAR file used in calculating the relative weights includes data for approximately 10,363,200 Medicare discharges from IPPS providers. Discharges for Medicare beneficiaries enrolled in a Medicare Advantage managed care plan are excluded from this analysis. These discharges are excluded when the MedPAR ‘‘GHO Paid’’ indicator field on the claim record is equal to ‘‘1’’ or when the MedPAR DRG payment field, which represents the total payment for the claim, is equal to the MedPAR ‘‘Indirect Medical Education (IME)’’ payment field, indicating that the claim was an ‘‘IME only’’ claim submitted by a teaching hospital on behalf of a beneficiary enrolled in a Medicare Advantage managed care plan. In addition, the March 31, 2013 update of the FY 2012 MedPAR file complies with version 5010 of the X12 HIPAA Transaction and Code Set Standards, and includes a variable called ‘‘claim type.’’ Claim type ‘‘60’’ indicates that the claim was an inpatient claim paid as fee-for-service. Claim types ‘‘61,’’ ‘‘62,’’ ‘‘63,’’ and ‘‘64’’ relate to encounter claims, Medicare Advantage IME claims, and HMO nopay claims. Therefore, the calculation of the relative weights for FY 2014 also excludes claims with claim type values not equal to ‘‘60.’’ The data exclude CAHs, including hospitals that subsequently became CAHs after the period from which the data were taken. The second data source used in the costbased relative weighting methodology is the Medicare cost report data files from the HCRIS. Normally, we use the HCRIS dataset that is 3 years prior to the IPPS fiscal year. Specifically, we used cost report data from the March 31, 2013 update of the FY 2011 HCRIS for calculating the FY 2014 cost-based relative weights. 2. Methodology for Calculation of the Relative Weights As we explain in section II.E.2. of the preamble of this final rule, as we proposed in the FY 2014 IPPS/LTCH PPS proposed rule, we are calculating the relative weights based on 19 CCRs, instead of the 15 CCRs previously used. The methodology we used to calculate the FY 2014 MS–DRG cost-based relative weights based on claims data in the FY 2012 MedPAR file and data from the FY 2011 Medicare cost reports is as follows: • To the extent possible, all the claims were regrouped using the FY VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 2014 MS–DRG classifications discussed in sections II.B. and II.G. of the preamble of this final rule. • The transplant cases that were used to establish the relative weights for heart and heart-lung, liver and/or intestinal, and lung transplants (MS–DRGs 001, 002, 005, 006, and 007, respectively) were limited to those Medicareapproved transplant centers that have cases in the FY 2011 MedPAR file. (Medicare coverage for heart, heart-lung, liver and/or intestinal, and lung transplants is limited to those facilities that have received approval from CMS as transplant centers.) • Organ acquisition costs for kidney, heart, heart-lung, liver, lung, pancreas, and intestinal (or multivisceral organs) transplants continue to be paid on a reasonable cost basis. Because these acquisition costs are paid separately from the prospective payment rate, it is necessary to subtract the acquisition charges from the total charges on each transplant bill that showed acquisition charges before computing the average cost for each MS–DRG and before eliminating statistical outliers. • Claims with total charges or total lengths of stay less than or equal to zero were deleted. Claims that had an amount in the total charge field that differed by more than $10.00 from the sum of the routine day charges, intensive care charges, pharmacy charges, special equipment charges, therapy services charges, operating room charges, cardiology charges, laboratory charges, radiology charges, other service charges, labor and delivery charges, inhalation therapy charges, emergency room charges, blood charges, and anesthesia charges were also deleted. • At least 92.7 percent of the providers in the MedPAR file had charges for 14 of the 19 cost centers. All claims of providers that did not have charges greater than zero for at least 14 of the 19 cost centers were deleted. In other words, a provider must have no more than five blank cost centers. If a provider did not have charges greater than zero in more than five cost centers, the claims for the provider were deleted. For FY 2014, as explained in section II.E.2. of the preamble of this final rule, we are calculating the relative weights using 19 cost centers instead of the 15 cost centers previously used in calculating the FY 2013 relative weights. In the FY 2014 IPPS/LTCH PPS proposed rule, we proposed, in calculating the FY 2014 relative weights, to continue to remove claims of providers with more than five blank cost centers from the dataset used to calculate the relative weights. (We refer PO 00000 Frm 00057 Fmt 4701 Sfmt 4700 50551 readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53326) for the edit threshold related to FY 2013 and prior fiscal years). In recent years, this trim kept approximately 96 percent of IPPS providers in the MedPAR file upon which we base our relative weight calculations. (For examples of our FYs 2012 and 2013 relative weight calculations, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51558) and the FY 2013 IPPS/LTCH PPS final rule 77 FR 53326).) However, under the proposal to add 4 cost centers to the relative weight calculations, which we are finalizing in this final rule, this trim kept approximately 92.7 percent of the IPPS providers in the MedPAR file upon which we base our final FY 2014 relative weight calculations. Although this trim is now removing a greater percentage of providers’ claims from the relative weight calculations than were previously removed in prior years, we stated in the proposed rule our belief that it is appropriate to propose to continue to remove providers’ claims that do not have charges greater than zero in more than five cost centers. We stated that we believe that this proposal is appropriate because we are not introducing new costs into the relative weight calculation; we are only making use of more refined, granular costs by breaking out implantable devices from the Supplies and Equipment CCR, MRIs and CT scans from the Radiology CCR, and cardiac catheterization from the Cardiology CCR. Furthermore, because we are making use of more refined cost report data for these cost centers, we believe that it is also appropriate to edit the claims with a more refined threshold. We invited public comments on the proposal to trim the data used in our relative weight calculations. However, we did not receive any public comments on this proposal. Therefore, for the reasons described above, we are finalizing this policy as proposed. • Statistical outliers were eliminated by removing all cases that were beyond 3.0 standard deviations from the geometric mean of the log distribution of both the total charges per case and the total charges per day for each MS– DRG. • Effective October 1, 2008, because hospital inpatient claims include a POA indicator field for each diagnosis present on the claim, only for purposes of relative weight-setting, the POA indicator field was reset to ‘‘Y’’ for ‘‘Yes’’ for all claims that otherwise have an ‘‘N’’ (No) or a ‘‘U’’ (documentation insufficient to determine if the E:\FR\FM\19AUR2.SGM 19AUR2 50552 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 condition was present at the time of inpatient admission) in the POA field. Under current payment policy, the presence of specific HAC codes, as indicated by the POA field values, can generate a lower payment for the claim. Specifically, if the particular condition is present on admission (that is, a ‘‘Y’’ indicator is associated with the diagnosis on the claim), it is not a HAC, and the hospital is paid for the higher severity (and, therefore, the higher weighted MS–DRG). If the particular condition is not present on admission (that is, an ‘‘N’’ indicator is associated with the diagnosis on the claim) and there are no other complicating conditions, the DRG GROUPER assigns the claim to a lower severity (and, therefore, the lower weighted MS–DRG) as a penalty for allowing a Medicare inpatient to contract a HAC. While the POA reporting meets policy goals of encouraging quality care and generates program savings, it presents an issue for the relative weight-setting process. Because cases identified as HACs are likely to be more complex than similar cases that are not identified as HACs, the charges associated with HAC cases are likely to be higher as well. Therefore, if the higher charges of these HAC claims are grouped into lower severity MS–DRGs prior to the relative weight-setting process, the relative weights of these particular MS–DRGs VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 would become artificially inflated, potentially skewing the relative weights. In addition, we want to protect the integrity of the budget neutrality process by ensuring that, in estimating payments, no increase to the standardized amount occurs as a result of lower overall payments in a previous year that stem from using weights and case-mix that are based on lower severity MS–DRG assignments. If this would occur, the anticipated cost savings from the HAC policy would be lost. To avoid these problems, we reset the POA indicator field to ‘‘Y’’ only for relative weight-setting purposes for all claims that otherwise have an ‘‘N’’ or a ‘‘U’’ in the POA field. This resetting ‘‘forced’’ the more costly HAC claims into the higher severity MS–DRGs as appropriate, and the relative weights calculated for each MS–DRG more closely reflect the true costs of those cases. Once the MedPAR data were trimmed and the statistical outliers were removed, the charges for each of the 19 cost groups for each claim were standardized to remove the effects of differences in area wage levels, IME and DSH payments, and for hospitals located in Alaska and Hawaii, the applicable cost-of-living adjustment. Because hospital charges include charges for both operating and capital PO 00000 Frm 00058 Fmt 4701 Sfmt 4700 costs, we standardized total charges to remove the effects of differences in geographic adjustment factors, cost-ofliving adjustments, and DSH payments under the capital IPPS as well. Charges were then summed by MS–DRG for each of the 19 cost groups so that each MS– DRG had 19 standardized charge totals. These charges were then adjusted to cost by applying the national average CCRs developed from the FY 2011 cost report data. The 19 cost centers that we used in the final relative weight calculation are shown in the following table. The table shows the lines on the cost report and the corresponding revenue codes that we used to create the 19 national cost center CCRs. (We note that we have made several changes to the table, most importantly, to remove the columns listing the cost centers from the CMS Form 2552–96 cost reports. Because we are using data from FY 2011 cost reports, which were filed on the CMS Form 2552–10, the columns referencing the CMS Form 2552–96 cost report are no longer relevant. We also have updated and refined the table to reflect the 19 CCRs, instead of the previous 15 CCRs, and we have made some minor corrections to revenue codes and cost report cost centers that are grouped with each CCR.) BILLING CODE 4120–01–P E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 VerDate Mar<15>2010 Jkt 229001 PO 00000 I Frm 00059 Fmt 4701 Sfmt 4725 E:\FR\FM\19AUR2.SGM OllX and 014X 012X,013X and 016X-019X I Cost Reoort Charges from HCRIS (Worksheet C, Part 1, Column 6 & 7 and line number) FormCMS2552-10 Medicare Charges from HCRIS (Worksheet D-3, Column & line number) FormCMS2552-10 C 1 C5 30 I C 1 C6 30 I D3 HOS C2 30 19AUR2 C 1 C5 31 I C 1 C6 31 I D3 HOS C2 31 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 21:51 Aug 16, 2013 Cost Center Revenue Codes I contained in Cost from HCRIS (Worksheet C, Part 1, Column 5 and line number) FormCMS2552-10 50553 ER19AU13.001</GPH> mstockstill on DSK4VPTVN1PROD with RULES6 50554 VerDate Mar<15>2010 Jkt 229001 PO 00000 I Cost Reoort Frm 00060 Fmt 4701 Medicare Charges from HCRIS (Worksheet D-3, Column & line number) FormCMS2552-10 C 1 C5 32 I Charges from HCRIS (Worksheet C, Part 1, Column 6 & 7 and line number) FormCMS2552-10 C 1 C6 32 D3 HOS C2 32 Sfmt 4725 E:\FR\FM\19AUR2.SGM C 1 C5 33 I C 1 C6 33 I D3 HOS C2 33 19AUR2 Surgical Intensive Care Unit IC 1 C5 34 IC 1 C6 34 I D3 HOS C2 34 C 1 C5 35 I C 1 C6 35 I D3 HOS C2 35 ER19AU13.002</GPH> Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 21:51 Aug 16, 2013 Cost Center Revenue Codes I contained in Cost from HCRIS (Worksheet C, Part 1, Column 5 and line number) FormCMS2552-10 mstockstill on DSK4VPTVN1PROD with RULES6 VerDate Mar<15>2010 Jkt 229001 PO 00000 Frm 00061 I I Cost Reoort Charges from HCRIS (Worksheet C, Part 1, Column 6 & 7 and line number) Form CMS2552-10 Medicare Charges from HCRIS (Worksheet D-3, Column & line number) FormCMS2552-10 Fmt 4701 Sfmt 4725 C 1 C5 64 I C 1 C6 64 I D3 HOS C2 64 E:\FR\FM\19AUR2.SGM C 1 C7 64 C 1 C5 73 I C 1 C6 73 I D3 HOS C2 73 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 21:51 Aug 16, 2013 Cost Center Revenue Codes I contained in Cost from HCRIS (Worksheet C, Part 1, Column 5 and line number) FormCMS2552-10 50555 ER19AU13.003</GPH> mstockstill on DSK4VPTVN1PROD with RULES6 50556 VerDate Mar<15>2010 Jkt 229001 PO 00000 Frm 00062 Fmt 4701 Sfmt 4725 E:\FR\FM\19AUR2.SGM Durable Medical Equipment I 0290, 0291, Medical Supplies Charged to Patients IC 1 C5 71 - 0292 and 0294-0299 19AUR2 0293 DME-Rented • IC 1 C6 71 Medicare Charges from HCRIS (Worksheet D-3, Column & line number) FormCMS2552-10 I D3 HOS C2 71 C 1 C7 71 C 1 C5 96 - Used Durable Medical ER19AU13.004</GPH> I Cost Report Line Descriotion Charges from HCRIS (Worksheet C, Part 1, Column 6 & 7 and line number) Form CMS2552-10 C 1 C6 96 D3 HOS C2 96 C 1 C7 96 DME-Sold IC 1 C5 67 IC 1 C6 97 I D3 HOS C2 97 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 21:51 Aug 16, 2013 Revenue Codes Cost Center I I contained in MedPAR Field '"' 0270,0271, 0272,0273, 0274,0277, Medical/Sur- I 0279, and Supplies and I gical Supply 0621, 0622, 0623 Cost from HCRIS (Worksheet C, Part 1, Column 5 and line number) FormCMS2552-10 mstockstill on DSK4VPTVN1PROD with RULES6 VerDate Mar<15>2010 Jkt 229001 PO 00000 I I Cost Reoort Frm 00063 Charges from HCRIS (Worksheet C, Part 1, Column 6 & 7 and line number) FormCMS2552-10 Medicare Charges from HCRIS (Worksheet D-3, Column & line number) FormCMS2552-10 Fmt 4701 C 1 C7 97 Sfmt 4725 E:\FR\FM\19AUR2.SGM Implantable Devices 19AUR2 Therapy Services I 0275, 0276, 0278.0624 042X I Implantable Devices Charged to Patients I C 1 C5 72 I C 1 C6 72 I D3 HOS C2 72 C 1 C5 66 I C 1 C6 66 I D3 HOS C2 66 C 1 C7 66 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 21:51 Aug 16, 2013 Cost Center Revenue Codes I contained in Cost from HCRIS (Worksheet C, Part 1, Column 5 and line number) FormCMS2552-10 50557 ER19AU13.005</GPH> mstockstill on DSK4VPTVN1PROD with RULES6 50558 VerDate Mar<15>2010 Jkt 229001 PO 00000 I Frm 00064 Fmt 4701 043X I Cost Reoort C 1 C5 67 I C 1 C6 67 I D3 HOS C2 67 Sfmt 4725 C 1 C7 67 E:\FR\FM\19AUR2.SGM 19AUR2 044Xand 047X C 1 C5 68 I C 1 C6 68 I D3 HOS C2 68 041X and 046X C 1 C5 65 I C 1 C6 65 I D3 HOS C2 65 C 1 C7 65 ER19AU13.006</GPH> Medicare Charges from HCRIS (Worksheet D-3, Column & line number) FormCMS2552-10 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 21:51 Aug 16, 2013 Cost Center Revenue Codes I contained in Cost from HCRIS (Worksheet C, Part 1, Column 5 and line number) FormCMS2552-10 Charges from HCRIS (Worksheet C, Part 1, Column 6 & 7 and line number) Form CMS2552-10 mstockstill on DSK4VPTVN1PROD with RULES6 VerDate Mar<15>2010 Jkt 229001 PO 00000 I Frm 00065 Fmt 4701 Sfmt 4725 Operating Room 036X I Cost Reoort Charges from HCRIS (Worksheet C, Part 1, Column 6 & 7 and line number) FormCMS2552-10 Medicare Charges from HCRIS (Worksheet D-3, Column & line number) FormCMS2552-10 C 1 C5 50 I C 1 C6 50 I D3 HOS C2 50 E:\FR\FM\19AUR2.SGM C 1 C7 50 C 1 C5 51 I C 1 C6 51 I D3 HOS C2 51 072X C 1 C5 52 I C 1 C6 52 I D3 HOS C2 52 19AUR2 071X Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 21:51 Aug 16, 2013 Cost Center Revenue Codes I contained in Cost from HCRIS (Worksheet C, Part 1, Column 5 and line number) FormCMS2552-10 50559 ER19AU13.007</GPH> mstockstill on DSK4VPTVN1PROD with RULES6 50560 VerDate Mar<15>2010 Jkt 229001 PO 00000 I I Cost Reoort Frm 00066 Charges from HCRIS (Worksheet C, Part 1, Column 6 & 7 and line number) FormCMS2552-10 Medicare Charges from HCRIS (Worksheet D-3, Column & line number) FormCMS2552-10 Fmt 4701 Sfmt 4725 C 1 C5 53 I C 1 C6 53 I D3 HOS C2 53 Anesthesia E:\FR\FM\19AUR2.SGM 19AUR2 C 1 C5 69 I C 1 C6 69 I D3 HOS C2 69 C 1 C7 69 Cardiac Catheteri- ER19AU13.008</GPH> 0481 Catheterization IC 1 C5 59 IC 1 C6 59 I D3 HOS C2 59 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 21:51 Aug 16, 2013 Cost Center Revenue Codes I contained in Cost from HCRIS (Worksheet C, Part 1, Column 5 and line number) FormCMS2552-10 mstockstill on DSK4VPTVN1PROD with RULES6 VerDate Mar<15>2010 Jkt 229001 PO 00000 I I Cost Reoort Frm 00067 Charges from HCRIS (Worksheet C, Part 1, Column 6 & 7 and line number) FormCMS2552-10 Medicare Charges from HCRIS (Worksheet D-3, Column & line number) FormCMS2552-10 Fmt 4701 Sfmt 4725 E:\FR\FM\19AUR2.SGM C 1 C5 60 I C 1 C6 60 I D3 HOS C2 60 C 1 C7 60 19AUR2 C 1 C5 61 I C 1 C6 61 I D3 HOS C2 61 C 1 C7 61 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 21:51 Aug 16, 2013 Cost Center Revenue Codes I contained in Cost from HCRIS (Worksheet C, Part 1, Column 5 and line number) FormCMS2552-10 50561 ER19AU13.009</GPH> mstockstill on DSK4VPTVN1PROD with RULES6 50562 VerDate Mar<15>2010 Jkt 229001 PO 00000 I I Cost Reoort Frm 00068 Charges from HCRIS (Worksheet C, Part 1, Column 6 & 7 and line number) FormCMS2552-10 Medicare Charges from HCRIS (Worksheet D-3, Column & line number) FormCMS2552-10 Fmt 4701 C 1 C5 70 I C 1 C6 70 I D3 HOS C2 70 Sfmt 4725 E:\FR\FM\19AUR2.SGM C 1 C5 541 C 1 C6 541 D3 HOS C2 54 - C 1 C7 54 19AUR2 I Thera.Qeutic I C 1 C5 55 I C 1 C6 55 I D3 HOS C2 55 0343 and 344 ER19AU13.010</GPH> 028x, 0331, 0332,0333, 0335,0339, 0342 • Radioisotooe IC 1 C5 56 IC 1 C6 56 I D3 HOS C2 56 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 21:51 Aug 16, 2013 Cost Center Revenue Codes I contained in Cost from HCRIS (Worksheet C, Part 1, Column 5 and line number) FormCMS2552-10 mstockstill on DSK4VPTVN1PROD with RULES6 VerDate Mar<15>2010 Jkt 229001 PO 00000 I I Cost Reoort Frm 00069 Fmt 4701 II Computed CT Scan Sfmt 4725 035X I E:\FR\FM\19AUR2.SGM I""'""'l (CT) Sc';' • Medicare Charges from HCRIS (Worksheet D-3, Column & line number) FormCMS2552-10 C 1 C7 56 I I 1C 1 C5 571 C 1 C6 571 D3 HOS C2 57 C 1 C7 57 Magnetic Resonance Imaging C 1 C6 58 I D3 HOS C2 58 19AUR2 Emergency Room Emergency Room 045x C 1 C5 91 I C 1 C6 91 I D3 HOS C2 91 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 21:51 Aug 16, 2013 Cost Center Revenue Codes I contained in Charges from HCRIS (Worksheet C, Part 1, Column 6 & 7 and line number) FormCMS2552-10 Cost from HCRIS (Worksheet C, Part 1, Column 5 and line number) FormCMS2552-10 50563 ER19AU13.011</GPH> mstockstill on DSK4VPTVN1PROD with RULES6 50564 VerDate Mar<15>2010 Jkt 229001 PO 00000 I I Cost Reoort Frm 00070 Medicare Charges from HCRIS (Worksheet D-3, Column & line number) FormCMS2552-10 C 1 C5 62 C 1 C6 62 D3 HOS C2 62 Fmt 4701 Charges from HCRIS (Worksheet C, Part 1, Column 6 & 7 and line number) FormCMS2552-10 Sfmt 4725 E:\FR\FM\19AUR2.SGM Products Char es Blood Cells 039x 19AUR2 038x Blood Storing, Processing, & Transfusin C 1 C7 62 Blood Storage / C 1 C5 63 C 1 C6 63 C 1 C7 63 ER19AU13.012</GPH> D3 HOS C2 63 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 21:51 Aug 16, 2013 Cost Center Revenue Codes I contained in Cost from HCRIS (Worksheet C, Part 1, Column 5 and line number) FormCMS2552-10 mstockstill on DSK4VPTVN1PROD with RULES6 VerDate Mar<15>2010 Jkt 229001 PO 00000 I I Cost Reoort Frm 00071 Charges from HCRIS (Worksheet C, Part 1, Column 6 & 7 and line number) Form CMS2552-10 Medicare Charges from HCRIS (Worksheet D-3, Column & line number) FormCMS2552-10 Fmt 4701 Sfmt 4725 E:\FR\FM\19AUR2.SGM 0002-0099, 022X,023X, 024X,052X, 053X 055X-060X, 064X-070X, 076X-078X, 090X-095X and099X Other Services 19AUR2 Renal 0800X 080X and 082X-088X C 1 C5 74 I C 1 C6 74 I D3 HOS C2 74 C 1 C7 74 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 21:51 Aug 16, 2013 Cost Center Revenue Codes I contained in Cost from HCRIS (Worksheet C, Part 1, Column 5 and line number) FormCMS2552-10 50565 ER19AU13.013</GPH> mstockstill on DSK4VPTVN1PROD with RULES6 50566 VerDate Mar<15>2010 Jkt 229001 PO 00000 Cost Reoort Frm 00072 Fmt 4701 C 1 C6 94 D3 HOS C2 94 Sfmt 4725 - E:\FR\FM\19AUR2.SGM Outpatient Service C 1 C7 94 , 049X Distinct Part) C 1 C5 75 C 1 C6 75 079X D3 HOS C2 75 C 1 C7 75 Other 19AUR2 C 1 C5 76 Clinic Visit 051X ER19AU13.014</GPH> Medicare Charges from HCRIS (Worksheet D-3, Column & line number) FormCMS2552-10 C 1 C5 94 I I Charges from HCRIS (Worksheet C, Part 1, Column 6 & 7 and line number) FormCMS2552-10 • Clinic C 1 C6 76 I IC 1 C5 90 D3 HOS C2 76 C 1 C7 76 IC 1 C6 90 I D3 HOS C2 90 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 21:51 Aug 16, 2013 Cost Center Revenue Codes I contained in Cost from HCRIS (Worksheet C, Part 1, Column 5 and line number) FormCMS2552-10 mstockstill on DSK4VPTVN1PROD with RULES6 VerDate Mar<15>2010 Jkt 229001 PO 00000 I I Cost Reoort Frm 00073 Medicare Charges from HCRIS (Worksheet D-3, Column & line number) FormCMS2552-10 Fmt 4701 C 1 C7 90 Sfmt 4725 C- 1- C5 - 92. 01 C- 1- C6- 92. 01 D3 HOS C2 92 .01 E:\FR\FM\19AUR2.SGM C- 1- C7- 92. 01 Other Professional Fees Char es 096X,097X, and 098X 19AUR2 Ambulance 054X Services - Ambulance C 1 C5 93 C 1 C6 93 I C 1 C5 95 D3 HOS C2 93 C 1 C7 93 C 1 C6 95 C 1 C7 95 D3 HOS C2 95 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 21:51 Aug 16, 2013 Cost Center Revenue Codes I contained in Charges from HCRIS (Worksheet C, Part 1, Column 6 & 7 and line number) FormCMS2552-10 Cost from HCRIS (Worksheet C, Part 1, Column 5 and line number) FormCMS2552-10 50567 ER19AU13.015</GPH> mstockstill on DSK4VPTVN1PROD with RULES6 50568 Jkt 229001 PO 00000 Frm 00074 Fmt 4701 I I Cost Reoort Sfmt 4700 Medicare Charges from HCRIS (Worksheet D-3, Column & line number) FormCMS2552-10 C 1 C5 88 C 1 C6 88 D3 HOS C2 88 E:\FR\FM\19AUR2.SGM C 1 C7 88 C 1 C5 89 C 1 C6 89 19AUR2 C 1 C7 89 D3 HOS C2 89 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 21:51 Aug 16, 2013 BILLING CODE 4120–01–C VerDate Mar<15>2010 ER19AU13.016</GPH> Cost Center Revenue Codes I contained in Cost from HCRIS (Worksheet C, Part 1, Column 5 and line number) FormCMS2552-10 Charges from HCRIS (Worksheet C, Part 1, Column 6 & 7 and line number) FormCMS2552-10 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations In the table above, revenue code 0274 is listed among the revenue codes included in the Supplies and Equipment CCR. In the actual calculation of the Supplies and Equipment CCR for the FY 2014 proposed rule, we inadvertently included charges from MedPAR associated with revenue 0274 in the Implantable Devices CCR. For this final rule, we have corrected this oversight and included the MedPAR charges associated with revenue code 0274 in the calculation of the Supplies and Equipment CCR. (We refer readers to the FY 2009 IPPS/LTCH PPS final rule (73 FR 48462) for a discussion on the revenue codes included in the Supplies and Equipment and Implantable Devices CCRs, respectively.) 3. Development of National Average CCRs We developed the national average CCRs as follows: Using the FY 2011 cost report data, we removed CAHs, Indian Health Service hospitals, all-inclusive rate hospitals, and cost reports that represented time periods of less than 1 year (365 days). We included hospitals located in Maryland because we include their charges in our claims database. We then created CCRs for each provider for each cost center (see prior table for line items used in the calculations) and removed any CCRs that were greater than 10 or less than 0.01. We normalized the departmental CCRs by dividing the CCR for each department by the total CCR for the hospital for the purpose of trimming the data. We then took the logs of the normalized cost center CCRs and removed any cost center CCRs where the log of the cost center CCR was greater or less than the mean log plus/minus 3 times the standard deviation for the log of that cost center CCR. Once the cost report data were trimmed, we calculated a Medicare-specific CCR. The Medicarespecific CCR was determined by taking the Medicare charges for each line item from Worksheet D–3 and deriving the Medicare-specific costs by applying the hospital-specific departmental CCRs to the Medicare-specific charges for each line item from Worksheet D–3. Once each hospital’s Medicare-specific costs were established, we summed the total Medicare-specific costs and divided by the sum of the total Medicare-specific charges to produce national average, charge-weighted CCRs. After we multiplied the total charges for each MS–DRG in each of the 19 cost centers by the corresponding national average CCR, we summed the 19 ‘‘costs’’ across each MS–DRG to produce a total standardized cost for the MS–DRG. The average standardized cost for each MS– DRG was then computed as the total standardized cost for the MS–DRG divided by the transfer-adjusted case count for the MS–DRG. The average cost for each MS–DRG was then divided by the national average standardized cost per case to determine the relative weight. The FY 2014 cost-based relative weights were then normalized by an adjustment factor of 1.615238977 so that the average case weight after recalibration was equal to the average case weight before recalibration. The normalization adjustment is intended to ensure that recalibration by itself neither increases nor decreases total payments under the IPPS, as required by section 1886(d)(4)(C)(iii) of the Act. The 19 national average CCRs for FY 2014 are as follows: When we recalibrated the DRG weights for previous years, we set a threshold of 10 cases as the minimum number of cases required to compute a reasonable weight. In the FY 2014 IPPS/ LTCH PPS proposed rule, we proposed to use that same case threshold in recalibrating the MS–DRG weights for FY 2014. Using data from the FY 2012 MedPAR file, there were 7 MS–DRGs that contain fewer than 10 cases. Under the MS–DRGs, we have fewer lowvolume DRGs than under the CMS DRGs because we no longer have separate DRGs for patients aged 0 to 17 years. With the exception of newborns, we previously separated some DRGs based on whether the patient was age 0 to 17 years or age 17 years and older. Other than the age split, cases grouping to these DRGs are identical. The DRGs for patients aged 0 to 17 years generally have very low volumes because children are typically ineligible for Medicare. In the past, we have found that the low volume of cases for the pediatric DRGs could lead to significant year-to-year instability in their relative weights. Although we have always encouraged non-Medicare payers to develop weights applicable to their own patient populations, we have received frequent complaints from providers about the use of the Medicare relative weights in the Group CCR pediatric population. We believe that Routine Days .................................... 0.500 eliminating this age split in the MS– Intensive Days .................................. 0.414 DRGs will provide more stable payment Drugs ................................................ 0.193 for pediatric cases by determining their Supplies & Equipment ...................... 0.300 Implantable Devices ......................... 0.356 payment using adult cases that are Therapy Services .............................. 0.356 much higher in total volume. Newborns Laboratory ......................................... 0.134 are unique and require separate MS– Operating Room ............................... 0.221 DRGs that are not mirrored in the adult Cardiology ......................................... 0.130 population. Therefore, it remains Cardiac Catheterization .................... 0.136 necessary to retain separate MS–DRGs Radiology .......................................... 0.171 MRIs ................................................. 0.090 for newborns. All of the low-volume CT Scans .......................................... 0.045 MS–DRGs listed below are for Emergency Room ............................. 0.206 newborns. In FY 2014, because we do Blood and Blood Products ................ 0.365 not have sufficient MedPAR data to set Other Services .................................. 0.400 accurate and stable cost weights for Labor & Delivery ............................... 0.424 these low-volume MS–DRGs, we Inhalation Therapy ............................ 0.186 Anesthesia ........................................ 0.119 proposed to compute weights for the low-volume MS–DRGs by adjusting their FY 2013 weights by the percentage Since FY 2009, the relative weights change in the average weight of the have been based on 100 percent cost weights based on our MS–DRG grouping cases in other MS–DRGs. The crosswalk system. table is shown below: mstockstill on DSK4VPTVN1PROD with RULES6 Low-volume MS–DRG MS–DRG Title 789 ................................. 791 ................................. Neonates, Died or Transferred to Another Acute Care Facility. Extreme Immaturity or Respiratory Distress Syndrome, Neonate. Prematurity with Major Problems ....................................... 792 ................................. Prematurity without Major Problems .................................. 790 ................................. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 50569 PO 00000 Frm 00075 Crosswalk to MS–DRG Fmt 4701 Sfmt 4700 FY 2013 FR weight (adjusted by percent change age weight of the cases in other MS–DRGs). FY 2013 FR weight (adjusted by percent change age weight of the cases in other MS–DRGs). FY 2013 FR weight (adjusted by percent change age weight of the cases in other MS–DRGs). FY 2013 FR weight (adjusted by percent change age weight of the cases in other MS–DRGs). E:\FR\FM\19AUR2.SGM 19AUR2 in averin averin averin aver- 50570 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Low-volume MS–DRG MS–DRG Title Crosswalk to MS–DRG 793 ................................. Full-Term Neonate with Major Problems ........................... 794 ................................. Neonate with Other Significant Problems .......................... 795 ................................. Normal Newborn ................................................................ FY 2013 FR weight (adjusted by percent change in average weight of the cases in other MS–DRGs). FY 2013 FR weight (adjusted by percent change in average weight of the cases in other MS–DRGs). FY 2013 FR weight (adjusted by percent change in average weight of the cases in other MS–DRGs). We did not receive any public comments on this proposal and, therefore, are finalizing it for FY 2014 as proposed. mstockstill on DSK4VPTVN1PROD with RULES6 4. Bundled Payments for Care Improvement (BPCI) Initiative The Bundled Payments for Care Improvement (BPCI) initiative, developed under the authority of section 3021 of the Affordable Care Act (codified at section 1115A of the Act), is comprised of four broadly defined models of care, which link payments for multiple services beneficiaries receive during an episode of care. Under the BPCI initiative, organizations enter into payment arrangements that include financial and performance accountability for episodes of care. On January 31, 2013, CMS announced the health care organizations selected to participate in the BPCI initiative. For additional information on the BPCI initiative, we refer readers to the CMS’ Center for Medicare and Medicaid Innovation’s Web site at https:// innovation.cms.gov/initiatives/BundledPayments/ and to section IV.H.4. of the preamble of the FY 2013 IPPS/LTCH PPS final rule (77 FR 53341 through 53343) for a discussion on the BPCI initiative. In the FY 2013 IPPS/LTCH PPS final rule, for FY 2013 and subsequent fiscal years, we finalized a policy to treat hospitals that participate in the BPCI initiative the same as prior fiscal years for the IPPS payment modeling and ratesetting process without regard to a hospital’s participation within these bundled payment models (that is, as if a hospital were not participating in those models under the BPCI initiative). Therefore, for FY 2014, we proposed to continue to include all applicable data from subsection (d) hospitals participating in BPCI Models 1, 2, and 4 in our IPPS payment modeling and ratesetting calculations. We did not receive any public comments on this proposal and, therefore, are finalizing it for FY 2014 as proposed. We refer readers to the FY 2013 IPPS/LTCH PPS final rule for a complete discussion on our final policy for the treatment of hospitals participating in the BPCI initiative in our ratesetting process. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 I. Add-On Payments for New Services and Technologies 1. Background Sections 1886(d)(5)(K) and (L) of the Act establish a process of identifying and ensuring adequate payment for new medical services and technologies (sometimes collectively referred to in this section as ‘‘new technologies’’) under the IPPS. Section 1886(d)(5)(K)(vi) of the Act specifies that a medical service or technology will be considered new if it meets criteria established by the Secretary after notice and opportunity for public comment. Section 1886(d)(5)(K)(ii)(I) of the Act specifies that a new medical service or technology may be considered for new technology add-on payment if, ‘‘based on the estimated costs incurred with respect to discharges involving such service or technology, the DRG prospective payment rate otherwise applicable to such discharges under this subsection is inadequate.’’ We note that beginning with discharges occurring in FY 2008, CMS transitioned from CMS– DRGs to MS–DRGs. The regulations at 42 CFR 412.87 implement these provisions and specify three criteria for a new medical service or technology to receive the additional payment: (1) The medical service or technology must be new; (2) the medical service or technology must be costly such that the DRG rate otherwise applicable to discharges involving the medical service or technology is determined to be inadequate; and (3) the service or technology must demonstrate a substantial clinical improvement over existing services or technologies. Below we highlight some of the major statutory and regulatory provisions relevant to the new technology add-on payment criteria as well as other information. For a complete discussion on the new technology add-on payment criteria, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51572 through 51574). Under the first criterion, as reflected in § 412.87(b)(2), a specific medical service or technology will be considered ‘‘new’’ for purposes of new medical service or technology add-on payments until such time as Medicare data are available to fully reflect the cost of the PO 00000 Frm 00076 Fmt 4701 Sfmt 4700 technology in the MS–DRG weights through recalibration. We note that we do not consider a service or technology to be new if it is substantially similar to one or more existing technologies. That is, even if a technology receives a new FDA approval, it may not necessarily be considered ‘‘new’’ for purposes of new technology add-on payments if it is ‘‘substantially similar’’ to a technology that was approved by FDA and has been on the market for more than 2 to 3 years. In the FY 2006 IPPS final rule (70 FR 47351) and the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43813 and 43814), we explained our policy regarding substantial similarity in detail. Under the second criterion, § 412.87(b)(3) further provides that, to be eligible for the add-on payment for new medical services or technologies, the MS–DRG prospective payment rate otherwise applicable to the discharge involving the new medical services or technologies must be assessed for adequacy. Under the cost criterion, to assess the adequacy of payment for a new technology paid under the applicable MS–DRG prospective payment rate, we evaluate whether the charges for cases involving the new technology exceed certain threshold amounts. Table 10 that was released with the FY 2013 IPPS/LTCH PPS final rule contains the final thresholds that we used to evaluate applications for new technology add-on payments for FY 2014. We refer readers to the CMS Web site at: https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ AcuteInpatientPPS/FY-2013-IPPS-FinalRule-Home-Page.html for a complete viewing of Table 10 from the FY 2013 IPPS/LTCH PPS final rule. In the September 7, 2001 final rule that established the new technology add-on payment regulations (66 FR 46917), we discussed the issue of whether the Health Insurance Portability and Accountability Act (HIPAA) Privacy Rule at 45 CFR Parts 160 and 164 applies to claims information that providers submit with applications for new technology add-on payments. We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51573) for complete information on this issue. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Under the third criterion, § 412.87(b)(1) of our existing regulations provides that a new technology is an appropriate candidate for an additional payment when it represents ‘‘an advance that substantially improves, relative to technologies previously available, the diagnosis or treatment of Medicare beneficiaries.’’ For example, a new technology represents a substantial clinical improvement when it reduces mortality, decreases the number of hospitalizations or physician visits, or reduces recovery time compared to the technologies previously available. (We refer readers to the September 7, 2001 final rule for a more detailed discussion of this criterion (66 FR 46902).) The new medical service or technology add-on payment policy under the IPPS provides additional payments for cases with relatively high costs involving eligible new medical services or technologies while preserving some of the incentives inherent under an average-based prospective payment system. The payment mechanism is based on the cost to hospitals for the new medical service or technology. Under § 412.88, if the costs of the discharge (determined by applying cost-to-charge ratios (CCRs) as described in § 412.84(h)) exceed the full DRG payment (including payments for IME and DSH, but excluding outlier payments), Medicare will make an addon payment equal to the lesser of: (1) 50 percent of the estimated costs of the new technology (if the estimated costs for the case including the new technology exceed Medicare’s payment); or (2) 50 percent of the difference between the full DRG payment and the hospital’s estimated cost for the case. Unless the discharge qualifies for an outlier payment, the additional Medicare payment is limited to the full MS–DRG payment plus 50 percent of the estimated costs of the new technology. Section 503(d)(2) of Public Law 108– 173 provides that there shall be no reduction or adjustment in aggregate payments under the IPPS due to add-on payments for new medical services and technologies. Therefore, in accordance with section 503(d)(2) of Public Law 108–173, add-on payments for new medical services or technologies for FY 2005 and later years have not been subjected to budget neutrality. In the FY 2009 IPPS final rule (73 FR 48561 through 48563), we modified our regulations at § 412.87 to codify our longstanding practice of how CMS evaluates the eligibility criteria for new medical service or technology add-on payment applications. That is, we first determine whether a medical service or VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 technology meets the newness criteria, and only if so, do we then make a determination as to whether the technology meets the cost threshold and represents a substantial clinical improvement over existing medical services or technologies. We also amended § 412.87(c) to specify that all applicants for new technology add-on payments must have FDA approval or clearance for their new medical service or technology by July 1 of each year prior to the beginning of the fiscal year that the application is being considered. The Council on Technology and Innovation (CTI) at CMS oversees the agency’s cross-cutting priority on coordinating coverage, coding and payment processes for Medicare with respect to new technologies and procedures, including new drug therapies, as well as promoting the exchange of information on new technologies between CMS and other entities. The CTI, composed of senior CMS staff and clinicians, was established under section 942(a) of Public Law 108–173. The Council is cochaired by the Director of the Center for Clinical Standards and Quality (CCSQ) and the Director of the Center for Medicare (CM), who is also designated as the CTI’s Executive Coordinator. The specific processes for coverage, coding, and payment are implemented by CM, CCSQ, and the local claimspayment contractors (in the case of local coverage and payment decisions). The CTI supplements, rather than replaces, these processes by working to assure that all of these activities reflect the agency-wide priority to promote highquality, innovative care. At the same time, the CTI also works to streamline, accelerate, and improve coordination of these processes to ensure that they remain up to date as new issues arise. To achieve its goals, the CTI works to streamline and create a more transparent coding and payment process, improve the quality of medical decisions, and speed patient access to effective new treatments. It is also dedicated to supporting better decisions by patients and doctors in using Medicare-covered services through the promotion of better evidence development, which is critical for improving the quality of care for Medicare beneficiaries. To improve the understanding of CMS’ processes for coverage, coding, and payment and how to access them, the CTI has developed an ‘‘Innovator’s Guide’’ to these processes. The intent is to consolidate this information, much of which is already available in a variety of CMS documents and in various places on the CMS Web site, in a user- PO 00000 Frm 00077 Fmt 4701 Sfmt 4700 50571 friendly format. This guide was published in August 2008 and is available on the CMS Web site at: https:// www.cms.gov/CouncilonTechInnov/ Downloads/ InnovatorsGuide5_10_10.pdf. As we indicated in the FY 2009 IPPS final rule (73 FR 48554), we invite any product developers or manufacturers of new medical technologies to contact the agency early in the process of product development if they have questions or concerns about the evidence that would be needed later in the development process for the agency’s coverage decisions for Medicare. The CTI aims to provide useful information on its activities and initiatives to stakeholders, including Medicare beneficiaries, advocates, medical product manufacturers, providers, and health policy experts. Stakeholders with further questions about Medicare’s coverage, coding, and payment processes, or who want further guidance about how they can navigate these processes, can contact the CTI at CTI@cms.hhs.gov. We note that applicants for add-on payments for new medical services or technologies for FY 2015 must submit a formal request, including a full description of the clinical applications of the medical service or technology and the results of any clinical evaluations demonstrating that the new medical service or technology represents a substantial clinical improvement, along with a significant sample of data to demonstrate that the medical service or technology meets the high-cost threshold. Complete application information, along with final deadlines for submitting a full application, will be posted as it becomes available on the CMS Web site at: https://www.cms.gov/ Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/ newtech.html. To allow interested parties to identify the new medical services or technologies under review before the publication of the proposed rule for FY 2015, the Web site also will post the tracking forms completed by each applicant. 2. Public Input Before Publication of a Notice of Proposed Rulemaking on AddOn Payments Section 1886(d)(5)(K)(viii) of the Act, as amended by section 503(b)(2) of Public Law 108–173, provides for a mechanism for public input before publication of a notice of proposed rulemaking regarding whether a medical service or technology represents a substantial clinical improvement or advancement. The process for evaluating new medical service and E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50572 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations technology applications requires the Secretary to— • Provide, before publication of a proposed rule, for public input regarding whether a new service or technology represents an advance in medical technology that substantially improves the diagnosis or treatment of Medicare beneficiaries; • Make public and periodically update a list of the services and technologies for which applications for add-on payments are pending; • Accept comments, recommendations, and data from the public regarding whether a service or technology represents a substantial clinical improvement; and • Provide, before publication of a proposed rule, for a meeting at which organizations representing hospitals, physicians, manufacturers, and any other interested party may present comments, recommendations, and data regarding whether a new medical service or technology represents a substantial clinical improvement to the clinical staff of CMS. In order to provide an opportunity for public input regarding add-on payments for new medical services and technologies for FY 2014 prior to publication of the FY 2014 IPPS/LTCH PPS proposed rule, we published a notice in the Federal Register on November 23, 2012 (77 FR 70163 through 70165), and held a town hall meeting at the CMS Headquarters Office in Baltimore, MD, on February 5, 2013. In the announcement notice for the meeting, we stated that the opinions and alternatives provided during the meeting would assist us in our evaluations of applications by allowing public discussion of the substantial clinical improvement criterion for each of the FY 2014 new medical service and technology add-on payment applications before the publication of the FY 2014 proposed rule. Approximately 60 individuals registered to attend the town hall meeting in person, while additional individuals listened over an open telephone line. We considered each applicant’s presentation made at the town hall meeting, as well as written comments submitted on the applications that were received by the due date of February 26, 2013, in our evaluation of the new technology addon payment applications for FY 2014 in the proposed rule. In response to the published notice and the new technology town hall meeting, commenters submitted and presented public comments that were unrelated to the substantial clinical improvement criterion in regard to the new VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 technology applications for FY 2014. We also received public comments in response to the proposed rule relating to topics such as marginal cost factors for new technology add-on payments, and the use of external data in determining the cost threshold and mapping new technologies to the appropriate MS– DRG. Because we did not request public comments nor propose to make any changes to any of the issues above, we are not summarizing these public comments nor responding to them in this final rule. We also live-streamed the town hall meeting over the Internet and received very positive feedback from the public on use of this option. In the FY 2014 IPPS/LTCH PPS proposed rule, we stated that we are considering no longer holding an in-person town hall meeting in Baltimore, MD, and instead holding a virtual town hall meeting that would be live-streamed on the Internet. We invited public comments on the possibility of holding a virtual town hall meeting instead of an in-person town hall meeting in Baltimore, MD. Comment: Some commenters expressed concern that limiting the town hall meeting to a virtual town hall meeting may give less of a voice to applicants. The commenters supported the option to observe the town hall meeting via live stream on line but recommended that we maintain the inperson option as well. Response: In the proposed rule, we noted that we received positive comments concerning the virtual town hall meeting. We expect that applicants would still be an integral part of the virtual town hall meeting as it is typical for applicants to make presentations at the annual town hall meeting about their technologies and why their technologies represent a substantial clinical improvement over existing technologies. However, we note that some applicants have either chosen not to make a presentation at the town hall meeting and/or to make all or part of their presentation by phone. Therefore, we do not believe a virtual town hall would offer less of a voice to applicants. The purpose of a virtual town hall meeting would be to continue to provide the information to the public in advance of the proposed rule while reducing the burden and providing greater access for all applicants and interested parties by eliminating the need to make special travel arrangements or by mitigating any other issue that would limit the public from attending the meeting in person. For example, in 2010, we postponed the town hall meeting due to inclement weather. We will consider the issues PO 00000 Frm 00078 Fmt 4701 Sfmt 4700 raised by these commenters as we consider whether to transition to a virtual town hall meeting. Further information regarding the mechanism we use to engage the public for future town hall meetings will be provided via public notice. 3. FY 2014 Status of Technologies Approved for FY 2013 Add-On Payments a. Auto Laser Interstitial Thermal Therapy (AutoLITTTM) System Monteris Medical submitted an application for new technology add-on payments for FY 2011 for the AutoLITTTM. AutoLITTTM is a minimally invasive, MRI-guided laser tipped catheter designed to destroy malignant brain tumors with interstitial thermal energy causing immediate coagulation and necrosis of diseased tissue. The technology can be identified by ICD–9–CM procedure codes 17.61 (Laser interstitial thermal therapy [LITT] of lesion or tissue of brain under guidance), and 17.62 (Laser interstitial thermal therapy [LITT] of lesion or tissue of head and neck under guidance), which became effective on October 1, 2009. The AutoLITTTM received a 510(k) FDA clearance in May 2009. The AutoLITTTM is indicated for use to necrotize or coagulate soft tissue through interstitial irradiation or thermal therapy in medicine and surgery in the discipline of neurosurgery with 1064 nm lasers. The AutoLITTTM may be used in patients with glioblastoma multiforme brain tumors. The applicant stated in its application and through supplemental information that, due to required updates, the technology was actually introduced to the market in December 2009. After evaluation of the newness, costs, and substantial clinical improvement criteria for new technology add-on payments for the AutoLITTTM and consideration of the public comments we received in response to the FY 2011 IPPS/LTCH PPS proposed rule, including the additional analysis of clinical data and supporting information submitted by the applicant, we approved the AutoLITTTM for new technology add-on payments for FY 2011. In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27935 through 27936), based on the original information provided by the applicant, we believed that the newness date for the AutoLITTTM began in December 2009. However, as summarized in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53345 through 53346), the applicant submitted a public E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations comment (in response to the FY 2013 proposed rule) demonstrating that the AutoLITTTM was first available on May 11, 2010. The manufacturer explained that some of the sterile disposable products were not released from quarantine until May 11, 2010, which prevented the AutoLITTTM from being used prior to May 11, 2010. Therefore, the manufacturer asserted that the first time the AutoLITTTM was available on the market was May 11, 2010. As a result of this information, we continued to make new technology add-on payments for the AutoLITTTM in FY 2013. (We refer readers to the FY 2013 IPPS/LTCH PPS final rule for a complete discussion on this issue). Consistent with the applicant’s clinical trial, the add-on payment is intended only for use of the device in cases of glioblastoma multiforme. Therefore, we limited the new technology add-on payment to cases involving the AutoLITTTM in MS–DRGs 025 (Craniotomy and Endovascular Intracranial Procedures with Major Complications or Comorbidities (MCC)), 026 (Craniotomy and Endovascular Intracranial Procedures with Complications or Comorbidities (CC)), and 027 (Craniotomy and Endovascular Intracranial Procedures without CC or MCC). Cases involving the AutoLITTTM that are eligible for the new technology add-on payment are identified by assignment to MS–DRGs 025, 026, and 027 with a procedure code of 17.61 (Laser interstitial thermotherapy of lesion or tissue of brain under guidance) in combination with a principal diagnosis code that begins with a prefix of 191 (Malignant neoplasm of brain). We note that using the procedure and diagnosis codes above and restricting the add-on payment to cases that map to MS–DRGs 025, 026, and 027 is consistent with information provided by the applicant, which demonstrated that cases of the AutoLITTTM would only map to MS–DRGs 025, 026, and 027. Procedure code 17.62 (Laser interstitial thermotherapy of lesion or tissue of head and neck under guidance) does not map to MS–DRGs 025, 026, or 027 under the GROUPER software and, therefore, is ineligible for new technology add-on payment. The average cost of the AutoLITTTM is reported as $10,600 per case. Under § 412.88(a)(2) of the regulations, new technology add-on payments are limited to the lesser of 50 percent of the average cost of the device or 50 percent of the costs in excess of the MS–DRG payment for the case. As a result, the maximum add-on payment for a case involving the AutoLITTTM is $5,300. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 The new technology add-on payment regulations provide that ‘‘a medical service or technology may be considered new within 2 or 3 years after the point at which data begin to become available reflecting the ICD–9–CM code assigned to the new service or technology’’ (§ 412.87(b)(2)). Our practice has been to begin and end new technology add-on payments on the basis of a fiscal year, and we have generally followed a guideline that uses a 6-month window before and after the start of the fiscal year to determine whether to extend the new technology add-on payment for an additional fiscal year. In general, we extend add-on payments for an additional year only if the 3-year anniversary date of the product’s entry on the market occurs in the latter half of the fiscal year (70 FR 47362). With regard to the newness criterion for the AutoLITTTM, as stated above, we consider the beginning of the newness period for the device to commence when the AutoLITTTM was first available on May 11, 2010. Because the 3-year anniversary date of the AutoLITTTM’s entry onto the market will occur on May 11, 2013, which is prior to the beginning of FY 2014, we proposed to discontinue new technology add-on payments for the AutoLITTTM for FY 2014. We invited public comments on this proposal. However, we did not receive any public comments in response to our invitation. Therefore, we are finalizing our proposal to discontinue new technology add-on payments for the AutoLITTTM for FY 2014. b. Glucarpidase (Trade Brand Voraxaze®) BTG International, Inc. submitted an application for new technology add-on payments for Glucarpidase (trade brand Voraxaze®) for FY 2013. Glucarpidase is used in the treatment of patients who have been diagnosed with toxic methotrexate (MTX) concentrations as of result of renal impairment. The administration of Glucarpidase causes a rapid and sustained reduction of toxic MTX concentrations. Voraxaze® was approved by the FDA on January 17, 2012. Beginning in 1993, certain patients could obtain expanded access for treatment use to Voraxaze® as an investigational drug. Since 2007, the applicant has been authorized to recover the costs of making Voraxaze® available through its expanded access program. We describe expanded access for treatment use of investigational drugs and authorization to recover certain costs of investigational drugs in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53346 through 53350). Voraxaze® was PO 00000 Frm 00079 Fmt 4701 Sfmt 4700 50573 available on the market in the United States as a commercial product to the larger population as of April 30, 2012. In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27936 through 27939), we expressed concerns about whether Voraxaze® could be considered new for FY 2013. After consideration of all of the public comments received, in the FY 2013 IPPS/LTCH PPS final rule, we stated that we considered Voraxaze® to be ‘‘new’’ as of April 30, 2012, which is the date of market availability. After evaluation of the newness, costs, and substantial clinical improvement criteria for new technology payments for Voraxaze® and consideration of the public comments we received in response to the FY 2013 IPPS/LTCH PPS proposed rule, we approved Voraxaze® for new technology add-on payments for FY 2013. Cases of Voraxaze® are identified with ICD–9– CM procedure code 00.95 (Injection or infusion of glucarpidase). The cost of Voraxaze® is $22,500 per vial. The applicant stated that an average of four vials is used per Medicare beneficiary. Therefore, the average cost per case for Voraxaze® is $90,000 ($22,500 × 4). Under § 412.88(a)(2), new technology add-on payments are limited to the lesser of 50 percent of the average cost of the technology or 50 percent of the costs in excess of the MS–DRG payment for the case. As a result, the maximum new technology add-on payment for Voraxaze® is $45,000 per case. As stated above, the new technology add-on payment regulations provide that ‘‘a medical service or technology may be considered new within 2 or 3 years after the point at which data begin to become available reflecting the ICD– 9–CM code assigned to the new service or technology’’ (§ 412.87(b)(2)). With regard to the newness criterion for Voraxaze®, as stated above, we consider the beginning of the newness period to commence when Voraxaze® was first available on the market on April 30, 2012. Because Voraxaze® is still within the 3-year newness period, we proposed to continue new technology add-on payments for this technology for FY 2014. We invited public comments on this proposal. Comment: Several commenters supported the continuation of making new technology add-on payments for Voraxaze® in FY 2014. Response: We appreciate the commenters’ support. After consideration of the public comments we received, we are finalizing our proposal to continue to make new technology add-on payments for Voraxaze® in FY 2014. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50574 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations c. DIFICIDTM (Fidaxomicin) Tablets Optimer Pharmaceuticals, Inc. submitted an application for new technology add-on payments for FY 2013 for the use of DIFICIDTM tablets. As indicated on the labeling submitted to the FDA, the applicant noted that Fidaxomicin is taken twice a day as a daily dosage (200 mg tablet twice daily = 400 mg per day) as an oral antibiotic. The applicant asserted that Fidaxomicin provides potent bactericidal activity against C. Diff., and moderate bactericidal activity against certain other gram-positive organisms, such as enterococcus and staphylococcus. Unlike other antibiotics used to treat CDAD, the applicant noted that the effects of Fidaxomicin preserve bacteroides organisms in the fecal flora. These are markers of normal anaerobic microflora. The applicant asserted that this helps prevent pathogen introduction or persistence, which potentially inhibits the re-emergence of C. Diff., and reduces the likelihood of overgrowths as a result of vancomycinresistant Enterococcus (VRE). Because of this narrow spectrum of activity, the applicant asserted that Fidaxomicin does not alter this native intestinal microflora. In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27939 through 27941), we expressed concern that DIFICIDTM may not be eligible for new technology add-on payments because eligibility is limited to new technologies associated with procedures described by ICD–9–CM codes. We further stated that drugs that are only taken orally (such as DIFICIDTM) may not be eligible for consideration for new technology addon payments because there is no procedure associated with these drugs and, therefore, no ICD–9–CM code(s). In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53350 through 53358), after consideration of the public comments received, we revised our policy to allow the use of National Drug Codes (NDCs) to identify oral medications that have no inpatient procedure for the purposes of new technology add-on payments. The revised policy is effective for payments for discharges occurring on or after October 1, 2012. We refer readers to the FY 2013 IPPS/LTCH PPS final rule for a complete discussion on this issue. With regard to the newness criterion, Fidaxomicin was approved by the FDA on May 27, 2011, for the treatment of CDAD in adult patients, 18 years of age and older. In the FY 2013 IPPS/LTCH PPS final rule, we established that the beginning of the newness period for this technology is its FDA approval date of May 27, 2011. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 After evaluation of the newness, costs, and substantial clinical improvement criteria for new technology add-on payments for DIFICIDTM and consideration of the public comments we received in response to the FY 2013 IPPS/LTCH PPS proposed rule, we approved DIFICIDTM for new technology add-on payments for FY 2013. Cases of DIFICIDTM are identified with ICD–9–CM diagnosis code 008.45 (Intestinal infection due to Clostridium difficile) in combination with NDC code 52015–0080–01. Providers must report the NDC on the 837i Health Care Claim Institutional form (in combination with ICD–9–CM diagnosis code 008.45) in order to receive the new technology add-on payment. According to the applicant, the cost of DIFICIDTM is $2,800 for a 10-day dosage. The average cost per day for DIFICIDTM is $280 ($2,800/10). Cases of DIFICIDTM within the inpatient setting typically incur an average dosage of 6.2 days, which results in an average cost per case for DIFICIDTM of $1,736 ($280 × 6.2). Under § 412.88(a)(2), new technology add-on payments are limited to the lesser of 50 percent of the average cost of the technology or 50 percent of the costs in excess of the MS–DRG payment for the case. As a result, the maximum new technology add-on payment for FY 2013 for DIFICIDTM is $868. As stated above, the new technology add-on payment regulations provide that ‘‘a medical service or technology may be considered new within 2 or 3 years after the point at which data begin to become available reflecting the ICD– 9–CM code assigned to the new service or technology’’ (§ 412.87(b)(2)). Our practice has been to begin and end new technology add-on payments on the basis of a fiscal year, and we have generally followed a guideline that uses a 6-month window before and after the start of the fiscal year to determine whether to extend the new technology add-on payment for an additional fiscal year. In general, we extend add-on payments for an additional year only if the 3-year anniversary date of the product’s entry on the market occurs in the latter half of the fiscal year (70 FR 47362). With regard to the newness criterion for DIFICIDTM, as stated above, we consider the beginning of the newness period to commence when DIFICIDTM was first approved by the FDA on May 27, 2011. Because the 3year anniversary date of DIFICIDTM will occur in the second half of the fiscal year (after April 1, 2014), we proposed to continue new technology add-on payments for DIFICIDTM for FY 2014. PO 00000 Frm 00080 Fmt 4701 Sfmt 4700 We invited public comments on this proposal. Comment: Several commenters supported the continuation of making new technology add-on payments for DIFICIDTM in FY 2014. In addition, the applicant submitted a comment stating that the new technology add-on payment for DIFICIDTM has expanded Medicare beneficiary access for DIFICIDTM in the acute care setting. The manufacturer also provided supplemental data demonstrating that cases of DIFICIDTM within the inpatient setting continue to incur an average dosage of 6.2 days. Based on this supplemental data, the manufacturer recommended that we continue to consider 6.2 days of inpatient administration of DIFICIDTM in its calculations for the cost criterion and the add-on payment. Response: We appreciate the commenters’ support. We agree that the supplemental data submitted by the manufacturer continues to support the use of 6.2 days for the cost criterion and the add-on payment. After consideration of the public comments we received, we are finalizing our proposal to continue to make new technology add-on payments for DIFICIDTM in FY 2014. d. Zenith® Fenestrated Abdominal Aortic Aneurysm (AAA) Endovascular Graft Cook® Medical submitted an application for new technology add-on payments for the Zenith® Fenestrated Abdominal Aortic Aneurysm (AAA) Endovascular Graft (Zenith® F. Graft) for FY 2013. The applicant stated that the current treatment for patients who have had an AAA is an endovascular graft. The applicant explained that the Zenith® F. Graft is an implantable device designed to treat patients who have an AAA and who are anatomically unsuitable for treatment with currently approved AAA endovascular grafts because of the length of the infrarenal aortic neck. The applicant noted that, currently, an AAA is treated through an open surgical repair or medical management for those patients not eligible for currently approved AAA endovascular grafts. With respect to newness, the applicant stated that FDA approval for the use of the Zenith® F. Graft was granted on April 4, 2012. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53360 through 53365), we stated that because the Zenith® F. Graft was approved by the FDA on April 4, 2012, we believed that the Zenith® F. Graft met the newness criterion as of that date. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations After evaluation of the newness, costs, and substantial clinical improvement criteria for new technology add-on payments for the Zenith® F. Graft and consideration of the public comments we received in response to the FY 2013 IPPS/LTCH PPS proposed rule, we approved the Zenith® F. Graft for new technology add-on payments for FY 2013. Cases involving the Zenith® F. Graft that are eligible for new technology add-on payments are identified by ICD–9–CM procedure code 39.78 (Endovascular implantation of branching or fenestrated graft(s) in aorta). In the application, the applicant provided a breakdown of the costs of the Zenith® F. Graft. The total cost of the Zenith® F. Graft utilizing bare metal (renal) alignment stents was $17,264. Of the $17,264 in costs for the Zenith® F. Graft, $921 are for components that are used in a standard Zenith AAA Endovascular Graft procedure. Because the costs for these components are already reflected within the MS–DRGs (and are no longer ‘‘new’’), in the FY 2013 IPPS/LTCH PPS final rule, we stated that we do not believe it is appropriate to include these costs in our calculation of the maximum cost to determine the maximum add-on payment for the Zenith® F. Graft. Therefore, the total maximum cost for the Zenith® F. Graft is $16,343 ($17,264¥$921). Under § 412.88(a)(2), new technology add-on payments are limited to the lesser of 50 percent of the average cost of the device or 50 percent of the costs in excess of the MS–DRG payment for the case. As a result, the maximum add-on payment for a case involving the Zenith® F. Graft is $8,171.50. As stated above, the new technology add-on payment regulations provide that ‘‘a medical service or technology may be considered new within 2 or 3 years after the point at which data begin to become available reflecting the ICD– 9–CM code assigned to the new service or technology’’ (§ 412.87(b)(2)). With regard to the newness criterion for the Zenith® F. Graft, as stated above, we consider the beginning of the newness period to commence when the Zenith® F. Graft was approved by the FDA on April 4, 2012. Because the Zenith® F. Graft is still within the 3-year newness period, we proposed to continue new technology add-on payments for this technology for FY 2014. We invited public comments on this proposal. Comment: Several commenters supported the continuation of new technology add-on payments for the Zenith® F. Graft in FY 2014. Response: We appreciate the commenters’ support. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 After consideration of the public comments we received, we are finalizing our proposal to continue to make new technology add-on payments for the Zenith® F. Graft in FY 2014. 4. FY 2014 Applications for New Technology Add-On Payments We received five applications for new technology add-on payments for FY 2014. In accordance with the regulations under § 412.87(c), applicants for new technology add-on payments must have FDA approval by July 1 of each year prior to the beginning of the fiscal year that the application is being considered. Two of the five technologies for which we received applications for new technology add-on payments, the NeuroPace Responsive Neurostimulator System (RNS) System and the Abbott Vascular MitraClip® System, did not receive FDA approval by the July 1 deadline. Therefore, these applications are not eligible for consideration for new technology add-on payments for FY 2014. In addition, the applicant for the NeuroPace RNS System withdrew its application prior to publication of this final rule. We note that we did receive public comments concerning these two applications. However, as stated above, because these two technologies did not receive FDA approval by the July 1 deadline and, therefore, cannot be considered for new technology add-on payments for FY 2014, we are not summarizing or responding to these comments in this final rule. We refer readers to the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27543 through 27545 and 27547 through 27552) for summaries of these two applications. A discussion of the remaining three applications is presented below. a. KcentraTM CSL Behring submitted an application for new technology add-on payments for KcentraTM for FY 2014. KcentraTM is a replacement therapy for fresh frozen plasma (FFP) for patients with an acquired coagulation factor deficiency due to warfarin and who are experiencing a severe bleed. KcentraTM contains the Vitamin K dependent coagulation factors II, VII, IX and X, together known as the prothrombin complex, and antithrombotic proteins C and S. Factor IX is the lead factor for the potency of the preparation. The product is a heat-treated, non-activated, virus filtered and lyophilized plasma protein concentrate made from pooled human plasma. KcentraTM is available as a lyophilized powder that needs to be reconstituted with sterile water prior to administration via intravenous infusion. The product is dosed based on Factor IX PO 00000 Frm 00081 Fmt 4701 Sfmt 4700 50575 units. Concurrent Vitamin K treatment is recommended to maintain blood clotting factor levels once the effects of KcentraTM have diminished. KcentraTM was approved by the FDA on April 29, 2013. The applicant applied for a new ICD–9–CM procedure code for consideration at the March 5, 2013 ICD–9–CM Coordination and Maintenance Committee Meeting. In this final rule, we have approved new ICD–9–CM procedure code 00.96 (Infusion of 4-Factor Prothrombrin Complex Concentrate) which uniquely identifies KcentraTM. More information on this request and approval can be found on the CMS Web site at: https:// cms.gov/Medicare/Coding/ ICD9ProviderDiagnosticCodes/ICD-9CM–C-and-M-Meeting-Materials-Items/ 2013-03-05-MeetingMaterials.html and https://cms.hhs.gov/Medicare/Coding/ ICD9ProviderDiagnosticCodes/ addendum.html. In the FY 2014 IPPS/LTCH PPS proposed rule, we noted that we were concerned that KcentraTM may be substantially similar to FFP and/or Vitamin K therapy. If so, KcentraTM would not meet the newness criterion because costs associated with FFP and/ or Vitamin K therapy are already reflected within the MS–DRGs. In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43813 through 43814), we established criteria for evaluating whether a new technology is substantial similar to an existing technology, specifically: (1) Whether a product uses the same or a similar mechanism of action to achieve a therapeutic outcome; (2) whether a product is assigned to the same or a different MS–DRG; and (3) whether the new use of the technology involves the treatment of the same or similar type of disease and the same or similar patient population. If a technology meets all three of the criteria above, it would be considered substantially similar to an existing technology and would not be considered ‘‘new’’ for purposes of new technology add-on payments. In evaluating the first criterion, we stated in the FY 2014 IPPS/LTCH PPS proposed rule that we believe that both FFP and KcentraTM use the same mechanism of action of Vitamin K dependent coagulation to reverse the anti-coagulation effects of warfarin. With respect to the second criterion, we believe that cases involving both FFP and KcentraTM would be assigned to the same MS–DRGs. Finally, with respect to the third criterion, we stated that we believe that both technologies treat the same condition and patient population. Specifically, the patient population for both KcentraTM and FFP are patients E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50576 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations with an iatrogenically acquired coagulation factor deficiency due to warfarin and who are experiencing severe bleeding. Delay of treatment of these patients can lead to an increase in complications as well as an increase of the severity of the blood loss. Although FFP needs to thaw before it can be administered and can delay treatment compared to KcentraTM, which can be used in a more timely manner, we stated that we believe that both KcentraTM and FFP treat the same patient population. Based on evaluation of the similarity criteria, we stated that it appears that KcentraTM is substantially similar to FFP with regard to being able to reverse the Warfarin effect of blood coagulation. Therefore, we stated in the proposed rule that KcentraTM may not be considered ‘‘new’’ for purposes of new technology add-on payments. We invited public comments regarding whether KcentraTM is substantially similar to existing technologies and whether KcentraTM meets the newness criterion. Comment: One commenter, the applicant and manufacturer, submitted a public comment stating that KcentraTM meets the newness criterion because it was approved by the FDA and no data on the product will be available in the DRG payment system until FY 2014. In addition, the applicant asserted that because a new ICD–9–CM procedure code for KcentraTM was created that will be effective October 1, 2013, KcentraTM fulfills the regulatory requirements. Response: As discussed in the proposed rule, because KcentraTM may be substantially similar to FFP, it is possible that the costs associated with KcentraTM may already be reflected in the MS–DRGs. Below we summarize the applicant’s comments and our response concerning substantial similarity. With regard to considering the technology ‘‘new’’ due to the issuance of a new ICD–9–CM procedure code, in the FY 2005 IPPS final rule (69 FR 49002), we discussed how, generally, we use the FDA approval as the indicator of the time when a technology begins to become available on the market and data reflecting the costs of the technology begin to become available for recalibration of the DRGs. In some specific circumstances, we have recognized a date later than the FDA approval as the appropriate starting point for the 2-year to 3-year period. Using the ICD–9–CM code alone is not an appropriate test of newness because technologies that are new to the market are automatically placed into the closest ICD–9–CM category when they first become available on the market, unless VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 the manufacturer requests the assignment of a new ICD–9–CM code because existing codes do not adequately reflect or describe the medical service or device. We refer readers to the FY 2005 IPPS final rule for a complete discussion concerning the issuance of an ICD–9–CM code and the newness criterion. Comment: The manufacturer submitted a public comment stating that KcentraTM has a different mechanism of action than FFP in the same way that we determined that the AutoLITTTM had a different mechanism of action than the Visual-ase in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50144). Response: The commenter did not provide any details regarding the perceived similarities between the AutoLITTTM and the KcentraTM applications in correlation with the comparison presented in its comment. For example, in the FY 2011 IPPS/LTCH PPS final rule, we determined that the AutoLITTTM was different than the Visual-ase due to its side-firing laser versus elliptical-firing. In addition, the AutoLITTTM contained a proprietary probe cooling system that removes heat from tissue not directly in the path of the laser beam, while the Visual-ase did not contain this cooling system. Therefore, without more information detailing the comparable differences in mechanism of action and/or the perceived similarities between these two applications, we are unable to provide further response to the comment. Comment: The manufacturer submitted a public comment asserting that KcentraTM has a different mechanism of action than FFP. The commenter explained that KcentraTM’s mechanism of action for Vitamin K antagonist (VKA) reversal is different from FFP. KcentraTM is purified, heat treated, nanofiltered, non-activated four factor prothorbin complex concentrate. It contains coagulation factors (II, VII, IX, X) and anti-coagulation proteins (C and S) that are 25 times more concentrated than plasma. KcentraTM provides a simple and rapid repletion within 30 minutes. Unlike FPP, it does not require ABO typing as it does not contain ABO antibodies, thereby reducing the risk of a transfusion reaction. The absence of additional proteins removes the risk of transfusion related acute lung injury or TRALI. Conversely, the manufacturer stated that FFP is isolated from the whole blood by the removal of cellular components (erythrocytes, granulocytes, lymphocytes and platelets), therefore it contains all the protein components in blood including coagulation proteins PO 00000 Frm 00082 Fmt 4701 Sfmt 4700 among others at a physiologic level of 1 IO/ml. In addition, FFP is a non-specific therapy which does not achieve the goal of repleting all coagulation factors to therapeutic levels. The manufacturer explained that factors II and X and Protein C remain below 50 percent at 3 hours. The manufacturer maintained that the reason for lack of correction of these factors is unclear and suggests that plasma cannot provide simple repletion or that there is another mechanism resulting in a plateau of some of the factors at a sub-therapeutic level. In contrast, the manufacturer noted that KcentraTM increases all coagulation factors (II, VII, IX, X) and anticoagulation proteins (C and S). The manufacturer added that modest reversal of VKA is also reflected in the slow return to normal of the International Normalized Ratio (INR). The manufacturer compared FFP to KcentraTM and noted that early INR reduction was achieved in 62 percent of KcentraTM patients versus less than 10 percent of FFP patients. The manufacturer also contended that the different method of production of KcentraTM contributes to its distinct mechanism of action by providing a highly specific, highly concentrated product available on an urgent basis. The manufacturer explained that KcentraTM’s blood factor constituents are 25 more times concentrated than those contained in a standard unit of FFP allowing for markedly decrease of infusion time and infusion of smaller volumes compared to equivalent doses of FFP; KcentraTM provides standardized and known concentrations of factors compared to variable concentrations for FFP; KcentraTM is a targeted therapy replacing only what is deficient in vitamin K antagonists reversal resulting in rapid reversal without impact of nonspecific protein content; KcentraTM does not require ABO typing compared to FFP; and KcentraTM is lyophilized powder for reconstitution and is stable for up to 36 months at room temperature making it ideal for emergency use compared to FFP. Response: We appreciate the details provided in the manufacturer’s comment that reference the different reasons why KcentraTM uses a different mechanism of action than FFP. We appreciate the issues that the manufacturer raises that KcentraTM provides a simple and rapid repletion relative to FFP and reduces the risk of a transfusion reaction relative to FFP because it does not contain ABO or RH antibodies, which require blood typing prior to administration. However, E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations despite the arguments presented in the public comment, we remain concerned that KcentraTM still uses the same mechanism of action as FFP because they both use coagulation factors and proteins to improve blood coagulation, in the context of an acquired coagulation deficiency. Comment: The manufacturer also submitted a public comment asserting that KcentraTM provides a therapeutic option for new patient populations and patient populations not recommended for FFP. The manufacturer listed the following patient populations that would be eligible to use KcentraTM but not FFP: • ‘‘Jehovah’s Witnesses: Certain religious groups’ beliefs prevent patients from accepting transfusion of whole blood or its primary components which includes plasma. Fractionated factor concentrates are considered ‘secondary components’, and thus they may be acceptable to some followers’’ (with these beliefs who would otherwise not be eligible for FFP). • Immunoglobulin A (IgA) deficient patients can have severe anaphylactoid reactions due to the formation of antiIgA antibodies. Plasma contains immunoglobulins and plasma in amounts as small as 10 ml, which can result in severe reaction. KcentraTM provides a treatment option for these patients who were not eligible for FFP. • Rapid reversal of bleeding is important for patients with intracranial hemorrhaging (ICH) in order to restrict hematoma enlargement and allow timely neurosurgical intervention. The manufacturer believed that KcentraTM provides a therapy for this population because plasma is not ideal because Warfarin increases the risk of ICH, which could lead to stroke. The manufacturer cited a study noting that intervention for ICH within the first hour may improve outcomes and protocol driven treatment can facilitate timely and efficient care. The manufacturer also noted that for patients receiving VKA therapy with an INR less than 1.4, protocol recommends administering agents to normalize the INR within minutes; KcentraTM provides a readily available treatment compared to FFP which takes time to thaw, type the patient and then infuse. • The manufacturer also noted that the most significant limitations of plasma are the volume and time required to increase factor levels. Because KcentraTM is concentrated, schemes can be designed to achieve targeted factor level for patients, especially those with cardiac impairment, rather than a maximum tolerated volume. The manufacturer VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 further explained that plasma volume, rate of infusion, left ventricular dysfunction and VKA reversal have been identified as risk factors for the development of Transfusion Associated Circulatory Overload (TACO). The manufacturer cited data from its clinical trial that demonstrated that plasma should not be administered to patients with cardiac impairment or risk of cardiac overload. The manufacturer asserted that KcentraTM provides a therapy for patients with cardiac impairment for whom plasma would not be ideal. • The manufacturer explained that given the logistical issues of managing, typing and storing supplies of plasma (fresh/thawed) as well as the limited supply of AB universal blood plasma, KcentraTM provides a new treatment option for hospitals, regardless of size (small, rural, community) or trauma level, to handle urgent warfarin reversals. Plasma requires blood-type matching, thawing and is often located away from the point of care. The applicant cited a study conducted at a large, urban, tertiary care facility, where the median time from time of diagnosis to plasma infusion was 90 minutes (Goldstein STROKE 2006). This did not include time to infuse the plasma, which can take hours. The manufacturer further explained that even at leading hospitals, the logistics around obtaining units of plasma for urgent transfusions is difficult, making good outcomes difficult to obtain (Goldstein STROKE 2006). Smaller hospitals without the resources of a Level 1 trauma center find plasma even more difficult to manage resulting in under-treatment and slow treatment (Menzin Thromb and Hemostasis 2012). Particularly for smaller, community, rural, and hospitals less than Level One Trauma Centers, KcentraTM represents the best opportunity for providing quality care to patients with Warfarin-related bleeding. Response: We agree that KcentraTM may be used in a patient population that is experiencing an acquired coagulation factor deficiency due to Warfarin and who are experiencing a severe bleed currently but are ineligible for FFP, particularly for use by IgA deficient patients and other patient populations that have no other treatment option to resolve severe bleeding in the context of an acquired Vitamin K deficiency. In addition, as mentioned above, FFP is limited because it requires special storage conditions while KcentraTM is stable for up to 36 months at room temperature thus allowing hospitals that otherwise would not have access to FFP (for example, small rural hospitals as discussed by the applicant in its PO 00000 Frm 00083 Fmt 4701 Sfmt 4700 50577 comments) to keep a supply of KcentraTM and treat patients who would possibly have no access to FFP. We note that, FFP is considered perishable and can be scarce by nature (due to production and other market limitations) thus making some hospitals unable to store FFP, which limits access to certain patient populations in certain locations. Therefore, we believe that KcentraTM provides a therapeutic option for a new patient population and is not substantially similar to FFP. Also, as stated above, we give credence to the information presented by the manufacturer in its comment that KcentraTM provides a simple and rapid repletion relative to FFP and reduces the risk of a transfusion reaction relative to FFP because it does not contain ABO antibodies and does not require ABO typing. Because KcentraTM is not substantially similar to FFP, we believe that KcentraTM meets the newness criterion. Comment: One commenter recommended that CMS eliminate the substantial similarity criterion. The commenter believed that there are several benefits to this proposal including eliminating the risk that patients would be denied access to new therapies that provide substantial clinical improvement, improving clarity and predictability of the add-on rules and conforming to the statutory and regulatory provisions governing add-on payments, which do not mention substantial similarity and allowing technologies that enter the market subsequent to similar products receiving the add-on payment to be eligible for the add-on payment as well and not giving an advantage to the first product on the market representing a specific technology. Response: We appreciate the commenter’s suggestion. However, we note that we did not propose to eliminate the substantial similarity criterion in the proposed rule. In regard to the commenter’s assessment of the benefits of eliminating the substantial similarity criterion, we refer readers to the FY 2006 IPPS final rule (70 FR 47351) and the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43813 and 43814), where we explain our policy and reasoning regarding substantial similarity in detail. According to the applicant, the technology is eligible to be used across all MS–DRGs. To demonstrate that it meets the cost criterion, the applicant searched the FY 2011 MedPAR file (across all MS DRGs) for cases reporting a primary or secondary diagnosis of E934.2 (Adverse events due to anticoagulants), V58.61 (Long term E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50578 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations (current) use of anticoagulants), or 964.2 (Poisoning by anticoagulants) in combination with procedure code 99.07 (Transfusion of the serum). The applicant believed that this combination identified cases that suggest the use of a Vitamin K antagonist therapy as well as a major bleed. The applicant found 66,749 cases across all MS–DRGs and noted that 18 percent of all cases would map to MS– DRGs 377 (Gastrointestinal Hemorrhage with MCC), 378 (Gastrointestinal Hemorrhage with CC), and 379 (Gastrointestinal Hemorrhage without CC/MCC), while the top 20 MS–DRGs would account for 41 percent of all cases. The applicant standardized charges (for all 66,749 cases) and removed charges for FFP therapy, which equated to a case-weighted average standardized charge per case of $49,748. The applicant calculated a caseweighted threshold of $46,068 across all MS–DRGs. The applicant asserted that the average case-weighted standardized charge per case without including charges for KcentraTM exceeded the case-weighted threshold of $46,068. Therefore, the applicant maintained that it meets the cost criterion. We invited public comments regarding whether KcentraTM meets the cost criterion, particularly with regard to the assumptions and methodology used in the applicant’s analysis. However, we did not receive any public comments concerning the cost criterion and, therefore, we believe that KcentraTM meets the cost criterion. With regard to substantial clinical improvement, according to the applicant, KcentraTM is the first prothrombin complex concentrate (PCC) that will be FDA-approved for rapid Warfarin reversal in patients experiencing an acute major bleed. The applicant maintained that KcentraTM represents a substantial clinical improvement in the treatment of patients with acute severe bleeding who require immediate reversal of their VKA therapy by (1) providing a rapid, beneficial resolution of the patient’s blood clotting factor deficiency, (2) decreasing the risk of exposure to blood borne pathogens, and (3) reducing the rate of transfusion-associated complications. The applicant cited its pivotal study (a randomized clinical trial) 3 and noted that KcentraTM was noninferior in its ability to reverse the effects of Warfarin 3 Sarode R, et al., Efficacy and Safety of a Four Factor Prothrombin Complex Concentrate in Patients on Vitamin K Antagonists Presenting with Major Bleeding: A Randomized, Plasma Controlled, Phase IIIb Study. Circulation. Submitted October 31, 2012. Copy to be provided upon acceptance. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 to a target INR of less than or equal to 1.3 within 30 minutes in 62 percent of patients compared to less than 10 percent success for plasma. Also, serum levels of the key coagulant and antithrombotic proteins were normalized in less than an hour with KcentraTM, but these levels remained depressed with plasma for hours after dosing with FFP. The applicant also explained that KcentraTM undergoes a dedicated pathogen detection and removal process as well as purification steps to produce its specific components and plasma does not. The applicant asserted that this drastically reduces the risk of transmitting both known and unknown blood borne pathogens. The applicant cited a retrospective analysis of scientific publications 4 on the use of KcentraTM in the European Union (EU), including the pharmacovigilance database from 1996 through 2008. The applicant noted that an estimated 350,000 patients have been treated with KcentraTM (known as Beriplex in the EU) with no documented cases of viral transmission. The applicant also stated that, in the United States, blood suppliers follow a strict set of regulations for screening and testing the blood supply, but these tests and donor questionnaires do not account for emerging pathogens that could contaminate the blood supply. The applicant explained that parasitic infections and bacterial diseases (such as babesiosis and Chaga’s disease) have already been documented in U.S. patients as a result of FFP transfusion. However, there is no screening test to date for some of these parasitic infections and diseases. The applicant believed that the multi-step manufacturing process for KcentraTM, including heat treatment and nanofiltration, reduces the risk of transmitting such infections and diseases. The applicant also noted that another benefit of KcentraTM is the ability to rapidly prepare and administer the product in an emergency situation. In addition to the benefit of room temperature storage, KcentraTM can be rapidly reconstituted and administered. In the clinical study, the applicant found that the average administration time for KcentraTM was less than 30 minutes. However, the applicant stated, other treatments such as FFP and intravenous Vitamin K therapies act more slowly, and FFP can be difficult to use. The applicant explained that FFP 4 Hanke A, et al., Efficacy and Long-Term Safety of a Pasteurized Nanofiltrated Prothrombin Complex Concentrate (BERIPLEX® P/N), 2009, J Thromb Haemost, Vol. 7 (Suppl.2) PP–WE–697. PO 00000 Frm 00084 Fmt 4701 Sfmt 4700 therapy requires blood-type matching, usually requires thawing, and is often located away from the point of care. The applicant also cited a study 5 that demonstrated the median time from time of diagnosis to plasma infusion was 90 minutes, which did not include the time to infuse the FFP which can take hours. The applicant further noted that essential blood coagulation factors in one vial of KcentraTM are approximately 25 times more concentrated than those in the equivalent plasma dose. According to the applicant, this translated to an infusion volume that was 87 percent greater in the FFP group of patients as seen in the pivotal study. The applicant explained that high transfusion volumes of treatments such as FFP therapy can lead to TACO. According to the applicant, when TACO occurs, acute left ventricular failure may occur resulting in shortness of breath, tachypnea (rapid breathing), and result in other harmful effects. Finally, the applicant noted that KcentraTM is recommended as the standard of care in the new guidelines issued by the American College of Chest Physicians (ACCP) for patients needing emergent Warfarin reversal. In addition, the applicant noted that the American Association of Blood Banks (AABB) stated that plasma should no longer be used to reverse Warfarin in bleeding patients when specific factor concentrates are available. In conclusion, the applicant maintained that KcentraTM represents a substantial clinical improvement over existing technologies. We invited public comments regarding whether KcentraTM meets the substantial clinical improvement criterion. Comment: Several commenters supported making new technology addon payments for KcentraTM. One commenter stated that KcentraTM is a new, significantly more rapid way to provide substantial improvement over existing technologies. The commenter noted that compared to FFP, KcentraTM is concentrated and includes natural anticoagulants. In addition, the commenter noted that KcentraTM is more targeted than FFP because it does not contain the full range of proteins and other molecules found in FFP and believed that this targeted therapy provides high levels of coagulation factors at a faster rate and a more rapid correction of deficiencies induced by Warfarin. The commenter further stated 5 Goldstein, Joshua N., et al., Timing of Fresh Frozen Plasma Administration and Rapid Correction of Coagulopathy in Warfarin-Related Intracerebral Hemorrhage, Stroke 37.1 (2006):151– 155. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations that KcentraTM can be infused in minutes compared to the hours needed to infuse FFP. The commenter expressed the opinion that this saved time can be critical when treating patients in a trauma or intensive care setting, including patients requiring urgent surgical intervention. The commenter also noted that Vitamin K therapy requires new factor synthesis/ modification, which is dependent on optimal organ function, which in the context of patient injury or disease, may occur only after substantial delay, while KcentraTM provides immediate functioning factors. The commenter also noted that a common use of FFP and/or Vitamin K is sometimes a prophylactic measure for Warfarin reversal prior to an invasive procedure. The commenter believes that once KcentraTM is widely available, it will likely be used in a broader subset of patients than FFP and/or Vitamin K. The commenter finally noted that another benefit of KcentraTM is the low transfusion volume compared to FFP which decreases the risk of exposure to TACO. Another commenter noted that FFP has not been prospectively studied in controlled randomized trials for urgent Warfarin reversal while current guidelines for Vitamin K antagonist reversal recommend the use of 4-factor PCC over plasma. Response: We agree that KcentraTM represents a substantial clinical improvement over existing technologies. Specifically, KcentraTM provides (1) a rapid, beneficial resolution of the patient’s blood clotting factor deficiency, (2) decreases the risk of exposure to blood borne pathogens, and (3) reduces the rate of transfusionassociated complications. KcentraTM meets all of the new technology add-on payment policy criteria. Therefore, we are approving KcentraTM for new technology add-on payments in FY 2014. Cases involving KcentraTM that are eligible for new technology add-on payments will be identified by ICD–9–CM procedure code 00.96. In the application, the applicant estimated that the average Medicare beneficiary would require an average dosage of 2500 International Units (IU). Vials contain 500 IU at a cost of $635 per vial. Therefore, cases of KcentraTM would incur an average cost per case of $3,175 ($635 × 5). Under § 412.88(a)(2), new technology add-on payments are limited to the lesser of 50 percent of the average cost of the technology or 50 percent of the costs in excess of the MS– DRG payment for the case. As a result, the maximum add-on payment for a case of KcentraTM is $1,587.50. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 In the FY 2014 IPPS/LTCH PPS proposed rule, we noted that, if KcentraTM were to be approved for new technology add-on payments, we did not believe such payments would be available with respect to discharges for which the hospital receives an add-on payment for blood clotting factor administered to a Medicare beneficiary with hemophilia who is a hospital inpatient. Under section 1886(d)(1)(A)(iii) of the Act, the national adjusted DRG prospective payment rate is ‘‘the amount of the payment with respect to the operating costs of inpatient hospital services (as defined in subsection (a)(4) of this section)’’ for discharges on or after April 1, 1988. Section 1886(a)(4) of the Act excludes from the term ‘‘operating costs of inpatient hospital services’’ the costs with respect to administering blood clotting factors to individuals with hemophilia. The costs of administering blood clotting factor to Medicare beneficiaries who have hemophilia and are hospital inpatients are paid separately from the IPPS. (For information on how the blood clotting factor add-on payment is made, we refer readers to section 20.7.3 of Chapter Three of the Medicare Claims Processing Manual, which can be downloaded from the CMS Web site at: https://cms.gov/Regulations-andGuidance/Guidance/Manuals/ Downloads/clm104c03.pdf.) In addition, we stated that if KcentraTM is approved by the FDA as a blood clotting factor, we believe that it may be eligible for blood clotting factor add-on payments when administered to Medicare beneficiaries with hemophilia. We would make an add-on payment for KcentraTM for such discharges in accordance with our policy for payment of blood clotting factor, and it would be excluded from the operating costs of inpatient hospital services as set forth in section 1886(a)(4) of the Act. Section 1886(d)(5)(K)(i) of the Act requires the Secretary to ‘‘establish a mechanism to recognize the costs of new medical services and technologies under the payment system established under this subsection’’ beginning with discharges on or after October 1, 2001. We believe that it is reasonable to interpret this requirement to mean that the payment mechanism established by the Secretary recognizes only costs for those items that would otherwise be paid based on the prospective payment system (that is, ‘‘the payment system established under this subsection’’). As noted above, under section 1886(d)(1)(A)(iii) of the Act, the national adjusted DRG prospective payment rate PO 00000 Frm 00085 Fmt 4701 Sfmt 4700 50579 is the amount of payment for the operating costs of inpatient hospital services, as defined in section 1886(a)(4) of the Act, for discharges on or after April 1, 1988. We understand this to mean that a new medical service or technology must be an operating cost of inpatient hospital services paid based on the prospective payment system, and not excluded from such costs, in order to be eligible for the new technology add-on payment. We point out that new technology add-on payments are based on the operating costs per case relative to the prospective payment rate as described in § 412.88. Therefore, we believe that new technology add-on payments are appropriate only when the new technology is an operating cost of inpatient hospital services and are not appropriate when the new technology is excluded from such costs. We stated that if KcentraTM were to be approved for new technology add-on payments, we believe that hospitals may only receive that add-on payment for discharges where KcentraTM is an operating cost of inpatient hospital services. In other words, we do not believe that a hospital could be eligible to receive the new technology add-on payment when it is administering KcentraTM in treating a Medicare beneficiary who has hemophilia. In those instances, KcentraTM is specifically excluded from the operating costs of inpatient hospital services in accordance with section 1886(a)(4) of the Act and paid separately from the IPPS. However, when a hospital administers KcentraTM to a Medicare beneficiary who does not have hemophilia, the hospital could be eligible for a new technology add-on payment because KcentraTM would not be excluded from the operating costs of inpatient hospital services. Therefore, we do not believe that discharges where the hospital receives a blood clotting factor add-on payment are eligible for a new technology add-on payment for the blood clotting factor. To summarize, we believe that it would be inappropriate to make an addon payment for new technology for a blood clotting factor when a blood clotting factor add-on payment has been made. We invited public comments on our proposal to only make new technology add-on payments for KcentraTM in cases when it is included in the operating costs of inpatient hospital services (that is, when no addon payment is made for blood clotting factor). We did not receive any public comments concerning this proposal. Because we are approving new technology add-on payments for KcentraTM, we are finalizing our E:\FR\FM\19AUR2.SGM 19AUR2 50580 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 proposal not to make a new technology add-on payment for cases of KcentrawTM in treating a Medicare beneficiary who has hemophilia. We refer readers to Chapter three, section 20.7.3 of the Medicare Claims Processing Manual for a complete discussion on when a blood clotting factor add-on payment is made. The manual can be downloaded from the CMS Web site at: https://www.cms.gov/ Regulations-and-Guidance/Guidance/ Manuals/Downloads/clm104c03.pdf. b. Argus® II Retinal Prosthesis System Second Sight Medical Products, Inc. submitted an application for new technology add-on payments for the Argus® II Retinal Prosthesis System (Argus® II System) for FY 2014. The Argus® II System is an active implantable medical device that is intended to provide electrical stimulation of the retina to induce visual perception in patients who are profoundly blind due to retinitis pigmentosa (RP). These patients have bare or no light perception in both eyes. The system employs electrical signals to bypass dead photo-receptor cells and stimulate the overlying neurons according to a real-time video signal that is wirelessly transmitted from an externally worn video camera. The Argus® II implant is intended to be implanted in a single eye, typically the worse-seeing eye. Currently, bilateral implants are not intended for this technology. According to the applicant, the surgical implant procedure takes approximately 4 hours and is performed under general anesthesia. The Argus® II System consists of three primary components: (1) An implant which is an epiretinal prosthesis that is fully implanted on and in the eye (that is, there are no percutaneous leads); (2) external components worn by the user; and (3) a ‘‘fitting’’ system for the clinician that is periodically used to perform diagnostic tests with the system and to custom-program the external unit for use by the patient. We describe these components more fully below. • Implant: The retinal prosthesis implant is responsible for receiving information from the external components of the system and electrically stimulating the retina to induce visual perception. The retinal implant consists of: (a) A receiving coil for receiving information and power from the external components of the Argus® II System; (b) electronics to drive stimulation of the electrodes; and (c) an electrode array. The receiving coil and electronics are secured to the outside of the eye using a standard scleral band and sutures, while the VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 electrode array is secured to the surface of the retina inside the eye by a retinal tack. A cable, which passes through the eye wall, connects the electronics to the electrode array. A pericardial graft is placed over the extra-ocular portion on the outside of the eye. • External Components: The implant receives power and data commands wirelessly from an external unit of components, which include the Argus II Glasses and Video Processing Unit (VPU). A small lightweight video camera and transmitting coil are mounted on the glasses. The telemetry coils and radio-frequency system are mounted on the temple arm of the glasses for transmitting data from the VPU to the implant. The glasses are connected to the VPU by a cable. This VPU is worn by the patient, typically on a belt or a strap, and is used to process the images from the video camera and convert the images into electrical stimulation commands, which are transmitted wirelessly to the implant. • ‘‘Fitting System’’: To be able to use the Argus® II System, a patient’s VPU needs to be custom-programmed. This process, which the applicant called ‘‘fitting’’, occurs in the hospital/clinic shortly after the implant surgery and then periodically thereafter as needed. The clinician/physician also uses the ‘‘Fitting System’’ to run diagnostic tests (for example, to obtain electrode and impedance waveform measurements or to check the radio-frequency link between the implant and external unit). This ‘‘Fitting System’’ can also be connected to a ‘‘Psychophysical Test System’’ to evaluate patients’ performance with the Argus® II System on an ongoing basis. These three components work together to stimulate the retina and allow a patient to perceive phosphenes (spots of light), which they then need to learn to interpret. While using the Argus® II System, the video camera on the patient-worn glasses captures a video image. The video camera signal is sent to the VPU, which processes the video camera image and transforms it into electrical stimulation patterns. The electrical stimulation data are then sent to a transmitter coil mounted on the glasses. The transmitter coil sends both data and power via radio-frequency (RF) telemetry to the implanted retinal prosthesis. The implant receives the RF commands and delivers stimulation to the retina via an array of electrodes that is secured to the retina with a retinal tack. In patients with RP, the photoreceptor cells in the retina, which normally transduce incoming light into an electro-chemical signal, have lost most PO 00000 Frm 00086 Fmt 4701 Sfmt 4700 of their function. The stimulation pulses delivered to the retina via the electrode array of the Argus® II Retinal Prosthesis System are intended to mimic the function of these degenerated photoreceptors cells. These pulses induce cellular responses in the remaining, viable retinal nerve cells that travel through the optic nerve to the visual cortex where they are perceived as phosphenes (spots of light). Patients learn to interpret the visual patterns produced by these phosphenes. With respect to the newness criterion, according to the applicant, the FDA designated the Argus® II System a Humanitarian Use Device in May 2009 (HUD designation #09–0216). The applicant submitted a Humanitarian Device Exemption (HDE) application (#H110002) to the FDA in May 2011 to obtain market approval for the Argus® II System. The HDE was referred to the Ophthalmic Devices Panel of the FDA’s Medical Devices Advisory Committee for review and recommendation. At the Panel’s meeting held on September 28, 2012, the Panel voted 19 to 0 that the probable benefits of the Argus® II System outweigh the risks of the system for the proposed indication for use. The applicant received the HDE approval from the FDA on February 14, 2013. Currently there are no other approved treatments for patients with severe to profound RP. The Argus® II System has an IDE number of G050001 and is a Class III device. The applicant applied for three new ICD–9–CM procedure codes for consideration at the March 5, 2013 ICD–9–CM Coordination and Maintenance Committee meeting. For this final rule, we have approved new ICD–9–CM procedure code 14.81 (Implantation of Epiretinal Visual Prosthesis) which uniquely identifies the Argus ®II System. The other two codes approved by CMS are for removal, revision or replacement of the device. More information on these codes can be found on the CMS Web site at: https:// cms.gov/Medicare/Coding/ ICD9ProviderDiagnosticCodes/ICD–9– CM–C-and-M-Meeting-Materials-Items/ 2013–03–05-MeetingMaterials.html. We invited public comments on whether the Argus® II System meets the newness criterion. Comment: Many commenters expressed their opinion that the Argus® II System meets the newness criterion. The commenters noted that this technology is the first available treatment approved by the FDA for profoundly blind RP patients, pointing out that it ‘‘enables patients to interpret the visual patterns and gain independence and mobility,’’ which has not been possible previously for these E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations patients with any other treatment modality. The commenters also noted that the Argus® II System has not been sold in the United States at this time. Response: We appreciate the commenters’ support. We agree that the Argus®II System meets the newness criterion based on its FDA approval date and due to the fact that we are unaware of any other existing technologies that are substantially similar to it that would allow Medicare beneficiaries with severe to profound Retinitis Pigmentosa (RP) who have no vision to have some functional vision. With regard to the cost criterion, the applicant identified all discharges from claims in the FY 2011 MedPAR file for MS–DRGs 116 (Intraocular Procedures with CC/MCC) and 117 (Intraocular Procedures without CC/MCC) with the presence of ICD–9–CM procedure code 14.73 (Anterior vitrectomy), or 14.74 (Posterior vitrectomy). (We note that because no procedure code previously existed for this technology, these cases would include patients that are not eligible for or would not otherwise receive this technology.) The applicant found 199 cases (47.6 percent of all cases) in MS–DRG 116 and 219 cases (52.3 percent of all cases) in MS–DRG 117. This resulted in an average charge per case of $40,957 for MS–DRG 116 and $20,621 for MS–DRG 117, equating to a case-weighted average charge per case of $24,011. The applicant then standardized the charges using the FY 2011 final rule impact file and converted the cost of the device to a charge by dividing the operating costs by a CCR of 0.50 (which equates to a 100 percent markup). Although the applicant submitted data related to the estimated cost of the Argus® II System, the applicant noted that the cost of the technology was proprietary information. The applicant then added the charges related to the device to the case-weighted average standardized charge per case and determined a final case-weighted average standardized charge per case of $311,180. Using the FY 2014 Table 10 thresholds, the case-weighted threshold for MS–DRGs 116 and 117 was $30,328 (all calculations above were performed using unrounded numbers). Because the final case-weighted average standardized charge per case for the applicable MS–DRGs exceed the caseweighted threshold amount, the applicant maintained that the Argus® II System would meet the cost criterion. We invited public comments on whether the Argus® II System meets the cost criterion, particularly based on the assumptions and methodology used in the applicant’s analysis. We did not VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 receive any public comments concerning the cost criterion and, therefore, we believe that the Argus® II System meets the cost criterion. In the FY 2014 IPPS/LTCH PPS proposed rule, we noted that, although we could not disclose the cost of the technology, the device is very costly. Because of its high costs, the technology would easily exceed the case-weighted threshold. In addition, because of the high cost of the device it is likely that claims with the device would receive an outlier payment. The applicant anticipates that approximately 65 Argus® II Systems will be sold in FY 2014, of which approximately 50 systems would be provided to Medicare patients. The target disease population is extremely limited as required and supported by the HDE application. Most patients for whom this technology is indicated may be eligible for Medicare based on their age, blindness, or a disability that is associated with profound blindness. We also noted that these types of procedures are often performed in the outpatient setting. We expressed concern that if new technology add-on payments were to be approved, this would serve as a financial incentive to inappropriately shift utilization from an outpatient to an inpatient setting, although medical review may result in very few of these cases being paid as inpatient hospital services if the patient can be appropriately treated as an outpatient. We emphasized that it is critical that physicians use their clinical judgment in determining the medical necessity of an inpatient admission and stress that care should be provided in the appropriate setting. We invited public comments on whether the Argus® II System meets the cost criterion, particularly based on the assumptions and methodology used in the applicant’s analysis. We also expressed general concerns relating to the descriptions of the medical necessity of performing this procedure on an inpatient basis. Therefore, we invited public comments to further our understanding regarding whether approving new technology add-on payments for the Argus® II System would create a financial incentive that would shift utilization inappropriately from an outpatient to an inpatient setting. Comment: Some commenters stated that approving new technology add-on payments for the Argus® II System would not create a financial incentive for inappropriate inpatient utilization because these patients are treated in both inpatient and outpatient settings. These commenters stated that the PO 00000 Frm 00087 Fmt 4701 Sfmt 4700 50581 complex clinical judgment of the physician must be the basis for determining inpatient status and/or the site of care. The commenters added that ‘‘decisions on the appropriate site of service must be based on the individual patient’s health status and expected treatment. . . .’’ Response: We appreciate the commenters’ input, feedback, and opinions that the appropriate setting and appropriate patients should be based on a complex clinical judgment of the physician and note that this would need to be supported by clinical documentation in the medical record to maintain appropriate use of inpatient and outpatient care settings. With regard to the substantial clinical improvement criterion, the Argus® II System is intended to provide electrical stimulation of the retina to induce visual perception in blind patients with the indication of severe to profound RP with bare or no light perception in both eyes. According to the applicant, an estimated 1 in 3,037 Americans suffers from RP, and the incidence of people with severe to profound RP is significantly lower. According to the applicant, the need for treatments for RP is high, given the impact of loss of vision. According to the applicant, numerous experimental research programs are currently underway to slow, stop, or reverse the progress of RP, including gene therapy, tissue and cell transplants, and some pharmacologic neuroprotection therapies. However, these approaches so far have had fairly limited success in treating RP patients, and some approaches are intended for an extremely small segment of the RP population. Currently there are no other approved treatments for patients with severe to profound RP. Therefore, the Argus® II device treats a patient population that has no other treatment options. The applicant submitted the results of a clinical trial to demonstrate substantial clinical improvement. This clinical trial enrolled 30 patients. The median age of patients was 57.9 years at the time of implantation and the range was 28 to 77 years of age. Thirty percent of the patients were female, and 70 percent were male. All of the patients had bare or no light perception in both eyes. Fourteen of the patients were Medicare eligible. As part of the methods for the study, the applicant stated that while working within the framework of clinical trials for other ophthalmic devices, the manufacturer and its team of scientific advisors selected or designed several tests that would address the main elements of the E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50582 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations system that should be assessed for these types of devices—visual function (that is, how the eye as an organ works [for example, visual acuity]), functional vision (that is, how the patient performs in vision-related activities of daily living), and quality of life. The endpoints that were selected provided a mixture of objective and subjective data. The study design was strengthened by the fact that controlled observations could be obtained by performing assessments with the Argus® II System ‘‘on’’ and ‘‘off’’ (that is, control was available at each time point). According to the applicant, there were no unexpected adverse events. Nonserious adverse events represented the majority of events. The safety review concluded that the Argus® II System has a reasonable safety profile for an ophthalmic device that requires vitreoretinal surgery to implant. In addition, the applicant noted that the device can be extracted and is reversible. The Argus® II System provided all 30 patients with benefit as measured by high-contrast visual function tests. The applicant stated that the degree of benefit varied from patient to patient and provided the following results: • All subjects were able to see visual percepts when the Argus® II System was electrically activated. • On the Square Localization Test (that is, object localization), patients (on average) performed better with the system ‘‘on’’ rather than ‘‘off’’ at all follow-up time points. At 24 months, on average, patients missed the target by approximately 50 pixels with the system ‘‘on’’ versus approximately 250 pixels with the system ‘‘off.’’ • On the Direction of Motion Test, which tested the patients’ ability to determine the direction of a moving bar, patients had higher mean accuracy with the system ‘‘on’’ than they did with the system ‘‘off’’ at all follow-up time points, indicating that the Argus® II System improved their performance on a spatial vision task. At 24 months, the mean response error was approximately 60° with the system ‘‘on’’ versus more than 80° with the system ‘‘off.’’ According to the applicant, this is nearly the error expected by chance. • On the Grating Visual Acuity Test, which assessed the patients’ visual acuity using the principles of acuity charts designed for extremely low vision patients, 27 percent of the patients were able to score on the scale (between 1.6 and 2.9 log MAR) at least once with the system ‘‘on,’’ while none of the Argus® II patients were able to score on the scale with the system ‘‘off.’’ VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 • A large number of patients were able to recognize large letters and numbers with the system ‘‘on’’ (but not with the system ‘‘off’’), and some of the patients were able to read short words. The median percent correct with the system ‘‘on’’ was approximately 50 percent higher than with the system ‘‘off.’’ • The trial also measured objectivelyscored functional vision tests. The patients performed better with the Argus® II System ‘‘on’’ versus ‘‘off’’ on orientation and mobility tests (finding a door and following a line) and on functional vision tasks (sorting white, black, and gray socks, following an outdoor sidewalk, and determining the direction of a person walking by). • Analysis of the Functional Lowvision Observer Rated Assessment (FLORA) results showed that threequarters of the patients received a positive benefit in terms of well-being and/or functional vision, while none of the patients experienced a negative effect. We also noted that we were concerned that the study did not have pre-specified endpoints and changed measurements mid-trial. In addition, we expressed concern about the reliability of the measures used for the tests and the inconsistency of the results across different patients, which lead us to question the long-term benefits associated with this device. We received two comments on the Argus®II System during the town hall meeting’s public comment period. These comments were summarized and responded to in the FY 2014 IPPS/LTCH PPS proposed rule. We refer readers to the proposed rule for a summary of these comments and our detailed responses (78 FR 27542 through 27543). In addition, we invited public comments on whether the Argus® II System meets the substantial clinical improvement criterion, specifically in regard to the measures used in the study and the lack of prespecified endpoints. Comment: One commenter, the applicant, submitted a public comment in response to CMS’ concern about the lack of pre-specified end points and evolving measures in their studies, noting that at the beginning of its studies, ‘‘it was clear that there was an absence of measures that were validated for the intended treatment population (e.g., no functional vision).’’ The commenter noted that as the trial progressed, new measures were introduced to address the applicability of clinical results to everyday life, and measurements changed to make the testing more challenging for the subjects (for example, with both the system ‘‘off’’ PO 00000 Frm 00088 Fmt 4701 Sfmt 4700 and ‘‘on’’) and to reduce the likelihood of success based on chance. The applicant further stated that the selection and modification of endpoint measures was done with a ‘‘tremendous amount of input from independent third party experts (ophthalmologists, surgeons, optometrists, retinal degeneration specialists, and low vision experts) and the FDA (and many times at the request of the FDA).’’ The applicant believed that ‘‘the resulting trial design and execution was the best possible trial for this target population given the novelty of the Argus II Retinal Prosthesis System.’’ The commenter asserted that, ‘‘Furthermore, the results of this study clearly indicate a beneficial effect for the Argus®II.’’ Another commenter noted that because the target population for this technology had not previously been studied, there were no pre-existing endpoints. This commenter opined that the new instruments and methods added during the study strengthened the results because they each added difficulty to the tests. Another commenter supported the study design and responded to our concerns that having no fixed endpoints or lack of validation for some of the clinical trial measures is an inevitable consequence of applying this new technology to a population that has had no other options. This commenter expressed its opinion that the measures needed to be designed, and refined, because very few tests existed that could assess such limited vision in quantitative terms. Response: We appreciate the commenters’ views and explanation of the study design, measures, and endpoints in light of the small and rare population of patients with severe to profound Retinitis Pigmentosa being studied for this Argus®II System. We agree with the commenters that, in view of these difficulties that very few tests existed that could assess such limited vision in quantitative terms for this population of blind patients with the indication of severe to profound RP with bare or no light perception in both eyes, the applicant presented data that demonstrated that the Argus®II System represents a substantial clinical improvement over existing technologies. The Argus®II System meets all of the new technology add-on payment policy criteria. Therefore, we are approving the Argus®II System for new technology add-on payments in FY 2014. Cases involving the Argus®II System that are eligible for new technology add-on payments will be identified by ICD–9– CM procedure code 14.81. We note that section 1886(d)(5)(K)(i) of the Act requires that the Secretary establish a E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 mechanism to recognize the costs of new medical services or technologies under the payment system established under that subsection, which establishes the system for paying for the operating costs of inpatient hospital services. The system of payment for capital costs is established under section 1886(g) of the Act, which makes no mention of any add-on payments for a new medical service or technology. Therefore, it is not appropriate to include capital costs in the add-on payments for a new medical service or technology. In the application, the applicant provided a breakdown of the costs of the Argus®II System. The total operating cost of the Argus®II System is $144,057.50. Under § 412.88(a)(2), new technology add-on payments are limited to the lesser of 50 percent of the average cost of the device or 50 percent of the costs in excess of the MS–DRG payment for the case. As a result, the maximum add-on payment for a case involving the Argus®II System is $72,028.75. c. Zilver® PTX® Drug Eluting Peripheral Stent Cook® Medical submitted an application for new technology add-on payments for the Zilver® PTX® Drug Eluting Peripheral Stent (Zilver® PTX®) for FY 2014. The Zilver® PTX® is intended for use in the treatment of peripheral artery disease (PAD) of the above-the-knee femoropopliteal arteries (superficial femoral arteries). According to the applicant, the stent is percutaneously inserted into the artery(s), usually by accessing the common femoral artery in the groin. The applicant stated that an introducer catheter is inserted over the wire guide and into the target vessel where the lesion will first be treated with an angioplasty balloon to prepare the vessel for stenting. The applicant indicated that the stent is selfexpanding, made of nitinol (nickel titanium), and is coated with the drug Paclitaxel. Paclitaxel is a drug approved for use as an anticancer agent and for use with coronary stents to reduce the risk of renarrowing of the coronary arteries after stenting procedures. The applicant received FDA approval on November 15, 2012, for the Zilver® PTX®. The applicant maintains that the Zilver® PTX® is the first drug-eluting stent used for superficial femoral arteries. The technology is currently described by ICD–9–CM procedure code 00.60 (Insertion of drug-eluting stent(s) of the superficial femoral artery). We invited public comments regarding how the Zilver® PTX® meets the newness criterion. However, we did not receive any public comments concerning the VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 newness criterion and, therefore, we believe that the Zilver® PTX® meets the newness criterion. With regard to the cost criterion, the applicant believed that cases of superficial femoral arteries typically map to MS–DRGs 252 (Other Vascular Procedures with MCC), 253 (Other Vascular Procedures with CC), and 254 (Other Vascular Procedures without CC/ MCC). The applicant searched the FY 2010 MedPAR file for cases reporting procedure code 39.90 (Insertion of nondrug-eluting peripheral vessel stents) in combination with a diagnosis code of 440.20 (Atherosclerosis of the extremities, unspecified), 440.21 (Atherosclerosis of the extremities, with intermittent claudication), 440.22 (Atherosclerosis of the extremities with rest pain), 440.23 (Atherosclerosis of the extremities with ulceration), or 440.24 (Atherosclerosis of the extremities with gangrene). The applicant noted that the Zilver® PTX® is available in an 80 mm size and is approved for lesions in native vascular disease of the above-theknee femoropopliteal arteries having reference vessel diameter from 4 mm to 9 mm and total lesion lengths up to 140 mm per limb. The applicant further noted that bare metal stents typically are available up to lengths of 200 mm. Therefore, in order to target cases eligible for the Zilver® PTX®, the applicant believed that it was only appropriate to target those cases with one or two bare metal stents. The applicant was able to identify the amount of stents used per claim by searching for ICD–9–CM procedure codes 00.45 (Insertion of one vascular stent) and 00.46 (Insertion of two vascular stents). The applicant submitted two methodologies: one with cases that received one bare metal stent and the other with cases that received one or two bare metal stents. Under the first methodology (one bare metal stent), the applicant found 2,062 cases (or 19.7 percent of all cases) in MS–DRG 252, 3,385 cases (or 32.3 percent of all cases) in MS–DRG 253, and 5,019 cases (or 48 percent of all cases) in MS–DRG 254. The average charge per case was $89,194 for MS– DRG 252, $67,965 for MS–DRG 253, and $46,539 for MS–DRG 254, equating to a case-weighted average charge per case of $60,855. The case-weighted average charge per case above does not include charges related to the Zilver® PTX®. Therefore, it was first necessary to remove the amount of charges related to the nondrug-eluting peripheral vessel stent and replace them with charges related to the Zilver® PTX®. The applicant multiplied the use of the single stent used per case PO 00000 Frm 00089 Fmt 4701 Sfmt 4700 50583 by the average market price for nondrug-eluting peripheral vessel stents and then converted the cost of the stents used per case to a charge by dividing the results by the hospital-specific CCR (from the FY 2010 IPPS impact file). The applicant removed the appropriate amount of charges per case and then standardized the charges per case. Because the applicant used FY 2010 MedPAR data, it was necessary to inflate the charges from FY 2010 to FY 2013. Using data from the Bureau of Labor Statistics Consumer Price Index, the applicant inflated the average standardized charge per case with an inflation factor of 7 percent. To determine the amount of Zilver® PTX® stents per case, instead of using the amount of stents used per case based on the ICD–9–CM codes above, the applicant used an average of 1.9 stents per case based on the Zilver® PTX® Global Registry Clinical Study.6 The applicant believed that it is appropriate to use data from the clinical study (to determine the average amount of stents used per case) rather than the actual data from the claims because the length of a non-drug-eluting peripheral vessel stent typically ranges from 80 mm to 120 mm, while the length of the Zilver® PTX® is 80 mm (which could cause a variance in the actual amount of stents used per case when using the Zilver® PTX®). The applicant then multiplied the average of 1.9 stents used per case by the future market price for the Zilver® PTX® and then converted the cost of the stents used per claim to a charge by dividing the results by the hospital-specific CCR (from the FY 2010 IPPS impact file). The applicant then added the amount of charges related to the Zilver® PTX® to the inflated average standardized charge per case and determined a final inflated caseweighted average standardized charge per case of $58,419. Although the applicant submitted data that related to the estimated cost of the Zilver® PTX®, the applicant noted that the cost of the technology was proprietary information. Using the FY 2014 Table 10 thresholds, the case-weighted threshold for MS– DRGs 252, 253, and 254 was $54,547 (all calculations above were performed using unrounded numbers). Because the final inflated case-weighted average 6 Dake, M.D., Ansel, G.M., Jaff, M.R., Ohki, T., Saxon, R.R., Smouse, H.B., Zeller, T., Roubin, G.S., Burket, M.W., Khatib, Y., Snyder, S.A., Ragheb, A.O., White, J.K., Machan, L.S. (2011), Paclitaxeleluting stents show superiority to balloon angioplasty and bare metal stents in femoropopliteal disease: twelve-month zilver PTX randomized study results. Circulation Cardiovascular Interventions, published online September 27, 2011, 495–504. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50584 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations standardized charge per case for the applicable MS–DRGs exceeded the caseweighted threshold amount, the applicant maintained that the Zilver® PTX® would meet the cost criterion. The applicant used the same methodology above to demonstrate that it meets the cost criterion with the only difference being that it included cases that used one or two bare metal stents instead of just one bare metal stent. Using this methodology, the applicant determined a final inflated caseweighted average standardized charge per case of $62,455. Using the FY 2014 Table 10 thresholds, the case-weighted threshold for MS–DRGs 252, 253, and 254 was $54,474 (all calculations above were performed using unrounded numbers). Because the final inflated case-weighted average standardized charge per case for the applicable MS– DRGs exceeded the case-weighted threshold amount, the applicant maintained that the Zilver® PTX® would meet the cost criterion. We invited public comments on whether or not the Zilver® PTX® meets the cost criterion. In addition, we invited public comments on the methodologies used by the applicant in its analysis, including its assumptions regarding the types of cases in which this technology could potentially be used and the number of stents required for each case. However, we did not receive any public comments concerning the cost criterion and, therefore, we believe that the Zilver® PTX® meets the cost criterion. In an effort to demonstrate that the technology meets the substantial clinical improvement criterion, the applicant shared several findings from the clinical trial data. The applicant stated that current treatment options for patients who have been diagnosed with PAD includes angioplasty, bare metal stenting, bypass graft, and endarterectomy. The applicant asserted that the Zilver® PTX® meets the substantial clinical improvement criterion because it decreases the recurrence of symptoms arising from restenotic SFA lesions, the rate of subsequent diagnostic or therapeutic interventions required to address restenotic lesions, and the number of future hospitalizations. The applicant cited a 479-patient, multicenter, multinational randomized controlled trial that compared the Zilver® PTX® to balloon angioplasty 7; 7 Dake, M.D., Ansel, G.M., Jaff, M.R., Ohki, T., Saxon, R.R., Smouse, H.B., Zeller, T., Roubin, G.S.,Burket, M.W., Khatib, Y., Snyder, S.A., Ragheb, A.O., White, J.K., Machan, L.S.(2011), Paclitaxeleluting stents show superiority to balloon angioplasty and bare metal stents in VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 an additional component of the study allowed a direct comparison of the Zilver® PTX® to a bare (uncoated) metal Zilver® stent. Patients were randomized to treatment with the Zilver® PTX® stent (treatment group) or with a percutaneous transluminal balloon angioplasty (PTA, control group). Recognizing that balloon angioplasty may not be successful acutely, the trial design mandated provisional stent placement immediately after failure of balloon angioplasty in instances of acute PTA failure. Therefore, patients with suboptimal (failed) PTA underwent a secondary randomization to stenting with either Zilver® PTX® or bare Zilver® stents. This secondary randomization allows evaluation of the Zilver® PTX® stent compared to a bare metal stent. The primary safety endpoint of the randomized controlled study was ‘‘Event-Free Survival’’ (EFS), defined as ‘‘freedom from the major adverse events of death, target lesion revascularization, target limb ischemia requiring surgical intervention or surgical repair of the target vessel, and freedom of worsening systems as described by the Rutherford classification by 2 classes or to class 5 or 6.’’ The primary effectiveness endpoint was primary patency (defined as a less than 50 percent re-narrowing). In the FY 2014 IPPS/LTCH PPS proposed rule, we noted that we were concerned that other endpoints such as walking, walking speed, and climbing were not considered as primary endpoints to demonstrate the effectiveness of the Zilver® PTX®. According to the applicant, the Zilver® PTX® had an EFS of 90.4 percent compared to balloon angioplasty, which had an EFS of 83.9 percent, at 12 months demonstrating that the Zilver® PTX® is as safe or safer than balloon angioplasty. The applicant further stated that this benefit was maintained at 24 months. In addition, the applicant noted that the Zilver® PTX® demonstrated a 50-percent reduction in restenosis rates compared to angioplasty and a 20-percent reduction compared to bare metal stents. The 12-month patency rate for the Zilver® PTX® was 82.7 percent, which compared favorably to the balloon angioplasty patency rate of 32.7 percent. In the provisional stenting arm of the study, which allowed a direct comparison of the Zilver® PTX® and a bare metal stent, the Zilver® PTX® primary patency exceeded the bare femoropopliteal disease: twelve-month zilver PTX randomized study results. Circulation Cardiovascular Interventions, published online September 27, 2011, 495–504. PO 00000 Frm 00090 Fmt 4701 Sfmt 4700 metal stent patency by nearly 20 percent (87.3 percent versus 72.3 percent at 12 months). The applicant stated that these differences are significant, as they result in a substantial clinical improvement compared to angioplasty and bare metal stenting, with patients being spared a recurrence of their leg pain and the need to be admitted to the hospital for repeat procedures on these treated lesions. The applicant also submitted 3 years of follow-up data, which the applicant maintained support that the Zilver® PTX® is more effective in maintaining primary patency.8 The applicant also cited a prospective, multicenter, multinational, 787-patient single arm study on the Zilver® PTX® that demonstrated similar safety and effectiveness results consistent with those from the pivotal randomized controlled study above. The applicant cited an EFS for the Zilver® PTX® of 89.0 percent and an 86.2 percent primary patency rate. According to the applicant, these results confirm the safety and effectiveness of the Zilver® PTX®, and compare favorably to current results for angioplasty and bare metal stenting. The applicant further stated that these results also demonstrate a 67 to 81 percent relative reduction in Target Lesion Revascularization (the need to retreat an already treated lesion that has restenosed, resulting in a recurrence of symptoms) rates compared to recently published results of contemporary bare metal stents.9 In the FY 2014 IPPS/LTCH PPS proposed rule, we also expressed concern that on April 24, 2013, the FDA announced that, based on its investigation into a small number of complaints that the delivery system of the device had separated at the tip of the inner catheter, Cook Medical has initiated a nationwide/global voluntary recall of its Zilver® PTX® Drug Eluting Peripheral Stent. We refer readers to https://www.fda.gov/Safety/Recalls/ ucm349421.htm?source=govdelivery for more information regarding this announcement. We note that we did not receive any public comments on the Zilver® PTX® during the new technology town hall meeting’s public comment period. However, we invited public comments 8 Dake, MD., VIVA 2012, October 10, 2012; Las Vegas, Nevada. 9 Dake, M. D., Scheinert, D., Tepe, G., Tessarek, J., Fanelli, F., Bosiers, M., et al., (2011). Nitinol stents with polymer-free paclitaxel coating for lesions in the superficial femoral and popliteal arteries above the knee: Twelve-month safety and effectiveness results from the Zilver PTX single-arm clinical study. Journal of Endovascular Therapy, 18(5), 613–623. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations regarding whether the Zilver® PTX® meets the substantial clinical improvement criterion. Comment: One commenter, the manufacturer and applicant, submitted a public comment responding to our concerns presented in the proposed rule. With regard to our first concern that other endpoints such as walking, walking speed, and climbing were not considered as primary endpoints, the manufacturer noted that in addition to the primary endpoint of primary patency at 12 months, the study investigators (for the Zilver® PTX® Global Registry Clinical Study) understood the importance of including other effective endpoints in the study. Specifically, the commenter noted that the study included Rutherford classification, walking ability, and quality of life. Also, a composite clinical endpoint defined as ‘‘freedom from symptoms of ischemia’’ was calculated based on freedom from worsening claudication, worsening Rutherford class, tissue loss, and other symptoms indicating the need for reintervention. The commenter added that similar improvements in the Rutherford score, and walking and quality of life scores were observed in both the PTA control and Zilver® PTX® treatment groups of the Zilver® PTX® Global Registry Clinical Study. The commenter noted that the study was designed to allow ongoing, clinically indicated care to optimize each patient’s health status and quality of life throughout the course of the study, which would result in improved clinical outcomes. The commenter asserted that while allowing for ongoing care within the clinical trial, the study design confounded the comparison of clinical benefit between the PTA control and Zilver® PTX® treatment groups due to the additional study and/or non-study related procedures that were performed during the study and subsequent to the index procedure(s). The commenter concluded that this confounding aspect of the study design, though in the patient’s best interest, argued against using these clinical effectiveness endpoints as primary endpoints. The commenter also explained that because these standard clinical effectiveness outcomes were not ideally suited to discriminate differences between treatment arms in clinical trial, a secondary clinical benefit index of freedom from symptoms of ischemia was calculated (as described above). The commenter believed that measuring freedom from symptoms of ischemia provides an important measure of clinical benefit of the Zilver® PTX®. The commenter noted that freedom from VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 symptoms of ischemia was maintained in 88.5 percent of the Zilver® PTX® treatment group at 12 month versus 75.3 percent of PTA control group patients. The commenter also pointed out that at the time of submission of the application, only 12-month data had been published in the peer review literature. Since that time, the 2-year safety and effectiveness outcomes have been published 10 and can be accessed on the Internet at: https:// www.sciencedirect.com/science/article/ pii/S0735109713014149. With regard to our concerns concerning the recall of the device, the commenter stated that it has ‘‘identified the root cause of the underlying failure mode to the delivery device and corrective action has been implemented’’ with the anticipated return of the Zilver® PTX® to the market in early August 2013. The commenter noted that there are no issues with the Zilver® PTX® itself, only the delivery system to implant the Zilver® PTX®. Response: After consideration of the public comments received in response to our concerns and proposals presented in the proposed rule, we agree that the Zilver® PTX® represents a substantial clinical improvement over existing technologies because it decreases the recurrence of symptoms arising from restenotic SFA lesions, the rate of subsequent diagnostic or therapeutic interventions required to address restenotic lesions, and the number of future hospitalizations. We also believe that the commenter has sufficiently responded to our concerns presented in the proposed rule. However, we will continue to monitor the long-term clinical trial data concerning the primary and secondary endpoints as it becomes available. Comment: Several commenters supported making new technology addon payments for the Zilver® PTX® in FY 2014. Response: We appreciate the commenters’ support. The Zilver® PTX® meets all of the new technology add-on payment policy criteria. Therefore, we are approving the Zilver® PTX® for new technology add-on payments in FY 2014. Cases involving the Zilver® PTX® that are eligible for new technology addon payments will be identified by ICD– 9–CM procedure code 00.60. As stated 10 Dake, M. D., Ansel, G. M., Jaff, M. R., Takao, O., Saxon, R. R., Smouse, H. B., Snyder, S. A., O’leary, E. E., Tepe, G., Scheinert, D., Zeller, T., (June 18, 2013) Sustained Safety and Effectiveness of Paclitaxel-Eluting Stents for Femoropopliteal Leasions: 2 Year-Follow-Up from the Zilver PTX Randomized and Single-Arm Clinical Studies. Journal of American College of Cardiology, Vol. 61, Issue 24. PO 00000 Frm 00091 Fmt 4701 Sfmt 4700 50585 above, to determine the amount of Zilver® PTX® stents per case, instead of using the amount of stents used per case based on the ICD–9–CM codes, the applicant used an average of 1.9 stents per case based on the Zilver® PTX® Global Registry Clinical Study. The applicant stated in its application that the anticipated cost per stent is approximately $1,795. Therefore, cases of the Zilver® PTX® would incur an average cost per case of $3,410.50 ($1,795 × 1.9). Under § 412.88(a)(2), new technology add-on payments are limited to the lesser of 50 percent of the average cost of the device or 50 percent of the costs in excess of the MS–DRG payment for the case. As a result, the maximum add-on payment for a case of the Zilver® PTX® is $1,705.25. III. Changes to the Hospital Wage Index for Acute Care Hospitals A. Background Section 1886(d)(3)(E) of the Act requires that, as part of the methodology for determining prospective payments to hospitals, the Secretary adjust the standardized amounts ‘‘for area differences in hospital wage levels by a factor (established by the Secretary) reflecting the relative hospital wage level in the geographic area of the hospital compared to the national average hospital wage level.’’ We currently define hospital labor market areas based on the delineations of statistical areas established by the Office of Management and Budget (OMB). A discussion of the FY 2014 hospital wage index based on the statistical areas appears under section III.B. of the preamble of this final rule. Section 1886(d)(3)(E) of the Act requires the Secretary to update the wage index annually and to base the update on a survey of wages and wagerelated costs of short-term, acute care hospitals. This provision also requires that any updates or adjustments to the wage index be made in a manner that ensures that aggregate payments to hospitals are not affected by the change in the wage index. The adjustment for FY 2014 is discussed in section II.B. of the Addendum to this final rule. As discussed below in section III.H. of this preamble, we also take into account the geographic reclassification of hospitals in accordance with sections 1886(d)(8)(B) and 1886(d)(10) of the Act when calculating IPPS payment amounts. Under section 1886(d)(8)(D) of the Act, the Secretary is required to adjust the standardized amounts so as to ensure that aggregate payments under the IPPS after implementation of the provisions of sections 1886(d)(8)(B), E:\FR\FM\19AUR2.SGM 19AUR2 50586 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 1886(d)(8)(C), and 1886(d)(10) of the Act are equal to the aggregate prospective payments that would have been made absent these provisions. The budget neutrality adjustment for FY 2014 is discussed in section II.A.4.b. of the Addendum to this final rule. Section 1886(d)(3)(E) of the Act also provides for the collection of data every 3 years on the occupational mix of employees for short-term, acute care hospitals participating in the Medicare program, in order to construct an occupational mix adjustment to the wage index. A discussion of the occupational mix adjustment that we are applying beginning October 1, 2013 (the FY 2014 wage index) appears under section III.F. of the preamble of this final rule. B. Core-Based Statistical Areas for the Hospital Wage Index The wage index is calculated and assigned to hospitals on the basis of the labor market area in which the hospital is located. Under section 1886(d)(3)(E) of the Act, beginning with FY 2005, we define hospital labor market areas based on the Core-Based Statistical Areas (CBSAs) established by OMB. The current statistical areas are based on OMB standards published on December 27, 2000 (65 FR 82228) and Census 2000 data and Census Bureau population estimates for 2007 and 2008 (OMB Bulletin No. 10–02). For a discussion of OMB’s delineations of CBSAs and our implementation of the CBSA definitions, we refer readers to the preamble of the FY 2005 IPPS final rule (69 FR 49026 through 49032). We also discussed in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51582) and the FY 2013 IPPS/LTCH PPS final rule (77 FR 53365) that, in 2013, OMB planned to announce new area delineations based on new standards adopted in 2010 (75 FR 37246) and the 2010 Census of Population and Housing data. As stated in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27552), on February 28, 2013, OMB issued OMB Bulletin No. 13–01, which established revised delineations for Metropolitan Statistical Areas, Micropolitan Statistical Areas, and Combined Statistical Areas, and provided guidance on the use of the delineations of these statistical areas. A copy of this bulletin may be obtained at https:// www.whitehouse.gov/sites/default/files/ omb/bulletins/2013/b-13-01.pdf. According to OMB, ‘‘[t]his bulletin provides the delineations of all Metropolitan Statistical Areas, Metropolitan Divisions, Micropolitan Statistical Areas, Combined Statistical Areas, and New England City and Town VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Areas in the United States and Puerto Rico based on the standards published on June 28, 2010, in the Federal Register (75 FR 37246–37252) and Census Bureau data.’’ In order to implement these changes for the IPPS, it is necessary to identify the new area designation for each county and hospital in the country. While the revisions OMB published on February 28, 2013 are not as sweeping as the changes OMB announced in 2003, the February 28, 2013 bulletin does contain a number of significant changes. For example, there are new CBSAs, urban counties that become rural, rural counties that become urban, and existing CBSAs that have been split apart. In addition, the effect of the new designations on various hospital reclassifications, the out-migration adjustment (established by section 505 of Pub. L. 108–173), and treatment of hospitals located in certain rural counties (that is, ‘‘Lugar’’ hospitals) provided for under section 1886(d)(8)(B) of the Act must be considered. These are just a few of the many issues that need to be considered regarding the effects of the new designations prior to proposing and establishing policies. However, because the bulletin was not issued until February 28, 2013, with supporting data not available until later, and because the changes made by the bulletin and their ramifications must be extensively reviewed and verified, we were unable to undertake such a lengthy process before publication of the FY 2014 IPPS/LTCH PPS proposed rule. By the time the bulletin was issued, the FY 2014 IPPS/LTCH PPS proposed rule was in the advanced stages of development. We had already developed the FY 2014 proposed wage index based on the previous OMB definitions. We note that, in June 2003, OMB announced changes resulting from the 2000 Census, and at that time, CMS proposed and implemented the changes during the following year’s rulemaking cycle for FY 2005. Although OMB published the data earlier than June this year, we still are in essentially the same situation as we were in 2003 because the data are not available in time to be incorporated into this year’s rulemaking cycle. To allow for sufficient time to assess the new changes and their ramifications, we intend to propose changes to the wage index based on the newest CBSA changes in the FY 2015 proposed rule. We refer readers to the FY 2005 IPPS final rule (69 FR 49026 through 49034) for those interested in learning about the issues we may need to address next year in proposing to implement the latest OMB update for FY 2015, and some of PO 00000 Frm 00092 Fmt 4701 Sfmt 4700 the policy decisions that we may consider making. Comment: Several commenters recommended that, if CMS were to implement OMB’s MSAs in the FY 2015 final rule, the newly adopted definitions should not be effective until FY 2016, and even then, CMS should phase in the new MSAs. Other commenters specifically stated that CMS should provide a 3-year ‘‘hold harmless’’ period for those hospitals that maintain a specific status under the Medicare program that is jeopardized by changes to the MSAs. For example, two commenters suggested that rural hospitals that currently qualify for MDH and SCH status should be protected from the negative financial consequences of a change to urban status. Several other commenters urged CMS to hold an open-door call to review the CMSA changes and outline for hospitals what may or may not be the next steps for CMS as it plans to proceed, similar to the 2003 process. One commenter suggested that the Secretary allow rural teaching hospitals that will be redesignated to urban to start a new residency training program, and under the GME rules specific to rural hospitals, allow the hospital to count the FTEs for an additional time period of 2 years. Response: We appreciate the comments made by the commenters. As we indicated in the proposed rule, we intend to assess these new definitions, which require extensive review and verification to identify the new area designation for each county and hospital in the county, before adopting them. Any changes would be made through notice-and-comment rulemaking. We will address the concerns raised in these comments and other issues at part of the FY 2015 rulemaking process. C. Worksheet S–3 Wage Data for the FY 2014 Wage Index The FY 2014 wage index values are based on the data collected from the Medicare cost reports submitted by hospitals for cost reporting periods beginning in FY 2010 (the FY 2013 wage indices were based on data from cost reporting periods beginning during FY 2009). 1. Included Categories of Costs The FY 2014 wage index includes the following categories of data associated with costs paid under the IPPS (as well as outpatient costs): • Salaries and hours from short-term, acute care hospitals (including paid lunch hours and hours associated with military leave and jury duty); E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations • Home office costs and hours; • Certain contract labor costs and hours (which includes direct patient care, certain top management, pharmacy, laboratory, and nonteaching physician Part A services, and certain contract indirect patient care services (as discussed in the FY 2008 final rule with comment period (72 FR 47315 through 47318)); and • Wage-related costs, including pension costs (based on policies adopted in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51586 through 51590)) and other deferred compensation costs. 2. Excluded Categories of Costs Consistent with the wage index methodology for FY 2013, the wage index for FY 2014 also excludes the direct and overhead salaries and hours for services not subject to IPPS payment, such as SNF services, home health services, costs related to GME (teaching physicians and residents) and certified registered nurse anesthetists (CRNAs), and other subprovider components that are not paid under the IPPS. The FY 2014 wage index also excludes the salaries, hours, and wage-related costs of hospital-based rural health clinics (RHCs), and Federally qualified health centers (FQHCs) because Medicare pays for these costs outside of the IPPS (68 FR 45395). In addition, salaries, hours, and wage-related costs of CAHs are excluded from the wage index, for the reasons explained in the FY 2004 IPPS final rule (68 FR 45397 through 45398). mstockstill on DSK4VPTVN1PROD with RULES6 3. Use of Wage Index Data by Providers Other Than Acute Care Hospitals under the IPPS Data collected for the IPPS wage index are also currently used to calculate wage indices applicable to other providers, such as SNFs, home health agencies (HHAs), and hospices. In addition, they are used for prospective payments to IRFs, IPFs, and LTCHs, and for hospital outpatient services. We note that, in the IPPS rules, we do not address comments pertaining to the wage indices for non-IPPS providers, other than for LTCHs. Such comments should be made in response to separate proposed rules for those providers. D. Verification of Worksheet S–3 Wage Data The wage data for the FY 2014 wage index were obtained from Worksheet S–3 of the Medicare cost report for cost reporting periods beginning on or after October 1, 2009, and before October 1, 2010. For wage index purposes, we refer to cost reports during this period as the ‘‘FY 2010 cost report,’’ the ‘‘FY 2010 VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 wage data,’’ or the ‘‘FY 2010 data.’’ Instructions for completing the wage index sections of Worksheet S–3 are included in the Provider Reimbursement Manual (PRM), Part 2 (Pub. No. 15–2), Chapter 36, Sections 3605.2 and 3605.3 for Form CMS–2552– 96 and Chapter 40, Sections 4005.2 through 4005.4 for Form CMS–2552–10. Hospitals with cost reporting periods beginning on or after October 1, 2009 and before May 1, 2010 reported FY 2010 data on Form CMS–2552–96. Hospitals with cost reporting periods beginning on or after May 1, 2010 and before October 1, 2010 reported FY 2010 data on the new Form CMS–2552–10. The data file used to construct the final FY 2014 wage index includes FY 2010 data submitted to us as of June 26, 2013. As in past years, we performed an extensive review of the wage data, mostly through the use of edits designed to identify aberrant data. We asked our fiscal intermediaries/ MACs to revise or verify data elements that result in specific edit failures. For the proposed FY 2014 wage index, we identified and excluded 43 providers with data that were too aberrant to include in the proposed wage index, although we stated that if data elements for some of these providers are corrected, we intended to include some of these providers in the final FY 2014 wage index. (We note that in the FY 2014 IPPS/LTCH PPS proposed rule, we inadvertently stated that we excluded 44 providers.) We have received corrected data for 11 providers, and therefore, we are including the data for these 11 providers in the final FY 2014 wage index. Therefore, in total, we are excluding the data of 32 providers from the final FY 2014 wage index. In constructing the proposed FY 2014 wage index, we included the wage data for facilities that were IPPS hospitals in FY 2010, inclusive of those facilities that have since terminated their participation in the program as hospitals, as long as those data did not fail any of our edits for reasonableness. We believe that including the wage data for these hospitals is, in general, appropriate to reflect the economic conditions in the various labor market areas during the relevant past period and to ensure that the current wage index represents the labor market area’s current wages as compared to the national average of wages. However, we excluded the wage data for CAHs as discussed in the FY 2004 IPPS final rule (68 FR 45397 through 45398). For the proposed rule, we removed 4 hospitals that converted to CAH status on or after February 14, 2012, the cut-off date for CAH exclusion from the FY 2013 wage PO 00000 Frm 00093 Fmt 4701 Sfmt 4700 50587 index, and through and including February 14, 2013, the cut-off date for CAH exclusion from the FY 2014 wage index. After removing hospitals with aberrant data and hospitals that converted to CAH status, the final FY 2014 wage index is calculated based on 3,440 hospitals. For the final FY 2014 wage index, we allotted the wages and hours data for a multicampus hospital among the different labor market areas where its campuses are located in the same manner that we allotted such hospitals’ data in the FY 2013 wage index (77 FR 53366). Table 2 containing the FY 2014 wage index associated with this final rule (available on the CMS Web site) includes separate wage data for the campuses of six multicampus hospitals (two additional multicampus hospitals have been added to the wage index calculation for FY 2014). E. Method for Computing the FY 2014 Unadjusted Wage Index The method used to compute the FY 2014 wage index without an occupational mix adjustment follows the same methodology that we used to compute the FY 2012 final wage index without an occupational mix adjustment (76 FR 51591 through 51593) and which we discussed and used for the FY 2013 final wage index without an occupational mix adjustment (77 FR 53366 through 53367). As discussed in the FY 2012 final rule, in ‘‘Step 5,’’ for each hospital, we adjust the total salaries plus wagerelated costs to a common period to determine total adjusted salaries plus wage-related costs. To make the wage adjustment, we estimate the percentage change in the employment cost index (ECI) for compensation for each 30-day increment from October 14, 2009, through April 15, 2011, for private industry hospital workers from the BLS’ Compensation and Working Conditions. We have consistently used the ECI as the data source for our wages and salaries and other price proxies in the IPPS market basket, and as we proposed, we are not making any changes to the usage for FY 2014. The factors used to adjust the hospital’s data were based on the midpoint of the cost reporting period, as indicated below. MIDPOINT OF COST REPORTING PERIOD After Before 10/14/2009 ........ 11/14/2009 ........ 12/14/2009 ........ 11/15/2009 12/15/2009 01/15/2010 E:\FR\FM\19AUR2.SGM 19AUR2 Adjustment factor 1.02682 1.02490 1.02299 50588 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations MIDPOINT OF COST REPORTING PERIOD—Continued After 01/14/2010 02/14/2010 03/14/2010 04/14/2010 05/14/2010 06/14/2010 07/14/2010 08/14/2010 09/14/2010 10/14/2010 11/14/2010 12/14/2010 01/14/2011 02/14/2011 03/14/2011 Before ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ 02/15/2010 03/15/2010 04/15/2010 05/15/2010 06/15/2010 07/15/2010 08/15/2010 09/15/2010 10/15/2010 11/15/2010 12/15/2010 01/15/2011 02/15/2011 03/15/2011 04/15/2011 Adjustment factor 1.02116 1.01941 1.01768 1.01591 1.01412 1.01235 1.01064 1.00898 1.00738 1.00584 1.00434 1.00288 1.00143 1.00000 0.99860 For example, the midpoint of a cost reporting period beginning January 1, 2010, and ending December 31, 2010, is June 30, 2010. An adjustment factor of 1.01235 would be applied to the wages of a hospital with such a cost reporting period. Using the data as described above and in the FY 2013 IPPS/LTCH PPS final rule, the FY 2014 national average hourly wage (unadjusted for occupational mix) is $38.3998. The FY 2014 Puerto Rico overall average hourly wage (unadjusted for occupational mix) is $16.4890. mstockstill on DSK4VPTVN1PROD with RULES6 F. Occupational Mix Adjustment to the FY 2014 Wage Index As stated earlier, section 1886(d)(3)(E) of the Act provides for the collection of data every 3 years on the occupational mix of employees for each short-term, acute care hospital participating in the Medicare program, in order to construct an occupational mix adjustment to the wage index, for application beginning October 1, 2004 (the FY 2005 wage index). The purpose of the occupational mix adjustment is to control for the effect of hospitals’ employment choices on the wage index. For example, hospitals may choose to employ different combinations of registered nurses, licensed practical nurses, nursing aides, and medical assistants for the purpose of providing nursing care to their patients. The varying labor costs associated with these choices reflect hospital management decisions rather than geographic differences in the costs of labor. 1. Development of Data for the FY 2014 Occupational Mix Adjustment Based on the 2010 Occupational Mix Survey As provided for under section 1886(d)(3)(E) of the Act, we collect data every 3 years on the occupational mix of employees for each short-term, acute VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 care hospital participating in the Medicare program. As discussed in the FY 2013 IPPS/ LTCH PPS final rule (77 FR 53367 through 53368), the occupational mix adjustment to the FY 2013 wage index was based on data collected on the 2010 Medicare Wage Index Occupational Mix Survey (Form CMS–10079 (2010)). For the FY 2014 wage index, as we proposed, we are again using occupational mix data collected on the 2010 survey to compute the occupational mix adjustment for FY 2014. We are including data for 3,201 hospitals that also have wage data included in the FY 2014 wage index. 2. New 2013 Occupational Mix Survey for the FY 2016 Wage Index As stated earlier, section 304(c) of Public Law 106–554 amended section 1886(d)(3)(E) of the Act to require CMS to collect data every 3 years on the occupational mix of employees for each short-term, acute care hospital participating in the Medicare program. We used occupational mix data collected on the 2010 survey to compute the occupational mix adjustment for FY 2013 and the FY 2014 wage index associated with this final rule. We also plan to use the 2010 survey data for the FY 2015 wage index. Therefore, a new measurement of occupational mix will be required for FY 2016. On December 7, 2012, we published in the Federal Register a notice soliciting comments on the proposed 2013 Medicare Wage Index Occupational Mix Survey (77 FR 73032 through 73033). The new 2013 survey, which will be applied to the FY 2016 wage index, includes the same data elements and definitions as the 2010 survey and provides for the collection of hospital-specific wages and hours data for nursing employees for calendar year 2013 (that is, payroll periods ending between January 1, 2013 and December 31, 2013). The comment period for the notice ended on February 5, 2013. After considering the public comments that we received on the December 2012 notice, we made a few minor editorial changes and published the 2013 survey in the Federal Register on February 28, 2013 (78 FR 13679). This survey was approved by OMB on May 14, 2013, and is available on the CMS Web site at: https://www.cms.hhs.gov/ PaperworkReductionActof1995 by clicking on ‘‘PRA Listings.’’ (The OMB control number for this collection of information is 0938–0907.) Hospitals are required to submit their completed 2013 surveys to their fiscal intermediaries/ MACs by July 1, 2014. The preliminary, unaudited 2013 survey data will be PO 00000 Frm 00094 Fmt 4701 Sfmt 4700 released afterward, along with the FY 2012 Worksheet S–3 wage data, for the FY 2016 wage index review and correction process. The 2013 Occupational Mix Survey Hospital Form and Instructions and Definitions are available on the CMS Web site at: https:// cms.gov/Medicare/Medicare-Fee-forService-Payment/AcuteInpatientPPS/ Wage-Index-Files-Items/Medicare-WageIndex-Occupational-MixSurvey2013.html. 3. Calculation of the Occupational Mix Adjustment for FY 2014 For FY 2014, we calculated the occupational mix adjustment factor using the same methodology that we used for the FY 2012 and FY 2013 wage indices (76 FR 51582 through 51586, and 77 FR 53367 through 53368, respectively). As a result of applying this methodology, the FY 2014 occupational mix adjusted national average hourly wage is $38.3698. The FY 2014 occupational mix adjusted Puerto Rico-specific average hourly wage is $16.5319. Because the occupational mix adjustment is required by statute, all hospitals that are subject to payments under the IPPS, or any hospital that would be subject to the IPPS if not granted a waiver, must complete the occupational mix survey, unless the hospital has no associated cost report wage data that are included in the FY 2014 wage index. For the FY 2010 survey, the response rate was 91.7 percent. In the FY 2014 wage index established in this final rule, we applied proxy data for noncompliant hospitals, new hospitals, or hospitals that submitted erroneous or aberrant data in the same manner that we applied proxy data for such hospitals in the FY 2012 wage index occupational mix adjustment (76 FR 51586). In the FY 2011 IPPS/LTCH PPS proposed rule and final rule (75 FR 23943 and 75 FR 50167, respectively), we stated that, in order to gain a better understanding of why some hospitals are not submitting the occupational mix data, we will require hospitals that do not submit occupational mix data to provide an explanation for not complying. This requirement was effective beginning with the 2010 occupational mix survey. We instructed fiscal intermediaries/MACs to continue gathering this information as part of the FY 2014 wage index desk review process. We will review these data for future analysis and consideration of potential penalties for noncompliant hospitals. E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations adjustment factor (as calculated in Step 6) of greater than 1.0. Based on the 2010 occupational mix survey data, we determined (in Step 7 of the occupational mix calculation) that 1. Analysis of the Occupational Mix the national percentage of hospital Adjustment and the Occupational Mix employees in the nurse category is 43.45 Adjusted Wage Index percent, and the national percentage of As discussed in section III.F. of this hospital employees in the all other preamble, for FY 2014, we apply the occupations category is 56.55 percent. occupational mix adjustment to 100 At the CBSA level, the percentage of percent of the FY 2014 wage index. We hospital employees in the nurse calculated the final occupational mix category ranged from a low of 21.9 adjustment using data from the 2010 percent in one CBSA, to a high of 62.0 occupational mix survey data, using the percent in another CBSA. methodology described in the FY 2012 We compared the FY 2014 IPPS/LTCH PPS final rule (76 FR 51582 occupational mix adjusted wage indices through 51586). for each CBSA to the unadjusted wage Using the occupational mix survey indices for each CBSA. As a result of data and applying the occupational mix applying the occupational mix adjustment to 100 percent of the FY adjustment to the wage data, the wage 2014 wage index results in a national index values for 205 (52.4 percent) average hourly wage of $38.3698 and a urban areas and 32 (66.7 percent) rural Puerto-Rico specific average hourly areas will increase. One hundred and wage of $16.5319. After excluding data twenty (30.7 percent) urban areas will of hospitals that either submitted increase by 1 percent or more, and 4 aberrant data that failed critical edits, or (1.02 percent) urban areas will increase that do not have FY 2010 Worksheet S– by 5 percent or more. Thirteen (27.1 3, Parts II and III, cost report data for use percent) rural areas will increase by 1 in calculating the FY 2014 wage index, percent or more, and no rural areas will we calculated the FY 2014 wage index increase by 5 percent or more. However, using the occupational mix survey data the wage index values for 182 (46.5 from 3,201 hospitals. Using the percent) urban areas and 16 (33.3 Worksheet S–3, Parts II and III, cost percent) rural areas will decrease. report data of 3,440 hospitals and Eighty (20.5 percent) urban areas will occupational mix survey data from decrease by 1 percent or more, and 1 3,201 hospitals represents a 93.1 percent urban area will decrease by 5 percent or survey response rate. The FY 2014 more (0.26 percent). Seven (14.6 national average hourly wages for each percent) rural areas will decrease by 1 occupational mix nursing subcategory percent or more, and no rural areas will as calculated in Step 2 of the decrease by 5 percent or more. The occupational mix calculation are as largest positive impacts are 6.61 percent follows: for an urban area and 2.64 percent for a rural area. The largest negative Average impacts are 5.28 percent for an urban Occupational mix nursing hourly subcategory area and 3.17 percent for a rural area. wage Four urban areas’ wage indices, but no National RN .......................... 37.430602011 rural area wage indices, will remain National LPN and Surgical unchanged by application of the Technician ......................... 21.771626577 occupational mix adjustment. These National Nurse Aide, Orderly, results indicate that a larger percentage and Attendant .................... 15.323325633 of rural areas (66.7 percent) will benefit National Medical Assistant ... 17.2056709 National Nurse Category ...... 31.80354668 from the occupational mix adjustment than will urban areas (52.4 percent). However, approximately one-third (33.3 The national average hourly wage for the entire nurse category as computed in percent) of rural CBSAs will still experience a decrease in their wage Step 5 of the occupational mix indices as a result of the occupational calculation is $31.80354668. Hospitals mix adjustment. with a nurse category average hourly wage (as calculated in Step 4) of greater 2. Application of the Rural, Imputed, than the national nurse category average and Frontier Floors hourly wage receive an occupational a. Rural Floor mix adjustment factor (as calculated in Step 6) of less than 1.0. Hospitals with Section 4410(a) of Public Law 105–33 a nurse category average hourly wage (as provides that, for discharges on or after calculated in Step 4) of less than the October 1, 1997, the area wage index national nurse category average hourly applicable to any hospital that is located wage receive an occupational mix in an urban area of a State may not be mstockstill on DSK4VPTVN1PROD with RULES6 G. Analysis and Implementation of the Occupational Mix Adjustment and the FY 2014 Occupational Mix Adjusted Wage Index VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 PO 00000 Frm 00095 Fmt 4701 Sfmt 4700 50589 less than the area wage index applicable to hospitals located in rural areas in that State. This provision is referred to as the ‘‘rural floor.’’ Section 3141 of Public Law 111–148 also requires that a national budget neutrality adjustment be applied in implementing the rural floor. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27556), we estimated that 434 hospitals would receive an increase in their FY 2014 proposed wage index due to the application of the rural floor. Based on the final FY 2014 wage indices associated with this final rule and available on the CMS Web site, 424 hospitals are receiving an increase in their FY 2014 wage index due to the application of the rural floor. We received some comments concerning the application of the rural floor and additional tables. We respond to these public comments in Appendix A of this final rule. b. Imputed Floor In the FY 2005 IPPS final rule (69 FR 49109 through 49111), we adopted the ‘‘imputed floor’’ policy as a temporary 3-year regulatory measure to address concerns from hospitals in all-urban States that have argued that they are disadvantaged by the absence of rural hospitals to set a wage index floor for those States. Since its initial implementation, we have extended the imputed floor policy three times, the last of which was adopted in the FY 2013 IPPS/LTCH PPS final rule and is set to expire on September 30, 2013 (we refer readers to the discussion in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53368 through 53369) and to our regulations at 42 CFR 412.64(h)(4)). There are currently two all-urban States, New Jersey and Rhode Island, that have a range of wage indices assigned to hospitals in the State, including through reclassification or redesignation (we refer readers to discussions of geographic reclassifications and redesignations in section III.H. of the preamble of this final rule). However, as we explain below, the method as of FY 2012 for computing the imputed floor, which we will refer to as the original methodology, benefitted only New Jersey, and not Rhode Island. In computing the imputed floor for an all-urban State under the original methodology, we calculated the ratio of the lowest-to-highest CBSA wage index for each all-urban State (that is, New Jersey and Rhode Island) as well as the average of the ratios of lowest-to-highest CBSA wage indices of those all-urban States. We compared the State’s own ratio to the average ratio for all-urban States and whichever is higher was E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50590 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations multiplied by the highest CBSA wage index value in the State—the product of which established the imputed floor for the State. Rhode Island has only one CBSA (Providence-New Bedford-Fall River, RI–MA); therefore, Rhode Island’s own ratio equals 1.0, and its imputed floor was equal to its original CBSA wage index value. Conversely, New Jersey has 10 CBSAs. Because the average ratio of New Jersey and Rhode Island was higher than New Jersey’s own ratio, the original methodology provided a benefit for New Jersey, but not for Rhode Island. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53368 through 53369), for the FY 2013 wage index, the final year of the extension of the imputed floor policy under § 412.64(h)(4), we did not make any changes to the original methodology and we finalized a proposed alternative, temporary methodology for computing the imputed floor wage index to address the concern that the then-current imputed floor methodology guaranteed a benefit for one all-urban State with multiple wage indices but could not benefit the other. The alternative methodology for calculating the imputed floor was established using data from the application of the rural floor policy for FY 2013. We first determined the average percentage difference between the post-reclassified, pre-floor area wage index and the post-reclassified, rural floor wage index (without rural floor budget neutrality applied) for all CBSAs receiving the rural floor. (Table 4D associated with the FY 2013 final rule, which is available on the CMS Web site, included the CBSAs receiving a State’s rural floor wage index.) The lowest postreclassified wage index assigned to a hospital in an all-urban State having a range of such values would then be increased by this factor, the result of which established the State’s alternative imputed floor. We refer to this methodology as the alternative methodology. We also adopted a policy that, for discharges on or after October 1, 2012, and before October 1, 2013, the minimum wage index value for the State is the higher of the value determined under the original methodology or the value computed using the alternative methodology. We amended § 412.64(h)(4) of the regulations to add new paragraph (vi) to incorporate the finalized alternative methodology policies, and to make conforming changes. We stated that we intended to further evaluate the need, applicability, and methodology for the imputed floor before the September 30, 2013 expiration of the imputed floor policy VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 and address these issues in the FY 2014 proposed rule. In the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR 27556), we proposed to extend the imputed floor policy (both the original methodology and the alternative methodology) for one additional year, through September 30, 2014, while we continue to explore potential wage index reforms. We proposed to revise the regulations at § 412.64(h)(4) to reflect the proposed 1-year extension. We invited public comments on this extension. Comment: Many of the commenters supported the CMS proposal, stating that it provides a remedy to the financial and competitive disadvantages suffered by hospitals in all-urban States, and that preserving the current imputed floor policy is the sound course of action as CMS continues to explore potential wage index reforms. One commenter who supported the proposal advised CMS that the American Hospital Association’s (AHA’s) Medicare Area Wage Index Task Force has issued draft recommendations (including the imputed floor policy) and has requested comments from hospitals prior to finalizing the report. The commenter suggested that the industry have a chance to provide input to CMS prior to finalizing any decisions regarding the imputed floor policy. The commenter also suggested that, if CMS decides to finalize a policy that would result in the expiration of the imputed floor, CMS afford hospitals a multiyear phase out in order to offset their lost revenue. One commenter objected to the proposal and stated that it did not support the policy behind the imputed floor. The commenter stated that it agreed with the rationale that CMS previously provided in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25878 and 25879) for not proposing to extend the imputed floor policy, and urged CMS to let the policy expire. Another commenter opposed the proposal, stating that it supported CMS’ position in the FY 2008 IPPS proposed rule (72 FR 24786) that the imputed floor policy should apply only when required by statute. Response: We appreciate the commenters’ support. For those commenters who objected to the proposed policy and made further recommendations, we will further consider these comments while we continue to explore potential wage index reforms. In response to the commenter who advised that the AHA’s Medicare Area Wage Index Task Force has requested comments from hospitals prior to finalizing its report and also PO 00000 Frm 00096 Fmt 4701 Sfmt 4700 suggested that the industry have a change to provide input to CMS prior to finalizing any decisions regarding the imputed floor policy, we are unclear on exactly what the commenter is requesting. We have allowed the industry to comment on the proposals regarding the imputed floor policy; specifically in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27556), we invited public comment on the proposed 1-year extension. With regard to the comment that requested that CMS afford hospitals a multiyear phase-out of the imputed floor policy, we did not propose to let the imputed floor policy expire for FY 2014. We will consider the commenter’s suggestion in future rulemaking. After consideration of the public comments we received, in this final rule, as we proposed, we are providing an extension of the imputed floor policy (both the original methodology and the alternative methodology) for one additional year, through September 30, 2014, while we continue to explore potential wage index reform. We also are adopting as final the proposed conforming changes at § 412.64(h)(4) to reflect the 1-year extension. The wage index and impact tables associated with this final rule that are available on the CMS Web site include the application of the imputed floor policy at § 412.64(h)(4) and a national budget neutrality adjustment for the rural floor (which includes the imputed floor). There are 25 hospitals in New Jersey that will receive an increase in their FY 2014 wage index due to the imputed floor calculated under the original methodology. The wage index and impact tables for this final rule also reflect the application of the alternative methodology for computing the imputed floor, which will benefit 4 hospitals in Rhode Island. c. Frontier Floor Section 10324 of Public Law 111–148 requires that hospitals in frontier States cannot be assigned a wage index of less than 1.0000 (we refer readers to regulations at 42 CFR 412.64(m) and to a discussion of the implementation of this provision in the FY 2011 IPPS/ LTCH PPS final rule (75 FR 50160 through 50161)). Forty-six hospitals are receiving the frontier floor value of 1.0000 for their FY 2014 wage index. These hospitals are located in Montana, North Dakota, South Dakota, and Wyoming. Although Nevada is also defined as a frontier State, its FY 2014 rural floor value of 1.1454 was greater than 1.0000, and therefore, no Nevada hospitals will receive a frontier floor value for their FY 2014 wage index. We E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations did not receive any public comments concerning the frontier floor. The areas affected by the rural, imputed, and frontier floor policies for the FY 2014 wage index are identified in Table 4D associated with this final rule, which is available on the CMS Web site. mstockstill on DSK4VPTVN1PROD with RULES6 3. FY 2014 Wage Index Tables The wage index values for FY 2014 (except those for hospitals receiving wage index adjustments under section 1886(d)(13) of the Act), included in Tables 4A, 4B, 4C, and 4F, available on the CMS Web site, include the occupational mix adjustment, geographic reclassification or redesignation as discussed in section III.H. of the preamble of this final rule, and the application of the rural, imputed, and frontier State floors as discussed in section III.G.2. of the preamble of this final rule. Tables 3A and 3B, available on the CMS Web site, list the 3-year average hourly wage for each labor market area before the redesignation or reclassification of hospitals based on FYs 2008, 2009, and 2010 cost reporting periods. Table 3A lists these data for urban areas, and Table 3B lists these data for rural areas. In addition, Table 2, which is available on the CMS Web site, includes the adjusted average hourly wage for each hospital from the FY 2008 and FY 2009 cost reporting periods, as well as the FY 2010 period used to calculate the FY 2014 wage index. The 3-year averages are calculated by dividing the sum of the dollars (adjusted to a common reporting period using the method described in Step 5 in section III.G. of the preamble of this final rule) across all 3 years, by the sum of the hours. If a hospital is missing data for any of the previous years, its average hourly wage for the 3year period is calculated based on the data available during that period. The average hourly wages in Tables 2, 3A, and 3B, which are available on the CMS Web site, include the occupational mix adjustment. The wage index values in Tables 4A, 4B, 4C, and 4D also include the national rural floor budget neutrality adjustment (which includes the imputed floor). The wage index values in Table 2 also include the outmigration adjustment for eligible hospitals. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 H. Revisions to the Wage Index Based on Hospital Redesignations and Reclassifications 1. General Policies and Effects of Reclassification and Redesignation Under section 1886(d)(10) of the Act, the MGCRB considers applications by hospitals for geographic reclassification for purposes of payment under the IPPS. Hospitals must apply to the MGCRB to reclassify not later than 13 months prior to the start of the fiscal year for which reclassification is sought (generally by September 1). Generally, hospitals must be proximate to the labor market area to which they are seeking reclassification and must demonstrate characteristics similar to hospitals located in that area. The MGCRB issues its decisions by the end of February for reclassifications that become effective for the following fiscal year (beginning October 1). The regulations applicable to reclassifications by the MGCRB are located in 42 CFR 412.230 through 412.280. (We refer readers to a discussion in the FY 2002 IPPS final rule (66 FR 39874 and 39875) regarding how the MGCRB defines mileage for purposes of the proximity requirements.) The general policies for reclassifications and redesignations that we are adopting for FY 2014, and the policies for the effects of hospitals’ reclassifications and redesignations on the wage index, are the same as those discussed in the FY 2012 IPPS/LTCH PPS final rule for the FY 2012 final wage index (76 FR 51595 and 51596). Also, in the FY 2012 IPPS/LTCH PPS final rule, we discussed the effects on the wage index of urban hospitals reclassifying to rural areas under 42 CFR 412.103. Hospitals that are geographically located in States without any rural areas are ineligible to apply for rural reclassification in accordance with the provisions of 42 CFR 412.103. Comment: One commenter noted that CMS did not propose any amendments to § 412.103, but requested that CMS retract the statement that hospitals that are geographically located in States without any rural areas are ineligible to apply for rural reclassification pursuant to 42 CFR 412.103; the commenter believed that this statement is a change in policy. The commenter believed that the statute and regulations permit a hospital in an all-urban State to be treated as if it were located in a rural area, and that no actual rural area in the State is necessary for such reclassification. Response: We disagree with commenter’s request, and maintain our position that hospitals that are geographically located in States without PO 00000 Frm 00097 Fmt 4701 Sfmt 4700 50591 any rural areas are ineligible for § 412.103 reclassification. This is consistent with the statute and CMS’ longstanding policy, and we did not propose any changes to this policy. Comment: One commenter questioned the reclassification process concerning urban hospitals that redesignate from urban status to rural status under § 412.103, then cancel their rural status and subsequently seek reclassification to another urban area through the MGCRB. The commenter also had questions concerning the process of MGCRB reclassification in the case of hospitals that currently have acquired rural status under § 412.103. Response: We thank the commenter for the comments. We did not make any proposals to change any of the reclassification processes or criteria. The processes for § 412.103 urban to rural redesignation and MGCRB reclassification are specified in 42 CFR 412.103 and 412.230 et. seq. The regulations in the sections above clearly define the process and describe the criteria and conditions for these reclassifications. We refer the commenter to the regulations for complete details on wage index reclassifications. 2. FY 2014 MGCRB Reclassifications a. FY 2014 Reclassification Requirements and Approvals Under section 1886(d)(10) of the Act, the MGCRB considers applications by hospitals for geographic reclassification for purposes of payment under the IPPS. The specific procedures and rules that apply to the geographic reclassification process are outlined in regulations under 42 CFR 412.230 through 412.280. At the time this final rule was constructed, the MGCRB had completed its review of FY 2014 reclassification requests. Based on such reviews, there were 296 hospitals approved for wage index reclassifications by the MGCRB for FY 2014. Because MGCRB wage index reclassifications are effective for 3 years, for FY 2014, hospitals reclassified during FY 2012 or FY 2013 are eligible to continue to be reclassified to a particular labor market area based on such prior reclassifications. There were 214 hospitals approved for wage index reclassifications in FY 2012, and 196 hospitals approved for wage index reclassifications in FY 2013. Of all the hospitals approved for reclassification for FY 2012, FY 2013, and FY 2014, based upon the review at the time of this final rule, 679 hospitals are in a reclassification status for FY 2014. Under the regulations at 42 CFR 412.273, hospitals that have been E:\FR\FM\19AUR2.SGM 19AUR2 50592 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 reclassified by the MGCRB are permitted to withdraw their applications within 45 days of the publication of a proposed rule. For information about withdrawing, terminating, or canceling a previous withdrawal or termination of a 3-year reclassification for wage index purposes, we refer readers to 42 CFR 412.273, as well as the FY 2002 IPPS final rule (66 FR 39887 through 39888) and the FY 2003 IPPS final rule (67 FR 50065 through 50066). Additional discussion on withdrawals and terminations, and clarifications regarding reinstating reclassifications and ‘‘fallback’’ reclassifications, were included in the FY 2008 IPPS final rule (72 FR 47333). Changes to the wage index that result from withdrawals of requests for reclassification, terminations, wage index corrections, appeals, and the Administrator’s review process for FY 2014 are incorporated into the wage index values published in this FY 2014 IPPS/LTCH PPS final rule. These changes affect not only the wage index value for specific geographic areas, but also the wage index value redesignated/ reclassified hospitals receive; that is, whether they receive the wage index that includes the data for both the hospitals already in the area and the redesignated/reclassified hospitals. Further, the wage index value for the area from which the hospitals are redesignated/reclassified may be affected. b. Applications for Reclassifications for FY 2015 Applications for FY 2015 reclassifications are due to the MGCRB by September 3, 2013 (the first working day of September 2013). We note that this is also the deadline for canceling a previous wage index reclassification withdrawal or termination under 42 CFR 412.273(d). As mentioned in section III.B. of the preamble of this final rule, although OMB issued revisions on February 28, 2013 to its area delineations, we did not propose to adopt those revisions for the FY 2014 wage index, and we will not be adopting the revisions before the September 3, 2013 deadline for applications for the FY 2015 wage index. Therefore, hospitals must apply for reclassifications based on the delineations we are using for FY 2014. Applications and other information about MGCRB reclassifications may be obtained via the Internet on the CMS Web site at: https://www.cms.gov/ Regulations-and-Guidance/ReviewBoards/MGCRB/, or by calling the MGCRB at (410) 786–1174. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 The mailing address of the MGCRB is: 2520 Lord Baltimore Drive, Suite L, Baltimore, MD 21244–2670. 3. Redesignations of Hospitals under Section 1886(d)(8)(B) of the Act Section 1886(d)(8)(B) of the Act requires us to treat a hospital located in a rural county adjacent to one or more urban areas as being located in the MSA if certain criteria are met. Effective beginning FY 2005, we use OMB’s 2000 CBSA standards and the Census 2000 data to identify counties in which hospitals qualify under section 1886(d)(8)(B) of the Act to receive the wage index of the urban area. (We note that, as mentioned in section III.B. of the preamble of this final rule, although OMB issued revisions on February 28, 2013, to its area delineations based on 2010 census data, we did not propose to adopt these revisions for the FY 2014 wage index.) Hospitals located in these counties have been known as ‘‘Lugar’’ hospitals and the counties themselves are often referred to as ‘‘Lugar’’ counties. The FY 2014 chart with the listing of the rural counties containing the hospitals designated as urban under section 1886(d)(8)(B) of the Act is available via the Internet on the CMS Web site. 4. Hospitals Redesignated under Section 1886(d)(8)(B) of the Act Seeking Reclassification by the MGCRB As in the past, hospitals redesignated under section 1886(d)(8)(B) of the Act are also eligible to be reclassified to a different area by the MGCRB. Using Table 4C associated with the proposed rule (which is available via the Internet on the CMS Web site), affected hospitals were permitted to compare the reclassified wage index for the labor market area into which they would be reclassified by the MGCRB to the reclassified wage index for the area to which they are redesignated under section 1886(d)(8)(B) of the Act. Hospitals could have withdrawn from an MGCRB reclassification within 45 days of the publication of the FY 2014 proposed rule. (We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51598 through 51599) for the procedural rules and requirements for a hospital that is redesignated under section 1886(d)(8)(B) of the Act and seeking reclassification under the MGCRB, as well as our policy of measuring the urban area, exclusive of the Lugar County, for purposes of meeting proximity requirements.) We treat New England deemed counties in a manner consistent with how we treat Lugar counties. (We refer readers to the FY 2008 IPPS final rule with comment PO 00000 Frm 00098 Fmt 4701 Sfmt 4700 period (72 FR 47337 through 47338) for a discussion of this policy.) 5. Waiving Lugar Redesignation for the Out-Migration Adjustment In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51599 through 51600), we adopted the policy that, beginning with FY 2012, an eligible hospital that waives its Lugar status in order to receive the out-migration adjustment has effectively waived its deemed urban status and, thus, is rural for all purposes under the IPPS, including being considered rural for the DSH payment adjustment, effective for the fiscal year in which the hospital receives the out-migration adjustment. (We refer readers to a discussion of DSH payment adjustment under section V.E. of the preamble of this final rule.) In addition, we adopted a minor procedural change that would allow a Lugar hospital that qualifies for and accepts the out-migration adjustment (through written notification to CMS within the requisite number of days from the publication of the proposed rule 11) to automatically waive its urban status for the 3-year period for which its out-migration adjustment is effective. That is, such a Lugar hospital would no longer be required during the second and third years of eligibility for the outmigration adjustment to advise us annually that it prefers to continue being treated as rural and receive the adjustment. Thus, under the procedural change, a Lugar hospital that requests to waive its urban status in order to receive the rural wage index in addition to the out-migration adjustment would be deemed to have accepted the outmigration adjustment and agrees to be treated as rural for the duration of its 3year eligibility period, unless, prior to its second or third year of eligibility, the hospital explicitly notifies CMS in writing, within the required period (generally 45 days from the publication of the proposed rule), that it instead elects to return to its deemed urban status and no longer wishes to accept the out-migration adjustment. We refer readers to the FY 2012 IPPS/ LTCH PPS final rule (76 FR 51599 through 51600) for a detailed discussion of the policy and process for waiving Lugar status for the out-migration adjustment. 11 Hospitals generally have 45 days from publication of the proposed rule to request an outmigration adjustment in lieu of the section 1886(d)(8) deemed urban status. E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations I. FY 2014 Wage Index Adjustment Based on Commuting Patterns of Hospital Employees In accordance with the broad discretion granted to the Secretary under section 1886(d)(13) of the Act, as added by section 505 of Public Law 108–173, beginning with FY 2005, we established a process to make adjustments to the hospital wage index based on commuting patterns of hospital employees (the ‘‘out-migration’’ adjustment). The process, outlined in the FY 2005 IPPS final rule (69 FR 49061), provides for an increase in the wage index for hospitals located in certain counties that have a relatively high percentage of hospital employees who reside in the county but work in a different county (or counties) with a higher wage index. For FY 2014, we are adopting the out-migration adjustment based on the same policies, procedures, and computation that were used for the FY 2012 out-migration adjustment. (We refer readers to a full discussion of the adjustment, including rules on deeming hospitals reclassified under section 1886(d)(8) or section 1886(d)(10) of the Act to have waived the out-migration adjustment, in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51601 through 51602).) Table 4J, which is available via the Internet on the CMS Web site, lists the out-migration adjustments for the FY 2014 wage index. We did not receive any public comments with regard to the outmigration adjustment for FY 2014. mstockstill on DSK4VPTVN1PROD with RULES6 J. Process for Requests for Wage Index Data Corrections The preliminary, unaudited Worksheet S–3 wage data and occupational mix survey data files for the proposed FY 2014 wage index were made available on October 3, 2012, through the Internet on the CMS Web site at: https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ AcuteInpatientPPS/Wage-Index-FilesItems/FY_2014_Wage_Index_ Home_Page.html. In the interest of meeting the data needs of the public, beginning with the proposed FY 2009 wage index, we post an additional public use file on our Web site that reflects the actual data that are used in computing the proposed wage index. The release of this new file does not alter the current wage index process or schedule. We notify the hospital community of the availability of these data as we do with the current public use wage data files through our Hospital Open Door forum. We encourage hospitals to sign up for automatic notifications of information about VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 hospital issues and the scheduling of the Hospital Open Door forums at the CMS Web site at: https://www.cms.gov/ Outreach-and-Education/Outreach/ OpenDoorForums/. In a memorandum dated October 19, 2012, we instructed all fiscal intermediaries/MACs to inform the IPPS hospitals they service of the availability of the wage index data files and the process and timeframe for requesting revisions (including the specific deadlines listed below). We also instructed the fiscal intermediaries/ MACs to advise hospitals that these data were also made available directly through their representative hospital organizations. If a hospital wished to request a change to its data as shown in the October 3, 2012 wage and occupational mix data files, the hospital was to submit corrections along with complete, detailed supporting documentation to its fiscal intermediary/MAC by December 10, 2012. (We note that this date was originally December 3, 2012. However, in a memorandum dated October 25, 2012, we instructed all fiscal intermediaries/MACs to inform the IPPS hospitals they service that we extended the deadline to December 10, 2012.) Hospitals were notified of this deadline and of all other deadlines and requirements, including the requirement to review and verify their data as posted in the preliminary wage index data files on the Internet, through the October 19, 2012 memorandum referenced above. In the October 19, 2012 memorandum, we also specified that a hospital requesting revisions to its occupational mix survey data was to copy its record(s) from the CY 2010 occupational mix preliminary files posted to the CMS Web site in October, highlight the revised cells on its spreadsheet, and submit its spreadsheet(s) and complete documentation to its fiscal intermediary/MAC no later than December 10, 2012. The fiscal intermediaries/MACs notified the hospitals by mid-February 2013 of any changes to the wage index data as a result of the desk reviews and the resolution of the hospitals’ earlyDecember revision requests. The fiscal intermediaries/MACs also submitted the revised data to CMS by mid-February 2013. CMS published the proposed wage index public use files that included hospitals’ revised wage index data on February 21, 2013. Hospitals had until March 4, 2013, to submit requests to the fiscal intermediaries/ MACs for reconsideration of adjustments made by the fiscal intermediaries/MACs as a result of the PO 00000 Frm 00099 Fmt 4701 Sfmt 4700 50593 desk review, and to correct errors due to CMS’ or the fiscal intermediary’s (or, if applicable, the MAC’s) mishandling of the wage index data. Hospitals also were required to submit sufficient documentation to support their requests. After reviewing requested changes submitted by hospitals, fiscal intermediaries/MACs were required to transmit to CMS any additional revisions resulting from the hospitals’ reconsideration requests by April 10, 2013. The deadline for a hospital to request CMS intervention in cases where the hospital disagreed with the fiscal intermediary’s (or, if applicable, the MAC’s) policy interpretations was April 17, 2013. Hospitals were given the opportunity to examine Table 2, which was listed in section VI. of the Addendum to the proposed rule and available via the Internet on the CMS Web site at: http: //www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/ AcuteInpatientPPS/Wage-Index-FilesItems/FY_2014_Wage_ Index_Home_Page.html. Table 2 contained each hospital’s adjusted average hourly wage used to construct the wage index values for the past 3 years, including the FY 2010 data used to construct the proposed FY 2014 wage index. We noted that the hospital average hourly wages shown in Table 2 only reflected changes made to a hospital’s data that were transmitted to CMS by March 4, 2013. We released the final wage index data public use files in early May 2013 on the Internet at: https://www.cms.gov/ Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/WageIndex-Files-Items/FY_2014_Wage_ Index_Home_Page.html. The May 2013 public use files were made available solely for the limited purpose of identifying any potential errors made by CMS or the fiscal intermediary/MAC in the entry of the final wage index data that resulted from the correction process described above (revisions submitted to CMS by the fiscal intermediaries/MACs by April 10, 2013). If, after reviewing the May 2013 final public use files, a hospital believed that its wage or occupational mix data were incorrect due to a fiscal intermediary/MAC or CMS error in the entry or tabulation of the final data, the hospital was required to send a letter to both its fiscal intermediary/MAC and CMS that outlined why the hospital believed an error existed and provide all supporting information, including relevant dates (for example, when it first became aware of the error). The hospital was required to send the letter to CMS and its fiscal E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50594 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations intermediaries/MACs no later than June 3, 2013. After the release of the May 2013 wage index data files, changes to the wage and occupational mix data were only made in those very limited situations involving an error by the fiscal intermediary/MAC or CMS that the hospital could not have known about before its review of the final wage index data files. Specifically, neither the fiscal intermediary/MAC nor CMS approved the following types of requests: • Requests for wage index data corrections that were submitted too late to be included in the data transmitted to CMS by fiscal intermediaries or the MACs on or before April 10, 2013. • Requests for correction of errors that were not, but could have been, identified during the hospital’s review of the February 21, 2013 wage index public use files. • Requests to revisit factual determinations or policy interpretations made by the fiscal intermediary or the MAC or CMS during the wage index data correction process. Verified corrections to the wage index data received timely by CMS and the fiscal intermediaries or the MACs (that is, by June 3, 2013) were incorporated into the final wage index in this FY 2014 IPPS/LTCH PPS final rule, which will be effective October 1, 2013. We created the processes described above to resolve all substantive wage index data correction disputes before we finalize the wage and occupational mix data for the FY 2014 payment rates. Accordingly, hospitals that did not meet the procedural deadlines set forth above will not be afforded a later opportunity to submit wage index data corrections or to dispute the fiscal intermediary’s (or, if applicable, the MAC’s) decision with respect to requested changes. Specifically, our policy is that hospitals that do not meet the procedural deadlines set forth above will not be permitted to challenge later, before the Provider Reimbursement Review Board, the failure of CMS to make a requested data revision. We refer readers also to the FY 2000 IPPS final rule (64 FR 41513) for a discussion of the parameters for appeals to the PRRB for wage index data corrections. Again, we believe the wage index data correction process described above provides hospitals with sufficient opportunity to bring errors in their wage and occupational mix data to the fiscal intermediary’s (or, if applicable, the MAC’s) attention. Moreover, because hospitals have access to the final wage index data by early May 2013, they have the opportunity to detect any data entry VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 or tabulation errors made by the fiscal intermediary or the MAC or CMS before the development and publication of the final FY 2014 wage index by August 2013, and the implementation of the FY 2014 wage index on October 1, 2013. If hospitals avail themselves of the opportunities afforded to provide and make corrections to the wage and occupational mix data, the wage index implemented on October 1 should be accurate. Nevertheless, in the event that errors are identified by hospitals and brought to our attention after June 3, 2013, we retain the right to make midyear changes to the wage index under very limited circumstances. Specifically, in accordance with 42 CFR 412.64(k)(1) of our existing regulations, we make midyear corrections to the wage index for an area only if a hospital can show that: (1) The fiscal intermediary or the MAC or CMS made an error in tabulating its data; and (2) the requesting hospital could not have known about the error or did not have an opportunity to correct the error, before the beginning of the fiscal year. For purposes of this provision, ‘‘before the beginning of the fiscal year’’ means by the June deadline for making corrections to the wage data for the following fiscal year’s wage index (for example, June 3, 2013 for the FY 2014 wage index). This provision is not available to a hospital seeking to revise another hospital’s data that may be affecting the requesting hospital’s wage index for the labor market area. As indicated earlier, because CMS makes the wage index data available to hospitals on the CMS Web site prior to publishing both the proposed and final IPPS rules, and the fiscal intermediaries or the MACs notify hospitals directly of any wage index data changes after completing their desk reviews, we do not expect that midyear corrections will be necessary. However, under our current policy, if the correction of a data error changes the wage index value for an area, the revised wage index value will be effective prospectively from the date the correction is made. In the FY 2006 IPPS final rule (70 FR 47385 through 47387 and 47485), we revised 42 CFR 412.64(k)(2) to specify that, effective on October 1, 2005, that is, beginning with the FY 2006 wage index, a change to the wage index can be made retroactive to the beginning of the Federal fiscal year only when CMS determines all of the following: (1) The fiscal intermediary (or, if applicable, the MAC) or CMS made an error in tabulating data used for the wage index calculation; (2) the hospital knew about the error and requested that the fiscal intermediary (or, if applicable, the PO 00000 Frm 00100 Fmt 4701 Sfmt 4700 MAC) and CMS correct the error using the established process and within the established schedule for requesting corrections to the wage index data, before the beginning of the fiscal year for the applicable IPPS update (that is, by the June 3, 2013 deadline for the FY 2014 wage index); and (3) CMS agreed before October 1 that the fiscal intermediary (or, if applicable, the MAC) or CMS made an error in tabulating the hospital’s wage index data and the wage index should be corrected. In those circumstances where a hospital requested a correction to its wage index data before CMS calculated the final wage index (that is, by the June 3, 2013 deadline for the FY 2014 wage index), and CMS acknowledges that the error in the hospital’s wage index data was caused by CMS’ or the fiscal intermediary’s (or, if applicable, the MAC’s) mishandling of the data, we believe that the hospital should not be penalized by our delay in publishing or implementing the correction. As with our current policy, we indicated that the provision is not available to a hospital seeking to revise another hospital’s data. In addition, the provision cannot be used to correct prior years’ wage index data; and it can only be used for the current Federal fiscal year. In situations where our policies would allow midyear corrections other than those specified in 42 CFR 412.64(k)(2)(ii), we continue to believe that it is appropriate to make prospective-only corrections to the wage index. We note that, as with prospective changes to the wage index, the final retroactive correction will be made irrespective of whether the change increases or decreases a hospital’s payment rate. In addition, we note that the policy of retroactive adjustment will still apply in those instances where a final judicial decision reverses a CMS denial of a hospital’s wage index data revision request. K. Labor-Related Share for the FY 2014 Wage Index Section 1886(d)(3)(E) of the Act directs the Secretary to adjust the proportion of the national prospective payment system base payment rates that are attributable to wages and wagerelated costs by a factor that reflects the relative differences in labor costs among geographic areas. It also directs the Secretary to estimate from time to time the proportion of hospital costs that are labor-related: ‘‘The Secretary shall adjust the proportion, (as estimated by the Secretary from time to time) of hospitals’ costs which are attributable to wages and wage-related costs, of the E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations DRG prospective payment rates. . . .’’ We refer to the portion of hospital costs attributable to wages and wage-related costs as the labor-related share. The labor-related share of the prospective payment rate is adjusted by an index of relative labor costs, which is referred to as the wage index. Section 403 of Public Law 108–173 amended sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act to provide that the Secretary must employ 62 percent as the labor-related share unless this ‘‘would result in lower payments to a hospital than would otherwise be made.’’ However, these provisions of Public Law 108–173 did not change the legal requirement that the Secretary estimate ‘‘from time to time’’ the proportion of hospitals’ costs that are ‘‘attributable to wages and wage-related costs.’’ Thus, hospitals receive payment based on either a 62-percent laborrelated share, or the labor-related share estimated from time to time by the Secretary, depending on which laborrelated share results in a higher payment. Comment: Several commenters stated that CMS has not kept pace by adjusting the labor-related share of the standard rate to which the wage index is applied. The commenters explained that CMS has provided incentives for hospitals to reduce costs through a declining wage index while hospitals have responded and made strides in labor efficiency. The commenters recommended that CMS adjust the labor-related share of the standard rate to 42 percent from the current 62 percent for hospitals with a wage index of less than 1.0. The commenters believed that a 42-percent labor component is more reflective of hospitals seeking cost efficiencies in wages. Response: As stated above, section 403 of Public Law 108–173 amended sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act to provide that the Secretary must employ 62 percent as the labor-related share. Therefore, any changes to the application of the 62 percent laborrelated share would require a change to current law by Congress. In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43850 through 43857), we rebased and revised the IPPS market basket and the labor-related share, using FY 2006 as the base year. The labor-related share for FY 2010 through FY 2013 is 68.8 percent. For FY 2014, as proposed in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27561 through 27572), and as described in section IV. of the preamble of this final rule, we are rebasing and revising the IPPS market basket using VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 FY 2010 as the base year. Using the FY 2010-based IPPS market basket, we also recalculated the labor-related share and are finalizing a labor-related share of 69.6 percent for discharges occurring on or after October 1, 2013, as discussed in section IV.B.4. of the preamble of this final rule. As discussed in Appendix A of this final rule, we are implementing this revised and rebased labor-related share in a budget neutral manner. However, consistent with section 1886(d)(3)(E) of the Act, we are not taking into account the additional payments that would be made as a result of hospitals with a wage index less than or equal to 1.0 being paid using a labor-related share lower than the labor-related share of hospitals with a wage index greater than 1.0. The labor-related share is used to determine the proportion of the national IPPS base payment rate to which the area wage index is applied. For FY 2014, as proposed in the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR 27561 through 27572) and as described in section IV. of the preamble of this final rule, we are including in the laborrelated share the national average proportion of operating costs that are attributable to wages and salaries, employee benefits, contract labor, the labor-related portion of professional fees, administrative and facilities support services, and all other laborrelated services as measured in the FY 2010-based IPPS market basket. Therefore, for FY 2014, as discussed in section IV.B.4. of the preamble of this final rule, we are finalizing our proposals without modification and adopting a labor-related share of 69.6 percent for discharges occurring on or after October 1, 2013. Tables 1A and 1B, which are published in section VI. of the Addendum to this final rule and are available via the Internet, reflect this labor-related share. For FY 2014, for all IPPS hospitals whose wage indices are less than 1.0000, we are applying the wage index to a labor-related share of 62 percent of the national standardized amount. For all IPPS hospitals whose wage indices are greater than 1.0000, for FY 2014, we are applying the wage index to a labor-related share of 69.6 percent of the national standardized amount. We note that, for Puerto Rico hospitals, the national labor-related share is 62 percent because the national wage index for all Puerto Rico hospitals is less than 1.0. In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43850 through 43856), we also rebased and revised the labor-related share for the Puerto Ricospecific standardized amounts using FY 2006 as a base year. We finalized a PO 00000 Frm 00101 Fmt 4701 Sfmt 4700 50595 labor-related share for the Puerto Ricospecific standardized amounts for FY 2010 through FY 2013 of 62.1 percent. As proposed in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27566 through 27568) and as described in section IV.B.4. of the preamble of this final rule, for FY 2014, we also are rebasing and revising the labor-related share for the Puerto Rico-specific standardized amounts using FY 2010 as a base year. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27566 through 27568), we proposed a laborrelated share for the Puerto Rico-specific standardized amounts of 63.2 percent for discharges occurring on or after October 1, 2013. For FY 2014, we are finalizing our proposal and adopting a labor-related share for the Puerto Ricospecific standardized amounts of 63.2 percent for discharges occurring on or after October 1, 2013, as discussed in section IV.B.4. of the preamble of this final rule. Consistent with our methodology for determining the national labor-related share, we added the Puerto Rico-specific relative weights for wages and salaries, employee benefits, and contract labor, with the national proportion of costs for the labor-related portion of professional fees, administrative and facilities support services, and all other laborrelated services to determine the laborrelated share. Puerto Rico hospitals are paid based on 75 percent of the national standardized amounts and 25 percent of the Puerto Rico-specific standardized amounts. For FY 2014, we are adopting that the labor-related share of a hospital’s Puerto Rico-specific rate will be either the Puerto Rico-specific laborrelated share of 63.2 percent or 62 percent, depending on which results in higher payments to the hospital. If the hospital has a Puerto Rico-specific wage index of greater than 1.0 for FY 2014, we will set the hospital’s rates using a labor-related share of 63.2 percent for the 25 percent portion of the hospital’s payment determined by the Puerto Rico standardized amounts because this amount will result in higher payments. Conversely, a hospital with a Puerto Rico-specific wage index of less than 1.0 for FY 2014 will be paid using the Puerto Rico-specific labor-related share of 62 percent of the Puerto Rico-specific rates because the lower labor-related share will result in higher payments. The Puerto Rico labor-related share of 63.2 percent for FY 2014 is reflected in Table 1C, which is published in section VI. of the Addendum to this final rule and available via the Internet. Comment: Several commenters supported the proposed increase in the E:\FR\FM\19AUR2.SGM 19AUR2 50596 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations labor-related share. We did not receive any public comments on the proposed Puerto Rico labor-related share. Response: We appreciate the commenters’ support. As discussed in section IV.B.4. of the preamble of this final rule, we are finalizing the labor-related share of 69.6 percent as proposed for all IPPS hospitals whose wage indices are greater than 1.0000. We also are finalizing the Puerto Rico labor-related share of the labor-related share of 63.2 percent as proposed. Further discussion of the FY 2014 labor-related share for the national standardized amount and the Puerto Rico-specific standardized amount can be found in section IV.B.4. of the preamble of this final rule. IV. Rebasing and Revision of the Hospital Market Baskets for Acute Care Hospitals mstockstill on DSK4VPTVN1PROD with RULES6 A. Background Effective for cost reporting periods beginning on or after July 1, 1979, we developed and adopted a hospital input price index (that is, the hospital market basket for operating costs). Although ‘‘market basket’’ technically describes the mix of goods and services used in providing hospital care, this term is also commonly used to denote the input price index (that is, cost category weights and price proxies combined) derived from that market basket. Accordingly, the term ‘‘market basket’’ as used in this document refers to the hospital input price index. The percentage change in the market basket reflects the average change in the price of goods and services hospitals purchase in order to provide inpatient care. We first used the market basket to adjust hospital cost limits by an amount that reflected the average increase in the prices of the goods and services used to provide hospital inpatient care. This approach linked the increase in the cost limits to the efficient utilization of resources. Since the inception of the IPPS, the projected change in the hospital market basket has been the integral component of the update factor by which the prospective payment rates are updated every year. An explanation of the hospital market basket used to develop the prospective payment rates was published in the Federal Register on September 1, 1983 (48 FR 39764). We also refer readers to the FY 2010 IPPS/ RY 2010 LTCH PPS final rule (74 FR 43843) in which we discussed the most recent previous rebasing of the hospital input price index. The hospital market basket is a fixedweight, Laspeyres-type price index. A VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Laspeyres-type price index measures the change in price, over time, of the same mix of goods and services purchased in the base period. Any changes in the quantity or mix of goods and services (that is, intensity) purchased over time are not measured. The index itself is constructed in three steps. First, a base period is selected (as we proposed, in this final rule, we are using FY 2010 as the base period) and total base period expenditures are estimated for a set of mutually exclusive and exhaustive spending categories, with the proportion of total costs that each category represents being calculated. These proportions are called ‘‘cost weights’’ or ‘‘expenditure weights.’’ Second, each expenditure category is matched to an appropriate price or wage variable, referred to as a ‘‘price proxy.’’ In almost every instance, these price proxies are derived from publicly available statistical series that are published on a consistent schedule (preferably at least on a quarterly basis). Finally, the expenditure weight for each cost category is multiplied by the level of its respective price proxy. The sum of these products (that is, the expenditure weights multiplied by their price index levels) for all cost categories yields the composite index level of the market basket in a given period. Repeating this step for other periods produces a series of market basket levels over time. Dividing an index level for a given period by an index level for an earlier period produces a rate of growth in the input price index over that timeframe. As noted above, the market basket is described as a fixed-weight index because it represents the change in price over time of a constant mix (quantity and intensity) of goods and services needed to provide hospital services. The effects on total expenditures resulting from changes in the mix of goods and services purchased subsequent to the base period are not measured. For example, a hospital hiring more nurses to accommodate the needs of patients would increase the volume of goods and services purchased by the hospital, but would not be factored into the price change measured by a fixed-weight hospital market basket. Only when the index is rebased would changes in the quantity and intensity be captured, with those changes being reflected in the cost weights. Therefore, we rebase the market basket periodically so that the cost weights reflect recent changes in the mix of goods and services that hospitals purchase (hospital inputs) to furnish inpatient care between base periods. PO 00000 Frm 00102 Fmt 4701 Sfmt 4700 We last rebased the hospital market basket cost weights effective for FY 2010 (74 FR 43843), with FY 2006 data used as the base period for the construction of the market basket cost weights. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27561 through 27572), we proposed to rebase the cost structure for the IPPS hospital index from FY 2006 to FY 2010, as discussed below. B. Rebasing and Revising the IPPS Market Basket The terms ‘‘rebasing’’ and ‘‘revising,’’ while often used interchangeably, actually denote different activities. ‘‘Rebasing’’ means moving the base year for the structure of costs of an input price index (for example, in this final rule, we are shifting the base year cost structure for the IPPS hospital index from FY 2006 to FY 2010). ‘‘Revising’’ means changing data sources, or price proxies, used in the input price index. As published in the FY 2006 IPPS final rule (70 FR 47387), in accordance with section 404 of Public Law 108–173, CMS determined a new frequency for rebasing the hospital market basket. We established a rebasing frequency of every 4 years and, therefore, for the FY 2014 IPPS update, as we proposed, we are rebasing and revising the IPPS market basket from FY 2006 to FY 2010. We invited public comments on our proposed methodology. A summary of the public comments we received and our responses are included under the appropriate subject area. 1. Development of Cost Categories and Weights a. Medicare Cost Reports The major source of expenditure data for developing the rebased and revised hospital market basket cost weights is the FY 2010 Medicare cost reports. These FY 2010 Medicare cost reports are for cost reporting periods beginning on and after October 1, 2009 and before October 1, 2010. In the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR 27562), we proposed to use FY 2010 as the base year because we believe that the FY 2010 Medicare cost reports represent the most recent, complete set of Medicare cost report data available for IPPS hospitals. As was done in previous rebasings, these cost reports are from IPPS hospitals only (hospitals excluded from the IPPS and CAHs are not included) and are based on IPPS Medicare-allowable operating costs. IPPS Medicare-allowable operating costs are costs that are eligible to be paid for under the IPPS. For example, the IPPS market basket excludes home health agency (HHA) costs as these costs would E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations other.’’ The proposed cost weights that were obtained directly from the Medicare cost reports were reported in Table IV01 of the proposed rule. We proposed to then supplement these Medicare cost report cost weights with information obtained from other data sources to derive the proposed IPPS market basket cost weights. Comment: One commenter supported the proposal to move to an FY 2010based market basket. be paid under the HHA PPS and, therefore, these costs are not IPPS Medicare-allowable costs. We proposed to obtain seven major expenditures or cost categories for the FY 2010 IPPS market basket from the Medicare cost reports—the same as in the FY 2006-based hospital market basket: Wages and salaries, employee benefits, contract labor, pharmaceuticals, professional liability insurance (malpractice), blood and blood products, and a residual ‘‘all 50597 Response: We appreciate the commenter’s support. In this final rule, we are finalizing our calculation of the FY 2010-based IPPS cost weights using the Medicare cost reports as proposed and describe our methods in more detail below. Table IV01 below shows the major cost categories and their respective cost weights as calculated directly from the Medicare Cost Reports for this final rule. TABLE IV01—MAJOR COST CATEGORIES AND THEIR RESPECTIVE COST WEIGHTS AS CALCULATED DIRECTLY FROM THE MEDICARE COST REPORTS FY 2006based market basket Major cost categories Wages and salaries ................................................................................................................................................. Employee benefits ................................................................................................................................................... Contract labor .......................................................................................................................................................... Professional Liability Insurance (Malpractice) ......................................................................................................... Pharmaceuticals ...................................................................................................................................................... Blood and blood products ........................................................................................................................................ All other .................................................................................................................................................................... From FY 2006 to FY 2010, the wages and salaries and employee benefits cost weights as calculated directly from the Medicare cost reports increased by approximately 0.7 and 0.8 percentage point, respectively, while the contract labor cost weight decreased by 0.8 percentage point. As we did for the FY 2006-based IPPS market basket (74 FR 43847), we proposed to allocate contract labor costs to the wages and salaries and employee benefits cost weights based on their relative proportions for employed labor under the assumption that contract labor costs are comprised of both wages and salaries and employee benefits. The contract labor allocation proportion for wages and salaries is equal to the wages and salaries cost weight as a percent of the sum of the wages and salaries cost weight and the employee benefits cost weight. Using the FY 2010 Medicare cost report data, this percentage is 78.3 percent; therefore, we proposed to allocate approximately 78.3 percent of the contract labor cost weight to the wages and salaries cost weight. Table IV02 in the proposed rule showed the wages and salaries and employee benefit cost weights after contract labor allocation for both the FY 2006-based IPPS market Proposed and final FY 2010based market basket 45.156 11.873 2.598 1.661 5.380 1.078 32.254 45.819 12.713 1.806 1.330 5.402 1.069 31.861 basket and the proposed FY 2010-based IPPS market basket. We did not receive any specific public comment regarding the allocation of contract labor cost weight to the wages and salaries and employee benefits cost weights. In this final rule, we are finalizing our methodology of allocating the contract labor cost weight as we proposed. Table IV02 below shows the wages and salaries and employee benefit cost weights after contract labor allocation for the FY 2006-based IPPS market basket and the proposed and final FY 2010-based IPPS market basket. TABLE IV02—WAGES AND SALARIES AND EMPLOYEE BENEFITS COST WEIGHTS AFTER CONTRACT LABOR ALLOCATION FY 2006based market basket Major cost categories mstockstill on DSK4VPTVN1PROD with RULES6 Wages and salaries ................................................................................................................................................. Employee benefits ................................................................................................................................................... After the allocation of contract labor, the final FY 2010-based wages and salaries cost weight is relatively similar to the FY 2006-based wages and salaries cost weight while the final FY 2010based employee benefits cost weight increased 0.7 percentage point. This is primarily a result of an increase in benefits costs relative to wages and salaries costs from the Medicare cost report data for employed workers; in VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 2006, the ratio of the employee benefits cost weight to the wages and salaries cost weight was 26.3 percent, while in 2010 this ratio increased to 27.8 percent. b. Other Data Sources In addition to the data from the Medicare cost reports, the other data source we proposed to use to develop the FY 2010-based IPPS market basket cost weights is the 2002 Benchmark Input-Output (I–O) Tables created by PO 00000 Frm 00103 Fmt 4701 Sfmt 4700 Proposed and final FY 2010based market basket 47.213 12.414 47.233 13.105 the Bureau of Economic Analysis (BEA), U.S. Department of Commerce. We proposed to use the 2002 BEA Benchmark I–O data to disaggregate the ‘‘all other’’ (residual) cost category (31.861 percent) into more detailed hospital expenditure category shares. The BEA Benchmark I–O accounts provide the most detailed information on the goods and services purchased by an industry, which allows for a more E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50598 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations detailed disaggregation of expenses in the market basket for which we can then proxy the appropriate price inflation. The BEA Benchmark I–O data are generally scheduled for publication every 5 years. At the time of development of the FY 2014 IPPS/LTCH PPS proposed rule, the most recent data available were for 2002. BEA also produces Annual I–O estimates; however, the 2002 Benchmark I–O data represent a much more comprehensive and detailed set of data that are derived from the 2002 Economic Census. In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43845), we used the 2002 Benchmark I–O data (aged to FY 2006) for the FY 2006-based IPPS market basket, to be effective for FY 2010. Because BEA had not yet released new Benchmark I–O data at the time we prepared our analysis for the proposed rule, and we believe the data to be comprehensive and complete as indicated above, we proposed to use the 2002 Benchmark I–O data in the FY 2010-based IPPS market basket for the FY 2014 IPPS/LTCH PPS proposed rule. Therefore, instead of using the less detailed, less accurate Annual I–O data, we proposed to age the 2002 Benchmark I–O data forward to FY 2010. The methodology we proposed to use to age the data forward involves applying the annual price changes from the respective price proxies to the appropriate cost categories. We repeat this practice for each year. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27563), we proposed that, if more recent BEA benchmark I–O data for 2007 was released between the proposed and final rule with sufficient time to incorporate such data into the final rule, we would incorporate these data into the FY 2010-based IPPS market basket for the final rule. The 2007 BEA I–O data was expected to be released in the summer of 2013. However, at the time we prepared our analysis for this final rule, BEA had not published the 2007 Benchmark I–O data. Therefore, we were unable to incorporate any revised I–O data in the final FY 2010-based IPPS market basket. The ‘‘all other’’ cost category expenditure shares are determined as being equal to each category’s proportion to total ‘‘all other’’ expenditures based on the aged 2002 Benchmark I–O data. For instance, if the cost for telephone services represented 10 percent of the sum of the ‘‘all other’’ Benchmark I–O hospital expenditures, telephone services would represent 10 percent of the ‘‘all other’’ cost category of the IPPS market basket. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Following publication of the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule, and in an effort to provide greater transparency, we posted on the CMS market basket Web page at: https:// www.cms.gov/Research-Statistics-Dataand-Systems/Statistics-Trends-andReports/MedicareProgramRatesStats/ MarketBasketResearch.html an illustrative spreadsheet that shows how the detailed cost weights in the proposed rule (that is, those not calculated using Medicare cost reports) were determined using the 2002 Benchmark I–O data. 2. Cost Category Computation As stated previously, for the proposed FY 2010-based market basket, we proposed to use data from the Medicare cost reports to derive seven major cost categories that were the same detailed cost categories as used in the FY 2006based IPPS market basket. Also, we did not propose to change our definition of the labor-related share. As discussed in more detail below and similar to the previous rebasings, we classify a cost category as labor-related and include it in the labor-related share if the cost category is defined as being laborintensive and its cost varies with the local labor market. Comment: One commenter supported the use of 2002 BEA data if it is not possible to move to 2007 data in the final rule. We did not receive any public comments on the specific methodology for calculating the final cost weights. Response: Since the 2007 BEA I–O data has not been published, we are unable to incorporate the data into the FY 2010-based IPPS market basket. We appreciate the commenter’s support to use the 2002 BEA I–O data, given these data limitations. In this final rule, we are finalizing the use of the 2002 I–O data as we proposed in the FY 2014 proposed rule. We also are finalizing our calculation of the final cost category weights as we proposed. 3. Selection of Price Proxies After computing the FY 2010 cost weights for the IPPS market basket, it was necessary to select appropriate wage and price proxies to reflect the rate of price change for each expenditure category. We proposed to use the same price proxies that were used in the FY 2006-based IPPS market basket. A discussion of our rationale for selecting these price proxies can be found in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43845). With the exception of the proxy for professional liability insurance (PLI), all the proxies we proposed were based on Bureau of Labor Statistics (BLS) data PO 00000 Frm 00104 Fmt 4701 Sfmt 4700 and are grouped into one of the following BLS categories: • Producer Price Indexes—Producer Price Indexes (PPIs) measure price changes for goods sold in markets other than the retail market. PPIs are preferable price proxies for goods and services that hospitals purchase as inputs because PPIs better reflect the actual price changes encountered by hospitals. For example, we proposed to use a PPI for prescription drugs, rather than the Consumer Price Index (CPI) for prescription drugs, because hospitals generally purchase drugs directly from a wholesaler. The PPIs that we proposed to use measure price changes at the final stage of production. • Consumer Price Indexes— Consumer Price Indexes (CPIs) measure change in the prices of final goods and services bought by the typical consumer. Because they may not represent the price faced by a producer, we proposed to use CPIs only if an appropriate PPI is not available, or if the expenditures are more like those faced by retail consumers in general rather than by purchasers of goods at the wholesale level. For example, the CPI for food purchased away from home was proposed to be used as a proxy for contracted food services. • Employment Cost Indexes— Employment Cost Indexes (ECIs) measure the rate of change in employee wage rates and employer costs for employee benefits per hour worked. These indexes are fixed-weight indexes and strictly measure the change in wage rates and employee benefits per hour. Appropriately, they are not affected by shifts in employment mix. We evaluated the price proxies using the criteria of reliability, timeliness, availability, and relevance. Reliability indicates that the index is based on valid statistical methods and has low sampling variability. Timeliness implies that the proxy is published regularly, preferably at least once a quarter. Availability means that the proxy is publicly available. Finally, relevance means that the proxy is applicable and representative of the cost category weight to which it is applied. We stated in the proposed rule that we believed the proposed PPIs, CPIs, and ECIs selected meet these criteria. Table IV03 below sets forth the final FY 2010-based IPPS market basket, including the cost categories and their respective weights and price proxies. For comparison purposes, the corresponding FY 2006-based IPPS market basket cost weights also are listed. A summary outlining the choice of the various proxies follows the table. E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 50599 TABLE IV03—FY 2010-BASED IPPS HOSPITAL MARKET BASKET COST CATEGORIES, COST WEIGHTS, AND PRICE PROXIES COMPARED TO FY 2006-BASED IPPS MARKET BASKET COST WEIGHTS FY 2006based hospital market basket cost weights FY 2010based hospital market basket cost weights 1. Compensation .............................. A. Wages and Salaries 1 .......... B. Employee Benefits 1 ............. 2. Utilities ......................................... A. Fuel, Oil, and Gasoline ........ B. Electricity .............................. C. Water and Sewage .............. 3. Professional Liability Insurance ... 4. All Other ....................................... A. All Other Products ................ (1.) Pharmaceuticals ................. (2.) Food: Direct Purchases ..... (3.) Food: Contract Services .... (4.) Chemicals 2 ........................ (5.) Blood and Blood Products (6.) Medical Instruments ........... (7.) Rubber and Plastics ........... (8.) Paper and Printing Products. (9.) Apparel ............................... (10.) Machinery and Equipment (11.) Miscellaneous Products ... B. Labor-related Services ......... (1.) Professional Fees: Laborrelated. (2.) Administrative and Facilities Support Services 3. (3.) All Other: Labor-Related Services. C. Nonlabor-Related Services .. (1.) Professional Fees: Nonlabor-Related. (2.) Financial Services .............. (3.) Telephone Services ........... (4.) Postage .............................. (5.) All Other: Nonlabor-Related Services. 59.627 47.213 12.414 2.180 0.418 1.645 0.117 1.661 36.533 19.473 5.380 3.982 0.575 1.538 1.078 2.762 1.659 1.492 60.338 47.233 13.105 2.246 0.447 1.666 0.133 1.330 36.086 19.458 5.402 4.206 0.578 1.529 1.069 2.577 1.637 1.507 0.325 0.163 0.519 9.175 5.356 0.299 0.151 0.503 9.249 5.500 PPI for Apparel. PPI for Machinery and Equipment. PPI for Finished Goods less Food and Energy. 0.626 0.619 ECI for Compensation for Office and Administrative Services. 3.193 3.130 ECI for Compensation for Private Service Occupations. 7.885 4.074 7.379 3.687 ECI for Compensation for Professional and Related Occupations. 1.281 0.627 0.963 0.940 1.239 0.597 0.956 0.900 ECI for Compensation for Financial Activities. CPI–U for Telephone Services. CPI–U for Postage. CPI–U for All Items less Food and Energy. Total ................................... 100.000 100.000 Cost categories FY 2010-based hospital market basket price proxies ECI for Wages and Salaries, Civilian Hospital Workers. ECI for Benefits, Civilian Hospital Workers. PPI for Petroleum Refineries. PPI for Commercial Electric Power. CPI–U for Water and Sewerage Maintenance. CMS Professional Liability Insurance Premium Index. PPI for Pharmaceuticals for Human Use, Prescription. PPI for Processed Foods & Feeds. CPI–U for Food Away From Home. Blend of Chemical PPIs. PPI for Blood and Organ Banks. PPI for Medical, Surgical, and Personal Aid Devices. PPI for Rubber & Plastic Products. PPI for Converted Paper & Paperboard Products. ECI for Compensation for Professional and Related Occupations. mstockstill on DSK4VPTVN1PROD with RULES6 Note: Detail may not add to total due to rounding. 1 Contract labor is distributed to wages and salaries and employee benefits based on the share of total compensation that each category represents. 2 To proxy the ‘‘chemicals’’ cost category, we used a blended PPI composed of the PPI for industrial gas manufacturing, the PPI for other basic inorganic chemical manufacturing, the PPI for other basic organic chemical manufacturing, and the PPI for soap and cleaning compound manufacturing. For more detail about this proxy, see the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43845). 3 We note that this cost category in the FY 2006-based IPPS market basket was ‘‘Administrative and Business Support Services.’’ We changed the name slightly to be more clear what type of costs are included in this cost category, but we did not change the classification of which costs are included in the category. As stated above, we proposed to use the same price proxies used in the FY 2006-based IPPS market basket. A rationale for selecting these price proxies can be found in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43845). The price proxies were selected to most closely match the costs included in each of the cost categories of the FY 2010-based IPPS market basket. We did not receive any public comments on the price proxies we proposed to use in the FY 2010-based IPPS market basket. In this final rule, we are finalizing the use of the price proxies that we proposed. Below is a list VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 of the price proxies we proposed, and are finalizing to use, for the FY 2010based IPPS market basket. a. Wages and Salaries We use the ECI for Wages and Salaries for Hospital Workers (All Civilian) (BLS series code CIU1026220000000I) to measure the price growth of this cost category. b. Employee Benefits We use the ECI for Employee Benefits for Hospital Workers (All Civilian) to measure the price growth of this cost category. PO 00000 Frm 00105 Fmt 4701 Sfmt 4700 c. Fuel, Oil, and Gasoline We use the PPI for Petroleum Refineries (BLS series code PCU324110324110) to measure the price growth of this cost category. d. Electricity We use the PPI for Commercial Electric Power (BLS series code WPU0542) to measure the price growth of this cost category. e. Water and Sewage We use the CPI for Water and Sewerage Maintenance (All Urban Consumers) (BLS series code E:\FR\FM\19AUR2.SGM 19AUR2 50600 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations CUUR0000SEHG01) to measure the price growth of this cost category. f. Professional Liability Insurance We proxy price changes in hospital professional liability insurance premiums (PLI) using percentage changes as estimated by the CMS Hospital Professional Liability Insurance Premium Index. To generate these estimates, we collect commercial insurance premiums for a fixed level of coverage while holding nonprice factors constant (such as a change in the level of coverage). This method is also used to proxy PLI price changes in the Medicare Economic Index (75 FR 73268). g. Pharmaceuticals We use the PPI for Pharmaceuticals for Human Use, Prescription (BLS series code WPUSI07003) to measure the price growth of this cost category. This is the same proxy that was used in the FY 2006-based IPPS market basket, although BLS since changed the naming convention for this series. h. Food: Direct Purchases We use the PPI for Processed Foods and Feeds (BLS series code WPU02) to measure the price growth of this cost category. i. Food: Contract Services We use the CPI for Food Away From Home (All Urban Consumers) (BLS series code CUUR0000SEFV) to measure the price growth of this cost category. j. Chemicals We use a blended PPI composed of the PPI for Industrial Gas Manufacturing (NAICS 325120) (BLS series code PCU325120325120P), the PPI for Other Basic Inorganic Chemical Manufacturing (NAICS 325180) (BLS series code PCU32518–32518–), the PPI for Other Basic Organic Chemical Manufacturing (NAICS 325190) (BLS series code PCU32519–32519), and the PPI for Soap and Cleaning Compound Manufacturing (NAICS 325610) (BLS series code PCU32561–32561–). k. Blood and Blood Products We use the PPI for Blood and Organ Banks (BLS series code PCU621991621991) to measure the price growth of this cost category. l. Medical Instruments We use the PPI for Medical, Surgical, and Personal Aid Devices (BLS series code WPU156) to measure the price growth of this cost category. m. Rubber and Plastics We use the PPI for Rubber and Plastic Products (BLS series code WPU07) to measure price growth of this cost category. n. Paper and Printing Products We use the PPI for Converted Paper and Paperboard Products (BLS series code WPU0915) to measure the price growth of this cost category. o. Apparel We use the PPI for Apparel (BLS series code WPU0381) to measure the price growth of this cost category. p. Machinery and Equipment We use the PPI for Machinery and Equipment (BLS series code WPU11) to measure the price growth of this cost category. q. Miscellaneous Products We use the PPI for Finished Goods Less Food and Energy (BLS series code WPUSOP3500) to measure the price growth of this cost category. r. Professional Fees: Labor-Related and Professional Fees: Nonlabor-Related We use the ECI for Compensation for Professional and Related Occupations (Private Industry) (BLS series code CIU2010000120000I) to measure the price growth of these cost categories. s. Administrative and Facilities Support Services We use the ECI for Compensation for Office and Administrative Support Services (Private Industry) (BLS series code CIU2010000220000I) to measure the price growth of this category. t. All Other: Labor-Related Services We use the ECI for Compensation for Service Occupations (Private Industry) (BLS series code CIU2010000300000I) to measure the price growth of this cost category. u. Financial Services We use the ECI for Compensation for Financial Activities (Private Industry) (BLS series code CIU201520A000000I) to measure the price growth of this cost category. v. Telephone Services We use the CPI for Telephone Services (BLS series code CUUR0000SEED) to measure the price growth of this cost category. w. Postage We use the CPI for Postage (BLS series code CUUR0000SEEC01) to measure the price growth of this cost category. x. All Other: Nonlabor-Related Services We use the CPI for All Items Less Food and Energy (BLS series code CUUR0000SA0L1E) to measure the price growth of this cost category. Table IV04 in the proposed rule compared both the historical and forecasted percent changes in the FY 2006-based IPPS market basket and the proposed FY 2010 based IPPS market basket. Table IV04 below compares both the historical and forecasted percent changes in the FY 2006-based IPPS market basket and the final FY 2010based IPPS market basket. As stated in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27572), we are incorporating a more recent forecast of the market basket to determine the FY 2014 market basket updates and MFP adjustment in the final rule. Therefore, the forecasted growth rates in Table IV04 are based on IHS Global Insight, Inc.’s (IGI) most recent second quarter 2013 forecast with historical data through first quarter 2013. The proposed rule presented IGI’s first quarter 2013 forecast with historical data through fourth quarter of 2012. mstockstill on DSK4VPTVN1PROD with RULES6 TABLE IV04—FY 2006-BASED AND FY 2010-BASED PROSPECTIVE PAYMENT HOSPITAL OPERATING INDEX PERCENT CHANGE, FY 2008 THROUGH FY 2016 FY 2006based IPPS market basket operating index percent change Fiscal year (FY) Historical data: FY 2008 ............................................................................................................................................................ FY 2009 ............................................................................................................................................................ FY 2010 ............................................................................................................................................................ VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 PO 00000 Frm 00106 Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2 FY 2010based IPPS market basket operating index percent change 4.0 2.6 2.1 4.0 2.6 2.1 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 50601 TABLE IV04—FY 2006-BASED AND FY 2010-BASED PROSPECTIVE PAYMENT HOSPITAL OPERATING INDEX PERCENT CHANGE, FY 2008 THROUGH FY 2016—Continued FY 2006based IPPS market basket operating index percent change FY 2010based IPPS market basket operating index percent change FY 2011 ............................................................................................................................................................ FY 2012 ............................................................................................................................................................ 2.7 2.2 2.7 2.2 Average FYs 2008–2012 .......................................................................................................................... Forecast: FY 2013 ............................................................................................................................................................ FY 2014 ............................................................................................................................................................ FY 2015 ............................................................................................................................................................ FY 2016 ............................................................................................................................................................ 2.7 2.7 2.2 2.5 2.7 3.0 2.1 2.5 2.7 3.0 Average FYs 2013–2016 .......................................................................................................................... 2.6 2.6 Fiscal year (FY) Source: IHS Global Insight, Inc., 2nd Quarter 2013 forecast. There is no difference between the FY 2006-based and the FY 2010-based IPPS market basket increases for 2008–2012. For FY 2014, the increase is 2.5 percent for both the FY 2006-based and FY 2010-based IPPS market baskets. mstockstill on DSK4VPTVN1PROD with RULES6 4. Labor-Related Share Under section 1886(d)(3)(E) of the Act, the Secretary estimates from time to time the proportion of payments that are labor-related. ‘‘The Secretary shall adjust the proportion, (as estimated by the Secretary from time to time) of hospitals’ costs which are attributable to wages and wage-related costs, of the DRG prospective payment rates . . . .’’ We refer to the proportion of hospitals’ costs that are attributable to wages and wage-related costs as the ‘‘labor-related share.’’ The labor-related share is used to determine the proportion of the national PPS base payment rate to which the area wage index is applied. We include a cost category in the labor-related share if the costs are labor intensive and vary with the local labor market. Because of this approach, in the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR 27566), we proposed to include in the laborrelated share the national average proportion of operating costs that are attributable to wages and salaries, employee benefits, contract labor, the labor-related portion of professional fees, administrative and facilities support services, and all other: Laborrelated services, as we did in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43850). Consistent with previous rebasings, the ‘‘all other: labor-related services’’ cost category is mostly comprised of building maintenance and security services (including, but not limited to, commercial and industrial VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 machinery and equipment repair, nonresidential maintenance and repair, and investigation and security services). Because these services tend to be laborintensive and are mostly performed at the hospital facility (and, therefore, unlikely to be purchased in the national market), we believe that they meet our definition of labor-related services. Similar to the FY 2006-based IPPS market basket, we proposed that the professional fees: Labor-related cost category includes expenses associated with advertising and a proportion of legal services, accounting and auditing, engineering, management consulting, and management of companies and enterprises expenses. As was done in the FY 2006-based IPPS market basket rebasing, we proposed to determine the proportion of legal, accounting and auditing, engineering, and management consulting services that meet our definition of labor-related services based on a survey of hospitals conducted by CMS in 2008. We notified the public of our intent to conduct this survey on December 9, 2005 (70 FR 73250) and received no comments (71 FR 8588). With approval from the OMB, we contacted the industry and received responses to our survey from 108 hospitals. Using data on FTEs to allocate responding hospitals across strata (region of the country and urban/rural status), we calculated poststratification weights. A more thorough discussion of the composition of the survey and poststratification can be found in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43850 through 43856). Based on the weighted results of the survey, we determined that hospitals purchase, on average, the following portions of contracted professional services outside of their local labor market: PO 00000 Frm 00107 Fmt 4701 Sfmt 4700 • 34 percent of accounting and auditing services; • 30 percent of engineering services; • 33 percent of legal services; and • 42 percent of management consulting services. We proposed to apply each of these percentages to its respective Benchmark I–O cost category underlying the professional fees cost category. This is the methodology that we used to separate the FY 2006-based IPPS market basket professional fees category into professional fees: Labor-related and professional fees: nonlabor-related cost categories. We proposed to use the same methodology and survey results to separate the FY 2010-based IPPS market basket professional fees category into professional fees: Labor-related and professional fees: nonlabor-related cost categories. We believe these survey results are appropriate to use for the FY 2010-based IPPS market basket rebasing as they empirically determine the proportion of contracted professional services purchased by the industry that is attributable to local firms and the proportion that is purchased from national firms. We did not receive any specific public comments on the use of the professional fees survey. Therefore, we are finalizing our methodology for allocating contracted professional services for FY 2014 as proposed. In the FY 2010-based IPPS market basket, nonmedical professional fees that were subject to allocation based on the survey results represent 2.059 percent of total costs (and are limited to those fees related to Accounting & Auditing, Legal, Engineering, and Management Consulting services). Based on our survey results, we are apportioning 1.301 percentage points of the 2.059 percentage point figure into the labor- E:\FR\FM\19AUR2.SGM 19AUR2 50602 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations related share and designating the remaining 0.758 percentage point as nonlabor-related. In addition to the professional services listed above, we also classify a proportion of the expenses under NAICS 55, Management of Companies and Enterprises, into the professional fees: Labor-related cost category as was done in the previous rebasing. The NAICS 55 data are mostly comprised of corporate, subsidiary, and regional managing offices, or otherwise referred to as home offices. As was done for the FY 2006-based IPPS market basket and as we proposed for the FY 2010-based IPPS market basket, for this final rule, we are including only a portion of the home office costs in the labor related share as not all hospitals are located in the same geographic area as their home office. We did not receive any specific public comments on our proposed methodology for allocating home office costs to the labor-related share. Therefore, we are finalizing this methodology as described in the proposed rule and provided below for FY 2014. Our methodology is based on data from the Medicare cost reports, as well as a CMS database of Home Office Medicare Records (HOMER) (a database that provides city and State information (addresses) for home offices). The Medicare cost report requires hospitals to report their home office provider numbers and locations. Using the data reported on the Medicare Cost Report as well as the HOMER database to determine the home office location for each home office provider number, we compared the location of the hospital with the location of the hospital’s home office. We determined the proportion of costs that should be allocated to the labor-related share based on the percent of total hospital home office compensation costs for those hospitals that had home offices located in their respective local labor markets—defined as being in the same Metropolitan Statistical Area (MSA). We primarily determined a hospital’s and home office’s MSAs using their zip code information from the Medicare cost report. For any home offices for which we could not identify a MSA from the Medicare cost report, we used the Medicare HOMER database to identify the home office’s city and State. As proposed, we determined the proportion of costs that should be allocated to the labor-related share based on the percent of hospital home office compensation as reported in Worksheet S–3, Part II. Using this methodology, we determined that 62 percent of hospitals’ home office compensation costs were for home offices located in their respective local labor markets. Therefore, we are allocating 62 percent of NAICS 55 expenses to the labor-related share. In the FY 2010-based IPPS market basket, NAICS 55 expenses that were subject to allocation based on the home office allocation methodology represent 5.650 percent of the total operating costs. Based on the home office results, we are apportioning 3.503 percentage points of the 5.650 percentage points figure into the labor-related share and designating the remaining 2.147 percentage points as nonlabor-related. In sum, based on the two allocations mentioned above, we apportioned 4.804 percentage points into the labor-related share. This amount is added to the 0.696 percentage point of professional fees that we already identified as laborrelated, resulting in a professional fees: Labor-related cost weight of 5.500 percent. Below is a table comparing the FY 2010-based labor-related share and the FY 2006-based labor-related share. As discussed in section IV.B.3. of the preamble of this final rule, the wages and salaries and employee benefits cost weight reflect contract labor costs. TABLE IV05—COMPARISON OF THE FY 2010-BASED LABOR-RELATED SHARE AND THE FY 2006-BASED LABOR-RELATED SHARE FY 2010based market basket cost weights Wages and Salaries ................................................................................................................................................ Employee Benefits ................................................................................................................................................... Professional Fees: Labor-Related ........................................................................................................................... Administrative and Facilities .................................................................................................................................... Support Services ..................................................................................................................................................... All Other: Labor-Related Services ........................................................................................................................... 47.213 12.414 5.356 47.233 13.105 5.500 0.626 3.193 0.619 3.130 Total Labor-Related Share ............................................................................................................................... mstockstill on DSK4VPTVN1PROD with RULES6 FY 2006based market basket cost weights 68.802 69.587 Using the cost category weights from the FY 2010-based IPPS market basket, we calculated a labor-related share of 69.587 percent, approximately 0.8 percentage point higher than the current labor-related share of 68.802. We continue to believe, as we have stated in the past, that these operating cost categories are related to, influenced by, or vary with the local markets. Therefore, our definition of the laborrelated share continues to be consistent with section 1886(d)(3) of the Act. We note that section 403 of Public Law 108– 173 amended sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act to provide that the Secretary must employ 62 VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 percent as the labor-related share unless 62 percent ‘‘would result in lower payments to a hospital than would otherwise be made.’’ Comment: Several commenters supported the proposed increase in the labor-related share. Response: We appreciate the commenters’ support. In this final rule, we are finalizing the labor-related share of 69.6 percent for FY 2014 as proposed. As we proposed, we also updated the labor-related share for Puerto Rico. Consistent with our methodology for determining the national labor-related share, we calculated the Puerto Rico- PO 00000 Frm 00108 Fmt 4701 Sfmt 4700 specific relative weights for wages and salaries, employee benefits, and contract labor using FY 2010 Medicare cost report data for IPPS hospitals located in Puerto Rico. Because there are no Puerto Rico-specific relative weights for professional fees and labor intensive services, we use the national weights as shown in Table IV05. This is the same methodology we used to determine the FY 2006-based Puerto Rico-specific labor-related share derived during the FY 2006-based IPPS market basket rebasing (74 FR 43856). Below is a table comparing the FY 2010-based Puerto Rico-specific labor- E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 50603 related share and the FY 2006-based Puerto Rico-specific labor-related share. TABLE IV06—COMPARISON OF THE FY 2010-BASED PUERTO RICO-SPECIFIC LABOR-RELATED SHARE AND FY 2006BASED PUERTO RICO-SPECIFIC LABOR-RELATED SHARE FY 2006based market basket cost weights FY 2010based market basket cost weights Wages and Salaries ................................................................................................................................................ Benefits .................................................................................................................................................................... Professional Fees: Labor-Related ........................................................................................................................... Administrative and Facilities: Support Services ...................................................................................................... All Other: Labor-Related Services ........................................................................................................................... 44.221 8.691 5.356 0.626 3.193 44.918 8.990 5.500 0.619 3.130 Total Labor-Related Share ............................................................................................................................... 62.087 63.157 Using the FY 2010-based Puerto Rico cost category weights, we calculated a labor-related share of 63.157 percent, approximately 1.1 percentage points higher than the current Puerto-Rico specific labor-related share of 62.087. We did not receive any public comments on the proposal to update the Puerto Rico labor-related share. Therefore, we are finalizing the Puerto Rico labor-related share of 63.2 percent for FY 2014 as proposed. mstockstill on DSK4VPTVN1PROD with RULES6 C. Market Basket for Certain Hospitals Presently Excluded From the IPPS In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43857), we adopted the use of the FY 2006-based IPPS operating market basket percentage increase to update the target amounts for children’s hospitals, PPS-excluded cancer hospitals and religious nonmedical health care institutions (RNHCIs). Children’s hospitals and PPSexcluded cancer hospitals and RNHCIs are still reimbursed solely under the reasonable cost-based system, subject to the rate-of-increase limits. Under these limits, an annual target amount (expressed in terms of the inpatient operating cost per discharge) is set for each hospital based on the hospital’s own historical cost experience trended forward by the applicable rate-ofincrease percentages. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27568), under the broad authority in sections 1886(b)(3)(A) and (B), 1886(b)(3)(E), and 1871 of the Act and section 4454 of the BBA, consistent with our use of the IPPS operating market basket percentage increase to update target amounts, we proposed to use the FY 2010-based IPPS operating market basket percentage increase to update the target amounts for children’s hospitals, 11 PPSexcluded cancer hospitals, and RNHCIs that are paid on the basis of reasonable VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 cost subject to the rate-of-increase limits under § 413.40. We did not receive any public comments on this proposal. In this final rule, we are finalizing the use of the FY 2010-based IPPS operating market basket percentage increase to update the target amounts for children’s hospitals, 11 PPS-excluded cancer hospitals, and RNHCIs that are paid on the basis of reasonable cost as we proposed. Due to the small number of children’s and cancer hospitals and RNHCIs that receive, in total, less than 1 percent of all Medicare payments to hospitals and because these hospitals provide limited Medicare cost report data, we are unable to create a separate market basket specifically for these hospitals. Due to the limited cost report data available, we believe that the FY 2010-based IPPS operating market basket most closely represents the cost structure of children’s hospitals, PPS-excluded cancer hospitals, and RNHCIs. We believe this is appropriate as the IPPS operating market basket would reflect the input price growth for providing inpatient hospital services (similar to the services provided by the above excluded hospitals) based on the specific mix of goods and services required. Therefore, we believe that the percentage change in the FY 2010-based IPPS operating market basket is the best available measure of the average increase in the prices of the goods and services purchased by children hospitals, the 11 cancer hospitals, and RNHCIs in order to provide care. D. Rebasing and Revising the Capital Input Price Index (CIPI) The CIPI was originally described in the FY 1993 IPPS final rule (57 FR 40016). There have been subsequent discussions of the CIPI presented in the IPPS proposed and final payment rules. The FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43857) discussed the PO 00000 Frm 00109 Fmt 4701 Sfmt 4700 most recent rebasing and revision of the CIPI to a FY 2006 base year, which reflected the capital cost structure of the hospital industry in that year. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27568), for the FY 2014 IPPS update, we proposed to rebase and revise the CIPI to a FY 2010 base year to reflect the more current structure of capital costs in hospitals. As with the FY 2006-based index, we developed two sets of weights in order to calculate the FY 2010-based CIPI. The first set of weights identifies the proportion of hospital capital expenditures attributable to each expenditure category, while the second set of weights is a set of relative vintage weights for depreciation and interest. The set of vintage weights is used to identify the proportion of capital expenditures within a cost category that is attributable to each year over the useful life of the capital assets in that category. A more thorough discussion of vintage weights is provided later in this section. Both sets of weights were developed using the best data sources available. In reviewing source data, we determined that the Medicare cost reports provided accurate data for all capital expenditure cost categories. We used the FY 2010 Medicare cost reports for IPPS hospitals to determine weights for all three cost categories: depreciation, interest, and other capital expenses. Lease expenses are unique in that they are not broken out as a separate cost category in the CIPI, but rather are proportionally distributed among the cost categories of Depreciation, Interest, and Other, reflecting the assumption that the underlying cost structure and price movement of leases is similar to that of capital costs in general. As was done in previous rebasings of the CIPI, we first assumed 10 percent of lease expenses represents overhead and assigned those costs to the Other E:\FR\FM\19AUR2.SGM 19AUR2 50604 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations category accordingly. The remaining lease expenses were distributed across the three cost categories based on the respective weights of Depreciation, Interest, and Other not including lease expenses. Depreciation contains two subcategories: (1) Building and Fixed equipment; and (2) Movable Equipment. The apportionment between building and fixed equipment and movable equipment was determined using the Medicare cost reports. This methodology was also used to compute the apportionment used in the FY 2006based index. The total Interest cost category is split between government/nonprofit interest and for-profit interest. The FY 2006based CIPI allocated 85 percent of the total interest cost weight to government/ nonprofit interest and proxied that category by the average yield on domestic municipal bonds. The remaining 15 percent of the interest cost weight was allocated to for-profit interest and was proxied by the average yield on Moody’s Aaa bonds (74 FR 43857). For the FY 2010-based CIPI, as we proposed, we derived the split using the relative FY 2010 Medicare cost report data on interest expenses for government/nonprofit and for-profit hospitals. Based on these data, we calculated an 89/11 split between government/nonprofit and for-profit interest. We believe it is important that this split reflects the latest relative cost structure of interest expenses. We did not receive any public comments on our proposed methodology for calculating the FY 2010-based CIPI cost weights. In this final rule, we are finalizing the FY 2010-based CIPI cost weights as proposed. Table IV07 presents a comparison of the FY 2010-based CIPI cost weights and the FY 2006-based CIPI cost weights. TABLE IV07—FY 2010-BASED CIPI COST CATEGORIES, WEIGHTS, AND PRICE PROXIES WITH FY 2006-BASED CIPI INCLUDED FOR COMPARISON FY 2006 weights Cost categories FY 2010 weights 100.00 75.154 35.789 100.00 74.011 36.153 39.365 17.651 15.076 37.858 19.157 17.051 For-profit interest ............................. Other ................................................ mstockstill on DSK4VPTVN1PROD with RULES6 Total ................................................. Total depreciation ............................ Building and fixed equipment depreciation. Movable equipment depreciation ..... Total interest .................................... Government/nonprofit interest ......... 2.575 7.195 2.106 6.832 Because capital is acquired and paid for over time, capital expenses in any given year are determined by both past and present purchases of physical and financial capital. The vintage-weighted CIPI is intended to capture the longterm consumption of capital, using vintage weights for depreciation (physical capital) and interest (financial capital). These vintage weights reflect the proportion of capital purchases attributable to each year of the expected life of building and fixed equipment, movable equipment, and interest. We used the vintage weights to compute vintage-weighted price changes associated with depreciation and interest expense. Following publication of the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule, and in order to provide greater transparency, we posted on the CMS market basket Web page at: https://www.cms.gov/Research-StatisticsData-and-Systems/Statistics-Trendsand-Reports/ MedicareProgramRatesStats/ MarketBasketResearch.html an illustrative spreadsheet that contains an example of how the vintage-weighted price indexes are calculated. Vintage weights are an integral part of the CIPI. Capital costs are inherently complicated and are determined by VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Price proxy BEA chained price index for nonresidential construction for hospitals and special care facilities—vintage-weighted (26 years). PPI for machinery and equipment—vintage-weighted (12 years). Average yield on domestic municipal bonds (Bond Buyer 20 bonds)— vintage-weighted (26 years). Average yield on Moody’s Aaa bonds—vintage-weighted (26 years). CPI–U for residential rent. complex capital purchasing decisions, over time, based on such factors as interest rates and debt financing. In addition, capital is depreciated over time instead of being consumed in the same period it is purchased. The CIPI accurately reflects the annual price changes associated with capital costs, and is a useful simplification of the actual capital investment process. By accounting for the vintage nature of capital, we are able to provide an accurate, stable annual measure of price changes. Annual nonvintage price changes for capital are unstable due to the volatility of interest rate changes and, therefore, do not reflect the actual annual price changes for Medicare capital-related costs. The CIPI reflects the underlying stability of the capital acquisition process and provides hospitals with the ability to plan for changes in capital payments. To calculate the vintage weights for depreciation and interest expenses, we needed a time series of capital purchases for building and fixed equipment and movable equipment. We found no single source that provides a uniquely best time series of capital purchases by hospitals for all of the above components of capital purchases. The early Medicare cost reports did not PO 00000 Frm 00110 Fmt 4701 Sfmt 4700 have sufficient capital data to meet this need. Data we obtained from the American Hospital Association (AHA) do not include annual capital purchases. However, AHA does provide a consistent database back to 1963. We used data from the AHA Panel Survey and the AHA Annual Survey to obtain a time series of total expenses for hospitals. We then used data from the AHA Panel Survey supplemented with the ratio of depreciation to total hospital expenses obtained from the Medicare cost reports to derive a trend of annual depreciation expenses for 1963 through 2010. In order to estimate capital purchases using data on depreciation expenses, the expected life for each cost category (building and fixed equipment, movable equipment, and interest) is needed to calculate vintage weights. We used FY 2010 Medicare cost reports to determine the expected life of building and fixed equipment and of movable equipment. The expected life of any piece of equipment can be determined by dividing the value of the asset (excluding fully depreciated assets) by its current year depreciation amount. This calculation yields the estimated useful life of an asset if depreciation were to continue at current year levels, E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations assuming straight-line depreciation. From the FY 2010 Medicare cost reports, the expected life of building and fixed equipment was determined to be 26 years, and the expected life of movable equipment was determined to be 12 years. The FY 2006-based CIPI was based on an expected life of building and fixed equipment of 25 years and 12 years as the expected life for movable equipment. As we proposed, we used the building and fixed equipment and movable equipment weights derived from FY 2010 Medicare cost reports to separate the depreciation expenses into annual amounts of building and fixed equipment depreciation and movable equipment depreciation. Year-end asset costs for building and fixed equipment and movable equipment were determined by multiplying the annual depreciation amounts by the expected life calculations from the FY 2010 Medicare cost reports. We then calculated a time series back to 1963 of annual capital purchases by subtracting the previous year asset costs from the current year asset costs. From this capital purchase time series, we were able to calculate the vintage weights for building and fixed equipment and for movable equipment. Each of these sets of vintage weights is explained in more detail below. For building and fixed equipment vintage weights, we used the real annual capital purchase amounts for building and fixed equipment to capture the actual amount of the physical acquisition, net of the effect of price inflation. This real annual purchase amount for building and fixed equipment was produced by deflating the nominal annual purchase amount by the building and fixed equipment price proxy, BEA’s chained price index for nonresidential construction for hospitals and special care facilities. Because building and fixed equipment have an expected life of 26 years, the vintage weights for building and fixed equipment are deemed to represent the average purchase pattern of building and fixed equipment over 26-year periods. With real building and fixed equipment purchase estimates available back to 1963, we averaged twenty-two 26-year periods to determine the average vintage weights for building and fixed equipment that are representative of average building and fixed equipment purchase patterns over time. Vintage weights for each 26-year period are calculated by dividing the real building and fixed capital purchase amount in any given year by the total amount of purchases in the 26-year period. This calculation is done for each year in the 26-year period, and for each of the twenty-two 26-year periods. We used the average of each year across the twenty-two 26-year periods to determine the average building and fixed equipment vintage weights for the FY 2010-based CIPI. For movable equipment vintage weights, the real annual capital purchase amounts for movable equipment were used to capture the actual amount of the physical acquisition, net of price inflation. This real annual purchase amount for movable equipment was calculated by deflating the nominal annual purchase amounts by the movable equipment price proxy, the PPI for machinery and equipment. Based on our determination that movable equipment has an expected life of 12 years, the vintage weights for movable equipment represent the average expenditure for movable equipment over a 12-year period. With real movable equipment purchase estimates available back to 1963, thirty-six 12-year periods were averaged to determine the average vintage weights for movable equipment that are representative of average movable equipment purchase patterns over time. Vintage weights for each 12year period are calculated by dividing 50605 the real movable capital purchase amount for any given year by the total amount of purchases in the 12-year period. This calculation was done for each year in the 12-year period and for each of the thirty-six 12-year periods. We used the average of each year across the thirty-six 12-year periods to determine the average movable equipment vintage weights for the FY 2010-based CIPI. For interest vintage weights, the nominal annual capital purchase amounts for total equipment (building and fixed, and movable) were used to capture the value of the debt instrument. Because we have determined that hospital debt instruments have an expected life of 26 years, the vintage weights for interest are deemed to represent the average purchase pattern of total equipment over 26-year periods. With nominal total equipment purchase estimates available back to 1963, twenty-two 26-year periods were averaged to determine the average vintage weights for interest that are representative of average capital purchase patterns over time. Vintage weights for each 26-year period are calculated by dividing the nominal total capital purchase amount for any given year by the total amount of purchases in the 26-year period. This calculation is done for each year in the 26-year period and for each of the twenty-two 26-year periods. We used the average of each year across the twenty-two 26-year periods to determine the average interest vintage weights for the proposed FY 2010-based CIPI. We did not receive any public comments on our proposed methodology for calculating the FY 2010-based CIPI vintage weights. In this final rule, we are finalizing the CIPI vintage weights as proposed. The vintage weights for the FY 2006-based CIPI and the FY 2010-based CIPI are presented in Table IV08. TABLE IV08—FY 2006 VINTAGE WEIGHTS AND FY 2010 VINTAGE WEIGHTS FOR CAPITAL-RELATED PRICE PROXIES Building and fixed equipment mstockstill on DSK4VPTVN1PROD with RULES6 Year 1 FY 2006 25 Years 1 ............................................................... 2 ............................................................... 3 ............................................................... 4 ............................................................... 5 ............................................................... 6 ............................................................... 7 ............................................................... 8 ............................................................... 9 ............................................................... 10 ............................................................. 11 ............................................................. 12 ............................................................. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 0.021 0.023 0.025 0.027 0.029 0.031 0.032 0.033 0.036 0.038 0.040 0.042 PO 00000 Frm 00111 FY 2010 26 Years Movable equipment FY 2006 12 Years 0.023 0.024 0.026 0.028 0.029 0.031 0.032 0.034 0.036 0.038 0.040 0.041 Fmt 4701 Sfmt 4700 Interest FY 2010 12 Years 0.063 0.067 0.071 0.075 0.079 0.082 0.085 0.086 0.090 0.093 0.102 0.106 E:\FR\FM\19AUR2.SGM 0.064 0.068 0.071 0.073 0.076 0.078 0.084 0.088 0.092 0.098 0.103 0.106 19AUR2 FY 2006 25 Years 0.010 0.012 0.014 0.016 0.018 0.020 0.023 0.025 0.028 0.031 0.034 0.038 FY 2010 26 Years 0.012 0.013 0.015 0.017 0.018 0.021 0.023 0.025 0.028 0.030 0.033 0.036 50606 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations TABLE IV08—FY 2006 VINTAGE WEIGHTS AND FY 2010 VINTAGE WEIGHTS FOR CAPITAL-RELATED PRICE PROXIES— Continued Building and fixed equipment Year 1 13 14 15 16 17 18 19 20 21 22 23 24 25 26 FY 2006 25 Years FY 2010 26 Years Movable equipment Interest FY 2006 12 Years FY 2010 12 Years FY 2006 25 Years FY 2010 26 Years ............................................................. ............................................................. ............................................................. ............................................................. ............................................................. ............................................................. ............................................................. ............................................................. ............................................................. ............................................................. ............................................................. ............................................................. ............................................................. ............................................................. 0.044 0.045 0.046 0.047 0.048 0.050 0.050 0.050 0.048 0.048 0.047 0.049 0.048 ........................ 0.042 0.042 0.043 0.044 0.044 0.044 0.044 0.044 0.045 0.045 0.045 0.046 0.045 0.045 ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ 0.041 0.044 0.047 0.050 0.053 0.057 0.059 0.060 0.060 0.062 0.063 0.068 0.069 ........................ 0.038 0.040 0.043 0.045 0.047 0.048 0.051 0.052 0.056 0.057 0.060 0.062 0.064 0.066 Total ......................................................... 1.000 1.000 1.000 1.000 1.000 1.000 Note: Detail may not add to total due to rounding. 1 Year 1 represents the vintage weight applied to the farthest year while the vintage weight for year 26, for example, would apply to the most recent year. After the capital cost category weights were computed, it was necessary to select appropriate price proxies to reflect the rate-of-increase for each expenditure category. As we proposed, in this final rule, we used the same price proxies for the FY 2010-based CIPI that were used in the FY 2006-based CIPI. The rationale for selecting the price proxies was explained more fully in the FY 1997 IPPS final rule (61 FR 46196) and the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43857). These price proxies are presented in Table IV07. Table IV09 below compares both the historical and forecasted percent changes in the FY 2006-based CIPI and the FY 2010-based CIPI. As stated in the FY 2014 IPPS/LTCH proposed rule (78 FR 27572), we are incorporating a more recent forecast of the market baskets in the final rule. Therefore, the forecasted growth rates in Table IV09 are based on IHS Global Insight Inc.’s (IGI) most recent second quarter 2013 forecast with historical data through first quarter 2013. The proposed rule presented IGI’s first quarter 2013 forecast with historical data through fourth quarter of 2012. TABLE IV09—COMPARISON OF FY 2006-BASED AND FY 2010-BASED CAPITAL INPUT PRICE INDEX, PERCENT CHANGE, FY 2008 THROUGH FY 2016 Fiscal year CIPI, FY 2006Based CIPI, FY 2010Based FY 2008 ................................................................................................................................................................... FY 2009 ................................................................................................................................................................... FY 2010 ................................................................................................................................................................... FY 2011 ................................................................................................................................................................... FY 2012 ................................................................................................................................................................... Forecast: .................................................................................................................................................................. FY 2013 ................................................................................................................................................................... FY 2014 ................................................................................................................................................................... FY 2015 ................................................................................................................................................................... FY 2016 ................................................................................................................................................................... Average: FYs 2008–2012 ................................................................................................................................................ FYs 2013–2016 ................................................................................................................................................ 1.5 1.5 1.0 1.2 1.2 ........................ 1.3 1.4 1.5 1.7 ........................ 1.3 1.5 1.1 1.2 0.7 0.9 1.0 ........................ 1.1 1.2 1.4 1.6 ........................ 1.0 1.3 mstockstill on DSK4VPTVN1PROD with RULES6 Source: IHS Global Insight, Inc., 2nd Quarter 2013 forecast. IHS Global Insight, Inc. forecasts a 1.2 percent increase in the FY 2010-based CIPI for FY 2014, as shown in Table IV09. The underlying vintage-weighted VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 price increases for depreciation (including building and fixed equipment and movable equipment) and interest (including government/ PO 00000 Frm 00112 Fmt 4701 Sfmt 4700 nonprofit and for-profit) are included in Table IV10. E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 50607 TABLE IV10—CMS CAPITAL INPUT PRICE INDEX PERCENT CHANGES, TOTAL AND DEPRECIATION AND INTEREST COMPONENTS—FYS 2008 THROUGH 2016 Fiscal year Total Depreciation Interest FY 2008 ....................................................................................................................................... FY 2009 ....................................................................................................................................... FY 2010 ....................................................................................................................................... FY 2011 ....................................................................................................................................... FY 2012 ....................................................................................................................................... Forecast: ...................................................................................................................................... FY 2013 ....................................................................................................................................... FY 2014 ....................................................................................................................................... FY 2015 ....................................................................................................................................... FY 2016 ....................................................................................................................................... 1.1 1.2 0.7 0.9 1.0 ........................ 1.1 1.2 1.4 1.6 2.0 2.0 1.7 1.7 1.7 ........................ 1.8 1.9 2.0 2.0 ¥3.1 ¥2.0 ¥2.8 ¥2.3 ¥2.7 ........................ ¥2.7 ¥2.3 ¥1.8 ¥0.8 Source: IHS Global Insight, Inc., 2nd Quarter 2013 forecast. Rebasing the CIPI from FY 2006 to FY 2010 decreased the percent change in the forecasted update for FY 2014 by 0.2 percentage point, from 1.4 percent to 1.2 percent, as shown in Table IV09. The difference in the forecasted market basket update for FY 2014 is primarily due to the rebasing of the index to FY 2010 and revising the base year cost weights to incorporate the FY 2010 Medicare cost report data. V. Other Decisions and Changes to the IPPS for Operating Costs and GME Costs A. Changes in the Inpatient Hospital Update for FY 2014 (§§ 412.64(d) and 412.211(c)) mstockstill on DSK4VPTVN1PROD with RULES6 1. FY 2014 Inpatient Hospital Update In accordance with section 1886(b)(3)(B)(i) of the Act, each year we update the national standardized amount for inpatient operating costs by a factor called the ‘‘applicable percentage increase.’’ Section 1886(b)(3)(B) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act, sets the applicable percentage increase under the IPPS for FY 2014 as equal to the rate-of-increase in the hospital market basket for IPPS hospitals in all areas, subject to a reduction of 2.0 percentage points if the hospital fails to submit quality information under rules established by the Secretary in accordance with section 1886(b)(3)(B)(viii) of the Act, and then subject to an adjustment based on changes in economy-wide productivity (the multifactor productivity (MFP) adjustment), and an additional reduction of 0.3 percentage point. Sections 1886(b)(3)(B)(xi) and (b)(3)(B)(xii) of the Act, as added by section 3401(a) of the Affordable Care Act, state that application of the MFP adjustment and the additional FY 2014 adjustment of 0.3 percentage point may result in the applicable percentage increase being less than zero. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 We note, in compliance with section 404 of the MMA, in this final rule, as we proposed, we are replacing the FY 2006-based IPPS operating and capital market baskets with the revised and rebased FY 2010-based IPPS operating and capital market baskets for FY 2014. We also are rebasing the labor-related share to reflect the more recent base year. For FY 2014, we are adopting a labor-related share of 69.6 percent, which is based on the rebased and revised FY 2010-based IPPS market basket (as compared to the FY 2013 labor-related share of 68.8 percent, which is based on the FY 2006-based IPPS market basket). For a complete discussion on the rebasing of the market basket and labor-related share, we refer readers to section IV. of the preamble of this final rule. Based on the most recent data available for the FY 2014 proposed rule, in accordance with section 1886(b)(3)(B) of the Act, we proposed to base the proposed FY 2014 market basket update used to determine the applicable percentage increase for the IPPS on the IHS Global Insight, Inc. (IGI’s) first quarter 2013 forecast of the FY 2010based IPPS market basket rate-ofincrease with historical data through fourth quarter 2012, which was estimated to be 2.5 percent. We also proposed that if more recent data become subsequently available (for example, a more recent estimate of the market basket and the MFP adjustment), we would use such data, if appropriate, to determine the FY 2014 market basket update and the MFP adjustment in the final rule. We did not receive any public comments on our proposal. Therefore, for this final rule, we based the final FY 2014 market basket update used to determine the applicable percentage increase for the IPPS on more recently available data, the IGI’s second quarter 2013 forecast of the FY 2010-based IPPS market basket rate-of-increase, which is estimated to be 2.5 percent. PO 00000 Frm 00113 Fmt 4701 Sfmt 4700 In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51689 through 51692), we finalized our methodology for calculating and applying the MFP adjustment. We also stated in the FY 2014 IPPS/LTCH PPS proposed rule that, for FY 2014, we were not proposing to make any change in our methodology for calculating and applying the MFP adjustment. In the proposed rule, we proposed a MFP adjustment of 0.4 percent. Similar to the market basket adjustment, for this final rule, we are using the most recent data available to compute the MFP adjustment. We did not receive any public comments on our proposal. Therefore, for this final rule, using the most recent data available, we computed a MFP adjustment of 0.5 percent for FY 2014. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27572–27573), consistent with current law, and based on IGI’s first quarter 2013 forecast of the FY 2014 market basket increase, we proposed an applicable percentage increase to the FY 2014 operating standardized amount of 1.8 percent (that is, the FY 2014 estimate of the market basket rate-of-increase of 2.5 percent less an adjustment of 0.4 percentage point for economy-wide productivity (that is, the MFP adjustment) and less 0.3 percentage point) for hospitals in all areas, provided the hospital submits quality data under rules established in accordance with section 1886(b)(3)(B)(viii) of the Act. For hospitals that do not submit these quality data, we proposed an applicable percentage increase to the operating standardized amount of ¥0.2 percent (that is, the FY 2014 estimate of the market basket rate-of-increase of 2.5 percent, less 2.0 percentage points for failure to submit quality data, less an adjustment of 0.4 percentage point for the MFP adjustment, and less an additional adjustment of 0.3 percentage point). Lastly, as noted above, in the E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50608 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations proposed rule, we stated that if more recent data become subsequently available (for example, a more recent estimate of the market basket and the MFP adjustment), we would use such data, if appropriate, to determine the FY 2014 market basket update and MFP adjustment in the final rule. We did not receive any public comments on our proposal. For this final rule, using the most recent data available, consistent with current law, and based on IGI’s second quarter 2013 forecast of the FY 2014 market basket increase, we are finalizing an applicable percentage increase to the FY 2014 operating standardized amount of 1.7 percent (that is, the FY 2014 estimate of the market basket rate-ofincrease of 2.5 percent less an adjustment of 0.5 percentage point for economy-wide productivity (that is, the MFP adjustment) and less 0.3 percentage point) for hospitals in all areas, provided the hospital submits quality data under rules established in accordance with section 1886(b)(3)(B)(viii) of the Act. For hospitals that do not submit these quality data, we are finalizing an applicable percentage increase to the operating standardized amount of –0.3 percent (that is, the FY 2014 estimate of the market basket rate-of-increase of 2.5 percent, less 2.0 percentage points for failure to submit quality data, less an adjustment of 0.5 percentage point for the MFP adjustment, and less an additional adjustment of 0.3 percentage point). In the proposed rule, we proposed to revise the existing regulations at 42 CFR 412.64(d) to reflect the current law for the FY 2014 update. Specifically, in accordance with section 1886(b)(3)(B) of the Act, we proposed to add a new paragraph (v) to § 412.64(d)(1) to reflect the applicable percentage increase to the FY 2014 operating standardized amount as the percentage increase in the market basket index less an MFP adjustment and less an additional reduction of 0.3 percentage point. We did not receive any public comments on this proposal. Therefore, in this final rule, we are adopting as final, without modification, the proposed changes to § 412.64(d)(1)(v) to reflect the current law. Section 1886(b)(3)(B)(iv) of the Act provides that the applicable percentage increase to the hospital-specific rates for SCHs equals the applicable percentage increase set forth in section 1886(b)(3)(B)(i) of the Act (that is, the same update factor as for all other hospitals subject to the IPPS). Therefore, the update to the hospital-specific rates for SCHs is also subject to section VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act. Accordingly, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27572–27573), we proposed an update to the hospital-specific rates applicable to SCHs of 1.8 percent for hospitals that submit quality data or ¥0.2 percent for hospitals that fail to submit quality data. For FY 2014, the existing regulations in §§ 412.73(c)(16), 412.75(d), 412.77(e) and 412.78(e) contain provisions that set the update factor for SCHs equal to the update factor applied to the national standardized amount for all IPPS hospitals. Therefore, we did not propose to make any further changes to these four regulatory provisions to reflect the FY 2014 update factor for the hospitalspecific rates of SCHs. We did not receive any public comments on this proposal. Therefore, for this final rule, we are finalizing an update to the hospital-specific rates applicable to SCHs of 1.7 percent for hospitals that submit quality data or ¥0.3 percent for hospitals that fail to submit quality data. As we noted above, for the proposed rule, we used the first quarter 2013 forecast of the FY 2010-based IPPS market basket with historical data through fourth quarter 2012. For this final rule, we used the most recent data available, which was the second quarter 2013 forecast of the FY 2010-based IPPS market basket with historical data through first quarter 2013. Similarly, for the proposed rule, we used IGI’s first quarter 2013 forecast of MFP. For this final rule, we used the most recent data available, which was IGI’s second quarter 2013 forecast of MFP. We note that, as discussed in section V.F. of this preamble, section 606 of the American Taxpayer Relief Act of 2012 extended the MDH program from the end of FY 2012 (that is, for discharges occurring before October 1, 2012) to the end of FY 2013 (that is, for discharges occurring before October 1, 2013). Under prior law, the MDH program was to be in effect through the end of FY 2012 only. Absent congressional action further extending the MDH program, the MDH program will expire for discharges beginning in FY 2014. Accordingly, we are not including MDHs in our update of the hospital-specific rates for FY 2014. 2. FY 2014 Puerto Rico Hospital Update Puerto Rico hospitals are paid a blended rate for their inpatient operating costs based on 75 percent of the national standardized amount and 25 percent of the Puerto Rico-specific standardized amount. Section 1886(d)(9)(C)(i) of the Act is the basis PO 00000 Frm 00114 Fmt 4701 Sfmt 4700 for determining the applicable percentage increase applied to the Puerto Rico-specific standardized amount. Section 401(c) of Public Law 108–173 amended section 1886(d)(9)(C)(i) of the Act, which states that, for discharges occurring in a fiscal year (beginning with FY 2004), the Secretary shall compute an average standardized amount for hospitals located in any area of Puerto Rico that is equal to the average standardized amount computed under subclause (I) for fiscal year 2003 for hospitals in a large urban area (or, beginning with FY 2005, for all hospitals in the previous fiscal year) increased by the applicable percentage increase under subsection (b)(3)(B) for the fiscal year involved. Therefore, the update to the Puerto Rico-specific operating standardized amount equals the applicable percentage increase set forth in section 1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act (that is, the same update factor as for all other hospitals subject to the IPPS). Accordingly, in the FY 2014 IPS/LTCH PPS proposed rule (78 FR 27572 through 27573), we proposed an applicable percentage increase to the Puerto Rico-specific operating standardized amount of 1.8 percent for FY 2014. The regulations at § 412.211(c) currently set the update factor for the Puerto Rico-specific operating standardized amount equal to the update factor applied to the national standardized amount for all IPPS hospitals. Therefore, it is not necessary to make any changes to the existing regulatory text. We did not receive any public comments on this proposal. Therefore, for this final rule, we are finalizing an applicable percentage increase to the Puerto Rico-specific operating standardized amount of 1.7 percent for FY 2014. As we noted above, for the proposed rule, we used the first quarter 2013 forecast of the FY 2010-based IPPS market basket with historical data through fourth quarter 2012. For this final rule, we used the most recent data available, which was the second quarter 2013 forecast of the FY 2010-based IPPS market basket with historical data through first quarter 2013. Similarly, for the proposed rule, we used IGI’s first quarter 2013 forecast of MFP. For this final rule, we used the most recent data available, which was IGI’s second quarter 2013 forecast of MFP. B. Rural Referral Centers (RRCs): Annual Updates to Case-Mix Index and Discharge Criteria (§ 412.96) Under the authority of section 1886(d)(5)(C)(i) of the Act, the E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations regulations at § 412.96 set forth the criteria that a hospital must meet in order to qualify under the IPPS as a rural referral center (RRC). RRCs receive some special treatment under both the DSH payment adjustment and the criteria for geographic reclassification. Section 402 of Public Law 108–173 raised the DSH payment adjustment for RRCs such that they are not subject to the 12-percent cap on DSH payments that is applicable to other rural hospitals. RRCs are also not subject to the proximity criteria when applying for geographic reclassification. In addition, they do not have to meet the requirement that a hospital’s average hourly wage must exceed, by a certain percentage, the average hourly wage of the labor market area where the hospital is located. Section 4202(b) of Public Law 105–33 states, in part, ‘‘[a]ny hospital classified as an RRC by the Secretary . . . for fiscal year 1991 shall be classified as such an RRC for fiscal year 1998 and each subsequent year.’’ In the August 29, 1997 IPPS final rule with comment period (62 FR 45999), CMS reinstated RRC status for all hospitals that lost the status due to triennial review or MGCRB reclassification. However, CMS did not reinstate the status of hospitals that lost RRC status because they were now urban for all purposes because of the OMB designation of their geographic area as urban. Subsequently, in the August 1, 2000 IPPS final rule (65 FR 47089), we indicated that we were revisiting that decision. Specifically, we stated that we would permit hospitals that previously qualified as an RRC and lost their status due to OMB redesignation of the county in which they are located from rural to urban, to be reinstated as an RRC. Otherwise, a hospital seeking RRC status must satisfy all of the other applicable criteria. We use the definitions of ‘‘urban’’ and ‘‘rural’’ specified in Subpart D of 42 CFR Part 412. One of the criteria under which a hospital may qualify as an RRC is to have 275 or more beds available for use (§ 412.96(b)(1)(ii)). A rural hospital that does not meet the bed size requirement can qualify as an RRC if the hospital meets two mandatory prerequisites (a minimum CMI and a minimum number of discharges), and at least one of three optional criteria (relating to specialty composition of medical staff, source of inpatients, or referral volume). (We refer readers to § 412.96(c)(1) through (c)(5) and the September 30, 1988 Federal Register (53 FR 38513).) With respect to the two mandatory prerequisites, a hospital may be classified as an RRC if— VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 • The hospital’s CMI is at least equal to the lower of the median CMI for urban hospitals in its census region, excluding hospitals with approved teaching programs, or the median CMI for all urban hospitals nationally; and • The hospital’s number of discharges is at least 5,000 per year, or, if fewer, the median number of discharges for urban hospitals in the census region in which the hospital is located. (The number of discharges criterion for an osteopathic hospital is at least 3,000 discharges per year, as specified in section 1886(d)(5)(C)(i) of the Act.) 1. Case-Mix Index (CMI) Section 412.96(c)(1) provides that CMS establish updated national and regional CMI values in each year’s annual notice of prospective payment rates for purposes of determining RRC status. The methodology we used to determine the national and regional CMI values is set forth in the regulations at § 412.96(c)(1)(ii). The national median CMI value for FY 2014 includes data from all urban hospitals nationwide, and the regional values for FY 2014 are the median CMI values of urban hospitals within each census region, excluding those hospitals with approved teaching programs (that is, those hospitals that train residents in an approved GME program as provided in § 413.75). These values are based on discharges occurring during FY 2012 (October 1, 2011 through September 30, 2012), and include bills posted to CMS’ records through March 2013. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27573), we proposed that, in addition to meeting other criteria, if rural hospitals with fewer than 275 beds are to qualify for initial RRC status for cost reporting periods beginning on or after October 1, 2013, they must have a CMI value for FY 2012 that is at least— • 1.5526; or • The median CMI value (not transfer-adjusted) for urban hospitals (excluding hospitals with approved teaching programs as identified in § 413.75) calculated by CMS for the census region in which the hospital is located. (We refer readers to the table set forth in the FY 2014 IPPS/LTCH PPS proposed rule at 78 FR 27574.) The final CMI values for FY 2014 are based on the latest available data (FY 2012 bills received through March 2013). In addition to meeting other criteria, if rural hospitals with fewer than 275 beds are to qualify for initial RRC status for cost reporting periods beginning on or after October 1, 2013, they must have a CMI value for FY 2012 that is at least— PO 00000 Frm 00115 Fmt 4701 Sfmt 4700 50609 • 1.5560; or • The median CMI value (not transfer-adjusted) for urban hospitals (excluding hospitals with approved teaching programs as identified in § 413.75) calculated by CMS for the census region in which the hospital is located. The final median CMI values by region are set forth in the following table: Region 1. New England (CT, ME, MA, NH, RI, VT) ................ 2. Middle Atlantic (PA, NJ, NY) .................................... 3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV) ................................... 4. East North Central (IL, IN, MI, OH, WI) ....................... 5. East South Central (AL, KY, MS, TN) ...................... 6. West North Central (IA, KS, MN, MO, NE, ND, SD) 7. West South Central (AR, LA, OK, TX) ...................... 8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY) ...... 9. Pacific (AK, CA, HI, OR, WA) ................................... Case-mix index value 1.3319 1.4015 1.4808 1.4618 1.4281 1.5355 1.5814 1.6438 1.5605 A hospital seeking to qualify as an RRC should obtain its hospital-specific CMI value (not transfer-adjusted) from its fiscal intermediary or MAC. Data are available on the Provider Statistical and Reimbursement (PS&R) System. In keeping with our policy on discharges, the CMI values are computed based on all Medicare patient discharges subject to the IPPS MS–DRG-based payment. 2. Discharges Section 412.96(c)(2)(i) provides that CMS set forth the national and regional numbers of discharges in each year’s annual notice of prospective payment rates for purposes of determining RRC status. As specified in section 1886(d)(5)(C)(ii) of the Act, the national standard is set at 5,000 discharges. We would normally propose to update the regional standards based on discharges for urban hospitals’ cost reporting periods that began during FY 2011 (that is, October 1, 2010 through September 30, 2011), which would normally be the latest cost report data available at the time of the development of the proposed rule. However, in the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR 27574), due to a transition in our data system, in lieu of a full year of FY 2011 cost report data, we proposed to use a combination of FY 2010 and FY 2011 cost report data in order to create a full fiscal year of cost report data for this E:\FR\FM\19AUR2.SGM 19AUR2 50610 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations analysis. Due to CMS’ transition to a new cost reporting form effective for cost reporting periods beginning on or after May 1, 2010, some FY 2011 cost reports were not yet in our system for analysis at the time of the development of the proposed rule. Therefore, in order to have a complete fiscal year of cost report data, we utilized FY 2011 cost report data if available, and for those providers whose FY 2011 cost report data were not yet in our system, we utilized their FY 2010 cost report data. This is similar to the process we used to establish the median number of discharges for urban hospitals in the census region for FY 2013, where we utilized FY 2009 and 2010 cost report data (77 FR 53406). At the time of the development of this final rule, a full year of FY 2011 cost report data became available in our system for analysis. Therefore, the final FY 2014 discharges criteria is based on only FY 2011 cost reports, that is, data from cost reporting periods that began in FY 2011. In the FY 2014 PPS/LTCH PPS proposed rule, we proposed that, in addition to meeting other criteria, a hospital, if it is to qualify for initial RRC status for cost reporting periods beginning on or after October 1, 2013, must have, as the number of discharges for its cost reporting period that began during FY 2011 (based on a combination of FY 2010 and FY 2011 cost report data as explained in the preceding paragraph), at least— • 5,000 (3,000 for an osteopathic hospital); or • The median number of discharges for urban hospitals in the census region in which the hospital is located. (We refer readers to the table set forth in the FY 2014 IPPS/LTCH PPS proposed rule at 78 FR 27574.) Based on the latest discharge data available at this time (that is, based on FY 2011 cost report data as explained earlier in this section), the final median number of discharges for urban hospitals by census region are set forth in the following table: mstockstill on DSK4VPTVN1PROD with RULES6 Region 1. New England (CT, ME, MA, NH, RI, VT) ................ 2. Middle Atlantic (PA, NJ, NY) .................................... 3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV) ................................... 4. East North Central (IL, IN, MI, OH, WI) ....................... 5. East South Central (AL, KY, MS, TN) ...................... VerDate Mar<15>2010 21:51 Aug 16, 2013 Number of discharges Region 6. West North Central (IA, KS, MN, MO, NE, ND, SD) 7. West South Central (AR, LA, OK, TX) ...................... 8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY) ...... 9. Pacific (AK, CA, HI, OR, WA) ................................... 7,792 5,374 9,024 8.857 We note that the median number of discharges for hospitals in each census region is greater than the national standard of 5,000 discharges. Therefore, 5,000 discharges is the minimum criterion for all hospitals under this final rule. We reiterate that, if an osteopathic hospital is to qualify for RRC status for cost reporting periods beginning on or after October 1, 2013, the hospital would be required to have at least 3,000 discharges for its cost reporting period that began during FY 2011 (based on FY 2011 cost report data as explained earlier in this section). C. Payment Adjustment for Low-Volume Hospitals (§ 412.101) 1. Background Section 1886(d)(12) of the Act provides for an additional payment to each qualifying low-volume hospital under the IPPS beginning in FY 2005. Section 1886(d)(12) of the Act sets forth the qualifying criteria for a qualifying low-volume hospital and the methodology for determining the lowvolume hospital payment adjustment. Sections 3125 and 10314 of the Affordable Care Act provided for a temporary change in the low-volume hospital payment policy for FYs 2011 and 2012 by expanding the definition of a low-volume hospital and modifying the methodology for determining the payment adjustment for hospitals meeting the definition. Therefore, prior to the enactment of the American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112–240) on January 2, 2013, beginning with FY 2013, the lowvolume hospital qualifying criteria and payment adjustment requirements would have reverted to the statutory Number of requirements under section 1886(d)(12) discharges of the Act that were in effect prior to FY 2011. Section 605 of the ATRA 7,830 extended for an additional year, through FY 2013, the temporary changes in the 10,968 low-volume hospital definition and methodology for determining the payment adjustment made by the 11,535 Affordable Care Act for FYs 2011 and 8,507 2012. Beginning with FY 2014, the lowvolume hospital qualifying criteria and 7,397 payment adjustment will revert to the Jkt 229001 PO 00000 Frm 00116 Fmt 4701 Sfmt 4700 statutory requirements that were in effect prior to the amendments made by the Affordable Care Act and the ATRA. In section V.D.3. of this preamble, we discuss the low-volume hospital payment adjustment policies for FY 2014. a. Original Implementation of the LowVolume Hospital Payment Adjustment Section 1886(d)(12) of the Act, as added by section 406(a) of Public Law 108–173, provides for a payment adjustment to account for the higher costs per discharge for low-volume hospitals under the IPPS, effective beginning FY 2005. The additional payment adjustment to a low-volume hospital provided for under section 1886(d)(12) of the Act is ‘‘[i]n addition to any payment calculated under this section.’’ Therefore, the additional payment adjustment is based on the per discharge amount paid to the qualifying hospital under section 1886 of the Act. In other words, the low-volume hospital payment adjustment is based on total per discharge payments made under section 1886 of the Act, including capital, DSH, IME, and outlier payments. For SCHs and MDHs, the low-volume hospital payment adjustment is based in part on either the Federal rate or the hospital-specific rate, whichever results in a greater operating IPPS payment. Section 1886(d)(12)(C)(i) of the Act defined a low-volume hospital as ‘‘a subsection (d) hospital (as defined in paragraph (1)(B)) that the Secretary determines is located more than 25 road miles from another subsection (d) hospital and has less than 800 discharges during the fiscal year.’’ Section 1886(d)(12)(C)(ii) of the Act further stipulates that the term ‘‘discharge’’ means ‘‘an inpatient acute care discharge of an individual regardless of whether the individual is entitled to benefits under Part A.’’ Therefore, the term ‘‘discharge’’ refers to total discharges, regardless of payer (that is, not only Medicare discharges). Furthermore, under section 406(a) of Public Law 108–173, which initially added subparagraph (12) to section 1886(d) of the Act, the provision requires the Secretary to determine an applicable percentage increase for these low-volume hospitals based on the ‘‘empirical relationship’’ between ‘‘the standardized cost-per-case for such hospitals and the total number of discharges of such hospitals and the amount of the additional incremental costs (if any) that are associated with such number of discharges.’’ The statute thus mandates that the Secretary develop an empirically justifiable E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 adjustment based on the relationship between costs and discharges for these low-volume hospitals. Section 1886(d)(12)(B)(iii) of the Act limits the applicable percentage increase adjustment to no more than 25 percent. Based on an analysis we conducted for the FY 2005 IPPS final rule (69 FR 49099 through 49102), a 25-percent lowvolume hospital payment adjustment to all qualifying hospitals with less than 200 discharges was found to be most consistent with the statutory requirement to provide relief to lowvolume hospitals where there is empirical evidence that higher incremental costs are associated with low numbers of total discharges. In the FY 2006 IPPS final rule (70 FR 47432 through 47434), we stated that multivariate analyses supported the existing low-volume hospital payment adjustment implemented in FY 2005. Therefore, the low-volume hospital payment adjustment of an additional 25 percent continued to be provided for qualifying hospitals with less than 200 discharges. b. Affordable Care Act Provisions for FYs 2011 and 2012 For FYs 2011 and 2012, sections 3125 and 10314 of the Affordable Care Act expanded the definition of low-volume hospital and modified the methodology for determining the payment adjustment for hospitals meeting that definition. Specifically, those provisions of the Affordable Care Act amended the qualifying criteria for low-volume hospitals under section 1886(d)(12)(C)(i) of the Act to specify that, for FYs 2011 and 2012, a subsection (d) hospital qualifies as a low-volume hospital if it is more than 15 road miles from another subsection (d) hospital and has less than 1,600 discharges of individuals entitled to, or enrolled for, benefits under Part A during the fiscal year. In addition, section 1886(d)(12)(D) of the Act, as added by the Affordable Care Act, provides that the low-volume hospital payment adjustment (that is, the percentage increase) is to be determined ‘‘using a continuous linear sliding scale ranging from 25 percent for low-volume hospitals with 200 or fewer discharges of individuals entitled to, or enrolled for, benefits under Part A in the fiscal year to zero percent for low-volume hospitals with greater than 1,600 discharges of such individuals in the fiscal year.’’ In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50238 through 50275 and 50414), we revised the regulations at 42 CFR 412.101 to reflect the changes to the qualifying criteria and the payment adjustment for low-volume hospitals VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 made by sections 3125 and 10314 of the Affordable Care Act. In addition, we defined, at § 412.101(a), the term ‘‘road miles’’’ to mean ‘‘miles’’ as defined at § 412.92(c)(1), and clarified the existing regulations to indicate that a hospital must continue to qualify as a lowvolume hospital in order to receive the payment adjustment in that year (that is, it is not based on a one-time qualification). Furthermore, in that same final rule, we discussed the process for requesting and obtaining the lowvolume hospital payment adjustment for FY 2011 (75 FR 50240). For the second year of the changes to the low-volume hospital payment adjustment provided for by section 3125 and 10314 of the Affordable Care Act (that is, FY 2012), consistent with the regulations at § 412.101(b)(2)(ii), in the FY 2012 IPPS/ LTCH PPS final rule (76 FR 51677 through 51680), we updated the discharge data source used to identify qualifying low-volume hospitals and calculate the payment adjustment (percentage increase). Under § 412.101(b)(2)(ii), for FYs 2011 and 2012, a hospital’s Medicare discharges from the most recently available MedPAR data, as determined by CMS, are used to determine if the hospital meets the discharge criteria to receive the low-volume hospital payment adjustment in the current year. In that same final rule, we established that, for FY 2012, qualifying low-volume hospitals and their payment adjustment are determined using Medicare discharge data from the March 2011 update of the FY 2010 MedPAR file, as these data were the most recent data available at that time. In addition, we noted that eligibility for the low-volume hospital payment adjustment for FY 2012 was also dependent upon meeting (if the hospital was qualifying for the low-volume hospital payment adjustment for the first time in FY 2012), or continuing to meet (if the hospital qualified in FY 2011), the mileage criterion specified at § 412.101(b)(2)(ii). Furthermore, we established a procedure for a hospital to request low-volume hospital status for FY 2012 (which was consistent with the process we employed for the lowvolume hospital payment adjustment for FY 2011). 2. Provisions of the ATRA for FY 2013 a. Background Section 605 of the ATRA amended sections 1886(d)(12)(B), (C)(i), and (D) of the Act to extend, for FY 2013, the temporary changes in the low-volume hospital payment adjustment policy provided for in FYs 2011 and 2012 by PO 00000 Frm 00117 Fmt 4701 Sfmt 4700 50611 the Affordable Care Act. As we have noted previously, prior to the enactment of section 605 of the ATRA, beginning with FY 2013, the low-volume hospital definition and payment adjustment methodology would have reverted to the policy established under statutory requirements that were in effect prior to the amendments made by the Affordable Care Act. Prior to the enactment of the ATRA, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53406 through 53409), we discussed the low-volume hospital payment adjustment for FY 2013 and subsequent fiscal years. Specifically, we discussed that, in accordance with section 1886(d)(12) of the Act, beginning with FY 2013, the lowvolume hospital definition and payment adjustment methodology would revert back to the statutory requirements that were in effect prior to the amendments made by the Affordable Care Act. Therefore, we explained, as specified under the existing regulations at § 412.101, effective for FY 2013 and subsequent years, that in order to qualify as a low-volume hospital, a subsection (d) hospital must be more than 25 road miles from another subsection (d) hospital and have less than 200 discharges (that is, less than 200 total discharges, including both Medicare and non-Medicare discharges) during the fiscal year. We also established a procedure for hospitals to request low-volume hospital status for FY 2013 (which was consistent with our previously established procedures for FYs 2011 and 2012). In a Federal Register notice published on March 7, 2013 (78 FR 14689) (hereinafter referred to as the FY 2013 IPPS notice), we announced the extension of the Affordable Care Act amendments to the low-volume hospital payment adjustment requirements under section 1886(d)(12) of the Act for FY 2013 pursuant to section 605 of the ATRA. The applicable low-volume hospital percentage increase provided for by the provisions of the Affordable Care Act and the ATRA is determined using a continuous linear sliding scale equation that results in a low-volume hospital payment adjustment ranging from an additional 25 percent for hospitals with 200 or fewer Medicare discharges to a zero percent additional payment adjustment for hospitals with 1,600 or more Medicare discharges. In the FY 2013 IPPS notice (78 FR 14689 through 14694), to implement the extension of the temporary change in the low-volume hospital payment adjustment policy for FY 2013 provided for by the ATRA, we updated the discharge data source used to identify E:\FR\FM\19AUR2.SGM 19AUR2 50612 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 qualifying low-volume hospitals and calculate the payment adjustment (percentage increase). Consistent with our implementation of the low-volume hospital payment adjustment policy for FYs 2011 and 2012 as set forth at existing § 412.101(b)(2)(ii), we established that, for FY 2013, qualifying low-volume hospitals and their payment adjustments are determined using Medicare discharge data from the March 2012 update of the FY 2011 MedPAR file, as these data were the most recent data available at the time of the development of the FY 2013 payment rates and factors established in the FY 2013 IPPS/LTCH PPS final rule. In addition, we noted that eligibility for the low-volume hospital payment adjustment for FY 2013 is also dependent upon meeting (in the case of a hospital that did not qualify for the low-volume hospital payment adjustment in FY 2012), or continuing to meet (in the case of a hospital that did qualify for the low-volume hospital payment adjustment in FY 2012), the mileage criterion specified at existing § 412.101(b)(2)(ii). We also established a procedure for a hospital to request lowvolume hospital status for FY 2013 (which is consistent with the process for the low-volume hospital payment adjustment for FYs 2011 and 2012). Furthermore, we noted our intent to make conforming changes to the regulations text at § 412.101 to reflect the changes to the qualifying criteria and the payment adjustment for lowvolume hospitals in accordance with the amendments made by section 605 of the ATRA in future rulemaking. (We refer readers to the FY 2013 IPPS notice (78 FR 14689 through 14694) for additional information on the extension of the Affordable Care Act amendments to the low-volume hospital payment adjustment requirements under section 1886(d)(12) of the Act through FY 2013 in accordance with section 605 of the ATRA.) b. Conforming Regulatory Changes In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50238 through 50275 and 50414), we amended the regulations at § 412.101 to specify that, beginning with FY 2013, the low-volume hospital definition and payment adjustment methodology reverted to the policy established under statutory requirements that were in effect prior to the amendments made by the Affordable Care Act. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27576), we proposed to make conforming changes to the existing regulations text at § 412.101 to reflect the extension of the changes to the qualifying criteria and VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 the payment adjustment methodology for low-volume hospitals through FY 2013 in accordance with section 605 of the ATRA, as announced in the FY 2013 IPPS notice (as discussed above). Specifically, we proposed to revise paragraphs (b)(2)(i), (b)(2)(ii), (c)(1), (c)(2), and (d). Under these proposed changes to § 412.101, beginning with FY 2014, consistent with section 1886(d)(12) of the Act, as amended, the low-volume hospital qualifying criteria and payment adjustment methodology would revert to that which was in effect prior to the amendments made by the Affordable Care Act and the ATRA (that is, the low-volume hospital payment adjustment policy in effect for FYs 2005 through 2010). We did not receive any public comments on the proposed conforming changes to the existing regulations text at § 412.101 to reflect the extension of the changes to the qualifying criteria and the payment adjustment methodology for low-volume hospitals through FY 2013 in accordance with section 605 of the ATRA. Therefore, in this final rule, we are adopting as final the proposed revisions to paragraphs (b)(2)(i), (b)(2)(ii), (c)(1), (c)(2), and (d) of § 412.101 without modification. 3. Low-Volume Hospital Definition and Payment Adjustment for FY 2014 and Subsequent Fiscal Years In accordance with section 1886(d)(12) of the Act, as amended, beginning with FY 2014, the lowvolume hospital definition and payment adjustment methodology will revert back to the statutory requirements that were in effect prior to the amendments made by the Affordable Care Act and the ATRA. Therefore, as discussed in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27576 through 27577), consistent with section 1886(d)(12) of the Act, as amended, under the proposed conforming changes to § 412.101(b)(2), effective for FY 2014 and subsequent years, in order to qualify as a low-volume hospital, a subsection (d) hospital must be more than 25 road miles from another subsection (d) hospital and have less than 200 discharges (that is, less than 200 discharges total, including both Medicare and non-Medicare discharges) during the fiscal year. Under our existing policy, effective for FY 2014 and subsequent years, qualifying hospitals would receive the low-volume hospital payment adjustment of an additional 25 percent for discharges occurring during the fiscal year. Comment: A few commenters expressed concern about the financial impact of the expiration of the PO 00000 Frm 00118 Fmt 4701 Sfmt 4700 temporary expansion of the low-volume hospital payment adjustment provided for by the provisions of Affordable Care Act and the ATRA, which were similar to the comments we received on the FY 2013 IPPS/LTCH PPS proposed rule, prior to the 1-year expansion of the lowvolume hospital payment adjustment for FY 2013 provided for by the ATRA. Some commenters supported legislative action that would continue the temporary expansion of the low-volume hospital payment adjustment. Other commenters requested that CMS use the existing statutory authority to make the low-volume adjustment to qualifying hospitals that have less than 800 total discharges rather than only to qualifying hospitals that have less than 200 total discharges. The commenters did not provide any data analysis in support of their comments to expand the lowvolume hospital adjustment to qualifying hospitals that have less than 800 total discharges. Response: As noted previously in section V.I.C.a. of the preamble of this final rule and as discussed in response to public comments in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53408 through 53409), to implement the original low-volume hospital payment adjustment provision, and as mandated by statute, we developed an empirically justified adjustment based on the relationship between costs and total discharges of hospitals with less than 800 total (Medicare and non-Medicare) discharges. Specifically, we performed several regression analyses to evaluate the relationship between hospitals’ costs per case and discharges, and found that an adjustment for hospitals with less than 200 total discharges is most consistent with the statutory requirement to provide for additional payments to low-volume hospitals where there is empirical evidence that higher incremental costs are associated with lower numbers of discharges (69 FR 49101 through 49102). Based on these analyses, we established a lowvolume hospital policy where qualifying hospitals with less than 200 total discharges receive a payment adjustment of an additional 25 percent. (Section 1886(d)(12)(B)(iii) of the Act limits the applicable percentage increase adjustment to no more than 25 percent.) In the future, we may reevaluate the low-volume hospital adjustment policy; that is, the definition of a low-volume hospital and the payment adjustment. However, because we are not aware of any analysis or empirical evidence that would support expanding the originally established a low-volume hospital adjustment policy E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations and we did not make any proposals regarding the low-volume hospital payment adjustment for FY 2014, we are not making any changes to the lowvolume hospital payment adjustment policy in this final rule. Thus, the lowvolume hospital definition and payment adjustment methodology will revert back to the policy established under statutory requirements that were in effect prior to the amendments made by the Affordable Care Act and the ATRA. As described above, for FYs 2005 through 2010 and FY 2014 and subsequent fiscal years, the discharge determination will be made based on the hospital’s number of total discharges, that is, Medicare and nonMedicare discharges. The hospital’s most recently submitted cost report is used to determine if the hospital meets the discharge criterion to receive the low-volume hospital payment adjustment in the current year (§ 412.101(b)(2)(i)). We use cost report data to determine if a hospital meets the discharge criterion because this is the best available data source that includes information on both Medicare and nonMedicare discharges. As we noted in the proposed rule, for FYs 2011, 2012, and 2013, we used the most recently available MedPAR data to determine the hospital’s Medicare discharges because only Medicare discharges were used to determine if a hospital met the discharge criterion for those years. In addition to a discharge criterion, the eligibility for the low-volume hospital payment adjustment also will be dependent upon the hospital meeting the mileage criterion specified at § 412.101(b)(2)(i). Specifically, to meet the mileage criterion to qualify for the low-volume hospital payment adjustment for FY 2014 and subsequent fiscal years, a hospital must be located more than 25 road miles from the nearest subsection (d) hospital. For FY 2014, as we stated in the proposed rule, we will continue to use the established process for requesting and obtaining the low-volume hospital payment adjustment. That is, in order to receive a low-volume hospital payment adjustment under § 412.101, a hospital must notify and provide documentation to its fiscal intermediary or MAC that it meets the discharge and distance requirements. The fiscal intermediary or MAC will determine, based on the most recent data available, if the hospital qualifies as a low-volume hospital, so that the hospital will know in advance whether or not it will receive a payment adjustment. The fiscal intermediary or MAC and CMS may review available data, in addition to the data the hospital submits with its request for low-volume VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 hospital status, in order to determine whether or not the hospital meets the qualifying criteria. (For additional details on our established process for the low-volume hospital payment adjustment, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53408).) Consistent with our previously established procedure, for FY 2014, a hospital must make its request for lowvolume hospital status in writing to its fiscal intermediary or MAC by September 1, 2013, in order for the 25percent low-volume hospital payment adjustment to be applied to payments for its discharges beginning on or after October 1, 2013 (through September 30, 2014). If a hospital’s request for lowvolume hospital status for FY 2014 is received after September 1, 2013, and if the fiscal intermediary or MAC determines the hospital meets the criteria to qualify as a low-volume hospital, the fiscal intermediary or MAC will apply the 25-percent low-volume hospital payment adjustment to determine the payment for the hospital’s FY 2014 discharges, effective prospectively within 30 days of the date of the fiscal intermediary’s or MAC’s low-volume hospital status determination. As we discussed previously in section V.C.2.b. of the preamble of this final rule, we are adopting as final our proposed conforming changes to the regulatory text at § 412.101 to reflect the extension of the changes to the qualifying criteria and the payment adjustment methodology for lowvolume hospitals through FY 2013 made by section 605 of the ATRA (78 FR 27576). Specifically, we are revising § 412.101 to conform the regulations to the statutory requirements that, beginning with FY 2014, the lowvolume hospital qualifying criteria and payment adjustment methodology revert to that which was in effect prior to the amendments made by the Affordable Care Act and the ATRA (that is, the lowvolume hospital payment adjustment policy in effect for FYs 2005 through 2010). Under this revision, the lowvolume hospital payment adjustment policy in effect prior for FYs 2005 through 2010 will apply for FY 2014 and subsequent years. Thus, as noted above, the low-volume hospital definition and payment adjustment methodology will revert back to the policy established under statutory requirements that were in effect prior to the amendments made by the Affordable Care Act and the ATRA. PO 00000 Frm 00119 Fmt 4701 Sfmt 4700 50613 D. Indirect Medical Education (IME) Payment Adjustment (§ 412.105) 1. IME Adjustment Factor for FY 2014 Under the IPPS, an additional payment amount is made to hospitals with residents in an approved graduate medical education (GME) program in order to reflect the higher indirect patient care costs of teaching hospitals relative to nonteaching hospitals. The payment amount is determined by use of a statutorily specified adjustment factor. The regulations regarding the calculation of this additional payment, known as the IME adjustment, are located at § 412.105. We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51680) for a full discussion of the IME adjustment and IME adjustment factor. Section 1886(d)(5)(B) of the Act states that, for discharges occurring during FY 2008 and fiscal years thereafter, the IME formula multiplier is 1.35. Accordingly, for discharges occurring during FY 2014, the formula multiplier is 1.35. We estimate that application of this formula multiplier for the FY 2014 IME adjustment will result in an increase in IPPS payment of 5.5 percent for every approximately 10 percent increase in the hospital’s resident to bed ratio. Comment: Two commenters supported the continuation of the IME adjustment factor. Both commenters stated that IME payments are vital to guaranteeing a strong surgery workforce in which there is currently a growing shortage. One commenter noted that this shortage is especially prevalent within the cardiothoracic surgery workforce. Response: We appreciate the commenters’ support. We note that the IME formula multiplier is set by Congress. We are specifying in this final rule that the IME formula multiplier for FY 2014 is set at 1.35, which we estimate will result in an increase in IPPS payments of 5.5 percent for every approximately 10-percent increase in the hospital’s resident-to-bed ratio. 2. Other Policy Changes Affecting GME In section V.J. of the preamble of this final rule, we present other proposed and final policy changes relating to GME payment. We refer readers to that section of the preamble of this final rule where we present the proposed and final policies. E. Payment Adjustment for Medicare Disproportionate Share Hospitals (DSHs) (§ 412.106) 1. Background Section 1886(d)(5)(F) of the Act provides for additional Medicare E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50614 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations payments to subsection (d) hospitals that serve a significantly disproportionate number of low-income patients. The Act specifies two methods by which a hospital may qualify for the Medicare disproportionate share hospital (DSH) adjustment. Under the first method, hospitals that are located in an urban area and have 100 or more beds may receive a Medicare DSH payment adjustment if the hospital can demonstrate that, during its cost reporting period, more than 30 percent of its net inpatient care revenues are derived from State and local government payments for care furnished to needy patients with low incomes. This method is commonly referred to as the ‘‘Pickle method.’’ The second method for qualifying for the DSH payment adjustment, which is the most common, is based on a complex statutory formula under which the DSH payment adjustment is based on the hospital’s geographic designation, the number of beds in the hospital, and the level of the hospital’s disproportionate patient percentage (DPP). A hospital’s DPP is the sum of two fractions: the ‘‘Medicare fraction’’ and the ‘‘Medicaid fraction.’’ The Medicare fraction (also known as the ‘‘SSI fraction’’ or ‘‘SSI ratio’’) is computed by dividing the number of the hospital’s inpatient days that are furnished to patients who were entitled to both Medicare Part A and Supplemental Security Income (SSI) benefits by the hospital’s total number of patient days furnished to patients entitled to benefits under Medicare Part A. The Medicaid fraction is computed by dividing the hospital’s number of inpatient days furnished to patients who, for such days, were eligible for Medicaid, but were not entitled to benefits under Medicare Part A, by the hospital’s total number of inpatient days in the same period. Because the DSH payment adjustment is part of the IPPS, the DSH statutory references (under section 1886(d)(5)(F) of the Act) to ‘‘days’’ apply only to hospital acute care inpatient days. Regulations located at § 412.106 govern the Medicare DSH payment adjustment and specify how the DPP is calculated as well as how beds and patient days are counted in determining the Medicare DSH payment adjustment. Under § 412.106(a)(1)(i), the number of beds for the Medicare DSH payment adjustment is determined in accordance with bed counting rules for the IME adjustment under § 412.105(b). VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 2. Counting of Patient Days Associated With Patients Enrolled in Medicare Advantage Plans in the Medicare and Medicaid Fractions of the Disproportionate Patient Percentage (DPP) Calculation The regulation at 42 CFR 422.2 defines Medicare Advantage (MA) plan to mean ‘‘health benefits coverage offered under a policy or contract by an MA organization that includes a specific set of health benefits offered at a uniform premium and uniform level of cost-sharing to all Medicare beneficiaries residing in the service area of the MA plan. . . .’’ Generally, each MA plan must at least provide coverage of all services that are covered by Medicare Part A and Part B, but also may provide for Medicare Part D benefits and/or additional supplemental benefits. However, certain items and services, such as hospice benefits, continue to be covered under Medicare fee-for-service (FFS). Under § 422.50 of the regulations, an individual is eligible to elect an MA plan if he or she is entitled to Medicare Part A and enrolled in Medicare Part B. Dual eligible beneficiaries (individuals entitled to Medicare and eligible for Medicaid) also may choose to enroll in a MA plan, and, as an additional supplemental benefit, the MA plan may pay for Medicare costsharing not covered by Medicaid. In the FY 2004 IPPS proposed rule (68 FR 27208), in response to questions about whether the patient days associated with patients enrolled in an MA plan (then called a Medicare + Choice (M+C) plan) should be counted in the Medicare fraction or the Medicaid fraction of the disproportionate patient percentage (DPP) calculation, we proposed that once a beneficiary enrolls in an MA plan, those patient days attributable to the beneficiary would not be included in the Medicare fraction of the DPP. Instead, those patient days would be included in the numerator of the Medicaid fraction, if the patient also were eligible for Medicaid. In the FY 2004 IPPS final rule (68 FR 45422), we did not respond to public comments on this proposal, due to the volume and nature of the public comments we received, and we indicated that we would address those comments later in a separate document. In the FY 2005 IPPS proposed rule (69 FR 28286), we stated that we planned to address the FY 2004 comments regarding MA days in the IPPS final rule for FY 2005. In the FY 2005 IPPS final rule (69 FR 49099), we determined that, under § 412.106(b)(2)(i) of the regulations, MA patient days should be counted in the Medicare fraction of the DPP PO 00000 Frm 00120 Fmt 4701 Sfmt 4700 calculation. We explained that, even where Medicare beneficiaries elect Medicare Part C coverage, they are still entitled to benefits under Medicare Part A. Therefore, we noted that if a MA beneficiary is also an SSI recipient, the patient days for that beneficiary will be included in the numerator of the Medicare fraction (as well as in the denominator) and not in the numerator of the Medicaid fraction. We note that, despite our explicit statement in the final rule that the regulations also would be revised, due to a clerical error, the corresponding regulation at § 412.106(b)(2)(i) was not amended to explicitly reflect this policy until 2007 (72 FR 47384). On November 15, 2012, in a ruling in the case of Allina Health Services v. Sebelius (Allina), the Federal District Court for the District of Columbia (the court) held that the final policy of putting MA patient days in the Medicare fraction adopted in the FY 2005 IPPS final rule was not a logical outgrowth of the FY 2004 IPPS proposed rule (904 F. Supp. 2d 75 (D.D.C. 2012), appeal docketed, No. 13– 5011 (D.C. Cir. Jan. 11, 2013). The court held that interested parties had not been put on notice that the Secretary might adopt a final policy of counting the days in the Medicare fraction and were not provided an adequate further opportunity for public comment. We continue to believe that individuals enrolled in MA plans are ‘‘entitled to benefits under part A’’ as the phrase is used in the DSH provisions at section 1886(d)(5)(F)(vi)(I) of the Act. Section 226(a) of the Act provides that an individual is automatically ‘‘entitled’’ to Medicare Part A when the person reaches age 65 or becomes disabled, provided that the individual is entitled to Social Security benefits under section 202 of the Act. Beneficiaries who are enrolled in MA plans provided under Medicare Part C continue to meet all of the statutory criteria for entitlement to Medicare Part A benefits under section 226 of the Act. Moreover, in order to enroll in Medicare Part C, or to change from one MA plan to another MA plan offered under Part C, a beneficiary must be ‘‘entitled to benefits under Part A and enrolled under Part B’’ (section 1852(a)(1)(B)(i) of the Act). Thus, by definition, a beneficiary must be entitled to Part A to be enrolled in Part C. There is nothing in the Act that suggests that beneficiaries who enroll in a Medicare Part C plan forfeit their entitlement to Medicare Part A benefits. To the contrary, a beneficiary who enrolls in Medicare Part C is entitled to receive benefits under Medicare Part A through E:\FR\FM\19AUR2.SGM 19AUR2 50615 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations the MA plan in which he or she is enrolled, and the MA organization’s costs in providing such Part A benefits are paid for by CMS with money from the Medicare Part A Trust Fund. In addition, under certain circumstances, Medicare Part A pays directly for care furnished to patients enrolled in Medicare Part C plans, rather than indirectly through Medicare Part A Trust Fund payments to MA organizations. For example, if, during the course of the year, the scope of benefits provided under Medicare Part A expands beyond a certain cost threshold due to Congressional action or a national coverage determination, Medicare Part A will pay the provider directly for the cost of those services (section 1852(a)(5) of the Act). Similarly, Medicare Part A also pays directly for federally qualified health center services and hospice care furnished to MA patients (section 1853(a)(4) and section 1853(h)(2) of the Act, respectively). Thus, we continue to believe that a patient enrolled in an MA plan remains entitled to benefits under Medicare Part A, and should be counted in the Medicare fraction of the DPP, and not the Medicaid fraction. We also believe that our policy of counting patients enrolled in MA plans in the Medicare fraction was a logical outgrowth of the FY 2004 IPPS proposed rule, and, accordingly, have appealed the decision in Allina. However, in an abundance of caution and for the reasons discussed above, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27578), we proposed to readopt the policy of counting the days of patients enrolled in MA plans in the Medicare fraction of the DPP. We sought public comments from interested parties that may support or oppose the proposal to include the MA patient days in the Medicare fraction of the DPP calculation for FY 2014 and subsequent years. We indicated in the proposed rule that we would evaluate these public comments and consider whether a further change in policy is warranted, and would include our final determination in the FY 2014 IPPS/LTCH PPS final rule. We did not propose any change to the regulation text because the current text reflects the policy being proposed. Comment: A few commenters supported CMS’ proposal to readopt the policy of including MA patient days in the numerator and denominator of the Medicare fraction of the DPP calculation. One commenter recommended, for consistency purposes, that MA days continue to be included in the Medicare fraction. Another commenter stated that the proposal makes logical sense because these patients remain entitled to, and receive, Medicare Part A benefits, and have simply chosen to receive them through an MA plan offered under Medicare Part C. The commenter also opined that the effect on the Medicare fraction would likely be minimal because the commenter believed that the majority of patients who enroll in Medicare Part C would not be likely to meet the income eligibility requirement for SSI benefits. Other commenters supported CMS’ proposal to readopt the policy, stating that CMS will have provided all interested parties with adequate time and information to meaningfully participate in the rulemaking process. Response: We appreciate the commenters’ support. We agree with commenters that a patient enrolled in a MA plan remains entitled to benefits under Part A and should be included in the Medicare fraction of the DPP and not the Medicaid fraction. We also agree with commenters that we have provided adequate notice and opportunity for the public to comment on our proposal to readopt our policy of counting the days of patients enrolled in MA plans in the Medicare fraction for FY 2014 and subsequent years. Furthermore, as discussed in more detail below, we continue to believe that we also provided adequate notice and opportunity for review and comment prior to the original adoption of the policy in the FY 2005 IPPS rule; and, therefore, we have appealed the court’s decision in Allina which concluded that we did not. In addition, with regard to the commenter’s assertion that the majority of patients who enroll in Medicare Part C would not be likely to meet the income eligibility requirement for SSI benefits, we disagree and note that research, such as the findings from the Medicare Current Beneficiary Survey as listed in the table below, has shown that Part C enrollees tend to have lower incomes at similar rates as Medicare beneficiaries who are not enrolled in Part C. PERCENTAGE OF MEDICARE BENEFICIARIES BY INCOME LEVEL, FEE FOR SERVICE AND RISK HMO: 2009–2011 12 Beneficiaries (%) 2011 Total Less than $5,000 .......................................................... $5,000–$9,999 .............................................................. $10,000–$14,999 .......................................................... $15,000–$19,999 .......................................................... $20,000–$24,999 .......................................................... $25,000–$29,999 .......................................................... $30,000–$39,999 .......................................................... $40,000–$49,999 .......................................................... $50,000 or more ............................................................ 2011 Fee-forservice 3.47 10.92 13.76 9.51 9.17 7.88 13.18 9.92 22.18 2011 Risk HMO 3.69 11.03 13.50 8.48 8.52 7.65 12.88 9.96 24.28 2.84 10.61 14.50 12.34 10.97 8.53 14.00 9.82 16.39 2010 Total 2010 Fee-forservice 4.17 10.94 13.94 10.13 8.67 8.02 13.44 9.83 20.87 2010 Risk HMO 4.29 11.00 13.63 9.01 8.15 7.85 13.17 10.21 22.71 3.82 10.78 14.86 13.46 10.21 8.53 14.23 8.70 15.41 2009 Total 3.86 11.75 14.00 9.97 9.00 8.80 13.30 9.65 19.67 2009 Fee-forservice 4.07 12.01 13.35 9.20 8.33 8.40 13.19 10.02 21.43 2009 Risk HMO 3.19 10.92 16.03 12.38 11.11 10.03 13.63 8.49 14.21 mstockstill on DSK4VPTVN1PROD with RULES6 12 Sources: Medicare Current Beneficiary Survey. 2011 Characteristics and Perceptions of the Medicare Population. 2010 Characteristics and Perceptions of the Medicare Population. 2009 Characteristics and Perceptions of the Medicare Population. Available at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Research/MCBS/Data-Tables.html. Note: As described in the sources, income estimates are derived from imputed income data. Standard errors of income estimates may be underestimated as they have not been adjusted to reflect the imputation of missing data. Comment: A few commenters stated that the policy proposal promotes the integrity of the 340B program. The commenters stated that the size of the 340B program has far exceeded Congress’ intent to help safety-net providers cover the costs of VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 uncompensated pharmaceutical care; and including MA patient days in the Medicare fraction helps to ensure that a hospital’s DPP is not artificially inflated, thereby helping to curb some of the recent abuse and promote the program’s original goals. In addition, the PO 00000 Frm 00121 Fmt 4701 Sfmt 4700 commenters stated that, given that section 3133 of the Affordable Care Act reduces aggregate DSH funding beginning in FY 2014, providing oversight of the 340B program will be critical. The commenters stated that, with less DSH funds available, ensuring E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50616 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations that entities with inflated DPPs do not divert funds from truly DSH eligible providers is critical to maintain that the support is provided where it will be the most beneficial, as intended by Congress. In addition, one commenter stated that CMS has an opportunity to provide protection for DPP values for hospitals located in States where Medicaid was not expanded under the intent of the Affordable Care Act. The commenter recommended that CMS issue rules that grandfather current providers who qualify for 340B prescription drug discounting until further impacts of the Affordable Care Act can be reviewed and a new standard be determined for hospitals located in States that are not expanding the Medicaid program to levels prescribed under the Affordable Care Act. Response: Although we appreciate receiving the commenters’ views on the 340B program, we note that this program is administered by HRSA and is not within the scope of this rulemaking. Additionally, we note that we believe the commenter that made the recommendation about issuing rules that would grandfather current providers who qualify for 340B prescription drug discounting until further impacts of the Affordable Care Act can be assessed for hospitals located in States that are not expanding the Medicaid program, may be confused about how the statute, specifically the Affordable Care Act, ‘‘protects’’ DPP values. Comment: Many commenters opposed CMS’ proposal and urged CMS to exclude MA patient days from the Medicare fraction of the DPP calculation. These commenters disagreed that individuals enrolled in Medicare Advantage are ‘‘entitled’’ to benefits under Part A, and asserted that the policy proposal is not dictated by the statute and is inconsistent with their view of the intent of Congress. The commenters argued that, in examining the statute and CMS’ regulations, it is clear to them that MA enrollees are not entitled to benefits under Part A and, therefore, should be excluded from the Medicare fraction. These commenters cited three provisions of the statute in support of this argument: • Section 226(c)(1) of the Act, which states ‘‘entitlement of an individual to hospital insurance benefits for a month [under Part A] shall consist of entitlement to have payment made under, and subject to the limitations in, [P]art A . . . .’’ • Section 1851(a)(1) of the Act, which states that the persons eligible for Medicare Advantage are ‘‘entitled to elect to receive benefits’’ either VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 ‘‘through the original [M]edicare fee-forservice program under [P]arts A and B, or through enrollment in a [Medicare Advantage] plan under [Part C].’’ • Section 1851(i)(1) of the Act, which states that ‘‘payments under a contract with a [Medicare Advantage] organization . . . with respect to an individual electing a [Medicare Advantage] plan . . . shall be instead of the amounts which (in the absence of the contract) would otherwise be payable under [P]arts A and B . . . .’’ The commenters contended that because individuals who enroll in an MA plan receive benefits under Part C and not Part A, they cannot be ‘‘entitled’’ to benefits under Part A because, in the commenters’ view, they no longer receive benefits under Part A. They argued that beneficiaries are not ‘‘entitled’’ to benefits that the commenters believe the law denies them, and therefore, CMS’ interpretation is unreasonable. Response: We disagree that Medicare beneficiaries enrolled in Part C no longer receive benefits under Part A and that, because the payment structure of Part C applies (that is, CMS pays the MA plans so that the plans may make payment to hospitals for the care of the beneficiaries), those beneficiaries are not entitled to Part A benefits. As we stated above, section 226(A) of the Act provides that an individual is automatically ‘‘entitled’’ to Medicare Part A when the person reaches age 65 or becomes disabled, provided that the individual is entitled to Social Security benefits under section 202 of the Act. This interpretation is consistent with our conclusion that Congress uses the phrase ‘‘entitled to benefits under part A’’ to consistently refer to an individual’s status as a Medicare beneficiary. We agree with the United States Court of Appeals for the Sixth Circuit when it recently explained, ‘‘the phrase ‘entitled to benefits under [Medicare] part A’ appears in more than 30 other sections of the Medicare statute, indicating that the phrase has a specific, consistent meaning throughout the statutory scheme, rather than a varying, context-specific meaning in each section and subsection. (We refer readers to Ali v. Fed. Bureau of Prisons, 552 U.S. 214, 222 (2008) (noting that statutory construction ‘‘must, to the extent possible, ensure that the statutory scheme is coherent and consistent’’) and Metro. Hosp. v. U.S. Dep’t of Health & Human Servs., 712 F.3d 248, 260 (6th Cir. 2013) (holding that including patients who have exhausted inpatient benefits in the Medicare fraction is consistent with how ‘‘entitled to benefits under part A’’ is used PO 00000 Frm 00122 Fmt 4701 Sfmt 4700 throughout the Medicare statute).) Enrolling in Part C does not change an enrollee’s status as a Medicare beneficiary and does not remove or reduce any benefits the beneficiary would otherwise have received; indeed, the MA plan must provide the benefits to which the beneficiary is entitled under Part A and may provide additional benefits as described by section 1852(a)(1)(A) of the Act. We agree with the Court of Appeals for the District of Columbia Circuit that ‘‘Congress has not clearly foreclosed the Secretary’s interpretation that [Part C] enrollees are entitled to benefits under Part A. Rather, it has left a statutory gap, and it is for the Secretary . . . to fill that gap’’ (Northeast Hosp. Corp. v. Sebelius; 657 F.3d 1, 13 (D.C. Cir. 2011)). We further note that the D.C. Circuit has already rejected many of the commenters’ view that the agency’s interpretation is inconsistent with the plain language of the statute (Id. at 6– 13). Thus, for purposes of section 226(c)(1) of the Act, beneficiaries enrolled in Part C are having payment made under Part A for the month in question, via the Part A component of the monthly payment made to the MA organization, and are receiving Part A benefits subject to the limitations on such benefits provided for in Part A. For purposes of section 1851(a)(1) of the Act, the ‘‘benefits’’ referenced in the phrase quoted by the commenters (‘‘entitled to elect to receive benefits’’) are the benefits provided for in Part A and Part B. Thus, this language confirms that beneficiaries enrolled in Part C remain ‘‘entitled to’’ benefits under Part A, and thus supports our interpretation of the statute. It is only the vehicle ‘‘through’’ which such Part A benefits are received that changes, from the ‘‘feefor-service’’ method spelled out under Part A, to the capitation payment method spelled out in Part C. Section 1851(i)(1) of the Act similarly refers only to whether Part A benefits are provided via payments to, and by, the MA organization, or direct payments made under the ‘‘fee-for-service’’ payment procedures provided for in Part A and Part B. It is only the process for furnishing these benefits that is at issue, not entitlement to such benefits. Comment: Another commenter objecting to our proposal noted that section 1886(d)(5)(F) of the Act, which defines the Medicare and Medicaid fractions of the DPP calculation, has not undergone any significant amendments since its enactment, and was never amended to explicitly address the creation of Medicare Part C. As such, the commenter asserted that Part C days E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations should clearly be excluded from the Medicare fraction because the commenter believed that services paid for under Part C cannot also result in a patient being entitled to benefits for those services under Part A. However, the commenter asserted that Part C days are clearly not excluded from the Medicaid fraction because ‘‘the numerator of the Medicaid fraction includes all hospital patient days (regardless of under which ‘Part’ of Medicare) for which the patient was ‘eligible’ for Medicaid as well as Medicare, but for which the patient was not entitled to receive benefits under Part A of Medicare . . . .’’ Response: The enactment of the current provisions in Medicare Part C authorizing an alternative way of receiving Part A benefits did not alter the criteria for entitlement to such benefits, any more than did earlier, similar provisions in section 1876 of the Act that were enacted in 1982. Indeed, language in section 1876 made clear that a beneficiary was still ‘‘entitled to benefits under Part A’’ while receiving Part A benefits through a private health plan paid by CMS to provide them because section 1876 provided for two classes of enrollees, one only enrolled in Part B, and another ‘‘entitled to benefits under Part A’’ and enrolled in Part B, and provided for Part A Trust Fund payments in the latter case, and only Part B payments in the former. There is no indication that Part C enrollees are not similarly ‘‘entitled to benefits under Part A’’ on an ongoing basis. With regard to the Medicaid fraction, as stated in section 1886(d)(5)(F) of the Act, the number of patient days for patients who, for those days, were eligible for medical assistance under a State plan approved under Title XIX (Medicaid) but who were not entitled to benefits under Medicare Part A is divided by the total number of patient days for that same period. MA enrollees are entitled to benefits under Medicare Part A, and therefore, these patient days should not be included in the Medicaid portion of the calculation. It is CMS’ interpretation that the statute provides support to include MA days in the Medicare fraction. The statute requires that the inpatient days be attributable to inpatients entitled to benefits under Part A. Section 1851(a)(3) of the Act defines an individual that is eligible to enroll in an MA plan as an individual who is entitled to benefits under Part A and enrolled under Part B. We have concluded that, based on section 1886(d)(5)(F) of the Act, MA enrollee patient days should be included in calculating the DSH adjustment by finding that such enrollees are VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 otherwise entitled to benefits under Part A. In other words, MA patients are entitled to Medicare Part A prior to and after selecting Part C, and because they do not lose that entitlement when they choose to enroll in a Part C plan, our position is that the Medicare Part C days should be included in the Medicare fraction, regardless of whether the beneficiary opts for Part C coverage. Comment: Another commenter argued that, while it is true that a patient must at some point be entitled to benefits under Part A in order to be eligible to enroll in Part C, once an enrollee has chosen Part C, he or she is no longer entitled to Part A benefits and instead, the payment structure in Part C applies, and CMS pays MA organizations for those beneficiaries, while the MA organizations pay the providers. The commenter also asserted that this was evidence that Congress did not intend to include Part C days in the Medicare fraction because if it had, Congress could have easily revised the DSH statute to indicate as such. Response: Again, this commenter confuses the method for covering Part A benefits with whether an individual is entitled to receive such benefits. We refer readers to the previous response for a fuller discussion. Comment: One commenter stated that the proposed policy would be inconsistent with prior practice and CMS’ longstanding operational treatment of Part C days in Medicare Part A calculations because services furnished to Part C enrollees historically were recorded as non-Medicare days. The commenter further stated that, similarly, CMS has historically interpreted entitled to benefits under Part A to mean entitlement to payment for inpatient hospital care under the IPPS. The commenter also asserted that the proposed policy is inconsistent with CMS’ interpretation of entitled to SSI benefits in the DSH statute because CMS construes this to mean including only those days for patients who were entitled to have SSI benefits actually paid to them on such days. Therefore, the commenter argued, even when an individual is entitled to payment of SSI benefits, CMS does not count the day as an SSI patient day if there is some other reason why the Social Security Administration does not make the payment owed to the individual. Response: While we acknowledge that in the past CMS has not always captured MA patient days as Medicare days, this was an operational issue, not the result of an authoritative agency legal interpretation or Medicare payment policy decision not to include MA days in the Medicare fraction. We PO 00000 Frm 00123 Fmt 4701 Sfmt 4700 50617 note that these operational issues persisted for a time after we expressly concluded that MA days should be counted in the Medicare fraction in the FY 2005 IPPS rule. Contrary to the commenter’s assertion, we have not, as a matter of either legal interpretation or policy, considered the days of patients enrolled in MA plans to be nonMedicare days. Patients enrolled in Medicare Part C must be entitled to Medicare Part A and enrolled in Part B. Moreover, the days of patients enrolled in Medicare HMOs are considered to be paid or covered days even though the payment may be made indirectly through a section 1876 HMO or through an MA plan. We note that the original Medicare DSH regulations indicated that patients receiving their Part A benefits under section 1876 of the Act were to count as Medicare patient days. We further disagree with the commenter that CMS’ interpretation is unreasonable and inconsistently interprets the term ‘‘entitled to benefits.’’ To the contrary, we adopted this interpretation of ‘‘entitled to benefits under part A’’ in large part in order to be consistent with how that phrase is used elsewhere in the Act. Section 1886(d)(5)(F)(vi)(I) of the Act specifically notes that the numerator of the Medicare fraction must reflect patient days for patients ‘‘entitled to benefits under part A’’ who are also ‘‘entitled to supplementary security income benefits (excluding any State supplementation) under title XVI of this Act.’’ Regarding entitlement to SSI benefits, we note that section 1602 of the Act states that ‘‘Every aged, blind, or disabled individual who is determined under part A to be eligible on the basis of his income and resources shall, in accordance with and subject to the provisions of this title, be paid benefits by the Commissioner of Social Security.’’ Therefore, because SSI is a cash benefit, only a person who is actually paid these benefits can be considered entitled to these benefits. This differs from entitlement to Medicare benefits under Part A, which are a distinct set of health insurance benefits described under section 1812 of the Act, including coverage of inpatient hospital, inpatient critical access hospital, and post-acute care services as well as post-institutional home health and hospice services under certain conditions. We note that the agency has undertaken extensive effort and noticeand-comment rulemaking to establish a process to identify appropriately Medicare patient days for which a beneficiary was simultaneously eligible for SSI benefits in the FY 2011 IPPS/ E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50618 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations LTCH PPS final rule (75 FR 50275 through 50286). Comment: One commenter noted that the Medicare fraction does not include patient days for Medicare beneficiaries enrolled in Medicare Part B only. The commenter further argued that, similarly, the Medicare fraction does not include all patient days for some individuals who are eligible for and enrolled in Part A because Part A patient days in hospital units excluded from the IPPS are not included in the Medicare fraction, even if actually paid under Part A. The commenter asserted that as the DPP calculation is limited to patient days in areas of the hospital that provide services that are paid for under the IPPS, in the same way, the Medicare fraction should exclude patient days for Medicare beneficiaries who have elected to receive benefits under Part C— because these days are not paid under the IPPS, they should not be included in the Medicare fraction. Response: In the case of a Medicare beneficiary enrolled only in Part B, we agree that such an individual is not ‘‘entitled to benefits under Part A,’’ and thus is clearly distinguishable from a beneficiary who is entitled to benefits under Part A, but has elected to enroll in a Part C plan. We note that commenters may be misunderstanding our policy when they asserted that the days of patients enrolled in Part C should not be included in the Medicare/SSI fraction because the DSH calculation does not include patient days in hospital units excluded from the IPPS but paid under Part A. The regulation at 42 CFR 412.106(a)(1)(ii) limits the patient days used in determining a hospital’s DPPs to patient days ‘‘attributable to units or wards of the hospital providing acute care services generally payable under the [inpatient] prospective payment system.’’ Patient days associated with beds in excluded distinct part hospital units are explicitly excluded from the DPP calculation in accordance with 42 CFR 412.105(a)(1)(ii)(A). In contrast, the days for MA beneficiaries that are counted in the Medicare/SSI fraction are days on which those beneficiaries received care that would be (and in some cases actually was) payable under IPPS. Accordingly, CMS’ policies regarding patient days in excluded distinct part units provide no reason to treat Part C enrollees differently than other patients also entitled to benefits under Part A. Comment: One commenter argued that the instances where a Part C beneficiary can have services paid under Part A are extremely limited, both in scope and duration, and asserted that VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 CMS’ descriptions of the exceptions overstate the extent to which Part A payments actually can be obtained by Part C beneficiaries. The commenter also contended that this illustrates that when Congress has wanted to explain how Part C and Part A benefits relate to one another, Congress has done so explicitly, and without ambiguity. Another commenter added that when Congress added Part C to the Medicare statute, it did not amend the DSH statute to require CMS to treat Part C days differently for DSH payment purposes, and that intent should be given effect by continuing to exclude Part C days from the Medicare fraction and including Medicaid eligible Part C days in the numerator of the Medicaid fraction. Response: While we appreciate the comments noting that instances where a Part C beneficiary can have services paid under Part A are limited, we disagree that our description of these exceptions overstates the extent to which Part A payments can be obtained by Part C beneficiaries. Under the commenters’ view of the statute, beneficiaries enrolled in MA plans are not ‘‘entitled to benefits under Part A,’’ which would suggest that Medicare Part A should not make any payments on their behalf. However, as discussed above, there are instances where Part A is required to do just that. The hospice benefit, for instance, is a significant part of the benefits available under Part A that is always paid for on a fee-forservice basis, even if the beneficiary is enrolled in an MA plan. We find these circumstances impossible to reconcile with the commenter’s assertion that beneficiaries enrolled in MA plans are not ‘‘entitled to benefits under Part A.’’ Rather, these payments make clear that beneficiaries enrolled in MA plans are ‘‘entitled to benefits under Part A,’’ regardless of the frequency or magnitude of these claims for payment. Comment: Commenters stated that CMS still does not discuss that including MA days in the Medicare fraction would be a reversal of its prior position and, therefore, is both substantively and procedurally flawed. Some commenters argued that CMS did not include a reasoned explanation for what they characterize as a reversal of policy. Some commenters contended that CMS, in both the FY 2004 proposed rule and the FY 2005 final rule, acknowledged that the statute is susceptible to multiple interpretations, including the agency’s own previous position that individuals enrolled in the MA plans should not be included in the Medicare fraction, and that the FY 2014 PO 00000 Frm 00124 Fmt 4701 Sfmt 4700 proposed rule only slightly elaborates on the assertion in the FY 2005 final rule that individuals enrolled in MA plans ‘‘are still, in some sense entitled to benefits under Medicare Part A.’’ Commenters stated that, in Allina, the court found the FY 2005 final rule was flawed because CMS did not acknowledge that the policy was a reversal of the agency’s prior interpretation, and did not give a sufficient explanation for that reversal in interpretation, and that the FY 2014 proposed rule does not correct those deficiencies, but instead just states that CMS ‘‘continues’’ to believe that MA patient days should be included in the Medicare fraction. Response: We disagree that including the MA days in the Medicare fraction is a reversal of prior policy. No final regulation, administrative decision, or subregulatory guidance issued by the Secretary has ever taken the position that MA days were to be excluded from the Medicare fraction. Similarly, no final regulation, administrative decision, or subregulatory guidance issued by the Secretary has ever taken the position that MA days should be included in the numerator of the Medicaid fraction. Accordingly, commenters are incorrect insofar as they suggest that including MA days in the Medicare fraction represents a reversal of a prior policy. However, we acknowledge that, although the DC Circuit held in Northeast that the agency had a practice of excluding MA days from the Medicare fraction prior to the FY 2005 rule (657 F.3d at 17), the court did not hold that the Secretary had adopted a legal interpretation of the phrase ‘‘entitled to benefits under part A’’ or an authoritative agency Medicare payment policy that would require excluding MA days from the Medicare fraction (Id. at 14–17). In fact, in the FY 1990 IPPS final rule (55 FR 35994), CMS made clear that its policy was to include the days of patients enrolled in managed care plans in the Medicare fraction: ‘‘Based on the language of section 1886(d)(5)(F)(vi) of the Act, which states that the disproportionate share adjustment computations should include ‘patients who were entitled benefits under Part A’, we believe it is appropriate to include the days associated with Medicare patients who receive care at a qualified [health maintenance organization (HMO)]. Prior to December 1, 1987, we were not able to isolate the days of care associated with Medicare patients in HMOs and, therefore, were unable to fold this number into the calculation. However, as of December 1, 1987, a field was E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations included on the Medicare Provider Analysis and Review (MedPAR) file that allows us to isolate those HMO days that are associated with Medicare patients. Therefore, since that time, we have been including HMO days in SSI/ Medicare percentage.’’ We note that a recent review of our records from the years immediately before the implementation of Part C demonstrates that the MedPAR data used to calculate Medicare fractions for those years includes the days of patients enrolled in section 1876 HMOs. Prior to the FY 2004 proposed rule, this was the only authoritative agency interpretation relating to the treatment of patient days of individuals enrolled in managed care plans. When Congress created Part C in the Balanced Budget Act of 1997 (BBA) (Pub. L. 105–33, 111 Stat. 251 (Aug. 5, 1997)), section 1876 HMO days were being counted in the Medicare fraction, and were correspondingly being excluded from the Medicaid fraction. On January 1, 1999, patients enrolled in risk HMOs under section 1876 of the Act were automatically enrolled in M+C plans. We issued no guidance discussing how the change in the type of HMO, from section 1876 to M+C, would have affected the DSH calculation. We see no reason why the reorganization in the managed care structure, from section 1876 HMOs into Part C, should have any bearing on how a day counts in the DSH calculation. The BBA does not specifically address DSH, and we thus believe it was appropriate that MA patients should have continued to be counted in the Medicare fraction after its enactment. Indeed, the BBA provided that to enroll in an MA plan, an individual must be ‘‘entitled to benefits under part A’’—the same language used in the DSH provision. Individuals enrolled in MA plans continue to meet the age and disability requirements for entitlement to benefits under Medicare Part A, and thus should be included in the Medicare fraction. Our contractors, having received no instructions to the contrary, continued to exclude the days of patients enrolled in Medicare HMOs (now mostly M+C) from the numerator of the Medicaid fraction. However, at this same time, and for reasons that are not clear to us now, the agency generally stopped collecting no-pay bills from hospitals and therefore lacked the data necessary to include Part C days in the Medicare fraction. We are aware of nothing to suggest that the failure to include Part C days in the Medicare fraction was the result of any reasoned decision making or even, in fact, that the relevant policy makers were aware the Part C days were VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 not being counted in the Medicare fraction. Consequently, Medicare Part C days were largely not included in the DSH calculation at all, except for the denominator of the Medicaid fraction which includes all patient days. We further note that even when the agency promulgated the FY 2005 IPPS final rule, which expressly stated that MA days should be included in Medicare fraction, the agency did not begin collecting the data that would have allowed for their inclusion. We believe that this suggests that relevant policymakers thought that MA days were being included in the Medicare fraction. However, as discussed in detail above, CMS has since taken action to ensure that we are collecting the data necessary to include these days in the Medicare fraction. In short, we disagree that the decision in the FY 2005 IPPS rule to include MA days in the Medicare fraction, and to exclude them from the numerator of the Medicaid fraction, was a reversal of prior policy. We had not (in rulemaking or through subregulatory guidance) specifically addressed the treatment of MA days prior to the FY 2004 proposed rule, although we acknowledge that, as a matter of practice, MA days generally had not been counted in either fraction. Accordingly, commenters are incorrect insofar as they suggested that including MA days in the Medicare fraction, and excluding them from the Medicaid fraction, represents a reversal of prior policy. In the FY 2005 IPPS final rule, CMS determined that M+C days should be included in the Medicare fraction because M+C beneficiaries ‘‘. . . are still, in some sense, entitled to benefits under Medicare Part A’’ (69 FR 49099). CMS acknowledged that, in the FY 2004 proposed rule, it had noted that although a beneficiary must be entitled to Medicare Part A to enroll in an M+C plan, when an individual enrolls in an M+C plan, his or her benefits are ‘‘no longer administered under Part A,’’ and had proposed to exclude M+C days from the Medicare fraction and to include them in the Medicaid fraction numerator if the M+C days enrollee was also eligible for Medicaid (69 FR 49099.) CMS further noted that the proposed rule recognized that whether MA days should be included in the Medicare or the Medicaid fraction ‘‘stems from whether M+C plan enrollees are entitled to benefits under Medicare Part A’’ (69 FR 49099). CMS thus made clear its view that MA days should be counted in one fraction or the other. CMS explained that after considering comments received to its proposal— including the comment that M+C PO 00000 Frm 00125 Fmt 4701 Sfmt 4700 50619 enrollees ‘‘are just as much Medicare beneficiaries as those beneficiaries in the traditional fee-for-service program’’—it ultimately agreed with those that opposed its proposal on the ground that M+C enrollees remain ‘‘entitled to benefits under part A’’ in the relevant sense for determining whether they should be included in the Medicare or Medicaid fraction. CMS thus responded to the comments that were most relevant to the question before the agency: how to interpret the phrase ‘‘entitled to benefits under part A’’ in the DSH provision and provided a reasoned explanation for including MA days in the Medicare fraction. As set forth above, CMS continues to believe that its interpretation reflects the statutory language and congressional intent. Indeed, when it enacted the DSH provision, Congress intended that the Medicare fraction serve as a proxy for the percentage of low-income Medicare patients and the Medicaid fraction serve as a proxy for the percentage of lowincome non-Medicare patients. When Congress subsequently created Part C, it provided that to enroll in part C, an individual must be ‘‘entitled to benefits under part A’’—the same language that it used in the DSH provision. Thus, Part C enrollees are a subset of individuals ‘‘entitled to benefits under part A,’’ and therefore should be included in the Medicare fraction. Comment: Some commenters added that it is unclear what CMS is actually proposing because the proposal to readopt the policy of counting MA patient days in the Medicare fraction is for FY 2014 and subsequent years, but CMS also stated that it believes the policy adopted in the FY 2005 final rule was a logical outgrowth of the FY 2004 proposed rule. The commenters asserted that CMS’ statements suggest that CMS is also planning to apply the policy to correct retroactively invalid past rulemaking. Some commenters stated that CMS cannot retroactively validate invalid rulemakings by restating the positions it adopted in FY 2005, through notice-and-comment rulemaking for FY 2014, and in the absence of a Congressional grant of retroactive rulemaking authority, an attempt to cure prior deficient proceedings is similarly invalid. Response: We disagree that the FY 2014 IPPS/LTCH PPS proposed rule seeks to validate retroactively an invalid rulemaking as the commenter asserted. We proposed to readopt the policy of counting the days of patients enrolled in MA plans in the Medicare fraction of the DPP for FY 2014 and subsequent years in an abundance of caution and have considered the public comments E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50620 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations received in support of and in opposition to our proposal in making our final determination. Comment: Commenters stated that CMS cannot finalize its new proposed policy for FY 2014 because CMS has not corrected the deficiencies cited by the court in Allina, and by doing so, CMS would be acting in an arbitrary and capricious manner in violation of the Administrative Procedure Act. The commenters added that, while they urge CMS not to finalize its proposal, if it does choose to move forward, the agency must provide a thorough discussion and allow stakeholder comment on it before deciding whether to finalize its proposal. Some commenters also stated that the ambiguity in CMS’ proposal does not provide affected parties adequate notice to properly comment on the proposal. Commenters stated that a complete and thorough discussion is critical because, citing the decision in FCC v. Fox Television Stations (556 U.S. 502 (2009), when stakeholders come to rely on a certain policy, an agency must give a more detailed explanation for changing its policy than would be necessary for a policy created on a blank slate. Response: Our proposed rule did not propose a change in policy, but rather to readopt a policy that we finalized in the FY 2005 IPPS final rule. We believe that commenters favoring our proposal and those opposed have had a fair opportunity to comment both in response to the FY 2004 proposed rule and the present proposed rule. We also believe that we have fully explained why our proposal is an appropriate and consistent interpretation of the DSH statute. Comment: Commenters stated that the court in Northeast Hospital v. Sebelius (657 F.3d at 5) opined that the fiscal impact of this policy change was a number in the hundreds of millions of dollars, and they requested that CMS release data as to whether this estimate is correct and, if not, provide the dollar impact so that hospitals can meaningfully assess this policy change in advance of issuing the final rule. Response: We note that we proposed to readopt this policy for FY 2014 and subsequent years. Because this proposal is consistent with our longstanding policy, it is not considered a change in our policy. Accordingly, we do not believe that there will be additional savings or costs to the Medicare program, and by inference, to hospitals, as a result of this policy. Comment: One commenter stated that the issue is further confused by the fact that, as discussed in the proposed budget presented by the President on VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 April 10, 2013, the agency intends to ask Congress to ‘‘clarify that individuals who have exhausted inpatient benefits under Part A or who have elected to enroll in part C plans should be included in the calculation of the Medicare fraction of hospitals’ [DPP calculation].’’ The commenter stated that the agency’s position regarding where such days should be counted has been rejected by the courts in several cases such as Northeast v. Sebelius and Allina v. Sebelius. The commenter asserted that asking Congress to clarify how these days should be treated in the DSH calculation is an attempt to reverse unfavorable court decisions. The commenter also asserted that from the beginning of the DSH program until the FY 2005 final rule, CMS administered the program exactly as the commenter asserted that it should have been administered then and today stating that: ‘‘1. CMS did not count Medicare managed care days in the SSI fraction; 2. From the outset of the Medicare + Choice program CMS instructed hospitals not receiving IME/GME reimbursement to not shadow bill M+C claims, which is the very data CMS needed to include the days in the SSI fraction; 3. CMS’ practice from the beginning of the program was to count all Medicaid paid days in the Medicaid fraction, which included Part A exhausted days.’’ Response: Although we appreciate receiving the commenter’s views, proposals in the President’s budget and/ or pending legislation are outside the scope of this rulemaking. As we have previously stated, it has never been CMS policy that MA days were to be included in the Medicaid fraction. We remind commenters that CMS issued Change Request 6329 on March 6, 2009, and Change Request 5647 on July 20, 2007, to instruct hospitals to submit informational claims for MA patients for FY 2006 and FY 2007 and subsequent periods when it was brought to our attention that hospitals were not submitting these claims, and contrary to our regulations, we were administratively unable to include these MA days in the Medicare fraction. Furthermore, we note that CMS issued Change Request 5647 to provide hospitals additional time to submit FY 2007 claims when it was brought to our attention that compliance with our policy was uneven, partly due to the fact that teaching hospitals have a financial incentive to submit these claims because they receive IME payments for MA discharges while nonteaching hospitals receive no additional IME payment. PO 00000 Frm 00126 Fmt 4701 Sfmt 4700 Comment: One commenter stated that if CMS maintains its view that MA days properly belong in the Medicare fraction, then IPPS hospitals should receive a DSH add-on payment for every MA beneficiary discharge in the same manner that IPPS hospitals receive an IME payment add-on for every MA beneficiary discharge. Response: We appreciate receiving the commenters’ views. However, we note that while section 1886(d)(11) of the Act explicitly provides for an IME payment add-on for each MA beneficiary discharge, section 1886(d)(5)(F) of the Act does not provide for a similar DSH payment add-on for each MA beneficiary discharge. A legislative change would be necessary to authorize such DSH payments to IPPS hospitals that treat MA beneficiaries. After consideration of the public comments we received, we are finalizing our proposal to readopt the policy of counting the days of patients enrolled in MA plans in the Medicare fraction of the DPP for FY 2014 and subsequent years. We continue to believe this policy is most consistent with the language of the statute, congressional intent, and the structure of the DSH calculation. 3. New Payment Adjustment Methodology for Medicare Disproportionate Share Hospitals (DSHs) Under Section 3133 of the Affordable Care Act (§ 412.106) a. General Discussion and Legislative Change Section 3133 of the Patient Protection and Affordable Care Act (PPACA), as amended by section 10316 of PPACA and section 1104 of the Health Care and Education Reconciliation Act (Pub. L. 111–152), added a new section 1886(r) to the Act that modifies the methodology for computing the Medicare DSH payment adjustment beginning in FY 2014. For purposes of this rule, we refer to these provisions collectively as section 3133 of the Affordable Care Act. Currently, Medicare DSH adjustment payments are calculated under a statutory formula that considers the hospital’s Medicare utilization attributable to beneficiaries who also receive Supplemental Security Income (SSI) benefits and the hospital’s Medicaid utilization. Beginning for discharges in FY 2014, hospitals that qualify for Medicare DSH payments under section 1886(d)(5)(F) will receive 25 percent of the amount they previously would have received under the current statutory formula for Medicare DSH payments. This provision E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations applies equally to all hospitals that qualify for DSH payments under section 1886(d)(5)(F)(i)(II) of the Act. Section 1886(d)(5)(F)(i)(II) of the Act provides for a method known as the ‘‘Pickle’’ adjustment under which a hospital that is located in an urban area and has 100 or more beds may receive a Medicare DSH payment adjustment if the hospital can demonstrate that, during its cost reporting period, more than 30 percent of its net inpatient care revenues are derived from State and local government payments for care furnished to needy patients with low incomes. Pursuant to new section 1886(r) of the Act, hospitals that qualify for the Pickle method of the DSH payment adjustment would receive 25 percent of the 35percent add-on adjustment for which they would otherwise qualify under section 1886(d)(5)(F)(i)(II) of the Act. The remaining amount, equal to an estimate of 75 percent of what otherwise would have been paid as Medicare DSH payments, reduced to reflect changes in the percentage of individuals under age 65 who are uninsured, will become available to make additional payments to each hospital that qualifies for Medicare DSH payments and that has uncompensated care. The payments to each hospital for a fiscal year will be based on the hospital’s amount of uncompensated care for a given time period relative to the total amount of uncompensated care for that same time period reported by all hospitals that receive Medicare DSH payments for that fiscal year. As provided by section 3133 of the Affordable Care Act, section 1886(r) of the Act requires that, for ‘‘fiscal year 2014 and each subsequent fiscal year,’’ a ‘‘subsection (d) hospital’’ that would otherwise receive a ‘‘disproportionate share hospital payment . . . made under subsection (d)(5)(F)’’ will receive two separately calculated payments. Specifically, section 1886(r)(1) of the Act provides that the Secretary shall pay to such a subsection (d) hospital (including a Pickle hospital) 25 percent of the amount the hospital would have received under section 1886(d)(5)(F) of the Act for disproportionate share payments, which represents ‘‘the empirically justified amount for such payment, as determined by the Medicare Payment Advisory Commission in its March 2007 Report to the Congress.’’ We refer to this payment as the ‘‘empirically justified Medicare DSH payment.’’ In addition to this payment, section 1886(r)(2) of the Act provides that, for fiscal year 2014 and each subsequent fiscal year, the Secretary shall pay to ‘‘such subsection (d) hospital an VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 additional amount equal to the product of’’ three factors. The first factor is the difference between ‘‘the aggregate amount of payments that would be made to subsection (d) hospitals under subsection (d)(5)(F) if this subsection did not apply’’ and ‘‘the aggregate amount of payments that are made to subsection (d) hospitals under paragraph (1)’’ for each fiscal year. Therefore, this factor amounts to 75 percent of the payments that would otherwise be made under section 1886(d)(5)(F) of the Act. The second factor is, for FYs 2014 through 2017, 1 minus the percent change in the percent of individuals under the age of 65 who are uninsured, determined by comparing the percent of such individuals who are uninsured in 2013, the last year before coverage expansion under the Affordable Care Act (as calculated by the Secretary based on the most recent estimates available from the Director of the Congressional Budget Office before a vote in either House on the Health Care and Education Reconciliation Act of 2010 that, if determined in the affirmative, would clear such Act for enrollment), minus 0.1 percentage point for FY 2014, and minus 0.2 percentage point for FYs 2015 through 2017. For FYs 2014 through 2017, the baseline for the estimate of the change in uninsurance is fixed by the most recent estimate of the Congressional Budget Office before the final vote on the Health Care and Education Reconciliation Act of 2010, which is contained in a March 20, 2010 letter from the then Director of the Congressional Budget Office to the Speaker of the House. A link to this letter is included in section V.E.3.d.2. of the preamble of the proposed rule (and this final rule). For FY 2018 and subsequent years, the second factor is 1 minus the percent change in the percent of individuals who are uninsured, as determined by comparing the percent of individuals ‘‘who are uninsured in 2013 (as estimated by the Secretary, based on data from the Census Bureau or other sources the Secretary determines appropriate, and certified by the Chief Actuary’’ of CMS, and ‘‘who are uninsured in the most recent period for which data is available (as so estimated and certified) minus 0.2 percentage points for FYs 2018 and 2019.’’ Thus, for FY 2018 and subsequent years, the statute provides some greater flexibility in the choice of the data sources to be used in the estimate of the change in the percent of uninsured individuals. The third factor is a percent that, for each subsection (d) hospital, ‘‘represents PO 00000 Frm 00127 Fmt 4701 Sfmt 4700 50621 the quotient of . . . the amount of uncompensated care for such hospital for a period selected by the Secretary (as estimated by the Secretary, based on appropriate data . . .),’’ including the use of alternative data ‘‘where the Secretary determines that alternative data is available which is a better proxy for the costs of subsection (d) hospitals for . . . treating the uninsured,’’ and ‘‘the aggregate amount of uncompensated care for all subsection (d) hospitals that receive a payment under this subsection.’’ Therefore, this third factor represents a hospital’s uncompensated care amount for a given time period relative to the uncompensated care amount for that same time period for all hospitals that receive Medicare DSH payments in that fiscal year, expressed as a percent. For each hospital, the product of these three factors represents its additional payment for uncompensated care for the applicable fiscal year. We refer to the additional payment determined by these factors as the ‘‘uncompensated care payment.’’ Section 1886(r) of the Act states that this provision is effective for ‘‘fiscal year 2014 and each subsequent fiscal year.’’ In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27578 through 27592), we set forth our proposals for implementing the required changes to the DSH payment methodology. We noted that, because section 1886(r) modifies the payment required under section 1886(d)(5)(F) of the Act, it affects only the DSH payment under the operating IPPS. It does not revise or replace the capital IPPS DSH payment provided under the regulations at 42 CFR Part 412, Subpart M, which were established through the exercise of the Secretary’s discretion in implementing the capital IPPS under section 1886(g)(1)(A) of the Act. Finally, section 1886(r)(3) of the Act provides that there shall be ‘‘no administrative or judicial review under section 1869, section 1878, or otherwise’’ of ‘‘any estimate of the Secretary for purposes of determining the factors described in paragraph (2),’’ or of ‘‘any period selected by the Secretary’’ for the purpose of determining those factors. Therefore, there can be no administrative or judicial review of the estimates developed for purposes of applying the three factors used to determine uncompensated care payments, or the periods selected in order to develop such estimates. Comment: Several commenters expressed concerns about the change in the payment methodology used to calculate Medicare DSH payments as a E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50622 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations result of the implementation of section 3133 of the Affordable Care Act, which limits the Medicare DSH payment to 25 percent of what would have otherwise been paid prior to the enactment of section 3133 and establishes an uncompensated care payment calculated under a different payment methodology. The commenters were concerned about large redistributions in payments and hospitals experiencing large increases or decreases in payment with little notice. Some commenters requested that CMS implement a stoploss and stop-gain policy that would limit the amount by which a hospital’s Medicare DSH payments could change in a single year in order to minimize the effects of annual Medicare DSH payment adjustment changes. Some of these commenters suggested a stop-loss and stop-gain policy that would limit the amount by which a hospital’s Medicare DSH payments could change in a single year by no more than 2 percent. Other commenters suggested that CMS institute a cap on the annual payment adjustments, or phase in the transition from Medicare DSH payments calculated prior to the enactment of section 3133 of the Affordable Care Act and Medicare DSH payments calculated under the new payment methodology mandated by section 3133 of the Affordable Care Act to mitigate drastic decreases in payments to eligible hospitals. The commenters noted that CMS has historically implemented transitions for policies that may cause significant changes in payments. The commenters recognized CMS’ policy position regarding data finality, but expressed concern that significant increases or decreases in payments may suggest that the data are inaccurate. The commenters further stated that a stoploss and stop-gain policy would protect against such problems. The commenters believed that the authority to implement a stop-loss and stop-gain policy is a logical extension of CMS’ proxy authority granted under section 1886(r)(2)(C) of the Act to ensure data integrity. Response: We appreciate the commenters’ input. We do not believe that we have the statutory authority to phase in the transition from Medicare DSH payments calculated prior to the enactment of section 3133 of the Affordable Care Act to Medicare DSH payments calculated under the new payment methodology established by section 3133 of the Affordable Care Act, or to apply a cap on the change in Medicare DSH payments to eligible hospitals. Rather, we believe that we are required to reduce Medicare DSH VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 payments to 25 percent of the amount that would otherwise be paid under section 1886(d)(5)(F) of the Act, effective for discharges occurring on or after October 1, 2013. In addition, we believe that we are required to make the additional payment for uncompensated care under the new payment methodology prescribed in section 1886(r)(2) of the Act effective for FY 2014. The change to the payment methodology for Medicare DSH payments for FY 2014 was designed to have redistributive effects in order to provide payments to eligible hospitals based upon their amount of uncompensated care relative to the total amount of uncompensated care furnished by all eligible hospitals. We also do not believe that the statute provides authority for adopting a stoploss and stop-gain policy, or any other transitional methodology. Rather, the statute designates an effective date of October 1, 2013, for implementing both empirically justified Medicare DSH payments and uncompensated care payments. Comment: Some commenters requested that CMS delay the implementation of this provision. These commenters cited factors such as uncertainties over the rate of reduction in uninsurance due to the decisions of some States not to adopt Medicaid expansion as reasons for recommending a delay. Some of these commenters indicated that a delay until FY 2016 would allow time to assess the effect of health care reform on the rates of insured and uninsured Americans and, therefore, would allow implementation of this provision in a manner that would be least disruptive to hospitals, especially those vulnerable hospitals that provide large amounts of uncompensated care. Response: The statute provides that this provision will be effective ‘‘for fiscal year 2014 and each subsequent fiscal year’’ and, therefore, does not provide us with the flexibility to delay implementation. b. Eligibility As indicated above, the new payment methodology applies to ‘‘subsection (d) hospitals’’ that would otherwise receive a ‘‘disproportionate share payment . . . made under subsection (d)(5)(F).’’ Therefore, eligibility for empirically justified Medicare DSH payments is unchanged under this new provision. Consistent with the law, hospitals must receive empirically justified Medicare DSH payments in FY 2014 or a subsequent year to receive an additional Medicare uncompensated care payment for that year. Specifically, section PO 00000 Frm 00128 Fmt 4701 Sfmt 4700 1886(r)(2) of the Act states that, ‘‘[i]n addition to the payment made to a subsection (d) hospital under paragraph (1) . . . the Secretary shall pay to such subsection (d) hospital an additional amount . . .’’ (Emphasis supplied.) Because paragraph (1) refers to empirically justified Medicare DSH payments, the additional payment under section 1886(r)(2) of the Act is, therefore, limited to hospitals that receive empirically justified Medicare DSH payments pursuant to section 1886(r)(1) of the Act for FY 2014 and subsequent years. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27580), we proposed that hospitals that are not eligible to receive empirically justified Medicare DSH payments in FY 2014 and subsequent years would not receive uncompensated care payments for those respective years. We also proposed to make a determination concerning eligibility for interim uncompensated care payments based on each hospital’s estimated DSH status for FY 2014 or the applicable year (using the most recent data that are available). We indicated that our final determination on the hospital’s eligibility for uncompensated care payments would be based on the hospital’s actual DSH status on the cost report for that payment year. (We discuss these proposals and our final policies in more detail below.) In the course of developing the proposed policies for implementing section 1886(r) of the Act, we considered whether several specific classes of hospitals are included within the scope of the statutory provision. In particular, we considered whether the provision applies to (1) hospitals in the Commonwealth of Puerto Rico, (2) hospitals in the State of Maryland paid under a waiver as provided in section 1814(b) of the Act, (3) sole community hospitals (SCHs), (4) hospitals participating in the Bundled Payments for Care Improvement Initiative developed by the Center for Medicare and Medicaid Innovation (Innovation Center), and (5) hospitals participating in the Rural Community Hospital demonstration. We discuss each of these specific classes of hospitals below. (1) Puerto Rico Hospitals Under section 1886(d)(9)(A) of the Act, Puerto Rico hospitals subject to the IPPS are not ‘‘subsection (d) hospitals,’’ but rather constitute a distinct class of ‘‘subsection (d) Puerto Rico hospitals.’’ However, section 1886(d)(9)(D)(iii) of the Act specifies that subparagraph (d)(5)(F) (the provision governing the current DSH payment methodology) ‘‘shall apply to subsection (d) Puerto E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Rico hospitals . . . in the same manner and to the extent as [it applies] to subsection (d) hospitals.’’ While the new section 1886(r) of the Act does not specifically address whether the methodology established there applies to ‘‘subsection (d) Puerto Rico hospitals,’’ section 3133 of the Affordable Care Act does make a revision to section 1886(d)(5)(F)(i) of the Act that is crucial for determining the eligibility of Puerto Rico hospitals for empirically justified Medicare DSH payments and uncompensated care payments under the new provision. Specifically, section 3133 of the Affordable Care Act amended section 1886(d)(5)(F)(i) of the Act to provide that this section is ‘‘[s]ubject to subsection (r).’’ One effect of this amendment is to provide that all hospitals subject to section 1886(d)(5)(F)(i) of the Act, including ‘‘subsection (d) Puerto Rico hospitals,’’ also are subject to the new payment methodology established in section 1886(r) of the Act. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27580), we proposed that subsection (d) Puerto Rico hospitals that are eligible for DSH payments also would be eligible to receive empirically justified Medicare DSH payments and uncompensated care payments under the new payment methodology. We invited public comments on this proposal. Comment: Several commenters supported the proposal to include subsection (d) Puerto Rico hospitals that are eligible for Medicare DSH payments as hospitals eligible to receive empirically justified Medicare DSH payments and uncompensated care payments under the new payment methodology. However, some commenters, including hospitals from Puerto Rico and associations representing Puerto Rico hospitals, maintained that Puerto Rico hospitals have been unfairly deprived of ’’DSH money’’ due to Puerto Rico’s exclusion from the national SSI program. These commenters noted that because of the proposed methodologies for determining the empirically justified DSH payments and Factor 3 of the uncompensated care payment, Puerto Rico will continue to be unfairly deprived of DSH dollars despite having significant uncompensated care expenses. Response: We are finalizing our proposal to include subsection (d) Puerto Rico hospitals that are eligible for Medicare DSH payments as hospitals eligible to receive empirically justified Medicare DSH payments and uncompensated care payments under VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 the new payment methodology. With respect to the comment that Puerto Rico hospitals will continue to be unfairly deprived of Medicare DSH payments because the new methodology continues to rely on SSI days, we acknowledge the commenters’ concerns and note that it is our view that section 1886(r)(1) of the Act requires us to use Medicare SSI days to determine the empirically justified Medicare DSH payments. We further note that, for the reasons discussed below, low-income insured days (which include Medicare SSI days) are currently the best data available that CMS can use as a proxy for the treatment costs of the uninsured and CMS intends to continue to develop an appropriate data source from which to determine the amount of uncompensated care provided by hospitals. However, we note that for FY 2014 the 51 hospitals in Puerto Rico are expected to experience a 41.3 percent increase in Medicare DSH payments (from approximately $8 million to $82 million, or a $74 million increase) due to the implementation of the changes to the DSH payment methodology under section 3133 of the Affordable Care Act, which represents a 41.8 percent increase in overall payments to these hospitals. Generally, Puerto Rico hospitals had a relatively low, less than 10 percent, Medicare utilization (as measured by a percentage of Medicare patient days to total patient days), therefore the changes in section 1886(r)(2) of the Act result in the significant increase for Puerto Rico. We refer readers to the appendix of this rule for a more detailed impact analysis. (2) Hospitals Paid Under a Waiver Under Section 1814(b) of the Act Under section 1814(b) of the Act, hospitals in the State of Maryland are subject to a waiver from the Medicare payment methodologies under which they would otherwise be paid. We have taken the position in other contexts, for example, for purposes of EHR incentive payments (75 FR 44448), that Maryland acute care hospitals remain subsection (d) hospitals. This is because these hospitals are ‘‘located in one of the fifty States or the District of Columbia’’ (as provided in the definition of subsection (d) hospitals) and do not meet the definitions of the hospitals that are specifically excluded from that category, such as cancer hospitals and psychiatric hospitals. However, section 1886(r) of the Act applies to hospitals that are both subsection (d) hospitals and hospitals that would otherwise receive a disproportionate share payment made under the previous DSH payment methodology. Because Maryland waiver hospitals are paid under section PO 00000 Frm 00129 Fmt 4701 Sfmt 4700 50623 1814(b)(3) of the Act and not under section 1886(d)(5)(F) of the Act, they are not eligible to receive empirically justified Medicare DSH payments and uncompensated care payments under the new payment methodology of section 1886(r) of the Act. Comment: Several commenters supported the proposal to exclude Maryland hospitals, which are paid under section 1814(b)(3) of the Act and not under section 1886(d)(5)(F) of the Act, from hospitals eligible to receive empirically justified Medicare DSH payments and uncompensated care payments under the new payment methodology established under section 1886(r) of the Act. Response: We appreciate the commenters’ support and are finalizing this policy, as proposed. (3) Sole Community Hospitals (SCHs) SCHs are paid based on their hospitalspecific rate from certain specified base years or the IPPS Federal rate, whichever yields the greatest aggregate payment for the hospital’s cost reporting period. Payments based on the Federal rate are based on the IPPS standardized amount and include all applicable IPPS add-on payments, such as outliers, DSH, and IME, while payments based on the hospital-specific rate have no add-on payments. For each cost reporting period, the fiscal intermediary/MAC determines which of the payment options will yield the highest aggregate payment. Interim payments are automatically made on a claim-by-claim basis at the highest rate using the best data available at the time the fiscal intermediary/MAC makes the payment determination for each discharge. However, it may not be possible for the fiscal intermediary/MAC to determine in advance precisely which of the rates will yield the highest aggregate payment by year’s end. In many instances, it is not possible to forecast outlier payments or the final amount of the DSH payment adjustment or the IME adjustment until cost report settlement. As noted above, these adjustment amounts are applicable only to payments based on the Federal rate and not to payments based on the hospital-specific rate. The fiscal intermediary/MAC makes a final adjustment at cost report settlement after it determines precisely which of the payment rates would yield the highest aggregate payment to the hospital for its cost reporting period. This payment methodology makes SCHs unique as they can change on a yearly basis from receiving hospital-specific rate payments to receiving Federal rate payments, or vice versa. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50624 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations In order to implement the provisions of section 1886(r) of the Act, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27580), we proposed to continue to determine interim payments for SCHs based on what we estimate and project their DSH status to be prior to the beginning of the Federal fiscal year (based on the best available data at that time), subject to settlement through the cost report. We also proposed that SCHs that receive interim empirically justified Medicare DSH payments in a fiscal year would receive interim uncompensated care payments that fiscal year, subject as well to settlement through the cost report. Final eligibility determinations would be made at the end of the cost reporting period at settlement, and both interim empirically justified Medicare DSH payments and uncompensated care payments would be adjusted accordingly. Therefore, we proposed to follow the same processes of interim and final payments for SCHs that we proposed to follow for eligible IPPS DSH hospitals generally. (We discuss these processes in more detail below.) Comment: Many commenters supported the proposal to allow SCHs that receive interim empirically justified Medicare DSH payments in a fiscal year to receive interim uncompensated care payments that fiscal year, subject to settlement through the cost report. However, one commenter stated that even an SCH paid under the hospitalspecific rate during a fiscal year that, therefore, would not receive empirically justified Medicare DSH payments in that year should still receive uncompensated care payments, provided that the SCH otherwise qualifies for empirically justified Medicare DSH payments under § 412.106(c). The commenter stated that, ‘‘Since such payments are not discharge-related payments, uncompensated care payments should be paid in addition to any dischargerelated payments for an SCH, whether such discharge-related payments are calculated on the basis of the federal standardized amount, plus DSH payments, or on the basis of the HSP, without DSH payments. In other words, if an SCH has aggregate HSP payments that exceed the sum of federal standardized amount and DSH payments, the SCH should still receive uncompensated care payments under 42 CFR 412.106(g)–(h), as long as it is DSHeligible under 42 CFR 412.106(c).’’ Response: We do not agree with the commenter who stated that SCHs paid under the hospital-specific rate during a fiscal year should still receive uncompensated care payments provided that the SCH otherwise qualifies for VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 empirically justified Medicare DSH payments under § 412.106(c). As we have noted above, section 1886(r)(2) of the Act specifically states that, ‘‘[i]n addition to the payment made to a subsection (d) hospital under paragraph (1) . . . the Secretary shall pay to such subsection (d) hospital an additional amount . . .’’ (Emphases supplied.) Because paragraph (2) provides that the uncompensated care payment is to be made ‘‘in addition to’’ the empirically justified Medicare DSH payments made under paragraph (1), a hospital must receive empirically justified Medicare DSH payments under section 1886(r)(1) in order to receive the additional payment under section 1886(r)(2) of the Act for FY 2014 and subsequent years. As previously noted, under the SCH payment methodology, SCHs are paid the higher of the Federal rate or a hospital-specific payment rate. This payment methodology is defined under sections 1886(d)(5)(D)(i) and 1886(d)(1)(A)(iii) of the Act. Section 1886(d)(3) of the Act specifically provides that SCH payments are to be made on a per-discharge basis. Accordingly, as we also note below, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27581), we proposed that the uncompensated care payments would not be accounted for in determining whether an SCH is paid the higher of the Federal rate or the hospital-specific rate. This is because we proposed that the uncompensated care payments would not be dischargedriven payments, but rather payments made on the basis of a hospital’s overall share of uncompensated care during a payment year. The amount of a hospital’s uncompensated care payments for a year is not directly affected by the number of the hospital’s discharges for the year. Therefore, we did not believe that uncompensated care payments should be taken into account in a comparison based on discharge driven hospital-specific and Federal rate payments. Furthermore, as we proposed later in the proposed rule, we intended to make interim uncompensated care payments on a periodic basis rather than a per discharge basis in order to create more predictability for hospitals and to increase administrative efficiency. To the extent the payments are intended to reflect the relative amount of uncompensated care furnished by the hospital, we considered it both reasonable and appropriate to view this payment as an amount for the year, which in the interests of predictability and consistency is made periodically through interim payments. We invited public comments on all of these proposals affecting SCHs. PO 00000 Frm 00130 Fmt 4701 Sfmt 4700 Comment: Several commenters objected to the proposal not to take uncompensated care payments into account in the comparison of payments under the hospital-specific rate and the Federal rate that occurs on a discharge basis and at cost report settlement for SCHs. These commenters contended that the proposed policy amounted to imposing a payment cut on many SCHs. This is because the proposed policy would have the result that more SCHs would be paid under their hospitalspecific rate rather than the higher Federal rate because the equivalent of 75 percent of the former DSH payment amounts would no longer be included in the Federal rate side of the comparison. The commenters maintained that it was not the intention of the new payment adjustment methodology for disproportionate share hospitals to impose reductions in payments indirectly on hospitals paid under different provisions of the statute. Response: We agree with these commenters that it is not the intention of the new payment adjustment methodology for disproportionate share hospitals to impose reductions in payments indirectly on hospitals paid under different provisions of the statute. We continue to believe that the periodic biweekly payments approach would be consistent with the statute, and that it would be, in isolation, the most administratively efficient means to distribute the fixed amount of a hospital’s uncompensated care payment in a manner that would avoid the potential for large over- and/or underpayments during the year and, therefore, limit the need for reconciliation at cost report settlement. However, after a thorough review of the above policy considerations reflected in the numerous public comments we received, we believe that distributing these payments on a per-discharge basis would allow these payments to be considered in the comparison of payments under the Federal rate and the hospital-specific rate for SCHs. We believe that this is an appropriate policy because this approach provides all SCHs an opportunity to be eligible for uncompensated care payments. To the extent that their payments under their hospital-specific rate are higher, we believe that it is appropriate that they do not receive uncompensated care payments because they are no longer eligible for DSH payments, as we describe above. However, after consideration of the public comments we received, we believe that it is appropriate for the uncompensated care payment to be considered as part of an E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations SCH’s payment under the Federal rate. For this and other reasons which we discuss later in this preamble, we have decided not to finalize our proposed policy to make interim uncompensated care payments on a periodic basis rather than a per-discharge basis for FY 2014. We discuss the operational details of including the uncompensated care amount in the payment for each IPPS hospital discharge in greater detail below in section V.E.3.f. of the preamble of this final rule. However, one result of including the uncompensated care payments in the payment for each hospital discharge is that such payments can now also be included in the comparison of the hospital-specific and Federal rate payments for SCHs. That is, we will now be able to employ the claims processing system to compare each SCH’s payment under the hospitalspecific rate to its Federal rate, including uncompensated care payments. mstockstill on DSK4VPTVN1PROD with RULES6 (4) Hospitals Participating in the Bundled Payments for Care Improvement Initiative IPPS hospitals that have elected to participate in the Bundled Payments for Care Improvement initiative receive a payment that links multiple services furnished to a patient during an episode of care. We have stated in previous rulemaking that those hospitals continue to be paid under the IPPS (77 FR 53342). Hospitals that elect to participate in the initiative can still receive DSH payments while participating in the initiative, if they otherwise meet the requirements for receiving such payments. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27581), we proposed to apply the new DSH payment methodology to the hospitals in this initiative, so that eligible hospitals would receive empirically justified Medicare DSH payments and uncompensated care payments. We invited public comments on this proposal. Comment: Several commenters supported the proposal to apply the new Medicare DSH payment adjustment methodology to the hospitals in the Bundled Payments for Care Improvement initiative so that eligible hospitals would receive empirically justified Medicare DSH payments and uncompensated care payments. Response: We appreciate the commenters’ support and are finalizing this policy, as proposed. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 50625 (5) Hospitals Participating in the Rural Community Hospital Demonstration Section 410A of the Medicare Modernization Act established the Rural Community Hospital Demonstration Program. After the initial 5-year period, the demonstration was extended for an additional 5-year period by sections 3123 and 10313 of the Affordable Care Act. There are 23 hospitals currently participating in the demonstration. Under the payment methodology provided in section 410A, participating hospitals receive payment for Medicare inpatient services on the basis of a cost methodology. Specifically, for discharges occurring in the hospitals’ first cost reporting period of the initial 5-year demonstration or the first cost reporting period of the 5-year extension, they receive payments for the reasonable cost of providing such services. For discharges occurring in subsequent cost reporting periods during the applicable 5-year demonstration period, hospitals receive the lesser of the current year’s reasonable cost amount, or the previous year’s amount updated by the percentage increase in the IPPS market basket (the target amount). (We refer readers to section V.K. of the preamble of this final rule for further information on the demonstration.) The instructions (CR 5020 (April 14, 2006) and CR 7505 (July 22, 2011)) for the demonstration require that the fiscal intermediary/ MAC not pay Medicare DSH payments in addition to the amount received under the cost-based payment methodology. Although the amounts that would otherwise be paid for Medicare DSH payments (absent the demonstration) are calculated and identified on the hospital cost report for statistical and research purposes, as in the case of Maryland waiver hospitals, hospitals in this demonstration do not receive a separate or identifiable DSH payment. Because hospitals participating in the Rural Community Hospital Demonstration do not receive DSH payments, these hospitals also are excluded from receiving empirically justified Medicare DSH payments and uncompensated care payments under the new payment methodology. Comment: Several commenters supported the proposal to exclude hospitals participating in the Rural Community Hospital Demonstration program from receiving empirically justified Medicare DSH payments and uncompensated care payments under the new payment methodology. Response: We appreciate the commenters’ support and are finalizing this policy, as proposed. c. Empirically Justified Medicare DSH Payments As we have discussed above, section 1886(r)(1) of the Act requires CMS to pay 25 percent of the ‘‘amount of disproportionate share hospital payment that would otherwise be made under subsection (d)(5)(F) to a subsection (d) hospital.’’ Currently, we have a system for interim payment and final settlement of DSH payments made under section 1886(d)(5)(F). Specifically, interim payments are made for each claim based on the best available data concerning each hospital’s eligibility for DSH payments and the appropriate level of such payments. Final eligibility for Medicare DSH payments and the final amount of such payments for eligible hospitals are determined at the time of cost report settlement. Because section 1886(r)(1) of the Act merely requires the program to pay a designated percentage of these payments, without revising the criteria governing eligibility for DSH payments or the underlying payment methodology, we stated in the proposed rule that we did not believe that it is necessary to develop and propose any new operational mechanisms for making such payments. Therefore, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27581), we proposed to implement this provision simply by revising the claims payment methodologies to adjust the interim claim payments to the requisite 25 percent of what would have otherwise been paid. We also indicated that we would make corresponding changes to the hospital cost report so that these empirically justified Medicare DSH payments can be settled at the appropriate level at the time of cost report settlement. We stated that we would provide more detailed operational instructions and cost report instructions following display of the final rule in the Federal Register. We proposed to implement this provision by adding a new paragraph (f) under the regulations at § 412.106. This proposed new paragraph provides for reducing Medicare DSH payments by 75 percent beginning in FY 2014. We invited public comments on this proposal. Comment: Several commenters supported the proposal to implement this provision by revising the claims payment methodologies to adjust the interim claim payments to the requisite 25 percent of what would have otherwise been paid. The commenters also supported the proposal to make PO 00000 Frm 00131 Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50626 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations corresponding changes to the hospital cost report so that these empirically justified Medicare DSH payment adjustments can be settled at the appropriate level at the time of cost report settlement. Response: We appreciate the commenters’ support and are finalizing these policies, as proposed, by adding a new paragraph (f) under § 412.106 to reflect the policies. Comment: Several commenters requested that CMS undertake additional audits to verify the data used to compute the 25-percent empirically justified Medicare DSH payment adjustments. Other commenters requested that CMS grant additional time for hospitals to verify the data and adjust their cost reports to ensure that the data used to compute the adjustment are accurate and up to date. Some commenters requested that CMS establish procedures to allow a hospital initially determined not to be eligible for Medicare DSH payments to begin receiving empirically justified Medicare DSH payments if data become available that indicate that the hospital would be eligible. Response: As we have emphasized, we are maintaining the well-established methodology and payment processes used under the current Medicare DSH payment adjustment methodology for purposes of making the empirically justified Medicare DSH payment adjustments. Hospitals are quite familiar with the cost reporting requirements and auditing procedures employed under the current Medicare DSH payment adjustment methodology. Hospitals are also familiar with the current process of determining interim eligibility for Medicare DSH payments with final determination at cost report settlement. Therefore, we do not believe that it would be warranted to add additional complexity to these procedures by adopting any of these recommendations. Comment: Several commenters noted that, under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, a 12-percent cap was placed on DSH payment adjustment percentages for certain rural hospitals, including those with SCH status. These commenters also noted that CMS’ proposal was silent about how this cap provision will apply to calculations under the revised Medicare DSH payment adjustment methodology. The commenters agreed that the cap should apply to the calculation of the empirically justified Medicare DSH payment adjustment amounts and the Factor 1 computation in the uncompensated care payment VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 determination. However, the commenters expressed concern that the cap could be applied again when formulating the overall Medicare DSH payment adjustment amount that a hospital receives. If the cap were to apply to the overall Medicare DSH payment adjustment amount, the commenters asserted that hospitals would in effect be penalized twice, once when calculating the empirically justified Medicare DSH payment adjustment amount and the amount of Factor 1, which is equal to 75 percent of the DSH payments that would otherwise have been made under section 1886(d)(5)(F), and again when formulating the overall Medicare DSH payment adjustment amount that the hospital receives. Therefore, the commenters asked CMS to clarify and confirm that the cap provision will not be applied to the overall Medicare DSH payment adjustment amount that each hospital receives. Response: Under the Medicare DSH statute, certain hospitals are subject to a 12-percent cap on their DSH payment adjustment percentage. For these hospitals, the maximum DSH payment adjustment factor has historically been 12 percent, regardless of how high the DPP for these hospitals was. We note that the 12-percent cap only applies to the following hospital types: hospitals located in urban areas with less than 100 beds, and hospitals located in rural areas with less than 500 beds (however, we note that the 12-percent cap does not apply to Rural Referral Centers or to Medicare Dependent Hospitals, regardless of bed size). We agree with the commenters that the cap should not be applied to payments under section 1886(r)(2) of the Act. Although we did not state so specifically, the commenters were correct to infer, from our proposal to continue employing the current Medicare DSH payment adjustment methodology in determining the empirically justified Medicare DSH payment amount, that the cap should and would be applied when calculating payments under section 1886(r)(1) of the Act (which is 25 percent of the amount otherwise payable under section 1886(d)(5)(F). This is because the cap under section 1886(d)(5)(F)(xiv)(II) limits the amount of the payment adjustment under section 1886(d)(5)(F), and payments under section 1886(r)(1) are 25 percent of the payments that would otherwise be made under section 1886(d)(5)(F), we believe the cap necessarily applies to payments under section 1886(r)(1) as well. Similarly, the commenters were correct to infer that the application of the cap on Medicare PO 00000 Frm 00132 Fmt 4701 Sfmt 4700 DSH payment adjustments to those hospitals would be taken into account in determining Factor 1 of the uncompensated care payment determination, which is equal to 75 percent of the aggregate amount of payments that would otherwise be made under section 1886(d)(5)(F). However, there is nothing in the statute that requires an application of this cap to the final amount of uncompensated care payments hospitals receive, beyond taking it into consideration in the estimate of Factor 1. Therefore, we are taking this opportunity to confirm that our proposal did not imply that the cap would be applied to payments to hospitals under section 1886(r)(2) of the Act. Comment: One commenter asked CMS to clarify how it will apply the cap to the empirically justified Medicare DSH payments. The commenter offered the following example: ‘‘If a hospital subject to the twelvepercent cap has a disproportionate share patient percentage sufficient to generate a disproportionate share adjustment percentage of 16 percent pursuant to [section] 1886(d)(5)(F)(vii) [of the Act], under the proposed formula, CMS could use either 16 percent or 12 [percent] as the empirically justified amount. If the Agency uses 16 percent, then the empirically justified amount portion of the formula would be 4 percent (16 * 0.25); if the agency uses 12 percent, then the empirically justified amount portion of the formula would be 3 percent (12 * 0.25).’’ Response: Section 1886(r)(1) of the Act clearly provides that Medicare shall pay 25 percent of the amount that would otherwise be paid ‘‘under subsection (d)(5)(F) to a subsection (d) hospital.’’ The cap provision is stipulated under section 1886(d)(5)(F)(xiv)(II) of the Act. Therefore, for purposes of the empirically justified Medicare DSH payment adjustment amount under section 1886(r)(1) of the act, Medicare is only authorized to pay 25 percent of the amount otherwise payable under section 1886(d)(5)(F), subject to the 12-percent cap. We note that the 12-percent cap only applies to the following hospital types: hospitals located in urban areas with less than 100 beds, and hospitals located in rural areas with less than 500 beds (however, we note that the 12percent cap does not apply to Rural Referral Centers or to Medicare Dependent Hospitals, regardless of bed size). In the commenter’s example, the empirically justified Medicare DSH payment adjustment amount paid under section 1886(r)(1) of the Act would be 25 percent of the maximum 12-percent E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations DSH adjustment factor under section 1886(d)(5)(F) of the Act, or 3 percent (12 * 0.25). That is, the empirically justified Medicare DSH payment adjustment amount paid under section 1886(r)(1) of the Act could not exceed 25 percent of the maximum 12-percent DSH adjustment factor under section 1886(d)(5)(F) of the Act and, therefore, could not exceed 3 percent. mstockstill on DSK4VPTVN1PROD with RULES6 d. Uncompensated Care Payments As we have discussed above, section 1886(r)(2) of the Act provides that, for each eligible hospital in FY 2014 and subsequent years, the new uncompensated care payment is the product of three factors. These three factors represent our estimate of 75 percent of the amount of Medicare DSH payments that would otherwise have been paid, an adjustment to this amount for the percent change in the national rate of uninsurance compared to a base of 2013, and each eligible hospital’s estimated uncompensated care amount relative to the estimated uncompensated care amount for all eligible hospitals. Below we discuss the proposed data sources and methodologies for computing each of these factors and our final policies. Before we begin to discuss these data sources and methodologies, it is necessary to discuss the timing and manner for determining the eligibility of hospitals for uncompensated care payments. The statute provides that subsection (d) hospitals that receive a payment under section 1886(d)(5)(F) of the Act are eligible to receive a payment under section 1886(r)(2) of the Act. Specifically, section 1886(r)(2) of the Act states that, ‘‘[i]n addition to the payment made to a subsection (d) hospital under paragraph (1) . . . the Secretary shall pay to such subsection (d) hospitals an additional amount. . . .’’ Therefore, because paragraph (1) refers to empirically justified Medicare DSH payments, the additional payment for FY 2014 and subsequent years is limited to hospitals that receive empirically justified Medicare DSH payments for the respective year. However, as we have discussed above, we currently have a system for interim payment and final settlement of DSH payments. Specifically, interim payments are made for each claim based on the best available data concerning each hospital’s eligibility for DSH payments and the appropriate level of such payments. Final determination of eligibility for Medicare DSH payments and the final amount of such payments for eligible hospitals are determined at the time of cost report settlement. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 As we describe above, because section 1886(r)(1) of the Act does not revise the criteria governing eligibility for DSH payments or the underlying payment methodology, we do not believe that it is necessary to develop any new operational mechanisms for making such payments and, therefore, will continue using the existing system of interim eligibility and payment determination with final cost report settlement for the empirically justified Medicare DSH payments. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27582), we proposed to adopt a similar system of interim eligibility and payment determination with final cost report settlement for purposes of uncompensated care payments. We discussed our proposals regarding the specific operational details of this system in section V.E.3.f. of the preamble of the proposed rule. We invited public comments on these proposals. Comment: Some commenters requested that if CMS has initially projected that a hospital is ineligible for uncompensated care payments, but data later become available to indicate that the hospital is eligible, the hospital be able to receive the uncompensated care payments prior to cost report settlement. Response: For the reasons discussed above regarding the empirically justified Medicare DSH payments, we do not believe that it is necessary or advisable to depart from our longstanding process of making interim eligibility determinations for Medicare DSH payments with final determination at cost report settlement. As we discuss in greater detail in section V.E.3.f. of the preamble to this final rule, we will make interim eligibility determinations based on data from the most recently available SSI ratios and Medicaid fractions prior to the beginning of the payment year. We will then make final determinations of eligibility at the time of settlement of each hospital’s cost report. Therefore, if a hospital is initially determined to be ineligible for payments under sections 1886(r)(1) and 1886(r)(2) of the Act, but is later determined to indeed be eligible, we are adopting as final our proposal to make those payments at cost report settlement. We also note that, consistent with our decision, as discussed in the next section, to determine Factor 1 prospectively, we will not revise Factor 1 retrospectively to account for the effects of these final determinations of eligibility for payments under sections 1886(r)(1) and 1886(r)(2) of the Act at cost report settlement. PO 00000 Frm 00133 Fmt 4701 Sfmt 4700 50627 (1) Methodology To Calculate Factor 1 Section 1886(r)(2)(A) of the Act establishes Factor 1 in the calculation of the uncompensated care payment. Section 1886(r)(2)(A) of the Act states that it is a factor ‘‘equal to the difference between (i) the aggregate amount of payments that would be made to subsection (d) hospitals under subsection (d)(5)(F) if this subsection did not apply for such fiscal year (as estimated by the Secretary); and (ii) the aggregate amount of payments that are made to subsection (d) hospitals under paragraph (1) for such a fiscal year (as so estimated).’’ Therefore, section 1886(r)(2)(A)(i) of the Act represents the estimated Medicare DSH payment that would have been made under section 1886(d)(5)(F) if section 1886(r) of the Act did not apply for such fiscal year. Section 1886(r)(2)(A)(i) of the Act specifies that, for each fiscal year to which the provision applies, such amount is to be ‘‘estimated by the Secretary.’’ Under a prospective payment system, we would not know the precise aggregate Medicare DSH payment amount that would be paid for a Federal fiscal year until cost report settlement for all IPPS hospitals is completed, which occurs several years after the end of the Federal fiscal year. Therefore, the statute gives CMS authority to estimate this amount, by specifying that, for each fiscal year to which the provision applies, such amount is to be ‘‘estimated by the Secretary.’’ Similarly, section 1886(r)(2)(A)(ii) of the Act represents the estimated empirically justified Medicare DSH payments to be made in FY 2014 and subsequent years, as prescribed under section 1886(r)(1) of the Act. Again, section 1886(r)(2)(A)(ii) of the Act gives CMS authority to estimate this amount. Therefore, Factor 1 is the difference between our estimates of: (1) The amount that would have been paid in Medicare DSH payments for FY 2014 and subsequent years, in the absence of the new payment provision; and (2) the amount of empirically justified Medicare DSH payments that are made for FY 2014 and subsequent years, which takes into account the requirement to pay 25 percent of what would have otherwise been paid under section 1886(d)(5)(F) of the Act. In other words, this factor represents our estimate of 75 percent (100 percent minus 25 percent) of our estimate of Medicare DSH payments that would otherwise be made, in the absence of section 1886(r) of the Act, for FY 2014 and subsequent years. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50628 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations In order to determine Factor 1 in the uncompensated care payment formula, we proposed to develop final estimates of both the aggregate amount of Medicare DSH payments that would be made in the absence of section 1886(r)(1) and the aggregate amount of empirically justified Medicare DSH payments to hospitals under section 1886(r)(1) of the Act prior to each fiscal year to which the new provision applies. We believe this will create some level of predictability and finality for hospitals eligible for these payments, in addition to being administratively efficient. Specifically, in order to determine the two elements of Factor 1 (Medicare DSH payments prior to the application of section 1886(r)(1) of the Act, and empirically justified Medicare DSH payments after application of section 1886(r)(1)), we proposed to use the most recently available projections of Medicare DSH payments for FY 2014 and each subsequent year, as calculated by CMS’ Office of the Actuary. The Office of the Actuary projects Medicare DSH payments on a biannual basis, typically in February of each year (based on data from December of the previous year) as part of the President’s Budget, and in July (based on data from June) as part of the Midsession Review. The estimates are based on the most recently filed Medicare hospital cost report with Medicare DSH payment information and the most recent Medicare DSH patient percentages and Medicare DSH payment adjustments provided in the IPPS Impact File. Therefore, for the Office of the Actuary’s February 2013 estimate, the data are based on the December 2012 update of the Medicare Hospital Cost Report Information System (HCRIS) and the FY 2013 IPPS/LTCH PPS final rule IPPS Impact file, published in conjunction with the publication of the FY 2013 IPPS/LTCH PPS final rule. For the July 2013 estimate, we anticipated that the data would be based on the March 2013 update of the Medicare Hospital Cost Report data and the proposed rule’s IPPS Impact file, published in conjunction with the proposed rule. For purposes of the proposed rule, we used the February 2013 Medicare DSH estimates to calculate Factor 1 and to model the proposed impact of this provision. We stated that if our proposal to use the Office of the Actuary’s projections for Factor 1 is finalized, we would use the July 2013 Medicare DSH estimates to determine Factor 1 for this FY 2014 IPPS/LTCH PPS final rule. In addition, because we proposed to exclude SCHs paid under their hospitalspecific payment rate from the VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 application of section 1886(r) of the Act, we also proposed to exclude these hospitals from our Medicare DSH estimate. Similarly, because Maryland hospitals and hospitals participating in the Rural Community Hospital Demonstration do not receive DSH payments, we also proposed to exclude these hospitals from our Medicare DSH estimate. Using the data sources discussed above, the Office of the Actuary uses the most recently submitted Medicare cost report data to identify current Medicare DSH payments and the most recent DSH payment adjustments provided in the IPPS Impact File, and applies inflation updates and assumptions for future changes in utilization and case-mix to estimate Medicare DSH payments for the upcoming fiscal year. The February 2013 Office of the Actuary estimate for Medicare DSH payments for FY 2014, without regard to the application of section 1886(r)(1) of the Act, was $12.338 billion. This estimate excludes Maryland hospitals, SCHs paid under their hospital-specific payment rate and hospitals participating in the Rural Community Hospital Demonstration as discussed above. Therefore, based on this estimate, the estimate for empirically justified Medicare DSH payments for FY 2014, with the application of section 1886(r)(1) of the Act, was $3.084 billion (25 percent of the total amount estimated). Under our proposal, Factor 1 is the difference of these two estimates of the Office of the Actuary. Therefore, for the purpose of modeling Factor 1, we calculated Factor 1 to be $9.2535 billion. We also proposed to develop and use the estimates necessary for Factor 1 on a purely prospective basis. We proposed to use the Actuary’s most recent February Medicare DSH estimates each year to calculate Factor 1 and to model the impact of this provision for the IPPS/LTCH PPS proposed rule. Similarly, we proposed to use the Actuary’s most recent July Medicare DSH estimates to determine Factor 1 for the IPPS/LTCH PPS final rule each year. In other words, we would not revise or update our estimates after we know the final Medicare DSH payments for FY 2014 and subsequent years. As we discussed earlier, we do not know the aggregate Medicare DSH payment amount that would be paid for each federal fiscal year until the time of cost report settlements, which occur several years after the end of the fiscal year. Because the statute provides that CMS use estimates in order to determine Factor 1 each year, we stated that we believe that applying our best estimates prospectively would be most conducive PO 00000 Frm 00134 Fmt 4701 Sfmt 4700 to administrative efficiency, finality, and predictability in payments. We proposed to add a new paragraph (g)(1)(i) under § 412.106 of our regulations to define the methodology for calculating Factor 1. We invited public comments on all the elements of this proposed methodology to calculate Factor 1. Comment: Some commenters pointed out that the summary analysis that CMS provided of the uncompensated care Factor 1 estimate indicates that the 2009 Medicare DSH payments were used as the starting point to project expected empirically justified Medicare DSH payment adjustments for FY 2014. The commenters noted that the current 2009 Medicare DSH payments do not reflect several key issues that have yet to be settled by the courts, such as dual eligible days and MA days, or issues that have already been settled such as labor and delivery room days. In addition, the commenters noted that the majority of the 2009 cost reports remain unaudited. Therefore, commenters maintained that we should not use 2009 as a base year for empirically justified Medicare DSH payment adjustment eligibility without finalizing all 2009 cost reports and appeals. Response: In this final rule, our Office of the Actuary has based its projections on cost reports for fiscal year 2010 as a starting point. This is the most recent year for which cost report data has been submitted by almost all the hospitals, which is very important for purposes of estimating the full amount of empirically justified Medicare DSH payments. We do not believe that we should employ a cost reporting period for which cost report data have all been audited because doing so would require using much earlier data as the basis for the projection. This would create the potential for much larger projection errors and would, therefore, not tend to increase the accuracy of the projection. Comment: Some commenters noted that CMS proposed to use 2009 cost report data as the base year for Factor 1, but to use 2010–2012 cost report data for purposes of the Factor 3 calculations. The commenters asked why the baseline information cannot be derived from the same period as the data used in the Factor 3 calculation and urged CMS to reconcile this discrepancy. Response: In order to determine the total amount of Medicare DSH spending for Factor 1, it is important to use the latest available data year for which almost all hospitals have submitted their cost reports, which for purposes of this final rule is 2010 cost report data. This is because we are computing a total E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations number that must include all hospitals and, therefore, to avoid discrepancies, we believe that it is important to use data from the same time period for all hospitals. Therefore, we believe that it is appropriate to use a data year that does not include some hospitals. However, for purposes of determining hospital-specific factors used to compute Factor 3, it is important to use the most recent data for each hospital. In this way, the projections for each hospital will be as accurate as possible because we use the most recent available data. It is more important in this case to provide for the most accurate projection for each hospital than to employ data from the same cost reporting period for each hospital. Therefore, using different years in making these two determinations actually enhances, rather than detracts from, the accuracy of these projections. Comment: One commenter maintained that we underestimated the 2009 Medicare DSH amount by not including adjustments required by the recent decision in Allina v. Sebelius. The commenter estimated that the projected 2014 Medicare DSH payments, which are based on 2009 DSH payments, are understated by $1.1 billion as a result of the incorrect treatment of MA days. Therefore, the commenter argued that CMS must use proper 2009 Medicare DSH data, including corrections required as a result of court cases, before it can appropriately extrapolate the data for current year calculations. Response: The commenter is correct that we did not include the effects of any court cases that are not already reflected in the cost reports in developing our estimate for Factor 1. We continue to believe that Allina was wrongly decided and have appealed the decision. Therefore, a final decision has not yet been rendered in the case. We note that elsewhere in this final rule, we are finalizing our proposal to readopt our policy to include Medicare Advantage days in the Medicare SSI ratio, which we believe further makes it unnecessary to revise our Factor 1 estimate. A secondary reason for not including such an adjustment in our estimate is that we are not aware of a methodology that could accurately estimate the impact of any court cases and so introducing another estimate would likely reduce, not improve, the accuracy of our calculations. We appreciate that the commenter has offered an estimate but we are unable to verify the methodology and computations used to develop it. Comment: One commenter noted that the summary analysis of the VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 uncompensated care Factor 1 estimate that we provided after the publication of the proposed rule includes a column for ‘‘other’’ adjustment factors used in developing the estimate. However, the commenter stated that CMS did not provide the detail explaining and supporting this factor. The commenter further noted that the footnote to the ‘‘other’’ column states: ‘‘Other column includes impact of only IPPS discharges and impact of DSH payments increasing or decreasing at a different rate than other IPPS payments.’’ The commenter requested that CMS provide the details behind this factor. Response: The ‘‘other’’ ‘‘adjustment factors as mentioned in the data file supporting our estimate of Factor 1 reflect two identifiable factors: The impacts of (1) only including IPPS discharges in the calculation, and (2) of Medicare DSH payments increasing or decreasing at a different rate than other IPPS payments. In relation to the first factor, an adjustment is made to reflect the fact that IPPS discharges increase at a different rate than total inpatient hospital discharges (which are reflected in the discharge column of the data file). The second factor comes into play if the Medicare DSH payments under IPPS are increasing faster or slower than all payments to IPPS hospitals, which is determined by looking at prior year’s impact files. We note that the application of these ‘‘other’’ adjustment factors has caused the total Medicare DSH estimate to increase. If we were to ignore these factors, the final Medicare DSH payment estimate used for purposes of estimating Factor 1 would be much lower. Comment: Some commenters stated that the same summary analysis of the Medicare DSH payments estimate includes an adjustment factor for discharges. However, the commenters noted that CMS had not provided the detail supporting the discharge factor it used. In addition, the commenters stated that the footnote to the discharge column states that all inpatient hospitals were included, not just IPPS hospitals. The commenters suggested that because the purpose of the projection is to estimate the amount of Medicare DSH payments that will go to a subset of all inpatient hospitals, CMS should use only the hospitals’ projected share in the payments when determining the factors that drive the estimate. Response: We agree that the Medicare DSH payment projections ideally should reflect only the number of discharges for IPPS hospitals. However, the Office of the Actuary only has projections of total inpatient hospital discharges. As a PO 00000 Frm 00135 Fmt 4701 Sfmt 4700 50629 result, in this calculation we have included an adjustment to reflect the impact of IPPS hospitals’ discharges as part of the ‘‘other’’ adjustment factors that we have just discussed. Comment: Several commenters asserted that CMS’ assumption that actual Medicare DSH payments made for FY 2012 amounted to only $11.59 billion is illogical and unsupported by any substantial evidence. The commenters stated that, first, this assumption conflicts with other recent estimates by the same Actuary concerning total Medicare DSH payments for the same year, 2012. The commenters noted that within 1 month of the release of the proposed rule, CMS released data, which it attributed to the Office of the Actuary indicating that aggregate Medicare DSH payments for FY 2012 totaled $11.93 billion. The commenters pointed out that this number is nearly $400 million greater than the 2012 estimate (extrapolated from 2009 data) used to calculate Factor 1 in the proposed rule. Response: The estimate of $11.93 billion in Medicare DSH payments for FY 2012 was based on all reported Medicare DSH payments, which are shown on the cost reports. We note that Maryland hospitals, SCHs, and hospitals participating in the Rural Community Hospital Demonstration program report DSH payments on their cost reports even if ultimately they are not paid a DSH payment adjustment. Therefore, this estimate included payments for three categories of hospitals that will not receive uncompensated care payments: Maryland hospitals; SCHs paid on a hospital-specific basis; and hospitals that are part of the Rural Community Hospital Demonstration program. Therefore, we removed the estimated DSH payments for these three categories of hospitals for purposes of determining Factor 1 in the proposed rule. The removal of these hospitals reduced the Factor 1 estimate to $11.59 billion compared to the $11.93 billion estimate of all reported Medicare DSH payments. Comment: Several commenters stated that the summary analysis of the Medicare DSH payment estimate includes an adjustment factor for casemix. However, the commenters noted that CMS had not provided the detail supporting the case-mix factor used. The commenters suggested that CMS provide the details behind this factor to allow for comprehensive comments. In addition, these commenters requested that CMS clarify how the case-mix change from year to year was derived as it relates to the documentation and coding adjustment. The commenters E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50630 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations pointed out that the trend in the change in case-mix from year to year does not seem to support the need for a documentation and coding adjustment and, in fact, the year-to-year change in two cases is a decrease. The commenters urged CMS to ensure that the case-mix being used does not already reflect the documentation and coding adjustment so providers can be certain the adjustment is not being made twice. Response: The case-mix increase is calculated using the weighted average of the relative weights for each year. These relative weights are weighted by the number of discharges in the first year. The case-mix numbers used in the estimate of Medicare DSH payments do not include the documentation and coding adjustments. The years which have been adjusted for documentation and coding (as required by law) occurred before the years shown in this data file. Comment: Several commenters noted that, based on projections made by CBO, the number of uninsured people is projected to drop 11.2 percentage points in 2014 compared to 2013. The commenters expressed the view that the projected decline in the uninsured rate is due in part to the potential addition of 9 million new Medicaid recipients, according to the May 2013 CBO projections to be used by CMS. However, the commenters stated that it does not appear that the projected 2014 Medicare DSH amount includes expected additional Medicare DSH payments due to Medicaid expansion and requested that CMS provide additional information. Response: We agree with the commenters that the number of Medicaid days will likely increase as a result of Medicaid expansion, therefore likely increasing the aggregate amount of payments that would have been made to subsection (d) hospitals under section 1886(d)(5)(F) of the Act if section 1886(r) of the Act did not apply. Medicaid days are included as part of a hospital’s disproportionate patient percentage as described at § 412.106(b)(4) of the regulations. Accordingly, we have included an estimate of the impact of the Medicaid expansion in our projection of Factor 1 for this final rule. Comment: Several commenters objected to the proposal to apply our best estimates of Factor 1 on a prospective basis only. These commenters maintained that the administrative efficiency, finality, and predictability in payments that CMS cited in favor of the proposal were less important than accuracy in payments. The commenters noted that there were VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 a number of questions and uncertainties about the Actuary’s proposed projection for FY 2014, and that it would therefore be most appropriate to establish a final value for Factor 1 only at the time of final cost report settlements, using actual data or at a later time, when more informed projections will be available. Other commenters supported the proposal to employ prospective estimates from the Office of the Actuary and not to update these estimates once final data become available. However, some of these commenters urged CMS to publish final amounts of Factor 1 so that any consistent errors can be addressed to improve the accuracy of future projections. Response: As we noted in the proposed rule (78 FR 27583), we would not know the precise aggregate Medicare DSH payment amount that would be paid for a Federal fiscal year until cost report settlement for all IPPS hospitals is completed, which occurs several years after the end of the Federal fiscal year. The statute gives us authority to estimate this amount by specifying that, for each fiscal year to which the provision applies, such amount is to be ‘‘estimated by the Secretary.’’ We believe that it is, therefore, most consistent with the statute to employ estimates for purposes of determining Factor 1. Otherwise, final settlement of these payments could be delayed as much as 6 years or more after the payment year. As in the case of other payment factors that we determine on the basis of prospective estimates (for example, the aggregate amount of annual payments for outliers), we will continually examine our estimates compared to actual data for each year in order to improve our future projections. Comment: Several commenters pointed out that CMS assumed a 2percent documentation and coding adjustment for FY 2014 in estimating Factor 1 for the proposed rule, but that CMS actually proposed a documentation and coding adjustment of 0.8 percent. These commenters urged CMS to correct this assumption in the final rule. Response: We agree with these commenters. Accordingly, for this final rule, the Office of the Actuary has employed a documentation and coding adjustment of 0.8 percent for FY 2014 in developing our estimate of Factor 1 for FY 2014. After consideration of the public comments we received, we are finalizing our proposal to add a new paragraph (g)(1)(i) under § 412.106 of our regulations to define the methodology for calculating Factor 1. As we noted in the proposed rule (78 FR PO 00000 Frm 00136 Fmt 4701 Sfmt 4700 27582 through 27583), the Office of the Actuary projects Medicare DSH payments on a biannual basis, typically in February of each year (based on data from December of the previous year) as part of the President’s Budget, and in July (based on data from June) as part of the Midsession Review. The estimates are based on the most recently filed Medicare hospital cost report with Medicare DSH payment information and the most recent Medicare DSH patient percentages and Medicare DSH payment adjustments provided in the IPPS Impact File. Therefore, for the Office of the Actuary’s February 2013 estimate, the data are based on the December 2012 update of the Medicare Hospital Cost Report Information System (HCRIS) and the FY 2013 IPPS/LTCH PPS final rule IPPS Impact file, published in conjunction with the publication of the FY 2013 IPPS/LTCH PPS final rule. For the July 2013 estimate, we anticipated that the data would be based on the March 2013 update of the Medicare Hospital Cost Report data and the IPPS Impact file published in conjunction with the proposed rule. For purposes of the proposed rule, we used the February 2013 Medicare DSH estimates to calculate Factor 1 and to model the proposed impact of this provision. We stated that if our proposal to use the Office of the Actuary’s projections for Factor 1 is finalized, we would use the July 2013 Medicare DSH estimates to determine Factor 1 for this FY 2014 IPPS/LTCH PPS final rule. For this final rule, the Office of the Actuary has used the July 2013 Medicare DSH estimates, based on the March 2013 update of the Medicare Hospital Cost Report data and the proposed rule’s IPPS Impact file, to determine Factor 1. The July 2013 Office of the Actuary estimate for Medicare DSH payments for FY 2014, without regard to the application of section 1886(r)(1) of the Act, is approximately $12.772 billion (for purposes of the proposed rule, we estimated this amount to be approximately $12.338 billion). As in the proposed rule, this estimate excludes Maryland hospitals, SCHs paid under their hospital-specific payment rate, and hospitals participating in the Rural Community Hospital Demonstration program. Therefore, based on this estimate, the estimate for empirically justified Medicare DSH payments for FY 2014, with the application of section 1886(r)(1) of the Act, is approximately $3.193 billion (25 percent of the total amount estimated). Under our proposal, Factor 1 is the difference of these two estimates of the Office of the Actuary. E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 Therefore, for the purpose of this final rule, we calculate Factor 1 to be approximately $9.579 billion (for purposes of the proposed rule, Factor 1 was estimated to be approximately $9.2535). (2) Methodology To Calculate Factor 2 Section 1886(r)(2)(B) of the Act establishes Factor 2 in the calculation of the uncompensated care payment. Specifically, section 1886(r)(2)(B)(i) of the Act provides: ‘‘For each of fiscal years 2014, 2015, 2016, and 2017, a factor equal to 1 minus the percent change in the percent of individuals under the age of 65 who are uninsured, as determined by comparing the percent of such individuals (I) who are uninsured in 2013, the last year before coverage expansion under the Patient Protection and Affordable Care Act (as calculated by the Secretary based on the most recent estimates available from the Director of the Congressional Budget Office before a vote in either House on the Health Care and Education Reconciliation Act of 2010 that, if determined in the affirmative, would clear such Act for enrollment); and (II) who are uninsured in the most recent period for which data is available (as so calculated), minus 0.1 percentage points for fiscal year 2014 and minus 0.2 percentage points for each of fiscal years 2015, 2016, and 2017.’’ Section 1886(r)(2)(B) of the Act establishes, as Factor 2 in the uncompensated care payment formula, the percent change in uninsurance, based on a comparison of the percent of individuals under 65 without insurance in 2013 to the percent of such individuals without insurance in the most recent period for which we have data, minus 0.1 percentage points for FY 2014 and 0.2 percentage points for each of FYs 2015, 2016, and 2017. Section 1886(r)(2)(B)(i)(I) of the Act further indicates that the percent of individuals under 65 without insurance in 2013 must be the percent of such individuals ‘‘who are uninsured in 2013, the last year before coverage expansion under the Patient Protection and Affordable Care Act (as calculated by the Secretary based on the most recent estimates available from the Director of the Congressional Budget Office before a vote in either House on the Health Care and Education Reconciliation Act of 2010 that, if determined in the affirmative, would clear such Act for enrollment).’’ The Health Care and Education Reconciliation Act (Pub. L. 111–152) was enacted on March 30, 2010. It was passed in the House of Representatives on March 21, 2010, and by the Senate VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 on March 25, 2010. Because the House of Representatives was the first House to vote on the Health Care and Education Reconciliation Act of 2010 on March 21, 2010, we have determined that the most recent estimate available from the Director of the Congressional Budget Office ‘‘before a vote in either House on the Health Care and Education Reconciliation Act of 2010 . . .’’ appeared in a March 20, 2010 letter from the director of the CBO to the Speaker of the House. (Emphasis supplied.) Therefore, we believe that only the estimates in this March 20, 2010 letter meet the statutory requirement under section 1886(r)(2)(B)(i)(I) of the Act. (To view the March 20, 2010 letter, we refer readers to the Web site at: https://www. cbo.gov/sites/default/files/cbofiles/ ftpdocs/113xx/doc11379/amend reconprop.pdf. In its March 20, 2010 CBO letter to the Speaker of the House of Representatives, the CBO provided two estimates of the ‘‘post-policy uninsured population.’’ The first estimate is of the ‘‘Insured Share of the Nonelderly Population Including All Residents’’ (which is 82 percent) and the second estimate is of the ‘‘Insured Share of the Nonelderly Population Excluding Unauthorized Immigrants’’ (83 percent). In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27583), we proposed to use the first estimate that includes all residents, including unauthorized immigrants. We stated that we believe this estimate is most consistent with the statute which requires us to measure ‘‘the percent of individuals under the age of 65 who are uninsured,’’ and provides no exclusions except for individuals over the age 65. In addition, we stated that we believe that this estimate would more fully reflect the levels of uninsurance in the United States that influence uncompensated care for hospitals than the estimate that reflects only legal residents. Therefore, using this estimate would seem more consistent with the statutory requirement of establishing a payment for uncompensated care. For these reasons, we proposed to use the estimate of the ‘‘Insured Share of the Nonelderly Population Including All Residents’’ for 2013 to calculate the baseline percentage of individuals under age 65 without insurance. We invited public comments on this proposal. Comment: Several commenters supported the proposal to use the CBO estimate of the ‘‘Insured Share of the Nonelderly Population Including All Residents’’ for purposes of determining Factor 2. The commenters agreed that this estimate more fully reflects the PO 00000 Frm 00137 Fmt 4701 Sfmt 4700 50631 levels of uninsurance in the United States that influence uncompensated care for hospitals than the estimate that excludes unauthorized immigrants and is, therefore, more consistent with the statutory requirement of establishing a payment for uncompensated care. Response: We appreciate the commenters’ support for this proposal, and we are finalizing our proposal to employ the CBO estimate of the ‘‘Insured Share of the Nonelderly Population Including All Residents’’ contained in its March 20, 2010 letter to the Speaker of the House of Representatives to determine the percentage of individuals under age 65 without insurance for purposes of Factor 2. The March 20, 2010 CBO letter reports these figures as the estimated percentage of individuals with insurance. However, because section 1886(r)(2)(B)(i) of the Act requires that we compare the percent of individuals ‘‘who are uninsured in 2013,’’ in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27584), we proposed to use the CBO insurance rate figure and subtract that amount from 100 percent (that is, the total population, without regard to insurance status) to estimate the 2013 baseline percentage of individuals without insurance. In its March 20, 2010 letter, the CBO reported its estimate of the ‘‘Insured Share of the Nonelderly Population Including All Residents’’ as 82 percent. Therefore, we proposed that, for FYs 2014 through 2017, our estimate of the uninsurance percentage for 2013 would be 18 percent. As provided for in the CBO March 20, 2010 letter, the CBO estimate for insurance for the nonelderly (under age of 65) population only includes residents of the 50 States and the District of Columbia, and the count of uninsured people includes unauthorized immigrants, as well as individuals who are eligible for, but not enrolled in, Medicaid. We note that, although we proposed that acute care hospitals located in Puerto Rico that receive DSH payments would be eligible to receive payments under section 1886(r) of the Act, this estimate for insurance does not account for residents in Puerto Rico. We believe that the impact of the exclusion of Puerto Rico from the insurance estimate is negligible. We invited public comments on this proposal. We did not receive any public comments on our proposal to employ an estimate for insurance among the nonelderly that includes only residents of the 50 States and the District of Columbia and, therefore, does not account for residents in Puerto Rico. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50632 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Therefore, we are finalizing the policy, as proposed. Section 1886(r)(2)(B)(i) of the Act requires that we compare the baseline uninsurance rate to the percent of such individuals ‘‘who are uninsured in the most recent period for which data is available (as so calculated).’’ In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27584), we proposed to use the same data source, CBO estimates, to calculate this percent of individuals without insurance. Section 1886(r)(2)(B)(i)(I) of the Act refers to the percent of uninsured in 2013 ‘‘as calculated by the Secretary based on’’ the CBO data. Similarly, section 1886(r)(2)(B)(i)(II) of the Act immediately afterwards refers to the percent of uninsured for 2014 ‘‘as so calculated.’’ (Emphasis supplied.) The phrase ‘‘as so calculated’’ in the latter section can be reasonably interpreted to require the calculation to similarly be based on CBO estimates. In addition, we believe that it is preferable from a statistical point of view to calculate a percent change in insurance over time using a consistent data source. Furthermore, rather than using the estimates included in the March 20, 2010 CBO letter, we believe it is appropriate to use more recent CBO estimates of the percent of individuals with insurance. The more recent CBO projections take into account changes in the environment that can impact insurance rates, such as more recent economic conditions and the Supreme Court’s decision in National Federation of Independent Business. v. Sebelius— U.S.—, 132 S. Ct. 2566 (2012), regarding Medicaid expansions authorized by the Affordable Care Act. Because the statute requires that we use ‘‘the most recent period for which data is available’’ to calculate the comparison percentage of individuals without insurance, we proposed to use the most recent update (that is, the most recent update available at the time of rulemaking with respect to a particular fiscal year) to the percent of individuals with insurance provided by the CBO to calculate this comparison figure. In addition, for FY 2014, we proposed to use CBO’s most recent estimate for the percent of individuals with insurance in 2014 for purposes of section 1886(r)(2)(B)(i)(II) of the Act because this is the year in which this provision is effective. This figure is used for Factor 2 and later applied to Factor 1, which is also based on an estimate for FY 2014. On February 5, 2013, the CBO released its annual Budget and Economic Outlook. The report included updated economic and budget projections that incorporated the effects of the legislation enacted prior to the VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 start of the year, a revised economic forecast consistent with the budget projections, and other changes to CBO’s estimates. (To view the report, we referred readers to the Web site at: https://www.cbo.gov/sites/default/files/ cbofiles/attachments/ 43900_ACAInsurance CoverageEffects.pdf.) In the proposed rule (78 FR 27584), we used the February 5, 2013, CBO health insurance estimates in order to calculate the percentage of individuals without insurance for 2014. As we did for the uninsurance percentage estimate for 2013 (based on the March 20, 2010 CBO letter discussed above), we proposed to use the ‘‘Insured Share of the Nonelderly Population Including All Residents’’ to calculate the comparison of the percentage of people without insurance for 2014. Consistent with the CBO estimate used to calculate the baseline uninsurance estimate, this estimate for insurance only includes residents of the 50 States and the District of Columbia, and the count of uninsured people includes unauthorized immigrants, as well as individuals who are eligible for, but not enrolled in, Medicaid. The CBO report projects that the ‘‘Insured Share of the Nonelderly Population Including All Residents’’ for 2014 will be 84 percent. Therefore, in the same manner that we calculated the uninsurance percentage for the baseline, we proposed that the uninsurance percentage for 2014 would be 16 percent (that is, 100 percent minus 84 percent) for the purpose of this proposed rule. We indicated that if our proposal was finalized, and there is a more recent estimate of the percentage of individuals with insurance in 2014 by the CBO available for the FY 2014 IPPS/LTCH PPS final rule, we would use that estimate to calculate Factor 2. However, we would not adjust Factor 2 retroactively to account for estimates that become available after publication of the final rule. Comment: Some commenters agreed with the proposal to use CBO estimates of rates of insurance coverage in 2014 and subsequent years as a basis for calculating Factor 2. One commenter stated that the CBO estimates were both sufficient and accurate for the purpose of determining Factor 2. However, other commenters expressed concern about the accuracy of CBO projections of insurance coverage in 2014 and subsequent years. These commenters mentioned uncertainties in the wake of the Supreme Court decision about Medicaid expansion. These commenters also noted that the statewide exchanges that are to be established under the Affordable Care Act will not be in PO 00000 Frm 00138 Fmt 4701 Sfmt 4700 operation until January 2014, so that the CBO projections of an increase in the rate of insurance coverage may be overstated. Other commenters stated that the CBO projections are unsupported by substantial data and requested that Factor 2 be reconciled on the basis of actual data for 2014. Response: We continue to believe that the CBO projections of insurance coverage in 2014 and subsequent years are the most reliable and consistent basis on which to calculate Factor 2. As we noted in the proposed rule, section 1886(r)(2)(B)(i)(I) of the Act refers to the percent of uninsured in 2013 ‘‘as calculated by the Secretary based on’’ the CBO data. Similarly, section 1886(r)(2)(B)(i)(II) of the Act immediately afterwards refers to the percent of uninsured for 2014 ‘‘as so calculated.’’ (Emphasis supplied.) The phrase ‘‘as so calculated’’ in the latter section can be reasonably interpreted to require the calculation to similarly be based on CBO estimates. In addition, we continue to believe that it is preferable from a statistical point of view to calculate a percent change in insurance over time using a consistent data source. The more recent CBO projections take into account changes in the environment that can impact insurance rates, such as more recent economic conditions and the Supreme Court’s decision in National Federation of Independent Business. v. Sebelius— U.S.—, 132 S. Ct. 2566 (2012), regarding Medicaid expansions authorized by the Affordable Care Act. As is the case with regard to reconciling the estimates used to determine Factor 1, we believe that employing actual data as the basis for reconciling the projections employed to determine Factor 2 would impose an unacceptable delay in the final determination of uncompensated care payments. Actual data on the rates of insurance and uninsurance would not become available until several years after the payment year, and the initial data for the year would continue to be adjusted for several years after that as further data become available. Furthermore, by stating that the Secretary’s calculations should be based on ‘‘estimates’’ provided by the CBO, the statute clearly contemplates the use of such estimates on a prospective basis without reconciliation. Therefore, we are finalizing our proposal to use the most recently available CBO estimates of insurance rates for each payment year, and not to adjust Factor 2 retroactively to account for estimates that become available after publication of the final rule. Section 1886(r)(2)(B)(i) of the Act states that Factor 2 for FY 2014 is equal E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations to 1 minus the percent change in the percent of individuals under the age of 65 who are uninsured, as determined by comparing the percent of such individuals without insurance in the baseline and in the most recent period for which we have data (minus 0.1 percentage points for FY 2014). Therefore, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27584), we proposed that Factor 2 is 1 minus the percent change between the baseline percentage of individuals without insurance in 2013 (which was, for the proposed rule, 18 percent) and the most recent percentage of individuals without insurance for 2014 (which was, for this proposed rule, 16 percent) minus 0.1 percentage points. Using the March 20, 2010 CBO projection for 2013 and the February 5, 2013 CBO projection of uninsurance for all residents for 2014, we proposed to use the following computation for Factor 2 for FY 2014: mstockstill on DSK4VPTVN1PROD with RULES6 Percent of individuals without insurance for CY 2013 (March 2010 CBO estimate): 18 percent Percent of individuals without insurance for CY 2014 (February 2013 CBO estimate): 16 percent 1¥|[(0.16¥0.18)/0.18]| = 1¥0.111 = 0.889 (88.9 percent) 0.889 (88.9 percent)¥0.001 (0.1 percentage points) = 0.888 (88.8 percent) 0.888 = Factor 2. Accordingly, we proposed Factor 2 to be 88.8 percent for FY 2014. In conjunction with this proposal, we proposed that the amount available for uncompensated care payments for FY 2014 would be $8.217 billion (0.888 times our proposed Factor 1 estimate of $9.2535 billion). As we noted previously, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27585), we stated that our proposal for Factor 2 may be subject to change if more recent CBO estimates of the insurance rate for 2014 become available prior to the preparation of the final rule. In the proposed rule, we proposed to add a new paragraph (g)(1)(ii) under § 412.106 of our regulations to define the methodology for calculating Factor 2. We invited public comment on our proposed methodology to calculate Factor 2. Comment: Many commenters noted that the CBO estimates of the effect of the Affordable Care Act on the level of insurance coverage are made on a calendar year basis (for example, calendar year 2014). However, the commenters stated, the new payment methodology for uncompensated care payments will go into effect for FY 2014 (that is, on October 1, 2013). The commenters stated that, therefore, the VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 CBO estimate for calendar year 2014 represents the first full year during which the exchanges and Medicaid expansion under the Affordable Care Act will be in effect. However, the commenters further stated, the new payment methodology will be in effect for 3 months of the previous calendar year before these Affordable Care Act provisions that should lower the uninsurance rate go into effect. Therefore, these commenters urged CMS to normalize the CBO estimate to reflect FY 2014 more accurately, specifically by calculating a weighted average of the CBO estimate for October–December 2013 and the estimate for January– September 2014. Several commenters illustrated the effect of calculating a weighted average using the February 5, 2013 CBO projections that CMS employed in the proposed rule as follows: CY 2013 rate of insurance coverage (February 2013 CBO estimate): 80 percent CY 2014 rate of insurance coverage (February 2013 CBO estimate): 84 percent FY 2014 rate of insurance coverage: (80 percent * .25) + (84 percent * .75) = 83 percent. Percent of individuals without insurance for CY 2013 (March 2010 CBO estimate): 18 percent Percent of individuals without insurance for FY 2014 (weighted average): 17 percent 1¥|[(0.17¥0.18)/0.18]| = 1¥0.056 = 0.944 (94.4 percent) 0.944 (94.4 percent)¥0.001 (0.1 percentage points) = 0.943 (94.3 percent) 0.943 = Factor 2 Response: We are finalizing our proposal to employ the most recent CBO estimates of the rates of insurance for FY 2014 and subsequent payment years. We agree with the recommendation of the commenters that we should normalize the estimate of uninsurance for FY 2014 by calculating a weighted average of the CBO estimates for CY 2013 and CY 2014, respectively. We agree that normalizing the estimate to cover FY 2014 rather than CY 2014 will more accurately reflect the actual rate of uninsurance that hospitals will experience during the FY 2014 payment year. We also believe that we have sufficient discretion under the statute to employ a normalized estimate for FY 2014 in place of the CBO estimate for CY 2014 because section 1886(r)(2)(B)(i) of the Act merely requires us to develop such estimates ‘‘based on the most recent estimates available from’’ the CBO. (We note that the base year estimate for 2013 remains the same whether it is normalized to FY 2013 or not. This is because the CBO estimates that the statute requires us to use for the base year indicate a rate of uninsurance of 18 percent for both CY 2012 and CY PO 00000 Frm 00139 Fmt 4701 Sfmt 4700 50633 2013, the calendar years which we would employ to normalize the estimate for FY 2013.) In this final rule, we are employing the most recent available estimate, specifically CBO’s May 2013 estimates of the effects of the Affordable Care Act on health insurance coverage, which are available at https://www.cbo.gov/sites/ default/files/cbofiles/attachments/ 44190_EffectsAffordableCare ActHealthInsuranceCoverage_2.pdf, as amended by CBO’s July 2013 estimates of changes in estimates of the effects of insurance coverage provisions in the Affordable Care Act issued in conjunction with a memo regarding ‘‘Analysis of the Administration’s Announced Delay of Certain Requirements Under the Affordable Care Act,’’ which are available at https:// www.cbo.gov/sites/default/files/ cbofiles/attachments/44465-ACA.pdf. The CBO’s May 2013 estimate of the rate of insurance for CY 2013 is 80 percent, and for CY 2014 is 84 percent. (These estimates are unchanged from the February 5, 2013 CBO projections that we employed in the proposed rule.) The CBO’s May 2013 estimate includes an estimate of the change in the number of uninsured non-elderly people (including unauthorized immigrants) of ¥14 million in CY 2014. Based on this estimate of the change in the number of uninsured non-elderly people, in May 2013, the CBO estimated that in CY 2014 there will be 44 million uninsured non-elderly people. In addition, the CBO’s May 2013 estimate stated that there will be a total of 274 million nonelderly people in CY 2014. Accordingly, we concluded that in the May 2013 CBO estimates that there will be 230 million insured non-elderly people (that is, 274 million total non-elderly people minus 44 million uninsured non-elderly people), which supports their estimate that the insured share of the non-elderly population is 84 percent (that is, 230 million insured non-elderly people divided by 274 million total non-elderly people). The CBO’s July 2013 estimates do not include a revised estimate of the insured share of the non-elderly population in CY 2014, and instead include estimates of the changes in the number of non-elderly people by type of insurance coverage. In other words, the CBO’s July 2013 estimate includes an estimate of the change in the number of uninsured non-elderly people (including unauthorized immigrants). The CBO’s July 2013 estimate includes a revised estimate of the change in the number of uninsured non-elderly people (including unauthorized immigrants) of ¥13 million in CY 2014. E:\FR\FM\19AUR2.SGM 19AUR2 50634 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Based on this July 2013 revised estimate of the change in the number of uninsured non-elderly people and the May 2013 estimate of uninsured nonelderly people, we conclude that it is appropriate to infer that in CY 2014 there will be 45 million uninsured nonelderly people. We also believe that is appropriate to conclude that the CBO made no change to its estimates of total non-elderly people in July 2013, so that it remains the same as in their May 2013 estimates of 274 million. Accordingly, we believe that the number of insured non-elderly people based on the July 2013 CBO estimates for CY 2014 is 229 million (that is, 274 million total nonelderly people minus 45 million uninsured non-elderly people), which results in the insured share of the nonelderly population of 84 percent (that is, 229 million insured non-elderly people divided by 274 million total non-elderly people). Therefore, the calculation of Factor 2 for FY 2014, employing a weighted average of the CBO projections for CY 2013 and CY 2014, is as follows: mstockstill on DSK4VPTVN1PROD with RULES6 CY 2013 rate of insurance coverage (May 2013 CBO estimate): 80 percent CY 2014 rate of insurance coverage (May 2013 CBO estimate, updated with July 2013 CBO estimate): 84 percent FY 2014 rate of insurance coverage: (80 percent * .25) + (84 percent * .75) = 83 percent. Percent of individuals without insurance for 2013 (March 2010 CBO estimate): 18 percent Percent of individuals without insurance for FY 2014 (weighted average): 17 percent 1¥|[(0.17¥0.18)/0.18]| = 1¥0.056 = 0.944 (94.4 percent) 0.944 (94.4 percent)¥0.001 (0.1 percentage points) = 0.943 (94.3 percent) 0.943 = Factor 2 We note that, as a result of this change, we will reduce the total amount of uncompensated care payments by a smaller amount than the reductions that would have resulted from our proposed methodology for Factor 2. Therefore, in this final rule, we are adopting 0.943 as the final determination of Factor 2 for FY 2014. In conjunction with this determination, we have also determined, for the purpose of this final rule, that the amount available for uncompensated care payments for FY 2014 will be approximately $9.033 billion (0.943 times our Factor 1 estimate of $9.579 billion). Comment: One commenter opined that the new Medicare DSH payment adjustment policy will hurt Massachusetts hospitals, which will see no reduction in uninsured rates because the State has already expanded health insurance coverage under its own health care reform. The commenter requested VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 that CMS exempt Massachusetts and any other State which expands health care coverage from any cuts driven by the reduction in uninsurance at the national level under the Affordable Care Act. At minimum, the commenter requested that CMS adjust Factor 2 to account for changes in uninsurance at the State level so that hospitals in States that are not expected to see reductions in their uninsured rates—because they have already expanded access in alignment with the Affordable Care Act—will not see large reductions in their Medicare DSH payments. Response: We appreciate receiving the commenter’s concerns. However, the statute provides no authority to exempt some States from the provision or to adjust the calculation of Factor 2 to reflect uninsurance rates at a State level. Therefore, we are unable to accept the commenter’s recommendations. (3) Methodology to Calculate Factor 3 Section 1886(r)(2)(C) of the Act defines Factor 3 in the calculation of the uncompensated care payment. As we have discussed above, section 1886(r)(2)(C) of the Act states that Factor 3 is ‘‘equal to the percent, for each subsection (d) hospital, that represents the quotient of (i) the amount of uncompensated care for such hospital for a period selected by the Secretary (as estimated by the Secretary, based on appropriate data (including, in the case where the Secretary determines alternative data is available which is a better proxy for the costs of subsection (d) hospitals for treating the uninsured, the use of such alternative data)); and (ii) the aggregate amount of uncompensated care for all subsection (d) hospitals that receive a payment under this subsection for such period (as so estimated, based on such data).’’ Therefore, Factor 3 is a hospitalspecific value that expresses the proportion of the estimated uncompensated care amount for each subsection (d) hospital and subsection (d) Puerto Rico hospital with the potential to receive DSH payments relative to the estimated uncompensated care amount for all hospitals estimated to receive DSH payments in the fiscal year for which the uncompensated care payment is to be made. Factor 3 is applied to the product of Factor 1 and Factor 2 to determine the amount of the uncompensated care payment that each eligible hospital will receive for FY 2014 and subsequent years. In order to implement the statutory requirements for this factor of the uncompensated care payment formula, we must determine the following: (1) The definition of uncompensated care, or in PO 00000 Frm 00140 Fmt 4701 Sfmt 4700 other words, the specific items that are to be included in the numerator (that is, the estimated uncompensated care amount for an individual hospital) and denominator (that is, the estimated uncompensated care amount for all hospitals estimated to receive DSH payments in the applicable FY); (2) the data source(s) for the estimated uncompensated care amount; and (3) the timing and manner of computing the quotient for each hospital estimated to receive DSH payments. The statute instructs the Secretary to estimate the amounts of uncompensated care for a period ‘‘based on appropriate data.’’ In addition, we note that the statute permits the Secretary to use alternative data ‘‘in the case where the Secretary determines that alternative data is available,’’ which is a better proxy for the costs of subsection (d) hospitals for treating uninsured individuals. In the course of considering how to determine Factor 3, we considered proposing to define the amount uncompensated care for a hospital as the uncompensated care costs of that hospital and considered potential data sources for those costs. In doing so, we first considered which costs should be included in the definition of ‘‘uncompensated care costs.’’ We examined the broad literature on uncompensated care and the concepts of uncompensated care used in various public and private programs. We also considered input from stakeholders and public comments in various forums, including the national provider call that we held in January 2013. Our review of the information from these sources indicated that there is some variation in how different States, provider organizations, and Federal programs define ‘‘uncompensated care.’’ However, a common theme of almost all these definitions is that they include both ‘‘charity care’’ and ‘‘bad debt’’ as constituents of ‘‘uncompensated care.’’ After considering the various factors that are included in different definitions of ‘‘uncompensated care,’’ we considered proposing to adopt a definition which incorporated those factors that are most commonly included within the term. Thus, we considered proposing to define ‘‘uncompensated care’’ as the cost of charity care plus bad debt which includes the cost of non-Medicare bad debt and non-reimbursed Medicare bad debt. In turn, we also considered proposing to define ‘‘charity care costs’’ as the cost of care for patients that meet hospitals’ individual criteria for charity care net of any partial payment received by the hospital from patients for that E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations care, and to define ‘‘non-Medicare bad debt costs’’ as the cost of hospital care for non-Medicare patients that have the financial capacity to pay, but are unwilling to settle the claim. In addition, we considered proposing to define ‘‘non-reimbursed Medicare bad debt costs’’ as the amount of allowable coinsurance and deductible for Medicare patients from whom the hospital has sought to collect payment through reasonable collection efforts as described in § 413.89(e) of the Medicare regulations and not reimbursed by Medicare. We discussed these possible elements of uncompensated care in more detail in the proposed rule (78 FR 27585) For purposes of selecting an appropriate data source for this possible definition of uncompensated care costs, we reviewed the literature and available data sources and determined that the Medicare cost report Worksheet S–10 could potentially provide the most complete data for Medicare hospitals. (We refer readers to the report ‘‘Improvements to Medicare Disproportionate Share (DSH) Payments’’ for a full discussion and evaluation of the available data sources. The report can be found on the CMS Web site at: https://www.cms.gov/ Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/dsh.html.) However, we noted that Worksheet S–10 is a relatively new data source that has been used for specific payment purposes only in relatively restricted ways (for example, to provide a source of charity care charges in the computation of EHR incentive payments; 75 FR 44456.). We also noted that some stakeholders have expressed concern that hospitals have not had enough time to learn how to submit accurate and consistent data through this reporting mechanism. Other stakeholders have maintained that some instructions for Worksheet S–10 still require clarification in order to ensure standardized and consistent reporting by hospitals. We understand and appreciate the concerns of these stakeholders. At the same time, Worksheet S–10 is the only national data source that includes data for all Medicare hospitals and is designed to elicit data that are both accurate and consistent with the definition of uncompensated care costs that we considered proposing to use. We discussed the possible use of data reported on Worksheet S–10 to determine uncompensated care costs in more detail in the proposed rule (78 FR 27586). In order to apply a definition of uncompensated care costs based upon VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 information reported on the Worksheet S–10, it would be necessary to use the 2010/2011 cost reports, which were submitted on or after May 1, 2010, when the new Worksheet S–10 went into effect. These are the most recently available full year of cost reports and the first cost reports with detailed uncompensated care data on the Worksheet S–10 that would be available for use in implementing the new methodology for uncompensated care payments for FY 2014. Concerns about the standardization and completeness of the Worksheet S–10 data could be more acute for data collected in the first year of the Worksheet’s use. Because of these concerns, we did not propose to define uncompensated care in a way that would require use of the Worksheet S– 10 data. However, we stated our belief that Worksheet S–10 of the Medicare Cost Report would otherwise be an appropriate data source to determine uncompensated care costs. In particular, we noted that Worksheet S–10 was developed specifically to collect information on uncompensated care costs in response to interest by MedPAC and other stakeholders regarding the topic (for example, MedPAC’s March 2007 Report to Congress) and that it is not unreasonable to expect information on the cost report to be used for payment purposes. Furthermore, hospitals attest to the accuracy and completeness of the information reported in the cost report at the time of submission. While we realize that hospitals may wish to have a more specific understanding of how these data will be used, we believe that the discussion in the proposed rule will help to increase their understanding and also inform our efforts to refine the cost report and cost report instructions so that hospitals may continue to gain experience in reporting accurate information. We also expect reporting on Worksheet S–10 to improve over time, particularly in the area of charity care which is already being used and audited for payment determinations related to the electronic health record incentive program, and will continue to monitor these data. Accordingly, we stated in the proposed rule that we may proceed with a proposal to use data on the Worksheet S–10 to determine uncompensated care costs in the future, once hospitals are submitting accurate and consistent data through this reporting mechanism. As we describe above, in the FY 2014 IPPS/LTCH PPS proposed rule, we indicated that we were concerned about stakeholder input that the variations in the data reported on Worksheet S–10 of PO 00000 Frm 00141 Fmt 4701 Sfmt 4700 50635 the Medicare cost report regarding uncompensated care may be due to hospitals’ relative lack of experience reporting all of the data elements on that worksheet. A large number of stakeholders noted that there is considerable variation and numerous inconsistencies in how uncompensated care is calculated and reported in Worksheet S–10 and they point out that these inconsistencies can produce divergent results. Some stakeholders went as far as noting that data from Worksheet S–10 is ‘‘flawed’’ and many suggested more precision in reporting instructions to help hospitals report data in a more consistent manner. We noted that most of the data elements reported on Worksheet S–10 have been previously unused for payment purposes, with only some data elements recently being used for determining a hospital’s electronic health record incentive payments, and these data elements have not been subject to audit prior to this time. We stated that we believe it is important that data used to determine Factor 3 are data that have been historically publicly available, subject to audit, and used for payment purposes (or that the public understands will be used for payment purposes). We indicated that it is our belief that hospitals expend more resources to ensure data accuracy when data are publicly available and used for payments. For example, the National Quality Forum (NQF) first endorsed quality measures for readmissions for heart failure (HF) in May 2008 and acute myocardial infarction (AMI) and pneumonia (PN) in October 2008. HF was subsequently adopted in the Hospital Inpatient Quality Reporting (IQR) Program in the FY 2009 IPPS rule and AMI and PN in the CY 2009 OPPS rule. All three were adopted for the FY 2010 Hospital IQR program and publicly reported in Hospital Compare in 2009. More recently, starting in FY 2013, all three were used to determine a payment adjustment under section 1886(q) of the Act. As the measures became linked with payment, CMS has received an increasing number of questions regarding and requests to refine these measures, leading us to believe that hospitals are increasingly focused on ensuring that their data are correct. Furthermore, it is also our belief that auditing plays an important role in ensuring data accuracy by identifying and remediating problem areas and/or hospitals as well as by having a sentinel effect in others. For example, each year, CMS and its intermediaries work with hospitals to review salary and wage data reported on Worksheet S–3 of the E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50636 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Medicare cost report for use in determining the wage index. This extensive process identifies errors and ensures that anomalous data are reviewed, corrected as needed, and documented. Due to stakeholder concerns and our belief in the importance of using data that have been historically publicly available, subject to audit, and used for payment purposes (or that the public understands will be used for payment purposes), for FY 2014, we stated in the proposed rule that we had serious concerns about proposing to use Worksheet S–10 to determine the amount of uncompensated care. While the statute instructs the Secretary to estimate the amounts of uncompensated care for a period ‘‘based on appropriate data,’’ section 1886(r)(2)(C)(i) of the Act permits the Secretary to use alternative data ‘‘in the case where the Secretary determines that alternative data is available which is a better proxy for the costs of subsection (d) hospitals for treating the uninsured’’ for the numerator of Factor 3. For the denominator of that quotient, section 1886(r)(2)(C)(ii) of the Act requires the Secretary to use ‘‘the aggregate amount of uncompensated care for all subsection (d) hospitals that receive a payment under this subsection for such period (as so estimated, based on such data). (Emphasis added.) The phrase ‘‘as so estimated, based on such data’’ in the latter section can be reasonably interpreted to require the calculation to similarly be based on the same data as is used to estimate the numerator of the quotient in Factor 3, including any alternative data which is determined to be a better proxy for the costs of treating the uninsured. As a result of our concerns regarding variations in the data reported on the Worksheet S–10, we stated in the proposed rule that we believe it is appropriate to consider the use of alternative data, at least in FY 2014, the first year that this provision is effective, and possibly additional years until hospitals have adequate experience reporting all of the data elements on Worksheet S–10. We noted that this is consistent with input we received from some stakeholders in response to the CMS National Provider Call in January 2013, who stated their belief that existing FY 2010 and FY 2011 data from the Worksheet S–10 cannot be used for implementation of section 1886(r) and who requested the opportunity to resubmit the data once more specific instructions were issued by CMS. Accordingly, we examined alternative data sources that could be used to allow time for hospitals to gain experience VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 with and to improve the accuracy of their S–10 reporting. In order to implement the statutory requirements for Factor 3 using alternative data, we must: (1) Determine whether alternative data would be a better proxy for the treatment costs of the uninsured than the information available on the Worksheet S–10; (2) identify a source for this alternative data; and (3) determine the timing and manner of computing the quotient for each hospital. We stated in the FY 2014 IPPS/LTCH PPS proposed rule that we believe that data on utilization for insured lowincome patients can be a reasonable proxy for the treatment costs of uninsured patients. Moreover, due to the concerns regarding the accuracy and consistency of the data reported on the Worksheet S–10, we believe that this alternative data, which is currently reported on the Medicare cost report, would be a better proxy for the amount of uncompensated care provided by hospitals. Accordingly, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27587 through 27588), we proposed to use the utilization of insured lowincome patients defined as inpatient days of Medicaid patients plus inpatient days of Medicare SSI patients as defined in 42 CFR 412.106(b)(4) and 412.106(b)(2)(i), respectively to determine Factor 3. We describe our proposal and rationale, on which we sought public comment, more fully below. As a preliminary matter, we noted that precise data on health care costs are difficult to obtain. For Medicare payment purposes, we estimate those costs using reported charges and cost-tocharge ratios. This approach to estimating costs is what is used on Worksheet S–10 to determine costs for charity care and bad debt. We do believe that the Medicare cost report is the most comprehensive data source regarding hospital costs reported to Medicare, and note that alternative data on uninsured patients are difficult to find in a comprehensive manner on a hospitalspecific basis. In a September 2002 report, Analysis of the Joint Distribution of Disproportionate Share Hospital Payments, RAND and Urban Institute researchers describe this difficulty, citing as an example how detailed inpatient utilization data on self-pay patients were available only for the sample of hospitals (20 percent sample) from the 24 States included in AHRQ’s HCUP database.13 13 Wynn, B. et al. Analysis of the Joint Distribution of Disproportionate Share Hospital Payments. PM–1387–ASPE. September 20, 2002. PO 00000 Frm 00142 Fmt 4701 Sfmt 4700 While Worksheet S–10 does contain some information regarding the treatment costs of the uninsured, most notably of those uninsured patients who qualify for charity care at an individual hospital, for the reasons described above, we stated that we were concerned about the use of information reported on the Worksheet S–10 as appropriate data for FY 2014 and possibly additional years. As a result of these concerns, in identifying alternative data that could serve as a proxy for the treatment costs of the uninsured, we acknowledged that we must consider methods other than costs to approximate the resources expended by hospitals to treat uninsured patients. One such method is utilization. A hospital’s costs for treating uninsured patients are a function of its input costs and utilization of services. In accordance with the statute, in order to determine Factor 3, a hospital-level estimate of uncompensated care is required. Such an estimate can be constructed using detailed data regarding specific items or services. However, such data are not available to us. In contrast, hospital-level data measuring utilization as inpatient days or discharges are available. While we noted that inpatient days or discharges would be more precise if they took into account the relative resource utilization of individual patients, such as case-mix, no such data are available to us. In the September 2002 report discussed above, RAND and Urban Institute researchers asserted that without specific case-mix data for low-income populations, inpatient days are preferable to discharges as a way to measure utilization. Therefore, we stated our belief that utilization based upon inpatient days is an appropriate method to approximate costs for the treatment costs of the uninsured. We further stated that we believe that utilization by insured low-income patients, such as Medicaid patients or Medicare patients that receive SSI benefits (Medicare SSI), can be a reasonable proxy for utilization by uninsured patients. In its 2000 report on American’s Health Care Safety Net, the Institute of Medicine considers uninsured individuals, low-income underinsured individuals, Medicaid beneficiaries, and patients with special health care needs all as vulnerable populations.14 We note that when Available at: https://www.urban.org/UploadedPDF/ 410975_ASPEDSH_final.pdf. 14 Marion Ein Lewin and Stuart Altman, Editors; Committee on the Changing Market, Managed Care, and the Future Viability of Safety Net Providers, Institute of Medicine. America’s Health Care Safety E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 studying access to care, researchers may study Medicaid and/or low-income populations (for example, health outcomes, utilization, etc.) in order to understand more broadly the impact of similar policy interventions for other vulnerable populations.15 For example, recently, researchers have studied the effects of Medicaid expansions to gauge the effects of these expansions on health status and other indicators to inform policymakers as these expansion efforts continue.16 Researchers have also studied the ability of Medicaid patients to gain access to outpatient care in an effort to highlight the ramifications of various policy interventions, such as mandatory co-payments and utilization restrictions.17 We noted that we believe that this type research is often used by state and other policy makers to evaluate how Medicaid and other public health insurance can expand access to care to uninsured populations. While the report by RAND and the Urban Institute cited above found shortcomings in how well both Medicaid and Medicare DSH target funds towards safety net hospitals, another key finding of the report was that the allocation methods used by these programs target funds to safety net hospitals at least as well as the alternative allocation methods they examined. The allocation method used by Medicare for Medicare DSH is the sum of two computations. The first computation, defined at 42 CFR 412.106(b)(2), known as the SSI ratio or Medicare fraction, is the proportion of a hospital’s Medicare SSI days relative to Medicare days. The second computation, defined at 42 CFR 412.106(b)(4), known as the Medicaid fraction, is the proportion of a hospital’s Medicaid days relative to total days. The RAND and the Urban Institute study also found that the choice of patient populations used to evaluate how well Medicare and Medicaid DSH funds are allocated is important. The study notes that including Medicare SSI beneficiaries along with all other lowincome patients generally performed better, resulting in a better targeting of these payments towards safety net hospitals. Therefore, we indicated that we believe the utilization of insured Net: Intact but Endangered. 2000. Available at: https://www.nap.edu/catalog/9612.html. 15 John K. Iglehart. Medicaid. N Engl J Med 1993; 328:896–900. March 25, 1993. 16 Benjamin D. Sommers, M.D., Ph.D., Katherine Baicker, Ph.D., and Arnold M. Epstein, M.D. Mortality and Access to Care among Adults after State Medicaid Expansions. N Engl J Med 2012; 367:1025–1034. September 13, 2012. 17 The Medicaid Access Study Group. Access of Medicaid Recipients to Outpatient Care. N Engl J Med 1994; 330:1426–1430. May 19, 1994. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 low-income patients defined as insured low-income days, or inpatient days of Medicaid patients plus inpatient days of Medicare-SSI patients could be a proxy for the treatment costs of uninsured patients. Currently, for the Medicare DSH adjustment, hospitals report utilization for Medicaid and Medicare SSI patients in accordance with the regulations at 42 CFR 412.106(b)(4) and 412.106(b)(2)(i), respectively. Specifically, we would define inpatient days for Medicaid patients as they are defined in § 412.106(b)(4) and inpatient days for Medicare-SSI patients as they are defined at § 412.106(b)(2)(i). A hospital’s individual insured lowincome insured days based on this calculation would represent that hospital’s numerator for Factor 3. The sum of the low-income insured days under this calculation for all the hospitals that we estimate would receive DSH payments (and thus the uncompensated care payment) for FY 2014 would represent the denominator of Factor 3. It is important to point out that when these insured low-income utilization data are used to determine Medicare DSH payments, they are subject to additional computations as described in 42 CFR 412.106(b) and 412.106(d). Therefore, using these data to determine Factor 3 will lead to a different set of results than using these data to determine hospitals’ Medicare DSH payments. In the FY 2014 IPPS/LTCH PPS proposed rule, we stated that we believe the data in the Medicare cost report (and the data that are used to update the SSI ratios in the cost report) are acceptable for use as a source for this alternative data because they include data for all Medicare hospitals. For the reasons described above, we considered data elements from the Medicare cost report that have been historically publicly available, subject to audit, and used for payment purposes, as alternative data for the costs of subsection (d) hospitals for treating the uninsured. Worksheet S– 3, Part I of the CMS–2552–96 version of the Medicare cost report and Worksheet S–2, Part I of the CMS 2552–10 version of the Medicare cost report contain information on the utilization of Medicaid patients. Specifically, they contain information regarding Medicaid days (that is, the numerator of the Medicaid fraction). The SSI ratios can be found in Worksheet E, Part A and hospitals’ SSI ratios are reported by CMS on the Medicare DSH Web site, by Federal fiscal year, and include a hospital’s Medicare SSI days. We pointed out that CMS calculates the SSI ratios using the MedPAR claims data PO 00000 Frm 00143 Fmt 4701 Sfmt 4700 50637 and updates them annually in accordance with the process and timing set forth in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50282), generally issuing them in the Spring of each year for the Federal fiscal year 2 years prior. For instance, we would expect that the SSI ratios for FY 2011 would be made available in the Spring of 2013. SSI ratios can be downloaded from https:// www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/ AcuteInpatientPPS/dsh.html. The SSI ratios for a Federal fiscal year are the data that would ultimately be used in Worksheet E, Part A to determine a hospital’s Medicare DSH adjustment for that fiscal year. While a hospital may choose to have its DSH payments settled using an SSI ratio based on the hospital’s cost reporting period, this choice will vary by hospital and the timing of this choice will vary. As a result, a hospital’s decision whether to have its SSI ratio calculated on the basis of its cost reporting period may not be available at the time we determine Factor 3 for a specific federal fiscal year. Therefore, in an effort to balance consistency and administrative efficiency with precision, we stated our belief that it is appropriate to use the SSI ratios based on the Federal fiscal year. Except for the data on Worksheet S– 10, the Medicare cost report does not currently include information that would allow calculation of the treatment costs of uninsured patients. For the reasons described previously, for FY 2014 and possibly additional years, we have concerns with using these data. Accordingly, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27589), we proposed to use Worksheet S–3 Part I of the CMS–2552–96 version of the Medicare cost report and Worksheet S–2, Part I of the CMS 2552– 10 version of the Medicare cost report and data that are used to update the SSI ratios on that Worksheet E, Part A as the source of the alternative data to determine Factor 3 for FY 2014. In the proposed rule, we stated that we may propose to use data from Worksheet S– 10 to determine uncompensated care costs in the future, once hospitals are submitting accurate and consistent data through this reporting mechanism. The statute also allows the Secretary the discretion to determine the time periods from which we will derive the data to estimate the numerator and the denominator of the Factor 3 quotient. Specifically, the statute defines the numerator of the quotient as ‘‘the amount of uncompensated care for such hospital for a period selected by the Secretary * * *’’ (Emphasis added.) The E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50638 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations statute defines the denominator as ‘‘the aggregate amount of uncompensated care for all subsection (d) hospitals that receive a payment under this subsection for such period.’’ (Emphasis added.) As we have discussed above, we proposed a process of making interim payments with final cost report settlement for both the empirically justified Medicare DSH payments and the uncompensated care payments required by section 3133 of the Affordable Care Act. Consistent with that proposed process, we also proposed to determine the time period from which to estimate the numerator and denominator of the Factor 3 quotient in a way that will be consistent with making interim and final payments. Specifically, we must have Factor 3 values available for hospitals that we estimate will qualify for Medicare DSH payments using most recently available historical data and for those hospitals that we do not estimate will qualify for Medicare DSH payments but that may ultimately qualify for Medicare DSH payments at the time of cost report settlement. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27589), we proposed to estimate the numerator and the denominator of Factor 3 for hospitals based on the most recently available full year of Medicare cost report data (including the most recently available data that may be used to update the SSI ratios) with respect to a Federal fiscal year. In other words, we proposed to use data from the most recently available cost report for the Medicaid days and the most recently available SSI ratios (that is, latest available SSI ratios before the beginning of the Federal fiscal year) for the Medicare-SSI days. We noted that these data are publicly available, subject to audit, and used for payment purposes. While we recognized that older data also meet these criteria, we often use the most recently available data for payment determinations. Therefore, for FY 2014, we proposed to use data from the 2010/ 2011 cost reports for the Medicaid days and the FY 2011 SSI ratios for the Medicare-SSI days (or, if the FY 2011 SSIs are unavailable, the FY 2010 SSI ratios) to estimate Factor 3 for FY 2014. To summarize, for FY 2014, in response to stakeholder concerns regarding data variability and lack of reporting experience with Worksheet S– 10, we proposed to determine Factor 3 using insured low-income patient days from the 2010/2011 cost reports (including the FY2011 or FY 2010 SSI ratios, whichever represents the most recently available inputs prior to October 1, 2013) as alternative data which are a better proxy for the VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 treatment costs of uninsured patients. We further proposed to define insured low-income patient days as inpatient days of Medicaid patients plus inpatient days of Medicare SSI patients as defined in 42 CFR 412.106(b)(4) and 412.106(b)(2)(i), respectively. We proposed to add a new paragraph (g)(1)(iii) under § 412.106 of our regulations to define the methodology for calculating Factor 3. We invited public comments on this proposal. Notwithstanding our concerns regarding Worksheet S–10, we stated that we were interested in hearing commenters’ views on the quality of the data reported on the Worksheet S–10, and whether it would be sufficient for use in determining uncompensated care amounts for fiscal year 2014, either by itself or in combination with other data. We also sought public comment on how fast we could transition to the use of Worksheet S–10 data based upon increased reliability over time, including whether the data could be used to determine uncompensated care in FY 2014 either alone or in combination with other data. Comment: Most commenters supported the proposal not to employ the Worksheet S–10 data to determine uncompensated care costs. These commenters agreed with CMS’ assessment that, at the least, hospitals need more time to learn how to accurately and consistently report the Worksheet S–10 data before CMS employs the data to determine Factor 3 in the uncompensated care cost calculation. Some commenters discouraged CMS from considering the use of these data at any point in the future, and asked CMS to provide sufficient notice that we may propose use of the Worksheet S–10 data so that stakeholders will have sufficient time to express remaining concerns about employing such data. Other commenters encouraged CMS to clarify and revise the reporting instructions as appropriate to ensure consistent and accurate reporting of Worksheet S–10 data so that it can eventually be employed in the determination of Factor 3. Response: We appreciate the comments in support of our proposal not to employ Worksheet S–10 data at this time for purposes of determining Factor 3. However, we remain convinced that the Worksheet S–10 could ultimately serve as an appropriate source of more direct data regarding uncompensated care costs. Therefore, we will review Worksheet S–10 in order to determine what revisions or clarifications may be necessary so that it can yield accurate and consistent data. We will consider the commenters’ PO 00000 Frm 00144 Fmt 4701 Sfmt 4700 specific recommendations for such revisions and clarifications as we do so. It is our intention to propose introducing use of the Worksheet S–10 to determine Factor 3 within a reasonable amount of time. Comment: Some commenters objected to our proposal not to employ the Worksheet S–10 data to determine uncompensated care costs. These commenters noted that Worksheet S–10 was developed specifically to collect information on uncompensated care costs. In addition, MedPAC expressed reservations about CMS’ proposal to employ insured low-income days as a proxy for uncompensated care costs, and recommended consideration of charity care and/or a blend of the insured low-income days and uncompensated care data over a transition of several years to sole use of the Worksheet S–10 uncompensated care data in determining Factor 3. Response: We agree with the commenters that the Worksheet S–10 was developed specifically to collect information on uncompensated care costs. However, we also agree with the many commenters who stated that the data reported on the Worksheet S–10 are not yet reported accurately and consistently enough to be adopted for purposes of determining Factor 3. Specifically, we agree that because this is the first year these data are being reported, confusion could exist about how to report information on Worksheet S–10. This confusion could affect the accuracy and completeness of the information reported on Worksheet S– 10. In addition, for the reasons described in the FY 2014 IPPS/LTCH PPS proposed rule and above, we believe that it would be most appropriate to use data elements that have been historically publicly available, subject to audit, and used for payment purposes (or that the public understands will be used for payment purposes) to determine the amount of uncompensated care. For FY 2014, we do not believe that data regarding uncompensated care from Worksheet S– 10 meet these criteria and, therefore, are not reliable enough to use for determining FY 2014 uncompensated care payments. We do not think they meet these criteria because it is the first year they are available and while we recognize that a limited portion of these data will be used for payment purposes (for example, for EHR payments) and, therefore, subject to audit for those purposes they are still not generally used for payment purposes and subject to audit. Accordingly, we continue to believe that alternative data will provide a better proxy for the amount of E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations uncompensated care during first year or years of implementation. As we discuss below, we will work on reviewing the instructions for Worksheet S–10 to determine whether any revisions or clarifications may be necessary to ensure that the data reported on this Worksheet can eventually be employed to determine Factor 3. We also appreciate MedPAC’s recommendation that we consider alternative proxies and also a transition period of several years to sole use of the Worksheet S–10 uncompensated care data in determining Factor 3, possibly with use of a blend of the insured lowincome days and uncompensated care data. While we acknowledge the appeal of a transition to the sole use of the uncompensated care data, we believe that we would need to further analyze the appropriateness of blending Worksheet S–10 uncompensated care data with other data for use in determining Factor 3. We note that it is possible that we would consider a more refined proxy or other proxies for the treatment costs of the uninsured until such a time that we can propose a methodology to calculate Factor 3 based directly on reported amounts of uncompensated care. Regardless, we believe that hospitals should have a full opportunity to comment on any such proposals before their adoption. Therefore, we may consider including this recommendation among our proposals in future rulemaking. Comment: Most commenters supported CMS’ proposal to employ each Medicare disproportionate share hospital’s insured low-income inpatient days relative to the total insured lowincome inpatient days provided by Medicare disproportionate share hospitals as a better proxy for the costs of the uninsured. These commenters agreed with CMS’ assessment that the data reported on the Worksheet S–10 are not yet reported accurately and consistently enough to be adopted for purposes of determining Factor 3. Most commenters endorsed the adoption of the proxy approach as an interim measure as CMS proceeds to refine the definition of uncompensated care costs and the instructions for reporting data on the Worksheet S–10. An association representing hospitals in a major metropolitan area requested that CMS use the wage index to adjust insured low-income days to account for the differences in ‘‘purchasing power’’ in different regions of the country. The association, along with several other commenters, requested that CMS include insured low-income days from exempt units (for example, inpatient rehabilitation units paid under the IRF VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 PPS or inpatient psychiatric units paid under the IPF PPS) of the hospital in order to better capture the treatment costs of the uninsured by the hospital. Some commenters, including a beneficiary advocacy organization and a hospital system, objected to CMS’ proposal to use insured low-income inpatient days as the proxy for distributing uncompensated care payments. These commenters believed that the proposed method unfairly rewards States that expand Medicaid to the detriment of States that do not, despite their belief that the latter group of States should have larger relative uncompensated care costs. The commenters also believed that this approach was not an appropriate proxy for uncompensated care because, by definition, insured low-income days are not uncompensated. Response: We agree with the commenters who supported our proposal to employ insured low-income days as a proxy for uncompensated care costs. For the reasons we detailed in the proposed rule, we believe that this proxy provides a reasonable basis on which to determine Factor 3 during an interim period while we work with the hospital community to review and make any necessary revisions and clarifications to the instructions to ensure that the data on Worksheet S–10 is reported accurately and consistently enough to employ in the determination of this factor. As is noted above, it remains our intention to propose introducing use of the Worksheet S–10 to determine Factor 3 within a reasonable amount of time. We do not agree with the commenters who stated that our proposal inappropriately rewards States that expand Medicaid coverage to the detriment of States that do not. Using some of the uncompensated care data discussed in the proposed rule, we recognize it would be possible for hospitals in States that choose to expand Medicaid to receive lower uncompensated care payments because they are less likely to have uninsured patients than hospitals in a State that does not choose to expand Medicaid. Nevertheless, for the reasons discussed above, we believe that data on insured low-income days remains the best proxy for uncompensated care costs currently available to determine Factor 3. With respect to the comments requesting that we use the wage index to adjust low-income days, we agree that there may be regional variation in uncompensated care costs due to regional variations in the costs of care generally. However, we do not believe that there is sufficient basis for believing PO 00000 Frm 00145 Fmt 4701 Sfmt 4700 50639 that the wage index reflects the variations in uncompensated care costs well enough to adopt it as the basis for adjusting Factor 3. The wage index reflects the relative hospital wage level in the geographic area of the hospital compared to the national average hospital wage level. In computing the wage index, we derive an average hourly wage for each labor market area (total wage costs divided by total hours for all hospitals in the geographic area) and a national average hourly wage (total wage costs divided by total hours for all hospitals surveyed in the nation). A labor market area’s wage index value is the ratio of the area’s average hourly wage to the national average hourly wage. We note that, for FY 2014, 69.6 percent of the standardized amount is considered to be the labor-related share and, therefore, adjusted by the wage index. However, in addition to the labor-related share of the standardized amount being adjusted by the wage index, the entire standardized amount is also adjusted for the relative weight of the MS–DRG for each individual patient. In other words, the wage index only adjusts for a portion of the variation in costs, and does not address variations in resource use and patient severity. Therefore, we think that there is insufficient basis for believing that adjusting low-income patient days by the wage index would better reflect variations in uncompensated care costs. Furthermore, as we discuss above, we are aware of no other data that may adequately capture these variations, such as case-mix. Finally, we believe that there may be some merit to the comments recommending inclusion of insured low-income days from exempt units of the hospital in order to better capture the full costs of the treatment of the uninsured by the hospital insofar as those data may be publicly available, subject to audit, and used for payment purposes. We believe that it would be prudent to more carefully consider the degree to which these data meet these conditions before adopting this recommendation. Therefore, we will consider including this recommendation among our proposals in future rulemaking. In the FY 2014 IPPS/LTCH PPS proposed rule, we proposed to estimate which hospitals would receive an empirically justified Medicare DSH payment in a given Federal fiscal year using the most recent data available. As we described previously, only hospitals that receive empirically justified Medicare DSH payments in a fiscal year may receive an uncompensated care payment. However, because whether or E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50640 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations not a hospital will actually receive an empirically justified Medicare DSH payment is not known until cost report settlement and cost report settlement occurs several years after end of the federal fiscal year, we stated that we believe it is necessary to estimate which hospitals will receive Medicare DSH payments for a given fiscal year. Because the uncompensated care amounts for these hospitals are used to determine the denominator of Factor 3, this allows for the calculation of Factor 3 in advance of or during the federal fiscal year so that interim payments can begin during the fiscal year. We indicated in the proposed rule that we believe this will create some level of predictability and finality for hospitals eligible for these payments, in addition to being administratively efficient. Therefore, for FY 2014, we proposed that the denominator for Factor 3 would reflect the estimated Medicaid and Medicare SSI patient days based on data from the 2010/2011 Medicare cost report (including the most recently available data that may be used to update the SSI ratios) for all hospitals that we estimate would receive an empirically justified Medicare DSH payment in FY 2014. The numerator of Factor 3 would be the estimated Medicaid and Medicare SSI patient days for the individual hospital based on its most recent 2010/2011 Medicare cost report data (including the most recently available data that may be used to update the SSI ratios). We proposed to calculate a numerator for all subsection (d) hospitals and subsection (d) Puerto Rico hospitals that have the potential of receiving a DSH payment regardless of whether we estimate that the hospital would receive DSH payments in the respective Federal fiscal year. In that way, if a hospital becomes eligible to receive the empirically justified Medicare DSH payment and also an uncompensated care payment, we will be able to finalize its uncompensated care payment efficiently and without affecting the uncompensated care payments of other hospitals. We noted that we believe this proposed approach strikes an appropriate balance between administrative efficiency, finality, and predictability in payments. Therefore, we also proposed to publish a table or tables listing Factor 3 for all hospitals that we estimate would receive empirically justified Medicare DSH payments in a fiscal year (that is, hospitals that would receive interim uncompensated care payments during the fiscal year), and for the remaining subsection (d) and subsection (d) Puerto Rico hospitals that have the potential of VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 receiving a DSH payment in the event that they receive an empirically justified Medicare DSH payment for the fiscal year as determined at cost report settlement. We also proposed that hospitals would have 60 days from the date of display of the IPPS/LTCH PPS proposed rule to review these tables and notify CMS in writing of a change in a hospital’s subsection (d) hospital status, such as if a hospital has closed or converted to a CAH. We stated that we would notify hospitals concerning the specifics of this process in program instructions after the final rule. For FY 2014, we stated that we would allow hospitals 60 days from the date of display of the IPPS/LTCH PPS proposed rule to review these tables and notify CMS in writing of a change in a hospital’s subsection (d) hospital status, and we indicated that we may allow an additional (perhaps shorter) such period after the publication of the final rule. For hospitals that were not estimated to receive an empirically justified Medicare DSH payment for a fiscal year, but ultimately qualify for such a payment at cost report settlement, we proposed to make the full uncompensated care payment at that time. In the case of hospitals that we estimated would receive an empirically justified Medicare DSH payment for a fiscal year and that received interim empirically justified Medicare DSH payments and uncompensated care payments, but are found to be ineligible for DSH payments at cost report settlement, we would recover the overpayment. However, we proposed only to calculate the denominator (that is, the estimated Medicaid and Medicare SSI patient days based on data from the 2010/2011 Medicare cost report (including the most recently available data that may be used to update the SSI ratios) for all hospitals that we estimate would receive an empirically justified Medicare DSH payment in FY 2014) once, at the time of the IPPS/LTCH PPS final rule each year. We did not propose to recalculate the denominator at the time when cost reports are settled and final eligibility determinations for uncompensated care (and empirically justified Medicare DSH) payments are made. We discuss our proposals and final polices for interim payments and reconciliation processes below in section V.E.3.f. of the preamble of this final rule. For the purpose of the proposed rule, we posted proposed tables listing Factor 3 for the hospitals that we estimated would receive Medicare DSH payments for FY 2014 on the CMS Web site at: https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ PO 00000 Frm 00146 Fmt 4701 Sfmt 4700 AcuteInpatientPPS/dsh.html. We requested that hospitals review these tables. In order to ensure that we would have sufficient time to incorporate any updated information in the tables for the final rule, we indicated that hospitals should notify CMS in writing within 60 days from the date of display of the proposed rule of any change in a hospital’s subsection (d) hospital status. For FY 2014, we stated that we may allow an additional (perhaps shorter) such period after the publication of the final rule for hospitals to notify CMS of such changes. Comment: Several commenters questioned their hospitals’ Medicare DSH eligibility because many of these hospitals, particularly SCHs, were projected not to receive empirically justified Medicare DSH payment adjustments in the FY 2014 IPPS/LTCH PPS proposed rule and, therefore, to be ineligible to receive uncompensated care payments. Many of the commenters submitted documentation that they had received Medicare DSH payments in the past, so the hospitals reasoned that they should be considered eligible for empirically justified Medicare DSH payment adjustments and uncompensated care payments. Response: For the FY 2014 IPPS/ LTCH PPS proposed rule, we identified hospitals as being eligible for empirically justified Medicare DSH payment adjustments and, therefore, eligible to receive uncompensated care payments, based on our projections of whether a hospital would receive Medicare DSH payments for FY 2014. Many SCHs were determined to be ineligible for empirically justified Medicare DSH payment adjustments and uncompensated care payments because SCHs are paid the higher of the hospital-specific rate (which, by definition, excludes Medicare DSH payments), or the Federal rate (which includes Medicare DSH payments). With the 75-percent reduction to Medicare DSH payments in FY 2014 pursuant to section 1886(r)(1) of the Act, and because we did not propose to include the uncompensated care payment as part of the Federal payment rate in the proposed rule, more SCHs were projected to receive payments under their hospital-specific rate. As a result, these SCHs were determined to be ineligible for empirically justified Medicare DSH payment adjustments and, therefore, were also ineligible for uncompensated care payments. In the FY 2014 IPPS/LTCH PPS proposed rule, we noted that we would calculate a Factor 3 for hospitals found to be ineligible for empirically justified Medicare DSH payment adjustments in E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations our projections, in the event that they become eligible for empirically justified Medicare DSH payment adjustments at cost report settlement and, therefore, able to receive uncompensated care payments. However, unlike the hospitals projected to receive empirically justified Medicare DSH payment adjustments for FY 2014, those non-DSH hospitals would not receive uncompensated care payments on an interim basis. For the final rule, we are finalizing our methodology to identify hospitals eligible for empirically justified Medicare DSH payment adjustments and, therefore, eligible to receive interim uncompensated care payments based on our projections of whether the hospital would receive Medicare DSH payments for FY 2014. We will identify those subsection (d) and Puerto Rico subsection (d) hospitals that we project to have a disproportionate patient percentage (DPP) of at least 15 percent, which is the minimum required DPP to be eligible for Medicare DSH payments under section 1886(d)(5)(F) of the Act and, by extension, under 1886(r)(1) of the Act (that is, empirically justified Medicare DSH payments). The DPP is the sum of a hospital’s SSI fraction and Medicaid fraction. We are using the most recent data available to us at the time of this rulemaking to calculate the DPP for all subsection (d) hospitals and Puerto Rico subsection (d) hospitals and to identify those hospitals projected to be eligible for empirically justified Medicare DSH payment adjustments for FY 2014. For purposes of this final rule, the most recent SSI fraction is the FY 2011 SSI fraction. We posted the FY 2011 SSI fractions for each subsection (d) hospital on the CMS DSH Web site (https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ AcuteInpatientPPS/dsh.html) on June 27, 2013. The most recently available Medicaid fraction is that reported on the March 2013 update of the Provider Specific File. However, we are modifying our methodology so that an estimated uncompensated care payment amount will be included as part of the Federal rate when comparing payments under the hospital-specific rate versus the Federal rate for SCHs. Once we identify which SCHs we project will be paid on their hospital-specific rate, we will consider these hospitals to be ineligible to receive interim uncompensated care payments because we do not project them to be eligible for the empirically justified Medicare DSH payment adjustments. We will calculate Factor 3 for all hospitals that are eligible for empirically VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 justified Medicare DSH payment adjustments under our revised methodology based on their proportion of low-income insured days relative to the low-income insured days for all hospitals projected to receive DSH payments, and the hospital will receive uncompensated care payments on an interim basis. As we describe more fully below, hospitals that receive uncompensated care payments on an interim basis but are not eligible for Medicare DSH payments at the time of cost report settlement would no longer be eligible to receive an uncompensated care payment and would need to repay those interim payments. However, we are adopting a policy to calculate Factor 3 for all subsection (d) hospitals, including hospitals that are projected to be ineligible to receive Medicare DSH payments (that is, those hospitals with a DPP less than 15 percent or SCHs that are projected to be paid based on their hospital-specific rate). If these hospitals are later determined to be eligible to receive Medicare DSH payments, those payments (under both sections 1886(r)(1) and 1886(r)(2) of the Act) would be made at the time of cost report settlement. We note that in calculating Factor 3, we include in the denominator data only for those hospitals that we estimate will be eligible to receive empirically justified Medicare DSH payments for FY 2014. As part of our estimation of the hospitals eligible for Medicare DSH payments, we consider whether a SCH is projected to receive Medicare DSH payments in FY 2014 and exclude those SCHs we project to be paid on their hospital-specific rate. The remaining hospitals with an estimated DPP of 15 percent of higher are considered to be eligible for Medicare DSH payments and their SSI days and Medicaid days are included in the calculation of the denominator for Factor 3. Comment: Two hospitals submitted public comments regarding their subsection (d) status. One hospital, Missouri Baptist Sullivan (CCN: 260115), commented that it converted to a CAH and is no longer a subsection (d) hospital and, therefore, not eligible for uncompensated care payments. Davie County Hospital submitted a public comment that stated it was converting from CAH status to become a subsection (d) hospital as of August 1, 2013, and the hospital requested to have a Factor 3 calculated so it could be determined eligible for uncompensated care payments. Response: As discussed earlier, a hospital is eligible for uncompensated care payments if the hospital is eligible PO 00000 Frm 00147 Fmt 4701 Sfmt 4700 50641 for the empirically justified Medicare DSH payment adjustment. Only subsection (d) hospitals are eligible for these payments. We have removed Missouri Baptist Hospital as a subsection (d) hospital as we have documentation that it has converted to a CAH, and we have adjusted our calculation of Factor 3 to ensure that its data are excluded from the denominator of this calculation. We do not have documentation to confirm that Davie County Hospital has been approved to convert from a CAH to an IPPS hospital. Therefore, we are not calculating a Factor 3 amount for that provider. If the CAH has converted to an IPPS hospital with the appropriate supporting documentation, the new IPPS hospital would receive a new CCN and would be treated as a new hospital. We discuss how we will calculate uncompensated care payments for new hospitals later in this final rule. In the FY 2014 IPPS/LTCH PPS proposed rule our estimates of eligibility to receive FY 2014 Medicare DSH payments were based on the Medicaid fraction listed in the December 2012 update of the Provider Specific File and the FY 2010 SSI ratios. We stated in the proposed rule that we intended to update in the final rule the list of hospitals that we estimate will be eligible for Medicare DSH payments for FY 2014 and our estimate of Factor 3 using more recent data and verified hospital notifications regarding hospital status for example, closures). Accordingly, we have updated our data, and, for this final rule, our estimates of eligibility to receive FY 2014 Medicare DSH payments are now based on the Medicaid fraction listed in the March 2013 update of the Provider Specific File and the FY 2011 SSI ratios published on June 27, 2013 on the CMS Web site. This is the most recently available data on the DPP for hospitals that are qualified to receive Medicare DSH payments. We identified 2,695 hospitals with a DPP greater than or equal to 15 percent and, therefore, eligible to receive Medicare DSH payments. However, we project that only 2,437 of these DSH-eligible hospitals would receive a Medicare DSH payment in FY 2014, as the remaining 257 hospitals are SCHs that we project would be paid under the hospitalspecific rate and, therefore, ineligible for Medicare DSH and the uncompensated care payments. (As discussed above, in determining whether a SCH is projected to receive Medicare DSH payments in FY 2014, we included an estimated uncompensated care payment amount in the Federal rate when comparing payments under the hospital-specific E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50642 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations rate versus the Federal rate.) We estimate that 2,437 hospitals, or 72 percent of all subsection (d) hospitals and subsection (d) Puerto Rico hospitals, would be eligible for Medicare DSH payments in FY 2014. The data from these 2,437 hospitals was used to determine the denominator for Factor 3. However, we will estimate a Factor 3 numerator for each subsection (d) and subsection (d) Puerto Rico hospital that has the potential of receiving Medicare DSH payments for FY 2014 and, therefore, qualifying for the uncompensated care payment in FY 2014. Comment: Several hospitals submitted public comments regarding the accuracy of the data used in the calculation of the hospital’s Factor 3 amount provided in the FY 2014 IPPS/ LTCH PPS proposed rule. These hospitals either indicated that their Medicaid days were understated and had not been updated in the HCRIS database used to calculate the Medicaid days for Factor 3, or they indicated that the Medicaid days reported on Worksheet S–2 of the Medicare Hospital Cost Report version 2552–10 did not match the Medicaid days reported on Worksheet S–3 of the Medicare Hospital Cost Report version 2552–10. Many hospitals submitted supporting documentation of the additional Medicaid days. The hospitals requested that their Medicaid days used in the calculation of Factor 3 be corrected for the final rule. Response: We appreciate the information submitted by commenters regarding the accuracy of the number of Medicaid days used in the calculation of Factor 3. For this final rule, we are using the March 2013 update of HCRIS and we are identifying a hospital’s Medicaid days based on the Medicaid days reported on the 2011, or if not available, the 2010 Medicare Hospital Cost Report. In addition, for hospitals that we project to be eligible to receive empirically justified Medicare DSH payment adjustments for FY 2014, we are using Medicaid days reported on Worksheet S–2 of the Medicare Hospital Cost Report version 2552–10 to determine Factor 3 and not Medicaid days reported on Worksheet S–3 of the Medicare Hospital Cost Report version 2552–10. The Medicaid days reported on Worksheet S–2 are used in the computation of the Medicaid fraction for Medicare DSH payments. Therefore, because they are used for the payment of Medicare DSH, we believe that these data are more reliable than data not used for payment purposes. We understand that there are inconsistencies between the reporting of VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 the days on Worksheet S–2 and Worksheet S–3. We also understand that hospitals were not able to report their Medicaid days on Worksheet S–2 if they were not eligible to receive Medicare DSH payments on that cost report. A Transmittal has since been released allowing these hospitals to report their Medicaid days on Worksheet S–2 and to ensure that the Medicaid days reported on Worksheet S–3 align with the Medicaid days reported on Worksheet S–2, but those changes may not be reflected in the March 2013 update of HCRIS. Accordingly, for hospitals that did not claim Medicare DSH payments on their CMS Form 2552–10 Medicare Hospital Cost Report for FY 2011 or FY 2010, we are calculating Medicaid days from Worksheet S–3 of the Medicare Hospital Cost Report from the most recently available cost report from 2011 or 2010. For disproportionate share hospitals, we are calculating Medicaid days from Worksheet S–2 of the Medicare Hospital Cost Report from the most recently available cost report from 2011 or 2010. By using this more updated data, we believe that we will address many of the issues and questions raised by commenters. We also remind hospitals that the data we are using are data that they submit and attest are accurate on the Medicare cost report. Comment: Two hospitals merged in 2011 with one surviving provider number. These hospitals had two cost reports and two SSI ratios in 2011. However, in the proposed rule, CMS calculated Factor 3 using only the surviving hospital’s cost report data and SSI ratio data. The hospital submitted a public comment requesting that we account for the merger and include both hospitals’ data in the calculation of the Factor 3 amount. Response: A hospital’s Factor 3 is calculated based on the data tied to its CCN. This is consistent with the treatment of other IPPS payment factors, where data used to calculate a hospital’s Medicare DSH payment adjustment, CCRs for outlier payments, and wage index values is tied to a hospital’s CCN. Data associated with a CCN that is no longer in use are not used to determine those IPPS hospital payments under the surviving CCN. Furthermore, data reported on the Medicare hospital cost report under the CCN associated with the old provider agreement would not necessarily be used to determine hospital payments for the CCN associated with the surviving provider agreement. Accordingly, in the case of a merger between two hospitals, Factor 3 will be calculated based on the lowincome insured patient days (that is, PO 00000 Frm 00148 Fmt 4701 Sfmt 4700 Medicaid days and SSI days) under the surviving CCN, based on the most recent available data for that CCN from the cost report for 2011 or 2010. Comment: Several commenters asked how new providers will be treated in the calculation of Factor 3, specifically what data will be used for the Factor 3 calculation and how this approach will impact existing providers. In addition, the commenters questioned how providers ‘‘terminated’’ from participation in the Medicare program as a subsection (d) hospital prior to 2014 would be treated and whether they would be removed from the Factor 3 calculation and how that would have an impact on the remaining providers. Response: In the FY 2014 IPPS/LTCH PPS proposed rule, we requested that the public verify the accuracy of the list of hospitals that we identified to be subsection (d) hospitals. As discussed above, one hospital submitted a public comment stating that it had converted to a CAH and was no longer a subsection (d) hospital. We have removed that hospital from our list and calculation of Factor 3. We are using this process of allowing the public to review the accuracy of our list of hospitals eligible to receive empirically justified Medicare DSH payment adjustments and uncompensated care payments as a mechanism of identifying and removing terminating providers, and adjusting the calculation of Factor 3 for the remaining providers accordingly. For the final rule, we have published an updated list of the hospitals we have identified to be subsection (d) hospitals and subsection (d) Puerto Rico hospitals eligible to receive empirically justified Medicare DSH payment adjustments and uncompensated care payments for FY 2014. For FY 2014, we will allow the public an additional period after the issuance of this final rule to contact us with comments on whether any of these hospitals should be removed from the list or if any hospitals should be added to the list, based on their subsection (d) status. The public can submit input on these two topics via the Internet on the CMS Web site at: Section3133DSH@cms.hhs.gov. All information, including relevant documentation, must be received by August 31, 2013. If we identify changes to the list of hospitals, we will publish a revised list of hospitals and updated Factor 3 values on the CMS Medicare DSH Web site after August 31, 2013. For new providers, meaning hospitals with a CCN established after 2011, we do not have data currently available to calculate a Factor 3 amount and we do not have data to determine if the new hospital is eligible for empirically E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 justified Medicare DSH payment adjustments and, therefore, eligible for uncompensated care payments for FY 2014. Accordingly, we will treat new hospitals in the same manner as hospitals that are not found to be eligible to receive empirically justified Medicare DSH payment adjustments based upon the most recently available cost report from 2011 or 2010, such that the hospital may not receive either interim empirically justified Medicare DSH payment adjustments or interim uncompensated care payments. However, should a hospital later be determined to be eligible to receive an empirically justified Medicare DSH payment adjustment based on its FY 2014 cost report, the hospital will also be eligible to receive uncompensated care payments. Consistent with our policy to calculate the Factor 3 for all subsection (d) hospitals regardless of whether or not they are projected to qualify for Medicare DSH payments, we will also calculate a Factor 3 for new hospitals, although we note that new hospitals would only require a Factor 3 calculation to receive their uncompensated care payment if they are ultimately determined to be eligible for the empirically justified Medicare DSH payment at cost report settlement. The denominator of every hospital’s Factor 3, including new hospitals, is set to be the sum of the low-income insured days for all hospitals projected to receive empirically justified Medicare DSH payment adjustments for FY 2014 as calculated in this final rule using the FY 2011 SSI ratios and the 2011 cost reports. We do not have Medicaid days or SSI days for new hospitals at the time of this final rule and we do not know when we will have Medicaid days or SSI days for new hospitals. Accordingly, we will use the Medicaid days and SSI days for FY 2014 for new hospitals to serve as the numerator in their Factor 3 calculations for their FY 2014 uncompensated care payments because we believe that at minimum, all new hospitals will have data on Medicaid and SSI patient days for FY 2014. e. Limitations on Review Section 1886(r)(3) of the Act provides that there will be no administrative or judicial review under section 1869 of the Act, 1878 of the Act, or otherwise for any of the following: • Any estimate of the Secretary for purposes of determining the factors described in paragraph (2) of section 1886(r) of the Act. • Any period selected by the Secretary for such purposes. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27590), we VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 proposed to codify this policy in new § 412.106(g)(2) of our regulations. We invited public comment on this proposal. We did not receive any public comments on our proposal to implement the statutory limitations on administrative or judicial review. We are finalizing the proposed new provisions at § 412.106(f) and (g) to codify these policies. We note, however, that we have made a minor change to the provision at § 412.106(g)(1)(i) to clarify that we intend to revisit the issue of the data that should be used to determine hospitals’ uncompensated care amounts for FY 2015. In addition, we have also made a minor technical correction to the provision at § 412.106(g)(2)(iii). f. Operational Considerations As discussed in section V.F.3.d. of the preamble of the proposed rule and this final rule, and in accordance with section 1886(r)(2) of the Act, only subsection (d) hospitals that receive empirically justified Medicare DSH payments in a given Federal fiscal year will also receive the uncompensated care payment (that is, Factor 1 times Factor 2 times Factor 3) for that given Federal fiscal year. In addition, as discussed above in this section, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27580), we proposed that subsection (d) Puerto Rico hospitals that receive empirically justified Medicare DSH payments in a given Federal fiscal year would also receive the uncompensated care payment (that is, Factor 1 times Factor 2 times Factor 3) for that given Federal fiscal year. As we discussed above, we proposed to estimate Factor 3 for each subsection (d) and subsection (d) Puerto Rico hospital with the potential to receive a DSH payment prior to the beginning of the Federal fiscal year and intend to make that information available via our Web site. https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ AcuteInpatientPPS/dsh.html. Specifically, we proposed to make interim uncompensated care payments on the basis of our best available estimates concerning the eligibility of each hospital for empirically justified Medicare DSH payments and our best available calculations concerning the amount of the uncompensated care payments that the hospital is eligible to receive. We stated that we intended to make these interim uncompensated care payments on a periodic basis and not on a per discharge basis as Medicare DSH payments are currently made and as empirically justified Medicare DSH payments will be made. As discussed PO 00000 Frm 00149 Fmt 4701 Sfmt 4700 50643 above, we made this proposal because we believed that this approach was more consistent with the language in the statute describing the additional payment, from which we inferred that the payment should not be made on a per-discharge basis. We also believed that this would be the most administratively efficient means to distribute a set dollar amount to individual hospitals and would also create predictability for hospitals. In the proposed rule, we acknowledged that if we were to make these interim uncompensated care payments on a perdischarge basis as Medicare DSH payments are currently made, unless a hospital’s Medicare utilization is identical to the period used to determine the per-discharge payment level, it is certain that Medicare would overpay or underpay. We stated further in the proposed rule that by making interim payments periodically, we could virtually eliminate the possibility that Medicare would pay a higher or lower amount than intended and limit the need for reconciliation to whether a hospital is eligible for Medicare DSH payments and, therefore, the entire uncompensated care payment at cost report settlement. In response to the comments on this suggested approach discussed below, in this final rule, we are instead adopting a policy to make the uncompensated care payment on a per-discharge basis, which will require reconciliation of the interim payments made during the year to the total uncompensated care payment derived as the product of Factors 1, 2, and 3. Comment: Many commenters, including national hospital associations, disagreed with CMS’ proposal to make interim uncompensated care payments, and to distribute them on a periodic basis rather than a per-discharge basis. The commenters expressed concern about the impact this proposal would have on certain providers, and stated that providers’ cash flow would be adversely affected if payments are distributed on a periodic bi-weekly basis, as we proposed. Many commenters were specifically concerned about the potential effects of this proposal on hospitals treating MA enrollees. One of the commenters, a national hospital association stated that, ‘‘[t]he contracts between the MA Plans and hospitals typically provide for payment based upon Medicare rates and reimbursements. Though the specific contract terms may vary, they often refer to Medicare DSH payments as one component of the Medicare reimbursement on which the MA Plan payments are based.’’ The commenters E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50644 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations further noted that under such contracts MA organizations typically use vendor software that utilizes the CMS Medicare Inpatient PPS PC PRICER, as a claim adjudication tool for paying acute care hospital claims. The commenters also pointed out that MA organizations are required by statute to pay noncontracted hospitals a floor amount based on what the provider would have received under original Medicare (what a hospital would be paid if the beneficiary were not enrolled in an MA plan), and they understand that MA organizations use the CMS Medicare Inpatient PPS PC PRICER to determine what that floor amount is. The commenters expressed concern that if the uncompensated care payment is not distributed on a per-discharge basis, it would not be incorporated into the CMS Medicare Inpatient PPS PC PRICER and that because they believe MA plans employ tools that rely on this software, MA plans would not be able to calculate an appropriate payment amount, which the commenters believed should include an amount representing a given Medicare patient’s share of the hospital’s uncompensated care payment. Another commenter added that the proposal would lead to confusion and underpayment from MA plans to providers. Several commenters requested that CMS also add a line in the CMS Medicare Inpatient PPS PC PRICER software for additional DSH ‘‘A–DSH’’ that would represent the perdischarge payment for Medicare Part A and the per-discharge payments for MA claims paid by MA plans when the MApaid claim option is selected, and these commenters requested that the perdischarge payments be reconciled at cost report settlement. One commenter recommended that CMS calculate the interim payment by dividing each hospital’s uncompensated care payment amount by the number of its transferadjusted cases. In addition, these commenters expressed concerns about the impact to SCHs under the proposal to make interim uncompensated care payments on a periodic basis because only the empirically justified Medicare DSH payment adjustments would be included in the comparison that determines whether an SCH is paid the Federal rate or the hospital-specific rate. Some commenters asserted under this approach that the comparison between payments under the Federal rate and under the hospital-specific rate would be inaccurate, causing several hospitals that were previously eligible for Medicare DSH payments to instead receive the hospital-specific rate. These VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 commenters asserted that this would impose unwarranted payment cuts for SCHs because uncompensated care payments were not accounted for in determining whether SCHs are paid the Federal rate or hospital-specific rate. Therefore, the commenters reasoned that such SCHs would be unfairly penalized. One commenter expressed concern that a hospital-specific rate based on costs creates incentives for SCHs to have higher costs of operation. Several commenters discussed how the uncompensated care payment should be considered when determining outlier payments and the fixed-loss threshold, and expressed their concerns about the impact of excluding uncompensated care payments from these determinations. These comments will be summarized and addressed fully in section II.A.4.g. of Appendix A to this final rule under the discussion of outlier payments, where we finalize our policy decision that uncompensated care payments also should be included in the determination of outlier payments. Response: We appreciate the commenters’ input with regard to fact that under our proposed approach, the new uncompensated care payments would not be accounted for in the CMS PC PRICER tool. While we acknowledge that many MA plans use this tool to estimate fee-for-service payments, we note that there is no official CMS requirement that MA plans use this specific tool. For those MA plans that may elect to use the CMS PC PRICER, we acknowledge that our proposed interim payment approach would make it a more complex task for MA organizations to determine the amount of the uncompensated care payment that would be attributable to a given discharge. We agree with the commenters that the uncompensated care payment must be treated as part of a hospital’s Medicare payment for purposes of section 1866(a)(1)(O) of the Act. We note that under section 1866(a)(1)(O) of the Act, hospitals treating MA enrollees are entitled to receive payment from an MA organization with which they have no contract governing payment of an amount representing the amount the hospital would have received from Medicare if the beneficiary were not enrolled in an MA plan. We understand the commenters’ reasoning that because the new uncompensated care payments are intended to replace a portion of the DSH payments previously made by CMS, and MA organizations have always included the amount of applicable DSH payment in their payments to non-contracting hospitals PO 00000 Frm 00150 Fmt 4701 Sfmt 4700 under section 1866(a)(1)(O) of the Act and to contracting hospitals that contract to be paid at the section 1866(a)(1)(O) rate, MA organizations should similarly be required to include amounts representing these uncompensated care payments in their payments for inpatient services furnished to their MA plan enrollees. It was not our intention to suggest otherwise in the proposed rule. We also note that while some commenters expressed concern regarding the payment arrangements between MA organizations and contracted providers, section 1854(a)(6)(B)(iii) of the Act prohibits CMS from interfering in the payment arrangements between MA organizations and contract providers and these arrangements are not within the scope of this rulemaking. We are only addressing an MA organization’s obligations under section 1866(a)(1)(O) of the Act with respect to payments to non-contracting hospitals. Of course, insofar as both parties to a contract agree that the contract provides for payment of the rate the MA organization is required under section 1866(a)(1)(O) to pay to non-contracting providers, that contract would be indirectly affected. However, this does not constitute an interference in the terms of the contracts, only on the indirect effects of our interpretation of section 1866(a)(1)(O) of the Act on those terms. We also recognize the potential impact on SCHs if the interim uncompensated care payments were to be paid on a periodic biweekly basis rather than a per-discharge basis. As we discuss previously in the preamble, after a thorough review of the above policy considerations reflected in the numerous public comments we received, we believe that distributing these payments on a per-discharge basis would allow these payments to be considered in the comparison of payments under the Federal rate and the hospital-specific rate for SCHs and that this would be an appropriate policy. We also note that we disagree with the commenter who stated that this could create an incentive for higher costs of operation for SCHs because hospitalspecific payment rates are based on costs in past years and would not be affected by higher costs of operation in the current or future years. Similarly, after a thorough review of the above policy considerations reflected in the numerous public comments we received, we believe that distributing these payments on a perdischarge basis would make it easier for MA organizations to take these payments into account when making payments to non-contracting hospitals E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations under section 1866(a)(1)(O) of the Act. We have always intended that this occur as current payments by MA organizations under this provision include 100 percent of DSH payments and the uncompensated care payment is intended to replace 75 percent of those payments, after adjusting for the uninsured percentage. The inclusion of amounts representing uncompensated care payments in MA organization payments to non-contracting hospitals does not change the amount of CMS’ uncompensated care payments nor overall IPPS payment, but ensures that payments by MA organizations under section 1866(a)(1)(O) of the Act reflect the full amount that would otherwise have been paid by CMS in the case of a given discharge. We also note that our decision to make uncompensated care payments on a per-discharge basis will make more SCHs eligible for uncompensated care payments and, therefore, also change the distribution of the uncompensated care payments. Accordingly, for FY 2014 we are finalizing a process to distribute interim uncompensated care payments under the IPPS on a per-discharge basis through our claims processing system, with a reconciliation of the hospital’s payments at cost report settlement to ensure that hospitals receive no more than the estimated amount included in this final rule. We do not intend to reconcile Factor 3 using data from the FY 2014 cost reports because we believe that the statute provides the authority to make these payments on the basis of estimates for Factors 1, 2, and 3, and that it is preferable to do so. If we were to use data from the FY2014 cost reports to recompute Factor 3, we would need to wait until such a time that all of these data were submitted by hospitals and then available to CMS, likely 2 years. Furthermore, it would be administratively difficult to recompute Factor 3 values for all hospitals. Under the methodology we are finalizing, because the per-discharge payment amounts are based on a hospital’s historic Medicare utilization, we would expect the amount of over- or underpayments to reflect the year to year changes in a hospital’s utilization patterns. We intend to calculate an estimated per-discharge amount (or per claim amount) for each hospital eligible to receive interim uncompensated care payments and we will pay that estimated amount on a per-discharge basis by adding it to the payment otherwise made on that claim. The estimated per-discharge amount is based on the amount of the uncompensated care payment that we have calculated VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 for the hospital for a fiscal year divided by the average number of discharges, or claims, in the most recently available three fiscal years of the Medicare claims dataset. For FY 2014 payments, we will use the average number of claims from the most recent 3 years of MedPAR claims data, FY 2010, FY 2011 and FY 2012, as this is the most recently available data on hospital utilization. We believe that it is appropriate to use a 3-year average to reduce the degree to which we would over- or under-pay the uncompensated care payment on an interim basis. In any given year, a hospital could have low or high Medicare utilization that differs from other years. For example, if a hospital had two Medicare discharges in its most recent cost report but experienced four discharges in FY2014, during the fiscal year, we would pay two times the amount the hospital should receive and need to adjust for that at cost report settlement. Similarly, if a hospital had four Medicare discharges on its most recent cost report, but experienced two discharges in FY2014, during the fiscal year, we would only pay half the amount the hospital should receive and need to adjust for that at cost report settlement. We note that because this fee-for-service per-claim payment will be reconciled against actual hospital utilization at the end of a hospital’s cost year, it may be necessary to make actuarial adjustments so that the MA organizations can more accurately and appropriately take these payments into account when making payment to noncontracting hospitals under section 1866(a)(1)(O) of the Act. Furthermore, because we do not intend to reduce the uncompensated care payment based on any claimspecific factors, such as DRG weight or transfer status, for discharges that are transfers, we do not believe that it is appropriate to determine the perdischarge interim payment using the number of transfer-adjusted discharges. In other words, we will not be using transfer-adjusted discharges to determine per-claim payments. In order to determine per-claim payments, we will use the 3-year average of the most recent periods to determine discharges. At cost report settlement, we will reconcile the total amounts paid on a per-discharge basis during the Federal fiscal year with the amount of the uncompensated care payment that we have calculated for the hospital for the fiscal year and issue further instructions as needed. Comment: MedPAC submitted a comment supporting the proposal to make interim uncompensated care payments on a periodic basis, and PO 00000 Frm 00151 Fmt 4701 Sfmt 4700 50645 further stated that this payment approach was appropriate and would prevent unnecessary cash flow problems for the hospitals. Other commenters also supported the proposal. One commenter urged CMS to make direct lump sum uncompensated care payments to hospitals on a biweekly basis to avoid the need for hospital-specific reconciliations. Response: Although we appreciate the commenters’ support for our proposal, for the reasons stated above, we are not adopting our proposed policy to make interim uncompensated care payments on a periodic basis. After consideration of the public comments we received, in this final rule, for FY2014, we are adopting a process to distribute interim uncompensated care payments on a perdischarge basis through the claims processing system. We believe that the inclusion of the uncompensated care per-claim amount on each claim paid will address MedPAC’s concerns about cash flow problems for the hospitals. Because the per-discharge uncompensated care payments will be made on a claim-by-claim basis in the claims processing system, we anticipate that the FY 2014 CMS Medicare Inpatient PPS PC PRICER software tool will also display the uncompensated care per-claim amount in the pricing information it calculates. This should assist those MA plans that opt to use the CMS Medicare Inpatient PPS PC PRICER tool to estimate fee-for-service like payments. Comment: Some commenters urged CMS to clarify in the final rule that MA plans must include payment for uncompensated care in their payments to hospitals, and requested that CMS take steps to ensure MA plans have access to the information they need to make payments for uncompensated care costs as of October 1, 2013. Response: We appreciate receiving the commenters’ feedback. As stated above, we agree with the commenters that MA organizations have the obligation to include these payment amounts for purposes of payments under section 1866(a)(1)(O) of the Act, and, as noted above, are taking steps to ensure that these amounts are included in the software used by MA organizations. After consideration of the public comments we received, in this final rule we are not adopting our proposed policy to make interim uncompensated care payments on a periodic basis, and instead for FY 2014 are adopting a process to distribute interim uncompensated care payments on a perdischarge basis through the claims processing system, and also such tools E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50646 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations that we make available to the public, including MA organizations. In the FY 2014 IPPS/LTCH PPS proposed rule, we also proposed to make a final determination concerning eligibility for uncompensated care payments at the time of cost report settlement. As a result of this proposal, our operational system must be able to handle the various situations that may arise between interim and final eligibility determinations. For example, a hospital may receive empirically justified Medicare DSH payments and uncompensated care payments based on an initial determination that the hospital is eligible for such payments, but the hospital may then be determined to be ineligible for such payments at cost report settlement. In such situations, we must be prepared and able to recoup the interim empirically justified Medicare DSH payments and uncompensated care payments that the hospital received. For each Federal fiscal year, we proposed to estimate which hospitals will receive an empirically justified Medicare DSH payment (that is, eligible hospitals). We proposed to provide periodic payments to these hospitals during the relevant Federal fiscal year so that they can receive their uncompensated care payments on an interim basis. For a fiscal year, each eligible hospital’s interim uncompensated care payments will be determined by multiplying the final values for Factor 1, Factor 2, and Factor 3 for that year and dividing the amount by the number of periods over which the interim payments will be made. Because we would be using historical data to estimate each hospital’s eligibility for empirically justified Medicare DSH payments in FY 2014 and subsequent years, we acknowledged that a reconciliation process would be necessary to account for cases in which a hospital’s eligibility for such payments changes after we have published our estimates during the rulemaking process. For example, a hospital that had not been estimated to be eligible for these payments may become eligible during the course of a given payment period. In such cases, our estimates would have indicated that the hospital was ineligible for empirically justified Medicare DSH payments and, therefore, ineligible for uncompensated care payments. That hospital would not receive interim payments. However, if the data available at cost report settlement were to indicate that the hospital is eligible for an empirically justified Medicare DSH payment, the hospital would become eligible for an VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 uncompensated care payment based on that hospital’s Factor 3 value. Therefore, we proposed that, at cost report settlement, the fiscal intermediary/MAC will issue a notice of program reimbursement that includes a determination concerning whether each hospital is eligible for empirically justified Medicare DSH payments and, therefore, eligible for uncompensated care payments in FY 2014 and each subsequent year. In the case where a hospital received interim payments for its empirically justified Medicare DSH payments and uncompensated care payments for FY 2014 or a subsequent year on the basis of estimates prior to the payment year, but is determined to be ineligible for the empirically justified Medicare DSH payment at cost report settlement, the hospital would no longer be eligible for either payment and CMS would recoup those monies. For a hospital that did not receive interim payments for its empirically justified Medicare DSH payments and uncompensated care payments for FY 2014 or a subsequent year, but at cost report settlement is determined to be eligible for DSH payments, the uncompensated care payment for such a hospital is calculated based on the Factor 3 value determined prospectively for that fiscal year. We proposed to codify this policy regarding the manner and timing of payments in new § 412.106(h) of our regulations. We invited public comment on this proposal. The reconciliations at cost report settlement would be based on the values for Factor 1, Factor 2, and Factor 3 that we have finalized prospectively for a Federal fiscal year. For example, a hospital that was estimated by CMS to receive empirically justified Medicare DSH payments for FY 2014 and received interim uncompensated care payments would not receive a different uncompensated care payment amount if the hospital remained eligible for empirically justified Medicare DSH payments at cost report settlement. In other words, we did not propose to include a reestimation of Factor 1, Factor 2, or Factor 3 in the reconciliation process. Rather, Factor 1, Factor 2, and Factor 3 are estimates determined prospectively using methodologies we establish through rulemaking. We recognize that, under this proposal, we may pay a total amount that could either be more or less than the product of Factor 1 and Factor 2. However, we believed this risk is inherent in the use of estimates to determine the Factors, similar to the manner in which we estimate the PO 00000 Frm 00152 Fmt 4701 Sfmt 4700 amount of total outlier payments under section 1886(d)(5)(A)(iv) although, as in this case, the amount of actual total outlier payments might vary from that estimate. In the FY 2014 IPPS/LTCH PPS proposed rule, we indicated that we do not know of any reason to believe that there will be a bias toward systematic overpayment or underpayment from year to year. We proposed to codify this policy at § 412.106(g)(1)(iv) of our regulations. We invited public comments on this proposal, especially in regard to whether we should include Factor 3 within the reconciliation process. We stated that, depending on the public comments received, we may revise our proposed policy in the final rule so that at the time of cost report settlement and reconciliation a hospital’s final uncompensated care payments could be based on Factor 3 numerators and denominators estimated using more recent cost report data (and associated inputs). In addition, we stated that we may revise our proposed reconciliation process, as appropriate, to account for any policy changes that we make in the final rule. We also note that the uncompensated care payment will be reported on the Medicare Hospital Cost Report. We recognized that hospitals have their own cost reporting periods that may differ from the Federal fiscal year and that may span more than one Federal fiscal year. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27592), we proposed that hospitals would receive their uncompensated care payments with respect to the fiscal year in which their cost report begins. For example, if a hospital is estimated to be eligible for the empirically justified DSH payment and also an uncompensated care payment in FY 2014 and has a cost report period of January 1, 2014 through December 31, 2014, this hospital would begin to receive interim payments for its uncompensated care on October 1, 2013. If, at cost report settlement, this hospital remained eligible for an empirically justified DSH payment, then the hospital would receive its FY 2014 uncompensated care payment on its cost report for the cost reporting period beginning on January 1, 2014 (that is, the hospital would neither owe nor be owed monies for its uncompensated care payment). As another example, if that same hospital is no longer eligible for an empirically justified Medicare DSH payment at the time of settlement of its cost report for the cost reporting period beginning January 1, 2014, the hospital would be required to pay back the interim payments it received for its uncompensated care payments. We E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations noted that this methodology would not delay the full payment of FY 2014 payments to hospitals with cost reporting periods that begin after October 1, 2013. While it is possible to align interim and final payments for the uncompensated care payment with individual hospital’s cost reporting periods, we noted that we believe it would be administratively efficient and practical to pay the uncompensated care payment on the basis of the Federal fiscal year because that is how it is determined, and to reconcile that amount in the cost reporting period that begins in the respective Federal fiscal year. We stated in the proposed rule that if this proposal is finalized, we would revise the cost report accordingly. We invited public comments on our proposal. Comment: Many commenters, including national hospital associations, expressed concerns regarding the accuracy of the data used to determine insured low-income days and requested that we establish a limited time period after the final rule for data corrections to afford hospitals an opportunity to provide the most current and best available data. Specifically, the commenters were concerned about the accuracy and completeness of the HCRIS data used to calculate Factor 3 in the proposed rule, noting that the inaccuracies could be due to timing issues related to when the HCRIS files are created, revised, and reissued. Therefore, the commenters requested that we allow hospitals an opportunity to validate the estimates and data used to determine the uncompensated care payments. Some commenters also stated that the Worksheet S–2 and Worksheet S–3 data being used are primarily from unaudited cost reports and there are discrepancies between Medicaid days reported on Worksheet S–2 versus Worksheet S–3. The commenters also noted that many of the as-filed cost reports would not necessarily include the final count of Medicaid days due to the nature of retroactive Medicaid eligibility determination. These commenters pointed out that this is more problematic because some States have a longer Medicaid eligibility determination timeline than others, and believed that hospitals in these States rely on secondary research to identify a large volume of retroactive Medicaid eligible days. One commenter stated that providers should be given sufficient time to review SSI data before the Factor 3 percentages are used, and stated that the 2011 SSI data should be published to allow for this. In addition, some commenters urged us to allow a 30-day VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 period after the publication of the final rule for hospitals to submit corrections to their cost reports; some commenters requested a 90-day period for corrections. Response: We understand the commenters’ concerns regarding the accuracy of the data used to calculate Factor 3, and as discussed above, for this final rule we are taking several steps to address these inconsistencies, including using the March 2013 update of HCRIS and identifying a hospital’s Medicaid days based on the Medicaid days reported on the 2011, or if not available 2010, Medicare Hospital Cost Report. For FY 2014 Factor 3 determinations, for hospitals filing CMS Form 2552–10 that claimed DSH on their cost reports, we will determine Medicaid days using Worksheet S–2, even if those data conflict with the Medicaid days reported on Worksheet S–3. We believe that this is appropriate because those hospitals’ DSH payments are determined using the data from Worksheet S–2. We also note that we believe that there should be no discrepancy between the Medicaid days reported on Worksheet S–2 and Worksheet S–3 and, therefore, have updated our processes so that Medicaid days reported on Worksheet S–2 may no longer be inconsistent with Medicaid days reported on Worksheet S–3. However, we understand that for FY 2014 Factor 3 determinations for hospitals filing CMS Form 2552–10 for either 2011 or 2010, that did not claim DSH on their cost report, it may have been impossible for some of these hospitals to enter data on Worksheet S– 2 due to Medicare systems issues. Therefore, for all hospitals that did not claim DSH on their cost report for either 2011 or 2010, for the FY 2014 Factor 3 determination, we will use Medicaid days from Worksheet S–3. We believe that this is appropriate so as not to disadvantage any group of hospitals that were unable to report information on Worksheet S–2 for their FY 2011 (or FY 2010) cost reporting period. Hospitals certify the accuracy of the information on their cost reports at the time of submission. As a result, we do not agree that providing hospitals additional time to submit data will necessarily improve the accuracy of the estimate used to calculate Factor 3 because such data could not be audited in a meaningful timeframe and still allow payments to be made in FY 2014. Therefore, we are not providing additional time after the publication of the final rule for hospitals to submit changes to their data. In response to the comment requesting that CMS publish the 2011 SSI ratios, on June 27, 2013, the FY PO 00000 Frm 00153 Fmt 4701 Sfmt 4700 50647 2011 SSI ratios were posted on the CMS Web site at: https://www.cms.gov/ Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/dsh.html. We note that CMS generally publishes SSI ratios annually in the spring. We are finalizing the proposed new provisions at § 412.106(g) and (h) to codify these policies. However, we note that we have made a minor change to the provision at § 412.106(h) to clarify that we intend to make interim payments during the year, and not interim payments on a periodic basis as we had proposed. F. Medicare-Dependent, Small Rural Hospital (MDH) Program (§ 412.108) 1. Backgound Section 1885(d)(5)(G) of the Act provides special payment protections, under the IPPS, to a Medicaredependent, small rural hospital (MDH). (For additional information on the MDH program and the payment methodology, we refer readers to the FY 2012 IPPS/ LTCH PPS final rule (76 FR 51683 through 51684.) As we discussed in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50287) and in the FY 2012 IPPS/ LTCH PPS final rule (76 FR 51683 through 51684), section 3124 of the Affordable Care Act extended the expiration of the MDH program from the end of FY 2011 (that is, for discharges occurring before October 1, 2011) to the end of FY 2012 (that is, for discharges occurring before October 1, 2012). Under prior law, as specified in section 5003(a) of Public Law 109–171 (DRA 2005), the MDH program was to be in effect through the end of FY 2011 only. Section 3124(a) of the Affordable Care Act amended sections 1886(d)(5)(G)(i) and 1886(d)(5)(G)(ii)(II) of the Act to extend the MDH program and payment methodology by striking out ‘‘October 1, 2011’’ and inserting ‘‘October 1, 2012’’. Section 3124(b) of the Affordable Care Act made conforming amendments to sections 1886(b)(3)(D) and 1886(b)(3)(D)(iv) of the Act. In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50287 and 50414), we amended the regulations at § 412.108(a)(1) and (c)(2)(iii) to reflect the statutory extension of the MDH program through FY 2012. In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51683 through 51684), we did not make any additional changes to the MDH regulatory text for FY 2012. As discussed below, the ATRA (Pub. L. 112–240) amended the Act to extend the MDH program through the end of FY 2013. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50648 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 2. Provisions of the ATRA for FY 2013 a. Background Prior to the enactment of the ATRA, under section 3124 of the Affordable Care Act, the MDH program authorized by section 1886(d)(5)(G) of the Act was set to expire at the end of FY 2012. Section 606 of the ATRA amended sections 1886(d)(5)(G)(i) and 1886(d)(5)(G)(ii)(II) of the Act to provide for an additional 1-year extension of the MDH program, effective from October 1, 2012 to September 30, 2013 (FY 2013). Section 606 of the ATRA also made conforming amendments to sections 1886(b)(3)(D)(i) and 1886(b)(3)(D)(iv) of the Act. Prior to the enactment of the ATRA, in the FY 2013 IPPS/LTCH PPS final rule, we discussed the expiration of the MDH program at the end of FY 2012 (77 FR 53413 through 53414) and revised the SCH regulation at § 412.92(b) to change the effective date of SCH status for MDHs that apply for SCH status with the expiration of the MDH program (77 FR 53404 through 53405). In a FY 2013 IPPS notice issued in the Federal Register on March 7, 2013 (78 FR 14689), we announced the extension of the MDH program for FY 2013 in accordance with the provisions of section 606 of the ATRA. In that notice, we explained that, as a result of section 606 of the ATRA, the MDH program is now extended for 1 additional year, through the end of FY 2013 (that is, effective October 1, 2012 through September 30, 2013). The FY 2013 IPPS notice explained how providers may be affected by the ATRA extension of the MDH program and described the steps to reapply for MDH status for FY 2013, as applicable. Generally, a provider that was classified as an MDH at the end of FY 2012 (that is, as of September 30, 2012) was reinstated as an MDH effective October 1, 2012, with no need to reapply for MDH classification. However, if the MDH had classified as a sole community hospital (SCH) or cancelled its rural classification under § 412.103(g) effective on or after October 1, 2012, the effective date of MDH status was not retroactive to October 1, 2012. In the FY 2013 IPPS notice, we also stated that we intended to make conforming changes to the regulations at §§ 412.108(a)(1) and (c)(2)(iii) in future rulemaking to reflect the statutory changes made by section 606 of the ATRA. We refer readers to the FY 2013 IPPS notice (78 FR 14689 through 14694) for additional information on the extension of the MDH program through FY 2013 pursuant to section 606 of the ATRA and for additional information on how and when MDH status was VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 determined for hospitals classified as MDHs prior to the September 30, 2012 expiration of the program. b. Conforming Regulatory Changes In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27593), we proposed to make conforming changes to the regulations at §§ 412.108(a)(1) and (c)(2)(iii) to reflect the statutory extension of the MDH program through FY 2013 made by section 606 of the ATRA. We did not receive any public comments on the proposed conforming changes to the existing regulations text at § 412.108 to reflect the extension of the MDH program through FY 2013 in accordance with section 606 of the ATRA. Therefore, in this final rule, we are adopting as final the proposed revisions to paragraphs (a)(1) and (c)(2)(iii) of § 412.108 without modification. c. Expiration of the MDH Program Since section 606 of the ATRA extended the MDH program through FY 2013 only, the MDH program will no longer be in effect in FY 2014 absent a change in law to extend the program. Therefore, beginning in FY 2014, all hospitals that previously qualified for MDH status will no longer have MDH status and will be paid based solely on the Federal rate. As noted earlier, in the FY 2013 IPPS/ LTCH PPS final rule (77 FR 53404 through 53405), we revised our SCH policies to allow MDHs to apply for SCH status and be paid as such under certain conditions, following expiration of the MDH program at the end of FY 2012. We codified these changes in the regulations at § 412.92(b)(2)(i) and § 412.92(b)(2)(v). For additional information, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53404 through 53405 and 53674). We note that those same conditions apply to MDHs that intend to apply for SCH status with the expiration of the MDH program at the end of FY 2013. Specifically, the existing regulations at § 412.92(b)(2)(i) and (b)(2)(v) allow for an effective date of approval of SCH status that is the day following the expiration date of the MDH program. In accordance with these regulations, in order for an MDH to receive SCH status effective October 1, 2013, it must apply for SCH status at least 30 days before the end of the MDH program; that is, the MDH must apply for SCH status by August 31, 2013. The MDH also must request that, if approved as an SCH, the SCH status be effective with the expiration of the MDH program provision; that is, the MDH must request PO 00000 Frm 00154 Fmt 4701 Sfmt 4700 that the SCH status, if approved, be effective October 1, 2013, immediately after its MDH status expires with the expiration of the MDH program at the end of FY 2013, on September 30, 2013. We note that an MDH that applies for SCH status in anticipation of the expiration of the MDH program would not qualify for the October 1, 2013 effective date upon approval if it does not apply by the August 31, 2013 deadline. The provider would instead be subject to the usual effective date for SCH classification, that is, 30 days after the date of CMS’ written notification of approval as specified at § 412.92(b)(2)(i). Comment: Several commenters expressed concern with the expiration of the MDH program, citing serious detrimental effects that would result to patients, hospitals, and communities. The commenters encouraged the continuation of the MDH program. Response: The MDH program, which provides special treatment of and payment to small, rural, Medicaredependent hospitals, is authorized by statute through FY 2013. Therefore, a change in law would be necessary in order for the MDH program to continue, or in order to reinstate it once it expires. While we understand the commenters’ concerns, CMS does not have the authority under current law to continue the MDH program. Comment: Several commenters continued to express their support of the ‘‘seamless transition’’ policy we finalized in last year’s rule. However, some commenters requested that, in the event that the MDH provision is reinstated, CMS allow providers that transitioned to SCH status to revert back to MDH status retrospectively without the need to reapply for MDH status. Similarly, these commenters requested that, if providers cancel their rural status in anticipation of the expiration of the MDH provision, CMS allow the providers to waive their cancellation and revert to MDH status retroactively should the MDH provision be reinstated. These commenters stated that CMS’ current regulations, which do not allow providers that transition to SCH status or cancel their rural classification in anticipation of the expiration of the MDH provision to be reinstated as MDHs retroactively upon the reinstatement of the MDH provision, put providers in the unfair position of having to guess whether or not Congress will reinstate the MDH provision and weigh the effects of applying for SCH classification or cancelling their rural status. A few others commenters pointed out that CMS’ policy to transition MDHs to SCH classification does not address the needs of many of E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations the hospitals currently classified as an MDH because those hospitals do not meet the criteria for an SCH, and recommended that CMS revise the criteria for an MDH to become an SCH. Response: The statute specifies that, in order to be an MDH, among other requirements, a hospital must be located in a rural area and not classified as an SCH. Hospitals that convert to an SCH or canceled their rural status no longer meet the statutory criteria to be classified as an MDH. If legislation is passed to authorize the continuation of the MDH program, we will develop policy to implement the specific provisions of such legislation. While we understand the commenters’ concerns about the expiration of the MDH program, the statute specifies the criteria for a hospital to be classified as an SCH and CMS does not have the authority to revise those statutory criteria as requested by the commenters. Comment: Some commenters requested that, if the MDH provision is reinstated after October 1, 2013, CMS expedite the MDH reinstatement process because many hospitals were not reinstated until several weeks after the enactment of the ATRA. Response: We understand those hospitals’ concerns regarding the time involved in the implementation of the reinstatement of their MDH status after the enactment of the ATRA. While we have made every effort to issue public notification and instructions to the MACs on our implementation of the extension of the MDH program as provided for in the provisions of the ATRA in a timely manner, we also are limited by the time necessary to develop the policy and systems changes to implement the specific provisions of the newly enacted legislation, as well as the time required to undergo the issuance process. If legislation is enacted to continue the MDH program, we will keep these concerns in mind in the implementation of the specific provisions of such legislation. G. Hospital Readmissions Reduction Program (§§ 412.150 through 412.154) mstockstill on DSK4VPTVN1PROD with RULES6 1. Statutory Basis for the Hospital Readmissions Reduction Program Section 3025 of the Affordable Care Act, as amended by section 10309 of the Affordable Care Act, added a new subsection (q) to section 1886 of the Act. Section 1886(q) of the Act establishes the ‘‘Hospital Readmissions Reduction Program,’’ effective for discharges from an ‘‘applicable hospital’’ beginning on or after October 1, 2012, under which payments to those applicable hospitals VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 may be reduced to account for certain excess readmissions. Section 1886(q)(1) of the Act sets forth the methodology by which payments to ‘‘applicable hospitals’’ will be adjusted to account for excess readmissions. Pursuant to section 1886(q)(1) of the Act, payments for discharges from an ‘‘applicable hospital’’ will be an amount equal to the product of the ‘‘base operating DRG payment amount’’ and the adjustment factor for the hospital for the fiscal year. That is, ‘‘base operating DRG payments’’ are reduced by a hospital-specific adjustment factor that accounts for the hospital’s excess readmissions. Section 1886(q)(2) of the Act defines the base operating DRG payment amount as ‘‘the payment amount that would otherwise be made under subsection (d) (determined without regard to subsection (o) [the Hospital VBP Program]) for a discharge if this subsection did not apply; reduced by . . . any portion of such payment amount that is attributable to payments under paragraphs (5)(A), (5)(B), (5)(F), and (12) of subsection (d).’’ Paragraphs (5)(A), (5)(B), (5)(F), and (12) of subsection (d) refer to outlier payments, IME payments, DSH adjustment payments, and add-on payments for low-volume hospitals, respectively. Furthermore, section 1886(q)(2)(B) of the Act specifies special rules for defining ‘‘the payment amount that would otherwise be made under subsection (d)’’ for certain hospitals. Specifically, section 1886(q)(2)(B) of the Act states that ‘‘[i]n the case of a Medicare-dependent, small rural hospital (with respect to discharges occurring during fiscal years 2012 and 2013) or a sole community hospital . . . the payment amount that would otherwise be made under subsection (d) shall be determined without regard to subparagraphs (I) and (L) of subsection (b)(3) and subparagraphs (D) and (G) of subsection (d)(5).’’ In the FY 2013 IPPS/ LTCH PPS final rule (77 FR 53374), we finalized policies to implement the statutory provisions related to the definition of ‘‘base operating DRG payment amount’’. Section 1886(q)(3)(A) of the Act defines the ‘‘adjustment factor’’ for an applicable hospital for a fiscal year as equal to the greater of ‘‘(i) the ratio described in subparagraph (B) for the hospital for the applicable period (as defined in paragraph (5)(D)) for such fiscal year; or (ii) the floor adjustment factor specified in subparagraph (C).’’ Section 1886(q)(3)(B) of the Act, in turn, describes the ratio used to calculate the adjustment factor. It states that the ratio is ‘‘equal to 1 minus the ratio of—(i) the aggregate payments for excess PO 00000 Frm 00155 Fmt 4701 Sfmt 4700 50649 readmissions . . .; and (ii) the aggregate payments for all discharges. . . .’’ Section 1886(q)(3)(C) of the Act describes the floor adjustment factor, which is set at 0.99 for FY 2013, 0.98 for FY 2014, and 0.97 for FY 2015 and subsequent fiscal years. Section 1886(q)(4) of the Act sets forth the definitions of the terms ‘‘aggregate payments for excess readmissions’’ and ‘‘aggregate payments for all discharges’’ for an applicable hospital for the applicable period. The term ‘‘aggregate payments for excess readmissions’’ is defined in section 1886(q)(4)(A) of the Act as ‘‘the sum, for applicable conditions . . . of the product, for each applicable condition, of (i) the base operating DRG payment amount for such hospital for such applicable period for such condition; (ii) the number of admissions for such condition for such hospital for such applicable period; and (iii) the ‘‘Excess Readmission Ratio . . . for such hospital for such applicable period minus 1.’’ The ‘‘excess readmission ratio’’ is a hospital-specific ratio based on each applicable condition. Specifically, section 1886(q)(4)(C) of the Act defines the excess readmission ratio as the ratio of ‘‘risk-adjusted readmissions based on actual readmissions’’ for an applicable hospital for each applicable condition, to the ‘‘risk-adjusted expected readmissions’’ for the applicable hospital for the applicable condition. Section 1886(q)(5) of the Act provides definitions of ‘‘applicable condition,’’ ‘‘expansion of applicable conditions,’’ ‘‘applicable hospital,’’ ‘‘applicable period,’’ and ‘‘readmission.’’ The term ‘‘applicable condition’’ (which is addressed in detail in section IV.C.3.a. of the FY 2012 IPPS/LTCH PPS final rule (76 FR 51665 through 51666)) is defined as a ‘‘condition or procedure selected by the Secretary among conditions and procedures for which: (i) Readmissions . . . represent conditions or procedures that are high volume or high expenditures . . . and (ii) measures of such readmissions . . . have been endorsed by the entity with a contract under section 1890(a) . . . and such endorsed measures have exclusions for readmissions that are unrelated to the prior discharge (such as a planned readmission or transfer to another applicable hospital).’’ Section 1886(q)(5)(B) of the Act also requires the Secretary, beginning in FY 2015, ‘‘to the extent practicable, [to] expand the applicable conditions beyond the 3 conditions for which measures have been endorsed . . . to the additional 4 conditions that have been identified by the Medicare Payment Advisory Commission in its report to Congress in E:\FR\FM\19AUR2.SGM 19AUR2 50650 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 June 2007 and to other conditions and procedures as determined appropriate by the Secretary.’’ Section 1886(q)(5)(C) of the Act defines ‘‘applicable hospital,’’ that is, a hospital subject to the Hospital Readmissions Reduction Program, as a ‘‘subsection (d) hospital or a hospital that is paid under section 1814(b)(3) [of the Act], as the case may be.’’ The term ‘‘applicable period,’’ as defined under section 1886(q)(5)(D) of the Act, ‘‘means, with respect to a fiscal year, such period as the Secretary shall specify.’’ As explained in the FY 2012 IPPS/LTCH PPS final rule, the ‘‘applicable period’’ is the period from which data are collected in order to calculate various ratios and adjustments under the Hospital Readmissions Reduction Program. Section 1886(q)(6) of the Act sets forth the public reporting requirements for hospital-specific readmission rates. Section 1886(q)(7) of the Act limits administrative and judicial review of certain determinations made pursuant to section 1886(q) of the Act. Finally, section 1886(q)(8) of the Act requires the Secretary to collect data on readmission rates for all hospital inpatients for ‘‘specified hospitals’’ in order to calculate the hospital-specific readmission rates for all hospital inpatients and to publicly report these readmission rates. 2. Overview The payment adjustment factor set forth in section 1886(q) of the Act did not apply to discharges until FY 2013. In the FY 2012 IPPS/LTCH PPS final rule, we addressed the issues of the selection of readmission measures and the calculation of the excess readmission ratio, which will be used, in part, to calculate the readmission adjustment factor. Specifically, in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51660 through 51676), we addressed the portions of section 1886(q) of the Act related to the following provisions: • Selection of applicable conditions; • Definition of ‘‘readmission’’; • Measures for the applicable conditions chosen for readmission; • Methodology for calculating the excess readmission ratio; and • Definition of ‘‘applicable period’’. With respect to the topics of ‘‘measures for readmission’’ for the applicable conditions, and ‘‘methodology for calculating the excess readmission ratio,’’ we specifically addressed the following: • Index hospitalizations; • Risk adjustment; • Risk standardized readmission rate; • Data sources; and VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 • Exclusion of certain readmissions. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53374 through 53401), we finalized our policies that relate to the calculation of the hospital readmission payment adjustment factor and the process by which hospitals can review and correct their data. Specifically, in the final rule, we addressed the portions of section 1886(q) of the Act related to the following provisions: • Base operating DRG payment amount, including policies for SCHs and MDHs and hospitals paid under section 1814(b) of the Act; • Adjustment factor (both the ratio and floor adjustment factor); • Aggregate payments for excess readmissions and aggregate payments for all discharges; • Applicable hospital; • Limitations on review; and • Reporting of hospital-specific information, including the process for hospitals to review readmission information and submit corrections. In the FY 2013 IPPS/LTCH PPS final rule, we established a new Subpart I under 42 CFR Part 412 (§§ 412.150 through 412.154) to codify rules for implementing the Hospital Readmissions Reduction Program. 3. FY 2014 Policies for the Hospital Readmissions Reduction Program a. Overview In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27594), for FY 2014 and beyond, we proposed to— • Refine the readmissions measures and related methodology for the current applicable conditions (section V.G.3.b. of this preamble); • Expand the ‘‘applicable conditions’’ for FY 2015 (section V.G.3.c. of this preamble); • Specify additional policies for hospitals paid under section 1814(b)(3) of the Act (§ 412.154(d)), including the process to be exempted from the Hospital Readmissions Reduction Program and the definition of ‘‘base operating DRG payment amount’’ (section V.G.3.d. of this preamble); • Specify the proposed adjustment factor floor for FY 2014 (section V.G.3.e. of this preamble); • Specify the proposed applicable period for FY 2014 (section V.G.3.f. of this preamble); • Refine the methodology to calculate the aggregate payments for excess readmissions (section V.G.3.g. of this preamble); and • Clarify the process for reporting hospital-specific information, including the opportunity to review and submit corrections (section V.G.3.h. of this preamble). PO 00000 Frm 00156 Fmt 4701 Sfmt 4700 Comment: Some commenters requested that CMS conduct additional analyses on the Hospital Readmissions Reduction Program. One commenter suggested that CMS evaluate how hospitals work towards reducing readmissions and determine if the Hospital Readmissions Reduction Program is successful. Another commenter suggested that CMS analyze the Hospital Readmissions Reduction Program to determine its impact on mortality rates. One commenter stated that CMS should monitor the program for unintended consequences, such as avoiding admissions for difficult patients or placing more patients in observations to avoid readmissions. Other commenters requested that CMS conduct additional analyses on any unintended consequences with avoiding readmissions. Response: We appreciate the commenters’ feedback and suggestions. However, we believe that there does not appear to be a meaningful correlation between hospital risk-standardized mortality rates and readmission rates. We believe that a hospital’s performance on mortality and readmissions measures represents different aspects of quality. While a recent MedPAC report 18 indicates that there may be an inverse correlation between readmission and mortality rates, we note that this inverse relationship has been found to be modest.19 We recognize the commenter’s concern and will monitor changes in the strength of these inverse correlations over time. Further, we recognize that performance-based payment programs, as with any pay-forperformance or pay-for-reporting program, may create the potential for unintended consequences. However, we remain committed to monitoring the Hospital Readmissions Reduction Program and assessing unintended consequences such as changes in utilization and patient outcomes over time, and adjusting the program as needed. We will also continue to make these analyses available to the public in the Chartbook posted annually each Fall on the CMS Web site at: https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/HospitalQualityInits/ OutcomeMeasures.html. We are especially cognizant of those areas of concern raised by stakeholders, including inappropriate shifting of care, 18 https://www.medpac.gov/documents/ Jun13_EntireReport.pdf. 19 Krumholz HM, Lin Z, Keenan PS, et al. Relationship between hospital readmission and mortality rates for patients hospitalized with acute myocardial infarction, heart failure, or pneumonia. JAMA. 2013; 309(6): 587–593. E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations increased patient morbidity and mortality, and increases in the use of observation services to avoid hospital readmissions. We remain committed to quickly addressing these areas, as well as any other unintended consequences that may arise as the Hospital Readmissions Reduction Program progresses. b. Refinement of the Readmission Measures and Related Methodology for FY 2014 and Subsequent Years Payment Determinations (1) Overview of the Inclusion of Planned Readmissions for the Calculation of the FY 2014 Readmissions Adjustment Factors mstockstill on DSK4VPTVN1PROD with RULES6 In the FY 2012 IPPS/LTCH PPS final rule, we adopted AMI, HF, and PN readmission measures for the Hospital Readmissions Reduction Program payment determinations beginning with FY 2013. During development of the three readmission measures for AMI, HF, and PN, we consulted with medical experts to identify readmissions that are typically scheduled as follow-up care for each specific condition within 30 days of discharge. We categorized these readmissions as planned follow-up care and excluded them from being counted as a readmission. The AMI measure finalized for the Hospital Readmissions Reduction Program included two revascularization procedures (coronary artery bypass graft surgery (CABG) and percutaneous coronary intervention (PCI) (76 FR 51667)). We considered these procedures planned readmissions and excluded them from the readmission calculation as long as the readmissions were not for one of five acute conditions (HF, AMI, other acute/ subacute forms of ischemic heart disease, arrhythmia, and cardiac arrest). During development of the HF and PN readmission measures, we did not identify any readmissions that were typically planned as follow-up care at the time of the patient’s discharge. Therefore, the readmission measures finalized for the Hospital Readmissions Reduction Program for these two conditions did not exclude any planned readmissions from the readmission calculation. (2) Refinement of the Readmission Measures and Related Methodology for the FY 2014 and Subsequent Years Payment Determinations Since the development and implementation of the initial three readmission measures adopted under the Hospital Readmissions Reduction Program, we have received comments from the medical community, other VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 stakeholders, and the general public encouraging us to identify and not count as readmissions a broader range of planned readmissions. Stakeholders also made recommendations for expanding the number and types of planned readmissions during the public comment period for the FY 2013 IPPS/ LTCH PPS proposed rule (as discussed in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53382 through 53398)). Stakeholders commented that readmission measures are intended to capture unplanned readmissions that arise from acute clinical events requiring urgent rehospitalization within 30 days of discharge. In addition, stakeholders commented that planned readmissions do not generally signal poor quality of care. In response to stakeholders’ concerns, we have worked with experts in the medical community, other stakeholders, and the public to broadly identify planned readmissions for procedures and treatments for exclusion from the readmission measures. Specifically, we developed an expanded ‘‘planned readmission algorithm’’ in the CMS Planned Readmission Algorithm Version 2.1 Report to identify planned readmissions across our readmission measures. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27595), we proposed to apply the algorithm to the AMI, HF, and PN measures for FY 2014. The CMS Planned Readmission Algorithm Version 2.1 Report is available on the CMS Web site at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/ HospitalQualityInits/MeasureMethodology.html. As discussed in the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR 27595), we developed the algorithm based on a hospital-wide (not condition-specific) cohort of patients. We began the development by using the Agency for Healthcare Research and Quality’s (AHRQ’s) Clinical Classification Software (CCS) codes to group thousands of individual procedures and diagnoses codes into clinically coherent, mutually exclusive procedure and diagnosis categories (PROC–CCS categories and Diagnosis-CCS categories, respectively). A panel of independent, non-CMS clinicians then reviewed the procedure categories and identified those that are commonly planned and require admission. Clinicians also reviewed the diagnosis categories and identified those that were acute diagnoses likely requiring hospitalization. Using these procedure and diagnosis categories and some individual ICD–9–CM procedure and diagnoses codes in the categories, we PO 00000 Frm 00157 Fmt 4701 Sfmt 4700 50651 developed an initial algorithm for identifying planned readmissions for a hospital-wide cohort of patients. The algorithm underwent several reviews by stakeholders. We initially posted the detailed algorithm for informal public comment during the measurement development process in August 2011. The National Quality Forum (NQF) reviewed and made the algorithm available for public comment during its endorsement review of the Hospital-Wide All-Cause Unplanned Readmission Measure (NQF #1789). We also recruited 27 surgical subspecialists nominated by their specialty societies to review the algorithm and suggest refinements, which resulted in Version 2.1 of the Planned Readmission Algorithm. In the proposed rule, we proposed to use this algorithm in the readmission measures under the Hospital Readmissions Reduction Program beginning with FY 2014. A detailed description of this algorithm is included later in this section. As required by section 1886(q)(5)(A)(ii) of the Act, the first three applicable conditions of AMI, HF and PN, must use readmission measures that have been endorsed by the entity with a contract under section 1890(a) of the Act; and such endorsed measures must have exclusions for readmissions that are unrelated to the prior discharge (such as planned readmission or transfer to another applicable hospital). Because the statute requires that the readmission measures for the three current applicable conditions (AMI, HF and PN) be NQF-endorsed, we sought NQF’s endorsement of the measures that were revised to include the CMS Planned Readmission Algorithm Version 2.1. NQF reviewed these revised measures through its ad hoc review process, which reviews previously endorsed measures that undergo material changes. Following ad hoc review, NQF endorsed the revised AMI (NQF #0505) and HF (NQF #0330) measures in January 2013 and the PN measure (NQF #0506) in March 2013. Comment: Several commenters stated that the Hospital Readmissions Reduction Program uses unreliable measures. One commenter suggested that the method used to calculate the number of excess readmissions adjusts for the volume of eligible patients served by the hospital, and weakens the incentive for low-volume hospitals to reduce their readmission rates. Another commenter stated that it is not reasonable to give a pass to hospitals with consistently high readmission rates year after year because they are low volume. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50652 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Response: We appreciate the commenters’ feedback. However, we disagree that the Hospital Readmissions Reduction Program uses unreliable measures for two reasons. First, the NQF both reviewed and endorsed the measures used in the Hospital Readmissions Reduction Program. As part of this endorsement process, the NQF requires that measures meet criteria for scientific acceptability, which include validity and reliability. Specifically, reliability under the NQF measure evaluation criteria means that the measure both allows for comparability and is well defined and precisely specified so it can be implemented consistently within and across organizations.20 Second, as previously addressed in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53379), ‘‘We determined the 25-case threshold for public reporting based on a reliability statistic that is calculated from the intercluster correlation, a parameter of the model. We are maintaining the minimum 25-case threshold that we adopted through rulemaking last year.’’ We acknowledge that smaller hospitals typically have less certain estimates because they have fewer cases for use in assessing quality. This challenge is inherent in outcome measurements. However, one advantage of the statistical model that we use for the measures is that it allows for the inclusion of small hospitals while characterizing the certainty of their estimates. The hierarchical logistic regression model that we use to calculate the risk-standardized outcome measures allows the inclusion of hospitals with relatively few observations, but takes into account the uncertainty associated with sample size in estimating their risk-standardized outcome rates. The model takes into account the uncertainty in the estimate of outcome rates for low-volume hospitals by assuming that each hospital is a typically performing hospital. It weighs that assumption along with the outcomes for the particular hospital in calculating the outcome rate. Therefore, the estimated outcome rates for smaller hospitals will likely be closer to the national rate because the limited number of eligible cases in the hospital tells little about that hospital’s true outcome rate. Comment: One commenter suggested that CMS exclude patients coded under ICD–9–CM code V15.81 (Personal 20 National Quality Forum (NQF), Measure Evaluation Criteria (November, 2012). Available at: https://www/qualityforum.org/docs/measure_ evaluation_criteria.aspx. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 history of non-compliance with medical treatment) from the readmission measures. Response: We appreciate the commenter’s suggestion. We recognize that some patients choose not to follow a recommended treatment plan, even when they have access to the care they need. However, all hospitals have the opportunity to reduce the rate of readmission, even among less compliant patients. Improving readmission rates is the joint responsibility of hospitals and clinicians. Measuring readmissions will create incentives to invest in interventions to improve hospital care, better assess the readiness of patients for discharge, and facilitate transitions to outpatient status. (a) Description of CMS Planned Readmission Algorithm Version 2.1 As described in the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR 27595), this algorithm is a set of criteria for classifying readmissions as ‘‘planned’’ using Medicare claims. The algorithm identifies typical planned admissions that may occur within 30 days of discharge from the hospital. We based the CMS Planned Readmission Algorithm on three principles: • A few specific, limited types of care are always considered planned (obstetrical delivery, transplant surgery, maintenance chemotherapy, rehabilitation); • Otherwise, a planned readmission is defined as a nonacute readmission for a scheduled procedure; and • Admissions for acute illness or for complications of care are never planned. The Planned Readmission Algorithm uses a flow chart and four tables of procedures and conditions to implement these principles and to classify readmissions as planned or unplanned. The flow chart and tables are available in a report, CMS Planned Readmission Algorithm Version 2.1, which is available on the CMS Web site at: https://www.cms.gov/Medicare/ Quality-Initiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html. We incorporated the algorithm into each condition-specific and procedurespecific readmission measure. For most readmission measures, including the AMI, HF, and PN measures, we used one standard version of the algorithm— the CMS Planned Readmission Algorithm Version 2.1. However, for a subset of readmission measures, we revised the list of potentially planned procedures or acute primary diagnosis after applying the standard algorithm version because it was clinically PO 00000 Frm 00158 Fmt 4701 Sfmt 4700 indicated. For example, for the Total Hip Arthroplasty (THA) and Total Knee Arthroplasty (TKA) readmission measure that we proposed in the FY 2014 IPPS/LTCH PPS proposed rule and are adopting in this final rule for FY 2015, we removed diagnostic cardiac catheterization from the potentially planned procedure list because patients in the hip/knee measure are typically well enough to undergo elective surgery and would not be expected to need a catheterization within 30 days of discharge. The details of these adaptations are available in the CMS Planned Readmission Algorithm Version 2.1 report (https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/Hospital QualityInits/MeasureMethodology.html). Comment: Several commenters supported the refinement of the readmission measures using the planned readmission algorithm. The commenters appreciated that CMS considered and acted upon public comments and suggestions made in last year’s rule, and supported CMS’ continued efforts to exclude planned readmissions from the penalty calculation. Response: We appreciate the commenters’ support of our proposal to include a planned readmission algorithm for readmissions measures in the Hospital Readmissions Reduction Program. Comment: Several commenters suggested that CMS continually assess the algorithm for planned readmissions to determine whether additional diagnoses or procedures should be considered ‘‘planned.’’ Response: We appreciate the commenters’ suggestion. We intend to continually review the planned readmissions algorithm. Our measures continually undergo maintenance to determine the need for updated specifications, and to monitor for trends and any relevant coding changes associated with the measures. With such updates, we will modify the planned readmission algorithm as needed. If substantive updates are required, we will inform the public of any changes to the planned readmissions algorithm through rulemaking. Comment: Some commenters stated that relying solely on claims data is insufficient for proper risk-adjustment. One commenter stated that riskadjustment based solely on claims data loses clinical detail for proper adjustment for severity. The commenter added, for example, that our coding does not capture those patients who are readmitted from hospice care. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Response: We have performed validation work to confirm the scientific rigor of using claims data for risk adjustment in outcome measures. We validated the AMI, HF, and PN mortality and readmission measures with models that use medical recordabstracted data for risk-adjustment. These analyses demonstrated that using claims data produces estimated hospital-level risk-standardized mortality rates (RSMRs) and riskstandardized readmission rates (RSRRs) that are very similar to the rates estimated by models based solely on medical record data (available at: https://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html). This high level of agreement in the results based on the two different approaches supports the use of the claims-based models for public reporting. These analyses are available in the methodology report located on the CMS Web site at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/Hospital QualityInits/MeasureMethodology.html. Our approach to gathering risk factors for patients also mitigates the potential limitations of claims data. Because not every diagnosis is coded at every visit, we use claims data for the year prior to the index admission, as well as secondary diagnosis codes during the index admission, for risk-adjustment. Comment: One commenter requested that the measures be risk-adjusted for hospitals located in rural areas because this may cause their readmission rate to be higher than hospitals in more concentrated markets. Response: We routinely monitor the impact of readmission measures on hospitals and have examined if hospitals in rural areas tend to have higher risk-standardized readmission rates. Our most recent analyses (available on our Web site at: https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Downloads/MedicareHospitalQuality Chartbook2012.pdf) examined hospital readmission rates for different hospital referral regions and did not find a relationship between rural referral regions and increased readmission rates. Comment: Several commenters addressed the proposed policy to not risk-adjust measures for socioeconomic status and other factors. Some commenters supported the policy and urged CMS to resist making any changes to the Hospital Readmissions Reduction Program based on socioeconomic status VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 concerns. These commenters stated that the same care protocols that work with a different population may also work with patients of lower socioeconomic circumstances. The commenters added that until CMS can disprove that notion, CMS should not modify the program in a way that would shield certain hospitals, based on fairness concerns about socioeconomic factors, from truly participating in a program to change the way Medicare and Medicaid services and payments are delivered. Other commenters suggested that the readmission measures should include adjustments for socioeconomic status and other factors that are either outside the hospitals’ or providers’ immediate control or that may adversely affect certain types of hospitals more than others. Suggestions for variables to include in either the patient-level or the hospital-level model included: patient race, ethnicity, language, income, lifestyle, health literacy, dual-eligible status (that is, eligibility for both Medicare and Medicaid), insurance status, functional status, cognitive impairment, post-discharge care support structure, and access to primary care. Some commenters suggested stratification of the hospital calculations by the percentage of dual-eligible patients. One commenter stated that a patient’s ability to afford medication should be included as a risk-adjustment variable because socioeconomic status impacts the patient’s ability to be compliant with medications and a patient’s ability to pay for medications is separate and apart from care provided by the hospital. Another commenter recommended that CMS conduct a thorough analysis of the role economic factors play in readmissions. This commenter also suggested that the analysis be conducted at the claims level, with matching zip codes to existing poverty data to provide an accurate understanding of the role of economic conditions. The commenter stated that readmission measures should fully account for economic drivers. Another commenter stated that chronic diseases as well as socioeconomic status are related to hospital readmissions, and these factors comprise major determinants of outcomes. Response: We appreciate the commenters’ feedback and suggestions on this issue. We have continued to consider and evaluate stakeholder concerns regarding the influence of patient socioeconomic status on readmission and mortality rates. The Hospital Readmissions Reduction Program, as pointed out by one commenter, seeks to transform the Medicare payment and delivery system PO 00000 Frm 00159 Fmt 4701 Sfmt 4700 50653 by financially incentivizing providers to change the way they deliver care. The program’s design encourages hospitals to make changes to avoid payment penalties while simultaneously enhancing the quality of health care provided to patients. We routinely monitor the impact of socioeconomic status on hospitals’ results and have consistently found that hospitals that care for large proportions of patients of low socioeconomic status are capable of performing well on our measures. Our most recent analyses, available on our Web site at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessmentInstruments/HospitalQuality Inits/Downloads/MedicareHospital QualityChartbook2012.pdf, again confirmed this finding. The definition of low SES we used was whether the beneficiary was enrolled in Medicaid, which is a proxy for low-income. Many safety-net providers and teaching hospitals do as well or better on the measures than hospitals without substantial numbers of patients of low socioeconomic status. Our analyses also show that adding socioeconomic status to the risk-adjustment has a negligible impact on hospitals’ risk-standardized rates. The risk-adjustment for clinical factors likely captures much of the variation due to socioeconomic status, therefore leading to more modest impact of socioeconomic status on hospitals’ results than stakeholders expect. We note that the goal of risk-adjustment is to account for factors that are inherent to the patient at the time of admission, such as severity of disease, so as to put hospitals on a level playing field. The measures should not be risk-adjusted to account for differences in practice patterns that lead to lower or higher risk for patients to be readmitted or die. The measures aim to reveal differences related to the patterns of care. The measures do not adjust for socioeconomic status because the association between socioeconomic status and health outcomes can be due, in part, to differences in the quality of health care received by groups of patients with varying socioeconomic status. The measures also do not adjust for socioeconomic status, or other patient factors such as race because we do not want to hold hospitals to different standards for the outcomes of their patients of low socioeconomic status. Finally, we do not want to mask potential disparities or minimize incentives to improve the outcomes of disadvantaged populations. This approach also is consistent with the guidance from the NQF, which states that risk models should not obscure E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50654 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations disparities by adjusting for factors associated with inequality (such as race or socioeconomic status). Furthermore, the statutory language in section 1886(q)(5)(A)(ii)(I) of the Act requires that the measures included in the Hospital Readmissions Reduction Program be NQF-endorsed, and the measures as endorsed by the NQF are not currently adjusted for socioeconomic status. However, we are committed to tracking this issue and will continue to evaluate disparities in care and the impact of patient’s socioeconomic status on hospital’s readmissions rates moving forward. Comment: Some commenters suggested that CMS separate Hospital Readmissions Reduction Programeligible hospitals into quartiles based on the proportion of their patients that are dually eligible, such that readmissions penalties would then be dependent on how hospitals perform compared to hospitals with a similar proportion of dually eligible patients. Several commenters expressed concern that hospitals with higher proportions of low socioeconomic status patients are at a disadvantage, and suggested that CMS stratify the measure score calculation to address this concern. One commenter suggested that CMS stratify hospitals by their proportion of dual-eligible patients and calculate the measure score in four different hospital strata. Based on commenters’ understanding of the proposal, the commenters suggested that CMS rank hospitals by their proportion of dual-eligible patients, and divide hospitals into quartiles based on their rank. The commenters further suggested that CMS apply the NQF-approved measure to each group of hospitals to calculate the risk-standardized ratio that is used for the Hospital Readmissions Reduction Program. Under this approach, each hospital’s ‘‘expected’’ (denominator) rate would be derived based on how hospitals within its quartile perform with similar patients. In other words, the benchmark for performance would be set within each quartile of hospitals, rather than by including all hospitals in the calculation and setting a uniform performance benchmark. Another commenter suggested that CMS stratify patients by their dualeligible status and calculate two readmission ratios for each hospital for each measure—one using dual-eligible patients and one using all other patients. The commenter further suggested that CMS combine these scores to derive a single, ‘‘blended’’ excess readmission ratio for each hospital. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Response: We appreciate these suggestions. However, we continue to believe that it is appropriate to include all hospitals and patients in a single comparison group. The measures do not stratify hospitals or patients by socioeconomic status or risk adjust for socioeconomic status because the association between socioeconomic status and health outcomes can be due, in part, to differences in the quality of health care received by groups of patients with varying socioeconomic status. We have consistently found that hospitals that care for large proportions of patients of low socioeconomic status are capable of performing well on our measures. Our most recent analyses (located on our Web site at: https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Downloads/MedicareHospital QualityChartbook2012.pdf) again confirmed this finding. Many safety-net providers and teaching hospitals do as well or better on the measures than hospitals without substantial numbers of patients of low socioeconomic status. Our analyses also show that adding socioeconomic status to the riskadjustment has a negligible impact on hospitals’ risk-standardized rates. The risk-adjustment for clinical factors likely captures much of the variation due to socioeconomic status, therefore leading to more modest impact of socioeconomic status on hospitals’ results than stakeholders expect. These findings suggest that using all hospitals and patients to calculate excess readmission ratios is most appropriate. We will continue to monitor this issue carefully. We note that we continue to provide support to hospitals with high numbers of dual-eligible patients through other programs and to assist hospitals with high excess readmission ratios with lowering their readmission rates through the Partnership for Patients Program and the Quality Improvement Organization Program. Comment: One commenter suggested that the readmission measures riskadjust for the acuity of the condition at the time of admission. Response: The measures, endorsed by the NQF and finalized in the FY 2012 IPPS/LTCH PPS final rule, risk-adjust for key factors that are clinically relevant and have strong relationships with the outcome (for example, patient demographic factors, patient coexisting medical conditions, and indicators of patient frailty). Under the current NQFendorsed methodology, these covariates are obtained from Medicare claims extending 12 months prior to, and including, the index admission. This PO 00000 Frm 00160 Fmt 4701 Sfmt 4700 risk-adjustment approach adjusts for differences in the clinical status of the patient at the time of the index admission, as well as for demographic variables. A complete list of the variables used for risk-adjustment and the clinical and statistical process for selecting the variables for each NQFendorsed measure, as proposed, is available on the NQF Web site at: https:// qualitynet.org/dcs/ContentServer?c= Page&pagename=QnetPublic%2FPage %2FQnetTier4&cid=1219069855841. Comment: Some commenters stated that the planned readmission algorithm does not account for the full range of planned readmissions, or for unrelated readmissions. Other commenters suggested that CMS exclude unrelated admissions from the payment adjustment. One commenter added that the unintended consequences of our position to not exclude unrelated readmissions may affect patient care. Other commenters stated that CMS has ignored the Affordable Care Act requirements by not excluding unrelated readmissions from the Hospital Readmissions Reduction Program. Response: We appreciate the commenters’ feedback and suggestions. However, we disagree that we have ignored the statutory requirements at section 1886(q)(5) of the Act as established by section 3025 of the Affordable Care Act relating to unrelated admissions. Section 1886(q)(5) of the Act requires us to use measures that contain appropriate exclusions for readmissions that are unrelated to the prior discharge. Section 1886(q)(5) of the Act then cites specific examples of such unrelated readmissions, including planned readmissions and transfers to another hospital. We note that we incorporated both examples of unrelated readmissions cited by the statute in the Hospital Readmissions Reduction Program. Further, we continue to review and revise the area of unrelated readmissions through our expansion of planned readmissions. For example, we included the planned readmissions algorithm to address public comments raised last year relating to expanding the number of planned readmissions. Regarding other types of unrelated readmissions, we currently do not seek to differentiate between related and unrelated readmissions because readmissions not directly related to the index condition may still be a result of the care received during the index hospitalization. For example, a patient hospitalized for COPD who develops a hospital-acquired infection may ultimately be readmitted for sepsis. It E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations would be inappropriate to treat this readmission as unrelated to the care the patient received during the index hospitalization. Furthermore, the range of potentially avoidable readmissions also includes those not directly related to the initial hospitalization, such as those resulting from poor communication at discharge or inadequate follow-up. As such, creating a comprehensive list of potential complications related to the index hospitalization would be arbitrary, incomplete, and, ultimately, extremely difficult to implement. However, in coordination with medical experts, we expanded the list of conditions considered planned. Generally speaking, planned readmissions are not a signal of quality of care. Therefore, we have worked with experts in the medical community, as well as other stakeholders to carefully identify procedures and treatments that should be considered ‘‘planned’’ and, therefore, not counted as readmissions. For FY 2014, we have proposed that the measures identify planned readmissions by using an expanded algorithm, which is a set of criteria for classifying readmissions as planned using Medicare claims. This algorithm identifies admissions that are typically planned and may occur within 30 days of discharge from the hospital. Comment: One commenter suggested that Left Ventricular Assist Devices (LVADs) and heart transplants be excluded as planned readmissions for HF patients. Response: As part of the planned readmissions algorithm, patients who are readmitted for a transplant are always classified as planned readmissions and will not count as readmissions in the measures. The same is true for LVADs because they are classified under CCS 49 (Other or heart procedures). Comment: One commenter suggested that hospitals have the ability to code when a readmission is considered planned. Response: We note that discharge status codes for planned readmissions have been adopted by the NUBC, as discussed earlier in this final rule, and allow for hospitals to identify planned readmissions on the claim through the use of specific discharge status codes. However, prior to considering use of such codes in our quality measures, we will need to establish that hospitals are using these codes in a valid and reliable manner relative to our planned readmission algorithm. Accordingly, these discharge status codes are not currently taken into account in the VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Hospital Readmissions Reduction Program. Comment: One commenter suggested that CMS exclude more admissions from the AMI, HF, and PN measures because the penalties associated with these conditions are very high. Response: We appreciate the commenter’s feedback. We are continuously evaluating the AMI, HF, and PN measures and may consider further exclusions to these measures in future rulemaking. Comment: One commenter recommended the inclusion of AMI codes with ‘‘0’’ in the fifth digit in the ICD–9–CM code on the claim, indicating ‘‘episode of care unspecified.’’ The commenter noted that if the episode of care is unspecified, it could be outside the 30-day readmission timeframe. The commenter added that under the ICD– 9–CM guidelines, the ICD–9–CM codes 410.XX for AMI are used for ‘‘acute’’ condition for up to 8 weeks duration. Response: We appreciate the commenter’s suggestion and note that we addressed this question in the FY 2013 IPPS/LTCH PPS final rule. In that final rule (77 FR 53377), we stated that the AMI ICD–9–CM codes described by the commenter are used to identify index hospitalizations, not readmissions. The measures only identify the index admissions based on the use of the principal discharge diagnosis, which should represent the reason the patient was admitted to the hospital. Therefore, despite the use of the word ‘‘unspecified,’’’ in most cases, the AMI diagnosis is the primary reason for admission and appropriately included as an index case. Comment: Several commenters suggested exclusions from the index hospitalizations included in the measures, which included exclusions for patients under ‘‘extreme circumstances’’ such as transplants, end-stage renal disease, burn, trauma, psychosis, and substance abuse. Response: We appreciate the commenters’ suggestions. We addressed this comment in the FY 2013 IPPS/ LTCH PPS final rule. In that final rule (77 FR 53377), we stated that, ‘‘we appreciate the concern expressed by some commenters that patients of these ‘extreme circumstances’ clinically could be sicker and more likely to be readmitted. The measures address clinical differences in hospitals’ casemix through risk adjustment rather than through excluding patients from the measure as suggested by the commenter. The goal in developing outcomes measures is to create a clinically cohesive cohort that includes as many patients as possible admitted with the PO 00000 Frm 00161 Fmt 4701 Sfmt 4700 50655 given condition. Greatly expanding our list of exclusions would result in a measure that was less useful and meaningful, because it would reflect the care of fewer patients. In addition, we believe that by excluding patients with significant comorbidities, the measure would not assess of the quality of care for those patients. To fairly profile hospitals’ performance, it is critical to place hospitals on a level playing field and account for their differences in the patients that present for care. This is accomplished through adequate riskadjustment for patients’ clinical presentation rather than exclusion of patients.’’ After consideration of the public comments we received, we are finalizing our proposal, without modification, to refine the readmission measures and to adopt the planned readmissions algorithm for the Hospital Readmissions Reduction Program. (b) Counting of Readmissions That Occur After a Planned Readmission In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27596), we proposed a related change to the AMI, HF, and PN measures to address unplanned readmissions that occur after a planned readmission but within 30 days of the patient’s initial index discharge. The AMI measure finalized in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51666) counted unplanned readmissions for the index admission if they occurred within 30 days of discharge from the index admission, even if they occurred following planned readmissions (because the two other measures did not have any planned readmissions, this method of counting only applied to the AMI measure). For the proposed revised AMI, HF, and PN measures, all of which now account for planned readmissions by incorporating the CMS Planned Readmission Algorithm Version 2.1, we proposed the following additional change: If the first readmission is planned, it will not count as a readmission, nor will any subsequent unplanned readmission within 30 days of the index readmission. In other words, unplanned readmissions that occur after a planned readmission and fall within the 30-day post discharge timeframe would no longer be counted as readmissions for the index admission. The rationale for this proposed change was that, in this case, either the index or the planned readmission could have contributed to the patient’s unplanned readmission. Therefore, it was unclear whether the unplanned readmission should be attributed back to the index admission. E:\FR\FM\19AUR2.SGM 19AUR2 50656 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations We stated in the proposed rule that this proposed change in counting practice would affect a very small percentage of readmissions (approximately 0.3 percent of index admissions nationally for AMI, 0.2 percent for HF, and less than 0.1 percent for PN). However, we stated that we intend to monitor trends in the proportion of planned readmissions for evidence of misuse or misapplication, and other unintended consequences. Comment: Several commenters supported the proposal to change the manner in which readmissions are counted following a planned readmission. Response: We appreciate the commenters’ support of our proposal relating to the counting of a readmission following a planned readmission. After consideration of the public comments we received, we are finalizing the proposed change to the AMI, HF, and PN measures to address unplanned readmissions that occur after a planned readmission but within 30 days of the patient’s initial index discharge, without modification. (c) Anticipated Effect of the Changes of CMS Planned Readmission Algorithm Version 2.1 and Counting of Readmissions on the Readmission Measures In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27596), we stated that the proposed changes to the measures in the proposed rule would have had the following effects on the measures based on our analyses of discharges between July 2008 and June 2011, if these changes had been applied for FY 2013. We noted that these statistics were for illustrative purposes only, and we did not propose to revise the measure calculations for the FY 2013 payment determination. Rather, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27596), we proposed to apply these changes to the readmissions measures for the FY 2014 payment determination and subsequent years. In the proposed rule, we stated that among hospitals that were subject to the Hospital Readmissions Reduction Program in FY 2013 (Table V.G.1), the number of eligible discharges based on the July 2008 through June 2011 data were 501,765 discharges for AMI; 1,195,967 discharges for HF; and 957,854 discharges for PN: • The proposed 30-day readmission rate (excluding the planned readmissions) would decrease by 1 percentage point for AMI; 1.5 percentage points for HF; and 0.7 percentage point for PN. • The new national measure (unplanned) rate for each condition would have been 18.2 percent for AMI; 23.1 percent for HF; and 17.8 percent for PN. • The number of readmissions considered planned (and, therefore, not counted as a readmission) would increase by 4,942 for AMI; 17,512 for HF; and 7,084 for PN. In the proposed rule, we proposed to update the measures to: (1) Incorporate the CMS Planned Readmission Algorithm Version 2.1 to identify planned readmissions; and (2) not count unplanned readmissions that follow planned readmissions. We invited public comments on this proposal. TABLE V.G.1—COMPARISON OF ORIGINAL AMI/HF/PN MEASURES FINALIZED IN FY 2013 RELATIVE TO REVISED AMI/HF/ PN MEASURES FOR FY 2014 [Based on July 2008 through June 2011 discharges from 3,025 hospitals] AMI Revised measure mstockstill on DSK4VPTVN1PROD with RULES6 Number of Admissions ..................................................... Number of Unplanned Readmissions .............................. Readmission Rate ............................................................ Number of Planned Readmissions .................................. Planned Readmission Rate ............................................. Percent of Readmissions that are Planned ..................... Comment: One commenter suggested that CMS clarify aspects of what is counted as a readmission, including whether a patient’s death during a hospital readmission is counted for purposes of the Hospital Readmissions Reduction Program. Response: We appreciate the commenter’s feedback. A patient’s death during the index hospitalization is excluded from the readmission measure because no opportunity exists for a subsequent admission. The same rationale applies when a patient dies after the index discharge but within the 30-day post discharge period. However, a patient’s death during a readmission in the hospital is included in the measure because they were discharged alive from the index admission and are, therefore, eligible for readmission. For more information relating to the VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 501,765 91,360 18.2% 12,811 2.6% 12.3% PN Original measure Revised measure 501,765 96,302 19.2% 7,869 1.6% 7.6% 957,854 170,396 17.8% 7,084 0.7% 4.0% exclusion criteria for a readmission, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51660 through 51676). Comment: One commenter requested clarification on what is meant that patients without at least 30 days postdischarge enrollment in Medicare Parts A and B are excluded from the readmission measures. Response: Patients without at least 30 days post-discharge enrollment in FFS Medicare are excluded from the readmission measures because the 30day readmission outcome cannot be assessed in this group. An example of a patient without 30 days of post discharge enrollment in Medicare Parts A and B would be a patient who enrolled in Medicare Advantage within 30 days of being discharged. However, patients who die during or after a PO 00000 Frm 00162 Fmt 4701 Sfmt 4700 HF Original measure 957,854 177,480 18.5% 0 0.0% 0.0% Revised measure Original measure 1,195,967 276,748 23.1% 17,512 1.5% 6.0% 1,195,967 294,260 24.6% 0 0.0% 0.0% readmission would be included in the measures because the readmission measures assign readmission status as a dichotomous ‘‘yes/no’’ value. Once a patient has been readmitted, the readmission measures would assign readmission status as a ‘‘yes’’ even if the patient subsequently died after the readmission. Comment: One commenter suggested that CMS modify the definition of transfer exclusion in the Hospital Readmissions Reduction Program to take into account the level of care provided at the transferring hospital. Response: We appreciate the commenter’s suggestion. We recognize that a readmission for a patient transferred to a second acute care hospital and then discharged to the subacute setting from that second hospital may be related to events that E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations occurred at the first admitting hospital. In developing the measures, we reviewed the approach to attributing the outcome carefully with clinical experts and with technical expert panels, and developed the attribution strategy that was most appropriate for each patient cohort. For the medical admissions of AMI, HF, and PN, the hospital discharging the patient retains primary responsibility for preparing the patient for discharge and developing a postdischarge care plan to minimize readmission risk, even if that risk was increased by management at a prior hospital. We have addressed this issue differently for other patient groups as appropriate. For example, for our readmissions measure for patients undergoing elective hip or knee replacement, we excluded patients who were transferred into the index hospital because it is likely that the procedure for these patients was not elective. In addition, we exclude patients who were admitted for the index procedure and subsequently transferred to another acute care facility because the index hospital that performed the joint replacement did not discharge the patient to the subacute care setting and, therefore, cannot fairly be held accountable for the readmission. In summary, we are finalizing our proposal, without modification, to use the revised versions of the AMI, HF, and PN measures to calculate the payment adjustments for the Hospital Readmissions Reduction Program in FY 2014. We believe that the revised measures will address stakeholder suggestions to broaden the number of planned readmissions and will result in a more accurate readmission calculation for purposes of the payment adjustment. mstockstill on DSK4VPTVN1PROD with RULES6 c. Expansion of the Applicable Conditions for FY 2015 (1) Background Under section 1886(q)(5)(B) of the Act, beginning with FY 2015, ‘‘the Secretary shall, to the extent practicable, expand the applicable conditions beyond the three conditions for which measures have been endorsed as described in subparagraph (A)(ii)(I) . . . to the additional 4 conditions that have been identified by the Medicare Payment Commission in its report to Congress in June 2007, and to other conditions and procedures as determined appropriate by the Secretary.’’ The four conditions and procedures recommended by MedPAC are: (1) coronary artery bypass graft (CABG) surgery; (2) chronic obstructive pulmonary disease (COPD); (3) percutaneous coronary intervention VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 (PCI); and (4) other vascular conditions. Section 1886(q)(5)(A)(i) of the Act directs the Secretary, in selecting an ‘‘applicable condition,’’ to choose from among conditions and procedures ‘‘that represent conditions or procedures that are high volume or high expenditures under this title (or other criteria specified by the Secretary).’’ In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27597), in accordance with section 1886(q)(5)(A) of the Act, effective for the calculation of the readmissions payment adjustment factors in FY 2015, we proposed to expand the applicable conditions and procedures to include: (1) Patients admitted for an acute exacerbation of COPD; and (2) patients admitted for elective total hip arthroplasty (THA) and total knee arthroplasty (TKA). At this point, it was not feasible for CMS to add readmission measures for three of the conditions identified by MedPAC in its 2007 Report to Congress (CABG, PCI, and other vascular conditions). We noted that inpatient admissions for PCI and other vascular conditions seem to be decreasing, and these procedures are being performed more in hospital outpatient departments. We stated that this shift in setting for these procedures may make their future inclusion in the Hospital Readmission Reduction Program more difficult and impracticable because: (1) The statutory definition of a readmission in section 3025 of the Affordable Care Act does not allow admissions following procedures performed on an outpatient basis to count as a readmission for purposes of this program, and (2) the shift of this procedure to the outpatient setting may result in much lower inpatient counts for this procedure, and hence potential statistical modeling issues. We also stated that we would explore how we may address CABG in this program at a future time. Comment: Several commenters addressed delaying implementation of CABG and PCI measures in the Hospital Readmissions Reduction Program. Some commenters supported delayed inclusion of a CABG readmission measure and stated that CMS should explore options on developing a CABG readmission measure for the Hospital Readmissions Reduction Program in the future. Other commenters generally supported the proposal to exclude vascular and PCI measures from the Hospital Readmissions Reduction Program at this time. However, other commenters opposed the proposal to exclude these measures from the program and requested clarification on the proposal. These commenters suggested that CMS include measures PO 00000 Frm 00163 Fmt 4701 Sfmt 4700 50657 for CABG, PCI, and other vascular conditions because MedPAC previously recommended inclusion of these measures in the Hospital Readmissions Reduction Program. One commenter further stated that, instead of THA/TKA, CMS should have focused on CABG, COPD, Percutaneous transluminal coronary angioplasty, and other vascular conditions for the Hospital Readmissions Reduction Program. Response: We appreciate the commenters’ feedback and suggestions. However, did not propose to include measures for these conditions because inclusion would not be feasible at this time. First, we found that inpatient admissions for PCI and other vascular conditions appear to be decreasing. Second, it appears that hospitals are increasingly performing procedures relating to these conditions in outpatient departments. Therefore, given the apparent shift in settings for these procedures, inclusion of these measures in the Hospital Readmissions Reduction Program is not currently practical. However, moving forward, we will continue to review these conditions and may consider them in future rulemaking. Comment: Several commenters addressed the expansion of measures for the Hospital Readmissions Reduction Program. One commenter suggested that CMS make the process for selecting measures for the Hospital Readmissions Reduction Program more transparent moving forward. Another commenter suggested that CMS add a wider variety of conditions to the program. Other commenters stated that CMS should ensure that hospitals are aware of the proposed expansion of the Hospital Readmissions Reductions Program and how the program works. Response: We appreciate the commenters’ suggestions and will take them into consideration for future rulemaking. We will continue to review and monitor the program to determine whether additional conditions should be added. We also have taken a number of steps to ensure that hospitals are aware of the proposed expansion and how the program works, including press releases, open door forums, as well as through the Federal rulemaking process. However, we maintain that our measure selection process for the Hospital Readmissions Reduction Program strives to ensure transparency and allows the public several opportunities to comment on measures being selected for the Hospital Readmissions Reduction Program. First, prior to being proposed in the proposed rule, we place our measures on a measure under consideration list, which is made public E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50658 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations by December 1 of each year. The Measure Application Partnership (MAP), a multi-stakeholder group convened by the NQF, then reviews the measures being proposed for Federal programs and provides input on those measures to the Secretary. The MAP process also allows an opportunity for the public to comment on the proposed measures being considered for selection and to participate in the MAP process. Second, should a measure be proposed through rulemaking for use in the Hospital Readmissions Reduction Program, the public may comment on any measure through the public comment period for the proposed rule. Therefore, we believe that the various opportunities available both before and during the rulemaking process provide safeguards to ensure public transparency. However, we will continue to review the measure selection process and make adjustments as needed to continue maintaining high levels of public transparency. Comment: One commenter agreed with all of MedPAC’s public comments on the Hospital Readmissions Reduction Program except for MedPAC’s recommendation to incorporate a hospital-wide readmission measure in the program. Specifically, in its public comment, MedPAC recommended that the law be redefined to address the following: The readmission penalty formula; random variation with single condition readmissions rates due to a small number of observations; readmission and mortality related to heart failure, and readmission rates and penalties being correlated with a lowincome patient share. Response: We appreciate the commenter’s feedback. We emphasize that we have included several of MedPAC’s previously recommended conditions for the Hospital Readmissions Reduction Program, including the incorporation of the COPD readmission measure in the program. However, other MedPAC recommendations could not be implemented for a number of reasons. First, some of MedPAC’s recommendations, such as those relating to changes to the readmission penalty, would require a legislative change. Second, in regard to those MedPAC recommendations to include a PCI measure in the Hospital Readmissions Reduction Program, we cannot implement the measure at this time because the current PCI measure also uses outpatient data, which makes it ineligible for the Hospital Readmissions Reduction Program. However, we are working towards finding a suitable PCI measure for the Hospital Readmissions VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Reduction Program and may introduce such a measure in future rulemaking. Comment: Some commenters expressed concern with measures overlapping with other programs. One commenter suggested that CMS not use the same measures in more than one program, such as the Hospital IQR Program. Another commenter raised concerns about penalties that would incur as a result of measures overlapping. Response: We appreciate the commenter’s feedback. We acknowledge stakeholders’ concern with potential measure overlap in our programs. However, several stakeholders requested that we align our programs and measures to decrease provider burden associated with multiple reporting programs. Further, the Hospital Readmissions Reduction Program and the Hospital IQR Program are separate hospital reporting programs with different purposes and policy goals. The Hospital Readmissions Reduction Program is a program that reduces payments to hospitals for excess readmissions to increase patient safety in hospitals, therefore, the payment adjustment is based on hospital performance on the readmissions measures. On the other hand, the Hospital IQR Program is a reporting program in which the applicable percentage increase applied to the hospital’s payment rate is dependent on whether the hospital satisfactorily reported data on the Hospital IQR measures. Therefore, although we acknowledge that similar measures may exist in both programs, the measures are used and calculated for different purposes. We maintain that the safety of our beneficiaries, coupled with the overwhelming requests by stakeholders to align all programs and measures, justify the use of some measures in more than one program. However, we will in the future monitor this issue and revise and update the program’s measures, if needed. Comment: MedPAC recommended that CMS include an all-condition readmission measure in the Hospital Readmissions Reduction Program. Response: We appreciate MedPAC’s suggestion and will take it into consideration in future rulemaking for the Hospital Readmissions Reduction Program. Comment: One commenter suggested that CMS include ESRD patients under the age of 65 from the readmission measures. While the commenter understood our current policy to exclude patients under the age of 65 from the readmissions measures and excessive readmissions data, the PO 00000 Frm 00164 Fmt 4701 Sfmt 4700 commenter encouraged CMS to reconsider this policy for FY 2014 for those with end-stage renal disease (ESRD) who are on dialysis and readmitted for any of the diagnosis codes under the readmissions and excessive readmissions reduction program. Response: We appreciate the commenter’s suggestion. However, we exclude Medicare patients under the age of 65, including ESRD patients, from the readmission measures because patients under the age of 65 have markedly different clinical risk profiles from other patients in the 65 and over category that are included in the measure. In general, we seek to address clinical differences in hospitals’ case-mix through riskadjustment rather than through excluding patients from the measure because the goal in developing outcomes measures is to create a clinically cohesive cohort that includes as many patients as possible admitted with the given condition. We include patients 65 and over, including ESRD patients, in our measure and our riskadjustment methodology takes into consideration ESRD-related comorbidities such as ESRD or dialysis and renal failure. Comment: One commenter requested that CMS develop process and outcomes measures to be reported alongside the readmission measures to evaluate transitions of care. Response: We appreciate the commenter’s suggestion and will take it into consideration in future rulemaking for the Hospital Readmissions Reduction Program. After consideration of the public comments we received and in light of the MedPAC recommendation, we are finalizing our proposal to include a measure of patients admitted for an acute exacerbation of COPD. Also, although MedPAC did not recommend inclusion of patients admitted for elective THA and TKA, we consider this category appropriate for the Hospital Readmissions Reduction Program because it is a high-volume and highexpenditure procedure and are finalizing the adoption of this measure in this final rule. For example, in 2003, 202,500 primary hip arthroplasties and 402,100 primary total knee arthroplasties were performed.21 The number of procedures performed has increased steadily over the past decade.22 Although these 21 Kurtz S, Ong K, Lau E, Mowat F, Halpern M.: Projections of primary and revision hip and knee arthroplasty in the United States from 2005 to 2030. J Bone Joint Surg Am. Apr 2007;89(4):780–785. 22 Ong KL, Mowat FS, Chan N, Lau E, Halpern MT, Kurtz SM. Economic burden of revision hip E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations procedures can dramatically improve patient health-related quality-of-life, they are costly. In 2005, annual hospital charges totaled $3.95 billion and $7.42 billion for primary THA and TKA, respectively.23 The aggregate costs for THA are projected to increase by 340 percent over a 10-year period, to $17.4 billion per fiscal year by FY 2015, and for TKA, by 450 percent to $40.8 billion per fiscal year by 2015.24 Medicare is the single largest payer for these procedures, covering approximately two-thirds of all THAs and TKAs performed in the United States.25 THA and TKA procedures combined account for the largest procedural cost in the Medicare budget.26 Therefore, as explained in detail below, we believe that it is appropriate to include THA/ TKA as an applicable condition. We developed a hospital-level, 30day, all-cause, risk-standardized readmission measure for THA/TKA. NQF endorsed the measure (NQF #1551) in January of 2012. The measure incorporated the Planned Readmission Version 2.1 algorithm and excludes transfers. Accordingly, we believe that the THA/TKA measure met the criteria of applicable condition and are finalizing it for the Hospital Readmissions Reduction Program. The rationale for expanding the applicable conditions and the measures used to estimate the Excess Readmission Ratios are described in detail below, as discussed in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27597 through 27599). mstockstill on DSK4VPTVN1PROD with RULES6 (2) COPD Readmission Measure COPD is a leading cause of readmissions to hospitals.27 In 2007, the MedPAC published a report to Congress in which it identified the seven conditions associated with the most costly potentially preventable readmissions. Among these seven conditions, COPD ranked fourth.28 and knee arthroplasty in Medicare enrollees. Clin Orthop Relat Res. May 2006;446:22–28. 23 Kurtz SM, Ong KL, Schmier J, et al.: Future clinical and economic impact of revision total hip and knee arthroplasty. J Bone Joint Surg Am. Oct 2007;89 Suppl 3:144–151. 24 Ibid. 25 Ong KL, Mowat FS, Chan N, Lau E, Halpern MT, Kurtz SM. Economic burden of revision hip and knee arthroplasty in Medicare enrollees. Clin Orthop Relat Res. May 2006;446:22–28. 26 Bozic KJ, Rubash HE, Sculco TP, Berry DJ. An analysis of medicare payment policy for total joint arthroplasty. Journal of Arthroplasty. 2008;23(6 Suppl 1):133–138. 27 Jencks SF, Williams MV, Coleman EA. Rehospitalizations among patients in the Medicare fee-for-service program. N Engl J Med. April 2 2009;360(14):1478–1428. 28 Committee MPA. Report to the Congress: Promoting Greater Efficiency in Medicare. 2007. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Evidence also shows variation in readmissions for patients with COPD, supporting the finding that opportunities exist for improving care. The median, 30-day, risk-standardized readmission rate among Medicare feefor-service patients aged 65 or older hospitalized for COPD in 2008 was 22.0 percent, and ranged from 18.33 percent to 25.03 percent across 4,546 hospitals.29 Clinical trials and observational studies suggest that several aspects of care provided to patients hospitalized for exacerbations of COPD can have significant effects on readmission.30 31 32 33 In addition, inclusion of this measure in the Hospital Readmissions Reduction Program aligns with CMS’ priority objectives to promote successful transitions of care for patients from the acute care setting to the outpatient setting, and reduces short-term readmission rates. Therefore, as we stated in the FY 2014 IPPS/LTCH PPS proposed rule, we believe the COPD measure warrants inclusion in the Hospital Readmissions Reduction Program for FY 2015. We invited public comments on this proposal. Comment: Several commenters supported the proposed expansion of applicable conditions to include patients admitted for an acute exacerbation of COPD and patients admitted for elective THA and TKA. Response: We appreciate the commenters’ support of the expansion of the Hospital Readmissions Reduction Program. Comment: One commenter suggested that CMS not expand the Hospital Readmissions Reduction Program to include additional measures due to lack 29 Grosso L.M., Lindenauer P., Wang C., et al.: Hospital-level 30-day Readmission Following Admission for an Acute Exacerbation of Chronic Obstructive Pulmonary Disease: Report prepared for the Centers for Medicare & Medicaid Services. 2011; Available at: https://www.qualitynet.org/. 30 Global Strategy for Diagnosis M, and Prevention of COPD. 2009; Available at: https:// www.goldcopd.org/. 31 National Institute for Health and Clinical Excellence. Chronic Obstructive Pulmonary Disease: Management of Chronic Obstructive Pulmonary Disease in Adults in Primary and Secondary Care (Partial Update):. National Collaborating Centre for Acute and Chronic Conditions. Available at: https://www.nice.org.uk/ nicemedia/live/13029/49397/49397.pdf. 32 Walters JA, PG Gibson, R Wood-Baker, M Hannay, EH Walters. Systemic corticosteroids for acute exacerbations of chronic obstructive pulmonary disease. Cochrane Database Syst Rev. 2009;CD001288(1). 33 Lightowler JV, Wedzicha JA, Elliott MW, Ram FS. Non-invasive positive pressure ventilation to treat respiratory Failure resulting from exacerbations of chronic obstructive pulmonary disease: Cochrane systematic review and metaanalysis. Bmj. 2003;326(7382). PO 00000 Frm 00165 Fmt 4701 Sfmt 4700 50659 of risk-adjustment of pre-existing conditions. Response: The COPD and hip/knee measures risk-adjust for key factors that are clinically relevant and are strongly correlated with the likelihood for readmission (for example, patient demographic factors, patient coexisting medical conditions, and indicators of patient frailty). Under the current NQFendorsed methodology, these covariates are obtained from Medicare claims extending 12 months prior to, and including, the index admission. This risk-adjustment approach adjusts for differences in the clinical status of the patient at the time of the index admission, as well as for demographic variables. A complete list of the variables used for risk-adjustment and the clinical and statistical process for selecting the variables for each NQFendorsed measure, as proposed, is available on our Web site at: https://cms. gov/Medicare/Quality-Initiatives-Patient -Assessment-Instruments/Hospital QualityInits/Measure-Methodology. html. Comment: Some commenters recommended that CMS not expand the Hospital Readmissions Reduction Program to include additional conditions because the measures for the program are not reliable. The commenters suggested that CMS raise the minimum case threshold required for hospitals to quality for the Hospital Readmissions Reduction Program to well over 25 cases in order to improve reliability. Response: We appreciate the commenters’ feedback. However, we disagree that the Hospital Readmissions Reduction Program uses unreliable measures. First, the NQF both reviewed and endorsed all measures used in the Hospitals Readmissions Reduction Program. Second, as previously stated in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53379), ‘‘We determined the 25case threshold for public reporting based on a reliability statistic that is calculated from the intercluster correlation, a parameter of the model. We are maintaining the minimum 25case threshold that we adopted through rulemaking last year.’’ We have further considered how to best measure quality for low-volume hospitals in order to address the concerns raised by stakeholders. We acknowledge that smaller hospitals do typically have less certain estimates because they have fewer cases for use in assessing quality. However, this challenge is inherent in outcome measurement. One advantage of the statistical model that we use for the measures is that it allows for the E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50660 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations inclusion of small hospitals while characterizing the certainty of their estimates. The hierarchical logistic regression model that we use to calculate the risk-standardized outcome measures allows the inclusion of hospitals with relatively few observations, but takes into account the uncertainty associated with sample size in estimating their risk-standardized outcome rates. The model takes into account the uncertainty in the estimate of outcome rates for low-volume hospitals by assuming that each hospital is a typically performing hospital. It weighs that assumption along with the outcomes for the particular hospital in calculating the outcome rate. Therefore, the estimated outcome rates for smaller hospitals will likely be closer to the national rate because the limited number of eligible cases in the hospital tells little about that hospital’s true outcome rate. Comment: One commenter suggested that CMS provide hospitals with a preview of their COPD and THA/TKA readmission data before these measures are included in the Hospital Readmissions Reduction Program. Response: We appreciate the commenter’s suggestion. Hospitals will have an opportunity to review and correct the readmissions data relating to these measures prior to its release to the public on the Hospital Compare Web site. We expect that these data will be provided around June of 2014. Comment: Several commenters addressed risk-adjusting the COPD, THA, and TKA measures to account for socioeconomic status. One commenter stated that CMS should not further expand the Hospital Readmissions Reduction Program beyond current and proposed conditions without properly planning to risk-adjust for education level and socioeconomic status. Another commenter stated that a patient’s ability to afford medication should be included as a risk-adjustment variable because socioeconomic status impacts the patient’s ability to be compliant with medications and a patient’s ability to pay for medications is separate and apart from the care provided by the hospital. One commenter suggested that a hospital’s performance on the COPD measure be compared to its peer hospitals that serve a similar population, rather than to all hospitals. For example, safety-net hospitals with large minority populations should be compared only to each other, rather than to all hospitals in the country. Response: We appreciate the commenters’ feedback. We have continued to consider and evaluate stakeholder concerns regarding the VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 influence of patient socioeconomic status on readmission and mortality rates. The Hospital Readmissions Reduction Program, as pointed out by one commenter, seeks to transform the Medicare payment and delivery system by financially incentivizing providers to change the way they deliver care. The program’s design encourages hospitals to make changes to avoid payment penalties while simultaneously enhancing the quality of health care provided to patients. We routinely monitor the impact of low socioeconomic status, using the proportion of patients enrolled in Medicaid as a proxy for low-income, on hospitals’ results and have consistently found that hospitals that care for large proportions of patients of low socioeconomic status are capable of performing well on our measures. Our most recent analyses, available on our Web site at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessmentInstruments/HospitalQuality Inits/Downloads/MedicareHospital QualityChartbook2012.pdf, again confirmed this finding. Many safety-net providers and teaching hospitals do as well or better on the measures than hospitals without substantial numbers of patients of low socioeconomic status. Our analyses also show that adding socioeconomic status to the riskadjustment has a negligible impact on hospitals’ risk-standardized rates. The risk-adjustment for clinical factors likely captures much of the variation due to socioeconomic status, therefore leading to more modest impact of socioeconomic status on hospitals’ results than stakeholders expect. We note that the goal of risk-adjustment is to account for factors that are inherent to the patient at the time of admission, such as severity of disease, so as to put hospitals on a level playing field. The measures should not be risk-adjusted to account for differences in practice patterns that lead to lower or higher risk for patients to be readmitted or die. The measures aim to reveal differences related to the patterns of care. The measures do not risk-adjust for socioeconomic status because the association between socioeconomic status and health outcomes can be due, in part, to differences in the quality of health care received by groups of patients with varying socioeconomic status. The measures also are not riskadjusted for socioeconomic status, or other patient factors such as race, because we do not want to hold hospitals to different standards for the outcomes of their patients of low socioeconomic status. Finally, we do PO 00000 Frm 00166 Fmt 4701 Sfmt 4700 not want to mask potential disparities or minimize incentives to improve the outcomes of disadvantaged populations. This approach also is consistent with the guidance from the NQF,34 which states that risk models should not obscure disparities by adjusting for factors associated with inequality (such as race or socioeconomic status). Furthermore, the statutory language in section 1886(q)(5)(A)(ii)(I) of the Act requires that the measures included in the Hospital Readmissions Reduction Program for FYs 2013 and 2014 be NQFendorsed. However, we are committed to tracking this issue and will continue to evaluate disparities in care and the impact of patient’s socioeconomic status on hospital’s rates. (3) Overview of COPD Measure: Hospital-Level, 30-Day, All-Cause, RiskStandardized Readmission Rate (RSRR) following Chronic Obstructive Pulmonary Disease (COPD) Hospitalization (NQF #1891) The COPD readmission measure assesses hospitals’ 30-day, all-cause risk-standardized rate of readmission for an acute exacerbation of COPD (AECOPD). In general, the measure uses the same approach to risk-adjustment and hierarchical logistic modeling (HLM) methodology that is specified for CMS’ AMI, HF, and PN readmission measures previously adopted for this program. Information on how the measure employs HLM can be found in the 2011 COPD Readmission Measure Methodology Report (available at: https://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html). This approach appropriately accounts for the types of patients a hospital treats (that is, hospital case-mix), the number of patients it treats, and the quality of care it provides. The HLM methodology is an appropriate statistical approach to measuring quality based on patient outcomes when the patients are clustered within hospitals (and, therefore, the patients’ outcomes are not statistically independent) and sample sizes vary across hospitals. The measure methodology defines hospital case-mix based on the clinical diagnoses provided in the hospitals’ claims for the hospitals’ patient inpatient and outpatient visits for the 12 months prior to the hospitalization for COPD, as well as those present in the claims for care at admission. However, the methodology specifically does not 34 National Quality Forum, Measure Evaluation Criteria (November, 2012). Available at: https:// www.qualityforum.org/docs/measure_evaluation_ criteria.aspx. E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 account for diagnoses present in the index admission that may indicate complications rather than patient comorbidities. As we did in the proposed rule, we are providing a summary of the measure methodology below. For further details on the risk-adjustment statistical model, we refer readers to the 2011 COPD Readmission Measure Methodology Report that we have posted on the CMS Web site at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/ HospitalQualityInits/MeasureMethodology.html. NQF endorsed the measure (NQF #1891) in March 2013 (https://www.qualityforum.org/QPS/ 1891). • Data Sources. The COPD measure is claims-based. It uses Medicare administrative data from hospitalizations for fee-for-service Medicare beneficiaries hospitalized with an acute exacerbation of COPD (AECOPD). • Outcome. The outcome for the COPD measure is 30-day, all-cause readmission, defined as an unplanned subsequent inpatient admission to any applicable acute care facility from any cause within 30 days of the date of discharge from the index hospitalization. A number of studies demonstrate that improvements in care at the time of discharge can reduce 30-day readmission rates.35 36 It is a timeframe that a readmission may reasonably be attributed to the hospital care and transitional period to a subacute care setting. The COPD readmissions measure assesses all-cause unplanned readmissions (excluding planned readmissions) rather than readmissions for acute exacerbations of COPD only. As we stated in the proposed rule, we proposed this measure for several reasons. First, from the patient perspective, a readmission for any reason is likely to be an undesirable outcome of care, even though not all readmissions are preventable. Second, limiting the measure to COPD-related readmissions may limit the effort focus too narrowly rather than encouraging broader initiatives aimed at improving the overall care within the hospital and transitions from the hospital setting. 35 Gulshan Sharma, Kou Yong-Fang, Freeman Jean L, Zhang Dong D, Goodwin James S.: Outpatient Follow-up Visit and 30-Day Emergency Department Visit and Readmission in Patients Hospitalized for Chronic Obstructive Pulmonary Disease. Arch Intern Med. Oct. 2010;170:1664– 1670. 36 Nelson EA, Maruish ME, Axler JL.: Effects of Discharge Planning and Compliance with Outpatient Appointments on Readmission Rates. Psychiatr Serv. July 1 2000;51(7):885–889. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Moreover, it is often hard to exclude quality issues and accountability based on the documented cause of readmission. For example, a patient with COPD who develops a hospitalacquired infection may ultimately be readmitted for sepsis. It would be inappropriate to consider such a readmission to be unrelated to the care the patient received for COPD. Finally, while the measure does not presume that each readmission is preventable; interventions generally have shown reductions in all types of readmissions. The measure does not count planned readmissions as readmissions. Planned readmissions are identified in claims data using the CMS Planned Readmission Algorithm Version 2.1 that detects planned readmissions that may occur within 30 days of discharge from the hospital. This algorithm is described briefly in section V.G.3.b.(2)(a) of the preamble of this final rule and more detailed information can be found on the CMS Web site at: https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html. For the COPD measure, unplanned readmissions that fall within the 30-day post discharge timeframe from the index admission would not be counted as readmissions for the index admission if they were preceded by a planned readmission (we refer readers to section V.G.3.b.(2)(b) of the preamble of this final rule on the counting of readmissions that occur after a planned readmission). • Cohort of Patients. COPD is a group of lung diseases characterized by airway obstruction. Patients hospitalized for an acute exacerbation of COPD (AECOPD) present with varying degrees of severity ranging from a worsening of baseline symptoms (dyspnea, cough, and/or sputum) to respiratory failure. To capture the full spectrum of severity of patients hospitalized for an AECOPD, the measure includes patients with a principal diagnosis of COPD, as well as those with a principal diagnosis of respiratory failure with a secondary diagnosis of an AECOPD. Requiring AECOPD as a secondary diagnosis helps to identify respiratory failure due to COPD exacerbation versus another condition (for example, heart failure). For detailed information on the cohort definition, we refer readers to the 2013 COPD Readmission Measure Updates and Specifications Report on the CMS Web site at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/ HospitalQualityInits/MeasureMethodology.html. PO 00000 Frm 00167 Fmt 4701 Sfmt 4700 50661 • Inclusion and Exclusion Criteria. The COPD measure includes hospitalizations for patients who are 65 years of age or older at the time of index admission and for whom there was a complete 12 months of Medicare fee-forservice (FFS) enrollment to allow for adequate risk-adjustment. The measure excludes the following admissions from the measure cohort: (1) Admissions for patients who die during the initial hospitalization (these patients are not eligible for readmission); (2) admissions for patients having a principal diagnosis of COPD during the index hospitalization and subsequently transferred to another acute care facility (these are excluded because the measure focuses on discharges to a nonacute care setting such as the home or a SNF); (3) admissions for patients that are discharged against medical advice (AMA) (excluded because providers do not have the opportunity to deliver full care and prepare the patient for discharge); (4) admissions for patients without at least a 30-day post-discharge enrollment in Medicare FFS (excluded because the 30-day readmission outcome cannot be assessed in this group); and (5) additional COPD admissions for patients within 30 days of discharge from an index COPD admission will be considered readmissions and not additional index admissions. • Risk-Adjustment. The COPD measure adjusts for differences across hospitals in how at risk their patients are for readmission relative to patients cared for by other hospitals. The measure uses claims data to identify patient clinical conditions and comorbidities to adjust patient risk for readmission across hospitals, but does not adjust for potential complications of care. Consistent with NQF guidelines, the model does not adjust for socioeconomic status or race because risk-adjusting for these characteristics would hold hospitals with a large proportion of patients of minority race or low socioeconomic status to a different standard of care than other hospitals. Rather, this measure seeks to illuminate quality differences, and riskadjustment for socioeconomic status or race would obscure such quality differences. • Calculating the Excess Readmission Ratio. The COPD readmission measure uses the same methodology and statistical modeling approach as the AMI, HF, and PN measures. We published a detailed description of how the readmission measures estimate the Excess Readmission Ratio used in the Hospital Readmissions Reduction E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50662 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Program in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53380 through 53381). Comment: Several commenters stated that CMS should not adopt the COPD all-cause readmission measure. Some commenters stated that unrelated readmissions are outside the hospital’s control or are not preventable. The commenters added that COPD patients often have other conditions for which they are admitted. Another commenter added that the hospital could not adequately plan for such readmissions and, therefore, should not be accountable. That commenter recommended that the causes for readmission be narrowed to more closely align with the index diagnosis. Response: We appreciate the commenters’ feedback. However, we do not seek to differentiate between related and unrelated readmissions because readmissions not directly related to the index condition may still be a result of the care received during the index hospitalization. For example, a patient hospitalized for COPD who develops a hospital-acquired infection may ultimately be readmitted for sepsis. It would be inappropriate to treat this readmission as unrelated to the care the patient received during the index hospitalization. Furthermore, the range of potentially avoidable readmissions also includes those not directly related to the initial hospitalization, such as those resulting from poor communication at discharge or inadequate follow-up. As such, creating a comprehensive list of potential complications related to the index hospitalization would be arbitrary, incomplete, and, ultimately, impossible to implement. However, in coordination with medical experts we expanded the list of conditions considered planned. Generally speaking, planned readmissions are not a signal of quality of care. Therefore, we have worked with experts in the medical community, as well as other stakeholders to carefully identify procedures and treatments that should be considered ‘‘planned’’ and therefore not counted as readmissions. For the FY 2014 program, we have proposed that the measures identify planned readmissions by using an expanded algorithm, which is a set of criteria for classifying readmissions as planned using Medicare claims. This algorithm identifies admissions that are typically planned and may occur within 30 days of discharge from the hospital. We developed the COPD measure to reflect the quality of care delivered to patients who are hospitalized with COPD. The goal of this measure is to improve patient outcomes by providing patients, physicians, and hospitals with VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 information about hospital-level, riskstandardized readmission rates following hospitalization for COPD. The measure is not intended to drive hospitals to a zero readmission rate, but rather is designed to encourage hospitals to identify opportunities to systematically reduce readmission risks in their environment. We do not assume all readmissions are preventable. The goal of the readmission measure is to identify hospitals that seem to have excess readmissions above and beyond what would be expected for their casemix. Careful discharge planning and instructions, communication with outpatient providers, attention to patient safety, and prevention of infections are all important for reducing readmissions. Hospitals that take these and other steps to reduce readmissions will have lower overall readmission rates and will likely have better rates on this measure. Comment: Some commenters stated that the current measures will encourage hospitals to not accept COPD patients or hip/knee patients to avoid high readmission rates and because its poses a financial risk. Response: We recognize that performance-based payment programs may have the potential for unintended consequences. We are committed to monitoring the COPD measure and assessing unintended consequences over time, such as the inappropriate shifting of care, increased patient morbidity and mortality, and other negative unintended consequences for patients. Comment: One commenter suggested that CMS implement standard intervention strategies to reduce COPD readmissions. Response: We appreciate the commenter’s suggestion, but note that the Hospital Readmissions Reduction Program does not implement intervention strategies. Comment: Some commenters stated that the COPD readmission measure should not be included in the program because the MAP did not recommend the measure. Response: We appreciate the commenters’ feedback. However, the MAP did support the measure for use in the Hospital IQR Program and does further support the direction of the measure for use in the Hospital Readmissions Reduction Program. Further, the NQF, the entity who convenes the MAP, subsequently reviewed and endorsed the COPD readmissions measure for use in the Hospital Readmissions Reduction Program. We refer readers to the MAP February 2013 Pre-rulemaking report for PO 00000 Frm 00168 Fmt 4701 Sfmt 4700 more information about their recommendations regarding these measures. The report can be found on the following Web site at: https:// www.qualityforum.org/Publications/ 2013/02/MAP_Pre-Rulemaking_Report__February_2013.aspx. We also received several comments supporting using the COPD readmission measure in the Hospital Readmissions Reduction Program. We believe that this support, coupled with MedPAC’s recommendation to include the measure into the program, warrants adoption of the COPD readmissions measure in the Hospital Readmissions Reduction Program. Comment: One commenter suggested that the COPD measure be added to the Hospital VBP Program. Response: Section 1886(o)(2)(A) of the Act statutorily prohibits us from including readmission measures in the Hospital VBP Program. Comment: One commenter suggested that the COPD readmission measure should risk-adjust for environmental factors, such as pollution. Response: We appreciate the commenter’s suggestion. During measure development, we conducted a literature review and consulted with experts to explore risk-adjustment for environmental factors, such as levels of particulate matter, affecting respiratory patients. We found that the literature suggests that ambient levels of particulate matter affect short-term mortality and admission rates for COPD (and for other cardiovascular and respiratory conditions). Although important from a public health standpoint, the increases in risk are relatively small. We did not find any studies of the effect of ambient particulates on mortality and readmission rates among patients hospitalized for COPD. The purpose of risk-adjustment is to account for differences across hospitals in factors unrelated to quality, such as patient comorbidities, that may affect the outcome of mortality and readmission. It is important to risk-adjust for factors that could bias the measure results (for example, could favor hospitals in low pollution areas). Risk-adjusting for environmental factors would make sense if it were technically feasible and if it would improve the model by reducing or eliminating a potential bias. We believe that variables for environmental factors are unlikely to affect hospital-level risk-standardized rates. The studies to date focus on the general nonhospitalized population, and it is not clear how they apply to the patients in our models—that is, patients hospitalized with an acute exacerbation E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 of COPD. We believe that the effect of risk-adjusting for particulate matter would likely be small or negligible, given that the model applies to patients already hospitalized for COPD. Second, there are feasibility issues with respect to collecting such information. Modeling the effect appropriately would be complex. Our review of the issues suggests it would be inappropriate to use ambient air quality levels as a riskadjuster without also adjusting for other factors that affect the strength and direction of the potential association between particulate levels and outcomes, including temperature, humidity, seasonal variation, and citylevel factors such as smoking and air conditioning use rates. Given these challenges, and our expectation that building particulate levels into the model is not likely to significantly improve the models’ performance even with the best methods, we do not plan to pursue adding air pollution variables to the models at this time. Comment: One commenter did not support the COPD readmission measure in the Hospital Readmissions Reduction Program because the commenter believed that the measure is closely related to heart failure readmissions measure. Response: We appreciate the commenter’s feedback. However, we disagree that the measures are closely related. COPD is a group of lung diseases characterized by airway obstruction. Patients hospitalized for an acute exacerbation of COPD (AECOPD) present with varying degrees of severity ranging from a worsening of baseline symptoms (dyspnea, cough, and/or sputum) to respiratory failure. To capture the full spectrum of severity of patients hospitalized for an AECOPD, we included patients with a principal diagnosis of COPD, as well as those with a principal diagnosis of respiratory failure who had a secondary diagnosis of an AECOPD. Requiring AECOPD as a secondary code helps to identify respiratory failure due to COPD exacerbation versus another condition (for example, heart failure). (4) Adoption of the COPD Measure for the Hospital Readmissions Reduction Program In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27599), we proposed to adopt the COPD measure in the Hospital Readmissions Reduction Program beginning in FY 2015. We also proposed the COPD measure for use in the Hospital IQR Program for FY 2014 (discussed in section IX.A. of this preamble). We noted that the set of hospitals for which this measure was VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 calculated for the Hospital Readmissions Reduction Program differs from those used in calculations for the Hospital IQR Program. The Hospital Readmissions Reduction Program includes only subsection (d) hospitals as defined in 1886(d)(1)(B) of the Act and hospitals paid under section 1814(b)(3) of the Act (that is, Maryland hospitals), while the Hospital IQR Program calculations include non-IPPS hospitals such as CAHs, cancer hospitals, and hospitals located in the Territories of the United States. However, we believe that the COPD measure is appropriate for use in both programs. We invited public comments on this proposal. Comment: Several commenters supported adding COPD to the Hospital Readmissions Reduction Program, but suggested that CMS not add the COPD readmission measure to Hospital Readmissions Reduction Program until it has been in the Hospital IQR Program for a period of time first. The commenters suggested a timeframe of between 1 to 2 years to allow hospitals to improve performance prior to the measure being adopted under any payfor-performance program. One commenter explained that hospitals have no experience with this measure and no data from CMS and, therefore, will not be able to incorporate changes before penalties are assessed. Response: We appreciate the commenters for their suggestions. We are cognizant of stakeholder requests to have the COPD readmission measure in the Hospital IQR Program first, given the lack of experience with this measure. However, we note that the COPD measure is being adopted under the Hospital IQR Program in FY 2014 and under the Hospital Readmissions Reduction Program in FY 2015. Therefore, stakeholders will have the opportunity to become familiar with the measure prior to its inclusion in the Hospital Readmissions Reduction Program. Further, we note that the COPD readmissions measure represents both a high-impact and high-cost condition that warrants inclusion in the Hospital Readmissions Reduction Program. In addition, MedPAC recommended the measure for inclusion in the Hospital Readmissions Reduction Program. Including this measure in the Hospital Readmissions Reduction Program aligns with our priority objectives to promote successful transitions of care for patients from the acute care setting to the outpatient setting, and reduces short-term readmission rates. Comment: One commenter suggested that CMS study the relationship between COPD readmissions and PO 00000 Frm 00169 Fmt 4701 Sfmt 4700 50663 mortality before adopting the COPD readmissions measure in the Hospital Readmissions Reduction Program. Response: We appreciate the commenter’s suggestion. However, in general, we believe that there does not appear to be a meaningful correlation between hospital risk-standardized mortality rates and readmission rates. We consider that hospital performance on mortality and readmission measures represent different aspects of quality. Researchers have found that performance on risk-standardized mortality rates was not strongly correlated with performance on riskstandardized readmission rates for HF, and not at all for AMI and PN.37 We recognize the commenter’s concern and will monitor the correlation as part of our hospital quality surveillance. After consideration of the public comments we received, we are finalizing our proposal to include the COPD readmissions measure in the Hospital Readmissions Reduction Program. (5) Total Hip Arthroplasty (THA) and Total Knee Arthroplasty (TKA) Measure As discussed in the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR 27599), THA and TKA are commonly performed procedures that improve quality of life. Between 2008 and 2010, over 1.4 million THA and TKA procedures were performed on Medicare FFS patients aged 65 years and older.38 However, the costs of these procedures, especially to Medicare, are very high. Combined, THA and TKA procedures account for the largest procedural cost in the Medicare budget.39 Evidence also shows variation in readmissions of patients with THA/TKA procedures, supporting the finding that opportunities exist for improving care. The median 30-day risk-standardized readmission rate among Medicare FFS patients aged 65 or older undergoing THA/TKA procedures between 2008 and 2010 was 5.7 percent, and ranged from 3.2 percent to 9.9 37 Citation Krumholz HM, Lin Z, Keenan PS, et al. Relationship between hospital readmission and mortality rates for patients hospitalized with acute myocardial infarction, heart failure, or pneumonia. JAMA. 2013; 309(6):587–593)’’. 38 Gross, L.M., Curtis, J.P., Lin, Z., et al.: Hospitallevel 30-Day All-Cause Risk-Standardized Readmission Rate Following Elective Primary total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA): Report prepared for the Centers for Medicare & Medicaid Services, 2012. Available on the Web site at: https://www.qualitynet.org/. 39 Bozic KJ, Rubash HE, Sculco TP.: Berry DJ. An analysis of medicare payment policy for total joint arthroplasty. J Arthroplasty. Sep 2008;23(6 Suppl 1):133–138. E:\FR\FM\19AUR2.SGM 19AUR2 50664 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 percent across 3,497 hospitals.40 In addition, inclusion of a THA/TKA measure in the Hospital Readmissions Reduction Program aligns with CMS’ priority objectives to promote successful transitions of care for patients from the acute care inpatient setting to the outpatient setting, and reduces shortterm readmission rates. Therefore, we believe the THA/TKA measure warrants inclusion in the Hospital Readmissions Reduction Program for FY 2015. (6) Overview of the THA/TKA Measure: Hospital-Level 30-Day All-Cause RiskStandardized Readmission Rate (RSRR) Following Elective Total Hip Arthroplasty (THA) and Total Knee Arthroplasty (TKA) (NQF #1551) To better assess hospital care and care transitions for patients with elective THA/TKA procedures, we developed a hospital-level readmission measure for patients undergoing elective primary THA and/or TKA procedures. We finalized this measure for use in the Hospital IQR Program in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53519 through 53521). In the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR 27599), we proposed to include this measure, updated with the CMS Planned Readmission Algorithm Version 2.1 adapted for THA/TKA (discussed in section V.G.3.b.(2) of this preamble) to: (1) Expand the applicable conditions for the Hospital Readmissions Reduction Program; (2) derive the Excess Readmission Ratio for patients with THA/TKA procedures; and (3) calculate the readmission payment adjustments in FY 2015. We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53519 through 53521) for details of the measure specifications as well as the 2013 Hip/Knee Readmission Measures Updates and Specifications Report which is available on the CMS Web site at: https://www.cms.gov/Medicare/ Quality-Initiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html. NQF endorsed the measure in January 2012 (https://www.qualityforum.org/QPS/ 1551). Comment: Many commenters supported the inclusion of the THA/ TKA readmissions measure in the Hospital Readmissions Reduction Program. Response: We appreciate the commenters’ support. 40 Grosso L.M., Curtis J.P., Lin Z., et al.: Hospitallevel 30-Day All-Cause Risk-Standardized Readmission Rate Following Elective Primary Total Hip Arthroplasty (THA) And/Or Total Knee Arthroplasty (TKA): Report prepared for the Centers for Medicare & Medicaid Services. 2012. Available on the Web site at: https://www.qualitynet.org/. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Comment: Some commenters stated that the THA/TKA readmissions measure should not be included at this time because the expansion of the program is new, MedPAC did not recommend these measures for the Hospital Readmissions Reduction Program, and the measure’s inclusion poses a financial risk to hospitals. One commenter further suggested that CMS conduct additional analyses before including the THA and TKA measure in the program. Another commenter suggested that CMS defer adding the THA/TKA measure until hospitals have had more experience with the Hospital Readmissions Reduction Program. Response: We appreciate the commenters’ feedback and suggestions. We believe that the THA/TKA readmissions measure represents both a high-impact and high-cost condition that warrants inclusion in the Hospital Readmissions Reduction Program. This measure aligns with our priority objectives to promote successful transitions of care for patients from the acute care inpatient setting to the outpatient setting. We further believe that this measure, which consists of one of the most frequently performed procedures on the Medicare population, will also reduce short-term readmission rates, while at the same time, improve the care provided to patients. We also note that the MAP supported inclusion of this condition in the Hospital Readmissions Reduction Program. We are cognizant of stakeholder concerns relating to increased financial risks to hospitals, the fact that this was not specifically one of the conditions previously listed by MedPAC, and hospitals’ inexperience with the measure. Therefore, we will monitor the THA/TKA readmissions measure closely for any unintended consequences that may arise from implementation of this measure, and adjust the Hospital Readmissions Reduction Program, accordingly. Comment: One commenter supported the exclusion of diagnostic cardiac catheterization from the list of planned procedures for the elective THA/TKA readmissions measure. Response: We appreciate the commenter’s support for our proposal. After consideration of the public comments we received, we are finalizing our proposal to include the THA/TKA readmissions measure in the Hospital Readmissions Reduction Program. (7) Calculating the Excess Readmission Ratio The THA/TKA readmission measure uses the same methodology and PO 00000 Frm 00170 Fmt 4701 Sfmt 4700 statistical modeling approach as the AMI, HF, and PN measures. We published a detailed description of how the readmission measures estimate the Excess Readmission Rate used in the Hospital Readmissions Reduction Program in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53380 through 53381). (8) THA/TKA Measure for the Hospital Readmissions Reduction Program In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27599), we proposed to adopt the THA/TKA measure in the Hospital Readmissions Reduction Program beginning in FY 2015. We also finalized this measure for use in the Hospital IQR Program in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53519 through 53521). In the proposed rule, we noted that the set of hospitals for which this measure is calculated for the Hospital Readmissions Reduction Program differs from the set of hospitals used in calculations for the Hospital IQR Program. The Hospital Readmissions Reduction Program includes only subsection (d) hospitals as defined in 1886(d)(1)(B) of the Act and hospitals paid under section 1814(b)(3) of the Act (that is, Maryland hospitals), while the Hospital IQR Program calculations include non-IPPS hospitals such as CAHs, cancer hospitals, and hospitals in the Territories. However, we believe that the THA/TKA measure is appropriate for use in both programs. We invited public comments on this proposal. Comment: Several commenters suggested that CMS not add the THA/ TKA readmission measure to Hospital Readmissions Reduction Program until it has been in the Hospital IQR Program. The commenters suggested a timeframe of between 1 to 2 years to allow hospitals to improve performance prior to the measure being adopted under any pay-for-performance program. One commenter explained that hospitals have no experience with this measure and no data from CMS and, therefore, will not be able to incorporate changes before penalties are assessed. Response: We adopted the measure in the Hospital IQR Program in the FY 2013 IPPS/LTCH PPS final rule. We conducted a dry run of the measure with hospitals last year, and will be reporting the measure in an upcoming release of the Hospital Compare Web site. After consideration of the public comments we received, we are finalizing our proposal to adopt the THA/TKA readmissions measure in the Hospital Readmissions Reduction Program for FY 2015. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations d. Hospitals Paid Under Section 1814(b)(3) of the Act, Including the Process To Be Exempt From the Hospital Readmissions Reduction Program and Definition of ‘‘Base Operating DRG Payment Amount’’ for Such Hospitals (§ 412.152 and § 412.154(d)) As finalized in the FY 2013 IPPS/ LTCH PPS final rule (77 FR 53397), the definition of ‘‘applicable hospital’’ under section 1886(q)(5)(C) of the Act also includes hospitals paid under section 1814(b)(3) of the Act (that is, acute care Maryland hospitals that would have otherwise been paid under the IPPS, but for the waiver under section 1814(b)(3) of the Act). As discussed in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27600 through 27601), section 1886(q)(2)(B)(ii) of the Act allows the Secretary to exempt such hospitals from the Hospital Readmissions Reduction Program, provided that the State submits an annual report to the Secretary describing how a similar program to reduce hospital readmissions in that State achieves or surpasses the measured results in terms of health outcomes and cost savings established by Congress for the program as applied to ‘‘subsection (d) hospitals.’’ Accordingly, a program established by the State of Maryland that could serve to exempt the State from the Hospital Readmissions Reduction Program would focus on those ‘‘applicable’’ Maryland hospitals operating under the waiver provided by section 1814(b)(3) of the Act; that is, those hospitals that would otherwise have been paid by Medicare under the IPPS absent this provision. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53384), we established criteria for evaluation of an annual report to CMS to determine whether Maryland should be exempted from the program each year. We codified this requirement at § 412.154(d) of the regulations. In addition, we specified that we will evaluate a report submitted by the State of Maryland documenting how its program meets those criteria. However, because the Hospital Readmissions Reduction Program was in its first year and Maryland’s program was completing its first year, we specified that the evaluation of Maryland’s program for measurable health outcomes and cost savings would not begin until FY 2014. In that same final rule, we explained that it would be premature to evaluate Maryland’s readmission program on health outcomes and cost savings at that time, as we did not have sufficient information on which to evaluate VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Maryland’s program because FY 2013 was the first year of the Hospital Readmissions Reduction Program. We noted that our finalized criteria to evaluate Maryland’s program is for FY 2013, the first year of the program, and our evaluation criteria may change through notice-and-comment rulemaking as the Hospital Readmissions Reduction Program evolves. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27600 through 27601), we proposed to establish a deadline by which the State must submit its annual report to the Secretary under proposed revised § 412.154(d)(2) of the regulations. We also proposed the criteria to determine whether or not the State would be exempted from the Hospital Readmissions Reduction Program beginning with FY 2014. In addition, we proposed to define the ‘‘base operating DRG payment amount’’ for Maryland hospitals under § 412.152 of the regulations in the event that the State is not exempted from the Hospital Readmissions Reduction Program. We proposed that the State of Maryland must submit its preliminary report to CMS no later than January 15 of each year for CMS to consider, through the IPPS/LTCH PPS proposed rule for a Federal fiscal year, its exemption from the Hospital Readmissions Reduction Program for the upcoming Federal fiscal year. For example, the State of Maryland would have to submit the report by January 15, 2014 for consideration for the FY 2015 (beginning October 1, 2014) program year. This deadline would provide CMS sufficient time to evaluate the report, have any discussions with the State regarding its program, and prepare a presentation of that report for the IPPS/ LTCH PPS proposed rule. Under this proposal, we also would require that the State submit a final report, with updated information on the State’s readmissions program and updated cost savings and health outcomes information, to CMS no later than June 1 of each year in order for CMS to determine, through the IPPS/ LTCH PPS final rule for a Federal fiscal year, whether the State meets the requirements for exemption from the Hospital Readmissions Reduction Program in that upcoming Federal fiscal year. As such, for FY 2015, under proposed § 412.154(d)(2)(ii), the State of Maryland would submit its preliminary report to the Secretary no later than January 15, 2014, and its final report to the Secretary no later than June 1, 2014, for consideration of exemption from the Hospital Readmissions Reduction Program. PO 00000 Frm 00171 Fmt 4701 Sfmt 4700 50665 As discussed in the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR 27600 through 27601), for FY 2014, we received a preliminary report from Maryland describing its readmissions program. Similar to its report submitted for FY 2013, Maryland described its current readmissions program, the Admissions-Readmission Revenue (ARR) Program. Under the voluntary program, the State pays hospitals under a case-mix adjusted bundled payment per episode of care, where the episode of care is defined as the initial admission and any subsequent readmissions to the same hospital or linked hospital system that occur within 30 days of the original discharge. According to the State, an initial admission with no readmissions provides the hospital with the same weight as an initial admission with multiple readmissions. Therefore, hospitals receive a financial reward for decreased readmissions (as determined through the case-mix adjusted episode of care weights). In the report, Maryland indicated that the reduction in intrahospital readmission rates (that is, readmissions to the same hospital as the initial admission) resulted in approximately $25 million, or 0.27 percent, in savings to the participating hospitals for 2011 and 2012. In addition, Maryland reported that its readmission rate per 1,000 Medicare beneficiaries declined from 17.14 percent (CY 2011, Quarter 2) to 15.21 percent (CY 2012, Quarter 2). The State also acknowledged in that report that it has begun to track inter-hospital readmissions, where a patient is admitted to one hospital and readmitted to another hospital, which is comparable to how readmissions are measured under the Hospital Readmissions Reduction Program. In the FY 2013 IPPS/LTCH PPS final rule, we estimated that, under the Hospital Readmissions Reduction Program, for FY 2013, Medicare IPPS operating payments would decrease nationally by approximately $300 million (or 0.3 percent of total Medicare IPPS operating payments). Maryland indicated that, for FY 2013, it would achieve comparable savings because it intends to reduce the rate update factor for all hospitals by 0.3 percent, regardless of a hospital’s performance on readmissions. Furthermore, in its FY 2014 preliminary report to the Secretary, the State of Maryland indicated that, for FY 2014, subject to approval by the Commission, it is proposing a shared savings approach, which would be applied to all hospitals in the State. Under that shared savings approach, hospitals in the State would be ranked E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50666 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations based on their performance on readmissions. Hospitals with high readmissions above an established standard would experience a reduction in their revenue and the hospitals below the established standard would not experience a reduction in their revenue. For Maryland hospitals that are in the voluntary ARR Program paid under the case-mix adjusted bundled payment per episode of care that are performing worse than the established standard for readmissions, their payment per episode of care would be reduced. In addition, the State proposes that hospitals that improve in readmissions above a certain standard would experience no reduction in their payments and those hospitals below the standard would experience a reduction. Based on this preliminary information, we believe that the State can achieve savings on readmissions that are tied to hospitals’ performance on readmissions, which is comparable to the Hospital Readmissions Reduction Program applied throughout the rest of the country. For FY 2014, we proposed to evaluate Maryland based on whether, under the shared savings approach, it can achieve comparable health outcomes and cost savings to the Hospital Readmissions Reduction Program. We noted that, for FY 2014, we project that the Hospital Readmissions Reduction Program will result in a 0.2 percent decrease, or approximately $175 million nationally, in payments to hospitals. We invited public comments on this proposal. Comment: Several commenters supported the proposals regarding the process by which Maryland may seek exemption from the Hospital Readmissions Reduction Program, on an annual basis. One commenter requested that Maryland be able to submit one annual report to seek exemption from the Hospital Readmissions Reduction Program under subsection (q), the Hospital VBP Program under subsection (p), and the HAC Reduction Program under subsection (o), and that if CMS exempts Maryland from the requirements of these provisions, that the State should be exempt for 3 years. Response: We believe that the section 1886(q)(2)(B)(ii) of the Act requires that in order for hospitals paid under section 1814(b)(3) of the Act to be exempt from the Hospital Readmissions Reduction Program, the State must submit a report demonstrating a similar State program that achieves or surpasses measured results in terms of cost savings and patient health outcomes, and the State must submit this report on an annual basis to receive an annual exemption. Therefore, the statute does not provide for a 3-year exemption. Accordingly, we VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 are finalizing the requirement that the State of Maryland submit its preliminary report to us no later than January 15 of each year and a final report no later than June 1 of each year for us to consider, through the IPPS/ LTCH PPS proposed and final rules for a Federal fiscal year, its exemption from the Hospital Readmissions Reduction Program for the upcoming Federal fiscal year. Comment: Maryland provided additional information on Maryland’s readmissions program for FY 2014. The commenter stated that Maryland has implemented a population-based ratesetting model for 10 hospitals called the Total Patient Revenue (TPR) system and an episode-of-care ratesetting model called the Admissions Readmissions Revenue (ARR) Program for most other hospitals in the State, which reduces payments to hospitals that do not meet an established readmissions performance target. The ARR Program will become effective January 1, 2014, and because it will be effective in the middle of Maryland’s 2014 rate year, the reduction is expected to be twice the amount it would have been had the program been effective for the entire 2014 rate year. The TPR and ARR Program have reduced readmissions and is estimated to achieve savings in FY 2014 in excess of the national savings: 0.3 percent of all payer inpatient revenue compared to an expected national savings of 0.2 percent of national Medicare base payments. Response: We appreciate the additional information on Maryland’s readmissions program. We believe that the program will provide for comparable savings to the Hospital Readmissions Reduction Program for FY 2014, and we believe that Maryland’s program for FY 2014 meets the requirement for Maryland hospitals to be exempt from the Hospital Readmissions Reduction Program for FY 2014. In the future, we intend to evaluate actual savings and health outcomes from the Hospital Readmissions Reduction Program, as compared to actual savings and health outcomes to Maryland’s readmissions program. In addition, we intend to evaluate how Maryland hospitals would perform in terms of readmissions measures and payment reductions if these hospitals were in the Hospital Readmissions Reduction Program, to potentially serve as another metric by which to evaluate Maryland when seeking an exemption from the Hospital Readmissions Reduction Program. Comment: Several commenters suggested that CMS also exempt certain categories of hospitals from the Hospital Readmissions Reduction Program. PO 00000 Frm 00172 Fmt 4701 Sfmt 4700 Specifically, the commenters suggested that CMS exclude hospitals participating in Accountable Care Organizations (ACOs), including the Pioneer ACO Program. The commenters also suggested that hospitals enrolled in the Bundled Payment demonstrations with a focus on hip/knee replacement should be exempt from the Hospital Readmissions Reduction Program and stated that because CMS is adding the THA/TKA readmissions measure to the Hospital Readmissions Reduction Program, hospitals in demonstrations that focus on THA/TKA should not be penalized twice for the same activity. Response: We appreciate the suggestions to exempt hospitals from the Hospital Readmissions Reduction Program if they already participate in an ACO program or other demonstrations. We addressed this comment in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53398) where we explained that we did not have the authority under section 1886(q) of the Act to exempt any subsection (d) hospitals participating in the Bundled Payment Care Improvement Demonstration or in an Accountable Care Organization from the Hospital Readmissions Reduction Program. In addition, we were not compelled to waive hospitals in Accountable Care Organizations through their waiver authority because the incentives of the Hospital Readmissions Reduction Program and the Medicare ACO initiatives are aligned, and we did not see a need to waive the requirements of the Hospital Readmissions Reduction Program in order to test the Pioneer ACO Model. We found that because the incentives of the two programs are aligned, we believe that hospitals successful in reducing avoidable readmissions could be important allies for ACOs that share similar goals. Because it is unlikely that the beneficiaries assigned to an ACO will use only a single inpatient facility, ACOs will need to work effectively with all local hospitals that their Medicare FFS beneficiaries choose to use. Finally, we stated that as we gain experience with the program and other new payment incentives in the Medicare FFS program, we will monitor their interactions with the Hospital Readmissions Reduction Program and continue our efforts to align measures and incentives to achieve the best outcomes for our patients and the program. Comment: One commenter stated that CMS should permit a one-time opportunity to waive the payment reduction to safety-net hospitals or hospitals that serve a large proportion of low socioeconomic status patients, and E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations in return, require those hospitals to submit to CMS their implementation plan to improve readmission rates and the waiver would be time limited in order to give hospitals the time to implement their readmission reduction strategies. Response: In the FY 2013 IPPS/LTCH PPS final rule, we finalized our definition of applicable hospitals, or hospitals included in the Hospital Readmissions Reduction Program, as hospitals that are (1) subsection (d) hospitals, that is hospitals paid under the IPPS, and (2) hospitals in Maryland that are paid under section 1814(b)(3) of the Act, and absent the ‘‘waiver’’ specified by section 1814(b)(3) of the Act, would have been paid under the IPPS. We do not believe that we have the authority to implement a process described above, whereby we provide a waiver for safety-net hospitals that submit to us an implementation plan to reduce readmissions. We believe that all hospitals should be working towards the goal of reducing readmissions, on an ongoing basis, regardless of patient population. Therefore, we do not believe that we need to provide additional time through a waiver to hospitals to implement readmission reduction programs. After consideration of the public comments we received, we are finalizing the requirement that the State of Maryland must submit its preliminary report to us no later than January 15 of each year and a final report no later than June 1 of each year for us to consider, through the IPPS/ LTCH PPS proposed and final rules for a Federal fiscal year, its exemption from the Hospital Readmissions Reduction Program for the upcoming Federal fiscal year. In addition, we are finalizing the policy to exempt Maryland hospitals paid under section 1814(b)(3) of the Act from the Hospital Readmissions Reduction Program for FY 2014. As proposed in the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR 27600 through 27601), in this final rule we are defining ‘‘base operating DRG payment amount’’ for hospitals paid under section 1814(b)(3) of the Act in the event that we do not exempt Maryland hospitals from the Hospital Readmissions Reduction Program in a given year. Consistent with section 1886(q)(2) of the Act, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53382), under the regulations at § 412.152, we defined the ‘‘base operating DRG payment amount’’ under the Hospital Readmissions Reduction Program as the wage-adjusted DRG operating payment plus any applicable new technology add-on payments. As VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 required by the statute, the definition of ‘‘base operating DRG payment amount’’ does not include adjustments or add-on payments for IME, DSH, outliers, and low-volume hospitals provided for under sections 1886(d)(5)(A), (d)(5)(B), (d)(5)(F), and (d)(12) of the Act, respectively. Section 1886(q)(2) of the Act does not exclude new technology payments made under section 1886(d)(5)(K) of the Act in the definition of ‘‘base operating DRG payment amount’’; therefore, any payments made under section 1886(d)(5)(K) of the Act are included in the definition of ‘‘base operating DRG payment amount.’’ In addition, under the regulations at § 412.152, we define ‘‘wage-adjusted DRG operating payment’’ as the applicable average standardized amount adjusted for resource utilization by the applicable MS–DRG relative weight and adjusted for differences in geographic costs by the applicable area wage index (and by the applicable COLA for hospitals located in Alaska and Hawaii). Acute care hospitals located in the State of Maryland currently are not paid under the IPPS but are, instead, paid under a special waiver as provided by section 1814(b)(3) of the Act. For these applicable hospitals, as we proposed, we are finalizing that the term ‘‘base operating DRG payment amount’’ means the base operating DRG payment amount defined at § 412.152. In other words, we are revising existing § 412.152, to specify that, for Maryland hospitals, the ‘‘base operating DRG payment amount’’ is an amount equal to the IPPS wage adjusted DRG payment amount or the average standardized amount adjusted for resource utilization by the applicable MS–DRG relative weight and adjusted for differences in geographic costs by the applicable area wage index plus new technology payments that would be paid to Maryland hospitals absent section 1814(b)(3) of the Act. Although Maryland hospitals are currently paid under this waiver and not under the IPPS, if, for any year, Maryland is not exempt from the Hospital Readmissions Reduction Program in, we are finalizing that, to determine the amount by which the hospitals’ payments under section 1814(b)(3) of the Act would be reduced under the Hospital Readmissions Reduction Program, the readmission payment adjustment under § 412.154(b) would be determined using the estimated base operating DRG payment amount that would have applied had the hospital been paid under the IPPS. To implement this policy, as proposed, we are finalizing that claims submitted by Maryland hospitals will be ‘‘priced’’ PO 00000 Frm 00173 Fmt 4701 Sfmt 4700 50667 under the IPPS payment methodology, and if a Maryland hospital has a readmissions payment adjustment factor, that factor would be applied to that base operating DRG payment amount to determine the payment adjustment under § 412.154(b) (that is, the amount of the payment reduction). We are adopting that the amount of the payment reduction, if any, would be applied to (that is, subtracted from) the payments made to the affected Maryland hospital under the waiver. This methodology would result in Maryland hospitals having the readmissions adjustment factor applied in a manner similar to that which is applied to hospitals that are paid under the IPPS. Furthermore, as proposed, we are finalizing that if Maryland is not exempt from the Hospital Readmissions Reduction Program in a given year, the definition of ‘‘base operating DRG payment amount’’ for Maryland hospitals discussed above (that is, the base operating DRG payment amount calculated as if the hospital were paid under the IPPS), and not any payment amount made under the waiver under section 1814(b)(3) of the Act, would be used to calculate both the ‘‘aggregate payments for excess readmissions’’ and ‘‘aggregate payments for all discharges’’ (defined at § 412.152) for purposes of determining the hospital’s readmission adjustment factor that accounts for excess readmissions under § 412.154(c). Comment: Several commenters supported the proposed definition of ‘‘base operating DRG payment amount’’ for Maryland hospitals, which is the base operating DRG payment amount calculated as if the hospital were paid under the IPPS, in the event that Maryland is not exempt from the Hospitals Readmissions Reduction Program in a given year. One commenter stated that the proposed definition of ‘‘base operating DRG payment amount’’ for Maryland hospitals for the Hospital Readmissions Reduction Program is inconsistent with both the definition of ‘‘base operating DRG payment amount’’ under the Hospital VBP Program and how Maryland hospitals are actually paid by Medicare for inpatient hospital services. The commenter recommended that CMS use a consistent definition of base operating DRG payment amount for Maryland hospitals. Response: We believe that the statute at section 1886(q)(2) of the Act clearly defines the base operating DRG payment amount as the wage-adjusted DRG payment amount excluding adjustments or add-on payments for IME, DSH, outliers, and low-volume hospitals E:\FR\FM\19AUR2.SGM 19AUR2 50668 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 provided for under sections 1886(d)(5)(A), (d)(5)(B), (d)(5)(F), and (d)(12) of the Act, respectively. Section 1886(q)(2) of the Act does not exclude new technology add-on payments made under section 1886(d)(5)(K) of the Act in the definition of ‘‘base operating DRG payment amount’’; therefore, any payments made under section 1886(d)(5)(K) of the Act are included in the definition of ‘‘base operating DRG payment amount.’’ Section 1886(q) of the Act does not provide a separate definition for base operating DRG payment amount for Maryland hospitals. The definition under the Hospital Readmissions Reduction Program may be inconsistent with the definition of base operating DRG payment amount under the Hospital VBP Program because these two programs are governed by different sections of the statute that provide different statutory definitions of base operating DRG payment amounts. As such, we do not believe that we have latitude to change our definition of ‘‘base operating DRG payment amount’’ and we are finalizing the definition, as proposed. e. Floor Adjustment Factor for FY 2014 (§ 412.154(c)(2)) Section 1886(q)(3)(A) of the Act defines the ‘‘adjustment factor’’ for an applicable hospital for a fiscal year as equal to the greater of ‘‘(i) the ratio described in subparagraph (B) for the hospital for the applicable period (as defined in paragraph (5)(D)) for such fiscal year; or (ii) the floor adjustment factor specified in subparagraph (C).’’ Section 1886(q)(3)(B) of the Act, in turn, describes the ratio used to calculate the adjustment factor. Specifically, it states that the ratio is ‘‘equal to 1 minus the ratio of—(i) the aggregate payments for excess readmissions . . . and (ii) the aggregate payments for all discharges . . . .’’ In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53386), we codified the calculation of this ratio at § 412.154(c)(1) of the regulations. Section 1886(q)(3)(C) of the Act specifies the floor adjustment factor, which is set at 0.99 for FY 2013, 0.98 for FY 2014, and 0.97 for FY 2015 and subsequent fiscal years. We codified the floor adjustment factor at § 412.154(c)(2) of the regulations. For FY 2013, under § 412.154(c), we specified that an applicable hospital will receive an adjustment factor that is either the greater of the ratio or a floor adjustment factor of 0.99. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27601), for FY 2014, we proposed that the floor adjustment factor be 0.98, consistent with section 1886(q)(3) of the VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Act, as codified at § 412.154(c)(2). As finalized in the FY 2013 IPPS/LTCH PPS final rule, the ratio is rounded to the fourth decimal place. In other words, for FY 2014, a hospital subject to the Hospital Readmissions Reduction Program would have an adjustment factor that is between 1.0 and 0.9800. We invited public comments on this proposal. Comment: One commenter stated that doubling the readmission payment reduction would be harmful to hospitals and would be particularly harmful to safety-net hospitals. Response: We recognize the commenter’s concern regarding the magnitude of the payment reduction for FY 2014. Section 1886(q)(3) of the Act requires that, effective for discharges occurring in FY 2014, the maximum readmissions adjustment factor or the floor adjustment factor be 0.98, or a 2percent reduction, applied to a hospital’s base operating DRG payment amount. While the maximum reduction will increase for FY 2014, only 18 hospitals are subject to the maximum reduction of 2.0 percent and all but one of those hospitals were subject to the maximum reduction of 1.0 percent in FY 2013, suggesting that these hospitals have poor performance on these readmissions measures compared to the national average. In addition, we believe that our other proposed changes to the Hospital Readmissions Reduction Program, including the application of a planned readmissions algorithm to the readmissions measures and the change to the calculation of the readmission payment adjustment factors to be more consistent with the calculation of the excess readmission ratios, provide refinements to the readmissions penalties that mitigate severe payment impacts to the hospitals in the program. As such, we are finalizing our proposal that the floor adjustment factor be 0.98, consistent with section 1886(q)(3) of the Act, as codified at § 412.154(c)(2). Comment: One commenter suggested that, if CMS added the additional readmissions measures for the conditions COPD and TKA/THA proposed in the FY 2014 IPPS/LTCH PPS proposed rule to be included as part of the readmissions payment adjustment for FY 2015, CMS should phase in the payment penalty over time so that the maximum reduction due to these two additional measures is 1 percent for FY 2015 rather than the full 3 percent for FY 2015. The commenter stated that the method for computing penalties will result in relatively large penalties for readmissions of THA and TKA because there are low readmissions rates for these cases. PO 00000 Frm 00174 Fmt 4701 Sfmt 4700 Response: We appreciate the commenter’s suggestion regarding the readmission payment adjustment factors for FY 2015. However, we believe that this comment is outside the scope of this rulemaking as we have not made any proposals on the calculation of the payment adjustment for FY 2015, with the inclusion of the two additional readmissions measures of COPD and TKA/THA. We intend to propose the calculation of the readmissions payment adjustment with the additional readmissions measures for FY 2015 in future rulemaking. After consideration of the public comments we received, we are finalizing our proposal that, for FY 2014, the floor adjustment factor is 0.98, consistent with section 1886(q)(3) of the Act, as codified at § 412.154(c)(2). f. Applicable Period for FY 2014 Under section 1886(q)(5)(D) of the Act, the Secretary has the authority to specify the applicable period with respect to a fiscal year under the Hospital Readmissions Reduction Program. We finalized our policy to use 3 years of claims data to calculate the readmission measures in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51671). In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53675), we codified the definition of ‘‘applicable period’’ in the regulations at 42 CFR 412.152 as the 3year period from which data are collected in order to calculate excess readmission ratios and adjustments for the fiscal year, which includes aggregate payments for excess readmissions and aggregate payments for all discharges used in the calculation of the payment adjustment. For the Hospital Readmissions Reduction Program for FY 2013, we established an applicable period under § 412.152 as July 1, 2008, to June 30, 2011. Specifically, to calculate the excess readmission ratios and to calculate the payment adjustments for FY 2013 (including aggregate payments for excess readmissions and aggregate payments for all discharges used in the calculation of the payment adjustment), we used Medicare claims data from the 3-year time period of July 1, 2008 to June 30, 2011 (76 FR 51671 and 77 FR 53388). In the FY 2014 IPPS/LTCH PPS proposed rule, consistent with the definition at § 412.152 of the existing regulations, we proposed that the applicable period for FY 2014 under the Hospital Readmissions Reduction Program would be the 3-year period from July 1, 2009, to June 30, 2012. That is, we would determine the excess readmission ratios and calculate the E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations payment adjustment (including aggregate payments for excess readmissions and aggregate payments for all discharges) for FY 2014 using data from the 3-year time period of July 1, 2009 to June 30, 2012, as this was the most recent available 3-year period of data upon which to base these calculations. As discussed later in this section, although we proposed an applicable period of July 1, 2009 through June 30, 2012 for FY 2014, for purposes of determining the readmissions payment adjustment factors for the FY 2014 proposed rule, we used excess readmission ratios based on older data, that is, from the FY 2013 applicable period of July 1, 2008 to June 30, 2011 (that includes the application of the planned readmission algorithm discussed earlier in this section). However, for this FY 2014 final rule, we are using excess readmission ratios based on data from the applicable period of July 1, 2009 to June 30, 2012, because the data for that period are now finalized. Comment: Some commenters supported the proposed 3-year applicable period of July 1, 2009 to June 30, 2012 to calculate the excess readmission ratios and the readmissions payment adjustment factors. Some commenters supported the 3-year applicable period because it aligns with the reporting data on Hospital Compare. The commenters also expressed concern regarding the use of 3 years of data to calculate the excess readmission ratios and the readmissions payment adjustment factors. The commenters stated that the payment penalties should be assessed every 3 years instead of every year; otherwise, CMS would be penalizing hospitals more than once for the same years of data and it would make it difficult for low-performing hospitals to improve. Several commenters suggested shorter timeframes for the applicable period. One commenter stated that the 3-year measurement period penalizes hospitals for performance before the focus on readmissions began. Other commenters suggested that the measures be reported on a quarterly basis. Response: We recognize the concerns raised by the commenters. As discussed in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53394), we use 3 years of data in order to have sufficient data to reliably measure a hospital’s performance, and we update the data annually with the most recently available 3 years of data. We continue to believe that hospitals do have the opportunity to not be subject to a readmission reduction to payments due to excess readmissions if they can VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 perform better than the average hospital in the future. We also believe that using the most recent 3 years of data may help hospitals in the event that a hospital’s poor performance in 1 year due to anomalous circumstances may be mitigated with the inclusion of 2 additional years of data. After consideration of the public comments we received, we are finalizing, as proposed, the policy to use data from the 3-year time period from July 1, 2009 to June 30, 2012 to calculate the excess readmission ratio and to calculate the readmission payment adjustment factors for FY 2014. g. Refinements of the Methodology To Calculate the Aggregate Payments for Excess Readmissions Section 1886(q)(3)(B) of the Act specifies the ratio used to calculate the adjustment factor under the Hospital Readmissions Reduction Program. It states that the ratio is ‘‘equal to 1 minus the ratio of—(i) the aggregate payments for excess readmissions . . . and (ii) the aggregate payments for all discharges . . . .’’ In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53387), we defined ‘‘aggregate payments for excess readmissions’’ and ‘‘aggregate payments for all discharges,’’ as well as a methodology for calculating the numerator of the ratio (aggregate payments for excess readmissions) and the denominator of the ratio (aggregate payments for all discharges). Section 1886(q)(4) of the Act sets forth the definitions of ‘‘aggregate payments for excess readmissions’’ and ‘‘aggregate payments for all discharges’’ for an applicable hospital for the applicable period. The term ‘‘aggregate payments for excess readmissions’’ is defined in section 1886(q)(4)(A) of the Act as ‘‘for a hospital for an applicable period, the sum, for applicable conditions . . . of the product, for each applicable condition, of (i) the base operating DRG payment amount for such hospital for such applicable period for such condition; (ii) the number of admissions for such condition for such hospital for such applicable period; and (iii) the ‘Excess Readmission Ratio’. . . for such hospital for such applicable period minus 1.’’ In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53675), we included this definition of ‘‘aggregate payments for excess readmissions’’ under the regulations at § 412.152. The ‘‘Excess Readmission Ratio’’ is a hospital-specific ratio calculated for each applicable condition. Specifically, section 1886(q)(4)(C) of the Act defines the excess readmission ratio as the ratio of ‘‘risk-adjusted readmissions based on actual readmissions’’ for an applicable PO 00000 Frm 00175 Fmt 4701 Sfmt 4700 50669 hospital for each applicable condition, to the ‘‘risk-adjusted expected readmissions’’ for the applicable hospital for the applicable condition. The methodology for the calculation of the excess readmission ratio was finalized in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51673). ‘‘Aggregate payments for excess readmissions’’ is the numerator of the ratio used to calculate the adjustment factor under the Hospital Readmissions Reduction Program. The term ‘‘aggregate payments for all discharges’’ is defined at section 1886(q)(4)(B) of the Act as ‘‘for a hospital for an applicable period, the sum of the base operating DRG payment amounts for all discharges for all conditions from such hospital for such applicable period.’’ ‘‘Aggregate payments for all discharges’’ is the denominator of the ratio used to calculate the adjustment factor under the Hospital Readmissions Reduction Program. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53387), we included this definition of ‘‘aggregate payments for all discharges’’ under the regulations at § 412.152. As proposed in the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR 27602), we note that we are taking this opportunity to finalize a technical change to the definition of ‘‘base operating DRG payment amount’’ in the existing regulations at § 412.152 to reflect our policy that the difference between the applicable hospital-specific payment rate and the Federal payment rate for SCHs and MDHs is excluded from the base operating DRG amount for these hospitals. We note that section 1886(q)(2)(B)(i) of the Act provides ‘‘special rules’’ for MDHs with respect to discharges occurring during FYs 2012 and 2013, and not for subsequent years. Under current law, as discussed in section V.F. of the preamble of this final rule, the MDH program expires at the end of FY 2013 (that is, the MDH program is in effect through September 30, 2013); therefore, the technical change would reflect that our policy applies to MDHs for FY 2013 only. We did not receive any public comments on this technical change on the definition of ‘‘base operating DRG payment amount’’ for MDHs, and we are finalizing the definition, as proposed. As discussed above, when calculating the numerator (aggregate payments for excess readmissions), we determined the base operating DRG payments for the applicable period. ‘‘Aggregate payments for excess readmissions’’ (the numerator) is defined as ‘‘the sum, for applicable conditions . . . of the product, for each applicable condition, E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50670 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations of (i) the base operating DRG payment amount for such hospital for such applicable period for such condition; (ii) the number of admissions for such condition for such hospital for such applicable period; and (iii) the ‘Excess Readmission Ratio’. . . for such hospital for such applicable period minus 1.’’ When determining the base operating DRG payment amount for an individual hospital for such applicable period for such condition, we use Medicare inpatient claims from the MedPAR file with discharge dates that are within the same applicable period that was finalized in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51671) to calculate the excess readmission ratio. We use MedPAR claims data as our data source for determining aggregate payments for excess readmissions and aggregate payments for all discharges, as this data source is consistent with the claims data source used in IPPS rulemaking to determine IPPS rates. For FY 2014, as proposed in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27603), we are using MedPAR claims with discharge dates that are on or after July 1, 2009, and no later than June 30, 2012. As specified in the FY 2013 IPPS/ LTCH PPS final rule (77 FR 53387), we use the update of the MedPAR file for each Federal fiscal year, which is updated 6 months after the end of each Federal fiscal year within the applicable period, as our data source (that is, the March updates of the respective Federal fiscal year MedPAR files) for the final rules. The FY 2009 through FY 2012 MedPAR data files can be purchased from CMS. Use of these files allows the public to verify the readmission adjustment factors. Interested individuals may order these files through the Web site at: https:// www.cms.hhs.gov/LimitedDataSets/ by clicking on MedPAR Limited Data Set (LDS)-Hospital (National). This Web page describes the files and provides directions and further detailed instructions for how to order the data sets. Persons placing an order must send the following: a Letter of Request, the LDS Data Use Agreement and Research Protocol (refer to the Web site for further instructions), the LDS Form, and a check for $3,655 to: • If using the U.S. Postal Service: Centers for Medicare and Medicaid Services, RDDC Account, Accounting Division, P.O. Box 7520, Baltimore, MD 21207–0520. • If using express mail: Centers for Medicare and Medicaid Services, OFM/ Division of Accounting- RDDC, Mailstop C#-07–11, 7500 Security Boulevard, Baltimore, MD 21244–1850. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 In the FY 2014 IPPS/LTCH PPS proposed rule (FR 27603), we proposed to determine aggregate payments for excess readmissions and aggregate payments for all discharges using data from MedPAR claims with discharge dates that are on or after July 1, 2009, and no later than June 30, 2012. However, we noted that, for the purposes of modeling the proposed readmissions payment adjustment factors in the proposed rule, we used excess readmission ratios based on an older performance period of July 1, 2008 to June 30, 2011, with the application of the planned readmission algorithm. Consistent with the approach taken in the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27964), for the purpose of modeling the FY 2014 readmissions payment adjustment factors for the FY 2014 proposed rule, we used excess readmission ratios for applicable hospitals from the FY 2013 Hospital Readmission Reduction Program applicable period. For FY 2014, applicable hospitals have had the opportunity to review and correct data from the FY 2014 applicable period of July 1, 2009 to June 30, 2012 before they were made public under our policy regarding the reporting of hospitalspecific information, which is discussed later in this section. In the FY 2014 IPPS/LTCH PPS proposed rule, we proposed for FY 2014 to use MedPAR data from July 1, 2009 through June 30, 2012, and we used the March 2010 update of the FY 2009 MedPAR file to identify claims within FY 2009 with discharges dates that are on or after July 1, 2009, the March 2011 update of the FY 2010 MedPAR file to identify claims within FY 2010, the March 2012 update of the FY 2011 MedPAR file to identify claims within FY 2010, and the December 2012 update of the FY 2012 MedPAR file to identify claims within FY 2012 with discharge dates no later than June 30, 2012. For this FY 2014 IPPS/LTCH PPS final rule, we are using the same MedPAR files as listed above, with the exception of using the March 2013 update of the FY 2012 MedPAR file. In order to identify the admissions for each condition for an individual hospital for calculating the aggregate payments for excess readmissions, as we did for FY 2013, we proposed in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27603), for FY 2014, to identify each applicable condition using the same ICD–9–CM codes used to identify applicable conditions to calculate the excess readmission ratios. In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51669), in our discussion of the methodology of the readmissions PO 00000 Frm 00176 Fmt 4701 Sfmt 4700 measures, we stated that we identify eligible hospitalizations and readmissions of Medicare patients discharged from an applicable hospital having a principal diagnosis for the measured condition in an applicable period. The discharge diagnoses for each applicable condition are based on a list of specific ICD–9–CM codes for that condition. These codes are posted on the Web site at: https:// www.QualityNet.org > HospitalInpatient > Claims-Based Measures > Readmission Measures > Measure Methodology. In order to identify the applicable conditions to calculate the aggregate payments for excess readmissions, as we did for FY 2013, we proposed, for FY 2014, to identify the claim as an applicable condition if the ICD–9–CM code for that condition is listed as the principal diagnosis on the claim, consistent with the methodology to identify conditions to calculate the excess readmission ratio. Based on public comments that we received on the FY 2013 IPPS/LTCH PPS proposed rule, which stated that the index admissions that are not considered readmissions for the purpose of the readmissions measures, and are thus excluded from the calculation of the excess readmission ratio, should also not be considered admissions for the purposes of determining a hospital’s aggregate payments for excess readmissions, we proposed to further modify our methodology to identify the admissions included in the calculation of ‘‘aggregate payments for excess readmissions.’’ As we did for FY 2013 in response to public comments (77 FR 53390), using our MedPAR data source, we identified admissions for the purposes of calculating aggregate payments for excess readmissions making the following exclusions: (1) Hospitalizations for patients discharged with an in hospital death; (2) hospitalization for patients discharged against medical advice; (3) transfers; (4) hospitalizations for patients under 65; (5) hospitalizations for patients enrolled in Medicare Part C; and (6) same day discharges for AMI cases. These admissions were excluded based on how they were identified in the MedPAR file. For FY 2014, as proposed in the FY 2014 IPPS/LTCH proposed rule (78 FR 27603 through 27604), we are adopting our proposal to make the same exclusions as we did in FY 2013, but, for some of the exclusions, to identify them using a different methodology which is more consistent with the manner in which exclusions are made to the admissions used to calculate the E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations excess readmission ratio. For FY 2014, in order to have the same types of admissions to calculate aggregate payments for excess readmissions, as is used to calculate the excess readmission ratio, we are finalizing our proposal to identify admissions for the purposes of calculating aggregate payments for excess readmissions as follows; we note where our methodology for exclusions for FY 2014 differs from our methodology in FY 2013: • We will exclude admissions that are identified as an applicable condition based on the ICD–9–CM code listed as the primary diagnosis if the patient died in the hospital, as identified by the discharge status code on the MedPAR claim. This is consistent with how we identified patients who died in the hospital in the FY 2013 IPPS/LTCH PPS final rule. • We will exclude admissions identified as an applicable condition based on the ICD–9–CM code listed as the primary diagnosis for which the patient was transferred to another acute care hospital (that is, a CAH or an IPPS hospital), as identified through examination of contiguous stays in MedPAR at other hospitals. (We note that this step differs from the methodology we used in the FY 2013 IPPS/LTCH PPS final rule to identify transfers based on discharge destination codes in the MedPAR file.) • We will exclude admissions identified as an applicable condition based on the ICD–9–CM code listed as the primary diagnosis for patients who are under the age of 65, as identified by linking the claim information to the information provided in the Medicare Enrollment Database. (We note that this step differs from the methodology we used in the FY 2013 IPPS/LTCH PPS final rule in that we previously used claims in the MedPAR file to identify a patient’s age.) • For conditions identified as AMI, we will exclude claims that are same day discharges, as identified by the admission date and discharge date on the MedPAR claim. (This is consistent with how we identified patients with same day discharges for AMI in the FY 2013 IPPS/LTCH PPS final rule. In addition, it is consistent with the calculation of the excess readmission ratio for AMI where same day discharges for AMI are not included as an index admission.) Furthermore, as proposed, we will only identify Medicare FFS claims that meet the criteria (that is, claims paid for under Medicare Part C (Medicare Advantage) would not be included in this calculation), consistent with the methodology to calculate excess readmission ratios based solely on admissions and readmissions for Medicare FFS patients. For FY 2013, we excluded admissions for Medicare Advantage patients based on whether the claim was identified as a Medicare Advantage claim in the MedPAR file or whether the FFS payment amount on the claim was for an IME payment only, also indicative of an admission for a Medicare Advantage patient. For FY 2014, we will exclude admissions for patients enrolled in Medicare Advantage as identified in the Enrollment Database, which is consistent with how admissions for Medicare Advantage patients are identified in the calculation of the excess readmission ratios. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53390), we noted that there were additional exclusions to the admissions used to calculate the excess readmission ratio that we could not apply to the calculation of aggregate payments for excess readmissions at the time of rulemaking. However, we stated our intention to modify our systems to identify the additional exclusions in order to calculate the aggregate payments for excess readmissions in a manner that would be more consistent with the calculation of the excess readmission ratio. Therefore, in addition to the exclusions to the admissions we finalized in FY 2013, as proposed for FY 2014, we are finalizing additional exclusions so that the criteria used to identify admissions for the purposes of calculating aggregate payments for excess readmissions will be the same as the criteria used to identify admissions for the purposes of calculating the excess readmission ratios. We are adopting as final the proposal to link our MedPAR claims data with the Medicare Enrollment Database to make additional exclusions to the admissions used to calculate aggregate payments for excess readmissions, which is consistent with our established methodology for calculating the excess readmission ratios. The Medicare Enrollment Database contains information on all individuals entitled to Medicare, including demographic information, enrollment dates, third party buy-in information, and Medicare managed care enrollment. For FY 2014, as proposed, we are including the following additional steps to identify admissions for the purposes of calculating aggregate payments for excess readmissions: • We are excluding admissions for patients who did not have Medicare Parts A and B FFS enrollment in the 12 months prior to the index admission, based on the information provided in the Medicare Enrollment Database. • We are excluding admissions for patients without at least 30 days postdischarge enrollment in Medicare Parts A and B FFS, based on the information provided in the Medicare Enrollment Database. • We are excluding all multiple admissions within 30 days of a prior index admission, as identified in the MedPAR file, consistent with how multiple admissions within 30 days of an index admission are excluded from the calculation of the excess readmission ratio. The tables below list the ICD–9–CM codes we are using, as proposed, to identify each applicable condition to calculate the aggregate payments for excess readmissions for FY 2014. These ICD–9–CM codes also will be used to identify the applicable conditions to calculate the excess readmission ratios, consistent with our policy finalized in the FY 2012 IPPS/LTCH PPS final rule. The list of ICD–9–CM codes for each condition has not changed from the list provided in the FY 2013 IPPS/LTCH PPS final rule. ICD–9–CM CODES TO IDENTIFY PNEUMONIA (PN) CASES mstockstill on DSK4VPTVN1PROD with RULES6 ICD–9–CM Code Description of code 480.0 ................. 480.1 ................. 480.2 ................. 480.3 ................. 480.8 ................. 480.9 ................. 481 .................... 482.0 ................. VerDate Mar<15>2010 Pneumonia due to adenovirus. Pneumonia due to respiratory syncytial virus. Pneumonia due to parainfluenza virus. Pneumonia due to SARS-associated coronavirus. Viral pneumonia: pneumonia due to other virus not elsewhere classified. Viral pneumonia unspecified. Pneumococcal pneumonia [streptococcus pneumoniae pneumonia]. Pneumonia due to klebsiella pneumoniae. 21:51 Aug 16, 2013 Jkt 229001 PO 00000 Frm 00177 Fmt 4701 Sfmt 4700 50671 E:\FR\FM\19AUR2.SGM 19AUR2 50672 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations ICD–9–CM CODES TO IDENTIFY PNEUMONIA (PN) CASES—Continued ICD–9–CM Code Description of code 482.1 ................. 482.2 ................. 482.30 ............... 482.31 ............... 482.32 ............... 482.39 ............... 482.40 ............... 482.41 ............... 482.42 ............... 482.49 ............... 482.81 ............... 482.82 ............... 482.83 ............... 482.84 ............... 482.89 ............... 482.9 ................. 483.0 ................. 483.1 ................. 483.8 ................. 485 .................... 486 .................... 487.0 ................. 488.11 ............... Pneumonia due to pseudomonas. Pneumonia due to hemophilus influenzae [h. influenzae]. Pneumonia due to streptococcus unspecified. Pneumonia due to streptococcus group a. Pneumonia due to streptococcus group b. Pneumonia due to other streptococcus. Pneumonia due to staphylococcus unspecified. Pneumonia due to staphylococcus aureus. Methicillin Resistant Pneumonia due to Staphylococcus Aureus. Other staphylococcus pneumonia. Pneumonia due to anaerobes. Pneumonia due to escherichia coli [e.coli]. Pneumonia due to other gram-negative bacteria. Pneumonia due to legionnaires’ disease. Pneumonia due to other specified bacteria. Bacterial pneumonia unspecified. Pneumonia due to mycoplasma pneumoniae. Pneumonia due to chlamydia. Pneumonia due to other specified organism. Bronchopneumonia organism unspecified. Pneumonia organism unspecified. Influenza with pneumonia. Influenza due to identified novel H1N1 influenza virus with pneumonia. ICD–9–CM CODES TO IDENTIFY HEART FAILURE (HF) CASES ICD–9–CM Code 402.01 402.11 402.91 404.01 Code description ............... ............... ............... ............... 404.03 ............... 404.11 ............... 404.13 ............... 404.91 ............... 404.93 ............... 428.xx ............... Hypertensive heart disease, malignant, with heart failure. Hypertensive heart disease, benign, with heart failure. Hypertensive heart disease, unspecified, with heart failure. Hypertensive heart and chronic kidney disease, malignant, with heart failure and with chronic kidney disease stage I through stage IV, or unspecified. Hypertensive heart and chronic kidney disease, malignant, with heart failure and with chronic kidney disease stage V or end stage renal disease. Hypertensive heart and chronic kidney disease, benign, with heart failure and with chronic kidney disease stage I through stage IV, or unspecified. Hypertensive heart and chronic kidney disease, benign, with heart failure and with chronic kidney disease stage I through stage IV, or unspecified failure and chronic kidney disease stage V or end stage renal disease. Hypertensive heart and chronic kidney disease, unspecified, with heart failure and chronic kidney disease stage V or end stage renal disease heart failure and with chronic kidney disease stage I through stage IV, or unspecified. Hypertensive heart and chronic kidney disease, unspecified, with heart failure and chronic kidney disease stage V or end stage renal disease. Heart Failure. ICD–9–CM CODES TO IDENTIFY ACUTE MYOCARDIAL INFARCTION (AMI) CASES mstockstill on DSK4VPTVN1PROD with RULES6 ICD–9–CM Code 410.00 410.01 410.10 410.11 410.20 410.21 410.30 410.31 410.40 410.41 410.50 410.51 410.60 410.61 410.70 410.71 410.80 410.81 Description of code ............... ............... ............... ............... ............... ............... ............... ............... ............... ............... ............... ............... ............... ............... ............... ............... ............... ............... VerDate Mar<15>2010 AMI AMI AMI AMI AMI AMI AMI AMI AMI AMI AMI AMI AMI AMI AMI AMI AMI AMI (anterolateral wall)—episode of care unspecified. (anterolateral wall)—initial episode of care. (other anterior wall)—episode of care unspecified. (other anterior wall)—initial episode of care. (inferolateral wall)—episode of care unspecified. (inferolateral wall)—initial episode of care. (inferoposterior wall)—episode of care unspecified. (inferoposterior wall)—initial episode of care. (other inferior wall)—episode of care unspecified. (other inferior wall)—initial episode of care. (other lateral wall)—episode of care unspecified. (other lateral wall)—initial episode of care. (true posterior wall)—episode of care unspecified. (true posterior wall)—initial episode of care. (subendocardial)—episode of care unspecified. (subendocardial)—initial episode of care. (other specified site)—episode of care unspecified. (other specified site)—initial episode of care. 21:51 Aug 16, 2013 Jkt 229001 PO 00000 Frm 00178 Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 50673 ICD–9–CM CODES TO IDENTIFY ACUTE MYOCARDIAL INFARCTION (AMI) CASES—Continued ICD–9–CM Code Description of code mstockstill on DSK4VPTVN1PROD with RULES6 410.90 ............... 410.91 ............... AMI (unspecified site)—episode of care unspecified. AMI (unspecified site)—initial episode of care. For FY 2014, as proposed, we are calculating aggregate payments for excess readmissions, using MedPAR claims from July 1, 2009 to June 30, 2012, to identify applicable conditions based on the same ICD–9–CM codes used to identify the conditions for the readmissions measures and to apply the exclusions for the types of admissions discussed above. Comment: Several commenters supported the proposal to calculate excess payments for readmissions, or the numerator of the readmissions payment adjustment factor, using MedPAR claims with the proposed trims such that the calculation is more consistent with the calculation of the excess readmission ratio. Response: We appreciate the commenters’ support for our proposed modifications to the MedPAR data to calculate the excess payments for readmissions, which is the numerator of the readmissions payment adjustment factor. As such, we are finalizing, as proposed, our methodology to apply the trims to the admissions used to calculate excess payments for readmissions discussed earlier. Comment: Some commenters stated that the data currently available are insufficient to replicate the readmission payment adjustment factors. The commenters requested that CMS provide sufficient data in the public MedPAR file to fully replicate the readmission payment adjustment factors. Response: We recognize the limitations on the public’s ability to replicate our calculations based on the data that are currently available. In response to those comments, we are providing additional provider-level information on the calculation of the readmissions payment adjustment factors in the Hospital Readmissions Reduction Program Supplemental Data File that can be found on our Web site at: https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ AcuteInpatientPPS/FY2014–IPPS-FinalRule-Home-Page.html. Comment: One commenter believed that the proposed calculation of the readmission payment adjustment factor creates excessive payment reductions. The commenter contended that the excess readmission ratio, which is a VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 ratio of actual readmissions to expected readmissions, should be applied to the number of a hospital’s readmissions, not admissions, in order to determine the hospital’s excess payments for readmissions. The commenter believed that CMS has the discretionary authority to implement the policy as Congress intended, and that regulatory action could be confirmed by Congress with a technical amendment. Furthermore, the commenter found that the Congressional Budget Office (CBO) score for the provision exceeds the estimated savings that we calculated. The commenter provided an alternative approach whereby CMS would determine the magnitude of the readmission reduction using the 25th percentile of hospital performance on the readmission measures rather than the current policy of comparing a hospital’s performance to the national average hospital performance. Response: We received a similar comment in response to the FY 2013 IPPS/LTCH PPS proposed rule and responded to it in the FY 2013 IPPS/ LTCH PPS final rule (77 FR 53393). We stated in the FY 2013 IPPS/LTCH PPS final rule that we believe that the statute is prescriptive with respect to the calculation of ‘‘aggregate payments for excess readmissions’’ where the statute specifies that the ‘‘aggregate payments for excess readmissions’’ is the sum for each condition of the product of ‘‘the operating DRG payment amount for such hospital for such applicable period for such condition’’ and ‘‘the number of admissions for such condition’’ and ‘‘the excess readmission ratio’’ minus one. We believe that section 1886(q)(4)(A) of the Act requires us to include all admissions for a condition in the calculation of ‘‘aggregate payments for excess readmissions.’’ We continue to believe that we are implementing the provision as required by law. Comment: Several commenters requested that CMS make additional adjustments to the calculation of the readmissions payment adjustment factor to account for differences in the readmissions payment adjustment factors for hospitals that treat a high proportion of patients of low socioeconomic status. The commenters also suggested that CMS make an adjustment to the readmission payment PO 00000 Frm 00179 Fmt 4701 Sfmt 4700 adjustment factors to account for a hospital’s proportion of dual-eligible patients. The commenters contended that dual-eligible status is a better predictor of readmission rates because it reflects Medicare beneficiaries, which is what the readmissions measures are based on. Response: We appreciate the commenters’ suggestions on modifying the readmission payment adjustment factors to account for differences in the socioeconomic status of patients treated by hospitals. As stated earlier and in prior rules, we continue to believe that we need to examine the relationship of patient socioeconomic status and readmissions as it applies to the readmissions measures. As we have stated above, the readmissions measures, as endorsed by the NQF, are not risk-adjusted for socioeconomic status. Currently, the NQF does not support risk-adjustments based on socioeconomic status, as the NQF believes it can create different standards of quality for hospitals that treat a higher proportion of patients with low socioeconomic status. Risk-adjusting the readmissions measures for socioeconomic status can obscure differences in the quality of health care. Similarly, applying an adjustment to the readmissions payment adjustment factors can also create different standards of quality for hospitals based on the socioeconomic status of the patients treated. Applying an adjustment to the readmissions payment adjustment factors at this point to account for socioeconomic status rather than determining whether a riskadjustment for socioeconomic status would be appropriate for the readmissions measures could appear as circumventing the NQF’s position on the application of a risk-adjustment for socioeconomic status on the readmissions measures. We note that, to the extent that dual-eligible patients or patients of low socioeconomic status have higher readmission rates because they are sicker or have more comorbidities, we already account for comorbidities in the risk-adjustment for the excess readmission ratios. While we are not incorporating any special adjustments for socioeconomic status in the Hospital Readmissions Reduction Program at this time, we remain E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50674 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations concerned about the impact of this provision on hospitals that serve a high proportion of low-income patients. We will continue to monitor the issue of the relationship of a patient’s socioeconomic status and a hospital’s readmission performance, and how it affects payments to hospitals. Comment: Several commenters requested various modifications to the calculation of the readmissions payment adjustment factor. One commenter suggested that CMS give credit to hospitals that have better than average national mortality rates for AMI, HF, and PN because the commenter believed it shows that hospitals are not sacrificing performance on the mortality measures in order to improve performance on readmission measures. Another commenter suggested that CMS reward hospitals that reduce their readmissions rate each year. The commenter suggested that CMS structure the Hospital Readmissions Reduction Program like the Hospital VBP Program that rewards hospitals for their performance. Another commenter suggested that readmissions that occur later in the 30-day window should count less towards the calculation of the readmission payment adjustment factor than readmissions that occur earlier in the 30-day window. Another commenter suggested that a hospital’s readmissions payment adjustment be based on whether or not the hospital can meet a fixed performance target. Another commenter believed that CMS should exclude additional admissions because the penalties are excessive, at $26,000 per excess readmission. The commenter suggested that CMS exclude admissions for patients over the age of 80 from the readmissions measures and payment adjustment calculations, risk-adjust for patient-mix, or apply alternative policies to obtain savings for the Medicare program. Response: We appreciate the comments on various ways to change the calculation of the readmissions payment adjustment factors that account for improvement in readmissions or provide incentives for readmissions, as opposed to a penalty for readmissions. We received similar comments in response to the FY 2012 IPPS/LTCH PPS proposed rule that we addressed in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53394). We believe that the Hospital Readmissions Reduction Program is structured to apply a payment reduction to hospitals with excess readmissions, as measured by having worse performance on readmissions for certain conditions compared to the average hospital. Section 1886(q)(4) of the Act is VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 prescriptive in the methodology to calculate the readmissions payment adjustment factor such that we are limited to readmissions payment adjustment factor being the higher of a ratio of a hospital’s excess payments for readmissions relative to their total payments for all discharges or a floor defined in the statute. In addition, we believe that the statute does not provide us with the authority to reward hospitals for improvement, which is allowed under section 1886(p) of the Act for the Hospital VBP Program. However, we continue to believe that if a hospital improves over time and those improvements result in performance on readmissions on the three readmissions measures that is better than the average hospital, the hospital would not be subject to a payment reduction. Comment: MedPAC submitted a comment that was similar to comments from several other commenters, stating that the readmission penalty formula is flawed where the aggregate penalties will remain constant even if national readmission rates decline. MedPAC recommended establishing a fixed performance target by which to compare hospitals against in order to evaluate a hospital’s performance on readmissions and to determine the readmissions payment adjustment. MedPAC is particularly concerned that the readmission penalties will increase more significantly with the introduction of additional readmissions measures in FY 2015 because the condition-specific penalty per excess readmission is higher for conditions with low readmission rates, such as for TKA/THA. Finally, MedPAC noted a correlation between readmission rates and a hospital’s share of low-income patients, and recommended that CMS evaluate hospital readmission rates against a group of peer hospitals with a similar share of low-income Medicare beneficiaries, as measured by proportion of patients with Supplemental Security Income (SSI), as a way to risk-adjust readmission penalties for socioeconomic status. MedPAC acknowledged that the proposals to implement the Hospital Readmissions Reduction Program are consistent with the statute and that its recommendations were beyond the scope of the statute and would require a legislative change by Congress. Response: We appreciate the comments and suggestions made by MedPAC and will be certain to explore in future rulemaking the payment implications of adding additional measures to the Hospital Readmissions Reduction Program for FY 2015. We also appreciate MedPAC’s observations and PO 00000 Frm 00180 Fmt 4701 Sfmt 4700 suggestions to refine the payment formula for the Hospital Readmissions Reduction Program. We agree that their recommendations are currently beyond the scope of the statute, particularly because we believe that we are required by sections 1886(q)(4)(C) and 1886(q)(5)(A) of the Act to use readmissions measures that are endorsed by the NQF, and the readmissions measures currently endorsed by the NQF measure a hospital’s performance on readmissions relative to the average hospital at the national level. We will evaluate MedPAC’s comment, particularly with regards to MedPAC’s recommendation that we evaluate hospital readmission rates against a group of peer hospitals with a similar share of low-income Medicare beneficiaries, as measured by proportion of patients with Supplemental Security Income (SSI), as a way to risk-adjust readmission penalties for socioeconomic status. However, as stated earlier in this final rule, our analyses also show that adding socioeconomic status to the riskadjustment has a negligible impact on hospitals’ risk-standardized rates. The risk-adjustment for clinical factors likely captures much of the variation due to socioeconomic status, therefore leading to a more modest impact of socioeconomic status on hospitals’ results than stakeholders may expect. As we discussed earlier in this final rule, we remain concerned about the impact of the Hospital Readmissions Reduction Program on hospitals that serve a high proportion of low-income patients. We will continue to assess various metrics of low-income patients and how to identify hospitals that serve a large share of low-income patients. In addition, we will continue to monitor the relationship of patient’s socioeconomic status and a hospital’s performance on readmissions as it applies to the readmissions measures and how this relationship impacts payments to hospitals. Comment: Some commenters suggested that CMS show the impact of the Hospital Readmissions Reduction Program by DSH decile, as it had done for the FY 2013 rule, in the interest of transparency. Response: In response to these comments, we have provided a table displaying the number of hospitals subject to the 2-percent maximum reduction, the number of hospitals subject to a reduction between 1 percent and 2 percent, the number of hospitals subject to a reduction less than 1 percent, and the number of hospitals that will not be subject to any reduction E:\FR\FM\19AUR2.SGM 19AUR2 50675 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations by DSH Patient Percentage (DPP) decile. The DPP is reported in the FY 2014 IPPS Final Rule Impact file. The analysis excludes new hospitals as they would not receive a readmissions payment adjustment and would not have a DPP. New providers were including the potential to evaluate the relationship of a hospital’s readmissions payment adjustment and their uncompensated care costs as reported on their Worksheet S–10 of the Medicare Hospital Cost Report. identified as providers in the March 2013 update of the provider specific file and not in the March 2012 update of the provider specific file (used in the FY 2013 IPPS/LTCH PPS final rule). We will continue to explore different measures of socioeconomic status, DISTRIBUTION OF HOSPITALS READMISSIONS ADJUSTMENT FACTOR BY DSH PATIENT PERCENTAGE (DPP) Number of hospitals Payment adjustment between ¥1 percent and 2 percent (not inclusive) ¥2 percent floor adjustment Any adjustment (sum of col. 2–4) No readmissions adjustment factor (1) Decile Payment adjustment up to ¥1 percent (inclusive) (2) (3) (4) (5) (6) Lowest DPP ............................................. Second ..................................................... Third ......................................................... Fourth ....................................................... Fifth .......................................................... Sixth ......................................................... Seventh .................................................... Eighth ....................................................... Ninth ......................................................... Highest DPP ............................................ 336 336 336 336 336 336 336 336 336 335 116 204 202 205 203 219 218 213 240 234 2 11 16 19 17 14 12 25 16 21 2 0 1 1 0 3 3 3 3 2 120 215 219 225 220 236 233 241 259 257 216 121 117 111 116 100 103 95 77 78 Total .................................................. 3,359 2,054 153 18 2,225 1,134 Comment: Some commenters requested that the inpatient claims denied by the CMS Recovery Audit Contractors (RACs) not be included in the calculation of the readmissions payment adjustment or readmissions measures, as those claims were not considered as inpatient for payment purposes. Response: As discussed earlier in this final rule, MedPAR claims data is our data source to calculate readmissions payment adjustment factors, specifically the excess payments for readmissions and payment for all discharges. We are finalizing the policy to use MedPAR data for discharges from July 1, 2009 through June 30, 2012, and we are finalizing the policy to use the March 2010 update of the FY 2009 MedPAR file, the March 2011 update of the FY 2010 MedPAR file, the March 2012 update of the FY 2011 MedPAR, and the March 2013 update of the FY 2012 MedPAR file to identify the discharges occurring from July 1, 2009 through June 30, 2012. In addition, the Standard Analytic File is the data source used to calculate the excess readmission ratios. We use the June 2010 update of the 2009 SAF file, the June 2011 update of the 2010 file, the June 2012 update of the 2011 file, and the September 2012 update of the 2012 file. As discussed in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53390), the RACs have up to 3 years to review claims to determine whether a claim was inappropriately billed as inpatient when it should have been an outpatient claim. If a claim is denied as an inpatient stay, the claim is adjusted through the standard Medicare claims processing systems, going through the CWF, SAF and MedPAR. However, given the timing of the RAC audits and the updates of the SAF and MedPAR files used to calculate the readmissions measures and readmissions payment adjustment factors, it is not certain that all denied claims will be reflected in our claims files at the time of our calculations. However, we continue to believe that using these updates of the MedPAR and SAF files is consistent with IPPS ratesetting and allows for transparency for the public to obtain this dataset for replication. Furthermore, inpatient stays that are denied payment under Medicare Part A remain classified as inpatient stays, and can be billed to Medicare Part B as an Medicare Part B inpatient stay. These inpatient stays that are denied payment under Medicare Part A will typically continue to count as a qualifying inpatient stay for other payment purposes such as qualifying for SNF benefits and Medicare DSH patient days. Therefore, we believe that it is appropriate to include these admissions in the Hospital Readmissions Reduction Program. After consideration of the public comments we received, we are finalizing the proposed methodology to calculate the readmissions payment adjustment factors, including our methodology to apply the trims to the admissions used to calculate excess payments for readmissions discussed earlier. mstockstill on DSK4VPTVN1PROD with RULES6 FORMULAS TO CALCULATE THE READMISSION ADJUSTMENT FACTOR Aggregate payments for excess readmissions = [sum of base operating DRG payments for AMI x (Excess Readmission Ratio for AMI–1)] + [sum of base operating DRG payments for HF x (Excess Readmission Ratio for HF–1)] +[sum of base operating DRG payments for PN x (Excess Readmission Ratio for PN–1)]. Aggregate payments for all discharges = sum of base operating DRG payments for all discharges. Ratio = 1-(Aggregate payments for excess readmissions/Aggregate payments for all discharges). VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 PO 00000 Frm 00181 Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2 50676 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations FORMULAS TO CALCULATE THE READMISSION ADJUSTMENT FACTOR—Continued Readmissions Adjustment Factor for FY 2014 is the higher of the ratio or 0.9800. *Based on claims data from July 1, 2009 to June 30, 2012 for FY 2014. h. Clarification of Reporting HospitalSpecific Information, Including Opportunity To Review and Submit Corrections mstockstill on DSK4VPTVN1PROD with RULES6 Comment: Some commenters provided suggestions regarding waivers for hospitals located in areas that experience disasters or other extraordinary circumstances. One commenter suggested that CMS establish a formal waiver process for disaster or other extraordinary circumstances. Another commenter suggested that CMS suppress reporting readmission rates for the last quarter of 2012 and the first quarter of 2013 pending analysis of potential bias in readmission rates due to Hurricane Sandy. Response: We appreciate the suggestions to establish a potential exception process from the Hospital Readmissions Reduction Program for hospitals located in areas that experience disasters or other extraordinary circumstances. We did not make any proposals related to a waiver process for the Hospital Readmissions Reduction Program in the proposed rule. Therefore, these comments are outside the scope of the provisions of the proposed rule. There are several policy and operational considerations in developing an exception process for extraordinary circumstances (such as natural disasters) for the Hospital Readmissions Reduction Program. If we consider implementing an exception application and approval process for hospitals located in areas that experience disasters or other extraordinary circumstances, we will propose that process through notice-and-comment rulemaking. Number (CCN) by recently acquired entities into calculations for a particular CCN will not be considered. This is because the particular CCN was not responsible for the patients under the other CCN prior to the hospital merger at the time of service. Comment: One commenter suggested that CMS make all data used in measure calculations available so hospitals can replicate readmissions and perform an independent analysis. Response: In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53401), we finalized the policies of providing applicable hospitals with: ‘‘(1) a period of 30 days to review and submit corrections for their excess readmission ratios for the Hospital Readmissions Reduction Program; and (2) confidential reports and accompanying confidential discharge-level information (this includes the excess readmission ratios, the risk-factors for the discharges that factor into the calculation of the excess readmission ratio, as well as information about the readmissions associated with these discharges.’’ After consideration of the public comments received, for the review and correction process, we are finalizing additional clarification on what constitutes a correction for the Hospital Readmissions Reduction Program. Specifically, requests to incorporate claims previously billed under a different CMS Certification Number (CCN) by recently acquired entities into calculations for a particular CCN shall not be considered a correction under the Hospital Readmissions Reduction Program. H. Hospital Value-Based Purchasing (VBP) Program In the FY 2013 IPPS/LTCH PPS final rule, we finalized our policy for the public reporting of the information for this program as well as providing hospitals with an opportunity to review and submit corrections to the information prior to public reporting. For FY 2014, we did not propose changes to the reporting, review, and submittal of corrections policy and the regulatory text that we finalized in the FY 2013 IPPS/LTCH final rule (77 FR 53399 through 53401). However, we wish to clarify that requests to incorporate claims previously billed under a different CMS Certification VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 1. Statutory Background Section 1886(o) of the Act, as added by section 3001(a)(1) of the Affordable Care Act, requires the Secretary to establish a hospital value-based purchasing program (the Hospital Value-Based Purchasing (VBP) Program) under which value-based incentive payments are made in a fiscal year to hospitals that meet performance standards established for a performance period for such fiscal year. Both the performance standards and the performance period for a fiscal year are to be established by the Secretary. Section 1886(o)(1)(B) of the Act states that the Hospital VBP Program applies PO 00000 Frm 00182 Fmt 4701 Sfmt 4700 to payments for hospital discharges occurring on or after October 1, 2012. In accordance with section 1886(o)(6)(A) of the Act, we are required to make valuebased incentive payments under the Hospital VBP Program to hospitals that meet or exceed performance standards for a performance period for a fiscal year. As further required by section 1886(o)(6)(C)(ii)(I) of the Act, we base each hospital’s value-based payment percentage on the hospital’s Total Performance Score (TPS) for a specified performance period. In accordance with section 1886(o)(7) of the Act, the total amount available for value-based incentive payments for a fiscal year will be equal to the total amount of the payment reductions for all participating hospitals for such fiscal year, as estimated by the Secretary. For FY 2013, the available funding pool was equal to 1.00 percent of the base-operating DRG payments to all participating hospitals, as estimated by the Secretary, and the size of the applicable percentage will increase to 1.25 percent for FY 2014, 1.50 percent for FY 2015, 1.75 percent for FY 2016, and 2.0 percent for FY 2017 and successive fiscal years. Section 1886(o)(1)(C) of the Act generally defines the term ‘‘hospital’’ for purposes of the Hospital VBP Program as a subsection (d) hospital (as that term is defined in section 1886(d)(1)(B) of the Act), but excludes from the definition of the term ‘‘hospital,’’ with respect to a fiscal year: (1) A hospital that is subject to the payment reduction under section 1886(b)(3)(B)(viii)(I) of the Act (the Hospital IQR Program) for such fiscal year; (2) a hospital for which, during the performance period for the fiscal year, the Secretary has cited deficiencies that pose immediate jeopardy to the health or safety of patients; and (3) a hospital for which there are not a minimum number (as determined by the Secretary) of measures that apply to the hospital for the performance period for the fiscal year involved, or for which there are not a minimum number (as determined by the Secretary) of cases for the measures that apply to the hospital for the performance period for such fiscal year. Comment: Several commenters opposed the increased reduction to the base operating DRG payment amount for FY 2014 because they believed that the measures under the Hospital VBP Program were not adequately riskadjusted. E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 Response: As noted above, the 1.25 percent reduction to base operating DRG payment amounts for FY 2014 is required by statute. It is a part of the gradual increase to 2.0 percent by 2017 in the applicable percent used to fund value-based incentive payments under the Hospital VBP Program. Comment: One commenter asked whether CMS could combine all CMS incentive payment program adjustments that affect payment to subsection (d) hospitals under the IPPS into one aggregate annual percent update (APU) adjustment. Response: While we appreciate the complexity of the multiple payment adjustments that are applicable to hospitals under various incentive payment programs, we are unable to combine the Hospital IQR Program, Hospital VBP Program, HAC Reduction Program, and Hospital Readmissions Reduction Program adjustments into one aggregate adjustment to the APU, because by law, they affect different portions of the Medicare payment made to subsection (d) hospitals under the IPPS. The Hospital IQR Program adjustment is made to the applicable percentage increase that applies to the standardized amount (referred to by the commenters as the APU), the HAC adjustment is a percentage reduction to the amount otherwise payable under the IPPS, and the Hospital VBP and Hospital Readmissions Reduction Programs’ adjustments are made to the base operating DRG payment amount. We also believe that it is useful for hospitals to be able to distinguish the effect of each program, so that they can focus their resources for improvement. 2. Overview of the FY 2013 Hospital VBP Program In April 2011, we issued the Hospital Inpatient VBP Program final rule to implement section 1886(o) of the Act (76 FR 26490 through 26547). As described more fully in that final rule, for the FY 2013 Hospital VBP Program, we adopted 13 measures, including 12 clinical process of care measures and 8 dimensions from the Hospital Consumer Assessment of Healthcare Providers and Systems Survey (HCAHPS) measure that we categorized into two domains (76 FR 26495 through 26511). We grouped the 12 clinical process-of-care measures into a clinical process of care domain, and placed the HCAHPS survey measure into a patient experience of care domain. We adopted a 3-quarter performance period from July 1, 2011 through March 31, 2012 for these measures (76 FR 26494 through 26495), and performance standards on which hospital performance would be VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 evaluated. To determine whether a hospital meets or exceeds the performance standards for these measures, we assessed each hospital’s achievement during this specified performance period, as well as its improvement during this period as compared with its performance during a 3-quarter baseline period from July 1, 2009 through March 31, 2010 (76 FR 26493 through 26495). We then calculated a TPS for each hospital by combining the greater of the hospital’s achievement or improvement points for each measure to determine a score for each domain, weighting each domain score (for the FY 2013 Hospital VBP Program, the weights were clinical process of care = 70 percent, patient experience of care = 30 percent), and adding together the weighted domain scores. We converted each hospital’s TPS into a value-based incentive payment percentage using a linear exchange function and then converted the value-based incentive payment percentage into a per discharge valuebased incentive payment amount. We incorporated the reduction to each hospital’s base operating DRG payment amount for each discharge, as well as the value-based incentive payment amounts that the hospital earned as a result of its performance (if applicable) into our claims processing systems in January 2013, and these adjustments applied to FY 2013 discharges. We finalized the Hospital VBP Program’s payment adjustment calculation methodology, including codifying certain definitions related to the program, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53569 through 53571). We also finalized our methodology for estimating the total amount available for value-based incentive payments in a fiscal year under the Hospital VBP Program (77 FR 53571 through 53573), our methodology to calculate the value-based incentive payment adjustment factor (77 FR 53573 through 53576), the delayed application of the base-operating DRG payment amount reduction for FY 2013 discharges until incorporation of the value-based incentive payment adjustments into our claims processing system (77 FR 53577), and our process for reducing the base-operating DRG payment amount and applying the value-based incentive payment adjustment for FY 2013 (77 FR 53577 through 53578). We refer readers to the Hospital Inpatient VBP Program final rule (76 FR 26490 through 26547), the CY 2012 OPPS/ASC final rule with comment period (76 FR 74527 through 74547) and the FY 2013 IPPS/LTCH PPS final rule PO 00000 Frm 00183 Fmt 4701 Sfmt 4700 50677 (77 FR 53567 through 53614) for further explanation of the details of the FY 2013 Hospital VBP Program and our other finalized policies related to future fiscal years. We received a number of general comments on the proposed rule related to the Hospital VBP Program. Comment: Commenters requested that CMS begin the Hospital VBP demonstration programs authorized by the Affordable Care Act for small hospitals and critical access hospitals as soon as possible. Response: We thank commenters for this input. We intend to begin those demonstrations as soon as is feasible within our planning and resource constraints. Comment: Commenters were concerned about the level of riskadjustment in use under the Hospital VBP Program, arguing that adjusting only for patients’ age, illness severity, and for geographic payment adjustments is insufficient, particularly for urban and safety-net hospitals. Response: We disagree. We believe that the Hospital VBP Program has adopted measures that incorporate riskadjustment where appropriate, and we further believe that the risk-adjusted measures we have adopted for the Hospital VBP Program properly take into account hospital characteristics that impact the delivery of high-quality patient care. Comment: Commenters requested that CMS post Hospital VBP Program performance information on the Hospital Compare Web site as soon as possible. Commenters noted, for example, that CMS has not yet posted any quantitative values for the PSI–90 measure on the Web site, even though the measure has been finalized for the FY 2015 Hospital VBP Program and proposed for inclusion in the HAC Reduction Program. Response: In addition to the PSI–90 performance data that we have published on the Hospital Compare Web site in the past, we have also posted PSI–90 quantitative data on our data.medicare.gov Web site (https:// data.medicare.gov/data/hospitalcompare) as part of the Hospital IQR Program’s public reporting display. We note that the July 2013 update for this measure was suppressed on this Web site, but we anticipate updating the quantitative data later in 2013. We intend to continue posting performance data for each fiscal year on the Web site, including scoring information on PSI– 90 for the FY 2015 Hospital VBP Program, in the future. E:\FR\FM\19AUR2.SGM 19AUR2 50678 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 3. FY 2014 Payment Details Section 1886(o)(7)(B) of the Act instructs the Secretary to reduce the base operating DRG payment amount for a hospital for each discharge in a fiscal year by an applicable percent. Under section 1886(o)(7)(A) of the Act, the sum total of these reductions in a fiscal year must equal the total amount available for value-based incentive payments for all eligible hospitals for the fiscal year, as estimated by the Secretary. We finalized details on how we would implement these provisions in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53571 through 53573), and refer readers to that final rule for more details. Under section 1886(o)(7)(c)(ii) of the Act, the applicable percent for the FY 2014 Hospital VBP Program is 1.25 percent. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27607), we estimated that the total amount available for value-based incentive payments for FY 2014 is $1.1 billion, based on the December 2012 update of the FY 2012 MedPAR file. We stated that we intended to update this estimate for the final rule, using the March 2013 update of the FY 2012 MedPAR file. Based on the March 2013 update of the FY 2012 MedPAR file, we continue to estimate that the amount available for value-based incentive payments for FY 2014 is $1.1 billion. As finalized in the FY 2013 IPPS/ LTCH PPS final rule, as referenced above, we will utilize a linear exchange function to translate this estimated amount available into a value-based incentive payment percentage for each hospital, based on its TPS. We will then calculate a value-based incentive payment adjustment factor which will be applied to the base operating DRG payment amount for each discharge occurring in FY 2014, on a per-claim basis. We published proxy value-based incentive payment adjustment factors in Table 16 of the FY 2014 IPPS/LTCH PPS proposed rule (which is available on the CMS Web site). The proxy factors are based on the TPSs from the FY 2013 Hospital VBP Program. These FY 2013 performance scores are the most recently available performance scores that hospitals have been given the opportunity to review and correct. We stated that the slope of the linear exchange function used to calculate those proxy value-based incentive payment adjustment factors was 1.8362446088. This slope, along with the estimated amount available for value-based incentive payments, was also published in Table 16. As we indicated in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27607), we are updating this table, as Table 16A, in this final rule (which is available on the CMS Web site) to reflect changes based on the March 2013 update to the FY 2012 MedPAR file. The slope of the linear exchange function used to calculate those updated proxy valuebased incentive payment adjustment factors is 1.8363321306. The updated proxy value-based incentive payment adjustment factors for FY 2014 continue to be based on historic FY 2013 Program TPSs because hospitals will not have been given the opportunity to review and correct their actual TPSs for the FY 2014 Hospital VBP Program until after the final rule is published. After hospitals have been given an opportunity to review and correct their actual TPSs for FY 2014, we will add a new table, Table 16B (which will be available on the CMS Web site) to display the actual value-based incentive payment adjustment factors, exchange function slope, and estimated amount available for the FY 2014 Hospital VBP Program. We expect that Table 16B will be posted on the CMS Web site in October 2013. 4. FY 2014 Hospital VBP Program Measures For FY 2014, we adopted 17 measures for the Hospital VBP Program, including the 12 clinical process of care measures and the HCAHPS measure that we adopted for the FY 2013 Hospital VBP Program, 1 new clinical process of care measure (SCIP-Inf-9: Postoperative Urinary Catheter Removal on Postoperative Day 1 or 2), and 3 mortality outcome measures (Acute Myocardial Infarction (AMI) 30-Day Mortality Rate, Heart Failure (HF) 30Day Mortality Rate, Pneumonia (PN) 30Day Mortality Rate). The clinical process of care, HCAHPS, and mortality measures are discussed in more detail in the Hospital Inpatient VBP Program final rule (76 FR 26510 through 26511) and SCIP-Inf-9 is discussed in more detail in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74530). We previously adopted 8 HAC measures, 2 AHRQ composite measures, and a Medicare Spending per Beneficiary (MSPB) measure for the FY 2014 Hospital VBP Program, then suspended the effective dates of these measures, with the result that these measures were not included in the FY 2014 Hospital VBP Program (76 FR 74528 through 74530). However, as discussed further below, we finalized adoption of a MSPB measure and an AHRQ composite measure for the FY 2015 Hospital VBP Program in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53582 through 53592). Set out below is a complete list of the measures we adopted for the FY 2014 Hospital VBP Program: FINALIZED QUALITY MEASURES FOR THE FY 2014 HOSPITAL VBP PROGRAM Measure ID Measure description mstockstill on DSK4VPTVN1PROD with RULES6 Clinical Process of Care Measures Acute myocardial infarction: AMI–7a ..................................... AMI–8a ..................................... Heart Failure: HF–1 ......................................... Pneumonia: PN–3b ....................................... PN–6 ......................................... Healthcare-associated infections: SCIP-Inf-1 ................................. SCIP-Inf-2 ................................. SCIP-Inf-3 ................................. SCIP-Inf-4 ................................. SCIP-Inf-9 ................................. Surgeries: VerDate Mar<15>2010 21:51 Aug 16, 2013 Fibrinolytic Therapy Received Within 30 Minutes of Hospital Arrival. Primary PCI Received Within 90 Minutes of Hospital Arrival. Discharge Instructions. Blood Cultures Performed in the Emergency Department Prior to Initial Antibiotic Received in Hospital. Initial Antibiotic Selection for CAP in Immunocompetent Patient. Prophylactic Antibiotic Received Within One Hour Prior to Surgical Incision. Prophylactic Antibiotic Selection for Surgical Patients. Prophylactic Antibiotics Discontinued Within 24 Hours After Surgery End Time. Cardiac Surgery Patients with Controlled 6AM Postoperative Serum Glucose. Postoperative Urinary Catheter Removal on Post Operative Day 1 or 2. Jkt 229001 PO 00000 Frm 00184 Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 50679 FINALIZED QUALITY MEASURES FOR THE FY 2014 HOSPITAL VBP PROGRAM—Continued Measure ID Measure description SCIP-Card-2 ............................. SCIP–VTE–1 ............................ SCIP–VTE–2 ............................ Surgery Patients on a Beta Blocker Prior to Arrival That Received a Beta Blocker During the Perioperative Period. Surgery Patients with Recommended Venous Thromboembolism Prophylaxis Ordered. Surgery Patients Who Received Appropriate Venous Thromboembolism Prophylaxis Within 24 Hours Prior to Surgery to 24 Hours After Surgery. Patient Experience of Care Measures HCAHPS .......................................... Hospital Consumer Assessment of Healthcare Providers and Systems Survey*. Outcome Measures MORT–30–AMI ................................ MORT–30–HF .................................. MORT–30 PN .................................. Acute Myocardial Infarction (AMI) 30-Day Mortality Rate. Heart Failure (HF) 30-Day Mortality Rate. Pneumonia (PN) 30-Day Mortality Rate. * The finalized dimensions of the HCAHPS survey for use in the FY 2014 Hospital VBP Program are: Communication with Nurses, Communication with Doctors, Responsiveness of Hospital Staff, Pain Management, Communication about Medicines, Cleanliness and Quietness of Hospital Environment, Discharge Information and Overall Rating of Hospital. These are the same dimensions that we adopted for the FY 2013 Hospital VBP Program. 5. FY 2015 Hospital VBP Program Measures In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53582 through 53592), we adopted 12 Clinical Process of Care measures, one Patient Experience of Care measure in the form of the HCAHPS survey, 5 Outcome measures, including three 30-day mortality measures, the AHRQ PSI composite measure, and the CLABSI measure, and one Efficiency measure for the FY 2015 Hospital VBP Program. We did not adopt two clinical process measures (SCIP-Inf-10 and AMI–10) that we determined were ‘‘topped-out’’ according to our criteria finalized in the Hospital Inpatient VBP Program final rule (76 FR 26496 through 26497). We also did not adopt SCIP–VTE–1 for the FY 2015 Hospital VBP Program because we believed that the measure is very similar to another measure we have adopted for the program (SCIP–VTE–2) and, in our view, is not as closely linked to better surgical outcomes because it assesses the ordering of VTE prophylaxis, rather than the patient’s actual receipt of such prophylaxis within 24 hours of surgery. We also noted that, during a recent maintenance review of SCIP– VTE–1, the National Quality Forum (NQF) concluded that it would no longer endorse this measure. Set out below is a complete list of the measures we adopted for the FY 2015 Hospital VBP Program: FINALIZED QUALITY MEASURES FOR FY 2015 HOSPITAL VBP PROGRAM Measure ID Measure description Clinical Process of Care Measures AMI–7a ............................................. AMI–8a ............................................. HF–1 ................................................ PN–3b .............................................. PN–6 ................................................ SCIP-Inf-1 ........................................ SCIP-Inf-2 ........................................ SCIP-Inf-3 ........................................ SCIP-Inf-4 ........................................ SCIP-Inf-9 ........................................ SCIP-Card-2 .................................... SCIP–VTE–2 .................................... Fibrinolytic Therapy Received Within 30 Minutes of Hospital Arrival. Primary PCI Received Within 90 Minutes of Hospital Arrival. Discharge Instructions. Blood Cultures Performed in the Emergency Department Prior to Initial Antibiotic Received in Hospital. Initial Antibiotic Selection for CAP in Immunocompetent Patient. Prophylactic Antibiotic Received Within One Hour Prior to Surgical Incision. Prophylactic Antibiotic Selection for Surgical Patients. Prophylactic Antibiotics Discontinued Within 24 Hours After Surgery End Time. Cardiac Surgery Patients with Controlled 6AM Postoperative Serum Glucose. Urinary Catheter Removed on Postoperative Day 1 or Postoperative Day 2. Surgery Patients on Beta-Blocker Therapy Prior to Arrival Who Received a Beta-Blocker During the Perioperative Period. Surgery Patients Who Received Appropriate Venous Thromboembolism Prophylaxes Within 24 Hours Prior to Surgery to 24 Hours After Surgery. Patient Experience Measures mstockstill on DSK4VPTVN1PROD with RULES6 HCAHPS* ......................................... Hospital Consumer Assessment of Healthcare Providers and Systems Survey. Outcome Measures AHRQ PSI composite ...................... CLABSI ............................................ MORT–30–AMI ................................ MORT–30–HF .................................. MORT–30–PN ................................. VerDate Mar<15>2010 21:51 Aug 16, 2013 Complication/patient safety for selected indicators (composite). Central Line-Associated Blood Stream Infection. Acute Myocardial Infarction (AMI) 30-day mortality rate. Heart Failure (HF) 30-day mortality rate. Pneumonia (PN) 30-day mortality rate. Jkt 229001 PO 00000 Frm 00185 Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2 50680 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations FINALIZED QUALITY MEASURES FOR FY 2015 HOSPITAL VBP PROGRAM—Continued Measure ID Measure description Efficiency Measures MSPB–1 ........................................... Medicare Spending per Beneficiary. * Dimensions of the HCAHPS survey for use in the FY 2015 Hospital VBP Program are: Communication with Nurses, Communication with Doctors, Responsiveness of Hospital Staff, Pain Management, Communication about Medicines, Cleanliness and Quietness of Hospital Environment, Discharge Information and Overall Rating of Hospital. These are the same dimensions of the HCAHPS survey that have been finalized for prior Hospital VBP Program years. 6. FY 2016 Hospital VBP Program Measures mstockstill on DSK4VPTVN1PROD with RULES6 a. Measures Previously Adopted and Removal of AMI–8a, PN–3b, and HF–1 In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53592 through 53593), we adopted for the FY 2016 Hospital VBP Program the three 30-day mortality measures that we had finalized for the Hospital VBP Program for FYs 2014 and 2015. We also adopted the AHRQ patient safety composite (PSI–90) for the Hospital VBP Program for FY 2016. We adopted those measures at that time in order to adopt a longer performance period and collect more data for performance scoring than would be possible if we waited to make those proposals until this proposed rule. We also adopted those measures at that time because we recognized that under section 1886(o)(3)(C) of the Act, we must establish and announce performance standards not later than 60 days prior to the beginning of the performance period for the fiscal year involved. We also automatically readopted the remaining FY 2015 measures (with the exception of the CLABSI measure), in accordance with our policy of automatic readoption of measures (77 FR 53592). In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27609), we proposed to remove three measures from the measure set previously adopted that we have discussed above. First, we analyzed the clinical process of care measures for ‘‘topped out’’ status and concluded that AMI–8a: Primary PCI Received within 90 Minutes of Hospital Arrival is ‘‘topped-out.’’ Our methodology for evaluating whether a measure is topped-out focuses on two criteria: (1) National measure data show statistically indistinguishable performance levels at the 75th and 90th percentiles; and (2) national measure data show a truncated coefficient of variation (TCV) less than 0.10. We believe that topped-out measures should not be included in the Hospital VBP Program because measuring hospital performance on those measures has no meaningful effect on a hospital’s TPS. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Therefore, in the FY 2014 IPPS/LTCH PPS proposed rule we proposed to remove AMI–8a from the FY 2016 Hospital VBP Program measure set. We welcomed public comments on our proposal to remove AMI–8a from the FY 2016 Hospital VBP Program measure set and on whether any other existing Hospital VBP Program measures are topped-out and, therefore, should be removed from the previously adopted FY 2016 measure set. We stated our intent to update our topped-out analysis using the most recently available data and to announce in the FY 2014 IPPS/LTCH PPS final rule whether any of the other FY 2016 measures will be removed due to topped-out status. We completed an analysis of the proposed and readopted Clinical Process of Care measures based on CY 2012 data. We have concluded that, in addition to AMI–8a discussed above, SCIP-Inf-1 now meets our criteria for being ‘‘topped out,’’ and we will therefore remove the measure for FY 2016 and subsequent years. Second, we proposed to remove PN– 3b, Blood Cultures Performed in the Emergency Department Prior to Initial Antibiotic Received in Hospital, and HF–1, Discharge Instructions, from the FY 2016 Hospital VBP Program. Both PN–3b and HF–1 are no longer endorsed by the NQF, and we noted that in its 2013 Pre-Rulemaking Report, the Measure Applications Partnership (MAP) did not recommend those measures for use in the Hospital VBP Program. As of February 28, 2012, the NQF Pneumonia Thoracic CT Work Group of the Pulmonary and Critical Care Endorsement Maintenance Project believed there was insufficient evidence that performing blood cultures prior to initiation of antibiotics led to better outcomes. The workgroup also cited significant issues with documentation of the timing of the blood cultures with respect to the initiation of the antibiotics. Documentation is often done retrospectively providing opportunities for data entry errors. The issue is compounded with EHRs as data entry is PO 00000 Frm 00186 Fmt 4701 Sfmt 4700 electronically time-stamped and may not accurately indicate when blood cultures were drawn or antibiotics given. Although the measure is currently chart-abstracted, the data might be abstracted from an EHR, instead of from a paper record. We noted further that NQF reviewed HF–1 during the summer of 2012. The NQF Steering Committee determined that there was insufficient evidence to link the HF–1 measure of discharge instructions with better outcomes. The committee noted that discharge instructions, as measured by HF–1, did not cover several important issues, including patient understanding of the instructions and their appropriateness for patients’ education and literacy levels. Therefore, we stated that we do not believe that these measures appropriately capture relevant inpatient quality information for purposes of the Hospital VBP Program, and, as indicated above, we proposed to remove them from the FY 2016 Hospital VBP Program. We welcomed public comments on our proposals on removing measures from the FY 2016 Hospital VBP Program. Comment: Many commenters supported the proposal to remove AMI– 8a, HF–1, and PN–3b from the FY 2016 Hospital VBP Program. Response: We thank commenters for their support. Comment: Some commenters expressed concern about the proposals not to adopt ‘‘topped out’’ measures, arguing that CMS had not proposed to monitor performance on these measures to ensure that it does not decrease. Other commenters argued that CMS should not remove AMI–8a from the measure set due to its importance to quality improvement efforts and its adoption by The Joint Commission. Response: We appreciate commenters’ concerns. However, as we indicated in the Hospital Inpatient VBP Program final rule (76 FR 26496), we believe that measuring hospital performance on topped-out measures would have no meaningful effect on a hospital’s total performance score. We therefore do not E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations believe it is appropriate to adopt Clinical Process of Care measures for the Hospital VBP Program when they are ‘‘topped out’’ according to our finalized criteria. However, we intend to continue to work with quality measurement stakeholders to ensure that performance on measure topics covered by ‘‘topped out’’ measures does not drop significantly. Comment: Some commenters supported the proposal to remove HF– 1 from the FY 2016 measure set, but expressed concern about the numerous heart failure measures that are no longer included in the program. Commenters urged CMS to work with stakeholders to develop and implement more heart failure measures. Response: We thank commenters for the suggestion, and intend to continue working with stakeholders to develop robust quality measures, particularly in areas of clinical need. Comment: Some commenters expressed concerns about the proposal not to adopt HF–1 for the FY 2016 Program. Commenters noted that the STK–8 measure requires similar discharge processes for the stroke patient population, but was not proposed for removal. Commenters argued that any lack of evidence linking hospital discharge processes to patient outcomes should apply to both measures. Response: We thank commenters for the input, but note that STK–8 has never been proposed or adopted for the Hospital VBP Program. As discussed above, our proposal not to adopt HF–1 for FY 2016 is based in part on NQF’s review of the measure, which concluded that there is insufficient evidence to link it with better outcomes. We will consider any such reviews of STK–8 in rulemaking on the Hospital IQR Program. Comment: Some commenters expressed specific support for the proposal not to adopt HF–1 for the FY 2016 Hospital VBP Program. Commenters suggested that CMS consider adopting a measure of postdischarge appointments for heart failure patients, which commenters noted will be submitted to NQF during its next call for cardiovascular measures. Commenters further suggested that CMS consider additional measures in this clinical area, including beta blocker therapy for left ventricular systolic dysfunction and time to intravenous thrombolytic therapy. One commenter also argued that diligence on the measure has not improved outcomes for heart failure patients. Response: We thank commenters for these suggestions. Under section VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 1886(o)(2)(A) of the Act, the Hospital VBP Program may only adopt measures that have been specified under the Hospital IQR Program. We will consider these measure topics in the future if they become available to us under the Hospital VBP Program’s statutory requirements. We did not receive any comments on our intention to update the ‘‘toppedout’’ analysis using the most recent data. After consideration of the public comments we received, we are finalizing our proposal to remove AMI– 8a, HF–1, PN–3b, and SCIP-Inf-1 from the FY 2016 Hospital VBP Program. b. New Measures for the FY 2016 Hospital VBP Program In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27609 through 27611), we considered if we should adopt additional measures for the FY 2016 Hospital VBP Program. We considered what measures are eligible for adoption based on the statutory requirements, including specification under the Hospital IQR Program and posting dates on the Hospital Compare Web site, as well as our priorities for quality improvement as outlined in the National Quality Strategy, which is available for download at https:// www.healthcare.gov/news/reports/ nationalqualitystrategy032011.pdf. We stated that we believe the following measures meet the statutory requirements for inclusion in the Hospital VBP Program. We also stated that we believe that these measures represent important components of quality improvement in the acute inpatient hospital setting. Influenza Immunization (IMM–2, NQF #1659) is a chart-abstracted prevention measure that addresses acute care hospitalized inpatients age 6 months or older who were screened for seasonal influenza immunization status and were vaccinated prior to discharge, if indicated. We believe this measure is important to quality improvement efforts because about 36,000 adults die and over 200,000 are hospitalized annually for flu-related causes. Older adults are more vulnerable to influenza, and adults over age 65 comprise about 90 percent of deaths related to flu. Vaccinations can significantly reduce the number of flu-related illnesses and deaths. This measure was incorporated into the Hospital IQR Program for FY 2014 in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50211), and data collection began with January 1, 2012 discharges. Measure data were posted on Hospital Compare on December 13, 2012, and MAP supported its inclusion in the PO 00000 Frm 00187 Fmt 4701 Sfmt 4700 50681 Hospital VBP Program in its February 2013 report (available at https:// www.qualityforum.org/Publications/ 2013/02/MAP_Pre-Rulemaking_Report__February_2013.aspx), noting that it addresses a high-impact condition not adequately addressed in the program’s current measure set. Therefore, we proposed to adopt IMM–2 into the Clinical Process of Care domain for the FY 2016 Hospital VBP Program. Comment: Numerous commenters urged CMS strongly to finalize the proposal to adopt IMM–2, congratulating CMS on recognizing the value of immunization measures. Commenters also suggested that CMS consider other preventative measures, such as immunizations for diphtheria, tetanus, and pertussis for patients during inpatient stays. Some commenters suggested that the IMM–2 measures should be inclusive of all influenza vaccinations available to patients and clinicians today. Response: We thank commenters for their support. As described above, we will consider new measures for the Hospital VBP Program as they become available to us under the statutory requirements. We will consider comments on the specific vaccinations that should count towards the IMM–2 measure as we continue working with measure developers to refine quality measures. Comment: Some commenters opposed adoption of IMM–2, arguing that many patients receive this immunization prior to hospital admission, complicating its measurement by participating hospitals. Response: The IMM–2 measure does not require that all patients be immunized, but rather, that they ‘‘are screened for seasonal influenza immunization status and were vaccinated prior to discharge if indicated.’’ We believe that screening patients for appropriate immunizations is an important component of care provided during acute hospitalizations. After consideration of the public comments we received, we are finalizing our proposal to adopt IMM– 2 for the FY 2016 Hospital VBP Program. Catheter-Associated Urinary Tract Infection (CAUTI, NQF #0138) is an HAI measure reported via CDC’s National Healthcare Safety Network (NHSN). This measure is important to quality improvement efforts because the urinary tract is the most common site of HAIs, accounting for more than 30 percent of infections reported by acute care hospitals. Complications associated with CAUTI cause discomfort to patients, prolonged hospital stays, increased costs, and mortality. More E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50682 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations than 13,000 deaths each year are associated with UTIs. This measure was finalized for the Hospital IQR Program in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51617 through 51618), and data collection began with January 1, 2012 discharges. Measure data were posted on Hospital Compare on December 13, 2012, and MAP supported its inclusion in the Hospital VBP Program in its February 2013 report, noting that it addresses the National Quality Strategy (NQS) priorities not adequately addressed in the program’s current measure set. Therefore, we proposed to adopt the NHSN CAUTI measure into the Outcome domain for the FY 2016 Hospital VBP Program. Surgical Site Infection (SSI, NQF #0753) is an HAI measure reported via CDC’s NHSN. As currently specified under the Hospital IQR Program, the measure is restricted to colon procedures, including incision, resection, or anastomosis of the large intestine, and large-to-small and smallto-large bowel anastomosis, and abdominal hysterectomy procedures, including those done by laparoscope. The measure is reported separately on Hospital Compare for those two surgery sites, and does not include rectal operations. This measure was incorporated into the Hospital IQR Program in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50211), and data collection began with January 1, 2012 discharges. Measure data were posted on Hospital Compare on December 13, 2012, and MAP supported its inclusion in the Hospital VBP Program in its February 2013 report, noting that it addresses NQS priorities not adequately addressed in the program’s current measure set. The SSI measure was stratified by surgery site when it was adopted for the Hospital IQR Program, and is both collected and publicly reported as a stratified measure. However, because we adopted SSI as one measure under the Hospital IQR Program, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27610), we proposed to score the measure for purposes of the Hospital VBP Program as a weighted average of the measure’s strata by applicable cases per stratum. Under this proposed scoring methodology, if a hospital meets the Hospital IQR Program’s threshold for public display of its SSI measure strata scores during a Hospital VBP performance period—that is, at least one predicted infection during the applicable time period—we will calculate a weighted average of the measure’s strata to score under the Hospital VBP Program. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 We stated our belief that this proposal enables us to score participating hospitals on the underlying components of the SSI measure fairly. We noted further that, for purposes of calculating performance standards displayed subsequently, we would equally weight the SSI measure’s strata. We sought public comment on our proposed adoption of this measure and its proposed scoring methodology under the Hospital VBP Program. We adopted the NHSN-based CLABSI measure in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53583), and refer readers to that regulation for further discussion of the measure. We stated that we continue to believe that the CLABSI measure is consistent with the Hospital VBP Program’s statutory requirement that we consider measures of HAIs for the FY 2013 Hospital VBP Program’s measure set. We also noted that the measure was included in the HHS Action Plan to Prevent HAIs, which is referenced in section 1886(o)(2)(B)(i)(I)(ee) of the Act. In the FY 2013 IPPS/LTCH PPS final rule, we stated that we would not automatically readopt CLABSI for the FY 2016 Program (77 FR 53592), although we stated our intent to adopt the measure in the future. We did not automatically readopt CLABSI because we understood that CDC was planning to submit a revised version of this measure to NQF for endorsement, and that there may have been substantive changes to the measure associated with reliability adjustment to the standardized infection ratio. The reliability-adjusted standardized infection ratio (SIR) is an outcome measure that summarizes the healthcare-associated infection experience by type of infection (for example, central-line associated bloodstream infection, surgical site infection) for individual hospitals. The reliability-adjusted measure enables more meaningful statistical differentiation between hospitals by accounting for differences in patient case-mix, exposures to medical devices or procedures (for example, central linedays, surgical procedure volume), and unmeasured factors that are not reflected in the unadjusted SIR and that cause variation in outcomes between hospitals. Accounting for these sources of variability enables better measure discrimination between hospitals and leads to more reliable quality measurements. We stated that we are aware the CDC has submitted the reliability-adjusted version of the CLABSI measure to the NQF for endorsement. We noted further that, in its February 2013 report, MAP PO 00000 Frm 00188 Fmt 4701 Sfmt 4700 recommended adoption of the reliability-adjusted CLABSI measure ‘‘contingent on NQF endorsement,’’ and noted that the ‘‘most recent NQFendorsed version should be applied.’’ We stated our belief that our proposal to adopt the current CLABSI measure is consistent with this recommendation, and we stated our intent to consider adopting the reliability-adjusted CLABSI measure in future rulemaking. We stated our intent to monitor CDC’s activity on this measure, particularly as it moves toward reliability adjustment, and intent to adopt the revised measure in future program years. However, in the absence of NQF endorsement of the reliability-adjusted measure, unless and until the Hospital IQR Program adopts the reliability adjustments, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27610 through 27611), we proposed to adopt the CLABSI measure as it currently exists into the Outcome domain for the FY 2016 Hospital VBP Program. Comment: Some commenters noted that NHSN has initiated a CAUTI review and revision process, and requested that CMS reconsider its proposal to adopt the measure until that process has been completed. Response: We do not agree with the commenters’ suggestion. We intend to monitor any changes made to the CAUTI measure, or any other measures that we have proposed for the program. However, we believe strongly that hospitals must be encouraged through the Hospital VBP Program to minimize infection events that present significant health risks to patients. We also believe that the CAUTI measure provides information critical to this quality improvement effort by tracking infection events. Comment: Commenters requested that CMS clarify whether or not it will include CAUTI’s expansion into nonICU settings in the Hospital VBP Program. Response: We may consider adopting the expanded CAUTI measure in future rulemaking. If we decide to adopt the expanded measure, we will do so in accordance with the Hospital VBP Program’s statutory requirements. Comment: Some commenters requested that CMS consider revising the CAUTI measure before adopting it for the Hospital VBP Program, and argued that the measure should exclude certain patients and should allow doctors some discretion in catheter removal in order to avoid complications. Commenters also argued that CAUTI has not been subject to sufficient data validation and that the E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations measure has undergone definition changes effective January 1, 2013. Response: We disagree. As described above, we believe that CAUTI is an important measure for patient safety and quality improvement efforts. CAUTI addresses an NQS priority, and has been recommended for adoption into the Hospital VBP Program by the MAP. Further, the Hospital VBP Program awards value-based incentive payments based on data submitted through the Hospital IQR Program. The Hospital VBP Program is therefore dependent on Hospital IQR data, and unless and until the CAUTI measure is revised under Hospital IQR, we do not believe it to be appropriate to revise it under the Hospital VBP Program. We also believe that the CAUTI measure, as currently structured, is sufficiently reliable for scoring purposes under the Hospital VBP Program. Comment: Some commenters expressed support for the continued adoption of the NHSN CLABSI measure, as well as adoption of the NHSN CAUTI and SSI measures. Commenters further stated their support for the proposal to stratify the SSI measure for reporting and scoring purposes. Commenters requested that CMS work with CDC to ensure that performance data for these measures are made available to facilities as soon as possible. Response: We thank commenters for their support. We intend to continue distributing hospitals’ performance information via our Program’s scoring reports, and hospitals should also have had a chance to review their data submissions through the Hospital IQR Program. Comment: Commenters suggested that CLABSI and CAUTI should be reliability-adjusted before their adoption into the Hospital VBP Program. Response: We disagree. While we understand that CDC is undertaking an effort to adjust its NHSN measures’ reliability, we do not believe that we should wait for that effort to conclude before adopting these measures for purposes of the Hospital VBP Program. CAUTI, CLABSI, and SSI all track infections that present real health risks to patients, and we believe it is critical to quality improvement and patient safety to ensure that hospitals are making every possible effort to minimize those infection events. We believe that these measures, in their current forms, are sufficiently reliable for scoring purposes under the Hospital VBP Program. However, if the Hospital IQR Program should adopt reliabilityadjusted versions of these measures in the future, we will consider how to VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 adopt them into the Hospital VBP Program. Comment: Some commenters were opposed to the proposal to adopt NHSN measures that are also proposed for the HAC Reduction Program, arguing that hospitals would therefore be subjected to ‘‘double jeopardy.’’ Some commenters also argued that the Affordable Care Act expressly prohibits measure duplication between the Hospital Readmissions Reduction Program and the Hospital VBP Program. Response: Section 1886(o)(2)(A) of the Act states that, for purposes of the Hospital VBP Program, the Secretary ‘‘shall select measures other than measures of readmissions.’’ We have interpreted this requirement solely to prohibit the adoption of measures of readmissions under the Hospital VBP Program. While we are aware that some commenters object to the possibility of scoring the CAUTI and CLABSI measures under both the Hospital VBP and HAC Reduction Programs, we note that these measures cover topics of critical importance to quality improvement in the inpatient hospital setting, and to patient safety. The NHSN measures that we have proposed to adopt track infections that could cause significant health risks to Medicare patients, and we believe it is appropriate to provide incentives for hospitals to avoid them under more than one program. Comment: Some commenters expressed concern about the proposal to adopt CLABSI for the FY 2016 Hospital VBP Program, because they believed that there is significant variation in coding for this condition. Commenters requested that CMS adopt CDC’s guidelines for identifying and reporting the CLABSI measure, and suggested that CMS discontinue use of the current CLABSI measure once its reliabilityadjusted version is available. Response: It is our understanding that the reliability-adjusted CLABSI measure is not currently NQF-endorsed. The MAP does not recommend adopting the reliability-adjusted CLASBI measure until it has been endorsed by NQF. In addition, the Hospital VBP Program only uses measures adopted by the Hospital IQR Program, and measure data collected by the Hospital IQR Program. Given the importance that we place on measures of outcomes, as well as on the CLABSI measure’s topic of infection events that could cause health risks to patients, we believe that adopting the measure as currently structured represents the best policy to ensure that hospitals are incentivized to provide PO 00000 Frm 00189 Fmt 4701 Sfmt 4700 50683 high-quality care that minimizes these infections. Comment: Some commenters suggested that CMS align the Hospital VBP, HAC Reduction, and Hospital Readmissions Reduction Programs to avoid measure duplication. Commenters argued that some proposed Outcome measures are more properly placed in the HAC Reduction Program, which could be considered the Hospital VBP Program’s Safety domain under the proposed realigned domains. Response: We disagree. While we continue to align our quality measurement and pay-for-performance programs in order to minimize provider burden and incentivize high-quality care, we do not believe it to be feasible at this time to treat one of our quality programs as a component of another quality program. We believe that it would present significant methodological challenges to combine performance scores from separate programs. However, as part of our ongoing alignment work, we will continue examining these issues. We note further that by adopting certain Outcome measures into more than one quality program, we believe we may encourage hospitals to focus intently on these measures, which we note capture information important to patient safety and to quality improvement efforts. Comment: Commenters supported the proposal to adopt the NHSN SSI measure, noting that it is NQF-endorsed and provides critical information for tracking and reducing infections. Some commenters cautioned, however, that it should be validated and further riskadjusted before being adopted under the Hospital VBP Program. Response: The SSI measure is riskadjusted based on the patient’s age and American Society of Anesthesiologists (ASA) score, a global score that assesses the physical status of patients before surgery. We refer commenters to https://www.cdc.gov/nhsn/PDFs/FINAL– ACH–SSI-Guidance.pdf for more information on risk-adjustment performed on the SSI measure. SSI validation is performed as part of the Hospital IQR Program’s validation of HAI measures. We believe these riskadjustment and validation processes to be sufficient for purposes of ensuring the accuracy of the data under the Hospital VBP Program. Comment: Commenters suggested that CMS consider removing SCIP-Inf-9, Post-Operative Urinary Catheter Removal on Post-Op Day 1 or Day 2, from the Hospital VBP Program in favor of the proposed CAUTI measure. Commenters argued that the process measure is less meaningful than E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50684 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations measures of the rate of CAUTI in a hospital. Response: We thank commenters for the suggestion. However, SCIP-Inf-9 is not currently ‘‘topped out,’’ meaning that hospitals have not, in the aggregate, reached high enough performance on the measure to merit removing it according to those finalized criteria. Further, we believe that the two measures complement each other and appropriately encourage hospitals to focus on performance improvement in this clinical area. As we stated in the Hospital Inpatient VBP Program final rule (76 FR 26491), we believe that public reporting and value-based payment systems should rely on a mix of standards, process, outcomes, and patient experience measures, including measures of care transitions and changes in patient functional status. Comment: Commenters argued that CMS should delay adopting the SSI measure for the Hospital VBP Program because the current CDC riskadjustment methods are insufficient to ensure fair comparisons between hospitals. Commenters argued that the impacts of teaching status and bed size should be visible to the public, and requested that CMS delay adopting SSI until new risk-adjustment models are validated. Response: As described above, the SSI measure is already risk-adjusted, and is subject to validation under the Hospital IQR Program. We note further that the SSI measure addresses the HHS NQS priority of ‘‘Safety.’’ The measure is NQF-endorsed and has been recommended for inclusion in the Hospital VBP Program by the MAP. We therefore believe that the measure will fairly represent hospitals’ performance at controlling measured surgical site infections, and do not believe we should delay its adoption into the Hospital VBP Program. Comment: Commenters raised concerns about the proposed weightedaverage SIR calculation for SSI, noting that differences in post-surgical surveillance programs, lacking data validation, problems with small volume calculations, and risk-adjustment could all present issues for our proposed scoring methodology. Some commenters suggested that CMS weight the SSI measure’s strata based on national procedure volume for each surgical site, or that CMS weight the strata by predicted number of infections. Response: We thank commenters for their feedback. We do not believe that weighting the underlying SSI strata by national procedure volume would appropriately capture each hospital’s patient mix, and could result in VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 hospitals being scored unfairly. However, we concur with commenters’ suggestions that we incorporate hospitals’ predicted infections into our strata scoring. We continue to believe that we must score the SSI measure’s strata separately, but have reconsidered our proposal to create a weighted-average SIR based on applicable cases per stratum. In response to public comments, we will finalize instead a policy under which we will award achievement and improvement points to each stratum of the SSI measure, then compute a weighted average of the points awarded to each stratum by predicted infections. The weighted average of the points awarded will be the hospital’s SSI measure score. As an example, a hospital that received 5 improvement points for the SSI-Colon stratum, with 1.0 predicted SSI-Colon infections, and 8 achievement points for the SSI-Abdominal Hysterectomy stratum, with 2.0 predicted SSI-Abdominal Hysterectomy infections, would receive a composite SSI measure score as follows: ((5 * 1.0) + (8 * 2.0))/(1.0 + 2.0) = 7 points We believe this finalized policy appropriately addresses commenters’ concerns about creating a weightedaverage SIR, and instead computes a weighted-average SSI score that reflects each individual hospital’s patient mix and risk-profile. Comment: Commenters argued that CMS should consider expanding the Hospital VBP Program to include clinical topics with larger measured differences among hospitals. Some commenters specifically suggested that CMS invest in development and testing of palliative care measures for the hospital population to ensure that quality measurement does not overlook the preferences and care needs of seriously ill patients. Other commenters suggested that CMS consider new measures for the program, such as complication rates following hip and knee replacement and other topics. Commenters also suggested that CMS consider measures related to smoking cessation, immunizations, urinary incontinence, pain assessment, imaging resource use, and other topics. Response: We thank commenters for these suggestions. We intend to continue adding to the Hospital VBP Program’s measure set as new measures and topics become available to us under the statutory requirements. Comment: Some commenters were opposed to further adoption of the AHRQ PSI composite measure for the Hospital VBP Program, citing concerns PO 00000 Frm 00190 Fmt 4701 Sfmt 4700 about non-uniform coding for its underlying indicators. Commenters also argued that the measure’s structure makes it difficult for hospitals to identify the specific cases during which measured events occur, and noted that the MAP did not believe the measure should be tied to payment. Commenters further argued that the measure is not appropriately risk-adjusted and may exaggerate problems at hospitals that treat sicker or more complex patients. Response: We believe that adopting the AHRQ PSI composite measure provides strong incentives for hospitals to ensure that patients are not harmed by the medical care they receive, which is a critical consideration for quality improvement. As we stated in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53589 through 53590), we are particularly concerned about the effects that not finalizing the AHRQ PSI composite might have on hospitals’ quality performance. We believe that the PSI measure, as a composite measure of patient safety, appropriately encourages robust hospital attention to patient safety events. As we have stated in prior rulemaking, we believe that the Hospital VBP Program drives quality improvement in the acute inpatient setting, and we believe strongly that measures of patient safety, such as the AHRQ PSI measure and the NHSN measures, are important metrics on which hospitals should focus their quality improvement efforts. On the subject of the PSI composite measure’s risk adjustment, we note that we use the risk-adjustment factors listed in specifications for the AHRQ measures selected for this program. We do not believe that the measure’s current riskadjustment factors unfairly penalize teaching and large hospitals. PSI–90 is comprised of component measures that are risk- and reliability-adjusted. The composite measure is a componentweighted average of these risk- and reliability-adjusted observed-toexpected ratios. The risk adjustment methodology’s adequacy is a function of the adequacy of the risk adjustment for each of the component indicators, and the average c-statistic for the component measures in the PSI composite in version 4.5 of the AHRQ QI software is 0.775, accounting for component weighting, and we believe that level of risk adjustment to be adequate to ensure that we do not penalize teaching and large hospitals, or others that treat relatively sicker patient populations. We refer readers to AHRQ’s Web site for the mathematical specifications of the E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations composite.41 Should changes to the riskadjustment models for the measures be adopted during NQF endorsement maintenance processes, we will adopt these changes as soon as possible. We encourage hospitals that are unsure how to improve their performance on the AHRQ PSI measure or on any other measure finalized for the Hospital VBP Program to contact their QIO for assistance. Comment: Commenters urged CMS to reassess how it adjusts HCAHPS survey scores for the severity of patient illness, arguing that the survey’s patient-mix adjustment model does not adequately account for the effect of severity of illness or patient’s mental health status, and that the HCAHPS Survey is biased against large urban hospitals and safetynet hospitals. Commenters also argued that the HCAHPS survey lacks sufficient risk-adjustment. Response: Since its national implementation in 2006, the HCAHPS Survey has included an item that asks for patients’ assessments of their overall health. We use this information in a transparent manner in our standard patient-mix adjustment of HCAHPS scores, as we have explained on the official HCAHPS On-Line Web site, https://www.hcahpsonline.org, in the research documents and patient-mix adjustment coefficients that are posted on this Web site, and in published research listed on this Web site. In response to comments about HCAHPS in previous Rules, we added an item to the HCAHPS Survey in January 2013 that asks patients to assess their overall mental or emotional health. At this time, we are analyzing the effect of patients’ overall mental or emotional health on HCAHPS scores. Based on the results of this analysis, we will determine whether we believe a further patient-mix adjustment for mental or emotional health may be warranted. With respect to a Cleveland Clinic analysis mentioned by a commenter that is said to show a greater than expected impact of severity of illness on HCAHPS scores, we understand that this analysis does not examine associations between patient characteristics and HCAHPS scores after the standard HCAHPS patient-mix adjustment has been applied. The standard HCAHPS patientmix adjustment would be expected to remove most or all of the association mentioned. We also understand that the Cleveland Clinic analysis mentioned by the commenter is not based on national data. 41 https://qualityindicators.arhq.gov/Downloads/ Modules/PSI/PSI%90Composite%20 Development.pdf. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 As we stated in the FY 2013 IPPS/ LTCH PPS final rule (77 FR 53585), we have examined the association between safety net status and the Patient Experience of Care (HCAHPS) domain score in the Hospital VBP Program. We stated that we analyzed Patient Experience of Care scores during the Hospital VBP Program Dry Run period (Baseline Period: April–December 2008; Performance Period: April to December 2010), both overall and among urban hospitals. Although we do not have an official definition or designation of ‘‘safety net’’ hospital, safety net status typically entails one or more of three criteria: high Medicaid share; high proportion of uncompensated patients; and high county-associated poverty rate. During the Hospital VBP Program Dry Run, 28 hospitals (7 of them urban) met all three criteria, 157 hospitals (83 of them urban) met two of the three criteria, 625 hospitals (391 urban) met one of the three criteria, and 2,219 hospitals (1,718 urban) met none of the three criteria. In general, during the Hospital VBP Program Dry Run, after all HCAHPS adjustments are applied (patient mix and survey mode), safety net hospitals performed similarly to other hospitals. For example, 24 percent of the hospitals that meet any of the three safety net criteria (198/810) scored in the top quartile of Hospital VBP Patient Experience of Care domain (versus 25 percent (550/2219) of hospitals that met none of the safety net criteria). For urban hospitals, the figures are 110/481 safety net hospitals (23 percent) vs. 454/ 1718 other hospitals (26 percent). If we consider only those hospitals that meet two of the three safety net criteria, then 36/185 safety net hospitals (20 percent) and 12/90 urban safety net hospitals (13 percent) are in the top quartile (with 5 of these 12 in the top decile). The HCAHPS patient mix adjustment model controls for patient characteristics not under the control of the hospital that directly impact response tendencies. It also controls for socioeconomic status of the patient population through education, which is a well-accepted method for controlling for socioeconomic status, in particular, in the elderly population. Other characteristics, such as hospital characteristics or geographic location, are not included in the adjustment models because controlling for hospital characteristics would mask potential quality differences across different types of hospitals. Comment: Some commenters argued that HCAHPS consistency scores were not thoroughly tested and are not functioning as envisioned. Commenters PO 00000 Frm 00191 Fmt 4701 Sfmt 4700 50685 argued that CMS should discontinue the use of HCAHPS consistency points because hospitals with consistently low HCAHPS scores were assigned a greater than average consistency score. Response: We designed the components and scoring formula for the HCAHPS measure in the Hospital VBP Program in order to achieve our stated policy goals, including relying on a mix of standards, process, outcomes, and patient experience measures in public reporting and value-based payment systems (76 FR 26491). We tested the HCHAPS scoring process thoroughly prior to proposing it in the 2011 Hospital Inpatient VBP Program proposed rule, and have continued to monitor and evaluate it since implementation of the Hospital VBP Program in October 2012. The Patient Experience of Care Domain score in the Hospital VBP Program is currently based on a hospital’s score on one measure, the HCAHPS Survey measure, which is scored as (1) the greater of the Achievement Points or Improvement Points for each of the eight HCAHPS dimensions included in the Hospital VBP Program (0 to 10 points for each dimension), plus (2) 0 to 20 Consistency Points, which are derived from the lowest HCAHPS dimension. In order to assess the separate contribution of Achievement Points and Improvement Points, the HCAHPS Project Team, using results from the HCAHPS scores in the FY 2013 Hospital VBP Program (Baseline Period: July 2009–March 2010; Performance Period: July 2011–March 2012),decomposed the scores into three separate components: Achievement Points; Improvement Supplement (the extra contribution of Improvement Points to the Base Score beyond the contribution of Achievement Points); and Consistency Points. Briefly, we found that Consistency Points are strongly and positively correlated with Achievement Points (0.68), which means that Consistency Points go mainly to hospitals with higher scores during the Performance Period. Although Achievement Points are the principal driver and account for nearly all of the variance in the HCAHPS score, Consistency Points play a small but important role by incentivizing targeted improvement in hospitals with below average scores, as well as augmenting the scores of lowerperforming hospitals. See March 2013 HCAHPS Update Training, slides 91– 101, at: https://www.hcahpsonline.org/ trainingmaterials.aspx. Comment: One commenter specifically argued that the HCAHPS survey and its scoring methodology E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50686 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations need to be modified to incorporate riskstratification to ensure more appropriate peer comparisons, particularly for patients that are English language learners and with whom communication may be more difficult for hospital staff. The commenter suggested that patients’ communications difficulty could be incorporated into HCAHPS risk-stratification. The commenter also contended that some hospitals may be unfairly penalized by the HCAHPS survey’s use of a ‘‘quietness’’ item, arguing that hospitals may not easily control ambient noise outside the hospital. The commenter presented analysis showing a negative correlation between population density and the HCAHPS ‘‘quietness’’ item. Response: We thank the commenter for the comments and research. Differences at the hospital level could be due to either patient differences or true differences in average hospital quality in urban and rural areas. Urban/ rural differences have been demonstrated for a variety of quality measures, including clinical quality measures. In order to ensure that true differences in hospital quality are not ‘‘adjusted away,’’ we only adjust HCAHPS scores for patient-level factors. One of the patient-mix adjustment factors that we employ is ‘‘language spoken at home,’’ currently categorized as ‘‘English’’ and ‘‘Non-English.’’ Having taken this factor into account through patient-mix adjustment, we believe that the remaining difference is due to true variation in the quality of hospitals in which English and nonEnglish speaking patients seek care. We believe that these hospital-level differences should not be adjusted away. Recently, we began to collect information on additional languages that patients speak at home, including English, Spanish, Chinese, Russian, Vietnamese, and ‘‘some other language.’’ We are conducting research to determine whether the patient-mix adjustment for ‘‘language spoken at home’’ would be measurably improved by including distinctions among these specific languages. Should we determine that, based on this data and research, a revised patient-mix adjustment for ‘‘language spoken at home’’ is warranted, we will seek to adopt the adjustment for the HCAHPS measure. The commenter contends that a major contributor to hospital total noise level is ambient noise from outside the hospital, which varies systematically with hospital location, that is, urban or rural setting. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 We have not seen evidence that ambient noise from outside the hospital is the cause of lower scores on the HCAHPS ‘‘quietness’’ item, which asks ‘‘how often the area around your room was quiet at night.’’ Developmental work on the HCAHPS Survey, including cognitive interviews and focus groups with patients and caregivers, indicated that patients distinguish between noise from outside of the hospital, which is more difficult to control, and noise from within the hospital, which the hospital can more readily reduce, mitigate or eliminate, such as that from loud conversations outside of patient rooms, equipment trolleys, alarms and announcements, maintenance operations, etc. We are aware of noise reduction efforts in a number of hospitals, in both urban and rural settings, that have successfully reduced within-hospital noise. In addition, in the Hospital VBP scoring system, hospitals are assessed on both achievement and improvement. Thus, regardless of location, hospitals can earn improvement points if patients experience greater quietness in the performance period than in the prior baseline period. Comment: One commenter was concerned about HCAHPS survey responses where patients refuse to answer. The commenter believed that this action could result in inaccurate survey data. The commenter also expressed concerns about cleanliness throughout the hospital to reduce the risk of infections, not just the cleanliness of the patient’s room and bathroom. Response: We thank the commenter for these concerns. With respect to the HCAHPS survey, which is administered after discharge, patients may refuse to answer any item by not filling in a response on the mail version of the survey, or not providing an answer on the telephone or Interactive Voice Response versions of the survey. This non-response is then captured in our data collection process. The national response rate for the HCAHPS Survey is 33 percent. Based on our analyses of the HCAHPS Survey, we found that the patient-mix adjustment model accounts for any nonresponse bias that could have been addressed through nonresponse weighting. Therefore, no further weighting or adjustment for nonresponse is needed (see https:// www.hcahpsonline.org/mode adjustment.aspx#ME2 and The Effects of Survey Mode, Patient Mix, and Nonresponse on CAHPS Hospital Survey Scores. M.N. Elliott, A.M. Zaslavsky, E. Goldstein, W. Lehrman, K. Hambarsoomian, M.K. Beckett and L. PO 00000 Frm 00192 Fmt 4701 Sfmt 4700 Giordano. Health Services Research, 44: 501–518. 2009). We share the commenter’s concern about the importance of clean and hygienic conditions in hospitals. The HCAHPS Survey contains an item about hospital cleanliness, ‘‘During this hospital stay, how often were your room and bathroom kept clean?’’ The HCAHPS Survey is designed to ask patients about important aspects of their hospital stay. While we agree that all hospital areas ought to be clean, we believe that patients are most aware of the cleanliness of their own room and bathroom, and this item is targeted accordingly. Comment: One commenter requested that CMS propose a process to account for changes in measure specifications to ensure fair treatment to participating hospitals. Commenters specifically suggested that CMS suppress the SCIPInf-4 measure for FY 2014 and propose a new benchmark and achievement threshold once enough data has been collected with the new specifications. Response: We are aware that the SCIPInf-4 measure underwent significant specifications changes for discharge quarters beginning on or after January 1, 2014. Since we are finalizing below a performance period of CY 2014 and a baseline period of CY 2012 for the clinical process of care measures under the FY 2016 Hospital VBP Program, we believe these specifications changes will have significant impacts on hospitals’ SCIP-Inf-4 performance during the FY 2016 performance period. We are therefore not finalizing the SCIP-Inf-4 measure for the FY 2016 Hospital VBP Program, or any other proposal we made that would relate to that measure (for example, the measure’s performance standards). However, these specifications changes will not affect either the finalized performance periods or baseline periods for FY 2014 or FY 2015. We do not believe it appropriate to remove the measure from the Hospital VBP Program measure set for either of those program years, because the changes to the measure specifications do not affect hospitals’ performance rates on the measure during the finalized performance periods for FY 2014 and FY 2015. While we have not established a Hospital VBP Program-specific process to date to account for specifications changes, we may consider doing so in future rulemaking. After consideration of the public comments we received, we are finalizing the FY 2016 measure set as proposed, with the exception of SCIPInf-1 and SCIP-Inf-4, described above, E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations and with the changes outlined above to the SSI measure’s scoring. The following table outlines the final measures for the FY 2016 Hospital VBP Program that we previously adopted, as 50687 well as the new measures that we are finalizing. NEWLY FINALIZED AND READOPTED MEASURES FOR THE FY 2016 HOSPITAL VBP PROGRAM CLINICAL PROCESS OF CARE MEASURES AMI–7a ............. IMM–2** ............ PN–6 ................. SCIP-Inf-2 ......... SCIP-Inf-3 ......... SCIP-Inf-9 ......... SCIP-Card-2 ..... SCIP–VTE–2 .... Fibrinolytic Therapy Received Within 30 Minutes of Hospital Arrival. Influenza Immunization. Initial Antibiotic Selection for CAP in Immunocompetent Patient. Prophylactic Antibiotic Selection for Surgical Patients. Prophylactic Antibiotics Discontinued Within 24 Hours After Surgery End Time. Urinary Catheter Removed on Postoperative Day 1 or Postoperative Day 2. Surgery Patients on Beta-Blocker Therapy Prior to Arriva Who Received a Beta-Blocker During the Perioperative Period Surgery Patients Who Received Appropriate Venous Thromboembolism Prophylaxes Within 24 Hours Prior to Surgery to 24 Hours After Surgery. Patient Experience Measures HCAHPS ........... Hospital Consumer Assessment of Healthcare Providers and Systems Survey. Outcome Measures CAUTI** ............ CLABSI*** ......... MORT–30–AMI* MORT–30–HF* MORT–30–PN* PSI–90* ............ SSI** ................. Catheter-Associated Urinary Tract Infection. Central Line-Associated Blood Stream Infection. Acute Myocardial Infarction (AMI) 30-day mortality rate. Heart Failure (HF) 30-day mortality rate. Pneumonia (PN) 30-day mortality rate. Complication/patient safety for selected indicators (composite). Surgical Site Infection: • Colon. • Abdominal Hysterectomy. Efficiency Measures MSPB–1 ........... Medicare Spending per Beneficiary. mstockstill on DSK4VPTVN1PROD with RULES6 * Measures previously finalized for the FY 2016 Hospital VBP Program. ** New measures. *** Measures finalized for FY 2015 but not subject to immediate readoption. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27611), we also sought public comment on our intent to adopt the Methicillin-resistant Staphylococcus aureus (MRSA) Bacteremia and the Clostridium difficile (C. difficile) standardized infection ratio measures for the FY 2017 Hospital VBP Program. Both of these measures are high-priority HAI measures listed in the HHS Action Plan to Prevent HAIs. We anticipate posting performance data for these measures on Hospital Compare later this year, and anticipate proposing to adopt these measures for the Hospital VBP Program in the FY 2015 IPPS/ LTCH PPS proposed rule. Comment: Commenters expressed support for CMS’ intent to adopt the MRSA and C. difficile measures into the Hospital VBP Program in future years. Commenters argued that MRSA is especially problematic in both hospital ICUs and in long-term care facilities, and noted significant increases in HAIs over the past 10 years. Commenters also noted that C. difficile-associated complications are linked to 14,000 deaths annually. Some commenters suggested that these measures would be better additions to the Hospital VBP VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Program than immunization measures because immunization measures do not cover the most effective topics. Response: We thank commenters for their support and for their input. We agree that these measures capture quality information that is critical to patient safety, and intend to consider adopting these measures in future rulemaking. Comment: Some commenters urged CMS to provide measure specifications for MRSA and C. difficile in order to enable constructive feedback on the measures. Commenters also suggested that it will be necessary to control for known regional variation in infection rates if CMS adopts these measures, and argued that CMS should consider ways to differentiate community-acquired infections from healthcare-associated strains. Response: We refer readers to the QualityNet Web site (https:// www.qualitynet.org/) for details on the specifications for both measures. The finalized Hospital VBP Program methodologies for developing performance standards and for calculating measure rates do not adjust for regional variation in infection rates, PO 00000 Frm 00193 Fmt 4701 Sfmt 4700 and we have not considered adopting such an adjustment for current measures of healthcare-associated infections. As we stated in the Hospital Inpatient VBP Program final rule (76 FR 26512), we believe that achievement thresholds and benchmarks based on national data provide balanced, appropriate standards of high quality care for hospitals to work towards under the Hospital VBP Program. We also stated in that final rule that we do not wish to lower the performance standards for a hospital simply because average performance in its local region is subpar compared to national performance, nor do we wish to raise or lower performance standards for hospitals based on observations that different types of hospitals differ in the average performance on individual measures. However, we encourage commenters to provide more detail on how we might make such adjustments in the future. Comment: Some commenters were concerned about CMS’ possible adoption of MRSA and C. difficile in future program years, noting methodological flaws associated with defining when infections are incubating at the time of admission. Commenters E:\FR\FM\19AUR2.SGM 19AUR2 50688 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 also argued that the definition of ‘‘hospital acquired infection’’ must be clearly set out for both measures. Some commenters did not support CMS’ intent to adopt MRSA or C. difficile in future program years, arguing that the measures are insufficiently risk-adjusted and should therefore not be adopted for Hospital VBP. Commenters noted that both measures are relatively new to the Hospital IQR Program, and commenters urged CMS to allow hospitals to gain additional experience with the measures before adopting them for Hospital VBP. Response: We thank commenters for their input. We intend to consider these comments when developing our policies for future rulemaking. c. Future Measures for the Efficiency Domain In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27611 through 27612), we stated that we are considering including additional measures in the Efficiency Domain for future years of both the Hospital IQR Program and the Hospital VBP Program. If we were to expand the Efficiency Domain in the future, we would do so through future rulemaking and in accordance with the requirements of section 1886(o) of the Act. We stated that we are considering adding a measure of hospitals’ performance on treating Medicare beneficiaries appropriately as a hospital inpatient or a hospital outpatient. Specifically, we stated that we are considering constructing a measure to assess the rate and/or dollar amount of billing hospital inpatient services to Medicare Part B, subsequent to the denial of a Part A hospital inpatient claim. We are considering such a measure in light of our recent proposal that when a Medicare Part A claim for inpatient hospital services is denied because the inpatient admission was determined not to be reasonable and necessary, or when a hospital determines under § 482.30(d) or § 485.641 after a beneficiary is discharged that his or her inpatient admission was not reasonable and necessary, the hospital may be paid for all of the Part B services that would have been reasonable and necessary had the beneficiary been treated as a hospital outpatient rather than admitted as an inpatient, if the beneficiary is enrolled in Medicare Part B (78 FR 16632 through 16646). We invited public comments on this or other approaches to include a measure of appropriateness of hospital inpatient services in future years of the Hospital IQR Program and the Efficiency Domain for the Hospital VBP Program. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 We also are considering the addition of Medicare spending measures specific to physician services such as Radiology, Anesthesiology, and Pathology that occur during a hospital stay. We invited public comment on how to best to construct measures of Medicare spending for these or other physician services provided during a hospital stay, for future inclusion in the Hospital IQR Program and the Efficiency Domain in the Hospital VBP Program. Comment: One commenter expressed support for a future measure of appropriateness of treating Medicare beneficiaries as hospital inpatients or hospital outpatients, stating that it would improve outcomes and help ensure that prices paid for prescription drugs under the 340B discount program are appropriate. Other commenters opposed the development of such a measure. The reasons they provided included: perceived inconsistencies or inaccuracies in Recovery Audit Contractor (RAC) denials across hospitals; the concern that the measure would not reflect successful appeals of RAC denials; the belief that such a measure would represent a double penalty in addition to any overpayments already collected; the belief that confusion exists regarding CMS’ inpatient versus outpatient policies; that belief that services that are rebilled are not medically unnecessary, but rather that they are billed incorrectly, and therefore do not represent a quality issue; that such a measure would increase the use of the appeals system; and that the physician, rather than the hospital is responsible for the decision whether or not to admit a patient. Response: We thank the commenters for their input and will take it into consideration as we develop any future policies related to this issue. In response to the comment about 340B drug pricing, we are not aware of any effect that inclusion of a future measure of appropriateness of treating Medicare beneficiaries as hospital inpatients or hospital outpatients would have on the 340B drug pricing program. Comment: A few commenters noted that any new efficiency measures would first have to be adopted in the Hospital IQR Program. Response: We agree and wish to clarify that we would finalize any future efficiency measure for the Hospital IQR Program through notice and comment rulemaking. We would include it in the Hospital IQR Program for at least one year and display performance information on the Hospital Compare Web site in accordance with section 1886(o)(2)(C)(i) of the Act before including it in the Hospital VBP PO 00000 Frm 00194 Fmt 4701 Sfmt 4700 Program. That was our intent in stating above that, if we were to expand the Efficiency Domain in the future, we would do so through future rulemaking and in accordance with the requirements of section 1886(o) of the Act. Comment: Some commenters supported CMS’ intent to adopt additional measures of efficiency in future program years, and suggested that CMS consider new measure topics such as Medicare Total Costs Per Capita and Rates of Medicare Service Utilization. Commenters also suggested that CMS consider measures that compare actual observed costs with expected costs both regionally and nationally. Response: We thank commenters for their support. We will consider additional measure topics as they become available to us under the Hospital VBP Program’s statutory requirements. Comment: One commenter expressed support for development of a measure of physician services occurring during a hospital stay, in order to align incentives for hospitals and physicians to provide high quality, efficient care. The commenter suggested that such a measure should not be overly riskadjusted, so as to avoid incorporating payment inequities. Response: We thank this commenter for the input and will take it into consideration as we develop any future measures for the Efficiency Domain. Comment: The majority of commenters did not support the development of a measure of physician services occurring during a hospital stay. These commenters’ concerns included the belief that hospitals should not be held accountable for physician services, with some commenters stating that the nature of the employment relationship between the hospital and its physicians dictate the level of control by the hospital over those physicians. Commenters also expressed concern that there is not adequate data on the appropriate level of utilization for the purpose of setting benchmarks and avoiding the reduction in needed care. These commenters also expressed a belief that such a measure would be duplicative of the MSPB measure. Response: We thank the commenters for their input, and we will take it into consideration as we develop any future measures for the Efficiency domain. Comment: Several commenters expressed concern that specialtyspecific spending measures would be better suited for the Physician ValueBased Payment Modifier Program or generally stated that accountability for physician services should be shared E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations b. Clinical Process of Care Domain Performance Period and Baseline Period for the FY 2016 Hospital VBP Program In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27612), we proposed to adopt a 12-month performance period for FY 2016 Clinical Process of Care measures of CY 2014, or January 1, 2014 through December 31, 2014, for the FY 2016 Hospital VBP Program. We also proposed to adopt a corresponding 12-month baseline period of CY 2012, or January 1, 2012 through December 31, 2012, for purposes of calculating improvement points and calculating performance standards. We invited public comment on these proposals. Comment: One commenter argued that CMS should not adopt the entirety of CY 2012 as the performance period for the IMM–2 measure within the Clinical Process of Care domain for FY 2016. The commenter explained that the measure was not collected during the 2nd and 3rd quarters of that year, and recommended that CMS also omit those quarters from the proposed baseline period to ensure fair comparisons. Response: According to the IMM–2 measure’s specifications, the measure is to be collected for discharges during the months of October, November, December, January, February, and March. The commenter is therefore correct that it is not collected during the second and third quarters of the calendar year. However, we do not believe this requires us to specify a separate performance or baseline period for this measure. We believe that CY 2012 is an appropriate baseline period for this measure, as it captures the measure’s reporting period and aligns the measure with the other measures in the Clinical Process of Care domain. After consideration of the public comments we received, we are finalizing the FY 2016 performance and baseline periods for the Clinical Process of Care domain as proposed. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53594 through 53595), we finalized a 12-month performance period for FY 2015 Clinical Process of Care measures of CY 2013, or January 1, 2013 through December 31, 2013, with a corresponding baseline period of CY 2011, or January 1, 2011 through December 31, 2011, for purposes of calculating improvement points and performance standards. As we stated in that rule, a 12-month performance period provides us more data on which to score hospital performance, which is an important goal both for CMS and for stakeholders. We also noted that a 12month performance period is consistent with the reporting periods used for these measures under the Hospital IQR Program. c. Patient Experience of Care Domain Performance Period and Baseline Period for the FY 2016 Hospital VBP Program Consistent with our goal of adopting a full 12-month period for this domain in order to collect a larger amount of HCAHPS survey data compared to a 9month period, in the FY 2013 IPPS/ LTCH PPS final rule (77 FR 53595), we finalized a 12-month performance period for FY 2015 Patient Experience of Care measures of CY 2013, or January 1, 2013 through December 31, 2013, with a corresponding baseline period of CY 2011, or January 1, 2011 through December 31, 2011, for purposes of calculating improvement points and performance standards. As we stated in that rule, a 12-month performance period provides us more data on which with physicians, not placed solely with the hospital. Many of the commenters expressed the opinion that incentives should be aligned for physicians and hospitals, expressing the concern that parallel incentives do not yet exist. Response: We thank the commenters for their input and we will take it into consideration as we develop any future measures for the Efficiency domain. As we stated in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51626), we agree that alignment of incentives is an important goal. Comment: Several commenters offered suggestions of additional measures for future inclusion in the Efficiency domain. These suggestions included measures of appropriate use, especially for cardiovascular conditions; national and regional total per capita cost measures; resource service utilization measures that compare overuse of services for patients with the same condition across the country; radiology efficiency measures; anesthesia efficiency measures; and DRG-specific spending measures. Two commenters also suggested adding radiation dose measures to the Hospital VBP Program. Response: We thank the commenters for their input and we will take it into consideration as we develop any future measures for the efficiency domain. 7. Performance Periods and Baseline Periods a. Background mstockstill on DSK4VPTVN1PROD with RULES6 Section 1886(o)(4) of the Act requires the Secretary to establish a performance period for the Hospital VBP Program for a fiscal year that begins and ends prior to the beginning of such fiscal year. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 PO 00000 Frm 00195 Fmt 4701 Sfmt 4700 50689 to score hospital performance, which is an important goal both for CMS and for stakeholders. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27612), we proposed to adopt a 12-month performance period for FY 2016 Patient Experience of Care measures of CY 2014, or January 1, 2014 through December 31, 2014, for the FY 2016 Hospital VBP Program. We also proposed to adopt a corresponding 12month baseline period of CY 2012, or January 1, 2012 through December 31, 2012, for purposes of calculating improvement points and calculating performance standards. We invited public comment on these proposals. However, we did not receive any specific comments on the proposed FY 2016 performance and baseline periods for the Patient Experience of Care domain. We are therefore finalizing these periods as proposed. d. Efficiency Domain Measure Performance Period and Baseline Period for the FY 2016 Hospital VBP Program In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53595 through 53596), we finalized a performance period for the MSPB measure for the FY 2015 Hospital VBP Program of May 1, 2013 through December 31, 2013, with a corresponding baseline period of May 1, 2011 through December 31, 2011. We finalized that performance period based on the measure’s posting date on Hospital Compare, our desire to ensure consistency across domains where possible, and in order to ensure that data have been posted for at least 1 year prior to the beginning of the measure performance period. In order to expand the dataset available for performance scoring on this measure, in the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR 27612) we proposed to adopt a 12-month performance period for the MSPB measure for the FY 2016 Hospital VBP Program of CY 2014, or January 1, 2014 through December 31, 2014, with a corresponding baseline period of CY 2012, or January 1, 2012 through December 31, 2012. These proposed performance and baseline periods align with the performance and baseline periods for Clinical Process of Care Domain measures. These proposed performance and baseline periods also enable us to collect sufficient measure data, while allowing time to calculate and incorporate MSPB measure data into the Hospital VBP Program scores in a timely manner. We invited public comments on the proposed performance and baseline periods for the MSPB measure. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50690 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Although we received no specific comments regarding the proposed performance and baseline periods for the MSPB measure, we did receive a number of general comments on the MSPB measure, which we respond to below. Comment: Some commenters fully supported the inclusion of the MSPB measure in the Hospital VBP Program as proposed, noting the importance of measuring resource use. One of these commenters noted the MSPB measure’s importance in the establishment of an effective Hospital VBP Program that begins to bend the cost curve for Medicare and emphasized the measure’s apparent importance to Congress, given that it was the only measure specifically required by statute for inclusion in the Hospital VBP Program. Response: We thank these commenters for their support, and we agree that the measure’s inclusion is important because it helps to address the critical issue of health care costs and furthers Medicare’s transformation from a system that rewards volume of service to one that rewards efficient, effective care and reduces delivery system fragmentation, as we stated in the FY 2012 IPPS/LTCH PPS final rule (77 FR 51618). Comment: The majority of commenters expressed concern with use of the MSPB measure in the Hospital VBP Program. The commenters’ concerns included: concern that there may not be a clear connection between cost variance and patient outcomes or other quality measurements; concern that hospitals might not provide necessary services, in order to improve measure performance; concern that the measure includes factors that are outside the hospital’s control; questioning whether claims data is sufficient for measure calculation; concern that the measure is not adjusted for socioeconomic factors; concern that the measure has not been adequately tested; question as to whether the riskadjustment methodology is sufficient, with one commenter questioning the ordinary least squares (OLS) approach; perception that the measure is not yet fully specified; concern that the measure is not NQF endorsed; and comments on the NQF endorsement process that is currently underway. Response: In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51619 through 51627), we finalized the MSPB measure for inclusion in the Hospital IQR Program and addressed concerns with the measure’s general construction, the degree of hospital control over performance on the measure, and its risk-adjustment. We continue to believe VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 that the MSPB measure is appropriately constructed to capture Medicare spending surrounding a hospitalization. As we stated in the FY 2012 IPPS/LTCH PPS final rule, the measure incentivizes hospitals to work on redesigning care systems and coordinating with other providers of care, which can have a significant impact on the quality and efficiency of services provided to the Medicare beneficiaries they serve. We also continue to believe that hospitals have a significant influence on Medicare spending during the episode surrounding a hospitalization, through the provision of appropriate, highquality care before and during inpatient hospitalization and through proper hospital discharge planning, care coordination, and care transitions. This measure will add an additional incentive for hospitals to apply this influence in ways that will promote the provision of the highest quality, most efficient care for hospitalized Medicare beneficiaries. We will work to incorporate any suggestions from hospitals on how to improve the hospital-specific reports to make them more actionable. With regard to the use of the OLS regression, we note that it is consistent with the risk-adjustment model used for several CMS initiatives, including Medicare Advantage rate setting. We believe that the variant of the model used for MSPB is appropriate, because it allows for a different coefficient on each HCC in each major diagnostic category based on index admission. In this sense, the model uses categorical condition indicators to flexibly capture differences in spending by condition. We finalized the measure for inclusion in the Hospital VBP Program in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53592), and we addressed a number of public comments related to the measure in that rule. With regard to linking the MSPB measure to other quality metrics, we addressed the importance of measuring cost independently and emphasized that within the Hospital VBP Program, the MSPB measure is combined with other quality measures in order to calculate the TPS (77 FR 53586). With regard to the measure being fully specified, at the preceding citation, we re-emphasized that the measure was fully detailed in the FY 2012 IPPS/LTCH PPS proposed and final rules, and was then subsequently publicly vetted through a national provider call during an MSPB hospital data preview period. We have also since conducted two additional MSPB data previews, and we have not received substantive comments on the validity of the claims data used to PO 00000 Frm 00196 Fmt 4701 Sfmt 4700 calculate the measure. This measure had been extensively tested. We refer readers to the discussion of the reliability analysis in the FY 2013 IPPS/ LTCH PPS final rule (77 FR 53589). We agree with commenters that NQF endorsement is valuable, though we note, as mentioned in the FY 2012 IPPS/ LTCH PPS final rule (76 FR 51619), that it is not required before adopting measures under the Hospital VBP Program. We are working with the NQF during the endorsement process that is currently in progress. We anticipate that we will receive the NQF’s decision on endorsement in October of 2013. Comment: A few commenters expressed their belief that there was a lack of national data on the MSPB measure and a lack of transparency into the service types included in the measure. One commenter requested the impact of each ‘‘adjustment factor’’ including area wage, case mix, outlier, IME, and DSH, had on the pre-index, during-index, and post-index spending categories during the MSPB episode. One commenter stated that, in addition to providing hospitals with confidential hospital-specific reports that identify the highest-spending providers in each of their MSPB episodes, CMS should provide a report to each of those providers listed. Response: We appreciate the importance of data related to performance on this measure. We posted a Medicare spending breakdown by claim type file publicly, so that hospitals and other stakeholders could compare their Medicare payments for various service types to those in their state and the nation. We will consider further breaking down the inpatient spending that is attributed to a hospital into specific inpatient settings, such as acute inpatient, LTCH, IPF and IRF, as the commenter suggests. We also provide extensive data to hospitals in their hospital-specific reports. For a description of the hospital-specific data files, and the spending breakdown by claim type file, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53588). We will also explore the possibility of providing reports to those providers listed in hospitals’ confidential hospital-specific reports, as the commenter suggests. With regard to ‘‘adjustment factors,’’ we believe that the commenter is referring to adjustments to inpatient payments, which are only one part of an MSPB episode. We remove area wage, IME, and DSH during the standardization process, so that geographic payment policy differences and other Medicare program goals are not reflected in hospitals’ MSPB E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations amounts. Case-mix and outlier adjustments are not removed from the standardized amount used to calculate the MSPB measures, because the MS– DRG is used in risk adjustment and outlier payments represent costs to Medicare incurred due to the treatment provided by the hospital. The CMS standardization methodology may be accessed on the QualityNet Web site at: https://www.qualitynet.org/dcs/ ContentServer?c=Page&pagename= QnetPublic%2FPage%2FQnetTier4& cid=1228772057350. Although the hospital-specific reports include only payment-standardized MSPB numbers, data files available in QualityNet also include non-standardized payment amounts. We refer readers to the ‘‘Hospital-Specific Data Files Description’’ link for further details of the MSPB hospital-specific data files available for download in QualityNet. We will consider reporting total outlier payments for an MSPB episode as an additional data point in hospitals’ confidential hospital-specific reports. Comment: Some commenters expressed the opinion that it was difficult to improve performance on the MSPB measure because they believed that improvement was not scored based on comparison to a hospital’s own historical performance but rather against a national median. Response: We wish to clarify that, consistent with improvement scoring for other Hospital VBP Program measures, improvement on the MSPB measure is based upon comparisons between the hospital’s own performance during the baseline period and the performance period. The MSPB measure is structured as a ratio of the hospital’s own MSPB amount to the national median MSPB amount, but improvement points are calculated by comparing the hospital’s individual performance during the specified periods. For additional information on MSPB improvement points, we refer readers to the discussion of improvement scoring on the MSPB measure in the FY 2012 IPPS/ LTCH PPS final rule (76 FR 51655 through 51656). We note that although the measure’s implementation was delayed subsequent to the issuance of that final rule, we retained the scoring methodology when the measure was finalized in the FY 2013 IPPS/LTCH PPS final rule for inclusion in the Hospital VBP Program for FY 2015 and subsequent years. Comment: Some of the commenters suggested that the MSPB measure should be applied within the Physician Value Modifier Program concurrently. Response: We agree with the suggestion made by these commenters VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 that this measure is appropriate for inclusion in the Medicare Physician Fee Schedule Program. Accordingly, we have proposed to include the MSPB amount in the cost composite portion of the physician value-based payment modifier, for the CY 2016 payment year (CY 2014 performance period), in the CY 2014 Medicare Physician Fee Schedule proposed rule (78 FR 43493 through 43496). As we have stated in the past, alignment of incentives across programs is an important goal for us. Comment: Several of these commenters suggested that CMS delay implementation of the measure based on the concerns discussed above, including concern with measure reliability, riskadjustment, degree of hospital control over spending, measure specification, linkage of spending to other quality measures, lack of NQF endorsement, lack of parallel incentives for physicians, and lack of performance data. Response: We responded above to these concerns, on which commenters based their recommendation that we delay implantation of the MSPB measure. We disagree with the suggestion that the MSPB measure’s implementation should be further delayed. As noted above, we believe that the MSPB measure is appropriately risk-adjusted, that its reliability has been established, and that it incentivizes hospitals to exert their control of episode spending. We continue to believe that a measure of cost is integral in recognizing and incentivizing hospitals involved in providing high quality care to the beneficiaries they serve, at a lower cost to Medicare. We note that the MAP, convened by the NQF, identified measures of cost as a high-priority gap area for the Hospital VBP Program and supported the measure for inclusion in the Hospital IQR and Hospital VBP Programs in its February 2013 PreRulemaking Report. As we also noted above, the measure is currently under review for endorsement by the NQF. With regard to establishing parallel incentives, we have proposed a similar measure for inclusion in the Physician Value Modifier Program in the CY 2014 Physician Fee Schedule Proposed Rule (78 FR 43493 through 43496). With regard to provision of performance data, the measure has been displayed on Hospital Compare since April 2012, and performance data was updated in December of 2012. In October 2013, we intend to publicly post CY 2012 performance data, which hospitals had the opportunity to review during a data preview period from May to June 2013. We have provided detailed data to PO 00000 Frm 00197 Fmt 4701 Sfmt 4700 50691 hospitals regarding their performance on this measure. As we stated in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53586), we believe that implementation of this measure without further delay is an important step in improving quality of care for Medicare beneficiaries through provision of quality inpatient care, improving post-acute care delivery and follow-up, and reduction in the provision of unnecessary services and preventable readmissions. After consideration of the public comments we received, we are finalizing a 12-month performance period for the MSPB measure for the FY 2016 Hospital VBP Program of CY 2014, or January 1, 2014 through December 31, 2014, with a corresponding baseline period of CY 2012, or January 1, 2012 through December 31, 2012, as proposed. We received a few general comments on our performance period proposals. Comment: Commenters expressed concerns about the varied baseline and performance periods currently in operation under the Hospital VBP Program. Commenters argued that CMS should attempt to align performance and baseline periods across all Hospital VBP domains. Response: We thank commenters for this feedback. We have attempted to align performance and baseline periods to the fullest extent possible under the Hospital VBP Program, and for most domains, we have proposed to adopt baseline and performance periods aligned to the calendar year. As discussed further below, we have proposed to adopt baseline and performance periods of longer duration than the calendar year for certain Outcome measures, but we have made these proposals in order to maximize quality measure data reliability and to align those periods with the Hospital Compare Web site’s reporting periods. We are aware that the various time periods involved in the Hospital VBP Program may be confusing for hospitals, and will continue to work with the provider community to ensure that participating hospitals fully understand the Hospital VBP Program. When we published the FY 2014 IPPS/LTCH PPS proposed rule, we inadvertently did not make FY 2016 performance and baseline period proposals for CLABSI, CAUTI, and SSI. We received a number of comments on this issue. Comment: Many commenters noted that CMS did not propose performance periods for these measures in the proposed rule and requested that we publish them as soon as possible. Commenters suggested that CMS defer E:\FR\FM\19AUR2.SGM 19AUR2 50692 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations finalizing these measures until we issue a proposed rule with the proposed baseline and performance periods. Response: We thank commenters for noting this policy omission from the proposed rule. We have proposed to adopt a FY 2016 performance period of CY 2014, with a corresponding baseline period of CY 2012, for these measures in the CY 2014 OPPS/ASC proposed rule (78 FR 43659). We refer readers to that proposed rule for further discussion, and we will consider public comments on this proposal in the CY 2014 OPPS/ASC final rule with comment period. Final baseline and performance periods for FY 2016 (with the exception of the NHSN measures, described above, and the Outcome domain, discussed further below) are summarized in the following table. FINALIZED PERFORMANCE AND BASELINE PERIODS FOR THE FY 2016 HOSPITAL VBP PROGRAM—CLINICAL PROCESS OF CARE, PATIENT EXPERIENCE OF CARE, AND EFFICIENCY DOMAINS Domain Baseline period Clinical Process of Care ..................................... Patient Experience of Care ................................ Efficiency ............................................................ January 1, 2012–December 31, 2012 ............. January 1, 2012–December 31, 2012 ............. January 1, 2012–December 31, 2012 ............. e. Outcome Domain Performance Periods and Baseline Periods for the FY 2017 through FY 2019 Hospital VBP Programs In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53598 through 53599) we Performance period January 1, 2014–December 31, 2014. January 1, 2014–December 31, 2014. January 1, 2014–December 31, 2014. finalized performance periods and baseline periods for the FY 2016 mortality and AHRQ PSI composite measures. These periods are summarized in the table below. FINALIZED FY 2016 PERFORMANCE PERIODS AND BASELINE PERIODS FOR 30-DAY MORTALITY AND AHRQ PSI MEASURES Measure Baseline period Mortality .............................................................. AHRQ PSI composite ......................................... October 1, 2010–June 30, 2011 ...................... October 15, 2010–June 30, 2011 .................... In light of the time needed to process measure data for the three 30-day mortality and AHRQ PSI composite measures and our policy goal to collect enough data to generate the most reliable scores possible, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27613) we proposed to adopt performance periods for the three 30day mortality and AHRQ PSI composite measures for the FY 2017 through FY 2019 program years. We also seek to increase transparency about performance of the Hospital VBP Program measures through use of Hospital Compare as a monitoring tool for hospitals to assess their performance on the Hospital VBP Program measures. Performance period We believe that aligning the Hospital VBP Program performance periods with the Hospital IQR Program reporting period duration would allow hospitals to review Hospital Compare measure rates when they are updated and incorporate this information into their quality improvement efforts, rather than having to wait until the Hospital VBP Program provides its scoring reports to hospitals. Further, we believe that aligning the Hospital IQR Program and the Hospital VBP Program in this manner will minimize the burden on participating hospitals by aligning the time periods during which they must monitor their performance on these measures. October 1, 2012–June 30, 2014. October 15, 2012–June 30, 2014. Therefore, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27613), we proposed to adopt the following performance and baseline periods for the three 30-day mortality and AHRQ PSI composite measures for the FY 2017 through FY 2019 Hospital VBP Programs. We noted that the performance periods proposed below for the AHRQ PSI composite measure reach 24 months at their maximum, compared to the 36 months proposed for the 30day mortality measures. We proposed those durations for the AHRQ PSI measure in order to adopt performance periods that align with AHRQ’s recommended data period for public reporting. PROPOSED PERFORMANCE AND BASELINE PERIODS FOR 30-DAY MORTALITY AND AHRQ PSI COMPOSITE MEASURES Domain Baseline period Performance period mstockstill on DSK4VPTVN1PROD with RULES6 FY 2017 Hospital VBP Program Outcome: • Mortality ................................................... • AHRQ PSI ............................................... • October 1, 2010–June 30, 2012 .................. • October 1, 2010–June 30, 2012 .................. • October 1, 2013–June 30, 2015 • October 1, 2013—June 30, 2015 FY 2018 Hospital VBP Program Outcome: • Mortality ................................................... • AHRQ PSI ............................................... VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 • October 1, 2009–June 30, 2012 .................. • July 1, 2010–June 30, 2012 ......................... PO 00000 Frm 00198 Fmt 4701 Sfmt 4700 • October 1, 2013–June 30, 2016. • July 1, 2014—June 30, 2016. E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 50693 PROPOSED PERFORMANCE AND BASELINE PERIODS FOR 30-DAY MORTALITY AND AHRQ PSI COMPOSITE MEASURES— Continued Domain Baseline period Performance period FY 2019 Hospital VBP Program mstockstill on DSK4VPTVN1PROD with RULES6 Outcome: • Mortality ................................................... • AHRQ PSI ............................................... We invited public comments on our proposal to adopt performance periods and corresponding baseline periods for these measures for the FY 2017 through FY 2019 Hospital VBP Programs. Comment: Commenters expressed support for the proposal to adopt lengthier performance periods for these Outcome measures for FY 2017 through FY 2019, though some commenters were also concerned about performance periods that overlap between payment years. Response: We thank commenters for their support. We understand commenters’ concerns about performance periods that overlap between payment years, but we view that overlap as unavoidable as long as we intend to adopt performance periods for these measures with a longer duration than 12 months, and as long as we intend to maintain a relatively consistent measure set between Program years. For example, while we could consider adopting measures with performance periods longer than 12 months in alternate program years in order to avoid overlap, we believe that this policy would result in substantial confusion in the provider community. We view overlapping performance periods as an acceptable compromise to enable increased performance period length and therefore increased measure data reliability. Comment: Some commenters raised continued objections to the finalized FY 2016 performance period and baseline period for the AHRQ PSI measure. Response: We thank commenters for their concerns. However, we finalized this policy in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53597) after considering public comments. We believe these comments to be beyond the scope of the policies addressed in this final rule. Comment: Some commenters argued that the proposed performance periods for these measures could increase the chances that a hospital would be excluded from the Hospital VBP Program due to immediate jeopardy citations, and suggested that, instead of aligning the Hospital VBP performance periods to Hospital IQR Program VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 • July 1, 2009–June 30, 2012 ......................... • July 1, 2010–June 30, 2012 ......................... reporting periods, CMS consider making the Hospital IQR Program reporting periods shorter. Response: We thank commenters for their concerns. However, we believe that the possibly increased risks of a hospital being excluded from the Hospital VBP Program due to immediate jeopardy citations is outweighed by the data reliability we gain from collecting mortality and AHRQ PSI measures for longer periods. Comment: Some commenters believe that CMS had displayed incorrect dates for the proposed baseline and performance periods for FY 2017 through FY 2019 for certain Outcome measures. Commenters noted that the baseline periods for FY 2018 and FY 2019 would begin in 2009, while the baseline period for FY 2017 would begin in 2010. Response: We believe commenters are referring to the second table displayed in the FY 2013 IPPS/LTCH PPS proposed rule at 78 FR 27613. However, we did not err in displaying the dates specified. When developing the performance and baseline period proposals for the proposed rule, we attempted to align performance and baseline periods’ durations, beginning dates, and end dates as much as possible in order to ensure fair comparisons between the two periods for each year. Because we proposed performance and baseline periods of increasing length between FY 2017 and FY 2019, we proposed to begin baseline periods for the mortality measures earlier in FY 2018 and FY 2019 than FY 2017. As we stated in the proposed rule (78 FR 27613), we proposed this policy to meet our policy goal of collecting enough data to generate the most reliable measure scores possible. We view this policy as necessary in order to finalize a 36-month performance period for the mortality measures by FY 2019. However, since performance on the AHRQ PSI measure is only reported on Hospital Compare for a maximum of 24 months, we do not believe it is necessary to finalize the measure’s performance and baseline periods for FY 2019 at this time. By declining to finalize the measure’s FY 2019 PO 00000 Frm 00199 Fmt 4701 Sfmt 4700 • July 1, 2014–June 30, 2017. • July 1, 2015—June 30, 2017. performance and baseline periods in this final rule, we will be able to adopt a more recent baseline period than was initially proposed. We intend to adopt these periods for the AHRQ PSI measure for FY 2019 in future rulemaking. Comment: Some commenters expressed opposition to the proposal to adopt lengthier performance periods for the mortality measures for FY 2017 through FY 2019. Commenters expressed their continued belief that these measures are not adequately reliable and should be removed from the Hospital VBP Program altogether. Commenters argued that the measures do not meet the lower limit of moderate reliability, even with a 24-month performance period. Commenters were appreciative of the proposal to adopt a 36-month performance period for these measures, but noted that CMS had not provided an updated reliability analysis, and argued that CMS should instead explore proposing other outcome measures in future rulemaking. Response: We disagree. We believe that the mortality measures capture important quality data for purposes of the Hospital VBP Program. As we noted in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53591), we believe that the three 30-day mortality measures are sufficiently reliable for inclusion in the Hospital VBP Program, particularly in light of our finalized policy to set a 25 case minimum for these measures. We further believe that extending the performance and baseline periods for these measures to 36 months by FY 2019 improves the measures’ reliability beyond the range originally analyzed by Mathematica Policy Research in its 2011 study, which we note estimated reliability for these measures for a maximum of 24 months and did not take into account a 25 case minimum for these measures. Further, by aligning the measures’ performance period with the duration of the reporting period for Hospital IQR data posted on Hospital Compare, we believe we are achieving more transparency with regard to hospitals’ performance on these measures under the Hospital VBP Program because we are more closely matching the time periods involved in E:\FR\FM\19AUR2.SGM 19AUR2 50694 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations current Hospital IQR public reporting with Hospital VBP performance. After consideration of the public comments we received, we are finalizing performance and baseline periods for the mortality and AHRQ PSI measures for FY 2017 through FY 2019 as proposed, with the exception of the AHRQ PSI measure’s performance and baseline periods for FY 2019, as described above. Set out below are the finalized performance and baseline periods for the 30-day mortality measures for the Hospital VBP Program for FY 2017 through FY 2019, and for the AHRQ PSI composite measure for FY 2017 and FY 2018. FINALIZED PERFORMANCE AND BASELINE PERIODS FOR 30-DAY MORTALITY AND AHRQ PSI COMPOSITE MEASURES Domain Baseline Period Performance Period FY 2017 Hospital VBP Program Outcome: • Mortality ................................................... • AHRQ PSI ............................................... • October 1, 2010–June 30, 2012 .................. • October 1, 2010–June 30, 2012 .................. • October 1, 2013–June 30, 2015. • October 1, 2013–June 30, 2015. FY 2018 Hospital VBP Program Outcome: • Mortality ................................................... • AHRQ PSI ............................................... • October 1, 2009–June 30, 2012 .................. • July 1, 2010–June 30, 2012 ......................... • October 1, 2013–June 30, 2016. • July 1, 2014–June 30, 2016. FY 2019 Hospital VBP Program Outcome: • Mortality ................................................... mstockstill on DSK4VPTVN1PROD with RULES6 8. Performance Standards for the Hospital VBP Program a. Background Section 1886(o)(3)(A) of the Act requires the Secretary to establish performance standards for the measures selected under the Hospital VBP Program for a performance period for the applicable fiscal year. The performance standards must include levels of achievement and improvement, as required by section 1886(o)(3)(B) of the Act, and must be established and announced not later than 60 days before the beginning of the performance period for the fiscal year involved, as required by section 1886(o)(3)(C) of the Act. Achievement and improvement standards are discussed more fully in the Hospital Inpatient VBP Program final rule (76 FR 26511 through 26513). In addition, when establishing the performance standards, section 1886(o)(3)(D) of the Act requires the Secretary to consider appropriate factors, such as: (1) Practical experience with the measures, including whether a significant proportion of hospitals failed to meet the performance standard during previous performance periods; (2) historical performance standards; (3) improvement rates; and (4) the opportunity for continued improvement. In the FY 2013 IPPS/ LTCH PPS final rule, (77 FR 53599 through 53604), we codified our interpretation of the Hospital VBP statute with respect to performance standards in our regulations at 42 CFR § 412.165. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 • July 1, 2009–June 30, 2012 ......................... In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53599 through 53604), we adopted performance standards for FY 2015 and FY 2016 Hospital VBP Program measures. We also finalized our policy to update performance periods and performance standards for future Hospital VBP Program years via notice on our Web site or another publicly available Web site. b. Performance Standards for the FY 2016 Hospital VBP Program Measures We refer readers to the Hospital Inpatient VBP Program final rule (76 FR 26511 through 26513) for a detailed discussion of the methodology we adopted for calculating performance standards with respect to the clinical process of care, patient experience of care, and outcome measures, and the FY 2012 IPPS/LTCH PPS final rule (76 FR 51654 through 51656) for a discussion of the methodology we adopted for the MSPB measure. We have defined the ‘‘achievement threshold’’ as the median, or 50th percentile, of all hospitals’ performance on a measure during a baseline period (or during the performance period in the case of the MSPB measure) with respect to a fiscal year (42 CFR 412.160). In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27614), we proposed to revise this definition, in order to clarify that while this is true for the majority of Hospital VBP Program measures, it does not apply to the MSPB measure. The performance standards for the MSPB measure are based on performance PO 00000 Frm 00200 Fmt 4701 Sfmt 4700 • July 1, 2014–June 30, 2017. period data, as finalized in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51655). Accordingly, we proposed to revise the definition of ‘‘achievement threshold’’ at 42 CFR 412.160 to read: ‘‘Achievement threshold (or achievement performance standard) means the median (50th percentile) of hospital performance on a measure during a baseline period with respect to a fiscal year, for Hospital VBP Program measures other than the Medicare Spending per Beneficiary measure, and the median (50th percentile) of hospital performance on a measure during the performance period with respect to a fiscal year, for the Medicare Spending per Beneficiary measure.’’ We have defined the ‘‘benchmark’’ as the arithmetic mean of the top decile of all hospitals’ performance on a measure during the baseline period (42 CFR 412.160). Similar to the codified definition of ‘‘achievement threshold’’ above, this definition of ‘‘benchmark’’ does not apply to the MSPB measure. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27614), we proposed to revise the definition of ‘‘benchmark’’ at 42 CFR 412.160 to read: ‘‘Benchmark means the arithmetic mean of the top decile of hospital performance on a measure during the baseline period with respect to a fiscal year, for Hospital VBP Program measures other than the Medicare Spending per Beneficiary measure, and the arithmetic mean of the top decile of hospital performance on a measure during the performance period with respect to a fiscal year, for the E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Medicare Spending per Beneficiary measure.’’ The ‘‘improvement threshold’’ is an individual hospital’s performance level on a measure during the baseline period with respect to a fiscal year,’’ and that definition applies to all measures. We welcomed public comments on these proposed regulation text changes. However, we did not receive specific comments on the proposed changes. We are therefore finalizing the regulation text changes as proposed. We stated that we continue to believe that the finalized methodology for calculating performance standards is appropriate for the Hospital VBP Program, and we recognize that we have an obligation to calculate the numerical values for each of these standards accurately. However, we also explained our concern that if we display the numerical values of the performance standards in a particular rulemaking document, but then discover that we made a data or calculation error, the result might be that hospitals are held to inaccurate performance standards. Examples of the types of errors that could occur are inaccurate variables on Medicare claims, programming errors, excluding hospitals that should have been included from performance standards calculations, or other errors that result in inaccuracies. For example, if our quality measurement software incorrectly excluded a number of hospitals from a given measure’s performance standards calculation, the resulting achievement thresholds and benchmarks could force participating hospitals to meet inaccurate performance standards, which could have unpredictable effects on hospitals’ scores. We stated that we are also aware that hospitals rely on the performance standards that we publicly display in order to target quality improvement efforts, and do not believe that it would be fair to participating hospitals to update repeatedly our finalized performance standards if we were to identify multiple errors. We stated our belief that the best method to balance our obligation to publicly display accurate performance standards with the need to correct such performance standards if we subsequently discover data errors is to make a single correction to a given measure’s performance standards for a fiscal year. Under this proposed policy, if we identified data problems, calculation issues, or other errors with a significant impact on performance standards, we would have the ability to update the measure’s performance standards once for a fiscal year. Therefore, we proposed to interpret the finalized definitions of ‘‘achievement threshold’’ and ‘‘benchmark’’ found under 42 CFR 412.160 to not include the numerical values that result when the performance standards are calculated. Further, we proposed to update a measure’s performance standards for a fiscal year once if we identify data issues, calculation errors, or other problems that would significantly change the displayed performance standards. However, as has been our practice, and to remain fully transparent with participating hospitals, we stated our intent to continue to display the performance standards’ numerical values in rulemaking. We invited public comments on this proposed interpretation. However, we did not receive any public comments on this policy. We are therefore finalizing our proposal to interpret the finalized definitions of ‘‘achievement threshold’’ and ‘‘benchmark’’ found under § 412.160 to not include the numerical values that result when the performance standards are calculated. We finalized FY 2016 performance standards for the three 30-day mortality measures and the AHRQ PSI composite measure in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53603) and are displaying them again in the first table below. The numerical values for the proposed FY 2016 performance standards for the clinical process, outcome, and efficiency measures appear in the second table below, while 50695 numerical values for the proposed FY 2016 performance standards for the patient experience of care (HCAHPS survey) measure appear in the third table below. We note that the numerical values for the performance standards displayed below represent estimates at the time that the proposed rule was published based on what was the most recently-available data. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27614), we stated that we intended to update the numerical values in the FY 2014 IPPS/LTCH PPS final rule. Because the MSPB measure’s performance standards are based on performance period data, we are unable to provide numeric equivalents for the standards at this time. In the proposed rule, we provided historical performance standards, for information purposes. During the period of May 1, 2011 through December 31, 2011, the achievement threshold would have been a MSPB ratio of 0.99, which corresponds to a standardized, riskadjusted MSPB amount of $18,079, and the benchmark would have been 0.82, which corresponds to an MSPB amount of $14,985. In this final rule, we are providing more recent historical performance standards, also for information purposes. During the period of January 1, 2012 through December 31, 2012, the achievement threshold would have been an MSPB ratio of 0.98, which corresponds to a standardized, riskadjusted MSPB amount of $18,412, and the benchmark would have been 0.82, which corresponds to an MSPB amount of $15,311. We also noted that the performance standards for the NHSNbased CLABSI, CAUTI, and SSI measures, the AHRQ PSI composite measure, and the MSPB measure are calculated with lower values representing better performance, in contrast to other measures, on which higher values indicate better performance. As discussed above, the proposed performance standards displayed below for SSI are an equally weighted average of the measure’s strata. FINALIZED PERFORMANCE STANDARDS FOR CERTAIN FY 2016 HOSPITAL VBP PROGRAM OUTCOME DOMAIN MEASURES mstockstill on DSK4VPTVN1PROD with RULES6 Measure ID Achievement threshold Description Benchmark Outcome Measures MORT–30–AMI MORT–30–HF .. MORT–30–PN .. PSI–90 .............. VerDate Mar<15>2010 Acute Myocardial Infarction (AMI) 30-day mortality rate .......................................................... Heart Failure (HF) 30-day mortality rate .................................................................................. Pneumonia (PN) 30-day mortality rate ..................................................................................... Complication/patient safety for selected indicators (composite) .............................................. 21:51 Aug 16, 2013 Jkt 229001 PO 00000 Frm 00201 Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2 0.847472 0.881510 0.882651 0.622879 0.862371 0.900315 0.904181 0.451792 50696 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations PROPOSED PERFORMANCE STANDARDS FOR THE FY 2016 HOSPITAL VBP PROGRAM CLINICAL PROCESS OF CARE, OUTCOME, AND EFFICIENCY DOMAIN MEASURES Measure ID Description Achievement threshold Benchmark Clinical Process of Care Measures AMI–7a .............. IMM–2 ................ PN–6 .................. SCIP-Inf-1 .......... SCIP-Inf-2 .......... SCIP-Inf-3 .......... SCIP-Inf-4 .......... SCIP-Inf-9 .......... SCIP-Card-2 ...... SCIP–VTE–2 ..... Fibrinolytic Therapy Received Within 30 Minutes of Hospital Arrival. Influenza Immunization .......................... Initial Antibiotic Selection for CAP in Immunocompetent Patient. Prophylactic Antibiotic Received Within One Hour Prior to Surgical Incision. Prophylactic Antibiotic Selection for Surgical Patients. Prophylactic Antibiotics Discontinued Within 24 Hours After Surgery End Time. Cardiac Surgery Patients with Controlled 6AM Postoperative Serum Glucose. Urinary Catheter Removed on Postoperative Day 1 or Postoperative Day 2. Surgery Patients on Beta-Blocker Therapy Prior to Arrival Who Received a Beta-Blocker During the Perioperative Period. Surgery Patients Who Received Appropriate Venous Thromboembolism Prophylaxes Within 24 Hours Prior to Surgery to 24 Hours After Surgery. 0.88625 .................................................. 1.00000 0.89947 .................................................. 0.96429 .................................................. 0.99036 1.00000 0.98942 .................................................. 1.00000 0.98951 .................................................. 1.00000 0.97971 .................................................. 1.00000 0.96797 .................................................. 0.99977 0.96743 .................................................. 1.00000 0.97561 .................................................. 1.00000 0.98086 .................................................. 1.00000 Outcome Measures CAUTI ................ CLABSI .............. SSI ..................... Catheter-Associated Urinary Tract Infection. Central Line-Associated Blood Stream Infection. Surgical Site Infection ............................ 0.826 ...................................................... 0.000 0.473 ...................................................... 0.000 0.737 ...................................................... 0.000 Efficiency Measures MSPB–1 ............. Medicare Spending per Beneficiary ....... Median Medicare Spending per Beneficiary ratio across all hospitals during the performance period. Mean of the lowest decile Medicare Spending per Beneficiary ratios across all hospitals during the performance period PROPOSED PERFORMANCE STANDARDS FOR THE FY 2016 HOSPITAL VBP PROGRAM PATIENT EXPERIENCE OF CARE DOMAIN Floor (percent) HCAHPS Survey Dimension mstockstill on DSK4VPTVN1PROD with RULES6 Communication with Nurses ........................................................................................................ Communication with Doctors ....................................................................................................... Responsiveness of Hospital Staff ................................................................................................ Pain Management ........................................................................................................................ Communication about Medicines ................................................................................................ Hospital Cleanliness & Quietness ............................................................................................... Discharge Information .................................................................................................................. Overall Rating of Hospital ............................................................................................................ We invited public comments on the proposed performance standards. Comment: One commenter suggested that CMS phase out the Hospital VBP Program’s use of improvement points when calculating hospitals’ TPSs. The commenter explained that the Hospital VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 VBP Program’s initial implementation made improvement points necessary to encourage historically poor-performing hospitals to improve by giving them an opportunity to earn a value-based incentive payment based on their improvement. Other commenters PO 00000 Frm 00202 Fmt 4701 Sfmt 4700 53.33 61.22 36.44 47.93 42.23 42.16 62.85 36.45 Achievement threshold (percent) 77.59 80.33 64.65 70.16 62.28 64.93 84.45 69.05 Benchmark (percent) 85.98 88.59 79.72 78.24 72.67 79.12 90.26 83.89 argued, however, that the Hospital VBP Program should instead offer only achievement points in order to stop rewarding hospitals for catching up after providing subpar care delivery in the past. E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Response: We thank commenters for this suggestion. However, the Hospital VBP statute requires that the performance standards include levels of both achievement and improvement. Our finalized scoring methodology awards points for improvement based on performance during the baseline period compared to performance during the performance period, and we continue to believe that this methodology enables us to incentivize hospitals both to achieve high performance on quality measures and to improve their performance over time. We will consider further revising our scoring methodology in the future. Comment: Commenters requested that CMS address how hospitals’ measured performance will change under CMS’ pay-for-performance programs when the transition to ICD–10–CM/PCS codes occurs on October 1, 2014. Commenters argued that it would be unfair to compare baseline period data coded under one system to performance period data coded under another. Response: We intend to address this topic with respect to the Hospital VBP Program in future rulemaking. After consideration of the public comments we received, we are 50697 finalizing our FY 2016 performance standards for the Clinical Process of Care, Efficiency, and Patient Experience of Care domains as proposed, with the exception of the performance standards for SCIP–Inf–4, described further above. In addition, we are finalizing a modified SSI measure performance standards calculation, as described above in section V.H.6.b. of the preamble of this final rule. Set out below are the finalized performance standards for the Clinical Process of Care, Outcome, Efficiency, and Patient Experience of Care Domains. FINALIZED PERFORMANCE STANDARDS FOR THE FY 2016 HOSPITAL VBP PROGRAM CLINICAL PROCESS OF CARE, OUTCOME, AND EFFICIENCY DOMAIN MEASURES Measure ID Description Achievement threshold Benchmark Clinical Process of Care Measures AMI–7a .............. IMM–2 ................ PN–6 .................. SCIP-Inf-2 .......... SCIP-Inf-3 .......... SCIP-Inf-9 .......... SCIP-Card-2 ...... SCIP–VTE–2 ..... Fibrinolytic Therapy Received Within 30 Minutes of Hospital Arrival. Influenza Immunization .......................... Initial Antibiotic Selection for CAP in Immunocompetent Patient. Prophylactic Antibiotic Selection for Surgical Patients. Prophylactic Antibiotics Discontinued Within 24 Hours After Surgery End Time. Urinary Catheter Removed on Postoperative Day 1 or Postoperative Day 2. Surgery Patients on Beta-Blocker Therapy Prior to Arrival Who Received a Beta-Blocker During the Perioperative Period. Surgery Patients Who Received Appropriate Venous Thromboembolism Prophylaxes Within 24 Hours Prior to Surgery to 24 Hours After Surgery. 0.91154 .................................................. 1.00000 0.90607 .................................................. 0.96552 .................................................. 0.98875 1.00000 0.99074 .................................................. 1.00000 0.98086 .................................................. 1.00000 0.97059 .................................................. 1.00000 0.97727 .................................................. 1.00000 0.98225 .................................................. 1.00000 Outcome Measures CAUTI ................ CLABSI .............. SSI ..................... Catheter-Associated Urinary Tract Infection. Central Line-Associated Blood Stream Infection. Surgical Site Infection. • Colon • Abdominal Hysterectomy 0.801 ...................................................... 0.000 0.465 ...................................................... 0.000 • 0.668 • 0.752 • 0.000 • 0.000 Efficiency Measures mstockstill on DSK4VPTVN1PROD with RULES6 MSPB–1 ............. Medicare Spending per Beneficiary ....... Median Medicare Spending per Beneficiary ratio across all hospitals during the performance period. Mean of the lowest decile Medicare Spending per Beneficiary ratios across all hospitals during the performance period FINALIZED PERFORMANCE STANDARDS FOR THE FY 2016 HOSPITAL VBP PROGRAM PATIENT EXPERIENCE OF CARE DOMAIN Floor (percent) HCAHPS Survey dimension Communication with Nurses ........................................................................................................ Communication with Doctors ....................................................................................................... VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 PO 00000 Frm 00203 Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 53.99 57.01 19AUR2 Achievement threshold (percent) 77.67 80.40 Benchmark (percent) 86.07 88.56 50698 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations FINALIZED PERFORMANCE STANDARDS FOR THE FY 2016 HOSPITAL VBP PROGRAM PATIENT EXPERIENCE OF CARE DOMAIN—Continued Floor (percent) HCAHPS Survey dimension Responsiveness of Hospital Staff ................................................................................................ Pain Management ........................................................................................................................ Communication about Medicines ................................................................................................ Hospital Cleanliness & Quietness ............................................................................................... Discharge Information .................................................................................................................. Overall Rating of Hospital ............................................................................................................ c. Certain Performance Standards for the FY 2017, FY 2018, and FY 2019 Hospital VBP Programs In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27616) we 38.21 48.96 34.61 43.08 61.36 34.95 Achievement threshold (percent) 64.71 70.18 62.33 64.95 84.70 69.32 Benchmark (percent) 79.76 78.16 72.77 79.10 90.39 83.97 proposed to adopt the following performance standards for the three 30day mortality and AHRQ PSI composite measures for the FY 2017, FY 2018, and FY 2019 Hospital VBP Program years: PROPOSED PERFORMANCE STANDARDS FOR THE THREE 30-DAY MORTALITY AND AHRQ COMPOSITE MEASURES FOR THE FY 2017 HOSPITAL VBP PROGRAM Measure ID Achievement threshold Description Benchmark Outcome Measures MORT–30–AMI MORT–30–HF .. MORT–30–PN .. PSI–90 .............. Acute Myocardial Infarction (AMI) 30-day mortality rate .......................................................... Heart Failure (HF) 30-day mortality rate .................................................................................. Pneumonia (PN) 30-day mortality rate ..................................................................................... Complication/patient safety for selected indicators (composite) .............................................. 0.851458 0.881794 0.882986 0.580808 0.871669 0.903985 0.908124 0.399880 PROPOSED PERFORMANCE STANDARDS FOR THE THREE 30-DAY MORTALITY AND AHRQ COMPOSITE MEASURES FOR THE FY 2018 HOSPITAL VBP PROGRAM Measure ID Achievement threshold Description Benchmark Outcome Measures MORT–30–AMI MORT–30–HF .. MORT–30–PN .. PSI–90 .............. Acute Myocardial Infarction (AMI) 30-day mortality rate .......................................................... Heart Failure (HF) 30-day mortality rate .................................................................................. Pneumonia (PN) 30-day mortality rate ..................................................................................... Complication/patient safety for selected indicators (composite) .............................................. 0.850916 0.883421 0.882860 0.585397 0.873053 0.907656 0.907900 0.400502 PROPOSED PERFORMANCE STANDARDS FOR THE THREE 30-DAY MORTALITY AND AHRQ COMPOSITE MEASURES FOR THE FY 2019 HOSPITAL VBP PROGRAM Measure ID Achievement threshold Description Benchmark Outcome Measures mstockstill on DSK4VPTVN1PROD with RULES6 MORT–30–AMI MORT–30–HF .. MORT–30–PN .. PSI–90 .............. Acute Myocardial Infarction (AMI) 30-day mortality rate .......................................................... Heart Failure (HF) 30-day mortality rate .................................................................................. Pneumonia (PN) 30-day mortality rate ..................................................................................... Complication/patient safety for selected indicators (composite) .............................................. We invited public comment on these proposed performance standards. However, we did not receive any comments specific to these proposed performance standards. We are therefore finalizing the performance standards as proposed, with the exception of the FY 2019 performance standards for the VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 AHRQ PSI measure. As discussed further above in section V.H.7.e. of the preamble of this final rule, we intend to adopt the AHRQ PSI measure for FY 2019 in future rulemaking, and believe that by declining to finalize its performance periods and performance standards at this time, we may select a PO 00000 Frm 00204 Fmt 4701 Sfmt 4700 0.850671 0.883472 0.882334 0.585397 0.873263 0.908094 0.907906 0.400502 more recent baseline period for that measure for FY 2019. We note further that the performance standards for the mortality measures for FY 2017 through FY 2019 have not changed since they were displayed in the proposed rule. E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 50699 FINALIZED PERFORMANCE STANDARDS FOR THE THREE 30-DAY MORTALITY AND AHRQ COMPOSITE MEASURES FOR THE FY 2017 HOSPITAL VBP PROGRAM Measure ID Achievement threshold Description Benchmark Outcome Measures MORT–30–AMI MORT–30–HF .. MORT–30–PN .. PSI–90 .............. Acute Myocardial Infarction (AMI) 30-day mortality rate .......................................................... Heart Failure (HF) 30-day mortality rate .................................................................................. Pneumonia (PN) 30-day mortality rate ..................................................................................... Complication/patient safety for selected indicators (composite) .............................................. 0.851458 0.881794 0.882986 0.577321 0.871669 0.903985 0.908124 0.397051 FINALIZED PERFORMANCE STANDARDS FOR THE THREE 30-DAY MORTALITY AND AHRQ COMPOSITE MEASURES FOR THE FY 2018 HOSPITAL VBP PROGRAM Measure ID Achievement threshold Description Benchmark Outcome Measures MORT–30–AMI MORT–30–HF .. MORT–30–PN .. PSI–90 .............. Acute Myocardial Infarction (AMI) 30-day mortality rate .......................................................... Heart Failure (HF) 30-day mortality rate .................................................................................. Pneumonia (PN) 30-day mortality rate ..................................................................................... Complication/patient safety for selected indicators (composite) .............................................. 0.850916 0.883421 0.882860 0.582626 0.873053 0.907656 0.907900 0.398030 FINALIZED PERFORMANCE STANDARDS FOR THE THREE 30-DAY MORTALITY AND AHRQ COMPOSITE MEASURES FOR THE FY 2019 HOSPITAL VBP PROGRAM Measure ID Achievement threshold Description Benchmark Outcome Measures MORT–30–AMI MORT–30–HF .. MORT–30–PN .. Acute Myocardial Infarction (AMI) 30-day mortality rate .......................................................... Heart Failure (HF) 30-day mortality rate .................................................................................. Pneumonia (PN) 30-day mortality rate ..................................................................................... mstockstill on DSK4VPTVN1PROD with RULES6 9. FY 2016 Hospital VBP Program Scoring Methodology a. General Hospital VBP Program Scoring Methodology In the Hospital Inpatient VBP Program final rule, we adopted a methodology for scoring clinical process of care, patient experience of care, and outcome measures. As noted in that rule, this methodology outlines an approach that we believe is well understood by patient advocates, hospitals, and other stakeholders because it was developed during a lengthy process that involved extensive stakeholder input, and was based on a scoring methodology we presented in a report to Congress. We also noted in that final rule that we had conducted extensive additional research on a number of other important methodology issues to ensure a high level of confidence in the scoring methodology (76 FR 26514). In addition, we believe that, for reasons of simplicity, transparency, and consistency, it is important to score hospitals using the same general methodology each year, with appropriate modifications to accommodate new domains and VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 measures. We finalized a scoring methodology for the MSPB measure in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51654 through 51656). In the FY 2013 IPPS/LTCH PPS final rule (77 FR 28087), for the FY 2015 Hospital VBP Program, we finalized our proposal to use these same scoring methodologies to score hospital performance for the FY 2015 Hospital VBP Program. In that rule, we stated that we believe these scoring methodologies continue to appropriately capture hospital quality as reflected by the finalized quality measure sets. We also noted that readopting the finalized scoring methodology from prior program years represents the simplest and most consistent policy for providers and the public. We continue to believe that the finalized scoring methodology for the Hospital VBP Program is well understood by patient advocates, hospitals, and other stakeholders because it was developed during a lengthy process that involved extensive stakeholder input, and was based on a scoring methodology we presented in a PO 00000 Frm 00205 Fmt 4701 Sfmt 4700 0.850671 0.883472 0.882334 0.873263 0.908094 0.907906 report to Congress. As we stated in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53604), we believe that, for reasons of simplicity, transparency, and consistency, it is important to score hospitals using the same general methodology each year, with appropriate modifications to accommodate new domains and measures. Therefore, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27616 through 27617), we proposed to readopt the finalized scoring methodology adopted for the FY 2015 Hospital VBP Program for the FY 2016 Hospital VBP Program. We welcomed public comment on this proposal. However, we did not receive any public comments specific to the proposed scoring methodology. Therefore, we are finalizing the scoring methodology as proposed. b. Domain Weighting for the FY 2016 Hospital VBP Program for Hospitals That Receive a Score on All Domains In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53582 through 53592), we added the Efficiency domain to the Hospital VBP Program beginning with the FY 2015 Hospital VBP Program. We E:\FR\FM\19AUR2.SGM 19AUR2 50700 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 experience and on efficiency, while maintaining clinical processes as an important component of the program’s quality measurement. Therefore, we proposed the following domain weighting for the FY 2016 Hospital VBP Program: worse health outcomes, and that emphasizing patient satisfaction has contributed to narcotics abuse. These commenters recommended that CMS reconsider this domain’s weighting. Commenters also expressed concern about the proposal to weight the Patient Experience of Care domain more heavily FINAL DOMAIN WEIGHTS FOR THE FY 2015 HOSPITAL VBP PROGRAM FOR PROPOSED DOMAIN WEIGHTS FOR THE than the Clinical Process of Care FY 2016 HOSPITAL VBP PROGRAM domain, arguing that Patient Experience HOSPITALS RECEIVING A SCORE ON FOR HOSPITALS RECEIVING A SCORE of Care measures do not necessarily ALL PROPOSED DOMAINS correlate with medical outcomes, and ON ALL PROPOSED DOMAINS suggested that CMS more evenly Weight Domain balance the domain weighting given to % Weight Domain those two domains. Commenters also % Clinical Process of Care ........... 20 suggested that the HCAHPS measure Patient Experience of Care ...... 30 Clinical Process of Care ........... 10 lacks sufficient risk-adjustment, and Outcome ................................... 30 Patient Experience of Care ...... 25 that the survey systematically Efficiency .................................. 20 Outcome ................................... 40 disadvantages hospitals that take on Efficiency .................................. 25 complex and sicker patients. We stated that we believed this Response: We thank the commenters domain weighting appropriately reflects We welcomed public comment on for their feedback. CMS and the our priorities for quality improvement this proposed domain weighting. HCAHPS Project Team are familiar with Comment: Commenters supported the the studies cited. We are also aware of in the inpatient hospital setting and proposal to place more emphasis on the a number of studies published in peerbegins aligning with the National Quality Strategy’s priorities. We believe Outcome domain compared to Clinical reviewed journals that have found that that the domain weighting will continue Process of Care domain. Commenters patient experience of care, as measured also recommended that CMS consider to improve the link between Medicare by the HCAHPS survey, is strongly and the relative magnitude of quality payments to hospitals and patient positively related to clinical process incentives across programs when outcomes, efficiency and cost, and the measures, outcomes, readmissions, and developing our domain weighting. patient experience. We note that the mortality. For brief reviews of these Response: We thank commenters for weighting places the strongest relative findings, we refer readers to: ‘‘The their support. emphasis on outcomes and the patient Patient Experience and Health Comment: Some commenters strongly Outcomes.’’ Matthew Manary, William experience, which we view as two supported significant domain weighting Boulding, Richard Staelin, and Seth critical components of quality for the Patient Experience of Care improvement in the inpatient hospital Glickman. New England Journal of setting. We further note that the domain domain, arguing that it is imperative Medicine, 368 (3): 201–203. 2013 and that hospitals continue to focus on the weighting, for the first time, ‘‘What does the patient know about incorporates a measure of efficiency and patient’s experience when developing quality?’’ Karen Luxford. International quality improvement efforts. continues to provide substantial weight Journal for Quality in Health Care. 24 Commenters suggested that CMS to clinical processes. (5): 439–440. 2012. As we stated in the Hospital Inpatient consider retaining the 30 percent weight With respect to the articles cited by finalized for FY 2015’s Patient VBP Program final rule (76 FR 26491), the commenter, we note that other Experience of Care domain for FY 2016 we believe that domains need not be researchers have cited flaws in the and future years. given equal weight, and that over time, approach, data and methodology Response: We thank commenters for scoring methodologies should be employed in the Fenton, et al., study, their support for substantial weighting weighted more towards outcomes, which did not directly examine the for the Patient Experience of Care patient experience of care, and HCAHPS Survey. The study by Lyu, et functional status measures (for example, Domain. We agree that hospitals should al. is premised upon the measures assessing physical and mental be provided strong incentives to focus misunderstanding that CMS uses patient on the patient’s experience of care capacity, capability, well-being and experience as the sole criterion for during acute inpatient hospitalizations, improvement). We took these measuring and assessing hospital and believe that our proposed weighting quality. In addition, their findings, considerations into account when for the Patient Experience of Care developing the domain weighting based on examination of 31 hospitals, domain for FY 2016 reflects that proposal outlined below. may insufficiently represent the over In the FY 2014 IPPS/LTCH PPS priority. We do not believe that the 3,000 hospitals that participate in the proposed rule (78 FR 27617), we minor change to the Patient Experience Hospital VBP Program and the proposed domain weights for hospitals of Care domain’s weighting proposed for approximately 4,000 hospitals that that receive a score in all proposed FY 2016 will diminish significantly the participate in the Hospital IQR Program. domains. We believe that the proposed strong emphasis that hospitals place on The focus of the Forbes magazine domain weighting specified below will the patient’s experience during acute article 42 the commenter cited is surveys continue to improve the link between hospitalizations. of physicians, not of the inpatient Medicare payments to hospitals and Comment: Some commenters opposed hospital experience. The HCAHPS patient outcomes, efficiency and cost, the proposed domain weighting, arguing Survey asks inpatients how often and the patient experience. We note that that the Patient Experience of Care doctors treated them with courtesy and the proposed domain weighting places domain received too much weight as respect, listened carefully to the patient, the highest relative weight on measures proposed. Commenters cited several of outcomes and continues to place studies and articles and argued that 42 Falkenberg, K., ‘‘Why rating your doctor is bad significant weight on the patient highly satisfied patients often have for your health.’’ Forbes: January 21, 2013. also finalized our proposal for the following domain weights for the FY 2015 Hospital VBP Program for hospitals that receive a score on all four proposed domains (77 FR 53605 through 53606): VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 PO 00000 Frm 00206 Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations and explained things in a way they could understand. HCAHPS does not identify or differentiate among the physicians who treated the patient. We are not aware of documented evidence or research that demonstrates that HCAHPS or other patient surveys have led hospitals or physicians to give patients ‘‘exactly what they want,’’ including medically unnecessary pain medications, in order to influence patients’ responses to such surveys. We believe that patient experience of care is a fundamental and intrinsically important aspect of hospital quality which merits its proposed weighting in the Hospital VBP Program TPS. As we stated in the Hospital Inpatient VBP final rule (76 FR 26526), we believe that delivery of high-quality, patientcentered care requires us to carefully consider the patient’s experience in the hospital inpatient setting. Moreover, as we stated in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53606), we are aware of no data suggesting that patient characteristics result in bias in the HCAHPS patient-mix adjusted data used in the Hospital VBP Program. We thoroughly tested the HCAHPS patient-mix adjustment model before the national implementation of the HCAHPS Survey in 2006 and have checked it regularly since. We use a patient-mix adjustment, also known as case-mix adjustment, in a transparent manner in our standard patient-mix adjustment of HCAHPS scores, as explained on the official HCAHPS OnLine Web site, https:// www.hcahpsonline.org, in our research documents, in the patient-mix adjustment coefficients that are posted on this Web site, and in our published research. The HCAHPS Survey includes an item that asks for patients’ assessment of their overall health that we use in our standard patient-mix adjustment of HCAHPS scores to account for patient acuity. While we continue to believe that this adjustment adequately captures patient acuity, in response to comments about HCAHPS in previous IPPS rules, we added an item to the HCAHPS Survey in January 2013 that asks patients to assess their overall mental or emotional health. At this time, we are analyzing the effect of patients’ overall mental or emotional health on HCAHPS scores. Based on the results of this analysis, we will determine whether we believe a further patient-mix adjustment for mental or emotional health may be warranted. Therefore, we do not believe that the proposed weighting for the Patient Experience of Care domain is too high, VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 and we believe that placing significant weighting on the Patient Experience of Care appropriately encourages hospitals to focus intently on this clinical area. Comment: Some commenters fully supported the proposed increase in the Efficiency domain weight, and a few of those commenters expressed support for an aggressive increase in its weight over time. MedPAC also supported the proposed domain weights. Response: We thank the commenters for their support, and we agree that shift in emphasis on efficiency is one important goal for the Hospital VBP Program. Comment: Many commenters opposed the increased weight for the Efficiency domain from 20 percent in FY 2015 to 25 percent for FY 2016. The commenters’ opposition was based on concerns related to the MSPB measure and the fact that the domain is comprised of only one measure. Response: We responded to commenters’ concerns with the MSPB measure in general in section V.H.7.d of the preamble to this final rule. With regard to the concern that the domain is comprised of only one measure, we acknowledge the potential for building a more robust efficiency measure set, as we stated in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53585 through 53586), and we solicited and received public comments on how we might pursue that goal in this rule. We intend to ensure that any additional efficiency measures are fully developed, tested, included in the Hospital IQR Program, and posted on the Hospital Compare Web site before they are included in the Hospital VBP Program, in accordance with the program’s statutory requirements. In the interim, we continue to believe that increased emphasis on efficiency is an important goal for the Hospital VBP Program, and that the efficiency domain weight should be increased accordingly. Comment: Some commenters opposed the proposed FY 2016 domain weighting, arguing that the Outcome, Patient Experience of Care, and Efficiency domains were accorded too much weighting as proposed. Commenters argued that the Clinical Process of Care domain should be given increased weight given those measures’ long inclusion in both the Hospital IQR and Hospital VBP Programs. Other commenters argued that because of reliability concerns about certain Outcome measures, the proposed weight for the Outcome domain is inappropriate. Response: We disagree that we have placed too much weight on the Outcome, Patient Experience, and PO 00000 Frm 00207 Fmt 4701 Sfmt 4700 50701 Efficiency domains. In the Hospital Inpatient VBP Program final rule (76 FR 26526), we stated our intent to consider placing greater weight on measures of outcomes than measures of clinical processes as we developed our domain weighting proposals for FY 2014, and we believe we have appropriately done so when proposing domain weights for FY 2014 and FY 2015. We believe it is appropriate to continue placing a strong emphasis on measures of clinical outcomes under the Hospital VBP Program. As described further above, we also believe it to be appropriate to place significant weight on the Patient Experience of Care and Efficiency domains. While we agree that Clinical Process of Care measures are important to quality measurement, we believe that placing emphasis on measures of Outcomes necessarily requires some reduction to the domain weight placed on Clinical Processes, in particular because the Clinical Process of Care domain was weighted as 70 percent of the TPS under the FY 2013 Hospital VBP Program. After consideration of the public comments we received, we are finalizing the FY 2016 domain weighting for hospitals receiving a score on all domains as proposed. Set out below are the finalized domain weights for hospitals that receive a score in all proposed domains. FINALIZED DOMAIN WEIGHTS FOR THE FY 2016 HOSPITAL VBP PROGRAM FOR HOSPITALS RECEIVING A SCORE ON ALL PROPOSED DOMAINS Domain Clinical Process of Care ........... Patient Experience of Care ...... Outcome ................................... Efficiency .................................. Weight % 10 25 40 25 c. Domain Weighting for the FY 2016 Hospital VBP Program for Hospitals Receiving Scores on Fewer Than Four Domains In prior program years, we finalized a policy that hospitals must have received domain scores on all finalized domains in order to receive a TPS. However, since the Hospital VBP Program has evolved from its initial two domains to an expanded measure set with additional domains, we considered whether it was appropriate to continue this policy. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53608 through 53609), we finalized our proposal for a higher minimum number of cases for the three E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50702 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 30-day mortality measures for the FY 2015 Hospital VBP Program than was finalized for the FY 2014 Hospital VBP Program. We made this change in our policy in order to improve these measures’ reliability given the relatively short performance period for these measures. However, we were concerned that the relatively higher minimum number of cases could result in a substantially larger number of hospitals being excluded from the Hospital VBP Program. We believe that we should make a concerted effort to include as many hospitals as possible in the program in order to offer quality incentives and encourage quality improvement. Therefore, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53606 through 53607), we finalized our proposal that, for the FY 2015 Hospital VBP Program and subsequent years, hospitals with sufficient data to receive at least two domain scores (that is, sufficient cases and measures to receive a domain score on at least two domains) will receive a TPS. We also finalized our proposal that, for hospitals with at least two domain scores, TPSs would be reweighted proportionately to the scored domains to ensure that the TPS is still scored out of a possible 100 points and that the relative weights for the scored domains remain equivalent to the weighting which occurs when there are scores in all four domains. We believe that this approach allows us to include relatively more hospitals in the Hospital VBP Program while continuing to focus on reliably scoring hospitals on their quality measure performance. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27617 through 26718), we proposed to continue this approach for the FY 2016 Hospital VBP Program and subsequent fiscal years for purposes of eligibility for the program. However, as detailed further below, we proposed to reclassify the Hospital VBP Program’s quality measurement domains beginning with the FY 2017 Hospital VBP Program to align more closely with CMS’ National Quality Strategy, and we sought public comments on how we should determine minimum numbers of cases and measures under that proposed policy. We invited public comment on this proposed reweighting for hospitals with sufficient data on at least two finalized domains. However, we did not receive any comments specific to this policy. We are therefore finalizing this policy as proposed. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 d. Domain Reclassification and Domain Weighting for the FY 2017 Hospital VBP Program In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53593 through 53594), we outlined one possible set of measure classifications based on the National Quality Strategy. However, we did not finalize our proposal to adopt quality measurement domains based on the National Quality Strategy for the FY 2016 Hospital VBP Program, because we understood stakeholders to be concerned about our proposal to reshape the Hospital VBP Program’s scoring methodology before hospitals had actual experience with the program and its value-based incentive payments. However, we now believe that hospitals have accumulated practical experience with all components of the Hospital VBP Program, including performance periods and payment periods. As a result of our extensive outreach efforts to hospitals and stakeholders, as well as the practical experience with the first year of the program, we also believe that hospitals and other stakeholders generally understand the program’s operations and scoring methodology. Therefore, we believe that we have addressed commenters’ concerns, summarized in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53594), that we should wait until hospitals have experienced the program fully before fundamentally reshaping its structure. We are attempting to align all of our quality improvement efforts with the NQS, particularly because it is a patientcentered approach that aligns public and private efforts. We are aware that NQF uses NQS-based domains, and we also use those domains in development of other agency-specific efforts. We note further that stakeholders frequently request that HHS align its quality improvement efforts so that providers are not subjected to different measurement approaches, and we believe that adapting the Hospital VBP Program domain structure is one approach to achieving that goal. We believe that the longer we wait to adapt the Hospital VBP Program to the NQS domains, the more difficult it will be, and we believe we need a common framework as we begin alignment efforts between the Hospital IQR Program, the Hospital VBP Program, and the Medicare EHR Incentive Program. CMS’s quality measurement strategic plan also centers on the NQS, and we believe that using these domains rewards hospitals for providing more efficient and more patient-centered care. The most recent Annual Progress Report PO 00000 Frm 00208 Fmt 4701 Sfmt 4700 to Congress addressing the NQS can be found on the Web site at: https:// www.ahrq.gov/workingforquality/nqs/ nqs2012annlrpt.pdf. Therefore, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27618 through 27619), we proposed to align the Hospital VBP Program’s quality measurement domains with the NQS’ quality priorities, with certain modifications discussed further below. We proposed to adopt this realignment beginning with the FY 2017 Hospital VBP Program. We proposed to combine the priorities of Care Coordination and Patient and Caregiver Centered Experience of Care into one domain for purposes of aligning the Hospital VBP Program domains with the NQS priorities. Care Coordination aligns with the NQS priority stated as promoting effective communication and coordination of care. Patient and Caregiver Centered Experience of Care aligns with the NQS priority stated as ensuring that each person and family are engaged as partners in their care. We stated our belief that, in order to be engaged as partners, effective communication and coordination of care must coexist. This notion is further exemplified by one of the 10 principles of the NQS, found at https://www.ahrq.gov/workingforquality/ nqs/principles.html, which notes that ‘‘Person-centeredness and family engagement, including understanding and valuing patient preferences, will guide all strategies, goals, and health care improvement efforts. The most successful health care experiences are often those in which clinicians, patients, and their families work together to make decisions.’’ We stated our belief that care coordination includes this shared decision-making among clinicians, patients, and their families, and further believe that a component of these important concepts can be captured with the HCAHPS measure. Therefore, we stated that we believe that placing the HCAHPS measure into the proposed combined domain below will continue to encourage hospitals to focus on improving the patient’s experience during acute care hospitalizations and will enable us to continue providing incentives that focus on patient and caregiver experience and coordination of care. However, with the exception of the HCAHPS measure described above, we did not believe that any of the other proposed measures for the FY 2016 Hospital VBP Program, which would form the basis for the FY 2017 Hospital VBP Program’s measure set, should be placed into the proposed combined Patient and Caregiver E:\FR\FM\19AUR2.SGM 19AUR2 50703 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Experience of Care/Care Coordination domain. We stated our intent to consider proposing to adopt measures of care coordination in the future as they become available. We stated that we may propose further refinements to the Hospital VBP Program domain structure in future years to accommodate the NQS’ population health priority or other quality improvement priorities as appropriate, but did not propose to adopt a Population Health domain at this time. We noted that the proposed NQSbased domain structure combines measures of clinical processes and outcomes under the ‘‘Clinical Care’’ priority. In order to ensure that outcomes remain a principal focus of hospitals’ quality improvement efforts, as well as to continue our effort to shift the program over time to include more measures of outcomes and efficiency, we proposed to stratify the NQS-based Clinical Care domain into ‘‘Clinical Care—Outcomes’’ and ‘‘Clinical Care— Process,’’ which will enable us to provide significant weight to measures of outcomes and avoid diluting hospitals’ focus on measures of outcomes. We noted further that the proposed NQS-based domains include ‘‘Efficiency and Cost Reduction,’’ a domain priority that we believe is analogous to the current ‘‘Efficiency’’ domain finalized for the Hospital VBP Program, and a ‘‘Safety’’ domain. We placed measures of outcomes into both the Clinical Care—Outcome and Safety domains below and generally distinguished between the two by focusing on the measures’ direct impact on patients. The measures we proposed to place into the Safety domain include measures of healthcare-associated infections and the AHRQ patient safety composite. We stated our belief that hospitals must continue to focus quality improvement efforts on these outcome safety measures, which track infection and safety events that pose direct harm to patients. Finally, as we stated in the Hospital Inpatient VBP Program final rule (76 FR 26491), we believe that domains need not be given equal weight, and that over time, scoring methodologies should be weighted more towards outcomes, patient experience of care, and functional status measures (for example, measures assessing physical and mental capacity, capability, well-being and improvement). We took these considerations into account when developing the domain weighting proposal outlined below. We stated our belief that the proposed domain weighting will continue to improve the link between Medicare payments to hospitals and patient outcomes, efficiency and cost, and the patient and care giver experience. We noted further that the proposed domain weighting below places significant weight on measures of clinical outcomes, efficiency, and the patient experience, while also prioritizing safety and clinical processes. We stated our belief that the proposed domain weighting appropriately balances the clinical quality priorities described by the NQS. Therefore, we proposed to adopt the following domains and domain weights for the FY 2017 Hospital VBP Program: PROPOSED DOMAINS AND DOMAIN WEIGHTS FOR THE FY 2017 HOSPITAL VBP PROGRAM FOR HOSPITALS RECEIVING A SCORE ON ALL PROPOSED DOMAINS Domain Weight Safety ....................................................................................................................................................................................... Clinical Care ............................................................................................................................................................................ • Clinical Care—Outcomes .............................................................................................................................................. • Clinical Care—Process ................................................................................................................................................. Efficiency and Cost Reduction ................................................................................................................................................ Patient and Caregiver Centered Experience of Care/Care Coordination ............................................................................... We welcomed public comments on this proposal. While we stated our belief there are advantages to aligning the Hospital VBP Program domains with the NQS domains, we also recognized that there may be advantages associated with maintaining consistency with previous years’ domains. Accordingly, as an alternative to realigning the Hospital VBP Program’s domain structure more closely with the NQS beginning with FY 2017, we also invited public comments on whether we should adopt the following domains and domain weighting, which would be consistent with the proposals outlined for FY 2016 above: ALTERNATIVE DOMAIN WEIGHTS FOR THE FY 2017 HOSPITAL VBP PROGRAM FOR HOSPITALS RECEIVING A SCORE ON ALL PROPOSED DOMAINS Clinical Process of Care ........... Patient Experience of Care ...... Outcome ................................... Efficiency .................................. mstockstill on DSK4VPTVN1PROD with RULES6 Measure ID 21:51 Aug 16, 2013 We also sought public comments on how we should assign proposed measures to the new NQS-aligned domains, if finalized for FY 2017, and sought public comments on the following domain assignments for proposed FY 2016 measures, which would form the initial basis for the FY 2017 Hospital VBP Program’s measure set: 10 25 40 25 Current domain AMI–7a ............................................................... IMM–2 ................................................................. PN–6 ................................................................... SCIP–Inf–2 ......................................................... SCIP–Inf–3 ......................................................... SCIP–Inf–9 ......................................................... SCIP–Card–2 ..................................................... SCIP–VTE–2 ...................................................... VerDate Mar<15>2010 Weight (percent) % Domain Jkt 229001 Clinical Clinical Clinical Clinical Clinical Clinical Clinical Clinical PO 00000 Process Process Process Process Process Process Process Process Frm 00209 of of of of of of of of Care Care Care Care Care Care Care Care Fmt 4701 NQS-based domain .................................. .................................. .................................. .................................. .................................. .................................. .................................. .................................. Sfmt 4700 15 percent. 35 percent. • 25 percent. • 10 percent. 25 percent. 25 percent. Clinical Clinical Clinical Clinical Clinical Clinical Clinical Clinical E:\FR\FM\19AUR2.SGM Care—Process. Care—Process. Care—Process. Care—Process. Care—Process. Care—Process. Care—Process. Care—Process. 19AUR2 50704 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Current domain NQS-based domain HCAHPS ............................................................. Patient Experience of Care .............................. CAUTI ................................................................. CLABSI ............................................................... MORT–30–AMI ................................................... MORT–30–HF .................................................... MORT–30–PN .................................................... PSI–90 ................................................................ SSI ...................................................................... MSPB–1 ............................................................. mstockstill on DSK4VPTVN1PROD with RULES6 Measure ID Outcome ........................................................... Outcome ........................................................... Outcome ........................................................... Outcome ........................................................... Outcome ........................................................... Outcome ........................................................... Outcome ........................................................... Efficiency .......................................................... Patient and Caregiver Centered Experience of Care/Care Coordination. Safety. Safety. Clinical Care—Outcomes. Clinical Care—Outcomes. Clinical Care—Outcomes. Safety. Safety. Efficiency and Cost Reduction. Comment: Many commenters expressed support for the proposal to adopt new quality domains based on the National Quality Strategy for FY 2017 and future program years. Commenters further suggested that CMS consider carefully how to score Mortality and Process measures under the revised domain structure, arguing that the Outcome portion of the Total Performance Score should receive no more than 25 percent weight, while Processes should receive at least 45 percent. Other commenters argued that CMS placed too much emphasis on the Outcome measures under the new domain structure given their concerns about the measures’ reliability, and argued that CMS should adopt a more balanced mix of process and outcome measures in the program. Response: We thank commenters for their support. We do not believe we placed too much domain weight on measures of Outcomes under the revised domain structure, as some commenters suggested. As we indicated in the Hospital Inpatient VBP Program final rule (76 FR 26491), we are attempting to move our quality programs ‘‘as quickly as possible to using primarily outcome and patient experience measures.’’ We believe that our proposed domain structure and domain weighting appropriately continues the program’s transition from being based primarily on measures of clinical processes towards a focus on measures of outcomes and the patient experience. Comment: Commenters suggested that CMS consider the Hospital Readmissions Reduction Program as the Care Coordination domain for the Hospital VBP Program, particularly because CMS did not propose to include any measures in the Care Coordination domain. Response: We thank commenters for this suggestion. However, as described above in section V.H.6.b. of the preamble of this final rule, we do not believe it to be feasible under the statute to treat the Hospital Readmissions Reduction Program as a component of the Hospital VBP Program. We note VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 further that we are prohibited by section 1886(o)(2)(A) of the Act from selecting measures of readmissions for the Hospital VBP Program. Comment: Commenters argued that CMS should select measures that assess the hospital’s role in Care Coordination given the Hospital VBP Program’s focus on providing quality-based incentives to hospitals. Some commenters suggested that CMS work with QIOs to develop new measures of care coordination for use in the Hospital VBP Program. Response: We thank commenters for this feedback. We agree that care coordination, and specifically, care transition, is a vital aspect of health care providers’ services and patients’ experience of care. In order to measure and assess inpatients’ experience with preparation for transition to post-acute care, we added the three-item Care Transition Measure to the HCAHPS Survey in January 2013. Once we have collected four quarters (12 months) of data on these items, we intend to publicly report results on the Hospital Compare Web site in the form of a Care Transition Composite measure. Whether, when, and how this information might be used in the Hospital VBP Program will be addressed in future rulemaking. We intend to continue working with stakeholders to develop new, robust quality measures for the Hospital VBP Program, including new measures of care coordination. After consideration of the public comments we received, we are finalizing our proposal to adopt new quality measurement domains based on the CMS National Quality Strategy for the FY 2017 Hospital VBP Program as proposed. We intend to propose more details about this policy in future rulemaking. We also sought comment on how we should address minimum numbers of cases and measures under sections 1886(o)(1)(C)(ii)(III) and (IV) of the Act if we finalize this domain structure for the FY 2017 Hospital VBP Program. If we adopted the NQS-based domains solely for purposes of constructing the PO 00000 Frm 00210 Fmt 4701 Sfmt 4700 TPS, we could retain the general case and measure minimums structure adopted for prior program years. However, given the requirement in section 1886(o)(1)(C)(iii) of the Act that the Secretary conduct an independent analysis of what numbers are appropriate, we are also considering if we should commission such an analysis for the NQS domains, as modified. We sought public comments on this issue. However, we did not receive any comments on this issue. We intend to address this issue in future rulemaking. e. Disaster/Extraordinary Circumstance Exception 43 Under the Hospital VBP Program We are concerned that hospital performance under the Hospital VBP Program might be adversely impacted as a direct result of a significant natural disaster or other extraordinary circumstance. We are aware, for example, that Hurricane Sandy forced some hospitals in the New York-New Jersey-Connecticut area to close during the autumn of 2012, which impacted their ability to report quality measure data that will be used for both the FY 2014 and FY 2015 Hospital VBP Programs. We also recognize that hospitals that are closed during a portion of a performance period might still be eligible to receive a TPS and value-based incentive payments based on their measured quality performance during the remaining portion of the performance period for a fiscal year. However, we also are aware that many hospitals that were affected by Hurricane Sandy nevertheless remained open both during and after the storm, and we are concerned more generally that these hospitals, as well as other hospitals that are able to remain open despite being impacted by a local disaster or other extraordinary circumstance, might experience a decline in performance as a direct result of remaining open. For example, a hospital might be able to demonstrate 43 We described this process in the FY 2014 IPPS/ LTCH PPS proposed rule as a ‘‘Disaster/ Extraordinary Circumstances Waiver’’ process. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations that its performance on the HCAHPS survey was adversely impacted as a direct result of remaining open during or after a natural disaster if the hospital became overcrowded due to a neighboring hospital’s closure, or understaffed due to the inability of staff to get to work. We believe that these types of unforeseen extraordinary circumstances could substantially affect the ability of the hospital to perform at the same level at which it might otherwise have performed if the natural disaster or extraordinary circumstance had not occurred, and we are concerned that using cases and claims from this period to generate the TPS might negatively, and unfairly, impact the value-based incentive payment amount that the hospital would otherwise receive. Currently, hospitals participating in the Hospital IQR Program may request that we grant an extension or waiver of one or more data submission deadlines in the event of extraordinary circumstances beyond the control of the hospital. However, we do not believe this process is entirely sufficient for the Hospital VBP Program. The Hospital IQR Program’s extraordinary circumstances extensions/waiver process allows hospitals that have been granted an extension/waiver to receive the full annual percentage increase under the IPPS for the applicable fiscal year even though they did not submit data on measures in the same time, form, and manner required of other hospitals. To the extent that a hospital, as a result of receiving an extension or waiver under the Hospital IQR Program, does not report the minimum number of cases or measures under the Hospital VBP Program (as determined appropriate by the Secretary under sections 1886(o)(1)(C)(ii)(III) and (IV) of the Act), that hospital will be excluded from the Hospital VBP Program for the applicable fiscal year. However, the Hospital IQR Program extraordinary circumstance extension/ waiver process does not address the situation we are concerned with here; namely, where a hospital is able to continue to report data on measures that are included in both the Hospital IQR Program and the Hospital VBP Program, but can demonstrate that its Hospital VBP measure rates are negatively impacted as a result of a natural disaster or other extraordinary circumstance and, as a result, the hospital receives a lower value-based incentive payment. Therefore, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27619 through 27621), we proposed to adopt a Hospital VBP Program extraordinary circumstances exception process. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 In developing our proposed approach, we considered the feasibility of adopting an exception that would allow a hospital to not have the measure data submitted during the affected time period included in its measure scores. This type of exception policy would enable affected hospitals to continue to participate in the Hospital VBP Program for a given fiscal year if they continued to meet applicable measure and case minimums despite the fact that their TPS would not include data that is the subject of the exception. Therefore, this policy could prevent the possibility that a hospital’s TPS is significantly, and negatively, affected by a natural disaster or other extraordinary circumstance, which we believed would alleviate our concerns. However, implementing this type of data exception process presents certain operational difficulties. While chartabstracted measures generally are reported using a date of service that would enable us to correctly identify which data should be excluded, the same is not necessarily true of patient experience of care measure data because HCAHPS survey dates do not align with service dates; instead, they are dependent on the timing of the survey’s completion after discharge. A further complication arises with certain claims-based measures. For example, the risk-adjustment methodology currently in use for the 30day mortality measures requires a fixed dataset for computation of all hospitals’ risk-adjusted measure rates. Adding or removing data from the national claims set used to calculate a mortality measure’s rates for a given time period therefore requires recalculation of all hospitals’ measure rates, as the riskprofile used to adjust hospitals’ measured performance for the time period would have changed. In addition, in light of our policy to generate a TPS for hospitals that receive scores on fewer than all domains, we were concerned that proposing to adopt an extraordinary circumstances exception process that would apply only to the clinical process of care domain data that we may relatively easily remove from scoring would be ineffective. We stated that we did not believe that creating an exception for only clinical process of care domain data would mitigate the effects of a disaster or other extraordinary circumstances on hospitals’ TPSs under the Hospital VBP Program, particularly if hospitals’ performance on all measures is affected significantly by those circumstances. An increase in measured mortality rates, for example, would not be mitigated by a clinical PO 00000 Frm 00211 Fmt 4701 Sfmt 4700 50705 process of care-centered exception, and could penalize the hospital. Given the operational constraints discussed above, we stated our belief that the best way to implement an extraordinary circumstances exception process under the Hospital VBP Program is to interpret the minimum numbers of cases and measures requirement in sections 1886(o)(1)(C)(ii)(III) and (IV) of the Act to enable us to not score (we used the term ‘‘waive’’ in the proposed rule) all applicable quality measure data from a performance period and, thus, exclude the hospital from the Hospital VBP Program for a fiscal year during which the hospital has experienced a disaster or other extraordinary circumstance. Under this policy, a hospital struck by a natural disaster or other extraordinary circumstance would be able to request a Hospital VBP Program disaster/ extraordinary circumstance exception at the same time that it requests an extraordinary circumstance waiver under the Hospital IQR Program. The hospital would submit the Hospital IQR Program extension/waiver request form, including any available evidence of the impact of the extraordinary circumstances on the hospital’s quality measure performance, and would note that it also seeks an exception from the Hospital VBP Program for the program year in which the same data could be used as performance period data to generate a TPS based on the measures included in the Hospital VBP Program. In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51652), we finalized a requirement for Hospital IQR waivers that affected hospitals submit their requests within 30 days of the date that the extraordinary circumstance occurred. We stated our belief that this timeframe was appropriate for our proposed exception process for the Hospital VBP Program as it aligned with the current requirements under the Hospital IQR Program and forestalled the possibility of hospitals attempting to ‘‘game’’ their Hospital VBP Program scores by requesting an exception after they receive their Percentage Payment Summary Reports for a given fiscal year. We stated our intent to review exception requests and, at our discretion based on our evaluation of the impact of the disaster/extraordinary circumstances on the hospital’s quality measure performance, provide a response to the hospital. We stated our intent to notify hospitals about our Hospital VBP Program exception decisions concurrent with decisions made under the Hospital IQR Program’s waiver process. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50706 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations For these reasons, we proposed that the phrases ‘‘minimum number of measures that apply to the hospital’’ in section 1886(o)(1)(C)(iii) of the Act and ‘‘minimum number of cases for the measures that apply to the hospital’’ in section 1886(o)(1)(C)(iv) of the Act do not include any measures or cases that a hospital has submitted during a performance period for which it is granted a Hospital VBP Program disaster/extraordinary circumstance exception. We stated our intent to implement this policy in a limited fashion, and based on prior experience with the Hospital IQR Program, anticipate providing such exceptions only to a small number of hospitals. We did not intend to allow hospitals to use this proposed process to seek exclusion from the Hospital VBP Program solely because of comparatively poor performance under the program’s scoring methodology; rather, we intended only to provide relief to hospitals whose performance suffered as a result of a disaster or other extraordinary circumstances. We invited public comments on this proposal. We stated that we were specifically interested in public comments on the structure of the proposed process, and if we should consider implementing the process differently. Comment: Many commenters supported the proposal to adopt a disaster/extraordinary circumstances exception process. Commenters were concerned, however, that 30 days might not be enough time for hospitals to determine if an exception is necessary, and suggested that CMS extend the request window to 60 or 90 days. Commenters also suggested that CMS decouple the Hospital VBP Program exception request from the Hospital IQR Program waiver process, noting that it may take longer than 30 days for hospitals to assess a disaster’s impact on their measured performance. Commenters also suggested that CMS consider providing exceptions to hospitals whose paper medical records are destroyed during natural disasters. Response: We thank commenters for their input. As described further below, we intend to decouple the Hospital VBP Program’s exception process from the Hospital IQR Program’s waiver process, and to extend the deadline for Hospital VBP Program-specific exception requests. Comment: Some commenters suggested that CMS reconsider the structure of its proposed exception process. Commenters noted that some types of disasters or circumstances may VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 not completely inhibit a hospital’s reporting capability for long durations, and may simply require extended data reporting deadlines. Commenters recommended that CMS grant extensions of the data reporting deadlines without granting hospitals an exception from the entirety of the Hospital VBP Program. Commenters also referred us to letters submitted to CMS in May 2013 explaining how Hurricane Sandy affected hospitals, and suggested that we conduct an assessment of Hospital VBP scores for FY 2014 and 2015 to determine whether they are lower than expected, and consider adjustments to scores if necessary. Response: We thank commenters for this feedback. However, we believe the type of exception envisioned by the commenters—that is, extensions of the data reporting deadlines—is already available under current Hospital IQR Program policy. Because the Hospital VBP Program generally uses data that was also submitted under the Hospital IQR Program, we believe that Hospital IQR data, even when submitted late in accordance with a Hospital IQR data reporting extension, can be scored under the Hospital VBP Program. We proposed the Hospital VBP Programspecific exception process in order to avoid penalizing hospitals under the Hospital VBP Program that are able to report Hospital IQR Program data but whose measured performance suffers due to disasters or other circumstances beyond their control. We intend to accommodate extensions or waivers of data reporting deadlines under the Hospital IQR Program as circumstances warrant. We also intend to continue monitoring Hospital VBP scores, and will examine the issue of performance affected by Hurricane Sandy in the future. After consideration of the public comments we received, we are finalizing a policy under which we will consider, upon a hospital’s request and after our review, providing an exception from a Hospital VBP Program year to hospitals affected by natural disasters or other extraordinary circumstances. Specifically, we are finalizing our proposal that the phrases ‘‘minimum number of measures that apply to the hospital’’ in section 1886(o)(1)(C)(iii) of the Act and ‘‘minimum number of cases for the measures that apply to the hospital’’ in section 1886(o)(1)(C)(iv) of the Act do not include any measures or cases that a hospital has submitted during a performance period for which it is granted a Hospital VBP Program disaster or extraordinary circumstance exception. We will evaluate a hospital’s PO 00000 Frm 00212 Fmt 4701 Sfmt 4700 requests, along with supporting evidence provided by the hospital, and if we agree that the disaster or extraordinary circumstance significantly affected the hospital’s performance under the Hospital VBP Program, we will grant an exception from a Hospital VBP Program year. However, we are not finalizing our proposal that these exception requests must be made at the same time as waiver requests under the Hospital IQR Program. We agree with commenters’ stated concerns about the time necessary to understand how a disaster or extraordinary circumstance affects measured performance under the Hospital VBP Program. We therefore will require that disaster exception requests be submitted within 90 calendar days of the date that the natural disaster or other extraordinary circumstance occurred. We believe that this extended timeline for disaster exception requests is responsive to commenters’ concerns and enables hospitals to evaluate fully the impacts of natural disasters or other extraordinary circumstances on their performance under the Hospital VBP Program. 10. Applicability of the Hospital VBP Program to Hospitals a. Background Section 1886(o)(1)(C) of the Act specifies how the Hospital VBP Program applies to hospitals. Specifically, the term ‘‘hospital’’ is defined under section 1886(o)(1)(C)(i) of the Act as a ‘‘subsection (d) hospital (as defined in section 1886(d)(1)(B [of the Act])).’’ Section 1886(o)(1)(C)(ii) of the Act sets forth a list of exclusions to the definition of the term ‘‘hospital’’ with respect to a fiscal year, including a hospital that is subject to the payment reduction under section 1886(b)(3)(B)(viii)(I) of the Act (the Hospital IQR Program), a hospital for which, during the performance period for the fiscal year, the Secretary has cited deficiencies that pose immediate jeopardy to the health or safety of patients, a hospital for which there are not a minimum number of measures that apply to the hospital for the applicable performance period for the fiscal year, and a hospital for which there are not a minimum number of cases for the measures that apply to the hospital for the performance period for the fiscal year. In addition, section 1886(o)(1)(C)(iv) of the Act states that in the case of a hospital that is paid under section 1814(b)(3) of the Act, the Secretary may exempt the hospital from the Hospital VBP Program if the State submits an E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations annual report to the Secretary describing how a similar program in the State for a participating hospital or hospitals achieves or surpasses the measured results in terms of patient health outcomes and cost savings established under the Hospital VBP Program. We interpret the reference to section 1814(b)(3) of the Act to mean those Maryland hospitals that are paid under section 1814(b)(3) of the Act and that, absent the ‘‘waiver’’ specified by section 1814(b)(3) of the Act, would have been paid under the IPPS. mstockstill on DSK4VPTVN1PROD with RULES6 b. Minimum Numbers of Cases and Measures for the FY 2016 Hospital VBP Program Outcome Domain In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53608 through 53609), we finalized minimum numbers of cases and measures for the FY 2015 Hospital VBP Program’s Outcome domain. For the finalized 30-day mortality measures, we finalized a 25-case minimum for FY 2015. For the AHRQ PSI composite measure, we adopted AHRQ’s methodology, which provides a score on the measure to any hospital with at least three cases on any underlying indicator. For the CLABSI measure, we adopted CDC’s minimum case criteria, which calculates a standardized infection ratio for a hospital on the CLABSI measure if the hospital has 1 predicted infection during the applicable period. We also finalized our policy to provide a TPS to hospitals with sufficient cases in at least two of the four finalized quality measure domains (77 FR 53607). In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74532 through 74534) we concluded, based on an independent analysis, that the minimum number of measures that a hospital must report in order to receive a score on the Outcome domain is two measures. We continue to believe that this minimum number is appropriate for the expanded Outcome domain because adding measure scores beyond the minimum number of measures has the effect of enhancing the domain score’s reliability. Therefore, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27621 through 27622), we proposed to retain the finalized minimum number of measures for the Outcome domain for the FY 2016 Hospital VBP Program. We invited public comment on these proposals. However, we did not receive any specific comments on the minimum number of measures for the Outcome domain. We are therefore finalizing this minimum number as proposed. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 c. Hospitals Paid Under Section 1814(b)(3) of the Act In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53607 through 53608), beginning with the FY 2014 Hospital VBP Program, we adopted a new procedure for submission of the report in order for a Maryland hospital to be exempt from the Hospital VBP Program for a fiscal year. Under this finalized procedure, if the State seeks an exemption with respect to a particular program year, it would need to submit a report that meets the requirements of section 1886(o)(1)(C)(iv) of the Act in a timeframe that allows it to be received by the Secretary on or before November 15 prior to the effective fiscal year (for example, the report seeking an exemption from the FY 2014 Hospital VBP Program would have to be received by the Secretary no later than November 15, 2012). We stated that we anticipate notifying the State, as well as each hospital for which the State has requested an exemption, of our decision whether to grant the request no later than 90 days following the exemption request deadline. We received an FY 2014 exemption request from the Maryland Health Services Cost Review Commission and the State of Maryland Department of Health and Mental Hygiene in November 2012, and the Secretary approved the exemption request on December 19, 2012. We determined that Maryland meets or exceeds the patient health outcomes and cost savings requirements for exemption from the FY 2014 Hospital VBP Program. In terms of patient health outcomes, the Maryland Quality-Based Reimbursement (MQBR) Program focuses rewarding high quality care on hospital performance in similar clinical areas as the Hospital VBP Program (heart attack, heart failure, and pneumonia, surgical processes of care and infection control). In general, the relevant health outcomes for the State’s hospitals cited in its request achieve or surpass the current national results for comparable quality process and closely related clinical outcomes. In terms of cost savings, both the Hospital VBP Program and the MQBR Program reward high performers in a revenue-neutral manner. In this way, Maryland has achieved cost savings under its quality programs that meet any documented savings under the Hospital VBP Program, thereby meeting the standard specified in section 1886(o)(1)(C)(iv) of the Act for hospitals paid under section 1814(b)(3) of the Act. We received a few general comments on our procedures for considering PO 00000 Frm 00213 Fmt 4701 Sfmt 4700 50707 exemption requests for hospitals paid under section 1814(b)(3) of the Act. Comment: One commenter argued that Maryland hospitals’ performance on quality measures reported to CMS does not surpass national averages for Clinical Process of Care and Patient Experience of Care measures. The commenter further argued that Maryland should not receive an exemption from the Hospital VBP Program for any years under consideration at CMS because it is not meeting or exceeding national standards on quality measures. Response: We thank the commenter for the input. We determined that Maryland meets or exceeds the cost savings requirement for exemption from the FY 2014 Hospital VBP Program, based on the fact that both programs reward high performers in a revenueneutral manner. In this way, Maryland has achieved cost savings under its quality programs that meet any documented savings under the Hospital VBP Program. In general, the relevant health outcomes for Maryland hospitals achieve or surpass the current national results for comparable quality process of care measures, and AMI, HF, and PN 30day mortality rates included in the FY 2014 Hospital VBP Program. Maryland hospitals are therefore exempt from the FY 2014 Hospital VBP Program. If we receive a timely exemption request for the FY 2015 Hospital VBP Program, we will evaluate Maryland hospitals in accordance with the standard specified in section 1886(o)(1)(C)(iv) of the Act for hospitals paid under section 1814(b)(3) of the Act. Comment: Commenters requested that CMS enable Maryland to combine the State’s exemption requests from CMS’ quality programs, including the Hospital Readmissions Reduction Program, the HAC Reduction Program, and the Hospital VBP Program, into a single request, and for CMS to approve a waiver request for a three-year period with annual reports submitted to CMS describing Maryland’s program results and any modifications. Response: We thank commenters for this feedback and may consider this suggestion in the future. I. Implementation of Hospital-Acquired Condition (HAC) Reduction Program for FY 2015 1. Background a. Overview CMS is committed to promoting higher quality of care and improving outcomes for Medicare beneficiaries. Accordingly, as part of that effort, we have in recent years undertaken a E:\FR\FM\19AUR2.SGM 19AUR2 50708 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 number of initiatives to reduce the number of hospital-acquired conditions (HACs) among Medicare beneficiaries. HACs are conditions that patients acquire while receiving treatment for another condition in an acute care health setting. HACs include hospitalacquired infections (HAIs) such as surgical site infections, as well as conditions such as foreign objects retained after surgery. HACs constitute an adverse event for the patient and a financial burden on the health care system. HACs, especially those stemming from medical errors, represent a leading cause of mortality in the United States.44 Deaths from HAIs alone are twice as high as those from HIV/ AIDS and breast cancer combined.45 Many common HACs can be prevented through the proper application of evidence-based guidelines. Yet, surveys reveal that 87 percent of hospitals have not followed such guidelines.46 Further, HACs constitute a significant economic burden on the health care system. For example, in 2009, the CDC estimated that preventable HAIs alone added nearly $6 billion to U.S. health care costs each year.47 Accordingly, we believe that our continued efforts to reduce HACs are vital to improving patients’ quality of care and reducing complications and mortality, while simultaneously decreasing costs. In section II.F. of the preamble of this final rule, we discuss prior and ongoing rulemakings to implement the provisions of section 5001(c) of the Deficit Reduction Act (DRA) of 2005. Section 5001(c) of the DRA requires the Secretary to identify conditions by October 1, 2007 that: (a) Are high cost or high volume or both; (b) result in the assignment of a case to a DRG that has a higher payment when present as a secondary diagnosis; and (c) could reasonably have been prevented through the application of evidence-based guidelines. An adjustment to the MS– DRG payment under the IPPS is made for identified HACs. This regulatory action has supported our efforts to encourage hospitals to reduce HACs. 44 Kohn L T, Corrigan J M., Donaldson MS (Institute of Medicine) To Err is Human: Building a Safer Health System. Washington, DC: National Academy Press, 2000. 45 Binder, Leah F., The Leapfrog Group Testimony before the House of Representatives Committee of Oversight and Government Reform, April 16, 2008. Available at: https:// www.leapfroggroup.org/policy_leadership/ leapfrog_news/4732651. 46 Id. 47 Centers for Disease Control, The Direct Medical Costs of Healthcare Associated Infections in US Hospitals and the Benefits of Prevention, March, 2009. Available at: https://www.cdc.gov/hai/pdfs/ hai/scott_costpaper.pdf. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Our initiatives to reduce HACs continued in 2009, when we developed National Coverage Determinations (NCDs) for the Medicare Program to eliminate ‘‘never events.’’ These ‘‘never events’’ stemmed from a 2002 report conducted by the NQF that listed 27 adverse events, listed as serious reportable events, that were both serious and largely preventable.48 Under these NCDs, we have specified that Medicare does not cover a particular surgical or other invasive procedure to treat a particular medical condition when a practitioner erroneously performs: (1) A different procedure altogether; (2) the correct procedure but on the wrong body part; or (3) the correct procedure but on the wrong patient.49 In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50196), we adopted 8 HAC measures into the Hospital IQR Program for the FY 2012 payment determination. These quality measures comprise additional efforts to promote quality of care by reducing the number of HACs in an acute care health setting. We have been publicly reporting on these eight HAC measures successfully on the Hospital Compare Web site since September 2010. As described above, the reduction of HACs is an important marker of quality of care and has a positive impact on both patient outcomes and costs of care. In accordance with section 1886(p) of the Act, the HAC Reduction Program aligns with our national strategy to improve health care quality by promoting the prevention of HACs, such as ‘‘never events’’ and HAIs. Our goal for the HAC Reduction Program is to heighten the awareness of HACs and reduce the number of incidences that occur through implementing the adjustments required by section 1886(p) of the Act. We believe that our efforts in using payment adjustments and our measurement authority will encourage hospitals to eliminate the incidence of HACs that could be reasonably prevented by applying evidence-based guidelines. 2. Statutory Basis for the HAC Reduction Program Section 3008 of the Affordable Care Act added section 1886(p) to the Act to provide an incentive for applicable 48 National Quality Forum (NQF), Serious Reportable Events in Healthcare—2011 Update: A Consensus Report, Washington, DC: NQF (2011). 49 Center for Medicare and Medicaid Services (CMS), National Coverage Determination (NCD) for, Surgical or Other Invasive Procedure Performed on the Wrong Body Part (140.7), Pub-100–3 (2009); Surgical or Other Invasive Procedure Performed on the Wrong Patient (140.8), Pub 100–3 (2009); Wrong Surgery Performed on a Patient (140.9), Pub 100– 3 (2009). PO 00000 Frm 00214 Fmt 4701 Sfmt 4700 hospitals to reduce HACs. Section 1886(p) of the Act requires the Secretary to make an adjustment to payments to ‘‘applicable hospitals’’ effective beginning on October 1, 2014 and for subsequent programs years. Section 1886(p)(1) of the Act sets forth the requirements by which payments to ‘‘applicable hospitals’’ will be adjusted to account for HACs with respect to discharges occurring during FY 2015 or later. The amount of payment shall be equal to 99 percent of the amount of payment that would otherwise apply to such discharges under section 1886(d) or 1814(b)(3) of the Act, as applicable. Section 1886(p)(2)(A) of the Act defines ‘‘applicable hospitals’’ as subsection (d) hospitals that meet certain criteria. Section 1886(p)(2)(B)(i) of the Act defines these criteria and specifies that the payment adjustment would apply to an applicable hospital that ranks in the top quartile (25 percent) of all subsection (d) hospitals, relative to the national average, of conditions acquired during the applicable period, as determined by the Secretary. Section 1886(p)(2)(B)(ii) of the Act requires the Secretary to establish and apply a riskadjustment methodology. Sections 1886(p)(3) and (p)(4) of the Act define ‘‘hospital-acquired conditions’’ and ‘‘applicable period’’, respectively. The term ‘‘hospitalacquired condition’’ means ‘‘a condition identified in subsection 1886(d)(4)(D)(iv) of the Act and any other condition determined appropriate by the Secretary that an individual acquires during a stay in an applicable hospital, as determined by the Secretary.’’ The term ‘‘applicable period’’ means, with respect to a fiscal year, a period specified by the Secretary. Section 1886(p)(5) of the Act requires that, prior to FY 2015 and each subsequent fiscal year, the Secretary provides the delivery of confidential reports to applicable hospitals with respect to HACs of the applicable hospital during the applicable period. Section 1886(p)(6)(A) of the Act sets forth the reporting requirements by which the Secretary would make information available to the public regarding HACs for each applicable hospital. Section 1886(p)(6)(B) of the Act requires the Secretary to ensure that an applicable hospital has the opportunity to review, and submit corrections for, the information to be made public with respect to the HACs of the applicable hospital prior to such information being made public. Section 1886(p)(6)(C) of the Act requires that, once corrected, the HAC information be posted on the Hospital Compare Web E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 site on the Internet in an easily understandable format. Section 1886(p)(7) of the Act limits administrative and judicial review of certain determinations made pursuant to section 1886(p) of the Act. These determinations include what qualifies as an applicable hospital, the specifications of a HAC, the Secretary’s determination of an applicable period, the provision of confidential reports submitted to the applicable hospital, and the information publically reported on the Hospital Compare Web site. 3. Implementation of the HAC Reduction Program In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27622 through 27636), we proposed the general framework for implementation of the HAC Reduction Program for the FY 2015 implementation. We included the following proposals for the program: (a) The relevant definitions applicable to the program; (b) the payment adjustment under the program; (c) the measure selection and conditions for the program, including a risk-adjustment and scoring methodology; (d) performance scoring; (e) the process for making hospital-specific performance information available to the public, including the opportunity for a hospital to review the information and submit corrections; and (f) limitation of administrative and judicial review. In this FY 2014 IPPS/LTCH PPS final rule, we are establishing the rules governing the payment adjustment under the HAC Reduction Program at Subpart I of 42 CFR Part 412 (§§ 412.170 and 412.172). We also are amending existing § 412.150 (the section that describes the basis and scope of Subpart I of Part 412, which contains the regulations governing adjustments to the base operating DRG payment amounts under the IPPS for inpatient operating costs) to incorporate the basis and scope of §§ 412.170 and 412.172 for the HAC Reduction Program. We discuss each of the regulatory provisions under the appropriate subject area below. Comment: Numerous commenters supported the HAC Reduction Program. One commenter supported the program because it addresses aims outlined in the National Quality Strategy. Other commenters supported the program because it requires public reporting of HAC data. Another commenter supported the program but requested clarification regarding the quality controls that will be in place to assure consistent and accurate coding. Response: We appreciate the commenters’ support. With respect to quality controls to assure consistent and VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 accurate coding, we note that the American Health Information Management Association (AHIMA) has promulgated Standards of Ethical Coding that require accurate coding that includes the reporting of all health care data elements (for example, diagnosis and procedure codes, the POA indicator, and discharge status) required for external reporting purposes (for example, reimbursement and other administrative uses, population health, quality and patient safety measurement, and research) completely and accurately, in accordance with regulatory and documentation standards and requirements and applicable official coding conventions, rules, and guidelines. In addition, Medicare program integrity initiatives closely monitor for inaccurate coding, as well as coding inconsistent with medical record documentation. Comment: Several commenters did not generally support the HAC Reduction program. These commenters asked CMS to delay implementing the program in FY 2015 in order to further refine the program and stated that the program does not adequately assess or differentiate hospital performance. Response: We believe that the measures selected and scoring methodology allow adequate differentiation of hospital performance, such that the payment reduction for the top quartile of hospitals can begin with FY 2015. Comment: One commenter believed that hospitals will need significant clinical and administrative resources to implement the HAC Reduction Program and execute the steps necessary to reduce or eliminate HACs. Response: The conditions being assessed for this program have either been targeted by the existing nonpayment program, or have been in the Hospital IQR Program for a number of years. Therefore, we believe that hospitals are already aware of and are taking steps to reduce these conditions. a. Definitions In accordance with the provisions of section 1886(p) of the Act, in the FY 2014 IPPS/LTCH PPS proposed rule, we proposed to include, under proposed § 412.170, definitions for the terms ‘‘hospital-acquired condition,’’ ‘‘applicable hospital,’’ and ‘‘applicable time period’’ (78 FR 27623). • Hospital-acquired condition. In accordance with the definition of ‘‘hospital-acquired condition’’ in section 1886(p)(3) of the act, we would include a definition of the term in the regulations to read: ‘‘Hospital-acquired condition is a condition as described in PO 00000 Frm 00215 Fmt 4701 Sfmt 4700 50709 section 1886(d)(4)(D)(iv) of the Act and any other condition determined appropriate by the Secretary that an individual acquires during a stay in an applicable hospital, as determined by the Secretary.’’ We also refer readers to section II.F. of the preamble of this final rule where we discuss the HACs that have been identified and selected by the Secretary through FY 2013 in accordance with the provisions of section 1886(d)(4)(D)(iv) of the Act as established by section 5001(c) of the DRA of 2005. • Applicable Hospital. Section 1886(p)(2)(A) of the Act specifies that, for the purpose of the HAC Reduction Program, an ‘‘applicable hospital’’ is a subsection (d) hospital that meets certain criteria. A subsection (d) hospital is defined in section 1886(d)(1)(B) of the Act, in part, as a ‘‘hospital located in one of the fifty States or the District of Columbia’’, subject to certain exceptions. We also note that, for purposes of determining applicable hospitals under the HAC Reduction Program, subsection (d) hospitals include hospitals paid under a waiver under section 1814(b)(3) of the Act (that is, Maryland hospitals). Section 1886(p)(2)(B) of the Act specifies that ‘‘with respect to a subsection (d) hospital, [a hospital is considered to be an applicable hospital if] . . . the subsection (d) hospital is in the top quartile of all subsection (d) hospitals, relative to the national average, of hospital acquired conditions during the applicable period, as determined by the Secretary.’’ Therefore, in the FY 2014 IPPS/LTCH PPS proposed rule we proposed to define an ‘‘applicable hospital’’ as ‘‘a hospital described in section 1886(d)(1)(B) of the Act (including a hospital in Maryland that is paid under section 1814(b)(3) of the Act and that, absent the waiver specified by section 1814(b)(3) of the Act, would have been paid under the hospital inpatient prospective payment system) so long as the hospital meets the criteria specified under § 412.172(e)’’ (78 FR 27623). We noted that while all subsection (d) hospitals, including hospitals paid under section 1814(b)(3) of the Act, would be used to determine which hospitals are ‘‘applicable hospitals,’’ as required by section 1886(p)(2)(B) of the Act, we identified several types of hospitals that would not be subject to the provisions of the HAC Reduction Program. A subsection (d) hospital as defined in section 1886(d)(1)(B) of the Act does not include hospitals and hospital units excluded from the IPPS, such as LTCHs, cancer hospitals, children’s hospitals, IRFs, IPFs. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50710 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Therefore, hospitals and hospital units that are excluded from the IPPS would not be considered when determining ‘‘applicable hospitals’’ nor would they be determined to be ‘‘applicable hospitals’’ subject to the payment adjustment under the HAC Reduction Program. Similarly, CAHs would not be considered when determining ‘‘applicable hospitals,’’ nor would they be determined to be ‘‘applicable hospitals’’ subject to the payment adjustment under the HAC Reduction Program because they do not meet the definition of a ‘‘subsection (d) hospital.’’ CAHs are separately defined under section 1886(mm) of the Act and are paid under a reasonable cost methodology under section 1814(l) of the Act. An Indian Health Services hospital enrolled as a Medicare provider meets the definition of a subsection (d) hospital and, therefore, would be considered in determining ‘‘applicable hospitals’’ and would be considered to be an ‘‘applicable hospital’’ under the HAC Reduction Program. In addition, hospitals that are SCHs, although they may be paid under a hospital-specific rate instead of the Federal rate under the IPPS, are subsection (d) hospitals and, therefore, would be included in determining ‘‘applicable hospitals’’ and would be considered to be an applicable hospital under the HAC Reduction Program. Hospitals located in the Territories, including Puerto Rico, are not subsection (d) hospitals. Section 1886(d)(9)(A) of the Act separately defines a ‘‘subsection (d) Puerto Rico hospital’’ as a hospital that is located in Puerto Rico and that ‘‘would be a subsection (d) hospital . . . if it were located in one of the 50 States.’’ However, because they are not located in ‘‘one of the fifty States,’’ Puerto Rico hospitals are not subsection (d) hospitals and, therefore, would not be included in determining ‘‘applicable hospitals,’’ nor would they be considered to be an ‘‘applicable hospital’’ under the HAC Reduction Program. Finally, hospitals paid under the authority of section 1814(b)(3) of the Act are located in Maryland, which is ‘‘one of the fifty States’’ as described under section 1886(d)(1)(B) of the Act. Therefore, these Maryland hospitals are subsection (d) hospitals and would be included in determining ‘‘applicable hospitals’’ and, unless the Secretary exempts them from the application of the payment adjustment under the HAC Reduction Program under the authority of section 1886(p)(2)(C) of the Act, would be considered to be ‘‘applicable VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 hospitals’’ under the HAC Reduction Program. We invited public comments on whether clarification is required for additional types of hospitals. Comment: Several commenters addressed the proposed definition of ‘‘applicable hospitals’’. Most commenters supported the proposed definition. One commenter specifically supported excluding CAHs from the definition of applicable hospitals. However, another commenter suggested expanding the definition of applicable hospital to include CAHs and Maryland and U.S. Territory hospitals. One commenter suggested that CMS collect and report data for most of the hospitals in a timely manner and include hospitals in Maryland, the U.S. Territories, and CAHs. Response: We appreciate the commenters’ support and acknowledge the commenter’s suggestion for expanding the definition of an applicable hospital. However, as stated above, section 1886(p)(2)(A) of the Act specifies that, for the purpose of the HAC Reduction Program, an ‘‘applicable hospital’’ is a subsection (d) hospital that meets certain criteria. CAHs do not meet the definition of a ‘‘subsection (d) hospital.’’ CAHs are separately defined under section 1886(mm) of the Act and are paid under a reasonable cost methodology under section 1814(l) of the Act. We also provided information regarding Maryland hospitals, which are paid under the authority of section 1814(b)(3) of the Act. As we describe above, because these hospitals are located in Maryland, which is ‘‘one of the fifty States’’ as described under section 1886(d)(1)(B) of the Act, these Maryland hospitals are subsection (d) hospitals and would be included in determining ‘‘applicable hospitals’’ and, unless the Secretary exempts them from the application of the payment adjustment under the HAC Reduction Program under the authority of section 1886(p)(2)(C) of the Act, would be considered to be ‘‘applicable hospitals’’ under the HAC Reduction Program. With regard to hospitals in Puerto Rico and the U.S. Territories, as we stated above, hospitals located in the Territories, including Puerto Rico, are not subsection (d) hospitals because they are not located in ‘‘one of the fifty States.’’ After consideration of the public comments we received, we are finalizing our proposal to codify the definition of ‘‘applicable hospital’’ at § 412.170 without modification. • Applicable Time Period. In accordance with the proposal and discussion in section V.I.3.d. of the PO 00000 Frm 00216 Fmt 4701 Sfmt 4700 preamble of the FY 2014 IPPS/LTCH PPS proposed rule regarding the proposed performance scoring methodology for proposed measures for selected conditions and a riskadjustment methodology under the HAC Reduction Program, we proposed to define the ‘‘applicable period’’ as, with respect to a fiscal year, the 2-year period (specified by the Secretary) from which data are collected in order to calculate the Total HAC Score for the HospitalAcquired Condition Reduction Program. We invited public comments on this proposed definition. Comment: A few commenters addressed the proposed definition of ‘‘applicable time period.’’ One commenter opposed the definition for applicable time period because of general opposition to the scoring methodology proposed for the HAC Reduction Program. Other commenters opposed the definition because of different reporting periods for the measures in the HAC Reduction Program versus other reporting programs. The commenters suggested that CMS align the duration of performance periods for the Hospital IQR Program, the Hospital VBP Program, and the HAC Reduction Program using 2 years of data for PSI measures and 1 year of data for NHSN measures. Another commenter requested that the data be submitted quarterly. Response: We appreciate the commenters’ feedback and suggestions. The Secretary retains the statutory authority to determine the applicable period for the HAC Reduction Program. We strive, to the extent possible, to align reporting periods within our programs, acknowledging that some provider burden exists with reporting in multiple programs. However, given the varying policy, statutory, and data collections differences among each program, such exact alignment is not always feasible. For the HAC Reduction Program, we proposed and are finalizing a Total HAC score using two domains or sets of measures to determine the payment adjustment. We believe using 2 years of data for both domains would balance the needs of the program and allow for sufficient time to process the claims data and calculate the measures to meet the program implementation timeline. Further, we believe that the longer performance period on the NHSN measures is better for reliability. Finally, we note that the Hospital VBP Program has the restriction of needing to announce performance standards 60 days prior to the beginning of the performance period, which may necessitate, in some cases, shorter E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations performance periods in the Hospital VBP Program. As these programs grow in future years, we will explore aligning the performance periods to the extent possible. After consideration of the public comments we received, we are finalizing our proposal to codify the definition of ‘‘applicable time period’’ at § 412.170 without modification. mstockstill on DSK4VPTVN1PROD with RULES6 b. Payment Adjustment under the HAC Reduction Program, Including Exemptions (1) Basic Payment Adjustment Section 1886(p)(1) of the Act sets forth the requirements by which payments to ‘‘applicable hospitals’’ will be adjusted to account for HACs with discharges beginning on October 1, 2014. Section 1886(p)(1) of the Act specifies that the amount of payment shall be equal to 99 percent of the amount of payment that would otherwise apply to such discharges under section 1886(d) or 1814(b)(3) of the Act, as applicable. As specified in the statute, this payment adjustment is calculated and made after payment adjustments under sections 1886(o) and 1886(q) of the Act, the Hospital VBP Program and the Hospital Readmissions Reduction Program respectively, are calculated and made. (We note that the Hospital VBP Program is discussed in section V.H. of the preamble of this final rule and the Hospital Readmissions Reduction Program is discussed in section V.G. of the preamble of this final rule.) Section 1886(p)(2)(A) of the Act defines ‘‘applicable hospitals’’ as subsection(d) hospitals that meet certain criteria. Section 1886(p)(2)(B)(i) of the Act defines these criteria and specifies that the payment adjustment would apply to an applicable hospital that ranks in the top quartile (25 percent) of all subsection (d) hospitals, relative to the national average, of conditions acquired during the applicable period, as determined by the Secretary. Therefore, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27624), we proposed to specify in proposed § 412.172(b) that, ‘‘For applicable hospitals, beginning with discharges occurring during FY 2015, the amount of payment under this section [proposed § 412.172], or section 1814(b)(3) of the Act, as applicable, for such discharges shall be equal to 99 percent of the amount of payment that would otherwise apply to such discharges under this section [proposed § 412.172], or section 1814(b)(3) of the Act. This amount of payment will be determined after the application of the payment adjustment under the Hospital VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Readmissions Reduction Program under § 412.154, and the adjustment made under the Hospital Value-Based Purchasing Program under § 412.162, and section 1814(l)(4) but without regard to this section 1886(p) of the Act)’’ (78 FR 27624). We invited public comments on this proposal. Comment: Several commenters addressed the proposed payment adjustment under the HAC Reduction Program. Most commenters supported the proposal to use financial incentives to reduce the number of HACs. One commenter stated that the payment adjustment is required under section 3008 of the Affordable Care Act. Another commenter supported the proposal but further requested application of the adjustment to MS– DRG payment amounts and overall consistency in payment adjustments administered under the Hospital Readmissions Reduction Program and the Hospital VBP Program. Other commenters opposed the basic payment adjustment. Some commenters stated that it was inappropriate to penalize one fourth of the nation’s hospitals with a payment adjustment simply because they fall in the top quartile. Another commenter stated that tying payments to HACs may not encourage high-quality care. Another commenter suggested that CMS consider modification to the proposed 1-percent penalty applied to the top 25 percent of hospitals with the worst HAC rates, but treat the 25th and 26th percentile hospitals differently by graduating the penalty. Response: We appreciate the commenters’ support and agree with the commenter that the payment adjustment is required under section 3008 of the Affordable Care Act. As stated previously, our goal for the HAC Reduction Program is to heighten the awareness of HACs and reduce the number of incidences that occur through implementing the adjustments required by section 1886(p) of the Act. We believe that our efforts in using payment adjustments and our measurement authority will encourage hospitals to eliminate the incidence of HACs that could be reasonably prevented by applying evidence-based guidelines. We note that, in accordance with section 1886(q)(1) of the Act, the hospital readmissions reduction program adjustment is applied to the base operating DRG payment amount, which is defined at section 1886(q)(2) of the Act to exclude certain payments under subsection (d). Similarly, in accordance with sections 1886(o)(7)(A) and 1886(o)(7)(B) of the Act, the Hospital VBP Program applies PO 00000 Frm 00217 Fmt 4701 Sfmt 4700 50711 adjustments to the based operating DRG payment amount, which is defined at section 1886(o)(7)(D) of the Act to exclude certain payments under subsection (d). For the HAC Reduction Program, no such statutory exclusion exists and section 1886(p)(1) of the Act states that the payment for applicable hospitals ‘‘shall be equal to 99 percent of the amount of payment that would otherwise apply.’’ Therefore, we are unable to accept the commenters’ recommendations to change the application of the payment adjustment. We will address this issue of the actual application of the payment adjustment to hospital payments more specifically next year in the FY 2015 IPPS/LTCH PPS rule. Comment: A few commenters commented on the waivers for hospitals located in areas that experience disasters or other extraordinary circumstances. One commenter suggested that CMS establish a formal waiver process for disaster or other extraordinary circumstances, including possible changes to the applicable periods for affected hospitals. Response: We appreciate the comments on establishing a potential exemption process for the HAC Reduction Program for hospitals located in areas that experience disasters or other extraordinary circumstances. We did not make any proposals related to disasters or other extraordinary circumstances for the HAC Reduction Program in the proposed rule; therefore, we consider this comment out of the scope of the proposed rule. However, we are reviewing this issue and may consider such a proposal in future rulemaking. If we do, we intend to focus on several policy and operational considerations in developing a disaster exemption process for the HAC Reduction Program, including the feasibility of aligning this process across other similar programs. Comment: One commenter expressed concern regarding the penalty for 25 percent of hospitals. The commenter believed it may be appropriate for the HAC Reduction Program to use a fixed performance target so that total penalties will decrease if overall HAC rates lower significantly. Response: We understand the commenter’s concerns. However, as we stated earlier, because section 1886(p)(1) of the Act states that the payment for applicable hospitals ‘‘shall be equal to 99 percent of the amount of payment that would otherwise apply,’’ we are unable to accept the commenter’s recommendations to change the application of the payment adjustment. E:\FR\FM\19AUR2.SGM 19AUR2 50712 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 After consideration of the public comments we received, we are finalizing our proposal to codify the payment adjustment at § 412.172(b) without modification. (2) Applicability to Maryland Hospitals Section 1886(p)(2)(c) of the Act specifies that the Secretary may exempt hospitals paid under 1814(b)(3) ‘‘from the application of this subsection if the State which is paid under such section submits an annual report to the Secretary describing how a similar program in the state for a participating hospital or hospitals achieves or surpasses the measured results in terms of patient health outcomes and cost savings established under this subsection.’’ Accordingly, a program established by the State of Maryland that could serve to exempt hospitals in the State from the HAC Reduction Program would focus on hospitals operating under the waiver provided by section 1814(b)(3) of the Act, that is, those hospitals that would otherwise have been paid by Medicare under the IPPS, absent this provision. As we describe in section V.I.3. of the preamble of this final rule, because hospitals paid under section 1814(b)(3) of the Act are subsection (d) hospitals, they would be included in determining ‘‘applicable hospitals’’ (subject to the payment adjustment under the HAC Reduction Program), and unless the Secretary exempts these hospitals from the application of payment adjustments under the HAC Reduction Program under the authority of section 1886(p)(2)(C) of the Act, they are considered to be ‘‘applicable hospitals’’ (subject to the payment adjustments in the HAC Reduction Program) under the HAC Reduction Program. In the FY 2014 IPPS/LTCH PPS proposed rule, we proposed to establish criteria for evaluation to determine whether Maryland should be exempted from the application of the payment adjustments under the HAC Reduction Program for a given fiscal year (78 FR 27624). Under proposed § 412.172(c), we proposed to specify that ‘‘CMS will determine whether to exempt Maryland hospitals that are paid under section 1814(b)(3) of the Act and not under the hospital inpatient prospective payment system . . . .’’ and that, absent the provisions of section 1814(b)(3) of the Act, to make payment under section 1886(d) of the Act exempt from the application of payment adjustments under the HAC Reduction Program, provided that the State submits an annual report to the Secretary describing how a similar program to reduce hospital acquired conditions in VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 that State achieves or surpasses the measured results in terms of health outcomes and cost savings for the HAC Reduction Program as applied to hospitals described in section 1886(d)(1)(B) of the Act. We proposed to specify in the proposed regulations that ‘‘CMS will establish criteria for evaluation of Maryland’s annual report to the Secretary to determine whether Maryland will be exempted from the application of payment adjustments under this program for a given fiscal year.’’ We also proposed to specify that ‘‘Maryland’s annual report to the Secretary and request for exemption from the Hospital-Acquired Condition Reduction Program must be resubmitted and reconsidered annually.’’ We proposed that, for FY 2015, Maryland would submit a preliminary report to us by January 15,, 2014 and a final report to us by June 1, 2014. We noted that our proposed criteria to evaluate Maryland’s program is for FY 2015, the first year of the payment adjustment under the HAC Reduction Program, and that our evaluation criteria may change through notice and comment rulemaking as this program evolves. We invited public comments on our proposals. Comment: Several commenters supported the Maryland waiver proposal for the HAC Reduction program. One commenter believed the clear prevention guidelines that exist with its State hospital-acquired condition program will help Maryland’s hospitals focus on key areas of harm and that recent revisions to the methodology will enable providers to continue making improvements in the program. Response: We appreciate the commenters’ support. After consideration of the public comments we received, we are finalizing our proposal to codify the payment adjustment pertaining to hospitals paid under section 1814(b)(3) of the Act (certain Maryland hospitals) at § 412.172(c), without modification. c. Measure Selection and Conditions, Including a Proposed Risk-Adjustment Scoring Methodology (1) General Selection of Proposed Measures In the FY 2014 IPPS/LTCH PPS proposed rule, we proposed measures and a scoring methodology for the HAC Reduction Program (78 FR 27625 through 27628). We believe that it is important to set forth such scoring methodologies for each individual HAC measure, in order for the public to understand how the measures discussed PO 00000 Frm 00218 Fmt 4701 Sfmt 4700 and finalized in this year’s rulemaking relate to the performance methodology used to determine the applicable hospitals subject to the payment adjustment under the HAC Reduction Program. (2) Measure Selection and Scoring Methodology We proposed initially to adopt eight measures for the FY 2015 determination under the HAC Reduction Program. Several of these measures are already part of the Hospital IQR Program and are reported on the Hospital Compare Web site. We noted that all measures proposed for the HAC Reduction Program follow the criteria established by the DRA of 2005 in that they consist of high-volume or high-cost conditions that could be prevented by the use of evidence-based guidelines (we refer readers to section II.F. of the preamble of this final rule for further information). In the FY 2014 IPPS/LTCH PPS proposed rule, we proposed the measure selection and methodology used to determine the Total HAC Score (78 FR 27629 through 27633). For measure scoring under the HAC Reduction Program, we proposed to group the measures into separate domains (Domain 1 and Domain 2) to calculate a Total HAC Score in order to determine the payment adjustment. For measure selection under Domain 1, we discussed a proposed and alternative approach, and sought to finalize a policy based upon public comment received regarding these approaches. For a detailed discussion of the measure selection and methodology proposed for the HAC Reduction Program, including a list of measures proposed for the Program, we refer readers to section V.I. of the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27625 through 27632). We invited public comments on the measures proposed for the HAC Reduction Program, including whether the proposed or alternative approach for Domain 1 would better serve the HAC Reduction Program. Comment: Numerous commenters addressed the proposed measures for the HAC Reduction Program. Several commenters, who also supported the HAC Reduction Program generally, also supported all measures proposed for the HAC Reduction Program. Other commenters provided feedback covering one of the following areas: Domain 1 measure methodology and proposed inclusion in the HAC Reduction Program; Domain 2 measure methodology and proposed inclusion in the HAC Reduction Program; or general E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations measure feedback on the HAC Reduction Program. In regard to Domain 1, commenters provided several suggestions on the proposal and alternative approach in which either six individual AHRQ PSI measures or a single AHRQ PSI–90 composite were to be used as part of calculating the Total HAC score. In regard to the six individual AHRQ PSI measures proposed under Domain 1, commenters appreciated this approach because these measures did not overlap with the CDC measures in Domain 2. Further, commenters stated that the measures proposed for Domain 1 addressed several key areas of patient safety, including addressing ‘‘never events’’ and aligning with the National Quality Strategy domain of patient safety. One commenter specifically supported the proposed Domain 1 approach to include iatrogenic pneumothorax rate in the HAC Reduction Program because it was highly preventable with ultrasound guidance and encouraged appropriate use of ultrasound for placement of venous catheters. Another commenter further suggested that if CMS adopted PSI–3 in Domain 1, CMS should exclude pressure ulcers that were undetectable at admission. Some commenters’ support of the Domain 1 proposal varied, depending on preference for each of the PSI measures themselves. Some commenters supported the proposed Domain 1 approach, subject to the removal of one or more measures. Other commenters did not support the proposed Domain 1 approach because they opposed one or more measures in the domain. For example, one commenter opposed PSI– 7 because current research suggests it has poor sensitivity and poor positive predictive value in determining CLABSI. However, that commenter supported the proposed Domain 1 approach without inclusion of that measure. Another commenter stated that PSI–3 relies on ICD–9–CM diagnosis codes, which may not provide complete information, and leads to underreporting of pressure ulcers. This commenter did not generally support the Domain 1 proposal because this measure existed in the domain. Other commenters suggested removal of PSI– 3 because it only covered Stage 3 and 4 pressure ulcers. Several commenters opposed one or more of the Domain 1 measures proposed for the HAC Reduction Program because they did not believe the measures were properly reviewed by the MAP in the manner required by the pre-rulemaking process that CMS must follow prior to proposing rules. Some VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 commenters opposed PSI–3, PSI–6, and PSI–10 because they were not MAPreviewed. Another commenter did not support PSI–90 because the MAP did not review each component of the composite measure individually. One commenter suggested that all measures be endorsed with clear prevention guidelines. Another commenter stated that CMS did not provide MAP with sufficient notice on implementation to allow for meaningful input for the HAC Reduction Program and proposed measures. One commenter suggested additional revisions to the PSI measures. This included the following changes: For PSI–3 (pressure ulcer rate), the commenter recommended exclusion of nascent pressure ulcers undetectable at admission; for PSI–5, the commenter recommended exclusion of hardware or devices intentionally left in the body; for PSI–6, the commenter recommended exclusions for lines placed under emergency conditions; and for PSI–12, the commenter recommended exclusions for patients with diagnosis of cancer, brain tumors, or trauma which are at higher risk of embolus. The commenter objected to PSI–15 because of a lack of coding guidelines to define accidental puncture. For the PSI–90 proposed Domain 1 alternative, commenters supported the composite because the composite received NQF endorsement and MAP review. In addition, one commenter preferred the composite because it included PSI–13 and PSI–14 which are indicators related to sepsis management. Another commenter favored this approach because PSI–90 is included in the Hospital VBP Program. Another commenter suggested additional measures to the Domain 1 alternative. For example, one commenter suggested adding PSI–4 along with the preferred PSI–90 composite. The greatest concern for the proposed alternative Domain 1 PSI–90 composite related to overlapping with Domain 2 measures in the calculation of the Total HAC Score, and overlapping with measures in the Hospital VBP Program. Some commenters stated that because some of the measures in the PSI–90 composite are also used for the Hospital VBP Program, hospitals would be penalized more than once for the same preventable HAC. Other commenters suggested that CMS remove the overlapping measures from the PSI–90 composite or retire overlapping measures from the Hospital VBP Program. Other commenters expressed concerns regarding the inclusion of PSI– 90 as the measure results are PO 00000 Frm 00219 Fmt 4701 Sfmt 4700 50713 complicated and skew individual hospitals’ results. However, for either the proposed or alternative Domain 1 proposal, some commenters did not support using any AHRQ PSI measures. Commenters cited these measures are only tested for reliability on CMS claims data, not allpayer data. Other commenters stated that the proposed PSI measures focus primarily on surgical care, have false positive rates, and the proposed risk adjustment in the HAC Reduction is insufficient to mitigate that bias. Other commenters urged CMS to develop measures and not use the PSI measures, and added that all measures should be in the Hospital IQR Program prior to inclusion in the HAC Reduction Program. One commenter stated that AHRQ, the measure developer of the PSI measures, indicated in an update that AHRQ PSI measures are not appropriate for payment programs. For the Domain 2 CDC measures, several commenters supported the CDC measures. Commenters stated generally that the HAI measures are statistically more reliable than PSIs at the hospital level. Many commenters stated a preference for chart-abstracted over claim based data measures. MedPAC stated that the success of each HAC measure selected will depend on hospitals using evidence-based care processes, a statistically reliable data method, and a consistent date source. MedPAC then recommended CDC HAI data because they met such criteria. Other commenters suggested renaming CAUTI and CLABSI or adding additional exclusions to the measures. Another commenter suggesting retaining CLABSI and CAUTI measures for the HAC Reduction Program and retiring them from the Hospital VBP Program. Some supported the proposed Domain 2 proposed approach because of its importance in measuring nosocomial infections. Other commenters supported the Domain 2 proposed measures, but expressed concern about the burden to the industry and the nature of the measures. Another commenter suggested that CMS work with AHRQ, CDC, and ONC to improve electronic reporting of these measures to remove subjectivity. Other commenters supported the inclusion of MRSA and clostridium difficile (CDI) into the HAC Reduction Program for FY 2017. One commenter stated that inclusion of the CDI measure in the HAC Reduction Program potentially may motivate hospitals to improve patient care and outcomes, and signals our important commitment to reducing CDIs in hospitals and raising awareness about the disease. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50714 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations However, some commenters opposed one or more of the Domain 2 measures. One commenter stated that the Domain 2 measures will unfairly penalize large and teaching hospitals. Other commenters did not support inclusion of MRSA or CDI in FY 2017. The commenters stated that the measures have low reliability, may be impacted by providers not within the hospital, and the testing vehicles used may have influenced results creating unfair comparisons between hospitals. Another commenter requested that CMS provide clarification on the specifications for these measures and added that CMS exclude communityacquired MRSA. Another commenter stated that the SSI measure was more appropriate for the Hospital VBP Program than the HAC Reduction Program. One commenter opposed using only health care-associated infection measures as they are not a true indicator of hospital performance. Still other commenters did not support either Domain 1 or Domain 2 measures proposed for the HAC Reduction program. One commenter stated that the measures are overly complex, methodologically challenged, and need further refinement. A few commenters asked that CMS provide additional alternatives for the program and extend the comment period. Some commenters suggested that CMS delay the finalization of the implementation of the HAC Reduction Program and collaborate with provider and consumer communities to improve the selection of HAC program measures. Other commenters requested that additional impact data be provided to stakeholders prior to implementation of the program. Another commenter opposed a payment adjustment for HACs when such HACs are not reasonably preventable through evidence based guidelines, or based on randomized, well-designed, prospective, and nonbiased studies developed by specialty medical organizations. This commenter believed that, under these circumstances, a payment adjustment should not occur in any payment setting. Other commenters stated that the AHRQ PSI measures cannot be calculated, are claims-based measures, and require additional tools for use by hospitals. Response: We appreciate all of the numerous comments and suggestions on the measures proposed for the HAC Reduction Program, and value this feedback. We have reviewed and considered every comment. To those commenters who supported one or more measures proposed for the HAC Reduction Program, we appreciate their support. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 We emphasize that the measures proposed for this program aim to increase patient safety. Therefore, we stress that patient safety remains the primary objective to the measures proposed and ultimately selected under the HAC Reduction Program. We note that several commenters raised concerns with using claims-based measures in the HAC Reduction Program. However, we believe that PSI measures proposed for Domain 1 are suitable for use in the HAC Reduction Program. We acknowledge stakeholders’ preference to use chart-abstracted measures, such as those found under Domain 2, but stress that both types of measures possess advantages. For example, claims data cover a larger population in the hospital and can provide signals where quality improvement may need to occur. Claims data, which are collected for payment purposes, are also readily available, while registry data, as also pointed out by several commenters, are costly to collect and present a potentially greater administrative and financial burden on hospitals. Therefore, we believe the use of such claim-based measures, such as the AHRQ PSIs proposed in Domain 1, are suitable for the HAC Reduction Program because they are already collected for use and widely accepted by States and other health care purchasers for payment purposes. We note that the MAP reviewed all finalized measures for the HAC Reduction Program. For Domain 1, the MAP supported the direction of the PSI–90 composite for the HAC Reduction Program. We note that we are not finalizing the other measures mentioned by the commenters. In response to one commenter stating that AHRQ PSI measures are unsuitable for a payment program, we consulted with AHRQ on this issue. AHRQ stated that new evidence has been developed, which changes some of the information on which this commenter likely previously relied. AHRQ is in the process of reevaluating the measures and updating the documents to reflect the changes. In regard to those commenters who objected to one or more of the proposed Domain 1 measures, we acknowledge that commenters wanted additional exclusions or clarifications to the measures proposed for the HAC Reduction Program. However, we believe that such exclusions are not warranted at this time. For example, we are aware that PSI–3 (pressure ulcer rate) captures Stage 3 and 4 pressure ulcers only, and does not capture all data, such as Stage 1 and 2. However, we stress that no other publically PO 00000 Frm 00220 Fmt 4701 Sfmt 4700 available data source captures these events, which comprise a critical area of patient safety. Further, with respect to additional exclusions for PSI–3, we note that PSI–3 already excludes patients admitted from nursing facilities, patients who had a pressure ulcer present on admission (including an ulcer of a lower stage that progressed after admission), and patients who stayed 4 or fewer days in the hospital. Therefore, we believe that such exclusions should already address the concerns raised by commenters. For PSI–5, some commenters raised concern that exclusions should be clearly added for hardware or other items placed purposely in the body. However, we note that the AHA’s Coding Clinic for ICD–9–CM addressed this issue. The codes that drive this indicator (998.4 and 998.7) account for at least 90 percent of flagged cases, and are limited to foreign bodies ‘‘accidentally left during procedure.’’ The Coding Clinic (First Quarter 1989, 2009, and 2011) has instructed coders that this code (998.4) should only be used when a foreign body has been accidentally left behind at the end of the procedure; foreign bodies that are discovered and retrieved in the operating room, or deliberately left behind, are not assigned code 998.4 or 998.7. Therefore, such circumstances would not be counted under this measure. For PSI–6, several commenters raised concern over the denominator used in the measure. We have consulted AHRQ on this issue and appreciate its assistance. For PSI–6, we acknowledge that the denominator of PSI 6 reflects the fact that many different procedures are associated with a nonzero risk of iatrogenic pneumothorax and note that not all of these procedures are consistently coded in administrative data sets. One viable strategy for preventing complications such as iatrogenic pneumothorax, CLABSI, and CAUTI is to reduce discretionary use of the procedures that place patients at risk and recognize and reward all hospital efforts to prevent undesired complications such as iatrogenic pneumothorax, including safer selection of patients for high-risk procedures as well as safer performance of these procedures. Further, we note that preventability remains a concern. However, exclusions are reexamined and adjusted on an annual basis. Further, the denominator of PSI 6 already excludes all trauma cases and most cases with urgent or emergent thoracic or cardiac procedures. In addition, other factors, such as E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations malnutrition, obesity, and chronic lung disease, are included in risk-adjustment. We note that some commenters raised validity and coding concerns with underreporting with some of the PSI components of PSI–90 as well as the individual PSI measures. According to recent and prior studies by the Agency for Healthcare Research and Quality, there is little evidence of underreporting of diagnoses, and a high degree of true positives (90 percent sensitivity) with respect to diagnoses used for the AHRQ measures. We believe that, regardless of data source (claims/administrative or chart/EHR), focusing on outcomes of interest, such as those represented in the PSI–90 composite, leads providers to focus more on prevention, which is the goal of the HAC Reduction Program. Regarding commenters’ concern with false positive results with AHRQ measures, we do note that some indicators of the composite presented a false positive rate on initial evaluation (for example, PSI 12). However, subsequent efforts to refine specifications or improve ICD–9–CM codes led to documented reductions in false positive rates. Moving forward, with assistance from AHRQ, we will continually evaluate and refine the measure as part of our continuous improvement process to further alleviate this concern. We acknowledge coding trepidations raised by commenters. However, many of the concerns raised by commenters can be alleviated with proper coding. For example, for PSI–15, some commenters expected enterotomies to be excluded (in the case of patients with small bowel obstruction) and added that the measure lacked specificities as to what has been punctured or lacerated. However, according to explicit guidance from the AHA’s Coding Clinic for ICD– 9–CM (Second Quarter 2007 and First Quarter 2010), ‘‘expected’’ enterotomies are not coded with code 998.2. By definition, this code is limited to ‘‘accidental’’ punctures and lacerations that are not ‘‘intrinsic’’ or ‘‘inherent’’ in a major procedure. Therefore, we maintain that proper coding and education on such coding will address stakeholders’ concerns. We designed the HAC Reduction Program to include currently available, risk-adjusted measures that are reflective of hospital performance. All of the measures proposed were either: Recommended for inclusion by the NQF Measures Application Partnership either on their own or as part of a composite, or represent 1 of the 12 HACs that have been identified by the Secretary and which are referenced in section 1886(p) of the Act for the HAC Reduction VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Program. We refer readers to the MAP Pre-Rulemaking Report: 2013 Recommendations on Measures Under Consideration by HHS, February 2013, pp 145–153, for further detail.50 As the number of risk-adjusted HAC measures increases over time, we will continue to conduct research on the impact of adding additional and/or different measures to the program. Some commenters opposed one or more of the Domain 1 measures because they lacked MAP review or NQF endorsement. Other commenters wanted additional time for more public engagement. However, we believe that both the pre-rulemaking and rulemaking process provides ample opportunity for public involvement. Second, we note that the MAP reviewed all measures for the HAC Reduction Program. For Domain 1, the MAP supported PSI–5, PSI–15, PSI–12 in December, 2012 as well as the PSI–90 composite. NQF also endorsed these measures. We do acknowledge the comments that PSI–3, PSI–6, and PSI–10 were not on the measure under consideration list (MUC) in December 2012. However, PSI–3 and PSI–6 were part of the PSI–90 composite which the MUC list did include and which was discussed by the MAP in December 2012. For PSI–10, we considered this measure for the HAC Reduction Program after the MUC list had posted, and immediately arranged review of the measure with the MAP in an ad hoc process. With regard to concerns that some measures, such as PSI–3 and PSI–6, were not NQFendorsed, we spoke to AHRQ on this issue. AHRQ clarified that these measures did not fail NQF endorsement, as commenters stated, but, rather, have not yet been submitted to NQF for endorsement. However, AHRQ is considering doing so in the near future. Further, we note that section 1886(p)(3) of the Act does not require NQF endorsement for a condition to be considered for the HAC Reduction Program. Rather, section 1886(p)(3) of the Act defines a ‘‘hospital-acquired condition’’ to means a condition identified for purposes of subsection (d)(4)(D)(iv) and any other condition determined appropriate by the Secretary that an individual acquires during a stay in an applicable hospital, as determined by the Secretary. The conditions covering PSI–3 and PSI–6, as well as all other conditions proposed for the HAC Reduction Program, meet the statutory definition under section 1886(p)(3) of the Act and, therefore, were properly 50 Available at: https://www.qualityforum.org/ Publications/2013/02/MAP_PreRulemaking_Report_-_February_2013.aspx. PO 00000 Frm 00221 Fmt 4701 Sfmt 4700 50715 considered for the HAC Reduction Program. We acknowledge that the PSI–90 alternative is also contained in the Hospital VBP Program. However, we believe that this measure, covering HACs, comprise some of the most critical of patient safety areas. Several commenters, many from Medicare beneficiaries themselves, overwhelming supported our efforts to reduce HAIs and these measures. Therefore, we believe that the importance of these measures to patient safety, coupled with the numerous comments asking for measure alignment, justifies the use of PSI–90 in more than one program. However, we will, in the future, monitor the HAC Reduction Program and the measures selected for it and revise the measures as needed. We further understand that some commenters are concerned with a double payment adjustment with the use of PSI–90 because a condition overlaps with the CDC NHSN CLABSI measure that we are finalizing for Domain 2. However, we further stress that the HAC Reduction Program and the Hospital VBP Program are separate hospital reporting programs with different purposes and policy goals. For example, the HAC Reduction Program is a penalty program that reduces payments to hospitals for excess HACs to increase patient safety in hospitals. On the other hand, the Hospital VBP Program is an incentive program that redistributes reductions made to the base operating DRG payment amount, based on certain performance measures. Therefore, although we acknowledge that the measures exist in more than one program, the measures are used and calculated for very distinct purposes. Accordingly, as stated above, we believe that the critical importance of these measures to patient safety warrants the inclusion in both programs. We will, in the future, monitor the HAC Reduction program and analyze the impact of our measures selection, including any unintended consequences with having a measure in more than one program, and will revise the program if needed. For Domain 2, we appreciate the support shown for these measures, including the favorable recommendations made by MedPAC. We acknowledge commenters’ concern that some provider burden is required in using these measures, but note that the majority of commenters supported these measures for the HAC Reduction Program. We also have consulted with the CDC on the public comments for the proposed Domain 2 measures and appreciate the assistance provided. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50716 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations With regard to additional modifications to CAUTI, we note that NQF reviewed the measure and took into account the concerns about unintended consequences and preventability. However, following detailed discussions of these concerns, the NQF endorsed the CAUTI measure for use in acute care hospitals and other health care facility types. We understand the potential for unintended consequences and concerns about preventability of this measure, but stress that these issues were discussed thoroughly by the NQF committee that considered and ultimately endorsed the measure. We also do not believe renaming CLAUTI and CLABSI is warranted. The NHSN CAUTI measure endorsed by the NQF, namely the Catheter-Associated Urinary Tract Infection (CAUTI) Outcome Measure (#0138), includes in its scope both symptomatic urinary tract infection (SUTI) and asymptomatic bacteremic UTI (ABUTI). For that reason, ‘‘symptomatic urinary tract infections due to an indwelling urinary catheter’’ does not accurately describe the NHSN measure. Second, the NHSN CLABSI measure endorsed by the NQF, namely the Central-Line Associated Bloodstream Infection Measure (#0139), does not include in its scope skin and soft tissue infections at the catheter insertion site. For that reason, ‘‘infection due to a central venous catheter’’ does not accurately describe the NHSN measure. With respect to some commenters’ concerns about MRSA and CDI reporting, we note that the LabID event measures do not require screening of all patients and do enable differentiation between community- and health careassociated LabID events. Therefore, we do not believe that an additional exclusion for community-acquired MRSA is required at this time. Finally, some commenters raised concerns that the Domain 2 measures do not adequately measure hospital performance. We note that measurement of healthcare-associated infections has been a mainstay of infection prevention for over 30 years in the United States, and the data are widely used by providers, policymakers, and the public to measure hospital performance and drive changes in patient care practices that make a difference in performance. Therefore, we disagree that quality measurement does not adequately measure hospital performance. We believe that the HAC Reduction Program exists, in part, to encourage quality improvement in the acute inpatient setting, and we believe that patient safety measures, such as the VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 AHRQ PSI–90 measure and the CDC NHSN measures, comprise important metrics on which hospitals should focus their quality improvement efforts. While we acknowledge the commenters’ concerns about the composite measure’s complexity, we note that the composite is NQF-endorsed, and being utilized in both public reporting and pay for performance initiatives. Furthermore, the PSI–90 composite measure consists of underlying safety indicators on which hospitals should focus their attention. We encourage hospitals that are unsure how to improve their performance on the AHRQ PSI measure or on any other measure finalized for the HAC Reduction Program to utilize the quality improvement resources that CMS, AHRQ, and CDC have made available to assist hospitals with improvement in these areas (that is, QIOs, PSOs, QI toolkits, and NHSN State-based prevention initiatives and member meetings). Comment: Several commenters expressed concern about the disproportionate impact on teaching hospitals and other large hospitals because they treat more complex patients with more comorbidities. Response: We acknowledge the commenters’ concern with the potential negative impact to large and teaching hospitals. As discussed further under section V.I.3.d. of the preamble of this final rule, we believe that the scoring changes made to the HAC Reduction Program will alleviate that concern. However, we will continue to examine and analyze the issue and will consider releasing additional analysis in future rulemaking. Comment: One commenter opposed inclusion of AHRQ PSI–5 because it is included in the AHRQ PSI–90 composite. Response: We appreciate the commenter’s feedback. However, we would like to clarify that PSI–5 is not part of the PSI–90 composite. Comment: One commenter suggested a third approach for Domain 1. The commenter suggested including Domain 1 PSIs with the addition of PSI–4, which is part of the Hospital IQR Program, and PSI–8, PSI–13, and PSI–14. Response: We appreciate the commenter’s suggestion and will consider it in future rulemaking. Comment: Several commenters suggested additional measures for the HAC Reduction Program. One commenter suggested adding iatrogenic pneumothorax with paracentesis and thoracentesis for future IPPS rulemaking. Other commenters recommended the addition of SSIs following hip and knee arthroplasty PO 00000 Frm 00222 Fmt 4701 Sfmt 4700 because there is a need to control high infection rates and subsequent managed care costs following post hip and knee replacement surgery. Another commenter requested a measure for the HAC Reduction Program on C-section births. One commenter asked CMS to consider identifying particular organisms of infection to better address quality issues such as multidrug resistant organism infections. One commenter suggested that, in an effort to reduce hospital infections, other areas of the hospital, such as the ice machines, should be considered for quality measurement. Response: We appreciate the commenters’ feedback and suggestions and will consider these measures in future rulemaking. Comment: Some commenters recommended that overlapping measures with the Hospital VBP Program be removed from the Hospital VBP Program. Another commenter asked that the measure adoption cycles for the HAC Reduction Program and the Hospital VBP Program be aligned. Response: The statute does not prohibit use of the same measures in both the HAC Reduction Program and the Hospital VBP Program. Furthermore, these two programs have different scoring methodologies and completely different incentive structures for different types of performance on these measures. By including certain measures under more than one program, we seek to emphasize topics of critical importance for quality improvement in the inpatient hospital setting, and to patient safety. We believe it is appropriate to provide incentives for hospitals to avoid HACs under more than one program. However, we intend to continue working to improve and align our quality improvement programs, and will consider whether we should attempt to minimize measure duplication between programs in the future. Comment: One commenter expressed concern about mixing measures based on all-payer data with those based on Medicare claims data. Response: We appreciate the commenter’s feedback. However, we do not believe any biases or inaccuracies are introduced to the program by basing the Total HAC Score on measures that use all-payer data, and measures that use Medicare data. Comment: One commenter believed that CMS should use measures with valid and reliable results and clear and concise definitions toward areas of quality improvement. Response: We appreciate the commenter’s feedback. We believe that E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 the measures selected for the HAC Reduction Program do meet these criteria. The measures finalized for FY 2015 have been MAP-reviewed and NQF-endorsed. Comment: One commenter expressed concerns regarding the proposed methodology and recommended modifications to avoid unintended consequences. The commenter believed the options are difficult to comprehend as there is a lack of data and urged CMS to extend the comment period and release data files for an accurate analysis of scoring methodologies and an accurate analysis of measure selection. Response: We will consider hosting educational provider calls to further explain the scoring methodology for the program, and will design the confidential reports in a manner that provides step-by-step explanations of the scoring. We note that data for the PSI–90 measure and the CAUTI and CLABSI measures are currently publicly available on the Hospital Compare Web site. Additionally, we will be making updated information available to the public on the individual indicators in PSI–90 in an upcoming release on the Hospital Compare Web site. After consideration of the public comments we received, we are adopting the PSI–90 composite for Domain 1 and the CDC measures for Domain 2 (CAUTI and CLABSI for FY 2015, SSI for FY 2016, and MRSA and C-Difficile for FY 2017). We believe that, given that PSI– 90 has been both NQF-endorsed and fully MAP-supported for the HAC Reduction Program, it is more suitable. We also believe that the PSI–90 measure, as a composite measure of patient safety, appropriately encourages robust hospital attention to patient safety events. (3) Applicable Time Period In the FY 2014 IPPS/LTCH PPS proposed rule, we proposed a 2-year applicable period to collect data that would be used to calculate the Total HAC Score (78 FR 27628). For Domain 1 (AHRQ measures), we proposed a 2year data period to calculate the measures based on recommendations from AHRQ, the measure developer. In addition, an analysis by Mathematica Policy Research, a CMS contractor,51 shows that, with a 24-month data period, 50 to 90 percent of hospitals attain a moderate or high level of 51 Mathematica Policy Research (November 2011). Reporting period and reliability of AHRQ, CMS 30day and HAC Quality Measures—Revised. Available at: https://www.cms.gov/Medicare/ Quality-Initiatives-Patient-Assessment-Instruments/ hospital-value-based-purchasing/Downloads/ HVBP_Measure_Reliability-.pdf. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 reliability for the proposed AHRQ measures. We believe that the proposed 24-month data period described below would provide hospitals and the general public the most current data available. The proposed 24-month data period also would allow time to complete the complex calculation process for these measures, to perform comprehensive quality assurance to enhance the accuracy of measure results, and to disseminate confidential reports on hospital-level results to individual hospitals. For FY 2015, we proposed to use the 24-month period from July 1, 2011 through June 30, 2013 as the applicable time period for the AHRQ measures. The claims for all Medicare FFS beneficiaries discharged during this period would be included in the calculation of measure results for FY 2015. This includes claims data from the 2011, 2012, and 2013 Inpatient Standard Analytic Files (SAFs). The national and hospital-specific rates for PSI–6, PSI–12, and PSI–15 are available on the Hospital Compare Web site. The hospital level PSI–90 composite bucket also is available on the Hospital Compare Web site.52 The CDC measures are currently collected and calculated on a quarterly basis. However, for purposes of the HAC Reduction Program, we proposed to use 2 years of data to calculate the Domain 2 score so Domain 1 and Domain 2 are calculated using 24 months of data. For FY 2015, we proposed to use calendar years 2012 and 2013 for the HAC Reduction Program. Comment: A few commenters addressed the proposed definition of ‘‘applicable time period.’’ One commenter opposed the definition for applicable time period because of general opposition to the scoring methodology proposed for the HAC Reduction Program. Other commenters opposed the definition because of different reporting periods for the measures in the HAC Reduction Program versus other reporting programs and suggested that CMS align the duration of performance periods for the Hospital IQR Program, the Hospital VBP Program, and the HAC Reduction Program using 2 years of data for PSI measures and 1 year of data for NHSN measures. Response: We appreciate the commenters’ feedback and suggestions. The Secretary maintains the statutory authority to determine the applicable period for the HAC Reduction Program. We strive, to the extent possible, to align 52 Available at: https://www.medicare.gov/ hospitalcompare/About/HOSInfo/RCD.aspx#ssi. PO 00000 Frm 00223 Fmt 4701 Sfmt 4700 50717 reporting periods within our programs, acknowledging that some provider burden exists with reporting in multiple programs. However, given the varying policy, statutory, and data collections differences between each program, such exact alignment is not always feasible. For the HAC Reduction program, we proposed and are finalizing a Total HAC score using two domains or sets of measures to determine the payment adjustment. We believe that using 2 years of data for both domains would balance the needs of the program and allow for sufficient time to process the claims data and calculate the measures to meet the program implementation timeline. Further, we believe that the longer performance period on the NHSN measures is better for reliability. Finally, we note that the Hospital VBP Program has certain restrictions (announcing performance standards 60 days prior to the beginning of the performance period and beginning a performance period no sooner than 1 year after a measure is publicly reported on the Hospital Compare Web site) which may result in different performance periods in the Hospital VBP Program than what is used in other programs. As these programs grow and are implemented in future years, we will examine the possibility of aligning the performance periods to the extent possible. After consideration of the public comments we received, we are finalizing our proposal to codify the definition of ‘‘applicable time period’’ at § 412.170 without modification. (4) Measure Calculations In the FY 2014 IPPS/LTCH PPS proposed rule, we proposed measure calculations for the AHRQ PSI measures under Domain 1 and the CDC NHSN measures under Domain 2. Measure calculations for the AHRQ PSI measures included using ICD–9–CM diagnosis and/or procedure codes for the primary diagnosis and, for the secondary diagnosis, POA value associated with the secondary diagnosis on the claim. We also proposed to extend the requirement under the FY 2008 IPPS final rule, requiring that all hospitals paid under the IPPS report on whether a diagnosis is present on admission (72 FR 47201) to subsection (d) Maryland hospitals paid under the waiver at section 1814(b)(3) of the Act. (We refer readers to section II. F.3. of the preamble of this final rule for a discussion of the POA coding requirement for Maryland hospitals.) In addition, we proposed that the same rules under the Hospital IQR Program be applied to determine how the AHRQ PSI and CDC NSHN measures are E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50718 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations applied and calculated and proposed to expand both of the populations for the CDC NHSN CAUTI and CLABSI measures to care provided in areas outside of the ICU in the future (78 FR 27628). For further details on these proposals for the HAC Reduction Program, we refer readers to section V.I. of the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27628). For the Hospital IQR Program, we refer readers to section IX.A. of the preamble of the final rule. Comment: One commenter recommended limiting CAUTI and CLABSI to ICUs for the HAC program because there are major risks of underreporting and surveillance/ assessment bias in self-reporting of hospitals. The commenter believed that because the validity of CLABSI and CAUTI in non-ICU locations remains uncertain, the measure be restricted to ICU locations until and further validation research is performed. Response: We appreciate the commenter’s feedback. In the future, we do intend to expand the CDC NHSN measures to non-ICU locations. The Hospital IQR Program will begin collecting non-ICU data for CLABSI and CAUTI beginning January 2015. For further detail, we refer readers to the section IX.A. of the preamble of this final rule for information regarding expanding the CAUTI and CLABSI measure to non-ICU locations under the Hospital IQR Program. Comment: One commenter supported the expansion of CLABSI and CAUTI beyond the ICUs. Response: We appreciate the commenter’s support. As stated above, we refer readers to the section IX.A. of the preamble of this final rule for information regarding expanding the CAUTI and CLABSI measures to nonICU locations under the Hospital IQR Program. Comment: One commenter recommended delaying the implementation of the proposed approach until validated data submission to NHSN is in place. The commenter believed this new process of data submission was unclear and that there is a need for precise NHSN definitions. The commenter suggested revising the NHSN definitions with more firm definitions which will cause less to be subject to interpretation and result in more accurate reporting. Response: We appreciate the commenter’s suggestion. We have received feedback from CDC on this issue. Numerous data validation efforts already are underway or have been completed for HAI data that were submitted to NHSN. The CDC then VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 reports these data to us for the Hospital IQR Program. These efforts include our validation of the 2012 CLABSI data and State health departments’ validation of CLABSI data submitted to NHSN as part of mandatory HAI reporting within their jurisdictions. We have plans in place to validate data across all of the HAIs required for reporting in 2013, and the CDC plans to expand its HAI Data Validation Guidance and Toolkits for States to use for validation of all NHSN HAIs reported in 2013. Changes made to HAI criteria and definitions for reporting HAIs to NHSN in 2013 were posted in protocols before January 1, 2013, so users would know in advance what guidance to follow. These changes were made to eliminate much of the subjectivity in determining whether an HAI exists per NHSN surveillance definitions. Although the CDC recognizes these changes could potentially shift the number of reported HAIs in 2013, this potential shift was evaluated and not expected to be significant. Comment: One commenter believed that the lower level of reliability for claims-based measures is not sufficient to use in a pay for performance program. The commenter recommended that CMS apply the same reliability benchmark as it does for chart-abstracted measures. Response: We appreciate the commenter’s feedback and support of the reliability benchmark that we use for chart-abstracted measures. Both claims and chart-based data are valid methods for gathering data for quality measurement and quality improvement. Claims data cover a larger population in the hospital and can provide signals of where quality improvement may need to occur. Chart-based data provide more clinical detail and, therefore, more specificity, but often cover a limited population. Claims data, which are collected for payment purposes, are readily available, while registry data are costly to collect and have a potentially high burden on the hospital. However, both types of data comprise important tools in the assessment of HAIs. Both the claims-based PSIs and the chartbased HAI measures have met NQF criteria for scientific acceptability, which include validity and reliability; therefore, we believe they are suitable for use in the HAC Reduction Program. Comment: One commenter stated that measures calculated from claims-based data are dependent on coding processes. The commenter provided an example that PSI–3 captured data may be incomplete if it is based solely on physician documentation because nurses may have more information. The commenter added that claims-based PO 00000 Frm 00224 Fmt 4701 Sfmt 4700 measures may not fully account for all patient risk factors. Response: We have received feedback from AHRQ on this issue and appreciate the commenter’s and AHRQ’s feedback. First, we want to stress that CMS has no other data source that currently captures pressure ulcers for subsection (d) hospitals. We find that these events comprise a serious patient health safety issue in need of quality improvement. We note that underreporting of pressure ulcers has improved over time, because if a hospital does not document a pressure ulcer when it is POA, then it takes the risk of being penalized later in the hospitalization when the pressure ulcer is clearly documented and it may appear to be acquired in the hospital (when it actually was not). We further add that we and our Federal partners, including AHRQ, consistently strive to maintain high quality measurement and have reviewed alternatives. For example, the National Database of Nursing Quality Indicators offers a promising alternative, but its measure is based on a quarterly prevalence survey of all eligible patients, and therefore it does not reflect the risk of acquiring a pressure ulcer during an incident hospitalization. Therefore, we believe that the PSI–3 measure remains a suitable measure for the HAC Reduction Program. However, because we have opted to finalize the alternative PSI–90 proposal at this time, we are not finalizing PSI– 3. We stress that in the future, given the critical patient safety area this measure encompasses, and numerous stakeholder comments supporting the pressure ulcer measure, we may consider this measure in future rulemaking for the HAC Reduction Program. After consideration of the public comments received, we are finalizing the measure calculations proposed for the PSI 90 composite measure for Domain 1 and the measure calculations proposed for the CDC measures for Domain 2. Measure calculations for the AHRQ PSI measures included using ICD–9–CM diagnosis and/or procedure codes for the primary diagnosis and, for the secondary diagnosis, the POA value associated with the secondary diagnosis on the claim. We also are finalizing that subsection (d) Maryland hospitals paid under the waiver at section 1814(b)(3) of the Act must also report on whether a diagnosis is present on admission as discussed in section II.F.3. of the preamble of this rule. We are finalizing that the same rules under the Hospital IQR Program be applied to determine how the AHRQ PSI and CDC NSHN measures are applied and calculated. E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 We note that the Hospital IQR Program is finalizing expanded collection for the non-ICU population (78 FR 27628). We intend to propose use of these data for the HAC Reduction Program in the future. (5) Measure Risk-Adjustment Methodology Section 1886(p)(2)(B)(ii) of the Act requires the Secretary to establish and apply an appropriate risk-adjustment methodology with respect to determining the top quartile of subsection (d) hospitals with respect to HACs subject to the 1 percent payment adjustment. In the FY 2014 IPPS/LTCH PPS proposed rule, we proposed to use the existing measure-level riskadjustment that is already part of the methodology for the individual measures being proposed for Domains 1 and 2 in order to fulfill this requirement (78 FR 27629). We proposed to codify the use of this methodology under proposed § 412.172(d). First, with the exception of PSI 5, all of the proposed PSI measures are risk-adjusted and reliability-adjusted. Specifically, risk factors such as the patient’s age, gender, comorbidities, and complications would be considered in the calculation of the measure rates so that hospitals serving a large proportion of sicker patients would not be unfairly penalized. We believe that such risk-adjustment is appropriate, pursuant to section 1886(p) of the Act. We noted that the PSI–5 measure (foreign object left in body) is not risk-adjusted. However, a foreign object left in the body constitutes an adverse event that should never occur. Therefore, such adverse events cannot be risk-adjusted because these events should not occur, regardless of patientrelated or hospital-related characteristics. We invited public comments on the proposed risk-adjustment methodology. Comment: One commenter was pleased that the measures proposed for the HAC Reduction Program will be risk-adjusted to account for factors such as the patient’s age, gender, and comorbidities. The commenter stated that this feature will ensure that hospitals servicing a large proportion of sicker patients will not be unfairly penalized. Response: We appreciate the commenter’s support. Comment: One commenter supported the inclusion of the PSI measures in the HAC Reduction Program even though the commenter stated there are limitations. The commenter suggested that CMS refine the measures in the future to have a better predictive ability and risk adjustment. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Response: We appreciate the commenter’s feedback and support. We note that our measures continually undergo maintenance to determine the need for updated specifications, and to monitor for trends and any relevant riskadjustment changes needed for the measures. Comment: One commenter expressed concern regarding the proposal to add additional components to the HAC Reduction program without fully understanding the impact of appropriate risk adjustment. The commenter requested additional information on how this will be incorporated into the Hospital VBP Program. Response: We will examine the impact of the additional risk-adjusted measures in the program, and propose refinements to the program if necessary. The Hospital VBP Program is a separate program with a separate scoring methodology from the HAC Reduction Program. We refer readers to section V.H. of this final rule for information about the scoring of specific measures for purposes of the Hospital VBP Program. Comment: Several commenters provided comments regarding riskadjustment for the HAC program. One commenter requested confirmation that the risk-adjustment factors listed in the specifications for the various measures will be used for the HAC reduction program. Several commenters believed that the risk-adjustment methodology will penalize teaching and large hospitals. One commenter suggested that the risk-adjustment methodology take into account patient location and primary language. Response: We confirm that we are using the risk-adjustment factors listed in specifications for the AHRQ and CDC measures selected for this program. We note that the risk-adjustment methodology for these measures meets NQF endorsement criteria. We do not believe that the current risk-adjustment factors for the measures in and of themselves unfairly penalize teaching and large hospitals, but will monitor this. Should changes to the riskadjustment models for the measures be adopted during NQF endorsement maintenance processes, CMS will adopt these changes as soon as possible. After consideration of the public comments we received, we are finalizing our proposal relating to the risk-adjustment methodology without modification. d. Criteria for Applicable Hospitals and Performance Scoring In the FY 2014 IPPS/LTCH PPS proposed rule, we proposed a scoring PO 00000 Frm 00225 Fmt 4701 Sfmt 4700 50719 methodology similar to the achievement scoring methodology currently used under the Hospital VBP Program (78 FR 27629). We proposed to implement a methodology for assessing the top quartile of applicable hospitals for HACs based on performance standards, where we would score each hospital based on whether they fall in the top quartile for each applicable measure and where in the top quartile they fall. In addition, we proposed to calculate a Total HAC Score for each hospital by summing the hospital’s performance score on each measure within a domain to determine a score for each domain, then multiplying each domain score by a proposed weight (Domain 1–AHRQ Patient Safety Indicators 50 percent, Domain 2–CDC NHSN Measures 50 percent), and adding together the weighted domain scores to determine the Total HAC Score. For further detail of the general scoring methodology proposed for the HAC Reduction Program, we refer readers to the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27629 through 27633). With respect to a subsection (d) hospital, we proposed that CMS would identify the top quartile of all hospitals that are subsection (d) hospitals with respect to their rate of HACs during the applicable period (proposed § 412.172(e)(1)). We proposed that CMS would use Total HAC Scores to identify applicable hospitals and would identify the 25 percent of hospitals with the highest Total HAC Scores as applicable hospitals (proposed § 412.172(e)(2)). In addition, we proposed that CMS would calculate the Total HAC Score by weighing Domain 1 score plus Domain 2 equally at 50 percent (proposed § 412.172(e)(3)). We proposed that hospital performance under section 1886(p) of the Act would be based on a Total HAC Score, which combines a hospital’s results for Domains 1 and 2. For Domain 1, we presented a proposed and alternative set of measures and provided an overall description of how the measures in the Domain 1 proposed approach would be handled in a Total HAC Score. We further proposed several rules that would be used to calculate AHRQ measures, including specific rules pertaining to both the proposed and alternative approach for Domain 1. For further detail on these proposals, we refer readers to the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27629 through 27633). For Domain 2, we proposed a method to calculate the CDC NHSN measures for Domain 2, which would use the SIR. For further details on this proposal, we refer readers to the FY 2014 IPPS/LTCH PPS E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50720 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations proposed rule (78 FR 27630 through 27633). Because of the differences among the measures proposed for the HAC Reduction Program and the distribution of measure results, simply adding up the measure results to calculate the domain or Total HAC Scores would make the scores less meaningful to hospitals and the general public. As a result, we proposed that points be assigned to hospitals’ performance for each measure (78 FR 27630). For all proposed measures for the HAC Reduction Program, with the exception of PSI 5, we proposed several rules to determine the number of points assigned to a measure that is within the top (or worse performing) quartile. We refer readers to the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27630 through 27632) for a detailed description of the rules explaining the points assigned to the measures for the HAC Reduction Program. For Domain 2, we proposed: how we would obtain measures results for the CDC NHSN measures; how we would treat ICUs and an ICU’s waiver; and how we would calculate Domain 2 with incomplete data. We proposed several rules to explain how we would calculate and use the CDC NHSN measures in the Domain 2 scoring methodology. For further details on these proposals, we refer readers to the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27630 through 27633). We proposed a Total HAC Score where Domain 1 and Domain 2 would be weighed equally (78 FR 27629). We described how complete data would factor into the calculation of the Total HAC Score, and what would occur if complete data was not available in one or more domains. We also described differences between the Domain 1 proposed and alternative approach. For further detail on these proposals, we refer readers to the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27629 through 27633). We invited public comments on this proposed scoring methodology. In addition, we invited public comments on alternate methodologies for scoring hospitals and determining most accurately those hospitals that are in the top quartile for the selected HACs. For example, instead of awarding points for each measure only to those hospitals that fall in the top quartile for that specific measure, an alternative option would be to award points to each hospital for each measure in deciles from the best performing hospital to the worst performing hospital. Another example would be to award points in deciles for each measure between the VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 median rate for a particular measure and the rate of the worst performing hospital. We sought to identify hospitals that are in the top quartile for all of the HACs combined and invited public comments on approaches to best identify this group of hospitals. Comment: One commenter recommended that CMS develop a third domain for calculating total HAC scores made up of two additional measures: (1) NQF #0753 Procedure-Specific Surgical Site Infections; and (2) a measure of medication reconciliation or a proxy measure for medication error prevention since both are high-volume or significant patient safety events. Response: We appreciate the commenter’s feedback and may consider the suggestion in future rulemaking. Comment: A number of commenters addressed the proposed scoring methodology for the HAC Reduction Programs. The comments fell in one of three categories. The first group of commenters supported the scoring proposal for the HAC Reduction Program. The second group of commenters did not support the scoring proposal. One commenter in this group stated that the proposed scoring methodology was confusing. Other commenters opposed the scoring proposal because they believed it would unreasonably penalize teaching and large hospitals. Some commenters stated that the scoring methodology gives undue weight to very rare events and may disproportionately impact a small subset of hospitals more likely to treat these types of patients. These commenters further concluded that the scoring proposal would not sufficiently assess hospital performance. Specifically, they expressed concern that the proposed performance scoring methodology awards points to hospitals with performance that is statistically the same as the national average and, in some cases, to hospitals performing above the average due to their placement in the top quartile. Other commenters objected to the methodology creating artificial thresholds in determining the top quartile for each measure, and then again in assessing the Total HAC Scores. These commenters suggested that CMS revise the methodology to account for statistical differences, increase score differentiation between hospitals, and address challenges brought on by such artificial thresholds. They also recommend that CMS delay implementing the program until further enhancements occur. One commenter requested that CMS release additional information so that facilities can replicate the methodology that will be PO 00000 Frm 00226 Fmt 4701 Sfmt 4700 employed. Other commenters stated that the PSI–90 alternative composite measure scores for CLABSI in Domain 1, which also represents a condition scored by the CDC NHSN CLABSI measure in Domain 2. The third group of commenters suggested changes and provided alternatives to the scoring proposal. One commenter believed that the PSI–90 measures in Domain 1 should be weighed individually rather than as a composite. Some commenters opposed weighing Domain 1 at 50 percent and suggested weighing Domain 2 measures higher. Another commenter suggested that CMS only use one domain for the first year, in order to become more familiar with the program. MedPAC recommended using only CDC measures for the HAC Reduction program. Another commenter suggested eliminating the two domains altogether. The commenter asked CMS to test the weighting effects of the measures and identify ways in which the weights may shift as more NHSN measures are introduced. The commenter believed that the NHSN and PSI composite measures should be equally weighted and that PSI–5 should be scored similarly to the other PSIs. Several commenters reiterated that PSI–5 should be equally weighed with the other PSIs. One commenter stated the current scoring process may not accurately assess poor performance across all measures. The commenter suggested that CMS not assign points to hospitals with no events, or those with less than expected events, just to meet the 25percent threshold. Rather, the commenter believed that CMS should use an index rather than a rank order approach for the top quartile hospitals at the measure level. The commenter further suggested that CMS assess the unintended consequences of the proposed scoring methodologies for the HAC Reduction Program. Response: We thank all of the commenters who provided comments, suggestions, and feedback on the scoring methodology. We appreciate the comments from those commenters who supported the scoring proposal and the HAC Reduction Program in general. For those commenters who did not support the scoring proposal, or who provided suggested revisions for the scoring methodology for the HAC Reduction Program, we thank you for the invaluable feedback. We reviewed all comments and suggestions, and, as explained further below, agree that we need to change some aspects of the scoring methodology. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations However, at the outset, we disagree with some comments made on the proposed scoring methodology. First, we disagree with the comments citing confusion over the scoring methodology. As stated in other parts of this preamble, we chose this particular scoring methodology to align with the scoring methodology used in the Hospital VBP Program. This approach sought to reduce confusion associated with multiple scoring methodologies. Because the HAC Reduction Program does not contain specific statutory directives on scoring methods, as found with other programs, we believe aligning the HAC Reduction Program scoring methodology with the Hospital VBP Program scoring methodology will reduce confusion, given stakeholders’ prior experience with the Hospital VBP Program. We do acknowledge the newness of the HAC Reduction Program, and, as with any new program, the time needed to gain familiarity. However, we believe that adopting similar scoring to that used in the Hospital VBP Program, in conjunction with the education and outreach available on the HAC Reduction Program, will likely alleviate any confusion that may inadvertently arise. Second, we do not believe in delaying the HAC Reduction Program. As stated further below, we made several revisions to the scoring methodology that addresses the majority of stakeholder concerns, including undue weight for rare events, the potential impact to large and teaching hospitals, and the potential for artificial thresholds. Further, the HAC Reduction Program directly addresses an area of critical importance—the safety of our beneficiaries in an acute care setting. Therefore, we believe that any delay to this program would not benefit the public. Accordingly, although we intend to monitor the program and make adjustments to the HAC Reduction Program as the program evolves, we do not intend to delay the program. Rather, we believe that, in the interest of public safety, this program should be implemented as soon as possible. Third, to those commenters who believed that the scoring methodology would penalize hospitals that are statistically the same as the national average, or even better than the national average, we disagree. Section 1886(p) of the Act states that the payment adjustment applies to the top quartile of hospitals, relative to the national average of hospital acquired conditions. Our proposed scoring methodology does not lead to the likelihood that hospitals performing at or above the national VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 average would be subject to the payment adjustment. However, we acknowledge the potential impact to large and teaching hospitals with the proposed scoring methodology. The potential impact to large and teaching hospitals comprised the majority of opposition to the scoring methodology for the HAC Reduction Program. We further acknowledge comments relating to the equal weights proposed in the rule for the two domains as well as opposition to using the 75th percentile as the benchmark for scoring on individual measures. For example, several commenters stated that hospitals may be unfairly penalized for rare events given such scoring. Other commenters, specifically MedPAC, suggested that we weigh Domain 2 measures higher and even suggested solely Domain 2 measures for the entire HAC Reduction Program. Other commenters stated that the benchmark proposed (75th percentile) would not accurately assess the worst performing hospitals with respects to HACs. Following consideration of the public comments received, we agree that Domain 2 measures should be weighed higher and are finalizing a scoring change where Domain 1 is weighed at 35 percent and Domain 2 is weighed at 65 percent. The support for Domain 2 measures in general, coupled with multiple recommendations to provide more weight to Domain 2 measures, specifically those from MedPAC, has led us to conclude that such scoring changes are necessary. We also considered public comments relating to the 75th percentile benchmark proposed, and agree that a change to the minimum benchmark for scoring each measure is necessary. As discussed further below, we are finalizing a scoring methodology where points will be assigned for each measure in deciles between the score of the best performing hospital and the worst performing hospital. This scoring change to the domain weights does not indicate that we agree with comments suggesting either the single domain approach or the elimination of the AHRQ PSI-measures from the HAC Reduction Program. Rather, we maintain the AHRQ PSI measures play a vital role in patient safety and comprise an integral part of the HAC Reduction Program. As stated in section V.I.3.c.. of the preamble of this final rule, we are finalizing the alternative PSI–90 for Domain 1. The selection of PSI–90 over the proposed approach eliminates several concerns regarding weighing PSI–5 differently from other measures, as well as general comments disagreeing with the use of PO 00000 Frm 00227 Fmt 4701 Sfmt 4700 50721 the individual AHRQ PSI measures. The PSI–90 composite measure received support from the MAP and endorsement from the NQF for the HAC Reduction Program. We acknowledge comments that wanted PSI–90’s components weighed individually in scoring for the HAC Reduction Program. However, the MAP supported and the NQF endorsed this measure as a composite; therefore, we believe that the measure must be scored as such. We further believe that adopting the AHRQ PSI composite measure provides strong incentives for hospitals to ensure that patients are not harmed by the medical care they receive, which is a critical consideration for quality improvement. Despite comments to the contrary, we maintain that not using the AHRQ PSI–90 composite in the HAC Reduction Program may have a negative impact on a hospital’s quality performance. We believe that the PSI measure, as a composite measure of patient safety, appropriately encourages robust hospital attention to patient safety events. As explained earlier in this preamble, the CDC measures received positive support from a number of commenters, including MedPAC. Therefore, we believe there is ample support to use these measures in the HAC Reduction Program. We believe that the HAC Reduction Program exists, in part, to drive quality improvement in the acute inpatient setting, and we believe strongly that patient safety measures, such as the AHRQ PSI–90 measure and the CDC NHSN measures, comprise important metrics on which hospitals should focus their quality improvement efforts. While we sympathize with commenters about the composite measure’s complexity, we note that the measure consists of underlying safety indicators on which hospitals should focus their attention. We encourage hospitals that are unsure how to improve their performance on the AHRQ PSI measure or on any other measure finalized for the HAC Reduction Program to contact their QIO for assistance. Next, as also stated earlier, we acknowledge that some conditions included in the PSI–90 measure of Domain 1 are also conditions included with the CDC NHSN measures of Domain 2. While we are aware that some commenters objected to the possibility of subjecting hospitals to ‘‘double jeopardy’’ by scoring the CLABSI measure in both domains, we note that this measure covers a topic of critical importance to quality improvement in the inpatient hospital setting and to patient safety. We intend E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50722 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations to continue evaluating and working to improve our quality improvement programs, and will consider whether we should attempt to avoid any such measure duplication in the future. However, we believe that a scoring change that assigns more weight to the CDC NHSN measures and assigns points along a scale from the best performing hospital’s score to the worst performing hospital’s score, rather than beginning at the 75th percentile, alleviates several commenters’ concerns, including those made by MedPAC. First, we believe that the scoring change providing Domain 2 greater weight will decreases the impact to large and teaching hospitals from the proposed method where weights were equally distributed between the domains. Second, the scoring change, both from the change in weighting and the change in the scoring methodology, also more accurately reflects the variation in performance on measures. Therefore, such changes address comments that the proposed scoring methodology does not adequately assess the worst performing hospitals with respect to HACs. Finally, we believe that such scoring changes will also reduce any potential artificial cut-off points for the measures suggested by the commenters, given the fact that we are using the entire distribution of the measures in the scoring. Regarding the request for additional data, the data used to calculate the scoring for this program will be provided to each hospital as outlined in the review and correction section of this preamble. In the future, as we reassess and further analyze the HAC Reduction program, we may present additional findings, data, and analysis in future rulemaking. Comment: Several commenters raised concerns about multiple penalties being assessed with the scoring methodology proposed. For the alternative domain 1 approach, commenters stated that the measures contained in the AHRQ PSI– 90 composite overlap with the CDC HAI measures of Domain 2, resulting in the same measures being counted twice in the Total HAC Score. Commenters also raised concerns that the scoring for the HAC Reduction program overlaps with the Hospital VBP program, which could potentially result in penalties being assessed in more than one program. One commenter stated that the criteria used for evaluating hospitals in the HAC Reduction program for Domain 2 are almost identical to the criteria used in the outcome domain in the Hospital VBP Program. Therefore, the commenter suggested that because both programs VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 are so similar, there is potential to penalize hospitals twice. Response: We appreciate the concerns raised by the commenters and acknowledge that we do have the same measures in both the Hospital VBP Program and the HAC Reduction Program. As stated earlier with regard to measure selection, the HAC Reduction Program and the Hospital VBP Program are separate hospital reporting programs with different purposes and policy goals. For example, the HAC Reduction Program is a penalty program that reduces payments to hospitals for excess HACs to increase patient safety in hospitals. The Hospital VBP Program is an incentive program that redistributes reductions made to the base operating DRG payment amount, based on certain performance measures. Therefore, although we acknowledge that measures appear in both programs, the measures are used and calculated for very distinct purposes. We also add that the measures in both programs relate to HACs, an area which numerous commenters stressed should be included in every program because it comprised a critical area of patient safety. Therefore, we maintain that the safety of Medicare beneficiaries, coupled with the overwhelming requests by stakeholder to align all programs, justify the use of these measures in the HAC Reduction program. However, we will, in the future, monitor the HAC Reduction Program, the measures selected for it, and the scoring methodology, and revise them as needed. In this FY 2014 IPPS/LTCH PPS final rule, based upon consideration of comments received, we are finalizing the following modified scoring methodology. As we proposed in the proposed rule (78 FR 27629), we are finalizing a scoring methodology similar to the achievement scoring methodology for the individual measures that is currently used under the Hospital VBP Program. However, in response to public comments, the scoring will begin at the minimum value for each measure rather than the 75th percentile, as originally proposed. The finalized methodology will assess the top quartile of applicable hospitals for HACs based on the Total HAC Score. However, based on comments received requesting that we give greater weight to Domain 2 measures, we are finalizing a different weight for each Domain than originally proposed. As provided in this final rule, we will calculate a Total HAC Score for each hospital by using the hospital’s performance score on each measure within a domain to determine a score for each domain, then multiplying each domain score by the following weights: PO 00000 Frm 00228 Fmt 4701 Sfmt 4700 Domain 1–(AHRQ PSI–90), 35 percent; and Domain 2–(CDC NHSN Measures), 65 percent; and combining the weighted domain scores to determine the Total HAC Score. We will use each hospital’s Total HAC Score to determine the top quartile of subsection (d) hospitals (applicable hospitals) that will be subject to the payment adjustment beginning with discharges on or after October 1, 2014. With respect to a subsection (d) hospital, we will identify as proposed the top quartile of all hospitals that are subsection (d) hospitals with respect to their rate of HACs during the applicable period (§ 412.172(e)(1)). As proposed, we will use a Total HAC scores to identify applicable hospitals and will identify the 25 percent of hospitals with the highest Total HAC scores as applicable hospitals (§ 412.172(e)(2)). In addition, we will calculate the Total HAC score by weighing Domain 1 at 35 percent plus Domain 2 at 65 percent (§ 412.172(e)(3)). As stated above, we have modified the proposed weighing scheme of 50 percent in each Domain to respond to public comments asking us to give more weight to Domain 2 CDC NHSN measures. As discussed earlier, we are finalizing the PSI–90 composite measure for Domain 1. As proposed, because hospitals may not have complete data for every AHRQ indicator in the composite measure for this Domain 1 measure, we are finalizing the same methodology used for the Hospital VBP Program to determine the minimum number of indicators with complete data to be included in the calculation of the Domain measure. We are finalizing the following rules we proposed to determine the number of AHRQ indicators to be included in the calculation for a hospital’s Domain 1 score. In this discussion, ‘‘complete data’’ refers to whether a hospital has enough eligible discharges to calculate a rate for a measure. Complete data for the AHRQ PSI–90 composite measure means the hospital has three or more eligible discharges for at least one component indicator. Specifically— If a hospital does not have ‘‘complete data’’ for the PSI–90 composite, we will not calculate a Domain 1 score for that hospital. If a hospital has ‘‘complete data’’ for at least one indicator for the AHRQ PSI– 90 composite, we will calculate a Domain 1 score. The calculation of the SIR for the CDC measures requires the facility have >1 predicted HAI event. The predicted number of events is calculated using the national HAI rate and the observed number of the specific HAIs. In the E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations event an SIR cannot be calculated because the facility has <1 predicted infection, Domain 1 scores exclusively will be used to calculated a HAC score. In other words, we will exclude from the overall HAC score calculation any measure for which an SIR cannot be calculated for the reason set out above. Because of the differences among the measures proposed for the HAC Reduction Program and the distribution of measure results, simply adding up the measure results to calculate the domain or Total HAC Scores will make the scores less meaningful to hospitals and the general public. As a result, in this FY 2014 IPPS/LTCH PPS final rule, points will be assigned to hospitals’ performance for each measure (78 FR 27630). This approach aligns with the Hospital VBP Program for measuring hospital achievement. In particular, the Hospital VBP Program assigns up to 10 points for each measure based on a hospital’s performance result for that measure for a given time period. We note that, for the HAC Reduction Program, unlike the Hospital VBP Program where a higher score means better performance, the more points a hospital receives on a measure corresponds with a poorer score. For the HAC Reduction Program, as we proposed, for this final rule we are using a slightly different methodology for scoring points, depending on the specific measure (Table C). Specifically— 50723 • For the AHRQ Patient Safety for Selected Condition (PSI 90) composite in Domain 1, point assignment will be based on a hospital’s score for the composite measure. • We will assign 1 to 10 points to the hospital for the PSI–90 composite measure. • For the CDC NHSN measures in Domain 2, point assignment for each measure will be based on the SIR for that measure. • For each SIR, we will assign 1 to 10 points to the hospital for each measure (CAUTI and CLABSI for FY 2015). • The Domain 2 score will consist of the average of points assigned to the SIR (CAUTI and CLABSI for FY 2015). TABLE C—CALCULATION OF DOMAIN 1 AND 2 MEASURES FOR FY 2015 Individual measure score (points) Measure name Measure result Scenario Domain 1 PSI 90 *** ......................................... Weighted average of rates of component indicators. Standard Infection Ratio (SIR) ......................... Composite value ....... 1–10. SIR ............................ 1–10 (see Figure A). Domain 2 CDC NHSN CAUTI CLABSI ............ *** These measure rates are risk-adjusted and reliability-adjusted. mstockstill on DSK4VPTVN1PROD with RULES6 For all measures finalized for the HAC Reduction Program, we will use the following rules, as we proposed, to determine the number of points assigned to a measure. Base on the distribution for PSI 90 rates for all the hospitals, we will divide the results into percentiles in increments of 10 with the lowest percentile ranges meaning better performance. Hospitals with PSI–90 rates within the lowest tenth percentile will be given one point; those with PSI– 90 rates within the second lowest percentile range (between the 10th and 20th percentile) will be given 2 points, etc. For Domain 2, as proposed, we will obtain measure results that hospitals submitted to the CDC NHSN for the Hospital IQR Program. The CDC HAI measures capture adverse events that occurred within intensive care units (ICUs), including pediatric and neonatal units. For the Hospital IQR Program, hospitals that elected to participate in the reporting program (that is, had an active IQR pledge), but did not have ICUs, can apply for an ICU waiver so that they will not be subject to the 2percent payment reduction for nonsubmission of quality reporting data. In the second quarter of 2012, among the 3,321 IPPS hospitals with an active IQR pledge for data submission, 377 (or FIGURE A—POINT ASSIGNMENT FOR 10.1 percent) applied and received an HOSPITAL A’S PSI–90 SCORE ICU waiver. At the same time, 2,939 hospitals (88.5 percent) of the IPPS If Hospital A’s PSI–90 Then assign this rate falls into this hospitals did not have an ICU waiver number of points percentile and submitted data for the CDC HAI CLABSI measure, while 4 hospitals (0.1 1st–10th ........................ 1 percent) that had no ICU waiver failed 11th–20th ...................... 2 to submit data to the NHSN. For the 21st–30th ...................... 3 same quarter, of the 3,321 IPPS 31st–40th ...................... 4 hospitals with an active IQR pledge, 41st–50th ...................... 5 2,935 (88.4 percent) that did not have an 51st–60th ...................... 6 ICU waiver submitted data for the CDC 61st–70th ...................... 7 HAI CAUTI measure, whereas 8 71st–80th ...................... 8 hospitals (0.2 percent) did not submit 81–90th ......................... 9 data. Because data availability for the 91st–100th .................... 10 two CDC HAI measures impact the score VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 PO 00000 Frm 00229 Fmt 4701 Sfmt 4700 for Domain 2 and eventually the Total HAC Score, we aim to encourage hospitals with an ICU that did not submit data to begin data submission, and to reward hospitals that have already submitted data to continue data submission for all the CDC HAI measures. To this end, as we proposed, we are finalizing the following rules (Figure B): • If a hospital has an ICU waiver for the CDC HAI measures, we will use only the Domain 1 score to calculate its Total HAC Score. • If a hospital does not have an ICU waiver for a CDC HAI measure: Æ If the hospital does not submit data for the CDC HAI measures, we will assign 10 points to that measure for that hospital. Æ If the hospital does submit data for at least one CDC NHSN measure: D If there are ‘‘complete data’’ (that is, enough adverse events to calculate the SIR) for at least one measure, we will use those data to calculate a Domain 2 score and use the hospital’s Domain 1 and Domain 2 scores to calculate the Total HAC Score. D If there are not enough adverse events to calculate the SIR for any of the measures, we will use only the hospital’s Domain 1 score to calculate its Total HAC Score. E:\FR\FM\19AUR2.SGM 19AUR2 50724 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Figure B. Calculation of Total HAC Score for Domain 2 CDC NHSN Measures Total HAC score = Yes Domain 1 score (weight = 100%) leu or other waiver? No Total HAC score = No data? Domain 1 score (weight = 35%) + 10 points for Domain 2 (weight = 65%) Yes to calculate SIR? No Total HAC score =Domain 1 Score (weight=35%) + Domain 2 Score Key: Domain 1 = AHRQ Patient Safety Indicators Domain 2 = CDC NHSN measures As discussed earlier, if a hospital has enough data to calculate PSI 90 for VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Domain 1 and ‘‘complete data’’ for at least one measure in Domain 2, the PO 00000 Frm 00230 Fmt 4701 Sfmt 4700 scores of the two domains will contribute to the Total HAC Score at 35 E:\FR\FM\19AUR2.SGM 19AUR2 ER19AU13.017</GPH> mstockstill on DSK4VPTVN1PROD with RULES6 (weight=65%) Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations percent for Domain 1 and 65 percent at Domain 2. However, if a hospital does not have enough data to calculate PSI 90 for Domain 1 but it has ‘‘complete data’’ for at least one measure in Domain 2, its Total HAC Score will depend entirely on its Domain 2 score. Similarly, if a hospital has ‘‘complete data’’ to calculate PSI 90 in Domain 1 but none of the measures in Domain 2, its Total HAC Score will be based entirely on its Domain 1 score. If the hospital does not have ‘‘complete data’’ to calculate PSI 90 for Domain 1 or any of the measures in Domain 2, we will not calculate a Total HAC Score for this hospital. mstockstill on DSK4VPTVN1PROD with RULES6 e. Reporting Hospital-Specific Information, Including the Review and Correction of Information (1) Confidential Reports to Applicable Hospitals Section 1886(p)(5) of the Act requires the Secretary to provide confidential reports to the applicable hospitals with respect to HACs. To meet the requirements under section 1886(p)(5) of the Act, in the FY 2014 IPPS/LTCH PPS proposed rule, we proposed that confidential reports for the HAC Reduction Program contain information related to claims-based measure data for the PSI measures, the domain score for each domain, and the Total HAC Score (78 FR 27633). We note that we proposed to use chart-abstracted measures in the HAC Reduction Program, and such information will be contained in the reports hospitals currently receive as part of the Hospital IQR Program and can be reviewed and corrected through the process specified for that program. We believe that this method would reduce the burden on hospitals, by alleviating the need to correct data present in two different programs. However, we welcomed any public comments and suggestions on this proposal. Comment: One commenter supported the proposal to provide hospitals with confidential reports and allow them the opportunity to submit corrections to HAC-related data prior to assessing a payment adjustment. Response: We appreciate the commenter’s support to our proposal on confidential reports. After consideration of the public comments we received, we are finalizing our proposal regarding confidential reports provided under the HAC Reduction program without modification. (2) Availability of Information to the Public Section 1886(p)(6)(A) of the Act requires the Secretary to ‘‘make VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 information available to the public regarding HAC rates of each subsection (d) hospital’’ under the HAC Reduction Program. Section 1886(p)(6)(C) of the Act requires the Secretary to post the HAC information for each applicable hospital on the Hospital Compare Web site in an easily understood format. Section 1886(p)(6)(B) of the Act also requires the Secretary to ‘‘ensure that an applicable hospital has the opportunity to review, and submit corrections for, the HAC information to be made public for each hospital.’’ To meet the requirements under section 1886(p)(6)(C) of the Act, in the FY 2014 IPPS/LTCH PPS proposed rule, we proposed that the following information would be made public on the Hospital Compare Web site relating to the HAC Reduction Program: (1) Hospital scores with respect to each measure; (2) each hospital’s domain specific score; and (3) the hospital’s Total HAC Score (78 FR 27633). However, because this is a new program, we invited public comments and suggestions on other information to be posted on the Hospital Compare Web site. Comment: Several commenters supported the public reporting of HAC data. One commenter generally supported public reporting and continued availability of HAC data for third party use. Other commenters supported full transparency of medical error reporting and strongly believed that the general public must have access to hospital safety measures for making informed decisions about hospital care. One commenter suggested that government funding be withheld to any hospital that would not publish their medical errors as part of a public Web site. The commenter added that patients should have reliable information in which to choose doctors and hospitals. One commenter supported full transparency of all medical error data. Response: We appreciate all the commenters’ recognition and support of the information we plan to publically report. We remain committed to fostering transparency for the public we serve and providing accurate data to hospitals to improve quality and increase patient safety. Comment: One commenter recommended that all quality measures be in the Hospital IQR Program for 1 year before being considered for performance programs. Response: Although it is not required for this program, the measures we are finalizing for the HAC Reduction Program for FY 2015 have all been in the Hospital IQR Program for at least 1 year, and have been publicly reported. PO 00000 Frm 00231 Fmt 4701 Sfmt 4700 50725 Comment: One commenter did not support publically reporting AHRQ PSI data. Response: We appreciate the commenter’s feedback. We believe that public reporting of PSI data is critical because we are using PSI–90 as part of calculating the Total HAC Score, which will be used to determine the payment adjustment under the HAC Reduction Program. We also already report these data on the Hospital Compare Web site. Therefore, in order to foster transparency and further provide safety information to the public in order to assist them with their healthcare decisions, we believe public reporting of the PSI–90 data is warranted. We are aware of stakeholders’ concerns regarding the use of claims-based measures. However, we maintain that because such claim information is suitable to determine payment under the Medicare program, it is also suitable to be reported to the public. We stress that we have provided a review and correction process to hospitals to revise data if hospitals recognize errors within their submitted data. We also are willing to assist hospitals with outreach and education in order to ensure they submit accurate claims information. After consideration of the public comments we received, we are finalizing that the following will be publically reported: (1) Hospital scores with respect to each measure; (2) each hospital’s domain specific score; and (3) the hospital’s Total HAC Score. (3) Review and Correction of Information Section 1886(p)(6)(B) of the Act requires the Secretary to ensure that each hospital has the opportunity to review and submit corrections for the information to be made available to the public with respect to each hospital under section 1886(p)(6)(A) of the Act prior to such information being made available to the public. In the FY 2014 IPPS/LTCH PPS proposed rule, we proposed that hospitals be allowed to review and correct the following information as part of the HAC Reduction Program prior to it being made available to the public: The claims-based measure rates in Domain 1; the point allocations for the measures in each domain; the domain scores; and the Total HAC Score (78 FR 27633). For the FY 2015 HAC Reduction Program, we proposed to use individual HAC measures consisting of CDC HAI measures as well as claims-based measures. Further, we proposed for the HAC Reduction Program that hospitals have an opportunity to review and correct chart-abstracted data and claims- E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50726 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations based data for each measure through the processes discussed below. These individual measures will be used to calculate the domain and Total HAC Score, which will determine those applicable hospitals within the top quartile, or those hospitals with the highest number of HACs. We also proposed that hospitals have the opportunity to review and submit corrections on its Domain and Total HAC Score for the HAC Reduction Program, which is also described below. Comment: Several commenters supported the review and correction process proposed for the HAC Reduction Program. Response: We appreciate the commenters’ support and feedback. Comment: One commenter suggested that CMS provide ample data for hospitals to fully review the program details, including hospital results and data files with tables to illustrate results by hospital and quartile type. Response: We considered several factors in deciding the amount of information that we would provide to hospitals for the review and correction process. These factors include confidentiality of information, our resources, and feasibility for hospital providers to process the data. For the purposes of the HAC Reduction Program data, we have decided to provide as much information that is pertinent to the calculation of the Domain and Total HAC Scores so that hospitals can verify the accuracy of these calculations. Providing extensive data information would be more than necessary in hospitals’ effort to review their Total HAC Score. To protect sensitive patient information, and to avoid burden and confusion to hospitals, we are careful not to include data elements that are not relevant for the review and correction process. Furthermore, providing all subsection (d) and Maryland hospitals with data requested by some commenters will require a large amount of resources, infrastructure changes and exert significant financial burden on these hospitals and on taxpayers. We have already provided hospitals with discharge level information about patient comorbidities, demographic characteristics, and dates of service that are pertinent to the calculation of the claims-based measures, and will continue to do so. Therefore, we believe that the proposed review and correction policies are adequate. We are working to identify new methods to provide hospitals with accurate and timely data to improve their care delivery processes to reduce HACs and increase patient safety in the acute care setting. We encourage VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 hospitals and other health care providers to provide us with recommendations for this effort. (a) Chart-Abstracted Measures (Domain 2—CDC HAI Measures) In the FY 2014 IPPS/LTCH PPS proposed rule, we proposed to use the same process that hospitals currently have to review and correct data submitted on the Hospital IQR Program chart-abstracted measures to review and correct chart-abstracted measures in Domain 2 under the HAC Reduction Program (78 FR 27633). Under this proposed process, hospitals would continue to have the opportunity to review and correct data they submit on all Hospital IQR Program chart abstracted measures, whether or not the measure was adopted as a measure for the HAC Reduction Program. We proposed to use the Hospital IQR Program’s data submission, review, and correction processes, which would allow for review and correction of data on a continuous basis as data are being submitted for the Hospital IQR Program, which in turn would allow hospitals to correct data used to calculate the Total HAC Score for those hospitals that participate in both the Hospital IQR Program and the HAC Reduction Program. We believe that this process would satisfy the requirement in section 1886(p)(6) of the Act to allow hospitals to review and submit corrections for information that will be made public with respect to each hospital. Under the Hospital IQR Program, hospitals currently have an opportunity to submit, review, and correct any of the chart-abstracted information for the full 41⁄2 months following the last discharge date in a calendar quarter. Hospitals can begin submitting data on the first discharge day of any reporting quarter. Hospitals are encouraged to submit data early in the submission schedule to identify errors and resubmit data before the quarterly submission deadline. Users may view and make corrections to the data that they submit starting immediately following submission. The data are populated into reports that are updated immediately with all data that have been submitted successfully. Hospitals are able to view a report each quarter which shows the numerator, denominator, and percentage of total for each Clinical Measure Set and Stratum. That report contains the hospital’s performance on each measure set/ stratum submitted quarterly by CDC on behalf of hospitals to CMS’ QIO Clinical Warehouse. We believe that 41⁄2 months is sufficient time for hospitals to be able to submit, review data, make corrections to the data, and view their percentage of PO 00000 Frm 00232 Fmt 4701 Sfmt 4700 total, or measure rate, on each Clinical Measure Set/Strata for use in both the Hospital IQR Program and the HAC Reduction Program. In addition, because this process is familiar to most hospitals, use of this existing framework reduces the burden that could have been placed on hospitals that participate in the Hospital IQR Program if they had to learn a new process for submitting chart-abstracted data for the HAC Reduction Program. Subsequent to the period during which hospitals could review and correct data and measure rates for chart-abstracted measures as specified, they would have no further opportunity to correct such data or measure rates. We proposed that once the hospital had an opportunity to review and correct quarterly data related to chart-abstracted measures submitted in the Hospital IQR Program, we would consider that the hospital had been given the opportunity to review and correct the data for the HAC Reduction Program. We proposed to use these data to calculate the measure scores for purposes of the HAC Reduction Program, and these measure scores would be used to calculate domain and Total HAC Scores for the HAC Reduction Program without further review and correction. We invited public comments on this proposal. Comment: One commenter supported the review and correction process for chart-abstracted measures. Response: We appreciate the commenter’s support. After consideration of the public comments we received, we are finalizing our proposal relating the review and correction process for chartabstracted measures without modification. (b) Claims-Based Measures (Domain 1 AHRQ PSI Measures) For purposes of the HAC Reduction Program for FY 2015, in the FY 2014 IPPS/LTCH PPS proposed rule, we proposed to calculate Domain 1 measure rates using the 2-year applicable period for the FY 2015 payment determination that spans from July 1, 2011 through June 30, 2013 and apply the minimum number of discharges criteria shown in Table B for each hospital as proposed (78 FR 27634). We intend to make this information available to the public, consistent with the requirements of section 1886(p)(6)(B) of the Act, as will be specified in further detail as part of the FY 2015 rulemaking process, in addition to posting this information on the Hospital Compare Web site in a subsequent release. We proposed to provide hospitals an opportunity to review and submit E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations corrections for claim-based measures using a process similar to the process currently used for posting results on the Hospital Compare Web site, which is also the process currently used in the Hospital Readmissions Reduction Program. We also proposed the details regarding the process for hospitals to review and submit corrections to their data score prior to making this information available to the public on the Hospital Compare Web site. For FY 2015, for the HAC Reduction Program, we proposed to deliver confidential reports and accompanying confidential discharge level information to hospitals as defined in section V.I.3.d. of the preamble of the proposed rule. These reports would be delivered in hospitals’ secure QualityNet accounts. The information in the confidential reports and accompanying confidential discharge-level information would be calculated using the claims information we had available approximately 90 days after the last discharge date in the applicable period, which is when we would create the data extract for the calculations. The discharge-level information accompanying the Domain 1 PSI measure rates would include the risk factors for the discharges that factor into the calculation of these measures, dates of admission and discharge, discharge characteristics, and other information relevant to the measure calculations, that is, exclusions. Our intent in providing this information is twofold: (1) To facilitate hospitals’ verification of the Domain 1 PSI measure calculations we provide during the review and correction period based upon the information we had available at the time our data extract was created; and (2) to facilitate hospitals’ quality improvement efforts with respect to the PSI measures. The review and correction process we proposed for claims-based measures in Domain 1 would not include submitting additional corrections related to the underlying claims data we used to calculate the measures for Domain 1, or adding new claims to the data extract we used to calculate the measures used in Domain 1. This is because it is necessary to take a static ‘‘snapshot’’ of the claims in order to perform the calculations. For purposes of this program, we would calculate the measures in Domain 1 using a static snapshot (data extract) taken at the conclusion of the 90-day period following the last date of discharge used in the applicable period. We recognize that under our current timely claims filing policy, hospitals have up to 1 year from the date of discharge to submit a claim to us. However, in using claims VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 data to calculate measures for this program, we proposed to create data extracts using claims in CMS’ Common Working File (CWF) 90 days after the last discharge date in the applicable period which we will use for the calculations. For example, if the last discharge date in the applicable period for a measure is June 30, 2013, we would create the data extract on September 30, 2013, and use that data to calculate the claims based measures for that applicable period. Hospitals would then receive the Domain 1 Score in their confidential reports and accompanying discharge-level information, and they would have an opportunity to review and submit corrections for the calculations of the measures in Domain 1. As we stated above, hospitals would not be able to submit corrections to the underlying claims snapshot used for the Domain 1 measure calculations after the extract date, and also would not be able to add claims to this data set. Therefore, we would consider hospitals’ claims data to be complete for purposes of calculating the Domain 1 for the HAC Reduction Program at the conclusion of the 90-day period following the last date of discharge used in the applicable period. We considered a number of factors in determining that a 90-day ‘‘run-out’’ period is appropriate for purposes of calculating claims based measures. First, we seek to provide timely quality data to hospitals for the purpose of quality improvement and to the public for the purpose of transparency. Next, we seek to make payment adjustments to hospitals based on their performance on measures as close in time to the performance period as possible. Finally, with respect to claims-based measures, we seek to have as complete a data set as possible, recognizing that hospitals have up to 1 year from the date of discharge to submit a claim under CMS’ timely claims filing policy. After the data extract is created, it takes several months to incorporate other data needed for the calculations (particularly in the case of risk-adjusted, and/or episodebased measures). We then need to generate and check the calculations, as well as program, populate, and deliver the confidential reports and accompanying data to be delivered to hospitals. We also are aware that hospitals would prefer to receive the calculations to be used for the HAC Reduction Program as soon as possible. Because several months lead time is necessary after acquiring the data to generate these claims-based calculations, if we were to delay our data extraction point to 12 months after PO 00000 Frm 00233 Fmt 4701 Sfmt 4700 50727 the last date of the last discharge in the applicable period, we would not be able to deliver the calculations to hospitals sooner than 18 to 24 months after the last discharge. We believe this would create an unacceptably long delay both for hospitals and for us to deliver timely calculations to hospitals for quality improvement and transparency, and, ultimately, timely HAC adjustment factors for purposes of this program. Therefore, we proposed to extract the data needed to calculate the Domain 1 for this program 90 days after the last date of discharge for the applicable period so that we can balance the need to provide timely program information to hospitals with the need to calculate the claims based measures using as complete a data set as possible. We noted that, under the proposed process, hospitals would retain the ability to submit new claims and corrections to submitted claims for payment purposes in line with CMS’ timely claims filing policies. However, we emphasized that the administrative claims data used to calculate the Domain 1 measures and the resulting Domain Score reflect the state of the claims at the time of extraction from CMS’ Common Working File. Under the proposed process, a hospital’s opportunity to submit corrections to the calculation of the Total HAC Score ends at the conclusion of the review and correction period. Comment: One commenter supported the proposal. Response: We appreciate the commenter’s support. After consideration of the public comments we received, we are finalizing our proposal relating to the review and correction process of the claims-based measures with the clarification that we are finalizing the AHRQ–PSI–90 composite claims based measure for Domain 1. (c) Total HAC Score In the FY 2014 IPPS/LTCH PPS proposed rule, we proposed to provide hospitals with a period of 30 days to review and submit corrections for their Total HAC Scores for the HAC Reduction Program (78 FR 27635). This 30-day period would begin when the hospitals’ confidential reports and accompanying discharge-level information are posted to their QualityNet accounts. This proposed requirement will enable us to evaluate correction requests and provide decisions on those requests in a timely manner. We believe that this proposed review and corrections process will ensure that hospitals are able to fully and fairly review their domain and Total HAC E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50728 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Score. We view the review and corrections process as a means to ensure that the information posted on the Hospital Compare Web site is accurate. We invited public comments on the proposed review and corrections process for the HAC Reduction Program. Based on previous experience with public reporting of measures under the Hospital IQR Program, and review and correction processes currently in place for the Hospital Readmission Reduction Program and the Hospital VBP Program, we believe this 30-day period allows enough time for hospitals to review their data and notify us of calculation errors, and for us to incorporate appropriate corrections to the HAC calculations prior to making the data available to the public. We proposed that the Total HAC Score would be made available to the public via the Hospital Compare Web site after the review and correction period. During the review and correction period, hospitals should notify us of suspected errors in their Total HAC Score using the technical assistance contact information provided in their confidential reports. During the 30-day review and correction process for the Total HAC Score, if a subsection (d) hospital suspects that discrepancies exist in our application of the HAC scoring methodology (assignment of points to measures, domain scoring, domain weighting), it should notify us during the review and correction period using the technical support contacts provided in the hospital’s confidential report. We would investigate the validity of each submitted correction and notify hospitals of the results. If we confirm that we made an error in creating the data extract or in calculating the Total HAC Score, we would correct the calculations, issue new confidential reports to affected subsection (d) hospitals, and then publicly report the corrected Total HAC Score. However, if the errors take more time than anticipated to correct, we would notify hospitals that corrected HAC Scores will be made available through delivery of confidential reports followed by a second 30-day review and correction period, subsequent publication, and posting on the Hospital Compare Web site. In addition, we proposed that any corrections to a hospital’s Total HAC Score would then be used to recalculate a hospital’s quartile under section 1886(p)(2)(B)(i) of the Act in order to determine the hospital’s adjustment factor in accordance with section 1886(p)(2)(B)(ii) of the Act. We stated that this proposed process would fulfill the statutory requirements VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 at section 1886(p)(2)(B), section 1886(p)(6)(B), and section 1886(p)(6)(C) of the Act. We stated that we further believe that the proposed process would allow hospitals to review and correct their total HAC Scores. We proposed to codify this review and correction process at proposed § 412.172(f). In summary, we would specify that CMS would make information available to the public regarding HAC rates of all hospitals described in section 1886(d)(1)(B) of the Act, including hospitals in Maryland paid under section 1814(b)(3) of the Act, under the HAC Reduction Program (proposed paragraph (f)). To ensure that a hospital has the opportunity to review and submit corrections for its HAC rates for the applicable conditions for a fiscal year that are used to determine its total hospital acquired conditions score, we would specify that CMS will provide each hospital with confidential hospitalspecific reports and discharge level information used in the calculation of its total hospital acquired conditions score (proposed paragraph (f)(2)). Hospitals would have a period of 30 days after receipt of the information provided to review and submit corrections for the hospital-acquired conditions domain score for each condition that is used to calculate the Total HAC score for the fiscal year (proposed paragraph (f)(2)). The administrative claims data used to calculate a hospital’s total hospital acquired conditions score for the conditions for a fiscal year would not be subject to review and correction (proposed paragraph (f)(3)). CMS would post the total hospital-acquired condition score for the applicable conditions for a fiscal year for each applicable hospital on the Hospital Compare Web site (proposed paragraph (f)(4)). Comment: One commenter suggested that CMS provide a minimum of 60 days to review and correct the Total HAC Score. Response: We appreciate the commenter’s suggestion. We are adopting the same review and correction process and timeframes already used for the Hospital Readmissions Reduction Program and Hospital VBP Program. We will provide hospitals with an opportunity to preview their Total HAC Score for 30 days prior to posting on the Hospital Compare Web site. This process meets the statutory requirement in section 1886(p)(6)(B) of the Act which requires the Secretary to ensure that a subsection (d) hospital has the opportunity to review and submit corrections with respect to the hospital prior to such PO 00000 Frm 00234 Fmt 4701 Sfmt 4700 information being made public. Aside from the statutory requirements, we also considered hospital experience with the measure and data production timeline in proposing the 30-day preview period. In terms of hospital experience with the measures, while the HAC Reduction Program is new, subsection (d) hospitals are already familiar with some of these measures given their inclusion in the Hospital IQR Program. Because hospitals are working with measures in which they have some prior experience from the Hospital IQR Program, and because the timeframe aligns with the 30-day preview period already in place for the Hospital Readmissions Reduction Program and the Hospital VBP Program, we believe that a 30-day preview period is sufficient for hospitals to review and correct their information on their Total HAC Score. In terms of the data production timeline, the complexity of these measures and the required calculations will involve a significant amount of programming resources. Therefore, we cannot extend the preview period to more than 30 days. Moreover, if hospitals find data problems that we determine to be attributable to our calculation or programming errors, we will need adequate time between mid-July and the end of September to: (1) Recalculate the Total HAC Score; (2) regenerate and redisseminate corrected results to hospitals in time for payment adjustment in early October (the beginning of the subsequent fiscal year); and (3) publicly report the Total HAC Score on the Hospital Compare Web site to meet the statutory reporting requirements under section 1886(p)(6) of the Act. Accordingly, we cannot change the review and correction timeframe to 60 days. After consideration of the public comments we received, for the review and correction process, we are finalizing the policies of providing subsection (d) hospitals with: (1) Confidential reports and accompanying discharge-level information (this includes information related to claims-based measure data for the PSI measures, the domain score for each domain, and the Total HAC Score); (2) publically reporting hospital scores with respect to each measure, each hospital’s domain specific score; and the hospital’s Total HAC Score on the Hospital Compare Web site; and (3) a period of 30 days to review and correct their claims-based measures in Domain 1, the point allocations for the measures in each domain, the domain score, and the Total HAC Score. E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 f. Limitation on Administrative and Judicial Review Section 1886(p)(7) of the Act provides that there will be no administrative or judicial review under Section 1869 of the Act, under Section 1878 of the Act, or otherwise for any of the following: • The criteria describing an applicable hospital under section 1886(p)(2)(A) of the Act. • The specification of hospital acquired conditions under section 1886(p)(3) of the Act. • The specification of the applicable period under section 1886(p)(4) of the Act. • The provision of reports to applicable hospitals under section 1886(p)(5) of the Act. • The information made available to the public under section 1886(p)(6) of the Act. In the FY 2014 IPPS/LTCH PPS proposed rule, we proposed to include these statutory provisions under proposed § 412.172(g) (78 FR 27636 and 27759). We note that section 1886(p)(6) of the Act requires the Secretary to make information available to the public regarding HAC scores of each applicable hospital under the HAC Reduction Program. Section 1886(p)(6)(B) of the Act also requires the Secretary to ensure that an applicable hospital has the opportunity to review, and submit corrections for, the information to be made available to the public, prior to that information being made public. We believe that the review and correction process explained above will provide hospitals with the opportunity to correct data prior to its release on the Hospital Compare Web site. Comment: One commenter stated that limited judicial and administrative review exists with respect to what qualifies as an applicable hospital, the specifications of a HAC, the determination of an applicable period, and what information is publically reported. Therefore, the commenter recommended that CMS provide additional data, information, and analysis of the HAC Reduction Program in order for commenters to provide meaningful comment on the HAC Reduction Program and adequately replicate CMS’ findings with regard to the program. Response: We appreciate the commenter’s suggestion. However, in this year’s rule, we have provided information and rationale on the qualifications of an applicable hospital, the specifications of the HAC, the determination of an applicable period, and the information that shall be reported to the public. Therefore, we VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 believe that commenters can and did provide meaningful comment on the HAC Reduction Program. In the future, as we reassess and further analyze the HAC Reduction Program, we may, if significant, present additional findings, data, and analysis in future rulemaking. After consideration of the public comments we received, we are finalizing our proposals, including the regulatory text at § 412.172(g), relating to the limitations on administrative and judicial review. J. Payments for Direct Graduate Medical Education (GME) Costs (§§ 412.105 and 413.75 Through 413.83 1. Background Section 1886(h) of the Act, as added by section 9202 of the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 (Pub. L. 99–272) and as currently implemented in the regulations at 42 CFR 413.75 through 413.83, establishes a methodology for determining payments to hospitals for the direct costs of approved graduate medical education (GME) programs. Section 1886(h)(2) of the Act sets forth a methodology for the determination of a hospital-specific base-period per resident amount (PRA) that is calculated by dividing a hospital’s allowable direct costs of GME in a base period by its number of full-time equivalent (FTE) residents in the base period. The base period is, for most hospitals, the hospital’s cost reporting period beginning in FY 1984 (that is, October 1, 1983 through September 30, 1984). The base year PRA is updated annually for inflation. In general, Medicare direct GME payments are calculated by multiplying the hospital’s updated PRA by the weighted number of FTE residents working in all areas of the hospital complex (and at nonprovider sites, when applicable), and the hospital’s Medicare share of total inpatient days. Section 1886(d)(5)(B) of the Act provides for a payment adjustment known as the indirect medical education (IME) adjustment under the hospital inpatient prospective payment system (IPPS) for hospitals that have residents in an approved GME program, in order to account for the higher indirect patient care costs of teaching hospitals relative to nonteaching hospitals. The regulations regarding the calculation of this additional payment are located at 42 CFR 412.105. The hospital’s IME adjustment applied to the DRG payments is calculated based on the ratio of the hospital’s number of FTE residents training in either the inpatient or outpatient departments of the IPPS PO 00000 Frm 00235 Fmt 4701 Sfmt 4700 50729 hospital to the number of inpatient hospital beds. The calculation of both direct GME and IME payments is affected by the number of FTE residents that a hospital is allowed to count. Generally, the greater the number of FTE residents a hospital counts, the greater the amount of Medicare direct GME and IME payments the hospital will receive. In an attempt to end the implicit incentive for hospitals to increase the number of FTE residents, Congress, through the Balanced Budget Act of 1997 (Pub. L. 105–33), established a limit on the number of allopathic and osteopathic residents that a hospital may include in its FTE resident count for direct GME and IME payment purposes. Under section 1886(h)(4)(F) of the Act, for cost reporting periods beginning on or after October 1, 1997, a hospital’s unweighted FTE count of residents for purposes of direct GME may not exceed the hospital’s unweighted FTE count for direct GME in its most recent cost reporting period ending on or before December 31, 1996. Under section 1886(d)(5)(B)(v) of the Act, a similar limit based on the FTE count for IME during that cost reporting period is applied effective for discharges occurring on or after October 1, 1997. Dental and podiatric residents are not included in this statutorily mandated cap. The Affordable Care Act made a number of statutory changes relating to the determination of a hospital’s FTE resident count for direct GME and IME payment purposes and the manner in which FTE resident limits are calculated and applied to hospitals under certain circumstances. Regulations implementing these changes are discussed in the November 24, 2010 final rule (75 FR 72133) and the FY 2013 IPPS/LTCH PPS final rule (77 FR 53416). 2. Inclusion of Labor and Delivery Days in the Calculation of Medicare Utilization for Direct GME Purposes and for Other Medicare Purposes In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53411), we discussed Medicare’s policies with respect to the treatment of labor and delivery services in the calculation of the Medicare DSH payment adjustment. We noted that, in the FY 2010 IPPS/LTCH PPS final rule (74 FR 43899 through 43901), we made a change to include, in the disproportionate patient percentage (DPP) calculation of the Medicare DSH payment adjustment, all patient days associated with patients occupying labor and delivery beds once the patient has been admitted to the hospital as an E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50730 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations inpatient, regardless of whether the patient days are associated with patients who occupied a routine bed prior to occupying an ancillary labor and delivery bed. We stated that we made the change because the costs associated with labor and delivery patient days of patients who are admitted as inpatients are generally payable under the IPPS. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53413), we finalized a policy extending our current approach of including labor and delivery patient days in the DPP of the Medicare DSH payment adjustment to our rules for bed counting for purposes of both the IME payment adjustment and the Medicare DSH payment adjustment. We stated that if a patient day is counted for DSH payment purposes because the services furnished are generally payable under the IPPS, the bed in which the services are furnished also should be considered to be available for IPPS-level care. To implement this policy, we amended the regulations at 42 CFR 412.105(b)(4) to remove from the list of excluded beds those beds associated with ‘‘ancillary labor/delivery services.’’ This change was effective for cost reporting periods beginning on or after October 1, 2012. In response to our proposal in the FY 2013 IPPS/LTCH proposed rule to include labor and delivery bed days as available bed days for DSH and IME payment adjustment purposes, commenters noted that if these days are considered inpatient days, they also should be considered patient days for purposes of allocating direct GME payments. However, the Medicare cost report currently does not allow for labor and delivery patient days to be counted in the direct GME patient load. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53413), we stated that we would undertake further review to determine whether it was necessary to make any changes in the manner in which patient days are reported on the Medicare cost report and whether these labor and delivery patient days should be excluded from or included in the calculation of the Medicare patient load. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27637), we stated that we had analyzed the calculation of the Medicare patient load and the cost reporting implications. Direct GME payments are calculated using three variables: the hospital’s per resident amount; the number of FTE residents a hospital is training subject to its FTE cap and the rolling average; and the hospital’s Medicare patient load. ‘‘Medicare patient load’’ is defined at 42 CFR 413.75(b) as ‘‘with respect to a hospital’s cost reporting period, the total number of hospital inpatient days VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 during the cost reporting period that are attributable to patients for whom payment is made under Medicare Part A divided by total hospital inpatient days. In calculating inpatient days, inpatient days in any distinct part of the hospital furnishing a hospital level of care are included and nursery days are excluded.’’ We agree with the commenters who stated that because labor and delivery days are considered inpatient days for DSH purposes, they also should be considered inpatient days for purposes of determining the Medicare share for direct GME payments. We believe that the best way to calculate a hospital’s Medicare patient load or the ‘‘Medicare utilization’’ (the term we will use for the remainder of this section) is to include all of the hospital’s inpatient days. Consistent with the inpatient day counting rules for DSH as clarified in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43899 through 43901), in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27637), we proposed that patient days associated with maternity patients who were admitted as inpatients and were receiving ancillary labor and delivery services at the time the inpatient routine census is taken, will be included in the Medicare utilization calculation, regardless of whether the patient actually occupied a routine bed prior to occupying an ancillary labor and delivery bed and regardless of whether the patient occupies a ‘‘maternity suite’’ in which labor, delivery, recovery, and postpartum care all take place in the same room. We understand that including labor and delivery inpatient days in the Medicare utilization ratio invariably would reduce direct GME payments because the denominator of the ratio, which includes the hospital’s total inpatient days, would usually increase at a higher rate than the numerator of the ratio. However, because the Medicare utilization ratio is a comparison of a hospital’s total Medicare inpatient days to its total inpatient days, we believe that revising the ratio to include labor and delivery days is appropriate because they are inpatient days and, therefore, should be counted as such. Therefore, we proposed that, effective for cost reporting periods beginning on or after October 1, 2013, for purposes of applying the Medicare utilization ratio, we would include labor and delivery inpatient days in the numerator (to the extent that there are any labor and delivery inpatient days associated with Medicare beneficiaries), and all labor and delivery inpatient days (associated PO 00000 Frm 00236 Fmt 4701 Sfmt 4700 with all inpatients of the hospital) in the denominator. In order to implement the proposed change, we noted that we would need to amend the applicable cost report worksheets and instructions (in particular, Worksheet S–3, Part I) to allow for the inclusion of labor and delivery inpatient days in the Medicare utilization ratio on the Medicare cost report. In addition to direct GME, which uses the ratio of Medicare inpatient days to total inpatient days to determine payment, we stated that the proposal also impacts other Medicare policies where either the number of inpatient days or a ratio of Medicare inpatient days to total inpatient days is used to determine eligibility or payment. Regarding eligibility, for example, including labor and delivery days as inpatient days could affect a hospital’s eligibility for SCH status. A hospital can be classified as an SCH if it is located more than 35 miles from other like hospitals or is located in a rural area (as defined at § 412.64 of the regulations) and meets one of the conditions listed in the regulations at § 412.92(a). In determining whether a nearby hospital is a like hospital, CMS compares the total inpatient days of the SCH applicant hospital with the total inpatient days of the nearby hospital. If the total inpatient days of the nearby hospital are greater than 8 percent of the total inpatient days reported by the SCH applicant hospital, the nearby hospital is considered a like hospital for purposes of evaluating the applicant hospital’s eligibility for SCH status. Therefore, including labor and delivery days as inpatient days may impact the count of inpatient days for both the SCH applicant hospital and the nearby hospital and may affect the applicant hospital’s eligibility for SCH status. In summary, we proposed to include labor and delivery days as inpatient days in the Medicare utilization calculation and for other Medicare purposes, effective for cost reporting periods beginning on or after October 1, 2013. However, we stated that this proposal would not impact Medicare payments calculated on a reasonable cost basis for routine inpatient services, which are apportioned in accordance with 42 CFR 413.53(a)(1). Comment: Many commenters objected to the inclusion of labor and delivery days in the Medicare utilization ratio absent a Congressional mandate to do so. Commenters asserted that labor and delivery days have no relevance to Medicare because only a minute percentage of U.S. births are covered by Medicare, and their inclusion would inappropriately dilute a hospital’s E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Medicare share. The commenters stressed that the inclusion of labor and delivery days would disproportionately affect production of generalist practitioners of medicine and surgeons and teaching hospitals that depend on substantial volumes of obstetrics/ gynecology, family medicine, and pediatric services, which could also lead to a physician workforce shortage across the board. Many commenters also requested that CMS reverse its FY 2010 decision on including labor and delivery inpatient days for DSH purposes and its FY 2013 decision on including labor and delivery beds for IME and DSH purposes. One commenter requested a comprehensive analysis of the impact of including labor and delivery days across IME, DSH, and direct GME rather than implementing the inclusion piecemeal because there might be unintended consequences when changes are made to parts rather than the whole. Response: As noted above, the ‘‘Medicare patient load’’ (‘‘Medicare utilization’’ used interchangeably) is defined in regulations at 42 CFR 413.75(b), as follows: The total number of hospital inpatient days during the cost reporting period that are attributable to patients for whom payment is made under Medicare Part A divided by total hospital inpatient days. The volume of labor and delivery services paid under the Medicare program, regardless of whether it is as low as asserted by the commenters, does not alter the fact that these services are covered by Medicare and many patients receiving these services are admitted as inpatients and are receiving an IPPSlevel of care. We do not believe it would be appropriate to adopt a policy to exclude patient days from a hospital’s number of inpatient days based on the volume of services paid for by Medicare. The issue at hand is the calculation of a hospital’s Medicare utilization, and the determination of what constitutes an inpatient day, in making such a calculation. Whether inpatient days are attributable exclusively to Medicare beneficiaries is not at issue, and the commenters’ assertion that labor and delivery days have no relevance to Medicare and, therefore, should be excluded from the Medicare utilization ratio has no bearing on how Medicare’s direct GME payments are calculated in the formula specified in the law. The definition of ‘‘Medicare patient load’’ at section 1886(h)(3)(C) of the Act does not specify inclusions or exclusions in the inpatient day count based on volume. An inpatient day has historically been counted in the Medicare utilization VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 calculation for direct GME purposes in situations where a maternity patient admitted as an inpatient occupied a routine bed at some time before going to the ancillary labor and delivery room or receiving labor and delivery services at the time of the routine census (Provider Reimbursement Manual-I (PRM–I), Section 2205.2). Therefore, it is an established policy that even if the number of inpatient days applicable to the maternity patients who occupied a routine bed before going to the labor and delivery room was low, both the Medicare and total inpatient days of these maternity patients have been included in the determination of the Medicare utilization calculation (in the denominator, and even in the numerator in the rare circumstance that the maternity patient is a Medicare beneficiary due to disability). Consequently, it is equally appropriate to include in the Medicare utilization calculation the inpatient days pertaining to the maternity patients who have been admitted as inpatients, but have not yet occupied a routine bed because they proceed directly to receive ancillary labor and delivery services, and are in the ancillary labor and delivery room at the time the inpatient routine census is taken. (We also note that the inpatient day is counted for that maternity patient only in the routine unit, and not in the routine unit and again in the ancillary labor and delivery room; this avoids counting 2 days for the same patient (PRM–I, Sections 2205 and 2205.2). However, because 42 CR 412.105(b) prescribes counting of available beds, the ancillary labor and delivery bed, for the time occupied by a particular maternity inpatient, and while unoccupied, would be counted as an available bed in addition to the routine bed occupied later by the maternity inpatient (FY 2013 IPPS/LTCH PPS final rule (77 FR 53413)). Furthermore, it is CMS’ general policy to treat inpatient days and beds consistently. That is why we believe that because labor and delivery days are considered inpatient days for DSH purposes, and the beds are considered available inpatient beds for IME and DSH purposes, the labor and delivery inpatient days also should be considered inpatient days for purposes of determining the Medicare share for direct GME payments. We also note that a hospital’s total number of inpatients includes pediatric patients, who would rarely be Medicare patients, yet their patient days, and the inpatient days of all other non-Medicare patients, are included in the Medicare utilization ratio. Furthermore, direct GME payments are made to hospitals for PO 00000 Frm 00237 Fmt 4701 Sfmt 4700 50731 all types of residency programs, including obstetrics/gynecology and pediatrics specialty programs, which train physicians to treat primarily the non-Medicare population. Therefore, we believe that the commenters’ concerns that the inclusion of labor and delivery inpatient days in the Medicare utilization ratio would have a harmful effect on the physician workforce are unfounded. Accordingly, we continue to believe that patient days associated with maternity patients who are admitted as inpatients and are receiving ancillary labor and delivery services at the time the inpatient routine census is taken, regardless of whether the patient actually occupied a routine bed prior to occupying an ancillary labor and delivery bed and regardless of whether the patient occupies a ‘‘maternity suite’’ in which labor, delivery, recovery, and postpartum care all take place in the same room, should be included in the Medicare utilization calculation. Comment: Several commenters argued that the inclusion of labor and delivery days in the Medicare utilization calculation is inconsistent with CMS’ longstanding policy regarding services that are not typically covered by Medicare. The commenters cited CMS’ policy on healthy newborn days which, for DSH purposes, are included in the patient day count but excluded from the bed day count (68 FR 45417). The commenters asserted that the rationale behind that policy is that Medicare does not typically cover these services while Medicaid does. Therefore, the commenters believed that CMS should exclude labor and delivery bed days from the IME intern and resident to bed (IRB) ratio and for DSH bed-day counting purposes but should continue to include labor and delivery patient days for calculating the disproportionate patient percentage (DPP). In addition, the commenters stated that the exclusion of bed days from these calculations is consistent with CMS’ longstanding definition of beds in the cost report. Response: We disagree with the commenters’ statement that inclusion of labor and delivery days in the Medicare utilization calculation is inconsistent with CMS’ longstanding policy regarding services that are not typically covered by Medicare. In the circumstance, albeit rare, that the maternity patient is disabled and qualifies for Medicare, the labor and delivery services of that maternity patient would be covered by Medicare. Therefore, the frequency of Medicare coverage is not at issue, and the days associated with the maternity inpatient would be included in both the E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50732 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations numerator and the denominator of the Medicare patient load calculation. We further believe that the commenters are confusing CMS’ (previously HCFA’s) longstanding policy regarding the inclusion of patient days associated with healthy newborns in the Medicaid fraction of the DSH DPP calculation. CMS’ policy of including healthy newborn days in the patient day count of the Medicaid fraction of the DSH DPP calculation is unique to DSH because of the way the days to be used in the Medicaid fraction are defined by law. Initially, after the enactment of the Consolidated Omnibus Reconciliation Act (COBRA) of 1985, HCFA’s policy was not to count healthy newborn days in determining a hospital’s Medicaid percentage, based on the fact that healthy newborn beds are not included in the bed size determination. However, not long afterward, we reconsidered the language at section 1886(d)(5)(F)(vi)(II) of the Act, which specifically states with respect to the Medicaid fraction of the DPP that the numerator consists of ‘‘the number of the hospital’s patient days for such period which consist of patients who (for such days) were eligible for medical assistance under a State plan approved under title XIX, but who were not entitled to benefits under part A of this title, and the denominator of which is the total number of the hospital’s patient days for such period.’’ (Emphasis added.) Because healthy newborns may be ‘‘eligible’’ for coverage by Medicaid, HCFA changed its policy and began to include patient days associated with healthy newborns in the Medicaid fraction of the Medicare DSH DPP. However, the treatment of nursery days and beds has no bearing on the treatment of patient days associated with maternity patients who are receiving ancillary labor and delivery services at the time the inpatient routine census is taken, yet who are admitted as inpatients, and therefore, the associated days should be included in the count of inpatient days. We continue to believe that patient days associated with such maternity patients should be included in the calculation of Medicare patient load defined at § 413.75(b), regardless of whether these patients occupied an inpatient routine bed prior to receiving the ancillary labor and delivery services at the time of the census because they are admitted as inpatients and they are receiving IPPS-level acute care. Comment: One commenter suggested that even though there is consistency in considering labor and delivery days to be inpatient days for direct GME purposes, along with consideration of those days to be inpatient days for DSH VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 and IME purposes, the application of such a policy for direct GME purposes as compared to DSH and IME purposes is different, because for DSH and IME, Medicare utilization is not directly tied to determining reimbursement. Rather, the commenter stated that it is used to determine if certain hospitals would qualify for those payments. Response: The commenter is correct that the ramifications of inpatient status are different for IME, DSH, and direct GME payments, respectively, because each has a different statutory payment formula. Nevertheless, as stated previously, the measure by which patient days are counted is the determination of whether the patient is admitted as an inpatient and those services furnished are at an IPPS-level of care. This applies whether or not the calculation involved determines an actual payment amount or whether it is used to determine eligibility for additional payment. As we explained in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53413), if a patient day is counted for DSH payment purposes because the services furnished are generally payable under the IPPS, the bed in which the services are furnished also should be considered to be available for IPPS-level care. Therefore, it follows that if the days in question are indeed inpatient, they should also be counted as inpatient days for other purposes, such as inclusion in the calculation of a hospital’s Medicare utilization ratio, or determination of eligibility for SCH status. In addition, regarding the commenter’s assertion that Medicare utilization is not directly tied to reimbursement for DSH and IME, while we note that the DSH and IME formulas are not paid based on a hospital’s Medicare utilization, as with direct GME, these payments are dependent on, and are made, for each Medicare inpatient discharge from a hospital. Comment: One commenter was concerned about the impact of including labor and delivery days in the Medicare utilization calculation on the payments for meaningful use of electronic health records under the Medicare and Medicaid EHR Incentive Programs. As many labor and delivery days are for Medicaid patients, in theory, such a proposal might result in an increase in Medicaid utilization and a decrease in Medicare utilization and, therefore may have no significant impact on hospitals eligible for both Medicare and Medicaid meaningful use reimbursement. The commenter noted that the Medicaid meaningful use reimbursement calculation is essentially a ‘‘one-time’’ calculation using historical data, spread PO 00000 Frm 00238 Fmt 4701 Sfmt 4700 over 3 years in most States, while the Medicare utilization is recalculated each year. Therefore, this proposed policy may result in a reduction in Medicare meaningful use reimbursement with no increase in Medicaid reimbursement. If CMS does finalize this policy, the commenter requested that the labor and delivery days be excluded from the Medicare utilization calculated to determine meaningful use reimbursement. Response: We understand the commenter’s concern regarding the potential effect of including labor and delivery inpatient days in the hospital’s number of total inpatient days, and the calculation of the incentive payments for meaningful use of certified EHR technology under Medicare, but we are not commenting in this Medicare IPPS final rule on the ramifications, if any, on Medicaid payment. However, regardless of the impact on a particular hospital, because labor and delivery inpatients are, in fact, inpatients, we continue to believe that these inpatient days should be included in the determination of a hospital’s total number of inpatient days. Furthermore, we note that in the final rule for Stage 1 of the EHR Incentive Program (75 FR 44453), we stated that ‘‘we proposed to determine the number of Medicare Part A and Part C inpatient bed [sic] days using the same data sources and methods for counting those days that we may employ in determining Medicare’s share for purposes of making payments for direct graduate medical education costs. . . .’’ Therefore, we note that there is already consistency between Medicare’s policies regarding inpatient days for EHR and direct GME. Comment: Some commenters pointed out that the labor and delivery beds are unique in that even though the bed might be occupied by a patient, that patient may not be ‘‘ready’’ to be admitted as an inpatient. These commenters requested clarification of our proposal on whether or not to include in the patient day count the scenario where the patient is occupying a labor and delivery bed but is under observation status. They also wanted confirmation that the counting of beds as inpatient beds would only occur after the patient’s admission as an inpatient. Response: Patients under observation status are outpatients; they are not admitted as inpatients. As we noted in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43900) and the FY 2013 IPPS/LTCH PPS final rule (77 FR 53412), our policy for counting labor and delivery patient days does not allow for the inclusion of days of labor and delivery patients who are not admitted E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations to the hospital as inpatients. For example, if a woman presents at a hospital for labor and delivery services, but is determined by medical staff to be in false labor and is sent home without ever being admitted to the hospital as an inpatient, any days associated with such services furnished by the hospital would not be included in the DPP for purposes of the calculation of the Medicare DSH payment adjustment. This same policy would apply with regard to inpatient days in the Medicare utilization ratio, and any time spent in the hospital prior to admission as an inpatient would not be counted toward the determination of an inpatient day. With regard to the counting of beds, the regulations at 42 CFR 412.105(b)(4) explicitly exclude ‘‘beds otherwise countable under this section used for outpatient observation services,’’ and therefore, the bed in a unit or ward that is otherwise occupied to provide a level of care that would be payable under the IPPS would be counted as available generally while it is unoccupied, or occupied with a patient admitted as an inpatient. Comment: Another commenter observed that CMS’ proposal does not take into account two different types of labor and delivery beds that are in place at some hospitals. The commenter noted that there are labor and delivery beds that are used for postpartum purposes and there are those that are used for delivery only. In addition, some hospitals with traditional labor and delivery beds have adopted the policy of setting aside a recovery room in the hospital’s obstetrical unit for the mother and baby once the mother is committed to delivery, even though she may still be in a traditional labor and delivery room. The commenter pointed out that CMS did not address how to avoid the double counting of these two types of beds during the same time period. Response: We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53413) where we responded to a similar comment and clarified our policy regarding the bed count for various types of labor and delivery beds. We disagree with the commenter that there would be ‘‘double counting’’ of postpartum and ancillary labor and delivery beds for the same mother. Rather, under our existing policies, we include all beds in a unit that is providing services that are generally payable under the IPPS because we believe such beds to be available for IPPS-level acute care hospital services. Specifically, postpartum beds have historically been included in the definition of an available inpatient bed and, therefore, are already included in the routine adult VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 and pediatric services bed count on line 1 of Worksheet S–3, Part I (68 FR 45420). Moreover, the definition of an available inpatient bed has been revised to eliminate the exclusion for ancillary labor and delivery beds because they are available for IPPS-level acute care hospital services. That is, effective for cost reporting periods beginning on or after October 1, 2012, beds in distinct ancillary labor and delivery rooms, when occupied by an inpatient receiving IPPS-level acute care hospital services or when unoccupied, are considered to be part of a hospital’s inpatient available bed count in accordance with 42 CFR 412.105(b) (77 FR 53411 through 53413). However, we understand that hospital practices may vary with regard to the types of beds used for the various stages of labor and delivery. To the extent that some hospitals set aside beds in the ancillary labor and delivery unit for recovery purposes, separate from the beds that are used for actual labor and delivery services, we would agree that these beds are not permanently maintained for inpatient use and would not be considered available for IPPS-level care. Comment: One commenter noted that the cost report now separates labor and delivery room days for DSH purposes, and does not include them in the calculation of Medicare utilization. Because the days in question will not be included in the days used for apportionment (for payment calculated on a reasonable cost basis), the commenter questioned whether the cost report would be revised to reflect the new policy. The commenter also requested clarification on whether labor and delivery days would be used for pass-through costs for nursing and allied health education programs, and whether or not the new policy would apply to existing SCHs or only to hospitals seeking SCH status once the proposal is finalized. The commenter recommended only applying the new policy to new SCH applicants due to the administrative burden of applying the policy to all existing SCHs. Response: We appreciate the commenter’s information regarding the need for changes to the Medicare hospital cost report and the cost reporting instructions. As noted the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27637), we plan to amend the applicable cost report worksheets and instructions (in particular, Worksheet S–3, Part I) to be able to include labor and delivery inpatient days in the Medicare utilization ratio on Worksheet E–4. As mentioned in the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR 27637), this change regarding inclusion of labor PO 00000 Frm 00239 Fmt 4701 Sfmt 4700 50733 and delivery inpatient days in the Medicare utilization ratio would not impact Medicare payments calculated on a reasonable cost basis for routine inpatient services, which are apportioned in accordance with 42 CFR 413.53(a)(1). Therefore, this change regarding labor and delivery patient days would not affect the policy currently in place for determining nursing and allied health education pass-through payments. In addition, this change applies for cost reporting periods beginning on or after October 1, 2013. Therefore, this policy would apply to hospitals seeking SCH status after the effective date of this rule. However, if CMS or the Medicare contractor reviews the status of an existing SCH after October 1, 2013, the new policy regarding inclusion of inpatient labor and delivery days would also apply. After consideration of the public comments we received, we are finalizing our proposed policy, without modification, to include patient days associated with maternity patients who have been admitted as inpatients and are receiving ancillary labor and delivery services at the time the inpatient routine census is taken, regardless of whether the patient actually occupied a routine bed prior to occupying an ancillary labor and delivery bed and regardless of whether the patient occupies a ‘‘maternity suite’’ in which labor, delivery, recovery, and postpartum care all take place in the same room, in the Medicare utilization calculation for cost reporting periods beginning on or after October 1, 2013. This final policy does not impact Medicare payments calculated on a reasonable cost basis for routine inpatient services, which are apportioned in accordance with 42 CFR 413.53(a)(1). 3. Notice of Closure of Teaching Hospitals and Opportunity To Apply for Available Slots a. Background Section 5506 of the Affordable Care Act authorizes the Secretary to redistribute residency cap slots after a hospital that trained residents in an approved medical residency program(s) closes. Specifically, section 5506 amended the Act by adding a subsection (vi) to section 1886(h)(4)(H) and modifying the language at section 1886(d)(5)(B)(v) to instruct the Secretary to establish a process to increase the FTE resident caps for other hospitals based upon the FTE resident caps in teaching hospitals that closed ‘‘on or after a date that is 2 years before the E:\FR\FM\19AUR2.SGM 19AUR2 50734 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations date of enactment’’ (that is March 23, 2008). In the CY 2011 OPPS/ASC final rule with comment period issued in the Federal Register on November 24, 2010 (75 FR 72212), we established regulations and an application process for qualifying hospitals to apply to CMS to receive direct GME and IME FTE resident cap slots from a hospital that closed. The procedures we established apply both to teaching hospitals that closed after March 23, 2008, and on or before August 3, 2010, and to teaching hospitals that closed after August 3, 2010. We made clarifications and revisions to the policy regarding applications under section 5506 in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53434 through 53477). Provider No. Provider name 010137 .... Cooper Green Mercy Hospital. Sacred Heart Hospital 140151 .... b. Notice of Closure of Teaching Hospitals In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27637), we provided notice to the public of the closure of a teaching hospital, and of the initiation of another round of the section 5506 application and selection process. This round was the fourth round of the section 5506 (‘‘Round 4’’) application and selection process, which announced the closure of Peninsula Hospital Center in Far Rockaway, NY, and applications were due to CMS no later than July 25, 2013. In a notice published in the Federal Register on May 31, 2013 (CMS–1459– N, 78 FR 32663), CMS announced the closure of two additional hospitals, Infirmary West Hospital in Mobile, AL, and Montgomery Hospital in City and state CBSA code Terminating date Birmingham, AL ..... 13820 January 1, 2013 ........ Chicago, IL ............. 16974 July 20, 2013 ............ Norristown, PA, and initiated the fifth round of the section 5506 (‘‘Round 5’’) application and selection process. Round 5 applications are due to CMS no later than August 29, 2013 (CMS–1459– CN, 78 FR 39730). In addition, we have learned of the closure of two more teaching hospitals, Cooper Green Mercy Hospital, in Birmingham, AL, and Sacred Heart Hospital, in Chicago, IL. The purpose of this notice is to notify the public of the closure of these teaching hospitals, and to initiate another round of the application and selection process described in section 5506 of the Affordable Care Act. This round will be the sixth round (‘‘Round 6’’) of the application and selection process. The following closed teaching hospitals are part of the Round 6 application process under section 5506: IME Cap (including +/MMA Sec. 422 1 adjustment) Direct GME cap (including +/-MMA Section 422 1 and ACA Section 5503 2 adjustments) 35.45–5.80 section 422 decrease = 29.65 3. 4.00 ............................. 35.45–9.21 section 422 decrease = 26.24.4 4.00–2.60 section 5503 decrease = 1.40.5 1 Section 422 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), Public Law 108–173, redistributed unused residency slots effective July 1, 2005. 2 Section 5503 of the Affordable Care Act, Public Law 111–148, redistributed unused residency slots effective July 1, 2011. 3 Cooper Green Mercy Hospital’s 1996 IME FTE cap is 35.45. Under section 422 of the MMA, the hospital received a decrease of 5.80 to its IME FTE cap: 35.45¥5.80 = 29.65. 4 Cooper Green Mercy Hospital’s 1996 direct GME FTE cap is 35.45. Under section 422 of the MMA, the hospital received a decrease of 9.21 to its direct GME FTE cap: 35.45¥9.21 = 26.24. 5 Sacred Heart Hospital’s 1996 direct GME FTE cap is 4.00. Under section 5503 of the Affordable Care Act, the hospital received a decrease of 2.60 to its direct GME FTE cap: 4.00¥2.60 = 1.40. mstockstill on DSK4VPTVN1PROD with RULES6 c. Application Process for Available Resident Slots The application period for hospitals to apply for slots under section 5506 is set at 90 days following notification to the public of a hospital closure. Therefore, hospitals wishing to apply for and receive slots from the above hospitals’ FTE resident caps under Round 6 must submit applications directly to the CMS Central Office no later than October 31, 2013. Unlike in the first 2 rounds of section 5506, under this round, hospitals are not required to submit applications to their respective CMS Regional Office. The mailing address for the CMS Central Office is included on the application form. Applications must be received, not postmarked, by October 31, 2013. After an applying hospital sends a hard copy of a section 5506 application to the CMS Central Office mailing address, we strongly encourage it to send an email to: ACA5506application@cms.hhs.gov. In the email, the hospital should state: VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 ‘‘I am sending this email to notify CMS that I have mailed a hard copy of a section 5506 application to CMS.’’ An applying hospital should not attach an electronic copy of the application to the email. The email only serves to notify CMS Central Office that a hard copy application has been mailed to CMS Central Office. In the CY 2011 OPPS/ASC final rule with comment period (75 FR 72212), we did not establish a deadline by when CMS would issue the final determinations to hospitals that receive slots under section 5506 of the Affordable Care Act. However, we will review all applications for Round 6 slots received by the October 31, 2013 deadline, and will notify applicants of our determinations as soon as possible. We refer readers to the CMS Web site at https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ AcuteInpatientPPS/dgme.html for a copy of the application form (Section 5506 CMS Application Form) that hospitals must use to apply for slots PO 00000 Frm 00240 Fmt 4701 Sfmt 4700 under section 5506. We also refer readers to this same Web site to access a copy of the CY 2011 OPPS/ASC final rule with comment period (75 FR 72212), a copy of the FY 2013 IPPS/ LTCH PPS final rule (CMS–1488–F, 77 FR 53434 through 53447), and a list of additional section 5506 guidelines for an explanation of the policy and procedures for applying for slots, and the redistribution of the slots under sections 1886(h)(4)(H)(vi) and 1886(d)(5)(B)(v) of the Act. 4. Payments for Residents Training in Approved Residency Programs at CAHs a. Background Recently, we have received questions regarding how CMS would make payment for residency training occurring in a CAH. In the past, we have advised that (1) CAHs may be paid directly under the CAH payment methodology (that is, 101 percent of the reasonable costs of the CAH in accordance with sections 1814(l) and 1834(g) of the Act), or (2) CAHs could E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations function as nonhospital settings and therefore, as such, a hospital may be paid if it incurred the costs of training occurring in the CAH as provided under section 1886(d)(5)(B)(iv) of the Act for IME and section 1886(h)(4)(E) of the Act for direct GME. Section 5504 of the Affordable Care Act, titled ‘‘Counting Resident Time in Non-Provider Settings,’’ amended the Act in connection with ‘‘cost reporting periods beginning on or after July 1, 2010,’’ for direct GME, and for discharges on or after July 1, 2010 for IME, to permit hospitals to count the time that a resident trains in activities related to patient care in a nonprovider site in its FTE count if the hospital incurs the costs of the residents’ salaries and fringe benefits for the time that the resident spends training in the nonprovider site. In connection with those periods and discharges, if more than one hospital incurs the residency training costs in a nonprovider setting, under certain circumstances, section 5504 of the Affordable Care Act allows each hospital to count a proportional share of the training time that a resident spends training in that setting, as determined by a written agreement between the hospitals. When Congress enacted section 5504 of the Affordable Care Act, it retained the statutory language which provides that a hospital can only count the time so spent by a resident under an approved medical residency training program in its FTE count if that one single hospital by itself ‘‘incurs all, or substantially all, of the costs for the training program in that setting.’’ Congress made that longstanding substantive standard and requirement applicable to ‘‘cost reporting periods beginning before July 1, 2010’’ for direct GME, and to ‘‘discharges occurring on or after October 1, 1997, and before July 1, 2010’’ for IME (Sections 1886(d)(5)(B)(iv)(I) and 1886(h)(4)(E)(i) of the Act). Section 5504 of the Affordable Care Act also changed the manner in which the Act refers to sites outside the hospital in which residents train. Specifically, section 5504(a)(4) of the Affordable Care Act, amended the Act by adding at the end of section 1886(h)(4)(E) a sentence that specifically identified such ‘‘outpatient settings’’ as ‘‘nonprovider setting[s].’’ That is, prior to the enactment of the Affordable Care Act, section 1886(h) of the Act did not include a specific term, but rather used the phrase, ‘‘without regard to the setting’’ in which the residents train, and now, with amendments from the Affordable Care Act, the Act specifically refers both to the phrase, ‘‘without VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 regard to the setting’’ and to the phrase ‘‘time spent in a nonprovider setting.’’ (We invite readers to compare section 1886(h)(4)(E)(i) of the Act as of 2010 with sections 1886(h)(4)(E)(i) and 1886(h)(4)(E)(ii) of the Act as of 2011.) We also note that prior to the amendment in section 5504(b) of the Affordable Care Act, section 1886(d)(5)(B)(iv) of the Act relating to IME referenced training in a ‘‘nonhospital’’ setting. This remains true after the enactment of the Affordable Care Act for ‘‘discharges occurring on or after October 1, 1997 and before July 1, 2010.’’ (We refer readers to section 1886(d)(5)(B)(iv)(I) of the Act.) However, effective for ‘‘discharges occurring on or after July 1, 2010,’’ the IME statutory language refers to training in a ‘‘nonprovider’’ setting. (We refer readers to section 5504(b) of the Affordable Care Act and section 1886(d)(5)(B)(iv)(II) of the Act.) We acknowledge that, prior to the effective date of section 5504 of the Affordable Care Act (July 1, 2010), in the preamble of rules and in other policy discussions, we have used both the term ‘‘nonhospital’’ and ‘‘nonprovider’’ interchangeably in the context of allowing a hospital to count residents training at locations outside the hospital. We amended the regulations at § 412.105(f)(1)(ii)(E) for IME and § 413.78(g) for direct GME to reflect the changes made by section 5504 of the Affordable Care Act to explicitly use the term ‘‘nonprovider’’ instead of ‘‘nonhospital’’ setting (although we note that some references to ‘‘nonhospital’’ inadvertently remained, and we are correcting those references in the regulation text accordingly in this final rule). Section 413.78(g) is explicitly made applicable only to ‘‘cost reporting periods beginning on or after July 1, 2010,’’ whereas earlier cost reporting periods are governed by other preceding paragraphs of § 413.78. b. Residents in Approved Medical Residency Training Programs That Train at CAHs Section 4201 of the BBA of 1997 (Pub. L. 105–33) amended section 1820 of the Act to create facilities called ‘‘Critical Access Hospitals’’ (CAHs). Following the enactment of the BBA, but before the enactment of the Affordable Care Act, we were asked if and how CMS would pay for residents that rotate to a CAH for some portion of the residency training program when another hospital pays for the costs of the training at the CAH. To answer this question, we considered that a CAH is a unique facility that, by definition, is not always a hospital. That PO 00000 Frm 00241 Fmt 4701 Sfmt 4700 50735 is, section 1861(e) of the Act states that ‘‘the term ‘hospital’ does not include, unless the context otherwise requires, a critical access hospital (as defined in section 1861(mm)(1)).’’ Because a CAH is generally not considered a ‘‘hospital’’ under section 1861(e) of the Act, we concluded that a CAH could be treated as a nonhospital site for GME purposes. If a CAH could be treated as a nonhospital site for GME purposes, we also concluded that if another hospital (such as an IPPS hospital that is subject to payment under section 1886(h) of the Act or an IPPS-excluded hospital), incurred the costs of training the FTE residents for the portion of the time that they train at the CAH, and met the requirements of the regulations at § 413.78(d) through (f), the hospital could claim the FTE residents training at the CAH for IME and/or direct GME purposes. We recently determined that, as a result of the amendments made by section 5504 of the Affordable Care Act, we should reevaluate our policy regarding whether payment can be made to a hospital that incurs the costs of the FTE residents training at a CAH. Section 1861(u) of the Act states that a ‘‘provider of services’’ is ‘‘a hospital, critical access hospital, skilled nursing facility, comprehensive outpatient rehabilitation facility, home health agency, hospice program, or . . . a fund.’’ Therefore, while section 1861(e) of the Act states that a CAH is excluded from the definition of ‘‘hospital’’ unless the context requires otherwise, a CAH is a ‘‘provider.’’ Because section 5504(a) of the Affordable Care Act amended sections 1886(d)(5)(B)(iv)(II) and 1886(h)(4)(E) of the Act on a prospective basis to specifically identify the setting in which time spent by residents training outside of the hospital setting may be counted for both direct GME and IME purposes, a hospital’s ability to count residents not training in the hospital is now limited to only those settings that are ‘‘nonproviders.’’ Although the term ‘‘nonprovider’’ is not defined in the statute, we believe it is reasonable to define the term as meaning those settings that do not meet the definition of ‘‘provider’’ at section 1861(u) of the Act. Accordingly, because a CAH is defined as a provider in the statute, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27639), we proposed that, effective for portions of cost reporting periods occurring on or after October 1, 2013, a hospital may not claim the time FTE residents are training at a CAH for IME and/or direct GME purposes. However, under policies that were E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50736 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations applicable prior to October 1, 2013, and that continue to apply on and after October 1, 2013, a CAH may incur the costs of training the FTE residents for the time that the FTE residents rotate to the CAH, and receive payment based on 101 percent of its Medicare reasonable costs under § 413.70 of the regulations. We also noted that, consistent with the regulations at § 413.24(d)(7), a CAH may not include as an allowable cost the portion of any training costs associated with the time that a resident is not training at the CAH. Comment: Commenters urged CMS not to finalize its proposal but rather to continue to allow teaching hospitals to count residency training time at CAHs for direct GME and IME payment purposes if the teaching hospitals incur the costs of the residents’ salaries and fringe benefits while the residents are training at the CAH. Commenters stated that not allowing hospitals to count residency training time at CAHs is inconsistent with CMS’ current regulations, CMS’ regulations implementing section 5504 of the Affordable Care Act, and the legislative intent of section 5504 of the Affordable Care Act. Commenters stated that the terms ‘‘nonhospital’’ and ‘‘nonprovider’’ have been used interchangeably by CMS and that it is inappropriate for the Agency to suddenly assign different meanings to those terms. Commenters stated that CMS cannot pretend that a distinction between those terms and the implication of using one term versus the other has always been clear and welldefined. Commenters stated that, ‘‘it also casts some doubt on the agency’s conclusion as part of the proposed rule that the Congress intended to exclude residents’ rotation to CAHs by choosing to use the term ‘nonprovider’ rather than ‘nonhospital’ in section 5504.’’ Commenters stated that in the final rule implementing section 5504 of the Affordable Care Act (the CY 2011 OPPS/ ASC final rule with comment period (75 FR 72134)), the use of the term ‘‘nonhospital’’ versus ‘‘nonprovider’’ was not addressed. One commenter stated that in that final rule, CMS stated that a nonprovider site means a setting that is not a provider-based facility or organization as defined at § 413.65 of the regulations, yet CMS made no mention in that final rule of the definition of ‘‘provider of services’’ at section 1861(u) of the Act. The commenter stated that if CMS believed a valid distinction existed between ‘‘nonprovider’’ and ‘‘nonhospital,’’ it would have provided definitions of these two terms in that final rule. Instead of discussing any distinction VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 between the two terms, CMS focused on the determination of whether a facility is one that is primarily engaged in patient care. The commenter stated that clearly CAHs are facilities that are primarily engaged in patient care and, therefore, should be included as a nonprovider setting under section 5504 of the Affordable Care Act. Commenters stated that the intention of section 5504 of the Affordable Care Act was not to exclude CAHs from nonprovider site training, but rather to reduce the administrative burden associated with counting residency training time in settings engaged in patient care outside of the IPPS hospital setting and to increase flexibility in GME rules that support primary care residency training programs in outpatient and community-based settings located in rural and underserved areas. Commenters referenced the Senate Finance Committee’s ‘‘Chairman’s Mark of the America’s Health Future Act of 2009,’’ and stated the purpose of section 5504 of the Affordable Care Act was to count all residency training time for direct GME payment purposes ‘‘without regard to where the activities are performed’’ if the hospital pays for the residents’ salaries and fringe benefits associated with the training time and also to count all patient care time for IME payment purposes in a nonhospital setting if the hospital or entities participating in the residency training program continue to incur the resident salaries and fringe benefits of the residents while they are training in the nonhospital setting. One commenter stated, ‘‘through CMS’s varied use of the word ‘hospital’, many family medicine programs in small communities were, in fact, harmed by interpretations of BBA 1997, the specific obstacle targeted by Section 5504.’’ Commenters stated that the purpose of section 5504 of the Affordable Care Act was to correct the error and not to prevent CAHs from collaborating with urban facilities for residency training programs. Commenters stated that the language included in section 5504 of the Affordable Care Act indicates that the drafters were using the terms ‘‘nonprovider’’ and ‘‘nonhospital’’ interchangeably. Commenters stated the sentence in section 5504 of the Affordable Care Act reads: ‘‘Any hospital claiming under this subparagraph for time spent in a ‘nonprovider setting’,’’ and that the sentence needs to be read in coordination with the previous paragraph that indicates the hospital should be able to count residency training time ‘‘without regard to the PO 00000 Frm 00242 Fmt 4701 Sfmt 4700 setting in which the activities are performed, if a hospital incurs the costs of the stipends and fringe benefits of the resident during the time the resident spends in that setting.’’ Commenters stated that reading these sentences consecutively, and in the context of one another, indicates that Congress was using the terms ‘‘nonprovider’’ and ‘‘nonhospital’’ interchangeably. Commenters reasoned that the term ‘‘nonprovider’’ should not be interpreted as a qualifier to the phrase ‘‘without regard to the setting’’ but rather as language affirming the intent of Congress ‘‘. . . to reimburse those facilities incurring the costs associated with training residents outside of a metropolitan hospital setting.’’ Another commenter noted that the language added under section 1886(h)(4)(E) of the Act includes the language ‘‘without regard to the setting’’ and does not focus on the difference between nonprovider setting and nonhospital settings. One commenter recommended two alternative options to CMS’ proposal. The commenter stated that CMS could refer to section 1861(e) of the Act which states that a CAH is not a hospital ‘‘unless the context requires otherwise.’’ The commenter stated this statutory language permits CMS to consider CAHs as hospitals for the purposes of GME reimbursement. The commenter stated a second option would be for CMS to define the term ‘‘nonprovider’’ for purposes of section 5504 of the Affordable Care Act. The commenter further stated that in doing so, CMS would have the authority to include CAHs as nonproviders for purposes of section 5504 of the Affordable Care Act. Response: As we stated in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27639), we acknowledge that in the past CMS has used the terms ‘‘nonhospital’’ and ‘‘nonprovider’’ interchangeably. We regret that we did not include this clarification in the CY 2011 OPPS/ASC final rule with comment period (75 FR 72134) in which we implemented section 5504 of the Affordable Care Act. We are taking the opportunity to explain the revised statutory language, and provide a prospective policy change, in this FY 2014 rulemaking process. The language added by section 5504 of the Affordable Care Act specifically refers to a ‘‘nonprovider’’ setting. Although the term ‘‘nonprovider’’ is not defined in the statute, as we proposed, we believe it is reasonable to define the term as meaning those settings that do not meet the definition of ‘‘provider’’ at section 1861(u) of the Act. Therefore, because CAHs are explicitly included in the E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations definition of ‘‘provider of services’’ for purposes of Title XVIII under section 1861(u) of the Act, we do not believe we have the discretion to regard a CAH as something other than a provider for purposes of determining whether a hospital can count residency training time at a CAH. For this same reason, despite one commenter’s assertion that because CAHs are facilities that are ‘‘engaged primarily in patient care,’’ they should be considered nonprovider settings under section 5504 of the Affordable Care Act, we believe it is reasonable to define the term ‘‘nonprovider’’ as meaning those settings that do not meet the definition of ‘‘provider’’ at section 1861(u) of the Act, and therefore, we cannot ignore the fact that a CAH is defined as such under section 1861(u) of the Act. We also strongly disagree with the commenter’s suggestion that the phrase at section 1886(h)(4)(E) of the Act, ‘‘without regard to the setting in which the activities are performed,’’ may be read so loosely as to refer to CAHs. While it is true that Congress intended, as the commenter noted, to facilitate training in settings other than the traditional inpatient hospital, historic conference report language also clearly indicates that this provision is intended to encourage training in ambulatory settings, such as clinics, physician offices, and other community-based settings, and not other inpatient facilities. The Conference committee report accompanying Public Law 99–509 indicates that ‘‘[s]ince it is difficult to find sufficient other sources of funding [than hospitals and Medicare] for the costs of such training [that is, training in freestanding primary care settings such as family practice clinics or ambulatory surgery centers], assignments to these settings are discouraged. It is the Committee’s view that training in these settings is desirable, because of the growing trend to treat more patients out of the inpatient hospital setting and because of the encouragement it gives to primary care’’ (emphasis added)). (H.R. Rep. No. 99–727, 99th Cong., 1st Sess., 70 (1986.) Furthermore, we believe that the last sentence of section 1886(h)(4)(E) of the Act, ‘‘Any hospital claiming under this subparagraph for time spent in a nonprovider setting shall maintain and make available to the Secretary records regarding the amount of such time and such amount in comparison with amounts of such time in such base year as the Secretary shall specify’’ (emphasis added), clearly indicates that the entire provision at section 1886(h)(4)(E) of the Act is referring to VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 the requirements for counting residents training in nonprovider settings, and as we reiterate throughout this preamble, we do not believe CAHs can be considered nonprovider settings. In addition, we note that in the CY 2011 OPPS/ASC final rule with comment period (75 FR 72135), we defined a ‘‘nonprovider site’’ as ‘‘a setting that does not qualify as a provider-based facility or organization in accordance with the criteria in the regulations at 42 CFR 413.65.’’ Therefore, as discussed above, under the policy finalized in this rule, an IPPS hospital cannot count residency training time at a CAH or a facility or organization that is provider-based to a CAH. For example, if a CAH has a provider-based RHC, even though an RHC is not included in the definition of ‘‘provider of services’’ at section 1861(u) of the Act, an IPPS hospital cannot claim residency training time at that provider-based RHC. However, we note that the CAH-based RHC could separately claim and receive payment for direct GME costs it incurs, as discussed in the regulations at 42 CFR 405.2468(f). We do not agree that considering CAHs to be ‘‘hospitals’’ under section 1861(e) of the Act in the context of section 5504 of the Affordable Care Act, as one commenter suggested, would provide any benefit, because under 42 CFR 413.78(b), one hospital may not count the time spent training at another hospital for IME or direct GME purposes. Therefore, under this regulation, an IPPS hospital is precluded from counting residents training at a CAH ‘‘hospital,’’ even if the IPPS hospital incurs the costs of training those residents. We also do not believe that we have the authority to adopt a separate definition for ‘‘nonprovider’’ for purposes of GME. The definition of ‘‘provider of services’’ for purposes of Title XVIII already exists in the statute, and as such, we believe the statute requires that we consider any entity not included in that definition a ‘‘nonprovider.’’ Comment: One commenter stated that it supported CMS’ proposal. However, the commenter also stated that a CAH which is located in a medically underserved area and has a rotation with a teaching hospital could affect the provision of care to that area. Specifically, the commenter expressed concern that a CAH could pay for the residency training that occurs at the CAH and be reimbursed based on 101 percent of reasonable costs for that training but such an arrangement could be difficult for both the CAH and the teaching hospital because of contractual arrangements that would need to occur PO 00000 Frm 00243 Fmt 4701 Sfmt 4700 50737 between the CAH and the hospital. Many commenters stated that they were concerned the proposed policy would reduce training in rural and underserved areas, thereby affecting primary care and community-based residency training programs such as family medicine, many of which have the mission to train residents to serve in these areas. Commenters expressed concern that the proposal would ultimately reduce the supply of physicians in these areas because many residents practice where they train. One commenter made reference to a publication from the Robert Graham Center for Academic Medicine, which they stated shows that the return on investment for training residents in rural areas is high. Commenters stated that providing care in rural areas requires collaboration among rural entities such as CAHs and IPPS hospitals so as to facilitate recruiting and retaining physicians in rural areas. One commenter stated that because Minnesota is the State with the third highest number of CAHs in the country and because facilities in Minnesota already struggle to recruit physicians, the proposed rule would disproportionately affect residency programs in Minnesota and be harmful to the CAHs and IPPS hospitals that coordinate residency training programs. Another commenter stated that Iowa hospitals are concerned that if a teaching hospital needs to train residents at a CAH to fully use its cap, not permitting hospitals to count residency training time at CAHs would mean that CAHs will not be able to train residents because hospitals will be incentivized to rotate residents through a teaching hospital or other non-CAH setting. The commenter stated that if a CAH wants to train residents, it would have to incur the costs of training those residents and a teaching hospital could be at risk of losing cap because of not fully utilizing its cap. One commenter provided information on the Wisconsin Academy of Rural Medicine and the Wisconsin Rural Training Track Collaborative, which aim to promote training and increase the supply of physicians in rural Wisconsin as well as improve the health of communities located in rural Wisconsin. The commenter stated the Affordable Care Act focused on training and referral programs in rural areas by increasing the funding for Area Health Education Centers and establishing the Rural Physician Training Grant. The commenter stated CMS’ proposal ‘‘. . . threatens to reverse the great good that may come about through the focus E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50738 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations on training, recruitment, and retention in the PPACA for rural communities.’’ Commenters also stated that some CAHs may be too small to support residency training programs on their own and that some CAHs may not be in a financial position to incur the costs associated with residency training programs. Commenters added that CAHs support a policy that allows teaching hospitals to be reimbursed for residency training that occurs at CAHs because CAHs want to make sure that IPPS hospitals continue rotating residents to CAHs. In addition, one commenter stated that IME payments are patient care payments which compensate teaching hospitals for providing specialized care that is not provided at other facilities. The commenter stated that if a teaching hospital rotates residents to a CAH, the hospital’s IME payments should not change because the teaching hospital will continue to provide these specialized services even if they rotate some of their residents to a CAH. The commenter also noted that, for direct GME payment purposes, if a teaching hospital pays the costs of the residents’ salaries and fringe benefits for the time they are training at the CAH, the teaching hospital should be able to receive direct GME payments for that training time. Response: It is not clear that not allowing hospitals to claim the time of FTE residents training at CAHs for direct GME and IME payment would have a negative impact on residency training in rural areas. The proposed rule did not in any way propose to change the training arrangements that CAHs may have with other providers, including IPPS hospitals. That is, we did not propose that CAHs are required to support or sponsor residency training programs on their own. Rather, CAHs may continue to function as participating institutions for purposes of training residents in a single or multiple residency training programs. Regarding the comments asserting that CAHs face challenges incurring costs associated with residency training, we note that whatever allowable costs the CAH would incur would be paid for based on Medicare’s share of 101 percent of those reasonable costs. We do not believe that treating CAHs as providers limits growth in residency training programs in rural areas. On the contrary, the policy of treating CAHs as providers has the potential to promote additional residency training in rural areas because CAHs are not restricted by the FTE resident caps, as IPPS hospitals are, and therefore, assuming appropriate education and accreditation standards are adhered to, there is no limit on the VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 number of residents training at a CAH for which Medicare will provide reimbursement when the CAH incurs the costs of training the residents at the CAH. Furthermore, by having the CAH count residency training time at the CAH, instead of the IPPS hospital counting that time towards its cap, an IPPS hospital that is training over its cap could now receive Medicare payment for FTE residents that were previously causing it to exceed its cap. Additional cap space could also provide an incentive for an IPPS hospital training below its cap to start a new residency training program or expand an existing residency training program. Regarding the potential reduction in IME payments to teaching hospitals paid under the IPPS if hospitals can no longer count residency training time at CAHs, we disagree with the commenter’s assertions. We believe that, generally, teaching hospitals’ IME payments will not change. Many teaching hospitals are currently training over their caps. As referenced above, by allowing the CAH to incur and be paid for the portion of the residency costs associated with training at the CAH, instead of the teaching hospital counting that time, a teaching hospital could substitute that FTE resident time with other residents training in its hospital or other nonprovider sites, and maintain generally the same intern and resident-to-bed ratio and level of IME payment. Under this scenario, teaching hospitals could continue to receive IME payments for FTE residents training up to the hospitals’ caps and the hospitals would no longer have to incur additional costs associated with FTE residents training over the hospital’s caps. If a teaching hospital is currently training below its caps, allowing the CAH to incur and be paid for the portion of the residency costs associated with training at the CAH could give the teaching hospital more space under its cap and provide an incentive for the teaching hospital to either start a new residency training program or expand an existing residency training program. We also note that to the extent that IPPS IME payments are made in recognition of the higher indirect patient care costs that teaching hospitals incur, CMS’ payments to the CAH would also inherently reflect applicable indirect patient care costs because payment to a CAH is based on 101 percent of Medicare’s share of the CAH’s reasonable costs for treating patients, including the costs which are a result of the CAH’s involvement with an approved residency training program. Comment: Commenters expressed concern regarding potential impacts on PO 00000 Frm 00244 Fmt 4701 Sfmt 4700 teaching health centers and rural training tracks. Commenters asked whether calculation of the rural track FTE limitation would be affected. One commenter stated that 9 out of 26 rural training tracks involve CAHs. In addition, an unknown number of other integrated rural training tracks or rurally-located programs, including one in Yakima, WA, rely on CAHs as training sites. The commenter also noted that while osteopathic programs currently do not use rural training tracks, it is anticipated they will use them in the future. The commenter stated that these rural track programs, in addition to allopathic and osteopathic programs which include more limited rotations to CAHs, would be negatively impacted if CAHs are not considered nonprovider settings. Response: Our proposal does not preclude a CAH from participating as a rural site in a rural training track(s) (a residency training program in which an urban teaching hospital sends its residents to train at a rural site for more than one-half of the total duration of the residency training program). The regulations for rural training tracks at § 413.79 require that the rural component of the training occur at either a rural hospital or rural nonhospital site. We believe that CAHs are captured within the universe of rural facilities. That is, as part of an accredited rural training track program, an urban hospital may rotate residents to a CAH and/or other facilities located in the rural area for greater than 50 percent of the duration of the entire program. Because there is no impact on CAHs’ participation in rural training tracks, there is no effect on the calculation of the FTE limitation provided to urban hospitals that participate in training residents in a rural track program(s). Comment: One commenter recommended that CMS require hospitals to clearly identify any CAH rotations on their rotation schedules. The commenter recommended that if there are any future changes to the Intern and Resident Information System (IRIS), these changes should include a provider-type identification for all rotations, which would include off-site rotations to CAHs. The commenter stated that the proposed rule indicates that in order for Medicare to pay for rotations at a CAH, the CAH has to incur the costs for the time the resident is training at the CAH. The commenter asked whether the CAH needs a written agreement with the sponsoring hospital that indicates the amount the CAH has to pay the hospital for the rotation or whether the CAH would need to have E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations its own agreement with the entity operating the residency training program and pay that entity directly. The commenter asked how the cost of the rotation to the CAH should be quantified, whether the costs would include the salary and fringe benefits of the resident, or whether other costs such as supervision costs would also be included. Response: We agree that it would be extremely helpful if a hospital’s rotation schedule would clearly designate the location of the rotation sites, regardless of whether the rotations are to CAHs, clinics, doctors’ offices, or other settings. This would help the Medicare contractor determine the hospital’s FTE count accurately. We appreciate the comment concerning IRIS and we will consider the commenter’s recommendation for any future IRIS changes. Regarding the commenter’s questions about written agreements, a CAH is not a nonprovider setting and, therefore, it is not required to have a written agreement with a hospital for the purpose of receiving payment for its GME costs under 42 CFR 413.70. CAHs are generally reimbursed based on 101 percent of their reasonable costs for the cost they incur associated with inpatient and outpatient services. Therefore, the costs that a CAH itself (either directly or through payment to a medical school or a hospital that first incurs the costs such as salaries) incurs associated with training residents in an approved residency training program would be reimbursed based on Medicare’s share of that reasonable cost. These costs include the costs associated with training residents in an approved medical residency training program, such as resident salaries and fringe benefits, the portion of the teaching physician’s salaries associated with GME activities, and other direct GME costs. In order to facilitate accurate payment of its GME or any other costs, the CAH would be required to have source documentation for these costs that would be available to the Contractor upon audit. After consideration of the public comments received, we are finalizing our proposed policy without modification to state that effective for portions of cost reporting periods beginning on or after October 1, 2013, a hospital may not claim the time FTE residents are training at a CAH for IME and/or direct GME purposes. However, under policies that were applicable prior to October 1, 2013, and that continue to apply on and after October 1, 2013, a CAH may incur the costs of training the FTE residents for the time that the FTE residents rotate to the CAH, VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 and receive payment based on 101 percent of its Medicare reasonable costs under § 413.70 of the regulations. A CAH may not include as an allowable cost the portion of any training costs associated with the time that a resident is not training at the CAH. We also are revising the regulations at § 413.78(g) to replace the term ‘‘nonhospital’’ with the term ‘‘nonprovider.’’ 5. Expiration of Inflation Update Freeze for High Per Resident Amounts (PRAs) The Balanced Budged Refinement Act (BBRA) of 1999 (Pub. L. 106–113) amended section 1886(h)(2) of the Act to establish a methodology for the use of a national average per resident amount (PRA) in computing direct GME payments for cost reporting periods beginning on or after October 1, 2000, and on or before September 30, 2005. The BBRA established a ‘‘floor’’ for hospital-specific PRAs at 70 percent of the locality-adjusted national average PRA. In addition, the BBRA established a ‘‘ceiling’’ that limited the annual adjustment to a hospital-specific PRA if the PRA exceeded 140 percent of the locality-adjusted national average PRA. Section 511 of the Benefits Improvement and Protection Act (BIPA) of 2000 (Pub. L. 106–554) further amended section 1886(h)(2) of the Act by increasing the floor established by the BBRA to 85 percent of the localityadjusted national average PRA, for cost reporting periods beginning in FY 2002. For purposes of calculating direct GME payments, each hospital-specific PRA is compared to the floor and ceiling to determine whether the hospital-specific PRA should be revised. Section 711 of the Medicare Modernization Act of 2003 (Pub. L. 108–173) amended section 1886(h)(2)(D)(iv)(I) of the Act by freezing the annual CPI–U updates to hospital-specific PRAs for those PRAs that exceed the ceiling for FYs 2004 through 2013. The implementing regulations for these statutory provisions are located at 42 CFR 413.77(d). As we did in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27639), we are providing notice here that the ‘‘freeze’’ for PRAs that exceed the ceiling expires beginning in FY 2014. That is, for cost reporting periods beginning on or after October 1, 2013, the usual full CPI–U update, as determined under 42 CFR 413.77(c)(1), would apply to all PRAs for direct GME payment purposes. Comment: Several commenters supported the expiration in FY 2014 of the ‘‘freeze’’ for PRAs that exceed the ceiling. PO 00000 Frm 00245 Fmt 4701 Sfmt 4700 50739 Response: We appreciate the commenters’ support. However, we did not propose any changes related to this provision; we merely provided notification regarding it. Outside the Scope of the Proposed Rule Comments. We received a comment regarding pass-through payment under 42 CFR 413.85 for hospital-operated pharmacy residency programs and a comment stating that GME cuts will adversely impact the physician workforce and reduce access to care, particularly to specialty care. Because we did not propose any changes regarding payments under 42 CFR 413.85, nor did we specifically propose any provisions related to reductions in GME payments, we consider these comments outside the scope of the proposed rule, and we are not responding to them. K. Rural Community Hospital Demonstration Program 1. Background Section 410A(a) of Public Law 108– 173 required the Secretary to establish a demonstration program to test the feasibility and advisability of establishing ‘‘rural community’’ hospitals to furnish covered inpatient hospital services to Medicare beneficiaries. The demonstration pays rural community hospitals under a reasonable cost-based methodology for Medicare payment purposes for covered inpatient hospital services furnished to Medicare beneficiaries. A rural community hospital, as defined in section 410A(f)(1), is a hospital that— • Is located in a rural area (as defined in section 1886(d)(2)(D) of the Act) or is treated as being located in a rural area under section 1886(d)(8)(E) of the Act; • Has fewer than 51 beds (excluding beds in a distinct part psychiatric or rehabilitation unit) as reported in its most recent cost report; • Provides 24-hour emergency care services; and • Is not designated or eligible for designation as a CAH under section 1820 of the Act. Section 410A(a)(4) of Public Law 108– 173 specified that the Secretary was to select for participation no more than 15 rural community hospitals in rural areas of States that the Secretary identified as having low population densities. Using 2002 data from the U.S Census Bureau, we identified the 10 States with the lowest population density in which rural community hospitals were to be located in order to participate in the demonstration: Alaska, Idaho, Montana, Nebraska, Nevada, New Mexico, North Dakota, South Dakota, Utah, and E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50740 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Wyoming. (Source: U.S. Census Bureau, Statistical Abstract of the United States: 2003). CMS originally solicited applicants for the demonstration in May 2004; 13 hospitals began participation with cost reporting periods beginning on or after October 1, 2004. In 2005, 4 of these 13 hospitals withdrew from the program and converted to CAH status. This left nine hospitals participating at that time. In 2008, we announced a solicitation for up to six additional hospitals to participate in the demonstration program. Four additional hospitals were selected to participate under this solicitation. These four additional hospitals began under the demonstration payment methodology with the hospital’s first cost reporting period starting on or after July 1, 2008. At that time, 13 hospitals were participating in the demonstration. Five hospitals (3 of the hospitals were among the 13 hospitals that were original participants in the demonstration program and 2 of the hospitals were among the 4 hospitals that began the demonstration program in 2008) withdrew from the demonstration program during CYs 2009 and 2010. (Three of these hospitals indicated that they would be paid more for Medicare inpatient hospital services under the rebasing option allowed under the SCH methodology provided for under section 122 of the Medicare Improvements for Patients and Providers Act of 2008 (Pub. L. 110–275). One hospital restructured to become a CAH, and one hospital closed.) In CY 2011, one hospital that was among the original set of hospitals that participated in the demonstration withdrew from the demonstration. These actions left 7 of the originally participating hospitals (that is, hospitals that were selected to participate in either 2004 or 2008) participating in the demonstration program as of June 1, 2011. Sections 3123 and 10313 of the Affordable Care Act (Pub. L. 111–148) amended section 410A of Public Law 108–173, which established the rural community hospital demonstration program. Sections 3123 and 10313 of the Affordable Care Act changed the rural community hospital demonstration program in several ways. First, the Secretary is required to conduct the demonstration program for an additional 5-year period that begins on the date immediately following the last day of the initial 5-year period. Further, the Affordable Care Act requires, in the case of a rural community hospital that is participating in the demonstration program as of the last day of the initial 5-year period, the VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Secretary to provide for the continued participation of such rural hospital in the demonstration program during the 5-year extension, unless the hospital makes an election, in such form and manner as the Secretary may specify, to discontinue participation (section 410A(g)(4)(A) of Public Law 108–173, as added by section 3123(a) of the Affordable Care Act and further amended by section 10313 of such Act). In addition, the Affordable Care Act provides that, during the 5-year extension period, the Secretary shall expand the number of States with low population densities determined by the Secretary to 20 (section 410A(g)(2) of Public Law 108–173, as added by section 3123(a) and amended by section 10313 of the Affordable Care Act). Further, the Secretary is required to use the same criteria and data that the Secretary used to determine the States under section 410A(a)(2) of Public Law 108–173 for purposes of the initial 5year period. The Affordable Care Act also allows not more than 30 rural community hospitals in such States to participate in the demonstration program during the 5-year extension period (section 410A(g)(3) of Public Law 108–173, as added by section 3123(a) of the Affordable Care Act and as further amended by section 10313 of such Act). We published a solicitation for applications for additional participants in the rural community hospital demonstration program in the Federal Register on August 30, 2010 (75 FR 52960). Applications were due on October 14, 2010. The 20 States with the lowest population density that are eligible for the demonstration program are: Alaska, Arizona, Arkansas, Colorado, Idaho, Iowa, Kansas, Maine, Minnesota, Mississippi, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Utah, and Wyoming (Source: U.S. Census Bureau, Statistical Abstract of the United States: 2003). We approved 19 new hospitals for participation in the demonstration program. We determined that each of these new hospitals would begin participating in the demonstration with its first cost reporting period beginning on or after April 1, 2011. Three of these 19 hospitals declined participation prior to the start of the cost reporting periods for which they would have begun the demonstration. In addition to the 7 hospitals that were selected in either 2004 or 2008, the new selection led to a total of 23 hospitals in the demonstration. So far, during CY 2013, one additional hospital among the set selected in 2011 has withdrawn from the demonstration, similarly citing a PO 00000 Frm 00246 Fmt 4701 Sfmt 4700 relative financial advantage to returning to the customary SCH payment methodology, such that there are now 22 hospitals participating in the demonstration. In addition, section 410A(c)(2) of Public Law 108–173 required that, ‘‘[i]n conducting the demonstration program under this section, the Secretary shall ensure that the aggregate payments made by the Secretary do not exceed the amount which the Secretary would have paid if the demonstration program under this section was not implemented.’’ This requirement is commonly referred to as ‘‘budget neutrality.’’ Generally, when we implement a demonstration program on a budget neutral basis, the demonstration program is budget neutral in its own terms; in other words, the aggregate payments to the participating hospitals do not exceed the amount that would be paid to those same hospitals in the absence of the demonstration program. Typically, this form of budget neutrality is viable when, by changing payments or aligning incentives to improve overall efficiency, or both, a demonstration program may reduce the use of some services or eliminate the need for others, resulting in reduced expenditures for the demonstration program’s participants. These reduced expenditures offset increased payments elsewhere under the demonstration program, thus ensuring that the demonstration program as a whole is budget neutral or yields savings. However, the small scale of this demonstration program, in conjunction with the payment methodology, makes it extremely unlikely that this demonstration program could be viable under the usual form of budget neutrality. Specifically, cost-based payments to participating small rural hospitals are likely to increase Medicare outlays without producing any offsetting reduction in Medicare expenditures elsewhere. Therefore, a rural community hospital’s participation in this demonstration program is unlikely to yield benefits to the participant if budget neutrality were to be implemented by reducing other payments for these same hospitals. In the past nine IPPS final regulations, spanning the period for which the demonstration program has been implemented, we have adjusted the national inpatient PPS rates by an amount sufficient to account for the added costs of this demonstration program, thus applying budget neutrality across the payment system as a whole rather than merely across the participants in the demonstration E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations program. As we discussed in the FYs 2005 through 2013 IPPS final rules (69 FR 49183; 70 FR 47462; 71 FR 48100; 72 FR 47392; 73 FR 48670; 74 FR 43922, 75 FR 50343, 76 FR 51698, and 77 FR 53449, respectively), we believe that the language of the statutory budget neutrality requirements permits the agency to implement the budget neutrality provision in this manner. In light of the statute’s budget neutrality requirement, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27639 through 27643), we proposed to continue to use the methodology we finalized in FY 2013 to calculate a budget neutrality adjustment factor to the FY 2014 national IPPS rates. In general terms, in each of these previous years, we used available cost reports for the participating hospitals to derive an estimate of the additional costs attributable for the demonstration. Prior to FY 2013, we used finalized, or settled, cost reports, as available, and ‘‘as submitted’’ cost reports for hospitals for which finalized cost reports were not available. Annual market basket percentage increase amounts provided by the CMS Office of the Actuary reflecting the growth in the prices of inputs for inpatient hospitals were applied to these cost amounts. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53452), we used ‘‘as submitted’’ cost reports (for cost reporting periods ending in CY 2010) for each hospital participating in the demonstration in estimating the costs of the demonstration. In addition, in FY 2013, we incorporated different update factors (the market basket percentage increase and the applicable percentage increase, as applicable, to several years of data as opposed to solely using the market basket percentage increase) for the calculation of the budget neutrality offset amount. Finally, in each of the previous years, an annual update factor provided by the CMS Office of the Actuary reflecting growth in the volume of inpatient operating services was also applied. For the budget neutrality calculations in the IPPS final rules for FYs 2005 through 2011, the annual volume adjustment applied was 2 percent; for the IPPS final rules for FYs 2012 and 2013, it was 3 percent. For a detailed discussion of our budget neutrality offset calculations, we refer readers to the IPPS final rule applicable to the fiscal year involved. In general, for FYs 2005 through 2009, we based the budget neutrality offset estimate on the estimated cost of the demonstration in an earlier given year. For these periods, we derived that estimated cost by subtracting the estimated amount that would otherwise VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 be paid without the demonstration in an earlier given year from the estimated amount for the same year that would be paid under the demonstration under the reasonable cost-based methodology authorized by section 410A of Public Law 108–173. (We note that section 410A of Public Law 108–173 was later amended by the Affordable Care Act.) The reasonable cost-based methodology authorized by section 410A of Public Law 108–173, as amended, is hereafter referred to as the ‘‘reasonable cost methodology.’’ (We ascertained the estimated amount that would be paid in an earlier given year under the reasonable cost methodology and the estimated amount that would otherwise be paid without the demonstration in an earlier given year from ‘‘as submitted’’ cost reports that were submitted by the hospitals prior to the inception of the demonstration.) We then updated the estimated cost described above to the current year by multiplying it by the market basket percentage increases applicable to the years involved and the applicable annual volume adjustment. For the FY 2010 IPPS/RY 2010 LTCH PPS final rule, data from finalized cost reports reflecting the participating hospitals’ experience under the demonstration were available. Specifically, the finalized cost reports for the first 2 years of the demonstration, that is, cost reports for cost reporting years beginning in FYs 2005 and 2006 (CYs 2004, 2005, and 2006) were available. These data showed that the actual costs of the demonstration for these years exceeded the amounts originally estimated in the respective final rules for the budget neutrality adjustment. In the FY 2010 IPPS/RY 2010 LTCH PPS final rule, we included in the budget neutrality offset amount an amount in addition to the estimate of the demonstration costs in that fiscal year. This additional amount was based on the amount that the costs of the demonstration for FYs 2005 and 2006 exceeded the budget neutrality offset amounts finalized in the IPPS rules applicable for those years. Following upon the FY 2010 IPPS/RY 2010 LTCH PPS final rule, we have continued to propose a methodology for calculating the budget neutrality offset amount to account for both the estimated demonstration costs in the upcoming fiscal year and an amount by which the actual demonstration costs corresponding to an earlier, given year (which would be known once we have finalized cost reports for that year) exceeded the budget neutrality offset amount finalized in the corresponding year’s IPPS final rule. However, we PO 00000 Frm 00247 Fmt 4701 Sfmt 4700 50741 noted that because of a delay affecting the settlement process for cost reports for IPPS hospitals occurring on a larger scale than merely for the demonstration, we were unable to finalize this component of the budget neutrality offset amount accounting for the amount by which the actual demonstration costs in a given year exceeded the budget neutrality offset amount finalized in the corresponding year’s IPPS final rule for cost reports of demonstration hospitals dating to those beginning in FY 2007. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53449 through 53453), we adopted changes to the methodology for calculating the budget neutrality offset amount in an effort to further improve and refine it. We noted that the revised methodology varied, in part, from that finalized in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51698 through 51705). Specifically, in adopting refinements to the methodology, our objective was to simplify the calculation so that it included as few steps as possible. In addition, we incorporated different update factors (the market basket percentage increase and the applicable percentage increase, as applicable, to several years of data as opposed to solely using the market basket percentage increase) for the calculation of the budget neutrality offset amount. We stated that we believed this approach would maximize the precision of our calculation because it would more closely replicate payments made with and without the demonstration. We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53449 through 53453) for a detailed discussion of the methodology we used for FY 2013. We noted that, although we were making changes to certain aspects of the budget neutrality offset amount calculation for FY 2013, several core components of the methodology would remain unchanged. For example, we continued to include in the budget neutrality offset amount methodology the estimate of the demonstration costs for the upcoming fiscal year and the amount by which the actual demonstration costs corresponding to an earlier year (which would be determined once we have finalized cost reports for that year) exceeded the budget neutrality offset amount finalized in the corresponding year’s IPPS final rule. However, finalized cost reports for the hospitals participating in the demonstration were not available for FYs 2007, 2008, 2009, and 2010 at the time of development of the FY 2013 IPPS/LTCH PPS final rule. Therefore, we were unable to finalize this component of the budget neutrality E:\FR\FM\19AUR2.SGM 19AUR2 50742 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 offset calculation. We stated in the final rule that we expected settled cost reports for all of the demonstration hospitals that participated in the applicable fiscal year (FYs 2007, 2008, 2009, and 2010) to be available prior to the FY 2014 IPPS/LTCH PPS proposed rule. 2. FY 2014 Budget Neutrality Offset Amount For the reasons discussed in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53449 through 53453), we proposed in the FY 2014 IPPS/LTCH PPS proposed rule to continue to use the methodology finalized in the FY 2013 IPPS/LTCH PPS final rule to calculate a budget neutrality adjustment factor to be applied to the FY 2014 national IPPS payment rates. As we stated in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53451), we revised our methodology in that final rule to further improve and refine the calculation of the budget neutrality offset amount and to simplify the methodology so that it includes only a few steps. Consistent with the methodology finalized in the FY 2013 IPPS/LTCH PPS final rule, the proposed methodology for calculating the estimated FY 2014 demonstration cost for the participating hospitals was as follows: Step 1: For each of the participating hospitals, we proposed to identify the general reasonable cost amount calculated under the reasonable cost methodology for covered inpatient hospital services (as indicated on the ‘‘as submitted’’ cost report for the hospital’s cost reporting period ending in CY 2011). The general reasonable cost amount calculated under the reasonable cost methodology is hereafter referred to as the ‘‘reasonable cost amount.’’ As we explained in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53451), we believe that a way to streamline our methodology for calculating the budget neutrality offset amount would be to use cost reports with the same status and from the same time period for all hospitals participating in the demonstration. Because ‘‘as submitted’’ cost reports ending in CY 2011 are the most recent available cost reports, we believe they would be an accurate predictor of the costs of the demonstration in FY 2014 because they give us a recent picture of the participating hospitals’ costs. Because section 410A of Public Law 108–173 stipulates swing-bed services are to be included among the covered inpatient hospital services for which the demonstration payment methodology applies, we proposed to include the cost of these services, as reported on the cost VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 reports for the hospitals that provide swing-bed services, within the general total estimated FY 2011 reasonable cost amount for covered inpatient hospital services under the demonstration. As indicated above, we proposed to use ‘‘as submitted’’ cost reports for the hospital’s cost reporting period ending in CY 2011 for this calculation. We proposed to sum the two abovereferenced amounts to calculate the general total estimated FY 2011 reasonable cost amount for covered inpatient hospital services for all participating hospitals. We proposed to multiply this sum (that is, the general total estimated FY 2011 reasonable cost amount for covered inpatient hospital services for all participating hospitals) by the FYs 2012, 2013, and FY 2014 IPPS market basket percentage increases, which are formulated by the CMS Office of the Actuary. In the proposed rule, we used the then current estimate of the FY 2014 IPPS market basket percentage increase provided by the CMS Office of the Actuary. We proposed to use the final FY 2014 IPPS market basket percentage increase in the final rule. We also proposed to then multiply the product of the general total estimated FY 2011 reasonable cost amount for all participating hospitals and the market basket percentage increases applicable to the years involved by a 3-percent annual volume adjustment for the years 2012 through 2014—the result would be the general total estimated FY 2014 reasonable cost amount for covered inpatient hospital services for all participating hospitals. We proposed to apply the IPPS market basket percentage increases applicable for FYs 2012 through 2014 to the FY 2011 reasonable cost amount described above to model the estimated FY 2014 reasonable cost amount under the demonstration. We proposed to use the IPPS market basket percentage increases because we believe that these update factors appropriately indicate the trend of increase in inpatient hospital operating costs under the reasonable cost methodology for the years involved. The 3-percent annual volume adjustment was stipulated by the CMS Office of the Actuary and was proposed because it is intended to accurately reflect the tendency of hospitals’ inpatient caseloads to increase. We acknowledged the possibility that inpatient caseloads for small hospitals may fluctuate, and proposed to incorporate into the estimate of demonstration costs a factor to allow for a potential increase in inpatient hospital services. PO 00000 Frm 00248 Fmt 4701 Sfmt 4700 Step 2: For each of the participating hospitals, we proposed to identify the general estimated amount that would otherwise be paid in FY 2011 under applicable Medicare payment methodologies for covered inpatient hospital services (as indicated on the ‘‘as submitted’’ cost report for cost reporting periods ending in CY 2011) if the demonstration was not implemented. Similarly, as in Step 1, for the hospitals that provide swing-bed services, we proposed to identify the estimated amount that generally would otherwise be paid for these services (as indicated on the ‘‘as submitted’’ cost report for cost reporting periods ending in CY 2011) and include it in the total FY 2011 general estimated amount that would otherwise be paid for covered inpatient hospital services without the demonstration. We proposed to sum these two amounts in order to calculate the estimated FY 2011 total payments that generally would otherwise be paid for covered inpatient hospital services for all participating hospitals without the demonstration. We proposed to multiply the above amount (that is, the estimated FY 2011 total payments that generally would otherwise be paid for covered inpatient hospital services for all participating hospitals without the demonstration) by the FYs 2012 through 2014 IPPS applicable percentage increases. This methodology differs from Step 1, in which we proposed to apply the market basket percentage increases to the sum of the hospitals’ general total FY 2011 estimated reasonable cost amount for covered inpatient hospital services. We believe that the IPPS applicable percentage increases are appropriate factors to update the estimated amounts that generally would otherwise be paid without the demonstration. This is because IPPS payments would constitute the majority of payments that would otherwise be made without the demonstration and the applicable percentage increase is the factor used under the IPPS to update the inpatient hospital payment rates. Hospitals participating in the demonstration would be participating under the IPPS payment methodology if they were not in the demonstration. Then we proposed to multiply the product of the estimated FY 2011 total payments that generally would otherwise be made without the demonstration and the IPPS applicable percentage increases applicable to the years involved by a 3percent annual volume adjustment for FYs 2012 through 2014. The result would be the general total estimated FY 2014 costs that would otherwise be paid E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations without the demonstration for covered inpatient hospital services to the participating hospitals. Step 3: We proposed to subtract the amount derived in Step 2 (representing the sum of estimated amounts that generally would otherwise be paid to the participating hospitals for covered inpatient hospital services for FY 2014 if the demonstration was not implemented) from the amount derived in Step 1 (representing the sum of the estimated reasonable cost amount that generally would be paid under the demonstration to all participating hospitals for covered inpatient hospital services for FY 2014). We proposed that the resulting difference would be the estimated amount for which an adjustment to the national IPPS rates would be calculated. For the proposed rule, the resulting difference was $46,515,865. This estimated amount was based on the specific assumptions identified regarding the data sources used, that is, ‘‘as submitted’’ recently available cost reports. Also, we noted that if updated data became available prior to the FY 2014 final rule, we would use them to the extent appropriate to estimate the costs of the demonstration program in FY 2014. Therefore, we stated that this estimated budget neutrality offset amount might change in the final rule, depending on the availability of updated data. In addition, similar to previous years, we proposed to include in the budget neutrality offset amount the amount by which the actual demonstration costs corresponding to an earlier given year (which would be determined once we had finalized cost reports for that year) exceeded the budget neutrality offset amount finalized in the corresponding year’s IPPS final rule. Because of delays affecting the settlement process for cost reports for IPPS hospitals occurring on a larger scale than merely for the demonstration, we were unable to determine prior to publication of the FY 2014 IPPS/LTCH PPS proposed rule the specific component of the budget neutrality offset amount accounting for the amount by which the actual demonstration costs in a given year exceeded the budget neutrality offset amount finalized in the corresponding year’s IPPS final rule for cost reports of demonstration hospitals dating to those beginning in FY 2007. Similar to previous years, we proposed that if settled cost reports for all of the demonstration hospitals that participated in the applicable fiscal year (FY 2007, 2008, 2009, or 2010) were available prior to the FY 2014 IPPS/ LTCH PPS final rule, we would include VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 in the budget neutrality offset amount any additional amounts by which the final settled costs of the demonstration for the year (FY 2007, 2008, 2009, or 2010) exceeded the budget neutrality offset amount applicable to such year as finalized in the respective year’s IPPS final rule. (The final settled costs of the demonstration for a year would be calculated by subtracting the total amount that would otherwise be paid under the applicable Medicare payment systems without the demonstration for the year from the amount paid to those hospitals under the reasonable cost methodology for such year.) We did not receive any public comments on the budget neutrality offset methodology proposed in the FY 2014 IPPS/LTCH PPS proposed rule. Therefore, we are finalizing the methodology we proposed in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27639 through 27643). In addition, as proposed, we are using updated data not available at the time the proposed rule was developed to calculate the budget neutrality adjustment amount for the demonstration for FY 2014. As discussed above, we have completed Steps 1, 2, and 3 using ‘‘as submitted’’ cost reports for the participating hospitals’ cost reporting periods ending in CY 2011. (The rationale for using this set of cost reports is the same as stated in the FY 2014 IPPS/LTCH proposed rule (78 FR 27642).) In this FY 2014 IPPS/LTCH PPS final rule, we are now finalizing the calculation of the budget neutrality adjustment amount for FY 2014, based on updated data that has become available since the publication of the proposed rule. The following are the updated data used to determine this budget neutrality adjustment factor for FY 2014 for the final rule: • We have removed data pertaining to the hospital that withdrew from the demonstration in CY 2013 from the estimated costs for FY 2014 with the demonstration and absent the demonstration. Thus, the estimate of costs for FY 2014 pertains to 22 participating hospitals. • For Step 1 discussed above, we are using the final FY 2014 IPPS market basket percentage increase (which is identified in section V.A. of this final rule) instead of the proposed market basket percentage increase that was used in the proposed rule, to determine the estimated FY 2014 reasonable cost amount for covered inpatient hospital services under the demonstration for the 22 participating hospitals. • Similarly, for Step 2, we are using the final FY 2014 applicable percentage increase (which is identified in section V.A. of the preamble of this final rule) PO 00000 Frm 00249 Fmt 4701 Sfmt 4700 50743 instead of the applicable percentage increase that was used in the proposed rule, to determine the estimated amount that would otherwise be paid to the participating hospitals in FY 2014 for covered inpatient hospital services without the demonstration. Using the budget neutrality offset methodology finalized above and the updated data discussed above, the final resulting difference between the estimated reasonable cost amount for the 22 participating hospitals for FY 2014 under the demonstration and the estimated amount that would otherwise be paid in FY 2014 without the demonstration is $46,549,861. In addition, we note that the complete set of finalized cost reports for cost reporting periods beginning in FY 2007 has become available since the publication of the FY 2014 IPPS/LTCH PPS proposed rule. As we proposed in the FY 2014 IPPS/LTCH PPS proposed rule, we have calculated the amount by which the actual costs of the demonstration for FY 2007, as shown in the finalized cost reports for the hospitals that participated in the demonstration during FY 2007, exceeded the budget neutrality offset amount that was finalized in the FY 2007 IPPS final rule. This amount— $6,039,880—is derived from finalized cost reports for cost reporting periods beginning in FY 2007 for the 9 hospitals that participated in the demonstration during that year. (Finalized cost reports for all participating hospitals are not yet available for FYs 2008, 2009, 2010, or 2011. We anticipate that these finalized cost reports will be available prior to publication of the FY 2015 IPPS/LTCH PPS proposed rule). Therefore, the final total budget neutrality offset amount that will be applied to the FY 2014 IPPS rates is $52,589,741. This is the sum of two separate components: (1) The difference between the total estimated FY 2014 reasonable cost amount to be paid under the demonstration to the 22 participating hospitals for covered inpatient hospital services, and the total estimated amount that would otherwise be paid to the participating hospitals in FY 2014 without the demonstration ($46,549,861); and (2) the amount by which the actual costs of the demonstration for FY 2007, as shown in the finalized cost reports for the hospitals that participated in the demonstration during FY 2007, exceeded the budget neutrality offset amount that was finalized in the FY 2007 IPPS final rule ($6,039,880). We discuss the final payment rate adjustment that is required to ensure the budget neutrality of the demonstration E:\FR\FM\19AUR2.SGM 19AUR2 50744 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations program for FY 2014 (the budget neutrality adjustment factor) in section II.A. of the Addendum of this final rule. mstockstill on DSK4VPTVN1PROD with RULES6 L. Hospital Emergency Services Under EMTALA: Technical Change (§ 489.24(f)) In a final rule issued in the Federal Register on May 16, 2012 (77 FR 29002 through 29031), we made changes to a number of regulations under 42 CFR Chapter IV governing the Medicare and Medicaid programs to achieve regulatory reforms under Executive Order 13563 on Improving Regulation and Regulatory Review and the Department’s Plan for Retrospective Review of Existing Rules. In the May 16, 2012 final rule (77 FR 29021), we stated that, in response to comments from the public recommending that we discontinue our use of the term ‘‘recipient’’ under Medicaid, we made a nomenclature change to replace ‘‘recipient’’ with ‘‘beneficiary’’ throughout 42 CFR Chapter IV in order to conform our regulations to our current use of the term ‘‘beneficiary.’’ However, we inadvertently replaced ‘‘recipient’’ with ‘‘beneficiary’’ in the title of the regulations at 42 CFR 489.24(f), which now reads ‘‘Beneficiary hospital responsibilities.’’ The regulations at 42 CFR 489.24(f) specifically discuss the responsibilities of a hospital with specialized capabilities to accept the appropriate transfer of an individual as required by the Emergency Medical Treatment and Labor Act. The use of the word ‘‘recipient’’ in the title of 42 CFR 489.24(f) is appropriate because the regulations are discussing the requirements of the ‘‘receiving’’ hospital. The term ‘‘recipient’’ in this context is not referring to a Medicare or Medicaid patient, but rather to the hospital. Therefore, in the FY 2014 IPPS/LTCH PPS proposed rule, we proposed to replace the word ‘‘beneficiary’’ with the word ‘‘recipient’’ so that the section heading of paragraph (f) of 42 CFR 489.24 is corrected to read as it did prior to the nomenclature change. The corrected regulation text at 42 CFR 489.24(f) would read ‘‘Recipient hospital responsibilities.’’ We did not receive any public comments on our proposed change to 42 CFR 489.24(f) to replace the word ‘‘beneficiary’’ with the word ‘‘recipient.’’ Therefore, we are adopting as final without modification our proposed change. The final title of the regulation reads ‘‘(f) Recipient hospital responsibilities.’’ VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 M. Hospital Routine Services Furnished Under Arrangements In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51711 through 51714), we included a provision that limits the circumstances under which a hospital may furnish services to Medicare beneficiaries ‘‘under arrangement.’’ Under the revised policy, therapeutic and diagnostic services are the only services that may be furnished under arrangements outside of the hospital to Medicare beneficiaries. ‘‘Routine services’’ (that is, bed, board, and nursing and other related services) must be furnished in the hospital. Under this revised policy, routine services furnished to Medicare beneficiaries as inpatients in the hospital are considered services furnished by the hospital. If these services are furnished outside of the hospital, the services are considered to be furnished ‘‘under arrangement.’’ As we stated in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53453 through 53454), we have become aware that a number of hospitals affected by this policy need additional time to restructure existing arrangements and establish necessary operational protocols to comply with the requirement that therapeutic and diagnostic services are the only services that may be furnished outside of the hospital to Medicare beneficiaries ‘‘under arrangement,’’ and that ‘‘routine services’’ must be furnished in the hospital. In the FY 2013 IPPS/LTCH PPS final rule, we stated that while we believe the policy to be correct and consistent with the statutory language, because a number of hospitals were actively pursuing compliance that involved building construction or restructuring, we postponed the effective date of the requirement to give hospitals additional time to comply with the provision. In the FY 2013 IPPS/LTCH PPS final rule, we changed the implementation date of the requirement to be effective for cost reporting periods beginning on or after October 1, 2013. We stated that we expected that, during FY 2013, hospitals would have completed the work needed to ensure compliance with the requirement. While we still believe that our policy is correct and consistent with the statutory language, we are aware that a number of hospitals are still actively pursuing compliance with the requirement through major building construction to be completed in 2014. Therefore, we believe it is appropriate to further postpone the effective date of this requirement to give those hospitals additional time to comply. In the FY PO 00000 Frm 00250 Fmt 4701 Sfmt 4700 2014 IPPS/LTCH PPS proposed rule (78 FR 27643 through 27644), we proposed to change the implementation date of the requirement to be effective for services provided on or after January 1, 2015 (instead of effective with cost reporting periods beginning on or after October 1, 2013). Because there are hospitals in the midst of significant building projects that, when completed, will enable the hospital to provide routine services in compliance with the requirements of this revised policy, we believe it is appropriate to further delay the effective date. We stated that we expect that, with the additional time before the revised ‘‘under arrangement’’ policy becomes effective, hospitals will complete the work needed to ensure compliance with the new requirement. Effective for services provided on or after January 1, 2015, all hospitals would need to be in full compliance with the revised policy for services furnished under arrangement. As we stated in the proposed rule, we will continue to work with affected hospitals to communicate the requirement established by this provision, and to provide continued guidance regarding compliance with the provision. Comment: Most commenters reiterated comments made last year in response to the proposal to delay the effective date of the services under arrangement policy (77 FR 53453 through 53454) and comments made in response to CMS’ proposal in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25964 through 25965). Some commenters were thankful for the delay; however, all commenters wanted the policy rescinded or, at the least, wanted a grandfathering provision included for those hospitals that were providing routine services under arrangement at the time of our original proposal in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25964 and 25965). PPS-excluded cancer hospitals that are co-located with IPPS hospitals are most affected by the proposed policy and, along with the alliance representing these hospitals, made further comments that repeated their objections to this policy raised in last year’s rule. These commenters expressed concern that it could compromise patient care, that the policy is a reversal of CMS’ guidance the hospitals received while each hospital was seeking co-located status, that there is no statutory mandate or policy rationale, that it is not needed to guard against inappropriate use of services under arrangement, and that it is administratively burdensome and costly to Medicare as well as the cancer hospitals. Two of the cancer hospitals E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations and the alliance further commented that if CMS ‘‘refused’’ to rescind the policy or add a grandfathering provision, CMS must allow these hospitals to operate under their ‘‘back-end’’ proposal. They believed that their proposal would allow the hospital to continue moving patients to its host hospital for particular services, without discharging the patient, as is currently done. The commenters added that after the patient is formally discharged, each hospital would separately bill Medicare for the services it provided the discharged patient. Response: The commenters’ concerns with the services under arrangement policy reiterate public comments received on the FY 2012 IPPS/LTCH PPS proposed rule and the FY 2013 IPPS/LTCH PPS proposed rule. We refer the commenters to the responses provided in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51711 through 51714) and the FY 2013 IPPS/LTCH PPS final rule (77 FR 53453 through 53454) where those comments were addressed. In response to the commenters’ ‘‘virtual discharge’’ proposal, the proposal is unacceptable from a CoP perspective because the co-located hospital and the cancer hospital are two separately certified hospitals for purposes of Medicare participation. Therefore, moving the patient from the cancer hospital to the co-located IPPS hospital would require the patient to be discharged. To address hospitals’ concerns that discharging the patient from the cancer hospital to the IPPS hospital could have a detrimental effect on patient care, as we stated in response to comments in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53453 through 53454), the hospital may want to consider merging the cancer hospital into the host hospital, rather than keeping them as two separately certified hospitals, which could alleviate those concerns. After consideration of the public comments we received and for the reasons set forth in the FY 2012 IPPS/ LTCH PPS final rule (76 FR 51711 through 51714), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53453 through 53454), and the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27643 and 27644), we are finalizing our proposal to change the effective date of the revised policy. Therefore, effective for services provided on or after January 1, 2015, routine services provided in the hospital to its inpatients are considered as being provided by the hospital. However, if services are provided outside the hospital, the services are considered as being provided under arrangement, and only therapeutic and diagnostic items VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 and services may be furnished under arrangement outside of the hospital. Services identified at section 1861(b)(1) and section 1861(b)(2) of the Act may not be furnished under arrangements. VI. Changes to the IPPS for CapitalRelated Costs A. Overview Section 1886(g) of the Act requires the Secretary to pay for the capital-related costs of inpatient acute hospital services ‘‘in accordance with a prospective payment system established by the Secretary.’’ Under the statute, the Secretary has broad authority in establishing and implementing the IPPS for acute care hospital inpatient capitalrelated costs. The IPPS for capitalrelated costs was initially implemented in the Federal fiscal year (FY) 1992 IPPS final rule (56 FR 43358), in which we established a 10-year transition period to change the payment methodology for Medicare hospital inpatient capitalrelated costs from a reasonable costbased methodology to a prospective methodology (based fully on the Federal rate). FY 2001 was the last year of the 10year transition period established to phase in the IPPS for hospital inpatient capital-related costs. For cost reporting periods beginning in FY 2002, capital IPPS payments are based solely on the Federal rate for almost all acute care hospitals (other than hospitals receiving certain exception payments and certain new hospitals). (We refer readers to the FY 2002 IPPS final rule (66 FR 39910 through 39914) for additional information on the methodology used to determine capital IPPS payments to hospitals both during and after the transition period.) The basic methodology for determining capital prospective payments using the Federal rate is set forth in § 412.312 of the regulations. For the purpose of calculating capital payments for each discharge, the standard Federal rate is adjusted as follows: (Standard Federal Rate) × (DRG Weight) × (Geographic Adjustment Factor (GAF)) × (COLA for hospitals located in Alaska and Hawaii) × (1 + Capital DSH Adjustment Factor + Capital IME Adjustment Factor, if applicable). In addition, under § 412.312(c), hospitals also may receive outlier payments under the capital IPPS for extraordinarily high-cost cases that qualify under the thresholds established for each fiscal year. PO 00000 Frm 00251 Fmt 4701 Sfmt 4700 50745 B. Additional Provisions 1. Exception Payments The regulations at § 412.348 provide for certain exception payments under the capital IPPS. The regular exception payments provided under §§ 412.348(b) through (e) were available only during the 10-year transition period. For a certain period after the transition period, eligible hospitals may have received additional payments under the special exceptions provisions at § 412.348(g). However, FY 2012 was the final year hospitals could receive special exceptions payments. For additional details regarding these exceptions policies, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51725). Under § 412.348(f), a hospital may request an additional payment if the hospital incurs unanticipated capital expenditures in excess of $5 million due to extraordinary circumstances beyond the hospital’s control. Additional information on the exception payment for extraordinary circumstances in § 412.348(f) can be found in the FY 2005 IPPS final rule (69 FR 49185 and 49186). 2. New Hospitals Under the capital IPPS, § 412.300(b) of the regulations defines a new hospital as a hospital that has operated (under previous or current ownership) for less than 2 years and lists examples of hospitals that are not considered new hospitals. In accordance with § 412.304(c)(2), under the capital IPPS a new hospital is paid 85 percent of its allowable Medicare inpatient hospital capital-related costs through its first 2 years of operation, unless the new hospital elects to receive full prospective payment based on 100 percent of the Federal rate. We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51725) for additional information on payments to new hospitals under the capital IPPS. 3. Hospitals Located in Puerto Rico Section 412.374 of the regulations provides for the use of a blended payment amount for prospective payments for capital-related costs to hospitals located in Puerto Rico. Accordingly, under the capital IPPS, we compute a separate payment rate specific to Puerto Rico hospitals using the same methodology used to compute the national Federal rate for capitalrelated costs. In general, hospitals located in Puerto Rico are paid a blend of the applicable capital IPPS Puerto Rico rate and the applicable capital IPPS Federal rate. Capital IPPS payments to hospitals located in Puerto Rico are E:\FR\FM\19AUR2.SGM 19AUR2 50746 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 computed based on a blend of 25 percent of the capital IPPS Puerto Rico rate and 75 percent of the capital IPPS Federal rate. For additional details on capital IPPS payments to hospitals located in Puerto Rico, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51725). C. Other Changes for FY 2014— Adjustment To Offset the Cost of the Policy Proposal on Admission and Medical Review Criteria for Hospital Inpatient Services Under Medicare Part A In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27650 through 27651), we discussed our proposal that would clarify that a beneficiary becomes a hospital inpatient when formally admitted following a physician order for hospital inpatient admission, and that would also clarify when we believe hospital inpatient admissions are reasonable and necessary based on how long beneficiaries have spent, or are reasonably expected to spend, in the hospital as inpatients. Under this proposal, Medicare’s external review contractors would presume that hospital inpatient admissions are reasonable and necessary for beneficiaries who require more than 1 Medicare utilization day (defined by encounters crossing 2 ‘‘midnights’’) in the hospital receiving medically necessary services after inpatient admission. Similarly, we would generally presume that services spanning less than 2 midnights and not involving services designated by CMS as inpatient-only should have been provided on an outpatient basis, unless there is clear physician documentation in the medical record supporting the physician’s order and expectation that the beneficiary required care spanning at least 2 midnights even though that did not ultimately transpire. In general, after consideration of public comments, we are adopting this proposal as final in this final rule. For a complete discussion of our proposed inpatient admission guidelines and the policy we are adopting in this final rule, including our time-based benchmark and presumption of medical necessity for hospital inpatient services based on the beneficiary’s length of stay as part of our medical review criteria for payment of hospital inpatient services under Medicare Part A, we refer readers to section XI.C. of the preamble of this final rule. As discussed in the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR 27651) and in section XI.C.4. of the preamble of this final rule, our actuaries estimated that our proposed policy would increase IPPS expenditures by approximately VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 $220 million. These additional expenditures result from an expected net increase in hospital inpatient encounters due to some encounters spanning more than 2 midnights moving to the IPPS from the OPPS, and some encounters of less than 2 midnights moving from the IPPS to the OPPS. In making this projection, the actuaries analyzed Medicare claims data for extended hospital outpatient encounters and shorter stay hospital inpatient encounters, and estimated the number of encounters that are expected to shift from outpatient to inpatient and vice versa (that is, the number that are expected to shift from inpatient to outpatient). These estimated shifts of encounters represent a significant portion of the total encounters paid under the IPPS. Our actuaries estimated that this projected net increase in inpatient encounters would increase IPPS expenditures by approximately $220 million. In light of the widespread impact on the IPPS of our proposed policy and the systemic nature of the issue, in the FY 2014 IPPS/LTCH PPS proposed rule, we stated our belief that it is appropriate to propose to use our exceptions and adjustments authority under section 1886(d)(5)(I)(i) of the Act to offset the estimated $220 million in additional IPPS expenditures associated with this proposed policy by proposing to apply a ¥0.2 percent adjustment to the operating IPPS standardized amount, the hospital-specific rates, and the Puerto Rico-specific standardized amount. (For additional information on our actuarial estimate, we refer readers to section XI.C.4. of the preamble of this final rule.) Consistent with the proposal to apply a ¥0.2 percent adjustment to the operating national and Puerto Ricospecific standardized amounts and the hospital-specific rates, we stated our belief that it is also appropriate, under the Secretary’s broad authority under section 1886(g) of the Act, to propose to reduce the national capital Federal rate and Puerto Rico-specific capital rate by 0.2 percent (an adjustment factor of 0.998) to offset the estimated increase in capital IPPS expenditures associated with the projected increase in inpatient encounters that is expected to result from our proposed inpatient admission guidelines (78 FR 27651). Because hospitals receive an operating IPPS payment and also a capital IPPS payment for each discharge, we stated that we believe it would be appropriate to reduce payments under both the operating and capital IPPS to fully offset the projected increase in expenditures associated with these inpatient PO 00000 Frm 00252 Fmt 4701 Sfmt 4700 discharges. (We refer readers to section V.N. of the preamble of the proposed rule and section XI.C. of the preamble of this final rule for a complete discussion of our proposed and final inpatient admission guidelines and medical review criteria, including our time-based benchmark and presumption of medical necessity for hospital inpatient services based on the beneficiary’s length of stay as part of our medical review criteria for hospital inpatient services under Medicare Part A.) While we did not receive any comments that specifically addressed our proposal to make the ¥0.2 percent adjustment to the national capital Federal rate and Puerto Rico-specific capital rate, in section XI.C.4. of the preamble of this final rule, we discuss the public comments we received on our proposal to make a ¥0.2 percent adjustment to the operating IPPS standardized amount, the hospitalspecific rates, and the Puerto Ricospecific standardized amount to offset the estimated $220 million in additional IPPS expenditures associated with the projected increase in inpatient encounters that is expected to result from our final inpatient admission guidelines. As we state in section XI.C.4. of the preamble of this final rule, our actuaries continue to estimate that there will be approximately $220 million in additional expenditures resulting from the net increase in hospital inpatient encounters due to some encounters spanning more than 2 midnights moving to the IPPS from the OPPS, and some encounters of less than 2 midnights moving from the IPPS to the OPPS. After consideration of the public comments we received, which we discuss in section XI.C.4. of the preamble of this final rule, under the Secretary’s broad authority under section 1886(g) of the Act, we are finalizing the proposed 0.2 percent reduction (that is, an adjustment factor of 0.998) to the national capital Federal rate and the Puerto Rico-specific capital rate to offset the estimated increase in capital IPPS expenditures associated with the projected increase in inpatient encounters that is expected to result from the inpatient admission guidelines policy we are adopting in this final rule. As noted above, this is the same adjustment that we are finalizing to the standardized amount, the hospitalspecific rates, and the Puerto Ricospecific standardized amount. Because hospitals receive an operating IPPS payment and also a capital IPPS payment for each discharge, we continue to believe it is appropriate to E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 reduce payments under both the operating and capital IPPS to fully offset the projected increase in expenditures associated with these inpatient discharges. D. Annual Update for FY 2014 The annual update to the capital PPS Federal and Puerto Rico-specific rates, as provided for at § 412.308(c), for FY 2014 is discussed in section III. of the Addendum to this final rule. We note that, in section II.D. of the preamble of this final rule, we present a discussion of the MS–DRG documentation and coding adjustment, including previously finalized policies and historical adjustments, as well as the recoupment adjustment to the standardized amounts under section 1886(d) of the Act that we are finalizing for FY 2014 pursuant to the amendments made to section 7(b)(1)(B) of Public Law 110–90 by section 631 of the ATRA. As we explained in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27652), because section 631 of the ATRA requires CMS to make a recoupment adjustment only to the operating IPPS standardized amount, we did not propose a similar adjustment to the national or Puerto Rico capital IPPS rates (or to the operating IPPS hospitalspecific rates or Puerto Rico-specific standardized amount). This approach is consistent with our historical approach regarding the application of the recoupment adjustment authorized by section 7(b)(1)(B) of Public Law 110–90. In that same proposed rule (78 FR 27505), we also discussed additional prospective adjustments for the MS– DRG documentation and coding effect through FY 2010 authorized under section 1886(d)(3)(A)(vi) of the Act, and stated that, after further consideration of the MedPAC analysis of claims data, if we were to apply an additional prospective adjustment for the cumulative MS–DRG documentation and coding effect through FY 2010, we believe the most appropriate additional adjustment is ¥0.55 percent, rather than the adjustment proposed in prior rulemaking of ¥0.8 percent. While we did not propose an additional prospective adjustment in FY 2014 for the cumulative MS–DRG documentation and coding effects through FY 2010 at the time of the proposed rule, we solicited comments on the issue of applying a prospective adjustment to the operating IPPS standardized amount (and hospital-specific rates) for the cumulative MS–DRG documentation and coding effect through FY 2010. Consistent with our historical approach, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27652), we VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 stated that, because the cumulative documentation and coding effect through FY 2010 results in inappropriately high capital IPPS payments, if we were to apply a prospective adjustment to the operating IPPS standardized amount and the hospital-specific rates to remove this effect, we would also do so for the national capital IPPS Federal rate. Therefore, if we attributed a portion of the proposed ¥0.8 percent recoupment adjustment to the operating IPPS standardized amount for FY 2014 to the prospective adjustment, we would also make an appropriate adjustment to the national capital IPPS Federal rate under the Secretary’s broad authority under section 1886(g) of the Act. (We also noted that the capital IPPS Puerto Rico rate (and operating IPPS Puerto Ricospecific standardized amount) would not be affected as we previously found no significant additional MS–DRG documentation and coding effect through FY 2010 for Puerto Rico that would warrant any additional adjustment (77 FR 53279 and 53457).) In section II.D.7. of the preamble of this final rule, we summarize, and respond to, public comments that we solicited as to whether any portion of the aforementioned ¥0.8 percent recoupment adjustment to the operating IPPS standardized amount should be reduced and instead applied as a prospective adjustment to the operating IPPS standardized amount (and hospital-specific rates) for the cumulative MS–DRG documentation and coding effect through FY 2010. As discussed in that same section, after consideration of public comments, CMS is not allocating any portion of the ¥0.8 percent recoupment adjustment in FY 2014 as a prospective adjustment to account for FY 2010 documentation and coding effects. Therefore, consistent with our proposal, we are not making an additional documentation and coding adjustment to the FY 2014 national or Puerto Rico capital IPPS rates. VII. Changes for Hospitals Excluded from the IPPS A. Rate of Increase in Payments to Excluded Hospitals for FY 2014 Historically, certain hospitals and hospital units excluded from the prospective payment system received payment for inpatient hospital services they furnished on the basis of reasonable costs, subject to a rate-ofincrease ceiling. A per discharge limit (the target amount as defined in § 413.40(a) of the regulations) was set for each hospital or hospital unit based on the hospital’s own cost experience in PO 00000 Frm 00253 Fmt 4701 Sfmt 4700 50747 its base year, and updated annually by a rate-of-increase percentage. The updated target amount was multiplied by total Medicare discharges during that period and applied as an aggregate upper limit (the ceiling as defined in § 413.40(a)) on total inpatient operating costs for a hospital’s cost reporting period. Prior to October 1, 1997, these payment provisions applied consistently to certain categories of excluded providers, which included rehabilitation hospitals and units (now referred to as IRFs), psychiatric hospitals and units (now referred to as IPFs), LTCHs, children’s hospitals, and IPPS-excluded cancer hospitals. IRFs, IPFs, and LTCHs, which were paid previously under the reasonable cost methodology, now receive payment under their own prospective payment systems, in accordance with changes made to the statute. In general, the prospective payment systems for IRFs, IPFs, and LTCHs provided transition periods of varying lengths during which time a portion of the prospective payment was based on cost-based reimbursement rules under 42 CFR Part 413. (However, certain providers do not receive a transition period or may elect to bypass the transition period as applicable under 42 CFR Part 412, Subparts N, O, and P.) We note that the various transition periods provided for under the IRF PPS, the IPF PPS, and the LTCH PPS have ended. Certain hospitals excluded from a prospective payment system, including children’s hospitals and 11 cancer hospitals, continue to be subject to the rate-of-increase ceiling based on the hospital’s own historical cost experience. In accordance with § 403.752(a) of the regulations, RNHCIs are also subject to the rate-of-increase limits established under § 413.40 of the regulations. Beginning with FY 2006, we have used the percentage increase in the IPPS operating market basket to update the target amounts for children’s and cancer hospitals and RNHCIs. As explained in the FY 2006 IPPS final rule (70 FR 47396 through 47398), with IRFs, IPFs, and LTCHs being paid under their own PPS, the number of providers being paid based on reasonable cost subject to a ceiling, including children’s hospitals, 11 cancer hospitals, and RNHCIs, is too small and the cost report data are too limited to be able to create a market basket solely for these hospitals. Therefore, for FY 2014 and subsequent fiscal years, as we stated in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27653), we would continue to use the percentage increase in the IPPS operating market basket to update the E:\FR\FM\19AUR2.SGM 19AUR2 50748 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations target amounts for these cancer hospitals, children’s hospitals, and RNHCIs for the reasons discussed in the FY 2006 IPPS final rule. In addition, because we also proposed in the FY 2014 IPPS/LTCH PPS proposed rule to revise and rebase the IPPS operating market to a FY 2010 base year, we proposed to use the percentage increase in the FY 2010-based IPPS operating market basket to update the target amounts for children’s hospitals, the 11 cancer hospitals, and RNHCIs for FY 2014 and subsequent fiscal years. As described in section IV. of the preamble of this final rule, we are finalizing our proposal (as presented in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27561 through 27572)) to revise and rebase the IPPS operating market basket to a FY 2010 base year. As we did not receive any public comments on our proposal to use the percentage increase in the FY 2010-based IPPS operating market basket to update the target amounts for children’s hospitals, the 11 cancer hospitals, and RNHCIs for FY 2014 and subsequent fiscal years, we are finalizing this proposal as well. Accordingly, for FY 2014 and subsequent fiscal years, the rate-ofincrease percentage to be applied to the target amount for these cancer hospitals, children’s hospitals, and RNHCIs is the percentage increase in the FY 2010based IPPS operating market basket. For the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27652 and 27653), based on IHS Global Insight, Inc.’s 2013 first quarter forecast, we estimated that the FY 2010-based IPPS operating market basket update for FY 2014 was 2.5 percent (that is, the estimate of the market basket rate-of-increase). We proposed that if more recent data became available for the final rule, we would use them to calculate the IPPS operating market basket update for FY 2014. For this final rule, based on IHS Global Insight, Inc.’s 2013 second quarter forecast (which is the most recent data available), we calculated the FY 2010-based IPPS operating market basket update for FY 2014 to be 2.5 percent. Thus, the FY 2014 rate-ofincrease percentage that is applied to the FY 2013 target amounts in order to calculate the final FY 2014 target amounts for children’s hospitals, the 11 cancer hospitals, and RNHCIs is 2.5 percent, in accordance with the applicable regulations at 42 CFR 413.40. The IRF PPS, the IPF PPS, and the LTCH PPS are updated annually. We refer readers to section IV. of the Addendum to this final rule for the specific update changes to the Federal payment rates for LTCHs under the LTCH PPS for FY 2014. The annual updates for the IRF PPS and the IPF PPS are issued by the agency in separate Federal Register documents. B. Report on Adjustment (exceptions) Payments Section 4419(b) of Public Law 105–33 requires the Secretary to publish annually in the Federal Register a report describing the total amount of adjustment payments made to excluded hospitals and hospital units by reason of section 1886(b)(4) of the Act during the previous fiscal year. The process of requesting, adjusting, and awarding an adjustment payment is likely to occur over a 2-year period or longer. First, generally, an excluded hospital must file its cost report for a fiscal year in accordance with Class of hospital § 413.24(f)(2). The fiscal intermediary or MAC reviews the cost report and issues a notice of provider reimbursement (NPR). Once the hospital receives the NPR, if its operating costs are in excess of the ceiling, the hospital may file a request for an adjustment payment. After the fiscal intermediary or MAC receives the hospital’s request in accordance with applicable regulations, the fiscal intermediary or MAC or CMS, depending on the type of adjustment requested, reviews the request and determines if an adjustment payment is warranted. This determination is sometimes not made until more than 180 days after the date the request is filed because there are times when the applications are incomplete and additional information must be requested in order to have a completed application. However, in an attempt to provide interested parties with data on the most recent adjustments for which we do have data, we are publishing data on adjustment payments that were processed by the fiscal intermediary or MAC or CMS during FY 2012. The table below includes the most recent data available from the fiscal intermediaries or MACs and CMS on adjustment payments that were adjudicated during FY 2012. As indicated above, the adjustments made during FY 2012 only pertain to cost reporting periods ending in years prior to FY 2011. Total adjustment payments given to excluded hospitals during FY 2012 are $3,457,953. The table depicts for each class of hospitals, in the aggregate, the number of adjustment requests adjudicated, the excess operating costs over the ceiling, and the amount of the adjustment payments. Excess cost over ceiling Number Adjustment payments Children’s ..................................................................................................................................... Cancer ......................................................................................................................................... Religious Nonmedical Health Care Institution (RNHCI) .............................................................. 2 1 1 $785,960 19,193,933 194,363 $540,658 2,818,076 99,219 Total ...................................................................................................................................... ........................ ........................ 3,457,953 mstockstill on DSK4VPTVN1PROD with RULES6 C. Critical Access Hospitals (CAHs): Changes to the Conditions of Participation 1. Background Sections 1820 and 1861(mm) of the Act, as amended by section 4201 of the Balanced Budget Act (BBA) of 1997, replaced the Essential Access Community Hospitals and Rural Primary Care Hospitals (EACH/RPCH) program with the Medicare Rural VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Hospital Flexibility Program (MRHFP), under which a qualifying facility can be designated as a CAH. CAHs participating in the MRHFP must meet the conditions for designation by the State and be certified by the Secretary in accordance with section 1820 of the Act. Further, in accordance with section 1820(e)(3) of the Act, a CAH must meet other criteria that the Secretary specifies. PO 00000 Frm 00254 Fmt 4701 Sfmt 4700 The regulations that codify the conditions of participation (CoPs) to implement the statutory requirements of section 1820 are codified at 42 CFR Part 485, Subpart F. 2. Proposed and Final Policy Changes As we discussed in the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR 27653 through 27654), we have received a number of questions from stakeholders in the CAH provider community E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations relating to whether CAHs are required to furnish acute care inpatient services under the CAH CoPs. Our interpretation is that CAHs must provide acute care inpatient services, and in the proposed rule (78 FR 27653 through 27654 and 27486), we proposed revisions to clarify and restate this requirement. In particular, we proposed to add paragraph (b)(1)(ii) to 42 CFR 485.635 as clarification that a CAH must provide acute care inpatient services. We stated that we expected that these services would be provided as appropriate to a CAH’s resources and as appropriate to meet the needs of its patients. In the proposed rule, we discussed our review of data for 1,230 of the existing 1,328 CAHs 53 using the July 2010 through June 2011 cost reports, and found that 99 percent of CAHs are regularly providing acute care inpatient services and are in compliance with the requirements under the CAH CoPs. However, we indicated that the data regarding the remaining 1 percent, together with the questions we had received, suggested that there may be some service gaps. We further stated that we believe that a few CAHs would benefit from clarification that CAHs must furnish acute care inpatient services. As set forth in section 1820 of the Act, the CAH program was established to improve access to hospital and other health services for rural residents of a State. We believe that the statutory requirements related to the provision of emergency care and acute care inpatient services, including those at section 1820(c)(2)(B) of the Act, suggest that a CAH must furnish these acute care inpatient services, albeit, in a more limited fashion than would be expected of a hospital. Hospitals are subject to a different set of CoPs, found in 42 CFR Part 482. In the proposed rule, we stated that we recognize that, given its resources and the needs of the community it serves, a CAH may not be actively treating inpatients at all times. Indeed, the Act fully recognizes the variable nature of a CAH’s inpatient census, as it provides specific contingency language for the staffing requirements under section 1820(c)(2)(B)(iv) of the Act. We noted that a CAH is not specifically required to maintain a minimum average daily census (ADC) of inpatients receiving inpatient acute care services or a minimum number of certified inpatient beds. We indicated 53 Produced by the Cecil G. Sheps Center for Health Services Research at the University of North Carolina under a Cooperative Agreement with the Federal ORHP. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 that we are aware that there are significant seasonal variations in the inpatient occupancy rates as well as variations that are a function of the size of the community in which a CAH is located. We also stated that we recognize the need for inpatient acute care services to be furnished in the best setting for the patient. However, we stated that while it may be true that CAHs generally are not able to handle patients requiring complex, specialized inpatient services, such as those services provided by trauma centers, or cardiac surgery centers, CAHs should be able to handle a range of patient needs requiring admission. We stated that we believe it is not in the best interest of patients for them to routinely be transferred to a more distant hospital if instead their care can be provided locally without compromising quality. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27486), we also wished to clarify the relationship between a CAH’s written policies and the services it offers. The regulations at 42 CFR 485.635(a) require a CAH to furnish health care services in accordance with appropriate written policies. Among other items, the CAH must describe its procedures for emergency medical services and its procedures for inpatient services. We explained that we would expect CAHs to be appropriately prepared to provide the services described in their policies and procedures. For example, we would expect a CAH’s policies and procedures to be reflected in the number of certified beds, appropriate equipment, and available staffing (whether as employees or through arrangements or agreements). We also stated that we would expect to see a relationship between CAHs’ policies and procedures and the actual services furnished, as appropriate to the needs of individual patients. To further clarify the interrelated standards at § 485.635(a) and (b) of the regulations, we proposed to amend the regulatory language at § 485.635(b), as noted below, and we proposed to revise the language under the standard for ‘‘Patient care policies’’ under § 485.635(a)(3)(vii) to remove the conditional phrase ‘‘If a CAH furnishes inpatient services.’’ By proposing to remove this conditional phrase, we stated that we would eliminate regulatory language that could be creating ambiguity where none was intended. We stated that the elimination of this language would clarify that CAHs are required to provide acute care inpatient services. We also stated that our revision would align the standard with the structure of neighboring standards under § 485.635(a). PO 00000 Frm 00255 Fmt 4701 Sfmt 4700 50749 Comment: One commenter thanked CMS for the continued emphasis on expanding access to critical health care services to all rural beneficiaries. The commenter believed that the CAH program has dramatically expanded access to critical health care services in rural areas for all rural residents. Another commenter noted that, often, the CAH provider is the foundation of all health care services in the community. Response: We appreciate the positive feedback regarding the CAH program. We are mindful of the fact that the CAH program was established to improve access for rural residents to essential health care services, including hospital services. We believe the clarifying changes that we are finalizing in this rule will maintain the integrity of the CAH program and ensure continued access to these critical services, including acute care inpatient services. Comment: One commenter stated that section 1820(c)(2)(B) of the Act, which sets forth criteria for designation as a CAH, does not include a requirement that CAHs provide inpatient acute care services. The commenter questioned CMS’ authority and underlying reasoning for proposing the regulatory changes. Another commenter asked why CMS would consider adding one of the defining features of a ‘‘hospital,’’ namely, inpatient care, given that the definition of a hospital at section 1861(e) of the Act provides that a CAH is not always considered a hospital. Response: While we acknowledge that section 1820(c)(2)(B) of the Act does not expressly require CAHs to provide inpatient acute care services, we note that section 1820(e)(3) of the Act authorizes the Secretary to require other criteria for a facility to be certified as a CAH. As set forth in section 1820 of the Act, the CAH program was established to improve access to hospital and other health services for rural residents of a State. We believe that the statutory requirements related to the provision of emergency care and acute care inpatient services, including those at section 1820(c)(2)(B) of the Act, suggest that a CAH must furnish these acute care inpatient services, albeit, in a more limited fashion than would be expected of a hospital. We further acknowledge that section 1861(e) of the Act specifies that the term ‘‘hospital’’ does not always include a CAH. At the same time, we note that section 1861(e) of the Act qualifies this statement with the phrase ‘‘unless the context otherwise requires.’’ For purposes of determining what services should be furnished by a CAH, we have concluded that the context E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50750 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations requires CAHs to furnish inpatient acute care services. Comment: One commenter noted that CMS’ interpretive guidelines state that the ‘‘CAH must provide outpatient and emergency room services as direct services at the CAH campus through the use of CAH personnel.’’ Further, the commenter stated, the interpretive guidelines allow for a CAH to ‘‘choose the level of services to be offered . . . [and that a] CAH is not required to offer outpatient services 24/7 except for emergency room services.’’ In addition, the commenter stated that the interpretive guidelines only state that the CAH’s ‘‘outpatient services must be integrated with inpatient services, as appropriate to the outpatient services offered.’’ Response: We appreciate the commenter’s questions. The guidance noted by the commenter related to the furnishing of services at § 485.635(b), which, under an earlier version of the regulation, were to have been provided by the CAH directly, by its own employees, rather than through an arrangement. As such, it would not have been appropriate to have viewed the guidance as identifying an exclusive list of services that a CAH must provide. Rather, the provision identified only those services that a CAH was required to provide directly. In any event, we note that the interpretive guidelines referenced in the comment are outdated. The above referenced guidelines were applicable to a prior version of § 485.635(b) that addressed services that CAHs were then required to provide as ‘‘direct services,’’ that is, services provided by CAH employees (and not through an arrangement). We note that, in an effort to reduce burden on CAHs, we amended § 485.635(b) in the May 16, 2012 final rule, ‘‘Medicare and Medicaid Programs; Reform of Hospital and Critical Access Hospital Conditions of Participation,’’ that sought to reduce outmoded and unnecessarily burdensome regulations, and to increase the ability of CAHs to devote more resources to providing high quality patient care (77 FR 29034). In that final rule, we removed the requirement under § 485.635(b) for these services to be provided directly by CAH employees. We issued revised interpretative guidelines in S&C13–20 on March 15, 2013, and updated the State Operations Manual accordingly via Transmittal No. 84, issued on June 7, 2013. With the publication of this final rule, we will further update the interpretative guidelines for CAHs. Comment: One commenter asked how CMS intended to monitor CAHs’ compliance with the proposed VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 requirement to provide inpatient services. The commenter was concerned that a requirement to provide inpatient acute care services would be enforced arbitrarily or that it might create a ‘‘slippery slope’’ leading to a misguided approach, such as a future requirement for a minimum average daily census (ADC). The commenter acknowledged CMS’ commentary in the proposed rule that listed several reasons why maintaining a minimum ADC would not be desirable. At the same time, the commenter believed that CMS had not specified a compliance mechanism in the proposed rule. Response: As we stated in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27653 through 27654), a CAH is not specifically required to maintain a minimum ADC of inpatients receiving inpatient acute care services or a minimum number of certified inpatient beds. We are aware that there are significant seasonal variations in the inpatient occupancy rates as well as variations that are a function of the size of the community in which a CAH is located. We agree with the commenter that requiring a minimum daily census would not allow for the seasonal and regional variability within the CAH system. We also recognize the need for inpatient acute care services to be furnished in the best setting for the beneficiary. For these reasons, we did not propose a minimum ADC requirement. However, while it may be true that CAHs generally are not able to handle patients requiring complex, specialized inpatient services, such as those services provided by trauma centers or cardiac surgery centers, CAHs should be able to handle a range of needs for beneficiaries requiring admission, particularly in the case of patients who present to the CAH seeking emergency services. As stated above, we believe it is not in the best interest of CAH patients requiring admission to be routinely transferred to a more distant hospital if their care can be provided by the CAH locally without compromising quality. We anticipate developing more detailed guidance that would consider the volume of emergency services provided by a CAH, along with the volume of transfers to hospitals, compared to inpatient CAH admissions through the emergency department. While we do not envision developing specific formulas for minimum inpatient admissions, we do believe this approach would enable identification of cases for further scrutiny where there is a significant disproportion between the emergency services and the inpatient services a CAH provides. We believe our PO 00000 Frm 00256 Fmt 4701 Sfmt 4700 proposal facilitates beneficiary care on both an individual and a population level. Comment: One commenter agreed with CMS that CAHs and all rural facilities should maintain an accurate listing of the services they offer. The commenter acknowledged that patients in rural areas rely on accurate and timely notices of the services available at their local hospital. The commenter encouraged all CAHs to maintain and regularly update their written policies as they relate to services available in their facility. Response: We appreciate the commenter’s remarks and encouragement to CAHs to maintain and regularly update their written policies as they relate to services available in their facility. The regulations at 42 CFR 485.635(a) require a CAH to furnish health care services in accordance with appropriate written policies. Among other items, the CAH must describe its procedures for emergency medical services and its procedures for inpatient services. Therefore, we expect CAHs to be appropriately prepared to provide the described services. For example, a CAH’s policies and procedures should be reflected in the number of certified beds, appropriate equipment, and available staffing (whether as employees or through arrangements or agreements). Similarly, we would expect CAHs to, in fact, be providing the same services outlined in their policies and procedures, as appropriate to the needs of individual patients. Comment: A few commenters urged that greater consideration be given to this proposed change in policy; one commenter described the proposal as a major departure from the CAH CoPs that have been in place for the past 20 years. The commenters suggested that the proposed change could thwart the provision of health care services to rural and frontier communities. The commenter noted that, particularly in the West, inpatient volumes are decreasing as hospitals better manage patients’ disease processes and care. Another commenter expressed concern that a requirement to furnish acute care inpatient services could have a major impact on the operational capacity and necessary workforce needs of many CAHs. One commenter remarked that the CoPs, as written, have given CAH providers an option to change as time goes on to meet the needs of their communities. The commenter opposed an express requirement for CAHs to furnish inpatient services and expressed concern that, as the health care system evolves, the providers in a community E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations continue to be able to respond to and meet the needs of its residents. Another commenter stated that provision that restricts or dictates how services are provided in these communities would necessarily limit innovations designed to meet the goals of the ‘‘Triple Aim.’’ The commenter also stated that proposals to reduce CAH payments or revoke status for current CAHs would do significant damage to the gains made since the establishment of this program in 1997. Response: We share the commenters’ concern for ensuring access to health care services in rural and frontier communities. At the same time, as we have stated, we have received a number of questions from stakeholders in the CAH provider community relating to whether CAHs are required to furnish acute care inpatient services under the CAH CoPs. As we stated in the proposed rule and as noted above, the data analysis that we conducted suggest that 99 percent of CAHs are regularly providing acute care inpatient services and are in compliance with such requirements. However, the data regarding the remaining 1 percent, along with the questions we have received, suggest that there may be some service gaps. We believe our proposed language to explicitly require CAHs to furnish inpatient acute care services would address these gaps in service. In light of the fact that 99 percent of CAHs are already providing inpatient acute care services, we do not agree that the establishment of an express requirement for CAHs to provide inpatient services represents a major change to the CAH program. Moreover, we note that none of the commenters submitted evidence or specific examples demonstrating how finalizing a general requirement for CAHs to provide acute care inpatient services could have a major impact upon or thwart the provision of health care services to rural and frontier communities. In the event that a CAH decides that it is no longer able to comply, or that the circumstances no longer warrant compliance, with all of the CAH requirements, such a facility may wish to engage in a dialogue with CMS to explore its options, including avenues other than the CAH program, for continued participation in the Medicare program. For example, if it does not meet the CAH CoPs, a CAH could convert to a certified Medicare hospital. We disagree with the comment that a requirement for CAHs to furnish inpatient acute care services is inconsistent with the goals of the ‘‘Triple Aim,’’ which calls for better care for individuals, better health for VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 populations, and lower cost through improvement (without any harm to individuals). The CAH program was established to improve access for rural residents to essential health care services and, particularly, hospital services. Hospital services include acute care inpatient services, and, when a CAH does not provide them, the individuals residing in that rural community may be at risk. Indeed, once a facility has been designated and certified as a CAH, that facility is expected to provide services as a CAH, and it is entrusted with the reliance of the general public and of the local community. We recognize that, given its resources and the needs of the community it serves, a CAH may not be actively treating inpatients at all times. As stated above, we believe it is not in the best interest of a CAH’s beneficiaries to be routinely transferred to a more distant hospital if instead their care could be provided locally without compromising quality. Finally, we note that because we did not make any proposals in this section to change CAH payments, we believe the comments concerning payments to CAHs are outside the scope of the proposed rule. Therefore, for the reasons discussed above, we are finalizing the provisions at § 485.635(a) and (b), as proposed. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27654), we proposed further changes at § 485.635(c), regarding ‘‘Services provided through agreements or arrangements.’’ We are removing paragraph (c)(1)(i) under § 485.635 requiring CAHs to furnish inpatient hospital care services through agreements or arrangements; redesignating the existing language of paragraph (b)(1) as paragraph (b)(1)(i); and adding a new paragraph (b)(1)(ii) under the standard ‘‘Patient services’’ that more clearly requires CAHs to furnish acute care inpatient services. (Because we are removing paragraph (c)(1)(i), we are redesignating existing paragraphs (c)(1)(ii) through (c)(1)(iv) as paragraphs (c)(1)(i) through (c)(1)(iii), respectively.) We regard the services furnished in accordance with § 485.635(c) as other additional services, which a CAH may also provide through agreements or arrangements. Notwithstanding these clarifications and revisions, in accordance with section 1820(d) of the Act, each CAH member of a Rural Health Network will still be required to have an agreement with at least one fullservice acute care hospital member of the network regarding patient referral and transfer. PO 00000 Frm 00257 Fmt 4701 Sfmt 4700 50751 We did not receive any public comments on our proposal to make the above-described changes at § 485.635(c). Therefore, we are finalizing these changes as proposed. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27654), we also proposed a technical change at § 485.620(a), the section addressing the ‘‘Number of Beds’’ standard. Specifically, we proposed to remove the phrase ‘‘after January 1, 2004,’’ a prospective effective date established in the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108–173) and which was subsequently restated in regulation at § 485.620(a) (69 FR 49215). The effective date of January 1, 2004 has passed and the revised maximum bed limit of 25 continues to apply. We did not receive any public comments on this proposed technical revision at § 485.620(a). Therefore, we are finalizing the technical revision without change. VIII. Changes to the Long-Term Care Hospital Prospective Payment System (LTCH PPS) for FY 2014 A. Background of the LTCH PPS 1. Legislative and Regulatory Authority Section 123 of the Medicare, Medicaid, and SCHIP (State Children’s Health Insurance Program) Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106–113) as amended by section 307(b) of the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106–554) provides for payment for both the operating and capital-related costs of hospital inpatient stays in long-term care hospitals (LTCHs) under Medicare Part A based on prospectively set rates. The Medicare prospective payment system (PPS) for LTCHs applies to hospitals that are described in section 1886(d)(1)(B)(iv) of the Act, effective for cost reporting periods beginning on or after October 1, 2002. Section 1886(d)(1)(B)(iv)(I) of the Act defines a LTCH as ‘‘a hospital which has an average inpatient length of stay (as determined by the Secretary) of greater than 25 days.’’ Section 1886(d)(1)(B)(iv)(II) of the Act also provides an alternative definition of LTCHs: specifically, a hospital that first received payment under section 1886(d) of the Act in 1986 and has an average inpatient length of stay (LOS) (as determined by the Secretary of Health and Human Services (the Secretary)) of greater than 20 days and has 80 percent or more of its annual Medicare inpatient discharges with a principal diagnosis E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50752 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations that reflects a finding of neoplastic disease in the 12-month cost reporting period ending in FY 1997. Section 123 of the BBRA requires the PPS for LTCHs to be a ‘‘per discharge’’ system with a diagnosis-related group (DRG) based patient classification system that reflects the differences in patient resources and costs in LTCHs. Section 307(b)(1) of the BIPA, among other things, mandates that the Secretary shall examine, and may provide for, adjustments to payments under the LTCH PPS, including adjustments to DRG weights, area wage adjustments, geographic reclassification, outliers, updates, and a disproportionate share adjustment. In the August 30, 2002 Federal Register, we issued a final rule that implemented the LTCH PPS authorized under the BBRA and BIPA (67 FR 55954). For the initial implementation of the LTCH PPS (FYs 2003 through FY 2007), the system used information from LTCH patient records to classify patients into distinct long-term care diagnosis-related groups (LTC–DRGs) based on clinical characteristics and expected resource needs. Beginning in FY 2008, we adopted the Medicare severity long-term care diagnosis-related groups (MS–LTC–DRGs) as the patient classification system used under the LTCH PPS. Payments are calculated for each MS–LTC–DRG and provisions are made for appropriate payment adjustments. Payment rates under the LTCH PPS are updated annually and published in the Federal Register. The LTCH PPS replaced the reasonable cost-based payment system under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) (Pub. L. 97–248) for payments for inpatient services provided by a LTCH with a cost reporting period beginning on or after October 1, 2002. (The regulations implementing the TEFRA reasonable cost-based payment provisions are located at 42 CFR Part 413.) With the implementation of the PPS for acute care hospitals authorized by the Social Security Amendments of 1983 (Pub. L. 98–21), which added section 1886(d) to the Act, certain hospitals, including LTCHs, were excluded from the PPS for acute care hospitals and were paid their reasonable costs for inpatient services subject to a per discharge limitation or target amount under the TEFRA system. For each cost reporting period, a hospitalspecific ceiling on payments was determined by multiplying the hospital’s updated target amount by the number of total current year Medicare discharges. (Generally, in section VIII. of this preamble, when we refer to VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 discharges, we describe Medicare discharges.) The August 30, 2002 final rule further details the payment policy under the TEFRA system (67 FR 55954). In the August 30, 2002 final rule, we provided for a 5-year transition period from payments under the TEFRA system to payments under the LTCH PPS. During this 5-year transition period, a LTCH’s total payment under the PPS was based on an increasing percentage of the Federal rate with a corresponding decrease in the percentage of the LTCH PPS payment that is based on reasonable cost concepts, unless a LTCH made a one-time election to be paid based on 100 percent of the Federal rate. Beginning with LTCHs’ cost reporting periods beginning on or after October 1, 2006, total LTCH PPS payments are based on 100 percent of the Federal rate. In addition, in the August 30, 2002 final rule, we presented an in-depth discussion of the LTCH PPS, including the patient classification system, relative weights, payment rates, additional payments, and the budget neutrality requirements mandated by section 123 of the BBRA. The same final rule that established regulations for the LTCH PPS under 42 CFR Part 412, Subpart O, also contained LTCH provisions related to covered inpatient services, limitation on charges to beneficiaries, medical review requirements, furnishing of inpatient hospital services directly or under arrangement, and reporting and recordkeeping requirements. We refer readers to the August 30, 2002 final rule for a comprehensive discussion of the research and data that supported the establishment of the LTCH PPS (67 FR 55954). We refer readers to the FY 2012 IPPS/ LTCH PPS final rule (76 FR 51733 through 51743) for a chronological summary of the main legislative and regulatory developments affecting the LTCH PPS through the annual update cycles prior to the FY 2013 rulemaking cycle. 2. Criteria for Classification as a LTCH a. Classification as a LTCH Under the existing regulations at §§ 412.23(e)(1) and (e)(2)(i), which implement section 1886(d)(1)(B)(iv)(I) of the Act, to qualify to be paid under the LTCH PPS, a hospital must have a provider agreement with Medicare and must have an average Medicare inpatient length of stay of greater than 25 days. Alternatively, § 412.23(e)(2)(ii) states that, for cost reporting periods beginning on or after August 5, 1997, a hospital that was first excluded from the PPS in 1986 and can demonstrate that PO 00000 Frm 00258 Fmt 4701 Sfmt 4700 at least 80 percent of its annual Medicare inpatient discharges in the 12month cost reporting period ending in FY 1997 have a principal diagnosis that reflects a finding of neoplastic disease must have an average inpatient length of stay for all patients, including both Medicare and non-Medicare inpatients, of greater than 20 days. b. Hospitals Excluded From the LTCH PPS The following hospitals are paid under special payment provisions, as described in § 412.22(c) and, therefore, are not subject to the LTCH PPS rules: • Veterans Administration hospitals. • Hospitals that are reimbursed under State cost control systems approved under 42 CFR Part 403. • Hospitals that are reimbursed in accordance with demonstration projects authorized under section 402(a) of the Social Security Amendments of 1967 (Pub. L. 90–248) (42 U.S.C. 1395b–1) or section 222(a) of the Social Security Amendments of 1972 (Pub. L. 92–603) (42 U.S.C. 1395b–1 (note)) (Statewide all-payer systems, subject to the rate-ofincrease test at section 1814(b) of the Act). • Nonparticipating hospitals furnishing emergency services to Medicare beneficiaries. 3. Limitation on Charges to Beneficiaries In the August 30, 2002 final rule, we presented an in-depth discussion of beneficiary liability under the LTCH PPS (67 FR 55974 through 55975). In the RY 2005 LTCH PPS final rule (69 FR 25676), we clarified that the discussion of beneficiary liability in the August 30, 2002 final rule was not meant to establish rates or payments for, or define Medicare-eligible expenses. Under § 412.507, if the Medicare payment to the LTCH is the full LTC–DRG payment amount, as consistent with other established hospital prospective payment systems, a LTCH may not bill a Medicare beneficiary for more than the deductible and coinsurance amounts as specified under §§ 409.82, 409.83, and 409.87 and for items and services as specified under § 489.30(a). However, under the LTCH PPS, Medicare will only pay for days for which the beneficiary has coverage until the shortstay outlier (SSO) threshold is exceeded. Therefore, if the Medicare payment was for a SSO case (§ 412.529) that was less than the full LTC–DRG payment amount because the beneficiary had insufficient remaining Medicare days, the LTCH could also charge the beneficiary for services delivered on those uncovered days (§ 412.507). E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 4. Administrative Simplification Compliance Act (ASCA) and Health Insurance Portability and Accountability Act (HIPAA) Compliance Claims submitted to Medicare must comply with both the Administrative Simplification Compliance Act (ASCA) (Pub. L. 107–105), and the Health Insurance Portability and Accountability Act of 1996 (HIPAA) (Pub. L. 104–191). Section 3 of the ASCA requires that the Medicare Program deny payment under Part A or Part B for any expenses incurred for items or services ‘‘for which a claim is submitted other than in an electronic form specified by the Secretary.’’ Section 1862(h) of the Act (as added by section 3(a) of the ASCA) provides that the Secretary shall waive such denial in two specific types of cases and may also waive such denial ‘‘in such unusual cases as the Secretary finds appropriate’’ (68 FR 48805). Section 3 of the ASCA operates in the context of the HIPAA regulations, which include, among other provisions, the transactions and code sets standards requirements codified as 45 CFR Parts 160 and 162, Subparts A and I through R (generally known as the Transactions Rule). The Transactions Rule requires covered entities, including covered health care providers, to conduct certain electronic health care transactions according to the applicable transactions and code sets standards. mstockstill on DSK4VPTVN1PROD with RULES6 B. Medicare Severity Long-Term Care Diagnosis-Related Group (MS–LTC– DRG) Classifications and Relative Weights for FY 2014 1. Background Section 123 of the BBRA requires that the Secretary implement a PPS for LTCHs (that is, a per discharge system with a diagnosis-related group (DRG)based patient classification system reflecting the differences in patient resources and costs). Section 307(b)(1) of the BIPA modified the requirements of section 123 of the BBRA by requiring that the Secretary examine ‘‘the feasibility and the impact of basing payment under such a system [the longterm care hospital (LTCH) PPS] on the use of existing (or refined) hospital DRGs that have been modified to account for different resource use of LTCH patients, as well as the use of the most recently available hospital discharge data.’’ When the LTCH PPS was implemented for cost reporting periods beginning on or after October 1, 2002, we adopted the same DRG patient classification system (that is, the CMS DRGs) that was utilized at that time VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 under the IPPS. As a component of the LTCH PPS, we refer to this patient classification system as the ‘‘long-term care diagnosis-related groups (LTC– DRGs).’’ Although the patient classification system used under both the LTCH PPS and the IPPS are the same, the relative weights are different. The established relative weight methodology and data used under the LTCH PPS result in relative weights under the LTCH PPS that reflect ‘‘the differences in patient resource use . . .’’ of LTCH patients (section 123(a)(1) of the BBRA (Pub. L. 106–113)). As part of our efforts to better recognize severity of illness among patients, in the FY 2008 IPPS final rule with comment period (72 FR 47130), the MS–DRGs and the Medicare severity long-term care diagnosis-related groups (MS–LTC–DRGs) were adopted under the IPPS and the LTCH PPS, respectively, effective beginning October 1, 2007 (FY 2008). For a full description of the development, implementation, and rationale for the use of the MS–DRGs and MS–LTC– DRGs, we refer readers to the FY 2008 IPPS final rule with comment period (72 FR 47141 through 47175 and 47277 through 47299). (We note that, in that same final rule, we revised the regulations at § 412.503 to specify that for LTCH discharges occurring on or after October 1, 2007, when applying the provisions of 42 CFR Part 412, Subpart O applicable to LTCHs for policy descriptions and payment calculations, all references to LTC– DRGs would be considered a reference to MS–LTC–DRGs. For the remainder of this section, we present the discussion in terms of the current MS–LTC–DRG patient classification system unless specifically referring to the previous LTC–DRG patient classification system that was in effect before October 1, 2007.) The MS–DRGs adopted in FY 2008 represent an increase in the number of DRGs by 207 (that is, from 538 to 745) (72 FR 47171). The MS–DRG classifications are updated annually. As described in section II.G. of this preamble, for FY 2014 we did not create or delete any MS–DRGs, and as such we continue to have a total of 751 MS–DRG groupings for FY 2014. Consistent with section 123 of the BBRA, as amended by section 307(b)(1) of the BIPA, and § 412.515 of the regulations, we use information derived from LTCH PPS patient records to classify LTCH discharges into distinct MS–LTC–DRGs based on clinical characteristics and estimated resource needs. We then assign an appropriate weight to the MS– LTC–DRGs to account for the difference PO 00000 Frm 00259 Fmt 4701 Sfmt 4700 50753 in resource use by patients exhibiting the case complexity and multiple medical problems characteristic of LTCHs. Below we provide a general summary of our existing methodology for determining the MS–LTC–DRG relative weights. In a departure from the IPPS, and as discussed in greater detail below in section VIII.B.3.f. of this preamble, we are continuing to use low-volume MS– LTC–DRGs (that is, MS–LTC–DRGs with less than 25 LTCH cases) in determining the MS–LTC–DRG relative weights because LTCHs do not typically treat the full range of diagnoses as do acute care hospitals. For purposes of determining the relative weights for the large number of low-volume MS–LTC–DRGs, we group all of the low-volume MS–LTC– DRGs into five quintiles based on average charge per discharge. (A detailed discussion of the initial development and application of the quintile methodology appears in the August 30, 2002 LTCH PPS final rule (67 FR 55978).) Under our existing methodology, we account for adjustments to payments for SSO cases (that is, cases where the covered length of stay at the LTCH is less than or equal to five-sixths of the geometric average length of stay for the MS–LTC–DRG). Furthermore, we make adjustments to account for nonmonotonically increasing weights, when necessary. That is, theoretically, cases under the MS–LTC–DRG system that are more severe require greater expenditure of medical care resources and will result in higher average charges such that, in the severity levels within a base MS–LTC– DRG, the relative weights should increase monotonically with severity from the lowest to highest severity level. (We discuss nonmonotonicity in greater detail and our methodology to adjust the MS–LTC–DRG relative weights to account for nonmonotonically increasing relative weights in section VIII.B.3.g. (Step 6) of this preamble.) 2. Patient Classifications Into MS–LTC– DRGs a. Background The MS–DRGs (used under the IPPS) and the MS–LTC–DRGs (used under the LTCH PPS) are based on the CMS DRG structure. As noted above in this section, we refer to the DRGs under the LTCH PPS as MS–LTC–DRGs although they are structurally identical to the MS–DRGs used under the IPPS. The MS–DRGs are organized into 25 major diagnostic categories (MDCs), most of which are based on a particular organ system of the body; the remainder involve multiple organ systems (such as E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50754 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations MDC 22, Burns). Within most MDCs, cases are then divided into surgical DRGs and medical DRGs. Surgical DRGs are assigned based on a surgical hierarchy that orders operating room (O.R.) procedures or groups of O.R. procedures by resource intensity. The GROUPER software program does not recognize all ICD–9–CM procedure codes as procedures affecting DRG assignment. That is, procedures that are not surgical (for example, EKG), or minor surgical procedures (for example, biopsy of skin and subcutaneous tissue (procedure code 86.11)) do not affect the MS–LTC–DRG assignment based on their presence on the claim. Generally, under the LTCH PPS, a Medicare payment is made at a predetermined specific rate for each discharge and that payment varies by the MS–LTC–DRG to which a beneficiary’s stay is assigned. Cases are classified into MS–LTC–DRGs for payment based on the following six data elements: • Principal diagnosis; • Additional or secondary diagnoses; • Surgical procedures; • Age; • Sex; and • Discharge status of the patient. Through FY 2010, the number of diagnosis and procedure codes considered for MS–DRG assignment was limited to nine and six, respectively. However, for claims submitted on the 5010 format beginning January 1, 2011, we increased the capacity to process diagnosis and procedure codes up to 25 diagnoses and 25 procedures. This includes one principal diagnosis and up to 24 secondary diagnoses for severity of illness determinations. We refer readers to section II.G.11.c. of the preamble of the FY 2011 IPPS/LTCH PPS final rule for a complete discussion of this change (75 FR 50127). Under HIPAA transactions and code sets regulations at 45 CFR Parts 160 and 162, covered entities must comply with the adopted transaction standards and operating rules specified in Subparts I through S of Part 162. Among other requirements, by January 1, 2012, covered entities were required to use the ASC X12 Standards for Electronic Data Interchange Technical Report Type 3— Health Care Claim: Institutional (837), May 2006, ASC X12N/005010X223, and Type 1 Errata to Health Care Claim: Institutional (837) ASC X12 Standards for Electronic Data Interchange Technical Report Type 3, October 2007, ASC X12N/005010X233A1 for the health care claims or equivalent encounter information transaction (45 CFR 162.1102). VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 HIPAA requires covered entities to use the applicable medical data code set requirements when conducting HIPAA transactions (45 CFR 162.1000). Currently, upon the discharge of the patient, the LTCH must assign appropriate diagnosis and procedure codes from the most current version of the Internal Classification of Diseases, Ninth Revision, Clinical Modification (ICD–9–CM). For additional information on the ICD–9–CM Coding System, we refer readers to the FY 2008 IPPS final rule with comment period (72 FR 47241 through 47243 and 47277 through 47281). We also refer readers to the detailed discussion on correct coding practices in the August 30, 2002 LTCH PPS final rule (67 FR 55981 through 55983). Additional coding instructions and examples are published in the Coding Clinic for ICD–9–CM, a product of the American Hospital Association. (We refer readers to section II.G.11. of this preamble for additional information on the annual revisions to the ICD–9– CM codes.) On October 1, 2014, covered entities must begin using the ICD–10–CM and ICD–10–PCS coding systems (45 CFR 162.1102(c)). We have been discussing the conversion to the ICD–10–CM and the ICD–10–PCS coding systems for many years. In prior rules published in the Federal Register (for example, in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50122 through 50128)), we discussed the implementation date for the conversion to the ICD–10–CM and ICD– 10–PCS coding systems. We refer readers to section II.G.11. of this preamble for additional information on the implementation of the ICD–10–CM and ICD–10–PCS systems. To create the MS–DRGs (and by extension, the MS–LTC–DRGs), base DRGs were subdivided according to the presence of specific secondary diagnoses designated as complications or comorbidities (CCs) into one, two, or three levels of severity, depending on the impact of the CCs on resources used for those cases. Specifically, there are sets of MS–DRGs that are split into 2 or 3 subgroups based on the presence or absence of a CC or a major complication or comorbidity (MCC). We refer readers to section II.D. of the FY 2008 IPPS final rule with comment period for a detailed discussion about the creation of MS– DRGs based on severity of illness levels (72 FR 47141 through 47175). Medicare contractors (that is, fiscal intermediaries and MACs) enter the clinical and demographic information submitted by LTCHs into their claims processing systems and subject this information to a series of automated screening processes called the Medicare PO 00000 Frm 00260 Fmt 4701 Sfmt 4700 Code Editor (MCE). These screens are designed to identify cases that require further review before assignment into a MS–LTC–DRG can be made. During this process, certain cases are selected for further development (74 FR 43949). After screening through the MCE, each claim is classified into the appropriate MS–LTC–DRG by the Medicare LTCH GROUPER software on the basis of diagnosis and procedure codes and other demographic information (age, sex, and discharge status). The GROUPER software used under the LTCH PPS is the same GROUPER software program used under the IPPS. Following the MS–LTC–DRG assignment, the Medicare contractor determines the prospective payment amount by using the Medicare PRICER program, which accounts for hospitalspecific adjustments. Under the LTCH PPS, we provide an opportunity for LTCHs to review the MS–LTC–DRG assignments made by the Medicare contractor and to submit additional information within a specified timeframe as provided in § 412.513(c). The GROUPER software is used both to classify past cases to measure relative hospital resource consumption to establish the MS–LTC–DRG relative weights and to classify current cases for purposes of determining payment. The records for all Medicare hospital inpatient discharges are maintained in the MedPAR file. The data in this file are used to evaluate possible MS–DRG and MS–LTC–DRG classification changes and to recalibrate the MS–DRG and MS–LTC–DRG relative weights during our annual update under both the IPPS (§ 412.60(e)) and the LTCH PPS (§ 412.517), respectively. b. Changes to the MS–LTC–DRGs for FY 2014 As specified by our regulations at § 412.517(a), which require that the MS– LTC–DRG classifications and relative weights be updated annually, and consistent with our historical practice of using the same patient classification system under the LTCH PPS as is used under the IPPS, as we proposed, we are updating the MS–LTC–DRG classifications effective October 1, 2013, through September 30, 2014 (FY 2014) consistent with the changes to specific MS–DRG classifications presented in section II.G. of this preamble (that is, GROUPER Version 31.0). Therefore, the MS–LTC–DRGs for FY 2014 presented in this final rule are the same as the MS–DRGs that are being used under the IPPS for FY 2014. In addition, because the MS–LTC–DRGs for FY 2014 are the same as the MS–DRGs for FY 2014, the other changes that affect MS–DRG (and E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations by extension MS–LTC–DRG) assignments under Version 31.0 of the GROUPER discussed in section II.G. of the preamble of this final rule, including the changes to the MCE software and the ICD–9–CM coding system, are also applicable under the LTCH PPS for FY 2014. 3. Development of the FY 2014 MS– LTC–DRG Relative Weights mstockstill on DSK4VPTVN1PROD with RULES6 a. General Overview of the Development of the MS–LTC–DRG Relative Weights One of the primary goals for the implementation of the LTCH PPS is to pay each LTCH an appropriate amount for the efficient delivery of medical care to Medicare patients. The system must be able to account adequately for each LTCH’s case-mix in order to ensure both fair distribution of Medicare payments and access to adequate care for those Medicare patients whose care is more costly (67 FR 55984). To accomplish these goals, we have annually adjusted the LTCH PPS standard Federal prospective payment system rate by the applicable relative weight in determining payment to LTCHs for each case. The basic methodology used to develop the MS–LTC–DRG relative weights generally continues to be consistent with the general methodology established when the LTCH PPS was implemented in the August 30, 2002 LTCH PPS final rule (67 FR 55989 through 55991), with the exception of some modifications of our historical procedures for assigning relative weights in cases of zero volume and/or nonmonotonicity resulting from the adoption of the MS–LTC–DRGs. (For details on the modifications to our historical procedures for assigning relative weights in cases of zero volume and/or nonmonotonicity, we refer readers to the FY 2008 IPPS final rule with comment period (72 FR 47289 through 47295) and the FY 2009 IPPS final rule (73 FR 48542 through 48550).) Under the LTCH PPS, relative weights for each MS–LTC–DRG are a primary element used to account for the variations in cost per discharge and resource utilization among the payment groups (§ 412.515). To ensure that Medicare patients classified to each MS–LTC–DRG have access to an appropriate level of services and to encourage efficiency, we calculate a relative weight for each MS–LTC–DRG that represents the resources needed by an average inpatient LTCH case in that MS–LTC–DRG. For example, cases in a MS–LTC–DRG with a relative weight of 2 will, on average, cost twice as much VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 to treat as cases in a MS–LTC–DRG with a relative weight of 1. b. Development of the MS–LTC–DRG Relative Weights for FY 2014 In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53462 through 53467), we presented our policies for the development of the MS–LTC–DRG relative weights for FY 2013. The basic methodology we used to develop the FY 2013 MS–LTC–DRG relative weights was the same as the methodology we used to develop the FY 2012 MS–LTC– DRG relative weights in the FY 2012 IPPS/LTCH PPS final rule and was consistent with the general methodology established when the LTCH PPS was implemented in the August 30, 2002 LTCH PPS final rule (67 FR 55989 through 55991). In the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR 27658 through 27664), we proposed to continue to apply our established methodology to develop the FY 2014 MS–LTC–DRG relative weights for FY 2014, which includes application of established policies related to the data, the hospital-specific relative value (HSRV) methodology, the treatment of severity levels in the MS–LTC–DRGs, low-volume and no-volume MS–LTC– DRGs, adjustment for nonmonotonicity, and the steps for calculating the MS– LTC–DRG relative weights with a budget neutrality factor. Below we present the methodology that we continue to use to determine the MS– LTC–DRG relative weights for FY 2014, which is consistent with the methodology presented in the FY 2013 IPPS/LTCH PPS final rule. Beginning with the FY 2008 update, we established a budget neutrality requirement for the annual update to the MS–LTC–DRG classifications and relative weights at § 412.517(b) (in conjunction with § 412.503), such that estimated aggregate LTCH PPS payments would be unaffected, that is, would be neither greater than nor less than the estimated aggregate LTCH PPS payments that would have been made without the classification and relative weight changes (72 FR 26882 through 26884). Consistent with § 412.517(b), and as we proposed, we continue to apply our established two-step budget neutrality methodology, which is based on the current year MS–LTC–DRG classifications and relative weights. We are continuing to apply our established two-step budget neutrality methodology such that the annual update to the MS– LTC–DRG classifications and relative weights for FY 2014 are based on the FY 2013 MS–LTC–DRG classifications and relative weights established in Table 11 listed in section VI. of the Addendum to PO 00000 Frm 00261 Fmt 4701 Sfmt 4700 50755 the FY 2013 IPPS/LTCH PPS final rule (77 FR 53716 through 53717). (For additional information on the established two-step budget neutrality methodology, we refer readers to the FY 2008 IPPS final rule (72 FR 47295 through 47296).) c. Data For the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27658 through 27659), to calculate the MS–LTC–DRG relative weights for FY 2014, we obtained total charges from FY 2012 Medicare LTCH bill data from the December 2012 update of the FY 2012 MedPAR file, which were the best available data at that time, and used the proposed Version 31.0 of the GROUPER to classify LTCH cases. Consistent with our existing methodology, we also proposed that if more recent data became available, we would use those data and the finalized Version 31.0 of the GROUPER in establishing the FY 2014 MS–LTC–DRG relative weights in the final rule. Consistent with our proposal, to calculate the MS–LTC–DRG relative weights for FY 2014 in this final rule, we obtained total charges from the FY 2012 Medicare LTCH bill data from the March 2013 update of the FY 2012 MedPAR file, which are the best available data, and used the finalized Version 31.0 of the GROUPER to classify LTCH cases. As proposed and consistent with our historical methodology, we excluded the data from LTCHs that are allinclusive rate providers and LTCHs that are reimbursed in accordance with demonstration projects authorized under section 402(a) of Public Law 90– 248 or section 222(a) of Public Law 92– 603. Furthermore, consistent with our historical practice, we excluded Medicare Advantage (Part C) claims, which are now included in the MedPAR files, in the calculations for the relative weights under the LTCH PPS that are used to determine payments for Medicare fee-for-service claims. Specifically, as we proposed, we did not use any claims from the MedPAR files that have a GHO Paid indicator value of ‘‘1,’’ which effectively removes Medicare Advantage claims from the relative weight calculations (73 FR 48532). Accordingly, in the development of the FY 2014 MS–LTC– DRG relative weights in this final rule, we excluded the data of 14 all-inclusive rate providers and the 2 LTCHs that are paid in accordance with demonstration projects that had claims in the March 2013 update of the FY 2012 MedPAR file, as well as any Medicare Advantage claims. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50756 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations d. Hospital-Specific Relative Value (HSRV) Methodology By nature, LTCHs often specialize in certain areas, such as ventilatordependent patients and treatment of infections and wound care. Some case types (MS–DRGs) may be treated, to a large extent, in hospitals that have, from a perspective of charges, relatively high (or low) charges. This nonrandom distribution of cases with relatively high (or low) charges in specific MS–LTC– DRGs has the potential to inappropriately distort the measure of average charges. As we proposed, to account for the fact that cases may not be randomly distributed across LTCHs, consistent with the methodology we have used since the implementation of the LTCH PPS, we continue to use a hospital-specific relative value (HSRV) methodology to calculate the MS–LTC– DRG relative weights for FY 2014. We believe this method removes this hospital-specific source of bias in measuring LTCH average charges (67 FR 55985). Specifically, under this methodology, we reduce the impact of the variation in charges across providers on any particular MS–LTC–DRG relative weight by converting each LTCH’s charge for a case to a relative value based on that LTCH’s average charge. Under the HSRV methodology, we standardize charges for each LTCH by converting its charges for each case to hospital-specific relative charge values and then adjust those values for the LTCH’s case-mix. The adjustment for case-mix is needed to rescale the hospital-specific relative charge values (which, by definition, average 1.0 for each LTCH). The average relative weight for a LTCH is its case-mix, so it is reasonable to scale each LTCH’s average relative charge value by its case-mix. In this way, each LTCH’s relative charge value is adjusted by its case-mix to an average that reflects the complexity of the cases it treats relative to the complexity of the cases treated by all other LTCHs (the average case-mix of all LTCHs). In accordance with our established methodology, we continue to standardize charges for each case by first dividing the adjusted charge for the case (adjusted for SSOs under § 412.529 as described in section VIII.B.3.g. (Step 3) of this preamble) by the average adjusted charge for all cases at the LTCH in which the case was treated. SSO cases are cases with a length of stay that is less than or equal to five-sixths the average length of stay of the MS–LTC– DRG (§ 412.529 and § 412.503). The average adjusted charge reflects the average intensity of the health care VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 services delivered by a particular LTCH and the average cost level of that LTCH. The resulting ratio is multiplied by that LTCH’s case-mix index to determine the standardized charge for the case (67 FR 55989). Multiplying the resulting ratio by the LTCH’s case-mix index accounts for the fact that the same relative charges are given greater weight at a LTCH with higher average costs than they would at a LTCH with low average costs, which is needed to adjust each LTCH’s relative charge value to reflect its case-mix relative to the average case-mix for all LTCHs. Because we standardize charges in this manner, we count charges for a Medicare patient at a LTCH with high average charges as less resource intensive than they would be at a LTCH with low average charges. For example, a $10,000 charge for a case at a LTCH with an average adjusted charge of $17,500 reflects a higher level of relative resource use than a $10,000 charge for a case at a LTCH with the same casemix, but an average adjusted charge of $35,000. We believe that the adjusted charge of an individual case more accurately reflects actual resource use for an individual LTCH because the variation in charges due to systematic differences in the markup of charges among LTCHs is taken into account. e. Treatment of Severity Levels in Developing the MS–LTC–DRG Relative Weights For purposes of determining the MS– LTC–DRG relative weights, under our historical methodology, there are three different categories of MS–DRGs based on volume of cases within specific MS– LTC–DRGs. MS–LTC–DRGs with at least 25 cases are each assigned a unique relative weight; low-volume MS–LTC– DRGs (that is, MS–LTC–DRGs that contain between 1 and 24 cases based on a given year’s claims data) are grouped into quintiles (as described below) and assigned the relative weight of the quintile. No-volume MS–LTC– DRGs (that is, no cases in the given year’s claims data are assigned to those MS–LTC–DRGs) are cross-walked to other MS–LTC–DRGs based on the clinical similarities and assigned the relative weight of the cross-walked MS– LTC–DRG (as described in greater detail below). As we proposed, we are continuing to utilize these same three categories of MS–LTC–DRGs for purposes of the treatment of severity levels in determining the MS–LTC–DRG relative weights for FY 2014. (We provide in-depth discussions of our policy regarding weight-setting for lowvolume MS–LTC–DRGs in section VIII.B.3.f. of the preamble of this final PO 00000 Frm 00262 Fmt 4701 Sfmt 4700 rule and for no-volume MS–LTC–DRGs, under Step 5 in section VIII.B.3.g. of this preamble.) Furthermore, in determining the FY 2014 MS–LTC–DRG relative weights, when necessary, as we proposed, we are making adjustments to account for nonmonotonicity, as discussed in greater detail below in Step 6 of section VIII.B.3.g. of this preamble. We refer readers to the discussion in the FY 2010 IPPS/RY 2010 LTCH PPS final rule for our rationale for including an adjustment for nonmonotonicity (74 FR 43953 through 43954). f. Low-Volume MS–LTC–DRGs In order to account for MS–LTC– DRGs with low volume (that is, with fewer than 25 LTCH cases), consistent with our existing methodology for purposes of determining the FY 2014 MS–LTC–DRG relative weights, as we proposed, we are continuing to employ the quintile methodology for lowvolume MS–LTC–DRGs, such that we group the ‘‘low-volume MS–LTC– DRGs’’ (that is, MS–LTC–DRGs that contained between 1 and 24 cases annually) into one of five categories (quintiles) based on average charges (67 FR 55984 through 55995 and 72 FR 47283 through 47288). In determining the FY 2014 MS–LTC–DRG relative weights in this final rule, in cases where the initial assignment of a low-volume MS–LTC–DRG to quintiles results in nonmonotonicity within a base-DRG, in order to ensure appropriate Medicare payments, consistent with our historical methodology, as we proposed, we are making adjustments to the treatment of low-volume MS–LTC–DRGs to preserve monotonicity, as discussed in detail below in section VIII.B.3.g. (Step 6) of this preamble. In this final rule, using LTCH cases from the March 2013 update of the FY 2012 MedPAR file (which is currently the best available data), we identified 281 MS–LTC–DRGs that contained between 1 and 24 cases. This list of MS– LTC–DRGs was then divided into one of the 5 low-volume quintiles, each containing 56 MS–LTC–DRGs (281/5 = 56 with one MS–LTC–DRG as the remainder). As we proposed, we assigned a low-volume MS–LTC–DRG to a specific low-volume quintile by sorting the low-volume MS–LTC–DRGs in ascending order by average charge in accordance with our established methodology. Based on the data available for this final rule, the number of MS–LTC–DRGs with less than 25 cases is not evenly divisible by 5. Therefore, as noted in the proposed rule, consistent with our historical approach, we used the average charge of E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations the low-volume quintile to determine which of the low-volume quintiles contain the additional low-volume MS– LTC–DRG. Specifically for this final rule, after organizing the MS–LTC– DRGs by ascending order by average charge, as we proposed, we assigned the first fifth (1st through 56th) of lowvolume MS–LTC–DRGs (with the lowest average charge) into Quintile 1. The MS–LTC–DRGs with the highest average charge cases were assigned into Quintile 5. Because the average charge of the 57th low-volume MS–LTC–DRG in the sorted list was closer to the average charge of the 56th low-volume MS– LTC–DRG (assigned to Quintile 1) than to the average charge of the 58th lowvolume MS–LTC–DRG (assigned to Quintile 3), we assigned it to Quintile 1 (such that Quintile 1 contains 57 lowvolume MS– LTC–DRGs before any adjustments for nonmonotonicity, as discussed below). This resulted in 4 of the 5 low-volume quintiles containing 56 MS–LTC–DRGs (Quintiles 2, 3, 4 and 5) and the other low-volume quintile containing 57 MS–LTC–DRGs (Quintile 5). Table 13A, which is listed in section VI. of the Addendum to this final rule and is available via the Internet, lists the composition of the low-volume quintiles for MS–LTC–DRGs for FY 2014. Accordingly, in order to determine the FY 2014 relative weights for the MS–LTC–DRGs with low volume, as we proposed, we are using the five lowvolume quintiles described above. We determined a relative weight and (geometric) average length of stay for each of the five low-volume quintiles using the methodology that we applied to the MS–LTC–DRGs (25 or more cases), as described below in section VIII.B.3.g. of this preamble. As we proposed, we assigned the same relative weight and average length of stay to each of the low-volume MS–LTC–DRGs that make up an individual low-volume quintile. We note that, as this system is dynamic, it is possible that the number and specific type of MS–LTC–DRGs with a low volume of LTCH cases will vary in the future. Furthermore, we note that we will continue to monitor the volume (that is, the number of LTCH cases) in the lowvolume quintiles to ensure that our quintile assignments used in determining the MS–LTC–DRG relative weights result in appropriate payment for such cases and do not result in an unintended financial incentive for LTCHs to inappropriately admit these types of cases. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 g. Steps for Determining the FY 2014 MS–LTC–DRG Relative Weights In this final rule, as we proposed, we determined the FY 2014 MS–LTC–DRG relative weights based on our existing methodology. (For additional information on the original development of this methodology, and modifications to it since the adoption of the MS–LTC–DRGs, we refer readers to the August 30, 2002 LTCH PPS final rule (67 FR 55989 through 55995) and the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43951 through 43966).) In summary, to determine the FY 2014 MS–LTC–DRG relative weights, we grouped LTCH cases to the appropriate MS–LTC–DRG, while taking into account the low-volume quintile (as described above). After grouping the cases to the appropriate MS–LTC–DRG (or low-volume quintile), we calculated the FY 2014 relative weights by first removing statistical outliers and cases with a length of stay of 7 days or less (Steps 1 and 2 below). Next, we adjusted the number of cases in each MS–LTC– DRG (or low-volume quintile) for the effect of SSO cases (Step 3 below). After removing statistical outliers (Step 1 below) and cases with a length of stay of 7 days or less (Step 2 below), the SSO adjusted discharges and corresponding charges were then used to calculate ‘‘relative adjusted weights’’ for each MS–LTC–DRG (or low-volume quintile) using the HSRV method. Below we discuss in detail the steps for calculating the FY 2014 MS–LTC– DRG relative weights. We note that, as we discussed in section VIII.B.3.c. of this preamble, we excluded the data of all-inclusive rate LTCHs, LTCHs that are paid in accordance with demonstration projects, and any Medicare Advantage claims in the March 2013 update of the FY 2012 MedPAR file. Step 1—Remove statistical outliers. The first step in the calculation of the FY 2014 MS–LTC–DRG relative weights is to remove statistical outlier cases. Consistent with our historical relative weight methodology, as we proposed, we are continuing to define statistical outliers as cases that are outside of 3.0 standard deviations from the mean of the log distribution of both charges per case and the charges per day for each MS–LTC–DRG. These statistical outliers are removed prior to calculating the relative weights because we believe that they may represent aberrations in the data that distort the measure of average resource use. Including those LTCH cases in the calculation of the relative weights could result in an inaccurate relative weight that does not truly reflect relative resource use among the PO 00000 Frm 00263 Fmt 4701 Sfmt 4700 50757 MS–LTC–DRGs. (For additional information on this step of the relative weight methodology, we refer readers to 67 FR 55989 and 74 FR 43959.) Step 2—Remove cases with a length of stay of 7 days or less. The MS–LTC–DRG relative weights reflect the average of resources used on representative cases of a specific type. Generally, cases with a length of stay of 7 days or less do not belong in a LTCH because these stays do not fully receive or benefit from treatment that is typical in a LTCH stay, and full resources are often not used in the earlier stages of admission to a LTCH. If we were to include stays of 7 days or less in the computation of the FY 2014 MS–LTC– DRG relative weights, the value of many relative weights would decrease and, therefore, payments would decrease to a level that may no longer be appropriate. We do not believe that it would be appropriate to compromise the integrity of the payment determination for those LTCH cases that actually benefit from and receive a full course of treatment at a LTCH by including data from these very short stays. Therefore, consistent with our historical relative weight methodology, in determining the FY 2014 MS–LTC–DRG relative weights, as we proposed, we removed LTCH cases with a length of stay of 7 days or less. (For additional information on this step of the relative weight methodology, we refer readers to 67 FR 55989 and 74 FR 43959.) Step 3—Adjust charges for the effects of SSOs. After removing cases with a length of stay of 7 days or less, we were left with cases that have a length of stay of greater than or equal to 8 days. As the next step in the calculation of the FY 2014 MS– LTC–DRG relative weights, consistent with our historical relative weight methodology, as we proposed, we adjusted each LTCH’s charges per discharge for those remaining cases for the effects of SSOs (as defined in § 412.529(a) in conjunction with § 412.503). As we proposed, we made this adjustment by counting an SSO case as a fraction of a discharge based on the ratio of the length of stay of the case to the average length of stay for the MS– LTC–DRG for non-SSO cases. This has the effect of proportionately reducing the impact of the lower charges for the SSO cases in calculating the average charge for the MS–LTC–DRG. This process produces the same result as if the actual charges per discharge of an SSO case were adjusted to what they would have been had the patient’s length of stay been equal to the average length of stay of the MS–LTC–DRG. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50758 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Counting SSO cases as full discharges with no adjustment in determining the FY 2014 MS–LTC–DRG relative weights would lower the FY 2014 MS–LTC–DRG relative weight for affected MS–LTC– DRGs because the relatively lower charges of the SSO cases would bring down the average charge for all cases within an MS–LTC–DRG. This would result in an ‘‘underpayment’’ for nonSSO cases and an ‘‘overpayment’’ for SSO cases. Therefore, we are adjusting for SSO cases under § 412.529 in this manner because it results in more appropriate payments for all LTCH cases. (For additional information on this step of the relative weight methodology, we refer readers to 67 FR 55989 and 74 FR 43959.) Step 4—Calculate the FY 2014 MS– LTC–DRG relative weights on an iterative basis. Consistent with our historical relative weight methodology, as we proposed, we calculated the FY 2014 MS–LTC– DRG relative weights using the HSRV methodology, which is an iterative process. First, for each LTCH case, we calculated a hospital-specific relative charge value by dividing the SSO adjusted charge per discharge (see Step 3) of the LTCH case (after removing the statistical outliers (see Step 1) and LTCH cases with a length of stay of 7 days or less (see Step 2)) by the average charge per discharge for the LTCH in which the case occurred. The resulting ratio was then multiplied by the LTCH’s case-mix index to produce an adjusted hospital-specific relative charge value for the case. An initial case-mix index value of 1.0 was used for each LTCH. For each MS–LTC–DRG, we calculated the FY 2014 relative weight by dividing the average of the adjusted hospital-specific relative charge values (from above) for the MS–LTC–DRG by the overall average hospital-specific relative charge value across all cases for all LTCHs. Using these recalculated MS–LTC–DRG relative weights, each LTCH’s average relative weight for all of its cases (that is, its case-mix) is calculated by dividing the sum of all the LTCH’s MS–LTC–DRG relative weights by its total number of cases. The LTCHs’ hospital-specific relative charge values (from above) were then multiplied by the hospital-specific case-mix indexes. The hospital-specific case-mix adjusted relative charge values were then used to calculate a new set of MS–LTC–DRG relative weights across all LTCHs. This iterative process was continued until there was convergence between the weights produced at adjacent steps, for example, when the maximum difference was less than 0.0001. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Step 5—Determine a FY 2014 relative weight for MS–LTC–DRGs with no LTCH cases. As we stated above, we determined the FY 2014 relative weight for each MS–LTC–DRG using total Medicare allowable total charges reported in the best available LTCH claims data (that is, the March 2013 update of the FY 2012 MedPAR file for this final rule). Using these data, we identified the MS–LTC– DRGs for which there were no LTCH cases in the database, such that no patients who would have been classified to those MS–LTC–DRGs were treated in LTCHs during FY 2012 and, therefore, no charge data were available for these MS–LTC–DRGs. Therefore, in the process of determining the MS–LTC– DRG relative weights, we were unable to calculate relative weights for the MS– LTC–DRGs with no LTCH cases using the methodology described in Steps 1 through 4 above. However, because patients with a number of the diagnoses under these MS–LTC–DRGs may be treated at LTCHs, consistent with our historical methodology, as we proposed, we assigned a relative weight to each of the no-volume MS–LTC–DRGs based on clinical similarity and relative costliness (with the exception of ‘‘transplant’’ MS– LTC–DRGs and ‘‘error’’ MS–LTC–DRGs, as discussed below). (For additional information on this step of the relative weight methodology, we refer readers to 67 FR 55991 and 74 FR 43959 through 43960.) In general, we determined FY 2014 relative weights for the MS–LTC–DRGs with no LTCH cases in the March 2013 update of the FY 2012 MedPAR file used in this final rule (that is, ‘‘novolume’’ MS–LTC–DRGs) by crosswalking each no-volume MS–LTC–DRG to another MS–LTC–DRG with a calculated relative weight (determined in accordance with the methodology described above). Then, the ‘‘novolume’’ MS–LTC–DRG was assigned the same relative weight (and average length of stay) of the MS–LTC–DRG to which it was cross-walked (as described in greater detail below). Of the 751 MS–LTC–DRGs for FY 2014, we identified 235 MS–LTC–DRGs for which there are no LTCH cases in the database (including the 8 ‘‘transplant’’ MS–LTC–DRGs and 2 ‘‘error’’ MS–LTC–DRGs). As stated above, we assigned relative weights for each of the 235 no-volume MS–LTC– DRGs (with the exception of the 8 ‘‘transplant’’ MS–LTC–DRGs and the 2 ‘‘error’’ MS–LTC–DRGs, which are discussed below) based on clinical similarity and relative costliness to one of the remaining 516 (751 ¥ 235= 516) MS–LTC–DRGs for which we were able PO 00000 Frm 00264 Fmt 4701 Sfmt 4700 to determine relative weights based on FY 2012 LTCH claims data using the steps described above. (For the remainder of this discussion, we refer to the ‘‘cross-walked’’ MS–LTC–DRGs as the MS–LTC–DRGs to which we crosswalked one of the 235 ‘‘no volume’’ MS–LTC–DRGs, with the exception of the 8 ‘‘transplant’’ MS– LTC–DRGs and the 2 ‘‘error’’ MS–LTC– DRGs, for purposes of determining a relative weight.) Then, we assigned the no-volume MS–LTC–DRG the relative weight of the cross-walked MS–LTC– DRG. (As explained below in Step 6, when necessary, we made adjustments to account for nonmonotonicity.) For this final rule, we cross-walked the no-volume MS–LTC–DRG to a MS– LTC–DRG for which there were LTCH cases in the March 2013 update of the FY 2012 MedPAR file, and to which it was similar clinically in intensity of use of resources and relative costliness as determined by criteria such as care provided during the period of time surrounding surgery, surgical approach (if applicable), length of time of surgical procedure, postoperative care, and length of stay. We evaluated the relative costliness in determining the applicable MS–LTC–DRG to which a no-volume MS–LTC–DRG was cross-walked in order to assign an appropriate relative weight for the no-volume MS–LTC– DRGs in FY 2014. (For more details on our process for evaluating relative costliness, we refer readers to the FY 2010 IPPS/RY 2010 LTCH PPS final rule (73 FR 48543).) We believe in the rare event that there would be a few LTCH cases grouped to one of the no-volume MS–LTC–DRGs in FY 2014, the relative weights assigned based on the crosswalked MS–LTC–DRGs would result in an appropriate LTCH PPS payment because the crosswalks, which are based on similar clinical similarity and relative costliness, generally require equivalent relative resource use. We then assigned the relative weight of the cross-walked MS–LTC–DRG as the relative weight for the no-volume MS–LTC–DRG such that both of these MS–LTC–DRGs (that is, the no-volume MS–LTC–DRG and the cross-walked MS–LTC–DRG) have the same relative weight for FY 2014. We note that if the cross-walked MS–LTC–DRG had 25 cases or more, its relative weight, which was calculated using the methodology described in Steps 1 through 4 above, was assigned to the no-volume MS– LTC–DRG as well. Similarly, if the MS– LTC–DRG to which the no-volume MS– LTC–DRG was cross-walked had 24 or less cases and, therefore, was designated to one of the low-volume quintiles for purposes of determining the relative E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations weights, we assigned the relative weight of the applicable low-volume quintile to the no-volume MS–LTC–DRG such that both of these MS–LTC–DRGs (that is, the no-volume MS–LTC–DRG and the cross-walked MS–LTC–DRG) have the same relative weight for FY 2014. (As we noted above, in the infrequent case where nonmonotonicity involving a novolume MS–LTC–DRG resulted, additional adjustments as described in Step 6 were required in order to maintain monotonically increasing relative weights.) For this final rule, a list of the novolume MS–LTC–DRGs and the MS– LTC–DRGs to which each was crosswalked (that is, the cross-walked MS– LTC–DRGs) for FY 2014 is shown in Table 13B, which is listed in section VI. of the Addendum to this final rule and is available via the Internet. To illustrate this methodology for determining the relative weights for the FY 2014 MS–LTC–DRGs with no LTCH cases, we are providing the following example, which refers to the no-volume MS–LTC–DRGs crosswalk information for FY 2014 provided in Table 13B. Example: There were no cases in the FY 2012 MedPAR file used for this final rule for MS–LTC–DRG 61 (Acute Ischemic Stroke with Use of Thrombolytic Agent with MCC). We determined that MS–LTC–DRG 70 (Nonspecific Cerebrovascular Disorders with MCC) was similar clinically and based on resource use to MS–LTC–DRG 61. Therefore, we assigned the same relative weight of MS–LTC–DRG 70 of 0.8212 for FY 2014 to MS–LTC–DRG 61 (obtained from Table 11, which is listed in section VI. of the Addendum to this final rule and is available via the Internet). Again, we note that, as this system is dynamic, it is entirely possible that the number of MS–LTC–DRGs with no volume of LTCH cases based on the system will vary in the future. We used the most recent available claims data in the MedPAR file to identify no-volume MS–LTC–DRGs and to determine the relative weights in this final rule. Furthermore, for FY 2014, consistent with our historical relative weight methodology, as we proposed, we are establishing the MS–LTC–DRG relative weight of 0.0000 for the following transplant MS–LTC–DRGs: Heart Transplant or Implant of Heart Assist System with MCC (MS–LTC–DRG 1); Heart Transplant or Implant of Heart Assist System without MCC (MS–LTC– DRG 2); Liver Transplant with MCC or Intestinal Transplant (MS–LTC–DRG 5); Liver Transplant without MCC (MS– LTC–DRG 6); Lung Transplant (MS– LTC–DRG 7); Simultaneous Pancreas/ VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Kidney Transplant (MS–LTC–DRG 8); Pancreas Transplant (MS–LTC–DRG 10); and Kidney Transplant (MS–LTC–DRG 652). This is because Medicare will only cover these procedures if they are performed at a hospital that has been certified for the specific procedures by Medicare and presently no LTCH has been so certified. At the present time, we include these eight transplant MS– LTC–DRGs in the GROUPER program for administrative purposes only. Because we use the same GROUPER program for LTCHs as is used under the IPPS, removing these MS–LTC–DRGs would be administratively burdensome. (For additional information regarding our treatment of transplant MS–LTC– DRGs, we refer readers to the RY 2010 LTCH PPS final rule (74 FR 43964).) Step 6—Adjust the FY 2014 MS–LTC– DRG relative weights to account for nonmonotonically increasing relative weights. As discussed earlier in this section, the MS–DRGs contain base DRGs that have been subdivided into one, two, or three severity of illness levels. Where there are three severity levels, the most severe level has at least one secondary diagnosis code that is referred to as an MCC (that is, major complication or comorbidity). The next lower severity level contains cases with at least one secondary diagnosis code that is a CC (that is, complication or comorbidity). Those cases without an MCC or a CC are referred to as ‘‘without CC/MCC.’’ When data do not support the creation of three severity levels, the base MS–DRG is subdivided into either two levels or the base MS–DRG is not subdivided. The two-level subdivisions could consist of the MS–DRG with CC/MCC and the MS–DRG without CC/MCC. Alternatively, the other type of twolevel subdivision may consist of the MS–DRG with MCC and the MS–DRG without MCC. In those base MS–LTC–DRGs that are split into either two or three severity levels, cases classified into the ‘‘without CC/MCC’’ MS–LTC–DRG are expected to have a lower resource use (and lower costs) than the ‘‘with CC/MCC’’ MS– LTC–DRG (in the case of a two-level split) or both the ‘‘with CC’’ and the ‘‘with MCC’’ MS–LTC–DRGs (in the case of a three-level split). That is, theoretically, cases that are more severe typically require greater expenditure of medical care resources and will result in higher average charges. Therefore, in the three severity levels, relative weights should increase by severity, from lowest to highest. If the relative weights decrease as severity increases (that is, if within a base MS–LTC–DRG, an MS– LTC–DRG with CC has a higher relative PO 00000 Frm 00265 Fmt 4701 Sfmt 4700 50759 weight than one with MCC, or the MS– LTC–DRG ‘‘without CC/MCC’’ has a higher relative weight than either of the others), they are nonmonotonic. We continue to believe that utilizing nonmonotonic relative weights to adjust Medicare payments would result in inappropriate payments because the payment for the cases in the higher severity level in a base MS–LTC–DRG (which are generally expected to have higher resource use and costs) would be lower than the payment for cases in a lower severity level within the same base MS–LTC–DRG (which are generally expected to have lower resource use and costs). Consequently, in determining the FY 2014 MS–LTC–DRG relative weights in this final rule, consistent with our historical methodology, as we proposed, we combined MS–LTC–DRG severity levels within a base MS–LTC–DRG for the purpose of computing a relative weight when necessary to ensure that monotonicity was maintained. For a comprehensive description of our existing methodology to adjust for nonmonotonicity, we refer readers to the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43964 through 43966). Any adjustments for nonmonotonicity that were made in determining the FY 2014 MS–LTC–DRG relative weights in this final rule by applying this methodology are denoted in Table 11, which is listed in section VI. of the Addendum to this final rule and is available via the Internet. Step 7—Calculate the FY 2014 budget neutrality factor. In accordance with the regulations at § 412.517(b) (in conjunction with § 412.503), the annual update to the MS–LTC–DRG classifications and relative weights is done in a budget neutral manner such that estimated aggregate LTCH PPS payments would be unaffected, that is, would be neither greater than nor less than the estimated aggregate LTCH PPS payments that would have been made without the MS– LTC–DRG classification and relative weight changes. (For a detailed discussion on the establishment of the budget neutrality requirement for the annual update of the MS–LTC–DRG classifications and relative weights, we refer readers to the RY 2008 LTCH PPS final rule (72 FR 26881 and 26882).) The MS–LTC–DRG classifications and relative weights are updated annually based on the most recent available LTCH claims data to reflect changes in relative LTCH resource use (§ 412.517(a) in conjunction with § 412.503). Under the budget neutrality requirement at § 412.517(b), for each annual update, the MS–LTC–DRG relative weights are uniformly adjusted to ensure that E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50760 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations estimated aggregate payments under the LTCH PPS would not be affected (that is, decreased or increased). Consistent with that provision, as we proposed, we updated the MS–LTC–DRG classifications and relative weights for FY 2014 based on the most recent available LTCH data, and applied a budget neutrality adjustment in determining the FY 2014 MS–LTC–DRG relative weights. To ensure budget neutrality in the update to the MS–LTC–DRG classifications and relative weights under § 412.517(b), as we proposed, we are continuing to use our established two-step budget neutrality methodology. In this final rule, in the first step of our MS–LTC–DRG budget neutrality methodology, for FY 2014, we calculated and applied a normalization factor to the recalibrated relative weights (the result of Steps 1 through 6 above) to ensure that estimated payments were not influenced by changes in the composition of case types or the changes to the classification system. That is, the normalization adjustment is intended to ensure that the recalibration of the MS–LTC–DRG relative weights (that is, the process itself) neither increases nor decreases the average CMI. To calculate the normalization factor for FY 2014 (the first step of our budget neutrality methodology), we used the following three steps: (1.a.) we used the most recent available LTCH claims data (FY 2012) and grouped them using the FY 2014 GROUPER (Version 31.0) and the recalibrated FY 2014 MS–LTC–DRG relative weights (determined in steps 1 through 6 of the Steps for Determining the FY 2014 MS–LTC–DRG Relative Weights above) to calculate the average CMI; (1.b.) we grouped the same LTCH claims data (FY 2012) using the FY 2013 GROUPER (Version 30.0) and FY 2013 MS–LTC–DRG relative weights and calculated the average CMI; and (1.c.) we computed the ratio of these average CMIs by dividing the average CMI for FY 2013 (determined in Step 1.b.) by the average CMI for FY 2014 (determined in Step 1.a.). In determining the MS–LTC– DRG relative weights for FY 2014, each recalibrated MS–LTC–DRG relative weight was multiplied by 1.11579 (determined in Step 1.c.) in the first step of the budget neutrality methodology, which produced ‘‘normalized relative weights.’’ In the second step of our MS–LTC– DRG budget neutrality methodology, we determined a budget neutrality factor to ensure that estimated aggregate LTCH PPS payments (based on the most recent available LTCH claims data) after reclassification and recalibration (that VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 is, the FY 2014 MS–LTC–DRG classifications and relative weights) are equal to estimated aggregate LTCH PPS payments before reclassification and recalibration (that is, the FY 2013 MS– LTC–DRG classifications and relative weights). Accordingly, consistent with our existing methodology, we used FY 2012 discharge data to simulate payments and compared estimated aggregate LTCH PPS payments using the FY 2013 MS–LTC–DRGs and relative weights to estimate aggregate LTCH PPS payments using the FY 2014 MS–LTC– DRGs and relative weights. Specifically, for this final rule, as discussed previously in section VIII.B.3.c. of this preamble, we used LTCH claims data from the March 2013 update of the FY 2012 MedPAR file, as these are the best available data at this time. For this final rule, we determined the FY 2014 budget neutrality adjustment factor using the following three steps: (2.a.) we simulated estimated total LTCH PPS payments using the normalized relative weights for FY 2014 and GROUPER Version 31.0 (as described above); (2.b.) we simulated estimated total LTCH PPS payments using the FY 2013 GROUPER (Version 30.0) and the FY 2013 MS–LTC–DRG relative weights in Table 11 of the Addendum to the FY 2013 IPPS/LTCH PPS final rule available on the Internet (76 FR 53716); and (2.c.) we calculated the ratio of these estimated total LTCH PPS payments by dividing the estimated total LTCH PPS payments using the FY 2013 GROUPER (Version 30.0) and the FY 2013 MS–LTC–DRG relative weights (determined in Step 2.b.) by the estimated total LTCH PPS payments using the FY 2014 GROUPER (Version 31.0) and the normalized MS–LTC–DRG relative weights for FY 2014 (determined in Step 2.a.). In determining the FY 2014 MS–LTC–DRG relative weights, each normalized relative weight was multiplied by a budget neutrality factor of 0.9955629 (determined in Step 2.c.) in the second step of the budget neutrality methodology to determine the budget neutral FY 2014 relative weight for each MS–LTC–DRG. Accordingly, in determining the FY 2014 MS–LTC–DRG relative weights in this final rule, consistent with our existing methodology, we applied a normalization factor of 1.11579 and a budget neutrality factor of 0.9955629 (computed as described above). Table 11, which is listed in section VI. of the Addendum to this final rule and is available via the Internet, lists the MS– LTC–DRGs and their respective relative weights, geometric mean length of stay, five-sixths of the geometric mean length PO 00000 Frm 00266 Fmt 4701 Sfmt 4700 of stay (used to identify SSO cases under § 412.529(a)), and the ‘‘IPPS Comparable Thresholds’’ (used in determining SSO payments under § 412.529(c)(3)), for FY 2014 (and reflect both the normalization factor of 1.11579 and the budget neutrality factor of 0.9955629). C. LTCH PPS Payment Rates for FY 2014 1. Overview of Development of the LTCH Payment Rates The basic methodology for determining LTCH PPS Federal prospective payment rates is set forth at § 412.515 through § 412.536. In this section, we discuss the factors that we used to update the LTCH PPS standard Federal rate for FY 2014, that is, effective for LTCH discharges occurring on or after October 1, 2013 through September 30, 2014. For further details on the development of the FY 2003 standard Federal rate when the LTCH PPS was initially implemented, we refer readers to the August 30, 2002 LTCH PPS final rule (67 FR 56027 through 56037). For subsequent updates to the LTCH PPS standard Federal rate as implemented under § 412.523(c)(3), we refer readers to the following final rules: RY 2004 LTCH PPS final rule (68 FR 34134 through 34140); RY 2005 LTCH PPS final rule (68 FR 25682 through 25684); RY 2006 LTCH PPS final rule (70 FR 24179 through 24180); RY 2007 LTCH PPS final rule (71 FR 27819 through 27827); RY 2008 LTCH PPS final rule (72 FR 26870 through 27029); RY 2009 LTCH PPS final rule (73 FR 26800 through 26804); FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 44021 through 44030); FY 2011 IPPS/LTCH PPS final rule (75 FR 50443 through 50444); FY 2012 IPPS/LTCH PPS final rule (76 FR 51769 through 51773); and FY 2013 IPPS/LTCH PPS final rule (77 FR 53479 through 53481). The update to the LTCH PPS standard Federal rate for FY 2014 is presented in section V.A. of the Addendum to this final rule. The components of the annual market basket update to the LTCH PPS standard Federal rate for FY 2014 are discussed below, including the reduction to the annual update for LTCHs that fail to submit quality reporting data for fiscal year FY 2014 as required by the statute (as discussed below in section VIII.C.2.c. of this preamble). Furthermore, as discussed below in section VIII.C.3. of this preamble, for FY 2014, in addition to the update factor, under the second year of the 3-year phase-in under the current regulations at § 412.523(d)(3), as we E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations proposed, we made a one-time prospective adjustment to the standard Federal rate for FY 2014 so that the effect of any significant difference between the data used in the original computations of budget neutrality for FY 2003 and more recent data to determine budget neutrality for FY 2003 is not perpetuated in the prospective payment rates for future years . In addition, as discussed in section V.A. of the Addendum of this final rule, as we proposed, we made an adjustment to the standard Federal rate to account for the estimated effect of the changes to the area wage level adjustment for FY 2014 on estimated aggregate LTCH PPS payments, in accordance with § 412.523(d)(4). (We refer readers to the discussion of the reduction to the annual update for LTCHs that fail to submit quality reporting data in section VIII.C.2.c. of this preamble, the application of the one-time prospective adjustment under the second year of the 3-year phase-in in section VIII.C.3. of this preamble, and the budget neutrality adjustment for changes in the area wage levels in section V.A. of the Addendum of this final rule.) mstockstill on DSK4VPTVN1PROD with RULES6 2. FY 2014 LTCH PPS Annual Market Basket Update a. Overview Historically, the Medicare program has used a market basket to account for price increases in the services furnished by providers. The market basket used for the LTCH PPS includes both operating and capital-related costs of LTCHs because the LTCH PPS uses a single payment rate for both operating and capital-related costs. As discussed in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53468 through 53476), we adopted the newly created FY 2009based LTCH-specific market basket for use under the LTCH PPS beginning in FY 2013. For additional details on the historical development of the market basket used under the LTCH PPS, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53467 through 53468) and this preamble. Section 3401(c) of the Affordable Care Act provides for certain adjustments to any annual update to the standard Federal rate and refers to the timeframes associated with such adjustments as a ‘‘rate year’’ (which are discussed in more detail in section VIII.C.2.b. of this preamble.) We note that because the annual update to the LTCH PPS policies, rates, and factors now occurs on October 1, we adopted the term ‘‘fiscal year’’ (FY) rather than ‘‘rate year’’ (RY) under the LTCH PPS beginning October 1, 2010, to conform VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 with the standard definition of the Federal fiscal year (October 1 through September 30) used by other PPSs, such as the IPPS (75 FR 50396 through 50397). Although the language of sections 3004(a) 3401(c), 10319, and 1105(b) of the Affordable Care Act refers to years 2010 and thereafter under the LTCH PPS as ‘‘rate year,’’ consistent with our change in the terminology used under the LTCH PPS from ‘‘rate year’’ to ‘‘fiscal year,’’ for purposes of clarity, when discussing the annual update for the LTCH PPS, including the provisions of the Affordable Care Act, we use ‘‘fiscal year’’ rather than ‘‘rate year’’ for 2011 and subsequent years. b. Revision of Certain Market Basket Updates as Required by the Affordable Care Act Section 1886(m)(3)(A) of the Act, as added by section 3401(c) of the Affordable Care Act, specifies that, for rate year 2010 and each subsequent rate year through 2019, any annual update to the standard Federal rate shall be reduced: • For rate year 2010 through 2019, by the ‘‘other adjustment’’ specified in sections 1886(m)(3)(A)(ii) and (m)(4) of the Act; and • For rate year 2012 and each subsequent year, by the productivity adjustment (which we refer to as ‘‘the multifactor productivity (MFP) adjustment’’) described in section 1886(b)(3)(B)(xi)(II) of the Act. Section 1886(m)(3)(B) of the Act provides that the application of paragraph (3) of section 1886(m) of the Act may result in the annual update being less than zero for a rate year, and may result in payment rates for a rate year being less than such payment rates for the preceding rate year. Section 1886(b)(3)(B)(xi)(II) of the Act defines the MFP adjustment as equal to the 10-year moving average of changes in annual economy-wide, private nonfarm business multifactor productivity (as projected by the Secretary for the 10-year period ending with the applicable fiscal year, calendar year, cost reporting period, or other annual period). Under our methodology, the end of the 10-year moving average of changes in the MFP coincides with the end of the appropriate FY update period. In addition, the MFP adjustment that is applied in determining any annual update to the LTCH PPS standard Federal rate is the same adjustment that is required to be applied in determining the applicable percentage increase under the IPPS under section 1886(b)(3)(B)(i) of the Act as they are both based on a fiscal year. The MFP adjustment is derived using a PO 00000 Frm 00267 Fmt 4701 Sfmt 4700 50761 projection of MFP that is currently produced by IHS Global Insight, Inc. (For additional details on the development of the MFP adjustment and its application under the LTCH PPS, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51691 through 51692 and 51770 through 51771).) For FY 2014, as we proposed, we are continuing to use our methodology for calculating and applying the MFP adjustment to determine the annual update to the LTCH PPS standard Federal rate for FY 2014. (For details on the development of the MFP adjustment, including our finalized methodology for calculating and applying the MFP adjustment, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51689 through 51692).) c. Adjustment to the Annual Update to the LTCH PPS Standard Federal Rate under the Long-Term Care Hospital Quality Reporting (LTCHQR) Program 1. Background In accordance with section 1886(m)(5) of the Act, as added by section 3004(a) of the Affordable Care Act, the Secretary established the Long-Term Care Hospital Quality Reporting (LTCHQR) Program. (As noted above, although the language of section 3004(a) of the Affordable Care Act refers to years 2011 and thereafter under the LTCH PPS as ‘‘rate year,’’ consistent with our change in the terminology used under the LTCH PPS from ‘‘rate year’’ to ‘‘fiscal year,’’ for purposes of clarity, when discussing the annual update for the LTCH PPS, including the provisions of the Affordable Care Act, we use ‘‘fiscal year’’ rather than ‘‘rate year’’ for 2011 and subsequent years.) Under the LTCHQR Program, as required by section 1886(m)(5)(A)(i) of the Act, for FY 2014 and each subsequent year, in the case of an LTCH that does not submit quality reporting data to the Secretary in accordance with section 1886(m)(5)(C) of the Act with respect to such a year, any annual update to a standard Federal rate for discharges for the hospital during the year, and after application of section 1886(m)(3) of the Act, shall be reduced by 2.0 percentage points. Section 1886(m)(5)(A)(ii) of the Act provides that the application of the 2.0 percentage points reduction may result in an annual update that is less than 0.0 for a year, and may result in LTCH PPS payment rates for a year being less than such LTCH PPS payment rates for the preceding year. Furthermore, section 1886(m)(5)(B) of the Act specifies that the 2.0 percentage points reduction is applied in a E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50762 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations noncumulative manner, such that any reduction made under section 1886(m)(5)(A) of the Act shall apply only with respect to the year involved, and shall not be taken into account in computing the LTCH PPS payment amount for a subsequent year. Section 1886(m)(5)(D)(iii) of the Act requires the Secretary to publish the selected measures for the LTCHQR Program that will be applicable with respect to the FY 2014 payment determination no later than October 1, 2012. Under section 1886(m)(5)(D)(i) of the Act, the quality measures for the LTCHQR Program are measures selected by the Secretary that have been endorsed by an entity that holds a contract with the Secretary under section 1890(a) of the Act, unless section 1886(m)(5)(D)(ii) of the Act applies. This contract is currently held by the National Quality Forum (NQF). Section 1886(m)(5)(D)(ii) of the Act provides that an exception may be made in the case of a specified area or medical topic determined appropriate by the Secretary for which a feasible and practical measure has not been endorsed by the entity that holds a contract with the Secretary under section 1890(a) of the Act. In such a case, section 1886(m)(5)(D)(ii) of the Act authorizes the Secretary to specify a measure(s) that is not so endorsed, as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary. The LTCHQR Program was implemented in section VII.C. of the FY 2012 IPPS/LTCH PPS final rule (76 FR 51743 through 51756). In that same final rule, as discussed in section IX.C. of the preamble of this final rule, we adopted the following three quality measures for the FY 2014 payment determination: Urinary Catheter-Associated Urinary Tract Infection (CAUTI) rate per 1, 000 urinary catheter days, for Intensive Care Unit Patients (NQF #013); Central Line Catheter-Associated Blood Stream Infection (CLABSI) Rate for ICU and High-Risk Nursery Patients (NQF #0139); and Percent of Residents with Pressure Ulcers That are New or Worsened (Application of NQF #0678). For additional discussion and details of the history of the LTCHQR Program, including the statutory authority and further details on the three measures previously finalized for the FY 2014 payment determination, we refer readers to section IX.C. of the preamble of this final rule and to the FY 2012 IPPS/ LTCH PPS final rule (76 FR 51743 through 51756). VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 2. Reduction to the Annual Update to the LTCH PPS Standard Federal Rate Under the LTCHQR Program Consistent with section 1886(m)(5)(A)(i) of the Act, for FY 2014 and subsequent fiscal years, we proposed that for LTCHs that do not submit quality reporting data under the LTCHQR Program with respect to such a fiscal year, any annual update to a standard Federal rate for discharges for the LTCH during the fiscal year and after application of the market basket update adjustments required by section 1886(m)(3) of the Act, would be further reduced by 2.0 percentage points. That is, in establishing an update to the LTCH PPS standard Federal rate for FY 2014 and subsequent fiscal years, the full LTCH PPS market basket increase estimate, subject to an adjustment based on changes in economy-wide productivity (‘‘the MFP adjustment’’) required under section 1886(m)(3)(A)(i) of the Act and an additional reduction required by sections 1886(m)(3)(A)(ii) and 1886(m)(4) of the Act, would be further reduced by 2.0 percentage points for LTCHs that fail to submit quality reporting data under the LTCHQR Program. We did not receive any public comments on our proposed implementation of the requirements of section 1886(m)(5)(A)(i) of the Act, and are adopting that proposal as final, without modification. Accordingly, in this final rule, as we proposed, we are implementing the reduction in the annual update to the LTCH PPS standard Federal rate for failure to report quality data under the LTCHQR Program for FY 2014 and subsequent fiscal years under § 412.523(c)(4). Specifically, consistent with section 1886(m)(5)(A)(i) of the Act, under § 412.523(c)(4)(i), as we proposed, for an LTCH that does not submit quality reporting data in the form and manner and at the time specified by the Secretary under the LTCHQR Program, the annual update to the standard Federal rate under § 412.523(c)(3) is further reduced by 2.0 percentage points. (Note, as discussed previously in this section, the annual update to the standard Federal rate implemented under § 412.523(c)(3) reflects the application of the adjustments to any annual update as required by sections 1886(m)(3) and (m)(4) of the Act.) In addition, as we proposed, consistent with section 1886(m)(5)(A)(ii) of the Act, we are specifying under § 412.523(c)(4)(ii), that any reduction of the annual update to the standard Federal rate under § 412.523(c)(4)(i) will apply only to the fiscal year involved PO 00000 Frm 00268 Fmt 4701 Sfmt 4700 and would not be taken into account in computing the annual update to the standard Federal rate for a subsequent fiscal year. Lastly, consistent with section 1886(m)(5)(B) of the Act, under § 412.523(c)(4)(iii), as we proposed, the application of any reduction of the annual update to the standard Federal rate under § 412.523(c)(4)(i) may result in an annual update that is less than 0.0 percent for a fiscal year, and may result in payment rates for a fiscal year that would be less than such payment rates for the preceding rate year. We also discuss this application of the 2.0 percentage point reduction under § 412.523(c)(4)(i) in our discussion of the annual market basket update to the LTCH PPS standard Federal rate for FY 2014 below in section VIII.C.2.e. of this preamble. d. Market Basket under the LTCH PPS for FY 2014 Under the authority of section 123 of the BBRA as amended by section 307(b) of the BIPA, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53468), we adopted a newly created FY 2009-based LTCH-specific market basket for use under the LTCH PPS beginning in FY 2013. The FY 2009-based LTCH-specific market basket is based solely on the Medicare cost report data submitted by LTCHs and, therefore, specifically reflects the cost structures of only LTCHs. For additional details on the development of the FY 2009-based LTCH-specific market basket, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53467 through 53476). For FY 2014, as we proposed, we are continuing to use the FY 2009-based LTCH-specific market basket to update the LTCH PPS for FY 2014. We continue to believe that the FY 2009-based LTCHspecific market basket appropriately reflects the cost structure of LTCHs for the reasons discussed when we adopted the FY 2009-based LTCH-specific market basket for use under the LTCH PPS in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53467 through 53476). e. Annual Market Basket Update for LTCHs for FY 2014 Consistent with our historical practice, we proposed to estimate the market basket update and the MFP adjustment based on IGI’s forecast using the most recent available data. Based on IGI’s second quarter 2013 forecast, the FY 2014 full market basket estimate for the LTCH PPS using the FY 2009-based LTCH-specific market basket is 2.5 percent. Using our established methodology for determining the MFP adjustment, the current estimate of the MFP adjustment for FY 2014 based on E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations IGI’s second quarter 2013 forecast is 0.5 percent, as discussed in section V.A.1. of this preamble. For FY 2014, section 1886(m)(3)(A)(i) of the Act requires that any annual update to the standard Federal rate be reduced by the productivity adjustment (‘‘the MFP adjustment’’) described in section 1886(b)(3)(B)(xi)(II) of the Act. Consistent with the statute, as we proposed, we reduced the full FY 2014 market basket update by the FY 2014 MFP adjustment. To determine the market basket update for LTCHs for FY 2014, as reduced by the MFP adjustment, consistent with our established methodology, as we proposed, we subtracted the FY 2014 MFP adjustment from the FY 2014 market basket update. Furthermore, sections 1886(m)(3)(A)(ii) and 1886(m)(4)(D) of the Act requires that any annual update to the standard Federal rate for FY 2014 be reduced by the ‘‘other adjustment’’ described in paragraph (4), which is 0.3 percentage point for FY 2014. Therefore, following application of the productivity adjustment, as we proposed, we reduced the adjusted market basket update (that is, the full market basket increase less the MFP adjustment) by the ‘‘other adjustment’’ specified by sections 1886(m)(3)(A)(ii) and 1886(m)(4) of the Act. (For additional details on our established methodology for adjusting the market basket increase by the MFP and the ‘‘other adjustment’’ required by the statute, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51771).) As discussed previously in section VIII.C.2.c. of this preamble, for FY 2014, section 1886(m)(5) of the Act requires that for LTCHs that do not submit quality reporting data under the LTCHQR Program, any annual update to a standard Federal rate, after application of the adjustments required by section 1886(m)(3) of the Act, is further reduced by 2.0 percentage points. Therefore, the update to the LTCH PPS standard Federal rate for FY 2014 for LTCHs that fail to submit quality reporting data under the LTCHQR Program, the full LTCH PPS market basket increase estimate, subject to an adjustment based on changes in economy-wide productivity (‘‘the MFP adjustment’’) as required under section 1886(m)(3)(A)(i) of the Act and an additional reduction required by sections 1886(m)(3)(A)(ii) and 1886(m)(4) of the Act, is also further reduced by 2.0 percentage points. In this final rule, in accordance with the statute, we reduced the FY 2014 full market basket estimate of 2.5 percent (based on IGI’s second quarter 2013 forecast of the FY 2009-based LTCH- VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 specific market basket) by the FY 2014 MFP adjustment (that is, the 10-year moving average of MFP for the period ending FY 2014, as described in section V.A.1. of the preamble of this final rule) of 0.5 percentage point (based on IGI’s second quarter 2013 forecast). Following application of the productivity adjustment, the adjusted market basket update of 2.0 percent (2.5 percent minus 0.5 percentage point) is then reduced by 0.3 percentage point, as required by sections 1886(m)(3)(A)(ii) and 1886(m)(4)(D) of the Act. Therefore, in this final rule, under the authority of section 123 of the BBRA as amended by section 307(b) of the BIPA, consistent with our proposal, we are establishing an annual market basket update under the LTCH PPS for FY 2014 of 1.7 percent (that is, the most recent estimate of the LTCH PPS market basket update at this time of 2.5 percent, less the MFP adjustment of 0.5 percentage point, and less the 0.3 percentage point required under section 1886(m)(4)(D) of the Act), provided the LTCH submits quality reporting data in accordance with section 1886(m)(5) of the Act (as discussed above in section VIII.C.2.c. of this preamble). Accordingly, consistent with our proposal, we are revising § 412.523(c)(3) by adding a new paragraph (x), which specifies that the standard Federal rate for FY 2014 is the standard Federal rate for the previous LTCH PPS year updated by 1.7 percent, and as further adjusted, as appropriate, as described in § 412.523(d). For LTCHs that fail to submit quality reporting data under the LTCHQR Program, under § 412.523(c)(3)(x) in conjunction with § 412.523(c)(4), as we proposed, we further reduce the annual update to the LTCH PPS standard Federal rate by 2.0 percentage points in accordance with section 1886(m)(5) of the Act (as discussed previously in section VIII.C.2.c. of this preamble). Accordingly, consistent with our proposal, we are establishing an annual update to the LTCH PPS standard Federal rate of -0.3 percent (that is, 1.7 percent minus 2.0 percentage points) for FY 2014 for LTCHs that fail to submit quality reporting data under the LTCHQR Program. (We note that, as we proposed, we are also adjusting the FY 2014 standard Federal rate by the application of the one-time prospective adjustment under the second year of the 3-year phase-in under § 412.523(d)(3) (discussed below in section VIII.C.3. of this preamble) and by an area wage level budget neutrality factor in accordance with § 412.523(d)(4) (as discussed in section V.B.5. of the Addendum of this final rule).) PO 00000 Frm 00269 Fmt 4701 Sfmt 4700 50763 3. Adjustment for the Second Year of the Phase-In of the One-Time Prospective Adjustment to the Standard Federal Rate under § 412.523(d)(3) We set forth regulations implementing the LTCH PPS, based upon the broad authority granted to the Secretary, under section 123 of the BBRA (as amended by section 307(b) of the BIPA). Section 123(a)(1) of the BBRA required that the system ‘‘maintain budget neutrality’’ in the August 30, 2002 LTCH PPS final rule (67 FR 55954). The statutory budget neutrality requirement means that estimated aggregate payments under the LTCH PPS for FY 2003 would be equal to the estimated aggregate payments that would have been made if the LTCH PPS were not implemented for FY 2003. The methodology for determining the LTCH PPS standard Federal rate for FY 2003 that would ‘‘maintain budget neutrality’’ is described in considerable detail in the August 30, 2002 final rule (67 FR 56027 through 56037). Our methodology for estimating payments for the purposes of budget neutrality calculations used the best available data, and necessarily reflected several assumptions (for example, costs, inflation factors, and intensity of services provided) in estimating aggregate payments that would have been made if the LTCH PPS had not been implemented (without accounting for certain statutory provisions that affect the level of payments to LTCHs in years prior to the implementation of the LTCH PPS, as required by the statute). In the August 30, 2002 final rule, we also stated our intentions to monitor LTCH PPS payment data to evaluate whether later data varied significantly from the data available at the time of the original budget neutrality calculations (for example, data related to inflation factors, intensity of services provided, or behavioral response to the implementation of the LTCH PPS). To the extent the later data significantly differed from the data employed in the original calculations, the aggregate amount of payments during FY 2003 based on later data may be higher or lower than the estimates upon which the budget neutrality calculations were based. Therefore, in that same final rule, under the broad authority conferred upon the Secretary in developing the LTCH PPS, including the authority for establishing appropriate adjustments, under section 123(a)(1) of the BBRA, as amended by section 307(b) of the BIPA, we provided in § 412.523(d)(3) of the regulations for the possibility of making a one-time prospective adjustment to the LTCH PPS rates, so that the effect of any significant difference between E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50764 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations actual payments and estimated payments for the first year of the LTCH PPS would not be perpetuated in the LTCH PPS rates for future years. We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53487 through 53488) for a complete discussion of the history of the development of the onetime prospective adjustment to the LTCH PPS standard Federal rate at § 412.523(d)(3). In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53495), we finalized our policy to make a one-time prospective adjustment to the standard Federal rate so that it will be permanently reduced by approximately 3.75 percent to account for the estimated difference between projected aggregate FY 2003 LTCH PPS payments and the projected aggregate payments that would have been made in FY 2003 under the TEFRA payment system if the LTCH PPS had not been implemented. Specifically, using the methodology we adopted in that same final rule, we determined that permanently applying a factor of 0.9625 (that is, a permanent reduction of approximately 3.75 percent) to the standard Federal rate is necessary to ensure estimated total FY 2003 LTCH PPS payments equal estimated total FY 2003 TEFRA payments consistent with our stated policy goal of the one-time prospective adjustment under § 412.523(d)(3) (that is, to ensure that the difference between estimated total FY 2003 LTCH PPS payments and estimated total FY 2003 TEFRA payments is not perpetuated in the LTCH PPS payment rates in future years). (We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53487 through 53502) for a complete discussion of the evaluation approach, methodology, and determination of the one-time prospective adjustment to the LTCH PPS standard Federal rate at § 412.523(d)(3).) Given the magnitude of this adjustment, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53501 through 53502), under § 412.523(d)(3), we established a policy to phase-in the permanent adjustment of 0.9625 to the standard Federal rate over a 3-year period. To achieve a permanent adjustment of 0.9625, under the phasein of this adjustment, in that same final rule, we explained that we will apply a factor of 0.98734 to the standard Federal rate in each year of the 3-year phase-in, that is, in FY 2013 (which does not apply to payments for discharges occurring on or after October 1, 2012, and on or before December 28, 2012, consistent with current law), FY 2014, and FY 2015. By applying a permanent factor of 0.98734 to the standard Federal VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 rate in each year for FYs 2013, 2014, and 2015, we will completely account for the entire adjustment by having applied a cumulative factor of 0.9625 (calculated as 0.98734 × 0.98734 × 0.98734 = 0.9625) to the standard Federal rate. Accordingly, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27668), in accordance with the existing regulations at § 412.523(d)(3), we proposed to apply a permanent factor of 0.98734 for FY 2014 to the standard Federal rate under the second year of the 3-year phase-in of the onetime prospective adjustment. Comment: Several commenters reiterated the objections raised in response to the one-time prospective adjustment under § 412.523(d)(3) proposal presented in the FY 2013 IPPS/ LTCH PPS proposed rule, and continued to assert that the adjustment is ‘‘unnecessary’’ or ‘‘overstated.’’ Specifically, some of these commenters asserted that the adjustment is ‘‘unnecessary’’ because they believed that the policy objective behind the onetime prospective adjustment has already been accomplished by other adjustments and payment policy changes under the LTCH PPS since its implementation in FY 2003. The commenters who believe that the adjustment is ‘‘overstated’’ maintained that CMS has not accounted for the change in the percentage of cases paid under the Federal (base) rate since FY 2003 when determining the adjustment necessary to ensure that the difference between estimated total FY 2003 LTCH PPS payments and estimated total FY 2003 TEFRA payments is not perpetuated in the LTCH PPS payment rates in future years. These commenters did not raise objections to CMS’ finding that estimated FY 2003 LTCH PPS payments are 2.5 percent higher than estimated total FY 2003 TEFRA payments, but, based on their analysis, these commenters believed that only a 2.75 percent reduction to the current standard Federal rate (rather than the approximate 3.75 percent reduction determined by CMS) is necessary to reduce total current LTCH PPS spending by 2.5 percent because there are now more cases paid under the standard Federal rate today than there were in FY 2003 (approximately 70 percent of cases in FY 2012 compared to approximately 50 percent of cases in FY 2003). Therefore, these commenters suggested that CMS eliminate the one-time prospective adjustment, or correct the amount of the adjustment for the remaining 2 years of the existing 3-year phase-in (FYs 2014 and 2015). Other commenters supported our proposed PO 00000 Frm 00270 Fmt 4701 Sfmt 4700 continuation of the 3-year phase-in of the one-time prospective adjustment, if after further analysis we determine that the adjustment is necessary. Response: We continue to disagree with the commenters that the one-time prospective adjustment under § 412.523(d)(3) of approximately 3.75 percent established in the FY 2013 IPPS/LTCH PPS proposed and final rules is ‘‘unnecessary’’ or ‘‘overstated.’’ As we explained in our responses to similar comments in the FY 2013 IPPS/ LTCH PPS final rule (78 FR 53493 through 53494), the other payment policy changes and adjustments made since the implementation of the LTCH PPS were not made to address any budget neutrality requirement related to the initial implementation of the LTCH PPS, and do not serve as a substitute for the one-time prospective adjustment under § 412.523(d)(3). The policy changes and adjustments that have been made to the LTCH PPS since its inception are part and parcel of finetuning a new prospective payment system, and were made to address explicitly stated policy goals, none of which were duplicative of the stated purpose and end-result of the one-time prospective adjustment. The purpose of the one-time prospective adjustment under § 412.523(d)(3) is to ensure that any significant difference between estimated total FY 2003 LTCH PPS payments and estimated total FY 2003 TEFRA payments is not perpetuated in the LTCH PPS payment rates (that is, the standard Federal rate) in future years. Our policy has always been that the one-time prospective adjustment be applied to the standard Federal rate. Our policy objective in providing for this one-time prospective adjustment has always been to ensure that computations based on the earlier, necessarily limited (but at the time best available) data at the inception of the LTCH PPS would not be built permanently into the payment rates if data available at a later date could provide more accurate results. The intended goal of the one-time prospective adjustment is to establish the LTCH PPS standard Federal rate in a manner that results in bringing the LTCH PPS standard Federal rate to the level it would have been had the estimated total FY 2003 LTCH PPS payments been 2.5 percent lower. Our goal is not to reduce current total LTCH PPS spending by 2.5 percent, as mistakenly believed by some commenters. We continue to believe that the one-time prospective adjustment is based on the difference between what would have otherwise E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations been paid under the TEFRA payment system and payments made under the LTCH PPS as it was implemented in FY 2003, consistent with our policy goal of the one-time prospective adjustment. For these reasons, we continue to disagree with the commenters’ assertions that the payment impact of policy changes and adjustments that have been made since the implementation of the LTCH PPS should be accounted for when evaluating the necessity of the one-time prospective adjustment under § 412.523(d)(3). We also disagree with the commenters that the one-time prospective adjustment of approximately 3.75 percent is overstated because our methodology does not account for the fact that there are now more cases paid under the standard Federal rate (and relatively fewer cases paid as short-stay outliers (SSOs)) than there were paid under the standard Federal rate in FY 2003 (where there were relatively more cases paid as SSOs). Although the relative level of cases paid under the standard Federal rate (and cases paid as SSOs) has changed since the inception of the LTCH PPS, the policy objective of the one-time prospective adjustment has always been to ensure that the LTCH PPS standard Federal rate originally determined for FY 2003 does not perpetuate any significant difference between the data used in the original computation of budget neutrality for FY 2003 and more recent data to determine budget neutrality for FY 2003. Consistent with this policy objective, our methodology for determining a onetime prospective adjustment compares estimated payments that would have been made in FY 2003 under the TEFRA payment system to estimated payments under the LTCH PPS in FY 2003. Therefore, the data and methodology that we used for this purpose is limited to the types of Medicare cases projected to have been treated in LTCHs in 2003, and the current levels of cases paid under the standard Federal rate (or paid under the SSO policy) are not germane to the computations of budget neutrality for FY 2003 under the one-time prospective adjustment under § 412.523(d)(3). The intended goal of the one-time prospective adjustment, to ensure that any significant difference between estimated total FY 2003 LTCH PPS payments and estimated total FY 2003 TEFRA payments is not perpetuated in the LTCH PPS payment rates (that is, the standard Federal rate) in future years, is not to reduce current total LTCH PPS spending by 2.5 percent, as mistakenly stated by some commenters. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Rather, the intended goal of the onetime prospective adjustment is to adjust the LTCH PPS standard Federal rate in a manner that results in bringing the standard Federal rate to the level it should be had the FY 2003 standard Federal rate resulted in estimated aggregate LTCH PPS payments that were equal to the level they would have been if the LTCH PPS had not been implemented (that is, FY 2003 payments under the TEFRA system), based on actual FY 2003 data. The current mix of cases paid under the standard Federal rate has no relationship to estimated FY 2003 LTCH PPS payments, which were used to evaluate and calculate the onetime prospective adjustment under § 412.523(d)(3). Our methodology for determining the one-time prospective adjustment of approximately 3.75 percent is consistent with our stated goal because it makes an adjustment to the current standard Federal rate to bring it to the level that the FY 2003 standard Federal (base) rate would have been if we had determined that rate based on the best data currently available to estimate FY 2003 payments to LTCHs. Therefore, we continue to believe that the one-time prospective adjustment should be based on any difference in payment in FY 2003 between what would have otherwise been paid under the TEFRA payment system and payments made under the LTCH PPS as it was implemented in FY 2003, only. For these reasons, we disagree with the commenters’ assertions that the one-time prospective adjustment of approximately 3.75 percent is overstated, and we are not adopting the commenters’ suggestion to reduce the adjustment by making an adjustment to our methodology for calculating the one-time prospective adjustment to account for the change in the levels of cases paid under the standard Federal rate. Finally, we appreciate the commenters’ support for our proposal to continue the established 3-year phase-in of the one-time prospective adjustment. Therefore, after consideration of public comments, we are finalizing our proposal to apply a permanent factor of 0.98734 for FY 2014 to the standard Federal rate under the second year of the 3-year phase-in of the one-time prospective adjustment, without modification. 4. Summary of Other Public Comments on the Proposed LTCH PPS Payment Rates for FY 2014 We received a number of public comments that were not within the scope of this regulation, but we appreciate the commenters for sharing PO 00000 Frm 00271 Fmt 4701 Sfmt 4700 50765 their concerns. We also received public comments on several other issues related to the proposed LTCH PPS payment rates for FY 2014, but not specifically addressed by the proposals and related discussion presented in the FY 2014 IPPS/LTCH PPS proposed rule. Comment: One commenter questioned how the changes to the Medicare disproportionate share hospital (DSH) payment methodology for inpatient operating costs under the IPPS beginning in FY 2014, provided for by section 3133 of the Affordable Care Act, would affect payments under the LTCH PPS. Specifically, the commenter questioned how those changes to the IPPS DSH payment methodology would affect the LTCH PPS payment adjustments that are based on ‘‘IPPS rates’’ for some patients (that is, the ‘‘IPPS-comparable amount’’ under the SSO policy at § 412.529(d)(4) and the ‘‘IPPS-equivalent amount’’ under the 25percent threshold payment adjustment policy at § 412.534(f) and § 412.536(e)). Under the provisions of section 3133 of the Affordable Care Act, starting in FY 2014, IPPS hospitals that qualify for Medicare DSH payments will receive an empirically justified Medicare DSH payment equal to 25 percent of the payment amount they previously would have received under the existing methodology under section 1886(d)(5)(F). The remaining amount, equal to 75 percent of the amount that would otherwise have been paid in Medicare DSH payments, will be adjusted to reflect changes in the percentage of individuals that are uninsured. Hospitals that receive empirically justified Medicare DSH payments will then receive an additional payment (referred to as an uncompensated care payment) that reflects the hospital’s amount of uncompensated care relative to the total uncompensated care amount for all eligible hospitals. (For additional information on the changes to the Medicare DSH payment adjustment methodology as provided by Section 3133 of the Affordable Care Act, we refer readers to section V.E.3. of this preamble.) The commenter asserted that, although the new uncompensated care payment is only applicable to subsection (d) hospitals that are paid under the IPPS, LTCH PPS payments that are based on ‘‘IPPS rates’’ would be incomplete without the inclusion of an uncompensated care payment derived on the same basis as is the case for IPPS hospitals. The commenter also pointed out that the current ‘‘IPPS-comparable amount’’ and ‘‘IPPS-equivalent amount’’ under the LTCH PPS include E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50766 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations adjustments for LTCHs treating lowincome patients. Response: We appreciate the commenter bringing this issue to our attention. In the FY 2014 IPPS/LTCH PPS proposed rule, we inadvertently neglected to specifically indicate how the changes to the Medicare IPPS DSH payment adjustment methodology beginning in FY 2014 provided for by section 3133 of the Affordable Care Act, including the new uncompensated care payment, would be reflected in the ‘‘IPPS-comparable amount’’ under the SSO policy at § 412.529(d)(4) and the ‘‘IPPS-equivalent amount’’ under the 25percent threshold payment adjustment policy at § 412.534(f) and § 412.536(e). The determination of both the ‘‘IPPScomparable amount’’ and the ‘‘IPPSequivalent amount’’ under the current regulations specifically includes amounts for inpatient operating costs ‘‘for the costs of serving a disproportionate share of low-income patients.’’ (We refer readers to § 412.529(d)(4)(ii)(C), § 412.534(f)(2)(iii), and § 412.536(e)(2)(iii) of the regulations.) When we adopted the ‘‘IPPS-comparable amount’’ under the SSO policy in the RY 2007 LTCH PPS final rule (71 FR 27848), we explained that this payment under the LTCH PPS is generally comparable to a payment under the IPPS payment methodology, and would be calculated based on the sum of the applicable operating and capital IPPS rates in effect at the time of the discharge from the LTCH, as established in the applicable IPPS final rule published in the Federal Register. We also explained that there are specific features of the IPPS that do not directly translate into the LTCH PPS, and that ‘‘IPPS-comparable amount’’ payments would be calculated by applying IPPS principles to achieve a close approximation of payments that would be made under the IPPS, recognizing the fact that not all components of the IPPS can be carried out precisely in the LTCH PPS context. Similarly, in that same final rule (71 FR 28879), we clarified the meaning of the ‘‘IPPS-comparable amount’’ under the 25 percent threshold payment adjustment policy, and stated that it is our intention under the ‘‘IPPSequivalent amount’’ to utilize and build upon IPPS payment principles to develop a payment adjustment under the LTCH PPS that approximates for LTCHs the payment for a particular case that would have been made under the IPPS. Therefore, we agree with the commenter that it is appropriate that the statutory changes to the Medicare IPPS DSH payment adjustment methodology provided by section 3133 of the VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Affordable Care Act, including the new uncompensated care payment that will begin in FY 2014, should be reflected in the calculation of the ‘‘IPPS-comparable amount’’ and the ‘‘IPPS-equivalent amount’’ under the LTCH PPS. As described above, under the statutory changes to the Medicare DSH payment adjustment methodology as implemented in the regulations at § 412.106(f), (g), and (h), in general, eligible IPPS hospitals will receive an empirically justified Medicare DSH payment equal to 25 percent of the amount they otherwise would have received under the current statutory formula for Medicare DSH payments. The remaining amount, equal to an estimate of 75 percent of the amount that otherwise would have been paid as Medicare DSH payments, reduced to reflect changes in the percentage of individuals under the age of 65 who are uninsured, will become available to make additional payments to each hospital that qualifies for Medicare DSH payments and that has uncompensated care. The additional uncompensated care payments will be based on the hospital’s amount of uncompensated care for a given time period relative to the total amount of uncompensated care for that same time period reported by all hospitals that receive Medicare DSH payments. Under these changes, aggregate Medicare IPPS operating DSH payments are projected to be reduced to 95.7 percent of the amount that would otherwise have been paid under the current statutory Medicare DSH payment formula. As discussed in greater detail in section V.E.3.d.(2) of this preamble, we are specifying that under the methodology outlined in section 1886(r)(2) of the Act, our estimate of 75 percent of the amount that would otherwise have been paid as Medicare DSH payments will be adjusted to 94.3 percent of that amount to reflect the change in the percentage of individuals that are uninsured. The resulting amount is then used to determine the amount of additional uncompensated care payments that will be made to eligible IPPS hospitals. In other words, Medicare DSH payments prior to the application of section 3133 of the Act are adjusted to 70.7 percent (the product of 75 percent and 94.3 percent) and the resulting amount is used to calculate the additional uncompensated care payments to eligible hospitals. As a result, for FY 2014, we project that the reduction in the amount of Medicare DSH payments pursuant to section 1886(r)(1) of the Act, along with the new additional payments for uncompensated care under section PO 00000 Frm 00272 Fmt 4701 Sfmt 4700 1886(r)(2) of the Act, will result in overall Medicare DSH payments of 95.7 percent of the amount of Medicare DSH payments that would otherwise have been made in the absence of section 3133 of the Act (that is, 25 percent + 70.7 percent = 95.7 percent). The current calculation of the ‘‘IPPScomparable amount’’ and the ‘‘IPPSequivalent amount’’ under the LTCH PPS includes an applicable IPPS operating DSH payment amount that is based on the current statutory Medicare DSH payment formula under section 1886(d)(5)(F) of the Act, as implemented at §§ 412.106(a) through (e). Therefore, we agree with the commenter that it is appropriate to reflect the statutory changes to the Medicare DSH payment adjustment methodology that will begin in FY 2014 in the calculation of the ‘‘IPPS-comparable amount’’ and the ‘‘IPPS-equivalent amount’’ under the LTCH PPS because section 3133 of the Affordable Care Act revised section 1886(d)(5)(F) of the Act to make payments under that section ‘‘[s]ubject to subsection (r), and the ‘‘IPPScomparable’’ and the ‘‘IPPS-equivalent’’ amounts in the current LTCH PPS payment methodology specifically incorporate the DSH payments under section 1886(d)(5)(F) of the Act. To reflect the statutory changes to the Medicare DSH payment adjustment methodology in the calculation of the ‘‘IPPS-comparable amount’’ and the ‘‘IPPS-equivalent amount’’ under the LTCH PPS for FY 2014 and subsequent years, we will include a reduced Medicare DSH payment amount that reflects the projected percentage of the payment amount calculated based on the current statutory Medicare DSH payment formula that will be paid to eligible hospitals as empirically justified Medicare DSH payments and uncompensated care payments in FY 2014 and subsequent years (that is, a percentage of the current operating DSH payment amount that is reflected in the LTCH PPS payments that are based on IPPS rates). The projected percentage would be updated annually consistent with the annual determination of the amount of uncompensated care payments that will be made to eligible hospitals under the IPPS. We believe that this approach will result in appropriate payments under the LTCH PPS and is consistent with our intention that the ‘‘IPPS-comparable amount’’ and the ‘‘IPPS-equivalent amount’’ under the LTCH PPS closely resembles what an IPPS payment would have been for the same episode of care, while recognizing that some features of the IPPS cannot be translated directly into the LTCH PPS (71 FR 28879). We E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations believe this approach is consistent with the way we have interpreted ‘‘IPPScomparable amount’’ and ‘‘IPPSequivalent amount’’ because it represents a reasonable approximation of the overall change in payments to IPPS hospitals that is projected to result from the statutory changes to the Medicare DSH payment adjustment methodology while recognizing that not all components of the IPPS can be carried out precisely in the LTCH PPS context and without imposing the administrative burden to approximate the new uncompensated care payment amount under the provisions of section 1886(r)(2) of the Act as implemented at § 412.106(f) through (h) for each LTCH. As described in greater detail in section V.E.3.d.(3) of this preamble, an eligible IPPS hospital’s uncompensated care payment is determined using a hospitalspecific value that expresses the proportion of the estimated uncompensated care amount for each eligible IPPS hospital with the potential to receive empirically justified Medicare DSH payments relative to the estimated uncompensated care amount for all hospitals estimated to receive empirically justified Medicare DSH payments in the fiscal year for which the uncompensated care payment is to be made. Because the portion of the ‘‘IPPS-comparable amount’’ that is based on the operating Medicare DSH payment amount derived from the current statutory Medicare DSH payment formula is a very small percentage of total LTCH PPS payments annually (approximately 0.1 percent) and we have acknowledged in our initial implementation of the ‘‘IPPScomparable amount’’ and the ‘‘IPPSequivalent amount’’ under the LTCH PPS that not all components of the IPPS can be carried out precisely in the LTCH PPS context, we do not believe that it is necessary to undertake the calculations necessary to more precisely replicate the statutory IPPS uncompensated care payment amount when a straightforward and administratively simpler approximation results in a payment amount that reflects the overall payment change IPPS hospitals are projected to experience under the statutory changes to the Medicare DSH payment adjustment methodology that will begin in FY 2014. Accordingly, for FY 2014, the calculation of the ‘‘IPPS-comparable amount’’ under § 412.529(d)(4) and the ‘‘IPPS-equivalent amount’’ under § 412.534(f) and § 412.536(e) will include an applicable operating Medicare DSH payment amount that is VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 equal to 95.7 percent of the operating Medicare DSH payment amount based the current statutory Medicare DSH payment formula (that is, the operating Medicare DSH payment amount currently included in those calculations). Comment: Two commenters suggested that CMS provide additional payment for end-stage renal disease (ESRD) patients under the LTCH PPS for the same circumstances that such payments are made under the IPPS, noting that section 1881(b) of the Act does not limit the adjustment to subsection (d) hospitals. The commenters cited our regulations at § 412.104 that provide for an ESRD add-on payment where the beneficiary received dialysis services during the inpatient stay (excepting specified MS–DRGs), constitute 10 percent or more of the IPPS hospital’s total Medicare discharges. One of the commenters included a copy of the conclusions derived from its research, which indicate the significant frequency and high costs of dialysis patients that are being treated in a small number of LTCHs. This commenter also suggested that in the alternative to an ESRD addon payment, CMS adjust the MS–DRG system to provide a CC or MCC for patients on dialysis. Response: This comment is beyond the scope of the provisions of the proposed rule. However, we note that we have responded previously to the issue that these commenters raise in a detailed response included in the RY 2009 LTCH PPS final rule (73 FR 26826 through 26827), which is reiterated, in part, below. We are aware of the situation of the particular LTCH described by both commenters, which typically treats between 17 to 20 percent of patients that would qualify for an ESRD add-on payment under the IPPS regulations at § 412.104(a). As we noted in the RY 2009 LTCH PPS final rule, we continue to believe that applying an ESRD add-on payment adjustment to LTCHs would be inappropriate. LTCH’s typically treat very sick patients with a number of serious secondary illnesses (multi-comorbidities) that require hospital-level care for, on average, greater than 25 days for any one episode of care. We believe that given the patient population treated at LTCHs, a higher proportion of LTCH patients would require dialysis than would be treated at an acute care hospital and paid for under the IPPS. Although the LTCH PPS uses the same patient classification system as is used by the IPPS, the relative weights assigned to the MS–LTC–DRGs under the LTCH PPS are based on LTCH cases, which reflect ‘‘differences in patient resource PO 00000 Frm 00273 Fmt 4701 Sfmt 4700 50767 use and costs’’ in LTCHs as mandated by the statute that provides for the establishment of the LTCH PPS. A patient classification system using relative weights, such as the DRG-based system used by both the IPPS and the LTCH PPS, determines the amount that Medicare pays for particular types of cases based on the hospital resources used in treating such cases as compared to the resources utilized in treating other types of cases, and assigns all cases numerical values called ‘‘relative weights.’’ Data, such as charges, used to measure hospital resource use for each MS–LTC–DRG is captured on patient claims, which Medicare uses in the annual update of the relative weights. In light of the commenters’ request and their analysis, we recently reviewed LTCH claims data from the FY 2012 MedPAR files to determine the prevalence of LTCH patients with ESRD as a secondary diagnosis as identified by the ICD–9–CM code 585.6 (excluding cases in MS–LTC–DRGs 652 and 682 through 685, which are not included in the IPPS ESRD add-on payment). Our analysis indicated the following: • 56 percent of the LTCHs have at least 10 percent of their cases with ESRD as a secondary diagnosis, which represents 78.8 percent of all the cases with ESRD as a secondary diagnosis; • The average percent of cases in a MS–LTC–DRG with ESRD as a secondary diagnosis is approximately 20 percent; • Almost 40 percent of MS–LTC– DRGs have cases with ESRD as a secondary diagnosis, of which 71 percent of those MS–LTC–DRGs have more than 10 percent of the cases in that MS–LTC–DRG with ESRD as a secondary diagnosis; and • 59 MS–LTC–DRGs have more than 25 percent of the cases with ESRD as a secondary diagnosis. Based on these findings, we continue to believe that ESRD patients in LTCHs are adequately reflected in data used to determine the MS–LTC–DRG relative weights for non-dialysis MS–LTC– DRGs. Therefore, we believe that payments based on the LTCH PPS will generally reflect the relative use of resources necessary to treat those MS– LTC–DRGs, except for cases with unusually high costs, which could qualify for high-cost outlier payments. Accordingly, we believe that the additional resources associated with renal dialysis treatments are include in the LTCH PPS payments, and we are not adopting the commenters’ suggestion to provide for an additional payment for ESRD patients under the LTCH PPS. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50768 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations D. Expiration of Certain Payment Rules for LTCH Services—The 25-Percent Threshold Payment Adjustment Section 114(c) of the MMSEA, as amended by section 4302(a) of the ARRA and sections 3106(c) and 10312(a) of the Affordable Care Act provided for a 5-year moratorium on the full application of the 25-percent threshold payment adjustment policy that expired for some LTCHs and LTCH satellites for cost reporting periods beginning on or after October 1, 2012 (‘‘October’’ LTCHs) and for other LTCHs and LTCH satellites for cost reporting periods beginning on or after July 1, 2012 (‘‘July’’ LTCHs). In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53483 through 53484) as amended by the FY 2013 IPPS/LTCH PPS correcting amendment (77 FR 63751 through 63753), we provided for extensions to the expiring statutory moratoria for both ‘‘October’’ and ‘‘July’’ LTCHs and LTCH satellites. Specifically, we established a 1-year extension (that is, for cost reporting periods beginning on or after October 1, 2012, and before October 1, 2013) on the full application of the 25-percent threshold payment adjustment policy for ‘‘October’’ LTCHs, and for those ‘‘July’’ LTCHs that would have been affected by the ‘‘gap’’ between the expiration of the statutory moratorium (for cost reporting periods beginning on or after July 1, 2012) and our prospective regulatory relief (for cost reporting periods beginning on or after October 1, 2012), we also provided for an additional moratorium based on LTCH discharges occurring on or after October 1, 2012 and ending at the start of their next cost reporting period. For those ‘‘July’’ LTCHs with cost reporting periods beginning on or after October 1, 2012, the regulatory extension of the statutory moratorium, described above, effective for the hospital’s first cost reporting period beginning on or after October 1, 2012, resulted in seamless coverage for that group. However, for those ‘‘July’’ LTCHs with cost reporting periods beginning on or after July 1, 2012, and before October 1, 2012, that would have otherwise been subject to the ‘‘gap’’ between the expiration of the statutory moratorium and the effective date of the regulatory moratoria, we established a second regulatory moratorium effective with discharges occurring beginning October 1, 2012, through the end of the hospital cost reporting period (that is, the end of the cost reporting period that began on or after July 1, 2012, and before October 1, 2012). For more details about these moratoria, we refer readers to the FY VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 2013 IPPS/LTCH PPS final rule (77 FR 53483 through 53484). Under current law, the regulatory moratorium on the full application of the 25-percent threshold payment adjustment policy will expire for all LTCHs (both ‘‘October’’ and ‘‘July’’ LTCHs) for cost reporting periods beginning on or after October 1, 2013. As discussed in greater detail below, we are not extending the regulatory moratorium of the 25-percent threshold payment adjustment policy. Therefore, LTCHs are encouraged to familiarize themselves with the prior rulemakings that established the adjustments for the various types of LTCHs and LTCH satellites. (We refer readers to the FY 2005 IPPS final rule (69 FR 49205 through 49214) and the RY 2007 LTCH PPS final rule (72 FR 26929). We note that the 25-percent threshold payment adjustment policy does not apply to ‘‘subclause (II)’’ LTCHs, that is, an LTCH described under section 1886(d)(1)(B)(iv)(II) of the Act as implemented at § 412.23(e)(2)(ii) of the regulations. Subclause (II) LTCHs meeting that definition continue to be exempted from this policy. In the proposed rule, we noted that we were allowing the moratoria to expire because we continue to be concerned that LTCHs that admitted more than the applicable percentage of patients from a particular referring hospital were, in effect, behaving like step-down units of the referring hospital, which results in two separate Medicare payments—one to the referring hospital and one to the LTCH—for what we believe should be structured as one episode of care. In light of our duties to protect the fiscal integrity of the Medicare program, we stated that we believed that it would be inappropriate to continue to offer the moratoria pending the implementation of the policy outcomes of the research discussed below. We welcomed public comments on this approach. Comment: Several commenters questioned CMS’ decision to allow the moratorium on the full application of the 25-percent threshold payment adjustment policy to expire. The commenters opined that CMS implied in the FY 2013 IPPS/LTCH final rule that the regulatory moratorium implemented for FY 2013 was being established as a bridge to new payment policies under the LTCH PPS. The commenters assumed that CMS’ ongoing research on patient-level criteria for LTCHs would serve as the basis for (and would result in) payment policy proposals that would render the 25percent threshold payment adjustment policy unnecessary. The commenters PO 00000 Frm 00274 Fmt 4701 Sfmt 4700 further viewed CMS’ decision to allow the moratorium to expire, as stated in the proposed rule, as being inconsistent with the approach taken by CMS last year in light of its consideration of a developed framework to support potential policy proposals for FY 2015. These commenters suggested that CMS eliminate the 25-percent threshold payment adjustment policy or to extend the moratorium on the full application of the 25-percent threshold payment adjustment policy for an additional year to mitigate the potentially negative impact on the continued economic viability of LTCHs under this policy. Response: While we understand that the FY 2013 IPPS/LTCH PPS final rule did not specify that we intended to fully implement the 25-percent threshold payment adjustment policy in FY 2014, there are no statutory or regulatory prohibitions on the Secretary that would bar her from allowing the moratorium to expire. The FY 2013 IPPS/LTCH PPS final rule did indicate that we had awarded research contracts for the purposes of developing patient-level criteria that could render the 25-percent threshold payment adjustment policy unnecessary. With that said, while the framework resulting from interim findings of these research projects was described in the FY 2014 IPPS/LTCH PPS proposed rule, we did not propose to implement patient-level criteria for LTCH admissions in FY 2014. Rather, based on the interim findings of these research projects, we were able to present a draft framework for potential payment policy proposals and solicited feedback. In light of the extensive public comments that we received in response to our initial thoughts about what the framework might entail, in the absence of patient-level criteria being in place, we continue to believe that the 25percent threshold payment adjustment policy serves as an effective instrument to protect the Medicare Trust Fund from significant and inappropriate expenditures. (We refer readers to our detailed discussions of the 25-percent threshold payment adjustment policy for HwHs and LTCH satellites in the FY 2005 IPPS final rule (69 FR 49191 through 49214) and its application to all other LTCHs in the RY 2008 LTCH PPS final rule (72 FR 26919 through 26944).) We further believe that the partial implementation of the 25-percent threshold payment adjustment policy has begun to serve this purpose. We note that the Office of the Assistant Secretary for Planning and Evaluation (ASPE) has conducted an analysis of LTCH referral patterns as part of its contract with Acumen, LLC. The results E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations of Acumen’s analysis indicate that, from 2010 through 2012 approximately 9–10 percent of total LTCH stays would have been subject to a payment adjustment under the 25-percent threshold payment adjustment policy. We note that a subset of those stays (for example, in rural LTCHs) would have been subject to the higher 50 percent threshold. Material supplied by an LTCH trade association as part of its comments to the FY 2014 IPPS/LTCH PPS proposed rule also support this conclusion. With regard to the potentially negative impact of the 25-percent threshold payment adjustment policy on the economic viability of LTCHs, we note that although we understand that some LTCHs have much lower margins and some much higher margins, LTCHs have generally adapted and succeeded under the 25-percent threshold payment adjustment policy as it was modified by the statutory and regulatory moratoria. (We refer readers to MedPAC’s March 2013 Report to the Congress, page 251, which notes that aggregate Medicare margins for LTCHs in 2013 would be 5.9 percent). Therefore, we believe that allowing the regulatory moratorium to expire and the 25-percent threshold payment adjustment policy to be fully implemented for cost reporting periods beginning on or after October 1, 2013, is the appropriate policy at least until such time as payments under the LTCH PPS are based on the adoption of clinically based, patient-level criteria. Comment: MedPAC submitted a public comment regarding the expiration of the moratorium on the full implementation of the 25-percent threshold payment adjustment policy. MedPAC noted in its comment that the policy was implemented to ensure that LTCHs did not ‘‘. . . serve as de facto units of IPPS hospitals,’’ and stated that it considers this policy, in the absence of LTCH admission criteria, as a ‘‘blunt but necessary’’ instrument.’’ MedPAC encouraged the use of clinical patientlevel admission criteria such as our CCI/ MC framework, but stated ‘‘[n]evertheless, we cannot ignore the possibility of a new set of inappropriate provider responses to payment incentives under the CCI/MC framework. Therefore, if CMS moves forward with its CCI/MC criteria, we urge the agency to continue to apply the 25 percent rule during the implementation until the robustness of the CCI/MC criteria can be assessed and unintended consequences can be observed and addressed.’’ Response: We appreciate MedPAC’s support and for sharing its concerns regarding the future implementation of LTCH patient-level admissions criteria. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Comment: One commenter opposed full implementation of the 25-percent threshold payment adjustment policy and believed that, in an effort to avoid the payment reduction for admitting patients in excess of the applicable threshold, LTCHs would ‘‘swap’’ patients among themselves from referring hospitals to stay within their threshold. The commenter also noted that LTCHs would be presented with significant financial consequences for exceeding their thresholds as a result of the full implementation of the 25percent threshold payment adjustment policy. The commenter also believed that the 25-percent threshold payment adjustment policy is not appropriate because of the differences between the care provided in LTCHs and IPPS hospitals, and stated that ‘‘LTCH patients are sicker and receive a unique set of services for their medical severity’’ and ‘‘. . . these are not the same short term acute interventions that are the focus of PPS hospitals.’’ Response: We note that the 25-percent threshold payment adjustment policy was not proposed in the FY 2014 IPPS/ LTCH PPS proposed rule. Rather, in the absence of proposing regulatory changes or a further extension of the moratorium, the policy simply becomes effective as set forth in our regulations at §§ 412.534 and 412.536. We are aware that, in areas where there are a number of LTCHs, patient ‘‘swapping’’ may enable hospitals to avoid exceeding their applicable thresholds. The ability of some LTCHs to side-step the intent of the 25-percent threshold payment adjustment policy is another reason why we believe that it is important to develop patient-level criteria for LTCHs, as we discussed in the FY 2014 IPPS/ LTCH PPS proposed rule, that will more clearly identify those patients that we believe are the most appropriate for treatment in an LTCH. In the meantime, it is incumbent upon us to attempt to limit the percentage of beneficiaries for whom the Medicare program generates two PPS payments for what is essentially one episode of care. Furthermore, the financial impact mentioned by the commenter can be minimized if an LTCH treats patients who achieve high cost outlier status at the referring hospital because those patients are not counted towards the percentage threshold. Although adapting to the full implementation of the 25-percent threshold payment adjustment policy may be challenging for a particular LTCH, we do not agree with the commenter’s assertion that this policy will compromise an LTCH’s ability to provide care for those Medicare PO 00000 Frm 00275 Fmt 4701 Sfmt 4700 50769 beneficiaries that the LTCH appropriately admits. In addition, the conclusions that we draw from the data reported by the Acumen analysis regarding LTCH compliance with the 25-percent threshold payment adjustment policy for the ASPE project, in combination with MedPAC’s report on aggregate LTCH margins for FY 2013, both explained in the previous response, do not appear to support the claims that there will be widespread economic consequences for LTCHs as a result of the full application of the 25percent threshold payment adjustment policy. While we understand that some LTCHs are equipped to provide medical care for high-acuity severely sick patients, as described in the proposed rule, our data indicate that there are many patients admitted to LTCHs that do not fit this description. In addition, we disagree with the commenter’s assertion that hospitals paid under the IPPS focus solely on short-term interventions and are not equipped to handle these high-acuity patients. As we noted in the FY 2014 IPPS/LTCH PPS proposed rule, ‘‘Our 2012 data indicates that less than 2 percent of all Medicare beneficiaries who were hospitalized in CY 2010 were treated in LTCHs. Our 2013 data indicates that New Hampshire, Maine, and Vermont have no LTCHs and the following States have five or fewer LTCHs: Connecticut, Delaware, Hawaii, Iowa, Idaho, Kansas, Maryland, Minnesota, Montana, Nebraska, New Mexico, New York, Wisconsin, West Virginia, Wyoming, and the District of Columbia. Therefore, the number of LTCHs and their geographic distribution suggest to us that LTCHs are only treating a small percentage of the patients that the LTCH industry has identified as their target population nationwide’’ (78 FR 27669). Clearly, in areas where there is little or no LTCH presence, general acute care hospitals are effectively providing treatment for the same types of patients that are treated in LTCHs in areas where there is one or more LTCH present. Comment: Several commenters expressed concern with the full application of the 25-percent threshold payment adjustment policy to freestanding LTCHs and ‘‘grandfathered’’ HwHs ‘‘for the first time’’ as these hospitals had previously been exempted from any application of the 25-percent threshold payment adjustment policy. Some commenters identified specific problems that groups of LTCHs that receive ‘‘special’’ treatment under the regulations (rural LTCHs and LTCHs admitting from MSA-dominant or urban single referring hospitals) have encountered even under E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50770 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations the moratorium on the full implementation of the 25-percent threshold payment adjustment policy. Several commenters representing LTCHs in rural areas with few referring hospitals and a single-hospital MSA described the negative consequences they anticipated if the 25-percent threshold payment adjustment policy were to be fully implemented, including possible hospital closures, access issues for beneficiaries, the diversion of patients to geographic areas away from their homes, and the lack of family and community support. One comment from an LTCH noted that, while it supported our goals under the 25-percent threshold payment adjustment policy, the policy would be unworkable in a single-hospital MSA. This commenter offered several suggestions to amend the existing policy, including exempting the six single-hospital MSAs in the United States or at least exempting the three freestanding LTCHs in those MSAs; grandfathering LTCHs currently operating as freestanding LTCHs in single-hospital MSAs in accordance with our policies to ‘‘protect existing hospitals from potentially adverse impacts,’’ exempting LTCHs based on their distance from other LTCHs; or increasing the threshold percentage for single-hospital MSAs. The commenter also suggested excluding cases that exceed a specific length of stay from the 25-percent threshold payment adjustment policy, for example, cases that exceed 2 standard deviations from the average length of stay of the designated DRG at the referring hospital, in addition to excluding high cost outlier cases from the percentage threshold calculation and presuming that such cases received the full course of treatment; blending the otherwise unadjusted LTCH PPS payment and the IPPS-comparable payment instituted for cases exceeding the applicable threshold (as in the short-stay outlier (SSO) policy at § 412.529(c)(2)(iv)); or reinstating the ‘‘transition’’ to the full implementation of the 25-percent threshold payment adjustment policy. Response: We agree with the commenter that, with the expiration of the moratoria, full implementation of the 25-percent threshold payment adjustment policy would apply to freestanding LTCHs and grandfathered co-located LTCHs for the first time. In addition, it would lower the percentage threshold for LTCHs in rural areas and LTCHs admitting patients from MSAdominant and urban single referring hospitals from the present 75 percent to 50 percent. We understand some of the commenters’ concern that the full VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 application of the 25-percent threshold payment adjustment policy could result in negative consequences for the LTCHs in rural areas and in MSAs with one referring hospital, but we continue to believe that LTCHs are free to admit any patient from any source without limit or restriction and that the 25-percent threshold payment adjustment policy addresses how Medicare will pay for patients and establishes the applicable thresholds that are the basis for such payment (69 FR 49207). We also appreciate the support expressed by the commenter from the single-hospital MSA for our policy goals, in general, and the suggestions made by this commenter. The application of the 25-percent threshold payment adjustment policy to freestanding LTCHs and grandfathered HwHs was finalized in RY 2008 (72 FR 26919 through 26944), and at that time we did provide a 3-year transition to the full implementation of the policy at §§ 412.536(f) and 412.534(h) of the regulations, respectively. Typically, we provide transitions when we have implemented significant policy changes in order to allow those entities affected by the policy change a reasonable time in which to adapt to whatever changes they need to make to come into compliance with the new regulatory scheme. The enactment of section 114(c) of the MMSEA of 2007, extended by section 4302 of the ARRA, sections 3106(c) and 10312(a) of the Affordable Care Act, and our regulations finalized for FY 2013, which will expire for cost reporting periods beginning on or after October 1, 2013, delayed the implementation of the full application of the 25-percent threshold payment adjustment policy under §§ 412.534 and 412.536 of the regulations. Congress only delayed application of the 25percent threshold payment adjustment policy; it did not reverse that policy in 2008, but rather left the decision on full implementation to the Secretary’s discretion, once the statutory moratorium expired for cost reporting periods beginning on or after July 1, 2012 and October 1, 2012, respectively. Furthermore, we believe that the moratorium period has allowed LTCHs adequate time to adapt to and prepare for the full implementation of the 25percent threshold payment adjustment policy. In addition, we believe that it is important to reiterate that patients that are admitted to an LTCH having reached the high-cost outlier threshold at those referring hospitals are not counted towards the percentage threshold. Comment: Several commenters challenged CMS’ restatement of its original policy rationale for the PO 00000 Frm 00276 Fmt 4701 Sfmt 4700 establishment of the 25-percent threshold payment adjustment that was presented in the proposed rule, stating, that ‘‘LTCHs that admit more than the applicable percentage of patients from a particular referring hospital are, in effect, behaving like step-down units of the referring hospital . . .’’ The commenters cited the report from Kennell/RTI’s July 2012 ‘‘follow-up’’ research on ‘‘Determining Medical Necessity and Appropriateness of Care for Medicare Long-Term Care Hospitals,’’ which they asserted differentiated LTCHs from step-down units of IPPS hospitals. The commenters pointed out that CMS’ contractors stated that LTCHs treat far more high-acuity patients than do step-down units. One commenter asserted that CMS has ‘‘no basis to suggest that step-down units in IPPS hospitals exist of the type and scope needed to care for patients admitted to LTCHs.’’ Response: The reality of LTCHs serving as defacto step-down units for IPPS hospitals has been at the center of our rationale for establishing the 25percent threshold payment adjustment policy, beginning in FY 2005 for colocated LTCHs and LTCH satellites and in RY 2008 for all other LTCHs. Specifically, our data indicated that Medicare patients were being discharged to LTCHs after being stabilized at IPPS hospitals for additional hospital-level care, care that Medicare had already paid the general acute care hospital to provide under the IPPS. The IPPS stays for these patients were shorter than for similar patients in communities where there was little or no LTCH presence (69 FR 49201, 49211). The commenters included excerpts from our report, ‘‘Determining Medical Necessity and Appropriateness of Care for Medicare Long-Term Care Hospitals,’’ (the follow-up report, as opposed to the Report to Congress, as discussed in greater detail below in section VIII.E. of this proposed rule) which indicated the percentage of critically ill patients treated in LTCHs as compared to step-down units in support of their contention that the distinction between LTCHs and step-down units indicated that our 25-percent threshold payment adjustment policy was based on a flawed premise. We disagree with the commenters. We believe that the basis of our 25-percent threshold payment adjustment policy has been well justified since its inception and that our recent data support the policy. We also note that, based on the FY 2010 MedPAR data, there were 13.8 million IPPS admissions, of which 450,989 met the CCI/MC patient profile. In FY 2010, E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations there were 127,969 LTCH admissions, of which only 32,743 (or 31 percent) met the CCI/MC patient profile. Therefore, while it may be correct that as a percentage of total patients, LTCHs treat a ‘‘higher percentage’’ of critically ill patients, these numbers are useful as a ‘‘reminder’’ that IPPS step-down units do treat critically ill CCI/MC patients, and are paid to treat those patients under the IPPS. Comment: Several commenters, including the American College of Thoracic Surgeons (ACTS) urged the adoption of clinical, as opposed to systems factors, for determining admissions to LTCHs. The ACTS stated, ‘‘[t]he [25 percent] policy is not grounded in evidence and may restrict appropriate transfers for some patients . . .’’ and further expressed concern that although existing payment models could provide inappropriate incentives to transfer some patients to LTCHs ‘‘. . . we believe that the best solution for the majority of patients is to standardize admission criteria by creating an operational definition of chronic critical illness, not by restricting LTCH transfers via the 25 percent rule.’’ Response: We agree with the commenters regarding the value of evidence-based clinical factors for determining which LTCH patients Medicare should pay for under the LTCH PPS. We believe that the CCI/MC patient profile material that we presented in the proposed rule, which was derived from our contractor’s preliminary report on the patient-level criteria project, provided a robust framework for further development. We note that, included among the many comments that we received on this matter, comments on independently commissioned research will be shared with our contractor, Kennell/RTI. Comment: Several commenters noted that there are a number of major changes occurring in the Medicare program for LTCHs with a wide array of regulatory demands: the roll out of quality programs, transition to ICD–10, implementation of requirements for electronic medical records, efforts to integrate with other providers and payers in their communities, and stated that LTCHs are presented with what some of these commenters call ‘‘substantial regulatory challenges and uncertainty.’’ Given these factors, commenters urged CMS to maintain the 25-percent threshold payment adjustment policy’s current threshold levels and (referring to the CCI/MC patient profile framework) to ‘‘. . . reconsider the direction and scope of its current research and concentrate on less VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 severe means of raising the minimum clinical standards for LTCHs.’’ One commenter quoted a recent preliminary report by the Institute of Medicine (IOM) on Geographic Variation in Medicare Services that stated ‘‘we are at a crossroads in postacute care’’ and a ‘‘call to action’’ was issued jointly by the House of Representatives Ways and Means Committee and Senate Finance Committee on June 19, 2013, which requested stakeholders’ input on concerns related post-acute care in the changing medical landscape by August 19, 2013. This commenter urged CMS to delay the full implementation of the 25percent threshold payment adjustment policy until the IOM’s final report has been issued and also pending the response to Congress’ request for stakeholder input. Response: We do not believe that the forthcoming Federal fiscal year presents uniquely burdensome regulatory demands for LTCHs. Several of the commenters specifically mentioned the ‘‘roll-out’’ of quality measures; transition to the ICD–10 code sets used to report medical diagnoses and inpatient procedures from ICD–9; implementation of requirements for electronic medical records; and efforts to integrate with other providers and payers in their communities. However, it is not clear to us that the presence of these programs would affect an LTCH’s ability to comply with the 25-precent threshold payment adjustment policy. Furthermore, we note that these are not all mandatory programs. These programs have been publicly known for some time and LTCHs have had considerable notice of the adopted policies. For example, the Long-Term Care Hospital Quality Reporting (LTCHQR) Program, which was initially introduced in section 3004 of the Affordable Care Act of 2010, required us to design and implement a pay-forreporting program for LTCHs by 2014, and stipulated that these quality measures be made available by 2012, with reporting on these measures to begin in FY 2013, and payment affected for FY 2014. The ICD–10 code sets were originally set to be implemented on January 1, 2012, a deadline that was changed first, to October 1, 2013, and then October 1, 2014. The Health Information Technology for Economic and Clinical Health (HITECH) Act of 2009 provides for incentive payments for providers who adopt and demonstrate meaningful use of certified EHRs with the goal of widespread adoption by 2014, but this is a voluntary program. Participation in our demonstrations for provider integration/ PO 00000 Frm 00277 Fmt 4701 Sfmt 4700 50771 bundling are also purely voluntary at this time. Therefore, we do not agree that the programs listed provide the LTCH community with substantial regulatory challenges, or that the expiration of the moratorium on the full application of the 25-percent threshold payment adjustment policy constitutes an additional burden. In addition, we do not align or link the full implementation of the 25percent threshold payment adjustment policy and the issuance of a final IOM report on Geographic Variation in Medicare Services and the request by Congress for stakeholder input on the broad topic of post-acute care. Each one of these items, independently, improves the Medicare program. Comment: Several commenters stated that LTCHs continue to be unable to obtain high cost outlier (HCO) details from discharging IPPS hospitals prior to admitting patients, therefore making it difficult for LTCHs to benefit from our exemption of HCO patients from the percentage calculation under the 25percent threshold payment adjustment policy. Response: We have provided publicly available software for IPPS hospitals for the purposes of tracking their charges, costs, and determining their anticipated payments (that is, the PC PRICER, which is available on the CMS Web site). In addition, we are aware that commercial software is also available for such purposes. It has been our expectation that this information would, or at least should, freely pass between an IPPS discharge planner and an LTCH admissions officer. We also expect LTCHs to aggressively pursue obtaining this information from their referring IPPS hospitals and for IPPS hospitals to cooperate with these efforts. As we discuss the mechanics of implementing this policy, we are taking this opportunity to note the recent findings from the Department of Health and Human Services’ Office of the Inspector General (OIG) in an Early Alert Memorandum Report entitled, ‘‘Co-Located Long-Term Care Hospitals Remain Unidentified, Resulting in Potential Overpayments,’’ (OEI–04–12– 00491). The regulations at §§ 412.22(e), 412.22(h), and 412.532(i) require colocated LTCHs (HwHs or LTCH satellites) to report their co-located status to us and the Medicare claims processing contractor. The regulatory penalty for not reporting co-located status as provided in § 412.505 (b) is that ‘‘. . . CMS may withhold (in full or in part) or reduce Medicare payment to the hospital.’’ The OIG estimates that nearly half of the 211 LTCHs whose colocated status it had determined have E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50772 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations not reported this information to contractors. We urge LTCHs that have not met the regulatory notification requirement to do so immediately. Comment: Several commenters stated that there is widespread confusion about the difference between the IPPScomparable payment, which is an option under the SSO policy and has been suggested for payment for nonCCI/MC patients under the preliminary framework presented in the proposed rule, and the IPPS-equivalent payment that is utilized under the 25-percent threshold payment adjustment policy. Response: There are similarities between an ‘‘IPPS-comparable’’ amount under the SSO policy and an ‘‘IPPSequivalent’’ amount under the 25percent threshold payment adjustment policy, but there are also differences. Both are initially calculated as one would calculate an IPPS payment amount, including the applicable IPPS payment adjustments that would respectively be applied to each. We refer readers to § 412.529(d)(4) of the regulations for a description of the ‘‘IPPS-comparable’’ amount and § 412.534(f) for a description of the ‘‘IPPS-equivalent’’ amount. We also note that, under the SSO policy if a case is paid an ‘‘IPPS-comparable’’ amount and is also a HCO, the LTCH PPS fixed-loss amount is applied, whereas under the 25-percent threshold payment adjustment policy, if the case is paid an ‘‘IPPS-equivalent’’ amount and is also a HCO, the fixed-loss amount is based on the IPPS fixed-loss amount. Furthermore, the ‘‘IPPS-comparable’’ amount under the SSO policy is one of four options for payment. Under the 25percent threshold payment adjustment policy, a case is paid ‘‘the lesser of’’ the otherwise unadjusted amount under the LTCH PPS or ‘‘an amount payable under this subpart that is equivalent, as set forth in paragraph (f) of this section, to the amount that would be determined under the rules at § 412.1(a).’’ The most significant difference between these two adjusted LTCH payments is also the issue that seemed to confound the commenters; for purposes of the SSO policy, the ‘‘IPPS-comparable’’ amount is paid as a per diem not to exceed the full MS–DRG amount for that case. However, for purposes of the 25-percent threshold payment adjustment policy, the ‘‘IPPS-equivalent’’ amount is the entire MS–DRG amount such as would be payable under the IPPS (not converted to a per diem). We refer readers to a detailed explanation of the ‘‘IPPS-equivalent’’ amount in the RY 2007 LTCH proposed rule (71 FR 4648, 4698 through 4700). VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Comment: Several commenters requested that CMS, in addition to excluding patients from the threshold calculation under the 25-percent threshold payment adjustment policy that had reached the HCO threshold at the referring IPPS hospital, exclude patients that Kennell/RTI have identified as ‘‘appropriate’’ for treatment at an LTCH, CCI/MC patients. Response: We understand the rationale behind the commenters’ request, that is, if we use HCO status at the referring hospital as a proxy for a patient having completed a full course of treatment and, therefore, a patient for whom it would be reasonable for Medicare to generate a second payment, it is logical that we also exclude patients from the threshold calculation that are, by definition, appropriate for treatment in an LTCH. We agree that this rationale and request are logical, but the CCI/MC patient profile framework has just been presented to LTCH stakeholders for discussion and feedback. If we are able to propose and finalize the CCI/MC patient profile framework and we retain the 25-percent threshold payment adjustment policy, we could consider excluding CCI/MC patients from the 25percent threshold. After consideration of the public comments we received, and as we did not propose any policy changes, the regulatory moratorium on full implementation of the 25-percent threshold payment adjustment will expire on October 1, 2013, which means that the 25-percent threshold payment adjustment policy will be applied to discharges occurring on or after October 1, 2013. E. Research on the Development of a Patient Criteria-Based Payment Adjustment Under the LTCH PPS 1. Overview In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27668 through 27676), we presented a description of our research on the development of patient and/or facility-level criteria for LTCHs and presented a potential framework for developing potential payment policy proposals based on the preliminary findings of two projects conducted by Kennell and Associates (Kennell) and its subcontractor, RTI, under the guidance of CMS’ Center for Medicare and Medicaid Innovation (the Innovation Center). We stated that we believed that the findings from these projects, in large part, could be used to identify the subpopulation of Medicare beneficiaries that should form the core of patients under the LTCH PPS. Although this research is still not PO 00000 Frm 00278 Fmt 4701 Sfmt 4700 completed, we believe that the preliminary findings suggest that certain types of patients, namely those who are chronically critically ill and considered medically complex, as identified by specific clinical factors, are more appropriate candidates for high-cost treatment at an LTCH than other types of patients. The resulting interim framework was presented in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27668 through 27676). As stated in the proposed rule, we believe that the potential policy changes discussed are consistent with a significant body of research, which identifies the CCI/MC patient criteria as a useful indicator of an appropriate LTCH admission. Furthermore, the CCI/MC patient criteria appear to coincide with the kinds of patients that LTCHs have asserted they are best equipped to treat (78 FR 27675). As stated in the proposed rule, we were interested in receiving feedback from the public on the findings of this research study, as well as the potential impact that our framework could have on hospital markets with the expectation of formulating a proposal for FY 2015. As a result, we received several public comments on the framework from hospital associations, groups and coalitions of LTCHs, individual LTCHs, and attorneys representing LTCHs. Some of these comments included detailed data analyses. While we are not addressing these comments in this final rule, we will be sharing the comments and the data analyses with CMMI’s contractors and soliciting their responses to the commenters’ assertions and any data that may bring into question our contractor’s interim framework. As previously stated, although we are not addressing these comments in this final rule, we believe that it is important to note several specific issues mentioned by the commenters regarding the CCI/MC patient profile framework: • CMS’ identification of the CCI/MC patient is more rigorous than MedPAC’s, which is based solely on 8 ICU/CCI days prior to discharge from an IPPS hospital without a list of additional medically complex clinical factors. Because the research conducted by Kennell/RTI stated that identification of the CCI/MC patient group based on Medicare claims data was ‘‘conservative and erring on side of being too restrictive rather than too inclusive,’’ CMS should use a less ‘‘restrictive’’ framework. • CCI/MC patients identified with the ‘‘ICU metric’’ are too limited. Patients with high acuity and significant resource use should be the focus of E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations LTCH-patient reform. This policy will dramatically lower payments for highseverity cases that are not identified as CCI/MC. CMS is not ‘‘establishing criteria to identify the types of patients who benefit from the unique services that LTCHs provide.’’ • There is a group of patients that are not captured by the CCI/MC clinical factors who could benefit from treatment in an LTCH. Rather than establishing a framework based on a data-driven ‘‘restrictive’’ definition of which patients ‘‘should’’ be treated in LTCHs for the full LTCH PPS payment, CMS ‘‘. . . should assess broader array of clinical conditions that can and should be treated in LTCHs,’’ as well as an inclusive consideration of those patients presently treated in LTCHs requiring hospital-level care. • LTCH industry-sponsored research is evaluating data on LTCH patients that have lower cost than patients not treated in LTCHs. The commenters suggested that CMS should consider this research. • Outcomes for patients in LTCHs are superior to those for similar patients not treated in LTCHs. • Paying for treatment of non-CCI/MC patients under an IPPS-comparable amount based on a per diem up to the full IPPS amount is not appropriate and violates the statutory intent of the establishment of the LTCH PPS, totally ‘‘skewing’’ the averaging systems of PPS payment settings. Like all PPSs, payments should be structured as per discharge payments subject to HCO payments. • Under the framework presented, LTCHs will be receiving the majority of their payments based on IPPS data. • LTCHs fill a unique role in the continuum of care and our data verifies that LTCHs case mix is becoming more complex. Clinical standards should be established to incent treating the highest acuity, long-stay patients and discourage admission of patients with low acuity, suitable for admission to a lower level of care. MedPAC summarized its comment on the CCI/MC patient profile framework as follows: ‘‘With respect to CMS’s discussion of possible policy changes to the long-term care hospital (LTCH) PPS that would encourage the LTCH industry to refocus its admitting practices on serving chronically critically ill and medically complex (CCI/MC) patients, we believe the policy potentially represents a first real step towards criteria for LTCH patients that would appropriately limit high LTCH payment rates to the most medically complex patients who may be most likely to benefit from an LTCH program of care. This approach has the VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 potential for significant Medicare savings, at least in the short run. The approach also may expand the concept of site neutrality by limiting payments for other cases admitted to LTCHs to IPPS payment rates for the same MS– DRGs. The Commission remains concerned, however, about the level of payments for medically complex patients in both LTCHs and ACHs. While the Commission continues to support the use of criteria to justify higher LTCH payments, we urge CMS to continue to strive toward site-neutral payments so that Medicare pays the same, subject to risk differentials for the same services, regardless of where the services are provided.’’ (p. 3). We also want to take this opportunity to address and correct misperceptions regarding the studies and the chronology that appeared in the majority of the public comments. These commenters asserted that at the time that the proposed rule was published, we had not submitted the 2011 Report to Congress. This is incorrect. As stated in the proposed rule, the Report to Congress on ‘‘Determining Medical Necessity and Appropriateness of Care for Medicare Long-Term Care Hospitals’’ required by section 114(b) of the Medicare and Medicaid State Children’s Expansion Act of 2007 (MMSEA) (Pub.L. 110–173) was submitted in March of 2011 (78 FR 27670 through 27671). As we also noted in the proposed rule, the report may be found on the CMS Web site at: https://www. cms.gov/officeoflegislation/downloads/ RTC-long-term-care-hospitals-final.pdf. Our contractors’ research findings for the 2011 Report to Congress can be found in Appendix A of the 2011 Report to Congress. In addition, the description of the framework that was presented in the FY 2014 IPPS/LTCH PPS proposed rule was also premised on ‘‘additional follow-up research that CMS was sponsoring [to] . . . update and refine our understanding of Medicare LTCH patients and payments’’ (78 FR 27671). One component of the follow-up research (as opposed to the research required by section 114(b) of the MMSEA for the 2011 Report to Congress), is described in the identically-named final report entitled ‘‘Determining Medical Necessity and Appropriateness of Care for Medicare Long-Term Hospitals,’’ which was finalized in July 2012. This July 2012 report factored in findings resulting from the implementation of the CARE tool, providing foundations for the remaining follow-up research, namely the to-be-completed research project to design a payment framework. The PO 00000 Frm 00279 Fmt 4701 Sfmt 4700 50773 follow-up research on the development of a payment framework will ultimately generate an additional report, namely the ‘‘Long-Term Care Hospitals and the Chronically Critically Ill Population— Payment Recommendations (CCIP–PR). We refer readers to the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR 27671 through 27672) for further discussion of this ongoing research. We refer readers to the following Web site: www.rti.org/ reports/cms/Kennell/Determine-MedNecessity-Appropriate-Care-MedicineLTCHs.pdf for additional information on Kennell/RTI’s work. For additional information on the CARE tool, we refer reader to the following Web sites: https://www.cms.gov/Research-StatisticsData-and-Systems/Statistics-Trendsand-Reports/Reports/downloads/Flood_ PACPRD_RTC_CMS_Report_Jan_ 2012.pdf and https://www.cms.gov/ Research-Statistics-Data-and-Systems/ Statistics-Trends-and-Reports/Reports/ downloads/GAGE_PACPRD_RTC_ Supp_Materials_May_2011.pdf. We also note that several commenters asserted that we were acting in ‘‘near total secrecy’’ as we carried out our research, and expressed concern regarding the lack of ‘‘transparency’’ because ‘‘none of the data, findings, or other information from this research [the CCI/MC framework] has been made available to the public.’’ We do not agree with these assertions. The FY 2014 IPPS/LTCH PPS proposed rule provided a recap of prior work (including citations to published findings) and put the public on notice as to ongoing research, as well as preliminary findings. Such information was made available to the public to ensure transparency and it included a description of a possible payment approach that ultimately may or may not figure into future proposals in LTCH PPS rulemakings. As part of the proposed rule, interested stakeholders were offered the opportunity to comment on a general approach. When our research is complete, the results will be made available to the public and, if such research leads to policy proposals, the public will have an opportunity to review our proposals and the data/ findings supporting those proposals. We do not expect the stakeholders to be able to perform a detailed analysis of a specific plan because a specific plan has not yet been formulated and has not been proposed at this time. If we do determine that we intend to proceed with rulemaking in this area, a specific plan will be proposed, along with relevant supporting materials. Stakeholders will be provided the opportunity to submit comments on this material as part of the rulemaking E:\FR\FM\19AUR2.SGM 19AUR2 50774 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations process. The specifics of any future proposals will be determined by us at the appropriate time during the development of any such policy. Review of contractor reports may ultimately prove useful if policies are ultimately proposed based on those findings, but interested parties should plan on referring to and commenting on the documentation associated with any future proposals during the rulemaking process as opposed to prior to any such proposals. The payment approach detailed in the FY 2014 IPPS/LTCH PPS proposed rule was influenced by a variety of projects and analyses. Publicly available reports for these projects can be found on the following Web sites: for the LTCH FPC Report to Congress at: https://www.cms.gov/AboutCMS/LegislativeAffairs/ OfficeofLegislation/Downloads/RTCLong-Term-Care-Hospitals-Final.pdf; and for the LTCH FPC Final Report at: https://www.rti.orglreports/cms/kennell/ Determine-Med-NecessityAppropriateCare-Medicare-LTCHs.pdf. The presented approach was additionally influenced by work performed under the Chronically Critically Ill Population Payment Recommendation (CCIP–PR) project. CCIP–PR is an active project, and there are no finalized documents available at this time. There will be a final report for this project, anticipated to be delivered to us in the Fall 2013. It is our intention to make this report publicly available. mstockstill on DSK4VPTVN1PROD with RULES6 IX. Quality Data Reporting Requirements for Specific Providers and Suppliers CMS is seeking to promote higher quality and more efficient health care for Medicare beneficiaries. This effort is supported by the adoption of widely agreed-upon quality measures. CMS has worked with relevant stakeholders to define measures of quality for most settings and to measure various aspects of care for most Medicare beneficiaries. These measures assess structural aspects of care, clinical processes, patient experiences with care, and, increasingly, outcomes. CMS has implemented quality reporting programs for multiple settings of care, including: • Hospital inpatient services, under the Hospital Inpatient Quality Reporting (IQR) Program (formerly referred to as the Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU) Program); • Hospital outpatient services, under the Hospital Outpatient Quality Reporting (OQR) Program (formerly referred to as the Hospital Outpatient VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Quality Data Reporting Program (HOP QDRP)); • Care furnished by physicians and other eligible professionals, under the Physician Quality Reporting System (PQRS, formerly referred to as the Physician Quality Reporting Program Initiative (PQRI)); • Inpatient rehabilitation facilities, under the Inpatient Rehabilitation Facility Quality Reporting Program (IRF QRP); • Long term care hospitals, under the Long Term Care Hospital Quality Reporting (LTCHQR) Program; • PPS-exempt cancer hospitals, under the PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program; • Ambulatory surgical centers, under the Ambulatory Surgical Center Quality Reporting (ASCQR) Program; • Inpatient psychiatric facilities, under the Inpatient Psychiatric Facilities Quality Reporting (IPFQR) Program; • Home health agencies, under the home health quality reporting program (HH QRP); and, • Hospices, under the Hospice Quality Reporting Program. CMS has also implemented an endstage renal disease quality improvement program that links payment to performance. In implementing the Hospital IQR Program and other quality reporting programs, we have focused on measures that have high impact and support CMS and HHS priorities for improved quality and efficiency of care for Medicare beneficiaries. Our goal for the future is to align the clinical quality measure requirements of the Hospital IQR Program with various other Medicare and Medicaid programs, including those authorized by the Health Information Technology for Economic and Clinical Health (HITECH) Act, so that the burden for reporting will be reduced. As appropriate, we will consider the adoption of measures with electronic specifications, so that the electronic collection of performance information is part of care delivery. Establishing such a system will require interoperability between EHRs and CMS data collection systems, additional infrastructural development on the part of hospitals and CMS, and the adoption of standards for capturing, formatting, and transmitting the data elements that make up the measures. However, once these activities are accomplished, the adoption of many measures that rely on data obtained directly from EHRs will enable us to expand the Hospital IQR Program measure set with less cost and burden to hospitals. We believe that in the near future, automatic collection PO 00000 Frm 00280 Fmt 4701 Sfmt 4700 and reporting of data elements for many measures through EHRs will greatly simplify and streamline reporting for various CMS quality reporting programs, and that hospitals will be able to switch primarily to EHR-based reporting of data for many measures that are currently manually chart-abstracted and submitted to CMS for the Hospital IQR Program. We have also implemented a Hospital Value-Based Purchasing (VBP) Program under section 1886(o) of the Act. In 2011, we issued the Hospital Inpatient VBP Program final rule (76 FR 26490 through 26547). We adopted additional policies for the Hospital VBP Program in section IV.B. of the FY 2012 IPPS/LTCH PPS final rule (76 FR 51653 through 51660), in section XVI. of the CY 2012 OPPS/ASC final rule with comment period (76 FR 74527 through 74547) and in section VIII.C. of the FY 2013 IPPS/ LTCH PPS final rule (77 FR 53567 through 53614). We are finalizing additional policies for this program in section V.H. of this final rule. Under the Hospital VBP Program, hospitals will receive value-based incentive payments if they meet performance standards with respect to measures for a performance period for the fiscal year involved. The measures under the Hospital VBP Program must be selected from the measures (other than readmission measures) specified under the Hospital IQR Program as required by section 1886(o)(2)(A) of the Act. In selecting measures for the Hospital IQR Program, we are mindful of the conceptual framework of the Hospital VBP Program. Section 1886(o)(2)(B)(i)(I) of the Act states that for FY 2013, the selected measures for the Hospital VBP Program must cover at least the following five specified conditions or procedures: Acute myocardial infarction (AMI), Heart failure (HF), Pneumonia (PN), surgical care, as measured by the Surgical Care Improvement Project (SCIP), and Healthcare-Associated Infections (HAIs), as measured by the prevention metrics and targets established in the HHS Action Plan to Prevent HAIs (or any successor HHS plan). Section 1886(o)(2)(B)(i)(II) of the Act provides that, for FY 2013, measures selected for the Hospital VBP Program must also be related to the Hospital Consumer Assessment of Healthcare Providers and Systems survey (HCAHPS). The Hospital IQR Program is linked with the Hospital VBP Program because the measures and reporting infrastructure for both programs overlap. We view the Hospital VBP Program as the next step in promoting higher quality care for Medicare E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations beneficiaries by transforming Medicare from a passive payer of claims into an active purchaser of quality healthcare for its beneficiaries. Value-based purchasing is an important step to revamping how care and services are paid for, moving increasingly toward rewarding better value, outcomes, and innovations instead of merely volume. As we stated in the Hospital Inpatient VBP Program proposed rule (76 FR 2455), we applied the following principles for the development and use of measures and scoring methodologies: • Public reporting and value-based payment systems should rely on a mix of standards, process, outcomes, and patient experience of care measures, including measures of care transitions and changes in patient functional status. Across all programs, we seek to move as quickly as possible to the use of primarily outcome and patient experience measures. To the extent practicable and appropriate, outcome and patient experience measures should be adjusted for risk or other appropriate patient population or provider characteristics. • To the extent possible and recognizing differences in payment system maturity and statutory authorities, measures should be aligned across public reporting and payment systems under Medicare and Medicaid. The measure sets should evolve so that they include a focused core set of measures appropriate to the specific provider category that reflects the level of care and the most important areas of service and measures for that provider. • The collection of information should minimize the burden on providers to the extent possible. As part of this effort, we will continuously seek to align our measures with the adoption of e-specified measures, and reporting of quality data via Certified Electronic Health Record Technology (CEHRT), so the electronic collection of performance information is part of care delivery. • To the extent practicable, measures used by CMS should be nationally endorsed by a multi-stakeholder organization. Measures should be aligned with best practices among other payers and the needs of the end users of the measures. We also view the Hospital-Acquired Condition (HAC) payment adjustment program authorized by section 3008 of the Affordable Care Act and the Hospital VBP Program as related, but separate, efforts to reduce HACs. The Hospital VBP Program is an incentive program that awards payments to hospitals based on quality performance on a wide variety of measures, while the program established by section 3008 of VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 the Affordable Care Act, the HAC Reduction Program, creates a payment adjustment resulting in payment reductions for the lowest performing hospitals based on their rates of HACs. Policies for the Hospital VBP Program are included in section V.H. of the preamble of this final rule. Policies for the HAC Reduction Program are included in section V.I. of the preamble of this final rule. Although we intend to monitor the various interactions of programs authorized by the Affordable Care Act and their overall impact on providers and suppliers, we also view programs that could potentially affect a hospital’s Medicaid payment as separate from programs that could potentially affect a hospital’s Medicare payment. In the preamble of this final rule, we are adopting changes to the following Medicare quality reporting systems: • In section IX.A., the Hospital IQR Program. • In section IX.B., the PCHQR Program. • In section IX.C., the LTCHQR Program. • In section IX.D., the IPFQR Program. In addition, in section IX.E. of the preamble of this final rule, we are adopting changes to the Medicare EHR Incentive Program and meaningful use. A. Hospital Inpatient Quality Reporting (IQR) Program 1. Background a. History of Measures Adopted for the Hospital IQR Program We refer readers to the FY 2010 IPPS/ RY 2010 LTCH PPS final rule (74 FR 43860 through 43861) and the FY 2011 IPPS/LTCH PPS final rule (75 FR 50180 through 50181) for detailed discussions of the history of the Hospital IQR Program, including the statutory history, and to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53503 through 53555) for the measures we have adopted for the Hospital IQR measure set through FY 2016. b. Maintenance of Technical Specifications for Quality Measures The technical specifications for the Hospital IQR Program measures, or links to Web sites hosting technical specifications, are contained in the CMS/The Joint Commission (TJC) Specifications Manual for National Hospital Quality Measures (Specifications Manual). This Specifications Manual is posted on the QualityNet Web site at https:// www.QualityNet.org. We generally update the Specifications Manual on a PO 00000 Frm 00281 Fmt 4701 Sfmt 4700 50775 semiannual basis and include in the updates detailed instructions and calculation algorithms for hospitals to use when collecting and submitting data on required measures. These semiannual updates are accompanied by notifications to users, providing sufficient time between the change and the effective date in order to allow users to incorporate changes and updates to the specifications into data collection systems. We will provide ICD–9 to ICD– 10 crosswalks for the measure specifications in the manual for preview and comment in the July 2013 manual release. The technical specifications for the HCAHPS patient experience of care survey are contained in the current HCAHPS Quality Assurance Guidelines manual, which is available at the HCAHPS On-Line Web site, https:// www.hcahpsonline.org. We maintain the HCAHPS technical specifications by updating the HCAHPS Quality Assurance Guidelines manual annually, and include detailed instructions on survey implementation, data collection, data submission and other relevant topics. As necessary, HCAHPS Bulletins are issued to provide notice of changes and updates to technical specifications in HCAHPS data collection systems. Many of the quality measures used in different Medicare and Medicaid reporting programs are endorsed by the National Quality Forum (NQF). The NQF is a voluntary consensus standardsetting organization with a diverse representation of consumer, purchaser, provider, academic, clinical, and other healthcare stakeholder organizations. The NQF was established to standardize healthcare quality measurement and reporting through its consensus development process. As part of its regular maintenance process for endorsed performance measures, the NQF requires measure stewards to submit annual measure maintenance updates and undergo maintenance of endorsement review every 3 years. In the measure maintenance process, the measure steward (owner/developer) is responsible for updating and maintaining the currency and relevance of the measure and will confirm existing or minor specification changes to NQF on an annual basis. NQF solicits information from measure stewards for annual reviews and in order to review measures for continued endorsement in a specific 3-year cycle. Through NQF’s measure maintenance process, NQF-endorsed measures are sometimes updated to incorporate changes that we believe do not substantially change the nature of the measure. Examples of such changes E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50776 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations could be updated diagnosis or procedure codes, medication updates for categories of medications, changes to exclusions to the patient population, definitions, or extension of the measure endorsement to apply to other settings. We believe these types of maintenance changes are distinct from more substantive changes to measures that result in what are considered new or different measures, and that they do not trigger the same agency obligations under the Administrative Procedure Act. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53504 through 53505), we finalized a policy under which we will use a subregulatory process to make non-substantive updates to NQFendorsed measures used for the Hospital IQR Program. With respect to what constitutes substantive versus nonsubstantive changes, we expect to make this determination on a case-bycase basis. Examples of non-substantive changes to measures might include updated diagnosis or procedure codes, medication updates for categories of medications, broadening of age ranges, and exclusions for a measure (such as the addition of a hospice exclusion to the 30-day mortality measures). We believe that non-substantive changes may also include updates to NQFendorsed measures based upon changes to guidelines upon which the measures are based. We will revise the Specifications Manual so that it clearly identifies the updates and provide links to where additional information on the updates can be found. We also will post the updates on the QualityNet Web site at https://www.QualityNet.org. We will provide sufficient lead time for hospitals to implement the changes where changes to the data collection systems would be necessary. We will continue to use rulemaking to adopt substantive updates made by the NQF to the endorsed measures we have adopted for the Hospital IQR Program. Examples of changes that we might consider to be substantive would be those in which the changes are so significant that the measure is no longer the same measure, or when a standard of performance assessed by a measure becomes more stringent (for example, changes in acceptable timing of medication, procedure/process, or test administration). Another example of a substantive change would be where the NQF has extended its endorsement of a previously endorsed measure to a new setting, such as extending a measure from the inpatient setting to hospice. The quality measure SCIP INF 4, Controlled 6AM Glucose for Cardiac Surgery Patients (NQF #300), is an VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 example of a measure that has undergone extensive changes as a result of the NQF maintenance process. The specifications have substantively changed and we proposed to adopt these changes in the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR 27684). As we discuss below, the NQF Steering Committee voted to change the measure from controlled glucose at 6AM to controlled glucose 18–24 hours postsurgery for cardiac surgery patients. The specifications also require corrective action to be documented if a postoperative glucose is over 180mg/dl. The specifications for the proposed updated measure can be found at: https:// www.qualityforum.org. We believe that this policy adequately balances our need to incorporate nonsubstantive NQF updates to NQFendorsed Hospital IQR Program measures in the most expeditious manner possible, while preserving the public’s ability to comment on updates that so fundamentally change an endorsed measure that it is no longer the same measure that we originally adopted. We also note that the NQF process incorporates an opportunity for public comment and engagement in the measure maintenance process. These policies regarding what is considered substantive versus non-substantive apply to all measures in the Hospital IQR Program. Comment: One commenter suggested that measure maintenance changes such as broadening of age ranges, and exclusions for a measure (for example, addition of a hospice exclusion to the 30-day mortality measures), as well as updates to NQF-endorsed measures based upon changes to guidelines upon which the measure was based) are substantive and should be proposed via rulemaking. One commenter urged that any changes involving individuals under the age of 18 in measures that were initially developed for adult populations include a process for review and input by a panel of pediatric experts and stakeholders. Response: As stated previously in this section, we will continue to use rulemaking to adopt substantive updates made to the endorsed measures we have adopted for the Hospital IQR Program. We believe that measure maintenance changes can be either substantive, which could result in what are considered new or different measures, or nonsubstantive, which does not trigger the same agency obligations under the Administrative Procedure Act. With respect to what constitutes substantive versus nonsubstantive changes, we expect to make this determination on a case-by-case basis to PO 00000 Frm 00282 Fmt 4701 Sfmt 4700 assess changes such as those suggested by the commenter—broadening of age ranges, additional exclusions for a measure, guideline changes, etc. We thank the commenter for the suggestion for getting input by a panel of pediatric experts and stakeholders when a measure applying to adults are changed to include individuals under the age of 18 and will consider doing so in the future. c. Public Display of Quality Measures Section 1886(b)(3)(B)(viii)(VII) of the Act, as amended by section 3001(a)(2) of the Affordable Care Act, requires that the Secretary establish procedures for making information regarding measures submitted available to the public after ensuring that a hospital has the opportunity to review its data before they are made public. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27678 through 27679), we proposed, for the FY 2014 Hospital IQR Program and subsequent years, to continue our current policy of reporting data from the Hospital IQR Program as soon as it is feasible on CMS Web sites such as the Hospital Compare Web site, https:// www.hospitalcompare.medicare.gov, and/or the interactive https:// data.medicare.gov Web site, after a 30day preview period. The Hospital Compare Web site is an interactive Web tool that assists beneficiaries by providing information on hospital quality of care to those who need to select a hospital. It further serves to encourage beneficiaries to work with their doctors and hospitals to discuss the quality of care hospitals provide to patients, thereby providing an additional incentive to hospitals to improve the quality of care that they furnish. The Hospital IQR Program currently includes process of care measures, risk-adjusted outcome measures, the HCAHPS patient experience-of-care survey, structural measures, Emergency Department Throughput timing measures, hospital acquired condition measures, immunization measures, and hospital acquired infection measures, all of which are featured on the Hospital Compare Web site. However, information that may not be relevant to or easily understood by beneficiaries and information for which there are unresolved display issues or design considerations for inclusion on Hospital Compare may be made available on other CMS Web sites that are not intended to be used as an interactive Web tool, such as https:// www.cms.hhs.gov/HospitalQualityInits/ or https://data.medicare.gov. Publicly reporting the information in this E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations manner, although not on the Hospital Compare Web site, allows CMS to meet the requirement under section 1886(b)(3)(B)(viii)(VII) of the Act for establishing procedures to make information regarding measures submitted under the Hospital IQR Program available to the public following a preview period. In such circumstances, affected parties are notified via CMS listservs, CMS email blasts and memorandums, Hospital Open Door Forums, national provider calls, and QualityNet announcements regarding the release of preview reports followed by the posting of data on a Web site other than Hospital Compare. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53507 through 53508), we removed five Agency for Healthcare Research and Quality (AHRQ) Patient Safety Indicators (PSIs). We did so noting that four of these indicators were part of the AHRQ PSI–90 measure, and that this information could be made publically available in the future in addition to the PSI–90 composite measure results that we currently make publically available. We recently received feedback from consumer advocacy groups and large purchasers that data on the individual PSI indicators that are part of the PSI–90 composite measure are highly relevant to consumers, and not publically reporting them would be a disservice to consumers of healthcare. Therefore, we proposed to make publicly available hospital level data for the PSI indicators that are part of the PSI–90 composite in addition to the composite results. We invited public comment on this proposal. Comment: Some commenters supported the proposal to break out the reporting of hospital-level data for the PSI indicators that are part of the PSI– 90 composite, in addition to the composite results. The commenters stated that while the display of specific adverse event data is more valuable to hospitals to determine areas for quality improvement, the composite rates are useful for beneficiaries. One commenter did not support the disaggregating the data on PSI–90 because several of the underlying measures are not NQF-endorsed, and therefore may not be stable at the individual level. The commenter contended that incomplete or unstable data does not serve the patients well when making informed decisions on the data. One commenter recommended excluding the display of PSI–7: Central venous catheter related bloodstream infection rate results in the PSI–90 composite for concerns that the public VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 may confuse this claims-based measure with the NHSN Central line associated bloodstream infection (CLABSI) measure in Hospital IQR Program. The commenter noted these two measures are significantly different as they are collected from different data sources. Response: We thank the commenters for recognizing the value of reporting separate hospital-level data for the PSI– 90 indicators that are part of the PSI–90 composite, aside from the reporting of the composite results. We recognize that not all of the indicators in PSI–90 are NQF endorsed. However, we do not believe that this means these measures are unreliable. We also recognize that one or more of the measures in PSI–90 may be similar to other measures displayed for consumers like the PSI–7. However, we believe that it would be beneficial for both hospitals and consumers to have access to performance information for the individual measures upon which the composite is based—hospitals for quality improvement purposes, consumers for greater understanding of what the composite score means. We will continue to provide data to the public in an easily understandable, user-friendly manner. We will report the composite score for PSI–90, and the individual hospital level rates in the downloadable database, https:// data.medicare.gov/, that is available to users free of charge. After consideration of the public comments we received, we are finalizing our proposal to make publicly available hospital level data for the PSI indicators that are part of the PSI–90 composite in addition to the composite results. We also invited public comment on what additional quality measures and information featured on Hospital Compare may be highly relevant to patients and other consumers of healthcare, and how we may better display this information on the Hospital Compare Web site. One option we have considered is aggregating measures in a graphical display, such as star ratings. Comment: One commenter suggested that CMS report additional information on medical errors on Hospital Compare. Another commenter suggested that CMS report the information on pressure ulcer Stages III or IV. Response: We thank the commenters for these suggestions for additional information to report that may be highly relevant to patients, and we will consider mechanisms that we may use to do so. Comment: Some commenters supported CMS’ goal of improving the display of quality information for the PO 00000 Frm 00283 Fmt 4701 Sfmt 4700 50777 public’s use. One commenter believed that the public would embrace a ‘‘star rating’’ system due to its simplicity. However, the commenter was concerned if confidence intervals and statistically significant differences can be displayed appropriately and correctly. One commenter recommended maintaining the availability of actual raw measure rates and testing different graphic depictions of measure results to improve the beneficiary-friendliness of the Hospital Compare Web site. Another commenter recommended that, prior to implementing graphical display, CMS should conduct an analysis of the appropriate domains or elements that would comprise the graphical rating, the relative weights assigned to each domain, and how risk-adjustment will be applied and get input from stakeholders. A few commenters opposed the ‘‘star rating’’ system as they believed that this kind of system requires arbitrary cutoffs. The commenters asserted that the pursuit for the small differences in high performance levels, as in the case of many Hospital IQR Program measures, is neither helpful to consumers nor fair to hospitals. Commenters believed that differentiation of hospital performance is best represented by the actual score or performance rate. The commenters were concerned that the use of star ratings may lead to hasty, snap decisions by the public. Response: We understand the commenter’s concerns and thank them for sharing their insight on star rating system and graphical display. We work continuously to develop our Web site into a positive, user-friendly experience. We will take the commenters’ suggestions into consideration as we work to further improve Hospital Compare. Comment: A few commenters believed the platform of Hospital Compare offers the best hub for all kinds of measures of hospital performance. One commenter believed that the term ‘‘Hospital Compare’’ on the site is not appropriate due to the fact that no hospital attributes are used in any of the methodologies, and therefore, the data is not ‘‘comparative’’ of ‘‘hospitals.’’ Some commenters contended that patient outcomes should be compared only against ‘‘like’’ facilities to truly measure outcomes that are meaningful. For example, the commenters believed that comparing a Trauma Level I facility to a Trauma Level III facility is not an appropriate compare. Likewise, tertiary facilities may unfairly be represented due to receiving higher acuity patients. The commenters urged adding more E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50778 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations transparency in hospital reports by including hospital attributes and regional patient demographics including volume, and numerators and denominators used to determine values, so that comparisons are realistic and a national standard within each stratum is user friendly and meaningful. Response: We thank the commenters for these suggestions for how to better display information on Hospital Compare, and will consider whether these enhancements are feasible for a future release of the Web site. We currently report characteristics including type of hospital and whether or not that hospital has an Emergency Department. We are fully committed to the display of hospital quality information for the general public to make informed decisions. Comment: One commenter recommended that CMS provide raw rates in Excel File format to meet provider and researchers’ needs. In addition, the commenter also asked CMS to post hospital-level data for any measures that are used in calculating payments in a timely and routine fashion. Response: We currently make available data in a downloadable format which includes both an Access Database and CSV file formats which can be imported into an Excel spreadsheet. We will continue to offer these formats for downloading Hospital Compare data. We provide this data each quarter on https://www.medicare.gov/Download/ DownloadDB.asp and on https:// data.medicare.gov/. The process of care, HCAHPS and HAI measure rates are calculated on this quarterly schedule. Due to the nature of the calculation requirements, the outcome measures are only calculated annually. Comment: A few commenters were concerned that the outcome measures do not adequately identify outliers since the vast majority of hospitals are classified as average. Response: We have chosen to classify hospitals as Higher than Expected only when there is a high degree of certainty in order to avoid misleading consumers. To fall in the Higher than Expected category, the 95 percent interval estimate surrounding the hospital’s rate must be higher than the national observed rate; the Lower than Expected category includes hospitals with 95 percent interval estimates lower than the national observed rate. The point estimate is also available for these hospitals, however, and shows a range of performance. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 2. Removal and Suspension of Hospital IQR Program Measures a. Considerations in Removing Quality Measures From the Hospital IQR Program Generally, we retain measures from the previous year’s Hospital IQR Program measure set for subsequent years’ measure sets except when they are removed or replaced as indicated. We refer readers to the FY 2013 IPPS/ LTCH PPS final rule (77 FR 53505 through 53506) for a discussion of the considerations we use in removing (formerly referred to as retiring) previously adopted Hospital IQR Program measures. Comment: One commenter stated that ‘‘topped-out’’ should not be the sole criterion to remove process measures from the Hospital IQR Program measure set because the commenter was concerned about unintended consequences. The commenter contended that data collection for process measures that are strongly linked to the desired health outcomes (that is, accountability measures) should be continued since it is hard to predict the impact on performance once the measurement stops. The commenter strongly encouraged CMS to adopt the TJC accountability classification system in determining which process measures to remove. Response: We wish to clarify that when we propose to remove or suspend measures, we consider not only the measure’s ‘‘topped-out’’ status, but also many other factors such as the MAP recommendation, NQF endorsement, the measure’s tie to better patient outcomes, the potential negative impact on performance, whether the practices addressed by these measures continue to be routinely practiced, as well as public comments. The four measures we suspended beginning with the FY 2015 payment determination (77 FR 53509) were examples of how we apply such considerations. We also wish to clarify that measure suspension from the Hospital IQR Program results in a discontinuation of routine data collection for the measure for Hospital IQR Program purposes until further notice. However, unlike measure removal, data collection for a suspended measure may be re-initiated through subregulatory notification processes should there be evidence to support doing so and the specifications do not require substantive revision. After suspension, we may choose to reinstate measure data collection at a future time. Some circumstances under which we may choose to reinstate collection include, but are not limited to: Evidence PO 00000 Frm 00284 Fmt 4701 Sfmt 4700 indicating declines in performance after the suspension of a topped-out measure; changes in performance targets or best practices that informed the original measure; or MAP recommendations to reinstate the measure. If changes in the measure prompt us to consider reinstating data collection and such changes are substantive in nature, any modifications to a previously NQFendorsed measure may require supplemental NQF review as well as rulemaking. We thank the commenter for the recommendation that we use the TJC accountability classification system and will take it into consideration when we contemplate measure removal and suspension. b. Hospital IQR Program Measures Removed in Previous Rulemaking In previous rulemakings, we have removed numerous Hospital IQR Program quality measures, including: • PN–1: Oxygenation Assessment for Pneumonia, a ‘‘topped-out’’ measure, because measures with very high performance among hospitals present little opportunity for improvement and do not provide meaningful distinctions in performance for consumers (73 FR 48604). • AMI–6: Beta Blocker at Arrival measure from the Hospital IQR Program because it no longer ‘‘represent[ed] the best clinical practice,’’ as required under section 1886(b)(3)(B)(viii)(VI) of the Act. We stated that when there is reason to believe that the continued collection of a measure as it is currently specified raises potential patient safety concerns, it is appropriate for CMS to take immediate action to remove a measure from the Hospital IQR Program and not wait for the annual rulemaking cycle. Therefore, we adopted the policy (74 FR 43864 and 43865) that we would promptly remove such a measure, confirm the removal in the next IPPS rulemaking cycle, and notify hospitals and the public of the decision to promptly remove measures through the usual hospital and QIO communication channels used for the Hospital IQR Program. These channels include memos, email notification, and QualityNet Web site postings. To this end, we confirmed the removal of the AMI–6 measure in the FY 2010 IPPS/ LTCH PPS rulemaking cycle after immediate suspension because the measure posed patient safety risks. • Mortality for Selected Procedures Composite measure because the measure is not considered suitable for purposes of comparative reporting by the measure developer (75 FR 50186). E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations • Three adult smoking cessation measures: AMI–4: Adult Smoking Cessation Advice/Counselling; HF–4: Adult Smoking Cessation Advice/ Counselling; and PN–4: Adult Smoking Cessation Advice/Counselling, because these measures are ‘‘topped-out’’ and no longer NQF-endorsed (76 FR 51611). • PN–5c: Timing of Receipt of Initial Antibiotic Following Hospital Arrival measure out of concerns that the continued collection of this measure 50779 might lead to the unintended consequence of antibiotic overuse (76 FR 51611). • 17 measures set out below (77 FR 53506 through 53509) 17 Measures removed from hospital IQR program measure set for the FY 2015 payment determination and subsequent years Topic Surgical Care Improvement Project (SCIP) Measure • SCIP INF–VTE–1: Surgery patients with recommended Venous Thromboembolism (VTE) prophylaxis ordered * AHRQ Patient Safety Indicators (PSIs), Inpatient Quality Indicators (IQIs) and Composite Measures • • • • • • • • PSI 06: Iatrogenic pneumothorax, adult ** PSI 11: Post Operative Respiratory Failure ** PSI 12: Post Operative PE or DVT ** PSI 14: Postoperative wound dehiscence ** PSI 15: Accidental puncture or laceration ** IQI 11: Abdominal aortic aneurysm (AAA) mortality rate (with or without volume) ** IQI 19: Hip fracture mortality rate ** IQI 91: Mortality for selected medical conditions (composite) ** Hospital Acquired Condition Measures • • • • • Foreign Object Retained After Surgery ** Air Embolism ** Blood Incompatibility ** Pressure Ulcer Stages III & IV ** Falls and Trauma: (Includes: Fracture Dislocation Intracranial Injury Crushing Injury Burn Electric Shock) ** • Vascular Catheter-Associated Infection ** • Catheter-Associated Urinary Tract Infection (UTI) ** • Manifestations of Poor Glycemic Control ** * Chart-abstracted measure ** Claims-based measure mstockstill on DSK4VPTVN1PROD with RULES6 Comment: A commenter recommended expediting the removal date of the 17 measures targeted for FY 2015 payment determination removal to FY 2014. Response: We note that although the payment determination in which these measures would cease to be used is FY 2015, the collection requirement for the measures will cease December 31, 2014. It is not feasible to cease collection sooner. c. Removal of Hospital IQR Program Measures for the FY 2016 Payment Determination and Subsequent Years As we move toward more outcomerelated measures, we have considered the removal of additional measures using our stated removal criteria. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27680 through 27681), we proposed to remove 8 measures from the Hospital IQR Program. Three measures are chart-abstracted (one pneumonia measure, one heart failure measure, and one immunization measure), and one is a structural measure (Systematic Clinical Database Registry for Stroke Care). We also proposed to remove 4 additional chart-abstracted measures VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 from the Hospital IQR Program because they were either recommended for removal by the MAP during the prerulemaking process or are considered ‘‘topped out.’’ (1) Removal of PN–3b: Blood Culture Performed in the Emergency Department Prior to First Antibiotic Received in the Hospital Measure In the FY 2007 IPPS final rule, we adopted PN–3b: Blood Culture Performed in the Emergency Department Prior to First Antibiotic Received in the Hospital. We proposed to remove this measure based on several considerations. First, the measure is no longer NQF-endorsed. Second, the MAP recommended removal of the measure from the Hospital IQR Program in a February 2013 pre-rulemaking report that made recommendations on measures under consideration by HHS. The MAP believed the measure was topped-out with no room for improvement. Third, the measure lacks an adequate association between processes of care and patient outcomes. Accordingly, since there is only limited data showing impact from drawing blood cultures prior to administering PO 00000 Frm 00285 Fmt 4701 Sfmt 4700 antibiotics and to address concerns of overuse of blood cultures, we proposed to remove PN–3b from the Hospital IQR Program. Comment: Many commenters strongly agreed with the rationale for removing PN–3b and acknowledged CMS’ concerns about the unintended consequences of measuring the timing of drawing blood cultures, starting of antibiotics and its effect on the overuse of antibiotics and the emergence of drug resistant organisms. Response: We thank the commenters for supporting the removal of this measure and agreeing with our concerns for this measure. After consideration of the public comments we received, we are finalizing the removal of this measure from the Hospital IQR Program measure set. (2) Removal of HF–1: Discharge Instructions Measure In the FY 2007 IPPS final rule we adopted HF–1: Discharge Instructions. We proposed to remove this measure based on several considerations. First, the measure is no longer NQF-endorsed. In addition, the MAP was concerned E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50780 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations because research showed a weak correlation between this measure and patient outcomes. Third, while we consider discharge instructions an important aspect of patient care, we face a challenge in validating the efficacy of the information received with this measure. Therefore, we proposed to remove HF–1 from the Hospital IQR Program. Comment: Some commenters supported the proposal to remove the HF–1 measure, but also recommended the removal of STK–8 Stroke education measure as they are similar in nature since they are both discharge instruction measures. Response: We thank the commenter for the support for the removal of HF– 1. We have not proposed to remove STK–8 because the assessment of stroke care quality is a relatively new topic in the Hospital IQR Program, and we have not had an opportunity to evaluate data on the measure because collection just began earlier this year. Also, for electronic reporting alignment purposes, STK–8 is one of the measures that we are going to allow hospitals to voluntarily report electronically. Comment: Many commenters strongly supported the proposed removal of the HF–1 Discharge Instruction Measure, which they believed contributes no real value in patient outcome. Commenters pointed out that the measure has been retired from the American College of Cardiology/America Hospital Association performance measure list for heart failure patients because there is no strong link to outcomes. One commenter stated that the medication reconciliation aspect of this measure is labor intensive. One commenter encouraged CMS to continue to evaluate potential heart failure measures to maintain a comprehensive perspective, including medication reconciliation, because this condition affects so many high risk beneficiaries in the Medicare population. The commenter was concerned that the removal of the HF– 1 measure would cause a void in the measurement of medication reconciliation. Response: We thank the commenters for the support of our proposal to remove this measure. We agree with the commenter that heart failure is a highrisk condition affecting a large percentage of the Medicare population. We recognize the commenter’s concerns that the HF–1 measure is not strongly tied to patient outcomes and that the medication reconciliation component of the measure is cumbersome to implement. However, there are currently three other measures in Hospital IQR Program measure set that VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 address heart failure: HF–2: Evaluation of left ventricular systolic function; Heart Failure 30-day risk standardized readmission; and Heart Failure 30-day risk standardized mortality rate. Regarding the commenter’s concern about a void in medication reconciliation from the removal of HF– 1, we will continue to seek potential measures that address this HF issue for future rulemaking. After consideration of the public comments we received, we are finalizing the removal of this measure from the Hospital IQR Program measure set as proposed. (3) Removal of IMM–1: Immunization for Pneumonia Measure We adopted IMM–1: Immunization for Pneumonia for the Hospital IQR Program for the FY 2014 payment determination with data collection beginning with January 1, 2012 discharges. We proposed to remove this measure based on the following consideration. In October of 2012, the Advisory Committee on Immunization Practices (ACIP) released new guidelines on the administration of pneumococcal vaccination for various populations. Because IMM–1 was already required as part of the Hospital IQR Program before the new guidelines were published, we cannot feasibly implement the measure to incorporate the potential iterations of the new guidelines. We believe that maintaining the measure in the Hospital IQR Program during this period of rapid guideline changes would detract from hospitals efforts to administer vaccines appropriately. We emphasize that, despite the proposed removal of IMM–1 from the Hospital IQR Program, we expect hospitals to continue to keep up-to-date with the vaccination recommendations for various populations. Comment: Many commenters supported the proposed removal of IMM–1 from the Hospital IQR Program measure set. Some commenters did not support the proposed removal of IMM–1 Immunization for Pneumonia measure because they believed that removing the measure would undermine efforts to continually improve pneumococcal immunization rates. In addition, the commenters noted that optimal vaccination rates for the older patient population have yet to be achieved. Commenters believed immunization for pneumonia in older adults, especially the Medicare population, is of paramount importance to prevent admissions due to pneumonia. The commenters believed that the latest PO 00000 Frm 00286 Fmt 4701 Sfmt 4700 CMS measure specifications updates in the Specifications Manual should be broad enough to accommodate the new ACIP guidelines for the administration of pneumococcal vaccination to various populations. Commenters expressed concern that efforts to increase adult vaccination for pneumonia would decline if the measure were removed from the program altogether. One commenter recommended allowing an interim period for hospitals to prepare to report on the measure based on the ACIP recommendations. Also, the commenter urged CMS to maintain a comprehensive pneumonia measure set in the Hospital IQR Program. Response: We appreciate the comments that support the removal IMM–1 from the Hospital IQR Program. Our original intent was to propose and finalize the removal of the measure from the Hospital IQR Program measure set based on the reasons indicated in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27680). Since the publication of the proposed rule, we have carefully assessed our measure removal criteria, measure suspension criteria as discussed in the IX.A.2.a. of the preamble of this final rule, the considerations in removing quality measures from the Hospital IQR Program set out in the FY 2012 IPPS/ LTCH PPS final rule (76 FR 51609 through 51611), as well as public comments received from this rulemaking. We have, as explained more fully below, decided it is more suitable to suspend the collection of the IMM– 1 measure until further notice rather than remove it from the program altogether in order that we may update the measure and reinstate the collection of the measure in electronic form in the future, should evidence arise of a decline in performance. As indicated in this example of measure suspension, we note our measure suspension policy entails flexibility in that suspension decisions can be made on a case by case basis. In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51609 through 51610), we removed measures because they were ‘‘topped-out.’’ In the FY 2013 IPPS/ LTCH PPS final rule (77 FR 53506 through 53509), we removed measures for several reasons: (1) They lost NQF endorsement; (2) an alternative measure that is more proximal to or that has a stronger relationship to outcome was available; (3) a more broadly applicable measure was available; (4) to reduce redundancy; (5) MAP recommendation; or (6) the measure would not be used in Hospital VB Program. The IMM–1 measure does not meet one or more of the criteria for removal E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations stated above, and therefore, we believe warrants suspension rather than removal. In the case of the IMM–1 measure, since the October 1, 2012 release of the ACIP guidelines on the administration of the pneumococcal vaccination for various populations, we investigated numerous options to refine the IMM–1 measure to be consistent with those guidelines. Following discussions with technical experts, we learned that creating several algorithms to capture all possible scenarios prior to pneumococcal vaccination was not the only challenge of implementing a feasible and reliable chart-abstracted measure. We learned that achieving reproducibly meaningful measure results depended on patient charts that consistently contained detailed information about the date and type of prior vaccination, and comorbid conditions. We determined that our current data source for the measure (that is, paper medical records that undergo chart abstraction) often do not contain this level of detailed historical data and patients often do not recall dates of prior vaccines received and specific vaccine types. When considering possible clinical scenarios of screening and vaccinating for pneumonia, current chart and electronic data do not consistently allow for successful abstraction of these varied and detailed historical facts, all of which are needed to appropriately administer a pneumococcal vaccine. The measure, as updated by ACIP guidelines, would burden hospitals with data abstraction yielding questionably meaningful and reliable results, and could potentially encourage hospitals to vaccinate inappropriate patients in order to not perform poorly on a measure. Furthermore, we also learned that the ACIP recommendations are likely to further evolve in the near future. However, we agree with the commenters that immunization for pneumonia in older adults, especially the Medicare population, is of paramount importance to prevent admissions due to pneumonia. Ideally, patients 65 years of age and older should be routinely screened and vaccinated during all points of contact with healthcare providers, not just in the acute care setting. Hospital IQR Program measures play a pivotal role in improving health care and we believe that IMM–1 has contributed to achieving desirable pneumococcal rates. We stress that is not our intent to discourage appropriate pneumococcal vaccination of adults. We reiterate that hospitals should adhere to preventive medicine principles by being up-to-date VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 with evidenced-based ACIP recommendations and CDC pneumococcal vaccination guidelines and vaccinate accordingly. In summary, we believe the IMM–1 measure is more appropriate for suspension than removal because it does not meet the previously stated removal criteria, but cannot be implemented in its current state. Therefore, in an effort to balance our goals to incentivize high quality care while minimizing data collection burden for hospitals, we have decided to suspend data collection for IMM–1 in the Hospital IQR Program until such time when the guidelines stabilize and are well-established. In addition, due to the detailed aspects of the current ACIP guidelines, we believe a pneumococcal measure is best implemented with information from electronic health records. Based on the above comments and issues, instead of removing, we will suspend the IMM– 1 measure from the Hospital IQR Program beginning with the FY 2016 payment determination until further notice. (4) Removal of the Structural Measure: Participation in a Systematic Clinical Database Registry for Stroke Care We adopted the structural measure Participation in a Systematic Clinical Database Registry for Stroke Care for the Hospital IQR Program for the FY 2013 payment determination with data collection beginning with January 1, 2011 discharges. We proposed to remove this measure based on the following consideration. Since the adoption of this structural measure, we have adopted a Stroke measure set with data collection beginning with January 1, 2013 discharges. We believe that the Stroke measure set will provide more meaningful and detailed information regarding how well stroke care is being managed in a hospital setting than the current structural measure, which consists of a general yes/no response. Comment: Many commenters supported the proposed removal of the measure in light of the proposed addition of clinically driven process of care measures of stroke care. The commenters believed that participation in a registry is not correlated with improved patient care. A few commenters did not support the removal of this measure for concern that hospitals may be dis-incentivized to participate in registry data collection. The commenters added that the stroke registry collects more information than the Stroke measure set specified for ereporting. PO 00000 Frm 00287 Fmt 4701 Sfmt 4700 50781 Response: We thank the commenters for their support of the removal of the measure. The purpose of this measure was to assess registry participation and not to incentivize it. We do not believe that removal of this measure would disincentivize hospitals from participating in registries. Currently, the Hospital IQR Program measure set still contains other structural measures regarding registry participation. We believe that registries continue to provide valuable quality improvement feedback to hospitals that may be useful beyond what we are reporting. We do not anticipate hospitals would discontinue participation in registry even though we remove this structural measure. After consideration of the public comments we received, we are finalizing the removal of this measure from the Hospital IQR Program measure set as proposed. (5) Removal of Four Additional ChartAbstracted Measures We also proposed to remove four chart-abstracted measures from the Hospital IQR Program because these measures were either recommended for removal by the MAP during the prerulemaking process or are considered ‘‘topped out.’’ • AMI–2: Aspirin prescribed at discharge • AMI–10: Statin prescribed at discharge • HF–3: ACEI or ARB for LVSD • SCIP-Inf–10: Surgery Patients with perioperative temperature management We invited public comment on our proposal to remove these measures. Comment: Many commenters supported the proposed removal of the four additional chart-abstracted measures. Response: We thank the commenters for their support for the removal of these proposed measures. Comment: A few commenters did not support the proposed removal of the AMI–2 Aspirin prescribed at discharge and AMI–10 Statin prescribed at discharge measures. The commenters were concerned that removal of these two measures may change the toppedout performance to sub-par performance. One commenter urged CMS to put these four measures in suspension rather than removal. The commenters noted that the first three of these measures are TJC accountability measures and are worthy of monitoring and continued review to ensure that performance do no inappropriately decline. Response: We recognize the commenters’ concern and appreciate the feedback. However, we consider many E:\FR\FM\19AUR2.SGM 19AUR2 50782 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations factors before proposing to remove a measure from the Hospital IQR Program. These factors include the measure’s ‘‘topped-out’’ status, MAP recommendation, NQF endorsement, the measure’s tie to better patient outcomes, the likelihood of a potential negative effect on performance, whether the practices addressed by these measures continue to be routinely practiced, as well as public comments. We believe that even with removal of the these measures, the remaining AMI and HF measures in Hospital IQR Program measure set will ensure that hospitals continue to monitor appropriate medication use for patients with AMI and HF conditions, and we also believe (based on our experience with other measures that we have removed) that performance of these routine care processes is unlikely to decline. Taking all these factors into consideration, we will finalize removal of these measures. Comment: One commenter did not support the removal of the HF–3 ACE– I or ARB for left ventricular systolic dysfunction measure. The commenter believed that the measure collects valuable data for HF patients as the ACE–I/ARB dose could shed light on best practices. The commenter urged CMS to put this measure in suspension rather than removal. Response: We appreciate the commenters concerns. However, the data collected from HF–3 only captures if an ACE–I or ARB was prescribed at discharge and does not capture dosing practices. We believe that the remaining measures in the Hospital IQR Program will continue to monitor and evaluate the quality of HF care within hospitals. After consideration of the public comments we received and based on the reasons provided in the proposed rule (78 FR 27680), we are finalizing our proposal to remove this measure from the Hospital IQR Program. Comment: One commenter recommended the removal of all structural measures. Response: In our view, the structural measures currently in the Hospital IQR Program measure set still yield valuable information in the improvement of healthcare quality and we have no plans to remove all structural measures unless evidence indicates otherwise. Comment: Many commenters requested immediate removal of the removed measures from Hospital Compare once their removal is finalized. Response: We note that once the measures are removed from the Hospital IQR Program, they are also removed from Hospital Compare. After consideration of the public comments we received, we are finalizing the removal of six chartabstracted measures and one structural measure listed in the tables below; we are also suspending the IMM–1 measure from the Hospital IQR Program measure set beginning with the FY 2016 payment determination and until further notice. Hospital IQR program measures removed in this Final Rule beginning with the FY 2016 Payment Determination Topic Acute Myocardial Infarction ............ • AMI–2 Aspirin prescribed at discharge. • AMI–10 Statin prescribed at discharge. Pneumonia ...................................... • PN–3b Blood culture performed in the emergency department prior to first antibiotic received in hospital. Heart Failure ................................... • HF–1 Discharge instructions. • HF–3 ACEI or ARB for LVSD. Surgical Care Improvement Project • SCIP-Inf-10 Surgery patients with perioperative temperature management. Structural Measure .......................... • Participation in a systematic clinical database registry for stroke care. Hospital IQR program measures suspended in this Final Rule beginning with the FY 2016 payment determination Topic Immunization ................................... • IMM–1 Immunization for pneumonia. d. Suspension of Data Collection for the FY 2014 Payment Determination and Subsequent Years In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51611), we suspended data Topic collection for four measures beginning with January 1, 2012 discharges, affecting the FY 2014 payment determination and subsequent years. Hospital IQR program measures previously suspended beginning with the FY 2014 payment determination mstockstill on DSK4VPTVN1PROD with RULES6 Acute Myocardial Infarction (AMI) .. • AMI–1 Aspirin at arrival. • AMI–3 ACEI/ARB for left ventricular systolic dysfunction. • AMI–5 Beta-blocker prescribed at discharge. Surgical Care Improvement Project (SCIP). • SCIP INF–6 Appropriate Hair Removal. We suspended, rather than removed, these measures, despite having evidence that these measures may be topped-out (that is, their performance is uniformly high nationwide, with little variability VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 among hospitals) because we believe that the processes assessed by these measures are tied to better patient outcomes, and that permanent removal of the measures from the Hospital IQR PO 00000 Frm 00288 Fmt 4701 Sfmt 4700 Program may result in declines in performance and, therefore, worse outcomes. Therefore, we decided not to remove these measures from the Hospital IQR Program. The suspension E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations of data collection for these four measures will be continued unless we have evidence that performance on the measures is in danger of declining. Should we determine that hospital adherence to these practices has unacceptably declined, we would resume data collection using the same form and manner and on the same quarterly schedule that we finalize for these and other chart abstracted measures, providing at least 3 months of notice prior to resuming data collection. Hospitals would be notified of this via CMS listservs, CMS email blasts, national provider calls, and QualityNet announcements. In addition, we would comply with any requirements imposed by the Paperwork Reduction Act before resuming data collection of these four measures. mstockstill on DSK4VPTVN1PROD with RULES6 3. Process for Retaining Previously Adopted Hospital IQR Program Measures for Subsequent Payment Determinations For the purpose of streamlining the rulemaking process, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53512 through 53513), we finalized our policy that when we adopt measures for the Hospital IQR Program beginning with a particular payment determination, these measures are automatically adopted for all subsequent payment determinations unless we propose to remove, suspend, or replace the measures. 4. Additional Considerations in Expanding and Updating Quality Measures Under the Hospital IQR Program We refer readers to the FY 2013 IPPS/ LTCH PPS final rule (77 FR 53510 through 53512) for a discussion of the considerations we use to expand and update quality measures under the Hospital IQR Program and our policy, beginning with the FY 2013, to use one calendar year of data for chartabstracted measures for payment determinations. Comment: Many commenters commended CMS for its overarching plans and efforts to advance the Hospital IQR Program to its current success. Many commenters applauded CMS’ program direction in strengthening the portfolio of hospital inpatient quality measures, removing some chartabstracted clinical process measures and adding more claims-based outcome measures in the Hospital IQR Program. Many commenters greatly appreciated CMS’ efforts to strive for measures that meet the objectives of the National Priorities Partnership, HHS Strategic Plan and National Quality Strategy and VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 moving towards using EHR for data collection. Commenters anticipated that streamlining the reporting requirements, aligning and harmonizing measures for the EHR Incentive Program and the Hospital IQR Program will significantly ease the reporting burden on hospitals as well as on clinicians who can devote more time to direct patient care. Response: We are strongly encouraged by the positive support from the public and hospitals. We will continue to embrace our goals and commitment to inspire hospitals to continually improve the quality of care. We are very pleased with the public support of our program direction and our efforts to shift our focus to more outcome measures and use the NQS as the framework to attain a cohesive public national quality strategy to achieve high quality care across the healthcare spectrum. Comment: One commenter suggested CMS consider issuing a prioritized set of medical conditions for which CMS seeks to adopt quality measures in proposed rulemaking to solicit stakeholders’ feedback. Response: We thank the commenter for this suggestion, and will consider doing so in future rulemaking. Comment: One commenter suggested consolidating all the hospital payment incentives and related reporting program requirements into one big program to alleviate the reporting burden on providers. Response: We understand the commenter’s concerns. However, it would not be feasible for us to implement such a program at this time. To alleviate burden for hospital providers, we are striving to align measures across settings as well as moving toward electronic reporting. Comment: One commenter supported the established NQF/MAP process to review and endorse measures. However, the commenter recommended that CMS adhere to the scheduled NQF/MAP meetings for endorsement without using ad hoc meetings to review measures that did not receive NQF endorsement. Response: We thank the commenters for their support of the Measure Applications Partnership (MAP) and the NQF. We acknowledge that their contributions to quality measurement remain a valuable part of our programs. However, because it appears that some confusion may have arisen, we are clarifying the roles that these two groups play in this process. First, we would like to state that the MAP pre-rulemaking process and the NQF endorsement process are very different processes, even though they both involve the NQF. The NQF PO 00000 Frm 00289 Fmt 4701 Sfmt 4700 50783 endorsement process involves reviewing measures for endorsement and deals with substantive changes to measures because such changes often affect measure endorsement. Section 1890 of the Act governs the contract that the Secretary has with the NQF and the duties related to endorsement. On the other hand, the MAP pre-rulemaking process does not address the review and development of measures for endorsement, nor does the MAP endorse measures. Rather, section 1890A of the Act, which establishes the prerulemaking process, requires that the entity under contract with the Secretary under section 1890 of the Act (currently the NQF) convene multi-stakeholder groups to provide input into the selection of certain categories of quality and efficiency measures being considered by the Secretary for use in a number of federal programs and other quality-related initiatives. This process provides another opportunity, in addition to opportunities provided during the rulemaking process itself, for the public to comment on measures being considered for use in certain federal healthcare programs and initiatives. The NQF convenes such multi-stakeholder groups and has labeled these multi-stakeholder groups the MAP. The MAP’s input is based on, among other things, a list that the Secretary must make available to the public by December 1st of each year (the List of Measures Under Consideration or MUC List). The MUC List sets forth the measures that the Secretary is considering for inclusion in certain federal programs at the time that the list is made public. The MAP must provide its input on selecting measures by February 1st of the following year, and can provide input on the measures on the MUC List. We note that there is no statutory requirement for us to follow every MAP recommendation. As stated in the statute, the Secretary need only consider the MAP input. We follow many MAP recommendations and have considered all MAP input, as required by statute. We did request that the MAP set up meetings with a Hospital Workgroup for an ad hoc review of four measures for hospital programs that were not on the MUC list. However, none of those measures were IQR measures. As such, the ad hoc meetings had no effect on the IQR program. Comment: A few commenters strongly recommended that CMS only adopt measures reviewed by the MAP and endorsed by NQF. The commenters contended that consensus achieved during the measure development process, through broad acceptance and E:\FR\FM\19AUR2.SGM 19AUR2 50784 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations use of a measure, or through public comment do not entail the robust and comprehensive process used to establish NQF endorsement. Response: We have adhered to the pre-rulemaking process as required under section 1890A of the Act in proposing and finalizing all measures in the Hospital IQR program. This includes receiving and taking into consideration input from the MAP. We reiterate that, as stated in 77 FR 53510, to the extent practicable, measures we use should be nationally endorsed by a multistakeholder organization. Section 3001(a)(2) of the Affordable Care Act added new sections 1886(b)(3)(B)(viii)(IX)(aa) and (bb) of the Act. These sections state that ‘‘* * * effective for payments beginning with fiscal year 2013, each measure specified by the Secretary under this clause shall be endorsed by the entity with a contract under section 1890(a) [of the Act],’’ and ‘‘[i]n the case of a specified area or medical topic determined appropriate by the Secretary for which a feasible and practical measure has not been endorsed by the entity with a contract under section 1890(a) [of the Act], the Secretary may specify a measure that is not so endorsed as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary.’’ Accordingly, we attempt to utilize endorsed measures whenever possible. 5. Changes to Hospital IQR Program Measures Previously Adopted for the FY 2015 and FY 2016 Payment Determinations and Subsequent Years a. Previously Adopted Hospital IQR Program Measures for the FY 2015 Payment Determination and Subsequent Years In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53512 through 53531), we finalized 59 measures for the Hospital IQR Program measure set for the FY 2015 payment determination and subsequent years. These 59 measures are listed below. Hospital IQR program measures previously adopted for the FY 2015 payment determination and subsequent years Topic • • • • Heart Failure (HF) Measures .......... • HF–1 Discharge instructions. • HF–2 Evaluation of left ventricular systolic function. • HF–3 Angiotensin Converting Enzyme Inhibitor (ACE–I) or Angiotensin II Receptor Blocker (ARB) for left ventricular systolic dysfunction. Stroke (STK) Measure Set ............. • • • • • • • • STK–1 VTE prophylaxis. STK–2 Antithrombotic therapy for ischemic stroke.† STK–3 Anticoagulation therapy for Afib/flutter.† STK–4 Thrombolytic therapy for acute ischemic stroke.† STK–5 Antithrombotic therapy by the end of hospital day 2.† STK–6 Discharged on Statin.† STK–8 Stroke education.† STK–10 Assessed for rehab.† VTE Measure Set ........................... • • • • • • VTE–1 VTE–2 VTE–3 VTE–4 VTE–5 VTE–6 Pneumonia (PN) Measures ............ • PN–3b Blood culture performed in the emergency department prior to first antibiotic received in hospital. • PN–6 Appropriate initial antibiotic selection. Surgical Care Improvement Project (SCIP) Measures. mstockstill on DSK4VPTVN1PROD with RULES6 Acute Myocardial Infarction (AMI) Measures. • SCIP INF–1 Prophylactic antibiotic received within 1 hour prior to surgical incision. • SCIP INF–2: Prophylactic antibiotic selection for surgical patients. • SCIP INF–3 Prophylactic antibiotics discontinued within 24 hours after surgery end time (48 hours for cardiac surgery). • SCIP INF–4: Cardiac surgery patients with controlled 6AM postoperative serum glucose. • SCIP INF–9: Postoperative urinary catheter removal on post operative day 1 or 2 with day of surgery being day zero. • SCIP INF–10: Surgery patients with perioperative temperature management. • SCIP Cardiovascular-2: Surgery Patients on a Beta Blocker prior to arrival who received a Beta Blocker during the perioperative period • SCIP–VTE–2: Surgery patients who received appropriate VTE prophylaxis within 24 hours pre/post surgery. Mortality Measures (Medicare Patients). • Acute Myocardial Infarction (AMI) 30-day mortality rate. • Heart Failure (HF) 30-day mortality rate. • Pneumonia (PN) 30-day mortality rate. Patients’ Experience of Care Measures. • HCAHPS survey (expanded to include one 3-item care transition set* and two new ‘‘About You’’ items).* VerDate Mar<15>2010 21:51 Aug 16, 2013 AMI–2 Aspirin prescribed at discharge. AMI–7a Fibrinolytic (thrombolytic) agent received within 30 minutes of hospital arrival. AMI–8a Timing of Receipt of Primary Percutaneous Coronary Intervention (PCI). AMI–10 Statin Prescribed at Discharge. Jkt 229001 VTE prophylaxis.† ICU VTE prophylaxis.† VTE patients with anticoagulation overlap therapy.† Patients receiving un-fractionated Heparin with doses/labs monitored by protocol.† VTE discharge instructions.† Incidence of potentially preventable VTE.† PO 00000 Frm 00290 Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 50785 Hospital IQR program measures previously adopted for the FY 2015 payment determination and subsequent years Topic Readmission Measures (Medicare Patients). • • • • • AHRQ Patient Safety Indicators (PSIs) Composite Measures. • Complication/patient safety for selected indicators (composite). AHRQ PSI and Nursing Sensitive Care. • PSI–4 Death among surgical inpatients with serious treatable complications. Structural Measures ........................ • • • • Healthcare-Associated Measures. • Central Line Associated Bloodstream Infection. • Surgical Site Infection. —SSI following Colon Surgery. —SSI following Abdominal Hysterectomy. • Catheter-Associated Urinary Tract Infection. • MRSA Bacteremia. • Clostridium difficile (C. difficile). • Healthcare Personnel Influenza Vaccination. Infections Acute Myocardial Infarction 30-day Risk Standardized Readmission Measure. Heart Failure 30-day Risk Standardized Readmission Measure. Pneumonia 30-day Risk Standardized Readmission Measure. 30-day Risk Standardized Readmission following Total Hip/Total Knee Arthroplasty.* Hospital-Wide All-Cause Unplanned Readmission (HWR).* Participation Participation Participation Participation in in in in a a a a Systematic Systematic Systematic Systematic Database for Cardiac Surgery. Clinical Database Registry for Stroke Care. Clinical Database Registry for Nursing Sensitive Care. Clinical Database Registry for General Surgery. Surgical Complications ................... • Hip/Knee Complication: Hospital-level Risk-Standardized Complication Rate (RSCR) following Elective Primary Total Hip Arthroplasty.* Emergency Department Throughput Measures. • ED–1 Median time from emergency department arrival to time of departure from the emergency room for patients admitted to the hospital.† • ED–2 Median time from admit decision to time of departure from the emergency department for emergency department patients admitted to the inpatient status.† Prevention: Global (IMM) Measures. (ED) Immunization • Immunization for Influenza. • Immunization for Pneumonia. Cost Efficiency ................................ • Medicare Spending per Beneficiary. Perinatal Care ................................. • PC–01 Elective delivery prior to 39 completed weeks of gestation.*/† mstockstill on DSK4VPTVN1PROD with RULES6 * New or expanded measures/items for the FY 2015 payment determination and subsequent years. † Measure for electronic reporting via CEHRT in the Hospital IQR Program (voluntary participation in CY 2014). We received some comments on some of the measures adopted for the FY 2015 payment determination and subsequent years. Comment: One commenter believed that the Hospital-wide readmission (HWR) measure cohort is too broad for adequate risk-adjustment and riskadjustment for readmission rates is inadequate overall. Response: In reference to the commenter’s concern about the cohort being too broad for adequate riskadjustment, we wish to clarify that the HWR measure divides the broad hospital cohort into 5 categories for riskadjustment. The HWR measure is composed of 5 separate models— cardiorespiratory, cardiovascular, general medicine, neurology and surgery. This enables us to assess the risk factor profiles of the conditions within each cohort to ensure that risk factors are similar within cohort both in directionality and the strength of the relationship with the outcome, for each VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 of these specific cohorts. Therefore, we believe that this cohort specific approach ensures adequate risk adjustment for the readmission measure. We note that the intent of readmission measures is to profile hospital quality and not to maximize the prediction of hospital or patient readmission risk as the commenter seems to imply. Comment: One commenter was concerned about hospitals shifting care to the ED or using more observation stay services in order to avoid being penalized for readmissions and requests that the readmission measures be accompanied by measures of ED and observation stay usage. Response: We have continued to consider and evaluate stakeholder concerns regarding the increased use of ED and observation stay use in order to avoid readmissions. We take this issue very seriously and will continue to monitor the usage of ED and observation stay services to determine if other measures of ED and observation stay PO 00000 Frm 00291 Fmt 4701 Sfmt 4700 should be reported alongside readmission measures. b. Refinements to Existing Measures in the Hospital IQR Program In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27683 through 27684), we proposed to incorporate refinements for several measures that are currently adopted in the Hospital IQR Program. These refinements have either arisen out of the NQF endorsement maintenance process, or during our internal efforts to harmonize measurement approaches. The measure refinements include the following: (1) Incorporation of the planned readmission algorithm in 30-day readmission measures for AMI, HF, PN, THA/TKA, and Hospital-Wide Readmission to match recent NQF endorsement maintenance decisions beginning in 2013; (2) expansion of CLABSI and CAUTI measures to select non-ICU locations in IPPS hospitals beginning with infections occurring on E:\FR\FM\19AUR2.SGM 19AUR2 50786 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 or after January 1, 2014 (consistent with NQF expansion of the measures beyond ICUs); (3) updates to SCIP INF 4 to match recent NQF endorsement maintenance decisions beginning with January 1, 2014 discharges; and (4) an update to the MSPB measure to include Railroad Retirement Board (RRB) beneficiaries beginning in 2014. These proposed refinements are described in greater detail below. (1) Incorporation of Planned Readmission Algorithm for 30-Day Readmission Measures In response to stakeholder comments, we have developed an algorithm to identify readmissions that are likely to be planned as part of ongoing medical or surgical treatment. Planned readmissions are identified in claims data using the CMS Planned Readmission Algorithm Version 2.1 which detects readmissions that are typically planned and may occur within 30 days of discharge from the hospital. For more information on the methodology used to identify planned readmissions, and the list of planned diagnoses and procedures used in the algorithm, we refer readers to the CMS Web site at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/ HospitalQualityInits/MeasureMethodology.html, as well as the discussion of planned readmissions under section 3025 of the Affordable Care Act in section V.G. of the preamble of this final rule. We submitted this algorithm for NQF review during annual maintenance of the AMI, HF, PN, and Total Hip/Total Knee Replacement readmission measures as well as for the recently adopted Hospital Wide Readmission measure. NQF has endorsed the use of the algorithm for these measures, and we proposed to incorporate the Planned Readmission Algorithm into the AMI, HF, PN, and Total Hip/Knee Replacement readmission measures in addition to the Hospital-Wide Readmission Measure beginning in 2013. We invited public comment on this proposal. Comment: Many commenters supported the inclusion of the planned readmissions algorithm. Response: We appreciate the commenters support for the readmissions algorithm. Comment: One commenter requested that the planned readmissions algorithm for stroke include patent foramen ovale closure and cranioplasty following a decompressive craniectomy. Response: We thank the commenter for the suggestions. We clarify that as VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 part of the planned readmissions algorithm, patients who are readmitted for a patent foramen ovale closure (AHRQ CCS 49—Other OR heart procedures) or cranioplasty (AHRQ CCS 9—Other OR therapeutic nervous system procedures) are already classified as planned readmissions and will not count as readmissions in the measures. Comment: Many commenters believed that CMS should exclude readmissions unrelated to the initial reason for admission. One commenter requested that CMS allow hospitals to indicate when a readmission was planned. Another commenter requested that CMS allow hospitals to indicate if a readmission was related so that these can be excluded. Response: We do not seek to differentiate between related and unrelated readmissions because readmissions not directly related to the index condition may still be a result of the care received during the index hospitalization. For example, a patient hospitalized for stroke who develops a hospital-acquired infection may ultimately be readmitted for sepsis. It would be inappropriate to treat this readmission as unrelated to the care the patient received during the index hospitalization. Furthermore, the range of potentially avoidable readmissions also includes those not directly related to the initial hospitalization, such as those resulting from poor communication at discharge or inadequate follow-up. Therefore, creating a comprehensive list of potential complications related to the index hospitalization would be arbitrary, incomplete, and, ultimately, impossible to implement. Generally, planned readmissions are not a signal of quality of care. We have worked with experts in the medical community as well as other stakeholders to carefully identify procedures and treatments that should be considered ‘‘planned’’ and not counted as readmissions. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27683), we proposed that the measures identify planned readmissions by using an expanded algorithm, which is a set of criteria for classifying readmissions as planned using Medicare claims. This algorithm identifies admissions that are typically planned and may occur within 30 days of discharge from the hospital. Comment: A few commenters urged CMS to continue researching additional exclusions for planned readmissions. Response: We are committed to continually updating the planned readmissions algorithm. Our measures PO 00000 Frm 00292 Fmt 4701 Sfmt 4700 continually undergo maintenance to determine the need for updated specifications and to monitor trends as well as coding changes. We will continue to closely monitor the planned readmissions algorithm and modify it as needed. Comment: A few commenters requested that CMS incorporate socioeconomic factors in its riskadjustment methodology for outcome measures. Response: We have continued to consider and evaluate stakeholder concerns regarding the influence of patient socioeconomic status on readmission and mortality rates. We routinely monitor the impact of socioeconomic status on hospitals’ results and have consistently found that hospitals that care for large proportions of patients of low socioeconomic status are capable of performing well on our measures. Our most recent analyses (Chartbook: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/ HospitalQualityInits/Downloads/ MedicareHospital QualityChartbook2012.pdf) once again confirmed this finding. Many safety-net providers and teaching hospitals do as well or better on the measures than hospitals without substantial numbers of patients of low socioeconomic status. Our analyses also show that adding SES to the risk-adjustment has a negligible impact on hospitals’ risk-standardized rates (p. 36 of the previously referenced Chartbook). The risk-adjustment for clinical factors likely captures much of the variation due to socioeconomic status, thus leading to more modest impact of socioeconomic status on hospitals’ results than stakeholders expect. We note that the goal of riskadjustment is to account for factors that are inherent to the patient at the time of admission, such as severity of disease, so as to put hospitals on a level playing field. The measures should not be riskadjusted to account for differences in practice patterns that lead to lower or higher risk for patients to be readmitted or die. The measures aim to reveal differences related to the patterns of care. The measures do not adjust for socioeconomic status because the association between socioeconomic status and health outcomes can be due, in part, to differences in the quality of health care received by groups of patients with varying socioeconomic status. The measures also do not adjust for socioeconomic status because we do not want to hold hospitals to different standards for the outcomes of their patients of low socioeconomic status. E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 Finally, we do not want to mask potential disparities or minimize incentives to improve the outcomes of disadvantaged populations. This approach is also consistent with the guidance from the NQF, which states that risk models should not obscure disparities by adjusting for factors associated with inequality (such as race or socioeconomic status). However, we are committed to tracking this issue and will continue to evaluate disparities in care and the impact of patients’ socioeconomic status on hospitals’ rates. After consideration of the public comments we received, we are finalizing the proposed incorporation of planned readmission algorithm for 30day readmission measures. (2) Expansion of Collection of CLABSI and CAUTI to Select Non-ICU Locations We proposed to expand the collection of the CAUTI and CLABSI measures to include several non-ICU locations beginning with infections occurring on or after January 1, 2014. Those proposed locations are medical wards, surgical wards, and medical/surgical wards. This expansion is consistent with the NQF re-endorsement update to these measures allowing application of the measures beyond ICUs. We proposed this expansion to allow hospitals that do not have ICU locations to use the tools and resources of the NHSN for quality improvement and public reporting efforts. We invited public comment on this proposal. Comment: Some commenters supported the proposed expansion and collection of the CLABSI and CAUTI measures to select non-ICU locations. These commenters believed the prevalence of the use of urinary and central venous line catheters outside the ICU setting is significant, and this refinement would allow hospitals that do not have ICU locations to use these tools and resources for quality improvement. In addition, the refinements align with the updated NQF-endorsed version. Commenters urged CMS to update the measure specifications in the measure Specifications Manual accordingly. Response: We thank the commenters’ for their support. CDC is the measure steward for the CLABSI and CAUTI measures and the technical Specifications Manual will refer to the CDC site for the updated measure specifications. Comment: A few commenters did not support the expansion and collection of CLABSI and CAUTI to select non-ICU locations for several reasons. These commenters noted that collection beyond the ICU setting is very VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 burdensome and labor intensive because it would require manual data collection for a potentially large number of patients each day that they have a catheter device for the denominator. These commenters recommended that CMS should: (1) Retain the current specifications and confine data collection for CLABSI and CAUTI to ICUs (where patients are at most risk) only within acute care hospitals until more accurate surveillance definitions and validated methods to more simply collect the data are available; (2) wait for the CDC to obtain NQF endorsement for a revised version of the CLABSI measure; and (3) focus on developing an electronically specified hospital-wide measure that relies on ICD–10. Response: Over 1,300 healthcare facilities nationwide already collect and report CLABSI and CAUTI data from patient care locations beyond ICUs. This reporting is prompted by State mandates, facility participation in the current CMS 10th Scope of Work for the QIO program (https://medicaring.org/ 2011/06/22/highlights-of-10th-sow-forqios/), and a number of existing regional collaborations. The commenter is correct that the CDC is working to clarify the CAUTI definitions to eliminate any confusion and inaccuracies in the determinations of specified criteria. These clarifications are planned to be included in the NHSN system as early as January 2014. There were no further updates submitted to NQF by CDC at this time for CLABSI definitions, so the only update being made by CDC to this NQF measure is inclusion of the calculations to produce a reliability-adjusted SIR. This is an addition and not a replacement to any metrics already described in the existing approved measure, and does not change any criteria or definitions for reporting CLABSIs. We also note that we consider a change of this type to be a technical change to the measure, rather than a substantive change requiring notice and comment rulemaking. CDC analyses have shown that the SIR and its use of the number of days catheters were used (catheter days) are reliable and accurately represent the risk for patients who acquire catheter-associated infections. Use of any other denominator, like number of patients (patient days), may not appropriately evaluate the risk of infection per patient. The NHSN definitions for CLABSI and CAUTI are a more accurate and true representation of these infections as the definitions focus on actual signs and symptoms collected from a patient and not simply a number of codes attached to a patient stay for billing purposes. PO 00000 Frm 00293 Fmt 4701 Sfmt 4700 50787 Therefore, ICD–10 diagnosis codes, as is the case with the current ICD–9–CM codes, would not be a suitable or acceptable replacement for the NHSN HAI definitions. Comment: Some commenters recommended delaying the expansion and collection of CAUTI to select nonICU locations, in order to give hospitals more time to implement electronic collection of the denominator data, expand best practices outside the ICU, and prepare for data collection to accurately count and report device days. Some commenters recommended allowing hospitals to have a trial collection period. Response: We acknowledge commenters’ concerns about needing additional time to expand collection efforts beyond the ICU for CLABSI and CAUTI. Based upon these comments, we will defer the implementation date of the CLABSI/CAUTI expansion to non-ICU settings by one year to January 1, 2015. This 1-year deferred implementation date would give hospitals time to test collection in nonICU locations prior to the January 1, 2015 implementation date. After consideration of the public comments we received, we are deferring the implementation date of the CLABSI/ CAUTI expansion to non-ICU settings to January 1, 2015. (3) Refinement of SCIP–INF–4 to Match Refinements Made During NQF Reendorsement The quality measure SCIP INF 4, Controlled 6AM Glucose for Cardiac Surgery Patients (NQF #300), is an example of a measure that has undergone extensive changes as a result of the NQF endorsement maintenance process. The specifications have changed so substantially that we proposed to adopt them in the proposed rule. Specifically, the NQF Steering Committee voted to change the measure from controlled glucose at 6AM to a more comprehensive measure, controlled glucose 18–24 hours postcardiac surgery. The revised specifications also require corrective action to be documented if a postoperative glucose is over 180mg/dl. We proposed to adopt these revised specifications for SCIP–INF–4 beginning with January 1, 2014 discharges and invited public comment on this proposal. The revised specifications for the measure can be found at https:// www.qualityforum.org/QPS/0300. Comment: Many commenters supported the proposed adoption of the NQF changes that arose from the NQF endorsement maintenance process. Some commenters believed the E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50788 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations specifications, once updated, would result in a more clinically meaningful measure. One commenter requested CMS consider more glycemic controlled-related measures in the future. Response: We thank the commenters’ support of our proposal and suggestions. Once this final rule is published, we will publish an addendum to the Specifications Manual to address any changes adopted in the final rule. Comment: One commenter noted that the 18–24 hours post-cardiac surgery time frame should not be tied to the anesthesia end time. Instead, the commenter requested use of a different time parameter by which the receiving unit would clearly have documented the arrival of the patient in the unit where the patient will likely remain throughout that specified time frame. Another commenter stated that most of the literature supports averaging blood glucose over the first one or two days. The commenter, therefore, recommended reducing the 0600 target glucose from 200 mg/dL to 180 mg/dL instead on post-operative day (POD) 1 and POD2. Another commenter asked if the term ‘‘corrective action’’ can be changed to ‘‘documentation of clinical attempt of glucose control.’’ One commenter asked for clarification whether the guidelines allow for exclusions when corrective actions are appropriately administered and glucose remains elevated above the threshold of 200mg/dL. Another commenter stated that the term ‘‘controlled’’ should be defined and raised concerns that tight glycemic control in frail elderly patients would contribute to decreased cognition and function. Response: We adopted the measure refinement as endorsed by NQF. We will consider whether some of the other suggestions made by commenters regarding glucose target and terminology (for example, corrective action and controlled) used in the measure should be changed or further defined in order to encourage appropriate treatment while preventing adverse outcomes as suggested by commenters. In response to the comment about broadening the timeframe of the measure, anesthesia end time is a standard data element already collected and reported by hospitals participating in the Hospital IQR Program as part of the SCIP performance measures. As a result, during re-endorsement, anesthesia end time was used to define the start of the period for blood glucose control. However, we will consider whether additional refinements should be made VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 to better define the 18 to 24 hour timeframe for the measure. In the past, we have received considerable feedback on the use of 0600, or 6 a.m., as the target for glucose control. This ‘‘6 a.m.’’ time does not take into account the time that the operation ended. For example, if a patients’ surgery did not end until midnight, hospitals have noted difficulty in getting the blood sugar under control by 6 a.m. During reendorsement, the NQF Technical Advisory Panel rejected the use of the arbitrary time frame of 6 a.m. to evaluate glucose control and recommended a fixed time of 18–24 hours after the end of surgery to allow sufficient time to get the blood glucose under control. All technical details and exclusions for the revised measures will be outlined in the inpatient technical Specifications Manual posted on QualityNet on July 1, 2013 for discharges beginning on January 1, 2014. After consideration of the public comments we received, we are finalizing the proposed refinement of SCIP–INF–4 to match refinements made during NQF re-endorsement. (4) Refinement of Medicare Spending Per Beneficiary Measure (MSPB) (a) Inclusion of Railroad Retirement Board Beneficiaries (RRB) We proposed to refine the Medicare Spending per Beneficiary (MSPB) measure previously finalized for the FY 2015 payment determination and subsequent years. We proposed to include Railroad Retirement Board (RRB) beneficiaries in the measure for the FY 2016 and subsequent years’ payment determinations. We do not consider this refinement to be a substantive change. However, we proposed this refinement through rulemaking because we explicitly stated in previous rulemaking that these beneficiaries would be excluded from the measure (76 FR 51620). Since that time, we have learned that we have complete claims data for RRB beneficiaries, and believe that eligible MSPB episodes generated by RRB hospital discharges should be included in the MSPB measure. We finalized the details of MSPB episode construction and adjustment in the FY 2012 IPPS/ LTCH PPS final rule (76 FR 51618 through 51626). The effect of including RRB beneficiaries on the MSPB ratio is minimal. For the majority of hospitals, the change in their MSPB measure rates would be small—between ¥0.01 and 0.01. PO 00000 Frm 00294 Fmt 4701 Sfmt 4700 Comment: No commenters opposed including RRB. One commenter did not have reservations about including RRB beneficiaries in the measure, and one stated that CMS should ensure that including the RRB beneficiaries is consistent with the measure specifications submitted to the NQF for endorsement consideration. One commenter generally expressed support for proposed refinements to existing Hospital IQR Program measures. Response: We thank these commenters for their support of including the RRB beneficiary population in the MSPB measure, and we agree that the measure specifications should reflect their inclusion. We did not exclude RRB beneficiary population on the NQF measure submission form, and we explicitly stated in the submission that we could include RRB beneficiaries without changing the measure methodology. Comment: Several commenters expressed views regarding the use of the MSPB measure in the Hospital IQR Program in general. Commenters expressed concern that the measure did not adequately address hospital efficiency and that hospitals require data in real time in order to improve. Response: This measure was finalized for inclusion in the Hospital IQR Program in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51618–51627). We addressed the question of whether the MSPB is a measure of efficiency in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53586), noting that it is consistent with existing approaches to measuring cost in the healthcare setting. We appreciate the value of timely performance information, which is why we provide hospitals with extensive amounts of data on their performance on this measure as soon as practicable, allowing time for claims to be processed, MSPB episodes to be calculated, and reports to be generated. In late May 2013, hospitals received the data on their performance during calendar year 2012. This followed the 3month claim run period out finalized for the measure. For a description of the extensive, hospital-specific data that hospitals receive during the measure preview period, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53588). After consideration of the public comments we received, we are finalizing the inclusion of RRB beneficiaries in the MSPB measure for future Hospital IQR Program payment determinations. E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 (b) Incorporating Maryland Hospitals We are considering how best to incorporate Maryland hospitals paid under the waiver under section 1814(b)(3) of the Act into the MSPB measure. The payments made to Maryland hospitals pose a unique challenge to the payment standardization methodology currently used for the MSPB measure. Currently, hospitalizations in Maryland hospitals that are captured in the post-discharge window of the MSPB measure are standardized by applying the hospital wage index to the labor-related share of the IPPS payment, according to the methodology found on page 10 of the ‘‘CMS Price Standardization’’ document (https://www.qualitynet.org/dcs/ ContentServer?c= Page&pagename=QnetPublic%2 FPage%2FQnetTier4&cid=122877 2057350). This approach does not account for the absence of outlier payments on Maryland claims. In order to make a comparison of Maryland hospitals to other subsection (d) hospitals paid under the IPPS, in the event that MSPB measure rates are calculated for Maryland hospitals in the future, outliers would have to be imputed. If we were to include Maryland hospitals in the MSPB measure in the future, we would do so through future rulemaking. Comment: A few commenters referred to calculation of base operating DRG payment amounts for Maryland, stating that they should be calculated as they are for all other IPPS hospitals. Response: We wish to clarify that we do not calculate the MSPB measure using base operating DRG payment amounts, but rather it is based on standardized Medicare payment amounts for Part A and Part B services received by Medicare beneficiaries during an MSPB episode surrounding a hospitalization. We refer readers to the FY 2012 IPPS/LTCH PPS final rule for further details of the measure’s construction (76 FR 51618 through 51627). Comment: Several commenters expressed that we should collect and publicly report data on Hospital Compare for as many hospitals as possible, including Maryland hospitals. Response: We thank these commenters for their input and will consider it as we develop further policy on this issue. Comment: One commenter noted a number of differences in the way that Maryland hospital payments are calculated and requested an opportunity to work with us to make the standardized allowed amounts for VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Maryland hospitals more comparable to hospitals paid under the IPPS. Response: We thank this commenter for the input, and we will consider it as we determine an appropriate standardization approach for Maryland hospital payments. 6. Additional Hospital IQR Program Measures for the FY 2016 Payment Determination and Subsequent Years In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27684 through 27694), we proposed to add five new risk-adjusted claims-based outcome measures to the Hospital IQR Program for the FY 2016 payment determination and subsequent years: (1) 30-day risk standardized COPD Readmission; (2) 30day risk standardized COPD Mortality; (3) 30-day risk standardized Stroke Readmission; (4) 30-day risk standardized Stroke Mortality; and (5) AMI payment per Episode of Care. In section IX.A.7. of the preamble of this final rule, we also discuss our proposal that hospitals may voluntarily report certain Hospital IQR measures in an electronic format. The proposed measures were included on a publicly available document entitled ‘‘List of Measures Under Consideration for December 1, 2012’’ in compliance with section 1890A(a)(2) of the Act, and they were reviewed by the MAP in its ‘‘MAP PreRulemaking Report: 2013 Recommendations on Measures Under Consideration by HHS,’’ which has been made available on the NQF Web site at https://www.qualityforum.org/ Setting_Priorities/Partnership/Measure_ Applications_Partnership.aspx. We considered the input and recommendations provided by the MAP in selecting measures to propose for the Hospital IQR Program. For purposes of the Hospital IQR Program, section 1886(b)(3)(B)(IX)(aa) of the Act requires that any measure specified by the Secretary must have been endorsed by the entity with a contract under section 1890(a) of the Act. However, the statutory requirements under section 1886(b)(3)(B)(IX)(bb) of the Act provide an exception that, in the case of a specified area or medical topic determined appropriate by the Secretary for which a feasible and practical measure has not been endorsed by the entity with a contract under section 1890(a) of the Act, the Secretary may specify a measure that is not so endorsed as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary. PO 00000 Frm 00295 Fmt 4701 Sfmt 4700 50789 We received some general comments on the proposed measures. Comment: One commenter noted that that claims data alone are not sufficient to support quality measures such as the risk-adjusted outcome measures. Response: We appreciate the commenter’s concern about the use of claims data in quality measures; however, we feel that claims data are sufficient for a number of reasons. The claims are used to identify the cohort of included hospitalizations, assess the outcome and risk-adjust. In order to identify the cohort of included hospitalizations (for example, admissions for heart attack), claims are commonly used in both quality measures and research. ICD–9 codes are generally considered reliable sources for identifying key information such as the principal discharge diagnosis to establish measure cohorts. Claims are a highly valid source of outcome measurement, readmission or death, and payment amount. Stakeholders’ specific concerns about claims data commonly relate to the use of claims for risk-adjusting measures. The current and proposed outcome measures have been developed in line with accepted standards for measure development and with extensive input from the clinical, scientific and stakeholder community to ensure the validity of our risk-adjusted outcome measures. Furthermore, many similar measures have undergone validation with medical-record data, which has demonstrated that the results of measures that use claims instead of medical record data for risk-adjustment have highly correlated hospital-level results. This validation confirms that claims are an adequate source of data needed for risk-adjustment of these outcome measures. We develop measures in accordance with national guidelines, and in consultation with clinical and measurement experts, key stakeholders, and the public. The current and proposed outcome measures are consistent with the technical approach to outcomes measurement set forth in the NQF guidance for outcomes measures, CMS’ Measure Management System, and the guidance articulated in the American Heart Association scientific statement ‘‘Standards for Statistical Models Used for Public Reporting of Health Outcomes.’’ Furthermore, many prior administrative claims based outcome measures have been validated with chart data and this validation demonstrated that hospital profiling is similar, supporting the use of claims data for these measures. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50790 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Throughout measure development, we obtain expert and stakeholder input via two mechanisms: First, through regular discussions with an advisory working group, and second, through meetings with a national Technical Expert Panel (TEP), a group of recognized experts and stakeholders in relevant fields. We hold regular conference calls with our working group throughout the measure development phase. The working group includes clinicians and other professionals with expertise in stroke, biostatistics, measure methodology, and quality improvement. The working group meetings address key issues surrounding measure development including detailed discussions regarding the pros and cons of specific decisions (for example, defining the appropriate measure cohort) to ensure the methodological rigor of the measure. In addition to the working group, and in alignment with the CMS’ Measure Management System, we convene a TEP to provide input and feedback during measure development. To create the TEP, we release a public call for nominations and select individuals representing a range of perspectives including those of physicians, consumers, hospitals, and purchasers. We convene three TEP conference calls during the course of measure development. In contrast to the working group meetings, the TEP meetings follow a more structured format consisting of presentation of key issues, relevant data, and our proposed approach. This presentation is followed by open discussion of these issues with TEP members. Finally, we publicly post the measure specifications and a summary of the TEP discussions and make a widely distributed call for public comments. We collect these comments through the Measure Management System Web site (https://www.cms.hhs.gov/apps/QMIS/ publicComment.asp). We summarize the public comments and post the verbatim comments on a freely accessible Web site. We take the comments we receive into consideration during the final stages of measure development. In conclusion, we believe that all the above steps that occur during the measure development process provide assurance that claims-based data provide adequate information we need for claims-based measures. Comment: One commenter supported the measurement of condition-specific outcomes measures, such as mortality and readmissions, as the data provides actionable quality improvement information. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Response: We appreciate the commenter’s support for this aspect of the program. Comment: One commenter believed that CMS should educate hospitals on the risk-adjustment variables and approach used for the measures. Response: We are committed to ensuring that hospitals are fully aware of the technical specifications of all quality measures. Prior to implementing new outcome measures, we conduct dry runs of the measures to familiarize hospitals with their discharge- and hospital-level data and the measure methodology. In addition we publicly post the methodology reports for the measures as well as frequently asked questions (https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/ HospitalQualityInits/MeasureMethodology.html). We also have inboxes which hospitals can contact with any questions they may have about the measures (CMSreadmissionmeasures@yale.edu and CMSmortalitymeasures@yale.edu). Comment: One commenter believed that CMS should monitor the unintended consequences of the outcome measures such as the appropriate use of palliative and hospice care. Response: We appreciate this comment. Through prior informal analysis, we learned that the use of codes to indicate hospice care is inconsistent across hospitals and, therefore, raises the concern of how accurately the current available data reflects appropriate use of palliative or hospice care. We will, however, consider the feasibility of monitoring the appropriate use of palliative and hospice care given the current inconsistent use of codes by hospitals. Comment: One commenter was concerned that CMS is not properly monitoring the readmission measures to determine if there are unintended consequences. Response: We are committed to monitoring the measures and assessing unintended consequences over time, such as the inappropriate shifting of care, increased patient morbidity and mortality, and other negative unintended consequences for patients. In order to monitor unintended consequences we have a surveillance system and annually publish a Chartbook (https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/ HospitalQualityInits/Downloads/ MedicareHospital QualityChartbook2012.pdf) which examines these issues. PO 00000 Frm 00296 Fmt 4701 Sfmt 4700 Comment: One commenter did not support using the same measures in both the Hospital IQR Program and the Hospital Readmissions Reduction Program. Response: We believe it is appropriate to align measurement across pay for reporting and pay for performance programs such as the Hospital IQR Program and Hospital Readmissions Reduction Program for various reasons, including placing emphasis on quality issues in need of improvement. To the extent that we target high-cost, highvolume areas for quality improvement in more than one program, we would expect there to be some amount of topical overlap among programs. In order to avoid confusion among providers, we also prefer to use one measure on a specific topic rather than measuring the same topic in two or more different ways in different programs. Comment: A few commenters requested that CMS specify measures for all populations, not just Medicare patients. Response: We appreciate the commenters’ suggestion. To the extent feasible and applicable, we will specify the measures for all patients regardless of payers. The proposed measures are described in greater detail below. a. Hospital 30-Day, All-Cause, RiskStandardized Readmission Rate (RSRR) Following Chronic Obstructive Pulmonary Disease (COPD) Hospitalization Measure (NQF #1891) We proposed to include this NQFendorsed measure in the Hospital IQR Program beginning with the FY 2016 payment determination. The MAP supports this measure. In 2007, MedPAC published a report to Congress in which it identified the seven conditions associated with the most costly potentially preventable readmissions; among these seven, COPD ranked fourth.54 In 2008, 12.1 million U.S. adults were estimated to have COPD resulting in approximately 672,000 hospital discharges.55 There is also evidence of variation in outcomes at hospitals for COPD patients, supporting the finding that there are opportunities for improving care. The median 30-day risk-standardized readmission rate among Medicare feefor-service (FFS) patients aged 65 or 54 Committee MPA. Report to the Congress: Promoting Greater Efficiency in Medicare. 2007. 55 American Lung Association. Trends in COPD (Chronic Bronchitis and Emphysema): Morbidity and Mortality. 2010; Available at: https:// www.lungusa.org/finding-cures/our-research/trendreports/copd-trend-report.pdf. E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 older hospitalized for COPD in 2008 was 22.0 percent, and ranged from 18.33 percent–25.03 percent across 4,546 hospitals.56 The AHRQ has identified COPD as an ambulatory-care-sensitive condition (ACSC). ACSCs are conditions for which good outpatient care can potentially prevent the need for hospitalization or for which early intervention can prevent complications or more severe disease.57 Although COPD is an ACSC, readmission rates are also influenced by inpatient care. To better assess hospital care and care transitions for COPD patients, we developed a hospital-level readmission measure for patients hospitalized with an acute exacerbation of COPD. We proposed this measure for use in the Hospital IQR Program as well as the Hospital Readmissions Reduction Program. We discuss the measure methodology in detail in the section of this final rule pertaining to the Hospital Readmissions Reduction Program. We refer readers to section IX.A.6.b. of the preamble of this final rule on COPD for details of the measure specifications. Details on the technical specifications of the measure can also be found on our Web site at: (https://cms.gov/Medicare/ Quality-Initiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html. We invited public comment on this proposal. Comment: One commenter believed that CMS should report COPD readmission and mortality rates by gender. Response: For public reporting, maintaining a single cohort has the advantage of increasing sample size and providing the ability to detect quality differences across hospitals. We will consider whether to look at this issue further as part of ongoing surveillance efforts. Comment: Many commenters requested CMS incorporate socioeconomic factors in the riskadjustment methodology. Response: Commenters also raised this issue regarding our proposed incorporation of planned readmission algorithm for 30-day readmission measures in section IX.A.5.b.(1) of the preamble of this final rule and we refer readers to our response in that section. 56 Grosso L.M., Lindenauer P., Wang C., et al. Hospital-level 30-day Readmission Following Admission for an Acute Exacerbation of Chronic Obstructive Pulmonary Disease: Report prepared for the Centers for Medicare & Medicaid Services. 2011; Available at: https://www.qualitynet.org/. 57 AHRQ Quality Indicators. Fact Sheet: Prevention Quality Indicators. 2006; Available at: https://qualityindicators.ahrq.gov/downloads/pqi/ 2006-Feb-PreventionQualityIndicators.pdf. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Comment: A few commenters requested that CMS implement the COPD readmission measure in the Hospital IQR Program before simultaneously proposing it for the Hospital Readmissions Reduction Program. Response: We proposed and are finalizing using the COPD readmission measure for the Hospital IQR Program and plan to publicly report data in FY 2014. This will allow hospitals to gain experience with the measure prior to implementation in both the Hospital IQR Program, and the Hospital Readmissions Reduction Program. In addition, we are committed to ensuring that hospitals are fully aware of the technical specifications of all quality measures. Prior to implementing new outcome measures, to the extent feasible, we conduct dry runs of the measures to familiarize hospitals with their patient- and hospital-level data and the measure methodology. The data provided to hospitals during the dry run are confidential and will not be publicly reported. In addition we publicly post the methodology reports for the measures as well as frequently asked questions. We also have inboxes which hospitals can contact us with any questions they may have about the measures (CMSreadmission measures@yale.edu and CMSmortality measures@yale.edu). Comment: One commenter believed that CMS should add length of stay data to the COPD mortality and readmission measures because length of stay impacts risk of mortality and readmission. Response: We recognize that length of stay affects risk of mortality and readmission. This is why our mortality and readmission measures use a standardized time period of 30-days in order to assess performance across hospitals fairly. We are committed to monitoring the measures and assessing unintended consequences over time, such as how shifts in length of stay impact performance on the measures. In order to monitor unintended consequences, we have a surveillance system and annually publish a Chartbook (https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/ HospitalQualityInits/Downloads/ MedicareHospital QualityChartbook2012.pdf) which examines these issues. Comment: One commenter was concerned about the lack of risk adjustment for environmental factors that may significantly affect respiratory patients. Response: During measure development, we conducted a targeted PO 00000 Frm 00297 Fmt 4701 Sfmt 4700 50791 literature review and consulted with several experts to explore risk adjusting for levels of particulate matter an air pollutant associated with short-term increases in morbidity and increased admission rates among respiratory patients. We found that the literature suggests that ambient levels of particulate matter affect short-term mortality and admission rates for COPD (and for other cardiovascular and respiratory conditions).58 59 60 Although important from a public health standpoint, the increases in risk are relatively small. Further, the strength and direction of the potential association between particulate levels and the outcomes of mortality and readmission are influenced by other factors, including temperature, humidity, seasonal variation, and citylevel factors such as smoking and air conditioning use rates.61 Finally, we did not find any studies regarding the effect of ambient particulates on mortality and readmission rates among hospitalized patients for COPD, and the effect of particulate matter on readmission rates remains uncertain. Given the technical challenge of risk adjusting for this pollutant, and our expectation that building particulate levels into the model is not likely to significantly improve the models’ performance even with the best methods, we do not plan to pursue adding air pollution variables to the models at this time. The purpose of risk-adjustment is to account for differences across hospitals in factors unrelated to quality, such as patient comorbidities, that may affect the outcome of mortality and readmission. It is important to risk adjust for factors that could bias the measure results (for example, could favor hospitals in low pollution areas). Adjusting for environmental factors would make sense if it were technically feasible and if it would improve the model by reducing or eliminating a 58 Environmental Protection Agency. Review of the National Ambient Air Quality Standards for Particulate Matter: Policy Assessment of Scientific and Technical Information. December 2005. 59 Medina-Ramon M, Zanobetti A, Schwartz J. The effect of ozone and PM10 on hospital admissions for pneumonia and chronic obstructive pulmonary disease: a national multicity study. American Journal of Epidemiology. 2006;163(6):579–588. 60 Dominici F, Peng RD, Bell ML, et al. Fine particulate air pollution and hospital admission for cardiovascular and respiratory diseases. Journal of the American Medical Association. 2006;295(10):1127–1134. 61 Medina-Ramon M, Zanobetti A, Schwartz J. The effect of ozone and PM10 on hospital admissions for pneumonia and chronic obstructive pulmonary disease: a national multicity study. American Journal of Epidemiology. 2006;163(6):579–588. E:\FR\FM\19AUR2.SGM 19AUR2 50792 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations potential bias. Variables for environmental factors are unlikely to affect hospital-level risk-standardized rates. The studies to date focus on the general non-hospitalized population, and it is not clear how they apply to the patients in our models—that is, patients hospitalized with an acute exacerbation of COPD. Experts believed the effect of adjusting for particulate matter would likely be small or negligible given that the model applies to patients already hospitalized for COPD. In addition, there are feasibility issues. Modeling the effect appropriately would be complex. Our review of the issues suggests it would be inappropriate to use ambient air quality levels as a risk adjuster without also adjusting for other factors that affect the strength and direction of the potential association between particulate levels and the outcomes, including temperature, humidity, seasonal variation, and city-level factors such as smoking and air conditioning use rates. Given these challenges, and our expectation that building particulate levels into the model is not likely to significantly improve the models’ performance even with the best methods, we do not plan to pursue adding air pollution variables to the models at this time. After consideration of the public comments we received, we are finalizing as proposed the Hospital 30Day, all-cause, risk-standardized readmission Rate (RSRR) following chronic obstructive pulmonary disease (COPD) hospitalization measure for the FY 2016 payment determination and subsequent years. b. Hospital 30-Day, All-Cause, RiskStandardized Mortality Rate (RSMR) Following Chronic Obstructive Pulmonary Disease (COPD) Hospitalization Measure (NQF #1893) mstockstill on DSK4VPTVN1PROD with RULES6 (1) Background COPD affects as many as 24 million individuals in the United States and is the nation’s fourth leading cause of death. Between 1998 and 2008, the number of patients hospitalized annually for acute exacerbations of COPD (AECOPD) increased by approximately 18 percent.62 63 64 62 National Heart L, and Blood Institute, The Morbidity & Mortality: Chart Book on Cardiovascular, Lung and Blood Diseases. 2009; Available at: https://www.nhlbi.nih.gov/resources/ docs/2009_ChartBook.pdf. 63 The Centers for Disease Control and Prevention. National Center for Health Statistics Chronic Lower Respiratory Disease. FastStats 2010; Available at: https://www.cdc.gov/nchs/fastats/ copd.htm. 64 Agency for Healthcare Research and Quality. Healthcare Cost and Utilization Project Statistics on VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Moreover, COPD is one of the top 20 conditions contributing to Medicare costs.65 Finally, there is evidence of variation in outcomes at hospitals for COPD patients, supporting the finding that there are opportunities for improving care. The median 30-day risk-standardized mortality rate among Medicare FFS patients aged 65 or older hospitalized for COPD in 2008 was 8.5 percent, and ranged from 5.9 percent to 13.5 percent across 4,537 hospitals.66 We proposed to include a hospital 30day, all-cause risk-standardized rate of mortality following an admission for an AECOPD in the Hospital IQR Program. The measure aims to address a prevalent and costly health problem in the nation. In addition, the measure aligns with our priority objectives to promote quality improvements leading to successful transition of care for patients from acute care to outpatient settings, and reducing short term, preventable mortality rates. We plan to implement this measure to encourage improvement of outcomes by providing patients, physicians, and hospitals with information about hospital-level, risk-standardized mortality rates following hospitalization for an AECOPD. Clinical trials and observational studies suggest that several aspects of care provided to patients hospitalized for AECOPD can have significant effects on mortality, thus supporting the essential construct of mortality as an appropriate outcome to measure quality.67 68 69 70 Moreover, by proposing an outcome measure, we intend to broaden the view of quality of Hospitals Stays. 2009; Available at: https:// hcupnet.ahrq.gov/. 65 Andrews RM. The National Hospital Bill: The Most Expensive Conditions by Payer, 2006. Rockville: Agency for Healthcare Research and Quality; 2008. 66 Grosso L.M., Lindenauer P., Wang C., et al. Hospital-level 30-day Mortality Following Admission for an Acute Exacerbation of Chronic Obstructive Pulmonary Disease: Report prepared for the Centers for Medicare & Medicaid Services. 2011; Available at: https://www.qualitynet.org. 67 Global strategy for Diagnosis M, and Prevention of COPD, 2009; Available at: https:// www.goldcopd.org/. 68 National Institute for Health and Clinical Excellence. Chronic Obstructive Pulmonary Disease: Management of Chronic Obstructive Pulmonary Disease in Adults in Primary and Secondary Care (Partial Update). National Collaborating Centre for Acute and Chronic Conditions. Available at: https://www.nice.org.uk/ nicemedia/live/13029/49397/49397.pdf. 69 Walters JA, PG Gibson, R Wood-Baker, M Hannay, EH Walters. Systemic corticosteroids for acute exacerbations of chronic obstructive pulmonary disease. Cochrane Database Syst Rev. 2009; CD001288(1). 70 Lightowler JV, Wedzicha JA, Elliott MW, Ram FS. Non-invasive positive pressure ventilation to treat respiratory Failure resulting from exacerbations of chronic obstructive pulmonary disease: Cochrane systematic review and metaanalysis. Bmj. 2003;326(7382). PO 00000 Frm 00298 Fmt 4701 Sfmt 4700 care that encompasses more than what can be captured by merely measuring individual processes-of-care. Through outcome measures, we can capture complex and critical aspects of care, such as communication between providers, prevention of, and response to, complications, patient safety and coordinated transitions to the outpatient environment, all contribute to patient outcomes but are difficult to measure by individual process measures.71 72 The specifics of the measure methodology are included in the measure methodology report we have posted on our Web site at: https:// cms.gov/Medicare/Quality-InitiativesPatient-Assessment-Instruments/ HospitalQualityInits/MeasureMethodology.html. Please see the report for further details on the risk-adjustment statistical model. (2) Overview of Measure The measure is a NQF-endorsed 30day, all-cause risk-standardized rate of mortality after admission for an AECOPD to any non-federal acute care hospital. The MAP supports this measure for inclusion in the Hospital IQR Program. In general, the measure uses the same approach to risk-adjustment and hierarchical logistic modeling (HLM) methodology that is specified for our inpatient outcome measures previously adopted for the Hospital IQR Program, including AMI, HF, and PN readmission and mortality measures. For a discussion of this methodology, we refer readers to our Web site at: https:// cms.gov/Medicare/Quality-InitiativesPatient-Assessment-Instruments/ HospitalQualityInits/MeasureMethodology.html. (3) Data Sources The proposed measure is claimsbased and uses Medicare administrative data that contain hospitalizations for FFS Medicare beneficiaries hospitalized with AECOPDs. (4) Outcome The outcome for this measure is 30day all-cause mortality defined as a death from any cause within 30 days of the admission date for the index hospitalization. This outcome period is consistent with other NQF-endorsed 71 Krumholz H, Normand S–L, Spertus JA, Shahian DM, Bradley EH. Measuring Performance for Treating Heart Attacks and Heart Failure: The Case for Outcomes Measurement. Health Affairs 2007;26:75–85. 72 Bradley EH, Herrin J, Elbel B, et al. Hospital Quality for Acute Myocardial Infarction: Correlation Among Process Measures and Relationship With Short-term Mortality. The Journal of the American Medical Association 2006;296:72–8. E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations publicly reported mortality measures (AMI, HF, and PN). The measure assesses all-cause mortality not just COPD-specific mortality for several reasons. First, limiting the measure to COPD-related mortalities may limit the focus of efforts to improve care to a narrow set of approaches (such as processes that will prevent a recurrent exacerbation) as opposed to encouraging broader initiatives aimed at improving the overall in-hospital care. Second, cause of death may be unreliably recorded and it is often not possible to exclude quality issues and accountability based on the documented cause of mortality. For example, a COPD patient who develops a hospital-acquired infection may ultimately die from sepsis. It would be inappropriate to treat this death as unrelated to the care the patient received for COPD. Finally, from a patient perspective, death is the outcome that matters, regardless of cause. mstockstill on DSK4VPTVN1PROD with RULES6 (5) Cohort COPD is a group of lung diseases characterized by airway obstruction. Patients hospitalized for an AECOPD present with varying degrees of severity ranging from a worsening of baseline symptoms (dyspnea, cough, and/or sputum) to respiratory failure. To capture the full spectrum of severity of patients hospitalized for an AECOPD, we included patients with a principal diagnosis of COPD, as well as those with a principal diagnosis of respiratory failure who had a secondary diagnosis of an AECOPD. Requiring AECOPD as a secondary code helps to identify respiratory failure due to COPD exacerbation versus another condition (for example, heart failure). For detailed information on the cohort definition please reference the COPD mortality technical report on our Web site at: https://cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html. (6) Inclusion and Exclusion Criteria The measure includes hospitalizations for patients 65 years or older at the time of index admission and for whom there was a complete 12 months of FFS enrollment to allow for adequate risk-adjustment. The measure excludes the following admissions from the measure cohort: (1) Admissions for patients having a principal diagnosis of an AECOPD during the index hospitalization who were transferred from another acute care facility are excluded because the hospital where the patient was initially admitted made VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 critical acute care decisions (including the decision to transfer and where to transfer); (2) admissions for patients enrolled in the Medicare Hospice Program any time in the 12 months prior to the index hospitalization, including the first date of the index admission are excluded because it is likely that these patients are continuing to seek comfort care and their goal may not be survival; and (3) admissions for patients that are discharged alive and against medical advice are excluded because providers did not have the opportunity to deliver full care and prepare the patient for discharge. (7) Risk Adjustment The measure adjusts for differences across hospitals in how at risk their patients are for death relative to patients cared for by other hospitals. Consistent with NQF guidelines, the model does not adjust for socioeconomic status or race because risk-adjusting for these characteristics would hold hospitals with a large proportion of minority or low socioeconomic status patients to a different standard of care than other hospitals. One goal of this measure is to illuminate quality differences that such risk adjustment would obscure. (8) Calculating the Risk-Standardized Mortality Ratio (RSMR) The measure is calculated using hierarchical logistic modeling (HLM). This approach appropriately accounts for the types of patients a hospital treats (that is, hospital case mix), the number of patients it treats, and the quality of care it provides. The HLM is an appropriate statistical approach to measuring quality based on patient outcomes when the patients are clustered within hospitals (and therefore the patients’ outcomes are not statistically independent) and the number of eligible patients for the measure varies from hospital to hospital. As noted above, the measure methodology defines hospital case mix based on the clinical diagnoses provided in the hospital claims for their patients’ inpatient and outpatient visits for the 12 months prior to the COPD hospitalization, as well as those present in the claims for care at admission. The methodology, however, specifically does not account for diagnoses present in the index admission that may indicate complications rather than patient comorbidities. The RSMR is calculated as the ratio of the number of predicted deaths to the number of expected deaths and then the ratio is multiplied by the national unadjusted mortality rate. The ratio is greater than one for hospitals that have PO 00000 Frm 00299 Fmt 4701 Sfmt 4700 50793 more deaths that would be expected for an average hospital with similar cases and less than one if the hospital has fewer deaths than would be expected for an average hospital with similar cases. This approach is analogous to a ratio of ‘‘observed’’ or ‘‘crude’’ rate to an ‘‘expected’’ or risk-adjusted rate used in other similar types of statistical analyses. The RSMR is a point estimate—the best estimate of a hospital’s mortality rate based on the hospital’s case mix. For displaying the measure for the Hospital IQR Program, we computed an interval estimate, which is similar to the concept of a confidence interval, to characterize the level of uncertainty around the point estimate. We use the point estimate and interval estimate to determine hospital performance (for example, higher than expected, as expected, or lower than expected). For more detailed information on the calculation methodology please refer to our Web site at: https://cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/ HospitalQualityInits/MeasureMethodology.html. We invited public comment on this proposal. Comment: Some commenters supported the addition of the COPD mortality measure to Hospital IQR Program. Response: We appreciate the commenters’ support for this measure. Comment: Several commenters noted that the COPD mortality measure may not be reliable. Response: We use the same statistical approach to reliability for the COPD mortality measure that we have established for our hospital riskadjusted outcome measures, including the mortality and readmissions measures. Reliability is related to sample size. We adopted a riskadjustment modeling methodology for our outcome measures that takes into account sample size. Although the commenter raised the issue of reliability related to the COPD mortality measure that CMS proposed for the Hospital IQR program, this issue was raised and responded to in part in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53379) in our discussion of the readmission measures for the Hospital Readmissions Reduction Program. The response is set out below. ‘‘We determined the 25-case threshold for public reporting based on a reliability statistic that is calculated from the intercluster correlation, a parameter of the model.’’ In addition, we have thought carefully about how best to measure quality for E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50794 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations small volume hospitals. Smaller hospitals do typically have less certain estimates, because they have fewer cases for use in assessing quality; that is a challenge inherent in outcome measurement. One advantage of the statistical model we use for the measures is that it allows for the inclusion of small hospitals while characterizing the certainty of their estimates. The hierarchical logistic regression model that we use to calculate the risk-standardized outcome measures allows the inclusion of hospitals with relatively few observations, but takes into account the uncertainty associated with sample size in estimating their risk-standardized outcome rates. The model takes into account the uncertainty in the estimate of outcome rates for small volume hospitals by assuming that each hospital is a typically performing hospital. It weighs that assumption along with the outcomes for the particular hospital in calculating the outcome rate. Therefore, the estimated outcome rates for smaller hospitals will likely be closer to the national rate because the limited number of eligible cases in the hospital tells little about that hospital’s true outcome rate. Comment: Several commenters requested that CMS incorporate socioeconomic factors in its riskadjustment methodology. Response: Commenters also raised this issue regarding our proposed incorporation of planned readmission algorithm for 30-day readmission measures in section IX.A.5.b.(1) of the preamble of this final rule and we refer readers to our response in that section. Comment: A few commenters suggested that additional work is needed to adequately explore the relationship between COPD 30-day risk standardized mortality rates and 30-day readmission rates. Response: We consider that hospital performance on mortality and readmission measures represent different aspects of quality. Researchers found that performance on riskstandardized mortality rates was not strongly correlated with performance on risk-standardized readmission rates for HF and not at all for AMI and pneumonia.73 We appreciate the commenters’ concern and will monitor the correlation for COPD as part of our hospital quality surveillance. Comment: One commenter noted that the hospice exclusion is a crude 73 Krumholz HM, Lin Z, Keenan PS, et al. Relationship between hospital readmission and mortality rates for patients hospitalized with acute myocardial infarction, heart failure, or pneumonia. JAMA. 2013; 309(6):587–593. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 exclusion for the mortality measures and requested that CMS add information about the desire of the patient to refuse CPR or other potentially life-extending services to determine if mortality was in fact an acceptable outcome for that patient. Response: We appreciate this comment, and will continue to consider options for identifying and removing from the measures patients who are seeking comfort care only. The options available for identifying these patients and excluding them from the mortality measures are limited and each has tradeoffs. We appreciate the concern about the potential effects of the current approach on clinical care, and will consider this as we maintain the measures. After consideration of the public comments we received, we are finalizing as proposed the Hospital 30Day, all-cause, risk-standardized mortality rate (RSMR) following chronic obstructive pulmonary disease (COPD) hospitalization measure for the FY 2016 payment determination and subsequent years. c. Hospital 30-day, All-Cause RiskStandardized Rate of Readmission Following Acute Ischemic Stroke (Stroke Readmission) Measure (1) Background Stroke is an important and common diagnosis among Medicare patients. Ischemic stroke affects hundreds of thousands of adults in the United States each year and leaves many with new disability and at increased risk for complications, recurrent stroke and clinical deterioration.74 Hospital readmissions after stroke may result from the progression of disease, but may also be an indicator of poor care. Approximately 10 percent of stroke survivors will have a recurrent stroke within a year and one out of four stroke patients will be readmitted to the hospital.75 76 77 Moreover, stroke is one of the top 20 conditions contributing to Medicare costs.78 Finally, there is 74 American Heart Association, Heart Disease and Stroke Statistics—2012 Update. American Heart Association, Circulation 2012, 125:e2-e220. 75 Sacco RL, Hauser WA, Mohr JP, Foulkes MA. One-year outcome after cerebral infarction in whites, blacks, and Hispanics. Stroke 1991;22:305-11. 76 Andersen HE, Schultz-Larsen K, Kreiner S, Forchhammer BH, Eriksen K, Brown A. Can readmission after stroke be prevented? Results of a randomized clinical study: a postdischarge follow-up service for stroke survivors. Stroke 2000;31:1038-45. 77 Gooding J, Jette AM. Hospital readmissions among the elderly. Journal of the American Geriatric Society 1985;33:595-601. 78 Andrews RM. The National Hospital Bill: The Most Expensive Conditions by Payer, 2006. PO 00000 Frm 00300 Fmt 4701 Sfmt 4700 evidence of variation in outcomes at hospitals for stroke patients, supporting the finding that there are opportunities for improving care. The median 30-day risk-standardized readmission rate among Medicare FFS patients aged 65 or older hospitalized for stroke in 2007 was 14.7 percent, and ranged from 11.6 percent to 19.4 percent across 4,242 hospitals.79 We proposed to include this nonNQF-endorsed hospital 30-day, allcause risk-standardized rate of readmission following acute ischemic stroke measure in the Hospital IQR Program, under the exception authority in section 1886(b)(3)(B)(IX)(bb) of the Act as previously discussed in section IX.A.6. of the preamble to this final rule. Although the proposed measure is not currently NQF-endorsed or MAP supported, we considered other available measures that have been endorsed or adopted by a consensus organization, and found no other feasible and practical measures on this topic. We believe it is imperative to adopt this measure as it aims to address a prevalent and costly health problem in the nation. In addition, the measure aligns with our priority objectives to promote quality improvements leading to successful transition of care for patients from acute care to outpatient settings, and reduce short term, preventable readmission rates. We plan to implement this measure to encourage improvement of outcomes by providing patients, physicians, and hospitals with information about hospital-level, risk-standardized readmission rates following hospitalization for acute ischemic stroke. Studies have shown stroke readmission to be related to quality of care, and that improvements in care can reduce readmission rates.80 81 82 Moreover, by proposing an outcome measure, we intend to broaden the view of quality of care that encompasses more Rockville: Agency for Healthcare Research and Quality; 2008. 79 Bernheim S.M., Wang C., Wang Y., et al. Hospital 30-Day Readmission Following Acute Ischemic Stroke Hospitalization Measure: Report prepared for the Centers for Medicare & Medicaid Services. 2010; Available at: https:// www.qualitynet.org. 80 Jack BW, Chetty VK, Anthony D, et al. A Reengineered Hospital Discharge Program to Decrease Rehospitalization. Annals of Internal Medicine 2009;150:178-88. 81 Naylor MD, Brooten D, Cambell R, et al. Comprehensive Discharge Planning and Home Follow-up of Hospitalized Elders: A Randomized Clinical Trial. The Journal of the American Medical Association 1999; 281:613-20. 82 Bravata DM, Ho SY, Meehan TP, Brass LM, Concato J. Readmission and death after hospitalization for acute ischemic stroke: 5-year follow-up in the Medicare population. Stroke 2007; 38:1899-904. E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations than what can be captured by merely measuring individual processes-of-care. Through outcome measures, we can capture complex and critical aspects of care, such as communication between providers, prevention of, and response to, complications, patient safety and coordinated transitions to the outpatient environment, all of which contribute to patient outcomes but are difficult to measure by individual process measures.83 84 The specifics of the measure methodology are included in the measure methodology report we have posted on our Web site at: https:// cms.gov/Medicare/Quality-InitiativesPatient-Assessment-Instruments/ HospitalQualityInits/MeasureMethodology.html. We refer readers to the report for further details on the riskadjustment statistical model. (2) Overview of Measure The measure is a 30-day, all-cause risk-standardized rate of readmission following hospitalization for acute ischemic stroke to any non-federal acute care hospital. The measure includes Medicare FFS patients aged 65 or older admitted for an acute ischemic stroke and assesses if the patient was readmitted within 30 days of discharge. In general, the measure uses the same approach to risk-adjustment and HLM methodology that is specified for our inpatient outcome measures previously adopted for the Hospital IQR Program, including AMI, HF, and PN readmission and mortality measures. For a discussion of this methodology, we refer readers to our Web site at: https:// cms.gov/Medicare/Quality-InitiativesPatient-Assessment-Instruments/ HospitalQualityInits/MeasureMethodology.html. Furthermore this measure, which is calculated using CMS claims or administrative data, is validated by comparing it to a medical record model in a matched cohort of admissions for which stroke medical record data and administrative claims data are available. mstockstill on DSK4VPTVN1PROD with RULES6 (3) Data Sources The proposed measure is claimsbased and uses Medicare administrative data that contain hospitalizations for fee-for-service Medicare beneficiaries hospitalized with acute ischemic stroke. 83 Krumholz H, Normand S–L, Spertus JA, Shahian DM, Bradley EH. Measuring Performance for Treating Heart Attacks and Heart Failure: The Case for Outcomes Measurement. Health Affairs 2007;26:75–85. 84 Bradley EH, Herrin J, Elbel B, et al. Hospital Quality for Acute Myocardial Infarction: Correlation Among Process Measures and Relationship With Short-term Mortality. The Journal of the American Medical Association 2006;296:72–8. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 (4) Outcome The outcome for this measure is 30day all-cause readmission defined as an unplanned subsequent inpatient admission to any acute care facility from any cause within 30 days of the admission date for the index hospitalization. A number of studies have demonstrated that improvements in care at the time of patient discharge can reduce 30-day readmission rates.85 86 87 It is a timeframe in which a readmission may reasonably be attributed to the hospital care and transitional period to a non-acute setting. The measure assesses all-cause unplanned readmission (excluding planned readmissions) rather than only stroke-specific readmissions for several reasons. First, from the patient perspective, readmission for any reason is likely to be an undesirable outcome of care, even though not all readmissions are preventable. Second, limiting the measure to stroke-related readmissions may limit the focus of efforts to improve care to a narrow set of approaches (such as processes that will prevent recurrent stroke) as opposed to encouraging broader initiatives aimed overall at improving the care within the hospital and transitions from the hospital setting. Moreover, it is often hard to exclude quality issues and accountability based on the documented cause of readmission, for instance, a patient who came back with pneumonia may have aspirated due to inadequate preventive measures and therefore we would not want to discount such a readmission. The measure does not count readmissions that are considered planned. Planned readmissions are identified in claims data using the CMS Planned Readmission Algorithm Version 2.1 which detects readmissions that are typically planned and may occur within 30 days of discharge from the hospital. For more information on the methodology used to identify planned readmissions, and the list of planned diagnoses and procedures used in the algorithm, please refer to on our Web site at: https://cms.gov/Medicare/ 85 Jack BW, Chetty VK, Anthony D, et al. A Reengineered Hospital Discharge Program to Decrease Rehospitalization. Annals of Internal Medicine 2009;150:178–88. 86 Coleman EA, Parry C, Chalmers S, Min S–j. The Care Transitions Intervention: Results of a Randomized Controlled Trial. Archives of Internal Medicine 2006;166:1822–8. 87 Anderson C, Deepak BV, Amoateng-Adjepong Y, Zarich S. Benefits of Comprehensive Inpatient Education and Discharge Planning Combined With Outpatient Support in Elderly Patients With Congestive Heart Failure. Congestive Heart Failure 2005;November–December:315–21. PO 00000 Frm 00301 Fmt 4701 Sfmt 4700 50795 Quality-Initiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html. The stroke readmission measure makes one modification to the planned readmissions algorithm as it does not consider readmissions as planned for patients who are readmitted for debridement of wound; infection or burn (AHRQ’s Clinical Classification Software procedure category 169). Such treatments are commonly provided for decubitus ulcers that can easily be unplanned readmissions following stroke care, because such ulcers can complicate a stroke. The algorithm includes planned readmissions for common related follow-up care for stroke patients (for example, carotid endarterectomy) as well as readmissions which are generally planned regardless of the original admission (for example, a stroke patient readmitted for cholecystectomy). Unplanned readmissions that fall within the 30-day post discharge timeframe from the index admission are not counted as outcomes for the index admission if they are preceded by a planned readmission. (5) Cohort The cohort of index hospital admissions included in the measure is restricted to hospitalizations for ischemic stroke. The measure is limited to ischemic stroke hospitalizations for several reasons. First, ischemic strokes are the most common type of stroke, accounting for the vast majority of stroke hospitalizations.88 Second, the etiology and prognosis of ischemic stroke is quite different than that of hemorrhagic stroke, so a combined cohort would be more heterogeneous. This heterogeneity could make it more difficult to account for a hospital’s patient mix and lead to a less fair measure. Similarly, patients with transient ischemic attacks (TIAs) are not included largely due to concerns about inconsistency in the use of administrative codes to define TIA and potential for inclusion of patients without cerebrovascular conditions. For detailed information on the cohort definition, we refer readers to the stroke readmission technical report on our Web site at: https://cms.gov/Medicare/ Quality-Initiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html. 88 Thom T, Haase N, Rosamond W, et al. Heart Disease and Stroke Statistics–2006 Update: A Report From the American Heart Association Statistics Committee and Stroke Statistics Subcommittee. Journal of the American Heart Association 2006:85–151. E:\FR\FM\19AUR2.SGM 19AUR2 50796 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations (6) Inclusion and Exclusion Criteria The measure includes hospitalizations for patients 65 years or older at the time of index admission and for whom there was a complete 12 months of FFS enrollment to allow for adequate risk-adjustment. The measure excludes the following admissions from the measure cohort: (1) Admissions for patients who die during the initial hospitalization because they are not eligible for readmission; (2) admissions for patients having a principal diagnosis of stroke during the index hospitalization and subsequently transferred to another acute care facility are excluded because the measure’s focus is on hospitals that discharge patients to a non-acute setting (for example, to home or a skilled nursing facility); (3) admissions for patients that are discharged against medical advice are excluded because providers did not have the opportunity to deliver full care and prepare the patient for discharge; (4) admissions for patients without at least 30-days post-discharge enrollment in Medicare FFS are excluded because the 30-day readmission outcome cannot be assessed in this group; and (5) additional stroke admissions for patients within 30 days of discharge from an index stroke admission will be considered readmissions and not additional index admissions. (7) Risk Adjustment The measure adjusts for differences across hospitals in how at risk their patients are for readmission relative to patients cared for by other hospitals. Consistent with NQF guidelines, the model does not adjust for socioeconomic status or race because risk-adjusting for these characteristics would hold hospitals with a large proportion of minority or low socioeconomic patients to a different standard of care than other hospitals. One goal of this measure is to illuminate quality differences that such riskadjustment would obscure. mstockstill on DSK4VPTVN1PROD with RULES6 (8) Calculating the Risk Standardized Readmission Ratio (RSRR) The measure is calculated using HLM. This approach appropriately accounts for the types of patients a hospital treats (that is, hospital case mix), the number of patients it treats, and the quality of care it provides. HLM is an appropriate statistical approach to measuring quality based on patient outcomes when the patients are clustered within hospitals (and therefore the patients’ outcomes are not statistically independent) and the number of eligible patients for the measure varies from hospital to VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 hospital. As noted above, the measure methodology defines hospital case mix based on the clinical diagnoses provided in the hospital claims for their patients’ inpatient and outpatient visits for the 12 months prior to the ischemic stroke hospitalization, as well as those present in the claims for care at admission. However, the methodology specifically does not account for diagnoses present in the index admission that may indicate complications rather than patient comorbidities. In addition, the measure takes into account situations where patients initially present at one ED but are then admitted to another hospital for their index stroke hospitalization. The measure includes a risk-adjustment factor to account for ED-transfer patients. The RSRR is calculated as the ratio of the number of predicted readmissions to the number of expected readmissions and then the ratio is multiplied by the national unadjusted readmission rate. The ratio is greater than one for hospitals that have more readmission that would be expected for an average hospital with similar cases and less than one if the hospital has fewer readmissions than would be expected for an average hospital with similar cases. This approach is analogous to a ratio of ‘‘observed’’ or ‘‘crude’’ rate to an ‘‘expected’’ or risk-adjusted rate used in other similar types of statistical analyses. The RSRR is a point estimate—the best estimate of a hospital’s readmission rate based on the hospital’s case mix. For displaying the measure for the Hospital IQR Program, we computed an interval estimate, which is similar to the concept of a confidence interval, to characterize the level of uncertainty around the point estimate. We use the point estimate and interval estimate to determine hospital performance (for example, higher than expected, as expected, or lower than expected). For more detailed information on the calculation methodology, we refer readers to our Web site at: https:// cms.gov/Medicare/Quality-InitiativesPatient-Assessment-Instruments/ HospitalQualityInits/MeasureMethodology.html. We proposed to adopt this measure in the Hospital IQR Program for the FY 2016 payment determination and subsequent years under the exception authority in section 1886(b)(3)(B)(IX)(bb) of the Act as previously discussed in section IX.A.6. of the preamble of this final rule. Although the proposed measure is not currently NQF-endorsed or MAP supported, we considered other PO 00000 Frm 00302 Fmt 4701 Sfmt 4700 available measures that have been endorsed or adopted by the NQF, and were unable to identify any other NQFendorsed measures that assess stroke readmission with a standard period of follow-up. We also are not aware of any other 30-day stroke readmission measures that have been endorsed or adopted by a consensus organization. The development of this measure went through the same rigorous development process as the other publicly reported outcomes measures and involved extensive input by stakeholders and clinical experts. It follows the same scientific approach to evaluate hospital performance as other Hospital IQR Program outcome measures. Finally, it has been validated with medical record measures and shown to produce similar hospital-level results. Accordingly, we proposed to adopt the 30-day stroke readmission measure under the Secretary’s authority set forth at section 1886(b)(3)(B)(IX)(bb) of the Act. We invited public comment on this proposal. Comment: Many commenters opposed the stroke readmission measure because it is not NQF-endorsed. Response: We submitted the 30-day Stroke Readmission and 30-day Stroke Mortality Measures to the NQF for review during its 2012 Neurology Endorsement Maintenance Consensus Development Project. The NQF Neurology steering committee convened three times to assess the CMS stroke measures. The first time the Committee recommended the readmission measure for endorsement (the vote was 13 to 9). After the public comment period, the Steering Committee met for a second time to discuss the issues raised by the commenters. The issues raised during public comment were: (1) The lack of inclusion of the NIH Stroke Scale (NIHSS) score as patient severity score for risk adjustment purposes; (2) whether the measures are able to show variability among hospitals, and room for improvement; and (3) hospitals perceived ability to influence the readmission measure. The committee reassessed these issues and concluded that the 30-day readmission measure met the four NQF endorsement criteria—importance, scientific acceptability, usability, and feasibility. However the committee voted 12–10 against the endorsement of the readmission measure. The third time the Committee met following a second round of public comment, they discussed the issue of whether the readmission measure should be risk adjusted for patient level SES factors. The Steering Committee discussed these issues and decided not to re-vote on the E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations measures. For further information, we refer readers to the Official NQF Report for this Consensus Development Project, located here: https:// www.qualityforum.org/Publications/ 2012/12/ Neurology_Endorsement_Maintenance__Phase_I_Technical_Report.aspx. We submitted the readmission and mortality measures for review by the MAP in December 2012. While some members of the MAP supported use of the measures in the Hospital IQR Program, in its Final Report to HHS, the MAP did not support either the 30-day Stroke Readmission Measure or the 30day Stroke Mortality Measure, because the measures did not receive NQF endorsement. We refer readers to the February 2013 MAP Pre-rulemaking recommendations located here: https:// www.qualityforum.org/Publications/ 2013/02/MAP_Pre-Rulemaking_Report__February_2013.aspx. In evaluating and selecting the 30-day acute ischemic stroke readmission measure for inclusion in the Hospital IQR Program, we considered whether there were other available measures that have been endorsed or adopted by the NQF, and were unable to identify any other NQF-endorsed measures that assess 30-day acute ischemic stroke readmission. We also are not aware of any other measures of 30-day acute ischemic stroke outcomes that have been endorsed or adopted by a consensus organization. The development of the 30-day acute ischemic stroke readmission measure went through the same rigorous development process as the other publicly reported outcomes measures and involved extensive input by stakeholders and clinical experts. This follows the same scientific approach to evaluate hospital performance as other Hospital IQR Program outcome measures. There are currently no stroke outcome measures in the Hospital IQR Program to complement the process of care and structural measures, yet stroke remains one of the top causes of death, and hospitalization for Stroke is frequently followed by readmission. This is why we proposed to adopt this measure for the Hospital IQR Program under the Secretary’s authority set forth at section 1886(b)(3)(B)(IX)(bb) of the Act. We appreciate and have heard the concerns of the stakeholders on this issue. We are committed to working with the stakeholder communities and to continuously refine our measures, which for the stroke outcome measures includes risk adjusted patient severity. We will work with the stroke communities and other stakeholders to VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 seek feasible ways to incorporate additional severity adjustment as suggested. We note that stroke is the fifth leading cause of adult mortality in the U.S., and therefore we believe it would be a disservice to patients to delay inclusion of these current stroke outcome measures in quality reporting and quality improvement initiatives. We are committed to making these measures better and working with stakeholders to do so. Comment: Several commenters supported the addition of the stroke readmission measure to Hospital IQR Program. Response: We appreciate the commenters support for this measure. Comment: A number of commenters expressed concerns that the stroke readmission measure does not include risk adjustment for stroke severity. Specifically a few commenters suggested that use of this measure could hamper efforts to develop State-wide coordinated care systems, since many stroke centers receive severe cases from other providers’ emergency departments. Commenters also stated that the adoption of the measure may create disincentives for providers to accept more severe stroke patients to try to avoid having high readmission rates. Instead of the proposed measure, one commenter asked CMS to develop a measure that accounts for stroke severity to enable hospitals to put internal changes in action to reduce readmission rates and improve quality of care for stroke patients. The same commenter also noted that the vast majority of stroke readmissions are not preventable. Response: We appreciate these concerns and suggestions and will continue to engage stakeholders on ways to incorporate stroke severity into the risk-adjusted model for stroke outcome measures. Our goal is to refine measures so that the measure results will better inform hospitals on ways to improve quality of care for their patients. We understand stakeholders’ concerns that a measure of stroke readmission that does not adequately adjust for stroke severity might negatively impact the development of State-wide coordinated care systems. During measure development, we attempted to address this concern through validation of our measure. We compared the results of our measure with medical record data that included a marker of stroke severity. The correlation coefficient of the risk standardized readmission rates from the administrative and medical record models is 0.99 and for the stroke PO 00000 Frm 00303 Fmt 4701 Sfmt 4700 50797 mortality model (see the discussion of the stroke mortality measure below), it was 0.80. Hospital performance on both of the measures using two different data sources (that is, administrative claims or medical records) was very similar. We believe this analysis not only demonstrates the validity of the administrative claims data for riskadjustment, but also illustrates how assessment of stroke severity using a method other than the NIHSS score can provide meaningful data that enables hospitals to improve stroke quality of care. Regarding the concerns about the creation of a potential disincentive to accept more severe stroke patients in transfer, we have thought carefully about this measure’s effect on tertiary care centers. In order to confirm that the measure is fair to tertiary care centers, we performed analyses during measure development and found that measure performance for stroke centers is not different than that of non-stroke center hospitals. Further, our measures continually undergo maintenance to determine the need for: (1) Updated specifications; (2) responses to concerns of stakeholders; and (3) measure refinement in response to monitored trends. We will closely monitor this issue to ensure that hospitals are appropriately caring for patients experiencing various levels of stroke severity. We would like to clarify that we do not assume all readmissions are preventable. Our goal for the readmission measure is to identify hospitals that seem to have excess readmissions above and beyond what would be expected for their case mix. We believe that careful discharge planning and instructions, communication with outpatient providers, attention to patient safety and prevention of infections, are all important for reducing readmissions. With these internal changes by hospitals, we believe that these and other steps to reduce readmissions will lead to hospitals having lower overall readmission rates and have better rates on this measure. We stress that the measure is not intended to drive hospitals to a zero readmission rate, but rather is designed to encourage hospitals to identify opportunities to systematically reduce readmission risks in their environment. Comment: One commenter was concerned that the measure calculations cannot be replicated/validated by hospitals by using solely their own data. Response: The measure would require access to 100 percent of Medicare Part A and Part B claims for all Medicare Fee E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50798 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations for Service beneficiaries in order to truly replicate the calculations that we perform for these measures. We realize that this type of data access or analytic capacity may not be available to hospitals, and this is why we provide hospitals with detailed information to help them understand what the calculations were based on—including discharge level comorbidities and dispositions, so that hospitals can verify the accuracy of the calculations we provide. Comment: One commenter suggested that any stroke outcome measures used by the program should be properly developed, tested and risk-adjusted. Some commenters requested that CMS begin collecting stroke severity in the form of the NIHSS score and work to revise these measures to include adjustment for stroke severity, prior to implementation in the Hospital IQR Program. Response: We appreciate these concerns and suggestions and will continue to engage stakeholders on ways to incorporate stroke severity into the stroke outcome measures. Our goal is to continuously refine measures so that the measure results will better inform hospitals on ways to improve quality of care for their patients. We understand stakeholder concerns that the current stroke outcome measures do not risk-adjust for stroke severity using the NIHSS score. We believe the stroke outcome measures were effectively developed, tested and risk-adjusted because we validated our claims-based risk adjustment model against a clinical risk adjustment model that included the National Stroke Project Stroke Severity Scale (NSPSSS), a marker of patient severity other than the NIHSS score that correlates well with the NIHSS.89 During development our aim was to: (1) Develop a scientifically valid measure; (2) conduct development in a fully transparent manner with multiple public comment periods; and (3) acquire extensive input from the clinical community. To address the concerns of validity, we performed a comparison of the performance of the administrative claims model with the performance of a clinical model that included the NSPSSS in a matched cohort of admissions. Our analyses found that there was a high-level of agreement between the claims-based model and the clinical model. The correlation coefficients of the hospital risk 89 El Husseini,N.; Shea,K.J.; and Goldstein, L.B. (2011). ‘‘Concerns for the Reliability and Validity of the National Stroke Project Stroke Severity Scale.’’ Cerebrovasc. Dis. Vol 32:426–430. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 standardized readmission rates calculated using the claims based model and the clinical model were 0.99 for the readmission measure and 0.80 for the stroke mortality measure. Hospital performance on the measures using the two different data sources (that is, administrative claims or medical records) was also very similar. We believe that these results demonstrate the validity of our administrative claims based model for risk-adjustment, because generally, clinical data from medical records are considered a gold standard for comparison. We appreciate and have heard the concerns of the stakeholders on this issue. We are committed to working with the stakeholder communities and to continuously refine our measures, which for the stroke outcome measures includes risk adjusted patient severity. We will work with the stroke communities and other stakeholders to seek feasible ways to incorporate additional severity adjustment as suggested. We must highlight that stroke is the fifth leading cause of adult mortality in the U.S., and therefore we believe it would be a disservice to patients to delay inclusion of these current stroke outcome measures in quality reporting and quality improvement initiatives. We are committed to making these measures better and working with stakeholders to do so. After consideration of the public comments we received, we are finalizing as proposed the Hospital 30day, all-cause risk-standardized rate of readmission following acute ischemic stroke measure for FY 2016 payment determination and subsequent years. d. Hospital 30-Day, All-Cause RiskStandardized Rate of Mortality Following an Admission for Acute Ischemic Stroke (Stroke Mortality) Measure (1) Background Stroke is an important and common diagnosis among Medicare patients. Stroke affects approximately 795,000 people each year in the U.S. with high rates of mortality and morbidity. Stroke is the fourth most common cause of death after heart disease, cancer, and chronic lower respiratory disease.90 Moreover, stroke is one of the top 20 conditions contributing to Medicare costs.91 Finally, there is evidence of 90 American Heart Association, Heart Disease and Stroke Statistics—2012 Update. American Heart Association, Circulation 2012, 125:e2–e220. 91 Andrews RM. The National Hospital Bill: The Most Expensive Conditions by Payer, 2006. Rockville: Agency for Healthcare Research and Quality; 2008. PO 00000 Frm 00304 Fmt 4701 Sfmt 4700 variation in outcomes at hospitals for stroke patients, supporting the finding that there are opportunities for improving care. The median 30-day risk-standardized mortality rate among Medicare FFS patients aged 65 or older hospitalized for stroke in 2007 was 15.3 percent, and ranged from 10.7 percent to 23.5 percent across 4,288 hospitals.92 We proposed to include a non-NQF endorsed hospital 30-day, all-cause riskstandardized rate of mortality following an admission for acute ischemic stroke measure in the Hospital IQR Program, under the exception authority in section 1886(b)(3)(B)(IX)(bb) of the Act as previously discussed in section IX.A.6. of the preamble of this final rule. Although the proposed measure is not currently NQF-endorsed or MAP supported, we considered other available measures that have been endorsed or adopted by a consensus organization, and found no other feasible and practical measures on this topic. We believe it is important to adopt this measure as it aims to address a prevalent and costly health problem in the nation. In addition, the measure aligns with our priority objectives to promote quality improvements leading to successful transition of care for patients from acute care to outpatient settings, and reducing short term, preventable mortality rates. We plan to implement this measure to encourage improvement of outcomes by providing patients, physicians, and hospitals with information about hospital-level, risk-standardized mortality rates following hospitalization for acute ischemic stroke. Studies have shown stroke mortality to be related to quality of care, and that there are effective interventions that hospitals can adopt to reduce mortality rates.93 94 Moreover, by proposing an outcome measure, we intend to broaden the view of quality of care that encompasses more than what can be captured by merely measuring individual processes-of-care. Through outcome measures, we can capture complex and critical aspects of care, such as communication between providers, prevention of, and response to, complications, patient safety and 92 Bernheim S.M., Wang C., Wang Y., et al. Hospital 30-Day Mortality Following Acute Ischemic Stroke Hospitalization Measure: Report prepared for the Centers for Medicare & Medicaid Services. 2010; Available at: https:// www.qualitynet.org. 93 Fonarow GC, Reeves MJ, Zhao X, et al. AgeRelated Differences in Characteristics, Performance Measures, Treatment Trends, and Outcomes in Patients With Ischemic Stroke. Journal of the American Heart Association 2010;121:879–91. 94 Bravata DM, Wells CK, Lo AC, et al. Processes of Care Associated With Acute Stroke Outcomes. Archives of Internal Medicine 2010;170:804–10. E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations coordinated transitions to the outpatient environment, all of which contribute to patient outcomes, but are difficult to measure by individual process measures.95 96 The specifics of the measure methodology are included in the measure methodology report we have posted on our Web site at: https:// cms.gov/Medicare/Quality-InitiativesPatient-Assessment-Instruments/ HospitalQualityInits/MeasureMethodology.html. We refer readers to the report for further details on the riskadjustment statistical model. (2) Overview of Measure The measure is a 30-day, all-cause risk-standardized rate of mortality after admission for acute ischemic stroke to any non-federal acute care hospital. The measure includes Medicare fee-forservice patients aged 65 or older admitted for an acute ischemic stroke and assesses if the patient died within 30 days of admission. In general, the measure uses the same approach to risk-adjustment and HLM methodology that is specified for our inpatient outcome measures previously adopted for the Hospital IQR Program, including AMI, HF, and PN readmission and mortality measures. For a discussion of this methodology, we refer readers to our Web site at: https:// cms.gov/Medicare/Quality-InitiativesPatient-Assessment-Instruments/ HospitalQualityInits/MeasureMethodology.html. Furthermore this measure, which is calculated using CMS claims or administrative data, is validated by comparing it to a medical record model in a matched cohort of admissions for which stroke medical record data and administrative claim data are available. (3) Data Sources The proposed measure is claimsbased and uses Medicare administrative data that contain hospitalizations for Medicare FFS beneficiaries hospitalized with acute ischemic stroke. mstockstill on DSK4VPTVN1PROD with RULES6 (4) Outcome The outcome for this measure is 30day all-cause mortality defined as a death from any cause within 30 days of the admission date for the index hospitalization. Thirty days is a 95 Krumholz H, Normand S–L, Spertus JA, Shahian DM, Bradley EH. Measuring Performance for Treating Heart Attacks and Heart Failure: The Case for Outcomes Measurement. Health Affairs 2007;26:75–85. 96 Bradley EH, Herrin J, Elbel B, et al. Hospital Quality for Acute Myocardial Infarction: Correlation Among Process Measures and Relationship With Short-term Mortality. The Journal of the American Medical Association 2006;296:72–8. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 standard time period used in other measures of stroke mortality.97 98 It is a timeframe in which a death may reasonably be attributed to the hospital care and transitional period to a nonacute setting. The measure assesses all-cause mortality as opposed to stroke-specific mortality for several reasons. First of all, limiting the measure to stroke-related mortalities may limit the focus of efforts to improve care to a narrow set of approaches (such as processes that will prevent recurrent stroke) as opposed to encouraging broader initiatives aimed at improving the overall care within the hospital. Second, cause of death may be unreliably recorded and it is often impossible to exclude quality issues and accountability based on the documented cause of mortality. For example, a stroke patient who develops a hospitalacquired infection may ultimately die from sepsis. It would be inappropriate to treat this mortality as unrelated to the care the patient received for stroke. Finally, from a patient perspective, death is the outcome that matters, regardless of cause. (5) Cohort The cohort of index hospital admissions included in the measure is restricted to hospitalizations for ischemic stroke. The measure is limited to ischemic stroke hospitalizations for a few reasons. First, ischemic strokes are the most common type of stroke, accounting for the vast majority of stroke hospitalizations.99 Second, the causes and prognosis of ischemic stroke are quite different than that of hemorrhagic stroke, so a combined cohort would be more heterogeneous. This heterogeneity could make it more difficult to account for a hospital’s patient mix and lead to a less fair measure. Similarly, patients with TIAs are not included largely due to concerns about inconsistency in the use of administrative codes to define TIA and potential for inclusion of patients without cerebrovascular conditions. For detailed information on the cohort definition please reference the stroke mortality technical report on our Web site at: https://cms.gov/Medicare/ 97 Saposnik G, Hill MD, O’Donnell M, Fang J, Hachinski V, Kapral MK. Variables Associated With 7-Day, 30-Day, and 1-Year Fatality After Ischemic Stroke. Journal of the American Heart Association 2008;39. 98 Counsell C, Dennis M, McDowall M, Warlow C. Predicting Outcome After Acute and Subacute Stroke: Development and Validation of New Prognostic Models Journal of the American Heart Association 2002:1041–7. 99 American Heart Association, Heart Disease and Stroke Statistics—2012 Update. American Heart Association, Circulation 2012, 125:e2-e220. PO 00000 Frm 00305 Fmt 4701 Sfmt 4700 50799 Quality-Initiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html. (6) Inclusion and Exclusion Criteria The measure includes hospitalizations for patients 65 years or older at the time of index admission and for whom there was a complete 12 months of FFS enrollment to allow for adequate risk-adjustment. The measure excludes the following admissions from the measure cohort: (1) Admissions for patients having a principal diagnosis of stroke during the index hospitalization who were transferred from another acute care facility are excluded because the hospital where the patient was initially admitted made critical acute care decisions (including the decision to transfer and where to transfer); (2) admissions for patients enrolled in the Medicare Hospice program any time in the 12 months prior to the index hospitalization, including the first date of the index admission are excluded because it is likely that these patients are continuing to seek comfort care and their goal may not be survival; and (3) admissions for patients that are discharged alive and against medical advice are excluded because providers did not have the opportunity to deliver full care and prepare the patient for discharge. (7) Risk Adjustment The measure adjusts for differences across hospitals in how at risk their patients are for death relative to patients cared for by other hospitals. Consistent with NQF guidelines, the model does not adjust for socioeconomic status or race because risk-adjusting for these characteristics would hold hospitals with a large proportion of minority or low socioeconomic status patients to a different standard of care than other hospitals. One goal of this measure is to illuminate quality differences that such risk-adjustment would obscure. (8) Calculating the Risk Standardized Mortality Ratio (RSMR) The measure is calculated using hierarchical logistic modeling (HLM). This approach appropriately accounts for the types of patients a hospital treats (that is, hospital case mix), the number of patients it treats, and the quality of care it provides. The HLM is an appropriate statistical approach to measuring quality based on patient outcomes when the patients are clustered within hospitals (and therefore the patients’ outcomes are not statistically independent) and the number of eligible patients for the measure varies from hospital to E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50800 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations hospital. As noted above, the measure methodology defines hospital case mix based on the clinical diagnoses provided in the hospital claims for their patients’ inpatient and outpatient visits for the 12 months prior to the stroke hospitalization, as well as those present in the claims for care at admission. However, the methodology specifically does not account for diagnoses present in the index admission that may indicate complications rather than patient comorbidities. In addition, the measure takes into account situations where patients initially present at one ED, are then admitted to another hospital for their index stroke hospitalization. The measure includes a risk-adjustment factor to account for EDtransfer patients. The RSMR is calculated as the ratio of the number of predicted deaths to the number of expected deaths and then the ratio is multiplied by the national unadjusted mortality rate. The ratio is greater than one for hospitals that have more deaths that would be expected for an average hospital with similar cases and less than one if the hospital has fewer deaths than would be expected for an average hospital with similar cases. This approach is analogous to a ratio of an ‘‘observed’’ or ‘‘crude’’ rate to an ‘‘expected’’ or risk-adjusted rate used in other similar types of statistical analyses. The RSMR is a point estimate—the best estimate of a hospital’s mortality rate based on the hospital’s case mix. For displaying the measure for the Hospital IQR Program, we computed an interval estimate, which is similar to the concept of a confidence interval, to characterize the level of uncertainty around the point estimate. We use the point estimate and interval estimate to determine hospital performance (for example, higher than expected, as expected, or lower than expected). For more detailed information on the calculation methodology, we refer readers to our Web site at: https:// cms.gov/Medicare/Quality-InitiativesPatient-Assessment-Instruments/ HospitalQualityInits/MeasureMethodology.html. We proposed to adopt this measure in the Hospital IQR Program for the FY 2016 payment determination and subsequent years under the exception authority in section 1886(b)(3)(B)(IX)(bb) of the Act as previously discussed in section IX.A.6. of the preamble of this final rule. Although the proposed measure is not currently NQF-endorsed or MAP supported, we considered other available measures that have been endorsed or adopted by the NQF, and VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 were unable to identify any other NQFendorsed measures that assess stroke mortality with a standard period of follow-up. We also are not aware of any other 30-day stroke mortality measures that have been endorsed or adopted by a consensus organization. The development of this measure went through the same rigorous development process as the other publicly reported outcomes measures and involved extensive input by stakeholders and clinical experts. It follows the same scientific approach to evaluate hospital performance as other Hospital IQR outcome measures. Finally, it has been validated with medical record measures and shown to produce similar hospitallevel results. Accordingly, we proposed to adopt the 30-day stroke mortality measure under the Secretary’s authority set forth at section 1886(b)(3)(B)(IX)(bb) of the Act. We invited public comment on this proposal. Comment: Many commenters opposed the use of the stroke mortality measure because it is not NQF-endorsed. Response: We submitted the 30-day Stroke Mortality Measure to the NQF for review during its 2012 Neurology Endorsement Maintenance Consensus Development Project. The NQF Neurology Steering Committee convened three times to assess the measure. At the first meeting, the Committee strongly recommended the measure for endorsement (the vote was 18 yes to 4 no). After the public comment period, the Steering Committee met for a second time to discuss the issues raised by the commenters. The issues raised during public comment were: (1) The measure uses administrative data rather than clinical data; (2) most of the severely disabled stroke patients are redirected to referral stroke centers, which may result in excess mortality at those sites; (3) unintended consequences—hospitals may selectively accept stroke patients with mild or moderate strokes and may not want to accept more severely ill patients; (4) the measure did not appear well validated; and (5) the NIHSS score is not included in the risk-adjustment model (The NIHSS is a tool used by healthcare providers to quantify the impairment caused by a stroke such as level of consciousness, eye movement, visual test, facial palsy, motor arm, motor leg, limb ataxia, sensory, language, and speech, whereas the NSPSSS assesses the presence of visual, speech, motor and sensory deficits for stroke patients.) Commenters cited the findings of the JAMA article, Comparison of 30-Day Mortality Models for Profiling Hospital Performance in PO 00000 Frm 00306 Fmt 4701 Sfmt 4700 Acute Ischemic Stroke With vs Without Adjustment for Stroke Severity, by Fonarow, et al. The Committee discussed these issues at length, especially the results in the Fonarow article. The Steering Committee then voted again on the measure. Votes on each of the four NQF criteria— importance, scientific acceptability, usability, and feasibility—resulted in a majority of high and moderate votes for the measure. For the overall endorsement vote, however the Committee did not reach consensus (the vote was split 11 yes to 11 no). The measure went out for a second public comment period with additional testing information. We elected to withdraw the stroke mortality measure from NQF review prior to the third Steering Committee meeting. For further information, we refer readers to the Official NQF Report for this Consensus Development Project, located here: https://www.qualityforum.org/ Publications/2012/12/ Neurology_Endorsement_Maintenance__Phase_I_Technical_Report.aspx. We submitted the measures for review by the MAP in December 2012. While some members of the MAP supported use of the measures in the Hospital IQR Program, in their Final Report to HHS, the MAP did not support the 30-day Stroke Mortality Measure because the measure did not receive NQF endorsement. We refer readers to the February 2013 MAP Pre-rulemaking recommendations located here: https:// www.qualityforum.org/Publications/ 2013/02/MAP_Pre-Rulemaking_Report__February_2013.aspx. In evaluating and selecting this measure for inclusion in the Hospital IQR Program, we considered whether there were other available measures that have been endorsed or adopted by the NQF, and were unable to identify any other NQF-endorsed measures that assess 30-day stroke mortality. We also are not aware of any other measures of 30-day stroke outcomes that have been endorsed or adopted by a consensus organization. The development of this measure went through the same rigorous development process as the other publicly reported outcomes measures and involved extensive input by stakeholders and clinical experts. This follows the same scientific approach to evaluate hospital performance as other Hospital IQR Program outcome measures. There are currently no stroke outcome measures in the Hospital IQR Program to complement the process of care and structural measures, yet stroke remains one of the top causes of death. This is why we proposed to adopt this measure for the Hospital IQR Program E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations under the Secretary’s authority set forth at section 1886(b)(3)(B)(IX)(bb) of the Act. We appreciate and have heard the concerns of the stakeholders on this issue. We are committed to working with the stakeholder communities and to continuously refine our measures, which for the stroke outcome measures includes risk adjusted patient severity. We will work with the stroke communities and other stakeholders to seek feasible ways to incorporate additional severity adjustment as suggested. We must highlight that stroke is the fifth leading cause of adult mortality in the U.S., and therefore we believe it would be a disservice to patients to delay inclusion of these current stroke outcome measures in quality reporting and quality improvement initiatives. We are committed to making these measures better and working with stakeholders to do so. Comment: Some commenters supported the addition of the stroke mortality measure to Hospital IQR Program. Response: We appreciate the commenters’ support. Comment: Several commenters requested CMS consider excluding hospice settings and levels of care for post discharge stroke patients. Response: The stroke mortality measure excludes patients who are enrolled in Medicare hospice on the day of admission or in the 12 months prior to the day of admission because the goal of the hospitalization for these patients is likely not survival. However, consistent with guidelines for health care quality outcome measures, the 30day measure does not exclude patients who transitioned to hospice or palliative care during their hospital stay because such transitions may be the result of quality failures that have led to poor clinical outcomes; thus, excluding these patients could mask quality problems. Moreover, the use of palliative care during a hospital stay is not necessarily an indication that a patient is no longer seeking life-sustaining measures. Palliative care is focused on providing patients relief of symptoms. It is increasingly used by patients who are not at the end of life and, therefore, should not be used to exclude patients from a mortality measure. Comment: A few commenters requested that CMS focus on an emeasure for strokes which implements ICD–10 codes. Response: We are currently expanding the use of e-measures and will continue to examine the feasibility of converting existing measures into e-measures. We VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 are also committed to transitioning current measures to ICD–10 once ICD– 10 is fully implemented. Comment: One commenter requested that the measure include Medicare Advantage patients. Response: We do not receive claims data for beneficiaries who are enrolled in the Medicare Advantage Program. Therefore, the measure cannot be calculated using claims paid under the Medicare Advantage Program. Comment: One commenter requested CMS develop a reporting mechanism, similar to the present on admission (POA) flag, so that providers can more accurately and properly report the care that they deliver to the patient. Response: We have implemented a POA coding requirement for primary and secondary diagnoses on claims submitted for Part A services. We currently do not use these codes in this measure. However, we appreciate the recommendation for the use of POA flags and will continue to evaluate whether they can be used as part of the stroke mortality measure rate calculations. Comment: One commenter requested CMS include the NQF #0467 measure— Acute Stroke Mortality Rate (AHRQ IQI 17) in the Hospital IQR measure set instead of the stroke readmission and mortality measures. Response: The NQF #0467 measure is a measure of inpatient deaths only and does not include deaths which occur in the post-acute timeframe. We believe it is important to not only measure inpatient deaths but also those that occur in any setting during the 30-day period after discharge, which are captured in the proposed measure. This is because measuring only in-hospital deaths may result in the unintended consequence of hospitals discharging patients inappropriately in order to avoid being attributed with their death. Comment: One commenter noted that the stroke mortality measure model does not provide adequate discrimination between hospitals in terms of performance citing a recent JAMA article which suggests that hospitals can be classified as ‘‘better than’’ or ‘‘worse than’’ expected mortality when those hospitals should be classified as ‘‘expected mortality’’ if the risk adjustment does not include the NIHSS. Response: The article referenced by the commenter in the Journal of the American Medical Association (JAMA) in 2012 is believed to be that written by Fonarow et al.100 In this article, the 100 Fonarow, G.C.; Pan, W.; Saver, J.L. et al. (2012) ‘‘Comparison of 30-Day Mortality Models for Profiling Hospital Performance in Acute Ischemic PO 00000 Frm 00307 Fmt 4701 Sfmt 4700 50801 authors compared categorization or classification of hospitals as better than, no different than, or worse than the national stroke rate using a 30-day mortality model with and without the NIHSS score. Briefly, Fonarow et al. created a 30-day mortality model thought to be identical to the CMS/Yale 30-day acute ischemic stroke mortality model. Once they created this model they added NIHSS score variables and categorized 782 hospitals using the model without the NIHSS score and with the NIHSS score. Their analyses showed that 94 percent of the 782 hospitals that were analyzed were classified or categorized identically by both models (that is, model with and without the NIHSS score). The commenter noted that Fonarow et al.’s article found that the model with the NIHSS score classified 6 percent of the hospitals (that is, 45 of 782 hospitals) differently from the model without the NIHSS score. We believe the reclassification found in article is potentially unreliable due to several limitations of this article. First over half of the patients in the study did not have a measured NIHSS score. This fact both undermines the findings in the article and provides evidence that implementing a measure with the NIHSS score would not be feasible in the near term. Second the measure analyzed within the article, though described as being the same as the CMS measure actually differed in important respects. The measure in the JAMA article lacks a risk variable for Emergency Department (ED)-transfer patients. The ED transfer variable included in the proposed measure is an important variable that likely captures some of the differences in stroke severity for patients treated in hospitals that are regional stroke centers. In addition the measure in the JAMA article included a different cohort of stroke patients other than Acute Ischemic Stroke patients (the JAMA article included hemorrhagic patients), the risk-adjustment includes different variables and is much less parsimonious (has 87 variables). Third, the article did not allow evaluation of the degree of differences between the results of the two models. A small change in the estimates may change ranking without meaningfully changing hospital results. The article does not provide information about how similar the new estimates are to the CMS original estimates, or whether the new estimates fall within the uncertainty of the original estimates. Nor does the article present the Stroke with vs without Adjustment for Stroke Severity. JAMA, vol. 308 No.3. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50802 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations correlation between the original model results and new results for hospitals. We believe the proposed stroke outcome measures were effectively developed, tested and risk adjust using the National Stroke Project Stroke Severity Scale (NSPSSS), a marker of patient severity other than but similar to the NIHSS score. The NIHSS is a tool used by healthcare providers to quantify the impairment caused by a stroke such as level of consciousness, eye movement, visual test, facial palsy, motor arm, motor leg, limb ataxia, sensory, language, and speech. The NSPSSS assesses the presence of visual, speech, motor and sensory deficits for stroke patients. The NSPSSS correlates well with NIHSS. During the measure development, we performed a comparison of the performance of the administrative claims model with the performance of a medical record model that included the NSPSSS. Our analysis found that the models had a high-level of agreement. The correlation coefficient of the hospital risk standardized readmission rates calculated from the claims and the medical record riskadjustment models is 0.99 and for the stroke mortality model it was 0.80. These results demonstrated the validity of the administrative claims data for risk-adjustment. Hospital performance on the measures using two different data sources (that is, administrative claims or medical records) was very similar. The measures we have developed are scientifically valid measures, developed in full transparency and with extensive input from the clinical community. We believe these are the best measures possible using available data and its implementation would encourage improvements in quality and patient outcomes. Comment: One commenter requested that measure performance be reported more frequently, on a quarterly basis. Response: We decided to use the proposed timeframe because it balances the needs for the most recent claims and for sufficient time to process the claims data and calculate the measures to meet the program implementation timeline. Quarterly reporting of performance data for the 30-day outcome measures will not allow sufficient differentiation of performance. However, we will continue to explore the feasibility of providing more frequent feedback on discharges to hospitals. After consideration of the public comments we received, we are finalizing as proposed the Hospital 30Day, all-cause risk-standardized rate of mortality following an admission for acute ischemic stroke for FY 2016 VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 payment determination and subsequent years. e. Hospital Risk-Standardized Payment Associated With a 30-day Episode-ofCare for Acute Myocardial Infarction (AMI) Measure (1) Background Providing high-value care is an essential part of our mission to provide better health care for individuals, better health for populations, and lower costs for health care. In order to incentivize innovation that promotes high-quality care at high value it is critical to examine measures of payment and patient outcomes concurrently. There is evidence of variation in payments at hospitals for AMI patients; mean 30-day risk-standardized payment among Medicare FFS patients aged 65 or older hospitalized for AMI in 2008 was $20,207, and ranged from $15,521 to $27,317 across 1,846 hospitals.101 However, high or low payments to hospitals are difficult to interpret in isolation. Some high payment hospitals may have better clinical outcomes when compared with low payment hospitals while other high payment hospitals may not have better outcomes. For this reason, the value of hospital care is more clearly assessed when pairing hospital payments with hospital quality. Therefore, we proposed to include a non-NQF-endorsed measure: hospital risk-standardized payment associated with a 30-day episode-of-care for acute myocardial infarction (AMI) in the Hospital IQR Program under the exception authority in section 1886(b)(3)(B)(IX)(bb) of the Act as previously discussed in section IX.A.6. of the preamble of this final rule. Although the proposed measure is not currently NQF-endorsed, we considered other available measures that have been endorsed or adopted by a consensus organization, and found no other feasible and practical measures on this topic. The MAP supports this measure contingent on NQF-endorsement. We believe it is important to adopt this measure as it is aligned with our 30day AMI mortality measure and can also be paired with our 30-day AMI readmission measure. This would facilitate assessing hospital value, because including this measure in the Hospital IQR Program and publicly reporting it on Hospital Compare will allow stakeholders to assess information 101 Kim N., Bernheim S.M., Ott L.S., et al. Hospital-level, Risk-Standardized Payment Associated with a 30-Day Episode-of-Care for AMI: Report prepared for the Centers for Medicare & Medicaid Services. 2013; Available at: https:// www.qualitynet.org. PO 00000 Frm 00308 Fmt 4701 Sfmt 4700 about a hospital’s quality and cost of care for AMI. The measure reflects differences in the management of care for patients with AMI both during hospitalization and immediately postdischarge. AMI is a condition with substantial variation in costs of care and, therefore, is an ideal condition for assessing relative value for an episodeof-care that begins with an acute hospitalization. By focusing on one specific condition, value assessments may provide actionable feedback to hospitals and incentivize targeted improvements in care. (2) Rationale for Examining Payments for a 30-Day Episode-of-Care When examining variation in payments, consideration of the episodeof-care triggered by admission is meaningful for several reasons. First, hospitalizations represent a brief period of illness that requires ongoing management post-discharge and decisions made at the admitting hospital affect payments for care in the immediate post-discharge period. Second, attributing payments for a continuous episode-of-care to admitting hospitals may reveal practice variations in the full care of the illness that can result in increased payments. Third, a 30-day preset window provides a standard observation period by which to compare all hospitals. Lastly, the AMI payment measure is intended to be paired with our 30-day AMI mortality and readmission measures and capture payments for Medicare patients across all care settings, services, and supplies, except for Medicare Part D (that is, inpatient, outpatient, skilled nursing facility, home health, hospice, physician/clinical laboratory/ambulance services, supplier Part B items, and durable medical equipment, prosthetics/ orthotics, and supplies). We have posted the measure methodology report on our Web site at: https://cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html. We refer readers to the report for further details on the risk adjustment statistical model as well as the model results. (3) Overview of the Measure The AMI payment measure assesses hospital risk-standardized payment associated with a 30-day episode-of-care for AMI for any non-federal acute care hospital. The measure includes Medicare FFS patients aged 65 or older admitted for an AMI and calculates payments for these patients over a 30day episode-of-care beginning with the index admission. In general, the E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations measure uses the same approach to riskadjustment as our 30-day outcome measures previously adopted for the Hospital IQR Program, including the AMI, HF, and PN readmission and mortality measures. We refer readers to our Web site at: https://cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/ HospitalQualityInits/MeasureMethodology.html. (4) Data Sources The proposed measure is claimsbased and uses Medicare administrative data that contain hospitalizations and payments for Medicare FFS beneficiaries hospitalized with AMI. mstockstill on DSK4VPTVN1PROD with RULES6 (5) Outcome The primary outcome of the AMI payment measure is the hospital-level risk-standardized payment for an AMI episode-of-care. The measure captures payments for Medicare patients across all care settings, services, and supplies, except Part D. By risk-standardizing the payment measure, we are able to adjust for case-mix at any given hospital and compare a specific hospital’s AMI payment to other hospitals with the same case-mix. The analytic time frame for the AMI payment measure begins with the index admission for AMI and ends 30 days post-admission. In order to isolate payment variation that reflects practice patterns rather than CMS payment adjustments, the AMI payment measure excludes policy and geography payment adjustments unrelated to clinical care decisions. We achieve this by ‘‘stripping’’ or ‘‘standardizing’’ payments for each care setting. Stripping refers to removing geographic differences and policy adjustments in payment rates for individual services from the total payment for that service. Standardizing refers to averaging payments across geographic areas for those services where geographic differences in payment cannot be stripped. Stripping and standardizing the payment amounts allows for a fair comparison across hospitals based solely on payments for decisions related to clinical care of AMI. (6) Cohort We created the AMI payment measure cohort to be aligned with the publicly reported AMI mortality measure cohort. Consistent with these measures, the AMI payment measure includes hospitalizations with a principal hospital discharge diagnosis of AMI using the International Classification of Diseases, Ninth revision, Clinical Modification. A full list of ICD–9–CM codes included in the final cohort can VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 be found in Appendix B of the technical report on our Web site at: https:// cms.gov/Medicare/Quality-InitiativesPatient-Assessment-Instruments/ HospitalQualityInits/MeasureMethodology.html. An index hospitalization is the initial AMI admission that triggers the 30-day episode-of-care for this payment calculation. The measure includes only those hospitalizations from short-stay acute care hospitals in the index cohort and restricts the cohort to patients enrolled in FFS Medicare Parts A and B (with no Medicare Advantage coverage). (7) Inclusion and Exclusion Criteria The AMI payment measure includes hospitalizations for patients 65 years or older at the time of index admission and for whom there was a complete 12 months of FFS enrollment to allow for adequate risk adjustment. The measure excludes the following admissions from the measure cohort: (1) Admissions for patients with fewer than 30 days of post-admission enrollment in Medicare because this is necessary in order to identify the outcome (payments) in the sample over the analytic period; (2) admissions for patients having a principal diagnosis of AMI during the index hospitalization who were transferred from another acute care facility are excluded, because the hospital where the patient was initially admitted made the critical acute care decisions (including the decision to transfer and where to transfer); (3) admissions for AMI patients who were discharged on the same or next day as the index admission and did not die or get transferred are excluded, because it is unlikely these patients suffered a clinically significant AMI; (4) admissions for patients enrolled in the Medicare Hospice program any time in the 12 months prior to the index hospitalization, including the first date of the index admission are excluded, because it is likely that these patients are continuing to seek comfort care and their goal may not be survival; (5) admissions for patients who are discharged alive and against medical advice are excluded because providers did not have the opportunity to deliver full care and prepare the patient for discharge; (6) admissions for patients transferred to or from federal or Veterans Administration hospitals are excluded, because we do not have claims data for these hospitals; thus, including these patients would systematically underestimate payments; and (7) admissions without a DRG or DRG weight for the index hospitalization are excluded, because we cannot calculate a payment for these PO 00000 Frm 00309 Fmt 4701 Sfmt 4700 50803 patients’ index admission using the IPPS; this would underestimate payments for the entire episode-of-care. (8) Risk Adjustment The measure adjusts for differences across hospitals in how payments are affected by patient comorbidities relative to patients cared for by other hospitals. Consistent with NQF guidelines, the model does not adjust for socioeconomic status or race, because risk-adjusting for these characteristics would hold hospitals with a large proportion of minority or low socioeconomic status patients to a different standard of care than other hospitals. One goal of this measure is to illuminate quality differences that such risk-adjustment would obscure. (9) Calculating the Risk Standardized Payment (RSP) The measure is calculated using hierarchical generalized linear statistical models with a log link and an inverse Gaussian error distribution. This approach appropriately models a positive, continuous, right-skewed outcome like payment and also accounts for the types of patients a hospital treats (that is, hospital case mix), the number of patients it treats, and the quality of care it provides. The hierarchical generalized linear model is an appropriate statistical approach to measuring quality based on patient outcomes when the patients are clustered within hospitals (and therefore the patients’ outcomes are not statistically independent) and sample sizes vary across hospitals. As noted above, the measure methodology defines hospital case mix based on the clinical diagnoses provided in the hospital claims for their patients’ inpatient and outpatient visits for the 12 months prior to the AMI hospitalization, as well as those present in the claims for care at admission. This methodology specifically does not, however, account for diagnoses present in the index admission that may indicate complications rather than patient comorbidities. The RSP is calculated as the ratio of predicted payments to expected payments and then the ratio is multiplied by the national unadjusted average payment for an episode-of-care. The ratio is greater than one for hospitals that have higher payments than would be expected for an average hospital with similar cases and less than one if the hospital has lower payments than would be expected for an average hospital with similar cases. This approach is analogous to a ratio of ‘‘observed’’ or ‘‘crude’’ rate to an E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50804 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations ‘‘expected’’ or ‘‘risk-adjusted’’ rate used in other similar types of statistical analyses. The RSP is a point estimate—the best estimate of a hospital’s payment based on the hospital’s case mix. For displaying the measure for the Hospital IQR Program, we computed an interval estimate, which is similar to the concept of a confidence interval, to characterize the level of uncertainty around the point estimate, we use the point estimate and interval estimate to determine hospital performance (for example, higher than expected, as expected, or lower than expected). For more detailed information on the calculation methodology, we refer readers to our Web site at: https://cms.gov/Medicare/ Quality-Initiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html. We proposed to adopt the AMI payment measure in the Hospital IQR Program for the FY 2016 payment determination and subsequent years under the exception authority in section 1886(b)(3)(B)(IX)(bb) of the Act as previously discussed in section IX.A.6. of the preamble of this final rule. Although the proposed measure is not currently NQF-endorsed, we considered available measures that have been endorsed or adopted by the NQF, and we were unable to identify any measures that assess hospital riskstandardized payment associated with a 30-day episode-of-care for acute myocardial infarction. We also are not aware of any other 30-day episode-ofcare for acute myocardial infarction measures that have been endorsed or adopted by a consensus organization. This measure is meant to be paired with our 30-day AMI mortality and/or readmission measure in order for us to gain a better understanding of the value of care for a hospital’s patients and the nation as a whole. We invited public comment on this proposal. Comment: Many commenters opposed the adoption of the AMI payment per episode of care measure because it is not NQF-endorsed. Response: Although the proposed measure is not currently NQF-endorsed, we considered other available measures that have been endorsed or adopted by a consensus organization, and found no other feasible and practical measures on this topic. The MAP supports this measure contingent on NQFendorsement. We believe it is important to adopt this measure as it is aligned with our 30-day AMI mortality measure and can also be paired with our 30-day AMI readmission measure. This measure would facilitate assessing hospital quality, because including this VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 measure in the Hospital IQR Program and publicly reporting it on Hospital Compare will allow stakeholders to assess information about a hospital’s quality and cost of care for AMI. Therefore, we are adopting this hospital risk-standardized payment associated with a 30-day episode-of-care for acute myocardial infarction (AMI) in the Hospital IQR Program under the exception authority in section 1886(b)(3)(B)(IX)(bb) of the Act as previously discussed in section IX.A.6. of the preamble of this proposed rule. There is evidence of variation in payments at hospitals for AMI patients; mean 30-day risk-standardized payment among Medicare FFS patients aged 65 or older hospitalized for AMI in 2008 was $20,207, and ranged from $15,521 to $27,317 across 1,846 hospitals. However, high or low payments to hospitals are difficult to interpret in isolation. Some high payment hospitals may have better clinical outcomes when compared with low payment hospitals while other high payment hospitals may not have better outcomes. For this reason, the quality of hospital care is more clearly assessed when pairing hospital payments with hospital quality. Comment: Some commenters noted that this measure is being proposed as a hospital measure even though it reflects the actions of a multitude of health care entities, many of which are often not within hospitals’ direct control. Costs within a 30-day episode of AMI care cannot be attributed solely to hospitals. Response: When considering payments to hospitals, we attributed payments for a 30-day episode of care to the hospital since the episode is triggered by admission to an inpatient hospitalization. Hospitalizations represent a brief period of acute illness that requires ongoing management postdischarge and hospitals are often directly responsible for scheduling postdischarge follow-up. Therefore decisions made at the admitting hospital affect not only the hospitalization payments, but payments for care in the immediate post-discharge period. Comment: A few commenters were concerned that the AMI payment measure is duplicative of CMS’ bundled payment program. Commenters questioned why CMS is not using CMS’ AMI episode grouper for this measure. Response: The AMI payment measure is different from our Bundled Payments for Care Improvement Initiative (BCPI) in several ways. If providers wish to participate in the BPCI for AMI episode of care, these episodes would be defined by DRGs and not ICD–9 codes. PO 00000 Frm 00310 Fmt 4701 Sfmt 4700 The goal of the AMI payment measure is to provide information on the value of care by comparing payments for an AMI episode of care with performance on quality measures like CMS’ 30-day readmission and mortality measures. Thus, it is important that the patient cohorts are as closely aligned as possible between payment and quality measures. This would not be possible if we used the AMI episode grouper. Comment: A few commenters requested clarification on the rationale for proposing the AMI payment measure when the MSPB measure is already in use and requested clarification regarding how the measure will be paired with the AMI Mortality and Readmission measures. These commenters believe the measure would be duplicative of the MSPB measure if it were to be adopted into the Hospital VBP Program. Response: The goal of the AMI payment measure is to provide information on the value of care provided for a specific condition, AMI, while the MSPB measure examines spending for all conditions. This measure is meant to be paired with our 30-day AMI mortality and/or readmission measure in order for us to gain a better understanding of the value of care for a hospital’s patients and the nation as a whole. We plan to publicly report a single summary riskstandardized payment (RSP) score for each hospital included in the measure. We proposed the AMI payment measure for the Hospital IQR Program, and at this time have not proposed to add it to the Hospital VBP Program. Because the AMI payment measure is condition-specific, we believe this measure would not be duplicative of the MSPB measure, which is not conditionspecific. Comment: A few commenters believed that the minimum number of cases for the AMI payment measure may not be reliable. Response: We use the same approach to small numbers and reliability for the AMI payment measure that we have established for our hospital riskadjusted outcome measures in general, including the mortality and readmission measures. Reliability is related to sample size. We adopted a riskadjustment modeling methodology for our outcome measures that takes into account sample size. Although the commenter raised the issue of reliability related to the AMI payment measure, the issue was raised and responded to in a previous rulemaking. We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53379) for our discussion of the basis for selecting the E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations minimum number of cases for the readmission measures for the Hospital Readmissions Reduction Program. We determined the 25-case threshold for public reporting based on a reliability statistic that is calculated from the intercluster correlation, a parameter of the model. In addition, we have considered how best to measure quality for small volume hospitals. Smaller hospitals do typically have less certain (for example, less statistically reliable) estimates, because they have fewer cases for use in assessing quality; that is a challenge inherent in outcome measurement. One advantage of the statistical model we use for the measures is that it allows for the inclusion of small hospitals while characterizing the certainty of their estimates. The hierarchical logistic regression model that we use to calculate the risk-standardized outcome measures allows the inclusion of hospitals with relatively few observations, but takes into account the uncertainty associated with sample size in estimating their risk-standardized outcome rates. The model takes into account the uncertainty in the estimate of outcome rates for small volume hospitals by assuming that each hospital is a typically performing hospital. It weighs that assumption along with the outcomes for the particular hospital in calculating the outcome rate. Therefore, the estimated outcome rates for smaller hospitals will likely be closer to the national rate because the limited number of eligible cases in the hospital tells little about that hospital’s true outcome rate. Comment: One commenter supported the measure methodology. Response: We appreciate the commenter’s support for this aspect of the measure methodology. Comment: One commenter requested CMS provide hospitals with their results before the AMI payment measure is added to Hospital IQR Program. Response: We strive to provide information to hospitals about new claims-based measures whenever it is feasible for us to do so. We plan to conduct a dry run prior to public reporting of the measure in which we mstockstill on DSK4VPTVN1PROD with RULES6 Topic will provide hospitals with their results on the measure as well as how payments for their patients are distributed among various post-acute care settings. Comment: One commenter was concerned that the AMI payment measure does not adequately capture case mix and has not been validated. Response: We have performed validation work to confirm the scientific rigor of using claims data for risk adjustment in outcome measures. We validated the AMI, HF, and pneumonia mortality and readmission measures with models that use medical recordabstracted data for risk adjustment. These analyses demonstrated that using claims data produces estimated hospital-level risk-standardized mortality rates (RSMRs) and riskstandardized readmission rates (RSRRs) that are very similar to the rates estimated by models based solely on medical record data. This high level of agreement in the results based on the two different approaches supports the use of the claims-based models for public reporting. Because the risk adjustment model for AMI payment is similar to that used for mortality, we believe that this previous validation study performed for the AMI, HF, and PN mortality and readmissions measures that establishes their overall reliability also supports that of the AMI payment measure. Our approach to gathering risk factors for patients also mitigates the potential limitations of claims data. Because not every diagnosis is coded at every visit, we use claims data for the year prior to the index admission, as well as secondary diagnosis codes during the index admission, for risk adjustment. Comment: One commenter noted the difference between the cost of care for those cases in the 10th percentile and the 90th percentile is small, especially when considering the cost of the admission is included in the calculation. One commenter believed that the index admission and readmissions are the largest drivers of payments for an AMI episode of care and other care settings will contribute little if any to hospital’s total episode payments. Response: The variation in the adjusted hospital-specific AMI 30-day episode-of-care payment ranges from $15,251 to $27,317 across 1,846 hospitals. We believe that this variation is sufficient for assessing differences in payment that arise from treating a patient with AMI. While other conditions may exhibit greater relative and absolute payment differences, assessing AMI payments remains important. This importance is magnified when considering that AMI quality and outcome measures are already being reported. The association between AMI episode payments and quality/outcome measures is of importance to us. While index admissions and readmissions are the most costly portions of treating AMI patients, they are not the only care settings used by AMI patients. In examining payments for AMI patients for a 30-day episode of care we find that there is variation between providers with regards to the types and amount of post-acute care used. After consideration of the public comments we received, we are finalizing as proposed the Hospital riskstandardized payment associated with a 30-day episode-of-care for acute myocardial infarction measure for the Hospital IQR Program for FY 2016 payment determination and subsequent years. In summary, we are adopting all of the Hospital IQR Program measures adopted in previous payment determinations, with the exception of seven measures (six chart-abstracted measures and 1 structural measure) that we are removing and one measure we are suspending (one chart-abstracted measure). We are finalizing five new claims-based measures for a total of 57 measures for the FY 2016 payment determination and subsequent years. Set out below is a table showing both the previously adopted and the new quality measures finalized in this final rule for the FY 2016 payment determination and subsequent years. This table does not include suspended measures and removed measures. Previously adopted hospital IQR Program measures and measures finalized in this final rule for the FY 2016 payment determination and subsequent years Acute Myocardial Infarction (AMI) Measures • AMI–7a Fibrinolytic (thrombolytic) agent received within 30 minutes of hospital arrival. • AMI–8a Timing of Receipt of Primary Percutaneous Coronary Intervention (PCI). Heart Failure (HF) Measures • HF–2 Evaluation of left ventricular systolic function. VerDate Mar<15>2010 50805 21:51 Aug 16, 2013 Jkt 229001 PO 00000 Frm 00311 Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2 50806 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Previously adopted hospital IQR Program measures and measures finalized in this final rule for the FY 2016 payment determination and subsequent years Topic Stroke Measure (STK) Set • • • • • • • • STK–1 VTE prophylaxis. STK–2 Antithrombotic therapy for ischemic stroke†. STK–3 Anticoagulation therapy for Afib/flutter†. STK–4 Thrombolytic therapy for acute ischemic stroke†. STK–5 Antithrombotic therapy by the end of hospital day 2†. STK–6 Discharged on Statin†. STK–8 Stroke education†. STK–10 Assessed for rehab†. • • • • • • VTE–1 VTE–2 VTE–3 VTE–4 VTE–5 VTE–6 VTE Measure Set VTE prophylaxis†. ICU VTE prophylaxis†. VTE patients with anticoagulation overlap therapy†. Patients receiving un-fractionated Heparin with doses/labs monitored by protocol†. VTE discharge instructions†. Incidence of potentially preventable VTE†. Pneumonia (PN) Measures • PN–6 Appropriate initial antibiotic selection. Surgical Care Improvement Project (SCIP) Measures • SCIP INF–1 Prophylactic antibiotic received within 1 hour prior to surgical incision. • SCIP INF–2: Prophylactic antibiotic selection for surgical patients. • SCIP INF–3 Prophylactic antibiotics discontinued within 24 hours after surgery end time gery). • SCIP INF–4: Cardiac surgery patients with controlled 6AM postoperative serum glucose. • SCIP INF–9: Postoperative urinary catheter removal on post operative day 1 or 2 with zero. • SCIP Cardiovascular-2: Surgery Patients on a Beta Blocker prior to arrival who received perioperative period. • SCIP–VTE-2: Surgery patients who received appropriate VTE prophylaxis within 24 hours (48 hours for cardiac surday of surgery being day a Beta Blocker during the pre/post surgery. Mortality Measures (Medicare Patients) • • • • • Acute Myocardial Infarction (AMI) 30-day mortality rate. Heart Failure (HF) 30-day mortality rate. Pneumonia (PN) 30-day mortality rate. Stroke 30-day mortality rate.*** COPD 30-day mortality rate.*** Patients’ Experience of Care Measures • HCAHPS survey (expanded to include one 3-item care transition set * and two new ‘‘About You’’ items).* Readmission Measures (Medicare Patients) • • • • • • • Acute Myocardial Infarction (AMI) 30-day Risk Standardized Readmission Measure. Heart Failure (HF) 30-day Risk Standardized Readmission Measure. Pneumonia (PN) 30-day Risk Standardized Readmission Measure. 30-day Risk Standardized Readmission following Total Hip/Total Knee Arthroplasty.* Hospital-Wide All-Cause Unplanned Readmission (HWR).* Stroke 30-day Risk Standardized Readmission.*** COPD 30-day Risk Standardized Readmission.*** AHRQ Patient Safety Indicators (PSIs) Composite Measures • Complication/patient safety for selected indicators (composite). mstockstill on DSK4VPTVN1PROD with RULES6 AHRQ PSI and Nursing Sensitive Care • PSI–4 Death among surgical inpatients with serious treatable complications. Structural Measures • • • • VerDate Mar<15>2010 Participation in a Systematic Database for Cardiac Surgery. Participation in a Systematic Clinical Database Registry for Nursing Sensitive Care. Participation in a Systematic Clinical Database Registry for General Surgery. Safe Surgery Checklist Use.** 21:51 Aug 16, 2013 Jkt 229001 PO 00000 Frm 00312 Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 50807 Previously adopted hospital IQR Program measures and measures finalized in this final rule for the FY 2016 payment determination and subsequent years Topic Healthcare-Associated Infections Measures • Central Line Associated Bloodstream Infection. • Surgical Site Infection. —SSI following Colon Surgery. —SSI following Abdominal Hysterectomy. • Catheter-Associated Urinary Tract Infection. • MRSA Bacteremia. • Clostridium difficile (C. difficile). • Healthcare Personnel Influenza Vaccination. Surgical Complications • Hip/Knee Complication: Hospital-level Risk-Standardized Complication Rate (RSCR) following Elective Primary Total Hip Arthroplasty.* Emergency Department (ED) Throughput Measures • ED–1 Median time from emergency department arrival to time of departure from the emergency room for patients admitted to the hospital†. • ED–2 Median time from admit decision to time of departure from the emergency department for emergency department patients admitted to the inpatient status†. Prevention: Global Immunization (IMM) Measures • Immunization for Influenza. Cost Efficiency • Medicare Spending per Beneficiary. • AMI Payment per Episode of Care.*** Perinatal Care • Elective delivery prior to 39 completed weeks of gestation*/†. * New or expanded measures/items for FY 2015 payment determination and subsequent years. ** New measures for FY 2016 payment determination and subsequent years. *** Measures finalized in this final rule for the FY 2016 payment determination and subsequent years. † Measure for electronic reporting via CEHRT in the Hospital IQR Program (voluntary participation in CY 2014). mstockstill on DSK4VPTVN1PROD with RULES6 7. Electronic Clinical Quality Measures We believe that collection and reporting of data through health information technology will greatly simplify and streamline reporting for many CMS quality reporting programs. Through electronic reporting, hospitals will be able to leverage EHRs to capture, calculate, and electronically submit quality data that is currently manually chart-abstracted and submitted to CMS for the Hospital IQR Program. As we noted in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51614), we recognize the need to align and harmonize measures across hospital quality reporting programs to minimize the reporting burden imposed on hospitals. In the Medicare EHR Incentive Program Stage 2 final rule (77 FR 54083 through 54087), we finalized 29 clinical quality measures from which hospitals must select at least 16 measures covering three domains to report beginning in FY 2014. We anticipate that, as health information technology evolves and infrastructure is expanded, we will have the capacity to accept electronic VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 reporting of many of the chartabstracted measures that are currently part of the Hospital IQR Program. Recently, we published in the Federal Register (78 FR 308 through 310) a Request for Information (RFI) entitled, ‘‘Medicare Program; Request for Information on Hospital and Vendor Readiness for Electronic Health Records Hospital Inpatient Quality Data Reporting’’ to gather stakeholder feedback to determine the optimal timing and transition strategy for adopting electronic reporting of quality measures by hospitals participating in the Hospital IQR Program. The information received in response to the RFI was considered as the requirements set forth below were developed. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27694 through 27695), we proposed an approach that begins to align the Hospital IQR and Medicare EHR Incentive Programs by providing hospitals currently participating in the Hospital IQR Program with the option of electronically reporting a subset of measures. PO 00000 Frm 00313 Fmt 4701 Sfmt 4700 We proposed that hospitals would be able to, on a voluntary basis, electronically report 16 measures across four measure sets, (stroke [STK], venous thromboembolism [VTE], emergency department [ED], and perinatal care [PC]) in CY 2014 for the FY 2016 Hospital IQR Program payment determination. These four measure sets are already included in the Hospital IQR Program as chart-abstracted measures. The measures in three of these four measure sets—STK, VTE, ED—(15 measures) are already included in the Medicare EHR Incentive Program Electronic Reporting Pilot for Eligible Hospitals and CAHs (76 FR 74489). With regard to the perinatal care (PC) measure set, we stated in the 2013 IPPS/ LTCH PPS final rule that we would consider electronic reporting when the e-specification of the PC–01 measure became available. The electronic specifications for these measures are included in the electronic clinical quality measure library at: https://www. cms.gov/Regulations-and-Guidance/ Legislation/EHRIncentivePrograms/ eCQM_Library.html. We recognize that E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50808 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations PC–01 is a highly burdensome measure for hospitals to report via chart abstraction. Also, we do not believe that the measures, in their electronically specified form, are substantively different than they are in their chartabstracted form, although we recognized that the EHR-based extraction methodology is different from the chart abstraction data collection methodology. We proposed to make electronic reporting voluntary in CY 2014. The requirements for electronic reporting are discussed below in section IX.A.9.d. of the preamble of this final rule. We invited public comment on this proposal. Comment: Most commenters expressed support for CMS efforts to align quality measurement reporting programs, encouraged CMS to simplify reporting periods as much as possible and urged CMS to continue to work to align the Hospital IQR Program, Medicare EHR Incentive Program, and all other federal quality reporting programs now and in the future. Commenters suggested CMS consider the variety of health system settings throughout the entire process of quality measurement when planning to include measures for public reporting and valuebased purchasing (VBP). Response: We agree with the commenters and believe that aligning various federal quality reporting programs will reduce provider reporting burden and increase patient quality of care now and in the future. We believe the optional electronic reporting will simplify reporting periods by enabling hospitals to submit clinical quality measures for both the Medicare EHR Incentive Program and the Hospital IQR Program with one submission. We will take into consideration the suggestion to consider the variety of health system settings throughout the entire process of quality measurement when planning to include measures for public reporting and value based purchasing. Comment: One commenter found the proposed approach—collecting electronic clinical quality measures—to be totally devoid of the critical role the Hospital IQR Program plays in providing valid, reliable and consistent data collection and reporting of measures for both public reporting and pay for reporting programs. Response: We appreciate the comment, but we disagree that the collection of electronic clinical quality measures is devoid of the critical role of the Hospital IQR Program. To align various federal quality programs affecting hospitals, we believe it is important to implement electronic measure reporting for hospitals. The VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 movement to adopt electronic measure reporting in the Hospital IQR Program will ultimately lessen the reporting burden on hospitals and improve data reliability. Comment: A few commenters encouraged CMS to spend more time planning for the transition to electronic measures for the Hospital IQR Program and urged CMS to address the timeline under which electronic clinical quality measures are developed and implemented. Response: We have invested and will continue to invest in planning for the transition to electronic clinical quality measures. We have evaluated the electronic clinical quality measures’ development and implementation processes and expect to streamline these processes in the near term. There is a well-established process whereby we work with stakeholders to propose and finalize electronic clinical quality measures. For additional details about these processes please see the CMS electronic clinical quality measures resource at https://www.cms.gov/ Regulations-and-Guidance/Legislation/ EHRIncentivePrograms/ClinicalQuality Measures.html and also see the Measures Management Blueprint at https://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/MMS/Measures ManagementSystemBlueprint.html. Comment: One commenter requested CMS lay out its plan for the current core measure topics (Acute Myocardial Infarction, Heart Failure, Pneumonia, Surgical Care Improvement Process, and Immunization) to provide healthcare organizations with enough lead time to plan for and make necessary changes to existing electronic medical record systems, hire appropriate staff, and address any issues as the Hospital IQR Program shifts to electronic data abstraction. Response: We understand the need to share the Hospital IQR Program electronic measures strategy to provide vendors and providers with enough lead time to plan for human resource and IT needs and we plan to continue to address these issues as we transition to electronic reporting of quality measures in the Hospital IQR Program. We intend to consider the adoption of additional electronic measures in future rulemaking. Comment: One commenter requested that CMS clarify whether the Stroke, VTE, ED, Perinatal, and Severe Sepsis measures will only be allowed to be submitted from the electronic medical record or will still be allowed to be reported via chart-abstraction under the Hospital IQR Program for FY 2014 and PO 00000 Frm 00314 Fmt 4701 Sfmt 4700 FY 2015, and asked whether a hospital’s failure to submit will result in a 2 percentage point reduction in its annual payment update. Response: To clarify, the electronic submission of the Stroke, VTE, ED, and PC measure data for the Hospital IQR Program in 2014 for the FY 2016 payment determination is voluntary, and hospitals can elect to submit the data via chart abstraction instead. For the FY 2014 and FY 2015 payment determination, hospitals will submit via chart-abstraction as previously finalized. We also note that the STK–1 measure need not be reported as part of the STK measure set for those electronically reporting because no electronic specification exists for STK– 1. There is no severe sepsis measure currently adopted for the Hospital IQR Program. Comment: Some commenters opposed requiring electronic submission of Hospital IQR Program measures in 2015. Commenters recommended instead that hospitals continue to electronically report measures on a voluntary basis for the Hospital IQR Program. Commenters indicated that this option would provide CMS with the time needed to collect evidence from the hospitals that voluntarily reported in 2014 to understand issues, lessons learned, and such and specify a date certain for the start of required electronic clinical quality measures reporting for the Hospital IQR Program. Commenters concluded that the proposal does not provide CMS with the benefit of learning from experience from the field. Response: We understand several commenters had concerns regarding our consideration to require mandatory electronic submission of measures for the Hospital IQR Program in 2015. To address these concerns, we plan to monitor electronic clinical quality measures submissions and CMS system responses. The 2013 Medicare EHR Incentive Program Electronic Reporting Pilot data (which will be submitted by November 30, 2013) will be used to develop and test the electronic clinical quality measures data collection process. This process will inform our decisions regarding electronic reporting of certain Hospital IQR measures in CY 2015 and beyond. Comment: One commenter sought clarification regarding how hospitals may participate in the EHR Incentive Program Pilot. Response: The 2013 Medicare EHR Incentive Program Electronic Reporting Pilot is a voluntary electronic reporting option hospitals may use to satisfy the electronic clinical quality measures reporting component for the Medicare E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations EHR Incentive Program. Participation in the pilot is highly encouraged and allows hospitals an opportunity to pioneer efforts for submitting clinical quality measures electronically. More information on the pilot, including how to participate, can be found on the QualityNet Web site at: https:// www.qualitynet.org/dcs/ContentServer? c=Page&pagename= QnetPublic%2FPage%2FQnet Tier2&cid=1228771190900. Comment: Several commenters requested that CMS evaluate the 2012 EHR Incentive Program Reporting Pilot data to determine the program’s challenges and lessons learned and urged CMS to extend the duration of the pilot program. Commenters also urged CMS to work with vendors to make the EHR Incentive Program Reporting Pilot a viable option for all hospitals. Response: The 2013 Medicare EHR Incentive Program Electronic Reporting Pilot data (which will be submitted by November 30, 2013) will be used to develop and test the electronic clinical quality measures data collection process as well as the monitoring process. We plan to share the lessons learned once the two-year pilot has concluded. We will be looking for errors in data submissions to identify potential problems—both systemic and hospitalspecific. We will analyze the pilot data to assess the consistency and reliability of quality measure reporting and will leverage those insights to inform electronic measure reporting policies. We do not plan to extend the pilot beyond FY 2013 because the Medicare EHR Incentive Program has established electronic reporting options for hospitals beginning in FY 2014. Comment: Many commenters requested that CMS consider the impact of the proposal to collect and use electronic clinical quality measures data on the overall establishment of national performance rates for the Hospital VBP Program. The commenters raised the concern that this proposal might negatively impact the true national database displayed on Hospital Compare and the benchmark values used to determine scoring for the Hospital VBP Program if hospitals are allowed to submit electronic measure data without fundamental statistical analysis to substantiate the accuracy, reliability and validity of the data. Response: We selected these four measure sets specifically to avoid impact to the Hospital VBP Program and note that the four measure sets are not included in the Hospital VBP Program. We do not intend to utilize the CY 2014 electronically submitted data for any of these measure sets to determine a VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 hospital’s baseline period for the Hospital VBP Program, in part because the volume of data we are requesting— one quarter of data—is insufficient to establish a baseline. We will consider adopting electronically-submitted measures for the Hospital VBP Program as the measures meet the program’s statutory requirements. Comment: One commenter supported the development of a central portal for distribution of electronic measure specifications and associated tools. Response: We appreciate the comment and will take it into consideration. Comment: One commenter urged CMS to formally designate a single national central external reference library for electronic clinical quality measures. Response: We believe the commenter is requesting CMS develop a central repository of electronic quality measures similar to NQF’s repository of endorsed quality measures. We will consider this request that we formally designate this type of repository for electronic clinical quality measures. Comment: A few commenters expressed concern that, as hospitals move towards submitting electronic clinical quality measures and the amount of quality measures increases, they face the difficulty of documenting activities that are spread over multiple electronic systems that may not yet be fully integrated. The commenters noted that since there is not yet an EHR available that handles all facets of healthcare delivery, hospitals will always run into this problem. Response: We are aware of the challenges associated with moving toward electronic quality measure reporting such as an increase in the difficulty of documenting activities using multiple electronic systems that may not yet be fully integrated. However, we believe that in the longrun, electronic quality measure reporting from EHRs will benefit patients and providers by decreasing the burden on providers of reporting measures using the chart-abstraction method. We believe electronic reporting will increase provider reporting efficiency and reduce costs by decreasing paperwork. Comment: Several commenters were concerned that electronic clinical quality measures yield different performance rates than their chartabstracted counterpart measures and, urged CMS to postpone mandatory electronic submission of measures to avoid reporting disparate results. The commenters supported a standardized electronic measures vocabulary to PO 00000 Frm 00315 Fmt 4701 Sfmt 4700 50809 reduce the reporting burden and electronic collection of health care quality information. The commenters also urged CMS to keep the electronic clinical quality measures library current with clinical practice and update the value sets as needed, based on changes to the national vocabularies. Response: We intend to use the voluntarily submitted measure data to assess the differences in performance rates for electronically submitted versus chart-abstracted data. We currently update electronic specifications annually to reflect current clinical practice for electronic clinical quality measures finalized in the Stage 2 final rule (Table 10: 77 FR 54083 through 54087), which include the four measure sets that we proposed to be electronically reported for the Hospital IQR Program. Each CMS electronic clinical quality measure ID identifies a root measure number plus a version number, which corresponds with a specific version of electronic specifications with the related value sets for each electronic clinical quality measure. We work in conjunction with the National Library of Medicine (NLM) and Office of the National Coordinator for Health Information Technology (ONC) to update value sets as needed and to standardize vocabularies. For more information on electronic specifications for electronic clinical quality measures, please visit https:// www.cms.gov/Regulations-andGuidance/Legislation/ EHRIncentivePrograms/ Electronic_Reporting_Spec.html. Comment: Several commenters agreed with CMS that measures used should be endorsed by a multi-stakeholder organization because consideration and input from a variety of stakeholders is necessary to ensure efficient and optimized use of measurement in the multi-dimensional process of health care delivery. Response: We appreciate the comment and agree with the commenter. We support measures approved through a multi-stakeholder consensus development process such as that of NQF. NQF uses a formal ‘‘Consensus Development Process’’ to evaluate and endorse consensus standards, including performance measures, and is designed to consider the interests of stakeholder groups from across the healthcare industry. After consideration of all the public comments we received, we are finalizing our proposal to allow optional electronic submission of the STK, VTE, ED, and PC measure sets for the FY 2016 payment determination. As we note above, the STK–1 measure need not be E:\FR\FM\19AUR2.SGM 19AUR2 50810 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations reported as part of the STK measure set for those electronically reporting because no electronic clinical quality measure exists for STK–1. As further detailed in section IX.A.9.d. of the preamble of this final rule, hospitals may electronically report one or more of these four measure sets electronically. mstockstill on DSK4VPTVN1PROD with RULES6 8. Possible New Quality Measures and Measure Topics for Future Years We anticipate that, as EHR technology evolves, hospitals will electronically report all chart-abstracted clinical process of care and HAI measures which are currently part of the Hospital IQR Program or which have been proposed for adoption into the Program. As stated above, we intend for the future direction of electronic quality measure reporting to significantly reduce administrative burden on hospitals under the Hospital IQR Program. We will continue to work with measure stewards and developers to develop new measure concepts, and conduct pilot, reliability, and validity testing. We believe that this proposal will provide hospitals and CMS with the ability to test systems in CY 2014 in order to prepare for future required electronic reporting. We believe this will simplify measure collection and submission for the Hospital IQR Program, and will reduce the burden on hospitals to report chart-abstracted measures. We intend to propose that hospitals report additional electronic measures in an effort to reduce the burden associated with reporting chart abstracted measures and to continue to promote the adoption of CEHRT. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27695), we invited public comment on our intention to add 5 new measures to be collected via EHRs in the future. The five new measures listed below were reviewed by the MAP for inclusion in the Hospital IQR Program: • Severe Sepsis and Septic Shock Management Bundle NQF #0500 (MAP supported) • PC–02 Cesarean Section NQF #0471 (MAP supported) • PC–05 Exclusive Breast Milk Feeding NQF #0480 (MAP supported) • Healthy Term Newborn NQF #0716 (MAP supported the direction of this measure) • Hearing Screening Prior to Hospital Discharge NQF #1354 (MAP supported). Comment: A few commenters supported the five measures that CMS intends to collect via EHRs in the future. One commenter stated that the five measures that CMS intended for ereporting should be put on hold until VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 the experience with the reporting of the first set of e-measures are available. Many commenters strongly advocated that sepsis and septic shock management saves lives and strongly recommended the implementation of this measure no later than 2015. A few commenters were very concerned that the severe sepsis and septic shock management and the Cesarean section measures have not been specified, validated or NQF-endorsed as emeasures and therefore, would not be conducive for e-reporting. A few commenters supported the PC– 05 Exclusive Breast Milk Feeding, Healthy Term Newborn, and Hearing Screening Prior to Hospital Discharge measures, and recommended the identification of the population through the use of administrative codes rather than a combination of diagnoses. One commenter did not support the PC–05 Exclusive Breast Milk Feeding measure stating that the exclusion limitation of this measure that requires a provider/ lactation consultant to complete the documentation is burdensome and does not match the EHR infrastructure and workflow. One commenter did not support the Hearing Screening Prior to Hospital Discharge measure which was believed to be more appropriate as an outpatient measure. Response: We thank the commenters for their input and we will take them into consideration as we decide whether to collect these measures via EHRs in the future. Comment: In addition to suggestions regarding specific measures, we also received many comments on the following measure topics: • Medication Reconciliation (NQF #0097), and Medication Reconciliation Post-Discharge (NQF #0554) • Medication safety • MRSA surveillance testing • Surgical outcomes, including lowerextremity bypass complications, ICU mortality and complications, elderly surgical outcomes and colorectal surgery outcomes • Appropriate therapy for surgical prophylaxis • TJC Substance use measure set • TJC Tobacco treatment measure set • Participation in a systematic clinical database for vascular treatment • Colorectal cancer screening • Oncology: Plan of care for pain • Urinary incontinence • Pain assessment • Hospital malnutrition: Nutrition screening and assessment • Registry-based CABG composite score We thank the commenters for the comments and suggestions and will take PO 00000 Frm 00316 Fmt 4701 Sfmt 4700 them into consideration for future measure selections. 9. Form, Manner, and Timing of Quality Data Submission a. Background Sections 1886(b)(3)(B)(viii)(I) and (II) of the Act state that the applicable percentage increase for FY 2007 and each subsequent fiscal year shall be reduced by 2.0 percentage points (or beginning with FY 2015, by one-quarter of such applicable percentage increase (determined without regard to sections 1886(b)(3)(B)(ix), (xi), or (xii) of the Act)) for any subsection (d) hospital that does not submit, to the Secretary in accordance with this clause and in a form and manner, and at a time, specified by the Secretary, data required to be submitted on measures selected under this clause with respect to such a fiscal year. For each Hospital IQR Program year, we require that hospitals submit data on each measure in accordance with the measure’s specifications for a particular period of time. The data submission requirements, Specifications Manual, and submission deadlines are posted on the QualityNet Web site at: https:// www.QualityNet.org/. Hospitals submit quality data through the secure portion of the QualityNet (formerly known as QualityNet Exchange) Web site (https:// www.QualityNet.org). This Web site meets or exceeds all current Health Insurance Portability and Accountability Act requirements for security of protected health information. In order to participate in the Hospital IQR Program, hospitals must meet specific procedural requirements. Hospitals choosing to participate in the Hospital IQR Program must also meet specific data collection, submission, and validation requirements. b. Procedural Requirements for the FY 2016 Payment Determination and Subsequent Years The Hospital IQR Program procedural requirements are now codified in regulation at 42 CFR 412.140. Hospitals should generally refer to the regulation for participation requirements. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27695 through 27696), however, we proposed to make three changes to the procedural requirements. We proposed to align the last date to withdraw with the final submission deadline. The current withdrawal deadline is August 15 of the fiscal year preceding the fiscal year for which a Hospital IQR Program payment determination will be made. We proposed to change that deadline to E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations May 15 prior to the start of the payment year affected in order to align with the last submission quarter deadline. For example, if a hospital wanted to withdraw from the program for the FY 2016 payment determination, the hospital would need to complete the withdrawal by May 15, 2015. We proposed to amend the language at 42 CFR 412.140(b) to reflect this proposal. We proposed this change because we are striving to provide more timely feedback to hospitals regarding their annual payment update (APU) status. We do not believe this change would add any additional burden to hospitals and it would provide CMS the ability to make earlier participation decisions. We invited public comment on this proposal. Comment: Several commenters supported the administrative changes proposed in the Hospital IQR Program. Response: We appreciate the commenters’ support. After consideration of the public comments we received, we are finalizing as proposed the alignment of the last day to withdraw with the final submission deadline, May 15th. We are also amending our regulations at § 412.140(b) to reflect this policy. In addition, we proposed two technical corrections to the regulation text at 42 CFR 412.140. The first correction is to the title of this section. The current title is ‘‘Participation, Data Submission, and Validation Requirements under the Hospital Inpatient Quality Review (IQR) Program.’’ This should state ‘‘Participation, Data Submission, and Validation Requirements Under the Hospital Inpatient Quality Reporting (IQR) Program.’’ The second technical correction is at paragraph (a)(3) which states: ‘‘Submit a completed Notice of Participation Form to CMS if the hospital is participating in the program for the first time, has previously withdrawn from the program and would like to participate again, or has received a new CMS Certification Number (CNN).’’ We proposed to correct the acronym ‘‘CNN’’ to ‘‘CCN.’’ The proposed language would state: ‘‘Submit a completed Notice of Participation Form to CMS if the hospital is participating in the program for the first time, has previously withdrawn from the program and would like to participate again, or has received a new CMS Certification Number (CCN).’’ Comment: Several commenters supported the proposed technical corrections. Response: We appreciate the commenters’ support. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 After consideration of the public comments we received, we are finalizing as proposed two technical corrections to the regulation text at § 412.140. The first correction is to the title of this section, ‘‘Participation, Data Submission, and Validation Requirements Under the Hospital Inpatient Quality Reporting (IQR) Program.’’ The second technical correction is to paragraph (a)(3) to ‘‘Submit a completed Notice of Participation Form to CMS if the hospital is participating in the program for the first time, has previously withdrawn from the program and would like to participate again, or has received a new CMS Certification Number (CCN).’’ c. Data Submission Requirements for Chart-Abstracted Measures In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53536 through 53537), for the FY 2015 payment determination and subsequent years, we retained the 41⁄2 months quarterly submission deadline for chart-abstracted quality measures. We also retained the aggregate population and sampling deadline of 4 months. Hospitals would continue to be required to submit aggregate population and sample size counts to CMS on a quarterly basis for Medicare and nonMedicare discharges for the topic areas for which chart-abstracted data must be submitted (76 FR 51640 through 51641). We adopted the same 14-day period after the aggregate population and sample size count deadline to submit the required patient-level records. For the FY 2016 payment determination and subsequent years, hospitals must submit data for four consecutive calendar year discharge quarters. For example, for the FY 2016 payment determination, the submission quarters are as follows: 1Q CY 2014, 2Q CY 2014, 3Q CY 2014 and 4Q CY 2014. We also adopted this submission deadline for the new chartabstracted measure for FY 2016, Elective Delivery Prior to 39 Completed Weeks Gestation: Percentage of Babies Electively Delivered Prior to 39 Completed Weeks Gestation which is collected via a Web Based Tool. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27696), for the FY 2016 payment determination and subsequent years, we proposed to clarify the submission deadline time. Although we have historically stated that the submission deadline is 11:59 p.m., we have not clarified which time zone. For the FY 2016 payment determination and subsequent years we proposed to clarify that submissions to QualityNet will be accepted until 11:59 p.m. Pacific time. PO 00000 Frm 00317 Fmt 4701 Sfmt 4700 50811 We invited public comment on this proposal. Comment: Several commenters supported the proposed clarification. Response: We appreciate the commenters’ support. After consideration of the public comments we received, we are finalizing as proposed policy to reflect that submissions to QualityNet will be accepted until 11:59 p.m. Pacific time. d. Data Submission Requirements for Quality Measures That May be Voluntarily Electronically Reported for the FY 2016 Payment Determination In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27696 through 27698), we proposed the following approach to begin to align quality measure reporting under the Hospital IQR and Medicare EHR Incentive Programs. (We noted that this proposal, if finalized, does not implement any statutory provisions of the HITECH Act or change any of the existing regulatory provisions of the Medicare EHR Incentive Program, which are the subject of section IX.E of the preamble of this final rule, separate rulemaking, and public comment.) Under the Hospital IQR Program, for the FY 2016 payment determination, we proposed that hospitals may choose to either (1) electronically report at least one quarter of CY 2014 quality measure data for each measure in each of four Hospital IQR measure sets (STK, VTE, ED, and PC), or (2) to continue reporting all of these measures using chart-abstracted data for all four quarters of CY 2014. The proposal also stated, if a hospital chose to electronically report the four measure sets, all of the quality measures in those four measure sets must be electronically reported for the same reporting quarter(s) although, as stated above, the hospital would choose which quarter(s) to report. We strongly recommended hospitals electronically report the 16 measures in these four measure sets in CY 2014, to provide hospitals and CMS with the ability to test systems and adjust workflow in CY 2014 in order to prepare for required electronic reporting. We stated our belief that this will simplify quality reporting and submission for the Hospital IQR Program, and will reduce the reporting burden on hospitals. To further incentivize hospitals to choose this option, we stated our intent to use the electronically reported data to determine whether the hospital has satisfied the Medicare EHR Incentive Program clinical quality measure reporting requirement. We noted that the hospital must also satisfy all other E:\FR\FM\19AUR2.SGM 19AUR2 50812 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations has satisfied the Medicare EHR Incentive Program clinical quality measure reporting requirement) or whether the hospital wishes to submit the data for both the Hospital IQR Program and the Medicare EHR Incentive Program. We proposed that, if a hospital chooses to report the four requirements for the Medicare EHR Incentive Program. We proposed different Hospital IQR Program data submission deadlines for each quarter depending on whether the hospital is submitting the data solely for the Hospital IQR Program (that is, if the hospital does not want the data to be used to determine whether the hospital measure sets electronically for the Hospital IQR Program, but does not want the data to be used to determine whether the hospital has satisfied the Medicare EHR Incentive Program clinical quality measure reporting requirement, the reporting periods and deadlines would be as follows: PROPOSED FY 2016 HOSPITAL IQR PROGRAM CHART-ABSTRACTED MEASURE REPORTING PERIODS AND DEADLINES Discharge reporting periods Submission deadlines January 1, 2014–March 31, 2014 ........................................................................................................................................... April 1, 2014–June 30, 2013 ................................................................................................................................................... July 1, 2014–September 30, 2014 .......................................................................................................................................... October 1, 2013–December 31, 2014 ..................................................................................................................................... We proposed that if the hospital does not want us to use the electronically reported data to also determine whether the hospital has satisfied the Medicare EHR Incentive Program clinical quality measure reporting requirement, we would modify this data submission schedule to align the reporting periods and deadlines for the Hospital IQR and Medicare EHR Incentive Programs. Specifically, we proposed that if a hospital wants us to also use the electronically reported data to determine whether the hospital has satisfied the Medicare EHR Incentive Program clinical quality measure reporting requirement, the Medicare EHR Incentive Program reporting periods and deadlines could be used to satisfy the Hospital IQR Program August 15, 2014. November 15, 2014. February 15, 2014. May 15, 2013. requirements. The Medicare EHR Incentive Program clinical quality measure reporting follows the Federal fiscal year while the Hospital IQR Program follows the calendar year. The table below lists the FY 2014 Medicare EHR Incentive Program reporting periods and submission deadlines. MEDICARE EHR INCENTIVE PROGRAM REPORTING PERIODS AND DEADLINES FY 2014 Reporting periods Submission deadlines mstockstill on DSK4VPTVN1PROD with RULES6 For eligible hospitals in their first year of the Medicare EHR Incentive Program—Any 90 consecutive days in FY 2014 prior to July 1, 2014. For eligible hospitals that are beyond their first year of the Medicare EHR Incentive Program reporting electronically— Any FY 2014 quarter, or the entire FY 2014 (October 1, 2013–September 30, 2014). We noted that the data submission deadline is November 30, 2014 for hospitals that are beyond their first year of the Medicare EHR Incentive Program (77 FR 54080). Accordingly, if such a hospital chose to electronically report 3Q CY 2014 data under the Hospital IQR Program, it would need to submit the data by November 30, 2014 (not February 15, 2015) in order to also use that data to determine whether the hospital has satisfied its Medicare EHR Incentive Program clinical quality measurement requirement. In addition, we noted that, as noted above, the hospital must also satisfy all other program requirements established for the Medicare EHR Incentive Program. We also noted that because of the difference in reporting deadlines, we would not be able to use 4Q 2014 electronically submitted Hospital IQR data for purposes of determining whether a hospital has satisfied its Medicare EHR Incentive Program clinical quality measurement requirement. We proposed that hospitals could still report the data VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 electronically to meet their Hospital IQR Program requirements. We proposed in section IX.E. of the preamble of the proposed rule to extend the beginning of the electronic submission period to January 2, 2014 (78 FR 27745). We noted that, if the extended electronic submission period is finalized, hospitals in their first year of demonstrating meaningful use could also electronically submit the four measure sets (STK, VTE, ED, and PC) for one quarter by July 1, 2014 to meet the clinical quality measure reporting criteria for the Medicare EHR Incentive Program as well as the Hospital IQR Program reporting requirement for those measure sets. We also proposed that hospitals choosing to report at least one quarter of quality measure data electronically would not need to submit chart-abstracted quality measure data for the other quarters in CY 2014 for these four measure sets (STK, VTE, ED, and PC). For hospitals choosing to report electronically in the Hospital IQR Program, we proposed that hospitals PO 00000 Frm 00318 Fmt 4701 Sfmt 4700 July 1, 2014. November 30, 2014. submitting these four measure sets electronically must use the Medicare EHR Incentive Program process for electronically submitting quality measure data into QualityNet (for EHRbased reporting). We proposed that Hospital IQR Program hospitals follow the submission requirements finalized in the Medicare EHR Incentive Program Stage 2 final rule (77 FR 54080) and utilize their existing QualityNet account to submit electronic quality measure data. We noted that specific submission procedures will be posted on the QualityNet Web site at: https:// www.qualitynet.org/. We proposed to align with the case threshold exemption from the Medicare EHR Incentive Program. This means that for each quality measure for which hospitals do not have a minimum number of patients that meet the patient population denominator criteria for the relevant EHR reporting period, hospitals would have the ability to declare a ‘‘case threshold exemption’’ of five or fewer discharges. We stated that our intent is to finalize the same process in both the E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Medicare EHR Incentive Program and the Hospital IQR Program as further detailed below. In preparation for this transition to electronic quality measure reporting under the Hospital IQR Program, we proposed that if a hospital chooses to report the four measure sets (STK, VTE, ED, and PC) electronically during CY 2014, the hospital’s data would be extracted from the Certified Electronic Health Record Technology (CEHRT) and submitted to CMS using the Health Level Seven (HL7) Quality Reporting Document Architecture (QRDA) Category I Revision 2 standard. Certified EHR Technology is defined for the Medicare EHR Incentive Program at 42 CFR 495.4 and 45 CFR 170.102. We recognized that a small percentage of Hospital IQR Program-participating hospitals are not currently participating in the Medicare EHR Incentive Program and that this proposal may not be applicable to those hospitals. We stated that these hospitals should continue to report the four measure sets using chartabstraction. However, we noted that greater adoption of CEHRT and reporting of quality measures electronically across Medicare hospital quality reporting will reduce the administrative burden on hospitals associated with the reporting of chartabstracted quality measures. This will help hospitals to meet both Hospital IQR Program and Medicare EHR Incentive Program requirements with a streamlined data submission to CMS. We stated that, in the recent HHS ONC final rule regarding standards, implementation specifications, and certification criteria for health information technology (77 FR 54163 through 54292), HHS adopted ‘‘2014 Edition’’ EHR certification criteria that will require CEHRT to provide the capability to submit electronic clinical quality measure data in the HL7 QRDA Category I standard to support patientlevel data submissions. We stated that we do not believe that our proposal to use QRDA Category I (patient-level) data under the Hospital IQR Program will create a new reporting burden for hospitals because we already require hospitals to submit ‘‘all-payer’’ patientlevel data under the Hospital IQR Program. We stated that the QRDA standard specifies the framework for quality reporting, standardizes measure-defined data elements for interoperability between organizations, and is used to transmit clinical quality measure data needed to meet meaningful use (MU) requirements under the Medicare EHR Incentive Program. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 We proposed that we would not publicly report data collected from hospitals choosing to report these four measure sets electronically in CY 2014. After reviewing comments we received from our Request for Information (RFI) entitled ‘‘Medicare Program; Request for Information on Hospital and Vendor Readiness for Electronic Health Records Hospital Inpatient Quality Data Reporting’’ (78 FR 308 through 310), it became clear that we should consider not publicly reporting clinical quality measure data submitted electronically for the four proposed measure sets due to possible abnormalities in the data and/or the submission process that may occur during the first year of electronic reporting to CMS. We stated that this proposal will provide us time to assess the data reported to determine the optimal timing and transition strategy for electronic quality measure reporting by hospitals participating in the Hospital IQR Program. However, we stated that we would like to recognize hospitals that report electronically and invited public comment on whether hospitals choosing electronic reporting of quality measures would like to be acknowledged on the Hospital Compare Web site as ‘‘Pioneers’’ in Medicare EHR-based reporting. We noted, however, that the data results for Medicare EHR-based measures would not be publicly reported. We stated our concern that a large number of hospitals would not be able to meet the Hospital IQR Program requirements for FY 2016 if we proposed to require hospitals to electronically report the four measure sets. Accordingly, we stated our belief that this proposal—providing hospitals the opportunity for voluntary electronic submission of data for one quarter of CY 2014 discharges—represents a balanced policy that some hospitals will be able to take advantage of while ensuring that the FY 2016 Hospital IQR Program requirements are attainable for all participating hospitals. We stated that, as we move further toward alignment of quality measures reporting among our reporting initiatives, we intend to propose in the future to require hospitals to report electronically specified quality measures. We did not propose to validate any of the data that is electronically reported for the FY 2016 Hospital IQR Program. However, we shared the concern among hospitals, vendors, and other stakeholders that there is a need to develop a comprehensive validation process that applies to electronically reported data. We stated our intent to develop and propose to adopt a data validation strategy for electronically PO 00000 Frm 00319 Fmt 4701 Sfmt 4700 50813 reported quality measure data in the FY 2015 IPPS/LTCH PPS proposed rule. This strategy will be informed, in part, by comments we receive in response to the proposed rule. We invited public comment on these proposals. Comment: Some commenters indicated that there are challenges with hospital EHR adoption and the number of hospitals using electronic clinical quality measures. A few commenters urged CMS to take a step back and rearticulate the program goals and logic. Response: We have conducted various outreach, education, and communication activities with stakeholder communities, including hospitals and vendors. We will continue to consider stakeholder feedback in developing the electronic quality reporting strategy. We have previously stated our commitment to align quality measurement and reporting among our programs (for example, the Hospital IQR Program and PQRS). We noted that our alignment efforts focus on several fronts including using the same measures for different programs, standardizing the measure development and electronic specification processes across our programs, coordinating quality measurement stakeholder involvement efforts, and identifying ways to minimize multiple submission requirements and mechanisms. A longer-term vision would be hospitals and clinicians reporting through a single, aligned mechanism for multiple CMS programs (77 FR 54053). We understand that, while there are some challenges with hospital EHR adoption rates, there has also been tremendous progress over the years. In March 2013, ONC reported, ‘‘since the passage of the HITECH Act in 2009, there has been strong growth in nonfederal acute care hospital adoption of EHR technology to meet Meaningful Use objectives. . . . Hospital adoption rates for each of the 14 Meaningful Use Stage 1 Core objectives ranged from 72% to 94%. . . . These findings indicate that acute care hospitals have made considerable progress since the passage of the HITECH Act toward the goals of improving health and health care through the use of advanced health information technology’’ (https:// www.healthit.gov/sites/default/files/ oncdatabrief10final.pdf). Comment: A few commenters wondered what, if any, potential impacts there would be on hospital ICD–10 implementation and wondered whether CMS provided algorithms for the electronic measures. Response: We do not believe that there will be significant impacts related E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50814 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations to ICD–10 implementation because the ICD–10 code sets have already been included in the electronic specifications for the electronic clinical quality measures. Also, the electronic specifications for the electronic clinical quality measures are available to the public at the electronic clinical quality measures library found at: https:// www.cms.gov/Regulations-andGuidance/Legislation/ EHRIncentivePrograms/ eCQM_Library.html. The code sets for all the electronic clinical quality measures are available on the National Library of Medicine’s Value Set Authority Center (VSAC) at https:// vsac.nlm.nih.gov. Comment: A few commenters requested clarification regarding whether or not hospitals report Hospital IQR Program measures using chartabstraction for the non-electronically reported measures. Commenters urged CMS to recognize that hospitals will be required to continue to report chart abstracted data to other national and State entities, such as The Joint Commission, until all of the entities are in total alignment with CMS efforts to electronically report quality measures. Response: As discussed in more detail below, we are finalizing a modified approach to voluntary electronic reporting. Under this approach, hospitals that choose to engage in voluntary electronic reporting should continue to report measures via chart abstraction unless the measure is part of the measure set that the hospital reports electronically. For example, if a hospital chooses to report the PC measure set (which is currently comprised of one measure) electronically, the hospital will be able to report that measure set electronically for one of the following quarters (its choice)—CY Q1, CY Q2 or CY Q3. If the hospital chooses to report more than one measure set electronically, they must be all reported in the same calendar quarter. For example, if a hospital choses to use voluntarily electronic reporting for a CY quarter and then reports a different measure set for a later CY quarter, the hospital would only receive Hospital IQR credit for the first discharge quarter submitted; the expectation is that the hospital would be submitting chartabstraction of a full calendar year for the latter measure set. All other chartabstracted measures, including the measures in the measure sets not electronically reported will need to be reported via chart-abstraction for all four quarters. If a hospital reports part of a measure set electronically and the other part via chart abstraction, the hospital will not receive Hospital IQR VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 credit for the measure set. We understand hospitals will continue to have to report chart-abstracted data to other national and State entities, and we continue to discuss options for electronic reporting alignment with various stakeholders. In addition, we note that the STK–1 measure cannot be electronically reported because electronic specifications have not been developed for that measure. Therefore, if a hospital chooses to report the STK measure set electronically, it would not need to report the STK–1 measure via chartabstracted measure to satisfy the Hospital IQR Program reporting requirements. Comment: Many commenters opposed the proposal to require electronic reporting of Hospital IQR Program data in 2014 because of the challenges associated with electronic measure specifications and the EHR implementation and certification process. Response: Hospitals are encouraged, but not required, to submit electronic clinical quality measures for the Hospital IQR Program in 2014 for the FY 2016 Hospital IQR Program payment determination. Through this voluntary process, hospitals and CMS will gain additional experience with electronic reporting and any potential issues that may result. We also encourage hospitals to continue submitting these measures via chart-abstraction if they choose. This will enable the most robust data set for the comparison. Since this proposal is voluntary, we believe it provides hospitals the flexibility to determine whether they are ready to submit electronically. Comment: Some commenters urged CMS to allow hospitals to voluntarily generate data using the specifications in the CMS/Joint Commission measure manual, rather than using the methods and standards finalized for the Medicare EHR Incentive Program, and report it to CMS using the electronic submission mechanism. The commenters noted that these data would be submitted in conformance with the requirements of the Hospital IQR Program, and if submitted through the electronic submission mechanism for at least one quarter, would count as fulfilling the Meaningful Use requirements for clinical data submission. Response: We appreciate the suggestion and note that the electronic submission of clinical quality measure data for the Hospital IQR Program in 2014 is voluntary. We are finalizing our proposal to allow hospitals to voluntarily submit measures electronically via the Medicare EHR PO 00000 Frm 00320 Fmt 4701 Sfmt 4700 Incentive Program. If a hospital chooses this option, the hospital will report the electronic clinical quality measures using the methods and standards finalized for the Medicare EHR Incentive Program (see the CMS and ONC final rules at 77 FR 53968 and 77 FR 54163, respectively, for further details regarding the Medicare EHR Incentive Program). This proposal does not preclude submitting the traditional chart-abstracted measures to the Hospital IQR Program using the specifications in the CMS/Joint Commission measure manual; however, the hospital need not do so if it elects to report electronically. Comment: A commenter questioned whether a hospital that does not report PC–01 can still participate in the Medicare EHR Incentive Program or whether the hospital has to report all 16 measures to be eligible. Response: Under the policy that we adopted for the Medicare EHR Incentive Program, a hospital may be exempted from reporting on a particular electronic clinical quality measure if the hospital seldom has the types of cases addressed by that electronic clinical quality measure. Specifically, a hospital that experiences 5 or fewer inpatient discharges per quarter or 20 or fewer inpatient discharges per year (Medicare and non-Medicare combined), as defined by an electronic clinical quality measure’s denominator population, would be exempted from reporting on that electronic clinical quality measure (for further explanation of the policy, see 77 FR 54080, 72988 through 72989). Under this policy, it is possible that a hospital could qualify for an exemption from reporting on PC–01 for the Medicare EHR Incentive Program. Comment: One commenter supported the CMS proposal to submit the identified four measure sets electronically to satisfy a portion of the Hospital IQR and EHR Incentive Program requirements. Response: We thank the commenter for the support. Comment: Many commenters opposed the proposal to submit the identified four measure sets—16 measures total— electronically to CMS noting that the policy would limit hospitals’ choice in fulfilling meaningful use requirements since, by identifying the 16 electronic clinical quality measures, the policy would eliminate the choice hospitals currently have to report any 16 of 29 electronic clinical quality measures. Most commenters also noted that vendors are not required to support all 29 measures and may not support the 16 identified in the proposed rule. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Response: We understand that hospitals prefer to have the flexibility to choose from the list of 29 measures from Stage 2 of the Medicare EHR Incentive Program. We have taken these comments into consideration and are finalizing a modified policy as a result. Specifically, we are finalizing a policy which permits hospitals, if they choose this voluntary option, to select one or more of the four measure sets (STK (except, as noted above, STK–1), ED, VTE, and PC) to electronically report in CY 2014, instead of requiring hospital, if they choose this option, to use electronic reporting for all four measure sets. We believe that this modification allows enough flexibility for hospitals to begin electronically reporting, if, for example, a hospital’s vendor does not support all of the measures in the four measure sets originally proposed. Comment: Commenters noted that Stage 2 of the Medicare EHR Incentive Program requires hospitals to implement at least five clinical decision support (CDS) tools in their EHRs that are related to the electronic clinical quality measures they report for Meaningful Use. Commenters suggested that CMS address this issue by eliminating the requirement that CDS tools be related to electronic clinical quality measures and allow hospitals to choose the CDS tools that best help them achieve their individual quality improvement strategies and goals. Response: We disagree with the commenters’ belief that this proposal interferes with CDS tools implementation. Hospitals have the flexibility to choose which CDS interventions to implement. It is expected that hospitals will select clinical decision support interventions to drive improvement in the delivery of care for the high-priority health conditions relevant to their patient population. We refer the commenters to the Medicare EHR Incentive Program Stage 2 final rule (77 FR 53995) for more information. Comment: One commenter requested that CMS provide additional details regarding where hospitals can find the measure failures and whether this information is contained at CMS or in the CEHRT. Response: We appreciate the request for additional details regarding measure failures but cannot respond because we were unclear of what was specifically meant by this comment given the lack of context. We invite the commenter and others to join our EHR listservs on QualityNet if the commenter has additional questions or would like to learn more about electronic clinical quality measures in general. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Comment: With regard to the proposed 16 electronic clinical quality measures, a few commenters requested more detail about how CMS intends to use and store the data. In addition, several commenters wondered whether CMS has the necessary infrastructure to accept electronic clinical quality measures within the specified timeframe. One commenter wanted more information about whether data would be retained for unknown usage in the future. Response: We intend to store the electronic data in the same manner that we store the Hospital IQR Program chart-abstracted data, with modifications to accept QRDA I data. We believe this infrastructure will allow us to accept the electronic clinical quality measure data submitted in CY 2014 for the Hospital IQR Program. We intend to retain the data to analyze it for lessons learned, and we will use the data to inform future policy decisions. Comment: Some commenters did not support the initiative to label hospitals ‘‘Pioneers’’ on the Hospital Compare Web site and suggested that CMS develop an icon and name through focus group testing to recognize hospitals that are submitting quality measure information electronically. Response: We appreciate the comment and will further evaluate the name to be used to recognize these hospitals. We intend to recognize hospitals that voluntarily report electronic clinical quality measures electronically in CY 2014 for the Hospital IQR Program. Comment: One commenter questioned why CMS finds it necessary to create a special designation on the Hospital Compare Web site for hospitals using CEHRTs given the public awareness of hospitals participating in the Meaningful Use program. A commenter noted that the purpose of Hospital Compare is to provide evidence-based quality and performance information about hospitals to consumers and wonders whether consumers may misinterpret the meaning of a special designation and make healthcare decisions based on that rather than the hospital’s performance on evidencebased measures. Response: Our intention in recognizing these hospitals is, in part, to incentivize other hospitals to electronically report and, as a result, increase the volume of electronic clinical quality measures data we collect for validation testing purposes. We intend to clearly indicate the purpose and meaning of the recognition on the Hospital Compare Web site to avoid any potential confusion. PO 00000 Frm 00321 Fmt 4701 Sfmt 4700 50815 Comment: One commenter asked CMS to validate data derived electronically from the EHR with the medical record in its totality. The commenter suggested the data validation process should occur in the FY 2015 reporting period and the level of data accuracy should be ascertained prior to instituting required electronic reporting in the FY 2016 payment determination or subsequent years. Some commenters also noted the data submitted electronically for the FY 2016 Hospital IQR Program would not be validated and wondered whether CMS intends to develop a validation strategy for electronically reported quality measure data in next year’s IPPS rulemaking. Some commenters objected to the adoption of baseline and performance periods for the Hospital VBP Program that blend the results of both reporting modes until the reliability and accuracy of measures reported using electronic specifications has improved. Many commenters supported CMS’ proposal to withhold voluntarily submitted electronic clinical quality measures data from public display in CY 2014 due to possible abnormalities in the data or potential issues associated with a new submission method. The commenters also noted that it would not be fair to compare results for hospitals reporting on chart-abstracted and electronic versions of the same measures since measures manually abstracted benefit from the broader context that is available in a chart. Commenters recommended that additional research be conducted to address differences between measures reported electronically and measures reported via chart-abstraction before CMS mandates public reporting of electronic clinical quality measure data through the Hospital IQR Program or other quality reporting programs. The majority of commenters, however, opposed CMS’ proposal to withhold the electronically reported data from publication on Hospital Compare and instead urged CMS to publicly display it. These commenters believed that withholding the data would undermine the intent of the Hospital IQR Program and provide little insight into whether EHRs can be used to effectively report comparable data for purposes of public reporting in the future. Response: We believe that the 2013 Medicare EHR Incentive Program Electronic Reporting Pilot is beginning to address concerns regarding data validity, and we invite participation in the 2013 Medicare EHR Incentive Program Electronic Reporting Pilot. In E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50816 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations addition, we have worked with ONC to include more stringent certification criteria for EHR products in order to increase data consistency and reliability across providers and vendors. The electronic clinical quality measures have been tested, and we are working with the EHR vendor and provider communities to continuously improve the electronic specifications. We do, however, understand the concerns raised by commenters regarding data validity and public reporting. After taking all of these considerations into account, we are finalizing that we will make the electronically reported data public on Hospital Compare if we deem that the data are accurate enough to be publicly reported. In addition, we intend to develop and propose a validation strategy for electronically reported quality measure data in future rulemaking. Comment: Several commenters suggested that CMS transition to electronic reporting of clinical quality measures by maintaining the intent of quality measures, testing tools designed to support electronic clinical quality measures development, and field testing measures prior to including them in a reporting program. Response: We are continuing to work with partners and key stakeholders to improve the tools used to develop electronic clinical quality measures and methodologies to test electronic clinical quality measures prior to adoption in our quality reporting programs. Comment: Many commenters noted that electronic clinical quality measures lack accuracy, testing, quality, validity, comparability with chart-abstracted measures, and well-developed standards. The commenters called for ‘‘electronic specification stability’’ before CMS adopts electronic reporting for the Hospital IQR Program and noted that electronic reporting does not currently produce complete information. Some commenters urged CMS to reconsider the proposed acceptance of hospital quality reporting data directly from EHRs until there has been verification of data reliability and validity. Response: We thank the commenters for their input. We are working with the hospital and vendor communities to develop a robust validation methodology. We continue to engage with external stakeholders by requesting public comments regarding validation methodologies. Until we receive quality data reported directly from EHRs, we will have limited ability to perform data reliability and validity testing. By offering a voluntary submission option, we anticipate that hospitals will submit VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 quality measure data directly from EHRs so that we have data for reliability and validity testing. Comment: A few commenters strongly supported continued engagement with the provider and vendor communities through cooperative efforts such as the eMeasures Learning Collaborative and its workgroups and urged CMS and ONC to include the vendor community when working with measure stewards and developers in the development of new measure concepts and when pilot, reliability, and validity testing is conducted. For example, commenters noted that in 2012, CMS launched the eMeasures Learning Collaborative with the NQF, and the commenters applauded this collective approach to effectively advise stakeholders on the best eMeasures development, maintenance, and implementation processes. Response: We thank the commenters for their support. We plan to continue to collaborate with multi-stakeholder groups and the ONC when working with measure stewards and developers in the development of new measure concepts and conducting pilot, reliability, and validity testing. Comment: Some commenters urged CMS and ONC to align efforts to verify through demonstration projects the comparability of results of manually abstracted measures with electronically specified/EHR extracted measures. The commenters also called for a certification requirement for third party auditors. Response: Although we do not understand what the commenters mean when referring to a ‘‘third-party auditor,’’ we do not believe that the electronic clinical quality measures are substantively different from their chartabstracted forms. We are researching methodologies, including consideration of demonstrations and/or pilots to develop data validation strategies and are working with the hospital and vendor communities. Comment: A few commenters noted errors in the 2014 measure specifications, the Cypress software used to certify electronic clinical quality measures, and the certification test methods. These commenters noted time pressures associated with the frequent updates and changes to the ONC certification process over the past five months since the tools and measure specifications became available. These changes require vendors and providers to adopt new versions of measures, resulting in time pressures for development, testing and implementation/roll out to customers. PO 00000 Frm 00322 Fmt 4701 Sfmt 4700 Response: We plan to continue to work with the ONC to address these issues. We understand vendors are working hard to adopt new measure specifications released by CMS and ONC. Comment: A few commenters found the proposal focused more on the electronic submission and less on the accuracy of the information and, consequently, believed 2014 was too soon to assume electronic quality measures are ready for validation. The commenters outlined an alternative approach to allow hospitals to satisfy both programs clinical quality measure reporting requirements when they pull quality data from an EHR and allow a chart abstractor to validate that information in the Hospital IQR Program specifications. Response: We do not plan to validate electronic clinical quality measure data, as part of the regular Hospital IQR validation program, for the FY 2016 payment determination. We will, however, review the accuracy of the electronic clinical quality measure data assessing it for the electronic specification adherence before making it publicly available. Further, we intend to use these submissions to inform the development of a validation strategy that would apply to electronically reported measure data in the future. We do not preclude hospitals from using their EHRs to collect data for submitting chart-abstracted measures under the Hospital IQR Program. We are working on a strategic plan to identify the optimal transition while providing a flexible voluntary option to electronically report measures in 2014. For validation of electronic clinical quality measures, we are researching methodologies to develop data validation strategies and are working with the hospital and vendor communities. We have engaged external stakeholders by requesting public comments regarding validation methodologies through a Request for Information (RFI) published in January 2013. Comment: Some commenters were concerned that, although the measure descriptions seem similar for both Meaningful Use and the Hospital IQR Program (the measures have the same title, etc.), the measure specifications and calculations were developed independently and are not equivalent. The commenters requested that CMS consider this variation and provide education and outreach to the provider community to assist in this transition. Response: We do not believe that the electronic clinical quality measures are substantively different from their chart- E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations abstracted form. We believe that collection and reporting of data through health information technology will greatly simplify and streamline reporting for many CMS quality reporting programs. Through electronic reporting, hospitals will be able to leverage EHRs to capture, calculate, and electronically submit quality data that is currently manually chart-abstracted and submitted to CMS for the Hospital IQR Program. In addition, we provide a central location for all clinical quality measure specifications and educational materials for electronic clinical quality measures reporting which providers can access (https://www.cms.gov/ Regulations-and-Guidance/Legislation/ EHRIncentivePrograms/ eCQM_Library.html). We are moving in the direction of expanding that resource to incorporate additional electronic clinical quality measures resources. We intend to provide outreach and education to hospitals for this transition in multiple formats such as Webinars and FAQs. Comment: A few commenters suggested that CMS work with an independent evaluator to understand any variance that may result from the electronic extraction of quality measure data from EHRs rather than through manual chart abstraction. Response: We appreciate the suggestion and will take this recommendation into consideration as we further develop our electronic reporting policies. Comment: A few commenters expressed concern that the efficiency of reporting should not be achieved at the expense of alienating clinicians and hospitals by detracting from patient care. Response: We agree with the commenters and will consider burden as we develop our policy and methods. Comment: Some commenters believed a hard cut-off between chart-abstracted and electronic ‘‘retooled’’ measures was not practical in the near term. Response: We agree with commenters. We are engaged in a transition from chart-abstracted reporting of measures to electronic reporting of measures, and we anticipate that the transition to full electronic measure reporting in the Hospital IQR Program will occur over a period of time, rather than all at once. Comment: One commenter identified a lack of alignment between the electronic data submission deadlines and the timeline in the FY 2014 IPPS/ LTCH PPS proposed rule. The commenter noted publication of the FY 2015 IPPS/LTCH PPS final rule would precede the data submission deadline of November (in the proposed rule, VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 November 30, 2014) and CMS would not benefit from the experience. Therefore, commenter requested that CMS align these timeframes in the future. Response: We understand that the rulemaking cycle will overlap with the voluntary electronic reporting period. However, we anticipate having the opportunity to collect two quarters of electronic data from hospitals that choose to report electronically. We encourage hospitals to report data as early as possible in order to gain experience with submitting measures via electronic specifications. We believe these two quarters of data will provide us with a better understanding of the data derived from submitting measures via electronic specifications. We will also gain additional experience with the 2013 Medicare EHR Incentive Program Electronic Reporting Pilot. Comment: A few commenters raised concerns about the proposal to require only one quarter’s worth of data for hospitals reporting Hospital IQR Program measures electronically, and believed that one quarter of data does not provide a statistically valid sample and that electronic data derived from CEHRTs may result in an inaccurate assessment of a hospital’s performance. Response: We proposed one quarter of data for the purposes of aligning with the reporting periods established for the Medicare EHR Incentive Program. In addition, we believe that allowing a hospital that chooses to report electronically to report one quarter of data will reduce the reporting burden on the hospital. Also, this policy creates an incentive for hospitals to participate in the voluntary electronic clinical quality measure reporting for the Hospital IQR Program. Comment: A few commenters found the reporting timelines confusing and questioned the rationale for proposing different reporting timelines that vary depending on whether or not a hospital elected to electronically report measures or to report measures using the standard chart-abstracted method. Response: The goal of the proposal was to synchronize the reporting periods of the Hospital IQR and the Medicare EHR Incentive Programs to reduce the reporting burden on hospitals. However, based on concerns of these commenters, we are finalizing a policy that better aligns the reporting deadlines under the two programs. We are finalizing that if a hospital would like us to use the electronically reported Hospital IQR data to determine whether the hospital has satisfied the Medicare EHR Incentive Program clinical quality measure reporting requirement, it must PO 00000 Frm 00323 Fmt 4701 Sfmt 4700 50817 electronically report the data for CY Q1, CY Q2 or CY Q3 2014 by November 30, 2014, or if the hospital is in its first year of demonstrating meaningful use, electronically report CY 2014 Q1 or CY 2014 Q2 data by July 1, 2014. Due to the FY 2016 Hospital IQR Program timeline and the desire to align with the Medicare EHR Incentive Program submission timelines, we will not be able to accept electronically specified measures during CY 2014 Q4 to determine whether a hospital satisfies the Hospital IQR Program requirements. This is the beginning of a multi-year process we seek to engage in to align the timelines of multiple federal quality reporting programs. Comment: A few commenters requested that CMS continue to adopt the newest version of the HL7 standard used to specify the electronic clinical quality measures within the quality reporting programs. Response: We plan to continue to collaborate with our partners and stakeholders to identify appropriate standards—including the HL7 standard—to be used for quality reporting. Comment: Many commenters requested that CMS provide the process it will use to develop and release new versions of electronic clinical quality measures, their associated value sets and how CMS plans to document the timeframe for which each HL7 version is active within the applicable qualityreporting programs, including the Hospital VBP Program. Response: We understand the nature of the commenters’ request and plan to continue to collaborate with our partners and stakeholders to identify appropriate standards and update existing standards for quality reporting. We will also continue to collaborate with our partners and stakeholders to identify the best manner in which to communicate those standards. Comment: Many commenters opposed CMS’ proposal to restrict the data standard to QRDA I and recommended that CMS allow hospitals to use either the QRDA I or QRDA III standard. Commenters requested clarification regarding why CMS made the determination that QRDA I is feasible and QRDA III is not feasible. In addition, commenters urged that if QRDA I is the policy choice for electronic quality data submission, CMS must take all necessary steps to protect against breaches of private health information through the use of CMS’ electronic reporting portal. Commenters also noted the QRDA standards (categories I and III) are still in draft format and are not yet widely used. E:\FR\FM\19AUR2.SGM 19AUR2 50818 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Therefore, there is little, if any, experience with or testing of these standards. One commenter suggested that CMS align its data standard with ONC’s certification requirements for EHR technology. The commenters noted that this approach would fully leverage CEHRTs which allow both QRDA I and QRDA III. Response: The QRDA category I specifies the framework for quality reporting, standardizes measure-defined data elements for interoperability between organizations, and is used to transmit clinical quality measure data needed to meet Meaningful Use (MU) requirements under the Medicare EHR Incentive Program. After reviewing all the comments, we have decided to adopt the QRDA I reporting standard for the Hospital IQR Program and may consider the QRDA III standard in future rulemaking. We will adopt the QRDA I reporting standard because it aligns with the current Hospital IQR Program standard of collecting patient level data for chart-abstracted measures. The Medicare EHR Incentive Program for hospitals has modified in this final rule, section IX.E below, the clinical quality measure reporting requirement for 2014 to accept only the QRDA I (release 2) format for electronic reporting. As noted above, hospitals will continue to submit quality data through the secure portion of the QualityNet Web site (https://www.QualityNet.org). This Web site meets or exceeds all current Health Insurance Portability and Accountability Act requirements for security of protected health information. CMS will consider other options for collecting clinical quality measurement data in future rulemaking. Comment: One commenter requested more information regarding whether CMS would make QRDA I details available for EHR developers who need to understand if the feasibility assessment will change in 2015 and beyond. Response: We understand the concerns raised and, as feasibility assessments are completed, we will make every effort to post the information on a Web site such as https://www.QualityNet.org/. Currently the Hospital IQR Program requires submission of chart-abstracted data at the patient level (QRDA I equivalent), so our decision to accept QRDA I is aligned with the method hospitals currently use to submit chart-abstracted data for the same measures. After consideration of the public comments we received, we are finalizing a modified approach that will allow hospitals to voluntarily report up to four measure sets (STK (with the exception of STK–1), ED, VTE, and/or PC) electronically for the same quarter for FY 2016 Hospital IQR Program. Hospitals that choose this option will meet their Hospital IQR reporting requirement with respect to each of these measure sets if they report all the measures in that measure set (with the exception of STK–1, if the hospital chooses that measure set) electronically for one quarter. We will take into account the measure set(s) reported electronically for the Hospital IQR Program when we determine whether a hospital has satisfied the clinical quality measure reporting component of meaningful use for the Medicare EHR Incentive Program in FY 2014. Specifically, if a hospital would like us to use the electronically reported Hospital IQR data to determine whether the hospital has satisfied the Medicare EHR Incentive Program clinical quality measure reporting requirement, it must electronically report the data for CY Q1, CY Q2 or CY Q3 2014 by November 30, 2014, or if the hospital is in its first year of demonstrating meaningful use, electronically report CY Q1 or CY Q2 2014 data by July 1, 2014. Due to the FY 2016 Hospital IQR Program’s 2016 payment determination timeline and the desire to align with EHR Incentive Program submission timelines, we cannot accept electronic submission of CY Q4 2014 data since EHR Incentive Program data is required to be reported by November 30, 2014. The measures electronically reported under the Hospital IQR Program will be considered to determine whether the hospital has satisfied the Medicare EHR Program clinical quality measure reporting requirement as long as the hospital also satisfies all other program requirements under the Medicare EHR Incentive Program. With the exception of the electronically reported measures (for which only one quarter of reporting would be necessary), all other Hospital IQR chart-abstracted measures (including those that are electronically specified but not chosen by the hospital for electronic reporting) must be reported via chart-abstraction for all four quarters of 2014. We are also finalizing that we will only publicly report the electronically reported data on Hospital Compare if we determine the data are accurate enough to be reported. The chart below provides a summary of the finalized reporting periods and electronic submission deadlines for the FY 2016 Hospital IQR Program: FY 2016 HOSPITAL IQR PROGRAM ELECTRONIC REPORTING PERIODS AND SUBMISSION DEADLINES FOR ELIGIBLE HOSPITALS THAT ARE BEYOND THEIR FIRST YEAR OF THE MEDICARE EHR INCENTIVE PROGRAM Discharge reporting periods Submission deadlines mstockstill on DSK4VPTVN1PROD with RULES6 January 1, 2014–March 31, 2014 ......................................................................................................................................... April 1, 2014–June 30, 2014 ................................................................................................................................................. July 1, 2014–September 30, 2014 ........................................................................................................................................ October 1, 2014–December 31, 2014 ................................................................................................................................... As described in section IX.E of the preamble of this final rule, we are also finalizing our proposal to extend the beginning of the electronic submission period for the Medicare EHR Incentive Program to January 2, 2014 and note that hospitals in their first year of demonstrating meaningful use could also electronically submit the four measure sets for one quarter by July 1, 2014 to meet the clinical quality VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 measure reporting criteria for the Medicare EHR Incentive Program. Hospitals choosing to report at least one quarter of quality measure data electronically are not required, but are highly encouraged, to also submit the same data via chart-abstraction. We understand that many hospitals will be submitting chart-abstracted quality measure data to The Joint Commission so the reporting burden would not be PO 00000 Frm 00324 Fmt 4701 Sfmt 4700 November 30, 2014. November 30, 2014. November 30, 2014. Not Applicable. increased. Hospitals will gain experience in understanding the differences in the submission methods. Furthermore, for hospitals who chose to voluntarily report electronically in the Hospital IQR Program, we are finalizing that the hospitals will use the Medicare EHR Incentive Program process for electronically submitting quality measure data into QualityNet (for EHRbased reporting). We also note that E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations hospitals voluntarily submitting electronically specified clinical quality measures will follow the submission requirements finalized in the Medicare EHR Incentive Program Stage 2 final rule (77 FR 54088) and in subsequent rulemaking. Hospitals voluntarily submitting electronically specified clinical quality measures will utilize their existing QualityNet account to submit electronic quality measure data. If a hospital chooses to report one or more of the four measure sets (STK (with the exception of STK–1), VTE, ED, and PC) electronically during CY 2014, the hospital’s data will be extracted from the CEHRT and submitted to CMS using the Health Level Seven (HL7) Quality Reporting Document Architecture (QRDA) Category I Revision 2 standard. After consideration of the public comments we received, we are finalizing our proposal to adopt the QRDA I reporting standard for hospitals voluntarily submitting electronically specified clinical quality measures to the Hospital IQR Program. We will not accept the QRDA III reporting standard at this time; however, we will consider this and other options in future rulemaking. The Hospital IQR Program requires submission of chart-abstracted data at the patient level, so our decision to accept QRDA I is aligned with the method hospitals currently use to submit clinical quality measure data. We intend to develop and propose a validation strategy for electronically reported quality measure data in the FY 2015 IPPS/LTCH PPS proposed rule. We are researching methodologies to develop data validation strategies and are working closely with the hospital and vendor communities to develop a robust validation methodology that will complement the vendor certification process for electronic clinical quality measures. We do not plan to validate, for purposes of meeting Hospital IQR Program validation requirements, electronic clinical quality measures voluntarily submitted to the Hospital IQR Program for the FY 2016 payment determination. We believe this proposal—providing hospitals the opportunity for voluntary electronic submission of data for one quarter of CY 2014 discharges— represents a balanced policy that some hospitals will be able to take advantage of while ensuring that the FY 2016 Hospital IQR Program requirements are attainable for all participating hospitals. As we move further toward alignment of quality measures reporting among our reporting initiatives, we intend to propose in the future to require VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 hospitals to report electronically specified quality measures. e. Sampling and Case Thresholds for the FY 2016 Payment Determination and Subsequent Years In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51641), we continued, for the FY 2015 payment determination and subsequent years, the approach we adopted in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50230) regarding hospital submission of population and sampling data. In the FY 2013 IPPS/ LTCH PPS final rule (77 FR 53537), we did not make any changes to these requirements. For the FY 2016 payment determination and subsequent years, we did not propose to make any changes to these requirements. We strongly recommend that hospitals review the QIO Clinical Warehouse Feedback Reports and the Hospital IQR Program Provider Participation Reports that are available after patient-level data are submitted to the QIO Clinical Warehouse. We generally update these reports on a daily basis to provide accurate information to hospitals about their submissions. These reports enable hospitals to ensure that their data were submitted on time and accepted into the QIO Clinical Warehouse. f. HCAHPS Requirements for the FY 2017 Payment Determination and Subsequent Years In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50220), we adopted the HCAHPS requirements for the FY 2013 and FY 2014 Hospital IQR Program payment determinations. In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51641 through 51643), we made one change to these requirements. Beginning with discharges occurring in third quarter CY 2011, we established that hospitals will have about 13 weeks after the end of a calendar quarter to submit HCAHPS data for that quarter to the QIO Clinical Warehouse. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53537 through 53538), for the FY 2016 Hospital IQR Program payment determination, we continued these HCAHPS requirements. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27698 through 27700), for the FY 2017 payment determination and subsequent years, we proposed to retain these requirements. Under these requirements, a hospital must continuously collect and submit HCAHPS data in accordance with the current HCAHPS Quality Assurance Guidelines and the quarterly data submission deadlines, both of which are posted at https://www.hcahpsonline.org. PO 00000 Frm 00325 Fmt 4701 Sfmt 4700 50819 In order for a hospital to participate in the collection of HCAHPS data, a hospital must either: (1) Contract with an approved HCAHPS survey vendor that will conduct the survey and submit data on the hospital’s behalf to the QIO Clinical Warehouse; or (2) selfadminister the survey without using a survey vendor provided that the hospital attends HCAHPS training and meets Minimum Survey Requirements as specified on the HCAHPS Web site at: https://www.hcahpsonline.org. A current list of approved HCAHPS survey vendors can be found on the HCAHPS Web site. For the FY 2017 Hospital IQR Program, the HCAHPS data would be based on discharges from January 1, 2015 through December 31, 2015. Every hospital choosing to contract with a survey vendor must provide the sample frame of HCAHPS-eligible discharges to its survey vendor with sufficient time to allow the survey vendor to begin contacting each sampled patient within 6 weeks of discharge from the hospital. (We refer readers to the Quality Assurance Guidelines located at https:// www.hcahpsonline.org for details about HCAHPS survey administration.) Hospitals are strongly encouraged to submit their entire patient discharge list, excluding patients who had requested ‘‘no publicity’’ status or who are excluded because of State regulations, in a timely manner to their survey vendor to allow adequate time for sample creation, sampling, and survey administration. We emphasize that hospitals must also provide the administrative data that is required for HCAHPS in a timely manner to their survey vendor. This includes the patient MS–DRG at discharge, or alternative information that can be used to determine the patient’s service line, in accordance with the survey protocols in the most recent HCAHPS Quality Assurance Guidelines. We note that the HCAHPS Quality Assurance Guidelines require that hospitals maintain complete discharge lists that indicate which patients were eligible for the HCAHPS survey, which patients were not eligible, and which patients were excluded, and the reason(s) for ineligibility and exclusion. (We refer readers to the Quality Assurance Guidelines located at https:// www.hcahpsonline.org for details about HCAHPS eligibility and sample frame creation.) In addition, the hospital must authorize the survey vendor to submit data via My QualityNet, the secure part of the QualityNet Web site, on the hospital’s behalf. Hospitals must obtain and submit at least 300 completed HCAHPS surveys in E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50820 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations a rolling four-quarter period unless the hospital is too small to obtain 300 completed surveys. We wish to emphasize that the absence of a sufficient number of HCAHPS eligible discharges is the only acceptable reason for obtaining and submitting fewer than 300 completed HCAHPS surveys in a rolling four quarter period. If a hospital obtains fewer than 100 completed surveys, the hospital’s HCAHPS scores will be accompanied by an appropriate footnote on the Hospital Compare Web site alerting the Web site users that the scores should be reviewed with caution, as the number of surveys may be too low to reliably assess hospital performance. After the survey vendor submits the data to the QIO Clinical Warehouse, we strongly recommend that hospitals employing a survey vendor promptly review the two HCAHPS Feedback Reports (the Provider Survey Status Summary Report and the Data Submission Detail Report) and the HCAHPS Review and Correction Report that are available. These reports enable a hospital to ensure that its survey vendor has submitted the data on time, the data has been accepted into the QIO Clinical Warehouse, and the data accepted into the QIO Clinical Warehouse are complete and accurate. In order to ensure compliance with HCAHPS survey and administration protocols, survey vendors and hospitals that self-administer the HCAHPS Survey must: (1) Meet HCAHPS Minimum Survey Requirements and Rules of Participation presented in the current HCAHPS Quality Assurance Guidelines; (2) adhere to the HCAHPS survey administration protocols provided in the current HCAHPS Quality Assurance Guidelines and updated through HCAHPS Bulletins and announcements on the official HCAHPS On-Line Web site, https://www.hcahpsonline.org; and (3) participate in all oversight activities. As part of the oversight process, during the onsite visits or conference calls, the HCAHPS Project Team will review the hospital’s or survey vendor’s survey systems and assess protocols based upon the most recent HCAHPS Quality Assurance Guidelines. All materials relevant to survey administration will be subject to review. The systems and program review includes, but is not limited to: (a) Survey management and data systems; (b) printing and mailing materials and facilities; (c) telephone and Interactive Voice Response (IVR) materials and facilities; (d) data receipt, entry and storage facilities; and (e) written documentation of survey processes. As needed, hospitals and survey vendors VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 will be subject to follow-up site visits or conference calls. We point out that the HCAHPS Quality Assurance Guidelines state that hospitals should refrain from activities that explicitly influence how patients respond on the HCAHPS survey. If we determine that a hospital is not compliant with HCAHPS program requirements, we may determine that the hospital is not submitting HCAHPS data that meet the requirements of the Hospital IQR Program. We strongly recommend that hospitals approved to self-administer the HCAHPS Survey attend both HCAHPS Introductory Training and HCAHPS Update Training every year. The dates of HCAHPS training session are announced on the HCAHPS On-Line Web site, https://www.hcahpsonline.org. The HCAHPS Survey is available in official translations in several languages other than English: Spanish (mail and telephone modes); Chinese (mail mode); Russian (mail mode); and Vietnamese (mail mode). All official translations of the HCAHPS Survey instrument are available in the current HCAHPS Quality Assurance Guidelines. We strongly encourage hospitals with a significant patient population that speaks Spanish, Chinese, Russian or Vietnamese to offer the HCAHPS Survey in those languages. We plan to offer an official translation of the HCAHPS Survey in Portuguese (mail mode) in 2013. We encourage hospitals that serve patient populations that speak languages other than those noted to request CMS to create an official translation of the HCAHPS Survey in those languages. Only the official translations of the HCAHPS Survey instrument can be implemented. We continue to strongly recommend that each new hospital participate in an HCAHPS dry run, if feasible, prior to beginning to collect HCAHPS data on an ongoing basis to meet Hospital IQR Program requirements. New hospitals can conduct a dry run in the last month of a calendar quarter. The dry run will give newly participating hospitals the opportunity to gain first-hand experience collecting and transmitting HCAHPS data without the public reporting of results. Using the official survey instrument and the approved modes of administration and data collection protocols, hospitals/survey vendors will collect HCAHPS dry-run data and submit the data to My QualityNet, the secure portion of QualityNet. We wish to emphasize that, barring the exception that the hospital is too small to obtain 300 completed surveys in a four-quarter period, IPPS hospitals that do not meet the minimum 300 PO 00000 Frm 00326 Fmt 4701 Sfmt 4700 completed surveys requirement may not be in compliance with the Hospital IQR Program’s requirement that hospitals submit quality data in the form, manner, and time specified by the Secretary in order to receive the full APU. If we become aware of specific cases in which a hospital has not met the finalized HCAHPS survey protocols, we may determine that the hospital has failed to meet the applicable APU requirement, and will reduce that hospital’s APU accordingly. We proposed to codify the current guideline that approved HCAHPS survey vendors and self-administering hospitals must fully comply with all HCAHPS oversight activities, including allowing CMS and its HCAHPS Project Team to perform site visits at hospitals’ and survey vendors’ locations. We proposed to codify this survey requirement at § 412.140(f)(1). We proposed to codify the current guideline that CMS approves survey vendor applicants to administer the HCAHPS survey for hospitals clients when applicants have met the Minimum Survey Requirements and Rules of Participation listed in the current HCAHPS Quality Assurance Guidelines and adhere to the survey administration protocols provided in the current HCAHPS Quality Assurance Guidelines and occasionally updated through HCAHPS Bulletins and announcements on the official HCAHPS On-Line Web site. We proposed to include this survey requirement at § 412.140(f)(2). The absence of a sufficient number of HCAHPS eligible discharges is the only acceptable reason for obtaining and submitting fewer than 300 completed HCAHPS surveys in a rolling four quarter period. Hospitals and HCAHPS survey vendors should regularly check the official HCAHPS Web site at https://www.hcahpsonline.org for new information and program updates regarding the HCAHPS Survey, its administration, oversight and data adjustments. We invited public comment on our proposal to continue using these HCAHPS requirements for the FY 2016 payment determination and subsequent years. We did not receive any public comments on our Hospital IQR HCAHPS proposal and are finalizing it as proposed, with some changes to the proposed regulatory language. g. Data Submission Requirements for Structural Measures for the FY 2015 and FY 2016 Payment Determinations In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51643 through 51644), beginning with FY 2013, we finalized the period of data collection for which E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations hospitals will submit the required structural measure information once annually for the structural measures via a Web-Based Measure Tool. We finalized our proposal for FY 2014 for submission of structural measures between April 1, 2013 and May 15, 2013 with respect to the time period of January 1, 2012 through December 31, 2012. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53538 through 53539), we finalized our proposal to continue this policy for the FY 2015 payment determination and subsequent years. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27700), however, in order to provide the more timely feedback to hospitals regarding APU participation status, for the FY 2015 payment determination, we proposed to change the date that structural measures will be submitted from April 1 2014– May 15, 2014 to January 1, 2014– February 15 2014. For the FY 2016 payment determination, we proposed that the period of data collection for which hospitals will submit the required registry participation information for the structural measures via a Web-Based Measure Tool be between January 1, 2015 and February 15, 2015, with respect to the time period of January 1, 2014 through December 31, 2014. These proposals will allow us to provide earlier feedback to hospitals regarding APU status. We invited public comment on our proposals. Comment: A few commenters supported the proposals. Response: We thank the commenters for their support. Although some commenters generally supported this proposal, some commenters did not support the proposal to move the deadline for the Data Accuracy and Completeness Acknowledgement (DACA). It is our experience that most hospitals complete the DACA and structural measures at the same time. Because we are not finalizing our proposal to move the deadline for the DACA to February 15th in this final rule (we refer readers to section IX.A.11. of the preamble of this final rule), we believe that moving the submission deadline for the structural measures as proposed would require hospitals to complete these requirements at different times and, as a result, create unnecessary burden because it would be inconsistent with the DACA submission deadline. In addition, because we are not finalizing the DACA submission deadline change, we will not be able provide more timely feedback to hospitals on whether they have satisfied the Hospital IQR Program requirements for a particular year regardless of whether the timeframe to report the structural measures is January 1, 2014–February 15, 2014 or April 1, 2014–May 15, 2014. For those reasons, we are not finalizing this proposal, and the timeframe to report the structural measures each year will be April 1, 2104–May 15, 2014, with respect to the preceding calendar year. h. Data Submission and Reporting Requirements for Healthcare-Associated Infection (HAI) Measures Reported via NHSN In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51644 through 51645), we adopted the data submission and 50821 reporting standard procedures that have been set forth by CDC for NHSN participation in general and for submission of the HAI measures to NHSN. The existing data collection and submission timeframes for the HAI measures for the FY 2015 payment determination and subsequent years align with the submission timeframes for chart-abstracted measures with the exception of Healthcare Provider Influenza Vaccination as defined below. The data submission deadlines are posted on the QualityNet Web site at: https://www.QualityNet.org/. Hospitals will have until the Hospital IQR Program final submission deadline to submit their quarterly data for CLABSI, SSI, CAUTI, MRSA Bacteremia and Clostridium difficile to NHSN. After the final Hospital IQR Program submission deadline has occurred for each calendar quarter of CY 2013, we will obtain the hospital-specific calculations that have been generated by the NHSN for the Hospital IQR Program. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53539), we continued the data submission and reporting standard procedures we adopted in the FY 2012 IPPS/LTCH PPS final rule, with two exceptions discussed below, for the FY 2015 payment determination and subsequent years. The HAI measures that will be included in the FY 2016 payment determination are included in the following chart: FY 2016 payment determination: hospital associated infection measures (CDC’s NHSN) Topic mstockstill on DSK4VPTVN1PROD with RULES6 Central Line Associated Blood Stream Infection. Surgical Site Infection. Catheter-Associated Urinary Tract Infection. MRSA Bacteremia. Clostridium difficile. Healthcare Provider Influenza Vaccination. We realize that some hospitals may not have locations that meet the NHSN criteria for CLABSI or CAUTI reporting, for example, when a hospital has no ICUs. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53539), we provided an exception for the CLABSI and CAUTI measures for hospitals that do not have an ICU, reducing the burden associated with reporting to NHSN. In addition, we recognize that some facilities may perform so few procedures requiring surveillance under the SSI measure that the data may not VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 meaningfully assess the hospital’s performance on the measure. Therefore, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53539), we provided an exception for these hospitals from the reporting requirement in any given year if the hospital performed fewer than a combined total of 10 colon and abdominal hysterectomy procedures in the calendar year prior to the reporting year. For example, a hospital that performed only 2 colon surgeries and 4 abdominal hysterectomies in CY 2013 is not required to report the SSI measure PO 00000 Frm 00327 Fmt 4701 Sfmt 4700 in CY 2014. We finalized our proposal to provide hospitals with a single HAI exception form, to be used for seeking an exception for any of the CLABSI, CAUTI and SSI measures, which is available on QualityNet at: https:// www.qualitynet.org/ HospitalsInpatient>Healthcare Associated Infections (HAI). For the FY 2016 payment determination and subsequent years, we did not propose to make any changes to these requirements and exceptions. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50822 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51631–51633) we finalized collection of the Healthcare Provider Influenza Vaccination measure data from October 1 through March 31st to coincide with the flu season. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27700), because this measure is collected seasonally, we proposed to collect this measure on May 15th of the calendar year for which the season ends. For example, for the Healthcare Provider Influenza Vaccination measure collection for vaccinations given from October 1, 2013 (or when the vaccine becomes available)—March 31, 2014, the submission deadline would be May 15, 2014. We invited public comment on this proposal. Comment: A few commenters expressed concerns that differing deadlines among CMS programs are confusing for submitters. Response: We thank the commenters for informing us of their concern. We have aligned several deadlines in recent years and will continue to align deadlines as possible across programs. Comment: Several commenters supported the May 15th deadline for the Healthcare Provider Influenza Vaccination measure. Response: We thank the commenters for their support. After consideration of the public comments we received, for FY 2015 and subsequent years we are finalizing as proposed the submission deadline of May 15 of the calendar year for which the season ends. For the FY 2016 payment determination and subsequent years, we proposed to require hospitals to report the Medicare Beneficiary ID numbers to the NHSN system for all events reported for Medicare beneficiaries. The NHSN system currently supports the voluntary submission of this information, but we proposed to make it mandatory for patients with Health Insurance Claim (HIC) numbers. We made this proposal to better support our validation efforts to improve CMS and hospitals’ ability to correctly identify the sampled validation episodes of care. We currently match medical records to NHSN data as part of validation. With the information available for matching, we may occasionally fail to match a reported event. By requiring that hospitals report the HIC number when it is available, we increase our confidence that records reported to NHSN will appropriately be matched with the records we sample for validation. Because we cannot anticipate in advance which records may be sampled for validation, we proposed to require that hospitals VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 provide this information for all reported events during Hospital IQR data submission. We invited public comment on this proposal. Comment: Several commenters supported the proposal to add a requirement to report the HIC numbers for those patients who have them in order to enhance future validation efforts. Response: We thank commenters for their support. Comment: Several comments expressed concern about the burden associated with adding the HIC number. Commenters observed that the HIC number is not routinely included in databases used by infection control practitioners to monitor infection, and that vendors may not be able to accommodate this change in the timeframes established. One commenter recommended that CMS work with infection control practitioners to evaluate the feasibility of including the HIC number in the NHSN database. One commenter expressed the opinion that this requirement should not be adopted without analysis of its impact on workflow/burden to hospitals, and that, if adopted, sufficient time should be provided to allow facilities to appropriately resource and/or alter their electronic data capture in order to meet this new requirement. Response: We proposed this requirement to greatly enhance both confidence and efficiency in achieving matches between events reported to NHSN and events identified during validation. However, we recognize that for some hospitals that do not maintain HIC number in their laboratory IT system and do not yet have interoperable systems for billing and laboratory data, this new requirement could be perceived as burdensome. To address concerns that hospitals need time to complete this set-up activity, we are finalizing that hospitals will be required to report Medicare Beneficiary ID numbers to the NHSN system for all events reported for Medicare beneficiaries, beginning with CY Q3 2014 events, which is the first quarter that we anticipate beginning to validate HAIs for the FY 2017 annual payment determination. Comment: One commenter noted that in their State, a Social Security number is already required and is used to match NHSN cases to an all-payer all claims database. Response: Although we are aware that some States may already require that providers report patient identifying information to NHSN, we believe that our proposal will enable us to improve the accuracy of the Hospital IQR PO 00000 Frm 00328 Fmt 4701 Sfmt 4700 validation process for all participating hospitals nationwide. We also note that the NHSN system already includes an optional field for the HIC number. Therefore, no NHSN infrastructure must be changed to accommodate this requirement. After consideration of the public comments we received, we are finalizing that hospitals will be required to report Medicare Beneficiary ID numbers to the NHSN system for all events reported for Medicare beneficiaries, beginning with CY Q3 2014 events. 10. Modifications to the Validation Process for Chart-Abstracted Measures Under the Hospital IQR Program In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27701 through 27709), for the FY 2015 payment determination and subsequent years, we proposed some modifications to the validation requirements and methods we finalized in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53539 through 53553). As described below, these proposals are intended to strengthen the Hospital IQR Program by validating new HAI measures while simultaneously decreasing burden relative to previous years. The procedures to which we proposed to modify are organized into the following sections: (a) Number and timing of quarters included in validation; (b) selection of measures and sampling of charts to be included in validation; (c) procedures for computing the validation score; (d) selection of hospitals for validation of chartabstracted measures; and (e) procedures for submitting records for validation. a. Timing and Number of Quarters Included in Validation As finalized in the FY 2011 IPPS/ LTCH PPS final rule (75 FR 50219), the quarters included in the validation effort for each year’s Hospital IQR Program payment determination are the 4th calendar quarter (October through December) of the year that occurs 2 years before the payment determination and the first 3 calendar quarters (January through September) of the following calendar year. For example, as illustrated below, for the FY 2015 payment determination, the quarters previously finalized for inclusion in validation are the fourth quarter of CY 2012 through the third quarter of CY 2013. The first figure below shows the timeline and steps associated with the Hospital IQR Program and the subsequent steps in annual validation as previously finalized and as proposed. E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 Section 1886(o)(1)(C)(ii)(I) of the Act precludes a hospital from participating in the Hospital VBP Program for a fiscal year if the hospital is subject to the payment reduction under the Hospital IQR Program for that fiscal year. As illustrated in the figure, the process previously finalized (75 FR 50219), yields the determination of a hospital’s Hospital IQR Program APU in August of every year. However, to support the hospital’s payment determination under the Hospital VBP Program in a timely manner, the Hospital IQR APU determination must be made by July 1 of each year. Therefore, we proposed the changes discussed below. For the FY 2015 payment determination and subsequent years, we proposed to change this requirement to include in validation only the 4th VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 quarter of the calendar year that occurs 2 years before the payment determination and the first 2 calendar quarters (January through June) of the following calendar year. As illustrated below, for the FY 2015 payment determination, the quarters proposed for inclusion in validation are the fourth quarter of CY 2012 through the second quarter of CY 2013; and for the FY 2016 payment determination, the quarters proposed for inclusion in validation are the fourth quarter of CY 2013 through the second quarter of CY 2014. For the FY 2016 payment determination and subsequent years, we also proposed to change the validation requirement to include the 3rd and 4th calendar quarters of the year that occurs 2 years before the payment determination is made and the 1st and PO 00000 Frm 00329 Fmt 4701 Sfmt 4700 50823 2nd quarters of the subsequent year for validation. As discussed above, this timeframe still allows an APU determination by July 1 each year. From an operational standpoint, gathering data for the entire year is preferable to gathering data for only three quarters. Also, we believe that all four quarters of data that are used for the Hospital IQR and VBP Programs should be checked for accuracy. However, as described further below, we will not have built the infrastructure needed to support the proposed HAI validation process by the 3rd quarter of CY 2013. Therefore, for the FY 2016 payment determination, we proposed to validate all measures except for HAIs starting with 3rd quarter of CY 2013, and to initiate validation of HAIs in the 4th quarter of CY 2013. E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations We invited public comment on this proposal. Comment: A commenter opposed this proposal because the commenter believed that decreased sample size would result in more hospitals failing to satisfy the validation requirement because of the narrow margin of error. Response: We thank the commenter for this feedback and wish to clarify the impact of a decreased sample size on a hospital’s ability to satisfy the validation requirement. In the FY 2013 IPPS/LTCH PPS final rule (77 FR VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 53551), we fixed the confidence level at 90 percent. We use the upper bound of a two-tailed confidence interval. At any given sample size and population value for the hospital’s score, the probability of failure is fixed at this confidence level. Because our confidence level is fixed, the probability of a hospital failing also does not change. However, decreasing the sample size would decrease our detection rates for failing hospitals by increasing the probability that a hospital would not fail (that is, its confidence interval will include a score PO 00000 Frm 00330 Fmt 4701 Sfmt 4700 of 75 percent), when in fact the population (true) score for the hospital was less than 75 percent. We believe that most of our hospitals have very high reliability. For example, for the FY 2013 payment determination, half of all hospitals had a score of 95 percent or better. Therefore, we believe that cutting sample size for a single year in order to make the necessary determinations in required timeframes will not negatively impact hospitals or the program. Comment: Several commenters supported CMS’ proposals to change the E:\FR\FM\19AUR2.SGM 19AUR2 ER19AU13.018</GPH> mstockstill on DSK4VPTVN1PROD with RULES6 50824 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations timing of the quarters of measure data it validates, as well as the number of quarters included in order to make all payment determinations by July 1 of each year. Response: We thank these commenters for their support. After consideration of the public comments we received, we are finalizing this policy as proposed. b. Selection of Measures and Sampling of Charts to be Included in Validation (1) Clinical Process of Care Measures In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53540 through 53550), for the FY 2015 payment determination and subsequent years, we finalized separate processes for selecting and scoring for validation of 21 chart-abstracted clinical process of care measures and three HAI measures. The measures finalized for validation for clinical processes of care were included in 6 measure sets: acute myocardial infarction (AMI), heart failure (HF), pneumonia (PN), surgical care improvement project (SCIP), emergency department (ED) and immunization (IMM) (77 FR 53541 through 53542). In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27703), for the purposes of the FY 2016 payment determination and subsequent years, we proposed to retain for validation 12 of the 21 chart-abstracted clinical process of care measures and to suspend validation for the remaining 9 chartabstracted clinical process of care measures. With respect to seven of the nine measures, we did not propose to include them in the FY 2016 measure set. However, we proposed to suspend validation of ED–1 and ED–2, despite their proposed inclusion in the FY 2016 measure set, because we do not operationally have the ability to validate electronically-specified versions of these quality measures. We believe that continuing to validate the measures only when they are reported via chartabstraction could create inequity in the validation process that favors hospitals opting to report the measures electronically. Therefore, we proposed to delete the ED measure set from the validation process. We invited public comment on these proposals. Comment: Several commenters emphasized the importance of validating the ED measure set. One commenter stated that all Hospital IQR measures should be validated for as long as they are publicly reported on Hospital Compare. One commenter disagreed with CMS’ proposal that the ED measures should not be validated because CMS lacks validation methods for Hospital IQR measures that are reported as electronically-specified. This commenter argued that ED measures derived from electronic specifications are as valid as ED measures derived via chart-abstracted methods, and that dropping the ED measures from validation would ‘‘devalue’’ these measures which are important indicators of quality and efficiency in EDs. One commenter emphasized the importance of developing validation methodologies for all electronically-specified quality measures in the Hospital IQR Program, but agreed with the logic for removing the measure set from the chartabstracted validation process. Response: We recognize the importance of validating ED–1 and ED– 2, and anticipate that their removal from validation will be temporary until we select an appropriate methodology for validating electronically reported measures. We discuss our efforts to develop a validation strategy in section 50825 IX.A.9.d. of the preamble of this final rule. Comment: Several comments supported the proposal to validate the clinical process of care measures for AMI, HF, PN, SCIP and IMM in the Hospital IQR Program. Some commenters expressed their understanding that the measures proposed to be included in Hospital IQR Program validation are measures which are retained in the program. Response: We thank these commenters for their support. In addition, in the FY 2014 IPPS/LTCH PPS proposed rule, we inadvertently mislabeled the tag for the IMM–2 measure in the Table on 78 FR 27703 as ‘‘Immunization for Pneumonia,’’ instead of ‘‘Immunization for Influenza.’’ We are clarifying that we are finalizing a requirement to validate IMM–2, which we clarify is ‘‘Immunization for Influenza.’’ We also clarify that we will not validate ‘‘IMM–1 Immunization for Pneumonia,’’ beginning with the FY 2016 Hospital IQR Program because, as explained in section IX.A.2.c.(3) of the preamble to this final rule above, we have decided to suspend the measure. After consideration of the public comments we received, we are finalizing as proposed the removal of 9 measures from validation including the 7 that have been suspended or removed from the Hospital IQR Program and two ED measures. Set out below are the 12 clinical process of care measures we are finalizing for validation for the FY 2016 payment determination and subsequent years. Please note that while the table only reflects the information for the FY 2016 payment determination, these measures are finalized for validation in subsequent years as well. mstockstill on DSK4VPTVN1PROD with RULES6 HOSPITAL IQR PROGRAM CHART-ABSTRACTED CLINICAL PROCESS OF CARE MEASURES FINALIZED FOR VALIDATION FOR THE FY 2016 PAYMENT DETERMINATION Measure: AMI–7a Fibrinolytic (thrombolytic) agent received within 30 minutes of hospital arrival. AMI–8a Timing of receipt of primary percutaneous coronary intervention. HF–2 Evaluation of left ventricular systolic function. PN–6 Appropriate initial antibiotic selection. SCIP INF–1 Prophylactic antibiotic received within 1 hour prior to surgical incision. SCIP INF–2: Prophylactic antibiotic selection for surgical patients. SCIP INF–3 Prophylactic antibiotics discontinued within 24 hours after surgery end time (48 hours for cardiac surgery). SCIP INF–4: Cardiac surgery patients with controlled 6AM postoperative serum glucose. SCIP INF–9: Postoperative urinary catheter removal on postoperative day 1 or 2 with day of surgery being day zero. SCIP Cardiovascular-2: Surgery Patients on a Beta Blocker prior to arrival who received a Beta Blocker during the perioperative period. SCIP–VTE–2: Surgery patients who received appropriate VTE prophylaxis within 24 hours pre/post surgery. IMM–2 Immunization for influenza The process for sampling of clinical process of care cases previously VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 finalized for the FY 2015 payment determination and subsequent years in PO 00000 Frm 00331 Fmt 4701 Sfmt 4700 the FY 2013 IPPS/LTCH PPS final rule (77 FR 53540 through 53541) is as E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50826 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations follows. A sample of 15 records per quarter is to be drawn for validation of the chart-abstracted clinical process of care measures (77 FR 53540 through 53541). As finalized in the FY 2012 IPPS/LTCH PPS final rule for the FY 2014 payment determination and subsequent years, the sample is to include 3 records each sampled from among the AMI, HF, PN, and SCIP measure sets, and 3 records to validate for both the ED and IMM measure sets from among ‘‘principal diagnoses and surgical procedures not already included in the AMI, HF, PN, and SCIP populations eligible for validation sampling in these four topic areas (76 FR 51648).’’ As finalized in the FY 2012 IPPS/LTCH PPS final rule, the records sampled for AMI, HF, PN, and SCIP will also be validated for ED/IMM (76 FR 51648); but as finalized in the FY 2013 IPPS/LTCH PPS final rule, these cases will not be validated from among charts sampled for HAI validation (77 FR 53540 through 53541). We proposed to modify this process for the FY 2016 payment determination and subsequent years in two ways. First, we proposed to eliminate validation of the ED measure set for the reasons described immediately above. Second, we proposed to change the requirement to validate ED and IMM for all records included in the validation sample for AMI, HF, PN, and SCIP (77 FR 53540 through 53541). When previously finalized, this policy was intended for two purposes. When a patient chart sampled for validation for AMI, HF, PN, or SCIP also had data submitted to the warehouse for ED/IMM, we have been evaluating the accuracy of the data submitted to the warehouse for ED and IMM and including our assessment of accuracy in the validation score. In addition, when a patient chart sampled for validation for AMI, HF, PN, or SCIP did not include data submitted to the warehouse, our intention in abstracting data on ED and IMM was to assess the extent to which hospitals may have misdrawn the sample such that the ED and IMM data reported to the warehouse was inaccurate. Although it was our intention to use the data for both reasons, we have found it challenging to use the data to evaluate inaccurate sampling and have not yet done so. Therefore, for the FY 2016 payment determination and subsequent years, we proposed to validate IMM for between 3 and 15 charts per hospital per quarter. These include the 3 charts sampled for IMM from among principal diagnoses and surgical procedures not already included in the AMI, HF, PN, and SCIP populations eligible for validation VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 sampling in these four topic areas, and as many of the 12 charts sampled for AMI, HF, PN, and SCIP populations as have IMM data submitted to the warehouse. We invited public comment on this proposal. Comment: One commenter supported this specific proposal, and no commenters explicitly opposed it. Response: We thank the commenter for the support. After consideration of the public comment we received, we are finalizing this policy as proposed. (2) HAI Measures Included in the Current Validation Process The three HAIs specified for chartabstracted validation in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53542), for FY 2015 payment determination and subsequent years are CLABSI, CAUTI, and SSI for patients undergoing abdominal hysterectomies and colon procedures. HAIs are very rare events, which makes validating that they have been reported accurately more challenging than validating the clinical process of care measures. As previously finalized in the FY 2012 and FY 2013 IPPS/LTCH PPS final rules (76 FR 51645 through 51648 and 77 FR 53542 through 53548, respectively), for each HAI, we identify a set of patient episodes of care which have a much higher probability of containing a reportable HAI than others. Each quarter, we sample up to 12 of these candidates, request patient charts from hospitals to determine whether or not an HAI occurred, and score these charts by determining whether events were appropriately reported to NHSN. Comment: Some commenters noted duplicated efforts between CMS and State health departments regarding HAI validation. Some of these commenters recommended that federal responsibility and funding for HAI validation should be redirected from CMS to the CDC and States. These commenters described the current and historical roles played by the CDC and State health departments in preventing HAIs, mandating State HAI reporting, providing training and education on NHSN definitions, developing protocols, reporting, and analyzing HAI data. Commenters also called attention to the CDC’s CLABSI Validation Toolkit,102 a guidance document for States. Some of these same commenters argued that 102 ‘‘National Healthcare Safety Network (NHSN) Validation Guidance and Toolkit 2012. Validation for Central Line-Associated Bloodstream Infection (CLABSI) in ICUs,’’ Centers for Disease Control and Prevention, Atlanta, GA, 2013, https://www.cdc.gov/ nhsn/toolkit/validation-clabsi/, last accessed July 3, 2013. PO 00000 Frm 00332 Fmt 4701 Sfmt 4700 redirecting funds would result in a more efficient and effective process because States are ‘‘better equipped’’ to perform validation than CMS. One commenter acknowledged that having a uniform method for validating all Hospital IQR Program measures ‘‘seems most efficient,’’ but asked CMS to consider whether HAIs warrant special attention. Commenters also emphasized the need for more detailed educational feedback and stronger communication and coordination between CMS and other stakeholders, particularly the CDC’s NHSN, State health departments and infection control practitioners. Response: We have the responsibility to ensure the validity of HAI data reported to our Hospital IQR Program. Data from this program are used to provide the public and other stakeholders with information regarding the quality of care furnished by subsection (d) hospitals throughout the nation. We are also collecting HAI data for the Hospital VBP Program. Given the importance of ensuring that the data are accurate, we believe that our validation process must be consistent nationwide. Although we recognize the role that many States are taking to prevent HAIs, we do not intend to fund State efforts to conduct these activities. We believe that State efforts in this area are best viewed as complementary to our efforts to uniformly validate HAI data. We understand that CDC and State health departments prefer on-site validation methodologies. However, at a national level, on-site validation is impractical because of the resources required. We disagree that on-site validation is the only way to achieve valid quality measurement systems. As discussed further below in this section, we believe that removing ambiguities from NHSN’s case definitions will be far more effective for achieving objective consistent reporting of HAI by all hospitals nationally than conducting validation onsite. We agree that hospitals need more detailed educational feedback. Because NHSN data are not integrated into CMS’s QualityNet System, which hospitals use to submit clinical process of care data to the Hospital IQR Program, the feedback available to hospitals in the first year of HAI validation was less detailed than that available to hospitals for the clinical process of care measures. However, individual hospitals with questions were still able to request educational feedback. We have already addressed this limitation by storing more detailed information about abstractors’ rationale for judging a particular record to have included or not included a reportable E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations HAI event beginning with validation of data for 4th quarter 2012 discharges. We anticipate that hospitals should begin receiving this more detailed feedback shortly, and that this may address some of the commenters’ concerns about hospitals’ educational needs. It should also allow us to provide better aggregate information about common pitfalls in reporting HAIs. Regarding collaboration, CMS and CDC staff have worked closely for more than two years to develop standardized approaches for validation of NHSNbased Hospital IQR data. To the extent that collaboration with other interested parties aligns with Hospital IQR Program goals while reducing burden to subsection (d) hospitals, we encourage such efforts. Comment: Commenters believed State health department staff were better qualified to conduct validation than the CMS contractor because of ‘‘greater content expertise.’’ One commenter requested information on the knowledge and training of those individuals performing the HAI data validation. Another commenter emphasized the knowledge of NHSN protocols held by hospital infection control practitioners. Response: We selected the Clinical Data Abstraction Center (CDAC) contractor because it employs highly trained professionals with extensive quality measurement experience developing and using standardized objective protocols. All CDAC staff are highly experienced medical records abstractors who undergo rigorous training and testing. The CDAC has abstracted HAI data from medical records for HHS quality measurement programs for approximately 10 years. In addition, the CDAC also abstracts the HAI quality measure data used to evaluate the HHS Partnership for Patients campaign. The CDAC contractor is also familiar with NHSN protocols. CMS and CDAC interact at least monthly and usually weekly with CDC staff to request detailed technical assistance in all areas related to the understanding and use of the NHSN protocol such that they can develop and update standardized abstraction protocols for their staff. After protocols are developed and before the implementation of any new validation activity, CMS and CDC subject matter experts review all CDAC materials. CDC trains CDAC supervisors and CMS staff on all newly introduced and updated NHSN protocols. CDAC supervisors continuously monitor their staff and provide routine feedback when they detect abstractor errors regarding HAI protocols. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Comment: One commenter asked for a summary of findings from CMS’ prior validation of CLABSI reporting including lessons learned and the accuracy of the surveillance in the ICUs for CLABSI based on data submitted to CMS. Response: We generally release quarterly validation scores to the hospitals using a secure QualityNet report. We protect the confidentiality of validation reports to provide hospitals with feedback for their internal quality improvement efforts. We intend to provide a national summary report on our 2012 CLABSI validation within the next year. From the first year, we identified some important lessons learned. For example: • CDAC identified a lack of a standardized timeframe in both CDAC and NHSN protocols for the presence of symptoms indicating infection onset prior to central line placement. As a result, this was a common reason why CDAC identified no infection when a hospital reported one. By the time we reviewed these results, CDC had already updated their protocols to reduce the subjectivity in their case definitions and increase standardized timeframes.103 CDAC is in the process of updating its validation protocols to align with these revised case definitions and will make them publicly available. CMS and CDC will continue to collaborate on additional standardization. • When hospitals failed to report an event that CDAC thought should have been reported, CDAC identified some cases in which there was partial documentation that a particular infection was secondary to another site (and therefore not a CLABSI), but for which all NHSN criteria for this designation were not met. Comment: One commenter agreed with CMS that identifying SSIs postdischarge is important, but urged CMS to delay adoption of post-discharge surveillance methods until the CDC is able to develop recommendations related to this specific issue. The commenter suggested that once the CDC is able to make these recommendations, the CMS Conditions of Participation (CoPs) for post-discharge surveillance could incorporate them. Response: In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53545), we raised the importance of identifying SSIs postdischarge for purposes of quality reporting. For this reason, we finalized 103 ‘‘Central Line-Associated Bloodstream Infection Event’’ https://www.cdc.gov/nhsn/pdfs/ pscmanual/4psc_clabscurrent.pdf, April 1, 2013. Last accessed 7/7/2013. PO 00000 Frm 00333 Fmt 4701 Sfmt 4700 50827 a process to validate SSIs occurring post-discharge using claims data and medical records. Hospital CoPs are separate from the Hospital IQR Program, and we have not proposed any changes to CoPs. Rather, we described how we would validate SSIs occurring postdischarge. Moreover, in the FY 2014 IPPS/LTCH PPS proposed rule, we proposed no changes to the general SSI approach. We intend to share with our Survey and Certification Group the commenter’s recommendation that postdischarge surveillance be incorporated into hospital CoPs for future consideration. In order to identify candidate cases referenced above for CLABSI and CAUTI, we also require hospitals to submit supplemental information on certain patient episodes of care quarterly. In the FY 2012 and FY 2013 IPPS/LTCH PPS final rules (76 FR 51645 through 51648 and 77 53542 through 53548, respectively), we identified the supplemental information to be provided and the types of patient episodes of care for which this information is needed. We require hospitals to submit this supplemental information in two separate ‘‘Validation Templates’’ according to formats specified on QualityNet. We require separate CLABSI and CAUTI Validation Templates because different information is required to identify candidate CLABSIs and candidate CAUTIs. For a detailed discussion of these requirements, we refer readers to our Web site at: https://www.qualitynet.org/ dcs/ContentServer?c=Page&pagename= QnetPublic%2FPage%2FQnetTier2 &cid=1228760487021. As stated in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51646), for the FY 2012 payment determination and subsequent years, hospitals are required to report positive blood cultures for intensive care unit patients and are also required to ‘‘self-identify intensive care unit patients with a central venous catheter (CVC) that are on this blood culture list.’’ In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27703 through 27704), we proposed for the FY 2016 payment determination and subsequent years to remove the requirement to note a CVC and replace it with a requirement to note a ‘‘central line.’’ In other words, we proposed to require that hospitals note on the CLABSI Validation Template whether patients had a ‘‘central line’’ present at any time during their hospital stay. We made this proposal to better align with current NHSN definitions. The FY 2012 IPPS/LTCH PPS final rule (76 FR 51646) also specified which organisms should be reported on the E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50828 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations CLABSI Validation Template, which are also regarded as common commensals (often referred to as skin contaminants), and where hospitals could find an updated list of these commensals. This list is updated annually. When we review the CLABSI Validation Templates for the FY 2016 payment determination and subsequent years, we proposed to apply the most up-to-date list available at the time of review. The current list may be found at: https:// www.cdc.gov/nhsn/XLS/masterorganism-Com-Commensals-Lists.xlsx. We also proposed for the FY 2016 payment determination and subsequent years that hospitals must exclude from CAUTI Validation Templates urine cultures with more than 2 organisms, even if they have greater than or equal to 1,000 colony-forming units (CFUs)/ ml. We made this proposal because, when we finalized the requirement to include on the CAUTI Validation Templates all urine cultures with greater than or equal to 1,000 CFUs/ml (77 FR 53542 through 53545), our intention was to identify urine cultures that conform to NHSN definitions for CAUTI. Although these definitions vary, all require that there be no more than 2 organisms identified in the result (because multiple organisms often indicate contamination).104 We invited public comment on this proposal. Comment: Commenters supported our proposals to align CMS’ validation practice with CDC case definitions. Some commenters supported CMS’ HAI validation of CLABSI, CAUTI, and SSI generally without mentioning these specific proposals. Response: We thank these commenters for their support. After consideration of the public comments we received, we are finalizing these policies as proposed. We proposed for the FY 2016 payment determination and subsequent years to notify hospitals of future changes to the definition of candidate HAI events through HAI Validation guidance documents to be posted annually on QualityNet. As illustrated by several proposals immediately above identifying places where CMS and NHSN are slightly misaligned, we believe that these very detailed specifications may more appropriately be addressed through sub-regulatory guidance than through the rulemaking process. Therefore, we made this proposal to simplify future proposed rules regarding validation, to ensure that 104 ‘‘Catheter-Associated Urinary Tract Infection (CAUTI) Event’’ https://www.cdc.gov/nhsn/PDFs/ pscManual/7pscCAUTIcurrent.pdf, last accessed February 19, 2013. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 we are able to remain current with NHSN guidance and protocols, and to ensure that hospitals are made aware of these updates. We invited public comment on this proposal. Comment: A few commenters supported this proposal. One commenter expressed the need for closer collaboration with the CDC, infection control practitioners, and the Association of Professionals in Infection Control (APIC) when engaging in this subregulatory process. Response: We will continue to consult with CDC as we have historically in nearly every aspect of the Hospital IQR Program’s HAI validation plan. We will consider other collaborations as described above in this section. Comment: One commenter stated that if a subregulatory process is used, hospitals should receive several notices pushed directly to hospital leadership describing the guidance. CMS should not just rely on line hospital staff to interpret the importance of the validation process and ensure its accuracy. Hospital leadership should be included in any changes to validation for any measure that significantly affects a hospital’s overall quality score. Response: The Hospital IQR Program has a routine process for education and outreach to notify hospital leadership and line staff of important updates, such as when hospitals have been selected to participate in validation activities. As part of this process, QIOs are required to maintain a list of hospital contacts, including leadership contacts, which the IQR program then uses for these updates. QIOs will periodically contact hospitals to verify hospital staff contacts and to keep them current. However, it is important for hospital staff to notify their QIO whenever they have staff changes, especially those that are in leadership roles so those contacts can be kept current. As we already do for other key Hospital IQR Program requirements, we intend to use this list to inform key contacts when critical changes to NHSN validation requirements are posted on QualityNet. After consideration of the public comments we received, we are finalizing this policy as proposed. For the FY 2016 payment determination and subsequent years, we also proposed to exclude from HAI validation all patient episodes of care with lengths of stay of more than 120 days. Patient episodes of care involving lengths of stay over 120 days are very rare, accounting for much less than one percent of the records submitted for Q1 2012 CLABSI validation. Because medical records for patients with very long lengths of stay may be tens of PO 00000 Frm 00334 Fmt 4701 Sfmt 4700 thousands of pages, the burden and costs of validation to hospitals and CMS are disproportionate to the information gained from their validation. In addition, this proposed change aligns the HAI episode of care maximum length of stay with the Hospital IQR Program’s clinical process of care measures episode of care maximum length of stay of 120 days as detailed in the Specifications Manual for the National Hospital Inpatient Quality Measures (https://www.qualitynet.org). We invited public comment on this proposal. Comment: Some commenters supported this proposal. Commenters expressed appreciation that CMS proposed policies to reduce validation burden. Response: We thank the commenters for the support. After considering public comments we received, we are finalizing this policy as proposed. For the FY 2016 payment determination and subsequent years, we also proposed to require each hospital to submit data without modifications to the format within the Validation Template posted on QualityNet at the beginning of each validation cycle. We believe this requirement is needed based on our experience with the CLABSI Validation Template for the FY 2013 payment determination. We have observed that many hospitals enter the required data but alter the format of the downloadable Validation Template. For example, hospitals may change the length or format of a column or change its column name. Because our contractors must process hundreds of these templates in a matter of weeks, even minor alterations to formats of the data within the Template create significant operational delays. We will continue to give hospitals feedback on their Validation Templates prior to the submission deadline. To assist hospitals in meeting this formatting requirement, we will include formatting in future feedback. We invited public comment on this proposal. Comment: A commenter recommended that CMS test this process before implementing it. Response: We understand that the requirements to produce Validation Templates are complex. However, these complex requirements were finalized for CLABSI and CAUTI in the FY 2012 IPPS/LTCH PPS (76 FR 51646–51648) and FY 2013 IPPS/LTCH PPS final rules (77 FR 53542 through 53544), and hospitals have already successfully submitted them for CLABSI for 5 quarters and for CAUTI for 1 quarter. E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 The additional requirements that we are finalizing in this final rule are technical in nature, intended to reduce the operational delays that are caused when hospitals alter the format of the Templates. We are finalizing that this requirement be effective with Validation Templates to be submitted beginning on May 1, 2014, which will give hospitals 9 months to make any system changes necessary to comply. We will also provide hospitals with education and feedback to assist them in meeting the requirement. Comment: A commenter supported this proposal. Response: We appreciate this commenter’s support. After considering the public comments we received, we are finalizing this policy as proposed. (3) HAI Measures to be Added to the Validation Process In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27704 through 27706), for the FY 2016 payment determination and subsequent years, we proposed to validate two new HAI measures: methicillin-resistant Staphylococcus aureus (MRSA) bacteremia Laboratory-identified (LabID) events and Clostridium difficile (CDI) LabID events. MRSA and CDI were finalized for inclusion in the Hospital IQR Program in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51629 through 51631) starting with the FY 2015 payment determination. We proposed to validate MRSA and CDI consistent with requirements under section 1886(b)(3)(B)(viii)(XI) of the Act which requires us to establish a process to validate measures included in the Hospital IQR Program as appropriate. We invited public comment on this proposal. Comment: A commenter stated that QualityNet does not function reliably and questioned whether the system can handle the addition of validation-related requirements. Response: The commenter appears to be concerned that as we continue to add validation-related requirements that use QualityNet, these performance issues will negatively impact validation. We agree that systems issues have created challenges for hospitals as well as for CMS and its other contractors. We are taking the following steps to ensure reliable access to QualityNet in the future. We are pursuing the use of ‘‘Axway’’, a secure file transfer product. When operational, hospitals will be able to transfer files through either a Webbased portal or direct from a client using secure file transfer protocol (FTP). We are currently testing Axway and intend VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 to make it available to hospitals in the Hospital IQR Program within the next 12 to 18 months. In the interim, we have archived large amounts of older data to off-site storage facilities, which greatly improve QualityNet performance. This will allow us to continue to use QualityNet until Axway replaces the existing system. Comment: Several commenters supported this proposal. One commenter mentioned that it was important to validate these infections. Response: We agree that it is important to validate MRSA and CDI, which is why we are finalizing a policy to do so. After consideration of the public comments we received, we are finalizing this policy as proposed. For MRSA and CDI validation, we proposed a process similar to that for CLABSI and CAUTI for the FY 2016 payment determination and subsequent years. Specifically, we proposed to require sampled hospitals to provide to CMS or its contractor one list of final blood cultures positive for MRSA and a second list of all final stool specimens toxin positive for CDI. We note that although CMS only publicly reports hospital-onset infections, CMS requires hospitals to report both hospital and community-onset cases. We require hospitals to report community-onset cases because NHSN employs this information in risk-adjustment. Validation of MRSA and CDI requires confirmation that both hospital and community-onset cases are reported correctly and completely. Therefore, for the FY 2016 payment determination and subsequent years, we proposed that both types of cases be included on the MRSA and CDI Validation Templates. For these payment determinations, we proposed to collect the following information on the MRSA and CDI Validation Templates needed to identify each candidate event: (1) Laboratory accession number, collection date, and location; (2) necessary information to identify the patient (that is, patient identifier, Medicare Beneficiary number also known as the HIC number, sex, and date of birth); (3) the patient’s admission and discharge dates; and (4) necessary information to identify the hospital (NHSN Facility ID, Provider ID/CCN, Hospital Name and State, Contact Information for the Person Completing the Template). Draft versions of the proposed MRSA and CDI Validation Templates were posted on the QualityNet Web site at: https://www.qualitynet.org/dcs/Content Server?c=Page&pagename=Qnet Public%2FPage%2FQnetTier2& cid=1228760487021 during the public PO 00000 Frm 00335 Fmt 4701 Sfmt 4700 50829 comment period. We proposed this approach for MRSA and CDI validation, because we believe that this is the best way for us to systematically identify candidates that are likely to yield a high proportion of cases that should have appropriately been reported to NHSN. Consistent with the process we have been using for the CLABSI and CAUTI Validation Templates, we proposed that quarterly submission deadlines correspond to those for population and sampling data as defined in section IX.A.9.e. of the preamble of the proposed rule. We invited public comment on this proposal. Comment: Commenters indicated that the time of specimen collection was unnecessary even though it was included on the draft MRSA and CDI Validation Templates. Response: We agree that the time of collection is not a necessary field. For this reason, we did not propose to require it on the MRSA and CDI Validation Templates. We indicated the required fields on these Templates with an asterisk, with others being optional. Time was included as an optional field. The optional information may assist our CDAC abstractors in locating the result in the medical record. In addition, because we have proposed that hospitals should only send the part of the record that documents the specimens collected, the optional information might be of assistance to hospital medical records personnel who may also use it to identify the right parts of the medical records to submit for validation. This may be especially useful if the staff who complete the Validation Templates and those who submit medical records for validation work in different hospital departments. Hospitals may choose whether to provide this information. Comment: Commenters suggested that establishing whether there were any hospital discharges for a particular patient in the last 28 days should be part of validation. This information may affect how community-onset cases are classified. Response: We agree that the information about discharges in the last 28 days would ideally be used for validation. The information contributes to how CDC risk-adjusts the MRSA and CDI statistics reported on Hospital Compare. However, in our first year of validation, we sought to validate only reporting of the candidate event and the date the event occurred, as these two pieces of information are most relevant to assessing completeness of reporting hospital-onset cases and accurately distinguishing hospital-onset from community-onset cases reported to E:\FR\FM\19AUR2.SGM 19AUR2 50830 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations NHSN. We believe that this validation effort is sufficiently ambitious at this time. Because we are concerned about the hospital burden related to validation, we will not yet be distinguishing among types of community-onset cases. We will consider refinements to our validation strategy in future rulemaking cycles. Comment: One commenter stated that ‘‘CMS is now proposing to require sampled validation hospitals to provide additional lists (one list of final blood cultures positive for MRSA and a second list of all final stool specimens toxin positive for CDI).’’ The commenter viewed this proposal as ‘‘prohibitively burdensome,’’ and believes that it should be delayed until ‘‘it can be automated through EHRs.’’ Response: Although we agree that the new Validation Templates for MRSA and CDI will create some burden for hospitals that are selected for validation, we do not believe that this burden is prohibitive or outweighs our goal to properly validate these measures. Moreover, we carefully considered ways to reduce the burden associated with this requirement, and proposed that no hospital would be required to complete more than 2 Validation Templates per quarter if selected for validation in given year. Accordingly, we believe that this requirement will not add a new burden to hospitals, as hospitals will either be required to submit (1) MRSA and CDI Validation Templates or (2) CLABSI and CAUTI Validation Templates, but not both sets. Comment: Some commenters supported the use of Validation Templates. One commenter noted support because hospitals are already familiar with it. Response: We thank the commenters for their support. After consideration of the public comments we received, we are finalizing this policy as proposed. We recognize that the proposal to add two new HAI Validation Templates has the potential to increase burden to individual hospitals selected for validation. As finalized in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53551 through 53553), for the FY 2015 payment determination and subsequent years, the annual validation sample includes 400 randomly selected hospitals and up to 200 hospitals sampled based on targeting criteria. To add these new Templates without increasing burden for the FY 2016 payment determination and subsequent years, we proposed to randomly assign half of hospitals to submit templates for CLABSI and CAUTI validation and half of hospitals to submit templates for MRSA and CDI validation. We believe this proposal will limit hospital burden to that finalized in the FY 2013 IPPS/ LTCH PPS final rule, because no hospital would be required to submit more than two templates per quarter. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53547 through 53548), we established a sample size of 12 records for HAI validation per quarter for the FY 2015 payment determination and subsequent years. Each quarterly sample is to be drawn from a list of patient episodes of care for all three types of candidate HAIs (CLABSI, CAUTI, and SSI) combined in one non-stratified sampling frame. For the FY 2016 payment determination and subsequent years, we proposed to target separate sampling strata for each type of HAI. We made this proposal because we believe that having separate sampling targets for each infection will better accommodate the very different incidence of different types of HAI events, particularly for hospitals which are to be validated for SSI, MRSA, and CDI. This proposal also supports the objective to evaluate how well each HAI is reported to NHSN when considered across all hospitals combined. Number of records/ quarter/ hospital Number of quarters Number of records per hospital APU determination HAI Number of hospitals FY 2015 (previously finalized) ................. CLABSI, CAUTI, SSI combined .. Up to 600 ... 4 12 48 CLABSI, CAUTI, SSI combined .. CLABSI ........................................ CAUTI .......................................... MRSA .......................................... CDI .............................................. SSI ............................................... CLABSI ........................................ CAUTI .......................................... MRSA .......................................... CDI .............................................. SSI ............................................... Up Up Up Up Up Up Up Up Up Up Up 3 3 3 3 3 3 4 4 4 4 4 12 5 5 5 5 2 * 3.75 * 3.75 * 3.75 * 3.75 * 1.5 36 15 15 15 15 6 15 15 15 15 6 In the preamble to the proposed rule FY FY FY FY FY FY FY FY FY FY FY 2015 2016 2016 2016 2016 2016 2017 2017 2017 2017 2017 ................................................... ................................................... ................................................... ................................................... ................................................... ................................................... and subsequent years .............. and subsequent years .............. and subsequent years .............. and subsequent years .............. and subsequent years .............. to to to to to to to to to to to 600 300 300 300 300 600 300 300 300 300 600 ... ... ... ... ... ... ... ... ... ... ... mstockstill on DSK4VPTVN1PROD with RULES6 * Within each hospital, quarterly targets are 3, 3, and 1 respectively for CLABSI, CAUTI, and SSI and 3, 3, and 1 respectively for MRSA, CDI, and SSI. We will randomly allocate 2 additional records per hospital each quarter to meet the fractional case targets on average. The sample sizes for each HAI proposed for the FY 2016 payment determination are shown in the table above. For hospitals submitting CLABSI and CAUTI templates, the infectionspecific sample sizes per hospital per quarter proposed are: 2 for SSI, 5 for CLABSI, and 5 for CAUTI (12 per quarter). For hospitals submitting MRSA and CDI Validation Templates, the infection-specific sample sizes per hospital per quarter proposed are: 2 for VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 SSI, 5 for MRSA, and 5 for CDI. For each hospital, in each quarter, these cases would be drawn randomly from each individual Validation Template (or from claims for SSI) from among episodes of care containing at least one candidate event. Across all hospitals and quarters combined, we are assuming that approximately 10 percent of patients with candidate CLABSI events had a CLABSI. This will yield approximately 450 hospital discharges with actual PO 00000 Frm 00336 Fmt 4701 Sfmt 4700 events. Assuming a design effect resulting from clustered data collection of no more than 2, this will allow us to estimate accurate reporting (+/¥ 5 percentage points with 90 percent confidence) of CLABSI if it occurs approximately 75 percent of the time. We developed sample size requirements based on a 75 percent score to align with CMS requirements for a 75 percent score to pass validation as specified in 42 CFR § 412.140(d)(2), and using a two- E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations tailed 90 percent confidence interval as finalized in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53551). Based on these statistics, we believe this is the smallest sample size needed to meet the objective of accurately evaluating how well hospitals report CLABSI data to NHSN. Because we have less data on which to base sample size calculations for CAUTI, MRSA bacteremia, and CDI than we have for CLABSI, we proposed similar sample size targets for these 4 HAIs. By proposing similar sample size requirements across these 4 HAIs for the FY 2016 payment determination and subsequent years, we assure that hospitals will be required to submit the same number of records regardless of which set of Validation Templates they are assigned to submit. For SSI, the proposed sample size assumes that most hospitals will not have more than 2 candidate SSIs per quarter. By sampling fewer SSI cases over twice as many hospitals, we ensure that the sample size for SSI validation is also adequate. Because SSI cases may be sampled without the added submission requirement of a Validation Template, we foresee no difficulty in requiring all hospitals sampled for validation to provide information for SSI. We invited public comment on these proposals. Comment: A number of commenters supported the proposal to reduce the number of records submitted per hospital, and minimizing the number of Validation Templates required for each hospital. Commenters expressed appreciation for the efforts to reduce burden and encouraged us to consider additional ways in which we may reduce burden associated with HAI validation, and to work more directly with stakeholders including infection preventionists. Response: We thank the commenters for their support, and acknowledge the need to continue to look for ways to reduce burden associated with HAI validation. We have discussed the issue of outreach above in section IX.A.10.b.(2) of the preamble to this final rule. Comment: One commenter believed that the proposal to split the validation sample would only save time/cost for CMS, but not for hospitals. The commenter opposed it because it would result in having two different standards for validation. Response: The proposal is intended to decrease burden for hospitals. Instead of having to complete four Validation Templates, each hospital only has to complete two. We agree that it is possible that some hospitals might find VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 it slightly easier to complete requirements for one set of Validation Template requirements or the other. We have no reason to believe that the process will be inequitable for different hospitals. However, we will monitor this concern, and consider changes in the future if we determine that one group of hospitals appears more likely to pass validation than the other. After considering the comments received, we are finalizing the policies describing the number of hospitals and number of cases to be sampled for each HAI as proposed. Within each hospital for each type of HAI event each quarter, a random sample would be drawn from among patient episodes of care with at least one candidate event identified from the Validation Template (or claims data for SSI) to meet the targeted sample size. If there are not enough cases in any stratum, we proposed for the FY 2016 payment determination and subsequent years to reallocate those cases to any stratum or strata that have more than enough cases to meet sample size targets. We proposed to reallocate cases because different hospitals may have different relative frequencies of each HAI. The proposed reallocation process will give CMS the flexibility to meet sample size quotas in the event that one hospital has more than enough candidate MRSA events but not enough candidate CDI events and the next hospital has more than enough candidate CDI events and not enough candidate MRSA events. We invited public comment on this proposal. We received no specific comments on this proposal, and are finalizing this policy as proposed. For the FY 2017 payment determination and subsequent years, we proposed to reduce the quarterly HAI sample from 12 to 9. Please see the chart above. This is to reflect the fact that we proposed to collect data for 4 quarters instead of for 3 quarters starting with the FY 2017 payment determination (section IX.A.10.a. of the preamble of the proposed rule). When we distribute over 4 quarters, the 15 annual patient charts each for CLABSI, CAUTI, MRSA, and CDI and 6 annual patient charts each for SSI, the process produces fractions. We proposed to request 9 patient charts by establishing quarterly targets of 3, 3, and 1 respectively for CLABSI, CAUTI, and SSI and 3, 3, and 1 respectively for MRSA, CDI, and SSI, and then randomly allocating the remaining 2 records to meet the hospital target of 9 HAIs for the quarter. We invited public comment on these proposals. PO 00000 Frm 00337 Fmt 4701 Sfmt 4700 50831 Comment: A few commenters expressed views related to the small proposed sample size. One commenter believed that the proposed HAI validation strategy is ‘‘statistically underpowered to detect substandard performance.’’ We interpret this statement to mean that the sample size is to too small to meet the goal of detecting inaccurate reporting of HAIs within each individual hospital. Response: Although we agree with the commenter that our sample sizes are small our goal is to validate the accuracy of Hospital IQR data as a whole, with as little burden to hospitals as is possible to achieve that goal. Therefore, when considering sample size for individual hospitals, we did not evaluate the minimum sample size needed to assess accuracy for HAIs alone. Because charts sampled for the clinical process of care measures are scored for multiple measures, the 96 charts per hospital per year proposed yields 180 separate measures. We believe this is adequate to estimate the overall reliability of the data with satisfactory accuracy and confidence. The combined approach also accomplishes the task of validation with much lower burden and cost than would be needed to meet the requirement suggested by the commenter. Our proposal acknowledged that for each individual hospital, although we can detect overall reliability, it may be difficult to detect errors for reportable HAIs alone. Therefore, we also are finalizing below in section IX.A.10.d. of the preamble to this final rule our proposal to target any hospital which failed to report to NHSN at least half of actual HAI events detected as determined during the previous year’s validation effort. To improve our program, we intend to analyze all the data across all hospitals in the validation sample to examine reporting accuracy and factors that influence it for individual HAIs. This will allow us to provide feedback to all Hospital IQR participating hospitals (whether or not included in the validation sample) about how to improve their reporting process and provide an overall measure of accuracy for the program. Comment: One commenter argued that CMS’ validation design differs markedly from international standards. The commenter provided an article detailing a recommended approach to ensuring adequate power based on acceptance sampling methods E:\FR\FM\19AUR2.SGM 19AUR2 50832 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations developed for quality control in manufacturing.105 Response: We found this article to be interesting and will consider the extent to which it might be useful as we further develop our validation policies. After consideration of the public comments we received, we are finalizing these policies as proposed. mstockstill on DSK4VPTVN1PROD with RULES6 c. Procedures for Scoring Records for Validation We did not propose any changes to the procedures for scoring records for validation for the clinical process of care measures for the FY 2016 payment determination or subsequent years. This process was described in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50226). In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27706 through 27707), however, we proposed changes to the procedures for scoring records for validation of HAI measures. (1) Scoring of CLABSI, CAUTI, and SSI In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53550 through 53551), for the FY 2015 payment determination and subsequent years, we finalized a scoring approach considering all three HAI measures simultaneously. In general, if hospitals have matched data on all three HAIs, they would receive a score of 1, and if they have a mismatch on one or more HAIs, they would receive a score of 0. For example, if a patient had a CLABSI during an episode of care and no CAUTI or SSI and the CLABSI was properly reported, the hospital received a score of 1 for that patient. We developed this approach primarily out of an interest in maximizing the information available to us about CLABSI, CAUTI, and SSI using the same set of records reviewed for all three infections at once, and because we recognized that an individual infection event could not simultaneously be attributed to more than one cause, that is, a particular infection was either a primary CLABSI, CAUTI, or SSI, but never all three at once. In addition, the records were sampled from a single unduplicated frame. With a single sampling frame for all three events, it was not always possible to determine in advance which event to evaluate for a particular case. Moreover, it is apparent that an event that was sampled because of a MRSA bacteremia result does not need to be evaluated for CDI and viceversa. For both of these reasons, we 105 Fortuna JA, Brenneman WA, Storli S, Birnbaum D, Brown KL. The current state of validating the accuracy of clinical data reporting: lessons to be learned from quality and process improvement scientists. Infect Control Hosp Epidemiol. 2013;34(6):611–4. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 proposed for the FY 2016 payment determination and subsequent years, to evaluate and score each case only for the infection for which it was sampled as having candidate events. For example, episodes of care for patients on the CLABSI Validation Template will be evaluated and scored only for CLABSI. We invited public comment on this proposal. Comment: Two commenters supported these changes. One of these commenters supported the proposed individualized process for validating each of the HAIs—CLABSI (ICUs), CAUTI (ICUs), and SSI (colon and hysterectomy). For SSIs, the commenter agreed that utilizing two charts will be necessary to provide a thorough review of the NHSN criteria. The other commenter described the change in scoring as ‘‘appropriate.’’ Response: We appreciate the commenters’ support. After considering the public comments we received, we are finalizing the policy to score each HAI individually as proposed. We also proposed for the FY 2016 payment determination and subsequent years to score charts selected for SSI, CLABSI, and CAUTI in the manner that scoring was finalized for CLABSI in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51647). If the CDAC contractor reviews a medical record and determines that patient had no CLABSI events and the hospital reported no CLABSI to NHSN, the case will receive a score of 1. If the CDAC contractor determines that the patient had a CLABSI and this was reported to NHSN, the case will also receive a score of 1. If a mismatch occurs and the CDAC contractor determined that the patient had no CLABSI when one is reported, or that the patient had a CLABSI that was not reported, the hospital will receive a score of 0. If the CMS quarterly validation process identified that 3 out of 4 total sampled records accurately reported the presence of CLABSI or did not report a CLABSI when none was present, then the hospitals’ quarterly CLABSI validation score would be 3⁄4 or 75 percent. If two or more infections are detected for a patient episode of care, the case may receive separate scores for each event. For example, if one patient episode of care included two CLABSIs, both of which were reported correctly, and reported correctly for 2 of the remaining three records evaluated for CLABSI, then the validation score for CLABSI that quarter would be 4⁄5 or 80 percent. Comment: One commenter supported this specific proposal. PO 00000 Frm 00338 Fmt 4701 Sfmt 4700 Response: We thank the commenter for this support. After consideration of the public comments we received, we are finalizing these policies as proposed. (2) Scoring of MRSA and CDI MRSA bacteremia and CDI, have very different reporting requirements from other HAIs included in the Hospital IQR Program. The major difference between the case definitions for MRSA and CDI relative to other HAIs being reported as part of IQR is that MRSA and CDI are laboratory-identified events that do not require extensive clinical judgment on the part of the reporting hospital. If the laboratory events and date of hospital admission are reported accurately, CDC makes the determination as to whether the event was community or hospital onset. Our proposal entails evaluating each patient episode of care on a minimum of two components, with a score of 1 for each matched component and 0 for each mismatched component. We proposed to evaluate each laboratory identified event on the following components: (1) Whether it was reported to NHSN when it should have been reported; and (2) whether the correct dates of admission and event were reported such that NHSN correctly classified the event as hospital or community onset. Each of these components contributes to an assessment of the accuracy and completeness of the public reporting result that appears on Hospital Compare, and each is important. Because each candidate event will be scored on two different components, scores will be reported in multiples of two. For example, if a sampled patient episode of care has only one candidate event, and 1 out of 2 elements matched for that event, the total score for that candidate event would be 1⁄2. If a particular patient episode of care contains multiple candidate events, that patient episode will be evaluated on each of these events, increasing the number of possible elements to be validated by 2, one for each candidate event evaluated. The maximum number of events that we would validate for any episode of care would be 4. Therefore, the maximum possible score for any one patient episode of care would be 8 (2 × 4). NHSN has an automated process to remove events that should not have been reported to NHSN if they occurred within 14 days of a previous laboratoryidentified event for the same infection. Because NHSN excludes these events automatically, we proposed for the FY 2016 payment determination and subsequent years that hospitals will not be credited or penalized for reporting or E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations failing to report an automatically excluded event. We invited public comment on these proposals. Comment: Two commenters suggested that CMS evaluate how well this proposal functioned at the end of the first year. Response: We are very committed to evaluating our process and will take this suggestion into consideration. Comment: Some commenters encouraged CMS to give each reportable event only 1 point. The commenters argued that both the date and the event must be reported correctly for hospitals to have an accurate hospital-onset infection rate, and that both are relatively easy to report. Response: We agree with the comment that giving each reportable event only 1 point is better than 2 points per case. This is because both pieces of information—the laboratory event and the date for which it occurred— contribute to the accuracy of reporting for a single case. By adopting a final score of 1 point per candidate event, scoring will more closely align with scoring for other HAI and clinical process of care measures to be validated. As described in section IX.A.10.c.(1) of this preamble, other HAIs receive a maximum of 1 point for each candidate event within the same episode of care. Similarly, as described in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50226), for each clinical process of care measure evaluated, the maximum score attainable for a measure is 1 point. We believe that for MRSA and CDI, giving each reportable event 1 point, instead of 2 as proposed, is more consistent with our policies. Based on the public comments we received, we will provide hospitals with only one point per candidate MRSA or CDI event. To receive a score of 1/1 for each event for up to 4 events, hospitals must correctly report both the laboratory event and the event date. Hospitals will receive a score of 0/1 for each event if they either fail to report the event or report the incorrect event date—in other words, if there is a mismatch in data received. In the case when a hospital has no reportable events, the hospital would receive a score of 1/1 if none were reported to NHSN (a match), and a score of 0/1 if any were reported to NHSN (a mismatch). We will provide hospitals with feedback on correct reporting of both the infection and the event date via QualityNet. (3) Combined Scores In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53549), we finalized the process for combining the clinical process of care and HAI validation scores for the FY 2015 payment determination and subsequent years scores by weighting them proportionate to the number of measures validated in each group. We did not propose any changes to this process. Using the finalized procedure for combining the clinical process of care and HAI validation scores, the relative weights for the FY 2016 payment determination would be 12/17 for the clinical process of care measures included in validation and 5/17 for the HAI measures included in validation. As previously finalized in the FY 2013 IPPS/LTCH PPS payment rule for the FY 2015 payment determination and subsequent years (77 FR 53551), we use the upper bound of a two-tailed 90 percent confidence interval around the combined score to determine if a hospital passes or fails validation. If this number is greater than or equal to 75 percent, then the hospital passes validation. We did not propose changes to this methodology. We intend to post the specific formulas used to compute the confidence interval on the QualityNet Web site at least one year prior to computation as we have done in the past (https://www.qualitynet.org/ dcs/ContentServer?c=Page&pagename= QnetPublic%2FPage%2FQnet Tier2&cid=1138115987129). These formulas will continue to account appropriately for the manner in which patient charts are sampled and scored for the measures corresponding to the payment determination period. Comment: A commenter supported the process for combining scores. Response: We appreciate the commenter’s support. Comment: One commenter stated that denominators were too small and would lead to unreliable results. Response: We had difficulty understanding the commenter’s concern because the size of the denominator in the context of this policy does not affect the reliability of results. We therefore wish to clarify that this policy does not refer to a sample size, but rather reflects: (1) The number of individual clinical process of care and HAI quality reporting measures to be validated, and (2) the relative weights for those measures. As we indicate above, each hospital will submit up to 96 charts and will have the opportunity to be evaluated up to 180 separate times. We did not propose any policy changes and we are not finalizing any changes to existing policy. d. Procedures to Select Hospitals for Validation In the FY 2013 IPPS/LTCH PPS final rule, for the FY 2015 payment VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 PO 00000 Frm 00339 Fmt 4701 Sfmt 4700 50833 determination and subsequent years, we finalized an annual hospital validation sample size of 400 randomly selected hospitals and a supplemental sample of up to 200 hospitals to be selected for more targeted validation (77 FR 53552 through 53553). The supplemental sample of up to 200 hospitals will include all hospitals that fail validation in the previous year and a random sample of hospitals meeting certain targeting criteria for the FY 2015 payment determination and subsequent years. The targeting criteria were finalized in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53552 through 53553) for the FY 2016 payment determination and subsequent years. A summary of these criteria is set out below. • Any hospital with abnormal or conflicting data patterns. • Any hospital with rapidly changing data patterns. • Any hospital that submits data to NHSN after the Hospital IQR Program data submission deadline has passed. • Any hospital that joined the Hospital IQR Program within the previous 3 years, and which has not been previously validated. • Any hospital that has not been randomly selected for validation in any of the previous 3 years. • Any hospital that passed validation in the previous year, but had a twotailed confidence interval that included 75 percent. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27707), for the FY 2016 payment determination and subsequent years, we proposed one additional criterion for targeting as follows: any hospital which failed to report to NHSN at least half of actual HAI events detected as determined during the previous year’s validation effort. We made this proposal to increase incentives for properly reporting HAI events that should have been reported to NHSN. To ensure a fair process for validation scoring, we credit hospitals for following NHSN protocols correctly. In this regard, hospitals receive credit for not reporting to NHSN candidate HAI events that we determine were not actually events and reporting candidate HAI events to NHSN that we determine were actually HAI events. We anticipate that hospitals may receive credit for not reporting many such candidate events. We believe it is appropriate to pass hospitals for following NHSN protocols correctly by not reporting non-events. However, we recognize that the Hospital VBP Program might give hospitals an unintended incentive to underreport HAI events because the lower their HAI E:\FR\FM\19AUR2.SGM 19AUR2 50834 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations measure rates, the more points they will earn. Therefore, we proposed to use evidence of severe under-reporting (less than 50 percent) as a targeting criterion for supplemental validation. In making this proposal, we recognize that the sample size of events, which should have been reported to NHSN, may not be reliable as it is a subset of the sample of 36 candidate HAI events per hospital per year. For the 30 candidate CLABSI and CAUTI records selected each year, we expect less than half of candidate events to be actual events. We would not wish to fail hospitals based upon such a small sub-sample. Instead, in such situations we would like to gather more data, which is why we proposed to add a targeting criterion for hospitals that appear to frequently under-report HAIs. We invited public comment on this proposal. Comment: A few commenters supported this proposal. Commenters discussed incentives for accurate reporting. One commenter indicated that in previous years they had recommended that CMS include targeting criteria for hospital selection. Response: CMS appreciates the support for our approach to target hospitals potentially inaccurate reporting and also incentivize accurate reporting. After consideration of the public comments we received, we are finalizing this policy as proposed. e. Procedures for Submitting Records for Validation (1) Separate Submission Requirements for MRSA Bacteremia and CDI Validation Under section 412.140(d)(1) of our regulations, a hospital must submit to CMS a sample of patient charts that the hospital used for purposes of data submission under the program. Historically, we have requested the entire medical record where the content of the medical record is defined under 42 CFR 482.24. In the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR 27707 through 27708), for validation of the MRSA bacteremia and CDI measures for the FY 2016 payment determination and subsequent years, we proposed to require hospitals to submit only those two specific parts of the medical record that are needed to validate these measures. For each sampled chart, the two required parts are: (1) All final positive blood cultures for MRSA and toxin-positive specimens for CDI with specimen collection dates; and (2) all documentation of the dates on which a patient was admitted to, transferred to, or discharged from each location within the hospital during his/her stay. We proposed to request only this information because it is all that CMS needs to complete validation for these measures. Therefore, this proposal will save CMS effort in completing validation, resulting in more timely feedback to hospitals. In addition, we believe that this more limited request may alleviate burden for many hospitals. Finally, this proposal should reduce the cost to CMS in both photocopying and shipping compared with submission of the entire patient chart. We invited public comment on this proposal. Comment: One commenter supported this proposal. Response: We thank the commenter for this support. After consideration of the public comments we received, we are finalizing this policy as proposed. (2) Secure Transmission of Electronic Versions of Medical Information The current regulation at 42 CFR 412.140(d)(1) states: ‘‘(d) Validation of Hospital IQR Program data. CMS may validate one or more measures selected under section 1886(b)(3)(B)(viii) of the Act by reviewing patient charts submitted by selected participating hospitals. (1) Upon written request by CMS or its contractor, a hospital must submit to CMS a sample of patient charts that the hospital used for purposes of data submission under the program. The specific sample that a hospital must submit will be identified in the written request. A hospital must submit the patient charts to CMS or its contractor within 30 days of the date identified on the written request.’’ In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27708 through 27709), we proposed that this requirement may be met by employing either of the following options each quarter: (1) A hospital may submit paper medical records, which is the form in which CMS has historically requested them; or (2) a hospital may securely transmit electronic versions of medical information for the FY 2016 payment determination and subsequent years. The intent of this proposal is to offer an additional mode through which hospitals may meet the requirement to submit patient charts. The content of the patient charts to be submitted are defined at 42 CFR 482.24(c). We did not propose to change the content of these charts (except for MRSA bacteremia and CDI as discussed in section IX.A.10.e.(1) of the preamble of this final rule). We proposed this change because hospitals are rapidly adopting EHR systems as their primary source of information about patient care. Our understanding is that as of December 2012, more than 4,000 hospitals, including 77 percent of hospitals participating in the Hospital IQR Program, had enrolled in the Medicare EHR Incentive Program. Based on the instructions that we have historically provided with written requests for records under 42 CFR 412.140(d)(1), hospitals have only been able to submit this information in paper format. For records stored electronically, hospitals expend additional resources printing records onto paper that may be more efficiently transmitted electronically. We pay hospitals at a rate of 12 cents per page, plus shipping (70 FR 23667). In addition, the length of paper charts has been increasing, and the paper used to submit these records has an environmental impact. As shown in the table below, the average patient chart based on the most recent available statistics from our CDAC contractor, is much larger than when CMS began validating quality reporting data. mstockstill on DSK4VPTVN1PROD with RULES6 IPPS/LTCH PPS final or proposed rule FY Approximate average page length Final 2006 ................................................................................................................................................................. Final 2009 ................................................................................................................................................................. Final 2012 ................................................................................................................................................................. Proposed 2014 .......................................................................................................................................................... In examining the most recent statistics available, which are based on records VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 submitted for 2Q 2012, most of the increase in chart length is attributable to PO 00000 Frm 00340 Fmt 4701 Sfmt 4700 140 150 275 410 Citation 70 FR 47702 73 FR 49075 76 FR 51828 including HAI charts in the sample; HAI charts are on average 1,500 pages long, E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations but other inpatient chart lengths are also larger, now averaging about 300 pages. Therefore, the proposal to allow hospitals to choose between submitting paper copy patient charts and securely transmitting electronic versions of medical information has the potential for significant reduction in administrative burden, cost, and environmental impact. Furthermore, this potential for savings grows as the measures selected for Hospital IQR Program chart validation increasingly focus on HAIs. We proposed for the FY 2016 payment determination and subsequent years that those hospitals wishing to securely transmit electronic versions of medical information to download or copy the digital image of the patient chart onto CD, DVD, or flash drive and ship it following instructions similar to those for shipping paper copies of patient charts. The precise guidelines to achieve this process will be posted on QualityNet and included with CMS’ written requests for patient charts. This proposal requires hospitals to use this single method for secure transmission of electronic versions of medical information, because it will enable us to efficiently process records and provide timely feedback to hospitals. We recognize that there may be many other methodologies under which transmission of electronic versions of medical information might occur. After evaluating several different potential approaches, we proposed the only one available at this time that has been successfully tested. We will continue to develop and test additional technologies for secure transmission of electronic versions of medical information. We will notify hospitals through QualityNet as we acquire any new capabilities for accepting electronic versions of medical information, and to update available methodologies through future payment rules. We invited public comment on this proposal. Comment: Many commenters supported this proposal. Most of these commenters encouraged CMS to consider a wider range of options for transmitting electronic version of medical records for validation. One commenter inquired why the methodology made available to hospitals by Recovery Audit Contractors (RACs) was not being made available to hospitals for Hospital IQR Program validation. Response: We thank commenters for their support and for the opportunity to further share our future plans regarding options for submission of medical records for validation. CMS evaluated the technology used by the RAC VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 program, known as ESMD. We found that ESMD was not a scalable option for our quality reporting programs. Among ESMD’s limitations are its resourceintensive hardware and software requirements as well as the frequency of user complaints and problems. In addition, ESMD requires the transmitter to either have its own software or to submit records through an intermediary. The use of an intermediary adds to the cost and complexity of this approach. Instead, we are pursuing the use of ‘‘Axway’’ a secure file transfer product. When operational, hospitals will be able to transfer files through either a Webbased portal or direct from a client using secure file transfer protocol (FTP). We are testing Axway now and intend to make it available to hospitals in the Hospital IQR Program within the next 12 to 18 months. Comment: One commenter expressed concern that medical records could not be securely transmitted on CDs, DVDs, or flash drives without encryption. The commenter further expressed the opinion that encryption may prove ‘‘more cumbersome’’ than sending paper charts. Response: We thank the commenter for the opportunity to clarify that the shipping instructions ‘‘similar’’ to those for shipping paper copies of patient charts would in fact include information on how to encrypt the CDs and how to share this information with CDAC. As noted above, we are exploring other options for secure transmission and intend to make them available soon. In the meantime, any hospital that finds it less cumbersome to send paper charts has the option of doing so. After consideration of the public comments we received, we are finalizing this policy as proposed. For the FY 2016 payment determination and subsequent years, we also proposed to incentivize the electronic option by offering reimbursement for the labor and supply costs of submitting electronic versions of medical information. Because hospitals can choose between the current paper and the proposed electronic option of submitting validation records, we believe that this proposal does not increase cost or burden to hospitals. We invited public comment on this proposal. Comment: Some commenters supported this proposal. Two commenters noted that CMS did not indicate what the reimbursement for medical records submitted electronically would be. Response: As stated in section XII.B.6. of the preamble of the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR 27749), PO 00000 Frm 00341 Fmt 4701 Sfmt 4700 50835 the amount we proposed to reimburse hospitals for the FY 2016 payment determination is $3.00 per patient chart. After consideration of the public comments we received, we are finalizing this policy as proposed. 11. Data Accuracy and Completeness Acknowledgement Requirements for the FY 2015 Payment Determination and Subsequent Years In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53554), we finalized our proposal to require hospitals to continue to electronically acknowledge their data accuracy and completeness once annually. For the FY 2015 payment determination and subsequent years, the submission deadline finalized for the Data Accuracy and Completeness Acknowledgement (DACA) was aligned with the final submission quarter for each fiscal year. For example, for the FY 2015 payment determination, the submission deadline for the Data Accuracy and Completeness Acknowledgement is currently May 15, 2014, with respect to the reporting period of January 1, 2013, through December 31, 2013. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27709), in order to provide the timely feedback to hospitals regarding the APU status, we proposed that for the FY 2015 payment determination and subsequent years, we would collect the DACA in alignment with the 3rd quarter submission deadline. This would mean, for example, the electronic acknowledgement of data accuracy and completeness for the FY 2015 payment determination would be submitted between January 1, 2014 and February 15, 2014, with respect to the reporting period of January 1, 2013 through December 31, 2013. We invited public comment on this proposal. Comment: Several commenters supported the proposed DACA requirements. Response: We thank the commenters for their support Comment: A few commenters expressed concern that aligning the DACA submission with the 3rd quarter submissions would not allow hospitals the opportunity to ensure that data submitted in the 4th quarter was accurate at the time of the DACA submission. Response: We understand the commenters’ concern, and agree that signing the DACA prior to the 4th quarter would not allow hospitals the opportunity to ensure complete and accurate data for the 4th quarter prior to the DACA submission. E:\FR\FM\19AUR2.SGM 19AUR2 50836 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 After consideration of the public comments we received, we not finalizing our proposal. 12. Public Display Requirements for the FY 2016 Payment Determination and Subsequent Years In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51650), we continued, for the FY 2014 payment determination and subsequent years, the approach we adopted in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50230) for public display requirements for the FY 2012 payment determination and subsequent years. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53554), we did not make any changes to these requirements. For the FY 2016 payment determination and subsequent years, we did not propose to make any changes to these requirements. As previously stated in section IX.A.9.d. of the preamble of this final rule, we proposed that we would not publicly report data collected from hospitals choosing to report the four measure sets (VTE, STK, ED and PC) electronically in CY 2014. We did not receive any public comments on this proposal and we are therefore, finalizing the proposal. We note that, as discussed above, hospital may voluntarily submit electronic data regarding one or more of the measure sets, if they choose. The Hospital IQR Program quality measures are typically reported on the Hospital Compare Web site at: https:// www.medicare.gov/hospitalcompare, but on occasion are reported on other CMS Web sites such as https:// www.cms.gov and/or https:// data.medicare.gov. We require that hospitals sign a Notice of Participation form when they first register to participate in the Hospital IQR Program. Once a hospital has submitted a form, the hospital is considered to be an active Hospital IQR Program participant until such time as the hospital submits a withdrawal form to CMS (72 FR 47360). Hospitals signing this form agree that they will allow us to publicly report the quality measures included in the Hospital IQR Program. We will continue to display quality information for public viewing as required by section 1886(b)(3)(B)(viii)(VII) of the Act. Before we display this information, hospitals will be permitted to review their information as recorded in the QIO Clinical Warehouse. 13. Reconsideration and Appeal Procedures for the FY 2015 Payment Determination and Subsequent Years The Hospital IQR Program reconsideration and appeals VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 requirements were adopted in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51650 through 51651) and are found at section 412.140(e) of our regulations. The form for reconsiderations and a detailed description of the reconsideration process are available on the QualityNet Web site at: https:// www.qualitynet.org/ > HospitalsInpatient > Hospital Inpatient Quality Reporting Program > APU Reconsiderations. In the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR 27709), we proposed to interpret this requirement to allow for this form to be completed online via the secure portion of the QualityNet Web site. Comment: Several commenters supported the proposed interpretation. Response: We thank the commenters for their support. After consideration of the public comments we received, we are finalizing as proposed, the policy to allow the reconsideration form to be completed via an online module in QualityNet. In the past, it has been CMS’ process to allow hospitals with a quarterly Overall Validation Result of <75 percent to request a review by or appeal mismatched data element(s) to their State Quality Improvement Organization (QIO). This process requires that the CDAC contractor copy and ship all records for any hospital that receives an overall validation score of <75 percent to the State QIO. In the past two years, none of the mismatched appeals would have resulted in a change to the final APU determination. As described at § 412.140(e) of our regulations, hospitals can also request a reconsideration of a decision by CMS that the hospital has not met the requirements of the Hospital IQR Program for a particular fiscal year. This includes reconsideration on the basis that CMS concluded it did not meet the validation requirements. We believe this process is redundant and, for the FY 2015 payment determination and subsequent years, we proposed to remove the quarterly appeal of mismatched data elements to the State QIO. We invited public comment on this proposal. Comment: Several commenters supported the proposed administrative changes. Response: We thank the commenters for their support. After consideration of the public comments we received, we are removing the quarterly appeal of mismatched data elements to the State QIO from the Hospital IQR Program. We encourage hospitals that believe there may be an error in validation to use our reconsideration and appeals procedures PO 00000 Frm 00342 Fmt 4701 Sfmt 4700 described at § 412.140(e) of our regulations. 14. Hospital IQR Program Extraordinary Circumstances Extensions or Waivers The Hospital IQR Program extraordinary circumstances disaster extensions or waiver requirements were adopted in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51651 through 51652) and can be found at 42 CFR § 412.140(c)(2). In the FY 2012 IPPS/ LTCH PPS final rule, we explained the requirements for disaster extensions or waivers. The forms and a detailed description of the extension or waiver process are available on the QualityNet Web site at: https://www.qualitynet.org/ > Hospitals-Inpatient>Hospital Inpatient Quality Reporting Program. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27709 through 27710), we proposed to allow for not only a CEO, but also other hospitaldesignated personnel contact to complete and sign waiver/extraordinary circumstances forms. This proposed change would allow hospitals to designate an appropriate, non-CEO, contact at its discretion. This individual would be responsible for the submission, and would be the one signing the form. In addition, we proposed to allow for this form to be completed online via the secure portion of the QualityNet Web site. We also proposed that we may grant a waiver or extension to hospitals if we determine that a systemic problem with one of our data collection systems directly affected the ability of the hospitals to submit data. Because we do not anticipate that these types of systemic errors will happen often, we do not anticipate granting a waiver or extension on this basis frequently. If we make the determination to grant a waiver or extension, we proposed to communicate this decision through routine communication channels to hospitals, vendors and QIOs by means of, for example, memoranda, emails, and notices on the QualityNet Web site. We invited public comment on these proposals. Comment: Several commenters supported the proposed changes regarding extraordinary circumstances extensions or waivers. Response: We thank the commenters for their support. After consideration of the public comments we received, we are finalizing our proposals to allow hospitals to designate an appropriate, non-CEO contact as the contact for the Extraordinary Circumstances Extensions or Waivers requests. In addition, we are E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations finalizing our proposal to allow the Extraordinary Circumstances Extensions or Waivers s form to be completed online. Lastly, we are finalizing the proposal to allow CMS to grant a waiver or extension to hospitals if we determine that a systemic problem with one of our data collection systems directly affected the ability of the hospitals to submit data. B. PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program 1. Statutory Authority Section 3005 of the Affordable Care Act added new subsections (a)(1)(W) and (k) to section 1866 of the Act. Section 1866(k) of the Act establishes a quality reporting program for a hospital described in section 1886(d)(1)(B)(v) of the Act (referred to as a ‘‘PPS-Exempt Cancer Hospital’’ or ‘‘PCH’’). Section 1866(k)(1) of the Act states that, for FY 2014 and each subsequent fiscal year, a PCH shall submit data to the Secretary in accordance with section 1866(k)(2) of the Act with respect to such a fiscal year. Section 1866(k)(2) of the Act provides that, for FY 2014 and each subsequent fiscal year, each hospital described in section 1886(d)(1)(B)(v) of the Act shall submit data to the Secretary on quality measures specified under section 1866(k)(3) of the Act in a form and manner, and at a time, specified by the Secretary. Section 1866(k)(3)(A) of the Act requires that any measure specified by the Secretary must have been endorsed by the entity with a contract under section 1890(a) of the Act, unless an exception under section 1866(k)(3)(B) of the Act applies. The NQF currently holds this contract. The NQF is a voluntary, consensus-based, standardsetting organization with a diverse representation of consumer, purchaser, provider, academic, clinical, and other health care stakeholder organizations. The NQF was established to standardize healthcare quality measurement and reporting through its consensus development processes. We have generally adopted NQF-endorsed measures in our reporting programs. However, section 1866(k)(3)(B) of the Act provides an exception. Specifically, it provides that, in the case of a specified area or medical topic determined appropriate by the Secretary for which a feasible and practical measure has not been endorsed by the entity with a contract under section 1890(a) of the Act, the Secretary may specify a measure that is not so endorsed as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary. Under section 1866(k)(3)(C) of the Act, the Secretary was required to publish the measure selection for PCHs no later than October 1, 2012, with respect to FY 2014. Section 1866(k)(4) of the Act requires the Secretary to establish procedures for making public the data submitted by PCHs under the PCHQR Program. Such procedures must ensure that a PCH has the opportunity to review the data that is to be made public with respect to the PCH prior to such data being made public. The Secretary must report quality measures of process, structure, 50837 outcome, patients’ perspective on care, efficiency, and costs of care that relate to services furnished by PCHs on the CMS Web site. 2. Covered Entities Section 1886(d)(1)(B)(v) of the Act excludes particular cancer hospitals from payment under the IPPS. This final rule covers only those PPS-excluded cancer hospitals meeting eligibility criteria specified in 42 CFR 412.23(f). 3. Previously Finalized Quality Measures for PCHs for the FY 2014 Program and Subsequent Years In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53556 through 53561), we finalized five quality measures for the FY 2014 program and subsequent years. Specifically, we finalized two of the CDC’s NHSN-based HAI quality measures (outcome measures): (1) Central Line-Associated Bloodstream Infection (CLABSI); and (2) CatheterAssociated Urinary Tract Infection (CAUTI). We also finalized three cancerspecific process of care measures: (1) Adjuvant chemotherapy is considered or administered within 4 months (120 days) of surgery to patients under the age of 80 with AJCC III (lymph node positive) colon cancer; (2) Combination chemotherapy is considered or administered within 4 months (120 days) of diagnosis for women under 70 with AJCC T1c, or Stage II or III hormone receptor negative breast cancer; and (3) Adjuvant hormonal therapy. The finalized measures are shown below. PCHQR PROGRAM MEASURES FINALIZED IN THE FY 2013 IPPS/LTCH PPS FINAL RULE FOR THE FY 2014 PROGRAM AND SUBSEQUENT YEARS Safety and Healthcare-Associated Infections—HAI • (NQF #0139) NHSN Central Line-Associated Bloodstream Infection (CLABSI) Outcome Measure • (NQF #0138) NHSN Catheter-Associated Urinary Tract Infections (CAUTI) Outcome Measure Clinical Process/Cancer-Specific Treatments mstockstill on DSK4VPTVN1PROD with RULES6 • (NQF #0223) Adjuvant Chemotherapy is considered or administered within 4 months (120 days) of surgery to patients under the age of 80 with AJCC III (lymph node positive) colon cancer • (NQF #0559) Combination Chemotherapy is considered or administered within 4 months (120 days) of diagnosis for women under 70 with AJCC T1c, or Stage II or III hormone receptor negative breast cancer • (NQF #0220) Adjuvant Hormonal Therapy We did not propose to remove or replace any of the previously finalized measures from the PCHQR Program for the FY 2015 program and subsequent years. We discussed the collection requirements and submission timeframes for these measures in the preamble of the FY 2013 IPPS/LTCH VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 PPS final rule (77 FR 53563 through 53564). 4. Considerations in the Selection of the Quality Measures Section 1866(k)(3)(A) of the Act requires that any measure specified by the Secretary must have been endorsed PO 00000 Frm 00343 Fmt 4701 Sfmt 4700 by the entity with a contract under section 1890(a) of the Act, unless section 1866(k)(3)(B) of the Act applies. Section 1866(k)(3)(B) of the Act states that, in the case of a specified area or medical topic determined appropriate by the Secretary for which a feasible and practical measure has not been endorsed E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50838 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations by the entity with a contract under section 1890(a) of the Act, the Secretary may specify a measure that is not so endorsed as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53556), we indicated that we have taken a number of principles into consideration when developing measures for the PCHQR Program, and that many of these principles are modeled on those we use for measure development under the Hospital IQR Program: • Public reporting should rely on a mix of standards, outcomes, process of care measures, and patient experience of care measures, including measures of care transitions and changes in patient functional status. • The measure set should evolve so that it includes a focused core set of measures appropriate to cancer hospitals that reflects the level of care and the most important areas of service furnished by those hospitals. The measures should address gaps in the quality of cancer care. • We also consider input solicited from the public through rulemaking and public listening sessions. • We consider suggestions and input from a PCH Technical Expert Panel (TEP), convened by a CMS measure development contractor, which rated potential PCH quality measures for importance, scientific soundness, usability, and feasibility. The TEP membership includes health-care providers specializing in the treatment of cancer, cancer researchers, consumer and patient advocates, disparities experts, and representatives from payer organizations. Like the Hospital IQR Program, the PCHQR Program also supports the National Quality Strategy, national priorities, HHS Strategic Plans and Initiatives, and CMS Strategic Plans, as well as takes into consideration the recommendations of the MAP and strives for burden reduction whenever possible. We invited public comment on these considerations. Comment: Some commenters expressed concern regarding the measures CMS had proposed to adopt or continue using for the PCHQR Program. These commenters believed that: (1) The previously finalized and newly proposed measures are fragmented in nature and most of them only apply to a small sub-set of the cancer population; (2) the majority of the already finalized and newly proposed measures for the PCHQR Program are process-of-care VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 oriented and cannot accurately reflect the quality of care at cancer centers; (3) some finalized and newly proposed measures have not been used in the cancer population possibly limiting their relevance and value for cancer hospitals; and (4) there are critical gaps in the NQF-endorsed cancer measures (for example, functional status, symptom management, survival and other outcomes). For example, these commenters suggested that some of the proposed NQF-endorsed measures assess a specific therapeutic regimen or treatment approach, which would lock clinicians into one standard of care that may represent suboptimal treatment. To address these concerns, the commenters supported measure selections to include care coordination, functional status, patient safety, patient and caregiver experience with care, population/community health, efficiency, and other outcomes of care that are important to patients. These commenters urged CMS to work with cancer centers to establish an effective quality reporting program that will lead to meaningful improvements in cancer centers. Response: We appreciate the commenters’ opinions and recommendations. We believe that both the previously finalized and newly proposed measures address many critical domains identified in the Department of Health and Human Services’ National Quality Strategy, including patient safety, efficiency, patient and family engagement, and clinical outcomes, in addition to clinical processes of care. They also assess many diagnosis, staging, and treatment modalities provided at cancer centers, including chemotherapy, adjuvant treatments, surgical care, and radiation therapy. However, we also recognize that measurement gaps remain, and we intend to propose in the future to adopt additional measures that assess the safety and efficiency of diagnosis and treatment of cancer, measures that take into account novel diagnostic and treatment modalities, measures that assess symptoms and functional status, measures of appropriate disease management and care coordination, measures that assess treatment of less common cancers such as leukemia and lymphoma, and measures of admissions for complications of cancer and treatment for cancer. In addition, we will continually reassess and update measures used in the PCHQR Program to ensure that they are consistent with optimal standards of care. PO 00000 Frm 00344 Fmt 4701 Sfmt 4700 5. New Quality Measures In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27711), for the FY 2015 PCHQR Program and subsequent years, we proposed to adopt one new measure: NHSN HAI measure of Surgical Site Infection (SSI). In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27711 through 27714), for the FY 2016 PCHQR Program and subsequent years, we proposed to adopt 13 new measures: six measures of Surgical Care Improvement Project (SCIP); six Clinical Process/Oncology Care Measures; and one Patient Experience of Care measure (the HCAHPS Survey). All 14 of these proposed measures are NQF-endorsed. Some address inpatient care, and others address outpatient care. All of the measures address treatment provided to cancer patients in PCH inpatient or outpatient settings. In addition, the adoption of measures that apply to more than one healthcare setting is one of our objectives in promoting quality care consistently across all health care settings. The 14 proposed measures are a subset of 19 measures that we included on a publicly available document entitled ‘‘List of Measures Under Consideration for December 1, 2012’’ in compliance with section 1890A(a)(2) of the Act. These measures were reviewed by the MAP, a multi-stakeholder body convened by the NQF for the purpose of providing input to HHS on the selection of measures, and the MAP’s conclusions can be found in the ‘‘MAP Pre-Rulemaking Report: 2013 Recommendations on Measures Under Consideration by HHS.’’ The MAP Report can be accessed at: https://www.qualityforum.org/ Publications/2013/02/MAP_PreRulemaking_Report__February _2013.aspx. We considered the input and recommendations provided by the MAP in selecting the 14 measures that we proposed for the PCHQR Program. Of these 14 measures, the MAP supported the inclusion of 13 of them in the PCHQR Program, and supported the direction of the proposed HCAHPS measure, noting that additional experience with the survey is needed so that the survey questions are applicable for use in the PCH settings. Although we recognize that some stakeholders would prefer that we adopt an experience of care measure developed specifically for the cancer hospital setting, we believe that other stakeholders think HCAHPS is appropriate for the cancer hospital setting, and are aware that approximately 27 percent of PCHs are currently administering HCAHPS to E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 their patients. For these reasons, we believe that until a new patient experience measure is developed specifically for the PCH setting, the HCAHPS will provide valuable information to the public on the patient experience of care in PCHs. In addition, the proposed measures address the National Quality Strategy domains of Patient Safety, Clinical Effectiveness, and Patient Experience/ Engagement, and further our goal of aligning measures across programs because they are already in use in either the Hospital IQR Program or the PQRS Program. We describe these proposed measures in detail below. Comment: Several commenters expressed concern that only two outcome measures are proposed for FY 2015 and FY 2016 and encouraged CMS to focus on developing meaningful outcome measures for the program, for example measures of risk-adjusted, stage-specific survival curves for various types of cancer. Commenters also supported the inclusion of cancerspecific measures and encouraged CMS to validate formally any non-cancer specific measures proposed for inclusion in the PCHQR Program to ensure their applicability and usability for this program. Response: We recognize the importance of outcome measures in assessing quality of care and we are continually working with contractors, clinical experts, and stakeholders to develop appropriate measures. We agree that a robust measure set is one that evolves to include a focused core set of measures appropriate to cancer hospitals that reflects the level of care and the most important areas of service furnished by these hospitals. The PCHQR Program measures also should address gaps in the quality of cancer care. Comment: One commenter recommended using existing registries and data sources to expand and enhance quality reporting to minimize burden on hospitals and physicians. Response: We appreciate the commenter’s suggestion. We strive to minimize burden whenever possible and consider multiple data sources and potential reporting mechanisms when considering a measure for adoption. The current measure set includes measures that are collected through registries. a. New Measure for the FY 2015 Program and Subsequent Years—NHSN Healthcare-Associated Infection (HAI) Measure: Surgical Site Infection (SSI) (NQF #0753) This NQF-endorsed American College of Surgeons/CDC harmonized measure VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 of surgical site infection (SSI) meets the measure selection requirements at section 1866(k)(3)(A) of the Act, and expands upon the existing HealthcareAssociated Infections (HAIs) measurement topic that is part of the PCHQR Program. The measure addresses HAIs, a topic area widely acknowledged by HHS, the Institute of Medicine, the National Priorities Partnership and others as a high priority requiring measurement and improvement. HAIs are among the leading causes of death in the United States. The CDC estimates that as many as 2 million infections are acquired each year in hospitals and that HAIs result in approximately 90,000 deaths per year. It is estimated that more Americans die each year from HAIs than from auto accidents and homicides combined. HAIs not only put the patient at risk, but also increase the days of hospitalization required for patients and add considerable health care costs. HAIs are largely preventable through interventions such as better hygiene and advanced scientifically tested techniques for surgical patients. Therefore, many health care consumers and organizations have called for public disclosure of HAIs, arguing that public reporting of HAI rates provides the information health care consumers need to choose the safest hospitals, and give hospitals an incentive to improve infection control efforts (75 FR 50201). Detailed specifications for this proposed measure can be found at: https://www.cdc.gov/nhsn/ TOC_manual.html. This measure assesses the incidence of surgical site infections following colon surgeries and abdominal hysterectomies performed by PCHs and include laparoscopic procedures. The measure rate is calculated as the Standardized Infection Ratio for each procedure type. Adult patients 18 years and older with deep incisional and organ space infections during the 30-day postoperative period are included in the measure. This measure is risk-adjusted and reported at the facility level. It is not specific to a hospital ward or setting, rather it is applicable to all postoperative patients who fall into the numerator criteria. The denominator is calculated using logistic regression models, determining the expected number of SSI’s by facility and procedure type. We invited public comment on this proposed SSI measure. Comment: A few commenters believed this measure is important to positive surgical outcomes and supported its addition to the PCHQR Program. However, one commenter cautioned that CMS should exercise discretion in publicly reporting the PO 00000 Frm 00345 Fmt 4701 Sfmt 4700 50839 measure in the future. The commenter pointed out that many cancer patients are immune-compromised and therefore, are more susceptible to infections than other patients. The commenter recommended engaging cancer centers to determine whether stratifying SSI reporting by type of cancer may allow for a more meaningful comparison of rates. Response: We appreciate the commenters’ support. We understand the concern about differences in patient case mix between PCHs and acute care hospitals. Like the CLABSI and CAUTI measures previously adopted for this program, we believe that the SSI measure in its current form is suitably risk-adjusted for the PCH setting. However, we will explore with the CDC, the measure developer, whether further stratification of the measure is feasible for future implementation. Comment: A few commenters suggested modifications to the SSI measure, including adding exceptions for patients who are discharged to hospice care and for cancer hospital patients on palliative care services, formally testing the measure in the cancer population, and granting a reporting exception to any PCH performing fewer than 20 eligible colon and abdominal hysterectomy procedures in the preceding calendar year. Response: We appreciate the commenters’ suggestions. As we noted, we believe it is important to align our measures with the Hospital IQR Program as much as possible to both streamline the programs and reduce burden. At this time, the Hospital IQR Program uses a case minimum of 10 for the SSI measure (77 FR 53539). As we explained in the FY 2013 IPPS/LTCH PPS final rule, we chose a case minimum of 10 cases because we believe 10 cases will be sufficiently meaningful for the results to be publicly displayed while ensuring the availability of the most data possible for public reporting (77 FR 53539). For detailed information regarding the number of cases, we refer readers to the CDC specification manual: https:// www.cdc.gov/hai/ssi/ssi.html. Comment: One commenter advocated that CMS and NHSN work with the National Surgical Quality Improvement Program (NSQIP) to develop a single set of specifications for the SSI measure. The commenter noted the different data collection timeframes as an example to demonstrate the need for alignment: NSQIP requires data collection for 90 days while NHSN requires data collection for 30 days post-op for all procedures related to breast cancer and E:\FR\FM\19AUR2.SGM 19AUR2 50840 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations for craniotomies. The commenter noted that without such definition alignments, both data sets will be less actionable and require extra communication to enable practice and process changes. Response: We agree that it is an important goal to achieve alignment of measure specifications if a measure is being collected by more than one entity. We also understand that both the CDC, which operates the NHSN, and the American College of Surgeons (ACoS), which operates the NSQIP, approve the NQF-endorsed SSI measure that we have proposed to adopt for the PCHQR Program. Under the harmonized NQF endorsed measure specifications, there is a 30-day follow up period for SSIs after colon surgeries and abdominal hysterectomies, and our understanding is that the NSQIP does not require 90day follow up for SSIs. Breast procedures and craniotomies are not included in the harmonized NQFendorsed SSI measure that we have proposed to adopt for the PCHQR Program. Comment: One commenter did not support the SSI measure CMS proposed for FY 2015, because the commenter believed the proposed measure only applies to highly specialized cancer centers. Response: We disagree. As we stated in the proposed rule, this measure is not specific to a hospital ward or setting, rather it is applicable to all postoperative patients who fall into the numerator criteria. The measure assesses the incidence of surgical site infections following colon surgeries and abdominal hysterectomies performed by PCHs and the measure includes laparoscopic procedures. After consideration of the public comments we received, we are finalizing the SSI measure as proposed for FY 2015 program and subsequent years. b. New Measures for the FY 2016 Program and Subsequent Years mstockstill on DSK4VPTVN1PROD with RULES6 (1) Surgical Care Improvement Project (SCIP) Measures Measures from the Surgical Care Improvement Project (SCIP) have been collected as part of the Hospital IQR Program for most subsection (d) hospitals paid under the IPPS and reported on the Hospital Compare Web site for a number of years, because they assess effective care for patients undergoing surgery. In general, these measures are also applicable to patients undergoing surgery in PCHs. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27711 through 27712), we proposed to adopt six NQF-endorsed, SCIP VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 measures for the PCHQR Program beginning with the FY 2016 program year. All six of the measures are NQFendorsed and therefore meet the selection requirements at section 1866(k)(3)(A) of the Act. In addition, all six of these measures were supported by the MAP for inclusion in the PCHQR Program in its February 2013 pre-rulemaking report to HHS located at: https://www.quality forum.org/Setting_Priorities/ Partnership/MAP_Final_Reports.aspx. Four of these measures: SCIP—Inf 1 (NQF #0527); SCIP—Inf 2 (NQF #0528), SCIP—Inf 3 (NQF #0529); and SCIP—Inf 9 (NQF #0453) assess hospital performance with regard to infection prevention practices. SCIP-Card-2 (NQF #0284) assesses the continuity of beta blocker treatment during the perioperative period for cardiac patients undergoing non-cardiac surgery. SCIP— VTE 2 (NQF #0218) assesses hospital performance regarding effective preventive care for venous thromboembolism. These measures are described below, and detailed measure specifications for all six of these measures can be found in the Hospital IQR Program Specifications Manual located at: https://www.qualitynet.org/dcs/Content Server?c=Page&pagename= QnetPublic%2FPage%2F QnetTier4&cid=1228772433589. (A) SCIP—Inf 1: Prophylactic Antibiotics received Within 1 Hour Prior to Surgical Incision (NQF #0527) This measure assesses the percent of surgical patients with prophylactic antibiotics initiated within one hour prior to surgical incision. Patients who received vancomycin or a fluoroquinolone for prophylactic antibiotics should have the antibiotics initiated within 2 hours prior to surgical incision. This measure addresses the National Quality Strategy domain of Clinical Effectiveness, and complements the proposed SSI measure. (B) SCIP—Inf 2: Prophylactic Antibiotic Selection for Surgical Patients (NQF #0528) This measure assesses the percent of surgical patients who received prophylactic antibiotics consistent with current guidelines (specific to each type of surgical procedure). A goal of prophylaxis with antibiotics is to use an agent that is safe, cost-effective, and has a spectrum of action that covers most of the probable intraoperative contaminants for the operation. This measure addresses the National Quality Strategy domain of Clinical PO 00000 Frm 00346 Fmt 4701 Sfmt 4700 Effectiveness, and complements the SSI measure. (C) SCIP—Inf 3: Prophylactic Antibiotic Discontinuation within 24 Hours after Surgery End Time (NQF #0529) This measure assesses the percentage of surgical patients whose prophylactic antibiotics were discontinued within 24 hours after Anesthesia End Time. A goal of prophylaxis with antibiotics is to provide benefit to the patient with as little risk as possible. It is important to maintain therapeutic serum and tissue levels throughout the operation. Intraoperative re-dosing may be needed for long operations. However, administration of antibiotics for more than 24 hours after the incision is closed offers no additional benefit to the surgical patient. Prolonged administration increases the risk of Clostridium difficile infection and the development of antimicrobial resistant pathogens. This measure addresses the National Quality Strategy domain of Clinical Effectiveness and complements the proposed SSI measure. (D) SCIP—Inf 9: Urinary Catheter Removed on Post-Operative Day 1 or Post-Operative Day 2 with Day Surgery being Day Zero (NQF #0453) This measure assesses the percent of surgical patients with a urinary catheter removed on Postoperative Day 1 or Postoperative Day 2 with day of surgery being day zero. The risk of catheterassociated urinary tract infection (UTI) increases with longer duration of indwelling urinary catheterization. This measure complements the CAUTI measure currently adopted for the PCHQR Program. (E) SCIP—Card 2: Surgery Patients on Beta Blocker Therapy Prior to Admission Who Received a Beta Blocker during the Perioperative Period (NQF #0284) This measure assesses the percent of surgery patients on beta blocker therapy prior to arrival who received a beta blocker during the perioperative period. The perioperative period for this measure is defined as the day prior to surgery through postoperative day two, with day of surgery being day zero. The American College of Cardiology/ American Heart Association promotes continuation of beta blocker therapy in the perioperative period as a class I indication, and accumulating evidence suggests that titration to maintain tight heart rate control should be the goal. We believe that this measure targets an important process of care, beta blocker administration for non-cardiac surgery patients. Concerns regarding the E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 discontinuation of beta blocker therapy in the perioperative period have existed for several decades. This measure addresses the National Quality Strategy domain of Clinical Effectiveness. (F) SCIP—VTE 2: Surgical Patients who Received Appropriate VTE Prophylaxis within 24 Hours prior to Surgery to 24 Hours after Surgery End Time (NQF #0218) This measure assesses the percent of surgery patients who received appropriate VTE prophylaxis within 24 hours prior to Anesthesia Start Time to 24 hours after Anesthesia End Time. The frequency of VTE, which includes deep vein thrombosis and pulmonary embolism, is related to the type and duration of surgery, patient risk factors, duration and extent of postoperative immobilization, and use or nonuse of prophylaxis. Despite the evidence that VTE is one of the most common postoperative complications and prophylaxis is the most effective strategy to reduce morbidity and mortality, it is often underused. We believe that this measure will encourage practices to reduce the risk of postoperative complications associated with VTE. This measure addresses the National Quality Strategy domain of Clinical Effectiveness. We invited public comment on these six proposed SCIP measures. Comment: Several commenters supported the six proposed SCIP measures because they are NQFendorsed and supported by MAP. A few commenters opposed the inclusion of the six SCIP measures, because the commenters believed that these proposed measures do not apply to PCHs. Response: We appreciate the commenters’ support of the proposed measures. We believe that the six SCIP measures apply to patient care furnished at both acute care hospitals and PCHs. The measures are currently used in the Hospital IQR Program, in which they measure care furnished to both cancer patients and non-cancer patients. Further, the inclusion of these measures promotes alignment between the PCHQR and Hospital IQR Program as many hospitals participating in the Hospital IQR Program are already reporting these same measures, allowing assessments of the quality of surgical care to be made in the same manner across these two settings. Comment: One commenter did not support the six proposed SCIP measures because the measures address procedures that are performed rarely at PCHs. The commenter was concerned that these chart-abstracted measures VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 would discourage PCHs from focusing on aspects of care that are more relevant in the PCH setting. Some commenters encouraged CMS to use current registries and claims data for reporting to minimize the reporting burden on PCHs. Response: While we recognize that resources are required to report the measures, the same measures are already reported by the 3,900 hospitals that participate in the Hospital IQR Program. Furthermore, these measures are also part of existing facility level accreditation programs that many of the PCHs are already participating in, and for that reason, we do not believe that the reporting of these data under the PCHQR Program will pose a significant additional burden for those PCHs. However, we appreciate the suggestion to use registries and alternative data sources. We are working with the American College of Surgeons National Cancer Data Base (NCDB) on the feasibility of allowing three of the five measures finalized in the FY 2013 IPPS/ LTCH PPS final rule to be reported via registry in the future, and we also intend to explore the feasibility of adopting future measures that can be reported via registry. Comment: Some commenters recommended that CMS delay adoption of the six SCIP measures until: (1) Formal sampling may be performed at PCHs to determine whether associated gaps in care exist; (2) we can ensure that the measures are validated formally for use in the cancer population; and, (3) a formal sampling methodology is developed for reporting these measures, such as the existing methodology currently used by the Hospital IQR Program, to decrease the burden placed on PCHs. Response: We appreciate the commenters’ views. The SCIP measures are important quality of care measures and are currently applied to cancer patients across the country through inclusion in the Hospital IQR Program. Furthermore, we believe that the measures are appropriate for all surgical patients (including those that have cancer) that meet the measure inclusion criteria and do not fall into any of the exclusion categories. In response to comments regarding the reporting burden, we will allow PCHs to report these measures using the same sampling methodology that we currently allow for the reporting of the same measures by subsection (d) hospitals under the Hospital IQR Program (outlined in the specification manual https:// www.qualitynet.org/dcs/Content Server?c=Page&pagename= PO 00000 Frm 00347 Fmt 4701 Sfmt 4700 50841 QnetPublic%2FPage%2F QnetTier2&cid=1138115987129). After consideration of the public comments we received, we are finalizing the adoption of the SCIP measures for the FY 2016 PCHQR Program and subsequent years, and will allow PCHs to report the measures using the same sampling methodology that we currently allow for the reporting of these measures under the Hospital IQR Program. (2) Clinical Process/Oncology Care Measures In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27712 through 27714), we proposed to add to the PCHQR Program, for the FY 2016 program and subsequent years, six measures specific to assessing the quality of medical treatment and staging of cancer by PPS-exempt cancer hospitals. All six measures are specified and endorsed for outpatient settings to evaluate the performance of a cancer treatment team. In addition, all six of these measures are NQF-endorsed and address the quality of outpatient cancer treatment provided at PCHs; therefore, they meet the measure selection requirement at section 1866(k)(3)(A) of the Act. All six measures also are recommended as priorities for program alignment in the PCHQR Program by the MAP in a June 2012 Final Report entitled ‘‘Performance Measurement Coordination Strategy for PPS-Exempt Cancer Hospitals.’’ In addition, the MAP in its 2013 Pre-Rulemaking Final Report issued in February 2013 supports all six of the measures for inclusion in the PCHQR Program. Both of these MAP reports can be located at: https:// www.qualityforum.org/Setting_ Priorities/Partnership/MAP_Final_ Reports.aspx. Detailed specifications of these six proposed measures can be found in Appendix A of the December 2012 NQF Cancer endorsement maintenance project report at: https://www.quality forum.org/Publications/2012/12/ Cancer_Endorsement_Maintenance_ 2011.aspx. We invited public comment on these six proposed clinical process/ oncology care measures. Comment: A few commenters supported the inclusion of cancerspecific measures. A few commenters opposed the six clinical process/ oncology care measures because the commenters believed that these proposed measures do not apply to PCHs. Some commenters encouraged using current registries and data sources for reporting to minimize the burden on PCHs. E:\FR\FM\19AUR2.SGM 19AUR2 50842 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 Response: We appreciate the commenters’ support. We believe that the proposed clinical process/oncology care measures are relevant to assessing the quality of care provided to cancer patients regardless of setting. We appreciate the suggestion to use registries and alternative data sources wherever possible and we are investigating the NCDB or other cancer registry data for future measures. Comment: One commenter requested that CMS delay the implementation of these 6 clinical process/oncology care measures until a formal sampling methodology is developed for reporting these measures to CMS and more meaningful measures are considered for inclusion. Response: We have directed our efforts to align our quality reporting programs across settings, to the extent possible. For this reason, we will allow PCHs to use the same sampling methodology as specified in the specification manual for the Physicians Quality Reporting System (PQRS) program found on the CMS Web site at https://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/PQRS/Measures Codes.html. (A) Clinical Process/Oncology Care— Multiple Myeloma-Treatment with Bisphosphonates (NQF #0380) This measure assesses the percentage of patients aged 18 years and older with a diagnosis of multiple myeloma, not in remission, for which intravenous bisphosphonate therapy was prescribed or received within the 12-month reporting period. This measure is intended to promote the appropriate use of bisphosphonates to reduce morbidity and mortality in multiple-myeloma patients. Bisphosphonates specifically decrease osteoclast activity, thereby reducing bone pain and fractures in patients with multiple myeloma.106 This measure addresses the National Quality Strategy domain of Clinical Effectiveness. Comment: Some commenters did not support this measure, stating that the drug has multiple side effects and would not be appropriate for bone stem deterioration in all patients. The commenters stated that there may be other drugs that work just as well, if not better. Another commenter stated that the data collection for this measure would be very labor intensive and burdensome. The commenter also 106 NQF. Cancer Endorsement Maintenance 2011.Candidate Review Consensus—Phase 1. Available at: https://www.qualityforum.org/Projects/ Cancer_Endorsement_Maintenance_2011.aspx#t= 2&s=&p=3%7C. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 questioned the value of this measure given that performance is already high in terms of providing guideline-based care. Another commenter stated that this measure was intended for a physician setting and that CMS has generalized it to apply to the PCH setting without appropriate testing. The commenter urged CMS to delay implementation of this measure. Response: After review of the public comments we received, we are persuaded by the commenters that this measure is not appropriate to be included in the PCHQR Program at this time. We acknowledge that collecting this measure would be resource intensive, and we are sensitive to the fact that new drugs are available for the same therapeutic purpose. Based upon the concerns expressed by the commenters, we have decided not to finalize this measure for the PCHQR Program. (B) Clinical Process/Oncology Care— Radiation Dose Limits to Normal Tissues (NQF #0382) This measure assesses the percentage of patients, regardless of age, with a diagnosis of pancreatic or lung cancer receiving 3D conformal radiation therapy with documentation in the medical record that radiation dose limits to normal tissues were established prior to the initiation of a course of 3D conformal radiation for a minimum of two tissues. This measure is intended to assess the appropriate use of 3D conformal radiation therapy in the treatment of pancreatic and lung cancers. Treatment is important due to the high rate of morbidity and mortality associated with these cancers. For example, among cancers in US adults, lung cancers are the leading cause of deaths in both men and women. It is estimated from 2006—2008 rates that 6.94 percent of U.S. men and women born today will be diagnosed with cancer of the lung and bronchus at some time during their lifetime.107 Regarding pancreatic cancer, there has been an increased frequency of this cancer since 1998 of 0.8 percent in men and 1.0 percent in women.108 Based on rates from 2006 through 2008, 1.45 percent of men and women born today will be diagnosed with cancer of the pancreas at some time during their 107 NQF. Cancer Endorsement Maintenance 2011.Candidate Review Consensus—Phase 1. Available at: https://www.qualityforum.org/Projects/ Cancer_Endorsement_Maintenance_2011.aspx#t= 2&s=&p=3%7C. 108 NQF. Cancer Endorsement Maintenance 2011.Candidate Review Consensus—Phase 1. Available at: https://www.qualityforum.org/Projects/ Cancer_Endorsement_Maintenance_2011.aspx#t= 2&s=&p=3%7C. PO 00000 Frm 00348 Fmt 4701 Sfmt 4700 lifetime. A major goal of radiation therapy is the delivery of the desired dose distribution of radiation to target tissue while limiting the radiation dose to the surrounding normal tissues to an acceptable level. Patients treated with 3D conformal radiation therapy are often subjected to radiation dose levels that exceed normal tissue tolerance. Precise specification of maximum doses to be received by normal tissues during radiation treatment planning is considered a best practice to avoid delivering unnecessary radiation to patients. Comment: A few commenters recommended that patients with metastatic disease receiving palliative care and patients with short life expectancy care be excluded from this measure. Response: Although palliative care often differs from curative cancer treatment, we are not aware of scientific evidence that patients receiving 3D conformal radiation therapy for palliative care or with short life expectancies should be exempt from dose limits. We believe that the measure is appropriate as it is currently specified. After consideration of the public comments we received, we are finalizing the Clinical Process/Oncology Care—Radiation Dose Limits to Normal Tissues measure for the FY 2016 program and subsequent years. (C) Clinical Process/Oncology Care— Plan of Care for Pain (NQF #0383) This measure assesses the percentage of visits for patients, regardless of age, with a diagnosis of cancer currently receiving chemotherapy or radiation therapy, who report having pain, with a documented plan of care to address that pain. Pain is one of the most common symptoms associated with cancer, occurring in approximately one quarter of patients with newly diagnosed malignancies, one third of patients undergoing treatment, and three quarters of patients with advanced disease. Proper pain management is critical to achieving pain control. ‘‘Unrelieved pain denies [patients] comfort and greatly affects their activities, motivation, interactions with family and friends, and overall quality of life.’’ 109 This measure aims to improve attention to pain management and requires a plan of care for cancer patients who report having pain to allow for individualized treatment 109 NQF. Cancer Endorsement Maintenance 2011.Candidate Review Consensus—Phase 1. Available at: https://www.qualityforum.org/Projects/ Cancer_Endorsement_Maintenance_2011. aspx#t=2&s=&p=3%7C. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations based on clinical circumstances and patient wishes.110 This measure addresses the National Quality Strategy domain of Patient and Family Engagement. This measure is intended to be paired with NQF #0384 below. Comment: A few commenters appreciated CMS’ intent in pairing the Oncology: Plan of Care for Pain, and the Oncology: Pain Intensity Quantified measures but did not support the measures. Commenters believed that pain must be systematically assessed and treated in a manner appropriate for the level of pain. Some commenters stated that the definition for a plan of care in the ‘‘Oncology: Plan of Care for Pain’’ measure is ambiguous, with no indication of which interventions are appropriate for what type of patients or what level of pain requires intervention. Commenters pointed out that pain fluctuates over time. A commenter stated that from a patient’s perspective, alleviation of pain is more important than the documentation of its evaluation. The commenter recommended the development of an outcome measure such as measuring changes in clinically significant cancerrelated pain scores. Response: While we agree with many of the commenters’ observations, we believe the broad definition of a plan of care in the Clinical process/Oncology care—Plan of care for pain measure would actually promote individualized treatment for each patient. We recognize that the alleviation of pain is the goal for both PCHs and patients and developing an appropriate plan of care is a necessary step to reach that goal. At the same time, we agree that an outcome measure of pain would be useful and are exploring how to develop this type of measure for the future. Comment: One commenter recommended that CMS modify the measure so that the numerator includes a minimum threshold for pain (for example, 3 or more on a 10-point scale) and the denominator includes visits outside of chemotherapy and radiation therapy appointments (for example, palliative care). The commenter also recommended that the term ‘‘visit’’ be well-defined. Response: Consistent with National Comprehensive Cancer Network guidelines, we believe that all patients who report pain, even those with mild pain, should have a plan of care. This is reflected in the denominator of the measure, which includes all patients 110 NQF. Cancer Endorsement Maintenance 2011.Candidate Review Consensus—Phase 1. Available at: https://www.qualityforum.org/Projects/ Cancer_Endorsement_Maintenance_ 2011.aspx#t=2&s=&p=3%7C. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 who report having pain. We agree that patients other than those receiving radiation therapy or chemotherapy may benefit from plan of care for treatment of pain, but the NQF-endorsed version of the measure does not include other categories of patients at this time. We also believe that many patients will benefit from our adoption of the measure as it is currently specified. The term ‘‘visit’’ has a detailed definition in the current specifications.111 After consideration of the public comments we received, we are finalizing the Clinical Process/Oncology Care—Plan of Care for Pain measure for the FY 2016 program and subsequent years. (D) Clinical Process/Oncology Care— Pain Intensity Quantified (NQF #0384) This measure assesses the percentage of patient visits, regardless of patient age, with a diagnosis of cancer currently receiving chemotherapy or radiation therapy in which pain intensity is quantified. As described above for the Oncology: Plan of Care for Pain (NQF #0383) measure, pain is the most common symptom in cancer patients and this measure is used in conjunction with NQF #0384 to encourage consistent assessment of pain intensity to better guide the care of pain.112 This measure addresses the National Quality Strategy domain of Patient and Family Engagement. Higher rates are indicative of better performance. This measure is intended to be paired with NQF #0383 above. Comment: A few commenters stated that there was ambiguity in the measure specifications for the Oncology: Pain Intensity Quantified measure which encompasses subjective interpretation, thereby undermining efforts to collect reliably the measure data. Commenters argued that the list of instrument examples included with the measure specifications only captures general types of tools that could be used and this could distract from substantive effort to alleviate cancer-related pain. Response: We disagree that the measure is subjective. The determination of whether a physician or other health care provider has used a tool is objective; the provider either used a tool or did not. The option to choose among different types of tools 111 NQF. Cancer Endorsement Maintenance 2011.Candidate Review Consensus—Phase 1. Available at: https://www.qualityforum.org/Projects/ Cancer_Endorsement_Maintenance_2011. aspx#t=2&s=&p=3%7C. 112 NQF. Cancer Endorsement Maintenance 2011.Candidate Review Consensus—Phase 1. Available at: https://www.qualityforum.org/Projects/ Cancer_Endorsement_Maintenance_2011. aspx#t=2&s=&p=3%7C. PO 00000 Frm 00349 Fmt 4701 Sfmt 4700 50843 allows providers to individualize care for patients. It is not necessary for the tools to be cancer-specific. The experience of pain is complex and it is not realistic or appropriate to separate cancer-specific pain when the goal is to support patients’ comfort and quality of life. We believe that measuring pain intensity by an appropriate method is a necessary step to achieving pain management. Comment: One commenter recommended that CMS modify this measure so that the denominator includes visits outside of chemotherapy and radiation therapy appointments (for example, palliative care). Response: We believe that the measure is appropriate as it is currently specified. We agree that patients other than those receiving radiation therapy or chemotherapy may benefit from plan of care for treatment of pain, but the NQF-endorsed version of the measure does not include other categories of patients at this time. We also believe that many patients will benefit from finalizing the measure as it is currently specified. After consideration of the public comments we received, we are finalizing the Clinical Process/Oncology Care—Pain Intensity Quantified measure for the FY 2016 program and subsequent years. (E) Clinical Process/Oncology Care— Prostate Cancer-Avoidance of Overuse Measure-Bone Scan for Staging LowRisk Patients (NQF #0389) This measure assesses the percentage of patients, regardless of age, with a diagnosis of prostate cancer at low risk of recurrence receiving interstitial prostate brachytherapy, or external beam radiotherapy to the prostate, or radical prostatectomy, or cryotherapy, who did not have a bone scan performed at any time since diagnosis of prostate cancer. Prostate cancer is the most commonly diagnosed cancer and the second leading cause of cancer death in men over the age of 40 years in the United States. Current guidelines and best practices do not recommend bone scans for patients in the low risk stratum for prostate cancer bony involvement. The goal of this measure is to reduce the use of bone scans that are clinically unnecessary and reduce economic burden to the patient and payer.113 This 113 NQF. Cancer Endorsement Maintenance 2011. Candidate Review Consensus—Phase 1. Available at: https://www.qualityforum.org/Projects/Cancer_ Endorsement_Maintenance_2011.aspx#t=2&s=&p= 3%7C. E:\FR\FM\19AUR2.SGM 19AUR2 50844 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 measure addresses the National Quality Strategy domain of Clinical Efficiency. Comment: One commenter stated that, as currently written, the wording of the measure implies that a low-risk patient should never receive a bone scan. The commenter stated that the measure specifications must accommodate patients whose disease manifestations warrant a bone scan (for example, short time to relapse, rapid PSA doubling time), and the term ‘‘at any time’’ should be avoided. Response: We agree with the commenter that the measure specifications should allow for appropriate use of bone scans when they are warranted. The current specifications of this measure account for these circumstances through several measure ‘‘exclusions’’ that remove otherwise low-risk patients with certain symptoms or physical findings from the denominator, because they would warrant a bone scan, and we agree that scans for these patients should not be counted as overuse. Comment: One commenter recommended that CMS modify the measure so that the numerator incorporates a literature-based period (for example, imaging within X days of diagnosis). Response: We believe the measure is appropriate as it is currently specified. Bone scans are considered unnecessary for most low-risk patients with prostatecancer, no matter how long a patient might have had prostate cancer. There is no scientific evidence that passage of time alone, in the absence of a change in clinical status, would indicate a valid reason for a bone scan. After consideration of the public comments we received, we are finalizing the Clinical Process/Oncology Care—Prostate Cancer-Avoidance of Overuse Measure-Bone Scan for Staging Low-Risk Patients measure for the FY 2016 PCHQR program and subsequent years. (F) Clinical Process/Oncology Care— Prostate Cancer-Adjuvant Hormonal Therapy for High-Risk Patients (NQF #0390) This measure assesses the percentage of patients, regardless of age, with a diagnosis of prostate cancer at high risk of recurrence receiving external beam radiotherapy to the prostate, who were prescribed adjuvant hormonal therapy (GnRH agonist or antagonist). Prostate cancer is the most commonly diagnosed cancer and the second leading cause of cancer death in men over the age of 40 years in the United States. If patients are receiving external beam radiotherapy as primary therapy, those patients that are VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 designated as high risk may be prescribed hormonal therapy. Adjuvant hormonal therapy in these patients has been shown to increase the effectiveness of the radiotherapy and may prolong survival. Further, the American Urological Association and the National Comprehensive Cancer Network guidelines recommend adjuvant hormonal therapy with radiotherapy for high-risk prostate cancer patients for prolonged survival. This measure attempts to encourage compliance with this guideline for this specific patient population.114 This measure addresses the National Quality Strategy domain of Clinical Effectiveness. Comment: One commenter recommended that CMS modify the measure so that the numerator provides additional specifications to categorize patients at ‘‘high risk for recurrence’’ and incorporates a literature-based period (for example, treatment within X days of diagnosis). Response: We believe that the measure is appropriate as it is currently specified. The specification describes patients at ‘‘high risk for recurrence’’ as having one or more of the following characteristics: PSA > 20 mg/dL, Gleason score of 8 to 10, or clinically localized stage T3a1. The measure requires that patients receiving External Beam Radiation Therapy (EBRT) receive adjuvant hormonal therapy at the same time (concurrently); therefore, the measure already contains a time period for the adjuvant hormonal therapy. After consideration of the public comments we received, we are finalizing the Clinical Process/Oncology Care—Prostate Cancer-Adjuvant Hormonal Therapy for High-Risk Patients measure for the FY 2016 PCHQR program and subsequent years. (3) Patient Experience of Care Survey: HCAHPS To advance patient safety and quality improvement in cancer hospital settings, we proposed that for the FY 2016 program and subsequent years, PCHs submit data on the HCAHPS Survey of patient experience-of-care. We partnered with AHRQ to develop HCAHPS. The HCAHPS Survey is the first national, standardized, publicly reported survey of patients’ experience of hospital care. HCAHPS, also known as CAHPS® Hospital Survey, is a survey instrument and data collection methodology for measuring patients’ perceptions of their hospital experience. 114 NQF. Cancer Endorsement Maintenance 2011. Candidate Review Consensus—Phase 1. Available at: https://www.qualityforum.org/Projects/Cancer _Endorsement_Maintenance_2011.aspx#t=2&s=& p=3%7C. PO 00000 Frm 00350 Fmt 4701 Sfmt 4700 The HCAHPS Survey asks recently discharged patients 32 questions about aspects of their hospital experience that they are uniquely suited to address. The core of the survey contains 21 items that ask ‘‘how often’’ or whether patients experienced a critical aspect of hospital care. The survey also includes four items to direct patients to relevant questions, five items to adjust for the mix of patients across hospitals, and two items that support Congressionallymandated reports (77 FR 53513 through 53515). Ten HCAHPS measures (six summary measures, two individual items and two global items) are currently publicly reported on the Hospital Compare Web site (https:// www.hospitalcompare.hhs.gov/) for each hospital participating in the Hospital IQR Program. One new composite item, ‘‘Transition to posthospital care,’’ will be added to the Hospital Compare Web site for the Hospital IQR Program once participating hospitals have submitted four calendar quarters of data on the three Care Transition Measure items that were added to the HCAHPS Survey beginning with January 2013 discharges (77 FR 53513 through 53515). Each of the six currently reported summary measures, or composites, is constructed from two or three survey questions. The six composites summarize how well doctors communicate with patients, how well nurses communicate with patients, how responsive hospital staff are to patients’ needs, how well hospital staff helps patients manage pain, how well the staff communicates with patients about medicines, and whether key information is provided at discharge. The two individual items address the cleanliness and quietness of patients’ rooms, while the two global items report patients’ overall rating of the hospital, and whether they would recommend the hospital to family and friends. The HCAHPS Survey is administered to a random sample of adult inpatients between 48 hours and 6 weeks after discharge. Patients admitted in the medical, surgical and maternity care service lines are eligible for the survey; the survey is not restricted to Medicare beneficiaries. PCHs may use an approved survey vendor, or collect their own HCAHPS data (if approved by CMS to do so). To accommodate hospitals, HCAHPS can be implemented using one of four different survey modes: mail; telephone; mail with telephone followup; or active interactive voice recognition (IVR). Regardless of the mode used, the PCH would be required E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations to make multiple attempts to contact patients. PCHs may use the HCAHPS Survey alone, or include additional questions after the 21 core items discussed above. PCHs must survey patients throughout each month of the year, and PCHs participating in the PCHQR Program must target at least 300 completed surveys over four calendar quarters in order to attain the reliability criterion CMS has set for publicly reported HCAHPS scores. The HCAHPS Survey is available in official translations in several languages other than English: Spanish (mail and telephone modes); Chinese (mail mode); Russian (mail mode); and Vietnamese (mail mode). All official translations of the HCAHPS Survey instrument are available in the current HCAHPS Quality Assurance Guidelines. The survey itself and the protocols for sampling, data collection, coding and file submission can be found in the current HCAHPS Quality Assurance Guidelines manual, available on the HCAHPS On-Line Web site located at: https:// www.hcahpsonline.org. We partnered with AHRQ to develop and test the HCAHPS Survey. AHRQ carried out a rigorous and multi-faceted scientific process, including a public call for measures; literature review; cognitive interviews; consumer focus groups; stakeholder input; a three-State pilot test; extensive psychometric analyses; consumer testing; and numerous small-scale field tests. In addition, we provided three separate opportunities for the public to comment on HCAHPS, and responded to over 1,000 comments. In May 2005, the HCAHPS Survey was NQF-endorsed and in December 2005 OMB gave its final approval for the national implementation of HCAHPS for public reporting purposes. We implemented the HCAHPS Survey for the Hospital IQR Program in October 2006 and the first public reporting of HCAHPS results under that program occurred in March 2008. The survey and its methodology are available on the HCAHPS On-Line Web site located at: https://hcahpsonline.org and the survey results are available on the Hospital Compare Web site at https:// www.hospitalcompare.hhs.gov. Currently, nearly 3,900 hospitals that participate in the Hospital IQR Program publicly report their HCAHPS scores on Hospital Compare, and about 27 percent of PCHs voluntarily administer the HCAHPs Survey. We strongly encourage those PCHs that are currently submitting the HCAHPS measure to continue their current data submission. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 We invited public comment on our proposals to adopt the HCAHPS measure beginning with the FY 2016 program year. Comment: One commenter supported inclusion of the HCAHPS measure. Response: We appreciate the commenter’s support for the adoption of the HCAHPS measure for PCHs. Comment: Some commenters objected to the HCAHPS inclusion because this tool has not yet been tested or NQFendorsed for use in PCHs, and it is limited to the inpatient population whereas the great majority of PCH patients receive care in the outpatient setting. Commenters urged rapid testing and adoption of a Cancer CAHPS survey. Response: The HCAHPS Survey received the endorsement of the National Quality Forum (NQF #0166) for use by acute care hospitals. In addition, approximately 27 percent of PCHs currently participate in HCAHPS on a voluntary basis. We believe that the HCAHPS Survey is appropriate to measure inpatients’ experience of care in the PCH setting. The widespread adoption of HCAHPS by acute care hospitals as resulted in benchmarks that could be useful to PCHs in their quality improvement efforts. The HCAHPS Survey looks at key facets of patient experience that are relevant to PCHs, such as communication with patients, responsiveness of staff, cleanliness and quietness of the hospital environment and discharge instructions. We further note that PCHs have the option to add their own supplemental items to the HCAHPS Survey, as explained in the current HCAHPS Quality Assurance Guidelines, V8.0, which can be found at https://www.hcahpsonline.org. PCHs treat patients on both an inpatient and an outpatient basis, and we believe that the HCAHPS Survey will provide a starting point to monitor patient experience of care in PCHs. We are monitoring the development of other CAHPS tools that may be appropriate for cancer care patients in the inpatient/ ambulatory settings. Comment: One commenter indicated that although some PCHs may currently use the HCAHPS Survey, posting on Hospital Compare will compel the institution to agree to participation in the Hospital IQR Program. Therefore, information that PCHs are exempt from reporting, such as hospital readmission rates, will be posted. If this is correct, commenter strongly urged the postponement of implementation of this measure until operational challenges such as these have been resolved. PO 00000 Frm 00351 Fmt 4701 Sfmt 4700 50845 Response: PCHs are not required to submit any data under the Hospital IQR Program because that program does not apply to PCHs. However, we are aware that some PCHs currently submit HCAHPS data to CMS on a voluntary basis, and we encourage PCHs to continue this practice so that they can assess the experience of care of their patients against the experience of care of subsection (d) hospital patients. In addition, by voluntarily continuing to submit HCAHPS data to CMS prior to the time when the data is due under the PCHQR Program, PCHs will increase their familiarity with the HCAHPS Survey, its implementation, data collection, and data submissions protocols. Comment: One commenter recommended that CMS postpone adoption of the HCAHPS measure until the development and testing of the cancer CAHPS survey is complete. Another commenter supported MAP’s recommendation to submit the cancer module of the HCAHPS Survey for endorsement as soon as possible. One commenter recommended further testing to address the cancer population, palliative/end-of-life-care, and to include outpatient services in the survey before inclusion in the PCHQR Program. Response: We continue to monitor AHRQ’s development of a cancer CAHPS survey. We understand that further development and more extensive testing of this instrument are still needed. In the interim, we believe that the HCAHPS Survey is an appropriate instrument to measure inpatient experience of care in the PCH setting. As noted above, the widespread adoption of HCAHPS by acute care hospitals has resulted in benchmarks that could be useful to PCHs in their quality improvement efforts. The HCAHPS Survey will allow a PCH to assess key facets of patient experience that are relevant to hospitals, such as communication with patients, responsiveness of staff, cleanliness and quietness of the hospital environment and discharge instructions. While the HCAHPS Survey was designed for the inpatient setting, it provides a starting point to monitor inpatient experience of care in PCHs. After consideration of the public comments received, we are finalizing the HCAHPS measure for the FY 2016 program and subsequent years. (4) Summary of Measures In addition to the five measures that we previously finalized for the PCHQR Program, we are finalizing one new SSI measure for reporting beginning with E:\FR\FM\19AUR2.SGM 19AUR2 50846 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations the FY 2015 PCHQR Program. We are also finalizing six new SCIP, five new Clinical Process/Oncology Care Measures and the HCAHPS Survey for reporting beginning with the FY 2016 PCHQR Program. We discuss below our finalized policies regarding the form, manner, and timing of data collection for these measures. The tables below list the previously finalized measures and the new finalized measures for the PCHQR Program beginning with the FY 2015 PCHQR Program. Previously finalized measures for the PCHQR program beginning with the FY 2014 program year Topic Safety and Healthcare-Associated Infection—HAI • (NQF #0139) NHSN Central Line-Associated Bloodstream Infection (CLABSI) Outcome Measure • (NQF #0138) NHSN Catheter-Associated Urinary Tract Infections (CAUTI) Outcome Measure Clinical Process/Cancer-Specific Treatments • (NQF #0223) Adjuvant Chemotherapy is Considered or Administered Within 4 Months (120 days) of Surgery to Patients Under the Age of 80 with AJCC III (lymph node positive) Colon Cancer • (NQF #0559) Combination Chemotherapy is Considered or Administered Within 4 Months (120 days) of Diagnosis for Women Under 70 with AJCC T1c, or Stage II or III Hormone Receptor Negative Breast Cancer • (NQF #0220) Adjuvant Hormonal Therapy Previously Finalized Measures for the PCHQR Program Beginning with the FY 2015 Program Year Topic Safety and Healthcare-Associated Infection—HAI • (NQF #0753) Harmonized Procedure Specific Surgical Site Infection (SSI) Outcome Measure Previously Finalized Measures for the PCHQR Program Beginning with the FY 2016 Program Year Topic SCIP • (NQF #0218) Surgery Patients who Received Appropriate VTE Prophylaxis within 24 Hrs Prior to Surgery to 24 Hrs After Surgery End Time • (NQF #0453) Urinary Catheter Removed on Post-Operative Day 1 or Post-Operative Day 2 with Day of Surgery Being Day Zero • (NQF #0527) Prophylactic Antibiotic Received Within 1 Hr Prior to Surgical Incision • (NQF #0528) Prophylactic Antibiotic Selection for Surgical Patients • (NQF #0529) Prophylactic Antibiotic Discontinued Within 24 Hrs After Surgery End Time • (NQF #0284) Surgery Patients on Beta Blocker Therapy Prior to Admission who Received a Beta Blocker During the Perioperative Period Clinical Process/Oncology Care Measures • • • • • (NQF (NQF (NQF (NQF (NQF #0382) #0383) #0384) #0390) #0389) Oncology-Radiation Dose Limits to Normal Tissues Oncology: Plan of Care for Pain Oncology: Pain Intensity Quantified Prostate Cancer-Adjuvant Hormonal Therapy for High-Risk Patients Prostate Cancer-Avoidance of Overuse Measure-Bone Scan for Staging Low-Risk Patients Patient Engagement/Experience of Care • (NQF #0166) HCAHPS mstockstill on DSK4VPTVN1PROD with RULES6 6. Possible New Quality Measure Topics for Future Years We seek to develop a comprehensive set of quality measures to be available for widespread use for informed decision-making and quality improvement in the PPS-exempt cancer hospital setting. Therefore, through future rulemaking, we intend to propose to adopt new or updated measures, such as measures that assess the safety and efficiency of diagnosis and treatment of cancer, measures that take into account novel diagnostic and treatment VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 modalities, measures that assess symptoms and functional status, measures of appropriate disease management and care coordination, and measures of admissions for complications of cancer and treatment for cancer, that help us further our goal of achieving better health care and improved health for Medicare beneficiaries who obtain cancer services through the widespread dissemination and use of performance information. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27715), we PO 00000 Frm 00352 Fmt 4701 Sfmt 4700 welcomed public comment and suggestions for the following measure domains: clinical quality of care, care coordination, patient safety, patient and caregiver experience of care, population/community health, and efficiency. These domains align with those of the National Quality Strategy, and we believe that selecting measures to address these domains will promote better cancer care while bringing the PCHQR Program in line with other established quality reporting and pay for performance programs such as the E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 Hospital IQR Program, the Hospital VBP Program, and the Hospital OQR Program, and others within our purview. Comment: One commenter recommended the inclusion of three MAP recommended and NQF-endorsed measures: Oncology: Radiation dose limits to normal tissue, prostate cancer; Adjuvant hormonal therapy for highrisk patients, and prostate cancer; and Avoidance of overuse of bone scan for staging low-risk patients. One commenter preferred the adoption of more long-term, cancer-specific outcome measures as well as measures for less common malignancies. One commenter recommended inclusion of more outcome measures in areas such as survival, quality of life, infection, VTE rates and mortality. One commenter suggested that CMS take a leadership role in developing measures of particular relevance to this reporting program, such as measures of riskadjusted, stage-specific survival curves for various types of cancer (for example, lung, pancreas, liver, thyroid and esophagus, breast, colorectal). Another commenter recommended a multi-drug resistant organism (MDRO) measure. Response: We appreciate the commenters’ comments and suggestions, and we will consider them as we develop and select future measures. A CMS contractor has actively engaged stakeholders to discuss viable strategies to develop valid and reliable measures in these domains. 7. Maintenance of Technical Specifications for Quality Measures Many of the quality measures used in different Medicare and Medicaid reporting programs are NQF-endorsed. As part of its regular maintenance process for endorsed performance measures, the NQF requires measure stewards to submit annual measure maintenance updates and undergo maintenance of endorsement review every 3 years. In the measure maintenance process, the measure steward (owner/developer) is responsible for updating and maintaining the currency and relevance of the measure and will confirm existing or minor specification changes to NQF on an annual basis. NQF solicits information from measure stewards for annual reviews and in order to review measures for continued endorsement in a specific 3-year cycle. Through NQF’s measure maintenance process, NQF-endorsed measures are sometimes updated to incorporate changes that we believe do not substantively change the nature of the measure. We believe these types of VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 maintenance changes are distinct from more substantive changes to measures that result in what are considered new or different measures, and that they do not trigger the same agency obligations under the Administrative Procedure Act. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53562), we adopted a policy to use a subregulatory process to make nonsubstantive updates to NQFendorsed measures used for the PCHQR Program. We also said that we expected to make the determination of what constitutes a substantive versus a nonsubstantive change on a case-by-case basis, and provided examples of the types of changes that would fall into each category. We further said that the policies regarding what is considered substantive versus nonsubstantive changes would apply to all PCHQR Program measures. The technical specifications for the HCAHPS patient experience of care survey are contained in the current HCAHPS Quality Assurance Guidelines manual, which is available at HCAHPS On-Line Web site, https:// www.hcahpsonline.org. As necessary, HCAHPS Bulletins are issued to provide notice of changes and updates to technical specifications in HCAHPS data collection systems. The specifications for the other measures are posted in the Specifications Manual on the QualityNet Web site at www.qualitynet.org. The Specifications Manual contains links to measure specifications, data abstraction information, data submission information, and other information necessary for PCHs to participate in the PCHQR Program. We maintain the technical specifications for the quality measures by updating this Manual periodically as we continue to expand and update our PCHQR Program. These updates include detailed instructions for PCHs to use when collecting and submitting data on the required measures and are accompanied by notifications to PCHQR Program-participating users, providing sufficient time between the change and effective dates in order to allow users to incorporate changes and updates to the measure specifications into data collection systems. We also revise the Specifications Manual and provide links to reflect measure changes which are also posted on the QualityNet Web site at: https://www.QualityNet.org. 8. Public Display Requirements for the FY 2014 Program and Subsequent Years Section 1866(k)(4) of the Act requires the Secretary to establish procedures for making the data submitted under the PO 00000 Frm 00353 Fmt 4701 Sfmt 4700 50847 PCHQR Program available to the public. Such procedures shall ensure that a PCH has the opportunity to review the data that is to be made public with respect to the hospital prior to such data being made public. Section 1866(k)(4) of the Act also provides that the Secretary shall report quality measures of process, structure, outcome, patients’ perspective on care, efficiency, and costs of care that relate to services furnished in such hospital on the CMS Web site. In order to meet these requirements, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53562 through 56563), we finalized our policy to publicly display the submitted data on the Hospital Compare Web site (https:// www.hospitalcompare.hhs.gov/) and established a preview period of 30 days prior to making such data public. This year we have more information on the state of our systems’ capability and readiness. Therefore, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27716), we proposed to display publicly in 2014 the data for the measures listed below: • Adjuvant Chemotherapy is considered or administered within 4 months (120 days) of surgery to patients under the age of 80 with AJCC III (lymph node positive) colon cancer (NQF #0223); and • Combination Chemotherapy is considered or administered within 4 months (120 days) of diagnosis for women under 70 with AJCC T1c, or Stage II or III hormone receptor negative breast cancer (NQF #0559). However, we proposed to defer the public reporting of the remaining three finalized measures for the FY 2014 PCHQR Program. We are in the process of testing and assessing data quality, including the reliability and validity of the measure rates, and do not believe that the data will be ready for public posting until sometime in the future. We will provide more information in future rulemaking. We invited public comment on these proposals. Comment: Many commenters supported CMS’ proposal to defer public reporting of the measures in the program while we continue to test and assess the quality of the data. Response: We appreciate the commenters’ support. Comment: One commenter recommended that CMS defer public reporting of the central line-associated blood stream infection (CLABSI) measure for the PCHQR Program until the NQF-endorsed measure has been revised to exclude infections unrelated to central line placement to avoid E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50848 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations erroneous conclusions about infection rates at PCHs. Response: We work very closely with the measure developer, the CDC, to provide meaningful public reporting data. The current CLABSI measure is NQF-endorsed and in use by the CDC and other quality reporting programs. Reporting on this measure will help to address the quality of care provided in PCH setting. We believe it is important to collect data on CLABSI because CLABSI can lead to severe complications that interfere with the quality of life of cancer patients. Further, given successful use of this measure in the Hospital IQR Program, we think that the measure as it is currently specified by the CDC provides sufficient information to allow meaningful public reporting. Comment: One commenter commended CMS’ efforts in including public reporting requirements in the PCHQR Program because the commenter believed that the public reporting of quality measure performance at a centralized Web site will improve a beneficiary’s ability to make informed health care choices and will facilitate a PCH’s ability to improve the quality and efficiency of its care. The commenter encouraged CMS to make the data for the additional finalized measures for 2014 publicly available as quickly as possible. Response: We appreciate the commenter’s support. It is our goal to ensure that the public obtains access to valid and reliable quality of care measure data in a timely manner. We intend to make data on these measures available to the public as soon as possible. Comment: One commenter recommended that CMS require all PCHs to display prominently the performance outcomes in patient areas in a manner similar to what is required by the ESRD QIP. Response: There are no performance score certificates in the PCHQR Program, and PCHs are not evaluated based on performance. We will make the data publicly available on the Hospital Compare Web site (https:// www.hospitalcompare.hhs.gov/). Such public display of the quality measure data will inform patients and their caregivers of the quality of care provided at PCHs. Comment: One commenter recommended that CMS exercise care in publicly reporting the SSI measure because reporting the measure for cancer patients presents different challenges than reporting the measure for general acute care hospital patients. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Response: We appreciate the commenter’s recommendation. At this time, this measure is specified for use by NQF for all postoperative patients. Therefore, we believe it is appropriate to use for postoperative cancer patients. After consideration of the public comments we received, we are finalizing the public display requirements for the FY 2014 program and subsequent years. 9. Form, Manner, and Timing of Data Submission for the FY 2015 Program and Subsequent Years a. Background Section 1866(k)(2) of the Act requires that, beginning with the FY 2014 PCHQR Program, each PCH must submit to the Secretary data on quality measures specified under section 1866(k)(3) of the Act in a form and manner, and at a time as specified by the Secretary. The complete data submission requirements and submission deadlines for FY 2014 have been posted on the QualityNet Web site at: https:// www.QualityNet.org. We also refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53563 through 535567) for more information. b. Waivers From Program Requirements In our experience with other quality reporting and/or performance programs, we have noted occasions when providers have been unable to submit required quality data due to extraordinary circumstances that are not within their control (for example, natural disasters). We do not wish to unduly increase their burden during these times. Therefore, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27716), we proposed that, beginning with FY 2014, PCHs may request and we may grant waivers with respect to the reporting of required quality data when extraordinary circumstances beyond the control of the PCH warrant. When waivers are granted, we will notify the respective PCH. Under the proposed process, in the event of extraordinary circumstances not within the control of the PCH, such as a natural disaster, the PCH may request a reporting extension or a complete waiver of the requirement to submit quality data for one or more quarters. Such facilities would submit to CMS a request form that would be made available on the QualityNet Web site. The following information should be noted on the form: • The PCH’s CCN; • The PCH’s name; • Contact information for the PCH’s CEO and any other designated PO 00000 Frm 00354 Fmt 4701 Sfmt 4700 personnel, including name, email address, telephone number, and mailing address (the address must be a physical address, not a post office box); • The PCH’s reason for requesting an extension or waiver; • Evidence of the impact of extraordinary circumstances, including but not limited to photographs, newspaper and other media articles; and • A date when the PCH will again be able to submit PCHQR Program data, and a justification for the proposed date. We proposed that the request form must be signed by the PCH’s CEO or designee, and must be submitted within 30 days of the date that the extraordinary circumstances occurred. Following receipt of the request form, we would: (1) Provide a written acknowledgement, using the contact information provided in the request, to the CEO and any additional designated PCH personnel, notifying them that the PCH’s request has been received; and (2) provide a formal response to the CEO and any additional designated PCH personnel, using the contact information provided in the request, notifying them of our decision. This proposal does not preclude us from granting waivers or extensions to PCHs that have not requested them when we determine that an extraordinary circumstance, such as an act of nature (for example, a hurricane or other natural disaster that could reasonably affect a PCH’s ability to compile or report data), affects an entire region or locale. If we make the determination to grant a waiver or extension to PCHs in a region or locale, we proposed to communicate this decision through routine communication channels to PCHs and vendors, by means of memoranda, emails, and notices on the QualityNet Web site, among other means. We invited public comment on this proposal. Comment: One commenter supported CMS’ proposal. Response: We appreciate the commenter’s support. After consideration of the public comment we received, we are finalizing the waiver and extension process for the PCHQR Program. c. Reporting Periods and Submission Timelines for the Finalized SSI Measure In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27716 through 27717), we proposed that PCHs report the proposed SSI measure beginning with January 1, 2014 events. We believe that this date will provide enough advance notice for PCHs to prepare to report the measure, and we base this E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations belief on our experience gained from collecting the SSI measure for the Hospital IQR Program. We proposed to calculate the SSI measure rate for purposes of the FY 2015 program year using data from the first quarter (Q1) of calendar year (CY) 2014. We recognize that using data from only one quarter may not provide a complete picture of the quality of care provided at a PCH. However, our intent is to align the PCHQR reporting timeline with the reporting timeline used by the Hospital IQR Program as well as to leverage current IT infrastructure to minimize cost and burden. We proposed to calculate the SSI measure rate for purposes of the FY 2016 program year using data from the last three quarters (Q2, Q3, and Q4) of CY 2014, and we proposed to calculate the SSI measure rate for purposes of the FY 2017 program year using data from all four quarters (Q1, Q2, Q3, and Q4) of CY 2015. We proposed that PCHs submit the SSI measure data to the CDC through the NHSN database. This is the same procedural/reporting mechanism requirement used for the CLABSI and CAUTI measures we finalized in FY 2013 IPPS/LTCH PPS final rule (77 FR 53563 through 53564). The data submission and reporting procedures have been set forth by CDC for NHSN participation in general and for submission of the SSI measure to NHSN. We refer readers to the CDC’s Web site (https://www.cdc.gov/nhsn/) for detailed data submission and reporting procedures. After the final submission deadline has passed, we will obtain the PCH-specific calculations that have been generated by the NHSN for the PCHQR Program. As noted above, we proposed to adopt a quarterly submission process for the SSI measure that uses a reporting mechanism that is the same as the one finalized for the Hospital IQR Program (77 FR 53539). We have successfully implemented this reporting mechanism in the Hospital IQR Program, and we strongly believe that this type of data submission is the most feasible option because PCHs are accustomed to reporting the CAUTI and CLABSI measures to the NHSN this way. We welcomed public comment on this proposal. Comment: Some commenters supported the proposed data collection and reporting proposals for the SSI measure. Response: We appreciate the commenters’ support. Comment: One commenter recommended that CMS allow sampling rather than chart abstraction whenever possible to reduce the reporting burden on PCHs. Response: As indicated in the SSI measure specifications, the SSI measure applies to all postoperative patients who fall into the numerator criteria. We believe that the reporting burden for this measure is minimized because PCHs can submit aggregate denominator data every quarter. We also note that PCHs are required to report patient-level infection events only for potentially infected patients, not all patients. PCHs are also required to summarize their population of all eligible patients receiving the surgical procedures by submitting aggregate level counts. We do not allow sampling because previous experience in the Hospital IQR Program indicates that PCHs will report relatively few patients with potential infections. We believe that complete submission of all potential patient-level infection events is necessary to perform risk adjustment and ensure sufficient reliability for SSI publicly reported measure data. Comment: One commenter recommended that CMS calculate measure rates for the PCHQR Program based on a full year of data for purposes of public reporting. Response: We appreciate the commenter’s recommendation. As noted above, we are attempting to align the PCHQR reporting timeline with the reporting timeline used by the Hospital 50849 IQR Program, with the goal that we will collect and report a full year of data for the SSI measure beginning FY 2017. We will continue to consider and strive to report, whenever operationally possible, 12 months of data. Comment: A few commenters recommended that CMS implement a vendor certification program for the PCHQR Program that would allow PCHs to reduce redundant data collection and streamline PCHQR Program reporting. Response: We believe the commenter is recommending that we implement something similar to the approved survey vendor list we use for the HCAHPS. For the HCAHPS, vendors must undergo rigorous training on how to conduct the survey prior to being added to our list of approved survey vendors. The reason we require hospitals to either receive training on how to conduct the survey or use vendors from our list who have been trained to conduct the survey is because the HCAHPS requires patient and/or patient caregiver interface to gather information on hospitalization experience of care. Therefore, human factors influence demand that survey conductors are trained in survey administration techniques in order to yield the most objective, reliable data. We do not think that there is a need for such a process for collecting the other measures which are gathered through chart abstraction. PCHs, however, can use any reliable and reputable vendor to meet their needs with non-HCAHPS data collection and submission. We do not require that such vendors be CMSapproved to submit PCHQR Program data. After consideration of the public comments we received, we are finalizing the reporting periods and submission timelines for the SSI measure. The table below outlines the finalized reporting periods and submission timeframes for the FY 2015, FY 2016, and FY 2017 programs. FINALIZED SSI MEASURE REPORTING PERIODS AND SUBMISSION TIMEFRAMES FOR THE FY 2015, FY 2016 AND FY 2017 PROGRAMS mstockstill on DSK4VPTVN1PROD with RULES6 Program year (FY) Reporting periods (CY) 2015 ...................................................... 2016 ...................................................... 2017 ...................................................... VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2014 2014 2014 2014 2015 2015 2015 2015 events events events events events events events events PO 00000 Data submission deadlines (January 1, 2014—March 31, 2014) ......................................... (April 1, 2014—June 30, 2014) ................................................. (July 1, 2014—September 30, 2014) ........................................ (October 1, 2014—December 31, 2014) .................................. (January 1, 2015—March 31, 2015) ......................................... (April 1, 2015—June 30, 2015) ................................................. (July 1, 2015—September 30, 2015) ........................................ (October 1, 2015—December 31, 2015) .................................. Frm 00355 Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2 August 15, 2014. November 15, 2014. February 15, 2015. May 15, 2015. August 15, 2015. November 15, 2015. February 15, 2016. May 15, 2016. mstockstill on DSK4VPTVN1PROD with RULES6 50850 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations eligible colon and abdominal hysterectomy procedures in the preceding calendar year. Response: We appreciate the commenter’s recommendation. As we noted, we believe it is important to align our measures with the Hospital IQR Program as much as possible to both streamline the programs and reduce provider burden. At this time, the Hospital IQR Program uses a case minimum of 10 for the SSI measure (77 FR 53539). As we explained in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53539), we chose a case minimum of 10 because we believe 10 cases will be sufficiently meaningful for the results to be publicly displayed while ensuring the availability of the most data possible for public reporting. For detailed information regarding the number of cases, we refer readers to the CDC specification manual: https:// www.cdc.gov/hai/ssi/ssi.html. After consideration of the public comments we received, we are finalizing the exceptions to reporting and data submission for the HAI Measures (CAUTI, CLABSI, and SSI). PCHs will not be required to report these measures if the PCH performed less than a combined total of 10 colon and abdominal hysterectomy procedures in the calendar year prior to the reporting year. We are also finalizing the location exceptions listed in the CDC’s specifications manual.117 118 d. Exceptions to Reporting and Data Submission for HAI Measures (CAUTI, CLABSI, and SSI) Last year we finalized policies for the Hospital IQR Program providing exceptions to the reporting and data submission requirements for the CLABSI, CAUTI and SSI measures (77 FR 53539). We implemented these exceptions because we realize that some hospitals may not have locations that meet the NHSN criteria for CLABSI or CAUTI reporting and that that some hospitals may perform so few procedures requiring surveillance under the SSI measure that the data may not be meaningful for Hospital Compare or sufficiently reliable to be utilized for a program year. We also finalized last year the CLABSI and CAUTI measures for the PCHQR Program starting with FY 2014 (77 FR 53557), but did not propose to adopt the same exceptions for those measures. This year, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27717), we proposed to adopt the same exceptions to the CLABSI and CAUTI measures for PCHs, which are outlined in CDC’s specifications manual, because we realize that some hospitals may not have locations that meet the NHSN criteria. We refer readers to the CDC’s specifications manual for more information on location exceptions for the CAUTI 115 and CLABSI.116 In addition, as with the Hospital IQR Program, we recognize that some PCHs may perform so few procedures requiring surveillance under the proposed SSI measure that the data may not be meaningful for Hospital Compare or sufficiently reliable to be utilized for quality reporting purposes. We proposed to provide an exception for these PCHs from the reporting requirement in any given year if the PCH performed less than a combined total of 10 colon and abdominal hysterectomy procedures in the calendar year prior to the reporting year. We proposed to provide PCHs with a single HAI exception form, to be used for seeking an exception for any of the CLABSI, CAUTI, and SSI measures. This exception form will be available on QualityNet Web site. We invited public comment on this proposal. Comment: One commenter recommended that for the SSI measure, CMS grant reporting exceptions to any hospital performing fewer than 20 e. Reporting and Data Submission Requirements for the Finalized Clinical Process/Oncology Care Measures In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27717 through 27718), we proposed that PCHs report the proposed clinical process/oncology care measures beginning with January 1, 2015 discharges. We believe that this date will provide enough advance notice for PCHs to prepare to report the measures. We believe that this timeline provides PCHs with sufficient time to prepare to report on the new measures. We proposed to calculate the clinical process/oncology care measure rates for purposes of the FY 2016 program year using data from the first quarter (Q1) of CY 2015, and that PCHs submit aggregated data for each measure for this quarter during a data submission window that will be open from July 1 through August 15, 2015. We proposed to calculate the clinical process/ oncology care measure rates for 115 Catheter-Associated Urinary Tract Infection (CAUTI) Event at https://www.cdc.gov/nhsn/pdfs/ pscManual/7pscCAUTIcurrent.pdf. 116 Central Line-Associated Bloodstream Infection (CLABSI) Event at: https://www.cdc.gov/nhsn/pdfs/ pscmanual/4psc_clabscurrent.pdf. 117 Catheter-Associated Urinary Tract Infection (CAUTI) Event at https://www.cdc.gov/nhsn/pdfs/ pscManual/7pscCAUTIcurrent.pdf. 118 Central Line-Associated Bloodstream Infection (CLABSI) Event at: https://www.cdc.gov/nhsn/pdfs/ pscmanual/4psc_clabscurrent.pdf. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 PO 00000 Frm 00356 Fmt 4701 Sfmt 4700 purposes of the FY 2017 program year using data from the last three quarters (Q2, Q3, and Q4) of CY 2015. We proposed that PCHs submit aggregated data for each measure for each of these quarters during a data submission window that will be open from July 1 through August 15, 2016. We proposed to calculate the clinical process/ oncology care measure rates for purposes of the FY 2018 program year using data from the four quarters (Q1, Q2, Q3, and Q4) of CY 2016. We proposed that PCHs submit aggregated data for each measure for each of these quarters during a data submission window that will be open from July 1 through August 15, 2017. For data collection, we proposed that PCHs submit aggregate-level data through the CMS Web-based Measures Tool. This proposal mirrors the requirements we have finalized for the IPFQR Program (77 FR 53655). PCHs would submit all the data required for a particular program year once annually during the data submission windows we proposed above, and would do so via the PCH section on the QualityNet secure Web site. However, the data input forms on the QualityNet Web site for such submission will require aggregate data for each separate quarter. Therefore, PCHs will need to track and maintain quarterly records for their data. We refer readers to FY 2013 IPPS/ LTCH PPS final rule (77 FR 53655) for more information on the CMS Webbased aggregated data collection tool used in the IPFQR Program, which we proposed to also use in the PCHQR Program. We believe that this option is less burdensome for PCHs than patientlevel reporting. We also recognize that aggregate level reporting has the potential to result in less accurate measure rates than patientlevel reporting; however, we have assessed our infrastructure readiness to collect these measures in the PCHQR Program and believe that an aggregate data submission approach is the most feasible approach at this time. We welcomed public comment on the proposed reporting periods and data collection methods/modes for the clinical process/oncology care measures. Comment: One commenter recommended that CMS utilize sampling rather than chart abstraction whenever possible to conduct PCHQR reporting to reduce burden. Response: We appreciate the commenter’s recommendation. As we noted earlier, we will allow PCHs to report the clinical process/oncology care measures using the same sampling methodologies we allow to be used to E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations report these measures under the PQRS Program. The methodologies can be found in the PQRS manual at https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/PQRS/ MeasuresCodes.html. In future years, we intend to work with the measure developer during the measure maintenance period so that we may develop a sampling methodology that is tailored to PCH settings. Comment: One commenter recommended that CMS calculate measure rates for the PCHQR Program based on a full year of data for purposes of public reporting. Response: A commenter also raised this issue regarding our proposed reporting periods and timelines for the SSI measure in section IX.B.9.c. of the preamble of this final rule and we refer readers to our response in that section. Comment: For the clinical process/ oncology care measures, a few commenters recommended that CMS implement a vendor certification program for the PCHQR Program that would allow PCHs to reduce redundant data collection and streamline PCHQR Program reporting. Response: Commenters also raised this issue regarding our proposed reporting periods and timelines for the 50851 SSI measure in section IX.B.9.c. of the preamble of this final rule and we refer readers to our response in that section. After consideration of the public comments we received, we are finalizing the reporting and data submission requirements for the Clinical Process/Oncology Care Measures. The table below outlines the finalized reporting periods and submission timeframes for the FY 2016, FY 2017, and FY 2018 programs for the clinical process/oncology care measures. FINALIZED CLINICAL PROCESS/ONCOLOGY CARE MEASURES—REPORTING PERIODS AND SUBMISSION TIMEFRAMES FOR THE FY 2016—FY 2018 PROGRAMS Program year (FY) Reporting periods (CY) 2016 ............................................... 2017 ............................................... 2018 ............................................... Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2015 2015 2015 2016 2016 2016 2016 mstockstill on DSK4VPTVN1PROD with RULES6 f. Reporting and Data Submission Requirements for the Finalized SCIP Measures In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27718), we proposed that PCHs report the proposed SCIP measures beginning with January 1, 2015 discharges. We believe that this date will provide enough advance notice for PCHs to prepare to report the measures, and our belief is based on the experience gained from collecting the SCIP measures for the Hospital IQR Program. We proposed to calculate the SCIP measure rates for purposes of the FY 2016 program year using patient-level data from the first quarter (Q1) of CY 2015. We recognize that using data from only one quarter may not provide a complete picture of the quality of care provided at a PCH. However, our intent is to align the PCHQR Program’s current reporting timeline with the reporting timeline used by the Hospital IQR Program, as well as to leverage the current IT infrastructure to minimize cost and burden. We proposed to calculate the SCIP measure rates for purposes of the FY 2017 program year using the last three quarters (Q2, Q3, and Q4) of CY 2015. This will allow us to calculate measure rates for FY 2018 using data from all four quarters (Q1, Q2, Q3, and Q4) of CY 2016. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 discharges discharges discharges discharges discharges discharges discharges discharges Data submission deadlines (January 1, 2015—March 31, 2015) .................... (April 1, 2015—June 30, 2015) ........................... (July 1, 2015—September 30, 2015) .................. (October 1, 2015—December 31, 2015) ............. (January 1, 2016—March 31, 2016) .................... (April 1, 2016—June 30, 2016 ............................. (July 1, 2016—September 30, 2016) .................. (October 1, 2016—December 31, 2016) ............. We proposed that PCHs submit patient-level data for each of the SCIP measures to CMS through the QualityNet infrastructure. This is the same procedural/reporting mechanism requirement used for collecting Hospital IQR Program SCIP process of care measures. We have successfully implemented this reporting mechanism in the Hospital IQR Program and intend to use the same reporting mechanism to collect data for the PCHQR Program. We proposed the patient-level data submission approach for the SCIP measures so that we can compare the data being submitted by PCHs with that being submitted by hospitals under the Hospital IQR Program. We also believe that patient-level data will provide us with more granular information that we can use to better assess the quality of care provided at a PCH. We welcomed public comment on the proposed reporting and submission requirements for the proposed SCIP measures and welcomed feedback on using patient-level versus other types of data submission. Comment: Some commenters supported the proposed data collection and reporting proposals for the SCIP measures. Response: We appreciate the commenters’ support. Comment: Some commenters urged that, if adopted, CMS implement a PO 00000 Frm 00357 Fmt 4701 Sfmt 4700 July 1, 2015–August 15, 2015. July 1, 2016–August 15, 2016. July 1, 2017—August 15, 2017. sampling methodology for reporting the SCIP measures. Commenters noted that doing so would reduce burden. Response: As we stated above, we will allow PCHs to report the SCIP measures using the same sampling methodology that we currently allow for the reporting of the same measures by subsection (d) hospitals under the Hospital IQR Program (outlined in the specification manual https://www.qualitynet.org/dcs/ ContentServer?c=Page&pagename= QnetPublic%2FPage%2FQnet Tier2&cid=1138115987129). Comment: One commenter requested that CMS provide clarification regarding the use of an approved core measure vendor to meet the reporting requirements for the SCIP measures. Response: Commenters also raised this issue regarding our proposed reporting periods and timelines for the SSI measure in section IX.B.9.c. of the preamble of this final rule and we refer readers to our response in that section. Comment: For the SCIP measures, one commenter recommended that CMS calculate measure rates for the PCHQR Program based on a full year of data for purposes of public reporting. Response: A commenters also raised this issue regarding our proposed reporting periods and timelines for the SSI measure in section IX.B.9.c. of the preamble of this final rule and we refer readers to our response in that section. E:\FR\FM\19AUR2.SGM 19AUR2 50852 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Comment: For the SCIP measures, a few commenters recommended that CMS implement a vendor certification program for the PCHQR Program that would allow PCHs to reduce redundant data collection and streamline PCHQR Program reporting. Response: Commenters also raised this issue regarding our proposed reporting periods and timelines for the SSI measure in section IX.B.9.c. of the preamble of this final rule and we refer readers to our response in that section. After consideration of the public comments we received, we are finalizing the reporting and data submission requirements for the SCIP measures. The table below outlines the finalized reporting periods and submission timeframes for the FY 2016, FY 2017, and FY 2018 programs. FINALIZED SCIP MEASURES—REPORTING PERIODS AND SUBMISSION TIMEFRAMES FOR THE FY 2016—FY 2018 PROGRAMS Program year (FY) 2016 .................. 2017 .................. 2018 .................. Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2015 2015 2015 2016 2016 2016 2016 discharges discharges discharges discharges discharges discharges discharges discharges (January 1, 2015–March 31, 2015) ........................................................................ (April 1, 2015–June 30, 2015) ............................................................................... (July 1, 2015–September 30, 2015) ...................................................................... (October 1, 2015—December 31, 2015) ............................................................... (January 1, 2016—March 31, 2016) ...................................................................... (April 1, 2016—June 30, 2016) .............................................................................. (July 1, 2016—September 30, 2016) ..................................................................... (October 1, 2016—December 31, 2016) ............................................................... mstockstill on DSK4VPTVN1PROD with RULES6 g. HCAHPS Requirements In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27719 through 27720), we proposed HCAHPS requirements that mirror those used for the Hospital IQR Program (77 FR 53537 through 53538). Similarly, we proposed that PCHs submit HCAHPS data in accordance with the current HCAHPS Quality Assurance Guidelines and the quarterly data submission deadlines, both of which are posted at https:// www.hcahpsonline.org. Like acute care hospitals that submit HCAHPS data under the Hospital IQR Program, we proposed that PCHs will have approximately 13 weeks after the end of a calendar quarter to submit HCAHPS data for that quarter to the QIO Clinical Warehouse, also referred to as the ‘‘HCAHPS data warehouse.’’ In order for a PCH to participate in the collection of HCAHPS data, a PCH must either: (1) Contract with an approved HCAHPS Survey vendor that will conduct the survey and submit data on the PCH’s behalf to the QIO Clinical Warehouse; or (2) self-administer the survey without using a vendor provided that the PCH attends HCAHPS training and meets Minimum Survey Requirements as specified on the HCAHPS Web site at: https:// www.hacahpsonline.org. A current list of approved HCAHPS Survey vendors can be found on the HCAHPS Web site. We proposed that a PCH which chooses to contract with a survey vendor must provide the sample frame of HCAHPS-eligible discharges to its survey vendor with sufficient time to allow the survey vendor to begin contacting each sampled patient within 6 weeks of discharge from the hospital. VerDate Mar<15>2010 Data submission deadlines Reporting periods (CY) 21:51 Aug 16, 2013 Jkt 229001 (We refer readers to the Quality Assurance Guidelines located at https:// www.hcahpsonline.org, for details about HCAHPS Survey administration.) We would strongly encourage PCHs to submit their entire patient discharge list, excluding patients who had requested ‘‘no publicity’’ status or who are excluded because of State regulations, in a timely manner to their survey vendor to allow adequate time for sample creation, sampling, and survey administration. We emphasize that PCHs must also provide the administrative data that is required for HCAHPS in a timely manner to their survey vendor. This includes the patient’s MS–DRG at discharge, or alternative information that can be used to determine the patient’s service line, in accordance with the survey protocols in the most recent HCAHPS Quality Assurance Guidelines. We note that HCAHPS Quality Assurance Guidelines require that hospitals maintain complete discharge lists that indicate which patients were eligible for the HCAHPS Survey, which patients were not eligible, which patients were excluded, and the reason(s) for ineligibility and exclusion. (We refer readers to the Quality Assurance Guidelines located at https:// www.hcahpsonline.org for details about HCAHPS eligibility and sample frame creation.) In addition, the PCH must authorize the survey vendor to submit data via My QualityNet, the secure part of the QualityNet Web site, on the PCH’s behalf. We proposed that the PCHs obtain and submit at least 300 completed HCAHPS Surveys in a rolling fourquarter period unless the PCH is too small to obtain 300 completed surveys. PO 00000 Frm 00358 Fmt 4701 Sfmt 4700 August 15, 2015. November 15, 2015. February 15, 2016. May 15, 2016. August 15, 2016. November 15, 2016. February 15, 2017. May 15, 2017. We proposed that the absence of a sufficient number of HCAHPS-eligible discharges will be the only acceptable reason for obtaining and submitting fewer than 300 completed HCAHPS Surveys in a rolling four quarter period. We proposed that if a PCH obtains fewer than 100 completed surveys, the PCH’s scores will be accompanied by an appropriate footnote on the Hospital Compare Web site alerting the Web site users that the scores should be reviewed with caution, as the number of surveys may be too low to reliably assess PCH performance. After the survey vendor submits the data to the QIO Clinical Warehouse, we strongly recommend that PCHs employing a survey vendor promptly review the two HCAHPS Feedback Reports (the Provider Survey Status Summary Report and the Data Submission Detail Report) and the HCAHPS Review and Correction Report that are available. These reports will enable a PCH to ensure that its survey vendor has submitted the data on time, the data has been accepted into the QIO clinical Warehouse, and the data accepted into the QIO Clinical Warehouse are complete and accurate. In order to ensure compliance with HCAHPS Survey and administration protocols, we proposed that PCHs and survey vendors must participate in oversight activities, which will include onsite visits and/or conference calls. During the oversight process, the HCAHPS Project Team will review the PCH’s or survey vendor’s survey systems and assess protocols based upon the most recent HCAHPS Quality Assurance Guidelines. All materials relevant to survey administration will be subject to review. The systems and E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations program review includes, but is not limited to: (a) Survey management and data systems; (b) printing and mailing materials and facilities; (c) telephone and Interactive Voice Response (IVR) materials and facilities; (d) data receipt, entry and storage facilities; and (e) written documentation of survey processes. As needed, hospitals and survey vendors will be subject to followup site visits or conference calls. We point out that the HCAHPS Quality Assurance Guidelines state that hospitals should refrain from activities that explicitly influence how patients respond on the HCAHPS Survey. We proposed that if we determine that a PCH is not compliant with HCAHPS program requirements, we may determine that the PCH is not submitting HCAHPS data that meet the requirements of the PCHQR Program. We strongly encouraged those PCHs that are currently administering the HCAHPS Survey and submitting survey data to CMS to continue to do so. We welcomed public comment on our proposed HCAHPS requirements for PCHs. Comment: One commenter did not support the HCAHPS reporting proposals because this commenter did not support the adoption of the HCAHPS Survey for the PCHQR Program. Response: We believe that the HCAHPS Survey is an appropriate instrument to measure inpatients’ 50853 experience of care in the PCH setting. The widespread adoption of HCAHPS by acute care hospitals has resulted in benchmarks that could be useful to PCHs in their quality improvement efforts. The HCAHPS Survey produces comparable measures of key facets of patient experience that are relevant to PCHs, such as communication with patients, responsiveness of staff, cleanliness and quietness of the PCH environment and discharge instructions. After consideration of the public comment we received, we are finalizing the HCAHPS requirements as proposed. Below is a table outlining the finalized HCAHPS reporting and data submission requirements. HCAHPS MEASURE—REPORTING PERIODS AND SUBMISSION TIMEFRAMES FOR THE FY 2016—FY 2018 PROGRAMS Program year (FY) 2016 .................. 2017 .................. 2018 .................. Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 discharges discharges discharges discharges discharges discharges discharges discharges discharges discharges discharges (April 1, 2014–June 30, 2014) ............................................................................... (July 1, 2014–September 30, 2014) ...................................................................... (October 1, 2014–December 31, 2014) ................................................................. (January 1, 2015–March 31, 2015) ........................................................................ (April 1, 2015–June 30, 2015) ............................................................................... (July 1, 2015–September 30, 2015) ...................................................................... (October 1, 2015–December 31, 2015) ................................................................. (January 1, 2016–March 31, 2016) ........................................................................ (April 1, 2016–June 30, 2016) ............................................................................... (July 1, 2016–September 30, 2016) ...................................................................... (October 1, 2016–December 31, 2016) ................................................................. C. Long-Term Care Hospital Quality Reporting (LTCHQR) Program mstockstill on DSK4VPTVN1PROD with RULES6 1. Statutory History In accordance with section 1886(m)(5) of the Act, as added by section 3004 of the Affordable Care Act, the Secretary established the Long-Term Care Hospital Quality Reporting (LTCHQR) Program. Under the LTCHQR Program, for the FY 2014 annual payment update (which we also refer to as the ‘‘payment determination’’) and subsequent years, in the case of an LTCH that does not submit data to the Secretary in accordance with section 1886(m)(5)(C) of the Act with respect to such a rate year, any annual update to a standard Federal rate for discharges for the hospital during the rate year, and after application of section 1886(m)(3) of the Act, shall be reduced by two percentage points. Section 1886(m)(5)(D)(iii) of the Act required the Secretary to publish the selected measures for the LTCHQR Program that will be applicable with respect to the FY 2014 payment determination no later than October 1, 2012. Under section 1886(m)(5)(D)(i) of the Act, the quality measures for the VerDate Mar<15>2010 Data submission deadlines Reporting periods (CY) 21:51 Aug 16, 2013 Jkt 229001 LTCHQR Program are measures selected by the Secretary that have been endorsed by an entity that holds a contract with the Secretary under section 1890(a) of the Act, unless section 1886(m)(5)(D)(ii) of the Act applies. This contract is currently held by the National Quality Forum (NQF). Additional information regarding NQF and its measure review processes is available at: https:// www.qualityforum.org/Measuring _Performance/Measuring _Performance.aspx. While as a general matter the Secretary must select endorsed measures for the LTCHQR Program, section 1886(m)(5)(D)(ii) of the Act provides that an exception may be made in the case of a specified area or medical topic determined appropriate by the Secretary for which a feasible and practical measure has not been endorsed by the entity that holds a contract with the Secretary under section 1890(a) of the Act. In such a case, section 1886(m)(5)(D)(ii) of the Act authorizes the Secretary to specify a measure(s) that is not so endorsed, as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the PO 00000 Frm 00359 Fmt 4701 Sfmt 4700 October 1, 2014. January 7, 2015. April 1, 2015. July 1, 2015. October 7, 2015. January 6, 2016. April 6, 2016. July 6, 2016. October 5, 2016. January 4, 2017. April 5, 2017. Secretary. The LTCHQR Program was implemented in section VII.C. of the FY 2012 IPPS/LTCH PPS final rule (76 FR 51743 through 51756). 2. General Considerations Used for Selection of Quality Measures for the LTCHQR Program We seek to promote higher quality and more efficient health care for the beneficiaries we serve. Quality reporting programs, as well as public reporting of that information, furthers such quality improvement efforts. Quality measurement remains the key tool to the success of these programs. Therefore, the selection of only the highest caliber of measures remains a constant priority for CMS. We seek to adopt measures for the LTCHQR Program that promote better, safer, and more efficient care. Our measure development and selection activities for the LTCHQR Program take into account national priorities, such as those established by the National Priorities Partnership (https:// www.qualityforum.org/Setting_ Priorities/NPP/National_ Priorities_Partnership.aspx), HHS Strategic Plan (https://www.hhs.gov/ secretary/about/priorities/ E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50854 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations priorities.html), and the National Quality Strategy (NQS) (https://www. ahrq.gov/workingforquality/nqs/ nqs2011annlrpt.htm). We must also consider input from the Measure Applications Partnership (MAP) when selecting measures under the LTCHQR Program. The MAP is composed of multi-stakeholder groups convened by our current section 1890 contractor, the NQF. The NQF must convene these stakeholders and provide us with the stakeholders’ input on the selection of certain categories of quality and efficiency measures as part of a prerulemaking process described in section 1890A of the Act. We, in turn, must take this input into consideration in selecting those categories of measures. The NQF provided MAP input to CMS in February of 2013, as required under section 1890A(a)(3) of the Act. This input appears at: https://www.quality forum.org/Setting_Priorities/ Partnership/Measure_Applications_ Partnership.aspx. Measures proposed for the LTCHQR Program in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27720 through 27734) were measures CMS included under its List of Measures Under Consideration (MUC List) for December 1, 2012119, a list CMS must make public by December 1 of each year, as part of the pre-rulemaking process, as described in section 1890A(a)(2). The list is discussed in the MAP Pre-Rulemaking Report available at: https://www.qualityforum.org/ Publications/2013/02/MAP_PreRulemaking_Report_-_ February_2013.aspx (pp. 170–176). The MAP supported the direction of each of the proposed measures described below, noting the measure concepts as promising for several of them, and requiring further testing and development. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27724 through 27730), in the absence of any NQFendorsed measures for the LTCH setting and after due consideration to any measures that may have been endorsed or adopted by a consensus organization, we proposed measures that are fully supported by the MAP for the LTCHQR Program, or that most closely align with the national priorities discussed in section IX.C.2. of the preamble of this final rule. In the absence of the MAP’s full support, we have in some cases deemed it appropriate to propose measures for which there is MAP support for the measure concept. Further discussion of why a particular 119 Available at: https://www.qualityforum.org/ WorkArea/linkit.aspx?LinkIdentifier=id& ItemID=72363. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 measure is high priority in the LTCH setting is included for each proposed measure below. In addition, to the extent practicable, we have for each proposed measure that is not endorsed by the NQF or another consensus organization, sought measures that have been recommended by multi-stakeholder organizations, and/ or been developed with the input of providers, purchasers/payers, and a variety of other stakeholders. While we did not invite public comments on the general considerations used for selection of quality measures for the LTCHQR Program, we received input from several commenters. We greatly appreciate the commenters’ views on our previously finalized policies. Although we did not make any proposals in the FY 2014 IPPS/LTCH PPS proposed rule on these topics or finalized policies, we will consider all of these views for future rulemaking and program development. We have responded, however, to a few comments in which commenters asked only for a clarification related to an existing policy or measure. We summarize these comments and our responses, below. Comment: Several commenters encouraged CMS to refrain from adopting measures into the LTCHQR Program, until after they have been endorsed by the NQF for use in the LTCH setting. One commenter also encouraged CMS to only include measures that have gone through the full NQF review process, as this process is significantly more rigorous than the expedited limited endorsement review process. Several commenters expressed concerns regarding the expansion of existing measures from other healthcare settings to the LTCH setting. These commenters encouraged CMS to either develop new measures specifically for the LTCH setting, or wait until measures have been re-specified and tested for the LTCH setting, before applying for NQF endorsement and eventually including these measures in the LTCHQR Program. Response: We agree that the NQF endorsement process is an important part of measure development. We have generally adopted NQF-endorsed measures whenever possible. However, where such measures do not exist for the LTCH setting, we may adopt measures that are not NQF-endorsed under the Secretary’s exception authority set out in section 1886(m)(5)(D)(ii) of the Act. When measures are not NQF-endorsed, we actively work with NQF to re-specify and expand endorsement of these measures to the LTCH setting. Given the critical quality and patient safety issues PO 00000 Frm 00360 Fmt 4701 Sfmt 4700 we address in the LTCHQR Program, there have been times, such as in the case of NQF #0678, Percent of Residents or Patients with Pressure Ulcers That Are New or Worsened (Short-Stay), that we have finalized an application of a quality measure for the LTCHQR Program, while we were still working on re-specification, and later obtained NQF endorsement for the expansion. We believe that the NQF endorsement process is public and transparent and would encourage LTCHs and stakeholders to participate in that process. Comment: Several commenters noted that CMS should, in its selection of measures, more closely align with the recommendations of MAP. These commenters noted that the MAP did not recommend any of the measures proposed for the FY 2017 and FY 2018 LTCHQR payment determinations and subsequent years, but rather, ‘‘supported the direction’’ of these measures and suggested that further testing and refinement is needed prior to introducing these measures in the LTCHQR Program. Response: We agree that MAP guidance is an important part of the measure selection process. When the MAP supports only the direction of a measure, we carefully consider how that measure will need to be modified for expansion to the LTCH setting. However, while submission of measures to the MAP and consideration of its recommendations are part of our measure selection process, we also consider the input of stakeholders, subject matter and industry experts through the technical expert panels (TEPs) periodically convened by our measure development contractor, as well as national healthcare priorities suggested by groups such as MedPAC, and as set forth in the National Quality Strategy. Comment: Two commenters encouraged CMS to work more closely with stakeholders to identify, select and modify quality measures to include in the LTCHQR Program. The commenters encouraged CMS to work with LTCHs to identify measures they currently use for quality reporting, to take advantage of measures from stakeholders such as LTCH associations and to use TEPs. Response: We appreciate the commenters’ suggestions and we stress that we place a high value on stakeholder feedback when developing quality measures. Throughout the measure selection process, we have sought input from a variety of stakeholders, including technical experts and LTCHs. A CMS Listening Session was held on November 15, E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 2010; Special Open Door Forums were held on December 6, 2010, September 21, 2011, and April 13, July 26, August 30, September 20, and October 18 of 2012; and our measure developer contractor convened LTCHQR TEPs on January 31, July 6, September 27, and December 13 of 2011, and March 8 and November 7 of 2012. We will continue to solicit input from stakeholders throughout the development and expansion of the LTCHQR Program. Comment: Several commenters expressed concern regarding the pace with which items are being added to the LTCH CARE Data Set, and one noted that this may require LTCHs to shift resources from prevention activities to reporting activities. Response: By building upon preexisting resources for data collection and submission, we intend to foster alignment of LTCHQR Program measures and measures in other quality reporting programs. This should help to reduce the administrative burden related to data collection and submission. We are aware that the initial setup and acclimation to the data collection vehicle—the LTCH CARE Data Set—has already occurred for a vast majority of LTCHs as part of the implementation of an application of the measure Percent of Residents or Patients with Pressure Ulcers That Are New or Worsened (Short-Stay) (NQF #0678) for the LTCHQR Program for the FY 2014 payment determination. Further, we anticipate that with the implementation of the Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) (NQF #0680) for the LTCHQR Program for the FY 2016 payment determination, which we adopted in the FY 2013 IPPS/LTCH final rule, LTCHs will be very familiar with the LTCH CARE Data Set through its use for the LTCHQR Program by the time when LTCHs are required to submit data on the new measures we included in the proposed rule. Therefore, we believe the transition to reporting one additional measure via the LTCH CARE Data Set may be less burdensome. 3. Process for Retention of LTCHQR Program Measures Adopted in Previous Payment Determinations In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53614 through 53637), for the LTCHQR Program, we adopted a policy that once a quality measure is adopted, it is retained for use in subsequent years, unless otherwise stated. For the purpose of streamlining the rulemaking process, when we initially adopt a measure for the VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 LTCHQR Program for a payment determination, this measure will be automatically adopted for all subsequent years or until we propose to remove, suspend, or replace the measure. For further information on how measures are considered for removal, suspension, or replacement, we refer readers to that final rule (77 FR 53614 and 53615). 4. Process for Adopting Changes to LTCHQR Program Measures In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53615 through 53616), we finalized our policy that if the NQF updates an endorsed measure that we have adopted for the LTCHQR Program in a manner that we consider to not substantively change the nature of the measure, we will use a subregulatory process to incorporate those updates to the measure specifications that apply to the LTCHQR Program. Examples of such nonsubstantive changes could be updated diagnosis or procedure codes, medication updates for categories of medications, changes to exclusions to the patient population, or minor changes to definitions. Examples of changes that we might consider to be substantive would be those in which the changes are so significant that the measure is no longer the same measure, or when a standard of performance assessed by a measure becomes more stringent. Specific examples of what we might consider substantive are changes in acceptable timing of medication, procedure/process, or test administration, or expansion of the measure to a new setting. The subregulatory process for nonsubstantive changes will include revision of the LTCHQR Program Manual and posting of updates on our LTCHQR Program Web site at: https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/ index.htm. While we did not propose changes to this process for adopting changes to LTCHQR Program measures, we received input from several commenters. We greatly appreciate the commenters’ views on these topics and previously finalized measures. We will consider all of these views for future rulemaking and program development. We summarize these comments on existing policies and/or measures and our responses, below. Comment: Several commenters recommended that CMS more clearly define the process involved in adopting changes to LTCHQR Program quality measures and allow for public comment before adopting, changing, or removing PO 00000 Frm 00361 Fmt 4701 Sfmt 4700 50855 approved measures, as minor changes to definitions can result in a substantive change to a quality measure. Many commenters noted that clear definitions are essential to the successful implementation of quality measures in the LTCH setting. More specifically, this commenter suggested that LTCHs must fully understand the specifics of each measure and CMS must communicate the standards for measuring quality measure performance and improvement. Further, commenters suggested that the proposed quality measures be subject to periodic review, including public comment. One commenter stated that CMS did not provide clear information regarding the process by which substantive changes will be made to quality measures. Response: We appreciate these commenters’ input and agree on the importance of allowing for public comment as part of the process of adopting changes to LTCHQR Program measures. Information on this process, as well as the process by which substantial changes will be made to quality measures, is described in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53615 through 53616). We will review these comments and take them into consideration when considering future changes. We agree that clear definitions are required for the successful implementation of quality measures in the LTCH setting. When available, we include detailed measure definitions in proposed rulemaking. Following rulemaking, we will release the final technical data submission specifications and updated LTCHQR Program Manual. We also plan to offer ongoing training related to all CMS- and CDC-stewarded measures adopted into the LTCHQR Program as we move forward in our expansion of this program. We will continue to provide multiple resources that include detailed measure information to continue the successful implementation of the LTCHQR Program. We invite the public to visit the LTCHQR Program Web site for future updates on our training activities and ongoing activities we have undertaken as part of LTCHQR Program implementation at: https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/ index.html. We plan to provide specific information regarding the standards for measuring quality measure performance and improvement. We have alerted providers with letters of noncompliance for October 1, 2012 through December 31, 2012 quarter for CAUTI, E:\FR\FM\19AUR2.SGM 19AUR2 50856 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations CLABSI, and Pressure Ulcer quality measure data. Regarding the suggestion that proposed quality measures be subject to periodic review, we have outlined the criteria that it will use to consider a quality measure for removal (77 FR 53614 through 53615). If we consider a measure for removal, the public will be given the opportunity to comment through the rulemaking process. In addition, we participate in a periodic review of all NQF-endorsed measures by submitting these measures for NQF maintenance review every three years. 5. Previously Adopted Quality Measures for the FY 2014 and FY 2015 Payment Determinations and Subsequent Years In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53616 through 53623), we retained the application of NQF #0678 to the LTCH setting (initially adopted in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51745 through 51750)) and adopted updated versions of NQF #0138 and NQF #0139, for the FY 2014 and FY 2015 payment determinations and subsequent years as listed in the following table: LTCHQR PROGRAM QUALITY MEASURES FINALIZED IN THE FY 2013 IPPS/LTCH PPS FINAL RULE FOR THE FY 2014 AND FY 2015 PAYMENT DETERMINATIONS AND SUBSEQUENT YEARS NQF Measure ID Measure title NQF #0138 ......................... NQF #0139 ......................... National Health Safety Network (NHSN) Catheter-associated Urinary Tract Infection (CAUTI) Outcome Measure. National Health Safety Network (NHSN) Central line-associated Blood Stream Infection (CLABSI) Outcome Measure. Percent of Residents with Pressure Ulcers That are New or Worsened (Short-Stay). mstockstill on DSK4VPTVN1PROD with RULES6 Application of NQF #0678 .. We refer readers to the FY 2013 IPPS/ LTCH PPS final rule (77 FR 53619 through 53623 and 53667 through 53672) for a discussion of the data collection and submission methods for these measures for the FY 2014 payment determination and subsequent years and for references to the descriptions of and specifications for these measures. While CMS did not propose any changes in the FY 2014 IPPS/LTCH PPS proposed rule to these previously adopted quality measures for the FY 2014 and FY 2015 payment determinations and subsequent years, CMS received input from several commenters. We greatly appreciate the commenters’ views on these previously finalized policies, and will consider all of these views for future rulemaking and program development. We have responded below, however, to a few comments in which commenters asked only for a clarification related to an existing policy and/or measure. Comment: One commenter suggested that the definition of the CAUTI measure (NQF #0138) be broadened to include the entire hospital, and not just intensive care unit (ICU) stays. Another commenter expressed concern about the adaptation of the CAUTI measure to the long-term care environment. Of particular concern is that LTCHs may need resources to enroll, receive training, and educate staff on CDC’s NSHN basics, including surveillance definitions and processes. Response: The CAUTI measure (NQF #0138), as currently specified and finalized for the LTCHQR Program (77 FR 53616 through 53623), is applicable at the hospital level. It is not solely for ICU stays. With respect to the concern of resources and training, before the implementation of the LTCHQR VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Program, many LTCHs were already submitting data to the CDC’s National Health Safety Network (NHSN) either voluntarily or as part of mandatory State reporting requirements for HAIs. For these LTCHs, the burden related to coping with the requirements of the LTCHQR Program was reduced because of pre-existing familiarity with the NHSN submission process. Further, we provided free training in May 2012, and both CDC and CMS have made extensive resources available to support providers and other stakeholders with the implementation of the LTCHQR Program. We plan to offer ongoing training related to all CMS- and CDCstewarded measures adopted into the LTCHQR Program as we move forward in our expansion of this program. Please continue to check the LTCHQR Program Web site for updates on our training activities at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/LTCH-QualityReporting/. Comment: One commenter noted that CAUTI rates would not be comparable with different populations, as LTCHs comprise a very mixed population. Response: Under the LTCHQR Program, CAUTI data will be analyzed solely for LTCHs. LTCHQR Program CAUTI data will not be compared to any data collected from hospitals, IRFs, or SNFs Because of the patient safety concerns CAUTIs pose to the patients with multiple comorbities in the LTCH setting, the burden they create on the healthcare system as well as available guidelines for prevention of CAUTIs, we continue to believe the measure remains relevant for the LTCHQR Program and believe it promotes awareness and encourages implementation of CAUTI prevention and control procedures in PO 00000 Frm 00362 Fmt 4701 Sfmt 4700 the LTCH setting. Further measure information is available on the NQF Web site at https:// www.qualityforum.org/QPS/0138. Comment: One commenter expressed concern regarding the changes that have been made to the NHSN definition effective January 1, 2013. For example, in the past, hospitals did not have to report CAUTIs when the hospital determined that the CAUTI was not the primary site of infection. With the recent change in definition, hospitals are now required to report CAUTIs in addition to the primary infection. Response: The CAUTI measure was previously finalized for the LTCHQR Program for the FY 2014 payment determination in the FY 2012 IPPS/ LTCH PPS final rule (76 FR 51745 through 51747). For this measure, facilities have never been able to state that a CAUTI was secondary to another site of infection (unlike CLABSIs). According to the measure steward (CDC), NHSN’s definition of CAUTI did not change in 2013, and the revised criteria in 2013 for what constitutes an healthcare-associated infection (HAI) amounts to providing operational guidance—already widely in use before the guidance was published—that makes identifying and reporting HAIs more consistent across healthcare facilities. There was no change in the NQF measure specification; the CAUTI measure remains the same. As a result, CAUTI data reported for infections occurring in 2013 can be compared to the CAUTI baseline established using CAUTI data reported for infections occurring in 2012. In short, there was no significant change in the measure and the changes in HAI criteria have no bearing on reporting obligations. E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Therefore, we do not believe that this should be addressed through rulemaking, as the NQF measure remains fully endorsed and NQF measure specifications criteria or the definition in the NHSN. Additional information related to the change in HAI definition is available at https:// www.cdc.gov/nhsn/pdf/pscmanual/ errata2013.pdf. Comment: One commenter suggested that the definition of the CLABSI measure (NQF #0139) be broadened to include the entire hospital, and not just intensive care unit (ICU) stays. Another commenter expressed concern about the adaptation of the CLABSI measure to the long-term care environment. Of particular concern is that LTCHs may need resources to enroll, receive training, and educate staff on CDC’s NSHN basics, including surveillance definitions and processes. Response: The CLABSI measure (NQF #0139), as currently specified and finalized for the LTCHQR Program in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53616 through 53623), is applicable at the hospital level. It is not solely for ICU stays. With respect to the concern of resources and training, before the implementation of the LTCHQR Program, many LTCHs were already submitting data to the NHSN either voluntarily or as part of mandatory State reporting requirements for HAIs. For these LTCHs, the burden related to coping with the requirements of the LTCHQR Program was reduced because of pre-existing familiarity with the NHSN submission process. Further, we provided free training in May 2012 and both CDC and CMS have made extensive resources available to support LTCHs and other stakeholders with the implementation of the LTCHQR Program. Comment: One commenter noted that CLABSI rates would not be comparable with different populations, as LTCHs comprise a very mixed population. Response: Under the LTCHQR Program, CLABSI data will be analyzed solely for LTCHs. LTCHQR Program CLABSI data will not be compared to any data collected from hospitals, IRFs, or SNFs. Because of the patient safety problem posed by CLABSIs to the chronically ill patient population in the LTCH setting, as well as its burden on the healthcare system, we believe it is appropriate to adopt this measure for the LTCHQR Program in order to promote awareness and encourage 50857 implementation of CLABSI control procedures in the LTCH setting. Further measure information is available on the NQF Web site at https:// www.qualityforum.org/QPS/0139. For comments received in response to the pressure ulcer measure, as well as to our proposed revisions to this measure, please see section IX.C.7.c of the preamble of this final rule. 6. Previously Adopted Quality Measures for the FY 2016 Payment Determination and Subsequent Years In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53624 through 53636), we adopted two additional quality measures for the LTCHQR Program for the FY 2016 payment determination and subsequent years, in addition to the three previously adopted measures (CAUTI measure, CLABSI measure, and Pressure Ulcer measure). Set out below are the quality measures, both previously adopted measures retained in the LTCHQR Program and measures adopted in FY 2013 IPPS/LTCH PPS final rule, for the FY 2016 payment determination and subsequent years. LTCHQR PROGRAM QUALITY MEASURES FINALIZED IN THE FY 2013 IPPS/LTCH PPS FINAL RULE FOR THE FY 2016 PAYMENT DETERMINATION AND SUBSEQUENT YEARS NQF Measure ID Measure Title NQF #0138 ......................... NQF #0139 ......................... National Health Safety Network (NHSN) Catheter-associated Urinary Tract Infection (CAUTI) Outcome Measure.* National Health Safety Network (NHSN) Central line-associated Blood Stream Infection (CLABSI) Outcome Measure.* Percent of Residents with Pressure Ulcers That are New or Worsened (Short-Stay).* Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short-Stay).** Influenza Vaccination Coverage among Healthcare Personnel.** Application of NQF #0678 .. NQF #0680 ......................... NQF #0431 ......................... mstockstill on DSK4VPTVN1PROD with RULES6 * Adopted for the FY 2014 payment determination and subsequent years. ** Adopted for the FY 2016 payment determination and subsequent years. For comments received in response to changes we proposed in the FY 2014 proposed rule relating to the Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) (NQF #0680) measure, as well as general comments on this measure, please see section IX.C.7.b. of the preamble of this final rule. For comments received in response to changes we proposed in the FY 2014 proposed rule relating to the Influenza Vaccination Coverage Among Healthcare Personnel (NQF #0431) measure, please see section IX.C.7.a. of the preamble of this final rule. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 7. Revisions to Previously Adopted Quality Measures In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27721 through 27724), we proposed the following revisions to the quality measures we have previously adopted for the LTCHQR Program. a. Proposed Revisions for Influenza Vaccination Coverage Among Healthcare Personnel (NQF #0431) for FY 2016 Payment Determination and Subsequent Years In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53630 through 53631) we finalized that for Influenza Vaccination Coverage among Healthcare Personnel (NQF #0431), LTCHs should begin to submit data for January 1, 2014, through PO 00000 Frm 00363 Fmt 4701 Sfmt 4700 December 31, 2014 (CY 2014) for the FY 2016 payment determination. There is unique seasonality in the timing of influenza activity each year. The CDC, the steward of this measure, notes (https://www.cdc.gov/flu/pastseasons/ 1213season.htm) that while influenza activity most commonly peaks in January or February in the United States, it can begin as early as October and can continue to occur as late as May. The CDC recommends that people get vaccinated against influenza as long as influenza viruses are circulating. Thus, influenza vaccination season usually begins in early fall. Therefore, we proposed that, for the LTCHQR Program, the Influenza Vaccination Coverage among Healthcare Personnel measure (NQF #0431) have its E:\FR\FM\19AUR2.SGM 19AUR2 50858 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations own reporting period to align with the influenza vaccination season, which is defined by the CDC as October 1 (or when the vaccine becomes available) through March 31. Instead of beginning data collection and submission in the middle of the 2013–2014 influenza season, as is the case when reporting begins on January 1, 2014 (as finalized in FY 2013 IPPS/LTCH PPS final rule), we proposed that data collection begin on October 1, 2014, or when the influenza vaccine becomes available (as defined by the CDC) and continue through March 31, 2015 for the 2014– 2015 influenza season. This change allows LTCHs to collect and report data on influenza vaccination for the entirety of the 2014–2015 influenza season for the FY 2016 payment determination. This change is presented in the following table for the FY 2016 and FY 2017 payment determinations: TIMELINE FOR SUBMISSION OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2016 AND FY 2017 PAYMENT DETERMINATIONS: NQF #0431 INFLUENZA VACCINATION COVERAGE AMONG HEALTHCARE PERSONNEL Final submission deadlines October 1, 2014 (or when the influenza vaccine becomes available)—March 31, 2015 ................................. October 1, 2015 (or when the influenza vaccine becomes available)—March 31, 2016 ................................. mstockstill on DSK4VPTVN1PROD with RULES6 Data collection timeframe May 15, 2015 ... May 15, 2016 ... While LTCHs can enter information in CDC’s NHSN (www.cdc.gov/nhsn/) at any point during the influenza season for NQF #0431, data submission is only required once per year, unlike the other measures finalized for the LTCHQR Program that also utilize NHSN (CAUTI measure NQF #0138 and CLABSI measure NQF #0139). For example, LTCHs can choose to submit influenza vaccination data for NQF #0431 on a monthly basis. However, each time an LTCH submits these data, it will be asked to provide a cumulative total of vaccinations for the ‘‘current’’ influenza season. Thus, entering this information at the end of the influenza season would yield the same total number of vaccinations. The NHSN system will not track the individual number of vaccinations on a monthly basis, but, rather, will track the cumulative total of vaccinations for the ‘‘current’’ influenza season. Also, we note that the data collection period for this measure is not 12 months, as with other measures, but is approximately 6 months (October 1 (or when the vaccine becomes available) through March 31). The final deadlines associated with submitting data, approximately 45 days after the end of the data collection timeframe for the FY 2016 payment determination and subsequent years, remain consistent with other measures in the LTCHQR Program, except that the other measures have quarterly data collection periods, with submission deadlines approximately 45 days after the close of each quarter. We note that these changes are applicable only to NQF #0431 Influenza Vaccination Coverage among Healthcare Personnel, and not applicable to any other LTCHQR Program measures, proposed or adopted, unless explicitly stated. The specifications for this measure can be found at https:// www.cdc.gov/nhsn/PDFs/HPS-manual/ vaccination/HPS-flu-vaccine- VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 protocol.pdf. We invited public comments on our proposal to revise the data collection and reporting timeline for this influenza vaccination measure (NQF #0431) for the FY 2016 and FY 2017 payment determinations and subsequent years. Comment: Several commenters expressed support for the proposed revisions to the data collection and reporting timeline for the quality measure Influenza Vaccination Coverage Among Healthcare Personnel (NQF #0431). Commenters were pleased that the new timeline would align with the influenza season and allow LTCHs to collect and report data on influenza vaccination for the entirety of the influenza season. Response: We appreciate the commenters’ support to revise the data collection and reporting timeline for the Influenza Vaccination Coverage Among Healthcare Personnel (NQF #0431) measure to better align with the influenza season and account for the unique seasonality in the timing of influenza activity each year. After consideration of the public comments we received, we are finalizing the proposed revision to the data collection and reporting timeline for the Influenza Vaccination Coverage Among Healthcare Personnel measure (NQF #0431) for the FY 2016 payment determination and subsequent years. b. Revisions for Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) (NQF #0680) for the FY 2016 Payment Determination and Subsequent Years In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53624 through 53627), we finalized that for NQF #0680, Percentage of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short-Stay), LTCHs should begin to collect and PO 00000 Frm 00364 Fmt 4701 Sfmt 4700 Payment determination FY 2016. FY 2017. submit data on January 1, 2014, through December 31, 2014 (CY 2014), for the FY 2016 payment determination. This measure, stewarded by CMS, will be collected using items included in the LTCH CARE Data Set (Version 2.01).120 The LTCH CARE Data Set was approved on June 10, 2013, by the Office of Management and Budget in accordance with the Paperwork Reduction Act (PRA); the OMB Control Number is 0938–1163. Later in 2013, we will release the final technical data submission specifications and updated LTCHQR Program Manual for the LTCH CARE Data Set (Version 2.01) containing items related to NQF #0680. Further, CMS and CDC have collaborated in the past with implementation of the LTCHQR Program and will continue to collaborate on training opportunities for providers. In order to allow time and opportunity for LTCHs and vendors to participate in CMS-sponsored training activities pertaining to the implementation of the LTCH CARE Data Set (Version 2.01), as well as time to plan for and incorporate changes into their data collection and entry systems, we proposed to revise the previously finalized start date of January 1, 2014 for collecting data for this measure to April 1, 2014. We also noted that for CY 2014, data collection will continue through December 31, 2014. We proposed that data for admissions and discharges for an LTCH during April 1, 2014, through December 31, 2014, will be used for the FY 2016 payment determination. We also proposed that data for January 1, 2015, through December 31, 2015 (CY 2015), will be used for the FY 2017 120 The LTCH CARE Data Set Version 2.01 was approved on June 10, 2013 by OMB in accordance with the PRA. The OMB Control Number is 0938– 1163. Expiration Date June 30, 2016. Available at https://www.cms.gov/Regulations-and-Guidance/ Legislation/PaperworkReductionActof1995/PRAListing-Items/CMS1252160.html. E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations payment determination. Further, we proposed that, thereafter, data for January 1 through December 31 of each year will be used for subsequent years. The proposed timeline is illustrated in 50859 the table below for the FY 2016 and FY 2017 payment determinations. PROPOSED TIMELINE FOR SUBMISSION OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2016 AND FY 2017 PAYMENT DETERMINATIONS: NQF #0680 PERCENTAGE OF RESIDENTS OR PATIENTS WHO WERE ASSESSED AND APPROPRIATELY GIVEN THE SEASONAL INFLUENZA VACCINE [Short-Stay] Submission deadlines April 1, 2014–June 30, 2014 ..................................................... July 1, 2014–September 30, 2014 ............................................ October 1, 2014–December 31, 2014 ....................................... January 1, 2015–March 31, 2015 ............................................. April 1, 2015–June 30, 2015 ..................................................... July 1, 2015–September 30, 2015 ............................................ October 1, 2015–December 31, 2015 ....................................... mstockstill on DSK4VPTVN1PROD with RULES6 Data collection timeframes August 15, 2014. ...................................................................... November 15, 2014. February 15, 2015. May 15, 2015. .......................................................................... August 15, 2015. November 15, 2015. February 15, 2016. Further, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27723), we proposed that while an LTCH’s compliance with reporting quality data for NQF #0680 will be based on the calendar year, the measure calculation and public reporting of this measure (once public reporting is instated) will continue to be based on the influenza vaccination season starting on October 1 (or when vaccine becomes available) and ending on March 31 of the subsequent year. We also noted that, for example, while data collection is based on April 1, 2014, through December 31, 2014, for the FY 2016 payment determination, we will base the calculation of the measure for public reporting purposes on the 2014–2015 influenza vaccination season (October 1, 2014 (or when the vaccine becomes available)—March 31, 2015). Similarly for the following year, CMS noted that we will base data collection on January 1, 2015, through December 31, 2015, for the FY 2017 payment determination and calculation of the measure for public reporting purposes on the 2015–2016 influenza vaccination season (October 1, 2015 (or when vaccine becomes available)—March 31, 2016). All LTCHs will be required to collect data using the LTCH CARE Data Set (Version 2.01).121 The Quality Improvement and Evaluation System (QIES) Assessment Submission and Processing (ASAP) System will remain the data submission mechanism for the LTCH CARE Data Set. Further information on data submission of the LTCH CARE Data Set for the LTCHQR 121 The LTCH CARE Data Set Version 2.01 was approved on June 10, 2013 by OMB in accordance with the PRA. The OMB Control Number is 0938– 1163. Expiration Date June 30, 2016. Available on the Web site at: https://www.cms.gov/Regulationsand-Guidance/Legislation/ PaperworkReductionActof1995/PRA-Listing-Items/ CMS1252160.html. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Program Reporting using the QIES ASAP system is available at: https:// www.qtso.com/ and https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/ LTCHTechnicalInformation.html. We noted that these changes are applicable only to the Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) (NQF #0680) for the LTCHQR Program, and not applicable to any other LTCHQR Program measures, proposed or adopted, unless explicitly stated. We invited public comments on our proposal to revise the data collection and reporting timeline for this influenza vaccination measure (NQF #0680) for the FY 2016 and FY 2017 payment determinations and subsequent years. Comment: Some commenters expressed support for the proposed revisions to the data collection and reporting timelines for Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) (NQF #0680). Commenters believed that the proposed delay in the data collection and reporting timeline would allow needed time for the LTCH community and vendors to train, plan for and incorporate necessary changes into their data entry systems, prior to beginning data collection. A few commenters also appreciated that the proposed change in the timeline for calculation of the measure would better align with the traditional influenza season. However, several commenters recommended that CMS align the data collection timeline for this measure to align with the data collection timeline for the Influenza Vaccination Coverage Among Healthcare Personnel measure PO 00000 Frm 00365 Fmt 4701 Sfmt 4700 Payment determination FY 2016. FY 2017. (NQF #0431), resulting in a data collection period of October 1, 2014 (or when the influenza vaccine becomes available), through March 31, 2015, for the FY 2016 payment determination and October 1, 2015 (or when the influenza vaccine becomes available), through March 31, 2016, for the FY 2017 payment determination. These commenters added that it was confusing to follow a data collection period that does not correspond to the influenza season, when CMS plans to base the measurement calculation and subsequent public reporting of the measure on the influenza season (October 1–March 31). In addition, commenters felt that having two different data collection periods for the two influenza vaccination measures (NQF #0680 and NQF #0431) is confusing and is likely to lead to errors. One commenter noted concern that a data collection start date of April 1, 2014, does not allow sufficient time for LTCHs to prepare for and train their staff for data collection, and noted a start date of October 1, 2014, would be more sufficient. Response: We appreciate the commenters’ support for our proposal to revise the data collection and reporting timelines for Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) (NQF #0680). We also appreciate commenters’ concerns with submitting data during a timeframe that could be considered ‘‘off season.’’ Upon review of comments, and in response to those comments, we have revised the data collection timeframe to more closely align with the influenza vaccination season. Starting with the 2014–2015 influenza season, we will require LTCHs to collect data for all LTCH patients admitted or discharged between October 1 and April 30. At this E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50860 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations point, our data reporting and submission infrastructure for the LTCH CARE Data Set requires LTCHs to submit data on patient admissions and discharges (or death) separately. As a result, allowing reporting through April will allow us to capture the influenza vaccination status of LTCH patients admitted in March and discharged in April. For example, any patient admitted to an LTCH in March is automatically included in the denominator of this measure. Requiring LTCHs to respond to, and report quality data items related to the Patient Influenza measure (#0680) through April 30th of any given year will allow LTCHs to show if those patients that were included in the denominator were vaccinated. If we were only to require LTCHs to answer the Patient Influenza items in the LTCH CARE Data Set through March 31st (as is required for the Healthcare Personnel Vaccination measure (NQF #0431), those patient admitted, but not discharged prior to March 31st would be excluded from the measure, and LTCHs would not receive credit for any Influenza vaccinations administered to those patients. Further, this revision will reduce the burden of data collection changing it from the previously finalized year-round data collection to seasonal data collection, which addresses concerns regarding year-round data collection. Further guidance for data collection will be released in the LTCHQR Program Manual and other subregulatory mechanisms (such as the special open door forums, provider training, etc.) later this year. Comment: One commenter requested clarification regarding this (Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine) quality measure. Specifically, the commenter asked whether screening patients for the influenza vaccine was required during the non-influenza season (April through December). Response: In order to fully capture all LTCH patients who were in the LTCH during the influenza vaccination season, LTCHs will need to screen patients for influenza vaccination status during the data collection period of October 1st through April 30th only. However, for purposes of measure calculation and public reporting, we will use data collected and submitted beginning in October 1 of that year and ending on March 31 of the following year. We will issue operational guidance regarding the collection and submission of this data in the LTCH QR Program Manual version 2.0, which will be finalized and released upon publication of this rule. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Comment: A few commenters expressed concerns regarding patients who were transferred to the LTCH from an acute inpatient facility. Specifically, these commenters remarked that acute inpatient hospitals paid under the IPPS are required to report on the vaccination status of their patients as part of the Hospital IQR Program. As a result, these commenters believed that the inclusion of the Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) (NQF #0680) as part of the LTCHQR Program is redundant, and expressed concerns that the inclusion of the measure in both quality reporting programs could result in duplicate vaccinations of the same patient leading to patient safety concerns. Response: We greatly appreciate the commenters’ views on these topics. Although we did not make proposals in the FY 2014 IPPS/LTCH PPS proposed rule on some of the topics or inclusion of this finalized measure in the LTCHQR Program, we are mindful of the concerns for redundancy and duplicate vaccination of the same patient that could result from the use of this measure in the Hospital IQR and LTCHQR Programs. However, we wish to clarify that the items on the LTCH CARE Data Set Version 2.01 for use in collecting data for the LTCHQR Program and specifications for the Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (short-stay) measure directly address and alleviate these concerns. Specifically, we note that item O0250 on LTCH CARE Data Set Version 2.01 and guidance provided in the Draft LTCHQR Program Manual Version 2.00 is designed to ensure LTCHs follow current clinical guidelines to assess whether a patient should receive an influenza vaccine and to ensure that, when clinically indicated, each patient only receives one influenza vaccine, thus addressing patient safety concerns. For patients who did not receive the influenza vaccine in the facility, item O0250 allows LTCHs to indicate why a patient did not receive the vaccine. Choices include: (1) Patient not in facility during this year’s influenza vaccination season; (2) Received outside of this facility; (3) Not eligible—medical contraindication; (4) Offered and declined; (5) Not offered; (6) Inability to obtain vaccine due to a declared shortage; and (9) None of the above. These options are designed to both ensure that influenza vaccinations occur within clinical guidelines and, with regard to option number 2, that patients are not vaccinated twice. PO 00000 Frm 00366 Fmt 4701 Sfmt 4700 In addition, the specifications of this quality measure are designed so that facilities will only vaccinate when the patient has not already received the vaccination in another setting. Specifically, the numerator statement of the measure separately reports (and gives credit for): (1) Those who received the influenza vaccine during the most recent influenza season, either in the facility or outside the facility; (2) the number who were offered and declined the influenza vaccine; or (3) the number who were ineligible due to contraindication(s). LTCHs can report that a patient received the vaccine at another facility prior to arriving at the LTCH and still receive credit in the numerator. The use of this measure in the LTCHQR Program assumes and supports ongoing efforts of LTCHs and acute care hospitals for care coordination and sharing of clinical information between health care settings as part of patient transfer and discharge records. Comment: One commenter recommended that the title of this measure be updated to reflect its application to LTCH patients. Response: We greatly appreciate the commenter’s input. Although we did not make proposals in the FY 2014 IPPS/LTCH PPS proposed rule on this topic, we will consider this view for future rulemaking and program development. We believe that the current title (which is the same as the title of the measure we finalized in the FY 2013 IPPS/LTCH PPS final rule) ‘‘Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (shortstay)’’ (revised from the previous title ‘‘Percent of Residents Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (short-stay)’’ to reflect expansion to the LTCH (and IRF) patient population in addition to Skilled Nursing Facility/Nursing Home Short-Stay residents) sufficiently reflects its applicability to the LTCH setting. The addition of the word ‘‘patients’’ in the measure title was done at the time of NQF review of this measure and endorsement by the NQF Board of Directors on May 2, 2012, for the LTCH (and IRF) settings. Comment: One commenter expressed concerns regarding the importance of Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (shortstay) (NQF #0680) within the LTCH setting. This commenter suggested that given CMS’ limited resources, CMS should focus on measures that are most important for the LTCH setting and have E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations the greatest impact on patients cared for in the LTCH setting. Response: We greatly appreciate the commenter’s view on this topic and this previously finalized measure. We will consider this input for future rulemaking and program development. We refer the commenter to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53624 through 53625) for a discussion of the importance, rationale, and relevance finalized for this measure for the FY 2016 payment determination and subsequent years, and for references to the description of and specifications for this measure. We recognize that there are many critical issues facing LTCHs and their patients and additional appropriate quality measures that we should consider for the LTCHQR Program. We continue to focus on developing and implementing measures for our various quality reporting programs that will have the greatest impact on patient populations cared for in each setting. Further, we remain committed to identifying quality measures in each quality reporting program, including the LTCHQR Program, to align with the aims and priorities outlined in the National Quality Strategy.122 In future years, we will continue to identify and assess the relevance of both settingspecific and cross-setting quality measures to strengthen our quality reporting programs, including the LTCHQR Program. After consideration of the public comments we received, we are finalizing a revised data collection and reporting timeline. Starting with the 50861 2014–2015 influenza vaccination season, data collection for the Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (short-stay) measure (NQF #0680) will be required for any patient admitted or discharged between October 1 and April 30. Submission deadlines for the FY 2016 and FY 2017 payment determinations are illustrated in the table below. However, we note that, as discussed above, similar timeframe and deadlines apply to subsequent years. In addition, we are finalizing our proposal that the measure calculation and public reporting of this measure (once public reporting is instated) will be based on the influenza vaccination season of the subsequent year. FINAL TIMELINE FOR SUBMISSION OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2016 AND FY 2017 PAYMENT DETERMINATIONS: NQF #0680 PERCENTAGE OF RESIDENTS OR PATIENTS WHO WERE ASSESSED AND APPROPRIATELY GIVEN THE SEASONAL INFLUENZA VACCINE [Short-Stay] Data collection timeframes Submission deadlines October 1, 2014–April 30, 2015 ................................................ October 1, 2015–April 30, 2016 ................................................ May 15, 2015 ........................................................................... May 15, 2016 ........................................................................... FY 2016. FY 2017. In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51748 through 51750), we adopted an application of NQF #0678 Percent of Residents with Pressure Ulcers That are New or Worsened (Short-Stay) for the FY 2014 payment determination, and retained this application of the measure in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53615 through 53619) for the FY 2015 payment determination and subsequent years. We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51748 through 51750) for a discussion of the rationale, data collection methods, and submission methods finalized for this measure for the FY 2014 payment determination and subsequent years, and for references to the description and specifications of this measure. At the time we completed our work on the FY 2013 IPPS/LTCH PPS final rule, NQF #0678 was not yet NQFendorsed for use in the LTCH setting and was undergoing ad hoc review at the NQF for expansion to the LTCH setting. As a result, we were only able to adopt an application of the endorsed measure in our FY 2013 IPPS/LTCH PPS final rule. NQF #0678 underwent review for expansion to the LTCH setting by the NQF Consensus Standards Approval Committee (CSAC) on July 11, 2012 and was subsequently ratified by the NQF Board of Directors for expansion to the LTCH setting on August 1, 2012.123 124 The title of the measure was changed to Percent of Residents or Patients with Pressure Ulcers that are New or Worsened (Short-Stay) to reflect this expansion. Updated specifications, reflecting the expansion are available on the NQF Web site at: https:// www.qualityforum.org/QPS/0678. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53615 through 53616), we stated that we would continue to use the rulemaking process to adopt changes to measures when NQF review substantively changes the measure. We stated that one example of a substantive change would be the change the NQF makes to a previously endorsed measure when it extends that measure to a new setting. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27723 through 27724), because NQF #0678 has received endorsement for the LTCH setting, we proposed to adopt the updated measure NQF #0678 Percent of Residents or Patients with Pressure Ulcers that are New or Worsened (ShortStay) for the FY 2015 payment determination and subsequent years. This change would not alter the data collection, data submission, or burden finalized in the FY 2013 IPPS/LTCH PPS final rule since there have been no changes to the data elements in the LTCH CARE Data Set (version 1.01), data submission system (QIES ASAP) and technical submission specifications for the LTCH CARE Data Set used for this measure for the FY 2015 payment determination. The only difference between our previously finalized application of the measure (NQF #0678 Percent of Residents with Pressure 122 U.S. Department of Health and Human Services. 2011 Report to Congress: National Strategy for Quality Improvement in Health Care. Washington, DC: U.S. Department of Health and Human Services, 2011. Available at: https:// www.ahrq.gov/workingforquality/nqs/nqs2011 annlrpt.htm. Accessed on July 16, 2013. 123 National Quality Forum, Consensus Standards Approval Committee Wednesday, July 11, 2012. Transcript. Available on the Web site at: https:// www.qualityforum.org/WorkArea/linkit.aspx? LinkIdentifier=id&ItemID=71612. 124 Press Release: NQF Removes Time-Limited Endorsement Status for 13 Measures, Measures Now Have Endorsed Status. August 1, 2012. Available on the Web site at: https:// www.qualityforum.org/News_And_Resources/ Press_Releases/2012/NQF_Removes_Time-Limited_ Endorsement_for_13_Measures;_Measures_Now_ Have_Endorsed_Status.aspx. c. Revisions for Percent of Residents or Patients With Pressure Ulcers That Are New or Worsened (Short-Stay) (NQF #0678) for the FY 2015 Payment Determination and Subsequent Years mstockstill on DSK4VPTVN1PROD with RULES6 Payment determination VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 PO 00000 Frm 00367 Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50862 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Ulcers that are New or Worsened (ShortStay)) and this expanded measure (NQF #0678 Percent of Residents or Patients with Pressure Ulcers that are New or Worsened (Short-Stay)) is the change in name and NQF-endorsed expansion of this measure to the LTCH (and IRF) patient population in addition to Skilled Nursing Facility/Nursing Home ShortStay residents. We invited public comment on this proposal to adopt NQF #0678 Percent of Residents or Patients with Pressure Ulcers that are New or Worsened (ShortStay) for the LTCHQR Program. Comment: Several commenters were supportive of the CMS proposal to adopt NQF #0678 Percent of Residents or Patients with Pressure Ulcers that are New or Worsened (Short-Stay) for the LTCHQR Program. Commenters commended CMS for completing the respecification process for this measure and applying for and receiving the NQF endorsement for expansion of this measure to the LTCH (and IRF) settings. Response: We appreciate the commenters’ support and recognition of the importance of our work to re-specify and expand this measure to the LTCH setting and NQF endorsement for LTCH setting. Comment: One commenter expressed concern regarding pressure ulcers that develop at another facility during a 3day interrupted stay. The commenter mentioned that when a patient is discharged from an LTCH to another facility, the LTCH is not able to control the care provided in the other facility and does not have a professional responsibility for the care of the patient. The commenter expressed that it is unreasonable to impose a payment reduction on an LTCH, for a pressure ulcer that occurs in another facility during a 3-day stay interruption. In addition, this commenter believed that it would be misleading to the public to report a pressure ulcer as having occurred at an LTCH, when it was acquired at another facility during an interrupted stay. The commenter recommended that CMS use a new data collection item to capture information on whether a pressure ulcer is acquired during an interrupted stay. Response: We refer readers to our response to these specific concerns in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53618). Comment: A few commenters did not believe NQF #0678 Percent of Residents or Patients with Pressure Ulcers that are New or Worsened (Short-Stay) is an appropriate quality measure for the LTCH setting. While these commenters recognized the importance of pressure ulcer prevention and management, they VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 believed that it was inappropriate for CMS to implement a measure in the LTCH setting that was originally developed for the nursing home setting. Two commenters recommended that a more appropriate measure would be one that specifically measures pressure ulcer healing. Commenters pointed out that many LTCHs have expertise in wound healing and often admit patients in order to address a non-healing wound. One commenter also recommended that CMS consider a measure of hospital acquired infections of pressure ulcers or wounds. Response: We greatly appreciate the commenters’ views on the appropriateness of the pressure ulcer measure in the LTCHQR Program. We will consider all of these views for future rulemaking and program development. Please note that the commenters’ concerns regarding the appropriateness of this measure in the LTCHQR Program were discussed in detail when this measure was originally finalized in the FY 2012 IPPS/LTCH PPS final rule. We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51748 through 51749) for a discussion of our rationale for finalizing this measure for the FY 2014 payment determination and subsequent years, and for references to the description and specifications of this measure. Further, we wish to clarify and reiterate that although this measure was originally developed for the SNF/nursing home patient population, it has been respecified for the LTCH (and IRF) settings and undergone NQF review and received NQF endorsement for expansion to the LTCH (and IRF) settings on August 1, 2012. NQF endorsement of this measure demonstrates appropriateness of this measure in the LTCH setting. We appreciate the commenters’ recommendations that CMS consider additional quality measures related to pressure ulcers and is committed to taking this input under consideration to inform our ongoing work on further development and implementation of the LTCHQR Program. Comment: One commenter expressed concern regarding the assumptions made in the development, selection, and re-specification of this measure. The commenter suggests that the measure does not take into account unavoidable pressure ulcers, or ulcers that are not caused by poor quality care. This commenter also pointed out that not all pressure ulcers progress through the numeric stages that are included in the data elements that LTCHs must report on and that worsening should not be PO 00000 Frm 00368 Fmt 4701 Sfmt 4700 defined as a pressure ulcer which increases in stage. Response: While we agree that some pressure ulcers are unavoidable, clinical evidence suggests that many or most pressure ulcers can be avoided through application of appropriate standards of care. We refer readers to FY 2012 IPPS/ LTCH PPS final rule for further discussion (76 FR 51749). However, the purpose of this measure is not to capture whether or not a pressure ulcer is or is not avoidable. That is a clinical determination outside of the scope of the measure. The measure only reflects the number of Stage 2–4 pressure ulcers that are new or worsened. With regard to the commenters concern regarding the relationship between pressure ulcers and poor quality care, we agree that poor quality care cannot be determined solely by the pressure ulcer measures. A determination of poor quality of care would require a full medical chart and an assessment of whether or not the care given to a specific patient was appropriate based on the clinical assessment of the patient. This determination would be made by regulatory and certifying bodies, and not via the LTCHQR Program. Finally, pressure ulcer worsening and healing is complex and multi-faceted, and takes into account several different factors including (but not limited to) increased exudate, erythema, lack of epithelialization, increase in surface area, continued degeneration of tissue and comorbidities. For the purposes of the LTCHQR Program, we define worsening of a wound as ‘‘a pressure ulcer that has progressed to a deeper level of tissue damage and is therefore staged at a higher number using a numerical scale of 1–4 (using the staging assessment classifications assigned to each stage; starting at stage 1, and increasing in severity to stage 4) on a discharge assessment as compared to the admission assessment.’’ (Draft LTCHQR Program Manual Version 2.00, page M–25, https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/LTCH-QualityReporting/Downloads/LTCH–QRProgram-Manual-v20–DRAFT.zip.) The staging system used for this measure is a modified version of the National Pressure Ulcer Advisory Panel (NPUAP) staging system, which has been tested for validity, accuracy, clarity, succinctness, utility, and discrimination.125 125 National Pressure Ulcer Advisory Panel. NPUAP Pressure Ulcer Stages/Categories. Accessed June 28, 2013. Available: https://www.npuap.org/ resources/educational-and-clinical-resources/ npuap-pressure-ulcer-stagescategories/. E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations After consideration of the public comments we received, we are finalizing our proposal to adopt the expanded measure NQF #0678 Percent of Residents or Patients with Pressure Ulcers that are New or Worsened (ShortStay) for the LTCHQR Program for FY 2015 payment determination and subsequent years. 8. New LTCHQR Program Quality Measures for the FY 2017 and FY 2018 Payment Determinations and Subsequent Years mstockstill on DSK4VPTVN1PROD with RULES6 a. Considerations in Updating and Expanding Quality Measures Under the LTCHQR Program for the FY 2017 Payment Determination and Subsequent Years As noted in section IX.C.2. of the preamble of this final rule, we consider input from the MAP (https:// www.qualityforum.org/ Setting_Priorities/Partnership/Measure_ Applications_Partnership.aspx) in selecting measures for the LTCHQR Program. Measures proposed for the LTCHQR Program in the proposed rule were included on CMS’ List of Measures under Consideration for December 1, 2012 (MUC List), and discussed in the MAP Pre-Rulemaking Report available at: https://www.qualityforum.org/ Publications/2013/02/MAP_PreRulemaking_Report_-_ February_2013.aspx (pp. 170–176). MAP supported the direction of each proposed measure. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27724 through 27730), in the absence of any NQFendorsed measures for the LTCH setting and after due consideration to any measures that may have been endorsed or adopted by a consensus organization, we proposed measures that are fully supported by the MAP for the LTCHQR Program, or that most closely align with the national priorities discussed in section IX.C.2. of the preamble of this final rule. In the absence of the MAP’s full support, we have in some cases deemed it appropriate to propose measures for which there is MAP support for the measure concept. Further discussion of why a particular measure is high priority in the LTCH setting is included for each proposed measure below. In addition, to the extent practicable, we have for each proposed measure that is not endorsed by the NQF or another consensus organization, sought measures that have been recommended by multi-stakeholder organizations, and/ or been developed with the input of providers, purchasers/payers, and a variety of other stakeholders. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 b. New LTCHQR Program Quality Measures for the FY 2017 Payment Determination and Subsequent Years We proposed the following three new quality measures for the LTCHQR Program to affect the FY 2017 payment determination and subsequent years: (1) Quality Measure #1: National Healthcare Safety Network (NHSN) Facility-Wide Inpatient Hospital-Onset Methicillin-Resistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure (NQF #1716) NQF #1716 is a standardized infection ratio (SIR) of hospital-onset unique blood source MRSA laboratoryidentified events among all inpatients in the facility. It was adopted by the Hospital IQR Program in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51630) for the FY 2015 payment determination, with data collection having begun on January 1, 2013. The measure was developed by the CDC and is NQFendorsed. Methicillin-Resistant Staphylococcus aureus (S. aureus) (MRSA) infections are caused by a strain of S. aureus bacteria that has become resistant to antibiotics commonly used to treat these infections. Between 2003 and 2004, an estimated 4.1 million persons in the United States had nasal colonization with MRSA.126 In addition, in 2005 it is estimated that there were 94,000 invasive MRSA infections in the United States associated with about 18,000 deaths.127 Currently, there are eight States that have implemented a MRSA Prevention Collaborative.128 For Medicare populations, MRSA is a source of increased cost, lengths of stay, morbidity and mortality, and can be a consequence of poor quality of care.129 130 Older adults and patients in healthcare settings are most vulnerable 126 Gorwitz RJ, Kruszon-Moran D, McAllister SK, et al. Changes in the prevalence of nasal colonization with Staphylococcus aureus in the United States, 2001–2004. J Infect Dis2008; 197: 1226–34. 127 Department of Health and Human Services. National Action Plan to Prevent HealthcareAssociated Infections: Roadmap to Elimination. Available at https://www.hhs.gov/ash/initiatives/hai/ infection.html. 128 Centers for Disease Control and Prevention. State Has Implemented a MRSA Prevention Collaborative. Available at https://www.cdc.gov/hai/ stateplans/states-w-MRSA-collaborative.html. 129 Centers for Disease Control and Prevention. People at Risk of Acquiring MRSA Infections. Available at https://www.cdc.gov/mrsa/riskfactors/ index.html. 130 Centers for Disease Control and Prevention. Management of Multidrug-Resistant Organisms in Healthcare Settings, 2006. Available at https:// www.cdc.gov/hicpac/pdf/guidelines/ MDROGuideline2006.pdf. PO 00000 Frm 00369 Fmt 4701 Sfmt 4700 50863 to MRSA infections, as these patients have weakened immune systems. LTCHs are characterized by having highly acutely ill patients with multiple comorbidities and longer lengths of stay, thereby making LTCH patients at risk for acquisition of an antibiotic-resistant infection like MRSA infection.131 According to analysis of ICD–9 codes reported on Medicare claims, LTCHs reported 5,853 cases of MRSA in 2009. Present-on-admission (POA) indicators are not available on LTCH claims; therefore, we are unable to say whether these conditions are present on admission or acquired during the LTCH stay. Therefore, it was not possible to determine which of these infections occurred in the LTCH. However, we note that on the majority of claims, the primary diagnosis is the admitting diagnosis and is considered to be present on admission and therefore, the secondary diagnoses can be assumed to provide a count of conditions that could have been acquired in the LTCH.132 When it was assumed that a MRSA infection recorded in the primary diagnosis code was likely present on admission and an MRSA infection recorded in the secondary diagnosis code was acquired in the LTCH, there were 5,826 reported cases that may have been acquired in the LTCH.133 Further, healthcare-associated MRSA infections occur frequently in patients who have invasive devices, such as catheters or ventilators.134 We included the proposed MRSA measure in the December 1, 2012, MUC list. The MAP supported the direction of this measure.135 We proposed to use the CDC’s NHSN reporting and submission infrastructure for reporting of the proposed NHSN 131 Furuno JP, Hebden JN, Standiford HC, et al. Prevalence of methicillin-resistant Staphylococcus aureus and Acinetobacter baumannii in a long-term acute care facility. Am J Infect Control 2008;36:468– 71. 132 Centers for Medicare & Medicaid Services Center for Medicare & Medicaid Innovation. Hospital Acquired Conditions (HAC)—Report to Congress. Available at https://innovation.cms.gov/ Files/x/HospAcquiredConditionsRTC.pdf. 133 Bernard SL, Dalton K, Lenfestey N F, Jarrett NM, Nguyen KH, Sorensen AV, Thaker S, West ND. Study to support a CMS Report to Congress: Assess feasibility of extending the hospital-acquired conditions—present on admission IPPS payment policy to non-IPPS payment environments. Prepared for the Centers for Medicare & Medicaid Services (CMS Contract No. HHSM–500–T00007). 2011. 134 Centers for Disease Control and Prevention. Protect Yourself from MRSA. Available at https:// www.cdc.gov/features/mrsainhealthcare/. 135 National Quality Forum. Measure Applications Partnership Pre-Rulemaking Report: 2013 Recommendations of Measures Under Consideration by HHS: February 2013. Available at: https://www.qualityforum.org/WorkArea/ linkit.aspx?LinkIdentifier=id&ItemID=72738. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50864 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Facility-Wide Inpatient Hospital-onset MRSA Bacteremia Outcome Measure (NQF #1716). CDC’s NHSN is the data collection and submission framework currently used for reporting the CAUTI (#0138), CLABSI (#0139), and Influenza Vaccination Coverage among Healthcare Personnel (#0431) measures. Details related to the procedures for using NHSN for data submission and information on definitions, numerator data, denominator data, data analyses, and measure specifications for the proposed NHSN Facility-Wide Inpatient Hospital-onset MRSA Bacteremia Outcome Measure (NQF #1716) can be found at: https://www.qualityforum.org/ QPS/1716 and https://www.cdc.gov/ nhsn/PDFs/pscManual/ 12pscMDRO_CDADcurrent.pdf. For January 2012 through January 2013, an estimated 42 LTCHs reported laboratory-identified MRSA event data into NHSN.136 By building on the CDC’s NHSN reporting and submission infrastructure, we intend to reduce the administrative burden related to data collection and submission for this measure under the LTCHQR Program. We refer readers to section IX.C.9. of the preamble of this final rule for more information on data collection and submission. We invited public comment on this proposed measure and data collection and submission for the proposed measure for the FY 2017 payment determination and subsequent years. Comment: A number of commenters expressed support of our proposal to include NHSN Facility-wide Inpatient Hospital-onset MRSA Infection Outcome Measure (NQF #1716), citing relevance of healthcare-acquired infections to the LTCH setting. One commenter also acknowledged the importance of MRSA prevention and control. One commenter noted that healthcare-acquired infections are a common reason for 30-day hospital readmission. Another commenter stated that pay-for-reporting programs are an important mechanism for raising awareness of conditions such as MRSA, especially when the data are publicly reported and institutions can compare their performance against the performance of other facilities. Two commenters appreciated the effort of CMS to align LTCHQR Program measures with measures in other quality reporting initiatives. Response: We appreciate the commenters’ recognition and support of our efforts to adopt measures for the LTCHQR Program that emphasize high136 Data from CMS–CDC correspondence on February 1, 2013. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 priority patient safety concerns and harmonize measures across settings, when applicable. Comment: Many commenters objected to the proposed MRSA SIR healthcareacquired infection measure, citing lack of NQF endorsement for the LTCH setting. These commenters urge CMS to request formal NQF review, using the Consensus Development Process, of this proposed measure for the LTCH setting before deciding whether to adopt it for the LTCHQR Program. Many commenters objected to inclusion of MRSA SIR because they are concerned that, while the proposed MRSA measure received a ‘‘support direction’’ vote from the MAP, it was not granted full approval. Commenters cited the MAP’s conclusion that the measure is ‘‘Not ready for implementation,’’ ‘‘the measure concept is promising but requires modification or further development,’’ and the ‘‘Measure should be specified and tested for the LTCH setting.’’ Commenters agreed with MAP reviewers that the measure has not been adequately developed, specified or tested in the LTCH setting. Some commenters noted it is inappropriate to apply this measure to the LTCH setting, which has more medically complex patients with acute hospital needs, since it was developed for another setting. One commenter noted that although a number of LTCHs voluntarily reported MRSA data to the CDC’s NHSN between January 2012 and January 2013, this voluntary reporting activity does not constitute formal testing. Commenters stated that it is essential that measures are rigorous enough to produce credible results given that LTCHQR Program measure scores will ultimately be publicly reported. Another commenter suggested delaying the collection and submission of this measure until such time as the data currently submitted to NHSN has been reviewed for validity and reliability. Response: The National Healthcare Safety Network (NHSN) Facility-wide Inpatient Hospital-onset MRSA Outcome Measure was endorsed as NQF #1716 as of December 14, 2012, and is endorsed for use in several settings, including LTCHs. Because of the scope of the patient safety problem posed by MRSA to the chronically ill patient population in the LTCH setting, as well as its burden on the healthcare system, we believe it in the best interest of patients to adopt this measure for the LTCHQR Program in order to promote awareness and encourage implementation of MRSA control procedures in the LTCH setting. The PO 00000 Frm 00370 Fmt 4701 Sfmt 4700 CDC states that rates will be calculated for this measure in the LTCH setting (referred to as the Long-Term Acute Care [LTAC] setting by the CDC’s NHSN) until appropriate risk adjustment can be determined for an SIR calculation. Data will be analyzed separately for the LTCHs so no inappropriate comparisons will be made between LTCH and other healthcare settings. The measure is on the list of NQF-endorsed measures and can be found on the NQF Web site at https:// www.qualityforum.org/QPS/1716. We appreciate the commenters’ input on finalizing a measure for which the MAP supported direction. We note that we have taken the MAP’s input into consideration in selecting quality measures, as we are required to do under section 1890(a)(4) of the Act. However, we are not required to follow the MAP’s recommendations, but to take them into account when selecting measures for proposal. In addition to MAP input, we take a variety of other factors into account in selecting measures. In this instance, for example, the National Healthcare Safety Network (NHSN) Facility-wide Inpatient Hospital-onset Methicillin-resistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure (NQF #1716) is NQF-endorsed for the LTCH setting, an indication that it is appropriate for LTCH patients. In addition, this measure is appropriate in light of the fact that illness from MRSA most commonly affects older adults in hospitals or in facilities with longer lengths of stay. For the reasons listed above, this measure is appropriate for LTCH patients. Comment: Commenters also expressed strong concern that CMS’ failure to convene a TEP for any of the new proposed quality measures demonstrates the questionable nature of the proposed measures. The commenters believed that TEPs are integral to developing healthcare setting appropriate quality measures. Response: We appreciate the commenter’s concern, and agree that TEPs are an integral step for assessing a measure’s appropriateness for a care setting. The MRSA measure was evaluated by a TEP. The TEP evaluated the measure on Importance, Scientific Soundness, Usability, and Feasibility. The TEP indicated that MRSA was of high importance and the measure was scientifically sound. Comment: Several commenters suggested that inclusion of a POA code for LTCH Medicare claims may help quantify the problem and avoid the costly implementation of very laborintensive data collection for MRSA E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations infections. One commenter expressed concern that the MRSA performance data cited in the rule are based on 2009 Medicare claims data and that CMS acknowledged that LTCH claims lack a POA indicator that would help determine whether the MRSA was acquired before or during hospitalization. Response: Although Medicare claims data for LTCHs lack the POA indicator, we believe that the data from our previous analysis provides evidence that MRSA infections do occur within the LTCH setting.137 The data sources for the NQF endorsement of this measure do not rely on claims data. (We refer readers to https:// www.qualityforum.org/QPS/1716 for a list of data sources for this measure.) We agree that using a POA indicator would permit a claims-based MRSA measure, which would not require LTCHs to collect data. However, we previously considered implementation of a claims-based MRSA measure for the Hospital IQR Program but found that it was not feasible to do so in a valid and reliable manner. We believe that the very same issues related to validity and reliability would apply in the LTCHQR Program, since the programs are not distinguishable in any way that might affect the reliability or validity of using a claims based-measure. As a result, we do not believe at this time that it is feasible to implement a claims-based MRSA measure for the LTCHQR Program. However, we will continue to explore the feasibility of adding a POA indicator to LTCH Medicare claims data. We also note that the definition of MRSA Laboratory-identified events (LabID events) (as required by this measure) allows laboratory testing data to be used without clinical evaluation of the patient, allowing for a much less labor-intensive method to track MRSA infections. This provides a proxy infection measure of MRSA healthcare acquisition, exposure burden, and infection burden based almost exclusively on laboratory data and limited admission date data, including patient care location. Further, we note that the definition of MRSA LabID events (as required by this measure) specifically addresses attribution through categorization of MRSA LabID events based on date admitted to facility and date specimen collected, as well as by the current date and prior dates of specimen collection. As specified in the measure, Community-Onset (CO) is a 137 Centers for Medicare & Medicaid Services Center for Medicare & Medicaid Innovation. Hospital Acquired Conditions (HAC)—Report to Congress. Available at https://innovation.cms.gov/ Files/x/HospAcquiredConditionsRTC.pdf. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 LabID Event collected as an outpatient or an inpatient ≤3 days after admission to the facility that is, days 1, 2, or 3 of admission), while Healthcare FacilityOnset (HO) is defined as a LabID Event collected from a patient >3 days after admission to the facility (that is, days 4 or later of admission). Data from outpatient locations (for example, outpatient encounters) are not included in this reporting of CO and HO Events. The CO definition accounts for infections acquired outside the LTCH setting, either in the community or in other healthcare settings. The measure to be used for comparison is the hospital-onset unique blood source MRSA LabID events among all inpatients in the facility. LabID events use NHSN forms to collect all required data, using the definitions of each data field. Comment: Several commenters recommended that CMS delay the adoption of this proposed measure until such time as LTCH personnel can be trained in quality measure collection and submission procedures. Commenters were concerned that hospitals and States had not had enough time to develop the proper infrastructure to report these data, because only three States currently require hospitals to report these data. Commenters furthermore recommended development of robust training and technical support for NHSN collection. One commenter recommended delaying the proposed adoption of this measure until there is adequate vendor support for hospitals to electronically interface with the NHSN for reporting. Response: As of May 15, 2013, based on CMS and CDC analysis of first quarter (October 1-December 31, 2012) data reporting for CLABSI and CAUTI measures, there is current and successful use of CDC’s NHSN reporting infrastructure by about 399 of the approximately 440 certified LTCHs. This widespread adoption of NHSN reporting in certified LTCHs clearly indicates that training, technical and infrastructure support for NHSN data collection has been adequate. By utilizing CDC’s NHSN for MRSA reporting, we intend to build upon LTCHs ongoing experience with data reporting via NHSN, thus avoiding adding in new systems and infrastructure requirements for the LTCHQR Program. Comment: One commenter believed that the interpretation of MRSA SIRs will be challenging because laboratorybased infection definitions are confounded by differences in the sensitivity and mechanisms of hospital testing procedures. This commenter was PO 00000 Frm 00371 Fmt 4701 Sfmt 4700 50865 concerned that the resulting difference in MRSA SIR measurement may unfairly portray hospitals that use the more sensitive testing technology as having more MRSA cases. Response: Variability in sensitivities of MRSA test methods is not a problem, as it is for C. difficile testing. For the purpose of this measure, all standardized laboratory methods to identify MRSA are acceptable for reporting. Therefore, test method is not included in the risk adjustment for calculation of the MRSA SIR. Important factors that are included in this calculation are facility bed size, medical school affiliation, and admission prevalence rate. After consideration of the public comments we received, we are finalizing the MRSA SIR measure as proposed (NQF #1716) for the FY 2017 payment determination and subsequent years. (2) Quality Measure #2: National Healthcare Safety Network (NHSN) Facility-Wide Inpatient Hospital-Onset Clostridium difficile Infection (CDI) Outcome Measure (NQF #1717) This measure is a standardized infection ratio (SIR) of hospital-onset C. difficile-associated infection (CDI) Laboratory-identified events among all inpatients in the facility, and was adopted by the Hospital IQR Program in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51630 through 51631) for the FY 2015 payment determination, with data collection having begun on January 1, 2013. The measure was developed by the CDC and is NQF-endorsed. Clostridium difficile (C. difficile) can cause a range of serious symptoms including diarrhea, serious intestinal conditions, sepsis, and death.138 In the United States, C. difficile is responsible for an estimated 337,000 infections and 14,000 deaths annually.139 Based on the HHS National Action Plan to Prevent Healthcare-Associated Infections, C. difficile rates have increased in recent years.140 The CDC estimates that CDIs cost more than $1 billion in additional 138 McDonald LC, Coignard B, Dubberke E, et al. Recommendations for surveillance of Clostridium difficile–associated disease. Infect Control Hosp Epidemiol 2007;28:140–145. Available at: https:// www.jstor.org/stable/pdfplus/10.1086/ 511798.pdf?acceptTC=true. 139 Centers for Disease Control and Prevention. Investigating Clostridium difficile Infections Across the U.S. Available at https://www.cdc.gov/hai/eip/ pdf/Cdiff-factsheet.pdf. 140 Department of Health and Human Services. National Action Plan to Prevent HealthcareAssociated Infections: Roadmap to Elimination. Available at https://www.hhs.gov/ash/initiatives/hai/ infection.html. E:\FR\FM\19AUR2.SGM 19AUR2 50866 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 health care costs each year.141 In recent years, CDIs have become more frequent, more severe and more difficult to treat. Mortality rates for CDIs are highest in elderly patients.142 Between 1996 and 2009, rates of CDI among hospitalized patients aged 65 years and older increased 200 percent, while deaths related to C. difficile increased 400 percent between 2000 and 2007, which is partly attributed to a stronger germ strain.143 144 Further, an estimated 90 percent of the C. difficile-related deaths occur in patients 65 and older. C. difficile is a source of increased costs in patient care, lengths of stay, morbidity and mortality, and can be a consequence of poor quality of care for Medicare patients.145 Illness from C. difficile most commonly affects older adults in hospitals or in facilities with longer lengths of stay, where germs spread easily, antibiotic use is common, and people are especially vulnerable to infection.146 Considering CDIs are increasing in LTCHs and that the LTCH population is highly vulnerable to CDI, it is important to measure these rates in LTCHs.147 According to analysis of ICD– 9 codes reported on Medicare claims, LTCHs reported 12,282 cases of C. difficile-associated disease in 2009. POA indicators are not available on LTCH claims, therefore we are unable to say whether these conditions are present on admission or acquired during the LTCH stay. Therefore, it was not possible to determine which of these infections 141 Centers for Disease Control and Prevention. Making Health Care Safer: Stopping C. difficile Infections. Available at: https://www.cdc.gov/ VitalSigns/HAI/. 142 Centers for Disease Control and Prevention. Investigating Clostridium difficile Infections Across the U.S. Available at: https://www.cdc.gov/hai/eip/ pdf/Cdiff-factsheet.pdf. 143 Centers for Disease Control and Prevention. QuickStats: Rates of Clostridium difficile Infection Among Hospitalized Patients Aged ≥65 Years,* by Age Group — National Hospital Discharge Survey, United States, 1996—2009.MMWR, 60(34); 1171. Available at: https://www.cdc.gov/mmwr/preview/ mmwrhtml/mm6034a7.htm. 144 Centers for Disease Control and Prevention. Making Health Care Safer: Stopping C. difficile Infections. Available at: https://www.cdc.gov/ VitalSigns/HAI/. 145 Dubberke ER, Reske KA, Olsen MA, McDonald LC, Fraser VJ. Short- and long-term attributable costs of Clostridium difficile–associated disease in nonsurgical inpatients. Clin Infect Dis 2008; 46:497–504. Available at: https:// cid.oxfordjournals.org/content/46/4/497.long. 146 Centers for Disease Control and Prevention. Frequently Asked Questions about Clostridium difficile for Healthcare Providers. Available at: https://www.cdc.gov/HAI/organisms/cdiff/ Cdiff_faqs_HCP.html. 147 Goldstein EJC, Polonsky J, Touzani M, Citron DM. C. difficile infection (CDI) in a long-term acute care facility (LTAC). Anaerobe 2009;15:241–243. Available at: https://www.sciencedirect.com/science/ article/pii/S1075996409001176. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 occurred in the LTCH. However, we note that on the majority of claims, the primary diagnosis is the admitting diagnosis and is considered to be present on admission and, therefore, the secondary diagnoses can be assumed to provide a count of conditions that could have been acquired in the LTCH.148 When it was assumed that a CDI recorded in the primary diagnosis code was likely present on admission and a C. difficile-associated infection recorded in the secondary diagnoses code may have been acquired in the LTCH, there were 11,384 reported cases that may have been acquired in the LTCH.149 In addition, there is evidence that CDIs are preventable, and therefore surveillance and measuring infection rates is important to reducing infections and improving patient safety. Currently, there are three States that require hospitals to report C. difficile data to NHSN. Fifteen States have implemented a C. difficile Prevention Collaborative.150 The goal for this proposed C. difficile measure is to provide a common mechanism (CDC’s NHSN) for all LTCHs to report and analyze these data that will inform infection control staff of the impact of targeted prevention efforts. We included the proposed C. difficile measure in the December 1, 2012, MUC list. The MAP supported the direction of this measure.151 We proposed to use the CDC’s NHSN reporting and submission infrastructure for reporting of the proposed NHSN Facility-wide Inpatient Hospital-onset Clostridium difficile Outcome Measure (NQF #1717). CDC’s NHSN is the data collection and submission framework currently used for reporting the CAUTI, CLABSI and Influenza Vaccination Coverage among Healthcare Personnel measures. Similar to the NHSN MRSA Bacteremia Outcome Measure we 148 Centers for Medicare & Medicaid Services Center for Medicare & Medicaid Innovation. Hospital Acquired Conditions (HAC)—Report to Congress. Available at: https://innovation.cms.gov/ Files/x/HospAcquiredConditionsRTC.pdf. 149 Bernard SL, Dalton K, Lenfestey N F, Jarrett NM, Nguyen KH, Sorensen AV, Thaker S, West ND. Study to support a CMS Report to Congress: Assess feasibility of extending the hospital-acquired conditions—present on admission IPPS payment policy to non-IPPS payment environments. Prepared for the Centers for Medicare & Medicaid Services (CMS Contract No. HHSM–500–T00007). 2011. 150 Centers for Disease Control and Prevention. State Has Implemented a C. diff Prevention Collaborative. Available at: https://www.cdc.gov/hai/ stateplans/states-w-CDI-collaborative.html. 151 National Quality Forum. Measure Applications Partnership Pre-Rulemaking Report: 2013 Recommendations of Measures Under Consideration by HHS: February 2013. Available at: https://www.qualityforum.org/WorkArea/ linkit.aspx?LinkIdentifier=id&ItemID=72738. PO 00000 Frm 00372 Fmt 4701 Sfmt 4700 proposed above, details related to the procedures for using NHSN for data submission and information on definitions, numerator data, denominator data, data analyses, and measure specifications for the proposed NHSN Facility-wide Inpatient Hospitalonset Clostridium difficile Outcome Measure (NQF #1717) can be found at: https://www.qualityforum.org/QPS/1717 and https://www.cdc.gov/nhsn/PDFs/ pscManual/ 12pscMDRO_CDADcurrent.pdf. For January 2012 through January 2013, an estimated 46 LTCHs reported laboratory-identified C. difficile event data into NHSN.152 By building on the CDC’s NHSN reporting and submission infrastructure, we intend to reduce the administrative burden related to data collection and submission for this measure under the LTCHQR Program. We refer readers to section IX.C.9. of the preamble of this final rule for more information on data collection and submission. We invited public comment on this proposed measure and data collection and submission for the proposed measure for the FY 2017 payment determination and subsequent years. Comment: A number of commenters supported the CMS proposal to include NHSN Facility-wide Inpatient Hospitalonset Clostridium difficile Infection (CDI) Outcome Measure (NQF #1717) in the LTCHQR Program. Several commenters based their support on the relevance of healthcare-acquired infections to the LTCH setting, and one commenter noted that healthcareacquired infections are a common reason for 30-day hospital readmission. Another commenter expressed the opinion that pay-for-reporting programs are an important mechanism for raising awareness of conditions such as CDI, especially when the data are publicly reported and institutions can compare their performance against the performance of other facilities. Two commenters appreciated the effort of CMS to align LTCHQR measures with other quality reporting initiatives. Response: We appreciate the commenters’ support and recognition of the importance of the expansion of the LTCHQR Program to include this measure. Comment: Many commenters objected to the proposed CDI measure, citing lack of NQF endorsement for the LTCH setting. These commenters urge CMS to request formal NQF review, using the Consensus Development Process, of this proposed measure for the LTCH setting 152 Data from CMS–CDC correspondence on February 1, 2013. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations before deciding whether to adopt it for the LTCHQR Program. Many commenters strongly objected to inclusion of the CDI measure because they are concerned that, while the proposed CDI measure received a ‘‘support direction’’ vote from the MAP, it was not granted full approval. Commenters cited the MAP’s conclusions that the measure is ‘‘[n]ot ready for implementation,’’ ‘‘the measure concept is promising but requires modification or further development,’’ and the ‘‘[m]easure should be specified and tested for the LTCH setting.’’ The commenters recognized the importance of CDI prevention and control, but believed that it was inappropriate to apply a measure that was developed for another setting to LTCHs given the more medically complex and acute hospital needs of LTCH patients, and therefore agreed with MAP reviewers that the measure has not been adequately developed, specified or tested in the LTCH setting. One commenter noted that although a number of LTCHs voluntarily reported C. difficle data to the National Healthcare Safety Network between January 2012 and January 2013, this voluntary reporting activity does not constitute formal testing. Several commenters stated that it is essential that the measures are rigorous enough to produce credible results given that LTCHQR measure scores will ultimately be publicly reported, and another commenter suggested delaying the collection and submission of these measures until such time as the data currently submitted to NHSN has been reviewed for validity and reliability. Response: The National Healthcare Safety Network (NHSN) Facility-wide Inpatient Hospital-onset Clostridium difficile Infection (CDI) Outcome Measure was endorsed as NQF #1717 as of December 14, 2012, and is endorsed for use in several settings, including the LTCH setting. As with the MRSA SIR, because of the scope of the patient safety problem posed by CDI to the very vulnerable LTCH population, as well as its burden on the healthcare system, we believe it is in the best interest of patients to adopt this measure in order to promote awareness and encourage immediate implementation of CDI control procedures within the LTCH setting. The measure is on the list of NQF-endorsed measures and can be found on the NQF Web site at https:// www.qualityforum.org/QPS/1717. We appreciate the commenters’ input on finalizing a measure for which the MAP supported direction. We note that we have taken the MAP’s input into VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 consideration in selecting quality measures, as we are required to do under section 1890(a)(4) of the Act. However, we are not required to follow the MAP’s recommendations, but to take them into account when selecting measures for proposal. In addition to MAP input, we take a variety of other factors into account in selecting measures. In this instance, for example, the National Healthcare Safety Network (NHSN) Facility-wide Inpatient Hospital-onset Clostridium difficile Infection (CDI) Outcome Measure (NQF #1717) is NQF-endorsed for the LTCH setting, an indication that it is appropriate for LTCH patients. In addition, this measure is appropriate in light of the fact that illness from CDI most commonly affects older adults in hospitals or in facilities with longer lengths of stay. For all of the reasons we have discussed, we believe this measure is appropriate for LTCH patients. Comment: Commenters expressed strong concern that CMS’ failure to convene a TEP for any of the new proposed quality measures demonstrates the questionable nature of the proposed measures. Response: We agree that TEPs are an integral step for assessing a measure’s appropriateness for a care setting. The CDI measure was evaluated by a TEP. The TEP evaluated the measure on Importance, Scientific Soundness, Usability, and Feasibility. The TEP indicated that CDI was of high importance and that the measure was scientifically sound. Comment: Several commenters suggested that inclusion of a POA code for LTCH Medicare claims may help quantify the problem and avoid the costly implementation of very laborintensive data collection for C. difficile infections. One commenter expressed concern that the CDI performance data cited in the rule are based on 2009 Medicare claims data and that CMS acknowledged that LTCH claims lack a POA indicator that would help determine whether the CDI was acquired before or during hospitalization. Response: Although Medicare claims data for LTCHs lack the POA indicator, we believe that the data from our previous analysis provides evidence that CDIs do occur within the LTCH setting.153 Further, the data sources for the NQF endorsement of this measure do not rely on claims data. (We refer readers to https://www.qualityforum.org/ 153 Centers for Medicare & Medicaid Services Center for Medicare & Medicaid Innovation. Hospital Acquired Conditions (HAC)—Report to Congress. Available at https://innovation.cms.gov/ Files/x/HospAcquiredConditionsRTC.pdf. PO 00000 Frm 00373 Fmt 4701 Sfmt 4700 50867 QPS/1717 for a list of data sources for this measure.) We previously considered implementation of a claimsbased CDI measure for the Hospital IQR Program, but found that it was not feasible to do so in a valid and reliable manner and as a result, by extension, at this time, we do not believe it is feasible to implement a claims-based MRSA measure for the LTCHQR Program. We will continue to explore the feasibility of adding a POA indicator to LTCH Medicare claims data. The definition of CDI LabID events inherently accounts for the problem of attribution, through categorization of CDI LabID events based on date admitted to facility and date specimen collected, as well as by the current date and prior dates of specimen collection. As specified in Community-Onset (CO) is a LabID Event collected as an outpatient or an inpatient at most 3 days after admission to the facility (that is, days 1, 2, or 3 of admission), while Community-Onset Healthcare FacilityAssociated (CO–HCFA) is defined as a CO LabID Event collected from a patient who was discharged from the facility at most 4 weeks prior to current date of stool specimen collection. Data from outpatient locations (for example, outpatient encounters) are not included in this reporting. A Healthcare FacilityOnset (HO) is a LabID event collected more than 3 days after admission to the facility (that is, on or after day 4). Together, these definitions account for infections acquired outside the LTCH setting, either in the community or in other healthcare settings. The CDI measure is already in use in the hospital inpatient setting, where similar concerns have been raised and successfully addressed. We also note that the definition of CDI LabID events (as required by this measure) allows laboratory testing data to be used without clinical evaluation of the patient, allowing for a much less labor-intensive method to track CDIs. This provides a proxy infection measure of CDI healthcare acquisition, exposure burden, and infection burden based almost exclusively on laboratory data and limited admission date data, including patient care location. LabID events use NHSN forms to collect all required data, using the definitions of each data field. Comment: Some commenters recommended that CMS delay the adoption of this proposed measure until such time as LTCH personnel can be trained in the quality measure collection and submission procedures. Commenters were concerned that hospitals and states had not had enough time to develop the proper E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50868 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations infrastructure to report these data, because only 3 States currently require hospitals to report these data. Other commenters noted that the burden of data collection must be considered in order to allow these facilities to acquire the resources to focus on improvement efforts and not completely on data collection and submission alone. Commenters furthermore recommended development of robust training and technical support for NHSN collection. One commenter recommended delaying the proposed adoption of this measure until there is adequate vendor support for hospitals to electronically interface with the NHSN for reporting. Response: As of May 15, 2013, based on CMS and CDC analysis of first quarter (October 1-December 31, 2012) data reporting for CLABSI and CAUTI measures, there is current and successful use of CDC’s NHSN reporting infrastructure by about 399 of the approximately 440 certified LTCHs. This widespread adoption of NHSN reporting in LTCHs clearly indicates that training, technical and infrastructure support for NHSN data collection has been adequate. By utilizing CDC’s NHSN for CDI reporting, we intend to build upon LTCHs ongoing experience with data reporting via NHSN, thus avoiding adding in new systems and infrastructure requirements for the LTCHQR Program. Comment: Some commenters believed that the calculation of CDI SIRs will be challenging because hospitals use testing mechanisms with differing sensitivity to identify the presence of CDI. These commenters were concerned that the resulting difference in CDI SIR measurement may unfairly portray hospitals that use the more sensitive testing technology as having more CDI cases. Response: CDC acknowledges that differences in the sensitivity of CDI laboratory testing methods make a difference in the numbers of CDI events that hospitals identify and report. CDI laboratory event data is a combination of laboratory results and admission/ discharge/transfer data. CDI facilitywide LabID event reporting is riskadjusted by facility bed size, medical school affiliation, and CO admission prevalence rate. In addition, NHSN uses a question from the required annual facility survey that asks about the type of CDI testing the lab conducts and this information is used for additional riskadjustment. And, for improved accuracy of this test type representation, CDC will be asking this question on a quarterly basis beginning in 2014. Comment: Some commenters believed that the CDI SIR is an inappropriate VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 measure for use among LTCHs because LTCHs are not sufficiently represented in baseline calculations. The commenters noted that, in the NQF Measure submission and evaluation worksheet 5.0, dated September 14, 2011, testing results in section 2b4.3 show that only 4 percent of the facilities used to construct the standard population that reported their facility type were LTCHs. The commenters believed that because the denominator identified in section 2a1.4, the hospital’s onset CDI LabID event rate for the same types of facilities (obtained from the standard population) will be part of the calculation, LTCHs would be judged against a standard population that is only 4 percent LTCHs. The commenters argued that LTCHs should only be judged against their peers, that is, other LTCHs, and that such a peer comparison approach is even more important because a large risk factor for CDI is the patient’s length of stay. Commenters believed that LTCHs would be at a distinct disadvantage since the average length of stay for LTCH patients is greater than 25 days. Response: We agree with the commenters regarding the importance of statistically appropriate measures. The NQF Measure submission and evaluation worksheet incorporated numbers that were available at that time as a demonstration for the endorsement process. Calculations of CDI SIR for the LTCHQR Program will be based on a standard population that includes all reporting LTCHs, which after full implementation we believe will number over 400. At this time, we do not intend to compare LTCHs with any other hospital type. Comment: Commenters noted that there are different types of microbiology tests available to test for CDI, and that the variety of tests available may result in up to a twofold difference in results. Commenters expressed that the more sensitive CDI tests will capture more true positives and that LTCHs that utilize these more expensive, more sensitive tests (for example, nucleic acid tests) will be penalized for ‘‘showing a higher rate’’. Commenters also noted that certain tests for CDI can show positive results for up to 6–9 weeks after the resolution of symptoms and recommended that CMS conduct further research of the timeline associated with duplicate positive CDI tests. Commenters also believed that the measure should be defined to exclude repeat tests on the same patient, in order to allow for confirmation of positive results. Finally, commenters were concerned that there is a high probability of an elderly PO 00000 Frm 00374 Fmt 4701 Sfmt 4700 patient who has diarrhea for an unrelated reason, falsely testing positive for CDI, thus falsely elevating the rates. Commenters recommended that CMS postpone this measure until further testing is conducted regarding the varying sensitivities of the multiple tests available that are needed to satisfy this measure, and risk adjustment methodologies are developed to address this variation for these variations. CMS should conduct further research of the timeline associated with duplicate positive tests. Commenters also recommended that CMS postpone the measure until an algorithm is developed made available in all clinical laboratories that would help LTCHs avoid scenarios in which an elderly patient presenting symptoms for unrelated reasons also tests positive for C. difficile-associated infection and, thus, falsely elevates hospital rates. Response: We appreciate the commenters’ concerns. However, we wish to note that the CDC has taken into account repeat testing results by building a 14-day algorithm into the protocol that requires users to wait a full 14 days between positive results from the laboratory before another CDI LabID event should be reported into the NHSN system for a patient in a specific care location. Further, and in addition to the 14-day testing algorithm, the CDC defines recurrent CDI as a positive test within 8 weeks of previous positive test. If a patient test positive a second time within this timeframe, the infection is not counted as a new infection. In addition to this protocol guidance, CDC has posted recommended guidance on its Web site that is designed to improve the diagnosis and management of CDI in adult patients. This document includes first test and repeat testing guidance, in order to standardize the process and minimize false-positive results. After consideration of the public comments we received, we are finalizing the CDI SIR measure National Healthcare Safety Network (NHSN) Facility-wide Inpatient Hospital-onset Clostridium difficile Infection (CDI) Outcome Measure (NQF #1717) as proposed for the FY 2017 payment determination and subsequent years. (3) Quality Measure #3: All-cause Unplanned Readmission Measure for 30 days Post- Discharge from Long-Term Care Hospitals LTCHs treat patients who, on average, are hospitalized 25 days or greater with medically complex problems, including prolonged mechanical ventilation or multiple organ failure. In 2011, as reported by MedPAC, about 123,000 Medicare beneficiaries received care for E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 almost 140,000 LTCH stays in roughly 424 LTCHs nationwide, with payments of $5.4 billion.154 For patients discharged from LTCH settings, the unadjusted rate of readmission to LTCHs and IPPS hospitals in the 30 days after an LTCH discharge was about 26 percent in 2010 and 2011.155 With such a large proportion of patients being readmitted to an acute level of care (that is, to either an LTCH or to an IPPS hospital), we are interested in monitoring the rates for each facility and reducing rates that are inappropriately high. Thus, we proposed a risk-adjusted measure of readmission rates, the All-cause Unplanned Readmission Measure for 30 days Post Discharge from Long-Term Care Hospitals. This measure will enhance efforts to promote patient safety, reduce healthcare-associated infections, improve coordination of care and care transitions, and reduce healthcare costs. Readmissions are costly to the Medicare program and have been identified as sensitive to improvements in coordination of care and discharge planning for patients.156 Literature on readmissions is mainly focused on discharges from short-term acute care hospitals. However, processes that may affect readmission rates, such as discharge planning, communications, and coordination, also occur at other inpatient facilities. While some readmissions are unavoidable, such as those resulting from the inevitable progression of disease or worsening of chronic conditions, readmissions may also result from poor quality of care or inadequate transitions between care settings. Randomized controlled trials in short-stay acute care hospitals have shown that improvement in the following areas can directly reduce hospital readmission rates: quality of care during the initial admission; improvement in communication with patients, their caregivers and their clinicians; patient education; predischarge assessment; and coordination of care after discharge. Successful randomized trials have reduced 30-day readmission rates by 20 to 40 percent,157 158 159 160 161 162 163 and a 2011 154 Medicare Payment Advisory Commission, Report to the Congress: Medicare Payment Policy. Available at: https://www.medpac.gov/documents/ Mar13_EntireReport.pdf, March 2013, see Chapter 11, Long-term care hospital services, pg. 237–257. 155 RTI analysis of 2010–2011 Medicare MedPAR claims data under CMS contract HHSM–500–2008– 00021I. 156 Federal Register, Vol. 76, No. 160, Thursday, August 18, 2011/Rules and Regulations, IV.C.1.a. 157 Jack BW, Chetty VK, Anthony D, Greenwald JL, Sanchez GM, Johnson AE, et al. A reengineered VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 meta-analysis of randomized clinical trials found evidence that interventions associated with discharge planning helped to reduce readmission rates,164 illustrating how hospitals may influence readmission rates through best practices. Because many studies have shown readmissions to be related to quality of care, and that interventions have been able to reduce 30-day readmission rates, we believe it is appropriate to include All-cause Unplanned Readmission Measure for 30 days Post Discharge from Long-Term Care Hospitals as a quality measure in the LTCHQR Program. Promoting quality improvements leading to successful transitions of care for patients moving from the LTCH setting to the community or another post-acute care setting, and reducing preventable facility-wide readmission rates, is consistent with the NQS aims of safer, better coordinated care and lower costs. Our approach to developing this measure is similar to the approach we took in developing NQF-endorsed Hospital-Wide Risk-Adjusted All-Cause Unplanned Readmission Measure (NQF #1789) (Hospital-Wide Readmission or HWR measure) (https:// www.qualityforum.org/QPS/1789), finalized for the Hospital IQR Program hospital discharge program to decrease rehospitalization: a randomized trial. Ann Intern Med 2009;150(3):178–87. 158 Coleman EA, Smith JD, Frank JC, Min SJ, Parry C, Kramer AM. Preparing patients and caregivers to participate in care delivered across settings: the Care Transitions Intervention. J Am Geriatr Soc 2004;52(11):1817–25. 159 Courtney M, Edwards H, Chang A, Parker A, Finlayson K, Hamilton K. Fewer emergency readmissions and better quality of life for older adults at risk of hospital readmission: a randomized controlled trial to determine the effectiveness of a 24-week exercise and telephone follow-up program. J Am Geriatr Soc 2009;57(3):395–402. 160 Garasen H, Windspoll R, Johnsen R. Intermediate care at a community hospital as an alternative to prolonged general hospital care for elderly patients: a randomised controlled trial. BMC Public Health 2007;7:68. 161 Koehler BE, Richter KM, Youngblood L, Cohen BA, Prengler ID, Cheng D, et al. Reduction of 30day postdischarge hospital readmission or emergency department (ED) visit rates in high-risk elderly medical patients through delivery of a targeted care bundle. J Hosp Med 2009;4(4):211– 218. 162 Naylor M, Brooten D, Jones R, Lavizzo-Mourey R, Mezey M, Pauly M. Comprehensive discharge planning for the hospitalized elderly. A randomized clinical trial. Ann Intern Med 1994;120(12):999– 1006. 163 Naylor MD, Brooten D, Campbell R, Jacobsen BS, Mezey MD, Pauly MV, et al. Comprehensive discharge planning and home follow-up of hospitalized elders: a randomized clinical trial. Jama 1999;281(7):613–20. 164 Naylor MD, Aiken LH, Kurtzman ET, Olds DM, Hirschman KB.The Importance of Transitional Care in Achieving Health Reform. Health Affairs 2011; 30(4):746–754. PO 00000 Frm 00375 Fmt 4701 Sfmt 4700 50869 in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53521 through 53528). We proposed to use the same statistical approach, the same time window and a similar set of patient characteristics. To the extent appropriate, the proposed LTCH measure is being harmonized with this HWR measure (NQF #1789) 165 and other measures of readmission rates being developed or proposed for postacute care (PAC) settings, including the All-cause Unplanned Readmission Measure for 30 days Post Discharge from Inpatient Rehabilitation Facilities. This reflects MAP recommendations to promote alignment across care settings.166 LTCH patients, on average, require long stays at a hospital level of care and need care even after discharge. The setting chosen for placement of the discharged patient, and coordination with caregivers after discharge, are important for the stability of these patients. The rate of readmission to an acute level of care (short- or long-term) for such patients will be sensitive to appropriate discharge placement. The All-cause Unplanned Readmission Measure for 30 days Post Discharge from Long-Term Care Hospitals assesses return to short-stay acute care hospitals or LTCHs within 30 days of discharge from an LTCH to the community or another care setting of lesser intensity than an acute care setting. Patient readmissions are tracked using Medicare FFS claims data for 30 days after discharge, or the date of patient death if the patient dies within 30 days of discharge. In the Hospital IQR Program, two readmission measurement approaches were taken: (1) Measures related to patients with specific medical conditions, such as heart failure, pneumonia, and acute myocardial infarction,167 and (2) a hospital-wide measure. In LTCHs, patients tend to be complex and not easily classified into specific condition or procedure types. In addition, LTCHs have relatively small numbers of patients. Even ventilator patients, who are reasonably definable, 165 QualityNet. Hospital-wide All-Cause Unplanned Readmission (HWR) Measure. Available at https://www.qualitynet.org/dcs/ContentServer? c=Page&pagename=QnetPublic%2FPage%2 FQnetTier4&cid=1228772504318. As obtained on March 20, 2013. 166 National Quality Forum. Measure Applications Partnership Pre-Rulemaking Report: 2013 Recommendations of Measures Under Consideration by HHS: February 2013. Available at: https://www.qualityforum.org/WorkArea/ linkit.aspx?LinkIdentifier=id&ItemID=72738. 167 Refer to 77 FR 53377 and table on 77 FR 53531 for current condition-specific readmission measures used in the Hospital IQR Program, available at: https://www.gpo.gov/fdsys/pkg/FR-2012-08-31/pdf/ 2012-19079.pdf. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50870 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations are not numerous enough to provide good, stable indicators of quality. Therefore, a hospital-wide all-cause readmission measure reflects a broader assessment of the quality of care in LTCHs, and may consequently better promote quality improvement and inform consumers about quality of care. In applying the All-cause Unplanned Readmission Measure for 30 days Post Discharge from Long-Term Care Hospitals, we will follow patients for 30 days after the LTCH discharge date, or date of death if the patient dies within the 30 day post-discharge period, using Medicare FFS claims data. Because patients differ in morbidity and complexity, the measure is risk-adjusted for patient case-mix. The measure also excludes planned readmissions because these are not considered to be indicative of poor quality care on the part of the LTCH. A model developed by a CMS measure development contractor predicts admission rates while accounting for patient demographics, primary condition in the prior short stay, comorbidities, and a few other patient factors. The use of such risk adjusters will account for case-mix differences that affect patient readmission rates among facilities. While estimating the predictive power of the patient characteristics, the model also estimates a facility specific effect common to patients treated at that facility. Similar to the Hospital IQR Program hospital-wide readmission measure, the proposed LTCHQR Program measure is the ratio of the number of risk-adjusted predicted unplanned readmissions for each individual LTCH, including the estimated facility effect, to the average number of risk-adjusted predicted unplanned readmissions for the same patients treated at a facility with the average effect on readmissions. A ratio above one indicates a higher than expected readmission rate, or lower level of quality, while a ratio below one indicates a lower than expected readmission rate, or higher level of quality. (The construction of the Hospital IQR Program hospital-wide measure and an NQF technical report outlining the findings of the expedited review process for the Patient Outcomes: All—Case Readmission Measures may be downloaded from: https:// www.qualityforum.org/Publications/ 2012/07/Patient_Outcomes_All-Cause_ Readmissions_Expedited_ Review_2011.aspx.) The patient population for the Allcause Unplanned Readmission Measure for 30 days Post Discharge from Long- VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Term Care Hospitals includes LTCH patients who: • Were discharged alive from the LTCH; • Had 12 months of Medicare Part A, fee-for-service coverage prior to the LTCH stay; • Had 30 days of Medicare Part A, fee-for-service coverage post discharge; • Had an acute care facility (IPPS, CAH, or psychiatric hospital) stay within the 30 days prior to the LTCH stay; and • Were aged 18 years or above when admitted to the LTCH. In this final rule, we are revising the terminology ‘‘Had an IPPS hospital stay within the 30 days prior to the LTCH stay’’ we used in the proposed rule and instead using ‘‘Had an acute care facility (IPPS, CAH, or psychiatric hospital) stay within the 30 days prior to the LTCH stay’’ to include acute care, including critical access hospitals (CAHs), IPPS hospitals, and inpatient psychiatric hospitals and units (IPFs). Patients from the IPPS and CAH settings with psychiatric diagnoses are included in the measure. As a result, including patients with an IPF stay for psychiatric diagnoses preceding the LTCH stay is also appropriate. There were about 0.5 percent of such stays in the measure using 2010–2011 data. As in the Hospital IQR Program hospital-wide readmission measure, patients with medical treatment for cancer are excluded. Studies of this population that were reviewed for the Hospital IQR Program readmission measure showed them to have a different trajectory of illness and mortality than other patient populations.168 The measure also excludes patients who were discharged against medical advice. Readmissions that are not included in the measure are: • Transfers from an LTCH to another LTCH or acute care facility; and • Readmissions within the 30 day window that are usually considered planned due to the nature of the procedures and principal diagnoses of the readmission. • LTCH stays with data that are problematic. (The Medicare data files occasionally have anomalous records that indicate a person is in two facilities or stays that overlap in dates, or are otherwise potentially erroneous or contradictory.) The planned readmission list for the All-cause Unplanned Readmission Measure for 30 days Post Discharge from 168 National Quality Forum. ‘‘Patient Outcomes: All-Cause Readmissions Expedited Review 2011’’. July 2012. pp12. PO 00000 Frm 00376 Fmt 4701 Sfmt 4700 Long-Term Care Hospitals includes the planned procedures specified in the Hospital-Wide All-Cause Unplanned Readmission (HWR) Measure (NQF #1789) used in the Hospital IQR Program, plus other procedures that were determined in consultation with a TEP. The list of procedures considered planned may be found in the LTCH Readmissions Measure Specifications file, which was made available for download at the time of release of the proposed rule at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/LTCH-QualityReporting/. In addition to the list of planned procedures this file includes a list of diagnoses, which, if found as the principal diagnosis on the readmission claim, would indicate that the procedure occurred during an unplanned readmission. Another readmission type that is counted as planned for this measure is any readmission to a psychiatric hospital or unit. This had not been explicitly noted in the proposed rule. A patient discharged from an LTCH is tracked until one of the following occurs: (1) The 30-day period postdischarge ends; (2) the patient dies; or, (3) the patient is readmitted to an acute level of care (short- or long-term). If multiple readmissions occur, only the first is considered for this measure. If the first readmission is unplanned, it is counted as a readmission in the measure rate. The occurrence of a planned readmission ends the 30-day window of the index discharge from the LTCH. Readmission rates are risk-adjusted for patient case-mix characteristics, independent of quality. The risk adjusted model accounts for demographic characteristics, principal diagnosis, comorbidities, length of stay in the prior acute care facility, critical care days in the prior acute care facility, number of acute care facility stays in the prior year, and the occurrence of various surgery types in the prior acute care facility stay. In modeling LTCH readmissions, all patients are included in a single model, an approach different from the fivecohort approach of the Hospital IQR Program HWR measure, adapted to account for a substantially smaller patient population in the LTCH setting. Separate models for patient types, as was done for the Hospital IQR Program measure, are not feasible. The number of cases is much smaller in the LTCHs than in the IPPS hospitals and patients are generally not as strongly characterized by one major admitting diagnosis or condition. Patient characteristics are captured by diagnoses and prior surgeries, with a E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations marker for prolonged mechanical ventilation also included. Because there are approximately 120,000 LTCH admissions per year, and approximately 110,000 of those admissions meet the criteria for inclusion, the proposed measure will use a model that merges two years of Medicare claims data. This approach is similar to that used by the Hospital IQR Program condition-specific readmission measures, which use three years of claims data (77 FR 53523). Merging multiple years of data produces more precise estimates of the effects of all the risk adjusters, and increases the sample size associated with each facility. Larger patient samples are better able to meaningfully distinguish facility performance. Under the exception authority in section 1886(m)(5)(D)(ii) of the Act, we proposed to use this measure in the LTCHQR Program. This section provides that in the case of a specified area or medical topic determined appropriate by the Secretary for which a feasible and practical measure has not been endorsed by the entity with a contract under section 1890(a) of the Act, the Secretary may specify a measure that is not so endorsed as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary. In the case of this measure, we did not find a feasible or practical NQF-endorsed measure that would be appropriate for the LTCH setting, or any other appropriate measure that has been adopted or endorsed by an appropriate consensus organization. The measure most similar in concept, and which has been endorsed by NQF, is the CMS Hospital-Wide All-Cause Unplanned Readmission Measure (NQF #1789) described below. This measure is for the short-term acute stay hospitals. In 2012, NQF endorsed two hospitalwide readmission measures, the National Committee for Quality Assurance (NCQA) measure intended for health plans, Plan All-Cause Readmissions (NQF #1768), and CMS’ Hospital-Wide All-Cause Unplanned Readmission Measure (HWR) (NQF #1789). The latter measure is the model for the All-cause Unplanned Readmission Measure for 30 days Post Discharge from Long-Term Care Hospital measure, we proposed in the FY 2014 IPPS/LTCH PPS proposed rule. We selected the latter measure as the model for the LTCH measure since it uses Medicare claims data and is in current use for the Hospital IQR Program, while the former uses health plans data. This measure was present on VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 CMS’ List of Measures Under Consideration for MAP 2012 and the most recent MAP Pre-Rulemaking Report noted that ‘‘readmission measures are also examples of measures that MAP recommends be standardized across settings, yet customized to address the unique needs of the heterogeneous Post-Acute Care (PAC)/ LTC population. The MAP has continually noted the need for care transition measures in PAC/LTC performance measurement programs, and in 2013 supported the direction of this measure.169 The readmission measure such as the one we proposed would address the need for an evidencebased measure that could promote alignment across the care continuum and PAC/LTC settings while ensuring appropriate risk adjustment to accommodate uniqueness of the LTCH population. We intend to seek NQF endorsement of the All-cause Readmission Measure for 30 days Post Discharge from LongTerm Care Hospital. As this is a claimsbased measure not requiring reporting of new data by LTCHs, this measure will not be used to determine LTCH reporting compliance for the LTCHQR Program. We proposed to begin reporting feedback to LTCHs on performance of this measure in CY 2016. The initial feedback will be based on FY 2013 and FY 2014 Medicare claims data related to LTCH readmissions. The readmission measure will be part of the LTCH public reporting program once public reporting is instated. We intend to provide details pertaining to public reporting, such as LTCH preview of performance results of this measure, in our future rulemaking. We invited public comment on these proposals. Comment: A number of commenters noted that the measure is not NQFendorsed and this NQF endorsement should occur before implementation. Further, commenters noted the MAP did not fully support this measure. Response: We are aware this measure is not yet NQF-endorsed. We intend to submit this measure for NQF review for endorsement. We are also aware that the MAP did not fully support this measure, but note that but note that we have taken the MAP’s input into consideration in selecting quality measures, as we are required to do under section 1890(a)(4) of the Act. However, we are not required to follow 169 National Quality Forum. Measure Applications Partnership Pre-Rulemaking Report: 2013 Recommendations of Measures Under Consideration by HHS: February 2013. Available at https://www.qualityforum.org/WorkArea/ linkit.aspx?LinkIdentifier=id&ItemID=72738. PO 00000 Frm 00377 Fmt 4701 Sfmt 4700 50871 the MAP’s recommendations, but to take them into account when selecting measures for proposal. In addition to MAP input, we take a variety of other factors into account in selecting measures. In this instance, for example, the All-cause Unplanned Readmission Measure for 30 days Post-Discharge from Long-Term Care Hospitals is appropriate in light of the fact that such a large proportion of patients being readmitted to an acute level of care (that is, to either an LTCH or to an acute care facility). For the reasons listed above, this measure is appropriate for LTCH patients. Further, we have the authority to finalize non-NQF endorsed measures under the exception authority when NQF-endorsed measures are not available or appropriate for a setting, as described above. We proposed the readmissions measure under this exception authority. Comment: Some commenters suggested that the readmission measure be created for only a few LTCH conditions. Response: The initial set of readmission measures for short-term acute hospitals took this conditionspecific approach. There is also an HWR measure for short-term acute care hospitals, which served as the starting point for the development of the LTCH readmissions measure. The HWR measure is NQF-endorsed. There are a number of reasons not to use subsets of patients to develop condition-specific readmissions measures for the LTCH setting. First, LTCH stays number fewer than 150,000 per year. Therefore, patient sample size for particular DRGs or even larger patient subgroups would be relatively small. Second, the LTCH patient population tends to have multiple comorbidities and are typically not as distinctively classified into conditionspecific categories as can be done for the short-term acute care hospital patient population. Third, the TEP convened by CMS’ measure development contractor did not recommend separating groups of patients or even stratifying the model by patient types. The model includes indicators of the principal diagnosis in the prior short-term acute care hospital setting. In addition, we include an indicator in the model to adjust for the important subgroup of LTCH patients on prolonged mechanical ventilation in LTCHs. While making separate models for separate subgroups of patients is not desirable for the LTCH population, the inclusion of many characteristics of the patients, such as diagnoses, comorbidities, surgeries, etc., does provide risk adjustment to account for patient mix that varies across facilities. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50872 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Comment: Some commenters stated that the LTCH measure should be made especially appropriate for and tailored for LTCHs. Response: The risk-adjustment model has been customized for LTCHs and includes predictors that are not present in the HWR model and a customized planned readmissions list. There is harmonization with other measures where reasonable and customization where appropriate. The tailoring of the measure is in the inclusion of particular risk adjustment variable types, such as the diagnoses, surgeries, intensive care days in the prior acute stay, and counts of prior acute admissions, as well as the statistical estimation of the effects of these variables using data specific to LTCH stays. Comment: One commenter suggested that, just as patients discharged against medical advice (AMA) are not counted in the measure, readmissions for patients deemed non-compliant with medical advice or a discharge plan should not be counted in the measure. Response: We believe the analogy to exclusion of discharges against medical advice is inaccurate. The AMA discharges are readily identifiable on claims submitted by LTCHs, the source of information used in the measure. These cases are completely excluded from the numerator and denominator. Non-compliance after discharge differs in that it can occur in degrees and be either voluntary or involuntary, such as when a patient does not have the assistance he or she needs to comply appropriately. We do not believe there is a clear marker for the point at which the patient should be excluded. We believe that the identification of such patients would be impractical at this time. For these reasons it is not possible to implement a non-compliance exclusion at this time. Comment: Some commenters believed that socioeconomic factors and dual eligibility for Medicaid should be accounted for in the model as well as other contextual factors. Response: The inclusion of factors related to socioeconomic status (SES) has been raised in the context of the Hospital IQR Program measures and our policy in that program omits them as explicit risk adjusters. Medicaid dual eligibility, which is related to income, is a socioeconomic factor, and is also not accounted for explicitly in Hospital IQR Program measures. The LTCH harmonizes with the other readmission measures in that respect (the Hospital IQR and the proposed IRFQR readmission measure). The effect of SES is similar in the case of LTCHs to the effects in the IPPS setting and the VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 reasoning for not explicitly accounting for SES is similar. The effect of levels of SES is captured to a great extent by other variables included in the model. The proposed readmission measure is a risk-standardized readmission measure that adjusts for case-mix differences based on the clinical status of the patient at the time of admission to the hospital. That is, they are risk-adjusted for certain key variables (for example, age, sex, comorbid diseases and a history of repeat admissions) that are clinically relevant and/or have been found to have strong relationships with the outcome. To the extent that race or socioeconomic status results in certain patient groups having a worse medical condition profile, those factors are accounted for in the measure. However, these measures are not specifically adjusted for factors such as race, SES, or English language proficiency. We believe such additional adjustments are not appropriate because the association between such patient factors and health outcomes can be due, in part, to differences in the quality of health care received by groups of patients with varying race/language/ SES. Differences in the quality of health care received by certain racial and ethnic groups may be obscured if the measures risk-adjust for race and ethnicity. In addition, risk-adjusting for patient race, for instance, may suggest that hospitals with a high proportion of minority patients are held to different standards of quality than hospitals treating fewer minority patients. We appreciate the concerns of hospitals that care for disproportionately large numbers of disadvantaged populations. Our analysis indicates that better quality of care is achievable regardless of the demographics of the hospital’s patients. The issue of the quality of care available after discharge is of concern to us and is being addressed by quality measures being proposed across the spectrum of care. The issue is also related to our major concern regarding the quality of transitions on discharge from the LTCH and care coordination. Comment: Some comments suggested that access to care in a community, from accessibility of providers to transportation, could affect readmission rates. They suggest that these factors be accounted for so that facilities are not disadvantaged. Response: We understand the concern about the effect of such factors and will consider how they might be accounted for during our future measure development efforts. Comment: One commenter recommended adding discharges to an IRF or IPF to the discharge destinations PO 00000 Frm 00378 Fmt 4701 Sfmt 4700 that serve as exclusions for the proposed measure. Response: We consider the IRF level of care for rehabilitation to be a nonacute level for this measure. Discharges to this setting do not serve as excluded cases and are treated the same as discharges to skilled nursing facilities, home health care and to the community without formal home health care. Direct discharges to an IPF are excluded from the measure. Readmissions to an IPF that are detected during the measure window are treated as planned and not counted in the numerator of the measure. Comment: Some commenters suggested exclusion of interrupted stays in the measure and clarification of treatment of discharges to collocated hospitals. Response: The proposed measure requires that a patient who has been discharged from an LTCH be considered for inclusion in the measure. Admissions occurring during an LTCH stay are not part of the measure. Interruptions may occur during the LTCH stay. Interruptions of 3 days or less do not result in a claim with a discharge and charges for any inpatient or outpatient treatment are sent to the LTCH. Stay interruptions longer than 3 days may result in Medicare receiving a separate bill from the other provider, though the patient is not formally discharged from the LTCH. An interruption of 4 to 9 days to an IPPS hospital is an example of this. There are also interrupted stays in which the patient is discharged to an IRF or a SNF. Those interruptions have longer defined spans. None of these is relevant for this measure. The Medicare claim for the LTCH stay must be for a discharged patient to be considered for inclusion in the measure. We evaluate the discharge record as to whether it is to a lower level of care. The rule for discharges to collocated hospitals depends on whether an interruption rule applies. If the claim shows that the patient is discharged to a collocated facility, not for an interruption, the treatment of the LTCH stay for the quality measure depends on the type of facility the patient is discharged to. The standard exclusions pertain. The special payment provisions for LTCHs that transfer more than 5 percent of cases to a collocated facility do have a direct relation to the quality measure. Whether cases are included in the measure depends the discharge claims observed in the Medicare data. Comment: Some commenters note that burn patients often need repeat hospitalizations and that the model does not account for that. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Response: The LTCH model could not include severe burn patients as a separate primary diagnosis group because the sample size in the national data was too small. The burn patients are included in the skin injury CCS diagnosis group. It was necessary to aggregate patient types with small numbers to include them in the model. As a very small group, such patients will have a small effect on the facility measure as a whole, and it is better to aggregate patient types to get a statistically significant average effect than to drop the small groups. The groupings were reviewed by a physician as they were being created, using clinical, sample size and estimated coefficients. In addition, we note that the Hospital-Wide All-Cause Unplanned Readmission Measure Final Technical Report (https://www.qualitynet.org/dcs/ ContentServer?c=Page&pagename= QnetPublic%2FPage%2FQnetTier4& cid=1228772504318) had enough sample size to look at the burn patients. This report is in the NQF submission (NQF #1789). The readmission rate following discharge from the IPPS setting was reported as average. To the extent the commenter’s concern is the number of readmissions that might occur, both the HWR measure and the LTCH measure do not count the number of readmissions in the post-discharge window, just the presence of at least one unplanned readmission. Comment: Some commenters wanted the list of planned readmissions to be larger and/or that the countable readmissions include only those related to the LTCH admission and/or those deemed preventable. One commenter proposed that the LTCHs themselves could code the planned readmissions. Response: The issue of all-cause readmissions, as opposed to a more focused set of readmission types, has been raised in other contexts, such as the Hospital IQR measure. Section 2.2.3 of the technical report in the HWR NQF Measure Submission Form for NQF ##1789 explains our decision regarding this issue. The link is on the QualityNet Web site.170 The same logic applies to the LTCH setting. Discussions with technical experts have led to our preference in the LTCH, as for the HWR measure, for using an all-cause measure rather than a measure specific to a narrow set of conditions. The latter is possible when the population being measured is narrowly defined and 170 QualityNet. Hospital-wide All-Cause Unplanned Readmission (HWR) Measure. Available at https://www.qualitynet.org/dcs/ContentServer? c=Page&pagename=QnetPublic%2FPage%2 FQnetTier4&cid=1228772504318. As obtained on July 8, 2013. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 certain complications are being targeted. For broader measures, covering patients with multiple medical conditions, a narrow set of readmission types is not desirable. In addition, readmissions may be clinically related even if they are not related to the principal diagnosis of the patient. One of the primary purposes of the measure is to encourage improved transitions at discharge and choice of discharge destination. Some readmissions can occur that are less related to the primary condition being treated in the LTCH than to the coordination of care post-discharge. For instances where the readmission is likely random, such as a car accident, we expect these events not to be systematically distributed among the LTCHs. Therefore, we have chosen to reduce the all-cause readmission set by excluding readmissions that are frequently planned or expected. The Hospital IQR set of planned readmissions has been augmented for LTCHs by further recommendations by technical experts in the field of postacute care. In 2010–2011 data, nearly 9 percent of readmissions are considered planned. As to the suggestion that LTCHs code the planned readmissions, many of these do not occur during the LTCH stay and so could not be coded. Some planned readmissions would be interruptions of a stay and not be part of the measure. Some long interruptions could become discharges and could be coded, in principle, but these discharges would not be included in the measure because the readmission would have been a direct discharge to the acute hospital. The remaining post-discharge planned admissions that occur in the measure window are not under the control of the LTCH to code. We intend to continue its measure development work to further refine the planned readmission set after implementation of the proposed measure. Comment: Some commenters suggested that more than two years of data be included in the measure to increase sample size. Response: The two years of data for each report period is a compromise between sample size and timeliness. In this case the total number of LTCH stays in one year of national data is much smaller than the number of IPPS stays. The HWR measure uses one year of data. However, though the number of LTCH stays in the national data is small relative to the IPPS stays, two years of data yield good sample sizes at the LTCH level. In the 2010–2011 data, 95 percent of LTCHs have more than 100 patients averaged in their measure. The PO 00000 Frm 00379 Fmt 4701 Sfmt 4700 50873 number of stays at the LTCH level is important for the precision of the LTCH measure. We do not think that three years of data are needed and the measure can be more current with 2 years. Comment: Some commenters are concerned about the statistical power of the model and specifically the C statistic. Response: The C statistic is one of the statistical criteria used in evaluating risk adjustment models. The acuity of patients in LTCHs is not uniform, though it is concentrated at the higher end of the spectrum. The relatively high readmission rate for LTCH patients postdischarge indicates that differentiating among the patients who have multiple medical conditions is challenging at the individual level. We note, however, that the risk-adjusted rates for LTCHs are not being compared to other facility types with a different patient mix. Though the LTCH C statistic is not as high as in some patient populations with a greater acuity span, the range of discrimination from the lowest to highest deciles of probability of readmission for individuals is quite good. The lowest decile has an average probability of an unplanned readmission of about 13 percent; the average in the highest decile is about 43 percent. The full range of patient readmission probabilities in the observed data (2010–2011) ranges from about 5 percent to about 64 percent. The risk adjustment model has a wide range of discrimination. In addition, other tests indicate the over- and under-prediction values throughout the deciles of predicted probability are good. Comment: A few commenters requested that data for all patients be made available to LTCHs to track the patients after discharge. One commenter suggested monthly or quarterly transmissions of notices of readmission and made the case that the identifiable data would be HIPAA-compliant. Commenters also requested that historical rates be made available to the facilities. Response: We recognize the value for LTCHs being able to track patients’ readmissions to other hospitals in real time both for an LTCH’s internal quality improvement purpose and for validating our readmission measure criteria. Further, we appreciate commenters request for historical rates. We will consider whether it is operationally possible to provide these data to LTCHs and whether sharing these data would be consistent with patient privacy considerations. Further, we note that the readmission rates will be made available to each LTCH from the first dry run E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50874 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations year, prior to implementation of the readmission measure as part of the LTCHQR Program. Comment: A few commenters were concerned about the appropriateness of a time window of 30 days postdischarge as a measure of readmission rate. Response: We have observed a continuous curve as readmissions increase over time. There is no discontinuity on which to base a cut-off point. The TEP has considered longer and shorter time intervals, but did not find a clear case that the measures for facilities, relative to each other, would vary meaningfully. A much shorter interval would have fewer events, making each event relatively more important in computing a rate. A much longer interval would bring in more random events. The 30-day interval is an interval that harmonizes with other measures and was found reasonable by the technical panel, which included industry representation. We will include a graph of readmissions over time as illustrative material in the final technical specifications prior to measure implementation. Comment: Two comments pointed out that LTCHs often discharge to another provider and that the attribution of any readmission might not belong to the LTCH because of limited control of the care at that point. Response: We have harmonized this measure with the other inpatient readmission measures in this respect. Stays that result in a discharge to another acute provider are not included in the measure. Patients that are discharged to a lower level of care are those for which attribution is made to the LTCH. There are two main considerations in making this decision: (1) The discharging facility should be making a best effort to discharge its patients to the best setting and provider for the patients in the transition planning; and (2) it is intended the discharging facility will be sharing responsibility with the admitting provider for any readmission in the common part of their observation windows. Measures are being developed for other providers that will result in attribution of responsibility to these providers as well. Comment: Some commenters expressed concern that CMS had not convened a TEP for this measure and requested that one be convened. Response: Our measure development contractor has convened several meetings of a TEP (including representatives of the LTCH community). During these meetings, TEP members were consulted to inform VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 our measure development efforts, including selection of the list of planned readmissions. Comment: One commenter expressed concern over burden of data collection for the LTCH readmission measure. Response: As we noted in the proposed rule and the measure specifications, this measure is based on claims and enrollment data. We do not require LTCHs to submit any data of a non-routine nature for the purpose of this measure. Therefore, there is no additional data collection or reporting burden associated with this measure. Comment: One commenter requested that the statement in the measure specification concerning definitions of planned readmissions be explicitly stated in the rule. Response: We included definitions of planned readmissions in the draft LTCH Readmissions Measure Specifications file available for download at the time of release of the proposed rule at: https://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/. Generally, we include Web links to measure specifications rather than including the specification in the proposed or final rule. Comment: One commenter wanted CMS to clarify that the LTCH stays included in the measure are only for patients discharged to the community or another setting of lesser intensity than an acute care facility. Response: We addressed this clearly in the proposed rule as well as in the measure specifications. The measure excludes patients discharged and directly admitted to an IPPS hospital, CAH or LTCH at the time of an LTCH discharge. In addition, the measure excludes discharges against medical advice (as noted in measure specifications). After consideration of the public comments we received, we are finalizing the All-cause Unplanned Readmission Measure for 30 days PostDischarge from Long-Term Care Hospitals, as proposed. c. New LTCHQR Program Quality Measure for the FY 2018 Payment Determination and Subsequent Years We proposed one new quality measure, Application of the Percent of Residents Experiencing One or More Falls with Major Injury (Long Stay) (NQF #0674), for the LTCHQR Program for the FY 2018 payment determination and subsequent years. This NQF-endorsed measure is an outcome measure that reports the percentage of residents (or patients for the LTCH setting) who experienced falls PO 00000 Frm 00380 Fmt 4701 Sfmt 4700 with major injury over a 12-month period. This measure was developed by CMS and is NQF-endorsed for the Nursing Home/Skilled Nursing Facility setting. Similar to our measure development work for the Pressure Ulcer measure (NQF #0678) and expansion to the LTCH setting, we anticipate re-specifying and expanding this measure to the LTCH setting through NQF ad hoc review and future rulemaking. Research indicates that fall-related injuries are the most common cause of accidental death in people aged 65 and older, with approximately 41 percent of accidental deaths annually.171 Rates increase to 70 percent of accidental deaths amongst individuals ages 75 and older.172 In addition to death, falls can lead to fracture, soft tissue or head injury, fear of falling, anxiety and depression.173 Research also indicates that approximately 75 percent of nursing facility residents fall at least once a year, twice the rate of their counterparts in the community.174 Similar data are not available for the LTCH setting. Falls also represent a significant cost burden to the entire health care system, with injurious falls accounting for 6 percent of medical expenses among those age 65 and older.175 According to analysis of ICD–9 codes reported on Medicare claims, LTCHs reported 2,567 major injuries due to falls in 2009. POA indicators are not available on LTCH claims; therefore, we are unable to say whether these conditions are present on admission or acquired during the LTCH stay. Therefore, it was not possible to determine which of these falls occurred in the LTCH. However, we note that on the majority of claims, the primary diagnosis is the admitting diagnosis and is considered to be present on admission and therefore, the secondary diagnoses can be assumed to provide a count of conditions that could have been acquired in the LTCH.176 When it 171 Currie LM. Fall and injury prevention. Annu Rev Nurs Res. 2006;24:39–74. 172 Fuller GF. Falls in the elderly. Am Fam Physician. Apr 1 2000;61(7):2159–2168, 2173–2154. 173 Premier Inc. Causes of Falls. 2013. Available: https://www.premierinc.com/quality-safety/toolsservices/safety/topics/falls/causes_of_falls.jsp. 174 Rubenstein LZ, Josephson KR, Robbins AS. Falls in the nursing home. Ann Intern Med. 1994 Sep 15; 121(6):442–51. 175 Rubenstein LZ, Powers CM, MacLean CH. Quality indicators for the management and prevention of falls and mobility problems in vulnerable elders (ACOVE). Ann Intern Med. 2001 Oct 16;135(8 Pt 2):686–93. 176 Centers for Medicare & Medicaid Services Center for Medicare & Medicaid Innovation. Hospital Acquired Conditions (HAC)—Report to E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 was assumed that a fall recorded in the primary diagnosis code was likely present on admission and that a fall recorded in the secondary diagnosis code was acquired in the LTCH, there were 2,049 reported injuries that may have been acquired in the LTCH.177 According to Morse (2002), 78 percent of falls are anticipated physiologic falls. Anticipated physiological falls are falls amongst individuals who scored high on a risk assessment scale, meaning their risk could have been identified in advance of the fall.178 To date, studies have identified a number of risk factors for falls.179 180 181 182 183 184 185 186 187 The identification of such risk factors suggests the potential for health care facilities to reduce and prevent the incidence of falls for their patients. In light of the evidence discussed above, we proposed an application of the measure NQF #0674 Percent of Residents Experiencing One or More Falls with Major Injury (Long Stay), for the LTCHQR Program for the FY 2018 Congress. Available at https://innovation.cms.gov/ Files/x/HospAcquiredConditionsRTC.pdf. 177 Bernard SL, Dalton K, Lenfestey N F, Jarrett NM, Nguyen KH, Sorensen AV, Thaker S, West ND. Study to support a CMS Report to Congress: Assess feasibility of extending the hospital-acquired conditions—present on admission IPPS payment policy to non-IPPS payment environments. Prepared for the Centers for Medicare & Medicaid Services (CMS Contract No. HHSM–500–T00007). 2011. 178 Morse, J. M. (2002) Enhancing the safety of hospitalization by reducing patient falls. Am J Infect Control 2002; 30(6): 376–80. 179 Rothschild JM, Bates DW, Leape LL. Preventable medical injuries in older patients. Arch Intern Med. 2000 Oct 9; 160(18):2717–28. 180 Morris JN, Moore T, Jones R, et al. Validation of long-term and post-acute care quality indicators. CMS Contract No: 500–95–0062/T.O. #4. Cambridge, MA: Abt Associates, Inc., June 2003. 181 Avidan AY, Fries BE, James ML, Szafara KL, Wright GT, Chervin RD. Insomnia and hypnotic use, recorded in the minimum data set, as predictors of falls and hip fractures in Michigan nursing homes. J Am Geriatr Soc. 2005 Jun; 53(6):955–62. 182 Fonad E, Wahlin TB, Winblad B, Emami A, Sandmark H. Falls and fall risk among nursing home residents. J Clin Nurs. 2008 Jan; 17(1):126– 34. 183 Currie LM. Fall and injury prevention. Annu Rev Nurs Res. 2006;24:39–74. 184 Ellis AA, Trent RB. Do the risks and consequences of hospitalized fall injuries among older adults in California vary by type of fall? J Gerontol A Biol Sci Med Sci. Nov 2001;56(11):M686–692. 185 Chen XL, Liu YH, Chan DK, Shen Q, Van Nguyen H. Chin Med J (Engl). Characteristics associated with falls among the elderly within aged care wards in a tertiary hospital: a retrospective. 2010 Jul;123(13):1668–72. 186 Frisina PG, Guellnitz R, Alverzo J. A time series analysis of falls and injury in the inpatient rehabilitation setting. Rehabil Nurs. 2010 JulAug;35(4):141–6, 166. 187 Lee JE, Stokic DS. Risk factors for falls during inpatient rehabilitant. Am J Phys Med Rehabil. 2008 May;87(5):341–50; quiz 351, 422. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 payment determination and subsequent years. We note that, while NQF #0674 is currently endorsed only for long stay nursing home residents, we believe that an application of this measure is highly relevant for the LTCH setting. As stated above, many patients receiving care in the LTCH setting are elderly and are at high risk for death and other injuries due to falls. A TEP convened by our measure development contractor discussed potential quality measures for the LTCH setting and stressed that falls with major injury are a major concern in LTCH setting. In section 1886(m)(5)(D)(ii) of the Act, the exception authority provides that ‘‘[i]n the case of a specified area or medical topic determined appropriate by the Secretary for which a feasible and practical measure has not been endorsed by the entity with a contract under section 1890(a) of the Act, the Secretary may specify a measure that is not so endorsed as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary.’’ We reviewed NQF’s consensus endorsed measures and were unable to identify any NQF-endorsed measures for falls with major injury in the LTCH setting. We are unaware of any other measures for falls with major injury that have been endorsed or adopted by another consensus organization for the LTCH setting. Therefore, we proposed to adopt an application of the NQF-endorsed measure Percent of Residents Experiencing One or More Falls with Major Injury (Long Stay) (NQF #0674) for use in the LTCH setting for the LTCHQR Program under the Secretary’s authority to select non-NQF-endorsed measures. As mentioned previously, we are considering applying for NQF review for endorsement of this measure to the LTCH setting as part of the measure expansion process. Additional information regarding NQF #0674, on which our application of the measure is based, including measure specifications, is available at: https:// www.qualityforum.org/QPS/0674. The use of different applications of the same quality measure across multiple healthcare settings is also consistent with the 2008 NQF steering committee recommendation that ‘‘in the interest of standardization and minimizing the burden for those implementing and using measures, measure harmonization is an important consideration in evaluating and recommending measures PO 00000 Frm 00381 Fmt 4701 Sfmt 4700 50875 for endorsement.’’ 188 Data on NQF #0674 is currently collected and reported on Nursing Home Compare as part of the Nursing Home Quality Initiative.189 We proposed that data for the proposed application of NQF #0674 will be collected through the LTCH CARE Data Set,190 with submission through the QIES ASAP System, as described in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53619 through 53621). For more information on LTCHQR Program reporting using the QIES ASAP system, we refer readers to the Web site at: https://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/ LTCHTechnicalInformation.html. We intend to revise the LTCH CARE Data Set to include new items which assess the presence of falls and falls with major injury. These new items will be applied to all LTCH patients and will not distinguish between long stay versus short stay patients since this categorization is not applicable to the LTCH setting. The items used for the application of the quality measure are based on the items from the Minimum Data Set (MDS) 3.0, version 1.13.0 (1/17/13) items J1800 (Any Falls Since Admission/Entry or Reentry or Prior Assessment) and J1900A., B. and C. (Number of Falls (A. with no injury, B. with injury (except major), C. with Major injury)) since Admission/Entry or Reentry or Prior Assessment), available at: https://www.cms.gov/Medicare/ Quality-Initiatives-Patient-AssessmentInstruments/NursingHomeQualityInits/ NHQIMDS30Technical Information.html. The calculation of the proposed application of the measure will be based on item J1900C, Number of Falls with major injury, since admission. The specifications and data elements for NQF #0674 are available in the MDS 3.0 Quality Measures User’s Manual Version 6.0 available on our Web site at https://www.cms.gov/ 188 National Quality Forum (2008, December) National Voluntary Consensus Standards for influenza and pneumococcal vaccinations. Available from: https://www.qualityforum.org/ Publications/2008/12/National_Voluntary_ Consensus_Standards_for_Influenza_and_ Pneumococcal_Immunizations.aspx. 189 Nursing Home Quality Initiative, Quality Measures. December 2012. Available: https://www. cms.gov/Medicare/Quality-Initiatives-PatientAssessment-Instruments/NursingHomeQualityInits/ NHQIQualityMeasures.html. 190 The LTCH CARE Data Set Version 2.01 was approved on June 10, 2013 by OMB in accordance with the PRA. The OMB Control Number is 0938– 1163. Expiration Date June 30, 2016. Available at https://www.cms.gov/Regulations-and-Guidance/ Legislation/PaperworkReductionActof1995/PRAListing-Items/CMS1252160.html. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50876 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Medicare/Quality-Initiatives-PatientAssessment-Instruments/NursingHome QualityInits/MDS30RAIManual.html. By building on the existing reporting and submission infrastructure for LTCHs, (the LTCH CARE Data Set, which we began using for data collection on October 1, 2012, for the Pressure Ulcer measure), we intend to reduce the burden related to data collection and submission for this measure under the LTCHQR Program. We refer readers to section IX.C.9. of the preamble of this final rule for more information on data collection and submission. We invited public comment on this proposed measure and data collection and submission for the proposed measure for the FY 2018 payment determination and subsequent years. Comment: A few commenters supported the adoption of an Application of the Percent of Residents Experiencing One or More Falls with Major Injury (Long Stay) (NQF #0674) for the LTCHQR Program for the FY 2018 payment determination and subsequent years. The commenters expressed that falls with major injury are an important safety concern in LTCHs, especially amongst frail and elderly patients, and this measure would reinforce efforts of LTCHs to provide high quality care. Response: We thank the commenters for their support of this measure for the LTCHQR Program and agree that falls with major injury are an important patient safety concern in LTCHs. Comment: Several commenters expressed concerns regarding the implementation of Percent of Residents Experiencing One or More Falls with Major Injury (Long Stay) (NQF #0674) to the LTCH setting prior to NQF endorsement and expansion to the LTCH setting. These commenters stated that this measure was developed for the long-stay nursing home population and that the patient populations in LTCHs and nursing homes are very different due to the medically complex and acute hospital needs of LTCH patients. Further, these commenters argued that the measure has not been adequately developed, specified or tested for the LTCH setting. While these commenters supported alignment and harmonization across settings, they strongly encouraged CMS to obtain NQF endorsement of this measure prior to expansion to the LTCH setting. Further, one commenter stated that this measure should undergo full NQF review, using the Consensus Development Process, rather than time-limited review. The commenter also stated that although the MAP supported the direction of the VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 measure, but it concluded that the measure was ‘‘not ready for implementation,’’ ‘‘requires modification or further development,’’ and ‘‘should be specified and tested for the LTCH setting.’’ Finally one commenter remarked that CMS should convene a TEP, which includes experts from the LTCH setting to review the applicability of this measure to that setting. Response: Although we agree that LTCHs are different from nursing homes in terms of medical complexity and patient needs, we do not agree that the definition of falls with major injury as well as guidelines for prevention of falls in health care settings is substantially different across nursing homes versus LTCHs. We appreciate the commenters’ concerns regarding NQF endorsement and recognize that obtaining NQF endorsement is an important step in the measure development process. However, given the fact that falls with major injury is an important patient safety concern in LTCHs, along with the lack of availability of NQF endorsed measures for the LTCH setting, or measures endorsed by any other consensus organizations, we proposed this measure under the exception authority given to the Secretary in section 1886(m)(5)(D)(ii) of the Act, that allows CMS to apply a measure to the LTCH setting that is not NQF-endorsed for the LTCH setting. While this measure is currently endorsed for the nursing home setting, we believe the data collection items, measure definition and measure specifications are applicable across multiple healthcare settings, including the LTCH setting. In addition, our measure development contractor has convened a TEP that provided feedback on this measure and supported the importance of a quality measure to address falls with major injury. We appreciate the commenters’ input on finalizing a measure for which the MAP supported direction. We note that we have taken the MAP’s input into consideration in selecting quality measures, as we are required to do under section 1890(a)(4) of the Act. However, we are not required to follow the MAP’s recommendations, but to take them into account when selecting measures for proposal. In addition to MAP input, we take a variety of other factors into account in selecting measures. In this instance, for example, an application of the Percent of Residents Experiencing One or More Falls with Major Injury (Long Stay) measure (NQF #0674) is NQF-endorsed for the LTCH setting, an indication that it is appropriate for LTCH patients. In PO 00000 Frm 00382 Fmt 4701 Sfmt 4700 addition, this measure is appropriate in light of the fact that fall-related injury is an important patient safety concern for LTCH patients. For the reasons listed above, this measure is appropriate for LTCH patients. Comment: One commenter expressed concern regarding the definition of falls with major injury. The commenter suggests that CMS work with LTCHs to establish common definitions of both falls and major injuries, as there are currently inconsistencies of the definitions used across facilities. The commenter expressed that the definitions need to be developed for the specific needs of the LTCH population. In addition, since LTCHs may care for long-term behavioral patients, falls will need to relate separately to medical and behavioral patients treated in those settings. Response: We agree with the commenters that it is important to develop definitions of both falls and major injury, and this goal aligns with the NQF steering committee recommendation for measure harmonization across settings.191 We believe that the definition of falls with major injury should be harmonized across healthcare settings since falls with major injury are setting-neutral concepts, should be defined and applied in the same way to all patients across healthcare settings, where appropriate, and that special exceptions to such definitions should not be made based on a specific patient population (such as behavioral patients). The definitions for these concepts were carefully developed and tested in the nursing home setting and data suggests both validity and reliability for the definitions included in this measure. Although this measure was developed in nursing homes, and measure-specific data analysis and data reporting falls with major injury among the elderly has primarily been conducted in nursing homes, and while LTCHs are not entirely identical to nursing homes, these two post-acute settings have overlap in their patient populations and their risk factors. A 2009 report prepared by RTI International found similarities in age, race and illness severity across LTCHs and nursing homes (https://aspe.hhs.gov/health/ reports/09/pacihs/report.pdf). This study also found that the location of a 191 National Quality Forum (2008, December) National Voluntary Consensus Standards for influenza and pneumococcal vaccinations. Available from: https://www.qualityforum.org/ Publications/2008/12/National_ Voluntary_Consensus_Standards_for_ Influenza_and_ Pneumococcal_Immunizations.aspx. E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations PAC referral is sometimes made based on nonclinical factors such as geographic availability and hospital affiliations. The similarities between the facilities and the potential overlap in patients, along with nonclinical factors that affect where a patient is treated, all suggest that research regarding nursing home residents, the MDS 3.0, and the use of quality measures in the nursing home setting, is applicable to LTCHs and the LTCH CARE Data Set. After consideration of the public comments we received, we are finalizing our proposal to adopt the Application of the Percent of Residents Experiencing One or More Falls with Major Injury (Long Stay) (NQF #0674), for the LTCHQR Program for the FY 2018 payment determination and subsequent years. d. LTCHQR Program Quality Measures and Concepts Under Consideration for Future Years Payment Determinations 50877 the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27730), we invited public comment on these measures and measure topics, specifically comments regarding the clinical importance, feasibility of data collection and implementation, current use, and usability of data to inform quality improvements in the LTCH setting. We are considering the measures and measure topics in the table below for future years in the LTCHQR Program. In FUTURE MEASURES AND MEASURE TOPICS UNDER CONSIDERATION FOR THE LTCH QUALITY REPORTING PROGRAM mstockstill on DSK4VPTVN1PROD with RULES6 National Quality Strategy Priority: Safety and Healthcare-Associated Infections HAIs: • Surgical Site Infection. • Ventilator-Associated Event. • Ventilator Bundle. National Quality Strategy Priority: Safety and Healthcare-Acquired Conditions: Avoidable Adverse Events and Serious Reportable Events: • Manifestations of Poor Glycemic Control. National Quality Strategy Priority: Effective Clinical Processes: • Severe Sepsis and Septic Shock: Management Bundle. • Application of Venous Thromboembolism Prophylaxis (NQF #0371). • Ventilator Weaning Rate. National Quality Strategy Priority: Patient Safety. • Application of Hospital-Based Inpatient Psychiatric Services (HBIPS)—2 Hours of Physical Restraint Use (NQF #0640). • Application of Percent of Residents Who Were Physically Restrained (Long-Stay) (NQF #0687). National Quality Strategy Priority: Patient and Caregiver-Centered Care: • Depression Assessment and Management. • Functional Change. • Application of HCAHPS (NQF #0166). • Application of Pain Management (for example, Percent of Residents Who Self-Report Moderate to Severe Pain (Short-Stay) (NQF #0677)). National Quality Strategy Priority: Communication and Coordination of Care: • Application of Medication Reconciliation (NQF #0097). • Application of Medication Reconciliation Post-Discharge (NQF #0554). • Reconciled Medication List Received by Discharged Patients (NQF #0646). • Transition Record with Specified Elements Received by Discharged Patients (NQF #0647). • Timely Transmission of Transition Record (NQF #0648). Comment: Several commenters expressed the need for a care coordination measure. Commenters supported implementation of two care coordination measures, the Hospital Consumer Assessment of Healthcare Providers and Systems Survey (HCAHPS) and the Care Transition Measure 3-Question Survey (CTM–3). One commenter noted that it would be helpful if CMS required a standardized LTCH patient satisfaction survey. Another commenter specifically noted that in order for CMS to take the lead in identifying palliative care measures appropriate for LTCHs, the HCAHPS survey should be a high priority in continuing measure development. One commenter advocated for the development and implementation of an LTCH-specific HCAHPS, which would broaden the survey to family members and surrogates if the patient is unable to self-report. This commenter also suggested that the survey be VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 disseminated at the time of discharge to avoid having to locate the patient later. Response: We appreciate the commenters’ support of these measures, and we will take their comments into consideration in our measure development efforts as well as in our ongoing efforts to identify and propose appropriate measures for the LTCHQR Program in the future. Comment: Two commenters encouraged CMS to consider implementing palliative care-related measures into the LTCHQR Program. Both commenters supported measures related to pain management, and one of the commenters recommended that depression assessment and management and functional change measures should continue to be priorities for LTCHQR Program measure development. These commenters urged CMS to work with measure developers to create and test these measures to be specifically appropriate for the LTCH setting. Response: We thank the commenters for the comments and suggestions and PO 00000 Frm 00383 Fmt 4701 Sfmt 4700 will take these into consideration as we develop future measures for the LTCHQR Program. Comment: One commenter expressed specific support for the Ventilator Weaning Rate measure and noted that it would serve as an indication of how well the LTCH is able to remove CCI patients from being dependent on ventilators. One commenter supported Surgical Site Infection (SSI) and sepsis measures and recommended that they should continue to be priorities in LTCHQR Program measure development. One commenter proposed the inclusion of a malnutrition-related quality measure for future use in the LTCHQR Program, as malnourishment can be associated with many other areas of quality measurement that are already implemented in the LTCHQR Program. The commenter suggested that adding a malnourishment measure to the LTCHQR Program would address this significant ‘‘gap’’ area and align E:\FR\FM\19AUR2.SGM 19AUR2 50878 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations priorities and incentives across care settings. Response: We appreciate the commenters’ support of these measures and we will take their comments into consideration as we develop future measures for the LTCHQR Program. Comment: One commenter suggested that CMS consider the MAP recommendations to pursue measures of Experience of Care, Care Planning, Implementing Patient/Family/Caregiver Goals, and Avoiding Unnecessary Hospital and ED Admissions. The commenter encouraged CMS to take the lead in identifying measures to address these concepts in the LTCH setting. Response: We will continue to work with the MAP as well as LTCH stakeholders to identify measure concepts and measures that address HHS priorities, align with quality initiatives in other settings, are evidence-based, have a low probability of unintended adverse consequences, and may drive quality improvement. We thank the commenters for the comments and suggestions and we will consider them as we develop future measures. 9. Form, Manner, and Timing of Quality Data Submission for the FY 2016 Payment Determination and Subsequent Years a. Background Section 1886(m)(5)(C) of the Act requires that, for the FY 2014 payment determination and subsequent years, each LTCH submit to the Secretary data on quality measures specified by the Secretary and that such data shall be submitted in a form and manner, and at a time, specified by the Secretary. As required by section 1886(m)(5)(A)(i) of the Act, for any LTCH that does not submit data in accordance with section 1886(m)(5)(C) of the Act with respect to a rate year, the Secretary will reduce any annual update to the standard Federal rate for discharges for the hospital during the rate year by two percentage points. All LTCHs will be required to collect data using the LTCH CARE Data Set (Version 2.01).192 The LTCH CARE Data Set (Version 2.01) was approved on June 10, 2013, by the Office of Management and Budget in accordance with the Paperwork Reduction Act (PRA); the OMB Control Number is 0938–1163. Later in 2013, we will release the final technical data submission specifications and updated LTCHQR Program Manual for the LTCH CARE Data Set (Version 2.01) containing items related to NQF #0680. The Quality Improvement and Evaluation System (QIES) Assessment Submission and Processing (ASAP) System will remain the data submission mechanism for the LTCH CARE Data Set. Further information on data submission of the LTCH CARE Data Set for the LTCHQR Program Reporting using the QIES ASAP system is available at: https://www.qtso.com/ and https://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/ LTCHTechnicalInformation.html. b. Finalized Timeline for Data Submission Under the LTCHQR Program for the FY 2016 Payment Determination In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53636 through 53637), we finalized the data submission timeline for measures for the FY 2016 payment determination. LTCHs are required to submit data on LTCH admissions and discharges occurring from January 1, 2014 through December 31, 2014 (CY 2014) for the FY 2016 payment determination. We adopted this timeframe because we believe this will provide sufficient time for LTCHs and CMS to put processes and procedures in place to meet the additional quality reporting requirements. We also finalized in this rule the quarterly submission deadlines for the FY 2016 payment determination as approximately 45 days after the end of each quarter, as outlined in the table below. This is the date by which all data collected during that quarter must be submitted to CMS for measures using the LTCH CARE Data Set and to CDC for measures using the CDC’s NHSN. FINALIZED TIMELINE FOR SUBMISSION OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2016 PAYMENT DETERMINATION Data collection timeframe: CY 2014 Q1 Q2 Q3 Q4 (January–March 2014) ....................................................................................................................................................... (April–June 2014) .............................................................................................................................................................. (July–September 2014) ..................................................................................................................................................... (October–December 2014) ................................................................................................................................................ c. Timeline for Data Submission for the NQF #0431 Influenza Vaccination Coverage Among Healthcare Personnel Measure for the FY 2016 Payment Determination and Subsequent Years mstockstill on DSK4VPTVN1PROD with RULES6 Submission deadline In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53630 through 53631) we finalized the adoption of the Influenza Vaccination Coverage among Healthcare Personnel (NQF #0431) measure for the FY 2016 payment determination. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53636) we also finalized the data collection period for the FY 2016 payment determination to be January 1, 192 The LTCH CARE Data Set Version 2.01 was approved on June 10, 2013 by OMB in accordance with the PRA. The OMB Control Number is 0938– VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 May 15, 2014. August 15, 2014. November 15, 2014. February 15, 2015. 2014 through December 31, 2014. As noted in IX.C.7.a. of the preamble to the proposed rule, there is a unique seasonality in the timing of influenza activity each year. The CDC, the steward of this measure, recommends that people get vaccinated against influenza as long as influenza viruses are circulating. We proposed that, for the LTCHQR Program, the Influenza Vaccination Coverage among Healthcare Personnel measure (NQF #0431) have its own reporting period to align with the influenza vaccination season, which is defined by the CDC as October 1 (or when the vaccine becomes available) through March 31of the subsequent year for the influenza season. This timeline is consistent with how the NQF specifies this measure. Further details related to the procedures for using the CDC’s NHSN for data submission and measure specifications for the Influenza Vaccination Coverage among Healthcare Personnel (NQF #0431) measure can be found at: https://www.qualityforum.org/ QPS/0431 and https://www.cdc.gov/ nhsn/LTACH/hcp-flu-vac/. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27731), we stated 1163. Expiration Date June 30, 2016. Available on the Web site at: https://www.cms.gov/Regulations- and-Guidance/Legislation/PaperworkReductionAct of1995/PRA-Listing-Items/CMS1252160.html. PO 00000 Frm 00384 Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations that if our proposal in IX.C.7.a. of the preamble to the proposed rule is finalized, LTCHs would be required to report data on the Influenza Vaccination Coverage among Healthcare Personnel (NQF #0431) measure from October 1, 2014 or the date on which the vaccine becomes available, whichever occurs first, through March 31, 2015 for the 2014–2015 influenza season for FY 2016 payment determination. We also proposed that this October (or when vaccine becomes available) through March reporting period for the Influenza Vaccination Coverage among Healthcare Personnel (NQF #0431) measure would apply to the FY 2016 payment determination and subsequent years. Comment: Several commenters provided input on the proposed data collection and reporting timelines for NQF #0431, Influenza Vaccination Coverage Among Healthcare Personnel. Response: We refer readers to section IX.C.7.a. of the preamble of this final rule for responses to the comments regarding the timelines for this measure. After consideration of the public comments we received (as discussed in section IX.C.7.a. of the preamble of this final rule), we are finalizing the data collection and reporting timeline for NQF #0431, Influenza Vaccination Coverage Among Healthcare Personnel for the FY 2016 payment determination and subsequent years. d. Timeline for Data Submission for the NQF #0680 Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short Stay) Measure for the FY 2016 Payment Determination and Subsequent Years In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53624 through 53627), we finalized the adoption of the Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short Stay) (NQF #0680) measure for the FY 2016 payment determination. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53637) we also finalized the data collection period for the FY 2016 payment determination to begin January 1, 2014 and continue through December 31, 2014. This measure will be collected using the LTCH CARE Data Set. The LTCH CARE Data Set (version 2.01),193 the proposed data collection instrument for this measure, was approved on June 10, 2013, by the Office of Management and Budget in accordance with the Paperwork Reduction Act (PRA); the OMB Control Number is 0938–1163. We generally allow 9–12 months for LTCHs to comply with and integrate the requisite changes to new versions of data sets into their existing IT infrastructure, and to train staff members. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27731 through 277322), because summer 2013 approval of the LTCH CARE Data Set version 2.01 would only allow 6 months for LTCHs to put plans and procedures into place, we proposed to move the start date for data collection of this measure to April 1, 2014, instead of the previously finalized start date of January 1, 2014. Data collection and submission of this measure will continue through December 31, 2014, for the FY 2016 payment determination. This proposed change would only affect CY 2014 reporting. We proposed that for all subsequent years this measure will be collected on a calendar year basis beginning on January 1 and continuing through December 31 of each year. We invited public comment on these proposed data collection and submission timeframes for NQF #0680 for the FY 2016 payment determination. Comment: Several commenters provided input on the proposed data collection and reporting timelines for 50879 NQF #0680, Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short Stay). We present these comments, in detail, in section IX.C.7.b. of the preamble of this final rule. Response: We refer readers to section IX.C.7.b. of the preamble of this final rule for responses to the comments regarding the timelines for this measure. After consideration of the public comments we received, we are finalizing a revised data collection and reporting timeline. Starting with the 2014–2015 influenza vaccination season, data collection for the Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (short-stay) measure (NQF #0680), will be required for any patient admitted or discharged between October 1 and April 30. Data collection and submission deadlines for the FY 2016 payment determination are illustrated in the table below. We note that similar deadlines apply in subsequent years. In addition, we are finalizing our proposal that the measure calculation and public reporting of this measure (once public reporting is instated) will be based on the influenza vaccination season. Further, we are also finalizing that the start date for LTCH CARE Data Set Version 2.01 will be July 1, 2014 in place of April 1, 2014 allowing providers and vendors an additional 3-months to prepare for the implementation of LTCH CARE Data Set Version 2.01, which contains the data items that will be used by LTCHs to submit quality measure data for this measure. The items for NQF #0680 on the LTCH CARE Data Set Version 2.01 will be required starting on October 1, 2014. Set out below are the data collection timelines and submission deadlines for the FY 2016 payment determination. TIMELINE FOR DATA COLLECTION OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2016 PAYMENT DETERMINATION NQF Measure ID mstockstill on DSK4VPTVN1PROD with RULES6 NQF NQF NQF NQF NQF #0138* ....................... #0139* ....................... #0678* ....................... #0680** ...................... #0431** ...................... Data collection timeframe January January January October October 1, 1, 1, 1, 1, 2014–December 31, 2014. 2014–December 31, 2014. 2014–December 31, 2014. 2014–April 30, 2015.** 2014 (or when vaccine becomes available)–March 31, 2015.** * The data collection period for this measure was finalized in the FY 2013 IPPS/LTCH PPS final rule. ** This data collection timeframe for this measure is finalized in this final rule. 193 The LTCH CARE Data Set Version 2.01 was approved on June 10, 2013 by OMB in accordance with the PRA. The OMB Control Number is 0938– VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 1163. Expiration Date June 30, 2016. Available at https://www.cms.gov/Regulations-and-Guidance/ PO 00000 Frm 00385 Fmt 4701 Sfmt 4700 Legislation/PaperworkReductionActof1995/PRAListing-Items/CMS1252160.html. E:\FR\FM\19AUR2.SGM 19AUR2 50880 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations TIMELINE FOR SUBMISSION OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2016 PAYMENT DETERMINATION NQF #0138*, NQF #0139*, NQF #0678* Final submission deadlines for the LTCHQR Program FY 2016 payment determination Data collection timeframe: CY 2014 Q1 Q2 Q3 Q4 (January–March 2014) ....................................................................................................................................................... (April–June 2014) .............................................................................................................................................................. (July–September 2014) ..................................................................................................................................................... (October–December 2014) ................................................................................................................................................ May 15, 2014. August 15, 2014. November 15, 2014. February 15, 2015. * The data collection period for this measure was finalized in the FY 2013 IPPS/LTCH PPS final rule. TIMELINE FOR SUBMISSION OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2016 PAYMENT DETERMINATION: NQF #0680 PERCENTAGE OF RESIDENTS OR PATIENTS WHO WERE ASSESSED AND APPROPRIATELY GIVEN THE SEASONAL INFLUENZA VACCINE (SHORT STAY) Final submission deadlines for the LTCHQR Program FY 2016 payment determination Data collection timeframe October 1, 2014–April 30, 2015 .............................................................................................................................................. May 15, 2015. TIMELINE FOR SUBMISSION OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2016 PAYMENT DETERMINATION: NQF #0431 INFLUENZA VACCINATION COVERAGE AMONG HEALTHCARE PERSONNEL Final submission deadlines for the LTCHQR Program FY 2016 payment determination Data collection timeframe mstockstill on DSK4VPTVN1PROD with RULES6 October 1, 2014 (or when vaccine becomes available)–March 31, 2015 .............................................................................. e. Timeline for Data Submission Under the LTCHQR Program for the FY 2017 Payment Determination As previously stated, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53636 through 53637), we finalized the data submission timeline for the FY 2016 payment determination. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27732), for the FY 2017 payment determination, we proposed to require data submission for the LTCHQR Program on all LTCH admissions and discharges occurring January 1, 2015 through December 31, 2015 (CY 2015), with the exception of Influenza Vaccination among Healthcare Personnel (NQF #0431). We proposed that the data collection timeframe for this measure (NQF #0431) be in alignment with the CDC measure specifications, because CDC is the steward for this NQF-endorsed measure. We refer readers to section IX.C.9.c. of the preamble of this final rule for additional information on this measure’s timelines. We noted that the All-cause Unplanned Readmission Measure for 30 days Post-Discharge from Long-Term Care Hospitals is a Medicare claims- VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 based measure; therefore, no new data need to be collected or reported by the facility. We will use CY 2013 and CY 2014 Medicare claims data to calculate the All-cause Unplanned Readmission Measure for 30 days Post-Discharge from Long-Term Care Hospitals. For each quarter outlined in the table below during which the LTCHs are required to collect data, we proposed final submission deadlines occurring approximately 45 days after the end of any given quarter by which all data collected during that quarter must be submitted. We believe that this is a reasonable amount of time to allow LTCHs to submit data and make any necessary corrections. We proposed these timeframes because we believe this will provide sufficient time for CMS and LTCHs to put processes and procedures in place to meet the quality reporting requirements for quality measures (except for the readmissions measure, which is a claims based measure, and therefore, does not pose any requirements on LTCHs) under the LTCHQR Program. We invited public comment on this proposal. PO 00000 Frm 00386 Fmt 4701 Sfmt 4700 May 15, 2015. Comment: A few commenters supported the proposed timeline for data submission under the LTCHQR Program for the FY 2017 payment determination. Response: We thank the commenters for their support of the proposed timeline for data submission for FY 2017 payment determination. Comment: One commenter expressed concern regarding the data collection timeline for both the FY 2017 and FY 2018 payment determinations and the burden of adding several quality measures over 2 years. This commenter remarked that LTCHs will need to acquire additional resources to accommodate the needs of additional data collection, as well as resources to focus on quality improvement issues and noted concern that the limited existing resources at LTCHs will be moved from prevention activities to reporting activities. Response: As we stated in section IX.B.9. of the preamble of this final rule, by building upon preexisting resources for data collection and submission, we intend to foster alignment between measures that help to reduce the administrative burden related to data E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations collection and submission. We are aware that the initial setup and acclimation to the data collection process using the LTCH CARE Data Set and QIES ASAP has occurred for a vast majority of LTCHs as part of the implementation of the Pressure Ulcer measure (NQF #0678) starting October 1, 2012, for the LTCHQR Program for the FY 2014 payment determination as well as the implementation of the Patient Influenza Vaccination measure for the LTCHQR Program for the FY 2016 payment determination. Similarly, we are aware that the initial setup and acclimation to the data collection process using the CDC’s NHSN has occurred for a vast majority of LTCHs as part of the implementation of the CAUTI and CLABSI measures (NQF #0138 and NQF #0139) starting October 1, 2012, for the LTCHQR Program. Therefore, we believe the addition of measures that employ the LTCH CARE Data Set and QIES ASAP or the CDC’s NHSN for FY 2017 and FY 2018 may be less burdensome. We also are aware of the need to improve quality of care for health care services provided within the LTCH and other health care settings while recognizing availability of limited resources. However, we believe that the cost of quality reporting programs is outweighed by the potential for gain in health and health care outcomes as well as potential cost savings from preventing avoidable conditions such as: Avoidable readmissions; HAIs such as CAUTI, CLABSI, C. Difficile and MRSA infections; HACs such as pressure ulcers; and falls with major injury. After consideration of the public comments we received, we are 50881 finalizing the timelines we proposed, as proposed for all measures except NQF #0680, related to the measures affecting the FY 2017 payment determination. In this final rule, we revised the data collection and submission timeline for the Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (shortstay) measure (NQF #0680). Data collection for this measure will be required for any patient admitted or discharged between October 1 and April 30. We refer readers to section IX.C.9.b. of the preamble of this final rule for additional information on this measure’s timeline. The timelines for data collection and submission for the measures for the FY 2017 payment determination are listed in the following tables. TIMELINE FOR COLLECTION OF CERTAIN LTCHQR PROGRAM QUALITY DATA FOR THE FY 2017 PAYMENT DETERMINATION NQF Measure ID NQF NQF NQF NQF NQF NQF NQF #0138 #0139 #0678 #0680 #0431 #1716 #1717 ......................... ......................... ......................... ......................... ......................... ......................... ......................... Data collection timeframe January January January October October January January 1, 1, 1, 1, 1, 1, 1, 2015–December 31, 2015. 2015–December 31, 2015. 2015–December 31, 2015. 2015–April 30, 2016. 2015 (or when vaccine becomes available)–March 31, 2016. 2015–December 31, 2015. 2015–December 31, 2015. TIMELINE FOR SUBMISSION OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2017 PAYMENT DETERMINATION: NQF #0138, NQF #0139, NQF #0678, NQF #1716, NQF #1717 Final submission deadlines for the LTCHQR Program FY 2017 payment determination Data collection timeframe: CY 2015 Q1 Q2 Q3 Q4 (January–March 2015) ....................................................................... (April–June 2015) ............................................................................... (July–September 2015) ...................................................................... (October–December 2015) ................................................................. May 15, 2015. August 15, 2015. November 15, 2015. February 15, 2016. TIMELINE FOR SUBMISSION OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2017 PAYMENT DETERMINATION: NQF #0680 PERCENTAGE OF RESIDENTS OR PATIENTS WHO WERE ASSESSED AND APPROPRIATELY GIVEN THE SEASONAL INFLUENZA VACCINE (SHORT STAY) Final submission deadlines for the LTCHQR Program FY 2017 payment determination Data collection timeframe mstockstill on DSK4VPTVN1PROD with RULES6 October 1 2015–April 30, 2016 ............................................................................................................................................... May 15, 2016. TIMELINE FOR SUBMISSION OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2017 PAYMENT DETERMINATION: NQF #0431 INFLUENZA VACCINATION COVERAGE AMONG HEALTHCARE PERSONNEL Final submission deadlines for the LTCHQR Program FY 2017 payment determination Data collection timeframe October 1 2015 (or when vaccine becomes available)–March 31, 2016 ............................................................................... VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 PO 00000 Frm 00387 Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2 May 15, 2016. 50882 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations f. Timeline for Data Submission Under the LTCHQR Program for the FY 2018 Payment Determination For measures for the FY 2018 payment determination, we proposed to require data collection on LTCH discharges occurring from January 1, 2016, through December 31, 2016, with the exception of Influenza Vaccination among Healthcare Personnel (NQF #0431). We proposed that the data collection timeframe for this measure (NQF #0431) be in alignment with measure specifications per advisement of the CDC, the steward for this NQFendorsed measure. LTCHs would follow the proposed deadlines presented in the tables below to complete submission of data for each quarter for each proposed measure for the FY 2018 payment determination. For each quarter outlined in the table below during which LTCHs are required to collect data, we proposed a final submission deadline occurring approximately 45 days after the end of each quarter by which all data collected during that quarter must be submitted. We believe that this is a reasonable amount of time to allow LTCHs to submit data and make any necessary corrections. We invited public comment on this proposal. Comment: A few commenters support the proposed timeline for data submission under the LTCHQR Program for FY 2018 payment determination. Response: We thank the commenters for their support of the proposed timeline for data submission for FY 2018 payment determination. After consideration of the public comments we received, we are finalizing, as proposed for all measures except for NQF #0680, all timelines related to FY 2018. For NQF #0680, in this final rule, we revised the data collection and submission timeline. Data collection for this measure will be required for all patients admitted or discharged from the LTCH between October 1 and April 30. We refer readers to section IX.C.9.b. of the preamble of this final rule for additional information on this measure’s timeline. The timelines for data collection and submission for the measures for the FY 2018 payment determination are listed in the following tables. TIMELINE FOR DATA COLLECTION OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2018 PAYMENT DETERMINATION NQF Measure ID NQF #0138 ......................... NQF #0139 ......................... NQF #0678 ......................... NQF #0680 ......................... NQF #0431 ......................... NQF #1716 ......................... NQF #1717 ......................... Application of NQF #0674 .. Data collection timeframe January January January October October January January January 1, 1, 1, 1, 1, 1, 1, 1, 2016–December 31, 2016. 2016–December 31, 2016. 2016–December 31, 2016. 2016–April 30, 2017. 2016 (or when vaccine becomes available)–March 31, 2017. 2016–December 31, 2016. 2016–December 31, 2016. 2016–December 31, 2016. TIMELINE FOR SUBMISSION OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2018 PAYMENT DETERMINATION FOR ALL MEASURES EXCEPT #0431 INFLUENZA VACCINATION COVERAGE AMONG HEALTHCARE PERSONNEL AND #0680 PERCENTAGE OF RESIDENTS OR PATIENTS WHO WERE ASSESSED AND APPROPRIATELY GIVEN THE SEASONAL INFLUENZA VACCINE (SHORT STAY) Final submission deadlines for the LTCHQR Program FY 2018 payment determination Data collection timeframe: CY 2016 Q1 Q2 Q3 Q4 (January–March 2016) ....................................................................................................................................................... (April–June 2016) .............................................................................................................................................................. (July–September 2016) ..................................................................................................................................................... (October–December 2016) ................................................................................................................................................ May 15, 2016. August 15, 2016. November 15, 2016. February 15, 2017. TIMELINE FOR SUBMISSION OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2018 PAYMENT DETERMINATION: #0680 PERCENTAGE OF RESIDENTS OR PATIENTS WHO WERE ASSESSED AND APPROPRIATELY GIVEN THE SEASONAL INFLUENZA VACCINE (SHORT STAY) Final submission deadlines for the LTCHQR Program FY 2018 payment determination Data collection timeframe mstockstill on DSK4VPTVN1PROD with RULES6 October 1, 2016–April 30, 2017 .............................................................................................................................................. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 PO 00000 Frm 00388 Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2 May 15, 2017. Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 50883 TIMELINE FOR SUBMISSION OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2018 PAYMENT DETERMINATION: NQF #0431 INFLUENZA VACCINATION COVERAGE AMONG HEALTHCARE PERSONNEL Final submission deadlines for the LTCHQR Program FY 2018 payment determination Data collection timeframe October 1 2016 (or when vaccine becomes available)–March 31, 2017 ............................................................................... mstockstill on DSK4VPTVN1PROD with RULES6 10. Public Display of Data Quality Measures for the LTCHQR Program Under section 1886(m)(5)(E) of the Act, the Secretary is required to establish procedures for making any quality data submitted by LTCHs under section 1886(m)(5)(C) of the Act available to the public. Section 1886(m)(5)(E) of the Act requires that such procedures shall ensure that a LTCH has the opportunity to review the data that is to be made public with respect to its facility, prior to such data being made public. The Act also requires that the Secretary report quality measures that relate to services furnished in LTCHs on CMS’ Internet Web site. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53637), we received and responded to public comment regarding the procedures we could adopt for the public reporting of quality data under the LTCHQR Program. Currently, we are developing plans regarding the implementation of these provisions. We appreciate the need for transparency into the processes and procedures that will be implemented to allow for public reporting of the LTCHQR Program data and to afford LTCHs the opportunity to preview that data before it is made public. At this time, we have not established procedures or timelines for public reporting of data, but we intend to include related proposals in future rulemaking. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27733), we welcomed public comment on what we should consider when developing future proposals related to public reporting of quality measures for the LTCHQR Program. Comment: One commenter urged CMS to publicly report the LTCHQR Program data on the Hospital Compare Web site: https://www.medicare.gov/ hospitalcompare. This commenter further noted that the lack of established procedures or timelines for public reporting of these data is inappropriate and does not reflect the commitment to accountability and transparency CMS has shown in other quality reporting programs. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Response: We appreciate the need for accountability and transparency for the LTCHQR Program similar to other quality reporting programs. To this end, we are continuing to undertake efforts to establish procedures and a timeline for the public reporting of data for the LTCHQR Program. We will communicate this information through future rulemaking. Comment: Another commenter urged CMS to provide LTCHs with ample time to review and make changes to their data before it is made available to the public. A commenter suggested that an initial review period greater than the typical 30-day period is critical for LTCHs. Response: We are considering policies and procedures that would allow LTCHs sufficient time to review their quality data prior to it being made public. Comment: One commenter urged CMS to seek input from stakeholders as to the best way to ensure the data made public is easily understood by providers and consumers. Response: We appreciate the need to ensure that the data made publicly available is easily understood by stakeholders such as the providers and consumers. At this time, we are working to establish procedures for public reporting, including procedures that provide the opportunity for LTCHs to review their data before it is made public, and will propose such procedures through future rulemaking allowing for stakeholder input. We thank the commenters for the input and suggestions, and we will consider them as we develop proposals for public reporting of quality measures in future rulemaking. 11. LTCHQR Program Submission Waiver Requirements for the FY 2015 Payment Determination and Subsequent Years Our experience with other quality reporting programs has shown that there are times when providers are unable to submit quality data due to extraordinary circumstances beyond their control (for example, natural or man-made disasters). We define a ‘‘disaster’’ as any natural or man-made catastrophe which PO 00000 Frm 00389 Fmt 4701 Sfmt 4700 May 15, 2017. causes damages of sufficient severity and magnitude to partially or completely destroy or delay access to medical records and associated documentation. Natural disasters could include events such as hurricanes, tornadoes, earthquakes, volcanic eruptions, fires, mudslides, snowstorms, and tsunamis. Man-made disasters could include such events as terrorist attacks, bombings, floods caused by man-made actions, civil disorder, and explosions. A disaster may be widespread and impact multiple structures or be isolated and impact a single site only. In certain instances of either natural or man-made disasters, an LTCH may have the ability to conduct a full patient assessment, and record and save the associated data either during or before the occurrence of an extraordinary event. In this case, the extraordinary event has not caused the facility’s data files to be destroyed, but it could hinder the LTCH’s ability to meet the quality reporting program’s data submission deadlines. In this scenario, the LTCH would potentially have the ability to report the data at a later date, after the emergency circumstances have subsided. In such cases, a temporary waiver of the LTCH’s responsibility to report quality measure data may be appropriate. In other circumstances of natural or man-made disaster, an LTCH may not have had the ability to conduct a full patient assessment, and record and save the associated data before the occurrence of an extraordinary event. In such a scenario, the facility does not have data to submit to CMS as a result of the extraordinary event. We believe that it is appropriate, in these situations, to grant a full waiver of the reporting requirements. We do not wish to penalize LTCHs in these circumstances or to unduly increase their burden during these times. Therefore, in the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR 27733 through 27734), we proposed a process, for the FY 2015 payment determination and subsequent years, for LTCHs to request and for CMS to grant waivers with respect to the reporting of required E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50884 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations quality data when there are extraordinary circumstances beyond the control of the LTCHs. When a waiver is granted, an LTCH will not incur payment reduction penalties for failure to comply with the requirements of the LTCHQR Program. For LTCHQR Program reporting and submission of quality measure data for the FY 2014 payment determination, we have issued guidance on the waiver process via the LTCHQR Program Web site at: https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/. Under the proposed process for the FY 2015 payment determination and subsequent years, an LTCH may request a waiver of the requirement to submit quality data for one or more quarters. We proposed a process that, in the event that an LTCH seeks to request a waiver for quality reporting purposes for the FY 2015 payment determination and subsequent years, the LTCH may request a waiver for one or more quarters by submitting a written request to CMS. We proposed that the LTCH compose a letter to CMS that documents the waiver request, with the information below, and submit the letter to CMS via email to the LTCH Quality Waiver mailbox at LTCHQRPReconsiderations @cms.hhs.gov. We note that the subject of the email must read ‘‘Disaster Waiver Request’’ and the letter must contain the following information: • LTCH CCN; • LTCH name; • CEO or CEO-designated personnel contact information including name, telephone number, title, email address, and mailing address (the address must be a physical address, not a post office box); • LTCH’s reason for requesting a waiver; • Evidence of the impact of extraordinary circumstances, including but not limited to photographs, newspaper and other media articles; and • A date when the LTCH believes it will be able to again submit LTCHQR Program data and a justification for the proposed date. We proposed that the letter documenting the disaster waiver request be signed by the LTCH’s CEO or CEOdesignated personnel, and must be submitted within 30 days of the date that the extraordinary circumstances occurred. Following receipt of the letter, we would: (1) Provide a written acknowledgement, using the contact information provided in the letter, to the CEO or CEO-designated contact notifying them that the request has been received; and (2) provide a formal VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 response to the CEO or any CEOdesignated LTCH personnel, using the contact information provided in the letter, indicating our decision. This proposal does not preclude us from granting waivers to LTCHs that have not requested them when we determine that an extraordinary circumstance, such as an act of nature, affects an entire region or locale. If we make the determination to grant a waiver to LTCHs in a region or locale, we proposed to communicate this decision through routine communication channels to LTCHs and vendors, including, but not limited to, issuing memos, emails, and notices on https://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/ index.html. We invited public comment on this proposal. Comment: Many commenters expressed support of CMS’ proposal for the inclusion of a waiver process in the LTCHQR Program to ensure that LTCHs are not penalized in the event of an extraordinary circumstance beyond the control of the LTCH. Response: We thank commenters for their support. Comment: One commenter noted the waiver policies of other quality reporting programs and urged us to develop consistent waiver policies for the LTCHQR Program waiver process with at least the following elements: (1) a minimum of 30 days should be allowed after the extraordinary event for submitting waivers; (2) a standardized form should be provided for requesting waivers; (3) the waiver process should be in addition to the payment reduction appeal process, however the appeal process should allow for decisions that waive penalties retroactively; and (4) CMS should be able to grant waivers without an LTCH’s request when the LTCH is located in an area impacted by a natural disaster or other extraordinary situation. In addition, the commenter recommended that CMS provide for a broad definition of ‘‘extraordinary circumstances’’ that allows for unanticipated situations. Response: We are aware that our other quality reporting programs include an opportunity for providers to request a waiver due to the occurrence of an extraordinary circumstance. It is our goal to align our policies with those of existing quality reporting programs to the extent appropriate for the LTCH setting. We will not be providing a standard form for LTCH waiver requests at this time. However, we are aware of the benefits of standardized forms for providers and for CMS, and we intend PO 00000 Frm 00390 Fmt 4701 Sfmt 4700 to create such forms for waiver requests in the future. In addition, we do allow 30 days from the date of the ‘‘extraordinary event’’ during which an LTCH must submit their request for a waiver and this process will be separate from the reconsideration and appeals process proposed and finalized except for the FY 2014 payment determination, which we explain in our next response. In response to the commenter’s statement that the CMS LTCH reconsideration process should allow for decisions that waive penalties retroactively, it is not clear to CMS to what penalties the commenter is referring. The CMS reconsideration process only reviews decisions of noncompliance the provider feels were made in error for one data reporting/ submission period. In addition, any APU reduction that results from a finding of non-compliance takes place only after the provider has had a chance to request reconsideration and receive a final determination based on that request. Thus, there is no penalty which could be waived retroactively. The CMS reconsideration process will only review determinations of noncompliance made for a given FY’s APU determination and not any previous determinations. Finally, we proposed and are finalizing a disaster waiver process for LTCHs in which we state that CMS may, in certain circumstances, grant a disaster waiver to LTCHs in particular region of the country that is affected by a natural disaster or extraordinary event without a request from these LTCHs if it is deemed necessary. Comment: Some commenters sought clarification as to why the proposed waiver processes begin with the FY 2015 payment determination. The commenters requested that the proposed policies be implemented in time for the FY 2014 payment determination. Response: This final rule will become effective October 1, 2013, the start of FY 2014 and, by that time, the FY 2014 annual payment determinations will be complete based on LTCHs compliance with the reporting requirements outlined in the FY 2012 IPPS/LTCH PPS final rule. As posted on the LTCHQR Program Web site, we made initial compliance determinations for the FY 2014 payment determination and issued notifications to non-compliant LTCHs in July 2013, at which time each LTCH had the opportunity to request a reconsideration. Any request for a waiver related to quality measure reporting and submission required for October 1, 2012–December 31, 2012 would have needed to be made through the FY 2014 reconsideration process as E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations CMS did not have a waiver process in place during that reporting period. We will have already evaluated those reconsideration or waiver requests related to FY 2014 APU determinations and will have already made final payment determinations for FY 2014 in September 2013. Therefore, it would not be appropriate to proposed and finalize a FY 2014 waiver process as any related payment determinations will be complete prior to this rule becoming effective. Furthermore, we would like to clarify that for purposes of the FY 2015 payment determination, because this final rule will become effective October 1, 2013, any LTCH that experiences an extraordinary circumstance on or after such date will be held to the requirement that waiver requests be received by CMS within 30 days of the event occurrence. If an extraordinary circumstance occurs prior to October 1, 2013 when this process and policy become final and effective, and if an LTCH wishes to request a waiver from the FY 2015 reporting requirements, the LTCH should communicate any extraordinary circumstances that prevented them from submitting data related to the FY 2015 APU during the reconsideration period for the FY 2015 payment determination. That is, if CMS issues a finding of non-compliance and the LTCH experienced an extraordinary event that prevented them from submitting data, but had no waiver process available to them at that time, the LTCH will need to use the reconsideration process in order to communicate their circumstances to CMS. This is the same process available to LTCHs to request a waiver from the reporting requirements of the FY 2014 payment determination as CMS did not have a waiver process in place during the reporting period affecting the FY 2014 APU determination. Further details of the LTCHQR Program reconsideration process can be found in this final rule and on the Program’s Web site at https://www.cms.gov/Medicare/ Quality-Initiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/ index.html. After consideration of the public comments we received, we are finalizing the LTCHQR Program waiver process as proposed. LTCHs will have 30 days after the date of an extraordinary circumstance, as described above, to submit a waiver request to CMS via email that meets all of the finalized requirements. In the event that any extraordinary circumstance occurs prior to the effective date of this rule, October 1, 2013, LTCHs may utilize the FY 2015 VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 reconsideration process to request a waiver, as the FY 2015 waiver policy and process will not be finalized and in effect until October 1, 2013. In addition, CMS may also grant waivers to LTCHs that have not requested them if it is determined that an extraordinary circumstances affects an entire region or local. More information on the LTCHQR Program Waiver process and all related announcements may be found on https://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/ index.html. 12. LTCHQR Program Reconsideration and Appeals for the FY 2014 and FY 2015 Payment Determination and Subsequent Years At the conclusion of any given quality data reporting and submission period, we will review the data received from each LTCH during that reporting period to determine if the LTCH has met the quality data reporting requirements. LTCHs that are found to be noncompliant with the reporting requirements set forth for that reporting cycle will receive a reduction in the amount of 2.0 percentage points to their annual payment update for the upcoming fiscal year. a. LTCHQR Program Reconsideration and Appeals for the FY 2014 Payment Determination We are aware that some of our other quality reporting programs, such as the Hospital IQR Program, include an opportunity for providers to request a reconsideration of our initial noncompliance determination. We are also aware, for the purposes of the LTCHQR Program, that we recently made compliance determinations for the FY 2014 payment determinations and that there was a need for providers to be able to request a reconsideration if their circumstances warranted. We provided details pertaining to the reconsideration process, and the mechanisms related to provider requests for reconsiderations of their payment determination, such as filing requests, required content, supporting documentation, and mechanisms of notification and final determinations on the LTCHQR Program Web site in spring 2013 prior to any LTCH’s need for information on the CMS reconsideration process for the FY 2014 payment determination and subsequent years at: https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/. CMS’ subregulatory approach to the FY 2014 reconsideration process was necessary, as any other form of the PO 00000 Frm 00391 Fmt 4701 Sfmt 4700 50885 reconsideration process that we might propose and finalize in this rule would not be final and in effect until October 1, 2013. This would have the effect of proposing and finalizing a FY 2014 process for reconsiderations that should already be completed. For this reason, we decided to post all information related to the FY 2014 reconsideration process on the CMS LTCHQR Program Web site listed above. We note that we are finalizing the policy that this subregulatory approach to the reconsideration process will remain in effect until we can propose and finalize a regulatory version of the reconsideration process in future rulemaking. We invited public comment on our subregulatory approach for reconsideration and appeals for FY 2014 payment determination and subsequent years. Comment: Many commenters expressed support for CMS’ FY 2014 reconsideration and appeals process. Response: We thank commenters for their support of the inclusion of reconsideration and appeals processes in the LTCHQR Program. Comment: Some commenters suggested that the proposed reconsideration and appeals processes should be made available to LTCHs for the FY 2014 payment determination, citing that the proposals stated that the processes would be applicable to the FY 2015 payment determination and subsequent years. Response: In the proposed rule, we communicated our intent to provide guidance pertaining to the reconsideration process for the FY 2014 payment determination on the LTCHQR Program Web site in addition to proposing processes for the FY 2015 payment determination. As posted on the LTCHQR Program Web site, we made initial compliance determinations for the FY 2014 payment determination and issued notifications to noncompliant LTCHs in July 2013, at which time each LTCH had the opportunity to request reconsideration. CMS considered those requests and final payment determinations were made in September 2013. While we did not propose and finalize an LTCH reconsideration process for FY 2014 we did make the process available to all LTCHs. We note that the reconsideration process is voluntary and only one of several processes in place, including the Provider Reimbursement Review Board (PRRB) or federal court, that an LTCH can use to have the CMS initial determination of non-compliance reevaluated. E:\FR\FM\19AUR2.SGM 19AUR2 50886 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 Comment: One commenter stated that the proposed rule provided no information on the FY 2014 reconsideration and appeals process and instead referred readers to the LTCHQR Program Web page. The commenter suggested that this process must be proposed and finalized through regulation. Response: We believe that we were justified in our subregulatory approach to the FY 2014 reconsideration process. Please see previous comment and response for a detailed explanation outlining our intentions and subsequent actions regarding the FY 2014 reconsideration process for LTCHs. Comment: One commenter requested clarification as to CMS’ authority to require providers to go through a reconsideration process that is not adopted through rulemaking before appealing to the PRRB referring to our subregulatory approach to the implementation of the FY 2014 LTCH reconsideration processes and procedures. Response: While we provide a process for reconsideration should LTCHs choose to request to use this process, we would like note a change in policy. In the FY 2014 IPPS/LTCH PPS proposed rule, we stated that LTCHs must first apply for reconsideration through CMS prior to appealing our initial finding of non-compliance to the PRRB. In light of this commenter’s concern that CMS did not provide procedural details of the reconsideration process through rulemaking and concern that CMS ensure that sufficient outreach and education are available, we have decided to continue with an LTCHQR Program reconsideration process that is voluntary for the time being in order to fully address these concerns. We are therefore only recommending that LTCHs use the reconsideration process prior to appealing to the PRRB. We note that we have had good success under the Hospital IQR Program with a process that is very similar to the one we proposed for the LTCHQR Program. Further, from the LTCH perspective, it allows for the opportunity to resolve issues early in the process when we have dedicated resources to considering all reconsideration requests before payment changes are applied to LTCH’s annual payment. b. LTCHQR Program Reconsideration and Appeals for the FY 2015 Payment Determination In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27734), to be consistent with other established quality reporting programs and to provide an opportunity for LTCHs to seek VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 reconsideration of our initial noncompliance decision, we proposed a process that will allow LTCHs to request reconsiderations pertaining to the FY 2015 annual update and subsequent annual updates. As part of this process, LTCHs that are non-compliant with the reporting requirements during a given reporting cycle will be notified of that finding. The purpose of this notification is to put the LTCH on notice of the following: (1) That the LTCH has been identified as being non-compliant with the LTCHQR Program’s reporting requirements for the reporting cycle in question; (2) that the LTCH will be scheduled to receive a reduction in the amount of two percentage points to the annual payment update for the upcoming fiscal year; (3) that the LTCH may file a request for reconsideration if they believe that the finding of noncompliance is erroneous, or that if they were non-compliant, they have a valid and justifiable excuse for this noncompliance; and (4) that the LTCH must follow a defined process on how to file a request for reconsideration, which will be described in the notification. Upon the conclusion of our review of each request for reconsideration, we will render a decision. We may reverse our initial finding of non-compliance if: (1) The LTCH provides proof of compliance with all requirements during the reporting period; or (2) the LTCH provides adequate proof of a valid or justifiable excuse for non-compliance if the LTCH was not able to comply with requirements during the reporting period. We will uphold our initial finding of non-compliance if the LTCH cannot show any justification for noncompliance. The full reconsideration request process is available at https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/ LTCH-QUality-ReportingReconsideration-and-Disaster-WavierRequest.html. We invited public comment on the proposed procedures for reconsideration and appeals for FY 2015 payment determination and subsequent years. Comment: Many commenters expressed support for CMS’ proposed reconsideration and appeals process. Response: We thank commenters for their support of the inclusion of reconsideration and appeals processes in the LTCHQR Program. Comment: One commenter noted the reconsideration processes for other quality reporting programs and urged us to develop consistent reconsideration policies for the LTCHQR Program with at least the following elements: (1) A PO 00000 Frm 00392 Fmt 4701 Sfmt 4700 minimum of 30 days should be allowed after the determination of reporting noncompliance to submit a request for reconsideration; (2) a standardized form should be provided for requesting reconsideration; (3) the appeal process should be in addition to the waiver process, however the appeal process should allow for decisions that waive penalties retroactively; (4) the regulations should specifically state that an LTCH may file an appeal with the PRRB if it is dissatisfied with the result of CMS’ reconsideration, similar to the provision at 42 CFR 412.434(c) for IPFs. Response: We are aware that our other quality reporting programs include an opportunity for providers to request reconsideration of the reporting requirements for any given fiscal year’s payment determination. It is our goal to align our policies with those of existing quality reporting programs to the extent appropriate for the LTCH setting. To that end, we proposed and are finalizing a reconsideration policy that does allow 30 days from the date of notification for a LTCH to file a request for reconsideration. In addition to this, the reconsideration process proposed and finalized in this rule is separate from and in addition to the disaster waiver process we proposed in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27733 through 277344) and are finalizing in section IX.C.11. of the preamble of this final rule. At this time, we will not be providing a standard form for LTCH reconsideration requests. However, we are aware of the benefits of standardized forms for providers and for CMS, and we intend to create such forms for reconsideration requests in the future. Further, we would like to clarify that LTCHs dissatisfied with CMS’ decision rendered at the reconsideration level may appeal to the PRRB under 42 CFR Part 405, Subpart R. In the FY 2014 IPPS/LTCH PPS proposed rule we stated that LTCHs that are dissatisfied with an initial CMS determination of noncompliance must first apply for reconsideration through CMS prior to appealing our initial finding of noncompliance to the PRRB. In light of a commenter’s concern that CMS did not provide procedural details of the reconsideration process through rulemaking and concern that CMS ensure that sufficient outreach and education are available, we have decided to continue with an LTCHQR Program reconsideration process that is voluntary for the time being in order to fully address these concerns. We are therefore only recommending that LTCHs use the reconsideration process prior to appealing to the PRRB. We note E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations that we have had good success under the Hospital IQR Program with a process that is very similar to the one we proposed for the LTCHQR Program. Further, from the LTCH perspective, it allows for the opportunity to resolve issues early in the process when we have dedicated resources to considering all reconsideration requests before payment changes are applied to LTCH’s annual payment update, thereby allowing for more efficient operations at the PRRB level. Comment: One commenter requested that CMS specify a timeframe by which CMS will render all reconsideration decisions. The commenter suggested that CMS should make reconsideration decisions within 60 days from the receipt of an LTCH’s request for reconsideration. Response: We will strive to render reconsideration decisions in a timely manner. Reconsideration decisions will be issued prior to the application of payment adjustment to LTCH’s standard Federal rate for a fiscal year. That is, we will assess an LTCH’s compliance against program requirements, issue non-compliance notification, and communicate reconsideration decisions prior to October 1 annually. Therefore, all reconsideration decisions will generally be made within 60 days of CMS’ receipt of a reconsideration request for the applicable fiscal year. We expect that the timeline for subsequent years’ payment determinations will be similar to the FY 2014 timeline currently outlined on the reconsideration page of the LTCHQR Program Web site at https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/ index.html. Comment: One commenter urged CMS to clearly set forth the process and standards CMS will use to measure a LTCH’s compliance with LTCHQR Program reporting requirements in order to determine if a LTCH will receive a full annual payment update. Response: As we have noted in previous rulemaking, all previous and current administrative and data submission requirements finalized through rulemaking must be met in order for an LTCH to receive their full annual payment update. All CMS quality data reporting requirements are discussed in detail in our LTCH QR Program Manual available for download on our LTCH QRP Web site at: https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/ index.html. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Comment: One commenter suggested that the two-percentage point reduction in payment to a LTCH’s annual update for the upcoming fiscal year should be stayed while a request for reconsideration is pending or until the PRRB appeal is concluded. Response: Any determination of noncompliance made through CMS’ initial review of data submitted by a provider, and subsequently upheld through the CMS reconsideration process will result in a 2.0 percentage point reduction to the provider’s annual payment update. CMS will not stay any payment reduction while an appeal of our initial decision is pending review by an independent review board, such as the PRRB. Comment: Several commenters suggested that CMS establish an appeal process for the LTCHQR Program that would allow LTCHs to seek review of any non-compliance determination to challenge the payment reduction. These commenters also suggested that this process be similar to established appeals processes of other quality reporting programs. Response: We are aware that other quality reporting programs include processes for providers to appeal a noncompliance determination made by CMS. As stated above, LTCHs dissatisfied with our initial finding of non-compliance, or a decision rendered at the CMS reconsideration level may appeal the decision with the PRRB under 42 CFR Part 405, Subpart R. In the FY 2014 IPPS/LTCH PPS proposed rule we stated that LTCHs that are dissatisfied with an initial CMS determination of non-compliance must first apply for reconsideration through CMS prior to appealing our initial finding of non-compliance to the PRRB. We would like to clarify that we recommend, rather than require, LTCHs use this order of appeals. We note that the CMS reconsideration process is voluntary, and that we have had good success with it under the Hospital IQR Program. Further, from the LTCH perspective, it allows for the opportunity to resolve issues early in the process when CMS has dedicated resources to considering all reconsideration requests before payment changes are applied to LTCH’s annual payment, thereby allowing for more efficient operations at the PRRB appeals level. After consideration of the public comments we received, and with the exception that the prescribed order of appeals CMS listed is recommended rather than required, we are finalizing the FY 2015 LTCHQR Program reconsideration and appeals processes PO 00000 Frm 00393 Fmt 4701 Sfmt 4700 50887 as proposed. Annually, we will notify LTCHs found to be non-compliant with the LTCHQR Program reporting requirements that they may be subject to the two percentage point reduction in their annual payment update. LTCHs may request a reconsideration of this non-compliance determination. If an LTCH are dissatisfied with our initial finding of non-compliance or a CMS decision rendered at the reconsideration level, it can appeal the decision with the PRRB under 42 CFR Part 405, Subpart R. An LTCH must submit a request for reconsideration, as described above and in the manner that is provided on the CMS Web site at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/LTCH-QualityReporting/. D. Inpatient Psychiatric Facilities Quality Reporting (IPFQR) Program 1. Statutory Authority Section 1886(s)(4) of the Act, as added and amended by sections 3401(f) and 10322(a) of the Affordable Care Act, requires the Secretary to implement a quality reporting program for inpatient psychiatric hospitals and psychiatric units. Section 1886(s)(4)(A)(i) of the Act requires that, for rate year (RY) 2014 and each subsequent rate year, the Secretary shall reduce any annual update to a standard Federal rate for discharges occurring during such rate year by 2.0 percentage points for any inpatient psychiatric hospital or psychiatric unit that does not comply with quality data submission requirements with respect to an applicable rate year. We note that section 1886(s)(4)(A)(i) of the Act uses the term ‘‘rate year.’’ Beginning with the annual update of the inpatient psychiatric facility prospective payment system (IPF PPS) that took effect on July 1, 2011 (RY 2012), we aligned the IPF PPS update with the annual update of the ICD–9–CM codes, which are effective on October 1 of each year. The change allows for annual payment updates and the ICD–9–CM coding update to occur on the same schedule and appear in the same Federal Register document, thus making updating rules more administratively efficient. To reflect the change to the annual payment rate update cycle, we revised the regulations at 42 CFR 412.402 to specify that, beginning October 1, 2012, the 12-month period of October 1 through September 30 is referred to as a fiscal year (FY) (76 FR 26435). For more information regarding this terminology change, we refer readers to section III. of the RY 2012 IPF PPS final rule (76 FR 26434 through 26435). For purposes of E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50888 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations the discussion below, the term ‘‘rate year’’ and ‘‘fiscal year’’ both refer to the period beginning October 1 and ending September 30. To avoid any confusion that may be caused by using the term ‘‘rate year’’ with respect to the inpatient psychiatric hospitals and psychiatric units quality reporting program, we will use the term ‘‘fiscal year’’ rather than ‘‘rate year’’ throughout this final rule, even when we are referring to statutory provisions that refer to ‘‘rate year.’’ As provided in section 1886(s)(4)(A)(ii) of the Act, the application of the reduction for failure to report under section 1886(s)(4)(A)(i) of the Act may result in an annual update of less than 0.0 percent for a fiscal year, and may result in payment rates under section 1886(s)(1) of the Act being less than such payment rates for the preceding year. In addition, section 1886(s)(4)(B) of the Act requires that the application of the reduction to a standard Federal rate update be noncumulative across fiscal years. Thus, any reduction applied under section 1886(s)(4)(A) of the Act will apply only with respect to the fiscal year rate involved and the Secretary shall not take into account such reduction in computing the payment amount under the system described in section 1886(s)(1) of the Act for subsequent years. Section 1886(s)(4)(C) of the Act requires that, for FY 2014 (October 1, 2013 through September 30, 2014) and each subsequent year, each psychiatric hospital and psychiatric unit shall submit to the Secretary data on quality measures as specified by the Secretary. Such data shall be submitted in a form and manner, and at a time, specified by the Secretary. Under section 1886(s)(4)(D)(i) of the Act, measures selected for the quality reporting program must have been endorsed by the entity with a contract under section 1890(a) of the Act. The National Quality Forum (NQF) currently holds this contract. The NQF is a voluntary, consensus-based, standard-setting organization with a diverse representation of consumer, purchaser, provider, academic, clinical, and other health care stakeholder organizations. The NQF was established to standardize health care quality measurement and reporting through its consensus development process. We generally prefer to adopt NQF-endorsed measures in our reporting programs with some exceptions as provided by law. For purposes of the Inpatient Psychiatric Facilities Quality Reporting (IPFQR) Program, section 1886(s)(4)(D)(ii) of the Act provides that, in the case of a specified area or medical VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 topic determined appropriate by the Secretary for which a feasible and practical measure has not been endorsed by the entity with a contract under section 1890(a) of the Act, the Secretary may specify a measure that is not so endorsed as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary. Finally, pursuant to section 1886(s)(4)(D)(iii) of the Act, the Secretary shall publish the measures applicable to the FY 2014 IPFQR Program no later than October 1, 2012. Section 1886(s)(4)(E) of the Act requires the Secretary to establish procedures for making public the data submitted by inpatient psychiatric hospitals and psychiatric units under the IPFQR Program. Such procedures must ensure that a facility has the opportunity to review its data prior to such data being made public. The Secretary must report quality measures that relate to services furnished by the psychiatric hospitals and units on a CMS Web site. 2. Application of the Payment Update Reduction for Failure To Report for the FY 2014 Payment Determination and Subsequent Years Beginning in FY 2014, section 1886(s)(4)(A)(i) of the Act requires the application of a 2.0 percentage point reduction to the applicable annual update to a Federal standard rate for those psychiatric hospitals and psychiatric units that fail to comply with the quality reporting requirements implemented in accordance with section 1886(s)(4)(C) of the Act, as detailed below. The application of the reduction may result in an annual update for a fiscal year that is less than 0.0 percent and in payment rates for a fiscal year being less than the payment rates for the preceding fiscal year. Pursuant to section 1886(s)(4)(B) of the Act, any such reduction is not cumulative and it will apply only to the fiscal year involved. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53678), we adopted requirements regarding the application of the payment reduction to the annual update of the standard Federal rate for failure to report data on measures selected for the FY 2014 payment determination and subsequent years and added new regulatory text at 42 CFR 412.424 to codify these requirements. 3. Covered Entities In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53645), we established that the IPFQR Program’s quality reporting requirements cover those psychiatric PO 00000 Frm 00394 Fmt 4701 Sfmt 4700 hospitals and psychiatric units that are paid under Medicare’s IPF PPS (42 CFR 412.404(b)). Generally, psychiatric hospitals and psychiatric units within acute care and critical access hospitals that treat Medicare patients are paid under the IPF PPS. For more information on the application of and exceptions to payments under the IPF PPS, we refer readers to section IV. of the November 15, 2004 IPF PPS final rule (69 FR 66926). As we noted in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53645), we use the term ‘‘inpatient psychiatric facility’’ (IPF) to refer to both inpatient psychiatric hospitals and psychiatric units. This usage follows the terminology we have used in the past in our IPF PPS regulations (42 CFR 412.402). 4. Considerations in Selecting Quality Measures For purposes of the IPFQR Program, section 1886(s)(4)(D)(i) of the Act requires that any measure specified by the Secretary must have been endorsed by the entity with a contract under section 1890(a) of the Act. However, the statutory requirements under section 1886(s)(4)(D)(ii) of the Act provide an exception that, in the case of a specified area or medical topic determined appropriate by the Secretary for which a feasible and practical measure has not been endorsed by the entity with a contract under section 1890(a) of the Act, the Secretary may specify a measure that is not so endorsed as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary. In implementing the IPFQR Program, our overarching objective is to support the HHS National Quality Strategy’s three-part aim of better health care for individuals, better health for populations, and lower costs for health care services: https:// www.healthcare.gov/news/reports/ quality03212011a.html#na. Implementation of the IPFQR Program will help achieve the three-part aim by creating transparency around the quality of care provided at IPFs to support patient decision-making and quality improvement. Over time, the IPFQR Program will help align the goals for quality measurement and improvement at IPFs with those of other providers in the health care system. We seek to collect data in a manner that balances the need for information related to the full spectrum of quality performance and the need to minimize the burden of data collection and reporting. We have focused on measures that have high impact and support CMS E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations and HHS priorities for improved quality and efficiency of care provided by IPFs. As we stated in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53645 through 53646), we will use the following considerations for the development and selection of measures: • Given the availability of wellvalidated measures and the need to balance breadth with minimizing burden, the measures should address, as fully as possible, the six domains of measurement that arise from the six priorities of the National Quality Strategy (NQS): Clinical care; personand caregiver-centered experience and outcomes; safety; efficiency and cost reduction; care coordination; and community/population health. • Public reporting should rely on a mix of standards, outcomes, process of care measures, and patient experience of care measures, including measures of care transitions and changes in patient functional status, with an emphasis on measurement as close to the patientcentered outcome of interest as possible. • The measure sets should evolve so that they include a focused set of measures appropriate to IPFs that reflects the level of care and the most important areas of service and measures for IPFs as well as measures addressing a core set of measure concepts that align quality improvement objectives across all provider and supplier types and settings. • Measures should address gaps in quality of inpatient psychiatric care. • As part of our burden reduction efforts, we continuously seek to weigh the relevance and utility of the measures compared to the burden on IPFs submitting data under the IPFQR Program. As appropriate, we will align our measures with other Medicare and Medicaid quality programs and may consider how we can incorporate data reporting by means of electronic reporting mechanisms, so that the collection of performance information is part of care delivery. • To the extent practicable, measures used by CMS should be nationally endorsed by a multi-stakeholder organization. Measures should be aligned with best practices among other payers and the needs of the end users of the measures. We take into account widely accepted criteria established in medical literature. We consider suggestions and input from technical expert panels (TEPs), convened by CMS contractors, which evaluate IPFQR quality measures for importance, scientific soundness, usability, and feasibility. We also take into account national priorities and HHS Strategic Plans and Initiatives: • HHS engaged a wide range of stakeholders to develop the National Quality Strategy, as required by the Affordable Care Act, which pursues three aims (better care, healthy people, and affordable care) that establish a framework with six identifiable priorities https://www.ahrq.gov/ workingforquality/nqs/ nqsfactsheet1.htm: •• Ensuring that each person and family is engaged as partners in their care. •• Promoting effective communication and coordination of care. •• Promoting the most effective prevention and treatment practices for the leading causes of mortality, starting with cardiovascular disease. •• Working with communities to promote wide use of best practices to enable healthy living. •• Making quality care more affordable for individuals, families, employers, and governments by developing and spreading new health care delivery models. •• Making care safer by reducing harm caused in the delivery of care. • We consider recommendations of the Measures Application Partnership (MAP) for the inclusion of clinical quality measures https:// 50889 www.qualityforum.org/MAP/. The MAP is a public-private partnership convened by the NQF for the primary purpose of providing input to HHS on selecting performance measures for quality reporting programs and pay-forreporting programs. • HHS is the United States Government’s principal department for protecting the health of all Americans. HHS accomplishes its mission through programs and initiatives. The goals of the HHS Strategic Plan for FYs 2010 through 2015 are: Strengthen Health Care; Advance Scientific Knowledge and Innovation; Advance the Health, Safety, and Well-Being of the American People; Increase Efficiency, Transparency, and Accountability of HHS Programs; and Strengthen the Nation’s Health and Human Services Infrastructure and Workforce (https:// www.hhs.gov/secretary/about/ priorities.html). HHS will update this strategic plan every 4 years and measure its progress in addressing specific national problems, needs, or missionrelated challenges. HHS prioritizes policy and program interventions to address the leading causes of death and disability in the United States, including heart disease, cancer, stroke, chronic lower respiratory diseases, unintentional injuries, and preventable behaviors. Initiatives such as the HHS Action Plan to Reduce Healthcare-Associated Infections in clinical settings and the Partnership for Patients exemplify these programs. 5. Quality Measures for the FY 2015 Payment Determination and Subsequent Years a. Background In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53646 through 53652), we adopted the following six chartabstracted IPF quality measures for the FY 2014 payment determination and subsequent years shown in the table below: PREVIOUSLY ADOPTED IPFQR PROGRAM QUALITY MEASURES BEGINNING WITH THE FY 2014 PAYMENT DETERMINATION National quality strategy priority Measure ID Clinical Quality of Care ........................ mstockstill on DSK4VPTVN1PROD with RULES6 Patient Safety ...................................... NQF No. 0640 0641 0552 0560 HBIPS–2 HBIPS–3 HBIPS–4 HBIPS–5 Care Coordination ............................... 0557 0558 HBIPS–6 HBIPS–7 VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 PO 00000 Frm 00395 Measure description Hours of Physical Restraint Use. Hours of Seclusion Use. Patients Discharged on Multiple Antipsychotic Medications. Patients Discharged on Multiple Antipsychotic Medications with Appropriate Justification. Post-Discharge Continuing Care Plan Created. Post-Discharge Continuing Care Plan Transmitted to Next Level of Care Provider Upon Discharge. Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50890 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations We note that, at the time of the finalization of the FY 2013 IPPS/LTCH PPS final rule (77 FR 53258), providers were using ICD–9–CM codes, but as of October 1, 2014 ICD–10–CM codes will be in effect. We do not at this time anticipate that this change will have substantive effects on any measures. Measures adopted for the IPFQR Program will remain in the quality reporting program for all subsequent years unless specifically stated otherwise (for example, through removal or replacement). In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27737), we did not propose to remove or replace any of the previously adopted measures from the IPFQR Program or add any new measures to the IPFQR Program for the FY 2015 payment determination. We believe that keeping the same measures for the FY 2015 payment determination will allow IPFs one additional year during which they could ramp up recordkeeping and improve quality of care on existing measures. We discussed the collection requirements and submission timeframes for these measures in section VIII.F.7. of the preamble of the FY 2013 IPPS/LTCH PPS final rule (77 FR 53654 through 53658). Comment: One commenter expressed appreciation that CMS did not propose additional data collection for the FY 2015 payment determination, because it will allow IPFs to improve data collection and documentation processes. Response: We thank the commenter for its support. Comment: In reference to the HBIPS– 6 and HBIPS–7 measures, a commenter stated that according to the instructions for chart-abstraction for these two measures, even if a patient leaves Against Medical Advice (AMA), providers are still required to offer a referral to a next level-of-care provider. Therefore, currently, patients who leave AMA are not automatically excluded from either HBIPS–6 or HBIPS–7 measures unless the patients refuse a referral. The commenter noted that there was no hand-off of care involved and therefore, believed uncomfortable to release a copy of the continuing plan of care (to any providers) as this action could be construed as a HIPAA violation. Based on the belief of potential HIPAA violations, the commenter requested that patients with a discharge status of AMA be excluded from HBIPS–6 and HBIPS–7. Response: We do not believe there is a potential HIPAA violation issue as we collect aggregate-level data and not patient-level data. Furthermore, a HIPAA covered entity is permitted to VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 make the disclosure under HIPAA under the ‘‘required by law’’ provisions at 45 CFR 164.512(a). That is, if the reporting of that measure is mandatory, ‘‘required by law’’ is the applicable HIPAA basis for disclosure. Comment: One commenter opposed the inclusion of HBIPS–4 because the commenter believed that the assumption that any patient discharged on multiple antipsychotic medications is an automatic indication of poor practice is unwarranted, particularly for acute care psychiatric facilities that treat distressed patients for a very short period. Response: We disagree with the commenter’s assumptions regarding the measure. The intent of the measure is not to prevent all instances of antipsychotic polytherapy, but rather to reduce the rate of discharge on two or more routinely prescribed antipsychotics without clinical justification. We acknowledge that circumstances, such as shorter inpatient stays, may require hospitals to discharge a patient on multiple antipsychotics. We believe that in these circumstances patients should be discharged with an aftercare plan to transition to monotherapy when clinically appropriate, and the facility should coordinate with post-discharge care providers. We also acknowledge that there are clinical circumstances when antipsychotic polytherapy may be clinically appropriate. b. New Quality Measures for the FY 2016 Payment Determination and Subsequent Years In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27737 through 277340), we proposed three new measures for the FY 2016 payment determination and subsequent years for the IPFQR Program. The measures are: (1) SUB–1: Alcohol Use Screening (Submitted for NQF review); (2) SUB–4: Alcohol & Drug Use: Assessing Status After Discharge (Submitted for NQF review); and (3) Follow-Up After Hospitalization for Mental Illness (FUH) (NQF #0576). The three proposed measures were included in a publicly available document entitled ‘‘List of Measures under Consideration for December 1, 2012’’ in compliance with section 1890A(a)(2) of the Act, and they were reviewed by the MAP in its ‘‘MAP PreRulemaking Report: 2013 Recommendations on Measures Under Consideration by HHS,’’ which is available on the NQF Web site at https://www.qualityforum.org/Setting_ Priorities/Partnership/Measure_ Applications_Partnership.aspx. We PO 00000 Frm 00396 Fmt 4701 Sfmt 4700 considered the input and recommendations provided by the MAP in selecting measures to propose for the IPFQR Program at this time. The MAP supported the inclusion of the third proposed measure in the IPFQR Program, and supported the direction of the first two measures, noting that their recommendation is contingent on NQF endorsement. The first two measures were submitted to the NQF in 2012. Currently, the dates for their review have not been established. The first two of these measures have been developed by and are maintained by The Joint Commission (TJC) (the measure steward) and the third measure has been developed by and is maintained by the National Committee for Quality Assurance (NCQA) (the measure steward). These measures are appropriate for the purposes of assessing the quality of inpatient psychiatric services and align with the National Quality Strategy goals of promoting effective prevention and treatment practices (clinical quality of care), and promoting effective communication and coordination of care. Technical specifications for measures ‘‘SUB–1: Alcohol Use Screening’’ and ‘‘SUB–4: Alcohol & Drug Use: Assessing Status After Discharge’’ can be found on the TJC Web site at: https://manual.joint commission.org/bin/view/Manual/ WebHome. Technical specifications for the measure ‘‘Follow-Up After Hospitalization for Mental Illness’’ (FUH) (NQF #0576) can currently be found on the NCQA Web site at: https:// www.ncqa.org/portals/0/Follow-Up%20 After%20Hospitalization%20for%20 Mental%20Illness.pdf. The three proposed measures for FY 2016 and subsequent years are described in more detail below. (1) SUB–1: Alcohol Use Screening (NQF Review Pending) Individuals with mental health conditions experience substance use disorders (SUDs) at a much higher rate than the general population. Individuals with the most serious mental illnesses have the highest rates of such disorders. Co-occurring SUDs often go undiagnosed and, without treatment, contribute to a longer persistence of disorders, poorer treatment outcomes, lower rates of medication adherence, and greater impairments to functioning. Accordingly, this proposed measure, and the one immediately following, are intended to assess efforts by IPFs to screen for the most common type of such disorder, alcohol abuse, and to follow up after discharge with individuals who screen positive for E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations alcohol abuse or who received a diagnosis of alcohol or drug disorder during the inpatient stay. In late 2008, TJC received funding from the Partnership for Prevention and HHS’ Substance Abuse and Mental Health Services Administration (SAMHSA) to develop, specify, and test standardized performance measures addressing alcohol screening and cessation counseling. Four alcohol/ substance use performance measures were pilot tested in the spring/summer of 2010. The four alcohol/substance use measures (SUB measure set) were approved as a core measure set for use in TJC’s accreditation programs (https:// www.jointcommission.org/core_ measure_sets.aspx). The SUB measures can be found in the TJC’s Specification Manual for National Hospital Inpatient Quality Measures at: https://manual. jointcommission.org/bin/view/Manual/ WebHome. The SUB–1: Alcohol Use Screening proposed measure assesses the number of patients 18 years of age and older who were screened for alcohol use using a validated screening questionnaire for unhealthy drinking during their inpatient stay, and is reported as a percentage. The numerator includes the number of patients who were screened for alcohol use using a validated screening questionnaire for unhealthy drinking. The denominator includes the number of hospitalized inpatients 18 years of age or older. Higher rates on the measure are indicative of better performance. The measure excludes the following populations: patients younger than 18, cognitively impaired patients, and patients admitted for less than 1 day or greater than 120 days. This measure is specified for collection through chart abstraction. We proposed the form, manner, and timing of collection in section IX.D.9. of the preamble of the proposed rule. Full specifications for this measure are available at: https://manual.joint commission.org/bin/view/Manual/ WebHome. The SUB–1: Alcohol Use Screening proposed measure meets the measure selection exception requirements for the IPFQR Program under 1886(s)(4)(D)(ii) of the Act as discussed in Section 4 (Considerations in Selecting Quality Measures) of this rule. Although the proposed measure is not currently NQFendorsed, we considered available measures that have been endorsed or adopted by a consensus organization and found no other feasible and practical measures on the topic of substance use disorder screening for the inpatient population. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 We invited public comment on this proposed measure. Comment: Some commenters supported inclusion of the SUB–1 measure because it promotes effective treatment practices, effective communication, and care coordination, as well as the ability to address issues of substance abuse. These commenters supported the proposed start date of January 1, 2013. Another commenter supported adoption of the SUB–1 measure because it promotes effective treatment and best care. This commenter noted that data for this measure can be retrieved by facilities, thereby promoting a standard of care that is within the control of the organization. One commenter supported CMS’ efforts in recognizing the clinical importance of routinely screening patients admitted for psychiatric conditions for risky alcohol use. Response: We thank the commenters for their support of our proposal. In response to the commenters who supported the adoption of the SUB–1 measure with a reporting start date as of January 1, 2013, we note that, as we stated in our proposal, the reporting start date for the FY 2016 payment determination is January 1, 2014, and not January 1, 2013 as the commenters stated. Comment: One commenter agreed with CMS’ proposal to add the SUB–1 measure to the IPFQR Program, but urged that, since there has been no reliability determination for such measure, we allow for a period of public reporting before attaching measures to payment. Response: We thank the commenter for the recommendation. We note that the IPFQR Program is a pay-forreporting and not a pay-for-performance program. This means that IPFs that participate in the IPFQR Program and meet its requirements will receive full payment. Comment: Some commenters commended CMS for recognizing the clinical importance of routinely screening patients admitted to hospitals for psychiatric conditions for risky alcohol use. These commenters, however, also raised concerns regarding the fact that TJC’s four substance use measures were developed and tested for use with all hospitalized patients, while the SUB–1 measure would only be used for IPF hospitals/units under the IPFQR Program. Response: We thank the commenters for their support. Although the SUB–1 measure was developed using all hospitalizations in general acute care, we believe that SUB–1 is equally applicable to freestanding IPFs and PO 00000 Frm 00397 Fmt 4701 Sfmt 4700 50891 psychiatric units within acute care facilities because risky alcohol use is an area of high comorbidity for populations hospitalized in freestanding IPFs and populations hospitalized in psychiatric units of general acute care facilities just as it is for all hospitalized patients. Comment: Some commenters indicated that the SUB–1 measure should be adopted concurrently with SUB–2 (brief intervention) and SUB–3 (treatment initiation) measures in the IPFQR Program because these measures are critical to providing quality care as screening and intervention significantly reduce health risks and generate costsavings. Commenters recommended that CMS add all four SUB measures because the measures are complementary to each other and are meant to be used as an entire set by hospitals to evaluate four key processes related to substance use. Response: We thank the commenters for these suggestions for future consideration. We did not elect to adopt both of the suggested measures at this time due to concerns regarding the burden of chart-abstraction should both the SUB–1 and SUB–4 measures be adopted. However, we will consider whether this is still the case during future rulemaking cycles. Comment: One commenter sought clarification on the kind of instrument to be used for alcohol screening with SUB–1. Response: There is no specific instrument specified by the measure. We believe that the assessment tool used may vary depending on age and other characteristics of the patient. We refer readers to the following document published by the National Institute on Alcohol Abuse and Alcoholism (NIAAA) which lists commonly used screening and assessment instruments, along with their scientific properties: https://pubs.niaaa.nih.gov/publications/ AssessingAlcohol/index.pdf. Comment: One commenter opposed inclusion of the proposed SUB–1 measure because collecting data for such measure would require expenditure of significant resources from the facility because TJC does not collect data for this measure. Another commenter indicated that it does not have the capacity to report the SUB–1 measure because it does not collect or report such data to TJC. Response: While IPFs may not currently be collecting this measure, we believe that our implementation timeline will allow sufficient time for facilities to make the necessary infrastructure changes to begin collecting and reporting the measure. In addition, although this measure would add burden, we do not believe that the E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50892 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations burden concerns override the importance of collecting information on such a measure. As we noted in this preamble, individuals with mental health conditions experience substance use disorders (SUDs) at a much higher rate than the general population. We also note that individuals abusing alcohol comprise a subset of all individuals with mental health conditions with SUDs. Individuals with the most serious mental illnesses have the highest rates of such disorders. Cooccurring SUDs often go undiagnosed and, without treatment, contribute to a longer persistence of disorders, poorer treatment outcomes, lower rates of medication adherence, and greater impairments to functioning. The SUB– 1 measure is intended to assess efforts by IPFs to screen for the most common type of such disorder, alcohol abuse, during the inpatient stay. Accordingly, we believe that the commenters’ burden concerns are outweighed by the important role that such measure plays in patient quality of care. Comment: Some commenters opposed the inclusion of the proposed SUB–1 measure because they believe that using a validated alcohol use screening tool in an acute care, short-term treatment setting is challenging and implies an IPF’s ability to establish a treatment option, which potentially may not be available in the aftercare setting. Response: We do not agree that use of an alcohol use screening tool in acute care would be challenging because we have previously implemented similar screening measures for other topics (such as tobacco use) in the acute care settings, and did not receive reports of implementation challenges in putting them in place. As we noted in the description of SUB–1, individuals with mental health conditions experience SUDs at a much higher rate than the general population, and individuals with the most serious mental illnesses have the highest rates of such disorders. The failure to identify and treat SUDs potentially contributes to a longer persistence of disorders, poorer treatment outcomes, lower rates of medication adherence, and greater functional impairment. Accordingly, assessment of such disorders is an important part of quality treatment planning in the IPF setting. Further, discharge planning, care coordination, and follow-up after hospitalization are critical in sustaining effective treatment that has begun in the acute care setting. The possibility that necessary treatment options may not exist in some circumstances does not justify a failure to assess the need for them. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Comment: Some commenters disagreed with the definition of the SUB–1 measure and argued that, although blood alcohol level is equivalent to screening for unhealthy alcohol use, one instance of excessive drinking does not require posthospitalization for alcohol treatment. Response: We disagree with the commenter. We do not believe that a blood alcohol level is equivalent to screening, or that it is sufficient to assess unhealthy alcohol use—chronic or otherwise. The measure is a screening measure, and therefore does not assess the need for or require posthospitalization treatment. Comment: Some commenters urged CMS not to finalize the SUB–1 measure because it has not been endorsed by the NQF or supported by the MAP. Response: The MAP’s assessment of SUB–1 was ‘‘support direction.’’ Recommendation of the measure by the MAP is contingent upon NQF endorsement. We note that at a recent meeting (June 2013), the NQF Behavioral Health Steering Committee recommended NQF endorsement of the SUB–1 measure. Comment: Some commenters opposed finalizing the SUB–1 measure because they considered it to be very limited relative to the needs of hospitalized psychiatric patients as this measure does not include: (1) Patients who are using/abusing other substances; (2) what period of use/abuse is being assessed; and (3) patients under 18 years of age. In addition, these commenters argue that the measure does not specify when the screening should be completed, whether IPFs should request data from collateral sources, or the clinical credentials of the persons permitted to complete the screening. These commenters recommended using the HBIPS–1 measure instead because it contains a requirement for all psychoactive substance use screening, in addition to alcohol use screening, and covers the last 12 months of each patient’s life. In addition, IPFs have been using this measure since 2010. Response: We believe that adoption of this measure will allow future alignment in the general acute care setting. This alcohol use screening measure is the first screening measure adopted by this program for psychiatric inpatients, and represents an important first step for this program. We recognize that the SUB–1 measure only assesses alcohol use, and that screening for risky use/abuse of other substances would be also be desirable. We intend to incorporate substance use measures into the program in the future. We also clarify that the SUB–1 measure does not PO 00000 Frm 00398 Fmt 4701 Sfmt 4700 require the collection of data from collateral sources, or credentialing requirements. The primary focus of the measure is to screen inpatients for unhealthy drinking. We also agree that it may be preferable to include screening measures with a broader age range and a distinct period during the inpatient stay during which screening is performed. As suggested by commenters, we will consider the HBIPS–1 measure as well as other substance use screening measures for future rulemaking cycles. Comment: One commenter did not support the SUB–1 measure because it believed that CMS should not add chartabstracted measures during the transition to electronic measures. Response: We support the adoption of EHRs, and will in the future adopt electronic measures. In the interim, however, we think that there is an immediate need to capture the quality of care provided to mental health patients. Therefore, while we do not disagree with the commenter in principle, we believe that the current needs of measuring quality of care in the IPF setting cannot wait until a later time. After consideration of the public comments we received, we are finalizing this measure as proposed for the FY 2016 payment determination and subsequent years. (2) SUB–4: Alcohol and Drug Use: Assessing Status After Discharge (NQF Review Pending) The SUB–4: Alcohol and Drug Use proposed measure assesses whether discharged patients are contacted between 7 and 30 days after hospital discharge in order to collect postdischarge follow-up information regarding their alcohol or drug use status. The measure applies to patients 18 years of age or older who screened positive for alcohol abuse, or who received a diagnosis of alcohol or drug disorder during their inpatient stay. The numerator includes the number of discharged patients that are contacted between 7 and 30 days after hospital discharge and follow-up information regarding alcohol or drug use status is collected. The denominator includes the number of discharged patients 18 years of age and older who screened positive for alcohol abuse or who received a diagnosis of alcohol or drug use disorder during their hospital stay. Higher rates on the measure are indicative of better performance. The following patients are excluded from the measure: • Patients less than 18 years of age; • Patients who are cognitively impaired; E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations • Patients who were not screened or refused to be screened for alcohol use; • Patients who expired; • Patients who have a duration of stay less than or equal to 1 day or greater than 120 days; • Patients who do not screen positive for alcohol abuse; • Patients discharged to another hospital; • Patients who left against medical advice; • Patients discharged to another health care facility; • Patients discharged to home or other health care facility for hospice care; • Patients who do not reside in the United States; • Patients who do not have a phone or cannot provide any contact information; • Patients discharged to a detention facility, jail, or prison; and • Patients who are readmitted within the follow-up time frame. This measure is specified for collection through chart abstraction. We proposed the form, manner, and timing of collection in section IX.D.9. of the preamble of the proposed rule. Full specifications for this measure are available at: https://manual.joint commission.org/bin/view/Manual/ WebHome. The SUB–4: Alcohol and Drug Use: Assessing Status After Discharge proposed measure meets the measure selection exception requirements for the IPFQR Program under section 1886(s)(4)(D)(ii) of the Act as discussed in section IX.D.4. of the preamble of the proposed rule. Because this measure is not currently NQF-endorsed, we considered other available measures that have been endorsed or adopted by a consensus organization. We found no other feasible and practical measures on the topic of post-discharge alcohol and drug assessment for inpatients who screened positive for substance abuse. We invited public comment on this proposed measure. Comment: Some commenters opposed the addition of the proposed SUB–4 measure for the following reasons: • They believed that there would be no added benefit to patients because hospital staff are unable to answer patients’ clinical questions once patients leave the hospital. • They believed the measure to be beyond the scope of psychiatric hospitals’ responsibility. • They argued that many freestanding psychiatric facilities do not currently submit the data to TJC, thus, making data collection burdensome. • They asserted that sampling requirements for the measure are VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 incompatible with those of the HBIPS measures. • They asserted that measure collection will require hiring and training new employees. • They believed that measure collection will require release of information forms. • They believed that because the measure excludes patients under 18 years of age, it may be of limited utility. • They argued that the measure will be financially burdensome to IPFs. • They argued that IPFs have limited or no contact information for some patients because IPF patients are a highly mobile population and temporary addresses pose difficulties for conducting follow-up. Response: We thank the commenters for articulating their concerns regarding this measure. We are aware that for some IPFs, this measure requires a process for following up with individuals with substance use disorders (SUDs) that may not now be in existence. Further, we are sensitive to the difficulties that may be created concerning differences between this measure and the other follow-up measure we proposed—the Follow-Up After Hospitalization for Mental Illness (FUH) measure. Most importantly, while the FUH measure only requires assessment of whether discharged patients with mental illness had contact with a specialty provider immediately after discharge, this measure requires contacting and obtaining clinicallyrelated information from the patients themselves, a more difficult standard to meet. We recognize the burden to both facilities and patients to report, collect, and submit this information needed to report SUB–4 to CMS. We also considered calculating SUB–4 using Medicare claims and believe that this approach is not appropriate for this measure, since detailed information about the patient’s follow-up visit necessary to calculate SUB–4 is not collected on Medicare claims. Accordingly, we are not finalizing this measure for the IPFQR Program at this time. We nevertheless will continue to explore the development and adoption of measures that assess the status and treatment of all patients in the period immediately following discharge, including those with SUDs. Comment: Some commenters supported inclusion of the SUB–4 measure because it promotes effective treatment practices, effective communication, and care coordination, as well as addressing substance abuse issues. These commenters supported the proposed start date. PO 00000 Frm 00399 Fmt 4701 Sfmt 4700 50893 Some commenters were supportive of the CMS proposal, but also offered suggestions to risk-adjust the SUB–4 measure to: (1) Prevent discrepancies in performance resulting from differences in patient demographics; and (2) to allow for public reporting prior to attaching measures to reimbursement since there has been no reliability determination for this measure. One commenter urged CMS to exclude halfway houses and voluntary community locations of care from this measure because these facilities are not healthcare facilities. Some commenters commended CMS for recognizing the clinical importance of routinely screening patients admitted to hospitals for psychiatric conditions for risky alcohol use, but raised concerns over the fact that TJC’s four substance use measures were developed and tested for use with all hospitalized patients and SUB–4 would only be used for IPF hospitals/units for the IPFQR Program. Some commenters urged CMS to concurrently include SUB–2 (brief intervention) and SUB–3 (treatment initiation) with SUB–4 in the IPFQR final rule because these measures are critical to providing quality care as screening and intervention significantly reduce health risks and generate costsavings. The commenters recommended that CMS add all four SUB measures because the measures are complementary to each other and are meant to be used as an entire set by hospitals to evaluate four key processes related to substance use. Response: We thank the commenters for supporting our proposal to adopt SUB–4. However, we are not finalizing the SUB–4 measure for the IPFQR Program at this time for the reasons we have described above. We will refer the measure refinement suggestions to the measure steward, and will consider the additional measures recommended by the commenters for future rulemaking. After consideration of the public comments we received, we are not finalizing the SUB–4 measure for the FY 2016 payment determination and subsequent years. (3) Follow-Up After Hospitalization for Mental Illness (FUH) (NQF #0576) Mental illness accounts for a very large disease burden and it is estimated that half of first-time psychiatric patients are readmitted within two years of hospital discharge. Continuity of treatment and appropriate follow-up care and management of chronic diseases, such as mental illnesses, are known to reduce the risk of repeated hospitalizations. Proper follow-up treatment for psychiatric hospitalization E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50894 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations can lead to improved quality of life for patients, families, and society as a whole. The Follow-Up After Hospitalization for Mental Illness measure assesses the percentage of discharges for patients 6 years of age and older who were hospitalized for treatment of selected mental health disorders, and who subsequently had an outpatient visit or an intensive outpatient encounter with a mental health practitioner, or received partial hospitalization services. The measure separately identifies the percentage of patients who received follow-up within 7 and 30 days of discharge. The detailed technical specifications for this measure can be found at: https://www.ncqa.org/portals/ 0/Follow-Up%20After%20 Hospitalization%20for%20Mental%20I llness.pdf. The measure is specified by the steward for either collection through chart abstraction or calculation using claims-based data. We considered using claims-based data for patients discharged from IPFs to calculate the measure, and in the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR 27738), we welcomed public feedback on this approach. However, we proposed to collect chart-abstracted data for this measure in order to maintain consistency with the approach used for existing measures in the IPFQR Program, and solicited comment on this proposal. We also considered using claims-based data for patients discharged from IPFs to calculate the measure, and welcomed public feedback on this alternative approach. We proposed the form, manner, and timing of collection in section IX.D.9. of the preamble of the proposed rule. The Follow-Up After Hospitalization for Mental Illness (FUH) proposed measure meets the measure selection criteria under section 1886(s)(4)(D)(i) of the Act, because it is NQF-endorsed. We invited public comment on this proposed measure. Comment: Some commenters supported inclusion of the FUH measure because it promotes effective treatment practices, effective communication, and care coordination, as well as provides the ability to address issues of substance abuse. These commenters supported the proposed start date. Another commenter supported the FUH measure and indicated that it has used it with some success to refer patients to the next level of care. This commenter stated that case management is needed for this measure. One commenter stated that the data for this measure could be retrieved by facilities, thereby promoting a standard VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 of care that is within the control of the organization. One commenter expressed concern that 7–30 days is not sufficient time for the FUH measure, especially in rural hospitals where access to specialty physicians is limited, thus making it difficult for patients to see the physicians within 30 days of discharge. One commenter suggested CMS require a uniform tool for collecting postdischarge information for the FUH measure so that outcomes can be appropriately compared. Response: We thank the commenters for supporting our proposal to implement this measure in the IPFQR Program. We agree that effective treatment is sustained and enhanced through case management activities such as care coordination, provider communication, and follow up after discharge. We may consider case management-related measures in the future. The timeframe specified by this measure is a consensus-based timeframe within which initial follow-up should occur. A specialty physician is not required for the follow-up visit, and so rural hospitals should not be adversely affected. We will consider for future rulemaking the suggestion that we require a uniform tool for collecting post-discharge information for this measure. Comment: A number of commenters sought clarification on the patient population criteria and exceptions and expressed other concerns about the measure. One commenter inquired whether the FUH measure applies to a patient enrolled in a Medicare Advantage plan with an insurance carrier that is fully at risk. One commenter inquired whether the FUH measure excludes patients who have been discharged to a non-CMS reimbursable service such as an intermediate care facility for individuals with mental retardation (ICF–MR), residential facility, group home, or jail, or when the patient is readmitted. Another commenter requested that CMS consider excluding homeless patients from the FUH measure. Another commenter requested information regarding how homeless patients or patients in shelters or boarding homes should be contacted. Another commenter indicated that the FUH measure is not appropriate for the ‘‘forensic’’ patient population because it is not possible to track these patients once they are released from jail. One commenter recommended riskadjusting the FUH measure to prevent discrepancies in performance resulting from differences in patient demographics. One commenter requested clarification about who is PO 00000 Frm 00400 Fmt 4701 Sfmt 4700 responsible for initiating follow-up for patients discharged from an acute care facility to an extended treatment facility for drugs and alcohol. This commenter was concerned that a patient who is currently being treated in an extended treatment program may have restricted contact. One commenter indicated that because a visit on the day of discharge is acceptable to meet the FUH measure requirements, adopting the measure may result in IPFs using same-day visits to meet the requirements of the measure rather than encouraging IPFs to coordinate care closely for follow-up treatment. One commenter noted that patients who are not involuntarily committed and make the decision to leave should not reflect poorly on the hospital. Response: The FUH measure includes persons discharged to an ambulatory care setting/home (including homeless beneficiaries, and those discharged to a residential facility or group home). However, the IPF patient population criteria and exceptions for the IPF FUH measure would apply to these discharges. Therefore, we would exclude those Medicare FFS beneficiaries who are transferred to another inpatient or institutional setting (for example, another hospital, IPF, Skilled Nursing Facility, ICF–MR, nursing home, jail/prison). Regarding partial hospitalization or outpatient chemical dependency programs, these services are not considered inpatient discharges, but rather are outpatient services; and thus, are not part of IPF PPS or the IPFQR Program. In addition, Medicare Advantage beneficiaries are not included in the Medicare FFS program; therefore Medicare Advantage beneficiaries are excluded from the FUH measure. The measure does not focus on the forensic population, and since treatment of that population is covered by the State rather than Medicare, these patients would not be included in the measure. We currently have no indication that same-day visits will be employed to a greater extent to meet the measure requirement once the measure is adopted, but we will monitor the measure for unintended consequences and changes in utilization patterns. We feel that certain disposition codes (involuntary commitment, left against medical advice) may be used improperly should we exclude these discharges from the measure, but will examine this issue further as well. We will consider the suggestions for additional exclusions and for risk adjustment of the IPF FUH measure. Comment: A few commenters opposed the addition of the proposed E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations FUH measure because it was perceived to be incompatible with the existing HBIPS measures. Some commenters stated that the FUH measure is incompatible with existing HBIPS measures because it requires follow-up at 7 and 30 days, whereas the timeframe for HBIPS is 12 months. The commenters were also concerned that sampling is not allowed for the FUH measure, but is allowed for the HBIPS measures. The commenters believed these differences will impose burdens on facilities. Response: We do not believe that the FUH measure is incompatible with the HBIPS measure. We believe that the commenters misinterpreted the collection and submission requirements for the HBIPs measures currently in the IPFQR Program. Data for the HBIPS measures currently included in the IPFQR Program (HBIPS 2 through 7) are collected quarterly by IPFs. This information is then submitted to CMS once every 12 months via QualityNet. We acknowledge that the FUH measure’s lack of sampling may pose a burden, and in response to concerns about burden, we are finalizing the adoption of this measure as a claimsbased measure. Comment: Some commenters opposed the addition of the FUH measure because it is specified for use by health plans and not IPFs. Therefore, these commenters argued that requiring IPFs to provide such data would impose great burden because they would need to develop systems to capture such data. Other commenters stated that psychiatric hospitals do not have such data. Some commenters indicated that collecting information for this measure raises confidentiality concerns and increases the risk of liability for hospitals. Other commenters argued that the FUH measure would require IPFs to put forth additional efforts to obtain Release of Information forms prior to patient discharge. Some commenters opposed the FUH measure because it would require psychiatric hospitals to reach out to aftercare providers to obtain the information needed for the measure, and thus impose a burden on IPFs. One commenter noted that the burden is further exacerbated because the measure specifications do not allow for sampling. One commenter noted that patients, rather than IPFs, should take the lead in their follow-up care. Another commenter stated that IPFs could not be responsible for what patients do postdischarge. This commenter also noted that this measure is problematic because it relies on patients being honest about their follow-up care. One commenter recommended that CMS use claims/ administrative data for the FUH measure. Response: Because we are finalizing this measure as claims-based instead of chart-abstracted as we had initially proposed, IPFs would not need to obtain any sort of release of information form. These forms are not a requirement of the IPFQR Program or CMS, but we are aware that many IPFs obtain them to comply with State, HITECH, and HIPAA requirements, in order to contact aftercare providers to obtain information on patient follow-up care status. Based upon the public comments received above regarding burden and privacy concerns for FY 2016 payment determination and subsequent years, we are finalizing the FUH measure with a change in order to alleviate these concerns. We will calculate the measure using Part A and Part B claims data that are already received by Medicare for payment purposes. This approach requires no additional data collection or reporting by IPFs. However, in the 50895 future, we will consider transitioning this measure to chart-abstracted data collection, and will take these comments into account should we do so. After considering the public comments we received, we are finalizing the FUH measure as a claimsbased measure because we believe it will reduce the burden to IPFs since we will calculate this measure by linking Medicare FFS claims submitted by IPFs and subsequent outpatient providers for Medicare FFS IPF discharges. In summary, we are retaining all six of the chart-abstracted measures previously adopted for the FY 2014 payment determination and subsequent years. We are not removing or replacing any of the previously adopted measures from the IPFQR Program or adding any new measures to the IPFQR Program for the FY 2015 payment determination and subsequent years. For the FY 2016 payment determination and subsequent years, we are adding one new chart-abstracted measure for the IPFQR Program: SUB– 1: Alcohol Use Screening (NQF review pending) as proposed. We are also adding another new measure: FollowUp After Hospitalization for Mental Illness (FUH) (NQF #0576) with a change that data collection be claimsbased. This change will apply to the FY 2016 payment determination and subsequent years, unless we change it through future rulemaking. We are finalizing the collection requirements for these measures in section IX.D.9. of the preamble of this final rule. The table below lists the previously adopted measures for the FY 2014 payment determination and subsequent years and the additional measures for the FY 2016 payment determination and subsequent years. PREVIOUSLY ADOPTED QUALITY MEASURES AND QUALITY MEASURES ADOPTED IN THIS FINAL RULE FOR THE IPFQR PROGRAM National Quality Strategy Priority Clinical Quality of Care ..................... 0640 0641 0552 0560 ................. ................. ................. ................. HBIPS–2 HBIPS–3 HBIPS–4 HBIPS–5 Care Coordination ............................. mstockstill on DSK4VPTVN1PROD with RULES6 Patient Safety .................................... Measure ID NQF No. 0557 ................. 0558 ................. HBIPS–6 HBIPS–7 Clinical Quality of Care ..................... Review Pending 0576 ................. SUB–1 FUH Measure description Hours of Physical Restraint Use.* Hours of Seclusion Use.* Patients Discharged on Multiple Antipsychotic Medications.* Patients Discharged on Multiple Antipsychotic Medications with Appropriate Justification.* Post-Discharge Continuing Care Plan Created.* Post-Discharge Continuing Care Plan Transmitted to Next Level of Care Provider Upon Discharge.* Alcohol Use Screening.** Follow-Up After Hospitalization for Mental Illness.** * Previously adopted quality measures for the FY 2014 payment determination and subsequent years. ** New quality measures adopted in this final rule for the FY 2016 payment determination and subsequent years. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 PO 00000 Frm 00401 Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50896 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations c. Maintenance of Technical Specifications for Quality Measures We will provide a user manual that will contain links to measure specifications, data abstraction information, data submission information, a data submission mechanism known as the Web-based Measure Tool, and other information necessary for IPFs to participate in the IPFQR Program. This manual will be posted on the QualityNet Web site at: https://www.qualitynet.org/dcs/Content Server?c=Page&pagename=Qnet Public%2FPage%2FQnetTier2& cid=1228772250192. We will maintain the technical specifications for the quality measures by updating this manual periodically and including detailed instructions for IPFs to use when collecting and submitting data on the required measures. These updates will be accompanied by notifications to IPFQR Program participants, providing sufficient time between the change and effective dates in order to allow users to incorporate changes and updates to the measure specifications into data collection systems. Many of the quality measures used in different Medicare and Medicaid reporting programs are NQF-endorsed. As part of its regular maintenance process for NQF-endorsed performance measures, the NQF requires measure stewards to submit annual measure maintenance updates and undergo maintenance of endorsement review every 3 years. In the measure maintenance process, the measure steward (owner/developer) is responsible for updating and maintaining the currency and relevance of the measure and will confirm existing or minor specification changes with NQF on an annual basis. NQF solicits information from measure stewards for annual reviews, and it reviews measures for continued endorsement in a specific 3-year cycle. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53652), we stated that the NQF regularly maintains its endorsed measures through annual and triennial reviews, which may result in the NQF making updates to the measures. We believe that it is important to have in place a subregulatory process to incorporate nonsubstantive updates made by the NQF into the measure specifications we have adopted for the IPFQR Program so that these measures remain up-to-date. Through NQF’s measure maintenance process, NQF endorsed measures are sometimes updated to incorporate changes that we believe do not substantially change the nature of the VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 measure. We believe these types of maintenance changes are distinct from more substantive changes to measures that result in what are considered new or different measures, and that they do not trigger the same agency obligations under the Administrative Procedure Act. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53653), we adopted a policy to use a subregulatory process to make nonsubstantive updates to NQFendorsed measures used for the IPFQR Program. We also stated that we expected to make the determination of what constitutes a substantive versus a nonsubstantive change on a case-by-case basis, and provided examples of the types of changes that would fall into each category. Examples of nonsubstantive changes to measures might include updated diagnosis or procedure codes, medication updates for categories of medications, broadening of age ranges, and exclusions for a measure (such as the addition of a hospice exclusion to the 30-day mortality measures). We believe that non-substantive changes may include updates to NQF-endorsed measures based upon changes to guidelines upon which the measures are based. As stated in the FY 2013 IPPS/ LTCH PPS final rule, we will revise the Specifications Manual so that it clearly identifies the updates and provide links to where additional information on the updates can be found. We also will post the updates on the QualityNet Web site at https://www.QualityNet.org. We will provide sufficient lead time for facilities to implement the changes where changes to the data collection systems would be necessary. We will continue to use rulemaking to adopt substantive updates made by the NQF to the endorsed measures we have adopted for the IPFQR Program. Examples of changes that we might consider to be substantive would be those in which the changes are so significant that the measure is no longer the same measure, or when a standard of performance assessed by a measure becomes more stringent (for example: changes in acceptable timing of medication, procedure/process, or test administration). Another example of a substantive change would be where the NQF has extended its endorsement of a previously endorsed measure to a new setting, such as extending a measure from the inpatient setting to hospice. We believe that the policy finalized in the FY 2013 IPPS/LTCH PPS final rule adequately balances our need to incorporate non-substantive NQF updates to NQF-endorsed IPFQR Program measures in the most PO 00000 Frm 00402 Fmt 4701 Sfmt 4700 expeditious manner possible, while preserving the public’s ability to comment on updates that so fundamentally change an endorsed measure that it is no longer the same measure that we originally adopted. We also note that the NQF process incorporates an opportunity for public comment and engagement in the measure maintenance process. These policies regarding what is considered substantive versus non-substantive apply to all measures in the IPFQR Program. 6. Request for Voluntary Information— IPF Assessment of Patient Experience of Care As indicated previously, we strive to address each of the six priorities of the HHS National Quality Strategy in our quality reporting programs. One priority area currently unaddressed in the IPFQR Program is that of patient and family engagement and experience of care. We included on our ‘‘List of Measures under Consideration for December 1, 2012,’’ the measure ‘‘Inpatient Consumer Survey of Inpatient Behavioral Healthcare Services’’ (NQF #0726). The MAP provided input on this measure supporting its inclusion in the IPFQR Program. We believe that while the specific survey instrument incorporated in that measure addressed an important area of quality care, and in the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR 27740), we did not propose to adopt the measure at this time because of several issues. These issues include potential reporting and information collection burdens in a new program, and compatibility with the content and format of other similar CMS beneficiary surveys. We intend to pursue the adoption of a standardized measure of patient experience of care for the IPFQR Program in the near future. In an effort to proceed cautiously with the selection of an assessment instrument and collection protocol, we instead proposed to collect information from IPFs participating in the IPFQR Program regarding whether the IPF assesses patient experience of inpatient behavioral health services using a standardized instrument (Yes/No). We would also ask those IPFs that answer ‘‘Yes’’ to indicate the name of the survey that they administer. Submission of this information would be voluntary and would not affect an IPF’s FY 2016 payment determination. We will use information we collect from this request for voluntary information to assess readiness of IPFs to report patient experience of care E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations measure data in the IPFQR Program. We intend to propose to make this request for voluntary information a mandatory measure in future rulemaking. Section IX.D.9. of the preamble of the proposed rule, which covered the form, manner, and timing of data submissions, included our proposal for collection requirements that would apply to any information IPFs voluntarily submit. Section X.D.9. of the preamble of the proposed rule also included more information about the request for voluntary information. We welcomed comments on this approach as well as recommendations concerning future measurement of this domain, including recommendations of specific instruments for surveying patient and family engagement and experience of care in inpatient psychiatric settings. Comment: Some commenters supported CMS’ efforts to implement a patient experience of care survey and offered to assist CMS to find patient experience of care measures that are appropriate for psychiatric settings. One commenter indicated that it is difficult to obtain experience of care information from geriatric psychiatric patients suffering from dementia and recommended using a readmission measure to assess whether the patient has improved. One commenter requested that when CMS selects a patient experience of care measure, it consider excluding patients committed involuntarily, because their views will be negatively influenced by the involuntary commitment. Some commenters urged CMS to work with stakeholders before implementing this measure to understand further the opportunities and challenges of various survey tools. Other commenters indicated that they developed their own surveys after determining that some of the questions in the NRI survey were not relevant to their patient population. Response: We recognize the challenges of measuring patient experience of care, particularly for involuntary cases and geriatric psychiatric patients suffering from dementia. We also recognize that IPFs may have developed their own survey instruments, and we seek to learn more about these instruments prior to requiring collection of a patient experience of care survey for the IPFQR Program. For this reason, we seek to implement this request for voluntary information assessing whether IPFs currently assess patient experience of care, and to learn from the opportunities and challenges that our stakeholders have experienced. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 After consideration of the public comments we received, we will implement the Request for Voluntary Information—IPF Assessment of Patient Experience of Care. 7. Request for Recommendations for New Quality Measures for Future Years We seek to develop a comprehensive set of quality measures to be available for widespread use for informed decision-making and quality improvement in the inpatient psychiatric setting. Therefore, through future rulemaking, we intend to propose new measures that will help us further our goal of achieving better health care and improved health for Medicare beneficiaries who obtain inpatient psychiatric services, through the widespread dissemination and use of performance information. We plan to continue developing a comprehensive set of quality measures to be available for widespread use for informed decision-making and quality improvement in IPFs. Accordingly, we are soliciting recommendations concerning future measures to assess the domains that arise from the six NQS priorities: clinical care; person- and caregiver-centered experience and outcomes; safety; efficiency and cost reduction; care coordination; and community/population health. This approach will enhance better psychiatric care while bringing the IPFQR Program in line with other established quality reporting and performance improvement programs who also aim to align with the NQS priorities such as the Hospital Inpatient Quality Reporting (IQR) Program, the Hospital Outpatient Quality Reporting (OQR) Program, the Hospital ValueBased Purchasing (VBP) Program, the End-Stage Renal Disease Quality Incentive Program (ESRD QIP), and other CMS quality programs. Recommendations for consideration of individual measures should address the importance of the measure, its scientific evidence, its relevance for quality improvement, and the feasibility of collection and reporting. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27740), we welcomed all recommendations related to any of the identified domains. However, we stated that we are particularly interested in measure and domain recommendations concerning: (1) Inpatient psychiatric treatment and quality of care of geriatric patients and other adults, adolescents, and children; (2) quality of prescribing for antipsychotics and antidepressants; (3) readmissions; (4) access to care; (5) screening for suicide and violence; and PO 00000 Frm 00403 Fmt 4701 Sfmt 4700 50897 (6) screening and treatment for nonpsychiatric, comorbid conditions for which patients with mental or substance use disorders are at higher risk. In addition, we sought recommendations on any other measures related to patient experience of care and overall quality of care for IPFs. We welcomed public comment on considerations of additional measure topics for the IPFQR Program in future rulemaking. Comment: In response to our request for comments we received the following additional measure topic suggestions: • Suicide screening and violence • HBIPS–1 • SUB–2 • SUB–3 • Readmission Response: We thank the commenters for their suggestions for future measure selection. We will take them into consideration for the IPFQR Program. 8. Public Display Requirements for the FY 2014 Payment Determination and Subsequent Years Section 1886(s)(4)(E) of the Act requires the Secretary to establish procedures for making the data submitted under the IPFQR Program available to the public. Such procedures shall ensure that an IPF has the opportunity to review the data that is to be made public with respect to the IPF prior to such data being made public. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53653 through 53654), we finalized our procedures for the FY 2014 payment determination and subsequent years regarding public display. We previously finalized that the data collected under the IPFQR Program would be displayed on a CMS Web site and that public display would begin in the first quarter of the calendar year following the respective payment determination year (77 FR 53654). Last year, we also finalized a 30-day preview period that would allow IPFs to review their data before it became public. The previously finalized preview period is September 20 through October 19 of the respective payment determination year (77 FR 53654). In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27740 through 27741), we proposed to change our finalized policies, however, in an attempt to align the IPFQR Program preview and display periods with that of the Hospital IQR Program. We proposed that for the FY 2014 payment determination and subsequent years, we would publicly display the submitted data on a CMS Web site in April of each calendar year following the start of the respective payment determination year. E:\FR\FM\19AUR2.SGM 19AUR2 50898 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations In other words, the public display period for the FY 2014 payment determination would be April 2014; the public display periods for the FY 2015 and FY 2016 payment determinations would be April 2015 and April 2016 respectively, and so forth. We also proposed that the preview period for the FY 2014 payment determination and subsequent years be modified to 30 days approximately twelve weeks prior to the public display of the data. This is to align with the Hospital IQR Program’s preview and display periods and, as a result, reduce burden to facilities. We welcomed public comment on these proposals. Comment: Many commenters supported our proposal to align the IPFQR Program public reporting and display periods with that of the Hospital IQR Program (April of each calendar year) and agreed that it will give IPFs the opportunity to review the data that is to be made public prior to its being made so. Response: We thank commenters for their support. Comment: One commenter believed that publicly reported quality data should be updated more than once per year so that hospitals have more current data in order to develop and track quality improvement. Response: We agree with the commenter that continuous review of the most current data is important to quality improvement. At this time, however, we only require providers to input data for the IPFQR Program once per year. Thus, it is not operationally possible for us to post this data publicly on a quarterly basis. In addition, at this time, we do not believe it is appropriate for us to require data entry on a more frequent basis because this would impose a larger burden on IPFs. As IPFs become more comfortable with the program, however, the frequency of data entry may be less of a burden and may then be more appropriate. We will consider requiring reporting more than once per year and publicly reporting data on a more frequent basis for future rulemaking. After consideration of the public comments we received, we are finalizing the public display requirements for the FY 2014 payment determination and subsequent years as proposed. Set out below is a table that displays the new public display timeline. Although we have listed the public display timeline only for the FYs 2014 through 2016 payment determinations, this policy applies to the FY 2014 payment determination and subsequent years. PUBLIC DISPLAY TIMELINE FOR THE FY 2014 PAYMENT DETERMINATION AND SUBSEQUENT YEARS Payment determination year (fiscal year) 2014 .................. 2015 .................. 2016 .................. Reporting period (calendar year) Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2012 2013 2013 2013 2013 2014 2014 2014 2014 (October 1, 2012–December 31, 2012) .................................................................................... (January 1, 2013–March 31, 2013). (April 1, 2013–June 30, 2013) .................................................................................................. (July 1, 2013–September 30, 2013). (October 1, 2013–December 31, 2013). (January 1, 2014–March 31, 2014) .......................................................................................... (April 1, 2014–June 30, 2014). (July 1, 2014–September 30, 2014). (October 1, 2014–December 31, 2014). mstockstill on DSK4VPTVN1PROD with RULES6 9. Form, Manner, and Timing of Quality Data Submission for the FY 2014 Payment Determination and Subsequent Years a. Background Section 1886(s)(4)(C) of the Act requires that, for the FY 2014 payment determination and each subsequent year, each IPF submit to the Secretary data on quality measures as specified by the Secretary. Such data shall be submitted in a form and manner, and at a time, specified by the Secretary. As required by section 1886(s)(4)(A) of the Act, for any IPF that fails to submit quality data in accordance with section 1886(s)(4)(C) of the Act, the Secretary will reduce any annual update to a standard Federal rate for discharges occurring during such fiscal year by 2.0 percentage points. The complete data submission requirements, submission deadlines, and data submission mechanism, known as the Web-Based Measure Tool, is posted on the QualityNet Web site at: https:// www.qualitynet.org/. The Web-Based Measure Tool is an Internet database for VerDate Mar<15>2010 Public display (calendar year) 21:51 Aug 16, 2013 Jkt 229001 IPFs to submit their aggregate data. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53654 through 53658), we required that IPFs submit data in accordance with the specifications for the appropriate proposed reporting periods to the Web-Based Measures Tool found in the IPF section on the QualityNet Web site (https:// www.qualitynet.org/). b. Procedural Requirements In order to participate in the IPFQR Program, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53654 through 53655), we required IPFs to comply with certain procedural requirements. We have aligned these procedural requirements with the Hospital IQR Program to avoid imposing additional burden on providers and to increase efficiencies by virtue of allowing providers to use similar submission requirements across programs. Under these adopted policies, IPFs must— • Register with QualityNet before the IPF begins reporting, regardless of the method used for submitting the data. PO 00000 Frm 00404 Fmt 4701 Sfmt 4700 April 2014. April 2015. April 2016. • Identify a QualityNet Administrator who follows the registration process located on the QualityNet Web site (https://www.qualitynet.org/). • Complete a Notice of Participation (NOP). IPFs that wish to participate in the IPFQR Program must complete an online NOP. Submission of a NOP is an indication that the IPF agrees to participate in the IPFQR Program and public reporting of their measure rates. The timeframe for completing the NOP is between January 1 and August 15 before each respective payment determination year. For example, for the FY 2015 payment determination year, the timeframe for completing the NOP is between January 1, 2014 and August 15, 2014. • Any IPF that receives a new CMS Certification Number (CCN) on or after the beginning of the respective payment determination year and wishes to participate in the IPFQR Program, but has not otherwise submitted a NOP using the new CCN, must submit a completed NOP no later than 180 days from the date identified as the open date (that is, the Medicare acceptance date) E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 on the approved CMS Quality Improvement Evaluation System to participate in the IPFQR Program. • Withdrawals from the IPFQR Program will be accepted no later than August 15 before the beginning of each respective payment determination year. We believe the August 15 deadline will give us sufficient time to update payment determinations for each respective year. For example, under current policies, the withdrawal period for the FY 2015 payment determination year is between January 1, 2014 and August 15, 2014. If in a given payment determination year, an IPF withdraws from the program, it will receive a reduction of 2.0 percentage points to that year’s applicable percentage increase. Once an IPF has submitted an NOP, it is considered to be an active IPFQR Program participant until such time as the IPF submits a withdrawal form to CMS. • We determine if an IPF has complied with our data submission requirements by validating each IPF’s CCN and their aggregated data submission on the QualityNet Web site. • IPFs must submit the aggregated numerator and denominator data for all age groups, for all measures, to avoid the 2.0 percentage point reduction. c. Submission Requirements for the FY 2016 Payment Determination and Subsequent Years Currently, IPFs choosing to participate in the IPFQR Program must meet the specific data collection and submission requirements as described on the QualityNet Web site at https:// www.qualitynet.org/ and by TJC, the HBIPS measure steward (77 FR 53655). As we indicated in the FY 2013 IPPS/ LTCH PPS final rule, the specifications for the HBIPS measures can be found on the TJC Web site at: https://manual.joint commission.org/bin/view/Manual/ WebHome. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27741 through 27742), for the FY 2016 payment determination, we proposed that, for the proposed chart-abstracted measures listed in the preamble of the proposed rule, participating IPFs meet the same specific data collection and submission requirements when reporting quality measure data. The specifications for the SUB–1 and SUB–4 measures can be found on the TJC Web site at: https:// www.jointcommission.org/specifications _manual_for_national_hospital_ inpatient_quality_measures.aspx. Please note, however, that we are not finalizing the SUB–4 measure in this rule. The specifications for the FUH measure are posted on the NCQA Web site at: VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 https://www.ncqa.org/portals/0/FollowUp%20After%20Hospitalization%20 for%20Mental%20Illness.pdf. We note that for the FUH measure, based on comments we received, we are finalizing claims-based submission instead of chart-abstraction as we proposed; therefore, the chartabstraction requirements described herein apply only to the SUB–1 measure. We finalized a policy in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53655 through 53656) requiring that IPFs submit aggregate data on measures on an annual basis via the Web-Based Measures Tool found in the IPF section on the QualityNet Web site. While this policy applies on an annual basis beginning in FY 2014, it is listed under a sub-heading labeled ‘‘Reporting and Submission Requirements for the FY 2014 Payment Determination’’ (77 FR 53655). To avoid reader confusion, we clarify that these reporting and submission requirements finalized in the FY 2013 IPPS/LTCH PPS final rule apply to all subsequent years unless we change our policy through future rulemaking. It is our intent to require that IPFs submit aggregate data on measures on an annual basis via the Web-Based Measures Tool found in the IPF section on the QualityNet Web site for the FY 2014 payment determination and subsequent years. The data input forms on the QualityNet Web site for such submission will require aggregate data for each separate quarter. Therefore, IPFs will need to track and maintain quarterly records for their data. Comment: One commenter objected to the submission deadline for the HBIPS measures, arguing that hospitals are not clear on expectations for data entry into the Web-based tool, which has yet to become operational. In addition, this commenter opposed the use of nonvalidated data for pay-for-performance programs. Response: We would like to clarify that the IPFQR Program is a pay-forreporting and not, as the commenter indicated, a pay-for-performance program. Last year, we finalized the measures amid overwhelming support from the public. We have held several Webinars listed on QualityNet to inform the public on program requirements. Although, as we noted, non-validated data may have some shortcomings, we believe that asking IPFs to acknowledge the accuracy and completeness of the data they submit will mitigate this problem. For more information, we refer readers to the IPFQR Program discussion in section VIII.F. of FY 2013 PO 00000 Frm 00405 Fmt 4701 Sfmt 4700 50899 IPPS/LTCH PPS final rule (77 FR 53655 through 53656). Comment: One commenter inquired whether Releases of Information forms are required to track data on behalf of CMS. Response: We thank the commenter for seeking clarification. We believe the commenter is asking whether a release of information form—an institutional form that many hospitals require upon releasing sensitive patient information— is necessary for the IPFQR Program. The release of information form is not applicable to the IPFQR Program because we are collecting aggregatelevel data, which do not contain sensitive patient information. Comment: Some commenters sought clarification as to how the specifications of the proposed Follow-Up After Hospitalization for Mental Illness measure, which require that the denominator list data for 11 months, align with our requirement that measures be reported by quarter. Some commenters sought clarification as to how the FUH measure would be converted since it is specified for annual and not monthly reporting. Response: As we have noted earlier in this preamble, based on comments received, we are finalizing the FUH measure with a change that it initially be collected as a claims-based measure, which will remove the need for IPFs to collect, calculate, and submit chartabstracted data. We will calculate this measure utilizing Part A and Part B claims data, in accordance with measure specifications. To allow for the lag in claims submission, for the FY 2016 payment determination and subsequent years, we will calculate the measure for the period from July 1 of the year immediately preceding the reporting period for chart-abstracted measures to June 30 of the following year. Thus, the first FUH measure calculation period for the FY 2016 payment determination would be from July 1, 2013 to June 30, 2014. Comment: Some commenters sought clarification on whether separate rates would be expected for different payers for the FUH measure since the measure specifications require that the data reported is payer-specific, whereas our proposal seeks data on ‘‘all payers.’’ Response: As we have noted earlier in this rule, based on comments received, for the FY 2016 payment determination and subsequent years, we are finalizing the FUH measure with a change that it initially be collected as a claims-based measure. We will collect the data from Medicare Part A and Part B claims. E:\FR\FM\19AUR2.SGM 19AUR2 50900 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Comment: One commenter inquired as to what will be accepted as ‘‘proof’’ of follow-up for the FUH measure. Response: As we have noted earlier in this rule, based on comments received, we are finalizing the FUH measure with a change that it initially be collected as a claims-based measure; thus, there is no ‘‘proof’’ of follow-up for the FUH submission requirements. Comment: One commenter opposed the addition of the proposed measures because developing, improving and testing the integrity of a data process can take up to a year. Another commenter recommended postponing the implementation of the newly proposed measures until FY 2015 because these measures are new for many facilities and the data collection for the initial six measures only began in October 2012. Response: We note that, contrary what the commenter suggested above, the measures will first apply to the FY 2016 payment determination and that the reporting period does not start until January 1, 2014. Since we are only finalizing one new chart-abstracted measure, we believe that facilities will have sufficient time to prepare for data collection and submission. With respect to the NCQA’s FUH measure, we proposed all-payer Webbased collection to maintain consistency throughout the measures we have selected for the IPFQR Program, but welcomed comments for alternative forms of data submission. Based on the public comments we received, we are finalizing that for the FY 2016 payment determination and subsequent years we will collect FUH measure using claimsbased data. After consideration of the public comments we received, we are finalizing the Submission Requirements for the FY 2016 Payment Determination and Subsequent Years policy for SUB-1 as proposed. For the FUH measure, we are finalizing a claims-based data collection and a reporting period for the FY 2016 payment determination and subsequent years, as illustrated for the FY 2016 payment determination in the table below. REPORTING PERIOD FOR THE FOLLOW-UP AFTER HOSPITALIZATION FOR MENTAL ILLNESS MEASURE FOR THE FY 2016 PAYMENT DETERMINATION Payment determination year (fiscal year) Reporting period (calendar year) 2016 .................. July 1, 2013–June 30, 2014 .................................................................................................................... As noted earlier in the preamble, NQF #0726 ‘‘Inpatient Consumer Survey of Inpatient Behavioral Healthcare Services’’ is a patient experience measure covering information not measured by existing program measures. While we are not adopting NQF #0726 at this time, we are finalizing our proposal to request voluntary information about survey administration, asking whether IPFs assess patient experience of inpatient behavioral health services using a standardized instrument. IPFs would only have to provide a ‘‘yes’’ or ‘‘no’’ response. We will also ask those IPFs that answer ‘‘yes’’ to indicate which survey they administer. We proposed that this information be collected through a Web-Based Collection Tool. We invited public comment on the proposed submission requirements. We did not receive any comments on the Public display (calendar year) submission proposals and are finalizing the requirement that facilities provide their voluntary information about survey administration via the Webbased tool as proposed. d. Reporting Requirements for the FY 2016 Payment Determination and Subsequent Years In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53655 through 53657), we established reporting periods and submission timeframes for the FY 2014, FY 2015, and FY 2016 payment determinations, but we did not require any data validation approach. However, we encouraged the IPFs to use a validation method and conduct their own analysis. Our recommendations remained the same in the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR 27742). In future years, should we modify the program to require patient-level data, we will consider proposals for an April 2016. appropriate validation method using rulemaking. Although in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53655 through 53657) we adopted policies for the FY 2014 payment determination and subsequent years, we only listed quality reporting periods and submission timeframes for the FY 2014, FY 2015, and FY 2016 payment determinations. We explained that the reporting periods for the FY 2014 and FY 2015 payment determinations were 6 and 9 months, respectively, to allow us to achieve a 12 month (calendar year) reporting period for the FY 2016 payment determination. We also indicated that the submission timeframe is between July 1 and August 15 within the same calendar year that marks the beginning of the appropriate payment determination year. We have included this information in the table below. QUALITY REPORTING PERIODS AND SUBMISSION TIMEFRAMES FOR THE FY 2014 PAYMENT DETERMINATION AND SUBSEQUENT YEARS mstockstill on DSK4VPTVN1PROD with RULES6 Payment determination (fiscal year) 2014 .................. 2015 .................. 2016 .................. VerDate Mar<15>2010 Reporting period for services provided (calendar year) Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2012 2013 2013 2013 2013 2014 2014 2014 Data submission timeframe (October 1, 2012–December 31, 2012) ............................................................. (January 1, 2013–March 31, 2013). (April 1, 2013–June 30, 2013) ........................................................................... (July 1, 2013–September 30, 2013). (October 1, 2013–December 31, 2013). (January 1, 2014–March 31, 2014) .................................................................... (April 1, 2014–June 30, 2014). (July 1, 2014–September 30, 2014). 21:51 Aug 16, 2013 Jkt 229001 PO 00000 Frm 00406 Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM July 1, 2013–August 15, 2013. July 1, 2014–August 15, 2014. July 1, 2015–August 15, 2015. 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 50901 QUALITY REPORTING PERIODS AND SUBMISSION TIMEFRAMES FOR THE FY 2014 PAYMENT DETERMINATION AND SUBSEQUENT YEARS—Continued Payment determination (fiscal year) Reporting period for services provided (calendar year) Data submission timeframe Q4 2014 (October 1, 2014–December 31, 2014). mstockstill on DSK4VPTVN1PROD with RULES6 To avoid reader confusion, we are reiterating that the policy we adopted for the FY 2016 payment determination also applies to the FY 2017 payment determination and subsequent years, unless we change it through future rulemaking. e. Population, Sampling, and Minimum Case Threshold for the FY 2016 Payment Determination and Subsequent Years In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53657 through 53658), for the FY 2014 payment determination and subsequent years, we finalized our policy that participating IPFs must meet specific population, sample size, and minimum reporting case threshold requirements as specified in TJC’s Specifications Manual. We also indicated that the Specifications Manual for the measures is updated at least twice a year (and may be updated more often as necessary), and IPFs must follow the requirements in the most recent manual, which can be found on the TJC Web site at: https://manual.joint commission.org/bin/view/Manual/ WebHome. We also finalized our policy that the target population for the quality measures includes all patients, not solely Medicare beneficiaries, to improve quality of care. We believe it is important to require IPFs to submit measures on all patients because quality improvement is of industry-wide importance and should not be focused exclusively on a certain subset of patients. In addition, we need this scope of data in order to be able to assess the quality of care being provided to Medicare beneficiaries. We also finalized our policy that IPFs that have no data to report for a given measure must enter zero for the population and sample counts. For example, an IPF that has no hours of physical restraint use (HBIPS–2) to report for a given quarter is still required to submit a zero for its quarterly aggregate population for HBIPS–2 in order to meet the reporting requirement. We believe it is important for IPFs to submit data on all measures even when the population size for a given measure is zero or small because it provides us with the opportunity to VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 identify, assess, and evaluate the baseline for the number of cases for each measure in future years. This will also assist us in determining the minimum case threshold for future years in the rule. In cases where the measure rates are calculated based on low caseloads, when the submitted data are publicly displayed on the QualityNet Web site, we will clearly note that the affected measure rates were calculated based on low caseloads that may affect the result. For the HBIPS measures, which we finalized in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53657 through 53658), we will continue to apply our finalized policies for population, sampling, and minimum case threshold outlined above. For the measures we proposed for the FY 2016 payment determination and subsequent years, we proposed that IPFs follow the sampling and population requirements as specified by the appropriate measure steward as outlined below. The most recent version of the Specifications Manual, including the sampling and population information for the SUB measures, can be found on the TJC Web site at: https://www.joint commission.org/specifications_manual_ for_national_hospital_inpatient_quality _measures.aspx. We note that IPFs are required to report data only for inpatient discharges treated by the IPF, not for acute care hospital discharges that are not treated and billed by the IPFs. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27743), we proposed that there will be no sampling required for the FUH measure—IPFs are expected to submit all data. We proposed that IPFs follow the population requirements outlined at: https://www.ncqa.org/portals/0/FollowUp%20After%20Hospitalization%20for %20Mental%20Illness.pdf. We invited public comment on this proposal. Comment: Some commenters opposed the proposed FUH measure because it would require IPFs to reach out to aftercare providers to obtain the information needed for the measure, thus imposing a burden on psychiatric hospitals. One commenter noted that the burden is further exacerbated because the measure specifications do not allow for sampling. PO 00000 Frm 00407 Fmt 4701 Sfmt 4700 Response: As we have noted, based on comments received, we are finalizing the FUH measure with a change that it be collected initially as a claims-based measure, which removes the need for IPFs to collect, calculate and submit the data. IPF’s are currently required to sign an IPFQR participation form that allows us to publicly report all IPFQR measures, including the FUH measure. However, as we consider transitioning this measure to a chart-abstracted measure in the future, we will take these comments into account. Comment: Some commenters opposed our proposal to add SUB–1 to the IPFQR Program because they believed that the specifications for SUB–1 differ from those required for the HBIPS measures. For example, sampling requirements are different for SUB–1 and the HBIPS measures and chemical dependency units are included in the global population for SUB–1 but excluded from HBIPS. The commenters believed that these differences would require hospitals to modify their processes for data collection thus increasing the burden on facilities. Response: Although there may be sampling and population differences between SUB–1 and HBIPS measures that may require IPFs to modify their data collection processes, we believe that the important role that SUB–1 plays in quality improvement far outweighs burden concerns. As we have explained in this preamble, individuals with mental health conditions experience substance use disorders (SUDs) at a much higher rate than the general population. Individuals with the most serious mental illnesses have the highest rates of such disorders. Cooccurring SUDs often go undiagnosed and, without treatment, contribute to a longer persistence of disorders, poorer treatment outcomes, lower rates of medication adherence, and greater impairments to functioning. Accordingly, we believe that SUB–1 plays an important role in assessing efforts by IPFs to screen for the most common type of such disorder, alcohol abuse. After consideration of the public comments we received, with respect to the SUB–1 measure, we are finalizing the reporting and submission E:\FR\FM\19AUR2.SGM 19AUR2 50902 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations requirements as proposed for the FY 2016 payment determination and subsequent years. IPFs must ensure that all the reporting and submission requirements are followed by their vendors (if data are submitted by vendors on their behalf), because IPFs remain responsible for all submitted data regardless if data are submitted by a vendor or by the entity/organization themselves. Based on the public comments we received, for the FY 2016 payment determination and subsequent years we are finalizing the FUH measure with a change that it be collected as a claims-based measure, subject to the measure specifications and reporting periods described above. f. Data Accuracy and Completeness Acknowledgement (DACA) Requirements In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53658), we finalized our DACA policy for the FY 2014 payment determination and subsequent years. We stated that IPFs must acknowledge their data accuracy and completeness once annually using a form provided on the QualityNet Web site. To affirm that the data provided to meet the IPFQR Program data submission requirements are accurate and complete to the best of an IPF’s knowledge, an IPF is required to submit the DACA form. We will provide a link to this form once IPFs have completed entry of all aggregated measure data. Data submission is not complete until the IPF submits the DACA form. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53658), we listed the DACA deadlines for the FY 2014, FY 2015, and FY 2016 payment determinations only, even though our finalized policy was for the FY 2014 payment determination and subsequent years. Set out in the table below are the DACA deadlines we listed in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53658). DATA ACCURACY AND COMPLETENESS ACKNOWLEDGMENT (DACA) DEADLINES FOR THE FY 2014 PAYMENT DETERMINATION AND SUBSEQUENT YEARS Payment determination (fiscal year) 2014 .................. 2015 .................. 2016 .................. Data accuracy and completeness acknowledgement deadline Reporting period for services provided (calendar year) Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2012 2013 2013 2013 2013 2014 2014 2014 2014 (October 1, 2012–December 31, 2012) .................................................................................... (January 1, 2013–March 31, 2013). (April 1, 2013–June 30, 2013) .................................................................................................. (July 1, 2013–September 30, 2013). (October 1, 2013–December 31, 2013). (January 1, 2014–March 31, 2014) .......................................................................................... (April 1, 2014–June 30, 2014). (July 1, 2014–September 30, 2014). (October 1, 2014–December 31, 2014). To avoid reader confusion, we are reiterating that the DACA finalized policies listed above will continue to apply for the FY 2014 payment determination and subsequent years unless and until we change such policies through our rulemaking process. Thus, we will continue with our adopted policy that the deadline for submission of both measure data and the DACA form is no later than August 15 prior to the applicable IPFQR Program payment determination year. August 15, 2013. August 15, 2014. August 15, 2015. We have summarized the pertinent IPFQR Program dates in the table below with regard to data reporting periods, submission deadlines, DACA deadlines, and public display periods. DATA ACCURACY AND COMPLETENESS ACKNOWLEDGMENT (DACA) DEADLINES FOR THE FY 2014 PAYMENT DETERMINATION AND SUBSEQUENT YEARS Payment determination (fiscal year) Reporting period for services provided (calendar year) Submission timeframe DACA Deadline 2014 .................. Q4 2012 (October 1, 2012–December 31, 2012). Q1 2013 (January 1, 2013–March 31, 2013). Q2 2013 (April 1, 2013–June 30, 2013) .... Q3 2013 (July 1, 2013–September 30, 2013). Q4 2013 (October 1, 2013–December 31, 2013). Q1 2014 (January 1, 2014–March 31, 2014). Q2 2014 (April 1, 2014–June 30, 2014). Q3 2014 (July 1, 2014–September 30, 2014). Q4 2014 (October 1, 2014–December 31, 2014). July 1, 2013–August 15, 2013 .. August 15, 2013 ........ April 2014. July 1, 2014–August 15, 2014 .. August 15, 2014 ........ April 2015. July 1, 2015–August 15, 2015 .. August 15, 2015 ........ April 2016. 2015 .................. mstockstill on DSK4VPTVN1PROD with RULES6 2016 .................. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 PO 00000 Frm 00408 Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2 Public display Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Again, we have listed information until the FY 2016 payment determination, but these deadlines apply to the FY 2014 payment determination and subsequent years. We did not receive any public comments on this issue. mstockstill on DSK4VPTVN1PROD with RULES6 10. Reconsideration and Appeals Procedures for the FY 2014 Payment Determination and Subsequent Years In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53658 through 53659), we adopted a reconsideration process whereby IPFs can request a reconsideration of their payment update reduction in the event an IPF believes that its annual payment update has been incorrectly reduced for failure to report quality data under the IPFQR Program. We codified the reconsideration procedures that IPFs must follow at 42 CFR 412.434. We instituted an annual reconsideration process similar to the Hospital IQR Program (74 FR 43892). We do not utilize reconsideration policies and procedures related to the Hospital IQR Program validation requirement because the IPFQR Program does not currently include an annual validation requirement for IPFs. We did not receive any public comments on this process. 11. Waivers From Quality Reporting Requirements for the FY 2014 Payment Determination and Subsequent Years In our experience with other quality reporting and/or performance programs, we have noted occasions when participants have been unable to submit required quality data due to extraordinary circumstances that are not within their control (for example, natural disasters). It is our goal to avoid penalizing IPFs in such circumstances or to unduly increase their burden during these times. Therefore, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53659 through 53660), we adopted a policy that, for the FY 2014 payment determination and subsequent years, IPFs may request and we may grant waivers with respect to the reporting of required quality data when extraordinary circumstances beyond the control of the IPF may warrant. When waivers are granted, IPFs will not incur payment reductions for failure to comply with the requirements of the IPFQR Program. Under the process, in the event of extraordinary circumstances not within the control of the IPF, such as a natural disaster, the IPF may request a reporting extension or a complete waiver of the requirement to submit quality data for one or more quarters. Such IPFs would submit a request form to CMS available VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 on the QualityNet Web site at: https:// www.qualitynet.org/dcs/Content Server?c=Page&pagename=Qnet Public%2FPage%2FQnetTier3&cid =1228772379030. This process does not preclude us from granting waivers or extensions to IPFs that have not requested them when we determine that an extraordinary circumstance, such as an act of nature (for example, a hurricane or other natural disaster that could reasonably affect an IPF’s ability to compile or report data), affects an entire region or locale. If we make the determination to grant a waiver or extension to IPFs in a region or locale, we will communicate this decision through routine communication channels to IPFs and vendors, by means of memoranda, emails, and notices on the QualityNet Web site, among other means. We did not receive any public comments on this issue. 12. Electronic Health Records (EHRs) Under the current and proposed chart-abstracted quality measures, IPFs cannot use EHRs (also referred to as electronic medical records) for data collection because the current and proposed measures will be submitted as aggregate data. However, we encourage IPFs to take steps towards adoption of EHRs that will allow for reporting of clinical quality data from EHRs directly to a CMS repository. We encourage IPFs that are implementing, upgrading, or developing EHR systems to ensure that the technology obtained, upgraded, or developed conforms to standards adopted by HHS. Although the IPFQR Program is in its initial implementation stages, we recommend that IPFs ensure that their EHR systems accurately capture quality data and that, ideally, such systems provide point-of-care decision support that promotes optimal levels of clinical performance. In the future, we will continue to work with standard-setting organizations and other entities to explore processes through which EHRs could speed the collection of data and minimize the resources necessary for quality reporting. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53660), we responded to public comments on the adoption of EHRs for the IPFQR Program in the future and in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27744), we again invited public comment on this issue. We did not receive any public comments on this issue. PO 00000 Frm 00409 Fmt 4701 Sfmt 4700 50903 E. Electronic Health Record (EHR) Incentive Program and Meaningful Use (MU) 1. Background The HITECH Act (Title IV of Division B of the ARRA, together with Title XIII of Division A of the ARRA) authorizes incentive payments under Medicare and Medicaid for the adoption and meaningful use of certified EHR technology (CEHRT). Eligible hospitals and critical access hospitals (CAHs) may qualify for these incentive payments under Medicare (as authorized under sections 1886(n) and 1814(l) of the Act, respectively) if they successfully demonstrate meaningful use of CEHRT, which includes reporting on clinical quality measures (CQMs) using CEHRT. The set of CQMs from which eligible hospitals and CAHs will report under the EHR Incentive Program beginning in FY 2014 is listed in Table 10 of the EHR Incentive Program Stage 2 final rule (77 FR 54083 through 54087). The subset of CQMs that we proposed for voluntary electronic reporting in the Hospital IQR Program in section IX.A.7. of the preamble to the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27694 through 27695) is included in Table 10 of the EHR Incentive Program Stage 2 final rule. We continue to believe there are important synergies with respect to the two programs. We believe the financial incentives under the EHR Incentive Program for the adoption and meaningful use of CEHRT by eligible hospitals and CAHs will encourage the adoption and use of CEHRT for the anticipated electronic reporting of CQMs under the Hospital IQR Program. We expect that the electronic submission of quality data from EHRs under the EHR Incentive Program will provide a foundation for establishing the capacity of hospitals to send, and for CMS to receive, CQMs via CEHRT for certain Hospital IQR Program measures. 2. Expanded Electronic Submission Period for CQMs Section 1886(n)(3)(B)(iii) of the Act requires that, in selecting CQMs for and establishing the form and manner of reporting for the EHR Incentive Program, the Secretary shall seek to avoid redundant or duplicative reporting with reporting otherwise required. To the extent that CQMs are included in both the Hospital IQR Program and the EHR Incentive Program, we expect that the Hospital IQR Program would transition to using CEHRT rather than manual chart abstraction. The beginning of this transition is described in section IX.A.7. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50904 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations of the preamble to this final rule with the voluntary electronic reporting in CY 2014 of up to 16 electronic clinical quality measures in the Hospital IQR Program, which are also included in the set of CQMs from which hospitals will report for the EHR Incentive Program beginning in FY 2014 (77 FR 54083 through 54087). By allowing voluntary electronic reporting in CY 2014 of the electronic clinical quality measures being finalized under the Hospital IQR Program, hospitals, if they choose to submit all 16 electronic clinical quality measures in the Hospital IQR Program, would be able to submit once and fulfill the CQM component of MU as well as the reporting requirement for those measures in the Hospital IQR Program. In the EHR Incentive Program Stage 2 final rule (77 FR 54049 through 54051), for CQM data that is submitted electronically beginning in 2014, we established the submission period as the 2 months immediately following the end of the fiscal year (October 1 through November 30 for eligible hospitals and CAHs). In response to feedback we have received through various forums, we proposed in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27745) to open the submission period for electronically submitted files on January 2. This will allow for better alignment with the Hospital IQR Program. The proposed expanded submission period would allow more flexibility for eligible hospitals and CAHs to start submitting earlier and more frequently, as patients who fit the denominator criteria of the CQMs that the hospitals will submit are discharged. As established in the EHR Incentive Program Stage 2 final rule, the submission period would end on November 30, and eligible hospitals that are demonstrating MU for the first time in the year immediately preceding any payment adjustment year must submit by July 1. This proposal would not change the reporting periods for CQMs established in the EHR Incentive Program Stage 2 final rule (77 FR 54051). Comment: Several commenters supported the expansion of the submission period for hospitals beginning in 2014. Specifically, the commenters believed that allowing hospitals to start submitting files earlier and more frequently could help prevent a bottleneck of uploads during the two months following the federal FY. Response: We appreciate the commenters’ support. After consideration of the public comments we received, and for the reasons set forth above, we are finalizing the policy as proposed. Beginning in FY 2014, the submission period for CQM VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 data submitted electronically for the Medicare EHR Incentive Program will begin on January 2 and will end on November 30. As an example, the submission period for the reporting periods that occur in FY 2014 will begin on January 2, 2014 and end on November 30, 2014. As established in the Stage 2 final rule, eligible hospitals that are demonstrating MU for the first time in the year immediately preceding any payment adjustment year must submit no later than July 1. In the Stage 2 final rule, we established the reporting periods for CQMs in FY 2014 for hospitals that have previously demonstrated meaningful use (77 FR 54050 through 54051). We stated that a hospital may choose to report CQM data for the full FY 2014, or alternatively, it may choose to report CQM data for the three-month FY quarter that is its EHR reporting period for the meaningful use objectives and measures. With this change to expand the submission period, we also consider it likely that some hospitals may prefer to report CQM data for a certain quarter and report the meaningful use objectives and measures for a different quarter. Furthermore, because there are different methods of submitting CQM data and meaningful use objectives and measures, it is also possible that a technical problem could arise for a submission of CQM data that would not affect a hospital’s submission of meaningful use objectives and measures, or vice versa. To provide additional flexibility for hospitals in light of the expanded submission period, we will accept reporting periods of different quarters for CQMs and for meaningful use objectives and measures, as long as the quarters are within FY 2014. We also proposed, beginning in FY 2014, to allow eligible hospitals and CAHs that are demonstrating meaningful use for the first time to report CQMs by attestation or through the electronic reporting methods that we establish for the EHR Incentive Program. We noted that in the EHR Incentive Program Stage 2 final rule (77 FR 54049 through 54051), we finalized a policy that first-time meaningful EHR users would be required to report CQMs through attestation. This proposal would change that policy to allow more flexibility for eligible hospitals and CAHs to choose between reporting by attestation or electronically in their first year of MU. For further explanation of reporting CQMs by attestation or electronically under the EHR Incentive Program, we referred readers to the discussion of reporting methods in the EHR Incentive Program Stage 2 final PO 00000 Frm 00410 Fmt 4701 Sfmt 4700 rule (77 FR 54087 through 54089). Regardless of the reporting method selected, however, the July 1 deadline for avoiding the Medicare payment adjustments will remain the same, as established in the EHR Incentive Program Stage 2 final rule (77 FR 54049 through 54051). We emphasized that to avoid a payment adjustment under Medicare, eligible hospitals demonstrating MU for the first time in the year immediately preceding any payment adjustment year must complete their submission of CQM data by July 1. We noted that although reporting CQM data by attestation would still be an option for first-time meaningful users under the EHR Incentive Program, it would not fulfill any Hospital IQR Program requirements. We welcomed public comment on this proposal. We did not receive any public comments on this proposed policy and are finalizing the policy as proposed for the reasons explained above. Beginning in FY 2014, eligible hospitals and CAHs that are demonstrating meaningful use for the first time may report CQMs by attestation or through the electronic reporting methods that we establish for the EHR Incentive Program. Regardless of the option selected, eligible hospitals that are demonstrating MU for the first time in the year immediately preceding any payment adjustment year must successfully meet all of the requirements to be a meaningful EHR user by July 1 to avoid the payment adjustment. We also clarify that if a hospital is demonstrating meaningful use for the first time in FY 2014 and chooses to report CQMs electronically, it must report for a three-month quarter in FY 2014 rather than any continuous 90-day period in FY 2014. Hospitals that would prefer to report CQMs for any continuous 90-day period may do so by attestation. As explained in section IX.A.9.d. of the preamble to this final rule, our general intention is to align electronic reporting of quality data under the Medicare EHR Incentive Program and the Hospital IQR Program. While the Hospital IQR Program is allowing for voluntary electronic reporting of quality measures in 2014, to meet the requirement, a hospital that is voluntarily electronically reporting its quality measure data must do so for a three-month quarter within 2014 that also meets the reporting deadlines in the Medicare EHR Incentive program. 3. Quality Reporting Data Architecture Category III (QRDA–III) Option in 2014 In the EHR Incentive Program Stage 2 final rule (77 FR 54088), we finalized two options for eligible hospitals and E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations CAHs to electronically submit CQMs beginning in FY 2014 under the Medicare EHR Incentive Program. Option 1 was to electronically submit aggregate-level CQM data using QRDA– III. Option 2 was to electronically submit using a method similar to the Hospital IQR Program electronic reporting pilot, which used QRDA–I (patient-level data). We also stated in that final rule that, consistent with section 1886(n)(3)(B)(ii) of the Act, in the event the Secretary does not have the capacity to receive CQM data electronically, eligible hospitals and CAHs that are beyond their first year of meaningful use may continue to report aggregate CQM results through attestation. We noted in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27745) that we have determined that the electronic submission of aggregate-level data using QRDA–III will not be feasible in 2014 for eligible hospitals and CAHs under the Medicare EHR Incentive Program. Thus, for the 2014 reporting period under the Medicare EHR Incentive Program, eligible hospitals and CAHs would have the option to continue to report aggregate CQM results through attestation. We stated that we will reassess this policy for the 2015 and future reporting periods. We noted that submissions of aggregate CQM data via attestation would not satisfy the reporting requirements for the Hospital IQR Program. We also noted that this policy does not apply to the Medicaid EHR Incentive Program. Therefore, the States may still require the submission of QRDA–III files to fulfill the CQM reporting requirements for hospitals that participate in the Medicaid EHR Incentive Program. As described in section IX.A.9.d. of the preamble of this final rule, the Hospital IQR Program intends to continue its policy to accept patientlevel data as it transitions to electronic reporting. In order to remain aligned with the Hospital IQR Program, and because over 82 percent of hospitals that participate in the Hospital IQR Program are already meaningful users, we strongly recommend that hospitals that are eligible to participate in both programs electronically submit up to 16 electronic clinical quality measures identified by the Hospital IQR Program in section IX.A.7. of the preamble of this final rule. We believe that keeping the two programs aligned will ultimately reduce reporting burden for hospitals. We believe that the extension of the submission period as finalized above will also help the electronic submission process for hospitals. We welcomed public comment on this proposal. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Comment: A few commenters stated that CMS should accept QRDA–III files from hospitals, including one commenter who noted that many EHR vendors are only prepared to support QRDA–III submission. Some of those commenters referenced examples of CMS eligible professional (EP) quality reporting programs that plan on accepting QRDA–III files beginning in the 2014 program year. Several commenters requested that CMS clarify why it does not have the capacity to accept QRDA–III files from hospitals. Response: All CEHRT that is certified to the 2014 Edition certification criteria adopted by ONC should have the capability to electronically submit either QRDA–I or QRDA–III formats. EHR products that are certified to the certification criterion under 45 C.F.R. § 170.314(c)(3) for electronic submission must be tested for and pass both QRDA– I and QRDA–III formats in order to be certified for this criterion. Therefore, any eligible hospital or CAH that has implemented CEHRT should have the capability to submit both QRDA–I and QRDA–III files. The CQMs and their respective electronic specifications are different for hospitals and EPs. Therefore, we cannot use the same infrastructure to accept and process quality data submitted by hospitals and EPs. Since the Hospital IQR Program has historically accepted and will continue to accept patient-level data, we will use the electronic reporting pilots from 2012 and 2013, which included electronic reporting via QRDA–I, as the basis for aligned reporting in 2014 for the Medicare EHR Incentive Program and the Hospital IQR Program. As we stated in the proposed rule, we will allow eligible hospitals and CAHs to submit aggregate CQM data for the EHR Incentive Program via attestation. However, CQM results submitted by attestation would not count towards submission for the Hospital IQR Program. Comment: One commenter requested clarification on whether hospitals would be required to submit both aggregate CQM results via attestation and patient-level data electronically via QRDA–I or if the hospital would be able to select one of these methods. Response: If the hospital would like to electronically report all 16 CQMs identified by the Hospital IQR Program and would like for its submission to also count for its CQM component of MU, the hospital could electronically submit those 16 CQMs via QRDA–I for both programs. For Hospital IQR Program purposes, if the hospital would like to report on a different set of 16 CQMs from the list of 29 CQMs finalized for PO 00000 Frm 00411 Fmt 4701 Sfmt 4700 50905 eligible hospitals and CAHs in Table 10 of the EHR Incentive Program Stage 2 final rule (77 FR 54083 through 54087) than those identified by the Hospital IQR Program for voluntary electronic reporting, the hospital could electronically report 16 CQMs via QRDA–I for the Medicare EHR Incentive Program, but would need to submit the remainder of those measures via chartabstraction to fulfill the Hospital IQR Program requirements. If the hospital would like to submit aggregate CQM data for the Medicare EHR Incentive Program by attestation, then the CQMs that will be reported to the Hospital IQR Program would need to be submitted separately. After consideration of the public comments we received, and for the reasons set forth above, we are finalizing the policy as proposed. For the Medicare EHR Incentive Program, eligible hospitals and CAHs may report their CQMs electronically using QRDA– I (patient-level data) or via attestation (aggregate-level data). We note again that reporting via attestation would not count towards the reporting requirements for the Hospital IQR Program. 4. Case Number Threshold Exemption— Requirements Regarding Data Submission In the EHR Incentive Program Stage 2 final rule (77 FR 54080), we established a case number threshold exemption policy for eligible hospitals and CAHs that experience a low volume of cases addressed by certain CQMs, and stated that hospitals seeking an exemption under the policy must submit aggregate population and sample size data in the same manner as required in the Hospital IQR Program. Our intent was to reduce the burden on hospitals that participate in both programs so they would only need to submit this information once. However, we have determined that this information could be captured in QualityNet for both the EHR Incentive Program and the Hospital IQR Program during the process of electronically submitting CQMs. In the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR 27746), we proposed to require that the aggregate population data be entered into QualityNet (for EHR-based reporting) during the process of electronically submitting CQMs. We noted that sample size data are not required for electronically submitted CQMs. We noted that, in general, the submission deadline for the aggregate population data is the same as the submission deadline for CQMs (November 30). For eligible hospitals in E:\FR\FM\19AUR2.SGM 19AUR2 50906 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 their first year of demonstrating MU, the aggregate population data would need to be submitted no later than July 1 for hospitals that seek to invoke the case number threshold exemption, as this data would be needed to determine whether the eligible hospital met the CQM reporting requirements for MU. We did not receive any public comments on this proposed policy, and for the reasons set forth above, we are finalizing the policy as proposed. Beginning in FY 2014 for the Medicare EHR Incentive Program, the aggregate population data will be entered into QualityNet (for EHR-based reporting) during the process of electronically submitting CQMs. X. Change to the Medicare Hospital Conditions of Participation (CoPs) Relating to the Administration of Pneumococcal Vaccines Among the regulations at 42 CFR Part 482 governing the Conditions of Participation (CoPs) for hospitals to participate in the Medicare program, we have established a condition for Nursing Services under § 482.23. Included in the standards for the nursing services condition is a standard for the preparation and administration of drugs. Section 482.23(c)(3) contains the following provision: ‘‘With the exception of influenza and pneumococcal polysaccharide [emphasis added] vaccines, which may be administered per physician-approved hospital policy after an assessment of contraindications, orders for drugs and biologicals must be documented and signed by a practitioner who is authorized to write orders in accordance with State law and hospital policy, and who is responsible for the care of the patient as specified under § 482.12(c).’’ At the time that this CoP standard was originally promulgated (October 2, 2002), and for several years thereafter, the pneumococcal polysaccharide vaccine (PPSV or Pneumovax 23®, Merck) was the only pneumococcal vaccine approved for adult use. In developing the original standard, it was not the Agency’s intention to specify a particular type or brand of pneumococcal vaccine. Instead, the Agency wanted to allow hospitals the flexibility to have a policy where nurses could administer influenza and pneumococcal vaccines without a prior practitioner order and only after assessing patients for any contraindications to the vaccines being administered. However, we recently became aware of another pneumococcal vaccine (pneumococcal conjugate vaccine (PCV) or Prevnar 13®, Pfizer), which received VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 FDA approval for adult use in December 2011. We believe that the availability of another FDA-approved pneumococcal vaccine may have the potential for causing confusion in the hospital community at large by our use of the term ‘‘polysaccharide’’ as a distinguisher for the pneumococcal vaccine in the hospital CoP standard. Indeed, it has come to our attention that some hospitals may be using only the polysaccharide type of pneumococcal vaccine because they believe they are not permitted under the CoPs to stock and use any other type of pneumococcal vaccine. However, the Advisory Committee on Immunization Practices (ACIP) recommends that certain groups receive PPSV23, and others are recommended to receive both PPSV23 and PCV13. As we discussed in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27746), we believe the proposed change would allow for the inclusion of all pneumococcal vaccines approved for use now and in the future. With two types of pneumococcal vaccines currently approved for use with adults and recommended by the ACIP for certain populations based on age, medical condition, smoking, and other considerations, we also believe that patient access to the pneumococcal vaccine would potentially improve because hospitals would now possess the freedom and flexibility to stock and use both vaccines as recommended by the ACIP. Therefore, in the FY 2014 IPPS/LTCH PPS proposed rule, we proposed to amend the regulatory language at § 482.23(c)(3) to delete the term ‘‘polysaccharide’’. We stated that this proposed deletion would allow a hospital to include any type of pneumococcal vaccine as part of its physician-approved policy for administration by nurses without a prior practitioner order, provided the vaccine has been approved by the FDA and recommended for use by the ACIP. In addition, we stated that this proposed change would give hospitals the added flexibility to include the administration of any pneumococcal vaccines that are approved in the future by the FDA for administration under this CoP standard. Comment: Commenters supported CMS’ rationale for the proposed changes. The commenters agreed that the proposed changes would provide hospitals with the flexibility to include the administration of any pneumococcal vaccines that are currently approved and those that may be approved in the future by the FDA for administration. One commenter recommended that the proposed changes be made effective PO 00000 Frm 00412 Fmt 4701 Sfmt 4700 immediately upon publication of the final rule. Response: We appreciate the commenters’ support. We share the common goal of improving patient access to pneumococcal vaccines and eliminating confusion in the hospital community about the type of pneumococcal vaccines that hospitals may stock and use. With regard to the recommendation for the effective date, we do not believe that an effective date of October 1, 2013, which is the general effective date for this IPPS final rule, will delay beneficiaries from receiving necessary vaccines. Further, we believe that the delay will allow hospitals time to evaluate their policies, if necessary, and obtain a supply of pneumococcal conjugate vaccine. We also note that either type of pneumococcal vaccine can be administered with a physician’s order. Therefore, for the reasons set forth above, we are finalizing, without change, our proposal to remove the term ‘‘polysaccharide’’ from the regulatory language at § 482.23(c)(3). XI. Payment Policies Related to Patient Status A. Background In the CY 2013 Outpatient Prospective Payment System (OPPS)/Ambulatory Surgical Center (ASC) proposed rule (77 FR 45155 through 45157) and final rule with comment period (77 FR 68426 through 68433), we expressed concern about recent increases in the length of time that Medicare beneficiaries spend as hospital outpatients receiving observation services. We also solicited and summarized public comments on potential policy changes we could make to improve clarity and consensus among providers, Medicare, and other stakeholders regarding the relationship between admissions decisions and appropriate Medicare payment, such as when a Medicare beneficiary is appropriately admitted to a hospital as an inpatient. (In this section, the term ‘‘hospital’’ includes critical access hospitals (CAHs) unless otherwise specified. Although the term ‘‘hospital’’ does not generally include CAHs, section 1861(e) of the Act provides that the term ‘‘hospital’’’ includes CAHs if the context otherwise requires. We believe it is appropriate to apply the final policies in this section of this final rule to CAHs as well as all other hospitals. In addition, in this section, the term ‘‘inpatient’’ means an inpatient of a hospital unless otherwise specified.) Observation care is a well-defined set of specific, clinically appropriate E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations services, which include ongoing shortterm treatment, assessment, and reassessment before a decision can be made regarding whether patients will require further treatment as hospital inpatients or if they are able to be discharged from the hospital (Section 20.6, Chapter 6 of the Medicare Benefit Policy Manual (MBPM) (Pub. 100–02)). In recent years, the number of cases of Medicare beneficiaries receiving observation services for more than 48 hours, while still small, has increased from approximately 3 percent in 2006 to approximately 8 percent in 2011. This trend concerns us because of the potential financial impact on Medicare beneficiaries, and we have published educational materials for beneficiaries to inform them of their respective liabilities as a hospital outpatient or inpatient.194 Beneficiaries who are treated for extended periods of time as hospital outpatients receiving observation services may incur greater financial liability than they would if they were admitted as hospital inpatients. They may incur financial liability for Medicare Part B copayments, the cost of selfadministered drugs that are not covered under Part B, and the cost of posthospital SNF care because section 1861(i) of the Act requires a prior 3-day hospital inpatient stay for coverage of post-hospital SNF care under Medicare Part A. In contrast, as a hospital inpatient under Medicare Part A, a beneficiary pays a one-time deductible for all inpatient services provided during the first 60 days in the hospital of the benefit period for the year. Therefore, an inpatient deductible does not necessarily apply to all hospitalizations in the year. Medicare Part A coinsurance applies after the 60th day in the hospital. In the CY 2013 OPPS/ASC proposed rule and final rule with comment period (77 FR 45155 and 77 FR 68426, respectively) and in a proposed rule entitled, ‘‘Medicare Program; Part B Inpatient Billing in Hospitals’’ that went on display at the Office of the Federal Register on March 13, 2013 and was issued in the Federal Register on March 18, 2013 (78 FR 16632) (referred to in this final rule as the ‘‘Part B Inpatient Billing proposed rule’’), we discussed how the trend towards the provision of extended observation services may be attributable in part to hospitals’ concerns about their ability to receive 194 CMS Pamphlets: ‘‘Are You a Hospital Inpatient or Outpatient? If You Have Medicare Ask’’, CMS Product No. 11435, Revised, February 2011; ‘‘How Medicare Covers Self-Administered Drugs Given in Hospital Outpatient Settings,’’ CMS Product No. 11333, Revised, February 2011. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 payment from Medicare under Part B when a Part A hospital inpatient claim is denied because a Medicare review contractor determines that the inpatient admission was not reasonable and necessary under section 1862(a)(1)(A) of the Act. Under longstanding Medicare policy, in these situations, hospitals could only receive payment for a limited set of largely ancillary inpatient services under Part B. We stated that we have heard from various stakeholders that hospitals appear to be responding to the financial risk of admitting Medicare beneficiaries for inpatient stays that may later be denied upon contractor review by electing to treat beneficiaries as outpatients receiving observation services, often for long periods of time, rather than admitting them as inpatients. In response to the CY 2013 OPPS/ASC proposed rule and final rule with comment period, the hospital community expressed a belief that Medicare’s standards for hospital inpatient admission are not clear, and that, as a result, Medicare’s medical review criteria for Part A hospital inpatient claims are inappropriately applied. To address these issues, we recently proposed several clarifications and changes in Medicare’s policies regarding payment of hospital inpatient services under Part B, Medicare’s definition of a hospital ‘‘inpatient,’’ inpatient admission guidelines, and Medicare’s medical review criteria for inpatient stays. First, in the Part B Inpatient Billing proposed rule (78 FR 16632), we proposed to revise our Part B inpatient payment policy to allow payment under Part B for all hospital services that were furnished and would have been reasonable and necessary if the beneficiary had been treated as a hospital outpatient, rather than admitted to the hospital as an inpatient. We proposed that this policy would apply when a Medicare Part A hospital inpatient claim is denied or when a hospital determines, through utilization review after a beneficiary has been discharged, that the inpatient admission was not reasonable and necessary and that the beneficiary should have received hospital outpatient services rather than hospital inpatient services. We proposed to continue applying the timely filing restriction to the billing of all Part B inpatient services, under which claims for Part B services must be filed within 1 year from the date of service. In addition, we addressed several issues related to administrative appeals and beneficiary liability. In addition to evaluating our policy related to Medicare Part B inpatient payment following denials of Part A PO 00000 Frm 00413 Fmt 4701 Sfmt 4700 50907 hospital inpatient claims on the basis that the inpatient admission was not reasonable and necessary or following a hospital self-audit, we also considered whether we could provide more clarity regarding the relationship between hospital inpatient admission decisions and Medicare payment. In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68426 through 68433), we discussed revising hospital inpatient status criteria as one of several policy clarifications or changes suggested by stakeholders to improve our policies governing when a Medicare beneficiary should be admitted as an inpatient, and how hospitals should be paid by Medicare for the associated costs they incur. Specifically, stakeholders suggested that we redefine ‘‘inpatient’’ using parameters other than the current requirements of medical necessity and a physician order, such as using the beneficiary’s length of stay at the hospital. Currently, a beneficiary’s length of stay may be a factor in determining whether he or she should be admitted as an inpatient to the hospital, but it is not the only factor for this determination. Our current manual instructions state that, typically, the decision to admit a beneficiary as an inpatient should be made within 24 to 48 hours of observation care, and that expectation of an overnight stay may be a factor in the admission decision (Section 20.6, Chapter 6 and Section 10, Chapter 1 of the MBPM). We state that physicians should use a 24-hour or overnight period as a benchmark, that is, they should order admission for patients who are expected to need hospital care for 24 hours or overnight, or more, and treat other patients on an outpatient basis. We state that, generally, a beneficiary is considered an inpatient if formally admitted as an inpatient with the expectation that he or she will remain at least overnight, whether or not the beneficiary is later discharged or transferred and is not present overnight. We instruct that in only rare and exceptional cases do reasonable and necessary outpatient observation services in the hospital span more than 48 hours. Nevertheless, our longstanding policy consistently has been that we do not define or pay under Medicare Part A for inpatient admissions solely on the basis of the length of time the beneficiary actually spends in the hospital. Rather, we rely on the physician to use his or her clinical judgment and evaluation of the patient’s needs to make the determination. We have stated in our manual guidance that the inpatient admission decision is a complex E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50908 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations medical judgment that should take into consideration many factors, such as the patient’s medical history and medical needs, the types of facilities available to inpatients and outpatients, the hospital’s bylaws and admission policies, the relative appropriateness of treatment in the inpatient and outpatient settings, patient risk of an adverse event, and other factors described in the MBPM provisions. The physician or other practitioner responsible for a patient’s care at the hospital also is responsible for deciding whether the patient should be admitted as an inpatient. We believe that our existing inpatient admission criteria are valid and appropriately reflect that the decision to admit a patient as a hospital inpatient is a complex medical judgment that can be made only after the physician has considered a number of factors. However, upon evaluating the suggestions of stakeholders who requested that we provide more clarity in the definition of ‘‘inpatient’’ using parameters other than those that we currently use, we recognized that it would be helpful to address what the requirements are for Medicare Part A payment and when a beneficiary should be admitted as a hospital inpatient. Toward that end, in the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR 27644 through 27650), we clarified that a beneficiary becomes a hospital inpatient if formally admitted pursuant to the order of a physician (or other qualified practitioner as provided in the proposed regulations) in accordance with the hospital conditions of participation (CoPs), and that, as a condition of Medicare payment under Part A for such an admission, the order must be documented in the medical record. However, the order must be supported by objective medical information for purposes of the Part A payment determinations. During Medicare contractor review of an inpatient admission, documentation in the medical record is evaluated in conjunction with the physician order and the physician certification that is also required for payment of hospital inpatient services under section 1814(a) of the Act and 42 CFR 424.13. In the FY 2014 IPPS/LTCH PPS proposed rule, we also proposed a new benchmark for purposes of medical review of hospital inpatient admissions, based on how long the beneficiary is expected to remain in the hospital. Under our proposal, beneficiaries who are expected to remain in the hospital to receive medically necessary care surpassing 2-midnights after the initiation of care are generally VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 appropriate for inpatient admission and inpatient hospital payment. As such, Medicare’s review contractors would consider all time after the initiation of care at the hospital in applying the benchmark that hospital inpatient admissions are generally reasonable and necessary for beneficiaries who are expected to require more than 1 Medicare utilization day (defined by encounters crossing 2 ‘‘midnights’’) in the hospital receiving medically necessary services. Reviewers would also adopt a presumption that a medically necessary stay surpassing 2 midnights after being admitted as an inpatient was appropriately provided as an inpatient service. If a hospital is found to be abusing this 2-midnight presumption for nonmedically necessary inpatient hospital admissions and payment (in other words, the hospital is systematically prolonging the provision of care to surpass the 2midnight timeframe), CMS review contractors would disregard the 2midnight presumption when conducting review of that hospital. Similarly, we proposed that review contractors would generally determine that hospital services spanning less than 2 midnights should have been provided on an outpatient basis, unless there is clear documentation in the medical record supporting the physician’s order and expectation that the beneficiary would require care spanning more than 2 midnights or the beneficiary is receiving a service or procedure designated by CMS as inpatient-only under 42 CFR 419.22(n). We received approximately 392 timely pieces of correspondence containing public comments on the Part B Inpatient Billing proposed rule, and approximately 192 timely pieces of correspondence containing public comments on the proposals in the FY 2014 IPPS/LTCH PPS proposed rule on hospital inpatient admission guidelines and medical review. We received public comments from hospital and physician associations, individual hospitals and physicians, other health care professionals, case management associations, rehabilitative and longterm care facilities, beneficiaries, consumer and beneficiary advocacy organizations, attorneys, Recovery Audit Contractors (RACs) and other interested parties. The policies addressed in these two proposed rules are interrelated and were designed to work together to reduce the frequency of extended observation care when it may be inappropriately furnished and provide payment to hospitals for the reasonable and necessary services they provide to PO 00000 Frm 00414 Fmt 4701 Sfmt 4700 inpatients. Accordingly, in this final rule we discuss the public comments we received in response to each of the proposed rules, and we provide our final policies for each rule after consideration of the public comments received. First, we address Part B hospital inpatient billing, followed by a discussion of Medicare’s hospital inpatient admission guidelines and medical review criteria. B. Payment of Part B Hospital Inpatient Services 1. Payable Part B Inpatient Services In our proposed rule on Part B inpatient billing in hospitals (CMS– 1455–P, 78 FR 16635), we discussed that in an increasing number of cases, hospitals that have appealed Part A inpatient claims that were denied because the inpatient admission was not reasonable and necessary have received partially favorable decisions from the Medicare Appeals Council or Administrative Law Judges (ALJs). While upholding the Medicare review contractor’s determination that the inpatient admission was not reasonable and necessary, the Medicare Appeals Council and ALJ decisions have ordered payment of the services as if they were rendered at an outpatient or ‘‘observation level’’ of care. These decisions effectively require Medicare to issue payment for all Part B services that would have been payable had the beneficiary originally been treated as an outpatient (rather than an inpatient), instead of payment for only the limited set of Part B inpatient services that are designated in the MBPM, Chapter 6, Section 10. Moreover, these decisions have required such payment regardless of whether the subsequent hospital claim for payment under Part B is submitted within the otherwise applicable time limit for filing Part B claims. These Medicare Appeals Council and ALJ decisions providing for payment of all reasonable and necessary Part B services under the circumstances described previously are contrary to our longstanding policies that permit billing for only a limited list of Part B inpatient services and require that the services be billed within the usual timely filing restrictions (we refer readers to Section 10, Chapter 6 of the MBPM; 63 FR 47560; 65 FR 18444; 66 FR 44698 through 44699; 66 FR 59891 through 59893, and 59915; and 75 FR 73449, 73627). While decisions issued by the Medicare Appeals Council and ALJs do not establish Medicare payment policy, we are bound to effectuate each individual decision. The increasing number of these types of decisions has E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations created numerous operational difficulties. After reviewing the public comments we received in response to the CY 2013 OPPS/ASC proposed rule, considering the most efficient way to effectuate the Medicare Appeals Council and ALJ decisions referenced earlier in this section, and further assessing our Part B inpatient payment policy, we concurrently issued the proposed rule CMS–1455–P and CMS Ruling 1455–R (78 FR 16614, hereinafter referred to as the Ruling). The Ruling established a standard process for effectuating these Medicare Appeals Council and ALJ decisions and handling claims and appeals while CMS considers how to best address this issue going forward. The Ruling also addressed the scope of administrative review in these and other, similar cases. Until the proposed rule could be finalized, CMS, through the Ruling, acquiesced in the approach taken in the aforementioned Medicare Appeals Council and ALJ decisions on the issue of subsequent Part B billing following the denial of a Part A hospital inpatient claim on the basis that the inpatient admission was not reasonable and necessary. The Ruling was intended as an interim measure until we finalize the policies in this final rule to address the issues raised by these decisions going forward. Specifically, the Ruling provides that when a Part A claim for a hospital inpatient admission is denied by a Medicare review contractor because the inpatient admission was determined not reasonable and necessary, the hospital may submit a subsequent Part B inpatient claim for more services than just those listed in Section 10, Chapter 6 of the MBPM, to the extent the services furnished were reasonable and necessary. The hospital may submit a Part B inpatient claim for payment for the Part B services that would have been payable to the hospital had the beneficiary originally been treated as an outpatient rather than admitted as an inpatient, except when those services specifically require an outpatient status. The Ruling only applies to denials of claims for inpatient admissions that were not reasonable and necessary; it does not apply to any other circumstances in which there is no payment under Part A, such as when a beneficiary exhausts Part A benefits for hospital services or is not entitled to Part A. Under the Ruling, Part B inpatient and Part B outpatient claims that are filed later than 1-calendar year after the date of service will not be rejected as untimely by Medicare’s claims processing system as long as the corresponding denied Part A inpatient VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 claim was filed timely in accordance with 42 CFR 424.44, consistent with the directives of the Medicare Appeals Council and ALJ decisions to which we are acquiescing. The Ruling also provided that the Part A to Part B (A/ B) Rebilling Demonstration would be discontinued, and we communicated to hospitals and contractors the details regarding termination of the A/B Rebilling Demonstration and implementation of Part B billing under the Ruling. The Ruling was effective on its date of issuance and applies to Part A hospital inpatient claims that were denied by a Medicare review contractor because the inpatient admission was determined not reasonable and necessary, as long as the denial was made: (1) While the Ruling is in effect; (2) prior to the effective date of the Ruling, but for which the timeframe to file an appeal has not expired; or (3) prior to the effective date of the Ruling, but for which an appeal is pending. The Ruling does not apply to Part A hospital inpatient claim denials for which the timeframe to appeal expired, and it does not apply to inpatient admissions determined by the hospital to be not reasonable and necessary (for example, through utilization review or other selfaudit). The policy announced in the Ruling superseded any other statements of policy on the issue of Part B inpatient billing following the denial by a Medicare review contractor of a Part A inpatient hospital claim because the inpatient admission was not reasonable and necessary (although hospital outpatient services would have been reasonable and necessary). We stated that the Ruling remains in effect until the effective date of the regulations that finalize proposed rule CMS–1455–P. The proposed rule CMS–1455–P proposed revisions to our Part B payment policy that would apply prospectively from the effective date of the final regulations and would differ in some respects from the provisions of the Ruling, the purpose of which is to effectuate the Medicare Appeals Council and ALJ decisions. In section XI.B.7. of the preamble of this final rule, we discuss how the Ruling will apply in relation to the effective date of this final rule. In the Part B Inpatient Billing proposed rule (78 FR 16636), we stated that, after reviewing the statutory and regulatory basis of our existing Part B inpatient payment policy, we believed that, under section 1832 of the Act, Medicare should pay for all Part B services that would have been reasonable and necessary (except for services that specifically require an PO 00000 Frm 00415 Fmt 4701 Sfmt 4700 50909 outpatient status) if the hospital had treated the beneficiary as a hospital outpatient rather than treating the beneficiary as an inpatient, when Part A payment cannot be made for a hospital inpatient claim because the inpatient admission is determined not reasonable and necessary under section 1862(a)(1)(A) of the Act. Therefore, we proposed to revise our existing policy to allow payment for additional Part B inpatient services than Medicare currently allows when CMS, a Medicare review contractor, or a hospital determines after discharge that payment cannot be made under Medicare Part A because a hospital inpatient admission was not reasonable and necessary, provided the statutorily required timeframe for submitting claims is not expired, as discussed in section XI.B.8. of the preamble of this final rule. We stated that the hospital would recode the reasonable and necessary services that were furnished as Medicare Part B services, and bill them on a Part B inpatient claim (78 FR 16636). We stated specifically in the proposed rule that the proposed policy would not apply to any other circumstances in which there is no payment under Part A, such as when a beneficiary exhausts Part A benefits for hospital services or is not entitled to Part A (78 FR 16636). Specifically, we proposed to revise our Part B inpatient payment policy to allow payment of all hospital services that were furnished and would have been reasonable and necessary if the beneficiary had been treated as a hospital outpatient, rather than admitted to the hospital as an inpatient, except for those services specifically requiring an outpatient status. We proposed to exclude from Part B inpatient payment all services that by statute, Medicare definition, or standard Healthcare Common Procedure Coding System (HCPCS) code definition are defined as outpatient services, including outpatient diabetes self-management training services (DSMT) defined in section 1861(qq) of the Act; outpatient physical therapy services; outpatient speech-language pathology services; and outpatient occupational therapy services (PT/SLP/OT or ‘‘therapy’’ services) defined in section 1833(a)(8) of the Act; hospital outpatient visits (including emergency department visits); and observation services (HCPCS codes G0378 (Hospital observation service, per hour) and G0379 (Direct referral for hospital observation care)) (78 FR 16636). We reasoned that these services are, by definition, provided to hospital outpatients and not inpatients. Hospitals could only submit claims for E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50910 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Part B inpatient services that were furnished to inpatients in accordance with their Medicare and HCPCS code definitions, and in accordance with Medicare coverage and payment rules (78 FR 16636). We stated in the proposed rule (78 FR 16637) that the proposals in the proposed rule would not change the existing 3-day payment window policy, which provides that if there is no Part A coverage for the inpatient stay, services provided to the beneficiary prior to the point of admission in the 3 calendar day (or 1 calendar day for a non-IPPS hospital) payment window prior to the hospital inpatient admission may be separately billed to Part B as the outpatient services that they were (42 CFR 412.2(c)(5), 412.405, 412.540, 412.604(f), and 413.40(c)(2); MCPM, Chapter 3 Section 40.3, and Chapter 4 Section 10.12). We stated that hospitals could only submit claims for Part B outpatient services that are reasonable and necessary and submitted in accordance with Medicare coverage and payment rules. In accordance with section 1833(e) of the Act, hospitals must furnish information as may be necessary in order to determine the amounts due for the services billed on a Part B outpatient claim for services provided in the 3-day (1-day for nonIPPS hospitals) payment window prior to the inpatient admission (78 FR 16637 through 16638). We discuss our proposed policy for payment of Part B outpatient services furnished in this payment window prior to the inpatient admission in section XI.B.2. of the preamble of this final rule. Comment: One commenter recommended that, under section 1861(s)(2)(B) of the Act, CMS expand the scope of Part B inpatient payment for circumstances other than reasonable and necessary inpatient claim denials that are currently listed in Chapter 6, Section 10, of the MBPM, for which payment of only ancillary Part B services is available. The commenter noted that these include circumstances in which: (1) Some days of an otherwise covered inpatient stay are denied because those days were not medically necessary; (2) no Part A prospective payment is made at all for the hospital stay because of patient exhaustion of benefit days before admission; and (3) the patient was not otherwise eligible for or entitled to coverage under Part A. The commenter argued that Medicare should pay for the Part B inpatient services under the benefit category described by section 1861(s)(2)(B) of the Act (hospital services incident to physicians’ services provided to outpatients) for all hospital inpatients, VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 regardless of the reason for which Part A payment is not made for all or part of their inpatient stay. The commenter believed that to not cover the expanded scope of payable services for beneficiaries with denied days within approved admissions, exhausted hospital benefits, and entitlement only to Part B is arbitrary and punitive to beneficiaries and the secondary payers, including Medicaid, that are liable for payment for these services. The commenter also believed it will cause stakeholders confusion that CMS did not propose any regulation text providing payment of only a limited set of Part B inpatient services in these other circumstances listed in the MBPM. Response: We appreciate the commenter’s feedback. We note that we stated in the proposed rule that our proposed policy would only apply to denials of claims for inpatient admissions that are not reasonable and necessary, and would not apply to any other circumstances in which there is no payment under Part A, such as when a beneficiary exhausts Part A benefits for hospital services or is not entitled to Part A at all. The proposed rule was intended to address the policy for billing reasonable and necessary Part B services when Part A coverage is not available because the inpatient admission was not reasonable and necessary, which is different from scenarios in which a beneficiary has exhausted or is not entitled to Part A benefits. Comment: Many commenters objected to the proposed exclusion of outpatient therapy services from payment as Part B inpatient services when a Part A hospital inpatient claim is denied because the inpatient admission was not reasonable and necessary. Some commenters believed that these inpatient therapy services should be paid under section 1833(a)(8)(B) of the Act. Other commenters noted that CMS proposed to exclude inpatient therapy services from payment because they are defined as strictly outpatient services. These commenters described a number of clinical circumstances in which therapy services are commonly and appropriately furnished to hospital inpatients, and argued that Medicare should therefore pay for them when furnished to a hospital inpatient as well as to an outpatient. Several commenters noted that therapy services are currently listed as payable Part B inpatient services for reasonable and necessary hospital inpatient claim denials as well as exhausted Part A benefits days and other circumstances in Chapter 6, Section 10 of the MBPM. These PO 00000 Frm 00416 Fmt 4701 Sfmt 4700 commenters requested a clearer explanation regarding why we proposed to exclude therapy services from Part B inpatient payment. In addition, several commenters recommended that if Medicare finalizes payment of Part B inpatient therapy services for the reasonable and necessary hospital inpatient claim denials, they should be excluded from the annual, per beneficiary limitations on incurred therapy expenses under Part B, commonly referred to as ‘‘therapy caps,’’ applied by section 1833(g) of the Act. Response: We appreciate the commenters’ concerns and the information they provided about the circumstances in which therapy services are provided to hospital inpatients. We understand that physical therapy services, speech-language pathology services, and occupational therapy services are payable under Part B in certain circumstances when they are provided to hospital inpatients. Section 1861(p) of the Act contemplates that these services could be provided to hospital inpatients when it defines the term ‘‘outpatient physical therapy services’’ as including services that are furnished to an outpatient or those ‘‘furnished to an individual as an inpatient of a hospital or extended care facility.’’ Sections 1861(g) and 1861(ll) of the Act adopt this definition for outpatient occupational therapy services and outpatient speech-language pathology services, respectively. In addition, as commenters noted, therapy services have long been on the list of payable Part B inpatient services that may be billed following the reasonable and necessary denial of a hospital inpatient admission for payment under Part A. Accordingly, we agree with commenters and believe Medicare should continue paying for these Part B inpatient therapy services furnished to hospital inpatients whose admissions are determined not reasonable and necessary for payment under Medicare Part A when these services are billed on Part B inpatient claims. We note that therapy services can also be paid as Part B outpatient services if they were provided in the 3-day (1-day for nonIPPS hospitals) payment window prior to the inpatient admission (we refer readers to section XI.B.2. of the preamble of this final rule) and are billed on a Part B outpatient claim. In addition, while we agree with commenters that we should pay for these therapy services, we do not believe they should be excluded from the annual limitations on per beneficiary incurred expenses, commonly referred to as the ‘‘therapy E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations caps,’’ as the commenters suggested. Rather, we believe we also must apply the therapy caps and all other Part B coverage and payment rules to hospital inpatient therapy services paid under Part B. Accordingly, if billed to Medicare Part B, therapy services furnished to hospital inpatients whose admissions are determined not reasonable and necessary for payment under Medicare Part A will be subject to the Part B therapy caps under section 1833(g) of the Act, the therapy caps exceptions process, the manual medical review process, and all other requirements for payment and coverage of therapy services under Part B (for example, functional status reporting requirements). The therapy caps under section 1833(g) of the Act apply to all therapy services described under section 1861(p) of the Act, which includes inpatient therapy services furnished to a hospital inpatient whose inpatient admission is determined not reasonable and necessary. As such, it is appropriate to apply the therapy caps to these services. This approach is also consistent with the requirement that Part B inpatient services must be furnished in accordance with Medicare’s coverage and payment rules under Part B in order for Part B payment to be made. Applying the therapy caps is consistent with our current payment policy for Part B inpatient therapy services that are paid under Chapter 6, Section 10 of the MPBM, for example when a beneficiary exhausts his or her benefits under Part A, which are subject to the Part B therapy caps and related policies, including all other requirements for payment and coverage of therapy services under Part B (for example, Functional Reporting requirements). In the CY 2014 MPFS proposed rule (78 FR 43332 through 43334), we proposed to subject therapy services that are furnished by a CAH to the therapy caps and related policies, the exceptions process, and the manual medical review process beginning on January 1, 2014. If we finalize this proposal to apply the therapy caps to therapy services furnished by CAHs, we will subject therapy services furnished to a CAH inpatient during a stay that is denied for Part A payment as not reasonable and necessary and that are subsequently billed as Part B inpatient services to the therapy caps, as we do for all other hospitals. The CY 2014 MPFS final rule is expected to be released on or around November 1, 2013. Comment: Several commenters recommended that IRFs and LTCHs be eligible to bill Part B inpatient services VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 following a reasonable and necessary Part A inpatient claim denial. They also believed that inpatient therapy services should be payable under Part B to IRFs and LTCHs when their Part A claims are denied because inpatient admission was not reasonable and necessary. The commenters reasoned that these facilities should be paid for Part B inpatient therapy because they furnish a large volume of therapy services (according to commenters, therapy and room and board represent almost the entire volume of IRF services). Response: We did not propose to exclude IRFs, LTCHs or other hospitals from payment of the proposed Part B inpatient services. As we discussed above, in our final policy we are providing for payment of inpatient therapy services furnished in IRFs, LTCHs and other hospitals under Part B when Part A payment cannot be made because the inpatient admission is determined not reasonable and necessary, and the beneficiary should have been treated as a hospital outpatient rather than an inpatient. Comment: Many commenters objected to the proposed exclusion from Part B inpatient payment of observation services, hospital outpatient visits, and other services that are defined strictly as outpatient services or require an outpatient status. These commenters presented various arguments expressing the belief that observation services should be paid because they are fundamentally the same as or can serve as a substitute for inpatient care. Several commenters stated that some contractors have made it clear that observation status can serve as a substitute for inpatient admission in many cases, despite CMS’ policy that inpatient admission and observation are not substitutes and that, for some patients, inpatient admission may be necessary even for care of short duration. Several other commenters stated that the administrative appeal decisions that have ordered payment at an outpatient or ‘‘observation level’’ of care support payment of observation services in all cases. They believed that the appeal decisions ordered payment for all services, including observation services, under Part B as a substitute for inpatient care, because the care was provided and met the requirements of observation billing. These commenters stated that the law requires payment of all reasonable and necessary services on an outpatient basis, including observation services, and that CMS’ proposed exclusion of observation is unsupported by law and contrary to agency precedent. PO 00000 Frm 00417 Fmt 4701 Sfmt 4700 50911 Some commenters stated that the inpatient admission order should be considered to suffice for observation as well as for inpatient services. They noted that, in most cases, an order for inpatient services does exist, inpatient and observation patients occupy the same routine beds, the same types of tests are administered, and the same level of nursing care is provided. Several commenters were concerned that excluding services such as observation services will not provide adequate payment for the nursing care provided. Some commenters recommended that CMS create new codes for billing the services that require an outpatient status so that they can be billed to Part B for inpatients. Commenters stated that many services can be provided on either an inpatient or an outpatient basis, and there is no reason that observation could not be treated in the same manner, even if doing so requires a change in the definition of the service that does not restrict it to outpatient billing. However, other commenters recognized a difference between outpatient or observation services, and inpatient services. They stated that observation is an outpatient service and does not belong on an inpatient claim, that room and board should not be ‘‘converted’’ to observation charges, and that observation is an action requiring an order and for which (in these cases) there was no order. In the public comments to the proposed rule on inpatient admission guidelines (section XI.C. of the preamble of this final rule), many commenters stated that there was a marked difference between observation or outpatient services and inpatient services, even when furnished in the same bed in the emergency department. The commenters stated that at the time of inpatient admission, in many cases the patient remains in the emergency or other outpatient area of the hospital but an entirely new team comes to that area to provide inpatient services once they are ordered. Response: We do not believe that observation services and inpatient services are the same services. As we discussed above, the purpose of outpatient observation services is to determine whether or not an inpatient admission is needed. Once a patient has been admitted for inpatient services, observation services are no longer medically necessary. Therefore, observation services would not be furnished to a hospital inpatient such that they would need to be billed for the time the beneficiary spent as an inpatient as Part B inpatient services following a Part A claim denial. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50912 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations As we stated in the proposed rule, according to our longstanding policy, hospitals may only submit claims for Part B outpatient and Part B inpatient services that are reasonable and necessary in accordance with Medicare coverage and payment rules. This is not new guidance. We have long provided that, ‘‘in accordance with the general Medicare requirements for services furnished to beneficiaries and billed to Medicare, even in Condition Code 44 situations, hospitals may not report observation services using HCPCS code G0378 (Hospital observation service, per hour) for observation services furnished during a hospital encounter prior to a physician’s order for observation services. Medicare does not permit retroactive orders or the inference of physician orders’’ (MCPM Chapter 1, Section 50.3.2). We agree with the commenters that observation services must be ordered by a physician, as must all hospital outpatient services. In this section of the MBPM, we stated in particular that the clock time begins at the time that observation services are initiated in accordance with a physician’s order As we discuss in section XI.B.2. of the preamble of this final rule, hospitals can (and we proposed that they could continue to) bill Medicare for observation services that were ordered and furnished as outpatient services in the 3-day (1-day for non-IPPS hospitals) payment window prior to the inpatient admission, provided there was a valid order and all other payment rules were met. However, we have long excluded billing and payment of observation services for the time a beneficiary spends as a hospital inpatient, even when condition code 44 permits a patient change to outpatient during the hospital stay (much less when the patient status remains inpatient). Similarly, outpatient DSMT services are payable when furnished to an outpatient in the 3-day (1-day for nonIPPS hospitals) payment window and billed on a Part B outpatient (13x) claim, but would not be payable if furnished to inpatients and billed on a Part B inpatient (12x) claim. Outpatient DSMT services are defined as services ‘‘provided in an outpatient setting’’ in section 1861(qq) of the Act, and therefore should not be furnished to hospital inpatients. The regulation at 42 CFR 414.63(e)(2) stipulates that outpatient DSMT services can be paid only if the beneficiary ‘‘[i]s not receiving services as an inpatient in a hospital, SNF, hospice, or nursing home.’’ Outpatient visits such as emergency department visits also would not be furnished to a hospital inpatient such VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 that they would need to be billed to Part B following a Part A claim denial for the time the beneficiary spent as an inpatient. Outpatient visits may be furnished in the 3-day (1-day for nonIPPS hospitals) payment window prior to the inpatient admission, in which case they may be billed as the outpatient services that they were on the Part B outpatient claim, in accordance with current policy. Therefore, we are finalizing our proposal to exclude observation services, outpatient DSMT, and hospital outpatient visits from payment as Part B inpatient services when the inpatient admission is determined not reasonable and necessary for Part A payment and the hospital bills Part B. However, we emphasize that we do not believe these services should be furnished to inpatients and, therefore, would not need to be billed on a Part B inpatient claim. To the extent these services are furnished to outpatients in the 3-day (1day for non-IPPS hospitals) payment window preceding inpatient admission, they may be billed on a Part B outpatient claim following the denial of the inpatient admission as not reasonable and necessary, as long as all other applicable Medicare coverage and payment rules are met. These hospital outpatient services could be billed on a Part B outpatient (13x) claim, but would not be payable if furnished to inpatients and billed on a Part B inpatient (12x) claim. Comment: One commenter asked how to bill Part B for certain services with differences in coding requirements for Part A and Part B claims. In particular, the commenter stated that, for Part A claims, a hospital may not need to record the start and stop time of infusions and injections, but would have to submit that information when billing under Part B. Response: The start and stop times for an infusion are expected parts of the medical record, regardless of the patient’s status. The hospital may only bill Part B for the duration of services that are supported in the medical record. If additional services requiring coding guidance are brought to our attention, we will provide instructions in the subregulatory guidance that we will be issuing for this final rule. Comment: Several commenters requested that CMS clearly define and list the services and/or revenue codes that will be payable as Part B inpatient services. Several commenters asked what additional services may be excluded from Part B inpatient payment because they require an outpatient status. PO 00000 Frm 00418 Fmt 4701 Sfmt 4700 Response: At this time, approximately 15,000 HCPCS codes and approximately 500 revenue codes are payable under Part B, and hospitals choose the appropriate revenue codes under which they bill services to Part B. Given that the vast majority of Part B services will be finalized as payable Part B inpatient services, we believe it is most administratively feasible to list the few services that are excluded from payment rather than list all procedures or revenue codes that are payable. In our final policy, the only services we are excluding from payment when furnished to hospital inpatients and billed on a Part B inpatient claim following a reasonable and necessary Part A inpatient claim denial are observation services, outpatient DSMT, and hospital outpatient visits, including emergency department visits. We note that, to the extent these services are furnished to outpatients in the 3-day (1day for non-IPPS hospitals) payment window preceding inpatient admission, they may be billed on a Part B outpatient claim following the denial of the inpatient Part A claim as not reasonable and necessary, if all other applicable Medicare coverage and payment rules are met. We also note that if, in our continued experience, we find that other services require an outpatient status or do not meet Part B coverage or payment definitions, we will propose to exclude these services from Part B inpatient payment in future rulemaking. However, at this time, we are not aware of any services other than those listed above that should be excluded. After consideration of the public comments we received, we are finalizing our proposal to exclude observation services, outpatient DSMT, and hospital outpatient visits from Part B inpatient payment. These services should only be furnished to hospital outpatients, and therefore, we do not believe hospitals will need to bill these services on Part B inpatient claims. If these services are furnished to a hospital outpatient during the 3-day (1-day for non-IPPS hospitals) payment window preceding a hospital inpatient admission that is later denied for Part A payment, as long as Part B coverage and payment rules are met, the services may be billed on a Part B outpatient claim if the Part B coverage and payment rules are met. We are not finalizing our proposed policy to exclude therapy services from Part B inpatient payment following Part A hospital inpatient reasonable and necessary claim denials. Accordingly, hospitals may continue to bill for therapy services on a Part B E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations inpatient claim when these services are furnished to inpatients, and the hospital’s Part A claim is denied because the inpatient admission was not reasonable and necessary and the beneficiary should have been treated as a hospital outpatient rather than a hospital inpatient. We proposed that we would implement this provision in proposed new 42 CFR 414.5, entitled ‘‘Hospital inpatient services paid under Medicare Part B when a Part A hospital inpatient claim is denied because the inpatient admission was not reasonable and necessary, but hospital outpatient services would have been reasonable and necessary in treating the beneficiary.’’ The claims for Part B inpatient and Part B outpatient services would have to be submitted within the timely filing period (we discuss the time limits for filing claims in section XI.B.8. of the preamble of this final rule). To ensure the accuracy and appropriateness of payment under Part A, we proposed that this policy would apply if a Medicare Part A claim for inpatient hospital services is denied because the inpatient admission was not reasonable and necessary, or if a hospital determines under Medicare’s utilization review requirements in section 1861(e)(6)(1) and 1861(k) of the Act and 42 CFR 482.30 (42 CFR 485.641 for CAHs) after discharge that the hospital inpatient admission was not reasonable and necessary, and that the beneficiary should have received hospital outpatient rather than hospital inpatient services (hereinafter referred to as the hospital ‘‘self-audit’’ for purposes of this final rule). In this circumstance, we proposed to continue requiring the hospital to submit a ‘‘no pay/provider liable’’ Part A claim indicating that the provider is liable under section 1879 of the Act for the cost of Part A services (we refer readers to section 40.2.2(E), Chapter 3, of the MCPM). Submission of this Part A claim indicates that the provider is assuming financial liability for the denied items or services on the Part A claim consistent with section 1879 of the Act (and acknowledging that the beneficiary is not financially liable under section 1879 of the Act) for the cost of the Part A items and services. Submitting the provider-liable Part A claim also cancels any claim that may have already been submitted by the hospital for payment under Part A. The hospital could then submit an inpatient claim for payment under Part B for all services that would have been reasonable and necessary if the beneficiary had been treated as a hospital outpatient rather than admitted VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 as a hospital inpatient, except for those services specifically requiring an outpatient status. This claim would have to be submitted within the timely filing period. We stated that we believed providing for additional payment under Part B when a hospital determines itself that an inpatient admission was not reasonable and necessary but hospital outpatient services would have been reasonable and necessary would reduce improper payments under Part A, and would reduce the administrative costs of appeals for both hospitals and the Medicare program. Comment: Several of the commenters asked whether hospitals could bill Part B inpatient services following a hospital self-audit that occurs prior to discharge. Response: We did not propose any changes to our policies governing patient status changes and inpatient admission reviews prior to hospital discharge. Under Medicare’s ‘‘Condition Code 44’’ policy, if a hospital’s utilization review committee determines prior to discharge that a beneficiary should have been treated as a hospital outpatient rather than an inpatient and if certain conditions are met, the beneficiary’s status may be changed to outpatient and the entire hospital encounter may be billed as an outpatient stay on a Part B outpatient claim (MCPM, Chapter 1, Section 50.3). The change in patient status from inpatient to outpatient must be made prior to discharge or release, while the beneficiary is still a patient of the hospital; the hospital could not have submitted a claim to Medicare for the inpatient admission; the practitioner responsible for the care of the patient and the utilization review committee must both concur with the decision; and the concurrence of the practitioner responsible for the care of the patient and the utilization review committee must be documented in the patient’s medical record. Comment: Some commenters were supportive of the proposal to allow Part B inpatient billing pursuant to a hospital self-audit, as it would promote real time self-monitoring and filing of Part B claims within the timely filing limit. Some commenters supported the proposal because it would allow additional Part B payment when the inpatient admission error is discovered after discharge, in comparison to the current restriction under the Condition Code 44 rules where full Part B payment is only made if the medical necessity determination and change in patient status to outpatient is made prior to discharge or release. However, some commenters asked CMS to clarify whether it was proposing PO 00000 Frm 00419 Fmt 4701 Sfmt 4700 50913 a self-audit process that would have to conform to the utilization review rules under the CoPs, notably physician concurrence, beneficiary notification, and other aspects related to continuation of an inpatient stay. These commenters stated that hospitals conduct internal reviews other than utilization review, and asked if the inpatient stay could be rebilled if the error is discovered as part of another type of review. Some of the commenters stated that beneficiaries do not need to be notified of the hospital’s determination that the inpatient admission was not reasonable and necessary (as required under the CoPs) because if the hospital bills Part B and the beneficiary liability under Part A is less than under Part B, the beneficiary’s liability can be waived. One commenter asked CMS to confirm that it was proposing a process that would conform to the CoP rules because the commenter did not believe the CoPs allowed selfaudit to be conducted after discharge. Response: We thank the commenters for their support. We agree with the commenters that applying the Part B inpatient billing process in cases of selfaudit will promote self-monitoring, proper payment, and increase Part B billing closer to the date of service, resulting in less confusion for the beneficiary and a greater number of Part B claims filed within the timely filing limits. We also agree that a significant benefit of the final rule to hospitals is the ability to receive full Part B payment if the determination is made after discharge that the beneficiary should have been treated as a hospital outpatient instead of admitted as a hospital inpatient. Currently there are no requirements in the CoPs or interpretive guidance indicating that review of admissions must be performed prior to discharge. We did not propose and are not finalizing a policy that would allow hospitals to bill Part B following an inpatient reasonable and necessary selfaudit determination that does not conform to the requirements for utilization review under the CoPs. We do not agree with the commenters that beneficiaries need not be notified of a hospital’s determination that the inpatient admission was not reasonable and necessary. Part B billing pursuant to such a determination may result in an increase in financial liability for some beneficiaries which hospitals may not be able to ‘‘waive’’ or forego attempting to collect (we refer readers to sections XI.B.5 and B.6. of the preamble of this final rule). We believe that the CoP rules for beneficiary notification and physician involvement in hospital E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50914 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations utilization review decisions are important for maintaining beneficiary rights, consistent with 42 CFR 482.13. We received many public comments from beneficiaries, beneficiary advocacy organizations, and law firms representing beneficiaries, recommending that we strengthen beneficiary notification and appeal rights for Part B inpatient billing (addressed in sections XI.B.5. and B.6. of the preamble of this final rule). In addition, we received several public comments from physician associations expressing concern that hospitals often change a patient’s status from inpatient to outpatient without the physician’s knowledge. We reiterate that hospitals must follow our policies requiring physician involvement and concurrence in hospital decisions regarding patient status and the medical necessity of hospital inpatient admissions under the Condition Code 44 rules and the CoPs. The Interpretive Guidelines for hospital utilization review under the CoPs are provided on the CMS Web site at: https://www.cms.gov/Regulations-andGuidance/Guidance/Manuals/ downloads/som107ap_a_hospitals.pdf# page312. Comment: Some commenters asked whether the ‘‘no pay/provider-liable’’ Part A claim and the Part B claims could be submitted simultaneously and whether a formal Medicare Part A denial is a prerequisite to Part B inpatient billing. Response: The ‘‘no pay/provider liable’’ claim must be present in the claims system in order for the subsequent Part B claim(s) to process. In order to pay the Part B services, CMS has to verify that a valid Part A denial exists in claims history. If both the ‘‘no pay/provider-liable’’ Part A claim and the Part B claim(s) are submitted simultaneously, the Part A and Part B claims would overlap as duplicates in the processing system. A decision must be made regarding the Part A claim denial before a subsequent claim can be submitted. In accordance with our current claims processing rules for payment of Part B hospital services following hospital Part A inpatient reasonable and necessary claim denials, once the Part A claim denial is posted in the claims history, the Part B claim(s) can be submitted. Comment: One commenter stated that hospital billing to Part B based on selfaudit should be rare, and any hospital that uses this process on a consistent basis should be audited. In addition, the commenter stated that because utilization reviews should be timely, the Part B claims resulting from these VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 reviews should be within the timely filing period. Response: As we stated for the Condition Code 44 policy (MCPM, Chapter 1, Section 50.3.1), changes in patient status from inpatient to outpatient should be few because hospitals should have case management and other staff available at all times to assist the physician in making the appropriate initial admission decision. Use of Condition Code 44 or Part B inpatient billing pursuant to hospital self-audit is not intended to serve as a substitute for adequate staffing of utilization management personnel or for continued education of physicians and hospital staff about each hospital’s existing policies and admission protocols. As education and staffing efforts continue to progress, inappropriate admission decisions, and the need for hospitals to correct inappropriate admissions or report Condition Code 44, should become increasingly rare. In section XI.C. of the preamble of this final rule, we finalize changes in our hospital inpatient admission guidelines and medical review criteria to help clarify on the front end when hospitals and physicians should admit beneficiaries as inpatients, with the goal of reducing inappropriate hospital admissions, hospital inpatient claim denials, and Part B billing following Part A hospital inpatient claim denials or hospital selfaudit. We are finalizing our proposal that payment of Part B inpatient services may be made if a hospital determines under § 482.30(d) or § 485.641 after a beneficiary is discharged that the beneficiary’s inpatient admission was not reasonable and necessary, and the beneficiary should have been treated as a hospital outpatient rather than admitted as an inpatient, provided the beneficiary is enrolled in Medicare Part B and that the hospital submits the Part B inpatient claim by the deadline for timely filing (discussed later in this section). a. Part B Inpatient Services Paid Under the Hospital OPPS We proposed that we would pay for Part B inpatient services that are paid under the OPPS (except those requiring an outpatient status) under proposed new § 414.5(a)(1), ‘‘If a Medicare Part A claim for inpatient hospital services is denied because the inpatient admission was not reasonable and necessary, or if a hospital determines under § 482.30(d) or § 485.641 after a beneficiary is discharged that the beneficiary’s inpatient admission was not reasonable and necessary, the hospital may be paid PO 00000 Frm 00420 Fmt 4701 Sfmt 4700 for the following Part B inpatient services that would have been reasonable and necessary if the beneficiary had been treated as a hospital outpatient rather than admitted as an inpatient, provided the beneficiary is enrolled in Medicare Part B: (1) Services described in § 419.21(a) that do not require an outpatient status’’ (78 FR 16636). We proposed to exclude payment of services under the OPPS such as observation services and hospital outpatient visits (including emergency department visits) that, by definition, require an outpatient status. b. Services Excluded From Payment Under the OPPS For the proposed Part B inpatient services furnished by the hospital that are not paid under the OPPS, but rather under some other Part B payment methodology, we proposed that when the inpatient admission is determined not reasonable and necessary, Part B inpatient payment would be made under the respective Part B fee schedules or prospectively determined rates for which payment is made for these services when provided to hospital outpatients (78 FR 16637; 65 FR 18442 and 18443). As provided in 42 CFR 419.22, the services for which payment is made under other payment methodologies are as follows: • Outpatient therapy services described in section 1833(a)(8) of the Act. • Ambulance services, as described in section 1861(v)(1)(U) of the Act, or, if applicable, the fee schedule established under section 1834(l) of the Act; • Except as provided in 42 CFR 419.2(b)(11), prosthetic devices, prosthetics, prosthetic supplies, and orthotic devices; • Except as provided in 42 CFR 419.2(b)(10), durable medical equipment supplied by the hospital for the patient to take home; • Clinical diagnostic laboratory services; • Effective December 8, 2003, screening mammography services and effective January 1, 2005, diagnostic mammography services; and • Effective January 1, 2011, annual wellness visit providing personalized prevention plan services as defined in 42 CFR 410.15. We proposed to provide payment of these OPPS-excluded services in 42 CFR 414.5(a)(2) through (a)(7) as follows: • Ambulance services, as described in section 1861(v)(1)(U) of the Act, or, if applicable, the fee schedule established under section 1834(l) of Act. • Except as provided in § 419.2(b)(11), prosthetic devices, E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations prosthetics, prosthetic supplies, and orthotic devices. • Except as provided in § 419.2(b)(10), durable medical equipment supplied by the hospital for the patient to take home. • Clinical diagnostic laboratory services. • Effective December 8, 2003, screening mammography services and effective January 1, 2005, diagnostic mammography services. • Effective January 1, 2011, annual wellness visits providing personalized prevention plan services as defined in § 410.15 of this chapter. In our review of the current regulations governing payment of Part B inpatient services, we noted an oversight in 42 CFR 419.22 that outpatient DSMT services, which are described in section 1861(qq) of the Act and 42 CFR 414.63 and are paid under the MPFS, were never excluded from OPPS payment along with all other physician services. Because the statute defines these services as outpatient services, § 414.63(e)(2) stipulates that outpatient DSMT services can be paid only if the beneficiary ‘‘[i]s not receiving services as an inpatient in a hospital, SNF, hospice, or nursing home.’’ Therefore, under our proposal, these services would not be payable Part B inpatient services, although they would be payable Part B outpatient services if furnished in the 3-day (1-day for onIPPS hospitals) payment window prior to the inpatient admission. However, based on our review of the regulations, we proposed a technical correction to clarify that outpatient DSMT services are excluded from OPPS payment. We proposed that this correction would appear in § 419.22(u). In addition, we noted a typographical error in paragraph (j), which should cross reference § 419.2(b)(11) rather than § 419.22(b)(11). We proposed a technical correction to delete the erroneous ‘‘§ 419.22(b)(11)’’’ and replace with ‘‘§ 419.2(b)(11)’’’. Also we noted that § 419.22(h) excludes ‘‘outpatient’’’ therapy services from the OPPS. Section 1833(t)(1)(B)(iv) of the Act specifically states that ‘‘the term ‘covered OPD services’ . . . (iv) does not include any therapy services described in subsection (a)(8)’’’ and section 1833(a)(8) describes outpatient therapy services furnished by a hospital to a hospital outpatient or a hospital inpatient who is entitled to benefits under Part A but has either exhausted or is not so entitled to such benefits. In order to more clearly follow the statutory language defining covered OPD services, we proposed to replace the words ‘‘outpatient therapy’’’ with ‘‘therapy’’’ in § 419.22(h) so that it VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 reads, ‘‘Therapy services described in section 1833(a)(8) of the Act.’’ We did not receive any public comments on the fee schedules or prospectively determined rates under which the proposed Part B inpatient services would be paid. After consideration of the public comments we received, we are finalizing new § 414.5(a) with the addition of paragraph (a)(2) to provide for payment of physical therapy, speech-language pathology, and occupational therapy services. We are revising § 419.22(h) by removing the phrase ‘‘Outpatient therapy’’ and adding in its place the phrase ‘‘Physical therapy services, speech-language pathology services and occupational therapy services described in section 1833(a)(8) for which payment is made under the fee schedule described in section 1834(k) of the Act’’ to be consistent with the exclusion language in section 1833(t)(1)(B)(iv) of the Act. In the proposed rule, based on our review of the regulations, we noted that outpatient DSMT was not excluded from OPPS payment as are other services paid under the MPFS. We proposed a correction to exclude them under 42 CFR 419.22, which lists hospital services excluded from payment under the OPPS. We did not receive any public comments on our proposed correction. Therefore, we are finalizing the addition of new paragraph (u) to § 419.22 as proposed, to read: ‘‘The following services are not paid for under the hospital outpatient prospective payment system . . . (u) Outpatient diabetes self-management training.’’ We are finalizing our proposed technical correction of a typographical error in paragraph (j) of § 419.22, which should cross-reference § 419.2(b)(11), rather than § 419.22(b)(11). In our review of the regulations, we had further noted that the headings of § 419.21 and § 419.22 describe the ‘‘hospital outpatient’’ services that are subject to (in § 419.21) or excluded from payment under (in § 419.22) the OPPS. To more appropriately describe the services that are payable under these regulations under the OPPS, we proposed to amend the titles of these sections by removing the term ‘‘outpatient.’’ We did not receive any public comments on this proposal. Therefore, we are finalizing amendments to revise the title of § 419.21 to read, ‘‘Hospital services subject to the outpatient prospective payment system’’ and to revise the title of § 419.22 to read, ‘‘Hospital services excluded from payment under the PO 00000 Frm 00421 Fmt 4701 Sfmt 4700 50915 hospital outpatient prospective payment system.’’ 2. Payment of Part B Outpatient Services in the 3-Day Payment Window In the Part B Inpatient Billing proposed rule (78 FR 16637 through 16638), we explained that the proposals in the proposed rule would not change the 3-day payment window policy, which requires payment for certain outpatient services provided to a beneficiary on the date of an inpatient admission or during the 3 calendar days (or 1 calendar day for a hospital that is not paid under the IPPS) prior to the date of an inpatient admission to be bundled (that is, included) with the payment for the beneficiary’s inpatient admission, if those outpatient services are provided by the admitting hospital or an entity that is wholly owned or wholly operated by the admitting hospital (42 CFR 412.2(c)(5), 412.405, 412.540, 412.604(f), and 413.40(c)(2); MCPM Section 40.3, Chapter 3 and Section 10.12, Chapter 4). The current policy applies to all diagnostic outpatient services and nondiagnostic (that is, therapeutic) services that are related to the inpatient stay. As stated in the MCPM, Section 10.12, Chapter 4, in the event that there is no Part A coverage for the inpatient stay, reasonable and necessary services provided to the beneficiary prior to the point of admission may be separately billed to Part B as the outpatient services that they were. We proposed that this policy would continue to apply where Part A payment is not available because the hospital inpatient admission is determined not reasonable and necessary. The Part B outpatient claims for the outpatient services provided in the 3-day (or 1-day for a non-IPPS hospital) payment window would be subject to the usual timely filing restrictions and not be considered adjustment claims. We explained that hospitals may only submit claims for Part B outpatient services that are reasonable and necessary in accordance with Medicare coverage and payment rules. In accordance with section 1833(e) of the Act, hospitals must furnish information as may be necessary in order to determine the amounts due for the services billed on a Part B outpatient claim for services rendered in the 3-day (or 1-day for non-IPPS hospitals) payment window prior to the inpatient admission. Comment: Many commenters seemed to misunderstand the proposal to exclude certain services from payment as Part B inpatient services, and believed CMS was also proposing to E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50916 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations exclude these services from payment as Part B outpatient services in the 3-day (1-day for non-IPPS hospitals) payment window. Several commenters asked us to clarify why the proposed regulation text only addressed payment of Part B inpatient services, and did not specify payment of Part B outpatient services furnished in the 3-day (1-day for nonIPPS hospitals) payment window prior to the inpatient admission. Other commenters believed CMS was proposing to allow payment of all rebilled services as Part B outpatient services by changing the beneficiary’s status for the entire hospital stay to outpatient. Response: For outpatient services provided to a beneficiary on the date of an inpatient admission or during the 3calendar day (or 1-calendar day for a non-IPPS hospital) payment window prior to the date of an inpatient admission, we proposed the same payment policy and claims process that we provide for under current policy (MCPM, Chapter 4, Section 50.3; MCPM Chapter 4, Section 10.12 and Chapter 3, Section 40.3), that we used in the A/B Rebilling Demonstration, and that we required under the Ruling (78 FR 16614 through 16617). As we stated in the Ruling (78 FR 16617), ‘‘the beneficiary’s patient status remains inpatient as of the time of inpatient admission and is not changed to outpatient, because the beneficiary was formally admitted as an inpatient and there is no provision to change a beneficiary’s status after she/ he is discharged from the hospital. The beneficiary is considered an outpatient for services billed on the Part B outpatient claim, and is considered an inpatient for services billed on the Part B inpatient claim.’’ Under existing policy, all reasonable and necessary outpatient services furnished in the 3day (or 1-day for non-IPPS hospitals) payment window, including those requiring an outpatient status, may be billed on the 13x (Part B outpatient) type of bill (TOB). Services furnished after the time of the inpatient admission must be billed on the 12x (Part B inpatient) TOB. Billing the Part B services according to the patient’s status supports proper payment and clarifies the patient’s status for determining skilled nursing facility coverage, and Medicare inpatient days for IPPS payments (we refer readers to section XI.B.11. of the preamble of this final rule). As explained above, those services that require an outpatient status and that cannot be billed on a 12x claim— observation services, outpatient hospital visits, and outpatient DSMT—are payable if they were furnished to an VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 outpatient during the 3-day (1-day for non-IPPS hospitals) payment window preceding the inpatient admission and are billed on a Part B outpatient (13x) claim. Our proposed regulation text did not specify payment of Part B hospital outpatient services following a Part A hospital inpatient claim denial for medical necessity of the admission, because these Part B services are already payable under other relevant Part B regulations for payment of outpatient services in accordance with Chapter 4, Section 10.12 of the MCPM. However, given the significant confusion among the commenters about this issue, we are incorporating this manual provision into our final regulation text, providing payment of Part B outpatient services provided in the 3-day (1-day for nonIPPS hospitals) payment window prior to the inpatient admission. Specifically, we are adding new paragraph (b) under § 414.5 stating that, ‘‘If a Medicare Part A claim for inpatient hospital services is denied because the inpatient admission was not reasonable and necessary, or if a hospital determines under § 482.30(d) of this chapter or § 485.641 of this chapter after a beneficiary is discharged that the beneficiary’s inpatient admission was not reasonable and necessary, the hospital may be paid for hospital outpatient services described in § 412.2(c)(5), § 412.405, § 412.540, § 412.604(f), or § 413.40(c)(2) of this chapter furnished to the beneficiary prior to the point of inpatient admission (that is, the inpatient admission order).’’ In addition, we are deleting the term ‘‘inpatient’’ from the phrase ‘‘hospital inpatient services’’ in the proposed title of § 414.5, to indicate that this section of the regulations addresses payment of both hospital outpatient and hospital inpatient services. The final title reads, ‘‘Hospital services paid under Medicare Part B when a Part A hospital inpatient claim is denied because the inpatient admission was not reasonable and necessary, but hospital outpatient services would have been reasonable and necessary in treating the beneficiary.’’ Comment: Several commenters disagreed with the proposal to require hospitals to bill two claims for payment of Part B inpatient and Part B outpatient services. Some commenters recommended that CMS allow all Part B services to be billed on the 13x TOB because they believed the MACs will fail to apply the rules correctly for the 12x TOB because they will be unable to distinguish the reason there was no Part A coverage (exhausted Part A benefits versus denial of inpatient admission for lack of medical necessity) and, PO 00000 Frm 00422 Fmt 4701 Sfmt 4700 therefore, the amount of allowable Part B payment. Some commenters suggested that CMS create a condition code that would distinguish the various reasons for Part B inpatient billing. Other commenters expressed the opinion that requiring both the 12x TOB and 13x TOB would be burdensome either because the accounting systems available to most hospitals do not have a means of easily separating charges furnished within a 24-hour period (presumably when the beneficiary has both outpatient and inpatient charges on the day of admission), or because splitting charges generally between the outpatient services in the 3-day payment window and the inpatient services provided during the inpatient stay is not standard operating procedure and would require hospitals to reprogram their billing systems. Other commenters believed that CMS will need to provide guidance on recoding services with differences in coding requirements for Part A and Part B claims. Some commenters stated that CMS should use information supplemented to the Part A claim to issue Part B payment, rather than requiring the submission of any Part B claims. The commenters suggested that supplemental payers and beneficiaries will have a greater number of claims to process if Medicare requires two Part B claims. Some commenters recommended either including all charges on the 12x TOB using the claims procedures that they believe CMS employed in the A/B Rebilling Demonstration, or creating a new bill type that would identify inpatient reasonable and necessary denials and allow all Part B services to remain on the same claim. Response: In the A/B Rebilling Demonstration, CMS used the claims process that is required under existing policy and that was proposed in the proposed rule (that is, requiring a Part B inpatient claim for services furnished after the time of inpatient admission, and a Part B outpatient claim for services furnished in the 3-day (1-day for non-IPPS hospitals) payment window prior to the inpatient admission (78 FR 16636 through 16638). In this process, because the beneficiary is an outpatient prior to the time of inpatient admission, and the services furnished during that time period are outpatient services, they must be billed on a 13x Part B outpatient TOB. Because the beneficiary remains an inpatient from the time of inpatient admission, and the services billed after the time of admission are inpatient services, CMS requires that these services be billed on a Part B inpatient 12x TOB and does not E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations allow outpatient services such as observation to be billed on this claim. As we stated in the proposed rule, in accordance with section 1833(e) of the Act, hospitals must furnish information as may be necessary in order to determine the amounts due for the services billed on a Part B outpatient or a Part B inpatient claim (78 FR 16636 and 16638). Because the inpatient services are bundled for payment rather than itemized on the original Part A claim, only the hospital can distinguish which services among those that were furnished would have been reasonable necessary if the hospital had treated the beneficiary on an outpatient basis. Only the hospital can provide this information to Medicare by itemizing the reasonable and necessary services on the subsequent Part B claim(s). In addition, Part B outpatient claims will not be required in situations other than when the beneficiary received outpatient services prior to being admitted as an inpatient. The alternative to separating the services provided before and after the inpatient admission on two claims would involve the creation of a complex system of modifiers to specify timing relative to the order for the services on a single claim. This would be considerably more burdensome than creating two claims. For example, requiring a separate outpatient claim will enable hospitals to distinguish the outpatient services they furnished in the 3-day (1-day for non-IPPS hospitals) payment window from the inpatient services furnished, allowing payment of services that are defined as strictly outpatient services in the 3-day payment window. We are not sure what informational format the commenter was referring to in the suggestion to allow for supplementation of the Part A claim. It seems that a ‘‘supplementation’’ process would require all Part B line item detail in addition to header information to allow the supplemental file to link to the original Part A claim. Although this would be administratively confusing because a Part B inpatient claim is a replacement for a Part A claim, not a supplement, the more operationally significant consideration is that the effort of creating a new Part B claim is no different (and may in fact be less) than the effort involved in creating a supplement but with the added necessity of linking a supplement to the primary Part A claim data. We are finalizing our proposed policies on the 3-day (1-day for nonIPPS hospitals) payment window and the required Part B claims. However, we also are evaluating the Medicare claims VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 system to ensure that it distinguishes among the reasons that Part A coverage was not available and provides the appropriate payment. We will issue additional guidance in the future with claims specifications for billing Part B inpatient services under this final rule, such as distinguishing the reason for the Part A claim denial. 3. Applicability: Types of Hospitals We proposed that all hospitals billing Part A services would be eligible to bill the proposed Part B inpatient services, including short-term acute care hospitals paid under the IPPS, hospitals paid under the OPPS, LTCHs, IPFs, IRFs, CAHs, children’s hospitals, cancer hospitals, and Maryland waiver hospitals. We proposed that hospitals paid under the OPPS would continue billing the OPPS for Part B inpatient services. We proposed that hospitals that are excluded from payment under the OPPS in 42 CFR 419.20(b) would be eligible to bill Part B inpatient services under their non-OPPS payment methodologies. Comment: One commenter asked whether Maryland waiver hospitals would be eligible for the proposed Part B inpatient billing policies. Another commenter asked CMS to clarify whether the reference to section 1861(e) of the Act (78 FR 16632) was intended to exclude IPFs from our proposed policies. Response: Under section 1814(b) of the Act, hospitals in the State of Maryland are subject to a waiver from the Medicare payment methodologies under which they would otherwise be paid. Under the demonstration that forms the basis of the statutory framework of the Maryland hospital Medicare payment system, only the hospitals’ payment methodology was waived. All other Medicare requirements generally apply; therefore, from a billing perspective, we believe Maryland waiver hospitals should be treated the same as nonwaiver hospitals for purposes of Part B inpatient billing. Our reference to section 1861(e) of the Act was intended to specify that CAHs were included in the proposed policies, not that IPFs or other non-IPPS hospitals would be excluded. We see no reason to exclude any non-IPPS hospitals from Part B inpatient billing in the circumstances addressed in this final rule, and we are applying the final rule policies to all hospitals and CAHs. In the CY 2002 OPPS proposed rule (66 FR 44698 through 44699) and final rule (66 FR 59891 through 59893), we recognized that certain hospitals do not submit claims for outpatient services under Medicare Part B, either because PO 00000 Frm 00423 Fmt 4701 Sfmt 4700 50917 they do not have outpatient departments or because they have outpatient departments but submit no claims to Medicare Part B (for example, state psychiatric hospitals). When the OPPS was implemented, the only claims these hospitals would ever have submitted for Part B payment would have been for the ancillary services designated as ‘‘Part B Only’’ services. These hospitals were concerned about the administrative burden and prohibitive costs they would incur if they were to change their billing systems to accommodate OPPS requirements solely to receive payment for Part B Only (Part B inpatient) services. Under our policy of limited (ancillary) Part B inpatient billing following a reasonable and necessary Part A claim denial, the cost to these hospitals of implementing claims systems to bill Part B inpatient services to the OPPS would have been greater than the payments they could have received for the services. In response to this concern, we revised 42 CFR 419.22 by adding paragraph (r), which provides that services defined in 42 CFR 419.21(b) that are furnished to inpatients of hospitals that do not submit claims for outpatient services under Medicare Part B are excluded from payment under the OPPS. We provided an exception under which, rather than billing Part B inpatient services under the OPPS, hospitals would bill these services under the hospital’s pre-OPPS payment methodology, for example at reasonable cost or the per diem payment rate, unless the services were subject to a payment methodology that was established prior to the OPPS. We solicited public comments from these hospitals regarding the types of Part B inpatient services they anticipated billing Medicare under our proposal for payment of additional Part B services (78 FR 16638). If, under our proposed policies, the Part B inpatient services payable to these hospitals would largely be limited to the ancillary services they currently bill Medicare, these hospitals would continue billing Part B inpatient services under the current exception. However, we stated that if we received public comments indicating that hospitals subject to the exception in 42 CFR 419.22(r) would be eligible and seek payment for additional Part B inpatient services under this proposed rule, we would consider finalizing a policy to require these hospitals to bill the OPPS because, unlike under existing policy, their eligible payments would likely outweigh the cost of implementing billing systems specific to the OPPS. To reflect such a policy, we E:\FR\FM\19AUR2.SGM 19AUR2 50918 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 stated that we would delete paragraph (r) of § 419.22(r) and redesignate paragraphs (s) and (t) as paragraphs (r) and (s), respectively. We did not receive any public comments regarding Part B inpatient billing by hospitals subject to the existing exception in § 419.22(r). Therefore, we are not finalizing a policy in the final rule to require these hospitals to bill the OPPS for Part B inpatient services that are typically paid under the OPPS. We intend to monitor the volume of Part B claims submitted for payment by these hospitals, and may propose in future rulemaking to require them to begin billing the OPPS based on the Part B inpatient services they bill. 5. Beneficiary Liability Under Section 1879 of the Act As discussed in the Part B Inpatient Billing proposed rule (78 FR 16639), prior to the issuance of CMS Ruling CMS 1455–R (as described in section XI.B.1. of the preamble of this final rule), our policy previously allowed for billing of only a limited set of Part B inpatient services rather than all Part B services following the reasonable and necessary denial of a Part A inpatient claim. Under the policy being adopted in this final rule, we recognize that allowing hospitals to bill for additional Part B inpatient services could create a unique liability issue for Medicare beneficiaries that did not previously exist. When a Part A inpatient admission is denied as not reasonable and necessary under section 1862(a)(1)(A) of the Act, or a hospital submits a ‘‘provider liable/ no-pay’’ claim (following a self-audit as described in section XI.B.3. of the preamble of this rule) indicating that the hospital has determined that an inpatient admission is not reasonable and necessary, a determination of financial liability for the noncovered inpatient admission is made in accordance with section 1879 of the Act. The Medicare contractor determines whether the hospital and the beneficiary knew, or could have reasonably been expected to know, that the services were not covered. If neither the hospital nor the beneficiary knew, or could reasonably have been expected to know, that the services were not covered, then Medicare makes payment for the denied services. However, because hospitals are expected to have knowledge of our coverage and payment rules, hospitals are often determined liable under section 1879 of the Act for the cost of the noncovered items and services furnished. In addition, unless the beneficiary had knowledge of noncoverage in advance of the provision VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 of services (typically through a HospitalIssued Notice of Noncoverage (HINN)), the beneficiary will not be financially liable for the denied Part A services in accordance with section 1879 of the Act. Following a denial of a Part A inpatient admission as not reasonable and necessary and a determination that the beneficiary was not financially liable in accordance with section 1879 of the Act, the hospital is required to refund any amounts paid by the beneficiary (such as deductible and copayment amounts) for the services billed under Part A (42 CFR 411.402). The beneficiary would have no out-ofpocket cost in this scenario. However, as we explained in the proposed rule, if the hospital subsequently submits a timely Part B claim after the Part A claim is denied, the financial protections afforded under section 1879 of the Act to limit liability for the denied Part A claim cannot also be applied to limit liability for the covered services filed on the Part B claim. The beneficiary (who may previously have had no out-of-pocket costs for the denied Part A claim) is responsible for applicable deductible and copayment amounts for Medicare covered services, and for the cost of items or services never covered (or always excluded from coverage) under Part B of the program. If, however, a hospital does not bill under Part B in a timely manner, in accordance with section 1866(a)(1)(A)(i) of the Act, the hospital may not charge the beneficiary for the costs related to the Part B items and services furnished, if the beneficiary would otherwise be entitled to have Part B payment made on his or her behalf. Finally, in instances where the beneficiary is not enrolled in Medicare Part B, we encouraged hospitals and beneficiaries to recognize the importance of billing supplemental insurers and pursuing an appeal of the Part A inpatient claim denial, as appropriate. As we stated in the proposed rule, we do not believe that the existing beneficiary liability notices used in the Medicare fee-for-service program (the HINN and Advance Beneficiary Notice of Noncoverage (ABN)) are applicable or relevant for the Part B inpatient billing process described in the proposed rule to alert beneficiaries to the possible change in deductible and cost-sharing if a Part A inpatient claim is denied and a Part B claim is subsequently submitted. These notices must be given prior to the provision of an item or service that is expected to be denied, and cannot be issued retroactively (that is, after the receipt of the post-payment Part A inpatient claim denial). Instead, we proposed to conduct an educational PO 00000 Frm 00424 Fmt 4701 Sfmt 4700 campaign and issue materials that address various aspects of this final rule, including raising beneficiary awareness that certain denied Part A inpatient hospital services may be covered under Part B of the program. Comment: Many commenters recommended that beneficiaries should be held harmless for the Part B costsharing and that patients should not be charged for provider error in admitting the patient inappropriately. Other commenters suggested that beneficiaries should be responsible for cost-sharing on the Part A claim but not responsible for anything beyond that amount if a Part B claim is submitted, similar to how the cost-sharing was handled under the A/B rebilling demonstration project. Response: We agree that beneficiaries should not be charged for unexpected costs of a service denied as not reasonable and necessary. The limitation on liability provision in section 1879 of the Act (‘‘Limitation on Liability of Beneficiary Where Medicare Claims Are Disallowed’’) protects beneficiaries from financial liability for certain denials and requires that providers refund any amounts collected for denied services, including coinsurance and deductible amounts, where the provider is determined to be liable for the denied services (42 CFR 411.402). However, in the case of a provider furnishing covered services that are payable by Medicare, beneficiaries are responsible for the applicable coinsurance and deductible (sections 1833(b) and 1833(t)(8) of the Act). We do not have authority to waive this statutory requirement in order to hold beneficiaries harmless from their cost-sharing obligations for covered Part B services. The commenters who suggested this approach are referring to the A/B rebilling demonstration project that ended March 13, 2013. Under the demonstration project, which was conducted prior to the issuance of the proposed rule and CMS Ruling 1455–R, hospitals were prohibited from collecting from beneficiaries coinsurance and deductible amounts related to covered Part B services billed to the program if these cost-sharing amounts under Part B exceeded the amount of the Part A inpatient deductible. We were able to waive the statutory requirements regarding beneficiary responsibility for coinsurance and deductibles and hold beneficiaries harmless from any additional Part B cost-sharing under the authority granted in section 402(b) of the Social Security Amendments of 1967 (42 U.S.C 1395b–1) but this waiver authority applies only to experiments and demonstration projects conducted E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations under section 402(a) of that statute. We do not have similar authority to change or waive such requirements under our general rulemaking authority. Therefore, we cannot adopt the commenters’ recommendations to hold beneficiaries harmless for the financial responsibility related to Part B coinsurance and deductible for covered claims. Comment: Several commenters suggested that CMS permit the hospital to retain amounts collected for the inpatient deductible related to the Part A claim and offset any amount that may need to be collected under Part B for the applicable coinsurance and deductible. The commenters stated that hospitals would then refund amounts where the amount to be collected related to the Part B claim(s) was less than the amount to be refunded for the Part A claim. Response: If a Part A claim for an inpatient stay is denied as not reasonable and necessary and the hospital, but not the beneficiary, is determined to be financially liable for the cost of the denied Part A services pursuant to section 1879 of the Act, the hospital is prohibited from collecting any amounts for the denied Part A services from the beneficiary and must refund any amounts previously collected. Failure to refund the amounts incorrectly collected may subject the hospital to an indemnification action pursuant to section 1879(b) of the Act and 42 CFR 411.402. We will issue subregulatory guidance about how this refund should occur when there is both a Part A refund owed to and a Part B liability owed from the beneficiary. Comment: Several commenters opined that the proposal to conduct an education campaign to alert beneficiaries to the potential changes in cost-sharing if a claim for a Part A inpatient admission is denied and subsequently rebilled under Part B was inadequate. These commenters recommended that CMS consider requiring hospitals to issue an additional standardized notice or a Frequently Asked Questions (FAQ) sheet regarding Part B inpatient billing to all inpatients prior to admission or after discharge, or adding information on Part B inpatient billing to the existing Important Message from Medicare (IM). Response: In the proposed rule, we explained that we intend to conduct an educational campaign to ensure that beneficiaries are aware of the on-going review of inpatient claims and the potential financial liability resulting from a Part A claim denial with subsequent Part B billing. We support the commenters’ intent to inform beneficiaries. However, we believe that VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 providing all beneficiaries with an additional notice or FAQ sheet on admission would likely create undue confusion and concern for beneficiaries. Beneficiaries already receive many notices and papers on hospital admission, and it is unlikely that a beneficiary’s admission will be subject to the Part B billing procedures described in this rule. We believe that the commenters’ recommended approach to provide all inpatients with a standard notice regarding postdischarge claims processing issues is excessive and unwarranted. In addition, delivery of this information on admission would violate our general approach to notice delivery, which is to provide information at a time when it is applicable to the situation and needed by the beneficiary. The commenters’ recommended timing of notice delivery, in most cases, would be well in advance of when a beneficiary might need the information and would negatively impact its utility. In addition, we believe that adding information to the IM on Part B inpatient billing or rebilling is not a feasible option. The IM, an information collection approved by the Office of Management and Budget (OMB), is used to inform and advise beneficiaries regarding discharge appeal rights and the steps to take if they believe that their discharge is premature, in accordance with section 1866(a)(1)(M) of the Act. It would be inappropriate to include information about claims processing policies on this notice and would likely be confusing to beneficiaries because the decision to submit a Part B inpatient claim is not a discharge. While there is existing statutory and regulatory authority to enforce hospital compliance with the existing IM notice requirements, we are unaware of existing authority that would enforce compliance or penalize noncompliance with either revisions to the IM or any separate notice requirement for hospitals to notify the beneficiary before submitting a Part B inpatient claim. Our longstanding educational strategies promote informed beneficiaries, and we believe that educating beneficiaries before entering the hospital and providing relevant information when it is needed is the best approach. By providing knowledge of hospital billing considerations in advance of their stay, beneficiaries with concerns about the appropriateness of a Part A inpatient hospitalization can discuss these issues with their physicians before or on admission. Information on Part B inpatient billing will be added to the annual Medicare & You publication and the existing PO 00000 Frm 00425 Fmt 4701 Sfmt 4700 50919 publication, Are You a Hospital Inpatient or Outpatient? If You Have Medicare—Ask! (CMS Product No. 11435). We also will review other existing CMS publications and include information where appropriate. In addition, for those beneficiaries specifically affected by a Part A hospital inpatient claim denial that may be subject to Part B billing or a Part B claim submission for hospital inpatient services subsequent to a Part A claim denial, contractors will include new messages on the Medicare Summary Notice (MSN) to inform them of the action. These newly created MSN messages explain that the hospital may submit the claim under Part B and that different cost-sharing may apply. In this manner, we will incorporate the commenters’ suggestion on the timing of post-discharge delivery of information regarding billing under Part B for inpatient hospital services, consistent with our approach to delivering notices at a time when the information is most relevant. For these reasons, we are not adopting the commenters’ recommendations to require delivery of an additional standardized notice or a Frequently Asked Questions (FAQ) sheet to inpatients prior to admission or after discharge, or to amend the existing Important Message from Medicare. However, we will continue to monitor the effectiveness of our efforts to inform and educate beneficiaries and may consider other options such as targeted beneficiary notice in future rulemaking. Comment: One commenter stated that the proposed rule subverts longstanding demand billing policy established subsequent to the settlement agreement in Sarrassat v. Sullivan (1989 WL 208444 (N.D.Cal.)). The commenter objected to CMS’ proposal requiring hospitals to submit a ‘‘no-pay’’ Part A claim with a Part B claim for inpatient and/or outpatient services when hospitals self-audit and determine that the claim(s) should be submitted under Part B. The commenter explained that beneficiaries subject to the Sarrassat settlement agreement have the right to request a demand bill for a Part A coverage determination. Response: We appreciate the comments submitted on this issue. However, the terms of the settlement agreement in Sarrassat applied to patients in SNFs, not hospitals. Nevertheless, we believe our proposed policy in cases of hospital self-audits requiring submission of a ‘‘no-pay’’ Part A claim with the hospital’s Part B claim(s) does not undermine demand billing policies. With demand billing, beneficiaries have the right to request E:\FR\FM\19AUR2.SGM 19AUR2 50920 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 claim submission and receive an official Medicare claim decision even when a provider believes that items and services furnished will not be covered. This right is not affected by the provisions of the proposed rule. In the case of a self-audit by the hospital, if the hospital determines the admission is covered under Part B rather than Part A, it will submit a Part B claim along with a ‘‘no-pay’’ Part A claim, and the contractor will make initial determinations on those claims. The beneficiary retains the right to an official Medicare decision on payment for the claim submitted by the hospital. Should the beneficiary dispute the initial determination by the contractor that the services are properly payable under Part B, the beneficiary may file an appeal of the Part B claim under the existing procedures in 42 CFR Part 405, Subpart I (76 FR 16640) and assert such concerns. For these reasons, we are not adopting the commenters’ recommendations and are finalizing the provisions of the proposed rule requiring the submission of a ‘‘no-pay’’ Part A claim with a Part B claim for inpatient and/or outpatient services when hospitals self-audit and determine that the claim(s) should be submitted as under Part B without modification. 6. Applicable Beneficiary Liability: Hospital Services In the Part B Inpatient Billing proposed rule (78 FR 16639), we stated that increasing the number of billable Part B inpatient services could affect beneficiary liability. In accordance with statute, beneficiary cost-sharing under Part A is different (and, in some cases, may be less) than under Part B. The CY 2013 Medicare Part A inpatient deductible and coinsurance amounts, which are set in accordance with statute, were recently announced in a notice published in the Federal Register on November 21, 2012 (77 FR 69848 through 69850). Under Part A, a beneficiary pays a one-time deductible for all hospital inpatient services provided during the first 60 days in the hospital of the benefit period for a year; therefore, an inpatient deductible does not necessarily apply to all hospitalizations. The Medicare Part A coinsurance only applies after the 60th day in the hospital. When the Part A claim is denied because the inpatient admission is determined to be not reasonable and necessary, the beneficiary is entitled to refunds of any amounts he or she paid to the hospital for the Part A claim if the hospital, but not the beneficiary, is held financially responsible for denied services under VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 section 1879 of the Act (42 CFR 411.402.) However, under our proposed policy, beneficiaries would continue to be liable for their usual Part B financial liability. We stated in the proposed rule that beneficiaries would be liable for Part B copayments for each hospital Part B outpatient or Part B inpatient service and for the full cost of drugs that are usually self-administered, which section 1861(s)(2)(B) of the Act does not include. We noted that selfadministered drugs are typically covered under Medicare Part D, and beneficiaries who have Part D coverage may submit a claim to their Part D plan for reimbursement of these costs. If a beneficiary must receive the selfadministered drug from a hospital, rather than a community pharmacy, he or she would likely be subject to higher out-of-pocket costs due to the hospital pharmacy’s status as a non-network pharmacy. Hospital billing systems, Part D reimbursement rates, and drug utilization review requirements make it difficult for hospitals to participate as a Part D network provider for these drugs. Therefore, if coverage is available, consistent with 42 CFR 423.124(b), beneficiaries would be responsible for the difference between the Part D plan’s allowance and the hospitals’ charges, and the difference may be significant. Therefore, under our proposed Part B payment policy, some beneficiaries who are entitled to coverage under both Part A and Part B may have a greater financial liability for hospital services compared to current policy, as they would be liable for additional Part B services billed when the inpatient admission is determined not reasonable and necessary. Accordingly, we solicited public comments on whether we should consider additional policies to mitigate or prevent this potential additional liability for beneficiaries. Comment: Most commenters asserted that changing beneficiary liability for hospital services after discharge, especially up to several years later, is inappropriate and unfair. Many commenters stated that while the proposed rule helps hospitals financially, it would financially harm low-income and other beneficiaries, and beneficiary advocates recommended that the proposal not be finalized for this reason. Hospitals believed it would be administratively burdensome and harmful to patient relations to bill beneficiaries for changes in liability after their discharge and without advance notice. Beneficiary advocates focused on beneficiaries’ right to informed consent, involvement in their plan of care, and advance knowledge of PO 00000 Frm 00426 Fmt 4701 Sfmt 4700 liabilities, similar to the public comments we received in response to the CY 2013 OPPS/ASC final rule with comment period (77 FR 68432). To address these issues, the commenters recommended the following: • Changes in cost-sharing should be waived as in the A–B rebilling demonstration, or Medicare should pay 100 percent of approved charges. In return, the hospital would agree not to charge the beneficiary for the cost of self-administered drugs. • Alternatively, beneficiaries could be held harmless for any additional costsharing above their cost-sharing for the Part A denied services. • Hospitals should have discretion in beneficiary billing policies, so long as the policies are applied consistently across all payers and patients. One commenter requested that CMS clarify that hospitals must bill beneficiaries for Part B cost-sharing. Several commenters expressed concerns about being able to bill beneficiaries for Part B cost-sharing many years after the services were provided. The commenters stated that, in some cases, beneficiaries may have moved or may have died, and collecting the coinsurance/deductible from the beneficiary would prove difficult or impossible. Response: We understand and appreciate the commenters’ concerns. However, CMS does not have authority to limit beneficiary liability for Part B covered services. As we discussed in section XI.B.5. of the preamble of this final rule, beneficiary liability is governed under section 1879 of the Act. Under this section, the beneficiary is typically not liable for costs associated with a Part A inpatient service denied as not reasonable and necessary, and CMS has authority to indemnify, if necessary, the beneficiary for any cost, including the deductible and coinsurance, paid to the hospital (and to then treat this indemnification as an overpayment to the hospital). However, CMS does not have authority under section 1879 or any other section of the Act to adjust costs to the beneficiary associated with a properly filed Part B inpatient claim. Similarly, CMS does not have authority under the statute to ‘‘waive’’ cost sharing liability or liability for the cost of drugs that are usually self-administered as we had under the A/B Rebilling Demonstration, nor does CMS have authority to ‘‘make up’’ for the beneficiary’s liability by paying 100 percent of the Part B charges or allowed amounts to hospitals. For beneficiaries enrolled in Part B, we understand that the issue of whether hospitals are required to bill the E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 beneficiaries for their Part B liabilities is governed by the beneficiary inducement and anti-kickback laws and, therefore, falls under the jurisdiction of the Office of the Inspector General (OIG). We refer the commenters to the OIG regarding whether hospitals are required to bill these beneficiaries for their Part B liabilities. For beneficiaries not enrolled in Part B, hospitals should bill Part B to ensure the claim enters the coordination of benefits cross-over process in the event the beneficiary has coverage under a supplemental or secondary insurance plan (we refer readers to section XI.B.10. of the preamble of this final rule). Comment: A few commenters noted that beneficiary liability amounts under Part B that hospitals are unable to recover will become bad debt under Medicare’s payment rules. Response: We agree that if a hospital is unable to recover beneficiary liability payments for covered Part B services, those amounts may become hospital Medicare bad debt. The hospital may claim uncollected copayments for covered Part B inpatient services as bad debt in accordance with the provisions of 42 CFR 413.89. 7. Applicable Beneficiary Liability: Skilled Nursing Facility Services As discussed in section XI.A. of the preamble of this final rule, the increased use of hospital observation services has a number of implications in terms of a beneficiary’s financial liability, one of which involves the ability to qualify for Part A coverage of posthospital SNF care. SNF coverage is affected because a hospital’s observation services are considered outpatient rather than inpatient services, and section 1861(i) of the Act requires a qualifying 3-day inpatient hospital stay for Part A SNF coverage. The importance of a beneficiary’s status as a hospital ‘‘inpatient’’ in terms of qualifying for posthospital SNF coverage has also generated concerns about the need to clarify any potential implications that the inpatient rebilling policy may have in this area. The following discussion presents a summary of the comments that we received on this topic, and our responses. Comment: Several commenters expressed concern about the financial liability to patients or SNFs in cases where a patient had a 3-day qualifying inpatient stay and transferred to the SNF for Part A services, but the qualifying inpatient stay was subsequently denied and determined to be not medically necessary. Commenters suggested that there has been little direction from CMS regarding VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 the financial liability to the beneficiary or the SNF if the qualifying Part A inpatient stay was determined to be not medically necessary. Response: The Part B inpatient billing policy finalized in this rule would not change CMS’ longstanding policy regarding the financial liability of the beneficiary or the SNF in situations where the inpatient hospital stay is subsequently denied after SNF admission. Under this policy, the 3-day inpatient hospital stay which qualifies a beneficiary for ‘‘posthospital’’ SNF benefits need not actually be Medicarecovered, as long as it is medically necessary. In this particular context, section 20.1 of the Medicare Benefit Policy Manual, Chapter 8 (available online at https://www.cms.gov/ Regulations-and-Guidance/Guidance/ Manuals/Downloads/bp102c08.pdf), includes the following in its discussion of the SNF benefit’s qualifying inpatient hospital stay requirement: ‘‘. . . the qualifying hospital stay must have been medically necessary. Medical necessity will generally be presumed to exist. When the facts that come to the intermediary’s attention during the course of its normal claims review process indicate that the hospitalization may not have been medically necessary, it will fully develop the case, checking with the attending physician and the hospital, as appropriate. The intermediary will rule the stay unnecessary only when hospitalization for 3 days represents a substantial departure from normal medical practice’’ (emphasis added). The ‘‘substantial departure from normal medical practice’’ language was developed specifically to target those rare situations where the 3-day stay is clearly unnecessary by any reasonable standard. For example, the MAC could determine that a hospital stay was medically unnecessary for purposes of qualifying for post-hospital SNF coverage in situations where the care is so clearly unnecessary that it appears that the patient was admitted to the hospital solely for the purpose of attempting to qualify the beneficiary inappropriately for ‘‘posthospital’’ SNF benefits. Thus, a beneficiary’s SNF coverage is not necessarily invalidated by a retroactive denial of the qualifying hospital stay, as long as the care provided during that hospital stay can still meet the relatively broad definition of medical necessity described above. Accordingly, the denial of the hospital stay itself would affect coverage of the related SNF stay only in those instances where it is further determined that ‘‘hospitalization for 3 days represents a PO 00000 Frm 00427 Fmt 4701 Sfmt 4700 50921 substantial departure from normal medical practice.’’ As discussed above, for purposes of qualifying for SNF coverage, an inpatient hospital stay that is retroactively denied after SNF admission could still meet the relatively broad definition of medical necessity set forth in the manual provision cited above. In addition, the status of the beneficiaries themselves does not change from inpatient to outpatient under the Part B inpatient billing policy. Therefore, even if the admission itself is determined to be not medically necessary under this policy, the beneficiary would still be considered a hospital inpatient for the duration of the stay—which, if it occurs for the appropriate duration, would comprise a ‘‘qualifying’’ hospital stay for SNF benefit purposes so long as the care provided during the stay meets the broad definition of medical necessity described above. This is consistent with the applicable statutory language in section 1861(i) of the Act which, in defining ‘‘post-hospital’’ SNF services, requires the beneficiary to be a hospital ‘‘inpatient for not less than 3 consecutive days’’, and the implementing regulations at 42 CFR 409.30(a)(1), which require ‘‘medically necessary inpatient hospital . . . care’’. Comment: Commenters expressed concern that the proposed rule was not sufficient to reduce the trend toward more and longer observation stays and that increasing observation stays would continue to harm beneficiaries and prevent access to Medicare covered post-acute services. Commenters suggested that the best way to provide beneficiaries access to needed posthospital skilled nursing facility care is for CMS to count all days in observation toward the 3-day inpatient hospital stay requirement for Medicare covered posthospital SNF care. Commenters suggested either modifying or eliminating the 3-day requirement itself, or adjusting the definition of ‘‘inpatient’’ to include beneficiaries receiving observation services. Regarding the latter, one commenter cited the previous solicitation of public comment in the SNF PPS proposed rule for FY 2006 on the feasibility of making such an adjustment in the inpatient definition (70 FR 29099) as evidence that we have the authority to make this kind of modification administratively. While acknowledging that we ultimately declined to adopt this approach in the FY 2006 SNF PPS final rule (70 FR 45050), the commenter noted CMS’ expressed intention to continue to review this issue, and urged CMS to E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50922 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations consider once again the feasibility of taking such an action now. Response: While we appreciate commenters’ concerns regarding the trend toward more and longer observation stays and the impact of this on coverage of post-hospital SNF care, we believe that the policies finalized in this final rule regarding Part B inpatient billing and medical review of inpatient hospital admissions adequately address this issue. As reflected in the proposed rule, we share the concerns of commenters regarding the increases in the length of time that Medicare beneficiaries spend receiving observation services, and the proposed rule was intended to address those concerns. In the Part B Inpatient Billing proposed rule, and again in the IPPS proposed rule, we acknowledged concerns that hospitals appear to be responding to the financial risk of admitting Medicare beneficiaries for inpatient stays that might later be denied upon contractor review by electing to treat beneficiaries as outpatients receiving observation services, rather than admitting them as inpatients. As one step to address these concerns, we proposed revisions to Part B inpatient billing policy in the Part B Inpatient Billing proposed rule. To further address these concerns, in the FY 2014 IPPS/LTCH PPS proposed rule, we aimed to provide greater clarity regarding inpatient admission decisions and Medicare payment by, among other things, addressing medical review criteria for Medicare payment of inpatient admissions under Medicare Part A. We believe that the policies reflected in the proposed rules and adopted in this final rule appropriately address the concerns expressed by stakeholders by lowering the risk associated with inpatient stays and denials of inpatient stays. The commenters suggested other approaches to addressing the effect of extended observation stays on SNF coverage (that is, eliminating the SNF benefit’s qualifying 3-day hospital stay requirement, counting days spent in observation specifically toward meeting that requirement, or adjusting the definition of inpatient itself to include beneficiaries receiving observation services). We have previously discussed similar suggestions in the FY 2006 SNF PPS proposed rule (70 FR 29098–29100) and final rule (70 FR 45050–45051), and we continue to have the same concerns with those approaches as we expressed in the FY 2006 proposed and final rules. Moreover, as discussed above, we believe that the policies finalized in this FY 2014 IPPS final rule regarding Part B inpatient billing and medical review VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 of inpatient hospital admissions appropriately address the issue of extended observation stays. 8. Time Limits for Filing Claims Sections 1814(a)(1), 1835(a), and 1842(b)(3)(B) of the Act establish time limits for filing Medicare Part A and B claims. The regulations at 42 CFR 424.44 implement those sections of the Act and require that all claims for services furnished on or after January 1, 2010, be filed within 1-calendar year after the date of service unless an exception applies. In the November 29, 2010 final rule with comment period titled, ‘‘Medicare Program; Payment Policies under the Physician Fee Schedule and Other Revisions to Part B for CY 2011’’ (75 FR 73627) in which § 424.44 was modified, commenters requested that we create an exception to the time limits for filing claims so that hospitals are permitted to file inpatient Part B only claims for any inpatient cases that are retrospectively reviewed by a Medicare Recovery Audit Contractor (RAC) or other review entity and determined not to be medically necessary in an inpatient setting. Commenters requested that an exception be created at § 424.44(b) to allow for the billing of Part B inpatient and Part B outpatient claims when there is no coverage under Part A for a hospital stay. We stated in the Part B Inpatient Billing proposed rule (78 FR 16639 through 16640) that for the reasons discussed in the November 29, 2010 final rule, we declined to create such an exception and we continued to believe that was the correct decision. Under CMS Ruling 1455–R (78 FR 16614), we adopted (although we did not endorse) the views of the Medicare Appeals Council and many ALJs that subsequent Part B rebilling is allowed after the timely filing period has expired. The Ruling states that subsequent Part B inpatient and Part B outpatient claims that are filed later than 1-calendar year after the date of service are not to be rejected as untimely by Medicare’s claims processing system as long as the original corresponding Part A inpatient claim was filed timely in accordance with 42 CFR 424.44. We stated that the Ruling would remain in effect until the effective date of final regulations that result from the proposed rule. At that time, we stated that this final rule would supersede the Ruling’s treatment of claims that providers file later than 1calendar year after the date of service. Accordingly, in the Part B Inpatient Billing proposed rule (78 FR 16639), we proposed a new § 414.5(b) that would require that claims for billed Part B PO 00000 Frm 00428 Fmt 4701 Sfmt 4700 inpatient services be rejected as untimely when those Part B claims are filed later than 1-calendar year after the date of service. Our proposal would treat these Part B claims as new claims subject to the timely filing requirements, instead of as adjustment claims. We stated that this is consistent with longstanding Medicare policy because an adjustment claim supplements information on a claim that was previously submitted without changing the fundamental nature of that original claim. In these Part B claim situations, however, the fundamental nature of the originally filed claim is changed completely (from a Part A claim to a Part B claim). Therefore, in order to remove any ambiguity, we stated that if the rule was finalized as proposed, billed Part B inpatient claims would be rejected as untimely when those Part B claims are filed later than 1-calendar year after the date of service. Moreover, because it is the responsibility of providers to correctly submit claims to Medicare by coding services appropriately, we stated that it is important to note that the exception located at § 424.44(b)(1), which extends the time for filing a claim if failure to meet the deadline was caused by error or misrepresentation of an employee, contractor, or agent of HHS (commonly referred to as the ‘‘administrative error’’ exception) would not apply in situations where a provider bills the originally submitted Part A claim incorrectly. Finally, we reminded providers that, in accordance with 42 CFR 405.926(n), determinations that a provider failed to submit a claim timely are not appealable. Over 300 commenters on the Part B Inpatient Billing proposed rule objected to the proposal that claims for billed Part B inpatient services would be rejected as untimely when those Part B claims are filed later than 1-calendar year after the date of service. One commenter supported the proposal. Comment: A majority of the commenters proposed that CMS waive, remove, eliminate, or not apply the 1calendar year time limit to file claims to billed Part B services. Commenters stated that it was both unlawful and fundamentally unfair to apply the 1calendar year time limit to file claims to billed Part B services in situations when a Medicare contractor denies a Part A claim on the ground that although the medical care was reasonable and necessary, the inpatient admission was not. Commenters stated that applying the 1-calendar year time limit to file claims to billed Part B services was particularly troubling because RACs may audit claims for services with dates E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations of service within the prior 3 years, and claims typically reviewed by the RAC are more than 1 year old. In addition, commenters stated that there is no time limit by which a RAC must complete its review of claims requested for review. Commenters contended that the 1calendar year time limit to file Part B services could easily expire before the RAC review of the Part A inpatient claim is completed or before it has even begun. Commenters believed the proposed rule’s time limit to file claims leaves few, if any, of a hospital’s denied Part A claims eligible for billing. Therefore, commenters proposed that CMS waive, remove, eliminate, or not apply the 1-calendar year time limit to claims for medically necessary Part B inpatient services that were furnished by hospitals. Response: Although we agree that RACs may audit claims with dates of service within the prior 3 years, we disagree with the commenters that there is no time limit by which a RAC must complete its review of claims requested for review. Medicare requires RACs to complete their complex reviews of claims within 60 days from receipt of the medical record documentation. We also disagree that it is unlawful and fundamentally unfair to apply the 1-calendar year time limit to file claims to billed Part B services in situations when a Medicare contractor denies a Part A claim on the ground that although the medical care was reasonable and necessary, the inpatient admission was not. Sections 1835(a) and 1842(b)(3)(B) of the Act require that all Part B claims for services be filed within 1-calendar year after the date of service. Although we have the ability to create exceptions to the 1-calendar year time limit to file claims, the existing exceptions at § 424.44(b)(1)–(4) were created because providers, suppliers, and beneficiaries, through no fault of their own, would be disadvantaged by strict application of the 1-calendar year timely filing requirements. Hospitals in this type of billing situation (unlike in the situations addressed by the existing exceptions) have the ability to avoid being disadvantaged by the 1-calendar year time limit to file claims and by any subsequent RAC audit if they bill correctly by following Medicare’s guidelines for hospital inpatient admissions. Furthermore, we disagree that it is unlawful and fundamentally unfair to apply the 1-calendar year time limit to file claims for Part B services, because hospitals are responsible for determining whether the submission of a Part A or Part B claim is appropriate within the applicable timeframe. In VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 order to assist hospitals in making those claim determinations and to make the billing process as fair as possible for hospitals, we revised the hospital inpatient admissions guidelines and external medical review criteria for those admissions. In section XI.C. of the preamble of this final rule, we clarify those guidelines and believe this guidance provides additional clarity. The guidance and review criteria should reduce the volume of this type of Part A claim denial and the need for hospitals to rebill under Part B. Therefore, because hospitals are responsible for correctly submitting claims to Medicare by coding services in accordance with the hospital inpatient admission guidelines and because sections 1835(a) and 1842(b)(3)(B) of the Act require that all Part B claims for services be filed within 1-calendar year after the date of service, we were not persuaded to modify the rule based on these comments. Comment: A number of commenters proposed that the time limit to file claims requirements should be equal to, comparable to, or aligned with, the RAC review timeframes. Commenters stated that it was unreasonable that RACs have an audit review period of 3 years from the date of service, and hospitals only have 1 calendar year from the date of service to bill medically necessary Part B services that were furnished. Commenters stated that it is impossible for a hospital to file a Part B claim within 1 calendar year of the date of service when the Part A claim denial occurs after the timely filing period expired. Response: We disagree with the commenters that it is unreasonable that Medicare does not align the RAC audit review time periods with the 1-calendar year time limit to file claims. Sections 1835(a) and 1842(b)(3)(B) of the Act require that all Part B claims for services be filed within 1-calendar year after the date of service. In addition, section 1893(h)(4)(B) of the Act indicates that recovery and audit activities (with respect to Medicare payments) may be conducted retrospectively for a period of not more than 4 fiscal years prior to the current fiscal year. Medicare has instructed RACs not to attempt to identify any overpayment or underpayment more than 3 years past the date of the initial determination made on the claim. Although we have the ability to create exceptions to the 1calendar year time limit to file claims, the existing exceptions at § 424.44(b)(1) through (b)(4) were created because providers, suppliers, and beneficiaries through no fault of their own would be disadvantaged by strict application of PO 00000 Frm 00429 Fmt 4701 Sfmt 4700 50923 the 1-calendar year timely filing requirements. Hospitals in this type of billing situation (unlike in the situations addressed by the existing exceptions) have the ability to avoid being disadvantaged by the 1-calendar year time limit to file claims and by any subsequent RAC audit if they bill correctly by following Medicare’s guidelines for hospital inpatient admissions. In order to assist hospitals in making those claim determinations and to make the billing process as fair as possible for hospitals, we revised the hospital inpatient admissions guidelines and external medical review criteria for those admissions. In section XI.C. of the preamble of this final rule, we clarify those guidelines and believe this guidance provides additional clarity. The guidance and review criteria should reduce the volume of this type of Part A claim denial and the need for hospitals to rebill under Part B. Therefore, we are not reducing the 4fiscal year timeframe further or creating a new exception to the 1-calendar year time limit to file claims for this type of billing situation, and are not modifying the rule based on these comments. Comment: Several commenters stated that finalizing the proposed rule with a 1-calendar year time limit to file claims will not lessen the steady stream of hospital appeals. The commenters stated that hospitals will continue to fully appeal to all levels any Part A claim denials because of hospitals’ inability to meet the 1-calendar year time limit to file Part B claims. Response: We believe the revised guidelines for hospital inpatient admissions and external medical review criteria for those admissions published in section XI.C. of the preamble of this final rule are clear and should reduce the volume of Part A claim denials and appeals. We expect these guidelines to reduce the volume of Part A claim denials and subsequent appeals because these guidelines provide additional clarification regarding the circumstances under which a beneficiary should be admitted as an inpatient and of the criteria that will be used during the medical review process. Although we believe our previous guidelines were clear, we believe the revised guidelines will promote greater shared or mutual understanding between hospitals, physicians, and Medicare’s medical review contractors. That is, the likelihood that hospitals or physicians will have a different understanding than Medicare’s medical review contractors of what constitutes an appropriate inpatient stay will be significantly reduced as a result of the E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50924 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations guidelines published in section XI.C. of the preamble of in this final rule. As a result, we anticipate a significant reduction in the volume of Part A claim denials and appeals. Therefore, we are not modifying our proposal based on these comments. Comment: A number of commenters proposed that CMS permanently adopt the interim time limit to file claims policy in the CMS 1455–R Ruling. The commenters believed that hospitals should have 180 days from the date of receipt of the final or binding unfavorable appeal decision (or subsequent dismissal notice) of the denied Part A claim to submit a Part B claim. Response: In the CMS 1455–R Ruling, we stated that until final regulations could be issued, we were temporarily adopting, but not endorsing, the views of the Medicare Appeals Council and many ALJs that subsequent Part B billing is supported by concepts of adjustment billing. However, as we indicated in the proposed rule, consistent with longstanding Medicare policy, an adjustment claim supplements information on a previously submitted claim without changing the fundamental nature of the original claim. The concept of adjustment billing employed by the Medicare Appeals Council and many ALJs, and supported by the commenters, is inconsistent with longstanding Medicare policy because, in these situations, the nature of the original claim is fundamentally changed from a Part A claim to a Part B claim. When this type of Part A claim denial occurs and a hospital subsequently submits a Part B claim for the denied services, the hospital is submitting a new Part B claim (it is not adjusting the original Part A claim). Because hospitals are responsible for determining whether submission of a Part A or Part B claim is appropriate within the applicable timeframe, permanently adopting the concept of adjustment billing used in the CMS 1455–R Ruling would allow hospitals to avoid the responsibility of correctly submitting claims to Medicare. Therefore, we were not persuaded to modify the rule based on these comments. However, because the Medicare Appeals Council and many ALJs did not consider our longstanding policy (that Part A claims cannot be adjusted into Part B claims) to be clear and because many commenters considered our timely filing proposal in the proposed rule to be unfair, we will permit hospitals to follow the Part B billing timeframes established in the Ruling after the effective date of this rule, VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 provided (1) the Part A claim denial was one to which the Ruling originally applied; or (2) the Part A inpatient claims has a date of admission before October 1, 2013, and is denied after September 30, 2013 on the grounds that although the medical care was reasonable and necessary, the inpatient admission was not. We believe our decision is fair to all relevant stakeholders. Comment: A number of commenters proposed that hospitals should be able to obtain full Part B payment for billed medically necessary Part B services through an adjustment claim process. The commenters stated that, under existing Medicare procedures, hospitals can make changes to a filed claim using an adjustment bill process, and those adjustment bills are not subject to the time limit to file claims restrictions. In addition, the commenters stated that ALJs and the Departmental Appeals Board (DAB) agreed that the principles of administrative finality supersede timely filing rules in this context and these principles permit an adjustment to be made to the Part A claim. The commenters stated that the services for which hospitals are seeking reimbursement are the same services which were originally submitted for payment. The commenters stated that hospitals are willing to provide the information necessary to obtain full Part B payment through an adjustment process, and this process can be designed by Medicare to fit the needs of this particular situation. Therefore, the commenters proposed that hospitals should be permitted to obtain full Part B payment for billed medically necessary Part B services through an adjustment claim process. Response: As we stated in the proposed rule, consistent with longstanding Medicare policy, an adjustment claim supplements information on a previously submitted claim without changing the fundamental nature of the original claim. However, under the concept of adjustment billing advocated by the commenters, the nature of the original claim is fundamentally changed when the claim is changed from a Part A claim to a Part B claim because Part A and Part B have different legal structures, regulations, payment methodologies, claims processing systems, and coding structures. In addition, because hospitals are responsible for determining whether submission of a Part A or Part B claim is appropriate within the applicable timeframe, permanently adopting the concept of adjustment billing so that hospitals can change claims from Part A claims to Part PO 00000 Frm 00430 Fmt 4701 Sfmt 4700 B claims would allow hospitals to avoid their responsibility to correctly submit claims to Medicare. Therefore, because Part A claims cannot be adjusted into Part B claims and hospitals are responsible for determining whether submission of a Part A or Part B claim is appropriate within the applicable timeframe, we were not persuaded to modify the rule based on these comments. Comment: A few commenters proposed that CMS use the existing authority under the Affordable Care Act to create an exception to the time limits for filing claims so that hospitals and physicians are permitted to file Part B claims when Part A claims are retrospectively reviewed by RACs and determined not to be reasonable and necessary in an inpatient setting. The commenters proposed, for example, that hospitals be permitted to file claims for Part B services no later than 30 days after the date of the final appeal decision, or be permitted to file Part B claims 180 days after the date the contractor communicates its decision that the Part A inpatient admission was denied, or that Medicare should reset the timely filing period to allow the submission of Part B claims following an appeal of a denied claim that was reviewed by a RAC or ALJ determination. Response: Although we have the ability to create exceptions to the 1calendar year time limit to file claims, the existing exceptions at § 424.44(b)(1) through (b)(4) were created because providers, suppliers, and beneficiaries, through no fault of their own, would be disadvantaged by strict application of the 1-calendar year timely filing requirements. Hospitals in this type of billing situation (unlike in the situations addressed by the existing exceptions) have the ability to avoid being disadvantaged by the 1-calendar year time limit to file claims and by RAC audits if they bill correctly by following Medicare’s guidelines for hospital inpatient admissions. Furthermore, hospitals are responsible for determining whether submission of a Part A or Part B claim is appropriate within the applicable timeframe. Therefore, we are not modifying the rule based on these comments. Comment: Many commenters proposed that CMS change the time limit to file a Part B claim from 1calendar year after the date of service to 1 year or 120 days from the date of denial of the Part A claim, or if the hospital appeals, 120 or 180 days after the unfavorable decision. The commenters stated that this proposal matches the current redetermination E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations and reconsideration filing timeframes and allows hospitals to bill and be paid for medically necessary care that was incorrectly billed under Part A. Response: Sections 1835(a) and 1842(b)(3)(B) of the Act require that all Part B claims for services be filed within 1 calendar year after the date of service. Because the law requires Part B claims be filed within 1-calendar year after the date of service, we do not have the legal authority to change that timeframe to the date of denial of the Part A claim or from the date of a final or binding appeal decision as proposed by the commenters. Although we have the ability to create exceptions to the 1-calendar year time limit to file claims, the existing exceptions at § 424.44(b)(1) through (b)(4) were created because providers, suppliers, and beneficiaries, through no fault of their own, would be disadvantaged by strict application of the 1-calendar year timely filing requirements. Hospitals in this type of billing situation (unlike in the situations addressed by the existing exceptions) have the ability to avoid being disadvantaged by the 1-calendar year time limit to file claims and by RAC audits if they bill correctly by following Medicare’s guidelines for hospital inpatient admissions. Therefore, we are not modifying the rule based on these comments. Comment: Several commenters proposed that the time limit to file claims be based on the date of any decision point in the review or appeal process of the Part A claim. The commenters proposed, for example, that a 120 or 180 day time limit to file a Part B claim could start on the date the Part A claim is denied, or a 1 year time limit to file a Part B claim could start on the date the final appeal was adjudicated. Commenters stated that because Recovery Auditors (formerly known as RACs) and other contractors have a longer recovery and audit review period, contractors have an incentive to review older claims so there is no possibility to bill the Part B claims within the timely filing period. Response: We agree that the law permits Recovery Auditors to identify any overpayment or underpayment more than 1-calendar year past the date of the initial determination made on the claim. Pursuant to section 1893(h)(4)(B) of the Act, Recovery Auditors have the authority to conduct recovery and audit activities (with respect to Medicare payments) retrospectively for a period of not more than 4 fiscal years prior to the current fiscal year. Medicare, though, has instructed Recovery Auditors not to attempt to identify any overpayment or VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 underpayment more than 3 years past the date of the initial determination made on the claim, and Recovery Auditors currently select claims with the highest probability of error within the 3-year span. We acknowledge provider concern and are also releasing revised admission guidance and medical review criteria. This provides physicians with a clear benchmark for determining the appropriateness of an inpatient admission. We note that a significant number of the claims submitted improperly, and subsequently reviewed and recouped, are for elective or minor surgical procedures. We expect the majority of such improper payments to be resolved with the implementation of the 2-midnight instruction. In addition, review contractors are instructed in the final rule that inpatient hospital claims with lengths of stay greater than 2 midnights after the formal admission following the order will be presumed generally appropriate for Part A payment and will not be the focus of medical review efforts absent evidence of systematic gaming, abuse, or delays in the provision of care in an attempt to qualify for the 2-midnight presumption. Moreover, sections 1835(a) and 1842(b)(3)(B) of the Act require that all Part B claims for services be filed within 1-calendar year after the date of service. Because the law requires Part B claims be filed within 1-calendar year after the date of service, we do not have the legal authority to change that timeframe to the date of any decision point in the review or appeal process of the Part A claim. Although we have the ability to create exceptions to the 1-calendar year time limit to file claims, the existing exceptions at § 424.44(b)(1)–(4) were created because providers, suppliers, and beneficiaries, through no fault of their own, would be disadvantaged by strict application of the 1-calendar year timely filing requirements. Hospitals in this type of billing situation (unlike in the situations addressed by the existing exceptions) have the ability to avoid being disadvantaged by the 1-calendar year time limit to file claims and by Recovery Auditor audits if they bill correctly by following Medicare’s guidelines for hospital inpatient admissions. Therefore, we are not modifying the rule based on these comments. Comment: A few commenters stated that hospitals have the option to proceed through a 5-stage appeal process and that if the full period of time is taken for each level of appeal, the appeals process for the denied Part A claim can take more than 2 years. PO 00000 Frm 00431 Fmt 4701 Sfmt 4700 50925 Therefore, the commenters proposed that the time limit to file claims not apply to the billed Part B claim if the Part A claim was filed timely and the Part A claim appeal process was initiated timely. Response: Hospitals are responsible for determining whether submission of a Part A or Part B claim is appropriate within the applicable timeframe. In order to assist hospitals in making those claim determinations and to make the billing process as fair as possible for hospitals, we revised the hospital inpatient admissions guidelines and external medical review criteria for those admissions. We clarify in section XI.C. of the preamble of this final rule those guidelines and believe this guidance provides additional clarity. Although we have the ability to create exceptions to the 1-calendar year time limit to file claims, the existing exceptions at § 424.44(b)(1) through (b)(4) were created because providers, suppliers, and beneficiaries, through no fault of their own, would be disadvantaged by strict application of the 1-calendar year timely filing requirements. Hospitals in this type of billing situation (unlike in the situations addressed by the existing exceptions) have the ability to avoid being disadvantaged by the 1-calendar year time limit to file claims and by RAC audits if they bill correctly by following Medicare’s guidelines for hospital inpatient admissions. Comment: Commenters stated that because Medicare allowed rebilling under the RAC demonstration program and the Part A to B demonstration program and because ALJ rulings indicate that Medicare’s contractors have the authority to address the overall claim at the time of reopening, Medicare has acknowledged that rebilling post denial or post appeal is feasible. Several commenters proposed that CMS consider the denied Part A claim as a reopened claim and that the only time constraint should be based on the appeal timeline or be 1 year from the date of reopening. Response: We temporarily permitted billing of claims to Medicare Part B beyond 1-calendar year after the date of service in the RAC demonstration program and the Part A to B demonstration program because those programs were limited in scope and experimental in nature. Those programs were used to gather information regarding the feasibility and potential usefulness of such billing practices. They are not precedent setting Medicare billing programs. Longstanding Medicare policy prohibits such billing because hospitals are responsible for E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50926 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations determining whether submission of a Part A or Part B claim is appropriate within the applicable timeframe. In addition, Part A claims cannot be reopened and ‘‘adjusted’’ into Part B claims because the Medicare claims processing systems changes that would be required in order to implement those types of adjustments (from Part A to Part B) are impossible for Medicare’s systems maintainers to implement and sustain. If a Part A claim was reopened and subsequently rebilled or ‘‘adjusted’’ so that the Part B services are billed on that reopened claim, the nature of the original claim fundamentally changes from a Part A claim to a Part B claim. Besides being contrary to longstanding Medicare policy, it is impossible for Medicare to establish and sustain a claim processing system that changes Part A claims into Part B claims because Parts A and B have different legal structures, regulations, payment methodologies, and coding structures. Therefore, we were not persuaded to modify the rule based on these comments. Comment: Several commenters proposed that the time limit to file claims not apply to rebilled Part B claims based on the concept of equitable tolling. The commenters stated that courts have determined that the concept of equitable tolling applies when a party has been induced or even tricked into allowing a filing deadline to pass. The commenters stated hospitals file tens of thousands of claims each year, and it would be impossible for a hospital to determine which of these claims, even though originally paid by a Medicare contractor, will be singled out later by a RAC (up to 3 years after the date of service) and denied. The commenters believed hospitals are essentially being induced into missing the timely filing deadline for the Part B claims and, therefore, the commenters believed equitable tolling should apply to allow hospitals to bill the Part B claims. Response: The existing exceptions at § 424.44(b)(1) through (b)(4) were created because providers, suppliers, and beneficiaries, through no fault of their own, would be disadvantaged by strict application of the 1-calendar year time limit to file claims. Hospitals in this type of billing situation (unlike in the situations addressed by the existing exceptions) have the ability to avoid being disadvantaged by the 1-calendar year time limit to file claims and by RAC audits if they bill correctly by following Medicare’s guidelines for hospital inpatient admissions. We disagree that hospitals are being induced or tricked into missing the 1calendar year time limit to file Part B VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 claims because hospitals are responsible for determining whether the submission of a Part A or Part B claim is appropriate within the applicable timeframe. Hospitals make Part A or Part B claim determinations by themselves; we do not make those determinations for hospitals nor do we induce or trick hospitals into filing Part A claims. We assist hospitals in making claim determinations and make the billing process as fair as possible by providing hospitals with clear hospital inpatient admission guidelines and external medical review criteria for those admissions. Although we believe our previous guidelines were clear, we believe the revised guidelines presented in section XI.C. of the preamble of this final rule will promote greater shared or mutual understanding between hospitals, physicians, and Medicare’s medical review contractors. That is, the likelihood that hospitals or physicians will have a different understanding than Medicare’s medical review contractors of what constitutes an appropriate inpatient stay will be significantly reduced as a result of these revised guidelines. As a result, we anticipate a significant reduction in the volume of Part A claim denials and appeals. Therefore, we are not modifying the rule based on these comments. Comment: Several commenters stated that many Medicare contractors are not able to properly acknowledge receipt of a hospital’s Part A claim appeal withdrawal and are not ready to accept Part B claims pursuant to the interim policy in Ruling CMS–1455–R. The commenters proposed that the time limits to file claims not be applied to any Part A claim appeal a hospital withdraws prior to implementation of this final rule. The commenters believed that all claims with a date of service prior to the effective date of the final rule should be governed by the policies in Ruling CMS–1455–R, regardless of whether any administrative proceedings concerning such claims take place after the effective date of the final rule. Another commenter asked whether a hospital that withdraws a Part A claim appeal while the interim policy in the Ruling is in effect, but the Medicare contractor does not respond until after the effective date of the final rule, will be able to bill under Part B for that claim. Another commenter asked whether a hospital that withdraws a Part A claim appeal and the Medicare contractor responds while the interim policy in the Ruling is still in effect, have to bill the Part B claim prior to the effective date of the final rule. Another commenter asked whether a Part A PO 00000 Frm 00432 Fmt 4701 Sfmt 4700 claim that is denied while the interim policy in the Ruling is in effect and the hospital decides to bill under Part B for that claim has to be filed before the effective date of the final rule. Another commenter asked whether a hospital can withdraw an appeal of the Part A claim after the effective date of the final rule if the Part A claim was denied while the interim policy in the Ruling was in effect. Another commenter asked whether a Part B claim that was submitted while the interim policy in the Ruling was in effect, but was not adjudicated by the Medicare contractor before the effective date of this final rule, will be processed in accordance with the interim policy of the Ruling. Response: Because the Medicare Appeals Council and many ALJs did not consider our longstanding policy (that Part A claims cannot be adjusted into Part B claims) to be clear and because many commenters considered our timely filing proposal in the proposed rule to be unfair, we will permit hospitals to follow the Part B billing timeframes established in the Ruling after the effective date of this rule, provided (1) the Part A claim denial was one to which the Ruling originally applied; or (2) the Part A inpatient claims has a date of admission before October 1, 2013, and is denied after September 30, 2013 on the grounds that although the medical care was reasonable and necessary, the inpatient admission was not. We believe that this decision addresses the commenters’ concerns and that our decision is fair to all relevant stakeholders. Comment: Two commenters proposed that the 1-calendar year time limit to file claims should apply in situations where the provider’s self-audit results in submitting a Part B claim after a Part A claim was initially submitted. Response: As stated above, hospitals are responsible for determining whether submission of a Part A or Part B claim is appropriate within the applicable timeframe, and hospitals may self-audit and correct this type of Part A billing error. If a hospital self-audits and discovers that it mistakenly filed (and received payment for) a Part A claim, the hospital must return that Part A payment (including refunding any Part A cost sharing amounts collected from the beneficiary or from a third party on behalf of the beneficiary) and may file (and receive payment for) the Part B claim as long as that Part B claim is filed within 1-calendar year after the date of service. It is unnecessary to modify the rule based on these comments because the comments are consistent with the proposed rule. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Comment: One commenter stated that CMS should coordinate the time limit to file claims with Medigap plans timely filing requirements. Response: Section 1882(c)(3)(A) of the Act obligates a Medigap plan to make a payment determination on the basis of the information contained in Medicare’s electronic notice to the Medigap plan. We believe this requirement overrides any timely filing requirement that a Medigap plan may have and obligates the Medigap plan to make payment when a beneficiary incurs a new costsharing obligation (for example, when a hospital submits a new Part B claim that is processed and paid by Medicare). Therefore, we are not modifying the final rule based on this comment. Comment: One commenter proposed that claims for Part B inpatient services be rejected as untimely when those Part B claims are filed later than 1 calendar year after the date of service, the date of Part A claim denial, or the date of the binding unfavorable decision on appeal of a Part A denied claim, whichever is longer. Response: Sections 1835(a) and 1842(b)(3)(B) of the Act require that all Part B claims for services be filed within 1-calendar year after the date of service. Because the Act requires Part B claims be filed within 1-calendar year after the date of service, we do not have the legal authority to change that timeframe to the various timeframes suggested by the commenter. Although we have the ability to create exceptions to the 1-calendar year time limit to file claims, the existing exceptions at § 424.44(b)(1) through (b)(4) were created because providers, suppliers, and beneficiaries, through no fault of their own, would be disadvantaged by strict application of the 1-calendar year timely filing requirements. Hospitals in this type of billing situation (unlike in the situations addressed by the existing exceptions) have the ability to avoid being disadvantaged by the 1-calendar year time limit to file claims and by RAC audits if they bill correctly by following Medicare’s guidelines for hospital inpatient admissions. Therefore, we are not modifying the rule based on this comment. Comment: One commenter supported the proposed rule. Response: We appreciate the commenter’s support. In summary, although we have the ability to create exceptions to the 1calendar year time limit to file claims, the existing exceptions at § 424.44(b)(1)–(4) were created because providers, suppliers, and beneficiaries, through no fault of their own, would be VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 disadvantaged by strict application of the 1-calendar year timely filing requirements. Hospitals in this type of billing situation (unlike in the situations addressed by the existing exceptions) have the ability to avoid being disadvantaged by the 1-calendar year time limit to file claims and by RAC audits if they bill correctly by following Medicare’s guidelines for hospital inpatient admissions. In order to assist hospitals in making those claim determinations and to make the billing process as fair as possible for hospitals, we revised the hospital inpatient admissions guidelines and external medical review criteria for those admissions. In section XI.C. of the preamble of this final rule, we clarify those guidelines and believe this guidance provides additional clarity. The guidance and review criteria should reduce the volume of this type of Part A claim denial and the need for hospitals to rebill under Part B. Therefore, we are not reducing the 4fiscal year recovery and audit timeframe further or creating a new exception to the 1-calendar year time limit to file claims for this type of billing situation, and are not modifying the rule. We are finalizing the regulatory text of new § 414.5(c) as proposed. (This text was proposed as § 414.5(b) but has been redesignated as § 414.5(c) in this final rule.) However, we are modifying what we stated in the preamble of the proposed rule regarding the applicability of the CMS–1455–R Ruling and this final rule to certain situations. Specifically, hospitals are permitted to follow the Part B billing timeframes established in the CMS–1455–R Ruling regarding appeals and the submission of Part B claims after the effective date of the final rule, provided (1) the Part A inpatient claim denial was one to which the Ruling originally applied; or (2) the Part A inpatient claim has a date of admission before October 1, 2013 (the effective date of this final rule), and is denied after September 30, 2013, on the grounds that the medical care was reasonable and necessary, but the inpatient admission was not. Therefore, we are finalizing new § 414.5(c), but we will continue to apply the Ruling to the situations described above. 9. Appeals Procedures As explained in the Part B Inpatient Billing proposed rule (78 FR 16640), and in CMS Ruling 1455–R, issued concurrently with the proposed rule (78 FR 16614), if a hospital is dissatisfied with an initial or revised determination by a Medicare contractor to deny a Part A claim for an inpatient admission as not reasonable and necessary, the PO 00000 Frm 00433 Fmt 4701 Sfmt 4700 50927 hospital may either submit Part B inpatient or outpatient claims (consistent with this proposed rule) or file a request for appeal of the denied Part A claim in accordance with the procedures in 42 CFR Part 405, Subpart I. In order to prevent duplicate billing and payment, a hospital may not have simultaneous requests for payment for the same services provided to a single beneficiary on the same dates of service (IOM Pub. 100–4, Chapter 1, section 120). This includes requests for payment under both Medicare Part A and Part B. Thus, we explained that if a hospital chooses to submit a Part B claim for payment following the denial of an inpatient admission on a Part A claim, the hospital cannot also maintain its request for payment for the same services on the Part A claim (including an appeal of the Part A claim). In this situation, before the hospital submits a Part B claim, it must ensure that there is no pending appeal request on the Part A claim. (A pending appeal means an appeal for which there is no final or binding decision or dismissal.) We proposed that if the hospital has filed a Part A appeal, the appeal must be withdrawn, or the decision must be final or binding, before the Part B claim can be processed. If a hospital submits a Part B claim for payment without withdrawing its appeal request, the Part B claim would be denied as a duplicate. In addition, once a Part B claim is filed, there would be no further appeal rights available with respect to the Part A claim. However, the hospital and beneficiary would have appeal rights with respect to an initial determination made on the Part B claim under existing policies set forth at 42 CFR Part 405, Subpart I. We also proposed that if a beneficiary files an appeal of a Part A inpatient admission denial, a hospital cannot utilize the Part B billing process proposed in this rule to extinguish a beneficiary’s appeal rights. Therefore, the hospital’s submission of a Part B claim would not affect a beneficiary’s pending appeal or right to appeal the Part A claim. If a beneficiary has a pending Part A appeal for an inpatient admission denial, any claims rebilled under Part B by the hospital would be denied as duplicates by the Medicare contractor. As we explained in the Part B Inpatient Billing proposed rule (78 FR 16640), in order for the Part B claim(s) to be processed, the Part A appeal must be final or binding, or dismissed following a request for withdrawal. For example, if a beneficiary receives an unfavorable reconsideration on a Part A inpatient claim and does not file a E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50928 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations timely request for hearing before an administrative law judge (ALJ), the reconsideration decision becomes binding. At that point, the hospital could submit a Part B claim, provided it either is a claim controlled by the provisions of CMS Ruling 1455–R, or it is a claim that has been filed within 12 months from the date of service (proposed 42 CFR 414.5(b) and 42 CFR 424.44). We also explained in the proposed rule that beneficiaries who are not enrolled in Medicare Part B may be liable for the cost of items and services associated with a hospital stay when billed under the Part B billing process proposed in the proposed rule. We believe that some beneficiaries who are not enrolled in Medicare Part B may have other health insurance that might pay for some or all of the Part B items and services. If a beneficiary is not enrolled in Medicare Part B, we encouraged hospitals to submit a Part B claim to Medicare before billing the beneficiary so that, when appropriate, the beneficiary’s supplemental insurer receives the claim. In the proposed rule and in CMS Ruling 1455–R, we explained the scope of review of an appeals adjudicator in the context of our proposed Part B billing policy. As noted in CMS Ruling 1455–R, a large number of recent appeal decisions for Part A inpatient admission claim denials by Medicare review contractors affirmed the Part A inpatient admission denial, but ordered that payment be issued as if services were provided at the outpatient or ‘‘observation’’ level of care under Medicare Part B. These decisions ordered payment under Part B (or consideration of payment for services furnished that the contractor determined to be covered and payable under Part B) even though a Part B claim had not been submitted for payment. We also explained that hospitals are solely responsible for submitting claims for items and services provided to beneficiaries and determining whether submission of a Part A or Part B claim is appropriate. Once a hospital submits a claim, the Medicare contractor makes an initial determination and determines any payable amount (42 CFR 405.904(a)(2)). Under existing Medicare policy, if such a determination is appealed, an appeals adjudicator’s scope of review is limited to the claim(s) that are before them on appeal, and such adjudicators may not order payment for items or services that have not yet been billed or have not yet received an initial determination. (We refer readers to sections 1869(a)(3)(B)(i), 1869(b)(1)(A), and 1869(c)(3)(B)(i) of the VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Act and 42 CFR 405.920, 405.940, 405.948, 405.954, 405.960, 405.968, 405.974, 405.1000, 405.1032, 405.1100, 405.1112, and 405.1128 of the regulations.) For example, if a hospital submits an appeal of a determination that a Part A inpatient admission was not reasonable and necessary, the only issue before the adjudicator is the propriety of the Part A claim, not an issue involving any potential Part B claim the hospital has not yet filed. In making a decision on that Part A claim, an appeals adjudicator may not develop information, or make a finding, with respect to a Part B claim that does not exist. Thus, under the billing processes described in the proposed rule, if a hospital appeals a Part A inpatient admission denial and receives a decision indicating that payment may not be made under Part A, appeals adjudicators may not order payment for items and services not yet billed under Part B. Rather, payment for items and services that may be covered under Part B may only be made in response to a Part B claim submitted by the hospital that is timely filed, as proposed under proposed 42 CFR 414.5(b) and 42 CFR 424.44. Comment: Many commenters expressed concerns about CMS’ clarification of the scope of review of an appeals adjudicator during appeals of Part A inpatient admission claim denials in the context of Part B billing, and requested that CMS remove the restriction. Many commenters characterized the clarification of the scope of review as a change or restriction on an adjudicator’s existing scope of review and commented that CMS does not have the authority to limit the scope of review. One commenter suggested that CMS conduct a comprehensive assessment of the impact of reducing adjudicator authority, specifically the ALJ, and publish such an assessment for comment before making any changes. Other commenters expressed concerns about the scope of review, asserting that it is only at the ALJ level where a fair and comprehensive review of the RAC’s denial takes place, that ALJs and other adjudicators should be able to order equitable remedies, and that favorable decisions issued by ALJs are accorded little or no precedential value by RACs because RACs deny substantially similar claims without regard to previous ALJ decisions. Response: As explained in the proposed rule and in CMS Ruling 1455– R, a large number of recent appeal decisions for Part A inpatient admission claim denials by Medicare review PO 00000 Frm 00434 Fmt 4701 Sfmt 4700 contractors have affirmed the Part A inpatient admission denial, but ordered that payment be issued as if services were provided at the outpatient or ‘‘observation’’ level of care under Medicare Part B. In these cases, appeals adjudicators made decisions with respect to payment, and in some cases, coverage, regarding services that are paid under Medicare Part B, even though a Part B claim had not been submitted by the provider. As we explained, hospitals are solely responsible for submitting claims for items and services provided to beneficiaries and determining whether submission of a Part A or Part B claim is appropriate. Following the submission of a claim by a hospital, the Medicare contractor makes an initial determination regarding coverage and determines any payable amount (42 CFR 405.904(a)(2)), and if that determination is appealed, appeals adjudicators make findings with respect to the contractor’s initial determination on the specific claim submitted by the hospital. We disagree with the commenters who characterized our explanation of the scope of review during appeals of Part A inpatient admission claim denials in the context of Part B billing as a restriction of an adjudicator’s existing scope of review. As explained in the proposed rule and in CMS Ruling 1455–R, existing Medicare policy provides that an appeals adjudicator’s scope of review is limited to the initial determination(s) made on the claim(s) that are before them on appeal (sections 1869(a)(3)(B)(i), 1869(b)(1)(A), and 1869(c)(3)(B)(i) of the Act; 42 CFR 405.920, 405.940, 405.948, 405.954, 405.960, 405.968, 405.974, 405.1000, 405.1032, 405.1100, 405.1112, and 405.1128 of the regulations). This policy has been in place since 2005 with the publication of the interim final rule with comment period, ‘‘Medicare Program: Changes to the Medicare Claims Appeals Procedures’’ (70 FR 11420).195 Adjudicators may not order payment for items or services that have not yet been billed or have not yet received an initial determination. As evidenced by the numerous decisions which reached issues of coverage and/ or payment for services under Part B 195 In addition, we note that prior to the 2005 amendments to the fee-for-service claims appeals process, an appeals adjudicator’s scope of review was similarly limited to the initial determination(s) made on the claim(s) before them on appeal. We refer readers to 42 CFR 405.715 (for Part A reconsiderations); 42 CFR 405.807(a) and 405.810 (for Part B review determinations); 42 CFR 405.821 (for Part B hearing officer hearings); 42 CFR 405.720 and 405.855 and 20 CFR 404.906(a) (for ALJ hearings); 20 CFR 404.967 (for Appeals Council review). E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations when no Part B claim was filed, we believe it is necessary to clarify that such findings are premature and, consistent with longstanding policy, can only be made following submission of a Part B claim by a hospital. As we explained in the proposed rule, it is the responsibility of the hospital to determine whether a Part A or Part B claim should be submitted for the items and services furnished to the patient (78 FR 16640). Based on the claim submitted to the Medicare contractor, the contractor issues an initial determination with respect to coverage and payment for the items and/or services on the claim. That initial determination may then be appealed with adjudicators making findings with respect to the contractor’s initial determination on the claim. As noted previously, this is an explanation of a longstanding policy merely applied to the context of our Part B inpatient billing policy, and is not a new restriction on the scope of review. Therefore, we do not believe it is necessary to undertake an impact assessment on this aspect of the proposed rule. We believe each level of the appeals process provides appellants with a fair, independent, and comprehensive review of the issues raised in the appeal. Contractor personnel who were involved in the initial determination are precluded from making decisions related to the redetermination (42 CFR 405.948). At the reconsideration level, CMS contracts with organizations that are independent of claims processing contractors. At both levels of appeal (the redetermination and reconsideration), appellants are able to submit evidence and arguments to support their position that the initial determination was incorrect and contractors consider that information in issuing their respective decisions. In addition, when the medical necessity of items or services is at issue during the reconsideration, the Qualified Independent Contractor (QIC) utilizes a panel of physicians or health care professionals to review the facts and circumstances in the case. We believe these processes demonstrate that all levels in the appeals process, including those that precede the ALJ level, offer appellants a fair, independent, and comprehensive review of the issues related to the claim(s) submitted. We also disagree with commenters that suggested ALJs and other appeals adjudicators should be able to order equitable remedies in their decisions. Appeals adjudicators in the administrative process have decisional independence in their decision-making. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 However, appeals adjudicators do not issue decisions that include equitable remedies in the context of Medicare claims appeals. Adjudicators review the contractor’s initial determination(s) on the claim for items and services furnished to a beneficiary, and issue a decision with respect to that initial determination. For example, a QIC reviews initial determinations, and its decision must either reverse or affirm (in whole or in part) the initial determination including the redetermination that is before them (section 1869(c)(3)(B)(i) of the Act; 42 CFR 405.974(a)). ALJs issue decisions that include findings of fact, conclusions of law and reasons for the decision based on the evidence offered at the hearing or otherwise admitted into the hearing record (42 CFR 405.1046(a)). Furthermore, QICs and ALJs and the Medicare Appeals Council are bound by Medicare laws, regulations, CMS Rulings, and national coverage determinations and give substantial deference to CMS program guidance and local coverage determinations to the extent such policies are applicable in the appeal (42 CFR 405.968(b), 405.1060(b)(1) and (c), 405.1062, and 405.1063). Neither the Medicare statute nor the Secretary’s implementing regulations grant ALJs or other adjudicators the authority to order equitable remedies. The Secretary exercises her authority to administer this administrative review scheme— which includes ALJs and other adjudicators—by proceeding through notice-and-comment rulemaking. The scope of review in the appeals process, the limitations on decisions, and the authorities that bind adjudicators are set forth in regulation, and beyond that there is no residual authority of ALJs or other adjudicators to grant relief (equitable or otherwise) in excess of that which is authorized by the Medicare statute and regulations. Given the scope of review in the appeals process, the limitations on decisions set forth in the regulations, and the authorities that bind adjudicators, we do not believe adjudicators are authorized to order equitable remedies as suggested by the commenters. Finally, in the final rule, ‘‘Medicare Program: Changes to the Medicare Claims Appeals Procedures’’ (74 FR 65296, 65327), we declined to afford precedential weight to ALJ or Medicare Appeals Council decisions. We explained that coverage and liability determinations on Medicare claims are largely unique to the specific set of facts in a given case, and requiring precedential authority or deference to PO 00000 Frm 00435 Fmt 4701 Sfmt 4700 50929 certain decisions would prove extremely difficult. Similarly, as noted in the public comments received on the Part B Inpatient Billing proposed rule, the decision to admit a patient as an inpatient involves unique, complex issues that require clinical judgment of the treating physician. For these reasons, we continue to believe it would be inappropriate to afford precedential weight or require deference to appeals decisions on inpatient admissions even in situations where the admissions involve a similar set of facts or issues. Accordingly, we are not adopting the commenters’ recommendations with respect to expanding an appeals adjudicator’s scope of review. Comment: One commenter objected to CMS’ clarification regarding the scope of review, suggesting that it is based on an unnecessary distinction made between Part A and Part B claims review, processing, and appeals. The commenter suggested that changes in the structure of Medicare contracts and the appeals process support the notion that adjudicators should be able to determine whether services are payable under Title XVIII as a whole rather than as Part A and Part B services. Response: Although contracting reform consolidated contractors so that a single contractor processes both Part A and Part B claims, and appeals process revisions created a uniform appeals process for Part A and Part B claims, the distinction between Part A and Part B coverage and payment schemes is still relevant and necessary. This is illustrated by the separate entitlement, eligibility, enrollment, benefits, and programs that continue to exist under Title XVIII, as well as the separate claims requirements and systems necessary to process such claims, and distinct trust funds that provide funding for the different parts of the program. In addition, our contracting scheme for QICs allocates second level appeals workload along benefit lines, acknowledging the differences in the benefits and the clinical expertise required for processing appeals under the different parts of the Medicare program. More importantly, however, appeal rights as established in section 1869 of the Act flow from the initial determination made by a contractor in response to the submission of a valid claim. (We refer readers to sections 1869(a)(3)(B)(i), 1869(b)(1)(A), and 1869(c)(3)(B)(i) of the Act.) Consistent with the statutory requirements and our longstanding policy, contractors will continue to make initial determinations for items and services under Part A in response to submission of a Part A claim, and initial determinations for E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50930 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations items and services under Part B in response to submission of a Part B claim. For these reasons, we are not adopting the commenters’ recommendations to expand an appeals adjudicator’s scope of review. Comment: Several commenters requested that hospitals be permitted to seek and receive Part B payments by filing claims while also pursuing an appeal of the Part A claim. Response: We appreciate the suggestions made by the commenters, requesting the opportunity to submit Part B claims while pursuing appeals of the Part A denials. We proposed that hospitals must choose between seeking payment under Part B by submitting a Part B claim for the items and services furnished to the beneficiary, or by pursuing an appeal of the Part A claim that was denied. We explained that the two actions cannot be pursued simultaneously, as this would result in the hospital inappropriately seeking duplicate payment for items or services furnished to the beneficiary. Allowing hospitals to appeal the denied claim and submit Part B claims simultaneously would also result in additional administrative burden and cost to the program, and would impose an additional administrative burden on hospitals and beneficiaries. For example, if the hospital submits a Part B claim under the process described in this rule, and receives payment for that claim while simultaneously pursuing its appeal of the Part A denial, in situations where the hospital is successful in challenging the denial of the Part A claim, several additional administrative actions would be required of Medicare, the hospital, and the beneficiary. In order to prevent duplicate payment, the Medicare contractor would be required to initiate an overpayment action to recover any payments made on the Part B claim before effectuating the Part A appeal decision. In addition, hospitals would be required to refund any costsharing amounts collected from beneficiaries for the Part B claim, and would need to collect the Part A costsharing that was previously refunded following the initial Part A denial. We believe the administrative burden and the prohibition of making duplicate payment necessitate that we prohibit hospitals from submitting Part B claims while an appeal of the Part A claim denial is in progress. We acknowledge the financial impact that may result from collection of overpayments for denied claims. However, providers may request relief from recovery while a reconsideration or redetermination is pending under the limitation of VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 recoupment provisions in 42 CFR 405.379. In addition, if recovery is in process, providers experiencing financial difficulties may work with contractors to establish an extended repayment schedule. For these reasons, we are not adopting the commenters’ recommendations to allow providers to simultaneously submit Part B claims and pursue appeals of the Part A denials, and are finalizing the provisions of the proposed rule without modification. Comment: One commenter questioned whether a hospital would receive payment on a Part A claim if the claim was denied and the beneficiary successfully appealed that Part A claim denial. Response: If a beneficiary appealed a Part A claim denial and the denial was reversed on appeal, the decision would be effectuated and the provider would receive payment on the Part A claim. 10. Coordination of Benefits With Supplemental Insurers Currently, CMS automatically transfers or ‘‘crosses over’’ Medicare adjudicated professional and institutional claims to a variety of entities for coordination of benefits (COB) purposes. We collectively term these entities ‘‘supplemental insurers’’ for ease of reference. These entities include private insurers that offer ‘‘Medicare supplemental’’ (or Medigap) policies, as defined in section 1882(g)(1) of the Act. Other entities, such as employer-sponsored retiree plans, multiemployer welfare trusts, TRICARE For Life, the Federal Employees Health Benefits Plan (FEHBP), and State Medicaid agencies, also provide secondary or, in some cases, tertiary coverage for beneficiaries after their Medicare coverage. As mentioned in the Part B Inpatient Billing proposed rule (78 FR 16639), most supplemental insurers sign national agreements with Medicare to facilitate our claims crossover process, more formally known as the ‘‘Coordination of Benefits Agreement’’ (or COBA) process. Through these national agreements, supplemental insurers indicate which types of Medicare claims they wish to receive via the COBA process and which types they wish to exclude. Within the context of this rule, hospitals will want to be aware that, in addition to inpatient hospital claims, the majority of supplemental insurers currently also accept hospital inpatient Part B claims (12x type of bill claims) and outpatient hospital claims (including 13x type of bill claims) through the COBA process. Most supplemental insurers elect not to PO 00000 Frm 00436 Fmt 4701 Sfmt 4700 receive fully denied Medicare claims via that process. However, several employer-sponsored retiree plans currently do accept fully denied claims via the COBA process, provided Medicare beneficiaries have some payment liability remaining on those claims. Comment: Several commenters who addressed supplemental insurers and the Medicare claims crossover process were concerned about the importance of ensuring that CMS provides early and continuous communications with supplemental payers to ensure that benefits are coordinated correctly. Response: As mentioned in the Part B Inpatient Billing proposed rule, we will communicate with all supplemental insurers to ensure they know what additional services beyond those termed ‘‘ancillary’’ will now be included under the TOB 12x designation. We also will ensure that supplemental insurers become aware of how they can identify any new cost-sharing elements within these claims when crossed over to them. Our principle communications method is an email broadcast ListServ, known as ‘‘COBVA,’’ to which all supplemental insurers subscribe. We also will update the COBA Implementation User Guide, which is available on the COBA Web site at: https://www.cms.gov/Medicare/ Coordination-of-Benefits-and-Recovery/ COBA-Trading-Partners/Coordinationof-Benefits-Agreements/Coordinationof-Benefits-Agreement-page.html, to include this information. In addition, where possible, we will provide supplemental insurers with a few mock claim examples to illustrate how the changes arising from this rule will be reflected in their crossover claims. Comment: One commenter indicated that the current Medicare crossover process was insufficient to ensure that providers do not face substantial administrative burden and increased bad debt by having to bill their patients’ supplemental insurance plans or programs for balances owed following Medicare’s payment determination. Response: We understand that the COBA crossover process does not always relieve providers from having to file claims with their patients’ supplemental insurers. The Medicare crossover process is voluntary and, therefore, not every insurer nationwide participates. However, as noted above, we know that the majority of supplemental insurers accept institutional claims (including Part A inpatient and Part B outpatient facility claims) via the COBA crossover process. In addition, some supplemental insurers agree to accept fully denied claims if the beneficiary may be held liable for any E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations portion of the denied claims by the provider. Comment: Within the context of Medicare denying a Part A inpatient hospital claim as not being reasonable and medically necessary, several commenters questioned whether hospitals would be required to submit a hospital Part B claim to Medicare prior to billing a Medigap, employersponsored, or other supplemental insurers or whether filing those claims with those entities would be the responsibility of Medicare beneficiaries. Response: Medigap insurers will not make payment unless there has been a formal Medicare determination on a claim. Our understanding is that other coverage is likely to require this as well. To avoid denial decisions from supplemental insurers, hospitals should first bill their Part B claim to their designated A/B MAC. To the greatest extent possible, hospitals should avoid imposing a filing burden on their patients, Medicare beneficiaries. Comment: One commenter questioned whether Medicare will cross over to Part B for beneficiaries who do not have Part B coverage. Response: The commenter appears to be referring to a situation where a Medicare beneficiary is not enrolled in Medicare Part B but has an employersponsored retiree policy that provides him or her with medical coverage. If the employer plan agrees to accept the fully denied hospital outpatient claim as a claim for benefits through the COBA crossover process, Medicare has the capability to send the claim. Comment: One commenter questioned whether supplemental insurers will be able to distinguish between Part A inpatient crossover claims denied due to a post-payment review indicating that the inpatient stay was not medically necessary and other Part A inpatient crossover claims that are denied due to benefits exhaustion. Response: We believe that supplemental insurers will be able to differentiate between these denial situations as evidenced on the crossover claims they receive on the basis of the Claim Adjustment Reason Codes (CARCs) and Claim Adjustment Segment (CAS) Group Codes used on the affected claims. Comment: Several commenters questioned whether hospitals would be required to provide refunds to supplemental insurers for any amounts the insurers paid for Part A inpatient hospital admissions that were later determined not to be reasonable and necessary, while other commenters indicated that hospitals would need better guidance from CMS to know if VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 they would need to refund payments to supplemental insurers in this situation. Response: Following a denial of a claim for a Part A inpatient admission as not reasonable and necessary, and a determination that the hospital, and not the beneficiary, is financially liable for the denied claim, in accordance with section 1879 of the Act, the hospital is required to refund any amounts paid by or on behalf of the beneficiary (such as deductible and copayment amounts) for the services billed under Part A (42 CFR 411.402). If this refund is not made, the Medicare program indemnifies the beneficiary or authorized representative for any amounts paid, including deductible and coinsurance, by, or on behalf of, the beneficiary. Any indemnification payments made by Medicare are considered an overpayment to the hospital. Accordingly, in order to avoid incurring an overpayment, hospitals should refund any cost-sharing amount to a supplemental insurer. The following comments and responses specifically address standardized Medicare Supplemental Health Insurance Policies (Medigap Policies) as defined in section 1882(g)(1) of the Act. Comment: A few commenters expressed concern that Medicare supplement insurance carriers may be subject to an increased liability to cover additional Part B costs in the form of increased copayments and cost-sharing for insulin and oral and topical drugs and that the additional cost incurred by the carriers could lead to greater financial liability for beneficiaries in the form of increased premiums for beneficiaries. Response: Oversight of premium rates and increases for standardized Medicare Supplemental Insurance Policies is not within CMS’ purview. That authority rests with the Commissioner of each State’s department of insurance. However, we note that, as discussed above, the carriers will be entitled to a refund of payments made with respect to Part A. Comment: A few commenters recommended that CMS mandate that all supplemental plans be liable for the Part B copayment and deductible on these rebilled claims for their members, regardless of their internal policies on timely filing. Response: It is unnecessary to mandate copayment and deductible liability for standardized Medicare Supplement Policies because section 1882(c)(3)(A) of the Act already requires Medicare Supplemental Health Insurance Carriers to ‘‘accept a notice under section 1842(h)(3)(B) of the Act as PO 00000 Frm 00437 Fmt 4701 Sfmt 4700 50931 a claim form for benefits under such policy in lieu of any claim form otherwise required and agree to make a payment determination on the basis of the information contained in such notice.’’ In addition, section 6(A) of the NAIC Model Regulation for Medicare Supplement Insurance states that ‘‘no policy or certificate may be advertised, solicited, or issued for delivery in this state as a Medicare supplement policy if the policy or certificate contains limitations or exclusions on coverage that are more restrictive than those of Medicare’’ (74 FR 18813). 11. Public Comments on Other Issues We received public comments on several other issues related to, but not directly addressed, by the proposed policies and related discussions contained in the Part B Inpatient Billing proposed rule. a. Application to Disproportionate Share Hospital (DSH) Payments, Indirect Medical Education (IME), Graduate Medical Education (GME) Payments, and Other IPPS Adjustments Comment: Three commenters stated that it was unclear whether the patient days for the Part B inpatient stays remain in the Medicare DSH calculations and in the denominator of the Medicare GME calculations. Specifically, the commenters noted that both the Medicare DSH calculation and the direct GME calculation use the hospital’s count of Part A inpatient days and total inpatient days, and that because these Part B inpatient days would be reflected in the denominator but excluded from the numerator, it would be harmful to hospitals. Another commenter pointed out that Medicare payment for DSH is calculated in part using Medicare inpatient and total inpatient days reported by hospitals on the Medicare cost report. This commenter was not clear if the Medicare days related to the ‘‘no pay/ provider’’ liable Part A claims would be included or excluded from the DSH calculations. The commenter requested that CMS clarify its policy in this regard and permit hospitals to either include or exclude Medicare inpatient days from both the numerator and denominator of these calculations. A third commenter was concerned about unintended consequences for the Medicare DSH adjustment. Response: We appreciate the commenters’ request for clarification. The Medicare DSH payment adjustment is calculated as the sum of two fractions, the SSI ratio and the Medicaid fraction. As defined at section 1886(d)(5)(F)(vi)(I) of the Act and at 42 CFR 412.106(b)(2), E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50932 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations the SSI ratio is the number of patient days furnished to patients who were entitled to both Medicare Part A (including Medicare Advantage (Part C)) and SSI divided by the total number of days associated with discharges of patients who were entitled to Medicare Part A (including Medicare Advantage (Part C)). As defined at section 1886(d)(5)(F)(vi)(II) of the Act and at 42 CFR 412.106(b)(4), the Medicaid fraction is the number of patient days for which patients were eligible for Medicaid but not entitled to Medicare Part A, divided by the total number of patient days. We note that in the CMS Ruling 1455– R, we stated, ‘‘For the Part B claims billed under this Ruling the beneficiary’s patient status remains inpatient as of the time of inpatient admission and is not changed to outpatient . . .’’ (78 FR 16617). We note that even though the inpatient claim was rebilled under Part B after being denied payment under Part A due to lack of medical necessity, the beneficiary for whom that claim was made was entitled to benefits under Part A during the inpatient stay. Therefore, as long as the patient status for a stay remains inpatient, under current policy and practice, the days associated with the inpatient stay rebilled under Part B are included in the numerator (when the beneficiary was also entitled to SSI) and the denominator for the SSI ratio and are reflected in the denominator of the Medicaid fraction of the DSH calculation. As we noted in the FY 2011 IPPS/ LTCH PPS final rule, there are three databases used to generate the SSI ratios: the SSI eligibility data file, the Medicare Enrollment Database, and the Medicare Provider Analysis and Review file (MedPAR). In that rule, we described the process by which we determine if patient days are for Medicare beneficiaries entitled to SSI, and we noted that hospitals submit claims to Medicare for inpatient services provided to Medicare beneficiaries and these claims are eventually accumulated in the MedPAR database. This database allows us to calculate the number of Medicare inpatient hospital days (that is, the denominator of the SSI ratio), a subset of which are Medicare SSI days (that is, the numerator of the SSI ratio) (75 FR 50277 through 50285). Currently, the MedPAR file includes all inpatient hospital claims, including those that were denied on the basis of medical necessity. In 2004, following notice-andcomment rulemaking, we amended our regulations to provide that all patient days for individual Medicare Part A beneficiaries, whether or not Medicare VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 actually paid for those days, are included in the Medicare-SSI fraction (69 FR 49098 through 49099 and 42 CFR 412.106(b)(2)). Thus, MedPAR utilizes length of stay to generate the SSI day count, rather than using ‘‘covered days’’ (that is, days for which Medicare Part A makes a payment). Each record contained in the MedPAR file represents a beneficiary stay in an inpatient hospital (where discharged), and it may include one claim, or it may include multiple claims. Because such claims remain in the MedPAR, and MedPAR is used to calculate the numerator and denominator of the SSI ratio, inpatient claims that are rebilled under Part B will remain included in the determination of the SSI ratio. This practice is consistent with 42 CFR 412.106(b)(2)(i), which states that, for the purpose of the DSH SSI calculation, ‘‘CMS determines the number of patient days that . . . are furnished to patients who during that month were entitled to . . . Medicare Part A.’’ We note that these patients remain entitled to benefits under Part A for the months at issue, even though no payment may be made for a claim because the inpatient status was not reasonable and necessary for these particular claims. This is also consistent with 42 CFR 412.106(a)(1)(ii) which states that ‘‘the number of patient days in a hospital includes only those days attributable to units or wards of the hospital providing acute care services generally payable under the [inpatient] prospective payment system,’’ and IPPSlevel acute care services are generally being provided in the units or wards those patients were staying, despite the fact that no IPPS payment may ultimately be made for those particular claims. In addition, we note that currently on Worksheet S–3, Part I, column 8 of the Medicare cost report (CMS Form 2552– 10), hospitals are required to report the number of inpatient days for all classes of patients and this is used to determine the total days for the Medicaid fraction. The total inpatient days from Worksheet S–3, Part I, column 8, are derived from the hospital’s census and, therefore, include inpatient days denied under Part A and rebilled under Part B. Therefore, we are clarifying, as requested by the commenters, that patient days for inpatient claims rebilled under Part B will continue to be included in the numerator (where the beneficiary was also entitled to SSI) and denominator of the SSI ratio and denominator of the Medicaid fraction for purposes of Medicare DSH calculations. Even though the inpatient claim was rebilled under Part B after being denied payment under Part A due PO 00000 Frm 00438 Fmt 4701 Sfmt 4700 to lack of medical necessity, the beneficiary for whom that claim was made was entitled to benefits under Part A during the inpatient stay. Direct GME payments are calculated using three variables: the hospital’s per resident amount (PRA); the number of FTE residents a hospital is training subject to its FTE cap and the 3-year rolling average; and the hospital’s Medicare patient load. ‘‘Medicare patient load’’’ is defined at 42 CFR 413.75(b) as ‘‘with respect to a hospital’s cost reporting period, the total number of hospital inpatient days during the cost reporting period that are attributable to patients for whom payment is made under Medicare Part A divided by total hospital inpatient days. In calculating inpatient days, inpatient days in any distinct part of the hospital furnishing a hospital level of care are included and nursery days are excluded.’’ With regard to the calculation of Medicare patient load used to calculate direct GME payments, we agree that, under current policy, Part B inpatient days are reflected in the denominator but are excluded from the numerator. Currently, the numerator is derived from Worksheet S–3, Part I, column 6, in which Medicare paid Part A days are reported, based on the Medicare paid Part A days accumulated in the hospital’s Provider Statistical & Reimbursement Report (PS&R). That is, once a claim in denied, for whatever reason (such as lack of medical necessity or if a beneficiary exhausts Part A benefits), the days associated with that claim are not reflected in the numerator (Worksheet S–3, Part I, column 6) of the Medicare patient load. This is consistent with the definition of ‘‘Medicare patient load’’ at 42 CFR 413.75(b), which states that the ratio is based on ‘‘. . . the total number of hospital inpatient days during the cost reporting period that are attributable to patients for whom payment is made under Medicare Part A divided by total hospital inpatient days’’ (emphasis added). However, similar to the denominator used in the Medicaid fraction for DSH, the denominator of the Medicare patient load ratio is currently calculated from Worksheet S–3, Part I, column 8 of the Medicare cost report. The total inpatient days from Worksheet S–3, Part I, column 8, are derived from the hospital’s census and, therefore, include inpatient days denied under Part A and rebilled under Part B. Therefore, we are clarifying that inpatient days for inpatient claims denied under Part A and rebilled under Part B are excluded from the numerator of direct GME Medicare patient load but E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations are included in the denominator. Accordingly, by continuing with current practices, we recognize that depending on the volume of claims that are denied for medical necessity that a hospital chooses to re-bill under Part B, teaching hospitals could experience a decline in their direct GME Medicare patient load calculation and experience reduced direct GME payments. Comment: One commenter stated that the proposal to allow patients to maintain inpatient status while rebilling under Part B ‘‘has effects on hospitals beyond payment for the services rendered.’’ Response: We agree with the commenter and have endeavored to provide clarification as requested specifically by other commenters on these effects. We note that other inpatient hospital policies rely on either the number of inpatient days or a ratio of Medicare inpatient days to total inpatient days to determine eligibility or payment. One example of another policy possibly affected by rebilling under Part B is in section V.E.2. of the preamble of this final rule, in connection with our policy to include labor and delivery inpatient days of maternity patients admitted as inpatients for direct GME Medicare utilization and other Medicare purposes. The example we provided is with regard to a hospital’s eligibility for SCH status. A hospital can be classified as an SCH if it is located more than 35 miles from other like hospitals or is located in a rural area (as defined at 42 CFR 412.64) and meets one of the conditions listed in the regulations at 42 CFR 412.92(a). In determining whether a nearby hospital is a like hospital, CMS compares the total inpatient days of the SCH applicant hospital with the total inpatient days of the nearby hospital. If the total inpatient days of the nearby hospital are greater than 8 percent of the total inpatient days reported by the SCH applicant hospital, the nearby hospital is considered a like hospital for purposes of evaluating the applicant hospital’s eligibility for SCH status. Therefore, including these days as inpatient days may impact the count of inpatient days for both the SCH applicant hospital and the nearby hospital and may affect the applicant hospital’s eligibility for SCH status. Comment: One commenter noted that the relative weights should be revised on a timely basis to reflect the elimination of short-stay cases. The commenter believed that nonshort-stay inpatient cases are underpaid insofar as the short-stay cases have been included in the calculation of the relative weights. Another commenter requested VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 that CMS consider establishing a different payment methodology, such as a different outlier payment, to address these cases. Response: We agree that the relative weights should reflect any movement of cases between the inpatient setting and the outpatient setting on a timely basis in accordance with the methodologies set forth in the Addendum to this final rule and note that, for each Federal fiscal year, we use the most recent complete year of claims data for charges and cost report data for CCRs to develop relative weights. We disagree as a general premise that the nonshort-stay inpatient cases are underpaid insofar as the short-stay cases are included because the MS–DRG system is a system of averages. The relative weights are intended to reflect relative resource use, and while some short-stay cases may have relatively lower resource use in a given MS–DRG, others may have higher resource use in that MS–DRG. Furthermore, relative weights reflect all of the cases that are included in a particular MS–DRG and MS–DRG classifications are established and updated in accordance with the process set forth in section II. of the preamble of this final rule. This process takes into consideration clinical coherence and resource use. We refer readers to the FY 2013 IPPS/LTCH PPS final rule for further information on the criteria for determining whether a subgroup of cases warrants creation of a CC or an MCC subgroup within a base MS–DRG (77 FR 53305) and point out that they do not include length of stay. However, we understand the viewpoint that the types and numbers of patients that hospitals admit as inpatient cases could change in the future in unforeseen ways as a result of this rulemaking. If we see a pattern of increasing volume of short-stay cases, we may further consider whether payment policy changes are necessary to reflect their potentially lower resource usage. Comment: One commenter believed that hospitals should not be subject to ‘‘documentation and coding rate reductions’’ in the future as denied short-stay cases migrate from an inpatient setting to an outpatient setting. The commenter stated that ‘‘arithmetic alone will force the average inpatient case mix index to increase and hospitals should not be penalized.’’ Response: We separately discuss the finalization of our proposal to make an adjustment to the standardized amount, hospital-specific payment amounts, and Puerto Rico-specific standardized amount in order to offset the additional estimated IPPS expenditures associated PO 00000 Frm 00439 Fmt 4701 Sfmt 4700 50933 with the inpatient admission guidelines and medical review criteria finalized and discussed in greater detail in section XI.C. of the preamble of this final rule. We believe the commenter may be erroneously associating the relationship between the recalibration of the relative weights and its effect on aggregate IPPS payments with the adjustment to offset the additional estimated IPPS expenditures associated with this policy. As discussed in section II.H. of the preamble of this final rule, we normalized the recalibrated MS– DRG relative weights by an adjustment factor so that the average case relative weight after recalibration is equal to the average case relative weight prior to recalibration. However, as we discuss in section II.A.4.a. of the Addendum to this final rule, equating the average case relative weight after recalibration to the average case weight before recalibration does not necessarily achieve budget neutrality with respect to aggregate payments to hospitals because payments to hospitals are affected by factors other than average case relative weight. Accordingly, to the extent that in any given year short-stay cases shift to outpatient or outpatient cases shift to inpatient, the relative weights are recalibrated and budget neutrality is applied so that aggregate expenditures do not increase or decrease as a result of these shifts in cases. Therefore, the relative weights will ensure that the relativity of the cases that result from the change in utilization due to the final policy is appropriate in a budget neutral fashion. However, it will not offset the change in utilization, which the final adjustment to offset these additional estimated expenditures is intended to do. b. Application to Beneficiary Utilization Days Under Medicare Part A Comment: Commenters asked CMS to clarify whether the inpatient days billed by the hospital would count towards beneficiaries’ limit on utilization of inpatient days for the Part A benefit period, described in section 1812(a) of the Act. Response: Under section 1812 of the Act, Medicare Part A will pay for up to 150 days per inpatient hospital stay. If a Part A claim is denied because the hospital inpatient admission was not reasonable and necessary, Medicare Part A will not pay for the claim. In these circumstances—where Medicare Part A is not making payment for particular inpatient claims—we do not believe it would be appropriate to charge the beneficiary’s utilization under Part A. Therefore, we are not deducting the days associated with the inpatient E:\FR\FM\19AUR2.SGM 19AUR2 50934 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 hospital stays billed under Part B from a beneficiary’s 150 utilization days for inpatient hospital services paid under Part A when no Part A payment is made for that inpatient hospital stay. We note that when the inpatient hospital stay is paid under Part B, the hospital stay remains inpatient from the time of admission and may continue to count towards qualification for skilled nursing facility coverage, and the beneficiary is liable for the Part B inpatient charges. c. Applicability to the Medicare Advantage (MA) Program Comment: Several commenters asked whether the proposed Part B billing policies would apply to Medicare Advantage (MA) hospitals or plans. They noted that the proposed rule only contemplates Medicare Part A claims denials as eligible for the proposed Part B inpatient billing. However, one commenter stated that the Affordable Care Act required that RAC reviews be expanded to Part C and Part D, to encompass the MA program. The commenter believed that the ability to submit ‘‘adjusted’’ claims after a contractor denial or self-audit denial should apply to MA just as it does for Medicare Part A, because the RACs will be denying Part C inpatient stays as not reasonable and necessary. Response: The proposed and final rules do not apply in the MA context, with one exception. In the MA program, hospitals are paid by MA organizations, which typically would prior authorize coverage of any non-emergency hospitalization. Also, to the extent the MA organization makes payment for a stay that does not meet Medicare coverage standards, it does not necessarily follow that the stay would not otherwise be covered under the MA plan, and even if it is not covered, and an attempt were made to recover payments, the payments would go to the MA organization, not the Medicare Trust Funds. Therefore, RACs and MACs do not perform review for such potential errors. If an MA organization does have a payment dispute with a hospital, however, it would be free to apply the same principles applied in the final rule regarding payment of Part B services to a hospital where a stay is not covered under Part A. However, as in the Medicare fee-for-service program, appeals adjudicators in the MA program are limited in their scope of review and may only review the submitted claim. In the context of a Part C out-of-network provider that billed inpatient services, review is limited to whether the MA plan was obligated to pay for the billed inpatient services. Similar to the Part A context, the provider has not billed for VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 outpatient services, and therefore, there is no appealable organization determination on those services. MA organizations and their stakeholders may also refer questions to their Part C account managers and other Part C staff at CMS. It would be helpful to CMS to understand more about any particular circumstances in which Part C hospitals and MA organizations believe the provisions of the final rule on Part B hospital inpatient billing following Part A reasonable and necessary inpatient denials might apply. Comment: One commenter asked whether hospitals must bill beneficiaries enrolled in MA plans for the Part B liabilities associated with rebilling, just as non-MA plans must bill beneficiaries. The commenter believed beneficiaries should be held harmless if an MA nonparticipating hospital bills Part B, particularly a non-participating MA hospital. Response: As we stated in section XI.B.6. of the preamble of this final rule, we believe that the issue of whether or not the hospital has an obligation to bill the beneficiary is governed by the beneficiary inducement and antikickback laws that fall under the purview of the OIG. Therefore, we refer the commenters (and other stakeholders) to the OIG for guidance on this matter. 12. Regulatory Impact Analysis: Final Part B Inpatient Payment Policy a. Statement of Need Our final policy on payment of Part B inpatient services is needed to address Medicare payment policy when a Part A hospital inpatient claim is denied because the inpatient admission was not reasonable and necessary, but hospital outpatient services would have been reasonable and necessary to treat the beneficiary. b. Overall Impact We have examined the impacts of our final policy as required by Executive Order 12866 on Regulatory Planning and Review (September 30, 1993), Executive Order 13563 on Improving Regulation and Regulatory Review (January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96–354), section 1102(b) of the Social Security Act, section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) (March 22, 1995, Pub. L. 104–4), Executive Order 13132 on Federalism (August 4, 1999), and the Contract with America Advancement Act of 1996 (Pub. L. 104–121) (5 U.S.C. 804(2)). Executive Orders 12866 and 13563 direct agencies to assess all costs and PO 00000 Frm 00440 Fmt 4701 Sfmt 4700 benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. Our final rule policy on Part B inpatient payment has been designated as an ‘‘economically’’ significant rule under section 3(f)(1) of Executive Order 12866 and a major rule under the Contract with America Advancement Act of 1996 (Pub. L. 104–121). Accordingly, the final rule policy has been reviewed by the Office of Management and Budget. We have prepared a regulatory impact analysis that, to the best of our ability, presents the costs and benefits of our final policy. The RFA requires agencies to analyze options for regulatory relief of small entities, if a rule has a significant impact on a substantial number of small entities. For purposes of the RFA, we estimate that most hospitals are small entities as that term is used in the RFA. For purposes of the RFA, most hospitals are considered small businesses according to the Small Business Administration’s size standards with total revenues of $34.5 million or less in any single year. We estimate that this final rule policy may have a significant impact on approximately 2,004 hospitals with voluntary ownership. For details, see the Small Business Administration’s ‘‘Table of Small Business Size Standards’’ at https:// www.sba.gov/content/table-smallbusiness-size-standards. In addition, section 1102(b) of the Act requires us to prepare a regulatory impact analysis if a rule may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 604 of the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of a metropolitan statistical area and has 100 or fewer beds. We estimate that this final rule may have a significant impact on approximately 694 small rural hospitals. Section 202 of the Unfunded Mandates Reform Act of 1995 also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. In 2013, that threshold level is currently E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations approximately $141 million. Our final policy on Part B inpatient payment does mandate requirements for the private sector. Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a final rule that imposes substantial direct costs on state and local governments, preempts state law, or otherwise has federalism implications. We have examined the provisions of our final rule policy in accordance with Executive Order 13132, federalism, and have determined that it will not have a substantial direct effect on State, local or tribal governments, preempt State law, or otherwise have a federalism implication, with the exception of Medicaid expenditures discussed below. As reflected in Table 1 of this final rule, we estimate that Medicare expenditures will increase for services furnished in governmental hospitals (including State and local governmental hospitals). The analyses we have provided in this section of the final rule demonstrate that this final rule is consistent with the regulatory philosophy and principles identified in Executive Order 12866, the RFA, and section 1102(b) of the Act. c. Estimated Impacts of the Final Part B Inpatient Payment Policy mstockstill on DSK4VPTVN1PROD with RULES6 (1) Estimated Impact on Medicare Program Expenditures In this section, we provide the estimated impact of our final policy to provide payment for additional Part B inpatient services on Medicare benefit expenditures over the next 5 years. Column (3) of Table 1 shows the estimated impacts of this final policy, relative to an estimated increase in baseline expenditures that will result from the effectuation of recent decisions by the Medicare Appeals Council and ALJs on Medicare Part A to Part B ‘‘rebilling’’ (in this section referred to as the ‘‘appeal decisions’’). In Part B Inpatient Billing proposed rule (78 FR 16635), we discussed that in an increasing number of cases, hospitals that have appealed Part A inpatient reasonable and necessary claim denials to ALJs and the Medicare Appeals Council have received decisions upholding the Medicare review contractor’s determination that the inpatient admission was not reasonable and necessary, but ordering payment of the services as if they were provided at an outpatient or ‘‘observation level’’ of care. These decisions effectively require Medicare to issue payment for all Part B services that would have been payable had the beneficiary originally been VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 treated as a hospital outpatient, instead of limiting payment to only the set of Part B inpatient services heretofore designated in the Medicare Benefit Policy Manual. Further, the appeal decisions have required payment regardless of whether the subsequent hospital Part B claim is submitted within the otherwise applicable time limit for filing claims. These appeal decisions were contrary to CMS’ longstanding policies permitting payment for only a limited list of Part B inpatient services, and requiring that the services be billed within the usual timely filing restrictions. While these appeal decisions do not establish Medicare payment policy, CMS’ contractors are bound to effectuate each individual decision. In the Part B Inpatient Billing proposed rule, we estimated the impacts of CMS’ instructions to contractors for effectuating the appeal decisions that have been issued. To resolve the discrepancy between Medicare’s historical policy and the decisions made by the Medicare Appeals Council and ALJs, we issued CMS Ruling 1455–R (78 FR 16614) concurrent with the Part B Inpatient Billing proposed rule. In the Ruling, we provided an interim Part B payment policy until we could establish a final policy through notice and comment rulemaking. The Ruling established a standard process for effectuation of the appeal decisions through payment of additional Part B inpatient (rather than Part B outpatient or ‘‘observation level’’) services than Medicare previously allowed in order to address the approach taken by the appeal decisions. Under the Ruling, in acquiescence to the appeal decisions, we did not apply the timely filing limitations in 42 CFR 424.44 to the subsequent claims for Part B services, but rather afforded the hospital 180 days from the date of receipt of a final or binding appeal decision, or 180 days from the date of receipt of the Part A initial determination or revised determination if there is no pending appeal, to file its Part B claim(s). Under the Ruling, hospitals are not required to appeal the Part A claim denial prior to billing Part B. Therefore, in the Part B Inpatient Billing proposed rule, we estimated the added cost for the Ruling in addition to the cost of effectuating the appeal decisions. The key differences between the Part B inpatient payment policy of the Ruling and our final policy in this final rule are: (1) the final policy applies the timely filing restriction that applied prior to the Ruling to Part B inpatient claims rebilled after the Part A PO 00000 Frm 00441 Fmt 4701 Sfmt 4700 50935 reasonable and necessary claim denial (that is, the Part B inpatient claims will only be paid if they are billed within 12 months of the date of service, which, as described previously, is not the case for the subsequent Part B inpatient claims billed under the Ruling); and (2) the final policy applies when hospitals determine through self-audit that an inpatient admission is not reasonable and necessary, discussed in section XI.B. of the preamble of this final rule (also subject to timely filing). As we stated in the proposed rule, our proposal to apply the timely filing restriction in accordance with our policy prior to the Ruling resulted in estimated savings to the Medicare program. Comment: Several stakeholders asked whether hospitals that had Part A claim denials subject to the Ruling are allowed to submit Part B claims for those services consistent with the requirements of the Ruling after the effective date of the final rule. In other words, the commenters asked whether hospitals that had Part A claim denials subject to the Ruling were allowed (after the effective date of the final rule) to submit Part B claims for those services 180 days from withdrawal or adjudication of an appeal upholding the Part A reasonable and necessary denial. Response: The Ruling permits Part B inpatient payment as described previously for Part A hospital inpatient claims that were denied by a Medicare review contractor because the inpatient admission was determined not reasonable and necessary, as long as the denial was made: (1) While the Ruling is in effect; (2) prior to the effective date of the Ruling, but for which the timeframe to file an appeal has not expired; or (3) prior to the effective date of the Ruling, but for which an appeal is pending. Because hospitals are responsible for correctly submitting claims to Medicare by coding services in accordance with the hospital inpatient admission instructions, we are finalizing our timely filing policy as proposed. However, we are modifying what we stated in the proposed rule (78 FR 16640) regarding the applicability of the Ruling and this final rule. We state in this final rule that the timely filing requirement in § 414.5(c) will not supersede the Ruling’s treatment of Part A claim denials to which the Ruling originally applied. Hospitals are permitted to follow the provisions in the Ruling regarding appeals and submission of Part B claims after the effective date of this final rule, provided (i) the Part A inpatient claim denial was one to which the Ruling originally applied, or (ii) the Part A inpatient E:\FR\FM\19AUR2.SGM 19AUR2 50936 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations claim has a date of admission before October 1, 2013 (the effective date of this final rule), and is denied after September 30, 2013, on the grounds that though inpatient services were not reasonable and necessary, hospital outpatient services would have been reasonable and necessary. Table 1 below shows the estimated impact of our final Part B inpatient payment policies. The amounts are shown in millions for CYs 2013 through 2017. We estimate the cost of the appeal decisions in Column (1), the Ruling CMS–1455–R (applied as described above) in Column (2), our final Part B inpatient payment policy in Column (3), and the estimated total impact in Column (4). The estimates for each column assume that the policy in the preceding column is already in place. Specifically, the estimated cost for the Ruling is relative to a baseline that includes the effect of the appeal decisions. Similarly, the estimated costs of our final Part B inpatient payment policy are in relation to a baseline that includes both the appeal decisions and the Ruling in place. We assumed short-stay inpatient utilization will increase by 1 percent as a result of the appeal decisions because hospitals are able to rebill after an appeal. (There are currently no controls in place to monitor hospitals for changes in their inpatient growth trend and/or error rate.) In addition, we assumed short-stay inpatient utilization will increase by an additional 3 percent under the Ruling because hospitals can rebill under Part B without the expense of an appeal. Due to the timely filing restrictions and lower Part B payment rate for rebilling, we estimate that there will be no increase in any inpatient utilization resulting from the final policy to restrict inpatient Part B billing to the timely filing requirement of 12 months from the date of service, relative to circumstances prior to the appeal decisions. The 12-month timely filing restriction imposed by this final rule will greatly limit the circumstances in which a hospital can rebill and thereby substantially reduce the number of Part B inpatient claims rebilled by hospitals, largely offsetting the higher costs arising from the appeal decisions and the Ruling. TABLE 1—ESTIMATED IMPACT ON MEDICARE PROGRAM EXPENDITURES FOR HOSPITAL SERVICES [Current year dollars (in millions)] 2013 2014 2015 2016 2017 Appeal decisions CMS ruling 1455–R Part B inpatient billing with 12-month timely filing restriction Total impact (1) Calendar year (2) (3) (4) $290 410 410 430 460 $560 770 780 830 870 $0 ¥1,060 ¥1,080 ¥1,160 ¥1,260 $850 120 120 100 70 mstockstill on DSK4VPTVN1PROD with RULES6 We note that the actual costs or savings will depend substantially on possible changes in behavior by hospitals, and such behavioral changes cannot be anticipated with certainty. The estimates are especially sensitive to the assumed utilization changes in inpatient and outpatient utilization. While we believe that these assumptions are reasonable, relatively small changes will have a disproportionate effect on the estimated net costs. (2) Estimated Impact on Beneficiaries In our regulatory impact analysis for the Part B Inpatient Billing proposed rule (78 FR 16643), we estimated an aggregate increase in beneficiary out-ofpocket expenses for Parts A and B services. Comment: As we discussed in section XI.B.6. of the preamble of this final rule, many public comments expressed concern regarding the estimated impact on beneficiary financial liability of our proposed Part B inpatient payment policies. Many commenters stated that the proposed policies would financially harm low-income and other beneficiaries. One commenter VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 recommended that CMS analyze the impact of the proposed policies on Medicaid to the extent that there may be additional Medicaid expenditures on behalf of dually eligible beneficiaries for Part B copayments. Similarly, given that many beneficiaries have secondary or supplemental insurance, the commenter recommended that the impact analysis address the extent to which these insurers will incur additional costs for Part B copayments and for drugs that are usually self-administered. The commenter also recommended that CMS include in its impact analysis an estimate of the cost of noncovered drugs that are usually self-administered, using the noncovered drug charges reported on Part B hospital claims in revenue codes 250 to 257 and 630 to 633. Response: We addressed the public comments regarding beneficiary liability for Part B inpatient services in detail in section XI.B.6. of the preamble of this final rule. In Table 2 below, we provide an estimate of the impact on beneficiary out-of-pocket costs for Part A and Part B services, resulting from the appeal decisions, the Ruling, and our final Part B inpatient payment policy. These changes are mainly the result of the PO 00000 Frm 00442 Fmt 4701 Sfmt 4700 changes in beneficiary cost-sharing when inpatient services are paid under Part B rather than under Part A. The amounts are shown in millions for CYs 2013 through 2017. We considered using the noncovered pharmacy revenue center charges to estimate the cost of drugs that are usually self-administered and, therefore, not covered under Part B. We did not use the noncovered pharmacy revenue center charges because these charges include drugs that are not covered for other reasons (for example, investigational drugs, and drugs that are non-covered by local coverage decisions). In addition, there is no requirement that hospitals must report outpatient services that are not covered by Medicare and billed directly to the patient. We do not believe that we can draw reasonable cost estimates for selfadministered drugs from the available Part B claims data. We provide an estimate below of the impact on Medicaid expenditures. Because of the variability in employersponsored or other supplemental insurance policies, we did not estimate impacts on these insurers. E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 50937 TABLE 2—ESTIMATED IMPACT ON BENEFICIARIES’ OUT-OF-POCKET EXPENSES FOR PART A AND PART B SERVICES [Current year dollars (in millions)] Calendar year Part A Part B Total $20 30 30 30 30 $40 60 60 60 60 ¥40 ¥60 ¥60 ¥60 ¥70 10 20 20 20 20 Appeal Decisions 2013 2014 2015 2016 2017 $20 30 30 30 30 CMS Ruling 1455–R 2013 2014 2015 2016 2017 50 80 80 80 90 Final Part B Inpatient Billing With 12-Month Timely Filing Restriction Policy 2013 2014 2015 2016 2017 0 ¥100 ¥100 ¥110 ¥110 0 40 40 50 50 0 ¥60 ¥60 ¥60 ¥60 ¥20 20 20 20 20 50 20 20 20 20 Total 2013 2014 2015 2016 2017 70 0 0 0 0 Note: Totals do not necessarily equal the sums of rounded components. Our final policy will not affect providers other than hospitals. to require that hospitals currently not billing the OPPS for Part B inpatient services under 42 CFR 419.22(r) (those with no outpatient departments, or that have outpatient departments but submit no claims to Medicare Part B) to now bill the OPPS for Part B services that are payable under the OPPS. We did not finalize this policy because we did not receive any public comments on this issue indicating that these hospitals’ likely payments under the final Part B inpatient policy will continue to outweigh their costs of implementing billing systems specific to the OPPS. We intend to monitor the volume of Part B claims submitted for payment by these hospitals, and may propose in future rulemaking to require them to begin billing the OPPS based on the Part B inpatient services they bill. d. Alternatives Considered e. Accounting Statement and Table Under our final policy, all hospitals and CAHs are eligible to bill Part B inpatient services when a Part A claim is denied because the inpatient admission was not reasonable and necessary but hospital outpatient services would have been reasonable and necessary. We solicited public comments regarding a potential policy Whenever a rule is considered a significant rule under Executive Order 12866, we are required to develop an Accounting Statement. This statement must state that we have prepared an accounting statement showing the classification of the expenditures associated with our final rule provisions. The accounting statement (3) Effects on the Medicaid Program The impact to Medicaid expenditures is due to the change in beneficiary costsharing when cases shift between inpatient and outpatient (shown in Table 2 above), and approximately 15 to 20 percent of Medicare beneficiaries are dually eligible for Medicaid. As such, our best estimate of the impact on Medicaid, given limited information, is that approximately 15 to 20 percent of the change in beneficiary cost-sharing represents the impact on Medicaid. For the final rule policy on Part B inpatient payment, the estimated impact is roughly up to $10 million in 2013 and up to $4 million in subsequent years. mstockstill on DSK4VPTVN1PROD with RULES6 (4) Effects on Other Providers VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 PO 00000 Frm 00443 Fmt 4701 Sfmt 4700 table for the final Part B inpatient payment policy is presented in section IV.C. of the Appendix to this final rule. f. Conclusion The analysis provided in this section of this final rule provides a Regulatory Impact Analysis for our Part B inpatient payment final policies. In accordance with the provisions of Executive Order 12866, this rule was reviewed by the Office of Management and Budget. 13. Collection of Information Requirements Under the Paperwork Reduction Act of 1995, we are required to provide 60day notice in the Federal Register and solicit public comment before a collection of information requirement is submitted to the Office of Management and Budget (OMB) for review and approval. In order to fairly evaluate whether an information collection should be approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995 requires that we solicit comment on the following issues: • The need for the information collection and its usefulness in carrying out the proper functions of our agency. • The accuracy of our estimate of the information collection burden. E:\FR\FM\19AUR2.SGM 19AUR2 50938 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations • The quality, utility, and clarity of the information to be collected. • Recommendations to minimize the information collection burden on the affected public, including automated collection techniques. We solicited public comment on each of these issues for applicable sections of the Part B Inpatient Billing proposed rule that contained information collection requirements (ICRs) as follows: With regard to the proposed payment of Medicare Part B inpatient services discussed in section II.B. of the Part B Inpatient Billing proposed rule (and in section XI.B. of the preamble of this final rule), the medical recordkeeping requirement associated with the services billed on Part B inpatient claims during the inpatient stay is exempt from the PRA in accordance with 5 CFR 1320.3(b)(2). The same holds for recordkeeping associated with the services billed on a Part B outpatient claim for services provided in the 3-day payment window prior to the inpatient admission. We believe that the time, effort, and financial resources necessary to comply with the aforementioned recordkeeping requirements would be incurred by persons in the normal course of their activities and, therefore, considered to be usual and customary business practices. With regard to the appeals of proposed payment of Medicare Part B inpatient services, the appeals information collection activity discussed in section II.H. of the Part B Inpatient Billing proposed rule (and in section XI.B.9. of the preamble of this final rule) is exempt from the requirements of the Paperwork Reduction Act because it is associated with an administrative action (5 CFR 1320.4(a)(2) and (c)). We did not receive any public comments on these medical recordkeeping requirements or appeals information collection activity. The finalized aforementioned provisions do not impose any new or revised reporting or recordkeeping requirements and would not impose any new or revised burden estimates. mstockstill on DSK4VPTVN1PROD with RULES6 C. Admission and Medical Review Criteria for Hospital Inpatient Services Under Medicare Part A 1. Background As we discussed in section XI.A. of the preamble of this final rule, in response to concerns about the provision of observation services for increasingly long periods of time albeit in a small percentage of cases, and in response to stakeholders’ concerns VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 about the clarity and appropriateness of Medicare’s hospital inpatient admission and medical review guidelines, we proposed several clarifications and changes in policy in the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR 27644 through 27650). In this section of this final rule, we discuss the public comments we received in response to our proposals and provide our final policies after consideration of the public comments we received. 2. Requirements for Physician Orders a. Statutory Basis, Relationship to Physician Certification, and Timing In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27646 through 27647), we clarified that a beneficiary becomes a hospital inpatient if formally admitted as such pursuant to a physician order for hospital inpatient admission. While the requirement for a physician order for hospital inpatient admission has long been clear in the hospital CoPs, we proposed to state explicitly in our payment regulations that admission pursuant to this order is the means whereby a beneficiary becomes a hospital inpatient and, therefore, is required for payment of hospital inpatient services under Medicare Part A. We stated that a beneficiary becomes a hospital inpatient when admitted as such after a physician (or other qualified practitioner as provided in the regulations) orders inpatient admission in accordance with the CoPs, and that Medicare pays under Part A for such an admission if the order is documented in the medical record. We stated that the order must be supported by objective medical information for purposes of the Part A payment determinations. Accordingly, we proposed new 42 CFR 412.3(a), which states, ‘‘For purposes of payment under Medicare Part A, an individual is considered an inpatient of a hospital, including a critical access hospital, if formally admitted as an inpatient pursuant to an order for inpatient admission by a physician or other qualified practitioner in accordance with this section and §§ 482.24(c), 482.12(c), and 485.638(a)(4)(iii) of this chapter for a critical access hospital.’’ We stated that this physician order must be present in the medical record and be supported by the physician admission and progress notes, in order for the hospital to be paid for hospital inpatient services under Medicare Part A (78 FR 27647). In addition, in the proposed rule, we discussed the statutory requirement for certification of hospital inpatient services for payment under Medicare PO 00000 Frm 00444 Fmt 4701 Sfmt 4700 Part A. The certification requirement for inpatient services other than psychiatric inpatient services is found in section 1814(a)(3) of the Act, which provides that Medicare Part A payment will only be made for such services ‘‘which are furnished over a period of time, [if] a physician certifies that such services are required to be given on an inpatient basis.’’ The regulation implementing this requirement is found at 42 CFR 424.13(a). The requirement for certification and recertification of inpatient psychiatric services as a condition of payment are found in section 1814(a)(2) of the Act and 42 CFR 424.14. We did not propose to exclude any hospitals from our proposed clarification of the requirement for the physician order and physician certification for Part A payment of hospital inpatient services. Comment: One commenter asked CMS to clarify what is meant by physician ‘‘certification.’’ Some commenters believed that CMS did not articulate a statutory authority for requiring the physician order as a condition of Part A payment. The commenters stated that the proposed rule implied that the physician order requirement flows from section 1814(a)(3) of the Act, which sets forth conditions and limitation on payment, one of which is a requirement for a physician certification that inpatient hospital services furnished over a period of time are required on an inpatient basis for such individual’s medical treatment. Other commenters assumed that, in the proposed rule, CMS was equating the physician order with the physician certification that is required for payment under section 1814(a)(3) of the Act, stating that in the Social Security Amendments of 1967 to this section of the Act, Congress found that admission ‘‘orders’’ are not required for Medicare payment because hospital admissions are almost always medically necessary. These commenters objected to the proposal to clarify that inclusion of the inpatient admission order in the medical record is a condition of payment. The commenters acknowledged that the hospital CoPs already require as a health and safety measure that the inpatient admission decision be made upon the ‘‘recommendation’’ of a physician. However, they believed it would be duplicative to also require an order as a condition of payment, and were concerned that the requirement would become the basis for hospital liability under the False Claims Act. One commenter stated that CMS’ proposal crossed the line in dictating the practice E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations of medicine. Some commenters believed that CMS proposed a new requirement that is not supported in the statute and is contrary to longstanding practice under the Medicare program. These commenters argued that the statutory reference to services furnished ‘‘over a period of time’’ as well as the regulation’s lack of any specific deadline for physician certifications in nonoutlier cases indicate that no certification is required for short-stay cases. In support of their argument, the commenters cited the legislative history of section 1814(a)(3) of the Act, which they interpret to apply only to certain long-term stays. They noted that, in the Social Security Amendments of 1967, Congress amended the statutory language from requiring physician certification of hospital inpatient services to requiring physician certification only for ‘‘inpatient hospital services . . . which are furnished over a period of time.’’ Moreover, the commenters cited congressional reports 196 explaining this statutory change by stating that it ‘‘eliminate[d] the requirement for hospital insurance payments that there be a physician’s certification of medical necessity with respect to admissions to hospitals which are neither psychiatric nor tuberculosis institutions’’ and that such a certification is required ‘‘only in cases of hospital stays of extended duration.’’ The commenters suggested that the House report also explains the reason for the change, stating that ‘‘admissions to general hospitals are almost always medically necessary and the requirement for a physician’s certification of this fact results in largely unnecessary paperwork’’ (H.R. Rep. No. 90–544, at 38 (1967)). Based upon all of the above factors, the commenters argued that, since 1967, the agency has not had authority to require a physician order as a condition of payment for hospital inpatient stays other than extended stays. Response: We do not agree that these arguments mandate the conclusion that the physician certification requirement only applies to long-stay cases. The statute does not define ‘‘over a period of time,’’ and further provides that ‘‘such certification shall be furnished only in such cases, and with such frequency, and accompanied by such supporting material . . . as may be provided by regulations.’’ By this language, Congress explicitly delegated authority to the agency to elucidate this provision of the statute by regulation. Accordingly, CMS 196 S. Rep. No. 90–744, at 239 (1967), H.R. Rep. No. 90–544, at 149 (1967). VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 is authorized to interpret the statutory phrase ‘‘over a period of time’’ so long as its interpretation is not arbitrary, capricious, or manifestly contrary to statute (Chevron U.S.A. Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984)). Section 424.13 of the regulations does not contain any length-of-time restrictions on the applicability of the certification requirement. Instead, § 424.13(a) provides that Medicare Part A payment will only be made for inpatient hospital services (other than inpatient psychiatric services) if a physician certifies or recertifies ‘‘the need for continued hospitalization of the patient for medical treatment or medically required inpatient diagnostic study.’’ Therefore, in its implementing regulations, CMS interpreted the statute’s requirement of a physician certification for inpatient hospitals services furnished ‘‘over a period of time’’ to apply to all inpatient admissions. While this is not the only possible interpretation of the statute, we believe that it is a permissible interpretation. We recently reiterated our requirement of a physician order for all inpatient admissions in the preamble to the CY 2012 Medicare Physician Fee Schedule final rule. In a discussion regarding whether services furnished to a patient who is at the hospital overnight, but for less than 24 hours, should be billed as outpatient or inpatient services, CMS stated that ‘‘[u]nless a treating physician has written an order to admit the patient as an inpatient, the patient is considered for Medicare purposes to be a hospital outpatient, not an inpatient’’ (76 FR 73106). In addition, the CoPs illustrate that CMS’ policy requires a physician order in order to justify inpatient hospitalization (including inpatient psychiatric hospitalizations). Under 42 CFR 482.12(c)(2), a hospital’s governing body must ensure that ‘‘[p]atients are admitted to the hospital only on the recommendation of a licensed practitioner permitted by the State to admit patients to a hospital.’’ In addition, § 482.24(c) requires that a patient’s medical record ‘‘contain information to justify admission and continued hospitalization.’’ We also have indicated our current policy and its applicability to all types of hospitals in our subregulatory guidance. In the MBPM, Chapter 1, Section 10, we define an inpatient as ‘‘a person who has been admitted to a hospital for bed occupancy for purposes of receiving inpatient services.’’ This section further explains that ‘‘[g]enerally, a patient is considered an PO 00000 Frm 00445 Fmt 4701 Sfmt 4700 50939 inpatient if formally admitted as inpatient with an expectation that he or she will remain at least overnight and occupy a bed even though it later develops that the patient can be discharged or transferred to another hospital and not actually use a hospital bed overnight.’’ In addition, Section 10 provides that ‘‘[t]he physician or other practitioner responsible for a patient’s care at the hospital is also responsible for deciding whether the patient should be admitted as an inpatient.’’ CMS’ policy is also reflected in the Medicare Claims Processing Manual (MCPM) (Pub. 100–04), Chapter 3, Section 40.2.2(K), which discusses the circumstance where a patient is admitted to an inpatient hospital, but dies or is discharged before being assigned to a room. Certainly, this circumstance would not qualify as a long stay, but CMS still requires a physician order to justify the admission, stating that ‘‘[a] patient of an acute care hospital is considered an inpatient upon issuance of written doctor’s orders to that effect.’’ Finally, Chapter 4 of the Medicare General Information, Eligibility, and Entitlement Manual also addresses the certification requirement. Section 10 of Chapter 4 provides that ‘‘[p]ayments may be made for covered hospital services only if a physician certifies and recertifies to the medical necessity for the services at designated intervals of the hospital inpatient stay.’’ As members of the hospital community have noted in the past, this section also states that ‘‘[f]or patients admitted to a general hospital . . . a physician certification is not required at the time of admission.’’ However, this merely means that the certification need not be contemporaneous with the admission, rather than indicating that no certification is required. Therefore, our longstanding policy, as reflected in our regulations and other guidance, has been that a physician order is required for all inpatient hospital admissions, regardless of the length of stay. We believe that this policy is a legally supportable interpretation of section 1814(a) of the Act. In order to clarify this policy going forward, we are finalizing § 412.3(a) to include the proposed language as well as the provision we described in the proposed rule (78 FR 27647) that the order must be present in the medical record and supported by the physician admission and progress notes. We are adding this preamble language from the proposed rule to the regulation text to improve clarity and provide consistency with our policy on medical review of inpatient admissions (section XI.C.3. of the preamble of this proposed rule) that, E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50940 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations while the physician order and the physician certification are required for all inpatient hospital admissions in order for payment to be made under Part A, the physician order and the physician certification are not considered by CMS to be conclusive evidence that an inpatient hospital admission or service was medically necessary. Rather, the physician order and physician certification are considered along with other documentation in the medical record. As finalized, § 412.3(a) reads: ‘‘For purposes of payment under Medicare Part A, an individual is considered an inpatient of a hospital, including a critical access hospital, if formally admitted as an inpatient pursuant to an order for inpatient admission by a physician or other qualified practitioner in accordance with this section and §§ 482.24(c), 482.12(c), and 485.638(a)(4)(iii) of this chapter for a critical access hospital. This physician order must be present in the medical record and be supported by the physician admission and progress notes, in order for the hospital to be paid for hospital inpatient services under Medicare Part A. In addition to these physician orders, inpatient rehabilitation facilities also must adhere to the admission requirements specified in § 412.622 of this chapter.’’ (We discuss the application of these final policies to IRFs in section XI.C.2.c. of the preamble of this final rule.) To provide further clarity and to more closely mirror the authorizing statutory language, we are deleting the word ‘‘continued’’ and adding the word ‘‘inpatient’’ before the phrase ‘‘medical treatment’’ in § 424.13(a)(2), to reflect that the content of the certification of inpatient services (other than inpatient psychiatric services) includes the reason for inpatient hospital services. The amended paragraph reads, ‘‘(a) Content of certification and recertification. Certification begins with the order for inpatient admission. Medicare Part A pays for inpatient hospital services (other than inpatient psychiatric facility services) only if a physician certifies and recertifies the following: (1) That the services were provided in accordance with § 412.3 of this chapter (2) The reasons for either— (i) Hospitalization of the patient for inpatient medical treatment or medically required inpatient diagnostic study; or (ii) Special or unusual services for cost outlier cases (under the prospective payment system set forth in subpart F of Part 412 of this chapter).’’ We believe this language better reflects the statutory content of the VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 certification required by section 1814(a)(3) of the Act ‘‘[t]hat such services are required to be given on an inpatient basis for such individual’s medical treatment, or that inpatient diagnostic study is medically required and such services are necessary for such purpose.’’ We note that the particular elements of the certification, for example, the order for inpatient services and documentation of the reason for continued hospitalization (diagnosis) should be documented within the medical record. Therefore, we are not finalizing any new documentation requirements. The existing provisions in § 424.11 continue to apply, for example paragraphs (b) and (c) which provide that no specific procedures or forms are required for certification and recertification statements. The provider may adopt any method that permits verification. The certification and recertification statements may be entered on forms, notes, or records that the appropriate individual signs, or on a special separate form. Except as provided for delayed certifications, there must be a separate signed statement for each certification or recertification. The succeeding sections of Part 424, subpart B set forth specific information required for different types of services. If that information is contained in other provider records, such as physicians’ progress notes, it need not be repeated. It will suffice for the statement to indicate where the information is to be found. To clarify the relationship between the physician order and the physician certification, we are adding new 42 CFR 412.3(c) which states that ‘‘The physician order also constitutes a required component of the physician certification of the medical necessity of hospital inpatient services under Part 424 of this chapter.’’ Similarly, we are revising paragraph (a) of § 424.13 to include in the content of the certification for inpatient hospital services (other than inpatient psychiatric services): ‘‘(1) [t]hat the services were provided in accordance with § 412.3 of this chapter [the order].’’ We are adding parallel provisions in 42 CFR 424.14(b) and 424.15(a) to include in the content of the physician certification for payment of inpatient psychiatric services and inpatient CAH services, respectively, that the services were provided in accordance with § 412.3. We discuss additional rules for certification that apply to inpatient services furnished in IRFs in section XI.C.2.c. of the preamble of this final rule. PO 00000 Frm 00446 Fmt 4701 Sfmt 4700 To further clarify the relationship between the physician order and the physician certification, and our requirement that, like the order, the certification applies to all hospital inpatient admissions (not just extended stays), we are adding new provisions to the regulations regarding timing of the certification. In § 424.13, we are providing that the certification must be signed and documented in the medical record prior to the hospital discharge (except for recertifications of extended stays, which are required earlier). We are redesignating existing paragraphs (b) through (g) of § 424.13 as paragraphs (c) through (h), respectively, in order to add a new paragraph (b). We are requiring under new § 424.13(b) that, for inpatient services other than inpatient psychiatric services: ‘‘For all hospital inpatient admissions, the certification must be completed, signed, and documented in the medical record prior to discharge. For outlier cases under subpart F of Part 412 of this chapter that are not subject to the PPS, the certification must be signed and documented in the medical record and as specified in paragraphs (e) through (h) of this section.’’ For inpatient psychiatric services, we are adding the phrase ‘‘and must be completed and documented in the medical record prior to discharge’’ at the end of § 424.14(d)(1) so that the paragraph reads, ‘‘Certification is required at the time of admission or as soon thereafter as is reasonable and practicable, and must be completed and documented in the medical record prior to discharge.’’ We will continue to provide under paragraph (d)(2) of § 424.14 that the first recertification is required as of the 12th day of hospitalization. Subsequent recertifications are required at intervals established by the utilization review committee (on a case-by-case basis if it so chooses), but no less frequently than every 30 days. Like other components or elements of the physician certification, the physician order reflects affirmation by the ordering practitioner that hospital inpatient services are medically necessary. However, the order serves the unique purpose of initiating the inpatient admission and documenting the physician’s (or other qualified practitioner as provided in the regulations) intent to admit the patient, which impacts its required timing. Therefore we are specifying in new paragraph (d) of § 412.3 that ‘‘The physician order must be furnished at or before the time of the inpatient admission’’ (unlike the rest of the certification which may be completed prior to discharge, except for the outlier E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations extended stays described in § 424.13(e) through (g)). Similarly, we are providing in the regulations on the certification that the certification begins with the order for inpatient admission. We are adding this as the new first sentence in §§ 424.13(a), 424.14(a), and 424.15(b) for CAHs. Also, we are including a conforming amendment in new paragraph (d)(5) of § 424.11 that, for hospital or CAH hospital inpatient services, a delayed certification may not extend past discharge. The existing delayed certification provisions in existing § 424.11(d)(3) and (d)(4) will continue to apply, but only for certification of the outlier extended stay cases described in § 424.13(e) through (g). To clarify that the rules for timing of certification and recertification for ‘‘cases not subject to the PPS’’ in redesignated paragraphs (e) through (h) of § 424.13 apply only to IPPS outlier cases, we are adding the word ‘‘outlier’’ prior to the phrase ‘‘subject to the PPS’’ in paragraphs (e), (f), (g), and (h). We are finalizing two conforming amendments in the regulation text governing physician certification. In § 424.11(e)(2), we are removing the reference ‘‘§ 424.13(c)’’ and adding in its place ‘‘§ 424.13(d)’’ as redesignated. Similarly, we are amending § 424.16(a) by removing the reference ‘‘§ 424.13(e)’’ and adding it its place ‘‘subpart B of this Part’’. Comment: Several commenters asked what Medicare’s payment rules would be regarding verbal inpatient admission orders. For example, the commenters asked whether the hospital could submit a Part A claim based upon a verbal order that is not documented in the medical record at the time the claim is submitted. In addition, the commenters asked how CMS defines ‘‘prompt’’ authentication of orders, or address verbal order ‘‘read-back’’ processes. Response: Because the physician order is required as a condition of payment, if the order is not documented in the medical record, the hospital should not submit a claim for Part A payment. A verbal order is a temporary administrative convenience for the physician and hospital staff but it is not a substitute for a properly documented and authenticated order for inpatient admission. A verbal order must be properly countersigned by the practitioner who gave the verbal order. We intend to further discuss and develop our requirements regarding verbal orders for inpatient admission in our subregulatory guidance. The CoPs regarding verbal orders were carefully developed over a period time, and we VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 believe we should take additional time to consider and potentially coordinate the CoP and payment rules. Comment: Some commenters believed that, while the order should be documented in the medical record as a best practice, documentation of the order should not be required if it is unintentionally omitted. They believed that the order is a technicality that should not serve as a condition of payment. The commenters stated that if the order to admit is missing, yet the physician intent and physician recommendation to admit to inpatient can clearly be derived from the medical record, for example if a medically necessary inpatient-only service was furnished, the contractor should consider these rather than requiring the physician order as a technical requirement for medical necessity and payment. Response: The admission order is evidence of the decision by the physician (or other practitioner who can order inpatient services) to admit the beneficiary to inpatient status. In very rare circumstances, the order to admit may be missing or defective (that is, illegible or incomplete), yet the intent, decision, and recommendation of the physician (or other practitioner who can order inpatient services) to admit the beneficiary as an inpatient can clearly be derived from the medical record. In these rare situations, we have provided contractors with discretion to determine that this information constructively satisfies the requirement that the hospital inpatient admission order be present in the medical record. However, in order for the documentation to provide acceptable evidence to support the hospital inpatient admission, thus satisfying the requirement for the physician order, there can be no uncertainty regarding the intent, decision, and recommendation by the physician (or other practitioner who can order inpatient services) to admit the beneficiary as an inpatient, and no reasonable possibility that the care could have been adequately provided in an outpatient setting. This narrow and limited alternative method of satisfying the requirement for documentation of the inpatient admission order in the medical record should be extremely rare, and may only be applied at the discretion of the medical review contractor. Even in those circumstances, all requirements for the other components of the physician certification must be met. Comment: Several commenters asked CMS to clarify whether, when a beneficiary would become an inpatient under the proposed policies, inpatient PO 00000 Frm 00447 Fmt 4701 Sfmt 4700 50941 status would be conferred retroactive to the beginning of the hospital stay. One commenter recommended that the patient become inpatient after the physician writes the order and the patient starts receiving care based on those orders, whether or not it is in a bed on an inpatient nursing unit, a holding bed in the emergency department or another location, or whether the patient is sent to imaging or the operating room first. One commenter questioned what CMS meant by the term ‘‘outpatient status.’’ Another commenter questioned CMS’ current definition of ‘‘inpatient,’’ stating it is not defined in the Act. The commenter stated that, at the time of the law’s passage, the meaning of ‘‘inpatient’’ was obvious and universal. The commenter stated that a patient that stays in a hospital is an inpatient, whereas a patient that goes home after treatment, or after a limited recovery period such as a few hours, is an outpatient. Response: As explained in the proposed rule, in response to concerns and suggestions of stakeholders, we aimed to provide more clarity regarding hospital inpatient admissions and Medicare payment. Toward those ends, in the FY 2014 IPPS/LTCH PPS proposed rule, we addressed medical review criteria and proposed to codify in regulation our longstanding policy (as reflected in manual provisions) that a patient becomes an inpatient when formally admitted as such pursuant to a physician order. CMS’ definition of ‘‘inpatient’’ has been upheld in litigation. Landers v. Leavitt, 545 F.3d 98 (2d Cir. 2008). We did not propose policy changes regarding the definition of ‘‘inpatient’’ or inpatient status. In contrast to a hospital inpatient, we have defined a hospital outpatient in the MBPM, Chapter 6, Section 20, as ‘‘a person who has not been admitted by the hospital as an inpatient but is registered on the hospital records as an outpatient and receives services (rather than supplies alone) from the hospital or CAH.’’ This final rule provides that a beneficiary is considered a hospital inpatient following formal admission ‘‘pursuant to’’ the hospital inpatient admission order. We included the phrase ‘‘pursuant to’’ in recognition that, in most cases, the beneficiary is formally admitted and becomes a hospital inpatient concurrent with the physician order to admit to inpatient. However, in cases such as elective surgeries where the inpatient admission order is written as far as several weeks in advance, the beneficiary is not considered an inpatient until the time of formal admission at the hospital for the E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50942 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations inpatient services. In this example, the beneficiary is admitted and becomes an inpatient pursuant to the physician’s order and could not be admitted without it, although there may be a time lag between when the order to admit is written and the time of formal admission. The physician order cannot be effective retroactively. In this final rule, we are not changing our definition of a ‘‘hospital inpatient.’’ Inpatient status only applies prospectively, starting from the time the patient is formally admitted pursuant to a physician order for inpatient admission, in accordance with our current policy. Comment: Several commenters expressed the opinion that physicians should not have to divide their attention between providing patient care and understanding Medicare’s admission rules, which the commenters viewed as mere billing distinctions. Some commenters believed that CMS should allow physicians to delegate the determination of patient status to the hospital or its utilization review committee, while the physician focuses on ordering and providing the necessary clinical care. Further, some commenters stated that this is their current practice. Some commenters commented that their current processes provide for admission ‘‘to case management’’ or ‘‘to utilization review’’ rather than specifying inpatient admission. Response: As we discussed above, many public comments from physicians indicated that they believed the physician should be involved in the determination of patient status, and we agree. To reinforce this policy and reduce confusion among hospitals, beneficiaries, and physicians on the differences between outpatient observation and inpatient services, we are providing in this final rule that the order for inpatient admission must specify admission ‘‘to or as an inpatient.’’ In previous discussions, stakeholders have indicated that often physician orders only specify admission to a certain location in the hospital (for example, ‘‘Admit to Tower 7’’) or do not clarify whether the physician’s intent is to ‘‘admit’’ the beneficiary for outpatient observation services or for hospital inpatient services. Therefore, we are providing that, for payment of hospital inpatient services under Medicare Part A, the order must specify the admitting practitioner’s recommendation to admit ‘‘to inpatient,’’ ‘‘as an inpatient,’’ ‘‘for inpatient services,’’ or similar language specifying his or her recommendation for inpatient care. In addition, as discussed in the proposed rule (78 FR 27646), we remind hospitals that patients are admitted to the hospital VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 only on the recommendation of a physician or licensed practitioner permitted by the State to admit patients to a hospital, provided that the practitioner, either a physician or other licensed practitioner, has been granted such privileges by the hospital to do so. Hospitals and physicians routinely must work together to comply with billing, coding, and admission rules not just for Medicare, but also for Medicaid and private payers. b. Authorization to Sign the Physician Order We proposed new regulation provisions in 42 CFR 412.3(b) which state that, as a condition of payment, the order must be furnished by a qualified and licensed practitioner who has admitting privileges at the hospital as permitted by State law, and who is responsible for the inpatient care of the patient at the hospital. The practitioner could not delegate the decision (order) to another individual who is not responsible for the care of that patient, is not authorized by the State to admit patients, or has not been granted admitting privileges applicable to that patient by the hospital’s medical staff. Comment: Commenters in the physician and Medicare contractor medical review communities generally supported the proposal to require the inpatient admission order, and to provide that it could not be delegated to another individual who does not possess the authority to order inpatient admission in his or her own right. In addition, some commenters representing hospitals did not object to this requirement because it is already standard practice. However, the commenters described a number of situations in which the ordering practitioner would appropriately not be the individual who takes responsibility for the inpatient care of the beneficiary, or for the entirety of the inpatient care. According to the commenters, these included emergency department physicians, hospitalists and other types of physicians in group practices who care for patients in the hospital, and residents working under the supervision of attending physicians. The commenters requested that if CMS finalizes a requirement for the inpatient order as a condition of Part A payment, CMS should allow it to be issued by any physician in the hospital who is knowledgeable about the beneficiary’s condition and has admitting privileges at the hospital. Response: We agree with the commenters that it would be appropriate to allow practitioners who may not be responsible for the inpatient PO 00000 Frm 00448 Fmt 4701 Sfmt 4700 hospital care of the beneficiary but are otherwise qualified to admit patients at that hospital and are knowledgeable about the case to order the inpatient admission. Therefore, we are deleting the proposed language in paragraph (b) of § 412.3 that would have required the order to be issued by a practitioner who is responsible for the inpatient care of the patient at the hospital. We are replacing this language with new language to specify that, although the ordering practitioner need not be responsible for the patient’s inpatient care, he or she must be knowledgeable about the patient’s hospital course, medical plan of care, and current condition. We are finalizing all of the other proposed qualifications in paragraph (b) of § 412.3 for the ordering practitioner. The final language reads, ‘‘(b) The order must be furnished by a qualified and licensed practitioner who has admitting privileges at the hospital as permitted by State law, and who is knowledgeable about the patient’s hospital course, medical plan of care, and current condition. The practitioner may not delegate the decision (order) to another individual who is not authorized by the State to admit patients, or has not been granted admitting privileges applicable to that patient by the hospital’s medical staff.’’ We discuss the application of these final policies to IRFs in section XI.C.2.c . of the preamble of this final rule. c. Applicability to Inpatient Rehabilitation Facilities (IRFs) We note that IRFs that are excluded from the IPPS and paid under the IRF prospective payment system (IRF PPS) specified in 42 CFR 412.1(a)(3) have certain requirements in 42 CFR 412.622(a)(3), (a)(4), and (a)(5) that govern an inpatient admission to an IRF. These requirements specify the admission criteria that must be documented in the medical record for an IRF admission of a Medicare Part A fee-for-service beneficiary to be considered reasonable and necessary under section 1862(a)(1) of the Act. For example, the documentation requirements contained in these regulations specify that a comprehensive preadmission screening must be conducted and must serve as the basis for the initial determination of whether or not the patient meets the requirements for admission to an IRF. A rehabilitation physician, defined as a licensed physician with specialized training and experience in rehabilitation, must document that he or she has reviewed and concurs with the preadmission screening prior to the E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations admission. However, we note that Chapter 1, Section 110.1.4 of the MBPM also specifies that, at the time each Medicare Part A fee-for-service patient is admitted to an IRF, a physician must generate admission orders for the patient’s care. Therefore, although the required physician orders discussed in section XI.C.2.a. of the preamble of this final rule apply to all inpatient hospital admissions, including inpatient admissions to an IRF, they do not determine the timing of an IRF admission, nor are they used to determine whether the IRF admission was reasonable and necessary. These determinations are governed by the requirements in §§ 412.622(a)(3), (4), and (5) of the regulations. To clarify this, we have included a provision under new § 412.3 in this final rule that the IRF requirements at § 412.622 also must be met in order for the IRF to be paid for hospital inpatient services under Medicare Part A. However, due to the aforementioned inherent differences in the operation of and beneficiary admission to IRFs, such providers are excluded from the 2-midnight admission guidelines and medical review instruction, as provided under XI.C.3. of the preamble of this final rule. mstockstill on DSK4VPTVN1PROD with RULES6 3. Inpatient Admission Guidelines CMS is authorized under section 1893 of the Act to implement the Medicare Integrity Program to conduct medical review of claims and ensure appropriateness of Medicare payment. Medicare review contractors, such as Medicare Administrative Contractors (MACs), Recovery Auditors (formerly known as the Recovery Audit Contractors, or RACs), the Comprehensive Error Rate Testing (CERT) Contractor, and other review contractors are hired by CMS to review claims on a pre-payment or postpayment basis to determine whether a claim should be paid or denied or whether a payment was properly made under Medicare payment rules. Following documentation reviews, many claim denials are made or improper payments identified because either— • The claim was incorrectly coded (for example, the provider did not appropriately assign the individual or grouper inpatient and/or outpatient coding for the care documented); or • The services were not medically necessary (that is, the review indicates that the services billed were not reasonable and necessary based upon Medicare payment policies or that the documentation was insufficient to VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 support the medical necessity of the services billed). CMS developed the CERT program to calculate the annual Medicare FFS program improper payment rate. The CERT program considers any claim that was paid when it should have been denied or paid at another amount (including both overpayments and underpayments) to be an improper payment. Hospital claim errors are identified more frequently for shorter lengths of stay. In 2012, the CERT contractor found that Medicare Part A inpatient hospital admissions for 1-day stays or less had an improper payment rate of 36.1 percent. The improper payment rate decreased significantly for 2-day or 3-day stays, which had improper payment rates of 13.2 percent and 13.1 percent, respectively. The improper payment rate further decreased to 8 percent for those beneficiaries who were treated as hospital inpatients for 4 days. Hospital claim errors are identified more frequently for shorter lengths of stay. The majority of improper payments under Medicare Part A for short-stay inpatient hospital claims have been due to inappropriate patient status (that is, the services furnished were reasonable and necessary, but should have been furnished on a hospital outpatient, rather than hospital inpatient, basis). Inpatient hospital short-stay claim errors are frequently related to minor surgical procedures or diagnostic tests. In such situations, the beneficiary is typically admitted as a hospital inpatient after the procedure is completed, monitored overnight as an inpatient, and discharged from the hospital in the morning. Medicare review contractors typically find that while the underlying services provided were reasonable and necessary, the inpatient hospitalization following the procedure was not (that is, the services following the procedure should have been provided on an outpatient basis). In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27644 through 27650), we sought to clarify our longstanding policy on how Medicare review contractors review inpatient hospital admissions for payment under Medicare Part A. We also issued proposed guidance to physicians and hospitals regarding when a hospital inpatient admission should be ordered for Medicare beneficiaries. In this final rule we discuss the public comments we received in response to our proposals relating to admission guidance and medical review and provide our final policies after considerations of those public comments. PO 00000 Frm 00449 Fmt 4701 Sfmt 4700 50943 a. Correct Coding Reviews We did not propose any changes to coding review strategies for hospital claims. Reviewers will continue to ensure that the correct codes were applied and are supported by the medical record documentation. b. Complete and Accurate Documentation When conducting complex medical review, we proposed that Medicare review contractors would continue to employ clinicians to review practitioner documented procedures and ensure that they are supported by the submitted medical record documentation. Such has been the case for complex medical review as historically performed, and will continue to be the case per this final rule instruction. c. Medical Necessity Reviews (1) Physician Order and Certification In the proposed rule (78 FR 27647), we proposed to codify in 42 CFR 412.46(b) the longstanding requirement that medical documentation must support the physician’s order and certification, as prescribed by CMS Ruling 93–1. Under the proposed new paragraph (b) titled ‘‘Physician’s order and certification regarding medical necessity,’’ CMS reiterated that ‘‘No presumptive weight shall be assigned to the physician’s order under § 412.3 or the physician’s certification under Subpart B of Part 424 of this chapter in determining the medical necessity of inpatient hospital services under section 1862(a)(1) of the Act. A physician’s order and certification will be evaluated in the context of the evidence in the medical record.’’ We also stated that current requirements for practitioner documentation of services ordered and furnished would remain unchanged. That is, while the physician order and the physician certification are required for all inpatient hospital admissions in order for payment to be made under Part A, the physician order and the physician certification are not considered by CMS to be conclusive evidence that an inpatient hospital admission or service was medically necessary. Rather, the physician order and physician certification are considered along with other documentation in the medical record. Comment: Some commenters disagreed with the proposal for reviewing the physician order and certification in accord with the documentation in the medical record. Rather, the commenters suggested that an assumption of medical necessity for the inpatient stay would more E:\FR\FM\19AUR2.SGM 19AUR2 50944 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 appropriately stem from the physician order to admit to inpatient, particularly due its requirement for admission purposes. Response: Satisfying the requirements regarding the physician order and certification alone does not guarantee Medicare payment. Rather, in order for payment to be provided under Medicare Part A, the care must also be ‘‘reasonable and necessary,’’ as specified under section 1862(a)(1) of the Act. In addition, section 1869(a) of the Act provides that determinations regarding entitlement to benefits are under the authority of the Secretary. As stated in our proposed rule, the instruction for reviewers to account for all documentation in the medical record, in addition to the actual order for inpatient admission, is consistent with statutory instruction and our prior policy as outlined in Medicare Ruling 93–1, and is being codified for transparency and consistency. Comment: Commenters requested that CMS define what constitutes ‘‘objective medical information,’’ which is required to support the order for a hospital inpatient admission. Response: We appreciate the commenters’ suggestions that additional documentation guidelines would be helpful. We will consider them as we develop implementation instructions and manual revisions. (2) Inpatient Hospital Admission Guidelines In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27648), we indicated that longstanding Medicare policy has recognized that there are certain situations in which a hospital inpatient admission is rarely appropriate. We have stated in the MBPM that when a beneficiary receives a minor surgical procedure or other treatment in the hospital that is expected to keep him or her in the hospital for only a few hours (less than 24), the services should be provided as outpatient hospital services, regardless of the hour the beneficiary comes to the hospital, whether he or she uses a bed, and whether he or she remains in the hospital past midnight (Section 10, Chapter 1 of the MBPM). In applying this benchmark, we have been clear that this instruction does not override the clinical judgment of the physician to keep the beneficiary at the hospital, to order specific services, or to determine appropriate levels of nursing care or physical locations within the hospital. Rather, this instruction provided a benchmark to ensure that all beneficiaries received consistent application of their Part A benefit to VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 whatever clinical services were medically necessary. Due to persistently large improper payment rates in short-stay hospital inpatient claims, and in response to requests to provide additional guidance regarding the proper billing of those services, we proposed to modify and clarify our general rule and provide at § 412.3(c)(1) that, in addition to services designated by CMS as inpatient only (which are appropriate for inpatient admission without regard to duration of care), surgical procedures, diagnostic tests, and other treatments would be generally appropriate for inpatient admission and inpatient hospital payment under Medicare Part A when the physician expects the beneficiary to require a stay that crosses at least 2 midnights and admits the beneficiary to the hospital based upon that expectation. Conversely, when a beneficiary enters a hospital for a surgical procedure not specified by Medicare as inpatient only under § 419.22(n), a diagnostic test, or any other treatment, and the physician expects to keep the beneficiary in the hospital for only a limited period of time that does not cross 2 midnights, the services would be generally inappropriate for payment under Medicare Part A. This would be the case regardless of the hour that the beneficiary came to the hospital or whether the beneficiary used a bed. In the proposed rule, we provided inpatient hospital admission guidance specifying that a physician or other qualified practitioner (herein we will refer to the physician, with the understanding that this can also pertain to another qualified practitioner) should order admission if he or she expects that the beneficiary’s length of stay will exceed a 2-midnight benchmark or if the beneficiary requires a procedure specified as inpatient-only under § 419.22. We proposed that the starting point for this 2-midnight instruction would be when the beneficiary is moved from any outpatient area to a bed in the hospital in which additional hospital services would be provided. We also sought public comment regarding alternative methods of calculating the start time for the 2-midnight instruction. In the proposed rule, we stated that the judgment of the physician and the physician’s order for inpatient admission should be based on the expectation of care surpassing 2 midnights, with both the expectation of time and the determination of the underlying need for medical care at the hospital supported by complex medical factors such as history and comorbidities, the severity of signs and PO 00000 Frm 00450 Fmt 4701 Sfmt 4700 symptoms, current medical needs, and the risk of an adverse event. We also indicated that, in accordance with current policy, factors that may result in an inconvenience to a beneficiary or family would not justify an inpatient hospital admission. The factors that lead a physician to admit a particular beneficiary based on the physician’s clinical expectation are significant clinical considerations and must be clearly and completely documented in the medical record. Because of the relationship that develops between a physician and his or her patient, the physician is in a unique position to incorporate complete medical evidence in a beneficiary’s medical records, and has ample opportunity to explain in detail why the expectation of the need for care spanning at least 2 midnights was appropriate in the context of that beneficiary’s acute condition. We stated in the proposed rule that a reasonable expectation of a stay crossing 2 midnights, which is based on complex medical factors and is documented in the medical record, will provide the justification needed to support medical necessity of the inpatient admission, regardless of the actual duration of the hospital stay and whether it ultimately crosses 2 midnights. As such, we acknowledged in the proposed rule that there may be an unforeseen circumstance that results in a shorter beneficiary stay than the physician’s expectation of surpassing 2 midnights. We stated that we would expect that the majority of such inpatient hospital admissions would occur when an inpatient hospital admission is appropriately ordered, but a beneficiary’s transfer or death interrupts the beneficiary’s hospital stay that would have otherwise spanned at least 2 midnights. Therefore, we provided in proposed § 412.3(c)(2), that ‘‘If an unforeseen circumstance, such as beneficiary death or transfer, results in a shorter beneficiary stay than the physician’s expectation of at least 2 midnights, the patient may be considered to be appropriately treated on an inpatient basis, and the hospital inpatient payment may be made under Medicare Part A.’’ We indicated that documentation in the medical record of such a circumstance would be required for purposes of supporting whether the inpatient hospital admission was reasonable and necessary for Medicare Part A payment. In addition, we explained that the physician must certify that inpatient hospital services were medically necessary in accordance with section 1814(a) of the Act and 42 CFR Part 424, Subpart B. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Comment: Commenters pointed to CMS’ guidance that time should not be the leading factor in the decision to admit a beneficiary and that the decision should rely on the physician’s clinical judgment and evaluation of the beneficiary’s needs based on the severity of illness, the intensity or complexity of care, and the predictability of high-risk adverse outcomes. The commenters stated that there are many beneficiaries who stay in a hospital for less than 2 midnights but still require an inpatient level of care. Response: In our existing guidance, we stated that the decision to admit a patient as an inpatient is a complex medical decision based on many factors, including the risk of an adverse event during the period considered for hospitalization, and an assessment of the services that the beneficiary will need during the hospital stay. The crux of the medical decision is the choice to keep the beneficiary at the hospital in order to receive services or reduce risk, or discharge the beneficiary home because they may be safely treated through intermittent outpatient visits or some other care. Our previous guidance also provided for a 24-hour benchmark, instructing physicians that, in general, beneficiaries who need to stay at the hospital less than 24 hours should be treated as outpatients, while those requiring care greater than 24 hours may usually be treated as inpatients. Our proposed 2-midnight benchmark, which we now finalize, simply modifies our previous guidance to specify that the relevant 24 hours are those encompassed by 2 midnights. While the complex medical decision is based upon an assessment of the need for continuing treatment at the hospital, the 2-midnight benchmark clarifies when beneficiaries determined to need such continuing treatment are generally appropriate for inpatient admission or outpatient care in the hospital. Contrary to the commenters’ suggestion, we do not refer to ‘‘level of care’’ in guidance regarding hospital inpatient admission decisions. Rather, we have consistently provided physicians with the aforementioned time-based admission framework to effectuate appropriate inpatient hospital admission decisions. This is supported by recent findings by the Office of Inspector General (OIG) (OIG, Hospitals’ Use of Observation Stays and Short Inpatient Stays for Medicare Beneficiaries, OEI–02–12–00040, July 2013). The OIG found that the reasons for short inpatient stays and for outpatient observation stays were often the same. They further noted that the relative use of short inpatient stays VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 versus outpatient observation stays varied widely between hospitals, consistent with medical review findings that identical beneficiaries may receive identical services as either inpatients or outpatients in different hospitals. We believe that this supports our proposed continuation of our existing policy that there are no prohibitions against a patient receiving any individual service as either an inpatient or an outpatient, except for those services designated by the Outpatient Prospective Payment System (OPPS) Inpatient-Only list as inpatient-only services. We further believe that this supports our proposed policy that the physician is expected to continue to use his or her complex clinical judgment in determining whether a beneficiary needs to stay at the hospital, what services and level of nursing care (for example, low-level, monitored, or one-on-one) the beneficiary will need, and what location (unit) is most appropriate. This does not require that the physician memorize complex billing or utilization guidelines; rather, the physician should generally order an inpatient admission when he or she has determined either that the beneficiary requires care at the hospital that is expected to transcend at least 2 midnights or that it will involve a procedure designated by the OPPS Inpatient-Only list as an inpatient-only procedure. Comment: Commenters asserted that making a time-based prediction is difficult for the physician. They stated that making such a determination is contradictory to medical professionals’ training, which is centered on the assessment of patients and the development of treatment plans, as opposed to focusing on the utilization review process. The commenters also stated that predicting length of stay is difficult because individual patients respond differently to care provided. Commenters suggested that a physician often does not have enough information about a patient at the onset of treatment to make an informed decision regarding anticipated length of stay. For example, a hospitalist admitting a beneficiary through the emergency department likely will not be familiar with the patient and may not have access to extensive medical history documentation on which to make a decision. Commenters suggested that beneficiaries with unknown or uncertain diagnoses should be kept under observation status until their diagnosis and course of treatment become clear. At that point, the commenters added, the hospital would be in the best position to determine the PO 00000 Frm 00451 Fmt 4701 Sfmt 4700 50945 length of treatment, make the decision to admit to inpatient status, or discharge the patient home. Response: It has been longstanding Medicare policy to require physicians to admit a beneficiary as a hospital inpatient based on their expected length of stay. However, we recognized when we published our definition of observation services that long-term predictions are inherently more difficult than short-term predictions. Therefore, we revised our guidance to indicate that, when it was difficult to make a reasonable prediction, the physician should not admit the beneficiary but should place the beneficiary in observation as an outpatient. As new information becomes available, the physician must then reassess the beneficiary to determine if discharge is possible or if it is evident that an inpatient stay is required. We believe that this principle still applies and have reiterated this in the final rule. For those hospital stays in which the physician cannot reliably predict the beneficiary to require a hospital stay greater than 2 midnights, the physician should continue to treat the beneficiary as an outpatient and then admit as an inpatient if and when additional information suggests a longer stay or the passing of the second midnight is anticipated. Comment: Commenters pointed out that although the proposal is framed as a presumption, the proposed rule, would, in effect, inappropriately establish a per se rule that inpatient admissions that are not expected to last at least 2 midnights are not medically reasonable and necessary (unless the beneficiary is receiving an inpatientonly service or procedure). The commenters stated that the proposed rule offers no legal or medical support for the idea that a 1-day stay that is expected to be a 1-day stay is not medically reasonable and necessary as an inpatient admission. Other commenters requested that CMS clarify that no per se rule would be created that inpatient payment is always inappropriate following procedures not on the inpatient-only list. Response: The proposed rule did not create a per se standard; rather, consistent with historical instruction, the proposed rule continues the use of a benchmark to ensure a uniform understanding of the circumstances under which an inpatient admission should be ordered or when the care should be provided on an outpatient basis. This common standard is not a per se rule but a necessary reference to ensure similar beneficiary cost-sharing and hospital reimbursement for similar E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50946 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations care. The 2-midnight benchmark, rather, provides that hospital stays expected to last less than 2 midnights are generally inappropriate for inpatient hospital admission and Part A payment absent rare and unusual circumstance to be further detailed in sub-regulatory instruction. In applying this benchmark, we have been clear that this instruction does not override the clinical judgment of the physician to keep the beneficiary at the hospital, to order specific services, or to determine appropriate levels of nursing care or physical locations within the hospital. Rather, this instruction provides a benchmark to ensure that all beneficiaries received consistent application of their Part A benefit to whatever clinical services were medically necessary. Comment: Commenters urged CMS to consider situations that result in a shorter beneficiary stay than the physician’s expectation of care transcending 2 midnights. The commenters stated that in the proposed rule, CMS indicated that it would expect that the majority of such cases to be due to beneficiary death or transfer. Commenters expressed concern that these exceptions are too restrictive and urged CMS to recognize other exceptions, such as when a beneficiary leaves against medical advice (AMA) before reaching the 2-midnight benchmark, when the beneficiary improves more rapidly than expected, or when the beneficiary requires care in the intensive care unit (ICU). One commenter inquired whether a beneficiary who receives intensive services and expires prior to crossing 2 midnights would automatically be classified as appropriately outpatient. Response: We appreciate industry feedback, and believe the rule, as finalized, provides for sufficient flexibility because of its basis in the physician’s expectation of a 2-midnight stay. Such would include situations in which the beneficiary improves more rapidly than the physician’s reasonable, documented expectation. Such unexpected improvement may be provided and billed as inpatient care, as the regulation is framed upon a reasonable and supportable expectation, not the actual length of care, in defining when hospital care is appropriate for inpatient payment. We do not believe beneficiaries treated in an intensive care unit should be an exception to this standard, as our 2-midnight benchmark policy is not contingent on the level of care required or the placement of the beneficiary within the hospital. In addition, while we did not specify the situation in which a beneficiary leaves AMA as an exception under the VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 proposed rule, we acknowledge that an AMA departure is usually an unexpected event and that an inpatient admission could still be appropriate provided that the medical record demonstrates a reasonable expectation of a 2-midnight stay when the admission order is written. As we develop our manual guidance to implement this proposed rule, we will identify those unusual situations in which we expect that the 2 midnight benchmark does not apply. Comment: Commenters voiced concerns that the use of observation would increase under the proposed policy, regardless of CMS’ intent to reduce the incidence of long observation stays. Some commenters believed that if the physician would have to predict a greater than 2 midnight stay, only the sickest individuals and those receiving procedures on the inpatient-only list would be admitted as inpatients, while many more beneficiaries would be placed in observation so as to avoid an inaccurate length of stay determination and subsequent short-stay audits. Other commenters believed that because an increase in observation stays will happen, many hospital stays that would generally be appropriate for an inpatient admission under CMS’ current 24-hour guidance would now be generally inappropriate for Part A payment unless the 2-midnight benchmark is met. Commenters voiced concern that the increase in observation will lead to a strain in outpatient beds and resources, leading the hospitals to use inpatient beds for beneficiaries in outpatient status who need more intense monitoring than is currently available in outpatient areas without a proportionate increase in outpatient reimbursement from Medicare. Commenters also urged CMS to recalibrate its outpatient payment so that hospitals will be adequately compensated for handling the increase in observation cases, particularly for those stays requiring complex monitoring and intervention. The commenters believed that as beneficiaries have the potential for greater cost-sharing for an observation stay than an inpatient stay, this may lead to greater financial liability for beneficiaries. Response: While previous guidance provided a 24-hour benchmark to be used in making inpatient admission decisions, we now specify that the 24 hours relevant to inpatient admission decisions are those encapsulated by 2 midnights. As we provide in this final rule, we expect that the decision to admit the beneficiary should be based on the cumulative time spent at the hospital beginning with the initial PO 00000 Frm 00452 Fmt 4701 Sfmt 4700 outpatient service. In other words, if the physician makes the decision to admit after the beneficiary arrived at the hospital and began receiving services, he or she should consider the time already spent receiving those services in estimating the beneficiary’s total expected length of stay. For example, if the beneficiary has already passed 1 midnight as an outpatient observation patient or in routine recovery following outpatient surgery, the physician should consider the 2 midnight benchmark met if he or she expects the beneficiary to require an additional midnight in the hospital. This means that the decision to admit becomes easier as the time approaches the second midnight, and beneficiaries in medically necessary hospitalizations should not pass a second midnight prior to the admission order being written. The potential increase in very short (less than 2 midnights) observation stays should be balanced by a significant decrease in long (2 midnights or more) observation stays. Because we expect that this revision should virtually eliminate the use of extended observation, we also anticipate it will concurrently limit beneficiary cost-sharing for outpatient services. We are not expecting any change in the utilization of specific beds or facilities, as the expectation of the duration of needed care is independent of the beneficiary’s location at the hospital. Comment: One commenter inquired about the appropriate use of Condition Code 44 in a situation when the physician expected a stay that met the 2-midnight standard but the beneficiary experienced an unanticipated recovery. Response: We refer commenters to the instruction provided at section XI.B. of the preamble of this rule, in which we expanded on Condition Code 44 requirements and application. Under this section, we state that providers may continue to change patient status to outpatient during the hospital stay upon meeting the Condition Code 44 requirements. However, we note that Condition Code 44 is not to be used for unexpected events because, as described above, those situations can remain appropriately inpatient. Thus, a beneficiary who experiences an unexpected recovery during a medically necessary stay should not be converted to an outpatient but should remain an inpatient if the 2-midnight expectation was reasonable at the time the inpatient order was written, but unexpectedly the stay did not fully transpire. In contrast, Condition Code 44 is specifically for the situation when the utilization review or management committee determines that the physician has not appropriately E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations admitted a patient and the physician concurs that the status should be converted to outpatient prior to beneficiary discharge. Comment: Commenters indicated that inpatient-only procedures that require a 1-day length of stay would be affected by this proposed policy and may not be adequately reimbursed under Medicare Part B. The commenters requested that CMS specify that all services on the inpatient-only list should automatically be deemed to meet inpatient service criteria, even if the beneficiary is in the hospital for less than 2 midnights. Conversely, another commenter suggested that excluding inpatient-only procedures, which may or may not require 2-midnight stays, contradicts a time-based policy. Response: In the proposed rule, we stated that procedures on the OPPS inpatient-only list are always appropriately inpatient, regardless of the actual time expected at the hospital, so long as the procedure is medically necessary and performed pursuant to a physician order and formal admission. Procedures designated as inpatient-only are deemed statutorily appropriate for inpatient payment at § 419.22(n). As such, we believe that inpatient-only procedures are appropriate for exclusion from the 2-midnight benchmark. Under this final rule, inpatient-only procedures currently performed as inpatient 1-day procedures will continue to be provided as inpatient 1day procedures, and therefore this rule will not result in any change in status or reimbursement. Comment: Commenters recommended that CMS remove the 2-midnight guidance for certain procedures, allowing physicians to continue admitting as inpatient high risk, complex beneficiaries who are to undergo a surgery with added complexity, regardless of the expected length of stay. The commenters stated that many Medicare beneficiaries have multiple comorbidities, and the execution of seemingly simple procedures may require more pre-, intra, and post-operative services than would be necessary for younger or healthier patients, even when there is no expectation that the beneficiary will require a stay of at least 2 midnights. Commenters added that the provision of such services may exceed the level of care typically associated with observation care. Other commenters suggested that CMS explicitly preclude from further review any services that are not typically available in an outpatient setting, such as telemetry. Response: We agree with commenters that factors such as the procedures being VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 performed and the health status of the beneficiary are important considerations in the decision to keep the beneficiary in the hospital. However, as we note above, the beneficiary’s required ‘‘level of care’’ is not part of the guidance regarding hospital inpatient admission decisions. Rather, we provide physicians with a 2-midnight admission framework to effectuate appropriate inpatient hospital admission decisions. More specifically, we have stipulated that factors such as the procedures being performed and the beneficiary’s condition and comorbidities apply when the physician formulates his or her expectation regarding the need for hospital care, while the decision of whether to admit a beneficiary as an inpatient or keep as an outpatient is based upon the physician’s expectation of the beneficiary’s required length of stay. In this rule, we have not identified any circumstances where the 2midnight benchmark restricts the physician to a specific pattern of care, as we have specified that the 2-midnight benchmark, like the previous 24-hour benchmark, does not prevent the physician from providing any service at any hospital regardless of the expected duration of the service. Rather, this policy provides guidance on when the hospitalized beneficiary is appropriate for coverage under Part A benefits as an inpatient, and when the hospitalized beneficiary should receive that treatment as a registered outpatient subject to Part B benefits. On the other hand, we also specify that certain procedures may have intrinsic risks, recovery impacts or complexities that would cause them to be appropriate for inpatient coverage under Part A regardless of the expected length of hospital time a specific physician expects a particular patient to require. We believe that the OPPS InpatientOnly List identifies those procedures and we have proposed that this is a specific exception to the generally applicable 2 midnight benchmark. We may also specify other potential exceptions to the generally applicable benchmark as we revise our manuals to implement this proposed rule. Comment: Commenters recommended that the risk of an adverse event as being a determinant in the inpatient admission decision should be removed, qualified as ‘‘high’’ or ‘‘unreasonable,’’ or narrowly defined to only include risks during the beneficiary’s course of treatment that can be addressed or managed by the hospital. The commenters pointed to past trends of inconsistency in the use of risk as a factor in the inpatient admission PO 00000 Frm 00453 Fmt 4701 Sfmt 4700 50947 decision by hospitals and appeal entities. Commenters suggested that, at most, the beneficiary’s risk of morbidity or mortality should be a factor considered when making the decision of whether the keep the beneficiary in the hospital or send the beneficiary home, not when determining the appropriate patient status as inpatient or outpatient. Response: We believe that, due to the nature of the Medicare population, coexisting or concurrent medical conditions are a frequent occurrence. As a result, admission decisions centered around risk must relate to current disease processes or presenting symptoms, and not merely be part of the beneficiary’s benign or latent past medical history. We note that ‘‘risk’’ in common usage describes an unacceptable probability of an adverse outcome, as in ‘‘risky behavior.’’ We reiterate our stance that the decision to hospitalize a beneficiary is a complex medical decision made by the physician in consideration of various risk factors, including the beneficiary’s age, disease processes, comorbidities, and the potential impact of sending the beneficiary home. It is up to the physician to make the complex medical decision of whether the beneficiary’s risk of morbidity or mortality dictates the need to remain at the hospital because the risk of an adverse event would otherwise be unacceptable under reasonable standards of care, or when the beneficiary may be discharged home. If the resultant length of stay for medically necessary hospitalization is expected to surpass 2 midnights, the physician should admit the patient as an inpatient. Comment: Commenters pointed out that the complexity of caring for the elderly beneficiary and the limited access to resources in the community continues to be challenging. While a beneficiary may not meet the screening criteria for an inpatient admission, the beneficiary’s complex needs and lack of access to medical therapies outside the hospital require the admitting physician to make a judgment as to whether such patients are in greater danger of serious illness or death if they are discharged than if they are admitted, and may result in the hospital being unable to release a beneficiary into the community. Conversely, a commenter wanted to remind CMS that convenience factors or nonmedically necessary care violate the Social Security Act, which excludes custodial care from Medicare coverage. Response: While we will not dictate the hospital or physician admission decision, we also note that Medicare is statutorily prohibited under section E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50948 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 1862(a)(1)(A) of the Act from paying for services that are not reasonable and necessary. Therefore, we have identified so-called ‘‘social admissions’’ and admissions to avoid inconvenience as inappropriate from Medicare payment per the aforementioned statutory exclusion. This is consistent with current manual instructions. We will look for opportunities to offer additional guidance addressing these types of medical necessity decisions as we update our policy manuals. Comment: Commenters requested that CMS provide clarification for how hospitals receiving beneficiaries from another hospital should make the admission decision under the proposed policy. Response: We recognize that, in addition to the occurrence of unexpected transfers out of a hospital, there are a number of possible scenarios involving transfers into a hospital that that may impact the length of stay determination under this policy. We noted in the proposed rule that an unexpected transfer out of the sending hospital is one reason why an inpatient stay that lasts less than 2 midnights may still be appropriately inpatient. Due to the complexity of the possible transfer scenarios, we believe that explicit guidance should be reserved for manual instruction. Drafting these instructions will be one of the highest priorities as we develop our implementation instructions. Comment: Commenters pointed out that, under this proposal, the distinction between inpatient and outpatient may come down to small time discrepancies. For example, a beneficiary whose hospital stay begins shortly before midnight and lasts just over 48 hours will be considered an inpatient because the stay will cross 2 midnights, while a beneficiary whose hospital stay begins shortly after midnight and lasts just under 48 hours will be considered an outpatient because the stay will only cross 1 midnight. Response: The application of 2 midnights was proposed for the purpose of providing both consistency and clarity. We have expected and continue to expect that physicians will make the decision to keep a beneficiary in the hospital when clinically warranted and will order all appropriate treatments and care in the appropriate location based on the beneficiary’s individual medical needs. We also expect that physicians will apply the revised benchmark as they have previously applied the existing benchmark, providing any medically necessary services in an inpatient status whenever the benchmark is met and in all other VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 instances providing identical services to patients staying at the hospital in a day or overnight outpatient status. While we have historically referenced a 24-hour benchmark, we now specify that the 24 hours relevant to inpatient admission decisions are those encapsulated by 2 midnights. This distinction is consistent with our application of Medicare utilization days, which are based on the number of midnights crossed. Medicare charges beneficiaries for utilization days and pays hospitals for utilization days when it applies per diem adjustments, such as the transfer adjustment. A beneficiary who is admitted just before midnight and discharged 36 hours later is currently charged 2 utilization days, while a beneficiary admitted just after midnight is charged 1 day. In addition, the use of 2 midnights is an easy concept for beneficiaries to understand in assessing the appropriateness of their assigned status, associated coverage, and impacts. Comment: Commenters provided alternate proposals for guiding inpatient admissions and medical review. Some commenters suggested that physicians are not apprised of admission criteria, but rather the medical treatment necessary for the beneficiary, and suggested that case management be permitted to make inpatient admission determinations, which could be concurred or nonconcurred to by the treating physician. Conversely, other commenters believed the physician was most apprised of the patient condition and, therefore, the need for inpatient admission or care spanning 2 midnights. As such, some commenters believed the physician order should trigger a presumption of appropriate payment for medical review purposes. One commenter suggested good faith protections for facilities in strict adherence to their hospital comprised utilization review plan. Another commenter disagreed with the need for any change to the current medical review policy. Response: In the proposed rule, we focused on clarifying and modifying the distinction between hospitalization as an outpatient and hospitalization as an inpatient. While the proposed approach arose out of significant consideration for provider impact, ease in implementation and operationalization, we will assess commenter feedback falling within the scope of CMS’ policy in implementing changes to our manual provisions. Comment: Commenters requested further guidance to clarify what criteria support a reasonable and necessary inpatient admission. The commenters’ suggested sources of such guidance PO 00000 Frm 00454 Fmt 4701 Sfmt 4700 included evidence-based guidelines offered through the Agency for Healthcare Research and Quality (AHRQ) National Guidelines Clearinghouse and the various medical specialty societies and commercial hospital screening guidelines. Some commenters also suggested that inpatient admissions be deemed reasonable and necessary based on the use of such sources. Another commenter indicated that a time-based policy contradicts CMS instructions contained in the Program Integrity Manual pertaining to the use of screening tools as part of the review of inpatient hospital claims. Regardless of the criteria chosen, commenters iterated that CMS and its contractors must update existing inpatient admission guidance and policies to ensure consistency in application by all Medicare review contractors. Commenters also inquired whether providers would have the opportunity to comment on any additional guidance that will be created to implement this rule. Response: Medicare review contractors must abide by CMS policies in conducting payment determinations, but are permitted to take into account evidence-based guidelines or commercial utilization tools that may aid such a decision. We also acknowledge that this type of information may be appropriately considered by the physician as part of the complex medical judgment that guides his or her decision to keep a beneficiary in the hospital and formulation of the expected length of stay. As we update our manuals and take additional steps to implement this rule, we anticipate using our usual processes to develop and release subregulatory guidance such as manual instructions and educational materials, which may include open door forums, regional meetings, correspondence and other ongoing interactions with stakeholders; and that our contractors will continue to involve local entities as they implement these rules. Comment: Several commenters indicated that CMS should delay enforcement of the revised admissions criteria until a time after October 1, 2013, due to the significant system changes and educational efforts that will be required. Some commenters indicated that CMS should use this delay in order to conduct further research and collaborate with providers, while others suggested that CMS conduct a thorough analysis of current payment policy and planned payment reforms that could affect inpatient admission decisions, including those E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations with implications for patient safety, quality, and beneficiary cost-sharing, before finalizing its guidance. Other commenters suggested that claim reviews for inpatient stays of greater than 2 midnights should continue without evidence of gaming for a period of time following implementation of the new policy to ensure that hospitals are properly billing under the revised criteria. The commenters stated that after that time has passed, reviews of inpatient stays longer than 2 midnights would be based on evidence of overutilization. Response: We proposed only a change in the inpatient admissions benchmark from an hourly expectation (24 hours) to a daily (2-midnights) expectation. We do not believe that delays in implementation are necessary or desirable, and we expect, through collaboration with stakeholders, to develop additional guidance and instruction as part of that implementation. Comment: Commenters questioned the applicability of the proposed rule to differing types of hospital facilities. Commenters specifically requested clarity regarding application of the rule to IRFs and IPFs. Commenters further asserted that this distinction may conflict with State laws requiring inpatient admissions post 24 hours, and such States should be granted exception. Response: In the proposed rule, our reference to section 1861(e) of the Act was intended to specify that CAHs were included in the proposed policies, not that we were proposing that IPFs or other non-IPPS hospitals should be excluded. Having considered the public comments to the proposed rule, we believe that all hospitals, LTCHs, and CAHs, with the exception of IRFs, would appropriately be included in our final policies regarding the 2-midnight admission guidance and medical review criteria for determining the general appropriateness of inpatient admission and Part A payment. Due to the inherent differences in the operation of and beneficiary admissions to IRFs, such providers must be excluded from the aforementioned admission guidelines and medical review instruction. We disagree with the commenters’ assertion that the 2-midnight admission and medical review policies conflict with existing state laws regarding observation. The 2-midnight benchmark does not prohibit physicians from ordering inpatient admission in accordance with state law; rather, this policy indicates when Medicare payment will be deemed appropriate. To the extent that State law requires VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 admission in situations where Medicare payment would not be appropriate, providers should work with their States to resolve those discrepancies. Comment: Commenters indicated that the proposed policy, which clarifies when a beneficiary becomes an inpatient, promotes the integrity and accuracy of the 340B program. They stated that the 340B program creates an incentive for hospitals to keep beneficiaries in observation status for the purpose of obtaining the deeply discounted 340B acquisition price that would otherwise by unavailable. Thus, they added, the 340B spread creates a financial incentive for 340B hospitals to keep beneficiaries in outpatient/ observation status for the sole purpose of administering drugs. Response: We appreciate the observation of the commenters and concur that this policy promotes consistent application of an inpatient status to all stakeholders. (3) Medical Review of Inpatient Hospital Admissions Under Part A Under this revised policy, services designated by the OPPS Inpatient-Only list as inpatient-only, would continue to be appropriate for inpatient hospital admission and payment under Medicare Part A. In addition, surgical procedures, diagnostic tests, and other treatments would be generally deemed appropriate for inpatient hospital admission and payment under Medicare Part A when the physician expects the patient to require a stay that crosses at least 2 midnights and admits the patient to the hospital based upon that expectation. We proposed, and are now finalizing, two distinct, though related, medical review policies, a 2-midnight presumption and a 2-midnight benchmark. Under the 2-midnight presumption, inpatient hospital claims with lengths of stay greater than 2 midnights after the formal admission following the order will be presumed generally appropriate for Part A payment and will not be the focus of medical review efforts absent evidence of systematic gaming, abuse or delays in the provision of care in an attempt to qualify for the 2-midnight presumption (that is, inpatient hospital admissions where medically necessary treatment was not provided on a continuous basis throughout the hospital stay and the services could have been furnished in a shorter timeframe). Beneficiaries should not be held in the hospital absent medically necessary care for the purpose of meeting the 2-midnight benchmark. Review contractors will also continue to assess claims in which the PO 00000 Frm 00455 Fmt 4701 Sfmt 4700 50949 beneficiary span of care after admission crosses 2 midnights: • To ensure the services provided were medically necessary; • To ensure that the stay at the hospital was medically necessary; • To validate provider coding and documentation as reflective of the medical evidence; • When the CERT Contractor is directed to do so under the Improper Payments Elimination and Recovery Improvement Act of 2012 (Pub. L. 112– 248); or • If directed by CMS or other authoritative governmental entity (including but not limited to the HHS Office of Inspector General and Government Accountability Office). Conversely, under this revised policy, CMS’ medical review efforts will focus on inpatient hospital admissions with lengths of stay crossing only 1 midnight or less after admission (that is, only 1 Medicare utilization day, as defined in 42 CFR 409.61 and implemented in the MBPM, Chapter 3, Section 20.1). As previously described, such claims have traditionally demonstrated the largest proportion of inpatient hospital improper payments under Medicare Part A. If the physician admits the beneficiary as an inpatient but the beneficiary is in the hospital for less than 2 midnights after the order is written, CMS and its medical review contractors will not presume that the inpatient hospital status was reasonable and necessary for payment purposes, but may instead evaluate the claim pursuant to the 2-midnight benchmark. Medicare review contractors will (a) evaluate the physician order for inpatient admission to the hospital, along with the other required elements of the physician certification, (b) the medical documentation supporting the expectation that care would span at least 2 midnights, and (c) the medical documentation supporting a decision that it was reasonable and necessary to keep the patient at the hospital to receive such care, in order to determine whether payment under Part A is appropriate. In their review of the medical record, Medicare review contractors will consider complex medical factors that support a reasonable expectation of the needed duration of the stay relative to the 2-midnight benchmark. Both the decision to keep the beneficiary at the hospital and the expectation of needed duration of the stay are based on such complex medical factors as beneficiary medical history and comorbidities, the severity of signs and symptoms, current medical needs, and the risk (probability) of an adverse event occurring during the E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50950 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations time period for which hospitalization is considered. In other words, if it was reasonable for the physician to expect the beneficiary to require a stay lasting 2 midnights, and that expectation is documented in the medical record, inpatient admission is generally appropriate, and payment may be made under Medicare Part A; this is regardless of whether the anticipated length of stay did not transpire due to unforeseen circumstances such as beneficiary death or transfer (so long as the physician’s order and certification requirements also are met). As discussed above, an inpatient admission is appropriate and Part A payment may also be made in the case of services on Medicare’s inpatientonly list, regardless of the expected length of stay. Comment: Some commenters shared concerns regarding the proposed method of calculating the length of stay for purposes of the 2-midnight benchmark, beginning when the beneficiary is moved from any outpatient area to a bed in the hospital in which the additional hospital services will be provided. Commenters noted that hospital capacity issues can lead to situations in which a beneficiary is boarded in the emergency department until a bed becomes available, which can be hours after the admission order is written. In other instances, the commenters added, an inpatient admission may be planned after a surgical procedure and the beneficiary becomes an inpatient when he or she reports to the operating room for preoperative assessment and preparation. Commenters pointed out that if the clock does not start until beneficiary movement to another area of the hospital occurs, the beneficiary may not meet the 2-midnight benchmark although he or she was receiving treatment in the hospital for greater than 2 midnights. Commenters provided various alternate suggestions for when the clock should start. Many commenters suggested that CMS start the clock the earliest of: (1) When the physician writes an order for admission or observation; (2) when the beneficiary is treated in the emergency department; or (3) when the beneficiary is placed in a bed for observation. Other commenters suggested that the clock should begin when the beneficiary meets inpatient admission criteria or when the nursing intake notes specify the time the beneficiary is admitted to the floor and is put in a bed. Regardless of the decision CMS made on this point, commenters requested that clarification be provided on when the inpatient order should be written and how the time VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 should be counted for medical review purposes. Response: We agree with the concerns noted by commenters, and are revising the proposed rule accordingly. In this final rule, we specify that the ordering physician may consider time the beneficiary spent receiving outpatient services (including observation services, treatments in the emergency department, and procedures provided in the operating room or other treatment area) for purposes of determining whether the 2-midnight benchmark is expected to be met and therefore inpatient admission is generally appropriate. For beneficiaries who do not arrive through the emergency department or are directly receiving inpatient services (for example, inpatient admission order written prior to admission for an elective admission or transfer from another hospital), the starting point for medical review purposes will be from the time the patient starts receiving any services after arrival at the hospital. We emphasize that the time the beneficiary spent as an outpatient before the inpatient admission order is written will not be considered inpatient time, but may be considered by physicians in determining whether a patient should be admitted as an inpatient, and during the medical review process for the limited purpose of determining whether the 2-midnight benchmark was met and therefore payment is generally appropriate under Part A. Claims in which a medically necessary inpatient stay spans at least 2 midnights after the beneficiary is formally admitted as an inpatient will be presumed appropriate for inpatient admission and inpatient hospital payment and will generally not be subject to medical review of the inpatient admission, absent evidence of systematic gaming, abuse, or delays in the provision of care in an attempt to qualify for the 2-midnight presumption. Comment: Commenters requested clarification regarding the distinction between inpatient time and outpatient time for purposes of meeting the 2midnight benchmark, specifically for those beneficiaries who are first treated in observation status and then later as hospital inpatients pursuant to a physician’s order. Commenters recommended that CMS consider observation care to count toward the 2midnight rule when complications arise that lead to previously unanticipated extended care in accord with requirements for skilled nursing facility eligibility. Response: As noted above, we will allow the physician to consider time spent in the hospital as an outpatient in PO 00000 Frm 00456 Fmt 4701 Sfmt 4700 making their inpatient admission decision. This is consistent with CMS existing instructions and medical review guidance, which allow physicians and Medicare review contractors to account for the beneficiary’s medical history and physical condition prior to the inpatient admission decision. Therefore, if upon beneficiary presentation, the physician is unable to make an evaluation and corresponding expected length of stay determination, the physician may first monitor the beneficiary in observation or continue to perform diagnostics in the outpatient arena. If the beneficiary’s medical needs and condition after 1 midnight in outpatient status dictate the need for an additional midnight within the hospital receiving medically necessary care, the physician may consider the care in the outpatient setting when making his or her admission decision. Medicare review contractors would similarly apply the 2midnight benchmark to all time spent within the hospital receiving medically necessary services in their claim evaluation. We reiterate that the physician order, the remaining elements of the physician certification, and formal inpatient admission remain the mandated means of inpatient admission. While outpatient time may be accounted for in application of the 2-midnight benchmark, it may not be retroactively included as inpatient care for skilled nursing care eligibility or other benefit purposes. Inpatient status begins with the admission based on a physician order. Comment: Commenters expressed concern about the additional scrutiny that 1-day inpatient hospital stays would undergo under this policy. Commenters also were particularly interested in how the review contractors would review inpatient stays that lasted less than 2 midnights, including whether current review criteria would continue to be utilized for such reviews. The commenters requested that CMS define situations in which a hospital stay lasting less than 2 midnights would properly qualify as inpatient. Response: If the physician admits the beneficiary as an inpatient but the beneficiary is in the hospital for less than 2 midnights after the admission begins, CMS and the Medicare review contractors will not presume that the inpatient hospital admission was reasonable and necessary for payment purposes, but will apply the 2-midnight benchmark in conducting medical review. In making their determination of whether the inpatient admission is appropriate, Medicare review E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations contractors will evaluate: (a) The physician order for inpatient admission to the hospital, along with the other required elements of the physician certification; (b) the medical documentation supporting that the order was based on an expectation of need for care spanning at least 2 midnights; and (c) the medical documentation supporting a decision that it was reasonable and necessary to keep the patient at the hospital to receive such care. In their review of the medical record, Medicare review contractors will consider complex medical factors that support a reasonable expectation of the needed duration of the stay relative to the 2midnight benchmark. These include such factors as beneficiary medical history and comorbidities, the severity of signs and symptoms, current medical needs, and the risk of an adverse event. Comment: Commenters asserted that the proposed rule penalizes efficiency, as those hospitals that are able to treat beneficiaries in less than 2 midnights will be able to admit fewer beneficiaries than those less efficient hospitals who do not have the same resources. Other commenters expressed concern that the new proposed policy would encourage hospitals to hold beneficiaries in the hospital solely for the purpose of meeting the 2-midnight presumption and avoid audits of their claims. The commenters stated that consequences of such practices on the beneficiaries could include prolonged exposure to additional medical risks and would also lead to increased costs to the Medicare program, due to medically unnecessary time in the hospital. Conversely, some commenters indicated that they did not believe that hospitals would not hold patients for longer than necessary to meet inpatient requirements. Response: We have noted that the decision to admit is based on an expectation of medically necessary care transcending 2 midnights resulting from the practitioner’s consideration of the beneficiary’s condition and medical needs. We will monitor all hospitals for intentional or unwarranted delays in the provision of care, which may result in increased inpatient admissions secondary to the 2 midnight instruction. We are also cognizant of concerns related to unnecessarily elongated hospital admissions, and will be monitoring for such patterns of systemic delays indicative of fraud or abuse. If a hospital is unnecessarily holding beneficiaries to qualify for the 2midnight presumption, CMS and/or its contractors may conduct review on any of its inpatient claims, including those VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 which surpassed 2 midnights after admission. Comment: One commenter stated that while it is reasonable that a medically necessary hospital stay crossing 2 midnights may be appropriately billed as inpatient, there should be no presumption that such a 2-midnight stay was itself medically necessary simply because a patient was in the hospital 2 consecutive nights. The commenter stated that the proposed rule includes a requirement that review will only be permitted when the error rate is sufficient to warrant auditing activity; however, the audit that would establish this error would itself be precluded under CMS’ presumption. The commenter stated that, alternatively, data analysis of the claims should remain the foundation for selection of claims for medical record review to determine whether the documentation supports the claim as billed. The commenter believed that a presumption of medical necessity based on the time a beneficiary stays in the hospital places the Medicare trust fund and taxpayers at risk. Response: We note that it was not our intent to suggest that a 2-midnight stay was presumptive evidence that the stay at the hospital was necessary; rather, only that if the stay was necessary, it was appropriately provided as an inpatient stay. We have discussed in response to other comments that, in accordance with our statutory obligations, some medical review is always necessary to ensure that services provided are reasonable and necessary, and that we will continue to review these longer stays for the purposes of monitoring, determining correct coding, and evaluating the medical necessity for the beneficiary to remain at the hospital, irrespective of the inpatient or outpatient ‘‘status’’ to which the beneficiary was assigned. In addition, claims that evidence that a hospital is effectuating systematic abuse of the 2midnight presumption, such as unexplained delays in the provision of care or aberrancies in billing, may be subject to medical review despite surpassing 2 midnights after admission. Comment: Commenters requested that CMS provide guidance on what would constitute ‘‘abuse’’ or ‘‘gaming’’ for this review purpose. Some commenters were concerned that enabling Medicare review contractors to make these determinations would unravel the presumption if the contractors had incentives to identify erroneous claims. Other commenters believed that Medicare contractors, who have expertise in utilization review and Medicare data, should be tasked with PO 00000 Frm 00457 Fmt 4701 Sfmt 4700 50951 identifying providers that are gaming or abusing the system for purposes of meeting the 2-midnight presumption. Comments also suggested that CMS examine hospitals’ utilization review process rather than rely on claim outputs. Commenters also urged CMS to be clear that audits will occur only if a pattern is detected. Response: In the proposed rule, we stated that patient status reviews for inpatient admissions with lengths of stay greater than 2 midnights after admission would typically be conducted if we suspect that a provider is using the 2-midnight presumption to effectuate systematic abuse or gaming. We have elaborated on our review plans above and summarize by stating that while we have a statutory obligation to ensure that all services are medically necessary and correctly paid, we believe that these changes in our benchmarks and the additional guidance accompanying them will allow us to reduce the administrative burden of reviews. We will do this by reviewing stays spanning at least 2 midnights after admission for the purpose of monitoring and responding to patterns of incorrect DRG assignments, inappropriate or systemic delays, and lack of medical necessity for the stay at the hospital, but not for the purpose of routinely denying payment for such inpatient admissions on the basis that the services should have been provided on an outpatient basis. We expect to shift our attention to the smaller anticipated volume of 0 and 1 day short stays and then, to the extent that facilities correctly apply the proposed benchmark, away from short stays to other areas with persistently high improper payment rates. Comment: Commenters voiced concerns that while CMS proposed that those inpatient hospital admissions meeting the 2-midnight benchmark would be generally appropriate for Part A payment, there is no guarantee that the Medicare contractors would follow this guidance. Some commenters expressed apprehension that the timebased policy would not result in fewer reviews, as the policy stated that contractors could review whether the physician’s expectation was reasonable, while others thought the doors would be opened to more hospital claim audits focusing on the need for the beneficiary to stay in the hospital for greater than 2 midnights. Commenters also sought assurance from CMS that reviews would be conducted based on the information the physician had available at the time he or she developed the expectation of a 2-midnight stay and wrote the order pursuant to that expectation. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50952 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Response: We acknowledge that it is very important that clear and consistent instructions are provided to facilities, physicians, and Medicare review contractors. We intend to quickly develop implementation instructions, manual guidance, and additional education to ensure that all entities receive initial and ongoing guidance in order to promote consistent application of these changes and repeatable and reproducible decisions on individual cases. We intend to ensure that our instructions to providers and reviewers alike emphasize that the decision to admit should be based on and evaluated in respect to the information available to the admitting practitioner at the time of the admission. After consideration of the public comments we received, we are including in this final rule several revisions and clarifications to the proposed policy. First, we are finalizing at § 412.3(e)(1) the 2-midnight benchmark as proposed at § 412.3(c)(1), that services designated by the OPPS Inpatient-Only list as inpatient-only would continue to be appropriate for inpatient hospital admission and payment under Medicare Part A. In addition, surgical procedures, diagnostic tests, and other treatments would be generally deemed appropriate for inpatient hospital admission and payment under Medicare Part A when the physician expects the patient to require a stay that crosses at least 2 midnights and admits the patient to the hospital based upon that expectation. We proposed at § 412.3(c)(2), and are finalizing at § 412.3(e)(2), that if an unforeseen circumstance, such as beneficiary death or transfer, results in a shorter beneficiary stay than the physician’s expectation of at least 2 midnights, the patient may still be considered to be appropriately treated on an inpatient basis, and the hospital inpatient payment may be made under Medicare Part A. We proposed, and are now finalizing, two distinct, although related, medical review policies, a 2midnight benchmark and a 2-midnight presumption. The 2-midnight benchmark represents guidance to admitting practitioners and reviewers to identify when an inpatient admission is generally appropriate for Medicare coverage and payment, while the 2midnight presumption directs medical reviewers to select claims for review under a presumption that the occurrence of 2 midnights after admission appropriately signifies an inpatient status for a medically necessary claim. The starting point for the 2-midnight benchmark will be when VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 the beneficiary begins receiving hospital care on either an inpatient basis or outpatient basis. That is, for purposes of determining whether the 2-midnight benchmark will be met and, therefore, whether inpatient admission is generally appropriate, the physician ordering the admission should account for time the beneficiary spent receiving outpatient services such as observation services, treatments in the emergency department, and procedures provided in the operating room or other treatment area. From the medical review perspective, while the time the beneficiary spent as an outpatient before the admission order is written will not be considered inpatient time, it may be considered during the medical review process for purposes of determining whether the 2-midnight benchmark was met and, therefore, whether payment is generally appropriate under Part A. For beneficiaries who do not arrive through the emergency department or are directly receiving inpatient services (for example, inpatient admission order written prior to admission for an elective admission or transfer from another hospital), the starting point for medical review purposes will be when the beneficiary starts receiving services following arrival at the hospital. We proposed that both the decision to keep the patient at the hospital and the expectation of needed duration of the stay would be based on such factors as beneficiary medical history and comorbidities, the severity of signs and symptoms, current medical needs, and the risk of an adverse event. In this final rule, we now are clarifying that risk (or probability) of an adverse event relates to occurrences during the time period for which hospitalization is considered. We are finalizing that inpatient hospital claims with lengths of stay greater than 2 midnights after the formal admission following the order will be presumed generally appropriate for Part A payment and will not be the focus of medical review efforts absent evidence of systematic gaming, abuse, or delays in the provision of care in an attempt to qualify for the 2-midnight presumption. We also are clarifying in this final rule how we will instruct contractors to review inpatient stays spanning less than 2 midnights after admission. Such claims would not be subject to the presumption that services were appropriately provided during an inpatient stay rather than an outpatient stay because the total inpatient time did not exceed 2 midnights. However, upon medical review, the time spent as an outpatient will be counted toward meeting the 2-midnight benchmark that PO 00000 Frm 00458 Fmt 4701 Sfmt 4700 the physician is expected to apply to determine the appropriateness of the decision to admit. In other words, even though the inpatient admission was for only 1 Medicare utilization day, medical reviewers will consider the fact that the beneficiary was in the hospital for greater than 2 midnights following the onset of care when making the determination of whether the inpatient stay was reasonable and necessary. For those admissions in which the basis for the physician expectation of care surpassing 2 midnights is reasonable and well-documented, reviewers may apply the 2-midnight benchmark to incorporate all time receiving care in the hospital. We will continue to use our existing monitoring and audit authority, such as the CERT program, to ensure that our review efforts focus on those subsets of claims with the highest error rates and reduce the administrative burden for those subsets that have demonstrated compliance with our clarified and modified guidance. 4. Impacts of Changes in Admission and Medical Review Criteria In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27649 through 27650), we discussed our actuaries’ estimate that our proposed 2-midnight policy (referred to in this final rule as the 2-midnight benchmark and the 2midnight presumption) would increase IPPS expenditures by approximately $220 million. These additional expenditures result from an expected net increase in hospital inpatient encounters due to some encounters spanning more than 2 midnights moving to the IPPS from the OPPS, and some encounters of less than 2 midnights moving from the IPPS to the OPPS. Specifically, our actuaries examined FY 2009 through FY 2011 Medicare claims data for extended hospital outpatient encounters and shorter stay hospital inpatient encounters and estimated that approximately 400,000 encounters would shift from outpatient to inpatient and approximately 360,000 encounters would shift from inpatient to outpatient, causing a net shift of 40,000 encounters. These estimated shifts of 400,000 encounters from outpatient to inpatient and 360,000 encounters from inpatient to outpatient represent a significant portion of the approximately 11 million encounters paid under the IPPS. The net shift of 40,000 encounters represents an increase of approximately 1.2 percent in the number of shorter stay hospital inpatient encounters paid under the IPPS. Because shorter stay hospital inpatient encounters currently represent approximately 17 percent of the IPPS expenditures, our actuaries estimated E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations that 17 percent of IPPS expenditures would increase by 1.2 percent under our proposed policy. These additional expenditures are partially offset by reduced expenditures from the shift of shorter stay hospital inpatient encounters to hospital outpatient encounters. Our actuaries estimated that, on average, the per encounter payments for these hospital outpatient encounters would be approximately 30 percent of the per encounter payments for the hospital inpatient encounters. In light of the widespread impact of the proposed 2-midnight policy on the IPPS and the systemic nature of the issue of inpatient status and improper payments under Medicare Part A for short-stay inpatient hospital claims, we stated our belief that it is appropriate to use our exceptions and adjustments authority under section 1886(d)(5)(I)(i) of the Act to propose to offset the estimated $220 million in additional IPPS expenditures associated with the proposed policy. This special exceptions and adjustment authority authorizes us to provide ‘‘for such other exceptions and adjustments to [IPPS] payment amounts . . . as the Secretary deems appropriate.’ ’’ We proposed to reduce the standardized amount, the hospital-specific rates, and the Puerto Rico-specific standardized amount by 0.2 percent. Comment: Commenters generally did not support the proposed -0.2 percent payment adjustment. Comments included the following assertions: CMS actuaries’ estimated increase in IPPS expenditures of $220 million was unsupported and insufficiently explained to allow for meaningful comment; CMS did not provide sufficient rationale for the use of our exceptions and adjustments authority under section 1886(d)(5)(I)(i) of the Act; CMS should not be adjusting the IPPS payment rates for expected shifts in utilization between inpatient and outpatient; CMS did not take into account the impact of the Part B Inpatient Billing proposed rule in developing its estimates; CMS should provide parallel treatment regarding the financial impact of both the medical review policy in the FY 2014 IPPS/ LTCH PPS proposed rule and the policies in the Part B Inpatient Billing proposed rule and offset and restore the $4.8 billion dollar reduction to hospital payments over 5 years contained in the Part B Inpatient Billing proposed rule; and CMS’ proposed policy was a coverage decision and CMS should not adjust IPPS rates for coverage decisions. Response: We disagree with commenters who indicated that our actuaries’ estimated increase in IPPS expenditures of $220 million was VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 unsupported and insufficiently explained to allow for meaningful comment. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27649), we specifically discussed the methodology used and the components of the estimate. Our actuaries examined FY 2009 to FY 2011 claims data. Based on this examination, we stated the number of encounters our actuaries estimated would shift from inpatient to outpatient (360,000) and the number of encounters they estimated would shift from outpatient to inpatient (400,000). We described the methodology we used to translate this net shift of 40,000 encounters into our $220 million estimate, including an estimate of the increase these 40,000 encounters represent in shorter stay hospital inpatient encounters (1.2 percent), the share that expenditures for shorter stay hospital inpatient encounters represent of IPPS expenditures (17 percent), and our estimate of the payment difference between OPPS and IPPS for these encounters (OPPS payment for these encounters was estimated to be 30 percent of the IPPS payment for these encounters). In addition to the opportunity to comment on the estimate, any component of the estimate, or the methodology, commenters had an opportunity to provide alternative estimates for us to consider. In determining the estimate of the number of encounters that would shift from outpatient to inpatient, our actuaries examined outpatient claims for observation or a major procedure. Claims not containing observation or a major procedure were excluded. The number of claims spanning 2 or more midnights based on the dates of service that were expected to become inpatient was approximately 400,000. This estimate did not include any assumption about outpatient encounters shorter than 2 midnights potentially becoming inpatient encounters. In determining the estimate of the number of encounters that would shift from inpatient to outpatient, our actuaries examined inpatient claims containing a surgical MS–DRG. Claims containing medical MS–DRGs were excluded. The number of claims spanning less than 2 midnights based on the length of stay that were expected to become outpatient, after excluding encounters that resulted in death or transfers, was approximately 360,000. The estimates of the shifts in encounters as described above were primarily based on FY 2011 Medicare inpatient and outpatient claims data. However, our actuaries also examined FY 2009 and FY 2010 Medicare PO 00000 Frm 00459 Fmt 4701 Sfmt 4700 50953 inpatient and outpatient claims data and found the results for the earlier years were consistent with the FY 2011 results. While there is a certain degree of uncertainty surrounding any cost estimate, our actuaries have determined that the methodology, data, and assumptions used are reasonable for the purpose of estimating the overall impact of our proposed policy. We note that the assumptions used for purposes of reasonably estimating the overall impact in FY 2014 should not be construed as absolute statements about every individual encounter. For example, we fully expect that not every single surgical MS–DRG encounter spanning less than 2 midnights will shift to outpatient and that not every single outpatient observation stay or major surgical encounter spanning more than 2 midnights will shift to inpatient. We also disagree with commenters who indicated that we did not provide sufficient rationale for the use of our exceptions and adjustments authority under section 1886(d)(5)(I)(i) of the Act. We discussed that the issue of patient status has a substantial impact on improper payments under Medicare Part A for short-stay inpatient hospital claims, citing the fact that the majority of improper payments under Medicare Part A for short-stay inpatient hospital claims have been due to inappropriate patient status. In 2012, for example, the CERT contractor found that inpatient hospital admissions for 1-day stays or less had a Part A improper payment rate of 36.1 percent. The improper payment rate decreased significantly for 2-day or 3-day stays, which had improper payment rates of 13.2 percent and 13.1 percent, respectively. We stated that we believed the magnitude of these national figures demonstrates that issues surrounding the appropriate determination of a beneficiary’s patient status are not isolated to a few hospitals. We also noted that the RAs had recovered more than $1.6 billion in improper payments because of inappropriate beneficiary patient status. While we agree with commenters that our exceptions and adjustments authority should not be routinely used in the IPPS system, we believe that the systemic and widespread nature of this issue justifies an overall adjustment to the IPPS rates and such an adjustment is authorized under section 1886(d)(5)(I)(i) of the Act. For similar reasons, while we generally agree with commenters that it is not necessary to routinely estimate utilization shifts to ensure appropriate IPPS payments, this is a unique situation. Policy clarifications such as E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50954 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations this do not usually result in utilization shifts of sufficient magnitude and breadth to significantly impact the IPPS. In this situation, we believe it would be inappropriate to ignore such a utilization shift in the development of the IPPS payment rates. With respect to the comments that we did not take into account the impact of the Part B Inpatient Billing proposed rule in developing our estimates, we note that our actuaries did take those impacts into account in developing our proposed adjustment. Our estimate of the net shift in FY 2014 encounters between inpatient and outpatient would have been substantially higher in the absence of the policies discussed in the Part B Inpatient Billing proposed rule, in particular the discussion of timely filing. Specifically, in the absence of the timely filing requirement, there would be fewer inpatient encounters estimated to become outpatient encounters, which would have resulted in a larger cost than our estimated $220 million. With respect to the comment that CMS should provide parallel treatment regarding the financial impact of the medical review policy in the FY 2014 IPPS/LTCH PPS proposed rule and the interrelated Part B Inpatient Billing proposed rule by offsetting and restoring the estimated $4.8 billion dollar reduction to hospital payments contained in that rule, we note that, although we estimated a decrease in expenditures as a result of our proposed Part B inpatient billing policy, this decrease in expenditures is offset by the costs of the significant number of related administrative appeal decisions as well as CMS Ruling 1455–R, which allows hospitals to seek payment of Part B inpatient services on claims filed outside the timely filing period. As discussed in greater detail in the Regulatory Impact Analysis in the Part B Inpatient Billing proposed rule (78 FR 16643), the combined impact of the appeals decisions, CMS Ruling 1455–R, and Part B inpatient billing policy, to which the 12-month timely filing requirement applies, is an estimated cost to the Medicare program of $1.03 billion over the CY 2013 to CY 2017 time period. We estimate in the Regulatory Impact Analysis of the final Part B inpatient payment policy in this final rule that the combined impact of the appeals decisions, CMS Ruling 1455–R, and the Part B inpatient billing policy will cost the Medicare program $1.260 billion over the CY 2013 to CY 2017 time period. Finally, we disagree with those comments asserting that the modification and clarification of our current instructions regarding the VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 circumstances under which Medicare will generally pay for a hospital inpatient admission in order to improve hospitals’ ability to make appropriate admission decisions are actually coverage decisions in the context of this adjustment. As we clearly stated in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27648), we will continue to review individual claims to ensure the hospital services furnished to beneficiaries are ‘‘reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member,’’ as required by section 1862(a)(1) of the Act. Any hospital service determined to be not reasonable or necessary may not be paid under Medicare Part A or Part B. In the context of this adjustment, these are not new hospital services. Our actuaries continue to estimate there will be approximately $220 million in additional expenditures resulting from our 2-midnight benchmark and 2-midnight presumption medical review policies. This net increase in hospital inpatient encounters is due to some encounters spanning more than 2 midnights moving to the IPPS from the OPPS, and some encounters of less than 2 midnights moving from the IPPS to the OPPS. Therefore, after consideration of the comments we received, and for the reasons described above, we are finalizing a reduction to the standardized amount, the hospitalspecific rates, and the Puerto Ricospecific standardized amount of ¥0.2 percent to offset the additional $220 million in expenditures. XII. MedPAC Recommendations Under section 1886(e)(4)(B) of the Act, the Secretary must consider MedPAC’s recommendations regarding hospital inpatient payments. Under section 1886(e)(5) of the Act, the Secretary must publish in the annual proposed and final IPPS rules the Secretary’s recommendations regarding MedPAC’s recommendations. We have reviewed MedPAC’s March 2013 ‘‘Report to the Congress: Medicare Payment Policy’’ and have given the recommendations in the report consideration in conjunction with the policies set forth in this final rule. MedPAC recommendations for the IPPS for FY 2014 are addressed in Appendix B to this final rule. For further information relating specifically to the MedPAC reports or to obtain a copy of the reports, contact MedPAC at (202) 653–7226, or visit MedPAC’s Web site at: https:// www.medpac.gov. PO 00000 Frm 00460 Fmt 4701 Sfmt 4700 XIII. Other Required Information A. Requests for Data From the Public In order to respond promptly to public requests for data related to the prospective payment system, we have established a process under which commenters can gain access to raw data on an expedited basis. Generally, the data are now available on compact disc (CD) format. However, many of the files are available on the Internet at: https:// www.cms.hhs.gov/Medicare/MedicareFee-for-Service-Payment/ AcuteInpatientPPS/. We listed the data files and the cost for each file, if applicable, in the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR 27746 through 27748). Commenters interested in discussing any data used in constructing the proposed rule or this final rule should contact should contact Nisha Bhat at (410) 786–5320. B. Collection of Information Requirements 1. Statutory Requirement for Solicitation of Comments Under the Paperwork Reduction Act of 1995, we are required to provide 60day notice in the Federal Register and solicit public comment before a collection of information requirement is submitted to the Office of Management and Budget (OMB) for review and approval. In order to fairly evaluate whether an information collection should be approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995 requires that we solicit comment on the following issues: • The need for the information collection and its usefulness in carrying out the proper functions of our agency. • The accuracy of our estimate of the information collection burden. • The quality, utility, and clarity of the information to be collected. • Recommendations to minimize the information collection burden on the affected public, including automated collection techniques. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27748 through 27755), we solicited public comment on each of these issues for the following sections of this document that contain information collection requirements (ICRs). We discuss and respond to any public comments we received in the relevant sections. 2. ICRs for Add-On Payments for New Services and Technologies Section II.I.1. of the preamble of the proposed rule and this final rule discusses add-on payments for new E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 4. Hospital Applications for Geographic Reclassifications by the MGCRB 3. ICRs for the Occupational Mix Adjustment to the FY 2014 Index (Hospital Wage Index Occupational Mix Survey) mstockstill on DSK4VPTVN1PROD with RULES6 services and technologies. Specifically, this section states that applicants for add-on payments for new medical services or technologies for FY 2015 must submit a formal request. A formal request includes a full description of the clinical applications of the medical service or technology and the results of any clinical evaluations demonstrating that the new medical service or technology represents a substantial clinical improvement. In addition, the request must contain a significant sample of the data to demonstrate that the medical service or technology meets the high-cost threshold. We believe the burden associated with this requirement is exempt from the PRA under 5 CFR 1320.3(c), which defines the agency collection of information subject to the requirements of the PRA as information collection imposed on 10 or more persons within any 12-month period. This information collection does not impact 10 or more entities in a 12-month period. In FYs 2008, 2009, 2010, 2011, 2012, 2013, and FY 2014, we received 1, 4, 5, 3, 3, 5, and 5 applications, respectively. We did not receive any public comments regarding this information collection. 5. ICRs for Application for GME Resident Slots Section III.F. of the preamble of the proposed rule (78 FR 27554 through 27555) and this final rule discusses the occupational mix adjustment to the proposed and final FY 2014 wage index, respectively. While the preamble of these rules does not contain any new ICRs, we note that there is an OMB approved information collection request associated with the hospital wage index. Section 304(c) of Public Law 106–554 amended section 1886(d)(3)(E) of the Act to require CMS to collect data at least once every 3 years on the occupational mix of employees for each short-term, acute care hospital participating in the Medicare program in order to construct an occupational mix adjustment to the wage index. We collect the data via the occupational mix survey. The burden associated with this information collection requirement is the time and effort required to collect and submit the data in the Hospital Wage Index Occupational Mix Survey to CMS. The aforementioned burden is subject to the PRA; it is currently approved under OCN 0938–0907. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Section III.H.2. of the preamble of the proposed rule (78 FR 27557 through 27558) and this final rule discusses proposed and final revisions, respectively, to the wage index based on hospital redesignations. As stated in that section, under section 1886(d)(10) of the Act, the MGCRB has the authority to accept short-term IPPS hospital applications requesting geographic reclassification for wage index or standardized payment amounts and to issue decisions on these requests by hospitals for geographic reclassification for purposes of payment under the IPPS. The burden associated with this application process is the time and effort necessary for an IPPS hospital to complete and submit an application for reclassification to the MGCRB. While this requirement is subject to the PRA, the associated burden was previously approved under OCN 0938–0573. However, the information collection expired on December 31, 2011. We are currently seeking to reinstate the information collection and, as required by the PRA, will announce public notice and comment periods in the Federal Register separate from this rulemaking. The information collection requirements associated with the preservation of resident cap positions from closed hospitals, addressed under section V.J.3. of this preamble, are not subject to the Paperwork Reduction Act, as stated in section 5506 of the Affordable Care Act. 6. ICRs for the Hospital Inpatient Quality Reporting (IQR) Program The Hospital IQR Program (formerly referred to as the Reporting Hospital Quality Data for Annual Payment (RHQDAPU) Program) was originally established to implement section 501(b) of the MMA, Public Law 108–173. This program expanded our voluntary Hospital Quality Initiative. The Hospital IQR Program originally consisted of a ‘‘starter set’’ of 10 quality measures. The collection of information associated with the original starter set of quality measures was previously approved under OMB control number 0938–0918. All of the information collection requirements previously approved under OMB control number 0938–0918 have been combined with the information collection request previously approved under OMB control number 0938–1022. We will no PO 00000 Frm 00461 Fmt 4701 Sfmt 4700 50955 longer be using the OMB control number 0938–0918. We added additional quality measures to the Hospital IQR Program and submitted the information collection request to OMB for approval. This expansion of the Hospital IQR measures was part of our implementation of section 5001(a) of the DRA. Section 1886(b)(3)(B)(viii)(III) of the Act, added by section 5001(a) of the DRA, requires that the Secretary expand the ‘‘starter set’’’ of 10 quality measures that were established by the Secretary as of November 1, 2003, to include measures ‘‘that the Secretary determines to be appropriate for the measurement of the quality of care furnished by hospitals in inpatient settings.’’ The burden associated with these reporting requirements was previously approved under OMB control number 0938–1022. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53666), we stated that, for the FY 2016 payment determinations and subsequent years updates, we are seeking OMB approval for a revised information collection request using the same OMB control number (0938–1022). In the revised request we will add the 5 claims-based measures that are finalized in this final rule: (1) 30-day risk standardized COPD Readmission; (2) 30-day risk standardized COPD Mortality; (3) 30-day risk standardized Stroke Readmission; (4) 30-day risk standardized Stroke Mortality; and (5) AMI payment per Episode of Care. We are also finalizing the removal of six chart-abstracted measures: (1) PN 3b: Blood Culture Performed in the Emergency Department Prior to First Antibiotic Received in the Hospital; (2) HF 1: Discharge Instructions; and (3) AMI–2: Aspirin Prescribed at Discharge; (4) AMI–10: Statin Prescribed at Discharge; (5) HF–3: ACEI or ARB for LVSD; and (6) SCIP-Inf–10: Surgery Patients with Perioperative Temperature Management as well as one structural measure, Systematic Clinical Database Registry for Stroke Care. We are suspending collection of IMM 1: Immunization for Pneumonia. Because claims-based measures can be calculated based on data that are already reported to the Medicare program for payment purposes, we believe no additional information collection will be required from the hospitals. However, we do believe there will be a reduction in the burden associated with the removal of six chartabstracted measures, suspension of one chart-abstracted measures, and removal of one structural measure. We estimate a reduction in burden associated with data collection for chart-abstracted measures and associated forms. For the E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50956 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations FY 2015 payment determination, we estimated that the burden for chart abstracted measures and associated forms for each hospital is 1,900 hours annually. For the FY 2016 payment determination, we estimate the burden to be 1,775 hours annually per hospital. We estimate the total burden for chart abstraction and structural measures for the approximately 3,300 Hospital IQR Program-participating hospitals to be 5.86 million hours. To support the validation of two additional HAI measures, we also are finalizing our proposal to add two new HAI Validation Templates for a total of four Validation Templates to be completed by hospitals selected for annual validation. To add these new Templates without increasing burden for the FY 2016 payment determination and subsequent years, we are finalizing our proposal to randomly assign onehalf of the hospitals to submit templates for CLABSI and CAUTI validation and one-half of the hospitals to submit templates for MRSA and CDI validation. We believe this approach will limit hospital burden because, of the 600 potential, total hospitals selected for annual validation, only up to 300 hospitals would be required to submit for MRSA and CDI validation and up to 300 hospitals would be required to submit for CLABSI and CAUTI validation. We estimate completion of the CLABSI and CAUTI validation templates will take approximately 20 hours each quarter. We estimate completion of the MRSA and CDI validation templates will take approximately 16 hours each quarter. As finalized for the FY 2016 payment determination, HAI validation will include 3 quarters of data. Therefore, we estimate the total burden for HAI validation to be 60 hours for hospitals validated for CLABSI and CAUTI and 48 hours for hospitals validated for MRSA and CDI. We estimate the total burden for validation templates for the 600 Hospital IQR participating hospitals selected for validation to be 32,000 hours. Utilizing the estimates above, we estimate an overall reduction in burden from the FY 2015 estimate of 6.3 million hours annually to 5.9 million hours annually for the FY 2016 payment determination year. This burden estimate includes both newly added measures and measure sets and those for which we are requesting renewal. It excludes the burden associated with the NHSN and HCAHPS measures, both of which are submitted under separate OMB numbers. Previously, we required hospitals to provide 12 patient charts per quarter per VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 hospital for HAI validation and 15 patient charts per quarter per hospital for validation of clinical process of care measures, for a total of 27 charts per quarter per hospital and 108 charts per year per hospital. For the FY 2016 payment determination and subsequent years, we are finalizing our proposal to reduce this requirement by 12 charts per hospital per year. In addition, we are finalizing our proposal that the requirement to submit patient charts for validation of Hospital IQR Program data may be met by employing either of the following options each quarter: (1) A hospital may submit paper medical records, which is the form in which we have historically requested them; or (2) a hospital may securely transmit electronic versions of medical information for the FY 2016 payment determination and subsequent years. The intent of this electronic option is to offer an additional mode through which hospitals may meet the requirement to submit patient charts. To support this electronic option, which has the potential to reduce burden, cost, and environmental impact, we also are finalizing our proposal for the FY 2016 payment determination and subsequent years to reimburse hospitals for submission of electronic versions of medical information. We are finalizing a reimbursement rate of $3.00 per chart for validation for the FY 2016 payment determination. In formulating this number we took into account the following considerations: • Cost estimates are for retrieval of records and not for the maintenance of electronic health records systems, which are supported by CMS by other means. • The activities associated with submitting an electronic version of a patient medical record include downloading, verifying, and copying records, which must be done for every record separately, and packaging and encrypting CDs or DVDs which must be done only once per DVD or CD sent. • We assume that an average patient record will be 412 pages in length, that the average capacity of a DVD of 45,000 pages, and that all 27 records submitted in a quarter will fit on one DVD most of the time. • Based on time and motion studies conducted by our contractor, we estimate that for records of average lengths, the minimum labor time is between 1 and 2 minutes per record. • To acknowledge that some records may be so large that they require their own DVD, and that some systems may be slower than others, we also estimated a maximum labor of about 12 minutes per record. PO 00000 Frm 00462 Fmt 4701 Sfmt 4700 • Averaging these two estimates, we achieve an average of less than 7 minutes of labor per record. • The labor performed can be accomplished by a combination of staff equivalent to a GS–5 administrative secretary and a GS–5 information technologist, earning within the middle range for this grade, which in 2013 was $38,616 per year. Assuming, 2,080 hours in a work year, we achieve an hourly rate of $18.57 per hour. • Applying OMB Circular A–76, we assumed overhead of 36.25 percent, for a fully burdened labor rate of $25.30 per hour. • The labor cost associated with each record is $2.95. • Supply costs are limited to DVDs and packaging. DVDs cost $20 per 100, or 20 cents per DVD. A protective shipping container also costs 20 cents each. • If a hospital submits all records on the same DVD, supply costs will equal approximately 1.4 cents per DVD. If a hospital submits one DVD per record, supply costs will equal approximately 40 cents per record. Averaging these costs results in 21 cents per record. • Adding supplies to labor yields a total cost of $3.16 per record. • Rounding to the nearest whole dollar yields $3.00 per record. For the FY 2016 payment determination, we also are encouraging hospitals to voluntarily submit up to 16 measures electronically for the Hospital IQR Program in a manner that would permit eligible hospitals to align Hospital IQR Program requirements with some requirements under the Medicare EHR Incentive Program. We estimate that the total burden associated with the electronic quality measure reporting option will be similar to the burden outlined for hospitals in the EHR Incentive Program Stage 2 final rule (77 FR 53968 through 54162). As established in that final rule, beginning in FY 2014, hospitals that are beyond their first year of meaningful use must electronically report a total of 16 clinical quality measures covering at least three domains using CEHRT that has been certified to the 2014 Edition certification criteria. By allowing hospitals to submit data that could be used to satisfy the requirements for both programs, each hospital that participates in the proposed voluntary electronic quality measure reporting option and electronically reports on the maximum of 16 electronic clinical quality measures could realize a reduction in burden for the Hospital IQR Program of approximately 800 hours. This estimate assumes an annual collection burden for E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations chart-abstracted Stroke, VTE and PC–01 to be a combined 816 hours annually per hospital over 4 quarters and an estimated 2.66 hours to submit those measures electronically for one quarter. Since the ED measures are a subset of the global measure set that also includes the Immunization measures, which will continue to be collected via chart abstraction, we do not believe there will be a significant reduction in burden for electronic submission of the ED–1 and ED–2 measures. In accordance with the estimates in the Medicare EHR Incentive Program Stage 2 final rule, we believe it will take a hospital approximately 2 hours and 40 minutes to select, prepare, and electronically submit a maximum of 16 electronic clinical quality measures using CEHRT. In addition, in accordance with the Medicare EHR Incentive Program Stage 2 final rule, we believe an individual with commensurate skills will submit electronic clinical quality measures on behalf of the hospital at a rate of approximately $59.00 per hour. Therefore, we believe it will cost a hospital approximately $156.94 ($59.00 × 2.66 hours) to report 16 electronic clinical quality measures in CY 2014 (77 FR 54133). Additional information about the chart abstraction burden is detailed in section XIII.B.6. of the preamble to the proposed rule and this final rule. 7. ICRs for PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program As discussed in section IX.B. of the preamble of the proposed rule and this final rule, section 1866(k) of the Act requires, for purposes of FY 2014 and each subsequent fiscal year, that a hospital described in section 1886(d)(1)(B)(v) of the Act (a PPSexempt cancer hospital, or a PCH) submit data in accordance with section 1866(k)(2) of the Act with respect to Topic 50957 such fiscal year. In the FY 2013 IPPS/ LTCH PPS final rule, we implemented the PCHQR Program to comply with the statutory mandate and in an effort to improve the quality of care for inpatient cancer patients. It is our aim and goal to encourage PCHs to furnish high quality care in a manner that is effective and meaningful, while remaining mindful of the reporting burden created by the implementation of this new program. Therefore, we intend to reduce and avoid duplicative reporting efforts, whenever possible, by leveraging existing infrastructure. In the FY 2013 IPPS/LTCH PPS final rule, for the FY 2014 program year, we adopted five NQF-endorsed quality measures, two of which were developed by the CDC and three of which were developed by the American College of Surgeons’ Commission on Cancer (ACoS/CoC) and discussed the information collection requirements for these measures. Quality measures Cancer-Specific Treatments. Healthcare Acquired Infections (HAIs). Adjuvant Chemotherapy is considered or administered within 4 months (120 days) of surgery to patients under the age of 80 with AJCC Stage III (lymph node positive) colon cancer (NQF #0223). Combination Chemotherapy is considered or administered within 4 months (120 days) of diagnosis for women under 70 with AJCC T1c, or Stage II or III hormone receptor negative Breast Cancer (NQF #0559). Adjuvant Hormonal Therapy (NQF #0220). National Healthcare Safety Network (NHSN) Central Line-Associated Bloodstream Infection (CLABSI) Outcome Measure (NQF #0139). National Healthcare Safety Network (NHSN) Catheter-Associated Urinary Tract Infection (CAUTI) Outcome Measure (NQF #0138). In this final rule, we are finalizing our program policy that PCHs submit data on 1 additional measure beginning with FY 2015 and 12 additional measures beginning with FY 2016 (as listed below), for a total of 18 measures (5 previously adopted plus 13 new measures). As indicated in the preamble to this rule, we have decided not to finalize our proposal to adopt the Multiple Myeloma-Treatment with Bisphosphonates (NQF# 0380) measure. NQF Endorsement number Measure domain The tables below sets forth the new measures finalized in this final rule for the FY 2015 and FY 2016 programs and subsequent years. Measure name New Measure for the FY 2015 Program and Subsequent Years Patient Safety .................................. 0753 Harmonized Procedure Specific Surgical Site Infection (SSI) Outcome Measure. New Measures for the FY 2016 Program and Subsequent Years Surgical Care Improvement Project (SCIP). 0218 0284 mstockstill on DSK4VPTVN1PROD with RULES6 0453 Clinical Process/OncologyCare ....... VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 0527 0528 0529 0382 0383 0384 0390 0389 PO 00000 Surgery Patients Who Received Appropriate VTE Prophylaxis within 24 Hrs Prior to Surgery to 24 Hrs After Surgery End Time. Surgery Patients on Beta Blocker Therapy Prior to Admission Who Received a Beta Blocker during the Perioperative Period. Urinary Catheter Removed on Post-Operative Day 1 or Post-Operative Day 2 with Day Surgery Being Day Zero. Prophylactic Antibiotic Received Within 1 Hr Prior to Surgical Incision. Prophylactic Antibiotic Selection for Surgical Patients. Prophylactic Antibiotic Discontinued Within 24 Hrs After Surgery End Time. Oncology-Radiation Dose Limits to Normal Tissues. Oncology: Plan of Care for Pain. Oncology: Pain Intensity. Prostate Cancer-Adjuvant Hormonal Therapy for High-Risk Patients. Prostate Cancer-Avoidance of Overuse Measure-Bone Scan for Staging Low-Risk Patients. Frm 00463 Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2 50958 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations NQF Endorsement number Measure domain Measure name mstockstill on DSK4VPTVN1PROD with RULES6 Patient Engagement/Patient Experience of Care. 0166 We believe that requiring PCHs to submit data on these additional measures will not prove burdensome. PCHs have familiarity with and experience reporting quality data to CMS during the initial year of the PCHQR program. Therefore, we believe that because a majority of PCHs have demonstrated the ability to report these measures, the reporting requirements we are finalizing will not significantly impact PCHs. The anticipated burden on these PCHs consists of the following: training of appropriate staff members on how to use the NHSN for the reporting of the SSI measure, CMS (QualityNet) for the reporting of the SCIP measures, and the CMS Web Measures Tool for the reporting of the clinical process/ oncology care measures; the time required for collection and aggregation of data; and the time required for reporting of the data by the PCH’s representative; and the time required to participate in administering the HCAHPS Survey and collecting HCAHPS data. We have taken into account all these elements in our burden calculation. We estimate that 11 PCHs will submit data on approximately 63,468 cancer cases annually. It will require, on average, 9 hours for a PCH to abstract the information from medical records and submit such information for each case. The time required to administer the HCAHPS Survey is likely to be lower than the time for chart abstraction. However, the same method was used to ensure a high-end estimate so that facilities will not experience a higher burden than estimated. In addition, sampling was not considered for this reason. Therefore, this burden represents the ‘‘worst-case scenario’’ of what would be required of each facility. Based on these assumptions, we estimate that the annual hourly burden on each PCH for the collection, submission, and training of personnel for submitting all quality measure data would be approximately 51,930 hours. We received the following comments on our burden analysis. Comment: Some commenters expressed concern with the inequality of program implementation requirements imposed on PCHs under the PCHQR Program as compared with the requirements imposed on subsection (d) hospitals under the Hospital IQR Program. For example, one commenter suggested that it would take less than one FTE to implement the Hospital IQR Program measures for FY 2014, but PCHs would need to hire 26 to 28 FTEs to implement the PCHQR Program requirements for FY 2015 and FY 2016. Response: We note that the burden calculations for the Hospital IQR Program that we performed for purposes of the FY 2014 IPPS/LTCH proposed and final rule include only the new measures adopted for a given payment year (for example, the burden for FY 2016 and FY 2017 is calculated by using only those measures finalized for each respective year), whereas the burden calculations for the PCHQR Program that we performed for purposes of the FY 2014 IPPS/LTCH proposed and final rule include all measures we have adopted since the program’s inception beginning with FY 2014 program year. Therefore, we believe that the difference in our calculation methodology, as opposed to the actual burden, accounts for the commenters’ observations. In addition, since we lack PCH-specific data, we have calculated the burden to PCHs on a worst case scenario basis and made our calculations by assuming PCHs would report on all measures for all cases. We are reasonably certain that the burden imposed on PCHs will not actually be as great as what we have calculated for the following reasons: (1) About 27 percent of the PCHs are currently voluntarily administering the HCAHPS Survey, which means that for some PCHs there will be no additional burden to report on this measure for all cases; (2) our experience with the Hospital IQR Program indicates that only a very small fraction of cases are SCIP cases, which means that PCHs will not have to report on these measures for all cases; (3) the sampling methodology for the SCIP measures requires that PCHs use only 10 percent of the patient population size,197 which means that PCHs’ reporting burden for the SCIP measures will be reduced by approximately 90 percent because of sampling method applied; (4) our experience with the Hospital IQR VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 HCAHPS Patient Experience of Care Survey. 197 See the specifications manual at: https:// www.qualitynet.org/dcs/ContentServer?pagename= QnetPublic%2FPage%2FQnetTier2&cid= 1138115987129. PO 00000 Frm 00464 Fmt 4701 Sfmt 4700 Program indicates that only a very small fraction of cases are HAI cases, which means that PCHs will not have to report on these measures for all cases; and (5) with the exception of the pain-related measures (Oncology: Plan of Care for Pain and Oncology: Pain Intensity Quantified) the other three oncology measures are specific to subsets of cancer patient populations,198 which means that PCHs will not have to report on these measures for all cases. Despite these factors, however, perhaps over-conservatively, we calculated the burden by assuming that PCHs would submit measure data on all cases. For the reasons cited above, we believe that the estimated burden we provided is an extreme, worst-case scenario calculation. We chose to calculate the burden using this methodology because we thought it more prudent to over-rather than underestimate. The Hospital IQR Program is a well-established program with several years’ worth of data on which we can draw to provide burden estimations and infer, as we did above, how the number of cases may play out. Although we can draw similarities between the Hospital IQR Program’s SCIP and HAI cases as a percentage of the overall patient population, we chose not to use concrete numbers from the Hospital IQR Program given the differences between the patient populations in the PCHQR and Hospital IQR Programs. As the PCHQR Program matures and we gather more PCH-specific data, we will provide more precise burden calculations that are closer to the real burden that PCHs will face. Comment: Some commenters opposed the burden estimates because we did not propose to allow sampling with respect to the collection of data on the clinical process/oncology care and SCIP measures. Response: We thank commenters for their comments. We note that in this final rule, we are finalizing a policy that 198 The Oncology-Radiation Dose Limits to Normal Tissues measure applies only to lung and pancreatic cancer patients, the Prostate CancerAdjuvant Hormonal Therapy for High-Risk Patients applies to prostate cancer patients, at high risk of recurrence, receiving external beam radiotherapy who were prescribed adjuvant hormonal therapy, and the Prostate Cancer-Avoidance of Overuse Measure-Bone Scan for Staging Low-Risk Patients applies to prostate cancer patients at low risk of recurrence receiving certain kinds of therapy. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations allows PCHs to use sampling methodologies to report the SCIP and the clinical process/oncology care measures. We believe that these sampling methodologies will decrease the PCHs’ reporting burden because PCHs will not have to perform chartabstraction on all cases. For the SCIP measures, we will allow PCHs to use the same sampling methodology that we currently allow subsection (d) hospitals to use to report the SCIP measures under the Hospital IQR Program (outlined in the specification manual https://www.qualitynet.org/dcs/Content Server?c=Page&pagename=Qnet Public%2FPage%2FQnetTier2&cid= 1138115987129). For the clinical process/oncology care measures, we will allow PCHs to use the sampling methodologies we allow for the reporting of these measures under the PQRS Program, and this sampling methodology can be found in the PQRS manual at https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/PQRS/ MeasuresCodes.html. Comment: One commenter recommended that CMS consider the relative value and associated burden of reporting measures. In particular, the commenter recommended that CMS consider the appropriateness of cancerspecific measures, particularly outcome measures. Response: We thank the commenter for these comments and will consider other measures (that is, outcome measures) relevant to the PCH settings in future years. As we indicated earlier in the preamble, we believe that the measures we have selected will help improve the quality of care for PCH patients. Our measures address critical components of PCH quality care, including oncology, prostate cancer care, surgical processes of care that should be followed in PCHs, and patient experience of PCH care. We believe that the value added by requiring PCHs to submit data on these measures far outweighs the burden. Comment: One commenter recommended we consider implementing a sampling protocol, similar to the Hospital IQR Program, to minimize burden. Response: As we explain above, we are allowing PCHs to use sampling methodologies for the SCIP and the clinical process/oncology care measures. 8. ICRs for the Hospital Value-Based Purchasing (VBP) Program In section V.H. of the preamble of the proposed rule and this final rule, we discuss requirements for the Hospital VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 VBP Program. Specifically, in this final rule, we are adopting three new measures for the FY 2016 Hospital VBP Program, including IMM–2: Influenza Immunization, CAUTI, and the Surgical Site Infection (SSI) measure. We also are adopting CLABSI, a measure that we finalized for FY 2015 but did not readopt at that time for the FY 2016 Hospital VBP Program. In addition, we are adopting the three 30-day mortality measures for the FYs 2017 through 2019 programs and the AHRQ PSI composite measure for the Hospital VBP Program for FYs 2017 and 2018. All of these additional measures are required for the Hospital IQR Program; therefore, their inclusion in the Hospital VBP Program does not result in any additional burden because the Hospital VBP Program uses data that are required for the Hospital IQR Program. 9. ICRs for the Long-Term Care Hospital Quality Reporting (LTCHQR) Program In section IX.C. of the preamble of this final rule, we discuss the requirements for the LTCHQR Program, established by section 1886(m)(5) of the Act, which was added to the Act by section 3004 of the Affordable Care Act. In the FY 2013 IPPS/LTCH PPS final rule, we finalized the adoption of five quality measures for use in the LTCHQR Program for the FY 2016 payment determination and subsequent years. These measures are: (1) NHSN CatheterAssociated Urinary Tract Infection (CAUTI) Outcome Measure (NQF #0138); (2) NHSN Central LineAssociated Blood Stream Infection (CLABSI) Outcome Measure (NQF #0139); (3) Application of Percent of Residents with Pressure Ulcers that are New or Worsened (Short Stay) (NQF #0678); (4) Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) (NQF #0680); and (5) Influenza Vaccination Coverage Among Healthcare Personnel (NQF #0431). In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53630 through 53631), we finalized that for Influenza Vaccination Coverage Among Healthcare Personnel (NQF #0431), LTCHs should begin to submit data from January 1, 2014 through December 31, 2014 (CY 2014) for the FY 2016 payment determination. However, there is unique seasonality in the timing of influenza activity each year. To account for this, we are finalizing our proposal that, for the LTCHQR Program, this measure (NQF #0431) will have a reporting period that aligns with the influenza vaccination season. The influenza vaccination PO 00000 Frm 00465 Fmt 4701 Sfmt 4700 50959 season is defined by the CDC as October 1 (or when the vaccine becomes available) through March 31 of the following year. This change would allow LTCHs to collect data on Healthcare Personnel influenza vaccination for the entirety of the 2014– 2015 influenza season for the FY 2016 payment determination based on the period of October 1 (or when the vaccine becomes available) through March 31. This change would allow LTCHs to collect data on this measure using the same period for future influenza seasons for each of the subsequent years. While LTCHs can enter information in NHSN at any point during the influenza season for NQF #0431, data submission is only required once per year, unlike the other measures finalized for the LTCHQR Program that utilize CDC’s NHSN (CAUTI measure NQF #0138 and CLABSI measure NQF #0139). LTCHs can choose to submit Healthcare Personnel influenza vaccination data on an incremental basis (for example, on a monthly basis), or just once a year. The final deadlines associated with submitting data, approximately 45 days after the end of the data collection timeframe for the FY 2016 payment determination, remain consistent across measures. Thus, the deadline for submission of data for NQF # 0431 would be approximately 45 days after March 31, or May 15. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53624 through 53627), we finalized that for NQF #0680, Percentage of Residents or Patients Who Were Assessed and Appropriately Give the Seasonal Influenza Vaccine (Short-Stay), LTCHs should begin to collect and submit data on January 1, 2014 through December 31, 2014 (CY 2014) for the FY 2016 payment determination. This measure, stewarded by CMS, will be collected using items included in the LTCH Continuity Assessment Record and Evaluation (CARE) Data Set (Version 2.01) approved by the Office of Management and Budget (OMB) on June 10, 2013 under the Paperwork Reduction Act.199 The OMB control number is 0938–1163. Later in 2013, we will release the final technical data submission specifications and updated LTCHQR Program Manual with guidance on the completion of the LTCH CARE Data Set (Version 2.01) containing items related to NQF #0680. In order to better align this measure (NQF #0680) with the influenza season 199 The LTCH CARE Data Set Version 2.01 was approved on June 10, 2013 by OMB in accordance with the PRA. The OMB Control Number is 0938– 1163. Expiration Date June 30, 2016. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50960 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations (as described earlier for NQF #0431), in light of public comments and to allow time and opportunity for LTCHs and vendors to participate in CMSsponsored training activities pertaining to the implementation of the LTCH CARE Data Set (Version 2.01), as well as time to plan for and incorporate changes into their data collection and entry systems, we are finalizing the data collection period for this measure to October 1, 2014 through April 30, 2015. This change accounts for the unique seasonality of the influenza season, as defined by the CDC as October 1 (or when the vaccine becomes available) through March 31 of the following year. At this point, our data reporting and submission infrastructure for the LTCH CARE Data Set requires LTCHs to submit data on patient admissions and discharges (or death) separately. As a result, allowing reporting through April will allow us to capture the influenza vaccination status of LTCH patients admitted in March and discharged in April. We are changing the timeline for data submission for NQF #0680 to admissions and discharges in an LTCH from October 1, 2014 through April 30, 2015, for the FY 2016 payment determination. We are revising and finalizing our timeline for data collection and submission for the FY 2017 payment determination to October 1, 2015 through April 30, 2016. Thereafter, data for October 1 through April 30 will be used for subsequent years. In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51748 through 51750), we adopted an application of NQF #0678 Percent of Residents with Pressure Ulcers That are New or Worsened (Short-Stay) for the FY 2014 payment determination, and retained this application of the measure in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53615 through 53619) for the FY 2015 payment determination and subsequent years. We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51748 through 51750) for a discussion of the rationale, data collection methods, and submission methods finalized for this measure for the FY 2014 payment determination and subsequent years, and for references to the description and specifications of this measure. At the time we completed our work on the FY 2013 IPPS/LTCH PPS final rule, we were only able to adopt an application of the endorsed measure in our final version of the FY 2013 rule. NQF #0678 was subsequently ratified by the NQF Board of Directors for expansion to the LTCH setting on VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 August 1, 2012.200 201 Because NQF #0678 has received endorsement for the LTCH setting, we are now finalizing our proposal to adopt the updated measure NQF #0678 Percent of Residents or Patients with Pressure Ulcers that are New or Worsened (Short-Stay) for the FY 2015 payment determination and subsequent years. This measure will continue to be collected using items included in the LTCH CARE Data Set (Version 1.01) for CY 2013 and for the first quarter of CY 2014. Further, starting April 1, 2014, this measure is proposed to be collected using items included in the LTCH CARE Data Set (LCDS) (Version 2.01). While LTCHs will be using a new version 202 of the LCDS to continue reporting this measure, the data items used to collect data for this measure will remain the same. The changes we described to the reporting periods for two measures (NQF #0431 and NQF #0680) and the updated NQF-endorsed pressure ulcer measure (NQF #0678) are not for new measures. We do not believe that these changes will result in any additional reporting burden on LTCHs. In section IX.C.8.b. of the preamble of this final rule, we are finalizing our proposal to add three additional measures for use in the LTCHQR Program for the FY 2017 payment determination and subsequent years. These measures are: (1) National Healthcare Safety Network (NHSN) Facility-Wide Inpatient Hospital-Onset Methicillin-Resistant Staphylococcus Aureus (MRSA) Bacteremia Outcome Measure (NQF #1716); (2) National Healthcare Safety Network (NHSN) Facility-Wide Inpatient Hospital-onset Clostridium Difficile Infection (CDI) Outcome Measure (NQF #1717); and (3) All-Cause Unplanned Readmission Measure for 30-Days Post Discharge from Long-Term Care Hospitals. 200 National Quality Forum, Consensus Standards Approval Committee Wednesday, July 11, 2012. Transcript. Available on the Web site at: https:// www.qualityforum.org/WorkArea/linkit.aspx?Link Identifier=id&ItemID=71612. 201 Press Release: NQF Removes Time-Limited Endorsement Status for 13 Measures, Measures Now Have Endorsed Status. August 1, 2012. Available on the Web site at: https://www.quality forum.org/News_And_Resources/Press_Releases/ 2012/NQF_Removes_Time-Limited_Endorsement_ for_13_Measures;_Measures_Now_Have_Endorsed_ Status.aspx 202 The LTCH CARE Data Set Version 1.01 was approved on April 24, 2012 by OMB in accordance with the PRA. The OMB Control Number is 0938– 1163. Expiration Date April 30, 2013. FRN 78 21955 through 21956, published April 12, 2013, solicits public comment on additions and updates to the LTCH CARE Data Set. https://www.cms.gov/ Regulations-and-Guidance/Legislation/Paperwork ReductionActof1995/PRA-Listing-Items/CMS12 52160.html. PO 00000 Frm 00466 Fmt 4701 Sfmt 4700 For the FY 2017 payment determination, in addition to the CAUTI, CLABSI, and Influenza Vaccination Coverage Among Healthcare Personnel measures, we are finalizing our proposal that LTCHs would report quality data related to the MRSA and CDI measures to the CDC’s NHSN data submission system (https:// www.cdc.gov/nhsn/). The NHSN is a secure, Internet-based healthcare associated infection tracking system that is maintained and managed by CDC. There are currently approximately 440 LTCHs in the United States paid under the CMS LTCH PPS and, according to the CDC, as of May 15, 2013, over 413 of these LTCHs already submit CAUTI and CLABSI data to the CDC’s NHSN. We believe that any burden increase related to complying with the LTCHQR Program requirements for submission of the MRSA and CDI measures will be minimal for those LTCHs that are already familiar with the NHSN submission process, for several reasons. First, these LTCHs have already completed initial setup and have become familiar with reporting data in the NHSN system due to the requirement to report CAUTI and CLABSI measures beginning on October 1, 2012 for the FY 2014 payment determination, and are continuing to report for CY 2013 for the FY 2015 payment determination. Second, due to their participation in a wide range of mandatory reporting and quality improvement programs, as of January 2013, there are approximately 42 LTCHs reporting MRSA measure data and approximately 46 LTCHs reporting CDI measure data into the NHSN. Third, there has been no change in the registration and training requirements for LTCHs that are already acquainted with the NHSN. Therefore, we believe that most LTCHs should be very comfortable using the NHSN for continuing with the reporting of data for CAUTI and CLABSI measures for CY 2014 for the FY 2016 payment determination and for submission of the finalized MRSA and CDI measures for CY 2015 for the FY 2017 payment determination. Further, we believe that by the time data collection and reporting for NQF #0431 begin for the FY 2016 payment determination (October 1, 2014 or when vaccine becomes available for the 2014–2015 influenza vaccination season), a vast majority of LTCHs should be very comfortable using the NHSN. The most significant burden associated with these quality measures is the time and effort associated with collecting and submitting the data on E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations the CAUTI, CLABSI, Influenza Vaccination Coverage among Healthcare Personnel, MRSA, and CDI measures for LTCHs that are not currently reporting any measures data into the CDC’s NHSN system. There are currently approximately 440 LTCHs in the United States paid under the CMS LTCH PPS. We estimate that each LTCH will execute approximately 12 NHSN submissions (6 CAUTI events and 6 CLABSI events) per month (144 events per LTCH annually). This equates to a total of approximately 63,360 submissions of HAI data to NHSN from all LTCHs per year. We estimate that each NHSN assessment will take approximately 25 minutes to complete. This time estimate consists of 10 minutes of clinical time (for example, nursing time) needed to collect the clinical data and 15 minutes of clerical time necessary to enter the data into the NHSN database. Based on this estimate, we expect each LTCH will expend 300 minutes (5 hours) per month and 60 hours per year reporting to NHSN. Therefore, the total estimated annual hourly burden on all LTCHs for reporting CAUTI and CLABSI events to NHSN is 26,400 hours. The estimated cost per submission is estimated at $12.07. These costs are estimated using an hourly wage for a registered nurse of $41.59 and a medical billing clerk/data entry person of $15.59 (U.S. Bureau of Labor Statistics data) (please note that we have corrected the hourly rate of a medical billing clerk/data entry person from $20.57, which was in our proposed rule, to a correct hourly rate of $15.59). Therefore, we estimate that the annual cost per each LTCH will be $1,559 and the total yearly cost to all LTCHs for the submission of CAUTI and CLABSI data to NHSN will be $686,136.203 While these requirements are subject to the Paperwork Reduction Act, we believe the associated burden hours are accounted for in the information collection request currently approved under OMB control number 0920–0666. We estimate that each LTCH will execute only one NHSN submission per year (total number of vaccinations) as required by the CDC for the NHSNreported Influenza Vaccination Coverage among Healthcare Personnel measure (NQF #0431). This equates to a total of approximately 440 submissions of vaccination data to NHSN from all LTCHs per year. We estimate that each NHSN submission will take approximately 15 minutes to complete. This time estimate consists of 15 minutes of clerical time necessary to enter the data into the NHSN database. Based on this estimate, we expect each LTCH will expend 15 minutes per year reporting to NHSN. Therefore, the total estimated annual burden on all LTCHs in the United States for reporting this measure to NHSN is 110 hours. The estimated cost per submission is estimated at $3.90. The cost is estimated using an hourly wage for a medical billing clerk/data entry person of $15.59 (U.S. Bureau of Labor and Statistics data). We estimate the annual cost per each LTCH will be $3.90 and the total yearly cost to all LTCHs for the submission of the Influenza Coverage among Healthcare Personnel measure (NQF #0431) will be $1,716. Similar to the submission of CAUTI and CLABSI data, we estimate that each LTCH will execute approximately 12 NHSN submissions (6 MRSA events and 6 C. Difficile events) per month (144 events per LTCH annually). This equates to a total of approximately 63,648 submissions of HAI data to NHSN from all LTCHs per year. We estimate that each NHSN assessment will take approximately 25 minutes to complete. This time estimate consists of 10 minutes of clinical time (for example, nursing time) needed to collect the clinical data and 15 minutes of clerical time necessary to enter the data into the NHSN. Based on this estimate, we expect each LTCH will expend 300 minutes (5 hours) per month and 60 hours per year reporting to NHSN. The total estimated annual hourly burden on all LTCHs in the United States for reporting MRSA and CDI data to NHSN is 26,400 hours. The estimated cost per submission is estimated at $12.07. These costs are estimated using an hourly wage for a registered nurse of $41.59 and a medical billing clerk/data entry person of $15.59 (U.S. Bureau of Labor Statistics data). Therefore, we estimate that the annual cost per each LTCH will be $1,739 and the total yearly cost to all LTCHs for the submission of MRSA and CDI data to NHSN will be $686,136.204 We estimate that the total annual cost to all LTCHs for submission of NHSN data will be $1,373,988 or $3,123 per LTCH annually. We are finalizing our proposal to adopt the updated measure NQF #0678 Percent of Residents or Patients with 203 Nursing Time—24 hours @ $41.59 per hour = $998.16; $998.16 × 440 LTCHs = approximately $439,190; Administrative Time—36 hours @ $15.59 per hour = $561.24; $561.24 × 440 LTCHs = approximately $246,946; TOTAL = $439,190 + $246,946 = $686,136. 204 Nursing Time—24 hours @ $41.59 per hour = $998.16; $998.16 × 440 LTCHs = approximately $439,190; Administrative Time—36 hours @ $15.59 per hour = $561.24; $561.24 × 440 LTCHs = approximately $246,946; TOTAL = $439,190 + $246,946 = $686,136. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 PO 00000 Frm 00467 Fmt 4701 Sfmt 4700 50961 Pressure Ulcers that are New or Worsened (Short-Stay) for the FY 2015 payment determination and subsequent years. This change would not alter the data collection, data submission, or burden finalized in the FY 2013 IPPS/ LTCH PPS final rule and PRA package for LTCH CARE Data Set (Version 1.01) 205 since there have been no changes to the data elements, data submission system (QIES ASAP) and technical submission specifications for the LTCH CARE Data Set used for this measure for CY 2013 and for the first quarter of CY 2014. The only difference between the previously finalized measure and the measure finalized in this final rule is the change in name and NQF-endorsed expansion of this measure to the LTCH (and IRF) patient populations in addition to Skilled Nursing Facility/Nursing Home ShortStay residents. Therefore, the burden on LTCHs for reporting of data for NQF #0678 remains unchanged.206 In order to allow time and opportunity for LTCHs and vendors to participate in CMS-sponsored training activities pertaining to the implementation of the LTCH CARE Data Set (Version 2.01), as well as time to plan for and incorporate changes into their data collection and entry systems, we are finalizing our proposal to revise the previously finalized start date for Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (ShortStay) (NQF #0680) of January 1, 2014 to April 1, 2014. For CY 2014, data collection will continue through December 31, 2014. We are finalizing our proposal that data for admissions and discharges for an LTCH during April 1, 2014 through December 31, 2014 will be used for the FY 2016 payment determination. Three items are included on the LTCH CARE Data Set Version 2.01 for this measure. For purposes unrelated to the measures we are finalizing in this rule, we have also 205 The LTCH CARE Data Set Version 1.01 was approved on April 24, 2012 by OMB in accordance with the PRA. The OMB Control Number is 0938– 1163. Expiration Date April 30, 2013. FRN 78 21955 through 21956, published April 12, 2013, solicits public comment on additions and updates to the LTCH CARE Data Set. https://www.cms.gov/ Regulations-and-Guidance/Legislation/ PaperworkReductionActof1995/PRA-Listing-Items/ CMS1252160.html. 206 The LTCH CARE Data Set Version 1.01 was approved on April 24, 2012 by OMB in accordance with the PRA. The OMB Control Number is 0938– 1163. Expiration Date April 30, 2013. FRN 78 21955 through 21956, published April 12, 2013, solicits public comment on additions and updates to the LTCH CARE Data Set. https://www.cms.gov/ Regulations-and-Guidance/Legislation/ PaperworkReductionActof1995/PRA-Listing-Items/ CMS1252160.html. E:\FR\FM\19AUR2.SGM 19AUR2 50962 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 removed several items from the administrative, functional status, and skin conditions sections of the LTCH CARE Data Set Version 1.01 to create the LTCH CARE Data Set Version 2.01,207 so we anticipate that increase in burden due to the addition of items for NQF #0680 will be minimal. Later in 2013, we will release the final data submission specifications and updated LTCHQR Program Manual for the LTCH CARE Data Set (Version 2.01) containing items related to NQF #0680. As previously mentioned, there are currently approximately 440 LTCHs paid under the CMS LTCH PPS. We estimate that the total number of LTCH discharges per year is 202,050 208 (134,700 Medicare beneficiaries and 67,350 non-Medicare beneficiaries). Therefore, the total number of discharges estimated for each LTCH is 457 annually and 38 monthly. We estimate that the total number of assessment records submitted using the LTCH CARE Data Sets (LCDS) by all LTCHs per year is 404,100 which equates to a total of 914 total LCDS submissions for each LTCH on an annual basis. The average number of LCDS submitted by each LTCH on a monthly basis is 76. We estimate that the total time required to complete an LCDS per patient to be approximately 32 minutes,209 which includes 11 minutes for the admission assessment, 11 minutes for the discharge assessment and 10 minutes for data entry. Therefore, each LTCH will spend approximately 1,216 minutes per month, or approximately 20.27 hours per month submitting the LCDS. We expect each LTCH to spend approximately 243 hours per year engaged in data collection and submission of the LCDS. Therefore, the total estimated burden to all LTCHs for reporting the LCDS is 106,920 hours per year.210 207 The LTCH CARE Data Set Version 2.01 was approved on June 10, 2013 by OMB in accordance with the PRA. The OMB Control Number is 0938– 1163. Expiration Date June 30, 2016. https:// www.cms.gov/Regulations-and-Guidance/ Legislation/PaperworkReductionActof1995/PRAListing-Items/CMS1252160.html. 208 MedPAC Report to Congress, March 2012, page 261. Available at: https://www.medpac.gov/ documents/Mar12_EntireReport.pdf. 209 This time estimate includes the time required to complete both the required and voluntary questions on the LTCH CARE Data Set. 210 32 minutes/form × 38 forms per LTCH per month = 1,216 minutes per LTCH per month; 1,216 minutes/60 minutes per hour = 20.27 hours per LTCH per month; 20.27 hours per LTCH per month × 12 months/year = 243 hours per each LTCH/year; 243 hours/each LTCH per year × 440 LTCHs in U.S. = 106,920 hrs/all LTCHs/year. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 We estimate that the total annual cost to each LTCH will be approximately $6,751 to submit the LCDS. That estimate is based on the hourly wage for a registered nurse to complete the LCDS at $41.59 per hour and for an administrative assistant to transmit the LCDS at $15.59.211 As previously stated, we estimate a total of 457 annual discharges (914 LCDS submissions) for each LTCH on an annual basis and that it will take 22 minutes total (11 minutes each) to complete the admissions and discharge assessments per patient. That is, 10,054 minutes of time, or 167.57 hours, that a registered nurse in each LTCH will spend completing the LCDS annually. For a registered nurse to spend 167.57 hours per year completing the LCSDs at a rate of $41.59 per hour, the associated cost for each LTCH will be approximately $6,969 and, for approximately 440 LTCHs, a total of $3,066,360 nursing wages per year. Similarly, we previously estimated that it will take approximately 10 minutes per patient for data entry by an administrative assistant, resulting in approximately 4,570 minutes that each LTCH will spend transmitting the LCDS per year, or 76 administrative hours per year. At an hourly rate of $15.59, that equates to approximately $1,154 for each LTCH and $507,954 for all LTCHs per year. Therefore, we estimate that the total annualized cost to each LTCH will be approximately $6,751 and $2,971,250 to all LTCHs. We believe the associated burden hours are accounted for in the information collection request approved on June 10, 2013 under OMB control number 0938–1163. We also are finalizing our proposal to add the All-Cause Unplanned Readmission Measure for 30 days Post Discharge from Long-Term Care Hospitals measure which we do not believe would increase LTCH burden because it is a Medicare FFS claimsbased measure and does not require reporting of data other than submission of Medicare FFS claims data (LTCHs submit these data to CMS for payment purposes). In section IX.C.8.c. of the preamble of this final rule, we are finalizing our proposal to add one additional quality measure (application of the Percent of Residents Experiencing One or More Falls with Major Injury (Long Stay) (NQF #0674)) for use in the LTCHQR Program for the FY 2018 payment determination and subsequent years. We 211 The mean hourly wage of $15.59 per hour for a Medical Secretary was obtained from the U.S. Bureau of Labor Statistics. We refer readers to: https://www.bls.gov/oes/current/oes436013.htm. PO 00000 Frm 00468 Fmt 4701 Sfmt 4700 are finalizing our proposal that LTCHs report data for an application of the Percent of Residents Experiencing One or More Falls with Major Injury (Long Stay) (NQF #0674) measure beginning January 1, 2016. It is our intent to foster alignment between measures by expanding preexisting data collection and submission methods to reduce the administrative burden related to data collection and submission. This measure will be collected using the LTCH CARE Data Set. The items used for this measure will be based on the two items from the Minimum Data Set (MDS) 3.0, version 1.13.0 (1/17/13): items J1800 (Any Falls Since Admission/Entry or Reentry or Prior Assessment) and J1900A., B. and C. (Number of Falls (A. with no injury, B. with injury (except major), C. with Major injury)) since Admission/Entry or Reentry or Prior Assessment), available at: https://www.cms.gov/Medicare/ Quality-Initiatives-Patient-AssessmentInstruments/NursingHomeQualityInits/ NHQIMDS30Technical Information.html. The calculation of the application of the measure will be based on item J1900C, Number of Falls with major injury, since admission/entry or reentry or prior assessment. The specifications and data elements for NQF #0674 are available in the MDS 3.0 Quality Measures User’s Manual Version 6.0 available on our Web site at: https://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/NursingHomeQualityInits/ MDS30RAIManual.html. We believe that the initial registration for use of the LTCH CARE Data Set, along with any necessary training, occurred for most LTCHs prior to the reporting of the Pressure Ulcer measure, which began on October 1, 2012. Therefore, we believe the burden will be minimal related to the addition of this quality measure into the LTCH CARE Data Set. Therefore, we do not expect the addition of the Application of NQF #0674 Percent of Residents Experiencing One or More Falls with Major Injury (Long Stay) measure to increase the burden substantially. Further, LTCHs will have been reporting data for the LTCHQR Program using the LTCH CARE Data Set for more than 2 years by the time the data collection begins for this measure. At this time, we have not completed the revision of the information collection instrument (LTCH CARE Data Set) that LTCHs would be required to submit to report the finalized measure (NQF #0674) for the FY 2018 payment determination and subsequent years. Because the forms are still under E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations development, we cannot make a complete burden estimate at this time for the inclusion of the Application of Percent of Residents Experiencing One or More Falls with Major Injury (Long Stay) measure in the LTCH CARE Data Set. Once the forms are available, we will prepare and submit the required information collection request, which will fully set forth the anticipated burden to LTCHs as a result of the new data items that must be added to the LTCH CARE Data Set. Comment: One commenter noted that the CARE Tool 2.0 must be significantly enhanced to accommodate collection of data on the proposed quality measures. Response: In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51753 through 51756), we finalized use of the LTCH CARE Data Set for collection of data on an application of NQF #0678, Percent of Residents or Patients With Pressure Ulcers That Are New or Worsened (Short-Stay). In the FY2013 IPPS/LTCH PPS final rule (77 FR 53624 through 53627), we finalized use of the LTCH CARE Data Set to collect data for NQF #0680, Percentage of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short-Stay). To accommodate the collection of data on NQF #0680, we revised the LTCH CARE Data Set (Version 1.01) to include additional items. The revised LTCH CARE Data Set (Version 2.01) was approved by the Office of Management and Budget on June 10, 2013 (OMB Control Number 0938–1163). To accommodate the collection of data on NQF #0674, the LTCH CARE Data Set (Version 2.01) will be revised to include items from other, standardized and clinically established data sets, including but not limited to the MDS 3.0 and CARE tool. With each revision, we will solicit public comment on the proposed LTCH CARE Data Set through the PRA approval process, which provides for the publication of two PRA notices in the Federal Register. The first notice is followed by a 60-day comment period. The second notice is followed by a 30-day comment period. Comment: As noted in section IX.C.2. of the preamble of this final rule, several commenters expressed concern regarding the pace with which items are being added to the LTCH CARE Data Set, and one noted that this may require LTCHs to shift resources from prevention activities to reporting activities. One commenter, in expressing concern with the amount of time provided for adopting the proposed MRSA and CDI measures, suggested that CMS look carefully at the growing VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 burden that the LTCHQR Program is generating, suggesting that CMS significantly underestimates the burden of these measures, particularly for smaller LTCHs with lower average daily census. Response: By building upon preexisting resources for data collection and submission, we intend to foster alignment of LTCHQR Program measures and measures in other quality reporting programs. This should help to reduce the administrative burden related to data collection and submission. We anticipate that the initial setup and acclimation to the data collection by the LTCH CARE Data Set will have already occurred with the adoption of the Pressure Ulcer measure for the LTCHQR Program for the FY 2014 payment determination as well as the Patient Influenza Vaccination measure for the LTCHQR Program for the FY2015 payment determination. Therefore, we believe the transition to reporting one additional measure via the LTCH CARE Data Set may be less burdensome. With respect to the burden placed on LTCHs by quality measure reporting, a burden estimate is required by NQF and carefully considered during their endorsement process. We recognize that the LTCHQR Program carries a certain level of burden, but also feel that this level of burden is justified in light of the benefits to patients in terms of patient safety, as well as by the health care system in terms of efficiency and cost. We also took into account the impact of data collection and submission on LTCH staff by adopting a policy of phased quality measure implementation and reporting. We have gradually introduced new measures and designed collection and submission requirements that are meant to provide sufficient time for all Medicare-certified LTCHs to adjust to and comply with LTCHQR Program requirements. Comment: Several commenters expressed concern over the burden estimate included in the PRA package for the LTCH CARE Data Set (Version 2.01), which represents (approximately) a 300 percent increase over the burden estimate for the LTCH CARE Data Set (Version 1.01). Response: On May 15, 2013, the LTCHQR Program completed the submission timeframe for the first quarter of measure reporting. As a result, we have become more familiar with the burden of this program and have now received feedback from LTCHs about the time burden associated with the completion of the LTCH CARE Data Set. We also have considered feedback from LTCHs in the form of PO 00000 Frm 00469 Fmt 4701 Sfmt 4700 50963 public comments to the FY 2014 IPPS/ LTCH PPS proposed rule, questions during Open Door forums, and LTCH helpdesk inquiries. LTCHs have stated that we had underestimated the amount of time that is required of the LTCH staff to complete the LTCH CARE Data Set on each LTCH patient. In response to the feedback received, we have significantly revised our burden estimates. For example, in our previous PRA package burden estimate we estimated burden based solely on LTCH yearly discharges of Medicare beneficiaries. The revised burden estimate includes yearly LTCH discharges of both Medicare and nonMedicare patients, because we require data submission on all payers, and not solely on Medicare patients. In addition, the original burden calculation only took into account one assessment per patient (admission), while the revised estimate includes two assessment records per patient (admission and discharge). While the burden calculation for this PRA submission has increased significantly compared to our original calculation, we believe that the calculation now more accurately reflects the burden associated with implementing collection of the quality measures. We provided the public with an opportunity to comment on the burden estimate and the LTCH CARE Data Set Version 2.01 as part of the PRA package. The PRA package for the LTCH CARE Data Set (Version 2.01) has been approved by the Office of Management and Budget. For a complete discussion on the current LTCH CARE Data Set Version 2.01 burden estimate, we refer readers to the PRA package approved by OMB on June 10, 2013.212 Comment: Several commenters believed that the amount of information that LTCHs are being required to collect exceeds the minimum amount of reporting necessary to accomplish the quality improvement purpose. The commenters believed that several measures require the disclosure of identifiable information that is not reasonably related to the LTCHQR Program. Response: LTCHs will only be required to complete a subset of the data elements that comprise the LTCH CARE Data Set. For the purposes of this discussion, we have separated the items which make up the LTCH CARE Data Set into three categories and have deemed them to be either required or 212 The LTCH CARE Data Set Version 2.01 was approved on June 10, 2013 by OMB in accordance with the PRA. The OMB Control Number is 0938– 1163. Expiration Date June 30, 2016. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50964 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations voluntary. These elements are: (1) A limited set of administrative items that are necessary in order to identify each LTCH and properly attribute patients to it for purposes of calculating the measure rate; (2) the data elements necessary to populate the measures being collected, consistent with the NQF-endorsed specifications for that measure; (3) the data elements necessary to enable us to validate that the measure’s data elements were accurately reported. All other data elements on the LTCH CARE Data Set can be completed on a voluntary basis, but will have no impact on the measure rate calculations or on our determination of whether the LTCH has met the reporting requirements under the LTCHQR Program. We will post on the CMS Web site a detailed matrix that identifies which data elements will be required and which will be voluntary. This matrix will also be incorporated into the final LTCHQR Program Manual, which will be posted on CMS LTCHQR Program Web site and available for download at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/LTCH-QualityReporting/. Comment: Several commenters questioned the requirement for LTCHs to collect data on all patients, not just Medicare patients, and argue that the improvement in the quality of care provided to Medicare patients does not require collection of data on nonMedicare patients. The commenters propose that if CMS chooses to continue collection of data on non-Medicare patients, this data should be deidentified. Response: With respect to the inclusion of non-Medicare beneficiaries in the LTCHQR Program, we believe delivery of high-quality care to all patients in the LTCH setting is imperative. Collecting such quality data on all patients in the LTCH setting supports our goal to ensure high quality care for Medicare beneficiaries. It provides us with the data to inform the public with the most robust and accurate reflection of quality of care and patient outcomes in the LTCH setting. Therefore, for non-claims-based measures, in order to facilitate and ensure that high-quality care is delivered to Medicare beneficiaries in the LTCH setting, we require that quality data be collected on all LTCH patients, regardless of payer. Since its implementation date (October 1, 2012), our policy for the LTCHQR Program requires data collection and submission requirements on all patients, regardless of payer and we did not propose any changes to this policy in the FY 2014 VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 proposed rule. We appreciate the suggestion that data on non-Medicare patients be de-identified, and we will consider this view for future rulemaking and program development. Comment: One commenter encouraged CMS to invest in enhanced information systems for LTCHs, to enable less burdensome data collection. Response: We are continually working to address policy and funding issues related to safer care, better outcomes, and the efficient use of resources. 10. ICRs for the Inpatient Psychiatric Facilities Quality Reporting (IPFQR) Program In section VIII.F. of the preamble of the FY 2013 IPPS/LTCH PPS final rule, we discussed the implementation of the Inpatient Psychiatric Facilities Quality Reporting (IPFQR) Program pursuant to the Secretary’s authority under section 1886(s)(4) of the Act. We previously adopted six measures for the FY 2014 IPFQR Program payment determination and subsequent years. In section IX.D. of the preamble of this final rule, we are finalizing our policies that, for the FY 2016 payment determination and subsequent years, IPFs must submit aggregate data on one additional measure (SUB–1: Alcohol Use Screening), for a total of seven measures. We note that, at this time, we have decided not to finalize SUB–4. Also, although we proposed to use chart-abstraction, we are finalizing claims-based data collection for the Follow-Up After Hospitalization for Mental Illness (FUH) measure, which reduces the burden on IPFs. In addition, we are finalizing a request for voluntary information. To reduce the burden on IPFs, we are not making changes to the administrative, reporting or submission requirements for the existing six measures previously finalized in last year’s final rule (77 FR 53654 through 53657). However, there will be new reporting and submission requirements associated with the new SUB–1 measure and the request for voluntary information for the FY 2016 payment determination and subsequent years. We believe that the new measures will help improve the quality of care provided by IPFs as we work to make quality data more transparent to the public. As required by the Act, we will share the information collected under the IPFQR Program with the public. These data will be displayed on the CMS Web site. We have estimated the burden associated with IPFs complying with the requirements of the IPFQR Program. Because claims-based measures can be PO 00000 Frm 00470 Fmt 4701 Sfmt 4700 calculated based on data that are already reported to the Medicare program for payment purposes, we believe no additional information collection will be required from the IPFs for the new FUH measure. In our burden estimate calculation, we have included the time that would be spent for: (1) The submission of voluntary information; (2) chart abstraction; and (3) training personnel on the collection of chartabstracted data, aggregation of the data, and for protocols to submit the aggregate-level data through QualityNet. We estimate that the annual hourly burden on each IPF for the collection, submission, and training of personnel for submitting all quality measures, including 30 minutes needed for the voluntary submission, is approximately 761 hours in a year for each IPF. Therefore, the average hourly burden on each IPF is approximately 63 hours per month. At this time, we have no way to estimate how many IPFs will participate in the program. Therefore, we cannot estimate the aggregate impact. List of Subjects 42 CFR Part 412 Administrative practice and procedure, Health facilities, Medicare, Puerto Rico, Reporting and recordkeeping requirements. 42 CFR Part 413 Health facilities, Kidney diseases, Medicare, Puerto Rico, Reporting and recordkeeping requirements. 42 CFR Part 414 Administrative practice and procedure, Health facilities, Health professions, Kidney diseases, Medicare, Reporting and recordkeeping requirements. 42 CFR Part 419 Hospitals, Medicare, Reporting and recordkeeping requirements. 42 CFR Part 424 Emergency medical services, Health facilities, Health professions, Medicare. 42 CFR Part 482 Grant program—health, Hospitals, Medicaid, Medicare, Reporting and recordkeeping requirements. 42 CFR Part 485 Grant programs—health, Health facilities, Medicaid, Medicare, Reporting and recordkeeping requirements. 42 CFR Part 489 Health facilities, Medicare, Reporting and recordkeeping requirements. E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations For the reasons stated in the preamble of this final rule, the Centers for Medicare & Medicaid Services is amending 42 CFR Chapter IV as follows: PART 412—PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL SERVICES 1. The authority citation for Part 412 continues to read as follows: ■ Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh), and sec. 124 of Public Law 106–113 (113 Stat. 1501A–332). 2. A new § 412.3 is added to read as follows: ■ mstockstill on DSK4VPTVN1PROD with RULES6 § 412.3 Admissions. (a) For purposes of payment under Medicare Part A, an individual is considered an inpatient of a hospital, including a critical access hospital, if formally admitted as an inpatient pursuant to an order for inpatient admission by a physician or other qualified practitioner in accordance with this section and §§ 482.24(c), 482.12(c), and 485.638(a)(4)(iii) of this chapter for a critical access hospital. This physician order must be present in the medical record and be supported by the physician admission and progress notes, in order for the hospital to be paid for hospital inpatient services under Medicare Part A. In addition to these physician orders, inpatient rehabilitation facilities also must adhere to the admission requirements specified in § 412.622 of this chapter. (b) The order must be furnished by a qualified and licensed practitioner who has admitting privileges at the hospital as permitted by State law, and who is knowledgeable about the patient’s hospital course, medical plan of care, and current condition. The practitioner may not delegate the decision (order) to another individual who is not authorized by the State to admit patients, or has not been granted admitting privileges applicable to that patient by the hospital’s medical staff. (c) The physician order also constitutes a required component of physician certification of the medical necessity of hospital inpatient services under subpart B of Part 424 of this chapter. (d) The physician order must be furnished at or before the time of the inpatient admission. (e)(1) Except as specified in paragraph (e)(2) of this section, when a patient enters a hospital for a surgical procedure not specified by Medicare as inpatient only under § 419.22(n) of this chapter, a diagnostic test, or any other treatment, and the physician expects to VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 keep the patient in the hospital for only a limited period of time that does not cross 2 midnights, the services are generally inappropriate for inpatient admission and inpatient payment under Medicare Part A, regardless of the hour that the patient came to the hospital or whether the patient used a bed. Surgical procedures, diagnostic tests, and other treatment are generally appropriate for inpatient admission and inpatient hospital payment under Medicare Part A when the physician expects the patient to require a stay that crosses at least 2 midnights. The expectation of the physician should be based on such complex medical factors as patient history and comorbidities, the severity of signs and symptoms, current medical needs, and the risk of an adverse event. The factors that lead to a particular clinical expectation must be documented in the medical record in order to be granted consideration. (2) If an unforeseen circumstance, such as a beneficiary’s death or transfer, results in a shorter beneficiary stay than the physician’s expectation of at least 2 midnights, the patient may be considered to be appropriately treated on an inpatient basis, and hospital inpatient payment may be made under Medicare Part A. ■ 3. Section 412.46 is revised to read as follows: § 412.46 Medical review requirements. (a) Physician acknowledgement. (1) Basis. Because payment under the prospective payment system is based in part on each patient’s principal and secondary diagnoses and major procedures performed, as evidenced by the physician’s entries in the patient’s medical record, physicians must complete an acknowledgement statement to this effect. (2) Content of physician acknowledgement statement. When a claim is submitted, the hospital must have on file a signed and dated acknowledgement from the attending physician that the physician has received the following notice: Notice to Physicians: Medicare payment to hospitals is based in part on each patient’s principal and secondary diagnoses and the major procedures performed on the patient, as attested to by the patient’s attending physician by virtue of his or her signature in the medical record. Anyone who misrepresents, falsifies, or conceals essential information required for payment of Federal funds, may be subject to fine, imprisonment, or civil penalty under applicable Federal laws. (3) Completion of acknowledgement. The acknowledgement must be PO 00000 Frm 00471 Fmt 4701 Sfmt 4700 50965 completed by the physician at the time that the physician is granted admitting privileges at the hospital, or before or at the time the physician admits his or her first patient. Existing acknowledgements signed by physicians already on staff remain in effect as long as the physician has admitting privileges at the hospital. (b) Physician’s order and certification regarding medical necessity. No presumptive weight shall be assigned to the physician’s order under § 412.3 or the physician’s certification under Subpart B of Part 424 of the chapter in determining the medical necessity of inpatient hospital services under section 1862(a)(1) of the Act. A physician’s order or certification will be evaluated in the context of the evidence in the medical record. ■ 4. Section 412.64 is amended— ■ a. Adding a new paragraph (d)(1)(v). ■ b. In the introductory text of paragraph (h)(4), removing the date ‘‘October 1, 2013’’ and adding in its place the date ‘‘October 1, 2014’’. ■ c. In paragraph (h)(4)(vi), removing the date ‘‘October 1, 2013’’ and adding in its place the date ‘‘October 1, 2014’’. The addition reads as follows: § 412.64 Federal rates for inpatient operating costs for Federal fiscal year 2005 and subsequent fiscal years. * * * * * (d) * * * (1) * * * (v) For fiscal year 2014, the percentage increase in the market basket index less a multifactor productivity adjustment (as determined by CMS) and less 0.3 percentage point for prospective payment hospitals (as defined in § 413.40(a) of this chapter) for hospitals in all areas. * * * * * § 412.101 [Amended] 5. Section 412.101 is amended by— ■ a. In paragraph (b)(2)(i), removing the term ‘‘FY 2013’’ and adding in its place the term ‘‘FY 2014.’’ ■ b. In paragraph (b)(2)(ii), removing the phrase ‘‘For FY 2011 and FY 2012,’’ and adding in its place the phrase ‘‘For FY 2011, FY 2012, and FY 2013,’’. ■ c. In paragraph (c)(1), removing the term ‘‘FY 2013’’ and adding in its place the term ‘‘FY 2014.’’ ■ d. In paragraph (c)(2) introductory text, removing the phrase ‘‘For FY 2011 and FY 2012,’’ and adding in its place the phrase ‘‘For FY 2011, FY 2012, and FY 2013,’’. ■ e. In paragraph (d), removing the term ‘‘FY 2013’’ and adding in its place the term ‘‘FY 2014.’’ ■ E:\FR\FM\19AUR2.SGM 19AUR2 50966 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 6. Section 412.106 is amended by adding new paragraphs (f), (g), and (h) to read as follows: ■ § 412.106 Special treatment: Hospitals that serve a disproportionate share of lowincome patients. mstockstill on DSK4VPTVN1PROD with RULES6 * * * * * (f) Empirically justified Medicare DSH payments. Effective for discharges on or after October 1, 2013, the amounts otherwise payable to a hospital under paragraph (d) of this section are reduced by 75 percent. (g) Additional payment for uncompensated care. (1) Payment rules. Hospitals that qualify for payments under this section for fiscal year 2014 and each subsequent year, will receive an additional amount equal to the product of the following three factors: (i) Factor 1. For FY 2014 and each subsequent fiscal year, a factor equal to the difference between: (A) The most recently available estimates, as calculated by CMS’ Office of the Actuary, of the aggregate amount of payments that would be made to such hospitals under paragraphs (a) through (e) of this section if paragraph (f) of this section did not apply for the fiscal year; and (B) The most recently available estimates, as calculated by CMS’ Office of the Actuary, of the aggregate amount of payments that are made to such hospitals pursuant to paragraph (f) of this section for the fiscal year. (ii) Factor 2. For each of fiscal years 2014, 2015, 2016, and 2017, a factor equal to 1 minus the percent change in the percent of individuals under the age of 65 who are uninsured (and subtracting from the factor 0.1 percentage point for fiscal year 2014 and 0.2 percentage point for each of fiscal years 2015, 2016, and 2017), as determined by comparing: (A) 18 percent, the percent of such individuals who are uninsured in 2013, based on the March 20, 2010 estimate of the ‘‘Insured Share of the Nonelderly Population Including All Residents’’ by the Congressional Budget Office; and (B) The percent of such individuals who are uninsured in the applicable fiscal year, based on the most recent estimate of the ‘‘Insured Share of the Nonelderly Population Including All Residents’’ by the Congressional Budget Office available at the time of development of the annual final rule for the hospital inpatient prospective payment system. (iii) Factor 3. A factor equal to the percent, for each inpatient prospective payment system hospital, that represents the quotient of: VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 (A) The amount of uncompensated care for such hospital as estimated by CMS. (B) The aggregate amount of uncompensated care as estimated by CMS for all hospitals that are estimated to receive a payment under this section. (C) For fiscal year 2014, CMS will base its estimates of the amount of hospital uncompensated care on the most recent available data on utilization for Medicaid and Medicare SSI patients, as determined by CMS in accordance with paragraphs (b)(2)(i) and (b)(4) of this section. (iv) The final values for each of the three factors are determined for each fiscal year at the time of development of the annual final rule for the hospital inpatient prospective payment system, and these values are used for both interim and final payment determinations. (2) Preclusion of administrative and judicial review. There is no administrative or judicial review under sections 1869 or 1878 of the Act, or otherwise, of the following: (i) Any estimate of the Secretary for the purpose of determining the factors in paragraph (g)(1) of this section; and (ii) Any period selected by the Secretary for such purposes. (h) Manner and timing of payments. (1) Interim payments are made during the payment year to each hospital that is estimated to be eligible for payments under this section at the time of the annual final rule for the hospital inpatient prospective payment system, subject to the final determination of eligibility at the time of cost report settlement for each hospital. (2) Final payment determinations are made at the time of cost report settlement, based on the final determination of each hospital’s eligibility for payment under this section. § 412.108 [Amended] 7. Section 412.108 is amended by— a. In paragraph (a)(1) introductory text, removing the phrase ‘‘before October 1, 2012’’ and adding in its place the phrase ‘‘before October 1, 2013’’. ■ b. In paragraph (c)(2)(iii) introductory text, removing the phrase ‘‘before October 1, 2012’’ and adding in its place the phrase ‘‘before October 1, 2013’’. ■ 8. Section 412.140 is amended by— ■ a. Revising the section heading. ■ b. Revising paragraph (a)(3) introductory text. ■ c. Revising paragraph (b). ■ d. Adding a new paragraph (f). The revisions and addition read as follows: ■ ■ PO 00000 Frm 00472 Fmt 4701 Sfmt 4700 § 412.140 Participation, data submission, and validation requirements under the Hospital Inpatient Quality Reporting (IQR) Program. (a) * * * (3) Submit a completed Notice of Participation Form to CMS if the hospital is participating in the program for the first time, has previously withdrawn from the program and would like to participate again, or has received a new CMS Certification Number (CCN). * * * * * (b) Withdrawal from the Hospital IQR Program. CMS will accept Hospital IQR Program withdrawal forms from hospitals on or before— (1) Prior to the FY 2016 payment determination, August 15 of the fiscal year preceding the fiscal year for which a Hospital IQR determination will be made. (2) Beginning with the FY 2016 payment determination, May 15 of the fiscal year preceding the fiscal year for which a Hospital IQR payment determination will be made. * * * * * (f) Patient experience of care data (HCAHPS survey). HCAHPS is the Hospital Consumer Assessment of Healthcare Providers and Systems survey that measures patient experience of care after a recent hospital stay. (1) Approved HCAHPS survey vendors and self-administering hospitals must fully comply with all HCAHPS oversight activities, including allowing CMS and its HCAHPS Project Team to perform site visits at the hospitals’ and survey vendors’ company locations. (2) CMS approves an application for an entity to administer the HCAHPS survey as an approved HCAHPS survey vendor on behalf of one or more hospitals when an applicant has met the Minimum Survey Requirements and Rules of Participation that can be found on the official HCAHPS On-Line Web site, and agree to comply with the current survey administration protocols that can be found on the official HCAHPS On-Line Web site. An entity must be an approved HCAHPS survey vendor in order to administer and submit HCAHPS data to CMS on behalf of one or more hospitals. ■ 9. Section 412.150 is amended by adding a new paragraph (c) to read as follows: § 412.150 Basis and scope of subpart. * * * * * (c) Section 1886(p) of the Act requires the Secretary to establish an adjustment to hospital payments for hospitalacquired conditions, or a Hospital- E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Acquired Condition Reduction Program, under which payments to applicable hospitals are adjusted to provide an incentive to reduce hospital-acquired conditions, effective for discharges beginning on October 1, 2014. The rules for determining the payment adjustment under the Hospital-Acquired Condition Reduction Program are specified in §§ 412.170 and 412.172. ■ 10. Section 412.152 is amended by revising the definition of ‘‘Base operating DRG payment amount’’ to read as follows: § 412.152 Definitions for the Hospital Readmissions Reduction Program. * * * * * Base operating DRG payment amount is the wage-adjusted DRG operating payment plus any applicable new technology add-on payments under subpart F of this part. This amount is determined without regard to any payment adjustments under the Hospital Value-Based Purchasing Program, as specified under § 412.162. This amount does not include any additional payments for indirect medical education under § 412.105, the treatment of a disproportionate share of low-income patients under § 412.106, outliers under subpart F of this part, and a low volume of discharges under § 412.101. With respect to a sole community hospital that receives payments under § 412.92(d) or a Medicare-dependent, small rural hospital that receives payments under § 412.108(c) for FY 2013, this amount also does not include the difference between the hospital-specific payment rate and the Federal payment rate determined under subpart D of this part. With respect to a hospital that is paid under section 1814(b)(3) of the Act, this amount is an amount equal to the wage adjusted DRG payment amount plus new technology payments that would be paid to such hospitals, absent the provisions of section 1814(b)(3) of the Act. * * * * * ■ 11. Section 412.154 is amended by revising paragraph (d)(2) to read as follows: § 412.154 Payment adjustments under the Hospital Readmissions Reduction Program. mstockstill on DSK4VPTVN1PROD with RULES6 * * * * * (d) * * * (2)(i) Maryland’s annual report to the Secretary and request for exemption from the Hospital Readmissions Reduction Program must be resubmitted and reconsidered annually. (ii) Beginning with the FY 2015 program year— VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 (A) The State must submit a preliminary report to CMS no later than January 15 of each year for the Secretary to consider, through the annual proposed rule, its exemption from the Hospital Readmissions Reduction Program for the upcoming Federal fiscal year. (B) The State must submit a final report to CMS no later than June 1 of each year for the Secretary to consider, through the annual final rule, its exemption from the Hospital Readmissions Reduction Program in the upcoming Federal fiscal year. (C) The reports required under paragraphs (d)(2)(ii)(A) and (d)(2)(ii)(B) of this section must include information as specified by CMS. * * * * * ■ 12. Section 412.160 is amended by revising the definitions of ‘‘Achievement threshold’’ and ‘‘Benchmark’’ to read as follows: § 412.160 Definitions for the Hospital Value-Based Purchasing (VBP) Program. * * * * * Achievement threshold (or achievement performance standard) means the median (50th percentile) of hospital performance on a measure during a baseline period with respect to a fiscal year, for Hospital VBP Program measures other than the Medicare Spending per Beneficiary measure, and the median (50th percentile) of hospital performance on a measure during the performance period with respect to a fiscal year, for the Medicare Spending per Beneficiary measure. * * * * * Benchmark means the arithmetic mean of the top decile of hospital performance on a measure during the baseline period with respect to a fiscal year, for Hospital VBP Program measures other than the Medicare Spending per Beneficiary measure, and the arithmetic mean of the top decile of hospital performance on a measure during the performance period with respect to a fiscal year, for the Medicare Spending per Beneficiary measure. * * * * * ■ 13. An undesignated center heading and new §§ 412.170 and 412.172 are added under Subpart I to read as follows: Payment Adjustments Under the Hospital-Acquired Condition Reduction Program §§ 412.170 Definitions for the HospitalAcquired Condition Reduction Program. As used in this section and § 412.172, the following definitions apply: PO 00000 Frm 00473 Fmt 4701 Sfmt 4700 50967 Applicable hospital is a hospital described in section 1886(d)(1)(B) of the Act (including a hospital in Maryland that is paid under the waiver under section 1814(b)(3) of the Act and that, absent the waiver specified by section 1814(b)(3) of the Act, would have been paid under the hospital inpatient prospective payment system) as long as the hospital meets the criteria specified under § 412.172(e). Applicable period is, with respect to a fiscal year, the 2-year period (specified by the Secretary) from which data are collected in order to calculate the total hospital-acquired condition score under the Hospital-Acquired Condition Reduction Program. Hospital-acquired condition is a condition as described in section 1886(d)(4)(D)(iv) of the Act and any other condition determined appropriate by the Secretary that an individual acquires during a stay in an applicable hospital, as determined by the Secretary. § 412.172 Payment adjustments under the Hospital-Acquired Condition Reduction Program. (a) Scope. This section sets forth the requirements for determining the payment adjustments under the Hospital-Acquired Condition Reduction Program for hospitals that meet the criteria described under paragraph (e) of this section. (b) Payment adjustment. With respect to all discharges from an applicable hospital occurring during FY 2015 or a subsequent year, the amount of payment under this section, or section 1814(b)(3) of the Act as applicable, for such discharges during the fiscal year will be equal to 99 percent of the amount of payment that would otherwise apply to these discharges under this section or section 1814(b)(3) of the Act (determined after the application of the payment adjustment under the Hospital Readmissions Reduction Program under § 412.154 and the adjustment made under the Hospital Value-Based Purchasing Program under § 412.162 and section 1814(l)(4) of the Act but without regard to section 1886(p) of the Act). (c) Hospitals paid under section 1814(b)(3) of the Act (certain Maryland hospitals). CMS will determine whether to exempt Maryland hospitals that are paid under section 1814(b)(3) of the Act and not under the hospital inpatient prospective payment system from the application of the payment adjustments under this section. The State must submit an annual report to CMS that describes how a similar program to reduce hospital-acquired conditions in E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50968 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations that State achieves or surpasses the measured results in terms of health outcomes and cost savings for the Hospital-Acquired Conditions Reduction Program as applied to hospitals described in section 1886(d)(1)(B) of the Act. (1) CMS will establish criteria for evaluation of Maryland’s annual report to determine whether the State will be exempted from the application of the payment adjustments under this section for a given fiscal year. (2) Maryland’s annual report and request for exemption from the Hospital-Acquired Condition Reduction Program must be resubmitted and reconsidered annually. (d) Risk adjustment. In carrying out the provisions of paragraph (e) of this section, CMS will establish and apply an appropriate risk-adjustment methodology. (e) Criteria for applicable hospitals. (1) General. With respect to a subsection (d) hospital, CMS will identify the top quartile of all subsection (d) hospitals with respect to hospital-acquired conditions as measured during the applicable period. (2) Use of total hospital-acquired condition scores. CMS will use total hospital-acquired condition scores to identify applicable hospitals. CMS will identify the 25 percent of hospitals with the highest total scores. (3) Methodology for calculating total hospital-acquired condition scores. CMS will calculate the total hospital-acquired condition scores by weighing the selected measures according to the established methodology. (f) Reporting of hospital-specific information. CMS will make information available to the public regarding hospital-acquired condition rates of all hospitals under the HospitalAcquired Condition Reduction Program. (1) CMS will provide each hospital with confidential hospital-specific reports and discharge level information used in the calculation of its total hospital-acquired condition score. (2) Hospitals will have a period of 30 days after the receipt of the information provided under paragraph (f)(1) of this section to review and submit corrections for the hospital-acquired condition domain score for each condition that is used to calculate the total score for the fiscal year. (3) The administrative claims data used to calculate a hospital’s total hospital-acquired condition score for a condition for a fiscal year are not subject to review and correction under paragraph (f)(2) of this section. (4) CMS will post the total hospitalacquired condition score, the domain VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 score, and the score on each measure for each hospital on the Hospital Compare Web site. (g) Limitations on review. There is no administrative or judicial review under § 412.170 and this section for the following: (1) The criteria describing applicable hospitals. (2) The applicable period. (3) The specification of hospitalacquired conditions. (4) The provision of reports to hospitals and the information made available to the public. ■ 14. Section 412.523 is amended by— ■ a. Revising the introductory text of paragraph (c)(3). ■ b. Adding paragraph (c)(3)(x). ■ c. Redesignating paragraph (c)(4) as paragraph (c)(5). ■ d. Adding a new paragraph (c)(4). The additions read as follows: § 412.523 Methodology for calculating the Federal prospective payment rates. * * * * * (c) * * * (3) Computation of the standard Federal rate. Subject to the provisions of paragraph (c)(4) of this section, the standard Federal rate is computed as follows: * * * * * (x) For long-term care hospital prospective payment system fiscal year beginning October 1, 2013, and ending September 30, 2014. The standard Federal rate for the long-term care hospital prospective payment system beginning October 1, 2013, and ending September 30, 2014, is the standard Federal rate for the previous long-term care hospital prospective payment system fiscal year updated by 1.7 percent, and further adjusted, as appropriate, as described in paragraph (d) of this section. (4) For fiscal year 2014 and subsequent fiscal years— (i) In the case of a long-term care hospital that does not submit quality reporting data to CMS in the form and manner and at a time specified by the Secretary, the annual update to the standard Federal rate specified in paragraph (c)(3) of this section is further reduced by 2.0 percentage points. (ii) Any reduction of the annual update to the standard Federal rate under paragraph (c)(4)(i) of this section will apply only to the fiscal year involved and will not be taken into account in computing the annual update to the standard Federal rate for a subsequent fiscal year. * * * * * PO 00000 Frm 00474 Fmt 4701 Sfmt 4700 PART 413—PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR END-STAGE RENAL DISEASE SERVICES; OPTIONAL PROSPECTIVELY DETERMINED PAYMENT RATES FOR SKILLED NURSING FACILITIES 15. The authority for Part 413 continues to read as follows: ■ Authority: Secs. 1102, 1861(v)(1)(A), and 1871 of the Social Security Act (42 U.S.C. 1302, 1395x(v)(1)(A), and 1395hh). 16. In § 413.78, amend paragraphs (g)(2) introductory text, (g)(2)(ii), (g)(2)(iii), (g)(3)(i), and (3)(ii) (two places), by removing the term ‘‘nonhospital’’ and adding ‘‘nonprovider’’ in its place. ■ PART 414—PAYMENT FOR PART B MEDICAL AND OTHER HEALTH SERVICES 17. The authority for Part 414 continues to read as follows: ■ Authority: Secs. 1102, 1871, and 1881(b)(l) of the Social Security Act (42 U.S.C. 1302, 1395hh, and 1395rr(b)(l)). 18. Subpart A is amended by adding § 414.5 to read as follows: ■ § 414.5 Hospital services paid under Medicare Part B when a Part A hospital inpatient claim is denied because the inpatient admission was not reasonable and necessary, but hospital outpatient services would have been reasonable and necessary in treating the beneficiary. (a) If a Medicare Part A claim for inpatient hospital services is denied because the inpatient admission was not reasonable and necessary, or if a hospital determines under § 482.30(d) of this chapter or § 485.641 of this chapter after a beneficiary is discharged that the beneficiary’s inpatient admission was not reasonable and necessary, the hospital may be paid for any of the following Part B inpatient services that would have been reasonable and necessary if the beneficiary had been treated as a hospital outpatient rather than admitted as an inpatient, provided the beneficiary is enrolled in Medicare Part B: (1) Services described in § 419.21(a) of this chapter that do not require an outpatient status. (2) Physical therapy services, speechlanguage pathology services, and occupational therapy services. (3) Ambulance services, as described in section 1861(v)(1)(U) of the Act, or, if applicable, the fee schedule established under section 1834(l) of Act. (4) Except as provided in § 419.2(b)(11) of this chapter, prosthetic E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations devices, prosthetics, prosthetic supplies, and orthotic devices. (5) Except as provided in § 419.2(b)(10) of this chapter, durable medical equipment supplied by the hospital for the patient to take home. (6) Clinical diagnostic laboratory services. (7)(i) Effective December 8, 2003, screening mammography services; and (ii) Effective January 1, 2005, diagnostic mammography services. (8) Effective January 1, 2011, annual wellness visit providing personalized prevention plan services as defined in § 410.15 of this chapter. (b) If a Medicare Part A claim for inpatient hospital services is denied because the inpatient admission was not reasonable and necessary, or if a hospital determines under § 482.30(d) of this chapter or § 485.641 of this chapter after a beneficiary is discharged that the beneficiary’s inpatient admission was not reasonable and necessary, the hospital may be paid for hospital outpatient services described in § 412.2(c)(5), § 412.405, § 412.540, or § 412.604(f) of this chapter or § 413.40(c)(2) of this chapter that are furnished to the beneficiary prior to the point of inpatient admission (that is, the inpatient admission order). (c) The claims for the Part B services filed under the circumstances described in this section must be filed in accordance with the time limits for filing claims specified in § 424.44(a) of this chapter. PART 419—PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL OUTPATIENT DEPARTMENT SERVICES 19. The authority citation for Part 419 continues to read as follows: ■ Authority: Secs. 1102, 1833(t), and 1871 of the Social Security Act (42 U.S.C. 1302, 13951(t), and 1395hh). 20. Section 419.21 is amended by revising the section heading to read as follows: ■ § 419.21 Hospital services subject to the outpatient prospective payment system. * * * * * 21. Section 419.22 is amended by— a. Revising the section heading. b. Revising paragraph (h). c. In paragraph (j), removing the crossreference ‘‘§ 419.22(b)(11)’’ and adding in its place ‘‘§ 419.2(b)(11)’’. ■ d. Adding paragraph (u). The revisions and addition read as follows: mstockstill on DSK4VPTVN1PROD with RULES6 ■ ■ ■ ■ § 419.22 Hospital services excluded from payment under the hospital outpatient prospective payment system. * * * VerDate Mar<15>2010 * * 21:51 Aug 16, 2013 Jkt 229001 (h) Physical therapy services, speechlanguage pathology services, and occupational therapy services described in section 1833(a)(8) of the Act for which payment is made under the fee schedule described in section 1834(k) of the Act. * * * * * (u) Outpatient diabetes selfmanagement training. PART 424—CONDITIONS FOR MEDICARE PAYMENT 22. The authority citation for Part 424 continues to read as follows: ■ Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1032 and 1395hh). 23. Section 424.11 is amended by— a. Revising paragraph (d). b. In paragraph (e)(2), removing the cross-reference ‘‘§ 424.13(c)’’ and adding in its place ‘‘§ 424.13(d)’’. The revision reads as follows: ■ ■ ■ § 424.11 General procedures. * * * * * (d) Timeliness. (1) The succeeding sections of this subpart also specify the timeframes for certification and for initial and subsequent recertifications. (2) A hospital or SNF may provide for obtaining a certification or recertification earlier than required by these regulations or vary the timeframe (within the prescribed outer limits) for different diagnostic or clinical categories. (3) Delayed certification and recertification statements are acceptable when there is a legitimate reason for delay. (For instance, the patient was unaware of his or her entitlement when he or she was treated.) Delayed certification and recertification statements must include an explanation of the reasons for the delay. (4) A delayed certification may be included with one or more recertifications on a single signed statement. (5) For all inpatient hospital or critical access hospital inpatient services, including inpatient psychiatric facility services, a delayed certification may not extend past discharge. * * * * * ■ 24. Section 424.13 is revised to read as follows: § 424.13 Requirements for inpatient services of hospitals other than inpatient psychiatric facilities. (a) Content of certification and recertification. Certification begins with the order for inpatient admission. Medicare Part A pays for inpatient hospital services (other than inpatient PO 00000 Frm 00475 Fmt 4701 Sfmt 4700 50969 psychiatric facility services) only if a physician certifies and recertifies the following: (1) That the services were provided in accordance with § 412.3 of this chapter. (2) The reasons for either— (i) Hospitalization of the patient for inpatient medical treatment or medically required inpatient diagnostic study; or (ii) Special or unusual services for cost outlier cases (under the prospective payment system set forth in subpart F of Part 412 of this chapter). (3) The estimated time the patient will need to remain in the hospital. (4) The plans for posthospital care, if appropriate. (b) Timing of certification. For all hospital inpatient admissions, the certification must be completed, signed, and documented in the medical record prior to discharge. For outlier cases under subpart F of Part 412 of this chapter that are not subject to the PPS, the certification must be signed and documented in the medical record and as specified in paragraphs (e) through (h) of this section. (c) Certification of need for hospitalization when a SNF bed is not available. (1) The physician may certify or recertify need for continued hospitalization if he or she finds that the patient could receive proper treatment in a SNF but no bed is available in a participating SNF. (2) If this is the basis for the physician’s certification or recertification, the required statement must so indicate; and the certifying physician is expected to continue efforts to place the patient in a participating SNF as soon as a bed becomes available. (d) Signatures.—(1) Basic rule. Except as specified in paragraph (d)(2) of this section, certifications and recertifications must be signed by the physician responsible for the case, or by another physician who has knowledge of the case and who is authorized to do so by the responsible physician or by the hospital’s medical staff. (2) Exception. If the intermediary requests certification of the need to admit a patient in connection with dental procedures, because his or her underlying medical condition and clinical status or the severity of the dental procedures require hospitalization, that certification may be signed by the dentist caring for the patient. (e) Timing of certifications and recertifications: Outlier cases not subject to the prospective payment system (PPS). (1) For outlier cases that are not subject to the PPS, certification is E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50970 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations required no later than as of the 12th day of hospitalization. A hospital may, at its option, provide for the certification to be made earlier, or it may vary the timing of the certification within the 12day period by diagnostic or clinical categories. (2) The first recertification is required no later than as of the 18th day of hospitalization. (3) Subsequent recertifications are required at intervals established by the UR committee (on a case-by-case basis if it so chooses), but no less frequently than every 30 days. (f) Timing of certification and recertification: Outlier cases subject to PPS. For outlier cases subject to the PPS, certification is required as follows: (1) For day outlier cases, certification is required no later than 1 day after the hospital reasonably assumes that the case meets the outlier criteria, established in accordance with § 412.80(a)(1)(i) of this chapter, or no later than 20 days into the hospital stay, whichever is earlier. The first and subsequent recertifications are required at intervals established by the UR committee (on a case-by-case basis if it so chooses) but not less frequently than every 30 days. (2) For cost outlier cases, certification is required no later than the date on which the hospital requests cost outlier payment or 20 days into the hospital stay, whichever is earlier. If possible, certification must be made before the hospital incurs costs for which it will seek cost outlier payment. In cost outlier cases, the first and subsequent recertifications are required at intervals established by the UR committee (on a case-by-case basis if it so chooses). (g) Recertification requirement fulfilled by utilization review. (1) At the hospital’s option, extended stay review by its UR committee may take the place of the second and subsequent recertifications required for outlier cases not subject to PPS and for PPS dayoutlier cases. (2) A utilization review that is used to fulfill the recertification requirement is considered timely if performed no later than the seventh day after the day the recertification would have been required. The next recertification would need to be made no later than the 30th day following such review; if review by the UR committee took the place of this recertification, the review could be performed as late as the seventh day following the 30th day. (h) Description of procedures. The hospital must have available on file a written description that specifies the time schedule for certifications and recertifications, and indicates whether VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 utilization review of long-stay cases fulfills the requirement for second and subsequent recertifications of all outlier cases not subject to PPS and of PPS day outlier cases. ■ 25. Section 424.14 is amended by revising paragraphs (a), (b), (d)(1), and (e) to read as follows: § 424.14 Requirements for inpatient services of inpatient psychiatric facilities. (a) Requirements for certification and recertification: General considerations. Certification begins with the order for inpatient admission. The content requirements differ from those for other hospitals because the care furnished in inpatient psychiatric facilities is often purely custodial and thus not covered under Medicare. The purpose of the statements, therefore, is to help ensure that Medicare pays only for services of the type appropriate for Medicare coverage. Accordingly, Medicare Part A pays for inpatient services in an inpatient psychiatric facility only if a physician certifies and recertifies the need for services consistent with the requirements of this section, as appropriate. (b) Content of certification. The physician must certify— (1) That inpatient psychiatric services were required for treatment that could reasonably be expected to improve the patient’s condition, or for diagnostic study. (2) That the inpatient psychiatric services were provided in accordance with § 412.3 of this chapter. * * * * * (d) * * * (1) Certification is required at the time of admission or as soon thereafter as is reasonable and practicable, and must be completed and documented in the medical record prior to discharge. * * * * * (e) Other requirements. Inpatient psychiatric facilities must also meet the requirements set forth in § 424.13(c), (d), (g), and (h). ■ 26. Section 424.15 is revised to read as follows: § 424.15 Requirements for inpatient CAH services. (a) Medicare Part A pays for inpatient CAH services only if a physician certifies that the individual may reasonably be expected to be discharged or transferred to a hospital within 96 hours after admission to the CAH, and that the services are provided in accordance with § 412.3 of this chapter. (b) Certification begins with the order for inpatient admission. The certification must be completed, signed, PO 00000 Frm 00476 Fmt 4701 Sfmt 4700 and documented in the medical record prior to discharge. § 424.16 [Amended] 27. In § 424.16, paragraph (a) is amended by removing the reference ‘‘§ 424.13(e)’’ and adding it its place ‘‘subpart B of this Part’’. ■ PART 482—CONDITIONS OF PARTICIPATION FOR HOSPITALS 28. The authority citation for Part 482 continues to read as follows: ■ Authority: Secs. 1102, 1871, and 1881 of the Social Security Act (42 U.S.C. 1302, 1395hh, and 1395rr), unless otherwise noted. 29. Section 482.23 is amended by revising paragraph (c)(3) to read as follows: ■ § 482.23 Condition of participation: Nursing services. * * * * * (c) * * * (3) With the exception of influenza and pneumococcal vaccines, which may be administered per physician-approved hospital policy after an assessment of contraindications, orders for drugs and biologicals must be documented and signed by a practitioner who is authorized to write orders in accordance with State law and hospital policy, and who is responsible for the care of the patient as specified under § 482.12(c). * * * * * PART 485—CONDITIONS OF PARTICIPATION: SPECIALIZED PROVIDERS 30. The authority citation for Part 485 continues to read as follows: ■ Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395(hh)). 31. Section 485.620 is amended by revising paragraph (a) to read as follows: ■ § 485.620 Condition of participation: Number of beds and length of stay. (a) Standard: Number of beds. Except as permitted for CAHs having distinct part units under § 485.647, the CAH maintains no more than 25 inpatient beds. Inpatient beds may be used for either inpatient or swing-bed services. * * * * * ■ 32. Section 485.635 is amended by revising paragraphs (a)(3)(vii), (b)(1), and (c)(1) to read as follows: § 485.635 Condition of participation: Provision of services. (a) * * * (3) * * * (vii) Procedures that ensure that the nutritional needs of inpatients are met E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations in accordance with recognized dietary practices and the orders of the practitioner responsible for the care of the patients, and that the requirement of § 483.25(i) of this chapter is met with respect to inpatients receiving posthospital SNF care. * * * * * (b) * * * (1) General: (i) The CAH provides those diagnostic and therapeutic services and supplies that are commonly furnished in a physician’s office or at another entry point into the health care delivery system, such as a low intensity hospital outpatient department or emergency department. These CAH services include medical history, physical examination, specimen collection, assessment of health status, and treatment for a variety of medical conditions. (ii) The CAH furnishes acute care inpatient services. * * * * * (c) * * * (1) The CAH has agreements or arrangements (as appropriate) with one or more providers or suppliers participating under Medicare to furnish other services to its patients, including— (i) Services of doctors of medicine or osteopathy; (ii) Additional or specialized diagnostic and clinical laboratory services that are not available at the CAH; and (iii) Food and other services to meet inpatients’ nutritional needs to the extent these services are not provided directly by the CAH. * * * * * PART 489—PROVIDER AGREEMENTS AND SUPPLIER APPROVAL 33. The authority citation for Part 489 continues to read as follows: ■ Authority: Secs. 1102 1819, 1820(E), 1861, 1864(M), 1866, 1869, and 1871 of the Social Security Act (42 U.S.C. 1302, 1395i–3, 1395x, 1395aa(m), 1395cc, 1395ff, and 1395(hh)). 34. The paragraph heading of § 489.24(f) is revised to read as follows: ■ § 489.24 Special responsibilities of Medicare hospitals in emergency cases. mstockstill on DSK4VPTVN1PROD with RULES6 * * * * * (f) Recipient hospital responsibilities. * * * * * * * * (Catalog of Federal Domestic Assistance Program No. 93.773, Medicare—Hospital Insurance; Program No. 93.774, Medicare— Supplementary Medical Insurance Program; and Program No. 93.778, Medical Assistance) VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Dated: July 29, 2013. Marilyn Tavenner, Administrator, Centers for Medicare & Medicaid Services. Dated: July 30, 2013. Kathleen Sebelius, Secretary, Department of Health and Human Services. Note: The following Addendum and Appendixes will not appear in the Code of Federal Regulations. Addendum—Schedule of Standardized Amounts, Update Factors, and Rate-ofIncrease Percentages Effective With Cost Reporting Periods Beginning On or After October 1, 2013 and Payment Rates for LTCHs Effective for Discharges Occurring On or After October 1, 2013 I. Summary and Background In this Addendum, we are setting forth a description of the methods and data we used to determine the prospective payment rates for Medicare hospital inpatient operating costs and Medicare hospital inpatient capitalrelated costs for FY 2014 for acute care hospitals. We also are setting forth the rateof-increase percentages for updating the target amounts for certain hospitals excluded from the IPPS for FY 2014. We note that, because certain hospitals excluded from the IPPS are paid on a reasonable cost basis subject to a rate-of-increase ceiling (and not by the IPPS), these hospitals are not affected by the figures for the standardized amounts, offsets, and budget neutrality factors. Therefore, in this final rule, we are establishing the rate-of-increase percentages for updating the target amounts for certain hospitals excluded from the IPPS that are effective for cost reporting periods beginning on or after October 1, 2013. In addition, we are setting forth a description of the methods and data we used to determine the standard Federal rate that will be applicable to Medicare LTCHs for FY 2014. In general, except for SCHs and hospitals located in Puerto Rico, for FY 2014, each hospital’s payment per discharge under the IPPS is based on 100 percent of the Federal national rate, also known as the national adjusted standardized amount. This amount reflects the national average hospital cost per case from a base year, updated for inflation. SCHs are paid based on whichever of the following rates yields the greatest aggregate payment: The Federal national rate (including, as finalized in section V.E.3. of the preamble to this final rule, uncompensated care payments under section 1886(r)(2) of the Act); the updated hospitalspecific rate based on FY 1982 costs per discharge; the updated hospital-specific rate based on FY 1987 costs per discharge; the updated hospital-specific rate based on FY 1996 costs per discharge; or the updated hospital-specific rate based on FY 2006 costs per discharge. We note that section 606 of the American Taxpayer Relief Act of 2012 (ATRA) extended the MDH program from the end of FY 2012 (that is, for discharges occurring PO 00000 Frm 00477 Fmt 4701 Sfmt 4700 50971 before October 1, 2012) to the end of FY 2013 (that is, for discharges occurring before October 1, 2013). Under prior law, the MDH program was to be in effect through the end of FY 2012 only. Absent additional legislation further extending the MDH program, the MDH program will expire for discharges beginning in FY 2014. Therefore, due to the expiration of the MDH program beginning with FY 2014, we are not including hospitals that are currently MDHs (until October 1, 2013) in our update of the hospital-specific rates for FY 2014. For hospitals located in Puerto Rico, the payment per discharge is based on the sum of 25 percent of an updated Puerto Ricospecific rate based on average costs per case of Puerto Rico hospitals for the base year and 75 percent of the Federal national rate. (We refer readers to section II.D.2. of this Addendum for a complete description.) As discussed below in section II. of this Addendum, we are making changes in the determination of the prospective payment rates for Medicare inpatient operating costs for acute care hospitals for FY 2014. In section III. of this Addendum, we discuss our policy changes for determining the prospective payment rates for Medicare inpatient capital-related costs for FY 2014. In section IV. of this Addendum, we are setting forth our changes for determining the rate-ofincrease limits for certain hospitals excluded from the IPPS for FY 2014. In section V. of this Addendum, we discuss policy changes for determining the standard Federal rate for LTCHs paid under the LTCH PPS for FY 2014. The tables to which we refer in the preamble of this final rule are listed in section VI. of this Addendum and are available via the Internet. II. Changes to Prospective Payment Rates for Hospital Inpatient Operating Costs for Acute Care Hospitals for FY 2014 The basic methodology for determining prospective payment rates for hospital inpatient operating costs for acute care hospitals for FY 2005 and subsequent fiscal years is set forth under § 412.64. The basic methodology for determining the prospective payment rates for hospital inpatient operating costs for hospitals located in Puerto Rico for FY 2005 and subsequent fiscal years is set forth under §§ 412.211 and 412.212. Below we discuss the factors we are using for determining the prospective payment rates for FY 2014. In summary, the standardized amounts set forth in Tables 1A, 1B, and 1C that are listed and published in section VI. of this Addendum (and available via the Internet) reflect— • Equalization of the standardized amounts for urban and other areas at the level computed for large urban hospitals during FY 2004 and onward, as provided for under section 1886(d)(3)(A)(iv)(II) of the Act. • The labor-related share that is applied to the standardized amounts and Puerto Ricospecific standardized amounts to give the hospital the highest payment, as provided for under sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act. • An update of 1.7 percent for all areas (that is, the FY 2014 estimate of the market E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50972 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations basket rate-of-increase of 2.5 percent less an adjustment of 0.5 percentage point for MFP and less 0.3 percentage point), as required by section 1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act. For hospitals that fail to submit data, in a form and manner, and at the time, specified by the Secretary relating to the quality of inpatient care furnished by the hospital, pursuant to section 1886(b)(3)(B)(viii) of the Act, the update is ¥0.3 percent (that is, the FY 2014 estimate of the market basket rate-of-increase of 2.5 percent, less 2.0 percentage points for failure to submit data under the Hospital IQR Program, less an adjustment of 0.5 percentage point for MFP, and less 0.3 percentage point). • An update of 1.7 percent to the Puerto Rico-specific standardized amount (that is, the FY 2014 estimate of the market basket rate-of-increase of 2.5 percent less an adjustment of 0.5 percentage point for MFP and less 0.3 percentage point), in accordance with section 1886(d)(9)(C)(i) of the Act, as amended by section 401(c) of Public Law 108–173, which sets the update to the Puerto Rico-specific standardized amount equal to the applicable percentage increase set forth under section 1886(b)(3)(B)(i) of the Act. • An adjustment to the standardized amount to ensure budget neutrality for DRG recalibration and reclassification, as provided for under section 1886(d)(4)(C)(iii) of the Act. • An adjustment to ensure the wage index changes are budget neutral, as provided for under section 1886(d)(3)(E)(i) of the Act. We note that section 1886(d)(3)(E)(i) of the Act requires that when we compute such budget neutrality, we assume that the provisions of section 1886(d)(3)(E)(ii) of the Act (requiring a 62 percent labor-related share in certain circumstances) had not been enacted. • An adjustment to ensure the effects of geographic reclassification are budget neutral, as provided for under section 1886(d)(8)(D) of the Act, by removing the FY 2013 budget neutrality factor and applying a revised factor. • An adjustment to ensure the effects of the rural community hospital demonstration program required under section 410A of Public Law 108–173, as amended by sections 3123 and 10313 of Public Law 111–148, which extended the demonstration program for an additional 5 years, are budget neutral as required under section 410A(c)(2) of Public Law 108–173. • An adjustment to remove the FY 2013 outlier offset and apply an offset for FY 2014, as provided for under section 1886(d)(3)(B) of the Act. • As discussed below and in section II.D. of the preamble of this final rule, a recoupment to meet the requirements of section 631 of ATRA to adjust the standardized amount to offset the estimated amount of the increase in aggregate payments as a result of not completing the prospective adjustment authorized under section 7(b)(1)(A) of Public Law 110–90 until FY 2013. • As discussed below and in section XI.C. of the preamble of this final rule, an adjustment to offset the cost of the policy on admission and medical review criteria for hospital inpatient services under Medicare Part A. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Beginning in FY 2008, we applied the budget neutrality adjustment for the rural floor to the hospital wage indices rather than the standardized amount. As we did for FY 2013, for FY 2014, consistent with current law, we are continuing to apply the rural floor budget neutrality adjustment to hospital wage indices rather than the standardized amount. Also, consistent with section 3141 of the Affordable Care Act, instead of applying a State level rural floor budget neutrality adjustment to the wage index, we are applying a uniform, national budget neutrality adjustment to the proposed FY 2014 wage index for the rural floor. We note that, in section III.G.2.b. of the preamble to this final rule, we are extending the imputed floor policy (both the original methodology and alternative methodology) for one additional year, through September 30, 2014. Therefore, for this final rule, we are continuing to include the imputed floor (calculated under the original and alternative methodologies) in calculating the uniform, national rural floor budget neutrality adjustment, which will be reflected in the FY 2014 wage index. A. Calculation of the Adjusted Standardized Amount 1. Standardization of Base-Year Costs or Target Amounts In general, the national standardized amount is based on per discharge averages of adjusted hospital costs from a base period (section 1886(d)(2)(A) of the Act), updated and otherwise adjusted in accordance with the provisions of section 1886(d) of the Act. For Puerto Rico hospitals, the Puerto Ricospecific standardized amount is based on per discharge averages of adjusted target amounts from a base period (section 1886(d)(9)(B)(i) of the Act), updated and otherwise adjusted in accordance with the provisions of section 1886(d)(9) of the Act. The September 1, 1983 interim final rule (48 FR 39763) contained a detailed explanation of how base-year cost data (from cost reporting periods ending during FY 1981) were established for urban and rural hospitals in the initial development of standardized amounts for the IPPS. The September 1, 1987 final rule (52 FR 33043 and 33066) contains a detailed explanation of how the target amounts were determined and how they are used in computing the Puerto Rico rates. Sections 1886(d)(2)(B) and 1886(d)(2)(C) of the Act require us to update base-year per discharge costs for FY 1984 and then standardize the cost data in order to remove the effects of certain sources of cost variations among hospitals. These effects include case-mix, differences in area wage levels, cost-of-living adjustments for Alaska and Hawaii, IME costs, and costs to hospitals serving a disproportionate share of lowincome patients. In accordance with section 1886(d)(3)(E) of the Act, the Secretary estimates, from timeto-time, the proportion of hospitals’ costs that are attributable to wages and wage-related costs. In general, the standardized amount is divided into labor-related and nonlaborrelated amounts; only the proportion considered to be the labor-related amount is adjusted by the wage index. Section PO 00000 Frm 00478 Fmt 4701 Sfmt 4700 1886(d)(3)(E) of the Act requires that 62 percent of the standardized amount be adjusted by the wage index, unless doing so would result in lower payments to a hospital than would otherwise be made. (Section 1886(d)(9)(C)(iv)(II) of the Act extends this provision to the labor-related share for hospitals located in Puerto Rico.) For FY 2014, we are rebasing and revising the national and Puerto Rico-specific laborrelated and nonlabor-related shares from the percentages established for FY 2013. Specifically, under section 1886(d)(3)(E) of the Act, the Secretary estimates from time to time the proportion of payments that are labor-related: ‘‘The Secretary shall adjust the proportion, (as estimated by the Secretary from time to time) of hospitals’ costs which are attributable to wages and wage-related costs, of the DRG prospective payment rates. . . .’’ We refer to the proportion of hospitals’ costs that are attributable to wages and wagerelated costs as the ‘‘labor-related share.’’ For FY 2014, as discussed in section IV.B.4. of the preamble of this final rule, we are establishing a labor-related share of 69.6 percent for the national standardized amounts and 63.2 percent for the Puerto Rico-specific standardized amount. Consistent with section 1886(d)(3)(E) of the Act, we are applying the wage index to a labor-related share of 62 percent for all IPPS hospitals whose wage index values are less than or equal to 1.0000. For all IPPS hospitals whose wage indices are greater than 1.0000, we are applying the wage index to a laborrelated share of 69.6 percent of the national standardized amount. For FY 2014, all Puerto Rico hospitals have a wage index less than 1.0 because the average hourly rate of every hospital in Puerto Rico divided by the national average hourly rate (the sum of all salaries and hours for all hospitals in the 50 United States and Puerto Rico) results in a wage index below 1.0000. Therefore, the national labor-related share will be 62 percent because the wage index for all Puerto Rico hospitals is less than 1.0. When we divide the average hourly rate of every hospital in Puerto Rico by the Puerto Rico-Specific national average hourly rate (the sum of all salaries and hours for all hospitals only in Puerto Rico), we determine a Puerto Rico Specific wage index above or below 1.0000, depending on the hospital. For hospitals located in Puerto Rico, we are applying a labor-related share of 63.2 percent if its Puerto Rico-specific wage index is greater than 1.0000. For hospitals located in Puerto Rico whose Puerto-Rico specific wage index values are less than or equal to 1.0000, we are applying a labor share of 62 percent. The standardized amounts for operating costs appear in Tables 1A, 1B, and 1C that are listed and published in section VI. of the Addendum to this final rule and are available via the Internet. 2. Computing the Average Standardized Amount Section 1886(d)(3)(A)(iv)(II) of the Act requires that, beginning with FY 2004 and thereafter, an equal standardized amount be computed for all hospitals at the level computed for large urban hospitals during FY 2003, updated by the applicable percentage update. Section 1886(d)(9)(A)(ii)(II) of the E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Act equalizes the Puerto Rico-specific urban and rural area rates. Accordingly, we are calculating the FY 2014 national standardized amount and Puerto Ricospecific rate irrespective of whether a hospital is located in an urban or rural location. 3. Updating the Average Standardized Amount Section 1886(b)(3)(B) of the Act specifies the applicable percentage increase used to update the standardized amount for payment for inpatient hospital operating costs. We note that, in compliance with section 404 of the MMA, in this final rule, we are replacing the FY 2006-based IPPS operating and capital market baskets with the revised and rebased FY 2010-based IPPS operating and capital market baskets for FY 2014. As discussed in section V.A. of the preamble of this final rule, in accordance with section 1886(b)(3)(B) of the Act, as amended by section 3401(a) of the Affordable Care Act, we are reducing the FY 2014 applicable percentage increase (which is based on IHS Global Insight, Inc.’s (IGI’s) second quarter 2013 forecast of the FY 2010based IPPS market basket) by the MFP adjustment (the 10-year moving average of MFP for the period ending FY 2014) of 0.5 percent, which is calculated based on IGI’s second quarter 2013 forecast. In addition, in accordance with section 1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act, we are further updating the standardized amount for FY 2014 by the estimated market basket percentage increase less 0.3 percentage point for hospitals in all areas. Sections 1886(b)(3)(B)(xi) and (xii) of Act, as added and amended by sections 3401(a) and 10319(a) of the Affordable Care Act, further state that these adjustments may result in the applicable percentage increase being less than zero. The percentage increase in the market basket reflects the average change in the price of goods and services comprising routine, ancillary, and special care unit hospital inpatient services. Based on IGI’s 2013 second quarter forecast of the hospital market basket increase (as discussed in Appendix B of this final rule), the most recent forecast of the hospital market basket increase for FY 2014 is 2.5 percent. Therefore, for FY 2014, the update to the average standardized amount is 1.7 percent for hospitals in all areas (that is, the FY 2014 estimate of the market basket rate-of-increase of 2.5 percent less an adjustment of 0.5 percentage point for MFP and less 0.3 percentage point). For hospitals that do not submit quality data pursuant to section 1886(b)(3)(B)(viii) of the Act, the estimated update to the operating standardized amount is -0.3 percent (that is, the FY 2014 estimate of the market basket rate-of-increase of 2.5 percent, less 2.0 percentage points for failure to submit data under the Hospital IQR Program, less an adjustment of 0.5 percentage point for MFP, and less 0.3 percentage point). The standardized amounts in Tables 1A through 1C that are published in section VI. of this Addendum and that are available via the Internet reflect these differential amounts. Section 401(c) of Public Law 108–173 amended section 1886(d)(9)(C)(i) of the Act VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 and states that, for discharges occurring in a fiscal year (beginning with FY 2004), the Secretary shall compute an average standardized amount for hospitals located in any area of Puerto Rico that is equal to the average standardized amount computed under subclause (I) for FY 2003 for hospitals in a large urban area (or, beginning with FY 2005, for all hospitals in the previous fiscal year) increased by the applicable percentage increase under subsection (b)(3)(B) for the fiscal year involved. Therefore, the update to the Puerto Rico-specific operating standardized amount is subject to the applicable percentage increase set forth under section 1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act (that is, the same update factor as for all other hospitals subject to the IPPS). Accordingly, we are establishing an applicable percentage increase to the Puerto Rico-specific standardized amount of 1.7 percent. Although the update factors for FY 2014 are set by law, we are required by section 1886(e)(4) of the Act to recommend, taking into account MedPAC’s recommendations, appropriate update factors for FY 2014 for both IPPS hospitals and hospitals and hospital units excluded from the IPPS. Section 1886(e)(5)(A) of the Act requires that we publish our proposed recommendations in the Federal Register for public comment. Our recommendation on the update factors is set forth in Appendix B of this final rule. 4. Other Adjustments to the Average Standardized Amount As in the past, we are adjusting the FY 2014 standardized amount to remove the effects of the FY 2013 geographic reclassifications and outlier payments before applying the FY 2014 updates. We then apply budget neutrality offsets for outliers and geographic reclassifications to the standardized amount based on FY 2014 payment policies. We do not remove the prior year’s budget neutrality adjustments for reclassification and recalibration of the DRG relative weights and for updated wage data because, in accordance with sections 1886(d)(4)(C)(iii) and 1886(d)(3)(E) of the Act, estimated aggregate payments after updates in the DRG relative weights and wage index should equal estimated aggregate payments prior to the changes. If we removed the prior year’s adjustment, we would not satisfy these conditions. Budget neutrality is determined by comparing aggregate IPPS payments before and after making changes that are required to be budget neutral (for example, changes to MS–DRG classifications, recalibration of the MS–DRG relative weights, updates to the wage index, and different geographic reclassifications). We include outlier payments in the simulations because they may be affected by changes in these parameters. In order to appropriately estimate aggregate payments in our modeling, we make several inclusions and exclusions so that the appropriate universe of claims and charges are included. We discuss IME Medicare Advantage payment amounts, fee-for-service PO 00000 Frm 00479 Fmt 4701 Sfmt 4700 50973 only claims, and charges for anti-hemophilic blood factor and organ acquisition below. First, consistent with our methodology established in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50422 through 50433), because IME Medicare Advantage payments are made to IPPS hospitals under section 1886(d) of the Act, we believe these payments must be part of these budget neutrality calculations. However, we note that it is not necessary to include Medicare Advantage IME payments in the outlier threshold calculation or the outlier offset to the standardized amount because the statute requires that outlier payments be not less than 5 percent nor more than 6 percent of total ‘‘operating DRG payments,’’ which does not include IME and DSH payments. We refer readers to the FY 2011 IPPS/LTCH PPS final rule for a complete discussion on our methodology of identifying and adding the total Medicare Advantage IME payment amount to the budget neutrality adjustments. Second, consistent with the methodology in the FY 2012 IPPS/LTCH PPS final rule, in order to ensure that we capture only fee-forservice claims, we are only including claims with a ‘‘Claim Type’’ of 60 (which is a field on the MedPAR file that indicates a claim is a fee-for-service claim). Third, consistent with our methodology established in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50422 through 50423), we examined the MedPAR file and removed pharmacy charges for anti-hemophilic blood factor (which are paid separately under the IPPS) with an indicator of ‘‘3’’ for blood clotting with a revenue code of ‘‘0636’’ from the covered charge field for the budget neutrality adjustments. We also removed organ acquisition charges from the covered charge field for the budget neutrality adjustments because organ acquisition is a pass-through payment not paid under the IPPS. The Bundled Payments for Care Improvement (BPCI) initiative, developed under the authority of section 3021 of the Affordable Care Act (codified at section 1115A of the Act), is comprised of four broadly defined models of care, which link payments for multiple services beneficiaries receive during an episode of care. Under the BPCI initiative, organizations enter into payment arrangements that include financial and performance accountability for episodes of care. On January 31, 2013, CMS announced the health care organizations selected to participate in the BPCI initiative. For additional information on the BPCI initiative, we refer readers to the CMS Center for Medicare and Medicaid Innovation’s Web site at: https://innovation.cms.gov/initiatives/ Bundled-Payments/. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53341 through 53343), for FY 2013 and subsequent fiscal years, we finalized a methodology to treat hospitals that participate in the BPCI initiative the same as prior fiscal years for the IPPS payment modeling and rate setting process (which includes recalibration of the MS–DRG relative weights, ratesetting, calculation of the budget neutrality factors, and the impact analysis) without regard to a hospital’s participation within these bundled payment E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50974 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations models (that is, as if they are not participating in those models under the BPCI initiative). Therefore, for FY 2014, we are continuing to include all applicable data from subsection (d) hospitals participating in BPCI Models 1, 2, and 4 in our IPPS payment modeling and ratesetting calculations. We refer the reader to the FY 2013 IPPS/LTCH PPS final rule for a complete discussion on our final policy for the treatment of hospitals in the BPCI initiative in our ratesetting process. The Affordable Care Act established the Hospital Readmissions Reduction Program and the Hospital VBP Program which adjust payments to certain IPPS hospitals beginning with discharges on or after October 1, 2012. Because the adjustments made under these programs affect the estimation of aggregate IPPS payments, in this final rule, consistent with our methodology established in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53687 through 53688), we believe it is appropriate to include adjustments for these programs within our budget neutrality calculations. We discuss the treatment of these two programs in the context of budget neutrality adjustments below. Section 1886(q) of the Act establishes the ‘‘Hospital Readmissions Reduction Program’’ effective for discharges from an ‘‘applicable hospital’’ beginning on or after October 1, 2012, under which payments to those hospitals under section 1886(d) of the Act are reduced to account for certain excess readmissions. Under the Hospital Readmissions Reduction Program, for discharges beginning on October 1, 2012 discharges from an ‘‘applicable hospital’’ are paid at an amount equal to the product of the ‘‘base operating DRG payment amount’’ and an ‘‘adjustment factor’’ that accounts for excess readmissions for the hospital for the fiscal year plus any applicable add-on payments. We refer readers to section V.G. of the preamble of this final rule for full details of our implementation of the Hospital Readmissions Reduction Program. We also note that the Hospital Readmissions Reduction Program provided for under section 1886(q) of the Act is not budget neutral. Section 1886(o) of the Act requires the Secretary to establish a Hospital VBP Program under which, for discharges beginning on October 1, 2012, value-based incentive payments are made in a fiscal year to eligible subsection (d) hospitals that meet performance standards established for a performance period for that fiscal year. As specified under section 1886(o)(7)(B)(i) of the Act, these value-based incentive payments are funded by a reduction applied to each eligible hospital’s base-operating DRG payment amount, for each discharge occurring in the fiscal year. As required by section 1886(o)(7)(A) of the Act, the total amount of allocated funds available for value-based incentive payments with respect to a fiscal year is equal to the total amount of base-operating DRG payment reductions, as estimated by the Secretary. In a given fiscal year, hospitals may earn a value-based incentive payment amount for a fiscal year that is greater than, equal to, or less than the reduction amount, based on their VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 performance on quality measures under the Hospital VBP Program. Thus, the Hospital VBP Program is estimated to have no net effect on overall payments. We refer readers to section V.H. of the preamble of this final rule for full details regarding the Hospital VBP Program. Both the hospital readmissions payment adjustment (reduction) and the hospital VBP payment adjustment (redistribution) are applied on a claim-by-claim basis by adjusting, as applicable, the base-operating DRG payment amount for individual subsection (d) hospitals, which affects the overall sum of aggregate payments on each side of the comparison within the budget neutrality calculations. For example, when we calculate the budget neutrality factor for MS–DRG reclassification and recalibration of the relative weights, we compare aggregate payments estimated using the prior year’s GROUPER and relative weights to estimated payments using the new GROUPER and relative weights. (We refer readers to section II.4.a. of this Addendum for full details.) Other factors, such as the DSH and IME payment adjustments, are the same on both sides of the comparison because we are only seeking to ensure that aggregate payments do not increase or decrease as a result of the changes of MS–DRG reclassification and recalibration. In order to properly determine aggregate payments on each side of the comparison, for FY 2014 and subsequent years, we are continuing to apply the hospital readmissions payment adjustment and the hospital VBP payment adjustment on each side of the comparison consistent with the methodology we adopted in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53687 through 53688). That is, we are applying the readmissions payment adjustment factor and the hospital VBP payment adjustment factor on both sides of our comparison of aggregate payments when determining all budget neutrality factors described in section II.A.4. of this Addendum. For the purpose of calculating the FY 2014 readmissions payment adjustment factors, we are using excess readmission ratios and aggregate payments for excess readmissions based on admissions from the prior fiscal year’s applicable period because hospitals have had the opportunity to review and correct these data before the data were made public under the policy we adopted regarding the reporting of hospital-specific readmission rates, consistent with section 1886(q)(6) of the Act. For this final rule, we are calculating the readmissions payment adjustment factors using excess readmission ratios and aggregate payments for excess readmissions based on admissions from the finalized applicable period for FY 2014 as hospitals have had the opportunity to review and correct these data under our policy regarding the reporting of hospital-specific readmission rates consistent with section 1886(q)(6) of the Act. We discuss our policy regarding the reporting of hospital-specific readmission rates for FY 2014 in section V.G.3.f. of the preamble of this final rule. (For additional information on our general policy for the reporting of hospital-specific readmission rates, consistent with section PO 00000 Frm 00480 Fmt 4701 Sfmt 4700 1886(q)(6) of the Act, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53399 through 53400).) In addition, for this final rule, for the purpose of modeling aggregate payments when determining all budget neutrality factors, we are using proxy hospital VBP payment adjustment factors for FY 2014 that are based on data from a historical period because hospitals have not yet had an opportunity to review and submit corrections for their data from the FY 2014 performance period. (For additional information on our policy regarding the review and correction of hospital-specific measure rates under the Hospital VBP Program, consistent with section 1886(o)(10)(A)(ii) of the Act, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53578 through 53581), the CY 2012 OPPS/ASC final rule with comment period (76 FR 74544 through 74547), and the Hospital Inpatient VBP final rule (76 FR 26534 through 26536).) The Affordable Care Act also establishes a new section 1886(r) of the Act that modifies the methodology for computing the Medicare DSH payment adjustment beginning in FY 2014. Beginning in FY 2014, IPPS hospitals receiving DSH payment adjustments will receive an empirically justified Medicare DSH payment of 25 percent of the amount they previously would have received under the current statutory formula under section 1886(d)(5)(F) of the Act for the Medicare DSH payment adjustment. In accordance with section 1886(r)(2) of the Act, the remaining amount, equal to an estimate of 75 percent of what otherwise would have been paid as Medicare DSH payments, reduced to reflect changes in the percentage of individuals under age 65 who are uninsured, will be available to make additional payments to Medicare DSH hospitals based on their share of the total amount of uncompensated care reported by Medicare DSH hospitals for a given time period. In order to properly determine aggregate payments on each side of the comparison for budget neutrality, prior to FY2014, we included estimated Medicare DSH payments on both sides of our comparison of aggregate payments when determining all budget neutrality factors described in section II.A.4. of this Addendum. To do this for FY 2014 and subsequent years, we are including estimated empirically justified Medicare DSH payments that will be paid in accordance with section 1886(r)(1) of the Act and are also including estimates of the additional uncompensated care payments made to hospitals receiving Medicare DSH as described by section 1886(r)(2) of the Act. That is, we are considering estimated empirically justified Medicare DSH payments at 25 percent of what would otherwise be paid and also the estimated additional uncompensated care payments for hospitals receiving Medicare DSH on both sides of our comparison of aggregate payments when determining all budget neutrality factors described in section II.A.4. of this Addendum. We note that, when calculating total payments for budget neutrality, to determine total payments for SCHs we model total hospital-specific rate payments and total E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations federal rate payments and then include whichever one of the total payments are greater. As discussed in section V.E.3.f. of the preamble to this final rule and below, we are finalizing a methodology under which we will take into consideration uncompensated care payments in the comparison of payments under the Federal rate and the hospital-specific rate for SCHs. Therefore, we included estimated uncompensated care payments in this comparison. a. Recalibration of MS–DRG Relative Weights and Updated Wage Index—Budget Neutrality Adjustment Section 1886(d)(4)(C)(iii) of the Act specifies that, beginning in FY 1991, the annual DRG reclassification and recalibration of the relative weights must be made in a manner that ensures that aggregate payments to hospitals are not affected. As discussed in section II.H. of the preamble of this final rule, we normalized the recalibrated MS–DRG relative weights by an adjustment factor so that the average case relative weight after recalibration is equal to the average case relative weight prior to recalibration. However, equating the average case relative weight after recalibration to the average case relative weight before recalibration does not necessarily achieve budget neutrality with respect to aggregate payments to hospitals because payments to hospitals are affected by factors other than average case relative weight. Therefore, as we have done in past years, we are making a budget neutrality adjustment to ensure that the requirement of section 1886(d)(4)(C)(iii) of the Act is met. Section 1886(d)(3)(E)(i) of the Act requires us to update the hospital wage index on an annual basis beginning October 1, 1993. This provision also requires us to make any updates or adjustments to the wage index in a manner that ensures that aggregate payments to hospitals are not affected by the change in the wage index. Section 1886(d)(3)(E)(i) of the Act requires that we implement the wage index adjustment in a budget neutral manner. However, section 1886(d)(3)(E)(ii) of the Act sets the laborrelated share at 62 percent for hospitals with a wage index less than or equal to 1.0, and section 1886(d)(3)(E)(i) of the Act provides that the Secretary shall calculate the budget neutrality adjustment for the adjustments or updates made under that provision as if section 1886(d)(3)(E)(ii) of the Act had not been enacted. In other words, this section of the statute requires that we implement the updates to the wage index in a budget neutral manner, but that our budget neutrality adjustment should not take into account the requirement that we set the labor-related share for hospitals with wage indices less than or equal to 1.0 at the more advantageous level of 62 percent. Therefore, for purposes of this budget neutrality adjustment, section 1886(d)(3)(E)(i) of the Act prohibits us from taking into account the fact that hospitals with a wage index less than or equal to 1.0 are paid using a labor-related share of 62 percent. Consistent with current policy, for FY 2014, we are adjusting 100 percent of the wage index factor for occupational mix. We describe the occupational mix adjustment in section III.F. of the preamble of this final rule. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 For FY 2014, to comply with the requirement that MS–DRG reclassification and recalibration of the relative weights be budget neutral for the Puerto Rico standardized amount and the hospitalspecific rates, we used FY 2012 discharge data to simulate payments and compared aggregate payments using the FY 2013 laborrelated share percentages, the FY 2013 relative weights, and the FY 2013 prereclassified wage data and applied the FY 2014 hospital readmissions payment adjustments and estimated FY 2014 hospital VBP payment adjustments to aggregate payments using the FY 2013 labor-related share percentages, the FY 2014 relative weights, and the FY 2013 pre-reclassified wage data and applied the same hospital readmissions payment adjustments and estimated hospital VBP payment adjustments. Based on this comparison, we computed a budget neutrality adjustment factor equal to 0.997989. As discussed in section IV. of this Addendum, we also are applying the MS–DRG reclassification and recalibration budget neutrality factor of 0.997989 to the hospital-specific rates that are effective for cost reporting periods beginning on or after October 1, 2013. In order to meet the statutory requirements that we do not take into account the laborrelated share of 62 percent when computing wage index budget neutrality, it was necessary to use a three-step process to comply with the requirements that MS–DRG reclassification and recalibration of the relative weights and the updated wage index and labor-related share have no effect on aggregate payments for IPPS hospitals. We first determined a MS–DRG reclassification and recalibration budget neutrality factor of 0.997989 (by using the same methodology described above to determine the MS–DRG reclassification and recalibration budget neutrality factor for the Puerto Rico standardized amount and hospital-specific rates). Secondly, to compute a budget neutrality factor for wage index and laborrelated share changes, we used FY 2012 discharge data to simulate payments and compared aggregate payments using the FY 2014 relative weights and the FY 2013 prereclassified wage indices, applied the FY 2013 labor-related share of 68.8 percent to all hospitals (regardless of whether the hospital’s wage index was above or below 1.0) and applied the FY 2014 hospital readmissions payment adjustment and the FY 2014 estimated hospital VBP payment adjustment when estimating aggregate payments using the FY 2014 relative weights and the FY 2014 pre-reclassified wage indices, applied the labor-related share for FY 2014 of 69.6 percent to all hospitals (regardless of whether the hospital’s wage index was above or below 1.0), and applied the same FY 2014 hospital readmissions payment adjustments and estimated FY 2014 hospital VBP payment adjustments. In addition, we applied the MS–DRG reclassification and recalibration budget neutrality factor (derived in the first step) to the rates that were used to simulate payments for this comparison of aggregate payments from FY 2013 to FY 2014. By applying this methodology, we determined a budget PO 00000 Frm 00481 Fmt 4701 Sfmt 4700 50975 neutrality factor of 0.999947 for changes to the wage index. Finally, we multiplied the MS–DRG reclassification and recalibration budget neutrality factor of 0.997989 (derived in the first step) by the budget neutrality factor of 0.999947 for changes to the wage index (derived in the second step) to determine the MS–DRG reclassification and recalibration and updated wage index budget neutrality factor of 0.997936. b. Reclassified Hospitals—Budget Neutrality Adjustment Section 1886(d)(8)(B) of the Act provides that certain rural hospitals are deemed urban. In addition, section 1886(d)(10) of the Act provides for the reclassification of hospitals based on determinations by the MGCRB. Under section 1886(d)(10) of the Act, a hospital may be reclassified for purposes of the wage index. Under section 1886(d)(8)(D) of the Act, the Secretary is required to adjust the standardized amount to ensure that aggregate payments under the IPPS after implementation of the provisions of sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the Act are equal to the aggregate prospective payments that would have been made absent these provisions. We note that the wage index adjustments provided for under section 1886(d)(13) of the Act are not budget neutral. Section 1886(d)(13)(H) of the Act provides that any increase in a wage index under section 1886(d)(13) shall not be taken into account in ‘‘applying any budget neutrality adjustment with respect to such index’’ under section 1886(d)(8)(D) of the Act. To calculate the budget neutrality factor for FY 2014, we used FY 2012 discharge data to simulate payments and compared total IPPS payments with FY 2014 relative weights, FY 2014 labor-related share percentages, and FY 2014 wage data prior to any reclassifications under sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the Act and applied the FY 2014 hospital readmissions payment adjustments and the estimated FY 2014 hospital VBP payment adjustments to total IPPS payments with FY 2014 relative weights, FY 2014 labor-related share percentages, and FY 2014 wage data after such reclassifications and applied the same hospital readmissions payment adjustments and the estimated hospital VBP payment adjustments. Based on these simulations, we calculated an adjustment factor of 0.990718 to ensure that the effects of these provisions are budget neutral, consistent with the statute. The FY 2014 budget neutrality adjustment factor was applied to the standardized amount after removing the effects of the FY 2013 budget neutrality adjustment factor. We note that the FY 2014 budget neutrality adjustment reflects FY 2014 wage index reclassifications approved by the MGCRB or the Administrator. c. Rural Floor Budget Neutrality Adjustment As noted above, as discussed in section III.G. 2.b. of the preamble of this final rule, in the FY 2012 IPPS/LTCH PPS final rule, we extended the imputed floor calculated under the original methodology through FY 2013 (76 FR 51594). In the FY 2013 IPPS/LTCH PPS final rule, we established an alternative E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50976 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations methodology for calculating the imputed floor and established a policy that the minimum wage index value for an all-urban state would be the higher of the value determined under the original methodology or the value computed using the alternative methodology (77 FR 53368 through 53369). We make an adjustment to the wage index to ensure that aggregate payments to hospitals after implementation of the rural floor under section 4410 of the BBA (Pub.L. 105–33) and the imputed floor under § 412.64(h)(4) of the regulations are not affected. In addition, we note in section III.G.2.b. of the preamble of this final rule, we are extending the imputed floor using the higher of the value determined under the original methodology or the alternative methodology for FY 2014. Consistent with the methodology for treating the imputed floor, similar to the methodology we used in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53368 through 53369), we included this alternative methodology for computing the imputed floor index in the calculation of the uniform, national rural floor budget neutrality adjustment for FY 2014. Also, consistent with section 3141 of the Affordable Care Act and as discussed in section III.G. of the preamble of this final rule, the budget neutrality adjustment for the rural and imputed floors is a national adjustment to the wage index. Since FY 2012, there has been one hospital in rural Puerto Rico. Therefore, similar to our calculation in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51593 and 51788) and the FY 2013 IPPS/LTCH PPS final rule (77 FR 53689), for FY 2014, we are calculating a national rural Puerto Rico wage index (used to adjust the labor-related share of the national standardized amount for hospitals located in Puerto Rico which receive 75 percent of the national standardized amount) and a rural Puerto Rico-specific wage index (which is used to adjust the labor-related share of the Puerto Rico-specific standardized amount for hospitals located in Puerto Rico that receive 25 percent of the Puerto Rico-specific standardized amount). Because this rural Puerto Rico hospital still has no established wage data, our calculation is based on the policy adopted in the FY 2008 IPPS final rule with comment period (72 FR 47323). A complete discussion regarding the computation of the rural Puerto Rico wage index can be found in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51594). To calculate the national rural floor and imputed floor budget neutrality adjustment factor and the Puerto Rico-specific rural floor budget neutrality adjustment factor, we used FY 2012 discharge data and FY 2014 postreclassified national and Puerto Rico-specific wage indices to simulate IPPS payments. First, we compared the national and Puerto Rico-specific simulated payments without the national rural floor and imputed floor and Puerto Rico-specific rural floor applied to the national and Puerto Rico-specific simulated payments with the national rural floor and imputed floor and Puerto Ricospecific rural floor applied to determine the national rural budget neutrality adjustment factor of 0.990150 and the Puerto Ricospecific budget neutrality adjustment factor of 0.990897. The national adjustment was VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 applied to the national wage indices to produce a national rural floor budget neutral wage index and the Puerto Rico-specific adjustment was applied to the Puerto Ricospecific wage indices to produce a Puerto Rico-specific rural floor budget neutral wage index. Comment: Many commenters opposed the continued application of a nationwide rural floor budget neutrality adjustment. One commenter noted that, under the current rural floor policy, all hospitals in Massachusetts are eligible for the rural floor due to one rural hospital that results in an approximate 4.4 percent increase in payments for Massachusetts hospitals, which creates a disparity for other hospitals around the country. The commenter also noted that, under the rural floor policy, hospitals in Connecticut will receive an increase of approximately 4.9 percent in payments due to the rural floor. The commenters believed that a nationwide rural floor budget neutrality adjustment initiates a policy that unfairly skews Medicare payments, thus reducing payments to thousands of hospitals while benefiting less than 5 percent of hospitals. The commenter requested that CMS reverse this ‘‘misguided and harmful policy.’’ Another commenter noted that a change to the nationwide rural floor budget neutrality adjustment would require legislative action but urged CMS to ‘‘contemplate any and all other options within its authority to mitigate the impact of the policy or counter one state’s attempt to manipulate the Medicare payment system.’’ Another commenter stated that hospitals nationwide are struggling with reduced payments and impending cuts and believed that ‘‘scarce funding should reward value and efficiency in health care and not be diverted based on artful manipulation of obscure payment formulas.’’ Response: We thank the commenters for their comments and share the concerns of the commenters. Section 3141 of the Affordable Care Act (Pub. L. 111–148) requires that a national budget neutrality adjustment be applied in implementing the rural floor so CMS cannot change this policy. The commenter did not suggest any alternatives to contemplate to mitigate the impact of this policy and CMS does not believe that it currently has the authority to implement alternatives to mitigate the impact. Therefore, barring a legislative change by Congress, we are unable to change the rural floor budget neutrality adjustment from a national to statewide adjustment. Comment: One commenter stated that ‘‘CMS should consider implementing a policy for both IPPS and OPPS that would result in only hospitals in rural areas being included in the statewide rural floor wage index used for urban hospitals in areas with wage indexes that are lower than the statewide rural wage index.’’ The commenter believed that such a policy would prevent urban hospitals from reclassifying to rural status simply to improve the rural wage index which might be used as a floor for urban hospitals in lower wage areas of a State. The commenter added that it believed that CMS has the regulatory authority to make such a policy change without the need for legislation. PO 00000 Frm 00482 Fmt 4701 Sfmt 4700 Response: We thank the commenter for its comments. As the commenter requested, we will consider the commenter’s suggestion in future rulemaking. d. Case-Mix Budget Neutrality Adjustment Below we summarize the recoupment adjustment to the FY 2014 payment rates, as required by section 631 of ATRA, to account for the increase in aggregate payments as a result of not completing the prospective adjustment authorized under section 7(b)(1)(A) of Public Law 110–90 until FY 2013. We refer readers to section II.D. of the preamble of this final rule for a complete discussion regarding our policies finalized in this final rule and previously finalized policies (including our historical adjustments to the payment rates) relating to the effect of changes in documentation and coding that do not reflect real changes in case-mix. We note that section II.D. of the preamble of this final rule also includes a discussion on documentation and coding effects that occurred through FY 2010, including the request for public comments in the FY 2014 IPPS/LTCH PPS proposed rule as to whether any portion of the proposed ¥0.8 percent recoupment adjustment discussed below should be reduced and instead applied as a prospective adjustment for the cumulative MS–DRG documentation and coding effect through FY 2010. (1) Recoupment or Repayment Adjustment Authorized by Section 631 of the American Taxpayer Relief Act of 2012 (ATRA) to the National Standardized Amount Section 631 of the ATRA amended section 7(b)(1)(B) of Public Law 110–90 to require the Secretary to make a recoupment adjustment totaling $11 billion by FY 2017. Our actuaries estimate that if CMS were to fully account for the $11 billion recoupment required by section 631 of ATRA in FY 2014, a onetime ¥9.3 percent adjustment to the standardized amount would be necessary. It is often our practice to delay or phase-in rate adjustments over more than 1 year, in order to moderate the effect on rates in any 1 year. Therefore, consistent with the policies that we have adopted in many similar cases, we are applying a ¥0.8 percent adjustment to the standardized amount in FY 2014. We note that, as section 631 of the ATRA instructs CMS to make a recoupment adjustment only to the standardized amount, this adjustment will not apply to the Puerto Rico-specific rate. e. Adjustment to Offset the Cost of the Policy on Admission and Medical Review Criteria for Hospital Inpatient Services Under Medicare Part A As discussed previously in section XI.C. of the preamble of this final rule, we are finalizing, as proposed, our proposal to revise our Part B inpatient billing policy to allow payment of all hospital services that were furnished and would have been reasonable and necessary if the beneficiary had been treated as an outpatient, rather than admitted to the hospital as an inpatient, except for those services specifically requiring an outpatient status. This policy will apply when CMS or a Medicare review contractor determines that the hospital admission was E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations not reasonable and necessary or when a hospital determines after a beneficiary has been discharged that the beneficiary should have received hospital outpatient services rather than hospital inpatient services. We are also finalizing our policy to continue applying the timely filing restriction to the billing of all Part B inpatient services, under which claims for Part B services must be filed within 1 year from the date of service. As we discuss in section XI.C. of the preamble of this final rule, in addition to evaluating our policy related to Part B inpatient billing following denials of Part A inpatient claims on the basis that the inpatient admission was not reasonable and necessary or following self-audit, we also believe that it is important to provide more clarity regarding the relationship between inpatient admission decisions and Medicare payment. Toward that end, in section XI.C. of the preamble of this final rule, we are clarifying that a beneficiary becomes a hospital inpatient when formally admitted following the physician order for hospital inpatient admission, and will also clarify when we believe that hospital inpatient admissions are reasonable and necessary based on how long beneficiaries have spent, or are reasonably expected to spend, in the hospital as inpatients. Under our final policy, Medicare’s external review contractors will presume that hospital inpatient admissions are reasonable and necessary for beneficiaries who require more than one Medicare utilization day (defined by encounters crossing 2 ‘‘midnights’’) in the hospital receiving medically necessary services. Similarly, we will presume that generally services spanning less than 2 midnights should have been provided on an outpatient basis, unless there is clear physician documentation in the medical record supporting the physician’s order and expectation that the beneficiary required an inpatient level of care. (For a complete discussion on our inpatient admission guidelines, including our timebased presumption of medical necessity for hospital inpatient services based on the beneficiary’s length of stay as part of our medical review criteria for payment of hospital inpatient services under Medicare Part A, we refer readers to section XI.C. of this final rule.) Our actuaries project a net increase in IPPS expenditures as a result of the policy that medical review of inpatient admissions will include a presumption that hospital inpatient admissions are reasonable and necessary for beneficiaries who require more than 1 Medicare utilization day (defined by encounters crossing 2 ‘‘midnights’’) in the hospital receiving medically necessary services after inpatient admission, discussed in section XI.C. of the preamble of this final rule (as summarized above). These additional expenditures result from an expected net increase in hospital inpatient encounters due to some encounters spanning more than 2 midnights moving to the IPPS from the OPPS, and some encounters of less than 2 midnights moving from the IPPS to the OPPS. In making this projection, the actuaries analyzed Medicare claims data for extended hospital outpatient encounters and shorter stay hospital inpatient encounters, VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 and estimated the number of encounters that are expected to shift from outpatient to inpatient and vice versa (that is, the number that are expected to shift from inpatient to outpatient). In section XI.C.4. of the preamble of this final rule, we discuss that our actuaries estimate that this projected net increase in inpatient encounters will increase IPPS expenditures by approximately $220 million. In light of the widespread impact on the IPPS of the policy and the systemic nature of the issue, we believe that it is appropriate to use our exceptions and adjustments authority under section 1886(d)(5)(I)(i) of the Act to offset the estimated $220 million in additional IPPS expenditures associated with this policy by reducing the national standardized amount, the Puerto Rico-specific standardized amount, and hospital-specific rates by 0.2 percent (or a 0.998 adjustment). We refer readers to section XI.C. of the preamble of this final rule for a complete discussion on this adjustment to offset the estimated cost of the time-based presumption of medical necessity for hospital inpatient services based on the beneficiary’s length of stay as part of our medical review criteria for hospital inpatient services under Medicare Part A. f. Rural Community Hospital Demonstration Program Adjustment As discussed in section V.K. of the preamble of this final rule, section 410A of Public Law 108–173 originally required the Secretary to establish a demonstration program that modifies reimbursement for inpatient services for up to 15 small rural hospitals. Section 410A(c)(2) of Public Law 108–173 requires that ‘‘[i]n conducting the demonstration program under this section, the Secretary shall ensure that the aggregate payments made by the Secretary do not exceed the amount which the Secretary would have paid if the demonstration program under this section was not implemented.’’ Sections 3123 and 10313 of the Affordable Care Act extended the demonstration program for an additional 5-year period, and allowed up to 30 hospitals to participate in 20 States with low population densities determined by the Secretary. (In determining which States to include in the expansion, the Secretary is required to use the same criteria and data that the Secretary used to determine the States for purposes of the initial 5-year period.) In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53449 through 53453), in order to achieve budget neutrality, we adjusted the national IPPS rates by an amount sufficient to account for the added costs of this demonstration program as described in section IV.K. of that final rule. In other words, we applied budget neutrality across the payment system as a whole rather than merely across the participants of this demonstration program, consistent with past practice. We stated that we believe that the language of the statutory budget neutrality requirement permits the agency to implement the budget neutrality provision in this manner. The statutory language requires that ‘‘aggregate payments made by the Secretary do not exceed the amount which the Secretary would have paid if the PO 00000 Frm 00483 Fmt 4701 Sfmt 4700 50977 demonstration . . . was not implemented,’’ but does not identify the range across which aggregate payments must be held equal. For FY 2014, we are adjusting the national IPPS payment rates according to the same methodology that we used for FY 2013, as set forth in section V.K. of the preamble of this final rule, to account for the estimated additional costs of the demonstration program for FY 2014. For this final rule, the estimated amount of this adjustment to the national IPPS payment rates for FY 2014 is $46,549,861. We note that we proposed that if updated data became available prior to the publication of the FY 2014 IPPS/LTCH PPS final rule, we would use that data, to the extent appropriate, to estimate the costs of the demonstration program in FY 2014. Therefore, the estimated budget neutrality offset amount changed in this final rule to reflect the updated data. In addition, we proposed that if settled cost reports for all of the demonstration hospitals that participated in the applicable fiscal year (2007, 2008, 2009 or 2010) were made available prior to the FY 2014 IPPS/LTCH PPS final rule, we would incorporate into the FY 2014 budget neutrality offset amount any additional amounts by which the final settled costs of the demonstration in any of these years (as described previously) exceeded the budget neutrality offset amount applicable to such year as finalized in the respective year’s IPPS final rule. Because finalized cost reports for FY 2007 have become available since the publication of the proposed rule, we are including in the budget neutrality offset amount for FY 2014 the amount by which the final settled costs of the demonstration program for FY 2007 (as shown in the finalized cost reports for hospitals that participated in the demonstration program in FY 2007) exceeded the budget neutrality offset amount that was finalized in the FY 2007 IPPS final rule. This amount is $6,039,880. Therefore, the total amount that will be applied to the FY 2014 national IPPS rates as an offset to account for the additional costs of the demonstration program is the sum of these two amounts—$52,589,741. Accordingly, using the most recent data available to account for the estimated costs of the demonstration program, for FY 2014, we computed a factor of 0.999415 for the rural community hospital demonstration program budget neutrality adjustment that will be applied to the IPPS standard Federal payment rate. We anticipate that finalized cost reports for FYs 2008, 2009, 2010, and 2011 will be available prior to the FY 2015 IPPS/LTCH PPS proposed rule. g. Outlier Payments Section 1886(d)(5)(A) of the Act provides for payments in addition to the basic prospective payments for ‘‘outlier’’ cases involving extraordinarily high costs. To qualify for outlier payments, a case must have costs greater than the sum of the prospective payment rate for the DRG, any IME and DSH payments, any new technology add-on payments, and the ‘‘outlier threshold’’ or ‘‘fixed-loss’’ amount (a dollar amount by which the costs of a case must exceed payments in order to qualify for an outlier payment). We refer to the sum of the E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50978 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations prospective payment rate for the DRG, any IME and DSH payments, any new technology add-on payments, and the outlier threshold as the outlier ‘‘fixed-loss cost threshold.’’ To determine whether the costs of a case exceed the fixed-loss cost threshold, a hospital’s CCR is applied to the total covered charges for the case to convert the charges to estimated costs. Payments for eligible cases are then made based on a marginal cost factor, which is a percentage of the estimated costs above the fixed-loss cost threshold. The marginal cost factor for FY 2014 is 80 percent, the same marginal cost factor we have used since FY 1995 (59 FR 45367). In accordance with section 1886(d)(5)(A)(iv) of the Act, outlier payments for any year are projected to be not less than 5 percent nor more than 6 percent of total operating DRG payments (which does not include IME and DSH payments) plus outlier payments. When setting the outlier threshold, we compute the 5.1 percent target by dividing the total operating outlier payments by the total operating DRG payments plus outlier payments. We do not include any other payments such as IME and DSH within the outlier target amount. Therefore, it is not necessary to include Medicare Advantage IME payments in the outlier threshold calculation. Section 1886(d)(3)(B) of the Act requires the Secretary to reduce the average standardized amount by a factor to account for the estimated proportion of total DRG payments made to outlier cases. Similarly, section 1886(d)(9)(B)(iv) of the Act requires the Secretary to reduce the average standardized amount applicable to hospitals located in Puerto Rico to account for the estimated proportion of total DRG payments made to outlier cases. More information on outlier payments may be found on the CMS Web site at: https://www.cms.gov/Medicare/MedicareFee-for-Service-Payment/AcuteInpatientPPS/ outlier.html. (1) FY 2014 Outlier Fixed-Loss Cost Threshold In the FY 2014 IPPS/LTCH PPS proposed rule, we stated that in the FY 2013 IPPS/ LTCH PPS final rule (77 FR 53691 through 53696), we received comments from the public concerning our methodology for calculating the outlier threshold. Specifically, many commenters expressed concern that CMS is still not reaching the 5.1 percent target for outlier payments and believed there is still room for improvement. The commenters made various suggestions to improve the current methodology used to calculate the outlier threshold. In that final rule we responded that we appreciate the commenters providing multiple alternative methodologies to adjust the CCRs used in our outlier fixed-loss cost threshold. Due to the many options the commenters presented, we stated that the most prudent approach was to study the merits of each methodology and, if appropriate, make a proposal in the FY 2014 IPPS/LTCH PPS proposed rule if we believed that making a change to our current methodology would improve our methodology for projecting the outlier fixedloss cost threshold. Since publication of the FY 2013 IPPS/LTCH PPS final rule, we have studied the merits of the commenters’ VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 suggestions to improve the outlier threshold methodology. In the proposed rule, we proposed the following outlier threshold methodology for FY 2014 with revisions from the prior fiscal year. As we have done in the past, to calculate the proposed FY 2014 outlier threshold, we simulated payments by applying proposed FY 2014 payment rates and policies using cases from the FY 2012 MedPAR file. Therefore, in order to determine the proposed FY 2014 outlier threshold, we inflated the charges on the MedPAR claims by 2 years, from FY 2012 to FY 2014. Since FY 2005, we have used the same methodology to inflate charges. For FY 2014 and subsequent years, we proposed to further refine our current methodology which uses more recent data that reflect the rate-ofchange in hospital charges under the new outlier policy. In the FY 2005 IPPS final rule (69 FR 49277), to compute the 1-year average annualized rate-of-change in charges per case, we stated that we were taking the unprecedented step of comparing the average charge per case from the most recent 6 month period of charge data available to the average charge per case from the same 6 month period from the prior year rather than using a full year of charge data. At that time, we noted that we adopted this methodology to calculate the outlier threshold for FY 2005 as a result of the special circumstances surrounding the revisions to the outlier payment methodology; specifically the exceptionally high rate of hospital charge inflation that was reflected in the data for FYs 2001, 2002, and 2003. We also noted that we would continue to consider other methodologies for determining charge inflation when calculating the outlier threshold in the future. We refer the reader to the FY 2005 IPPS final rule for a complete discussion on this methodology. For FY 2014, if we had proposed to continue to use our current methodology that we adopted in FY 2005, we would have computed the 1-year average annualized rateof-change in charges per case by comparing the last quarter of FY 2011 in combination with the first quarter of FY 2012 (July 1, 2011, through December 31, 2011) to the last quarter of FY 2012 in combination with the first quarter of FY 2013 (July 1, 2012, through December 31, 2012). This rate-of-change was 4.7 percent (1.046908) or 9.6 percent (1.096016) over 2 years. After 9 years of using the same methodology, the special circumstances of the exceptionally high rate of hospital charge inflation that was reflected in the data for FYs 2001, 2002, and 2003 may not be as applicable. We believe the policies that we implemented in the FY 2003 Outlier final rule (outlier reconciliation and no longer assigning the statewide average CCR for those hospitals that fall below a CCR floor) have helped control inflation of hospital charges. Therefore, instead of comparing periods of the most recent 6 months of charge data, we proposed to adopt a new methodology to compare periods of 1-year of the most recent charge data in order to inflate charges. We stated that we believe a methodology that is based on 1-year of charge data will provide a more stable measure to project the average PO 00000 Frm 00484 Fmt 4701 Sfmt 4700 charge per case since a 6 month measure inherently uses fewer claims than a 1-year measure, which makes it more susceptible to fluctuations in the average charge per case as a result of any significant charge increases or decreases by hospitals. Under this new proposed methodology, to compute the 1year average annualized rate-of-change in charges per case for FY 2014, we proposed to compare the second quarter of FY 2011 through the first quarter of FY 2012 (January 1, 2011, through December 31, 2011) to the second quarter of FY 2012 through the first quarter of FY 2013 (January 1, 2012, through December 31, 2012). This rate-of-change was 4.8 percent (1.048458) or 9.9 percent (1.099264) over 2 years. Comment: Many commenters supported the use of the most recent 1-year period of charge data instead of the most recent 6 months of charge data to inflate charges. Response: We appreciate the commenters’ support and are finalizing, as proposed, the policy to use the most recent 1-year period of charge data for the reasons stated above. We refer readers to the discussion below for complete details concerning our final outlier threshold methodology. As we have done in the past, we proposed to establish the proposed FY 2014 outlier threshold using hospital CCRs from the December 2012 update to the ProviderSpecific File (PSF)—the most recent available data at the time of the proposed rule. For FY 2014, we also proposed to continue to apply an adjustment factor to the CCRs to account for cost and charge inflation (as explained below). In the FY 2007 IPPS final rule (71 FR 48150), we worked with the Office of Actuary to develop the current methodology used to adjust the CCRs. We have used this same methodology to adjust the CCRs from FY 2007 through FY 2013. Over the years, many commenters have stated that our current methodology is unnecessary complicated. In addition, as mentioned above, in the FY 2013 IPPS/LTCH PPS final rule, commenters made various suggestions to improve the current methodology used to calculate the outlier threshold and we stated that we would study the merits of each methodology and, if appropriate, make a proposal in the FY 2014 IPPS/LTCH PPS proposed rule if we believe making a change to our current methodology would improve our projection of the outlier fixed-loss cost threshold. In that same final rule, some commenters suggested the use of historical CCR data from the PSF to compute a rate-of-change in CCRs. Under this approach, the commenters compared the national average case-weighted operating and capital CCR from the most recent update of the PSF to the national average case-weighted operating and capital CCR from the same period of the prior year. The commenters stated that although this adjustment would be based on 1 year’s data, the commenters believed that the use of historical data to adjust the CCRs is consistent with CMS’ estimation of charge inflation. After reviewing the commenters’ suggestion, we agree that the use of historical data to adjust the CCRs is simpler and is consistent with CMS’ estimation of charge inflation. E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Therefore, for FY 2014, we proposed to adjust the CCRs from the December 2012 update of the PSF by comparing the percentage change in the national average case-weighted operating CCR and capital CCR from the December 2011 update of the PSF to the national average case-weighted operating CCR and capital CCR from the December 2012 update of the PSF. We note that we used total transfer-adjusted cases from FY 2012 to determine the national average case-weighted CCRs for both sides of the comparison. We stated that we believe it is appropriate to use the same case count on both sides of the comparison as this will produce the true percentage change in the average case-weighted operating and capital CCR from one year to the next without any effect from a change in case count on different sides of the comparison. Using the proposed methodology above, we calculated a December 2011 operating national average case-weighted CCR of 0.303178 and a December 2012 operating national average case-weighted CCR of 0.295049. We then calculated the percentage change between the two national operating case-weighted CCRs by subtracting the December 2011 operating national average case-weighted CCR from the December 2012 operating national average case-weighted CCR and then dividing by the December 2011 national operating average case-weighted CCR. This resulted in a national operating CCR adjustment factor of 0.973187. We used the same methodology proposed above to also adjust the capital CCRs. Specifically, we calculated a December 2011 capital national average case-weighted CCR of 0.025994 and a December 2012 capital national average case-weighted CCR of 0.0249373. We then calculated the percentage change between the two national capital case-weighted CCRs by subtracting the December 2011 capital national average case-weighted CCR from the December 2012 capital national average case-weighted CCR and then dividing by the December 2011 capital national average case-weighted CCR. This resulted in a national capital CCR adjustment factor of 0.959337. Consistent with our methodology in the past and as stated in the FY 2009 IPPS final rule (73 FR 48763), we stated that we continue to believe it is appropriate to apply only a 1-year adjustment factor to the CCRs. On average, it takes approximately 9 months for a fiscal intermediary or MAC to tentatively settle a cost report from the fiscal year end of a hospital’s cost reporting period. The average ‘‘age’’ of hospitals’ CCRs from the time the fiscal intermediary or the MAC inserts the CCR in the PSF until the beginning of FY 2009 is approximately 1 year. Therefore, as stated above, we believe a 1-year adjustment factor to the CCRs is appropriate. Comment: One commenter matched the CCRs from the proposed rule impact file to the December 2012 PSF and found that 221 providers did not match. The commenter noted that it calculated a weighted mean deviation of ¥4.7 percent, which is greater than the historical average deviation from the years 2008 through 2013 which ranged from ¥0.3 percent to 3.4 percent. The commenter VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 concluded that the ¥4.7 percent weighted mean deviation demonstrates that CMS used significantly outdated CCRs to make projections for the FY 2014 fixed-loss threshold. The commenter recommended that this error be rectified in the final rule, which will result in a substantially reduced threshold for the final rule. In addition, the commenter recommended that CMS use the most recently updated PSF file for the final rule. Response: With regard to the commenter’s finding 221 providers with CCRs from the proposed rule impact file that did not match the December 2012 PSF, we note that we apply the following edits to providers’ CCRs in the PSF. We believe these edits are appropriate in order to accurately model the outlier threshold. We first search for Indian Health providers and those providers assigned the statewide average CCR from the current fiscal year. We then replace these CCRs with the statewide average CCR for the upcoming fiscal year. We also assign the statewide average CCR (for the upcoming fiscal year) to those providers that have no value in the CCR field in the PSF. We believe that the edits above are the reason why the commenter found 221 providers that had CCRs in the impact file that did not match the CCRs in the December 2012 PSF. With regard to the comment concerning the weighted mean deviation, we believe this measure can fluctuate depending on the pool of providers whose PSF CCR is replaced with the statewide average CCR for the upcoming fiscal year. We believe we have accurately calculated and applied these statewide average CCRs and will continue to monitor any large variances (to the weighted mean deviation) in the future. With regard to using the most recently updated PSF file for the final rule, we respond to a similar comment below. Comment: Many commenters supported the proposed revised methodology to adjust hospital CCRs used in the calculation of the outlier fixed-loss cost threshold. Response: We appreciate the commenters’ support and are finalizing, as proposed, to use the methodology above to adjust hospital CCRs in the calculation of the outlier fixedloss cost threshold. As stated above, for FY 2014, we applied the proposed FY 2014 rates and policies using cases from the FY 2012 MedPAR files in calculating the proposed outlier threshold. As discussed in section III.B.3. of the preamble to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50160 and 50161) and in section III.G.3. of the preamble of this final rule, in accordance with section 10324(a) of the Affordable Care Act, beginning in FY 2011, we created a wage index floor of 1.00 for all hospitals located in States determined to be frontier States. We noted that the frontier State floor adjustments will be calculated and applied after rural and imputed floor budget neutrality adjustments are calculated for all labor market areas, in order to ensure that no hospital in a frontier State will receive a wage index lesser than 1.00 due to the rural and imputed floor adjustment. In accordance with section 10324(a) of the Affordable Care Act, the frontier State adjustment will not be subject PO 00000 Frm 00485 Fmt 4701 Sfmt 4700 50979 to budget neutrality, and will only be extended to hospitals geographically located within a frontier State. However, for purposes of estimating the proposed outlier threshold for FY 2014, it was necessary to apply this provision by adjusting the wage index of those eligible hospitals in a frontier State when calculating the outlier threshold that results in outlier payments being 5.1 percent of total payments for FY 2014. If we did not take into account this provision, our estimate of total FY 2014 payments would be too low, and, as a result, our proposed outlier threshold would be too high, such that estimated outlier payments would be less than our projected 5.1 percent of total payments. As we did in establishing the FY 2009 outlier threshold (73 FR 57891), in our projection of FY 2014 outlier payments, we proposed not to make any adjustments for the possibility that hospitals’ CCRs and outlier payments may be reconciled upon cost report settlement. We stated that we continue to believe that, due to the policy implemented in the June 9, 2003 Outlier final rule (68 FR 34494), CCRs will no longer fluctuate significantly and, therefore, few hospitals will actually have these ratios reconciled upon cost report settlement. In addition, it is difficult to predict the specific hospitals that will have CCRs and outlier payments reconciled in any given year. We also noted that reconciliation occurs because hospitals’ actual CCRs for the cost reporting period are different than the interim CCRs used to calculate outlier payments when a bill is processed. Our simulations assume that CCRs accurately measure hospital costs based on information available to us at the time we set the outlier threshold. For these reasons, we proposed not to make any assumptions about the effects of reconciliation on the outlier threshold calculation. Comment: One commenter was concerned that CMS did not consider outlier reconciliation in the development of the outlier threshold. The commenter stated that CMS did not provide any objective data concerning the number of hospitals that have been subject to outlier reconciliation and the amounts recovered. The commenter further stated that, in February 2003, the Secretary signed an emergency interim final regulation that would have corrected the outlier threshold and included outlier reconciliation payments (in the calculation of the outlier threshold) but that rule was not issued because of objections from the Office of Management and Budget. The commenter asserted that if it was possible to account for outlier reconciliation payments at the initial implementation of the outlier reconciliation policy in the calculation of the threshold, it should be possible to do so 10 years later. The commenter also searched cost reports from the HCRIS database for the years 2003 through 2009 (Form CMS–2552–96) and, based on these data, provided its estimate of the annual amounts recovered by CMS through reconciliation which totaled $85,797,699. The commenter believed that these data can be used to provide a baseline and trend information to assess whether outlier reconciliation is a significant factor to be considered in the development of the E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50980 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations outlier threshold. The commenter noted that it was unable to extract outlier reconciliation payment information from cost reports filed under Form CMS–2552–10; the commenter was puzzled as to why this data was not being captured. The commenter also requested that CMS disclose in the final rule and future rulemaking the amount CMS has recovered through reconciliation by year. Response: We received a similar comment in response to the policies presented in last year’s rule, and we appreciate the commenter, again, informing us of its concern regarding our policy of not including outlier reconciliation within the development of the outlier fixed-loss cost threshold. The commenter provided data from HCRIS that demonstrated total outlier reconciliation payments from 2003–2009 was $85,797,699, which equates to approximately $12,256,814 annually. We do not believe that this relatively small annual amount would have an impact on the outlier threshold because total outlier payments are approximately $4.3 billion. Further, with regard to the interim final rule referenced by the commenter that would have adjusted the outlier threshold by accounting for payment changes due to outlier reconciliation, that rule was never finalized or implemented. As stated in prior final rules, we continue to believe that, due to the policy implemented in the June 9, 2003 outlier final rule (68 FR 34494), CCRs will no longer fluctuate significantly and, therefore, few hospitals will actually have these ratios reconciled upon cost report settlement as demonstrated by the total outlier payments provided by the commenter. In addition, it is difficult to predict the specific hospitals that will have CCRs and outlier payments reconciled in any given year. We also note that reconciliation occurs because hospitals’ actual CCRs for the cost reporting period are different than the interim CCRs used to calculate outlier payments when a bill is processed. Our simulations assume that CCRs accurately measure hospital costs based on information available to us at the time we set the outlier threshold. For these reasons, we proposed and are again finalizing our policy not to make any assumptions about the effects of reconciliation on the outlier threshold calculation. Also, outlier reconciliation is a function of the cost report and Medicare contractors record the outlier reconciliation amount on each provider’s cost report (and are not required to report these data to CMS outside of the cost report settlement process). Therefore, the outlier reconciliation data that the commenter is requesting should be publicly available through the cost report. With regard to the commenter not being able to retrieve outlier reconciliation payments for cost reports filed under Form CMS–2552–10, we will follow up with our information system team to ensure this information is readily available to the public. Since the effective date of Change Request 7192 on April 1, 2011, we have approved the reconciliation of outlier payments for some hospitals. Other hospitals that were flagged for outlier reconciliation are still under review for approval. In addition, some hospitals flagged for outlier reconciliation VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 may experience a delay in reconciling their outlier payments due to circumstances that prevent the Medicare contractor from finalizing the hospital’s cost report (such as other payments that may need to be reconciled aside from outlier payments). As described in sections V.G. and V.H., respectively, of the preamble of this final rule, sections 1886(q) and 1886(o) of the Act establish the Hospital Readmissions Reduction Program and the Hospital VBP Program, respectively. We do not believe it is appropriate to include the hospital VBP payment adjustments and the hospital readmissions payment adjustments in the outlier threshold calculation or the outlier offset to the standardized amount. Specifically, consistent with our definition of the base operating DRG payment amount for the Hospital Readmissions Reduction Program under § 412.152 and the Hospital VBP Program under § 412.160, outlier payments under section 1886(d)(5)(A) of the Act are not affected by these payment adjustments. Therefore, outlier payments would continue to be calculated based on the unadjusted base DRG payment amount (as opposed to using the base-operating DRG payment amount adjusted by the hospital readmissions payment adjustment and the hospital VBP payment adjustment). Consequently, we proposed to exclude the hospital VBP payment adjustments and the hospital readmissions payment adjustments from the calculation of the outlier fixed-loss cost threshold. Using this proposed methodology, we proposed an outlier fixed-loss cost threshold for FY 2014 equal to the prospective payment rate for the DRG, plus any IME and DSH payments, and any add-on payments for new technology, plus $24,140. In the proposed rule, we noted that the proposed FY 2014 threshold was higher than the FY 2013 final outlier threshold of $21,821. We stated that we believe that the decrease in DSH payments due to the implementation of section 1886(r)(1) of the Act contributed to a higher proposed fixedloss outlier threshold for FY 2014. We noted that the additional payments based on uncompensated care made to hospitals receiving Medicare DSH under section 1886(r)(2) of the Act were not taken into consideration when determining outlier payments because we did not propose to make this payment on a per discharge basis. However, when computing a claim by claim outlier threshold, we calculate DSH payments under section 1886(d)(5)(F) of the Act with the reduction required under section 1886(r)(1) (the original DSH amount multiplied by 0.25). Therefore, we stated that we believe that, decreasing DSH payments decreases total payments in typical cases, which are used to compute the claim by claim outlier threshold thus leading to an increase in outlier payments. This requires that we raise the outlier threshold to decrease the amount of outlier dollars expended in order to reach the 5.1 percent target. Comment: Many commenters opposed CMS’ proposal not to include payments under section 1886(r)(2) of the Act (from here on referred to as uncompensated care payments) in the calculation of the fixed-loss outlier threshold. PO 00000 Frm 00486 Fmt 4701 Sfmt 4700 One commenter stated that by ignoring uncompensated care payments in the calculation of outlier determinations (the outlier fixed loss cost threshold and payments), CMS is assuming there will be a 75-percent cut to DSH payments while, under section 1886(r)(2) of the Act, approximately 88 percent of the amount cut will be paid back to hospitals. Therefore, the commenter believed the outlier fixed-loss cost threshold is overstated and requested that the threshold be adjusted to reflect these additional payments. Another commenter stated that CMS did not calculate the threshold with regard to a 100 percent DSH adjustment rather than a 25 percent DSH adjustment because CMS proposed that some of the DSH payment will not be made on a claim by claim basis. The commenter explained that if CMS agrees to include uncompensated care payments on the claim, CMS should make outlier determinations that include those payments. The commenter also provided several reasons why outlier determinations should include uncompensated care payments regardless of whether uncompensated care payments are included on the claim. Firstly, the commenter stated that allowing the mechanics of DSH payments to affect outlier determinations is unfair to non-DSH hospitals. The commenter explained that, by reducing the amount of DSH payments included in the outlier calculation, non-DSH hospitals would see their claim by claim outlier thresholds rise, resulting in fewer cases that would qualify for outlier payments; this would result in a reduction in payments to these non-DSH hospitals solely because Congress changed the DSH payment methodology (in order to better target payments under that subsection to hospitals with high rates of uncompensated care) and CMS proposed to alter the mechanics for making DSH payments to DSH hospitals by including only the empirically justified DSH payments on the claim. Other commenters had similar concerns. The commenter also noted that there is no indication in section 3133 of the Affordable Care Act or section 1886(d)(5)(A) of the Act that Congress intended such a result. The commenter asserted that whether CMS chooses to make the additional uncompensated care payments through the claims processing system or some other mechanism, it should not create fundamental payment changes in other components of the PPS system, absent some evidence that Congress intended such an impact. Secondly, the commenter cited sections 1886(d)(5)(A) and 1886(r) of the Act and stated that it is the commenter’s view that these sections compel all amounts attributable to DSH to be part of outlier determinations whether or not such amounts are paid on a per claim basis. The commenter explained that section 1886(d)(5)(A) of the Act provides that ‘‘a subsection (d) hospital may request additional payments in any case where charges, adjusted to cost, . . . exceed the sum of the applicable DRG prospective payment rate plus any amounts payable under subparagraphs (B) and (F) plus a fixed dollar amount determined by the Secretary.’’ The commenter noted that subparagraph E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations (F)(i) was amended by section 3133 of the Affordable Care Act to provide that payments under the subparagraph are ‘‘[s]ubject to to subsection (r).’’ Additionally, the commenter stated that within subsection (r), subparagraph (d)(5)(F) is referenced both with regard to ‘‘Empirically Justified DSH payments’’ in subparagraph (r)(1) and the ‘‘Additional Payment’’ under subparagraph (r)(2). The commenter concluded that it seems logical that both such payments, which are part of the overall DSH payment adjustment, would have to be considered in the aggregate for purposes of outlier determinations. The commenter suggested three different methodologies to account for changes to Medicare DSH payments in outlier determinations. The first was to multiply the empirically justified Medicare DSH payment by 4, which resulted in a fixed-loss cost threshold of $20,950. The commenter believed that this approach is very simple and is similar to the second approach. The second approach assigns the uncompensated care payments to hospitals and discharges based on the operating cost for each case, which results in a fixed-loss cost threshold of $20,939. The final method allocates the uncompensated care payments to all cases equally, which results in a fixed-loss cost threshold of $22,028. The commenter stated that it expressed no specific preferences regarding the methods described above, but noted that the consensus of its members was that the final methodology is more reflective of how uncompensated care payments should occur through the claims processing system. Response: As discussed in section V.E.3.f. of the preamble of this final rule, for FY 2014, we are finalizing a process to distribute interim uncompensated care payments on a per-discharge basis through our claims processing system, with a reconciliation of the hospital’s total uncompensated care payment at cost report settlement. The estimated per-discharge uncompensated care amount is based on the amount we have finalized to distribute for a fiscal year divided by the average number of discharges, or claims, in the most recently available 3 full-years in the fiscal year Medicare claims dataset. For FY 2014 payments, we will use the average number of claims from the most recent 3 years of MedPAR claims data, FY 2010, FY 2011 and FY 2012, as this is the most recently available data on hospital utilization. As discussed in section V.E.3.f. of the preamble of this final rule, we believe that distributing uncompensated care payments on a per-discharge basis would allow these payments to be taken into consideration for the comparison of payments under the Federal rate and the hospital-specific rate for SCHs. We refer readers to section V.E.3. of the preamble of this final rule for a complete discussion of the Medicare DSH payment adjustment and the new uncompensated care payments. Consistent with the policy above to make uncompensated care payments on a perdischarge basis through our claims processing system, we agree that uncompensated care payments should be considered in outlier determinations. We also VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 agree that to the extent section 1886(r) of the Act modifies the existing DSH payment methodology under section 1886(d)(5)(F), the new uncompensated care payment under section 1886(r)(2), like the empirically justified Medicare DSH payment under section 1886(r)(1), may be considered an amount payable under section 1886(d)(5)(F) of the Act such that it would be reasonable to include the payment in the outlier determination under section 1886(d)(5)(A). We also agree with the commenter’s third suggested methodology to allocate an estimated per-discharge uncompensated care payment amount to all cases for the hospitals eligible to receive the uncompensated care payment amount in the calculation of the outlier fixed-loss cost threshold methodology. We believe this method to be superior to the other two methods suggested because we believe it most closely approximates the inclusion of all of the uncompensated care payments in determining the fixed-loss threshold. We believe that the commenter’s first suggested methodology of multiplying the empirically justified Medicare DSH payment by 4 results in the inclusion of a higher amount of uncompensated care payments in the determination of the fixed-loss threshold than will actually be paid. This approach fails to account for the statutory requirement that total uncompensated care payments are not equal to 75 percent of the amount that would otherwise be paid as DSH payment adjustments but rather the amount is reduced by Factor 2 in order to reflect changes in the rate of uninsurance as a result of the implementation of the Affordable Care Act. Similarly, we believe that the commenter’s second methodology of assigning uncompensated care payments based on the operating costs of a case could also lead to a different amount of uncompensated care payments being included in the determination of the fixed-loss threshold than is actually paid. Uncompensated care payments are calculated independently of operating costs and assigning these payments on such a basis would not necessarily allocate them appropriately. We believe that allocating an eligible hospital’s estimated uncompensated care payment to all cases equally in the calculation of the outlier fixedloss cost threshold would best approximate the amount we would pay in uncompensated care payments during the year because, when we make claim payments to a hospital eligible for such payments, we will make estimated per-discharge uncompensated care payments to all cases equally. Furthermore, we believe that using the estimated per-claim uncompensated care payment amount to determine outlier estimates provides predictability as to the amount of uncompensated care payments included in the calculation of outlier payments. To determine outlier payments in the claims processing system, beginning with discharges on or after October 1, 2013, we will include estimated uncompensated care payments in the claim-by-claim outlier threshold calculation used to make outlier payments. Below we discuss our computation of the final outlier fixed loss cost threshold for FY 2014 and how we include uncompensated care payments. PO 00000 Frm 00487 Fmt 4701 Sfmt 4700 50981 Comment: One commenter recommended that CMS maintain the outlier threshold at $21,821, which is the threshold that CMS finalized for FY 2013. The commenter explained that CMS has a history of projecting inaccurately the percentage of inpatient PPS payments that would qualify for outlier payments and an increase to the fixed-loss outlier threshold would result in a lesser number of cases that would qualify for outlier payments. Another commenter had the same concerns and believed the outlier threshold was simply too high. An additional commenter noted that, for some hospitals, DSH payments (at 75 percent of DSH) represent 5 to 7 percent of total Medicare payments. The commenter was unclear how a 5 to 7 percent decrease in Medicare payments necessitates a 10-percent increase in the fixed-loss outlier threshold from the prior fiscal year. The commenter recommended that CMS review and reconsider raising the threshold by 10 percent; the commenter also believed a more reasonable increase to the fixed loss outlier threshold is in the 5-percent range. Another commenter recommended a small increase to the fixed-loss threshold in light of the concerns above. One commenter noted that CMS is proposing to increase the outlier threshold by 10 percent for FY 2014. The commenter noted that, in order for hospitals to maintain this payment stream, hospitals are incentivized to increase charges by 10 percent. As a result, the commenter requested that CMS reevaluate and lower the final fixed-loss outlier threshold so hospitals can keep charge inflation as neutral as possible. Response: As noted above, section 1886(d)(5)(A)(iv) of the Act requires outlier payments to be not less than 5 percent nor more than 6 percent of total estimated or projected payments. Therefore, we cannot adopt the commenters’ suggestion to maintain the FY 2013 outlier fixed-loss cost threshold for FY 2014 because setting a threshold that is based on the current fiscal year for the coming fiscal year is inconsistent with the statute. When we calculate the threshold, we use the latest data that is available at the time of the proposed and final rule. Also, for FY 2014, as discussed above, we refined the calculation of the outlier fixed-loss cost threshold in order that outlier payments will meet the 5.1 percent target. We cannot put a cap on the increase or decrease of the outlier threshold nor can we arbitrarily lower the threshold as the commenters requested, as this would also be inconsistent with the statute. Comment: One commenter was concerned that, with each rulemaking, the final outlier threshold established by CMS is always significantly lower than the threshold set forth in the proposed rule. The commenter speculated that this may occur due to the use of updated CCRs and other data in calculating the final rule threshold. As a result, the commenter emphasized the need for CMS to use the most recent data available when calculating the outlier threshold. The commenter stated that, with regard to the current rulemaking, CMS used data from the December 2012 PSF in the proposed rule, E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50982 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations when the March 2013 PSF was available at the time the proposed rule was issued. Using the March 2013 PSF, the commenter calculated an outlier threshold of $23,542 (compared to the threshold in the proposed rule of $24,140, which used the December 2012 PSF). Response: CMS’ historical policy is to use the best available data when setting the payment rates and factors in both the proposed and final rules. Sometimes there are variables that change between the proposed and final rule due to the availability of more recent data, such as the charge inflation factor and the CCR adjustment factors that can cause fluctuations in the threshold amount. Other factors such as changes to the wage indexes and market basket increase can also cause the outlier fixed-loss cost threshold to fluctuate between the proposed rule and the final rule each year. We use the latest data that is available at the time of the proposed and final rule, such as the most recent update of MedPAR claims data and CCRs from the most recent update of the PSF. With regard to the commenter noting the availability of the March 2013 PSF at the time the proposed rule was issued, this file was not available when we calculated the proposed outlier fixed-loss cost threshold as part of the development of the proposed rule. Therefore, for the proposed rule, we used the latest update available, which was the December 2012 PSF. If we were to wait for the March 2013 PSF to become available, this would cause further delay of publication of the proposed rule which could possibly cause CMS to miss the statutory requirement of issuing the final rule 60 days prior to the upcoming fiscal year. Comment: Many commenters appreciated CMS’ efforts to refine the calculation of the outlier threshold. The commenters recommended that CMS continue to monitor the new fixed-loss outlier threshold methodology to determine if it has, in fact, improved accuracy. Response: We appreciate the commenters for their support and agree with the commenters to monitor the new methodology to determine if it has, in fact, improved accuracy. Below we discuss our methodology to calculate the final outlier fixed-loss cost threshold for FY 2014. As discussed above, we are finalizing our proposal to refine the methodology by using the most recent one year period of charge data instead of the most recent 6 months of charge data to inflate charges. We also are revising our methodology to adjust hospital CCRs in the calculation of the outlier fixed-loss cost threshold. Finally, we agree with the commenters that the new uncompensated care payments under section 1886(r)(2) of the Act should be included in the calculation of the outlier fixed-loss cost threshold. As we have done in the past, to calculate the final FY 2014 outlier threshold, we simulated payments by applying FY 2014 payment rates and policies using cases from the FY 2012 MedPAR file. Therefore, in order to determine the final FY 2014 outlier threshold, we inflated the charges on the MedPAR claims by 2 years, from FY 2012 to VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 FY 2014. We note that when we calculate the outlier fixed-loss cost threshold, for SCHs, we model total hospital-specific rate payments and total federal rate payments and then exclude from the outlier threshold calculation those SCHs whose hospitalspecific rate payments are greater than their Federal rate payments, as these hospitals will not receive outlier payments. As discussed above, we are finalizing a policy to take into consideration uncompensated care payments in the comparison of payments under the Federal rate and the hospital-specific rate for SCHs. Therefore, we included estimated uncompensated care payments in this comparison (and then excluded from the outlier threshold calculation those SCHs whose hospital-specific rate payments were greater than their Federal rate payments). For FY 2014 and subsequent years, as discussed above, we are finalizing our proposal to refine our current methodology which uses more recent data that reflect the rate-ofchange in hospital charges under the new outlier policy. As discussed above, instead of comparing periods of the most recent 6 months of charge data, we are finalizing our proposal to adopt a new methodology to inflate charges that use periods of 1-year of the most recent charge data. We believe a methodology that is based on 1-year of charge data will provide a more stable measure to project the average charge per case because a 6-month measure inherently uses fewer claims than a 1-year measure, which makes it more susceptible to fluctuations in the average charge per case as a result of any significant charge increases or decreases by hospitals. Under this new methodology, to compute the 1-year average annualized rateof-change in charges per case for FY 2014, we compare the third quarter of FY 2011 through the second quarter of FY 2012 (April 1, 2011, through March 31, 2011) to the third quarter of FY 2012 through the second quarter of FY 2013 (April 1, 2012, through March 31, 2013). This rate-of-change was 4.7 percent (1.047329) or 9.7 percent (1.096898) over 2 years. As we have done in the past, we are establishing the final FY 2014 outlier threshold using hospital CCRs from the March 2013 update to the Provider-Specific File (PSF)—the most recent available data at the time of this final rule. For FY 2014, we are also continuing to apply an adjustment factor to the CCRs to account for cost and charge inflation (as explained below). Instead of using our prior methodology that was developed with the Office of Actuary to adjust the CCRs, for FY 2014 and subsequent years, we are finalizing as proposed to adjust the CCRs from the March 2013 update of the PSF by comparing the percentage change in the national average case-weighted operating CCR and capital CCR from the March 2013 update of the PSF to the national average case-weighted operating CCR and capital CCR from the March 2012 update of the PSF. We note that we used total transfer-adjusted cases from FY 2012 to determine the national average case-weighted CCRs for both sides of the comparison. As stated in the proposed rule, we believe it is appropriate to use the same case count on both sides of the comparison as this will produce the true PO 00000 Frm 00488 Fmt 4701 Sfmt 4700 percentage change in the average caseweighted operating and capital CCR from one year to the next without any effect from a change in case count on different sides of the comparison. Using the methodology adopted above, we calculated a March 2012 operating national average case-weighted CCR of 0.302317 and a March 2013 operating national average case-weighted CCR of 0.292106. We then calculate the percentage change between the two national operating case-weighted CCRs by subtracting the March 2012 operating national average case-weighted CCR from the March 2013 operating national average caseweighted CCR and then dividing by the March 2012 national operating average caseweighted CCR. This resulted in a national operating CCR adjustment factor of 0.966224. We used the same methodology above to also adjust the capital CCRs. Specifically, we calculated a March 2012 capital national average case-weighted CCR of 0.025993 and a March 2013 capital national average caseweighted CCR of 0.025013. We then calculated the percentage change between the two national capital case-weighted CCRs by subtracting the March 2012 capital national average case-weighted CCR from the March 2013 capital national average case-weighted CCR and then dividing by the March 2012 capital national average case-weighted CCR. This resulted in a national capital CCR adjustment factor of 0.964524. Consistent with our methodology in the past and as stated in the FY 2009 IPPS final rule (73 FR 48763), we continue to believe it is appropriate to apply only a 1-year adjustment factor to the CCRs. On average, it takes approximately 9 months for a fiscal intermediary or MAC to tentatively settle a cost report from the fiscal year end of a hospital’s cost reporting period. The average ‘‘age’’ of hospitals’ CCRs from the time the fiscal intermediary or the MAC inserts the CCR in the PSF until the beginning of FY 2009 is approximately 1 year. Therefore, as stated above, we believe a 1-year adjustment factor to the CCRs is appropriate. As stated above, for FY 2014, we applied the final FY 2014 rates and policies using cases from the FY 2012 MedPAR files in calculating the final outlier threshold. As noted above, for purposes of estimating the final outlier threshold for FY 2014, it was necessary to apply the frontier State adjustment by adjusting the wage index of those eligible hospitals in a frontier State when calculating the outlier threshold that results in outlier payments being 5.1 percent of total payments for FY 2014. If we did not take into account this provision, our estimate of total FY 2014 payments would be too low, and, as a result, our final outlier threshold would be too high, such that estimated outlier payments would be less than our projected 5.1 percent of total payments. As discussed above, in our projection of FY 2014 outlier payments, we did not make any adjustments for the possibility that hospitals’ CCRs and outlier payments may be reconciled upon cost report settlement. Also, as stated above, we do not believe it is appropriate to include the hospital VBP payment adjustments and the hospital readmissions payment adjustments in the E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations outlier threshold calculation or the outlier offset to the standardized amount. Consequently, we excluded the hospital VBP payment adjustments and the hospital readmissions payment adjustments from the calculation of the outlier fixed-loss cost threshold. As discussed above, we included estimated uncompensated care payments in the computation of the final outlier fixed-loss cost threshold. Specifically, we used the estimated per-discharge uncompensated care payments to hospitals eligible for the uncompensated care payment for all cases in the calculation of the outlier fixed-loss cost threshold methodology. Using this methodology, we calculated a final outlier fixed-loss cost threshold for FY 2014 equal to the prospective payment rate for the MS–DRG, plus any IME, empirically justified Medicare DSH payments, estimated uncompensated care payment, and any addon payments for new technology, plus $21,748. We note that the final FY 2014 threshold is lower than the FY 2014 proposed outlier threshold of $24,140. We believe that taking into consideration uncompensated care payments in the calculation of the outlier threshold contributed to a lower final fixedloss outlier threshold for FY 2014. (2) Other Changes Concerning Outliers As stated in the FY 1994 IPPS final rule (58 FR 46348), we establish an outlier threshold that is applicable to both hospital inpatient operating costs and hospital inpatient capital-related costs. When we modeled the combined operating and capital outlier payments, we found that using a common threshold resulted in a lower percentage of outlier payments for capital-related costs than for operating costs. We project that the thresholds for FY 2014 will result in outlier payments that will equal 5.1 percent of operating DRG payments and 6.07 percent of capital payments based on the Federal rate. In accordance with section 1886(d)(3)(B) of the Act, we are reducing the FY 2014 standardized amount by the same percentage to account for the projected proportion of payments paid as outliers. The outlier adjustment factors that will be applied to the standardized amount based on the FY 2014 outlier threshold are as follows: Operating standardized amounts mstockstill on DSK4VPTVN1PROD with RULES6 National .................................................................................................................................................................... Puerto Rico .............................................................................................................................................................. We are applying the outlier adjustment factors to the FY 2014 rates after removing the effects of the FY 2013 outlier adjustment factors on the standardized amount. To determine whether a case qualifies for outlier payments, we apply hospital-specific CCRs to the total covered charges for the case. Estimated operating and capital costs for the case are calculated separately by applying separate operating and capital CCRs. These costs are then combined and compared with the outlier fixed-loss cost threshold. Under our current policy at § 412.84, we calculate operating and capital CCR ceilings and assign a statewide average CCR for hospitals whose CCRs exceed 3.0 standard deviations from the mean of the log distribution of CCRs for all hospitals. Based on this calculation, for hospitals for which the fiscal intermediary or MAC computes operating CCRs greater than 1.186 or capital CCRs greater than 0.173, or hospitals for which the fiscal intermediary or MAC is unable to calculate a CCR (as described under § 412.84(i)(3) of our regulations), statewide average CCRs are used to determine whether a hospital qualifies for outlier payments. Table 8A listed in section VI. of this Addendum (and available only via the Internet) contains the statewide average operating CCRs for urban hospitals and for rural hospitals for which the fiscal intermediary or MAC is unable to compute a hospital-specific CCR within the above range. Effective for discharges occurring on or after October 1, 2013, these statewide average ratios will replace the ratios posted on our Web site at https://www.cms.gov/ Medicare/Medicare-Fee-for-Service-Payment/ AcuteInpatientPPS/FY-2013-IPPS-Final-RuleHome-Page-Items/FY2013-Final-RuleTables.html. Table 8B listed in section VI. of this Addendum (and available via the Internet) contains the comparable statewide average capital CCRs. Again, the CCRs in Tables 8A and 8B will be used during FY 2014 when hospital-specific CCRs based on the latest settled cost report are either not VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 available or are outside the range noted above. Table 8C listed in section VI. of this Addendum (and available via the Internet) contains the statewide average total CCRs used under the LTCH PPS as discussed in section V. of this Addendum. We finally note that we published a manual update (Change Request 3966) to our outlier policy on October 12, 2005, which updated Chapter 3, Section 20.1.2 of the Medicare Claims Processing Manual. The manual update covered an array of topics, including CCRs, reconciliation, and the time value of money. We encourage hospitals that are assigned the statewide average operating and/or capital CCRs to work with their fiscal intermediary or MAC on a possible alternative operating and/or capital CCR as explained in Change Request 3966. Use of an alternative CCR developed by the hospital in conjunction with the fiscal intermediary or MAC can avoid possible overpayments or underpayments at cost report settlement, thus ensuring better accuracy when making outlier payments and negating the need for outlier reconciliation. We also note that a hospital may request an alternative operating or capital CCR ratio at any time as long as the guidelines of Change Request 3966 are followed. In addition, as mentioned above, we published an additional manual update (Change Request 7192) to our outlier policy on December 3, 2010, which also updated Chapter 3, Section 20.1.2 of the Medicare Claims Processing Manual. The manual update outlines the outlier reconciliation process for hospitals and Medicare contractors. To download and view the manual instructions on outlier reconciliation, we refer readers to the CMS Web site: https://www.cms.hhs.gov/manuals/ downloads/clm104c03.pdf. (3) FY 2012 and FY 2013 Outlier Payments In the FY 2013 IPPS final rule (77 FR 53697 through 53698), we stated that, based on available data, we estimated that actual FY 2012 outlier payments would be approximately 5.0 percent of actual total MS– PO 00000 Frm 00489 Fmt 4701 Sfmt 4700 50983 0.948995 0.943455 Capital federal rate 0.939255 0.932305 DRG payments. This estimate was computed based on simulations using the FY 2011 MedPAR file (discharge data for FY 2011 claims). That is, the estimate of actual outlier payments did not reflect actual FY 2012 claims, but instead reflected the application of FY 2012 payment rates and policies to available FY 2011 claims. Our current estimate, using available FY 2012 claims data, is that actual outlier payments for FY 2012 were approximately 4.87 percent of actual total MS–DRG payments. Thus, the data indicate that, for FY 2012, the percentage of actual outlier payments relative to actual total payments is lower than we projected for FY 2012. Consistent with the policy and statutory interpretation we have maintained since the inception of the IPPS, we do not make retroactive adjustments to outlier payments to ensure that total outlier payments for FY 2012 are equal to 5.1 percent of total MS– DRG payments. We currently estimate that, using the latest CCRs from the March 2013 update of the PSF, actual outlier payments for FY 2013 will be approximately 4.77 percent of actual total MS–DRG payments, approximately 0.33 percentage point lower than the 5.1 percent we projected when setting the outlier policies for FY 2013. This estimate of 4.77 percent is based on simulations using the FY 2012 MedPAR file (discharge data for FY 2012 claims). Comment: One commenter believed it is critical for CMS to accurately calculate prior year actual outlier payment estimates. The commenter was concerned with CMS’ estimate of FY 2012 outlier payments at 5.47 percent. The commenter attempted to validate CMS analysis and determined that the FY 2012 outlier payout was 4.86 percent. The commenter stated that the starting point for any assessment of the need to change methods to develop the outlier threshold will be informed by how successful prior methods were in actually meeting the target through actual payments. E:\FR\FM\19AUR2.SGM 19AUR2 50984 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Response: We thank the commenter for bringing this issue to our attention. In the proposed rule, we inadvertently used CCRs from FY 2011 in our estimate of the FY 2012 outlier payments. For this final rule, we corrected this error and determined an estimated FY 2012 outlier payment that is nearly identical to the commenters. We believe the refinements made to the calculation of the FY 2014 outlier threshold will help ensure that outlier payments meet the 5.1 percent target. 5. FY 2014 Standardized Amount The adjusted standardized amount is divided into labor-related and nonlaborrelated portions. Tables 1A and 1B listed and published in section VI. of this Addendum (and available via the Internet) contain the national standardized amounts that we are applying to all hospitals, except hospitals located in Puerto Rico, for FY 2014. The Puerto Rico-specific amounts are shown in Table 1C listed and published in section VI. of this Addendum (and available via the Internet). The amounts shown in Tables 1A and 1B differ only in that the labor-related share applied to the standardized amounts in Table 1A is the labor-related share of 69.6 percent, and Table 1B is 62 percent. In accordance with sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act, we are applying a labor-related share of 62 percent, unless application of that percentage would result in lower payments to a hospital than would otherwise be made. In effect, the statutory provision means that we will apply a laborrelated share of 62 percent for all hospitals whose wage indices are less than or equal to 1.0000. In addition, Tables 1A and 1B include the standardized amounts reflecting the applicable percentage increase of 1.7 percent for FY 2014, and an update of ¥0.3 percent for hospitals that fail to submit quality data consistent with section 1886(b)(3)(B)(viii) of the Act. Under section 1886(d)(9)(A)(ii) of the Act, the Federal portion of the Puerto Rico payment rate is based on the dischargeweighted average of the national large urban standardized amount (this amount is set forth in Table 1A). The labor-related and nonlaborrelated portions of the national average standardized amounts for Puerto Rico hospitals for FY 2014 are set forth in Table 1C listed and published in section VI. of this Addendum (and available via the Internet). This table also includes the Puerto Rico standardized amounts. The labor-related share applied to the Puerto Rico-specific standardized amount is the labor-related share of 63.2 percent, or 62 percent, depending on which provides higher payments to the hospital. (Section 1886(d)(9)(C)(iv) of the Act, as amended by section 403(b) of Public Law 108–173, provides that the labor-related share for hospitals located in Puerto Rico be 62 percent, unless the application of that percentage would result in lower payments to the hospital.) The following table illustrates the changes from the FY 2013 national standardized amount. The second column shows the changes from the FY 2013 standardized amounts for hospitals that satisfy the quality data submission requirement and, therefore, receive the full update of 1.7 percent. The third column shows the changes for hospitals receiving the reduced update of ¥0.3 percent. The first row of the table shows the updated (through FY 2013) average standardized amount after restoring the FY 2013 offsets for outlier payments, demonstration budget neutrality, the geographic reclassification budget neutrality, and the retrospective documentation and coding adjustment under section 7(b)(1)(B) of Public Law 110–90. The MS–DRG reclassification and recalibration wage index budget neutrality factors are cumulative. Therefore, those FY 2013 factors are not removed from this table. COMPARISON OF FY 2013 STANDARDIZED AMOUNTS TO THE FY 2014 STANDARDIZED AMOUNT WITH FULL AND REDUCED UPDATE mstockstill on DSK4VPTVN1PROD with RULES6 Full update (1.7 percent); wage index is greater than 1.0000; labor/non-labor share percentage (69.6/30.4) FY 2013 Base Rate after removing: 1. FY 2013 Geographic Reclassification Budget Neutrality (0.991276). 2. FY 2013 Rural Community Hospital Demonstration Program Budget Neutrality (0.999677). 3. Cumulative FY 2008, FY 2009, FY 2012, FY 2013 Documentation and Coding Adjustment as Required under Sections 7(b)(1)(A) and 7(b)(1)(B) of Public Law 110–90 (0.9478). 4. FY 2013 Operating Outlier Offset (0.948999). FY 2014 Update Factor ............................... FY 2014 MS–DRG Recalibration and Wage Index Budget Neutrality Factor. FY 2014 Reclassification Budget Neutrality Factor. FY 2014 Rural Community Demonstration Program Budget Neutrality Factor. FY 2014 Operating Outlier Factor ............... Adjustment to Offset the Cost of the Policy on Admission and Medical Review Criteria for Hospital Inpatient Services under Medicare Part A. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Full update (1.7 percent); wage index is less than or equal to 1.0000; labor/non-labor share percentage (62/38) Reduced update (¥0.3 percent); wage index is greater than 1.0000; labor/nonlabor share percentage (69.6/30.4) Labor: $4,176.63 ......... Nonlabor: $1,824.27 ... Labor: $3,720.56 ......... Nonlabor: $2,280.34 ... Labor: $4,176.63 ......... Nonlabor: $1,824.27 ... Labor: $3,720.56 Nonlabor: $2,280.34 1.017 ........................... 0.997936 ..................... 1.017 ........................... 0.997936 ..................... 0.997 ........................... 0.997936 ..................... 0.997 0.997936 0.990718 ..................... 0.990718 ..................... 0.990718 ..................... 0.990718 0.999415 ..................... 0.999415 ..................... 0.999415 ..................... 0.999415 0.948995 ..................... 0.998 ........................... 0.948995 ..................... 0.998 ........................... 0.948995 ..................... 0.998 ........................... 0.948995 0.998 PO 00000 Frm 00490 Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2 Reduced update (¥0.3 percent); wage index is less than or equal to 1.0000; labor/nonlabor share percentage (62/38) Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 50985 COMPARISON OF FY 2013 STANDARDIZED AMOUNTS TO THE FY 2014 STANDARDIZED AMOUNT WITH FULL AND REDUCED UPDATE—Continued Full update (1.7 percent); wage index is greater than 1.0000; labor/non-labor share percentage (69.6/30.4) Cumulative Factor: FY 2008, FY 2009, FY 2012, and FY 2013 Documentation and Coding Adjustment as Required under Sections 7(b)(1)(A) and 7(b)(1)(B) of Public Law 110–90 and Documentation and Coding Recoupment Adjustment as required under Section 631 of the American Taxpayer Relief Act of 2012. Final National Standardized Amount for FY 2014. Full update (1.7 percent); wage index is less than or equal to 1.0000; labor/non-labor share percentage (62/38) Reduced update (¥0.3 percent); wage index is greater than 1.0000; labor/nonlabor share percentage (69.6/30.4) 0.9403 ......................... 0.9403 ......................... 0.9403 ......................... 0.9403 Labor: $3,737.71 ......... Nonlabor: $1,632.57 ... Labor: $3,329.57 ......... Nonlabor: $2,040.71 ... Labor: $3,664.21 ......... Nonlabor: $1,600.46 ... Labor: $3,264.10 Nonlabor: $2,000.57 The following table illustrates the changes from the FY 2013 Puerto Rico-specific payment rate for hospitals located in Puerto Rico. The second column shows the changes from the FY 2013 Puerto Rico specific payment rate for hospitals with a Puerto Rico-specific wage index greater than 1.0000. The third column shows the changes from the FY 2013 Puerto Rico specific payment rate for hospitals with a Puerto Rico-specific wage index less than 1.0000. The first row of the table shows the updated (through FY 2013) Puerto Rico-specific payment rate after restoring the FY 2013 offsets for Puerto Rico- Reduced update (¥0.3 percent); wage index is less than or equal to 1.0000; labor/nonlabor share percentage (62/38) specific outlier payments, rural community hospital demonstration program budget neutrality, and the geographic reclassification budget neutrality. The MS–DRG recalibration budget neutrality factor is cumulative and is not removed from this table. COMPARISON OF FY 2013 PUERTO RICO-SPECIFIC PAYMENT RATE TO THE FY 2014 PUERTO RICO-SPECIFIC PAYMENT RATE Update (1.7 percent); wage index is greater than 1.0000; labor/non-labor share percentage (63.2/ 36.8) FY 2013 Puerto Rico Base Rate, after removing: 1. FY 2013 Geographic Reclassification Budget Neutrality (0.991276) ........... 2. FY 2013 Rural Community Hospital Demonstration Program Budget Neutrality (0.999677). 3. FY 2013 Puerto Rico Operating Outlier Offset (0.944760) ........................... FY 2014 Update Factor ............................................................................................ FY 2014 MS–DRG Recalibration Budget Neutrality Factor ..................................... FY 2014 Reclassification Budget Neutrality Factor .................................................. FY 2014 Rural Community Hospital Demonstration Program Budget Neutrality Factor. FY 2014 Puerto Rico Operating Outlier Factor ........................................................ Adjustment to Offset the Cost of the Policy on Admission and Medical Review Criteria for Hospital Inpatient Services under Medicare Part A. Final Puerto Rico–Specific Payment Rate for FY 2014 ........................................... mstockstill on DSK4VPTVN1PROD with RULES6 B. Adjustments for Area Wage Levels and Cost-of-Living Tables 1A through 1C, as published in section VI. of this Addendum (and available via the Internet), contain the labor-related and nonlabor-related shares that we used to calculate the prospective payment rates for hospitals located in the 50 States, the District of Columbia, and Puerto Rico for FY 2014. This section addresses two types of adjustments to the standardized amounts that are made in determining the prospective payment rates as described in this Addendum. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Labor: $1,700.33 ................ Nonlabor: $990.07 .............. 1.017 ................................... 0.997989 ............................. 0.990718 ............................. 0.999415 ............................. Labor: $1,668.05 Nonlabor: $1,022.35 1.017 0.997989 0.990718 0.999415 0.943455 ............................. 0.998 ................................... 0.943455 0.998 Labor: $1,608.90 ................ Nonlabor: $936.82 .............. Labor: $1,578.35 Nonlabor: $967.37 1. Adjustment for Area Wage Levels Sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act require that we make an adjustment to the labor-related portion of the national and Puerto Rico prospective payment rates, respectively, to account for area differences in hospital wage levels. This adjustment is made by multiplying the labor-related portion of the adjusted standardized amounts by the appropriate wage index for the area in which the hospital is located. In section III. of the preamble of this final rule, we discuss the data and methodology for the FY 2014 wage index. PO 00000 Frm 00491 Fmt 4701 Sfmt 4700 Update (1.7 percent); wage index is less than or equal to 1.0000; labor/nonlabor share percentage (62/ 38) 2. Adjustment for Cost-of-Living in Alaska and Hawaii Section 1886(d)(5)(H) of the Act provides discretionary authority to the Secretary to make ‘‘such adjustments . . . as the Secretary deems appropriate to take into account the unique circumstances of hospitals located in Alaska and Hawaii.’’ Higher labor-related costs for these two States are taken into account in the adjustment for area wages described above. To account for higher nonlabor-related costs for these two States, we multiply the nonlabor-related portion of the standardized amount for hospitals located in Alaska and Hawaii by an E:\FR\FM\19AUR2.SGM 19AUR2 50986 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations adjustment factor. For FY 2011 and in prior fiscal years, we used the most recent cost-ofliving adjustment (COLA) factors obtained from the U.S. Office of Personnel Management (OPM) Web site at: https:// www.opm.gov/oca/cola/rates/asp to update this nonlabor portion. In the FY 2013 IPPS/LTCH PPS proposed and final rules (77 FR 28145 through 28146 and 77 FR 53700 through 53701, respectively), we explained that statutory changes transitioned the Alaska and Hawaii COLAs to locality pay. We further explained that, beginning in FY 2012, as OPM transitioned away from COLAs, we continued to use the same ‘‘frozen’’ COLA factors that were used to adjust payments in FY 2011 (based on OPM’s 2009 COLA factors) to adjust the nonlabor-related portion of the standardized amount for hospitals located in Alaska and Hawaii while we explored alternatives for updating the COLA factors in the future. In the FY 2013 IPPS/ LTCH PPS final rule, for FY 2013, we continued to use the same COLA factors used to adjust payments in FY 2012 (which are based on OPM’s 2009 COLA factors). We also established a methodology to update the COLA factors for Alaska and Hawaii that were published by OPM every 4 years (at the same time as the update to the labor-related share of the IPPS market basket), beginning in FY 2014. We refer readers to the FY 2013 IPPS/LTCH PPS proposed and final rules for additional background and a detailed description of this methodology (77 FR 28145 through 28146 and 77 FR 53700 through 53701, respectively). For FY 2014, we proposed to update the COLA factors published by OPM for 2009 (as these are the last COLA factors OPM published prior to transitioning from COLAs to locality pay) using the methodology that we finalized in the FY 2013 IPPS/LTCH PPS final rule. Under our proposal, we proposed COLA factors for FY 2014 for the three specified urban areas of Alaska (Anchorage, Fairbanks and Juneau) of 1.23; for the City and County of Honolulu, the County of Kauai, the County of Maui, the County of Kalawao, and ‘‘All other’’ areas of Alaska of 1.25; and for the County of Hawaii of 1.19. For additional details on our proposal, we refer readers to the FY 2014 IPPS/LTCH PPS proposed rule (77 FR 27770 through 27771). We did not receive any public comments on our proposed COLA factors for FY 2014 and, therefore, are adopting them as final in this final rule without modification. The development of the COLA factors for FY 2014 is described below. For FY 2014, we are updating the COLA factors for Alaska and Hawaii published by OPM for 2009 (as these are the last COLA factors OPM published prior to transitioning from COLAs to locality pay) using the methodology that we finalized in the FY 2013 IPPS/LTCH PPS final rule. Specifically, under our methodology, we are using a comparison of the growth in the Consumer Price Indices (CPIs) in Anchorage and Honolulu relative to the growth in the overall CPI as published by the Bureau of Labor Statistics (BLS) to update the COLA adjustment factors for all areas in Alaska and Hawaii, respectively. As discussed in the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 28145 through 28146), because BLS publishes CPI data for only Anchorage, Alaska and Honolulu, Hawaii, our methodology for updating the COLA factors uses a comparison of the growth in the CPIs for those cities relative to the growth in the overall CPI to update the COLA adjustment factors for all areas in Alaska and Hawaii, respectively. We believe that the relative price differences between these cities and the United States (as measured by the CPIs mentioned above) are generally appropriate proxies for the relative price differences between the ‘‘other areas’’ of Alaska and Hawaii and the United States. The CPIs for ‘‘All Items’’ that BLS publishes for Anchorage, Alaska, Honolulu, Hawaii, and for the average U.S. city are based on a different mix of commodities and services than is reflected in the nonlaborrelated share of the IPPS market basket. As such, under the methodology we established to update the COLA factors, we calculated a ‘‘reweighted CPI’’ using the CPI for commodities and the CPI for services for each of the geographic areas to mirror the composition of the IPPS market basket nonlabor-related share. The current composition of BLS’ CPI for ‘‘All Items’’ for all of the respective areas is approximately 40 percent commodities and 60 percent services. However, the nonlabor-related share of the IPPS market basket is comprised of approximately 60 percent commodities and 40 percent services. Therefore, under the methodology we established in the FY 2013 IPPS/LTCH PPS final rule, we have created reweighted indexes for Anchorage, Alaska, Honolulu, Hawaii, and the average U.S. city using the respective CPI commodities index and CPI services index and applying the approximate 60/40 weights from the IPPS market basket. We believe that this methodology is appropriate because we would continue to make a COLA adjustment for hospitals located in Alaska and Hawaii by multiplying the nonlabor-related portion of the standardized amount by a COLA factor. Under the COLA factor update methodology we established in the FY 2013 IPPS/LTCH PPS final rule, we further exercised our discretionary authority to adjust payments made to hospitals located in Alaska and Hawaii by incorporating a 25percent cap on the CPI-updated COLA factors used to adjust the nonlabor-related portion of the standardized amounts, which is consistent with a statutorily mandated 25percent cap that was applied to OPM’s published COLA factors. We believe that this is appropriate because our CPI-updated COLA factors for FY 2014 use the 2009 OPM COLA factors as a basis. In addition, we are continuing to establish COLA factors that are rounded to 2 decimal places, which is consistent with the number of decimal places in the 2009 OPM COLA factors that are used as the basis for calculating the FY 2014 COLA factors. This policy also will maintain consistency with the rounding used for the 25-percent cap on the COLA factors (that is, a COLA factor of no more than 1.25). Applying this methodology, we are establishing the COLA factors for FY 2014 that will adjust the nonlabor-related portion of the standardized amount for hospitals located in Alaska and Hawaii as shown in the table below. FY 2014 COST-OF-LIVING ADJUSTMENT FACTORS: ALASKA AND HAWAII HOSPITALS Cost of living adjustment factor mstockstill on DSK4VPTVN1PROD with RULES6 Area Alaska: City of Anchorage and 80-kilometer (50-mile) radius by road ............................................................................................... City of Fairbanks and 80-kilometer (50-mile) radius by road ................................................................................................ City of Juneau and 80-kilometer (50-mile) radius by road .................................................................................................... Rest of Alaska ........................................................................................................................................................................ Hawaii: City and County of Honolulu .................................................................................................................................................. County of Hawaii .................................................................................................................................................................... County of Kauai ...................................................................................................................................................................... County of Maui and County of Kalawao ................................................................................................................................ Each of the COLA factors was calculated using data through 2012 as these are the latest historical CPI data published by the BLS. The reweighted CPI for Honolulu, Hawaii grew faster than the reweighted CPI VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 for the average U.S. city over the time period from 2009 to 2012, with a growth rate of 8.9 percent and 8.3 percent, respectively. As a result, for FY 2014, we calculated COLA factors for the City and County of Honolulu, PO 00000 Frm 00492 Fmt 4701 Sfmt 4700 1.23 1.23 1.23 1.25 1.25 1.19 1.25 1.25 the County of Kauai, the County of Maui, and the County of Kalawao to be 1.26 compared to the FY 2013 COLA factor of 1.25. However, as stated above, our COLA factor update methodology caps COLA factors at E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 1.25. In addition, the COLA factor calculated for the County of Hawaii for FY 2014 is 1.19 compared to the FY 2013 COLA factor of 1.18. The reweighted CPI for Anchorage, Alaska grew slower than the reweighted CPI for the average U.S. city over the time period from 2009 to 2012, with a growth rate of 8.0 percent and 8.3 percent, respectively. However, applying this slower relative growth rate to the FY 2009 COLA factors for each of the Alaska areas results in no change to the COLA factors for the Alaska areas for FY 2014 (1.25 for ‘‘All other’’ areas of Alaska and 1.23 for the three specified urban areas of Alaska (Anchorage, Fairbanks and Juneau)) as compared to the FY 2013 COLA factors. C. Calculation of the Prospective Payment Rates General Formula for Calculation of the Prospective Payment Rates for FY 2014 In general, the operating prospective payment rate for all hospitals paid under the IPPS located outside of Puerto Rico, except SCHs, for FY 2014 equals the Federal rate (which includes uncompensated care payments). (As noted above, due to the expiration of the MDH program, beginning with FY 2014, we are not including MDHs in our discussion of the update of the hospitalspecific rates for FY 2014.) SCHs are paid based on whichever of the following rates yields the greatest aggregate payment: The Federal national rate (which, as finalized in section V.E.3. of the preamble of this final rule, includes uncompensated care payments); the updated hospital-specific rate based on FY 1982 costs per discharge; the updated hospital-specific rate based on FY 1987 costs per discharge; the updated hospital-specific rate based on FY 1996 costs per discharge; or the updated hospitalspecific rate based on FY 2006 costs per discharge to determine the rate that yields the greatest aggregate payment. The prospective payment rate for SCHs for FY 2014 equals the higher of the applicable Federal rate, or the hospital-specific rate as described below. The prospective payment rate for hospitals located in Puerto Rico for FY 2014 equals 25 percent of the Puerto Ricospecific payment rate plus 75 percent of the applicable national rate. 1. Federal Rate The Federal rate is determined as follows: Step 1—Select the applicable average standardized amount depending on whether the hospital submitted qualifying quality data (full update for hospitals submitting quality data; update including a ¥2.0 percent adjustment for hospitals that did not submit these data). Step 2—Multiply the labor-related portion of the standardized amount by the applicable wage index for the geographic area in which the hospital is located or the area to which the hospital is reclassified. Step 3—For hospitals in Alaska and Hawaii, multiply the nonlabor-related portion of the standardized amount by the applicable cost-of-living adjustment factor. Step 4—Add the amount from Step 2 and the nonlabor-related portion of the standardized amount (adjusted, if applicable, under Step 3). VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Step 5—Multiply the final amount from Step 4 by the relative weight corresponding to the applicable MS-DRG (Table 5 listed in section VI. of this Addendum and available via the Internet). The Federal rate as determined in Step 5 may then be further adjusted if the hospital qualifies for either the IME or DSH adjustment. In addition, for hospitals that qualify for a low-volume payment adjustment under section 1886(d)(12) of the Act and 42 CFR 412.101(b), the payment in Step 5 would be increased by the formula described in section V.C. of the preamble of this final rule. The base-operating DRG payment amount may be further adjusted by the hospital readmissions payment adjustment and the hospital VBP payment adjustment as described under sections 1886(q) and 1886(o) of the Act, respectively. Finally, we add the uncompensated care payment to the total claim payment amount. We note that, as finalized above, we take uncompensated care payments into consideration when calculating outlier payments. 2. Hospital-Specific Rate (Applicable Only to SCHs) a. Calculation of Hospital-Specific Rate Section 1886(b)(3)(C) of the Act provides that SCHs are paid based on whichever of the following rates yields the greatest aggregate payment: The Federal rate (which, as finalized in section V.E.3. of the preamble of this final rule, includes uncompensated care payments); the updated hospital-specific rate based on FY 1982 costs per discharge; the updated hospital-specific rate based on FY 1987 costs per discharge; the updated hospital-specific rate based on FY 1996 costs per discharge; or the updated hospitalspecific rate based on FY 2006 costs per discharge to determine the rate that yields the greatest aggregate payment. For a more detailed discussion of the calculation of the hospital-specific rates, we refer readers to the FY 1984 IPPS interim final rule (48 FR 39772); the April 20, 1990 final rule with comment period (55 FR 15150); the FY 1991 IPPS final rule (55 FR 35994); and the FY 2001 IPPS final rule (65 FR 47082). We also refer readers to section V.E. of the preamble of this final rule for a complete discussion on DSH and uncompensated care payments. b. Updating the FY 1982, FY 1987, FY 1996 and FY 2006 Hospital-Specific Rate for FY 2013 Section 1886(b)(3)(B)(iv) of the Act provides that the applicable percentage increase applicable to the hospital-specific rates for SCHs equals the applicable percentage increase set forth in section 1886(b)(3)(B)(i) of the Act (that is, the same update factor as for all other hospitals subject to the IPPS). Because the Act sets the update factor for SCHs equal to the update factor for all other IPPS hospitals, the update to the hospital-specific rates for SCHs is subject to the amendments to section 1886(b)(3)(B) of the Act made by sections 3401(a) and 10319(a) of the Affordable Care Act. Accordingly, the applicable percentage increase to the hospital-specific rates applicable to SCHs is 1.7 percent (that is, the FY 2014 estimate of the market basket rate- PO 00000 Frm 00493 Fmt 4701 Sfmt 4700 50987 of-increase of 2.5 percent less an adjustment of 0.5 percentage point for MFP and less 0.3 percentage point) for hospitals that submit quality data or ¥0.3 percent (that is, the FY 2014 estimate of the market basket rate-ofincrease of 2.5 percent, less 2.0 percentage points for failure to submit data under the Hospital IQR Program, less an adjustment of 0.5 percentage point for MFP, and less 0.3 percentage point) for hospitals that fail to submit quality data. For a complete discussion of the applicable percentage increase applicable to the hospital-specific rates for SCHs, we refer readers to section V.A. of the preamble of this final rule. In addition, because SCHs use the same MS–DRGs as other hospitals when they are paid based in whole or in part on the hospital-specific rate, the hospital-specific rate is adjusted by a budget neutrality factor to ensure that changes to the MS–DRG classifications and the recalibration of the MS–DRG relative weights are made in a manner so that aggregate IPPS payments are unaffected. Therefore, a SCH’s hospitalspecific rate is adjusted by the MS–DRG reclassification and recalibration budget neutrality factor of 0.997989, as discussed in section III. of this Addendum. The resulting rate is used in determining the payment rate an SCH will receive for its discharges beginning on or after October 1, 2013. We note that, in this final rule, for FY 2014, we are not making a documentation and coding adjustment to the hospital-specific rate. We refer readers to section II.D. of the preamble of this final rule for a complete discussion regarding our finalized policies and previously finalized policies (including our historical adjustments to the payment rates) relating to the effect of changes in documentation and coding that do not reflect real changes in case-mix. We note that section II.D. of the preamble of this final rule also includes a discussion on documentation and coding effects that occurred through FY 2010, including the request for public comments in the FY 2014 IPPS/LTCH PPS proposed rule as to whether any portion of the ¥0.8 percent recoupment adjustment discussed in section II.D.6. of the preamble of this final rule should be reduced and instead applied as a prospective adjustment for the cumulative MS–DRG documentation and coding effect through FY 2010. c. Adjustment to Offset the Cost of the Admission and Medical Review Criteria for Hospital Inpatient Services Under Medicare Part A Policy and Clarification As discussed previously, in section XI.C. of the preamble of this final rule, our actuaries project additional IPPS expenditures will result from our policy that medical review of inpatient admissions will include a presumption that hospital inpatient admissions are reasonable and necessary for beneficiaries who require more than 1 Medicare utilization day (defined by encounters crossing 2 ‘‘midnights’’) in the hospital receiving medically necessary services after inpatient admission (which is presented in section XI.C. of the preamble of this final rule). We believe that it is appropriate to use our exceptions and adjustments authority under section 1886(d)(5)(I)(i) of the Act to apply reductions E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50988 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations of 0.2 percent (or a 0.998 adjustment) to the IPPS rates, including the FY 2014 hospitalspecific rate for SCHs, to offset our estimate of the increase in IPPS payments. We refer readers to section XI.C. of the preamble of this final rule for a complete discussion of our policy on admission and medical review criteria for hospital inpatient services under Medicare Part A. 3. General Formula for Calculation of Prospective Payment Rates for Hospitals Located in Puerto Rico Beginning on or After October 1, 2013, and Before October 1, 2014 Section 1886(d)(9)(E)(iv) of the Act provides that, effective for discharges occurring on or after October 1, 2004, hospitals located in Puerto Rico are paid based on a blend of 75 percent of the national prospective payment rate and 25 percent of the Puerto Rico-specific rate. a. Puerto Rico-Specific Rate The Puerto Rico-specific prospective payment rate is determined as follows: Step 1—Select the applicable average standardized amount considering the applicable wage index (obtained from Table 1C published in section VI. of this Addendum and available via the Internet). Step 2—Multiply the labor-related portion of the standardized amount by the applicable Puerto Rico-specific wage index. Step 3—Add the amount from Step 2 and the nonlabor-related portion of the standardized amount. Step 4—Multiply the amount from Step 3 by the applicable MS–DRG relative weight (obtained from Table 5 listed in section VI. of this Addendum and available via the Internet). Step 5—Multiply the result in Step 4 by 25 percent. b. National Prospective Payment Rate The national prospective payment rate is determined as follows: Step 1—Select the applicable average standardized amount. Step 2—Multiply the labor-related portion of the standardized amount by the applicable wage index for the geographic area in which the hospital is located or the area to which the hospital is reclassified. Step 3—Add the amount from Step 2 and the nonlabor-related portion of the national average standardized amount. Step 4—Multiply the amount from Step 3 by the applicable MS–DRG relative weight (obtained from Table 5 listed in section VI. of this Addendum and available via the Internet). Step 5—Multiply the result in Step 4 by 75 percent. The sum of the Puerto Rico-specific rate and the national prospective payment rate computed above equals the prospective payment for a given discharge for a hospital located in Puerto Rico. This rate is then further adjusted if the hospital qualifies for either the IME or DSH adjustment. Finally, we add the uncompensated care payment to the total claim payment amount. We note that, as finalized above, we take uncompensated care payments into consideration when calculating outlier payments. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 c. Adjustment to Offset the Cost of the Admission and Medical Review Criteria for Hospital Inpatient Services Under Medicare Part A Policy and Clarification As discussed previously, in section XI.C. of the preamble of this final rule, our actuaries project additional IPPS expenditures will result from our policy that medical review of inpatient admissions will include a presumption that hospital inpatient admissions are reasonable and necessary for beneficiaries who require more than 1 Medicare utilization day (defined by encounters crossing 2 ‘‘midnights’’) in the hospital receiving medically necessary services after inpatient admission (which is presented in section XI.C. of the preamble of this final rule). We believe that it is appropriate to use our exceptions and adjustments authority under section 1886(d)(5)(I)(i) of the Act to apply reductions of 0.2 percent (or a 0.998 adjustment) to the IPPS rates, including the FY 2014 national standardized amount and the Puerto Rico standardized amount, to offset our estimate of the increase in IPPS payments. We refer readers to section XI.C. of the preamble of this final rule for a complete discussion of our policy on admission and medical review criteria for hospital inpatient services under Medicare Part A. III. Changes to Payment Rates for Acute Care Hospital Inpatient Capital-Related Costs for FY 2014 The PPS for acute care hospital inpatient capital-related costs was implemented for cost reporting periods beginning on or after October 1, 1991. Effective with that cost reporting period, over a 10-year transition period (which extended through FY 2001) the payment methodology for Medicare acute care hospital inpatient capital-related costs changed from a reasonable cost-based methodology to a prospective methodology (based fully on the Federal rate). The basic methodology for determining Federal capital prospective rates is set forth in the regulations at 42 CFR 412.308 through 412.352. Below we discuss the factors that we used to determine the capital Federal rate for FY 2014, which is effective for discharges occurring on or after October 1, 2013. The 10-year transition period ended with hospital cost reporting periods beginning on or after October 1, 2001 (FY 2002). Therefore, for cost reporting periods beginning in FY 2002, all hospitals (except ‘‘new’’ hospitals under § 412.304(c)(2)) are paid based on the capital Federal rate. For FY 1992, we computed the standard Federal payment rate for capital-related costs under the IPPS by updating the FY 1989 Medicare inpatient capital cost per case by an actuarial estimate of the increase in Medicare inpatient capital costs per case. Each year after FY 1992, we update the capital standard Federal rate, as provided at § 412.308(c)(1), to account for capital input price increases and other factors. The regulations at § 412.308(c)(2) also provide that the capital Federal rate be adjusted annually by a factor equal to the estimated proportion of outlier payments under the capital Federal rate to total capital payments under the capital Federal rate. In addition, § 412.308(c)(3) requires that the PO 00000 Frm 00494 Fmt 4701 Sfmt 4700 capital Federal rate be reduced by an adjustment factor equal to the estimated proportion of payments for exceptions under § 412.348. (We note that, as discussed in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53705), there is generally no longer a need for an exceptions payment adjustment factor.) However, in limited circumstances, an additional payment exception for extraordinary circumstances is provided for under § 412.348(f) for qualifying hospitals. Therefore, in accordance with § 412.308(c)(3), an exceptions payment adjustment factor may need to be applied if such payments are made. Section 412.308(c)(4)(ii) requires that the capital standard Federal rate be adjusted so that the effects of the annual DRG reclassification and the recalibration of DRG weights and changes in the geographic adjustment factor (GAF) are budget neutral. Section 412.374 provides for blended payments to hospitals located in Puerto Rico under the IPPS for acute care hospital inpatient capital-related costs. Accordingly, under the capital PPS, we compute a separate payment rate specific to hospitals located in Puerto Rico using the same methodology used to compute the national Federal rate for capital-related costs. In accordance with section 1886(d)(9)(A) of the Act, under the IPPS for acute care hospital operating costs, hospitals located in Puerto Rico are paid for operating costs under a special payment formula. Effective October 1, 2004, in accordance with section 504 of Public Law 108–173, the methodology for operating payments made to hospitals located in Puerto Rico under the IPPS was revised to make payments based on a blend of 25 percent of the applicable standardized amount specific to Puerto Rico hospitals and 75 percent of the applicable national average standardized amount. In conjunction with this change to the operating blend percentage, effective with discharges occurring on or after October 1, 2004, we also revised the methodology for computing capital payments made to hospitals located in Puerto Rico to be based on a blend of 25 percent of the Puerto Rico capital rate and 75 percent of the national capital Federal rate (69 FR 49185). A. Determination of the Federal Hospital Inpatient Capital-Related Prospective Payment Rate Update In the discussion that follows, we explain the factors that we used to determine the capital Federal rate for FY 2014. In particular, we explain why the FY 2014 capital Federal rate increases approximately 0.9 percent, compared to the FY 2013 capital Federal rate. As discussed in the impact analysis in Appendix A to this final rule, we estimate that capital payments per discharge will increase 1.6 percent during that same period. Because capital payments constitute about 10 percent of hospital payments, a percent change in the capital Federal rate yields only about a 0.1 percent change in actual payments to hospitals. 1. Projected Capital Standard Federal Rate Update a. Description of the Update Framework Under § 412.308(c)(1), the capital standard Federal rate is updated on the basis of an E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations analytical framework that takes into account changes in a capital input price index (CIPI) and several other policy adjustment factors. Specifically, we adjust the projected CIPI rate-of-increase as appropriate each year for case-mix index-related changes, for intensity, and for errors in previous CIPI forecasts. The update factor for FY 2014 under that framework is 0.9 percent based on the best data available at this time. The update factor under that framework is based on a projected 1.2 percent increase in the revised and rebased FY 2010-based CIPI (discussed in more detail in section IV.D. of the preamble of this final rule), a 0.0 percentage point adjustment for intensity, a 0.0 percentage point adjustment for case-mix, a 0.0 percentage point adjustment for the FY 2012 DRG reclassification and recalibration, and a forecast error correction of ¥0.3 percentage point. As discussed below in section III.C. of this Addendum, we continue to believe that the CIPI is the most appropriate input price index for capital costs to measure capital price changes in a given year. We also explain the basis for the FY 2014 CIPI projection in that same section of this Addendum. Below we describe the policy adjustments that we are applying in the update framework for FY 2014. The case-mix index is the measure of the average DRG weight for cases paid under the IPPS. Because the DRG weight determines the prospective payment for each case, any percentage increase in the case-mix index corresponds to an equal percentage increase in hospital payments. The case-mix index can change for any of several reasons: • The average resource use of Medicare patients changes (‘‘real’’ case-mix change); • Changes in hospital documentation and coding of patient records result in higherweighted DRG assignments (‘‘coding effects’’); and • The annual DRG reclassification and recalibration changes may not be budget neutral (‘‘reclassification effect’’). We define real case-mix change as actual changes in the mix (and resource requirements) of Medicare patients as opposed to changes in documentation and coding behavior that result in assignment of cases to higher-weighted DRGs, but do not reflect higher resource requirements. The capital update framework includes the same case-mix index adjustment used in the former operating IPPS update framework (as discussed in the May 18, 2004 IPPS proposed rule for FY 2005 (69 FR 28816)). (We no longer use an update framework to make a recommendation for updating the operating IPPS standardized amounts as discussed in section II. of Appendix B to the FY 2006 IPPS final rule (70 FR 47707).) For FY 2014, we are projecting a 0.5 percent total increase in the case-mix index. We estimated that the real case-mix increase will also equal 0.5 percent for FY 2014. The net adjustment for change in case-mix is the difference between the projected real increase in case-mix and the projected total increase in case-mix. Therefore, as we proposed, the net adjustment for case-mix change in FY 2014 is 0.0 percentage point. The capital update framework also contains an adjustment for the effects of DRG VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 reclassification and recalibration. This adjustment is intended to remove the effect on total payments of prior year’s changes to the DRG classifications and relative weights, in order to retain budget neutrality for all case-mix index-related changes other than those due to patient severity of illness. Due to the lag time in the availability of data, there is a 2-year lag in data used to determine the adjustment for the effects of DRG reclassification and recalibration. For example, we have data available to evaluate the effects of the FY 2012 DRG reclassification and recalibration as part of our update for FY 2014. We estimate that FY 2012 DRG reclassification and recalibration resulted in no change in the case-mix when compared with the case-mix index that would have resulted if we had not made the reclassification and recalibration changes to the DRGs. Therefore, as we proposed, we are making a 0.0 percentage point adjustment for reclassification and recalibration in the update framework for FY 2014. The capital update framework also contains an adjustment for forecast error. The input price index forecast is based on historical trends and relationships ascertainable at the time the update factor is established for the upcoming year. In any given year, there may be unanticipated price fluctuations that may result in differences between the actual increase in prices and the forecast used in calculating the update factors. In setting a prospective payment rate under the framework, we make an adjustment for forecast error only if our estimate of the change in the capital input price index for any year is off by 0.25 percentage point or more. There is a 2-year lag between the forecast and the availability of data to develop a measurement of the forecast error. A forecast error of ¥0.3 percentage point was calculated for the FY 2014 update. That is, current historical data indicate that the forecasted FY 2012 rate-ofincrease of the FY 2006-based CIPI (1.5 percent) used in calculating the FY 2012 update factor slightly overstated the actual realized FY 2012 price increases of the FY 2006-based CIPI (1.2 percent) by 0.3 percentage point because the prices associated with both the depreciation and interest cost categories grew more slowly than anticipated. Historically, when forecast error of the CIPI is greater than 0.25 percentage point in absolute terms, it is reflected in the update recommended under this framework. Therefore, as we proposed, we are making a ¥0.3 percentage point adjustment for forecast error in the update for FY 2014. Under the capital IPPS update framework, we also make an adjustment for changes in intensity. Historically, we calculated this adjustment using the same methodology and data that were used in the past under the framework for operating IPPS. The intensity factor for the operating update framework reflected how hospital services are utilized to produce the final product, that is, the discharge. This component accounts for changes in the use of quality-enhancing services, for changes within DRG severity, and for expected modification of practice patterns to remove noncost-effective services. PO 00000 Frm 00495 Fmt 4701 Sfmt 4700 50989 Our intensity measure is based on a 5-year average. We calculate case-mix constant intensity as the change in total cost per discharge, adjusted for price level changes (the CIPI for hospital and related services) and changes in real case-mix. Without reliable estimates of the proportions of the overall annual intensity increases that are due, respectively, to ineffective practice patterns and the combination of quality-enhancing new technologies and complexity within the DRG system, we assume that one-half of the annual increase is due to each of these factors. The capital update framework thus provides an add-on to the input price index rate of increase of one-half of the estimated annual increase in intensity, to allow for increases within DRG severity and the adoption of quality-enhancing technology. In this final rule, we are continuing to use a Medicare-specific intensity measure that is based on a 5-year adjusted average of cost per discharge for FY 2014 (we refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50436) for a full description of our Medicarespecific intensity measure). Specifically, for FY 2014, we are using an intensity measure that is based on an average of cost per discharge data from the 5-year period beginning with FY 2006 and extending through FY 2011. Based on these data, we estimated that case-mix constant intensity declined during FYs 2006 through 2011. In the past, when we found intensity to be declining, we believed a zero (rather than a negative) intensity adjustment was appropriate. Consistent with this approach, because we estimate that intensity declined during that 5-year period, we believe it is appropriate to continue to apply a zero intensity adjustment for FY 2014. Therefore, as we proposed, we are making a 0.0 percentage point adjustment for intensity in the update for FY 2014. Above, we described the basis of the components used to develop the 0.9 percent capital update factor under the capital update framework for FY 2014 as shown in the table below. CMS FY 2014 UPDATE FACTOR TO THE CAPITAL FEDERAL RATE Capital Input Price Index* ................... Intensity .............................................. Case-Mix Adjustment Factors: Real Across DRG Change .......... Projected Case-Mix Change ....... 1.2 0.0 ¥0.5 0.5 Subtotal ................................ Effect of FY 2012 Reclassification and Recalibration ............................ Forecast Error Correction ................... 1.2 0.0 ¥0.3 Total Update ......................... 0.9 *The capital input price index is based on the revised and rebased FY 2010-based CIPI discussed in section IV.D. of the preamble of this final rule. b. Comparison of CMS and MedPAC Update Recommendation In its March 2013 Report to Congress, MedPAC did not make a specific update recommendation for capital IPPS payments E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50990 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations for FY 2014. (We refer readers to MedPAC’s Report to the Congress: Medicare Payment Policy, March 2013, Chapter 3.) 2. Outlier Payment Adjustment Factor Section 412.312(c) establishes a unified outlier payment methodology for inpatient operating and inpatient capital-related costs. A single set of thresholds is used to identify outlier cases for both inpatient operating and inpatient capital-related payments. Section 412.308(c)(2) provides that the standard Federal rate for inpatient capital-related costs be reduced by an adjustment factor equal to the estimated proportion of capital-related outlier payments to total inpatient capitalrelated PPS payments. The outlier thresholds are set so that operating outlier payments are projected to be 5.1 percent of total operating IPPS DRG payments. For FY 2013, we estimated that outlier payments for capital will equal 6.38 percent of inpatient capital-related payments based on the capital Federal rate in FY 2013. Based on the thresholds as set forth in section II.A. of this Addendum, we estimate that outlier payments for capital-related costs would equal 6.07 percent for inpatient capitalrelated payments based on the capital Federal rate in FY 2014. Therefore, we are applying an outlier adjustment factor of 0.9393 in determining the capital Federal rate for FY 2014. Thus, we estimate that the percentage of capital outlier payments to total capital Federal rate payments for FY 2014 will be slightly lower than the percentage for FY 2013. The outlier reduction factors are not built permanently into the capital rates; that is, they are not applied cumulatively in determining the capital Federal rate. The FY 2014 outlier adjustment of 0.9393 is a 0.33 percent change from the FY 2013 outlier adjustment of 0.9362. Therefore, the net change in the outlier adjustment to the capital Federal rate for FY 2014 is 1.0033 (0.9393/0.9362). Thus, the outlier adjustment will increase the FY 2014 capital Federal rate by 0.33 percent compared to the FY 2013 outlier adjustment. 3. Budget Neutrality Adjustment Factor for Changes in DRG Classifications and Weights and the GAF Section 412.308(c)(4)(ii) requires that the capital Federal rate be adjusted so that aggregate payments for the fiscal year based on the capital Federal rate after any changes resulting from the annual DRG reclassification and recalibration and changes in the GAF are projected to equal aggregate payments that would have been made on the basis of the capital Federal rate without such changes. Because we implemented a separate GAF for Puerto Rico, we apply separate budget neutrality adjustments for the national GAF and the Puerto Rico GAF. We apply the same budget neutrality factor for DRG reclassifications and recalibration nationally and for Puerto Rico. Separate adjustments were unnecessary for FY 1998 and earlier because the GAF for Puerto Rico was implemented in FY 1998. To determine the factors for FY 2014, we compared (separately for the national capital rate and the Puerto Rico capital rate) estimated aggregate capital Federal rate VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 payments based on the FY 2013 MS–DRG classifications and relative weights and the FY 2013 GAF to estimated aggregate capital Federal rate payments based on the FY 2013 MS–DRG classifications and relative weights and the FY 2014 GAFs. To achieve budget neutrality for the changes in the national GAFs, based on calculations using updated data, we are applying an incremental budget neutrality adjustment factor of 0.9997 for FY 2014 to the previous cumulative FY 2013 adjustment factor of 0.9904, yielding an adjustment factor of 0.9900 through FY 2014. For the Puerto Rico GAFs, we are applying an incremental budget neutrality adjustment factor of 0.9990 for FY 2014 to the previous cumulative FY 2013 adjustment factor of 1.0095, yielding a cumulative adjustment factor of 1.0084 through FY 2014. We then compared estimated aggregate capital Federal rate payments based on the FY 2013 MS–DRG relative weights and the FY 2014 GAFs to estimated aggregate capital Federal rate payments based on the cumulative effects of the FY 2014 MS–DRG classifications and relative weights and the FY 2014 GAFs. The incremental adjustment factor for DRG classifications and changes in relative weights is 0.9990 both nationally and for Puerto Rico. The cumulative adjustment factors for MS–DRG classifications and changes in relative weights and for changes in the GAFs through FY 2014 are 0.9881 nationally and 1.0076 for Puerto Rico. (We note that all the values are calculated with unrounded numbers.) The GAF/DRG budget neutrality adjustment factors are built permanently into the capital rates; that is, they are applied cumulatively in determining the capital Federal rate. This follows the requirement under § 412.308(c)(4)(ii) that estimated aggregate payments each year be no more or less than they would have been in the absence of the annual DRG reclassification and recalibration and changes in the GAFs. The methodology used to determine the recalibration and geographic adjustment factor (GAF/DRG) budget neutrality adjustment is similar to the methodology used in establishing budget neutrality adjustments under the IPPS for operating costs. One difference is that, under the operating IPPS, the budget neutrality adjustments for the effect of geographic reclassifications are determined separately from the effects of other changes in the hospital wage index and the MS–DRG relative weights. Under the capital IPPS, there is a single GAF/DRG budget neutrality adjustment factor (the national capital rate and the Puerto Rico capital rate are determined separately) for changes in the GAF (including geographic reclassification) and the MS–DRG relative weights. In addition, there is no adjustment for the effects that geographic reclassification has on the other payment parameters, such as the payments for DSH or IME. The cumulative adjustment factor accounts for the MS–DRG reclassifications and recalibration and for changes in the GAFs. It also incorporates the effects on the GAFs of FY 2014 geographic reclassification decisions made by the MGCRB compared to FY 2013 decisions. However, it does not account for PO 00000 Frm 00496 Fmt 4701 Sfmt 4700 changes in payments due to changes in the DSH and IME adjustment factors. 4. Capital Federal Rate for FY 2014 For FY 2013, we established a capital Federal rate of $425.49 (77 FR 53706). We are establishing an update of 0.9 percent in determining the FY 2014 capital Federal rate for all hospitals. In addition, as discussed in greater detail in section IV.C. of the preamble of this final rule, we are making a reduction of 0.2 percent to the capital IPPS rates, to offset the estimated additional IPPS expenditures that are projected to result from our policy on admission and medical review criteria for hospital inpatient services under Medicare Part A. As a result of the 0.9 percent update, the budget neutrality factors, and the 0.2 percent reduction to offset the estimated additional IPPS expenditures projected to result from our policy on admission and medical review criteria for hospital inpatient services discussed above, we are establishing a national capital Federal rate of $429.31 for FY 2014. The national capital Federal rate for FY 2014 was calculated as follows: • The FY 2014 update factor is 1.009, that is, the update is 0.9 percent. • The FY 2014 budget neutrality adjustment factor that is applied to the capital Federal rate for changes in the MS– DRG classifications and relative weights and changes in the GAFs is 0.9987. • The FY 2014 outlier adjustment factor is 0.9393. • An adjustment factor of 0.9980 (that is, a reduction of 0.2 percent) to offset the estimated additional IPPS expenditures that are projected to result from our policy on admission and medical review criteria for hospital inpatient services under Medicare Part A. (We note that, as discussed in section VI.D. of the preamble of this final rule, we are not making an additional MS–DRG documentation and coding adjustment to the capital IPPS Federal rates for FY 2014.) Because the capital Federal rate has already been adjusted for differences in casemix, wages, cost-of-living, indirect medical education costs, and payments to hospitals serving a disproportionate share of lowincome patients, we are not making additional adjustments in the capital Federal rate for these factors, other than the budget neutrality factor for changes in the MS–DRG classifications and relative weights and for changes in the GAFs. (As noted previously in this section, there is no need for an exceptions payment adjustment budget neutrality factor in determining the FY 2014 capital Federal rate.) We are providing the following chart that shows how each of the factors and adjustments for FY 2014 affects the computation of the FY 2014 national capital Federal rate in comparison to the FY 2013 national capital Federal rate. The FY 2014 update factor has the effect of increasing the capital Federal rate by 0.9 percent compared to the FY 2013 capital Federal rate. The GAF/ DRG budget neutrality adjustment factor has the effect of decreasing the capital Federal rate by 0.13 percent. The FY 2014 outlier adjustment factor has the effect of increasing the capital Federal rate by 0.33 percent E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations compared to the FY 2013 capital Federal rate. The adjustment to account for the estimated additional IPPS expenditures that are projected to result from our policy on admission and medical review criteria for hospital inpatient services under Medicare Part A has the effect of decreasing the capital Federal rate by 0.2 percent compared to the FY 2013 capital Federal rate. The combined effect of all the changes will increase the 50991 national capital Federal rate by 1.90 percent compared to the FY 2013 national capital Federal rate. COMPARISON OF FACTORS AND ADJUSTMENTS: FY 2013 CAPITAL FEDERAL RATE AND FY 2014 CAPITAL FEDERAL RATE FY 2013 Update Factor 1 ........................................................................ GAF/DRG Adjustment Factor 1 ................................................ Outlier Adjustment Factor 2 ...................................................... Adjustment for admission and medical review criteria 3 .......... Capital Federal Rate ................................................................ FY 2014 1.0120 0.9998 0.9362 N/A $425.49 Change 1.0090 0.9987 0.9393 0.9980 $429.31 1.0090 0.9987 1.0033 0.9980 1.0190 Percent change 0.90 ¥0.13 0.33 ¥0.20 1.90 1 The update factor and the GAF/DRG budget neutrality adjustment factors are built permanently into the capital Federal rates. Thus, for example, the incremental change from FY 2013 to FY 2014 resulting from the application of the 0.9987 GAF/DRG budget neutrality adjustment factor for FY 2014 is a net change of 0.9987 (or ¥0.13 percent). 2 The outlier reduction factor is not built permanently into the capital Federal rate; that is, the factor is not applied cumulatively in determining the capital Federal rate. Thus, for example, the net change resulting from the application of the FY 2014 outlier adjustment factor is 0.9393/ 0.9362, or 1.0033 (or 0.33 percent). 3 The adjustment to account for the estimated additional IPPS expenditures that are projected to result from our policy on admission and medical review criteria for hospital inpatient services under Medicare Part A (discussed in section VI.C. of the preamble of this final rule). In this final rule, we also are providing the following chart that shows how the final FY 2014 capital Federal rate differs from the proposed FY 2014 capital Federal rate as presented in the FY 2014 IPPS/LTCH PPS proposed rule. COMPARISON OF FACTORS AND ADJUSTMENTS: PROPOSED FY 2014 CAPITAL FEDERAL RATE AND FINAL FY 2014 CAPITAL FEDERAL RATE Proposed mstockstill on DSK4VPTVN1PROD with RULES6 Update Factor .......................................................................... GAF/DRG Adjustment Factor .................................................. Outlier Adjustment Factor ........................................................ Adjustment for admission and medical review criteria ............ Capital Federal Rate ................................................................ 6. Special Capital Rate for Puerto Rico Hospitals Section 412.374 provides for the use of a blended payment system for payments made to hospitals located in Puerto Rico under the PPS for acute care hospital inpatient capitalrelated costs. Accordingly, under the capital PPS, we compute a separate payment rate specific to hospitals located in Puerto Rico using the same methodology used to compute the national Federal rate for capital-related costs. Under the broad authority of section 1886(g) of the Act, beginning with discharges occurring on or after October 1, 2004, capital payments made to hospitals located in Puerto Rico are based on a blend of 25 percent of the Puerto Rico capital rate and 75 percent of the capital Federal rate. The Puerto Rico capital rate is derived from the costs of Puerto Rico hospitals only, while the capital Federal rate is derived from the costs of all acute care hospitals participating in the IPPS (including Puerto Rico). To adjust hospitals’ capital payments for geographic variations in capital costs, we apply a GAF to both portions of the blended capital rate. The GAF is calculated using the operating IPPS wage index, and varies depending on the labor market area or rural area in which the hospital is located. We use the Puerto Rico wage index to determine the GAF for the Puerto Rico part of the capitalblended rate and the national wage index to determine the GAF for the national part of the blended capital rate. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 1.0090 0.9988 0.9451 0.9980 $432.03 Final 1.0090 0.9987 0.9393 0.9980 $429.31 Because we implemented a separate GAF for Puerto Rico in FY 1998, we also apply separate budget neutrality adjustment factors for the national GAF and for the Puerto Rico GAF. However, we apply the same budget neutrality adjustment factor for MS–DRG reclassifications and recalibration nationally and for Puerto Rico. The budget neutrality adjustment factors for the national GAF and for the Puerto Rico GAF, and the budget neutrality factor for MS–DRG reclassifications and recalibration (which is the same nationally and for Puerto Rico) is discussed above in section III.A.3. of this Addendum. In computing the payment for a particular Puerto Rico hospital, the Puerto Rico portion of the capital rate (25 percent) is multiplied by the Puerto Rico-specific GAF for the labor market area in which the hospital is located, and the national portion of the capital rate (75 percent) is multiplied by the national GAF for the labor market area in which the hospital is located (which is computed from national data for all hospitals in the United States and Puerto Rico). For FY 2013, the special capital rate for hospitals located in Puerto Rico was $207.25 (77 FR 53707). With the changes we are making to the other factors used to determine the capital Federal rate (including the adjustment to account for the estimated additional IPPS expenditures that are projected to result from our policy on admission and medical review criteria for PO 00000 Frm 00497 Fmt 4701 Sfmt 4700 Change 1.0000 0.9999 0.9938 1.0000 0.9937 Percent change 0.00 ¥0.01 ¥0.62 0.00 ¥0.63 hospital inpatient services under Medicare Part A (discussed in section IX.C. of the preamble of this final rule)), the FY 2014 special capital rate for hospitals in Puerto Rico is $209.82. B. Calculation of the Inpatient CapitalRelated Prospective Payments for FY 2014 For purposes of calculating payments for each discharge during FY 2014, the capital Federal rate is adjusted as follows: (Standard Federal Rate) × (DRG weight) × (GAF) × (COLA for hospitals located in Alaska and Hawaii) × (1 + DSH Adjustment Factor + IME Adjustment Factor, if applicable). The result is the adjusted capital Federal rate. Hospitals also may receive outlier payments for those cases that qualify under the thresholds established for each fiscal year. Section 412.312(c) provides for a single set of thresholds to identify outlier cases for both inpatient operating and inpatient capital-related payments. The outlier thresholds for FY 2014 are in section II.A. of this Addendum. For FY 2014, a case would qualify as a cost outlier if the cost for the case plus the (operating) IME and DSH payments (including both the empirically justified Medicare DSH payment and the estimated uncompensated care payment, as discussed in section II.A.4.g.(1) of this Addendum) is greater than the prospective payment rate for the MS–DRG plus the fixed-loss amount of $21,748. Currently, as provided under § 412.304(c)(2), we pay a new hospital 85 E:\FR\FM\19AUR2.SGM 19AUR2 50992 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations percent of its reasonable costs during the first 2 years of operation unless it elects to receive payment based on 100 percent of the capital Federal rate. Effective with the third year of operation, we pay the hospital based on 100 percent of the capital Federal rate (that is, the same methodology used to pay all other hospitals subject to the capital PPS). mstockstill on DSK4VPTVN1PROD with RULES6 C. Capital Input Price Index 1. Background Like the operating input price index, the capital input price index (CIPI) is a fixedweight price index that measures the price changes associated with capital costs during a given year. The CIPI differs from the operating input price index in one important aspect—the CIPI reflects the vintage nature of capital, which is the acquisition and use of capital over time. Capital expenses in any given year are determined by the stock of capital in that year (that is, capital that remains on hand from all current and prior capital acquisitions). An index measuring capital price changes needs to reflect this vintage nature of capital. Therefore, the CIPI was developed to capture the vintage nature of capital by using a weighted-average of past capital purchase prices up to and including the current year. We periodically update the base year for the operating and capital input price indexes to reflect the changing composition of inputs for operating and capital expenses. As we proposed, in this final rule, we are rebasing and revising the CIPI to a FY 2010 base year to reflect the more current structure of capital costs in hospitals. A complete discussion of this rebasing is provided in section IV.D. of the preamble of this final rule. The CIPI was last rebased to FY 2006 in the FY 2010 IPPS/ RY 2010 LTCH PPS final rule (74 FR 44021). 2. Forecast of the CIPI for FY 2014 Based on the latest forecast by IHS Global Insight, Inc. (second quarter of 2013), we are forecasting the FY 2010-based CIPI to increase 1.2 percent in FY 2014. This reflects a projected 1.9 percent increase in vintageweighted depreciation prices (building and fixed equipment, and movable equipment), and a projected 2.8 percent increase in other capital expense prices in FY 2014, partially offset by a projected 2.3 percent decline in vintage-weighted interest expenses in FY 2014. The weighted average of these three factors produces the forecasted 1.2 percent increase for the FY 2010-based CIPI as a whole in FY 2014. IV. Changes to Payment Rates for Excluded Hospitals: Rate-of-Increase Percentages for FY 2014 Historically, certain hospitals and hospital units excluded from the prospective payment system received payment for inpatient hospital services they furnished on the basis of reasonable costs, subject to a rate-ofincrease ceiling. An annual per discharge limit (the target amount as defined in § 413.40(a)) was set for each hospital or hospital unit based on the hospital’s own cost experience in its base year, and updated annually by a rate-of-increase percentage. The updated target amount for that period was multiplied by the Medicare discharges VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 during that period and applied as an aggregate upper limit (the ceiling as defined in § 413.40(a)) on total inpatient operating costs for a hospital’s cost reporting period. Prior to October 1, 1997, these payment provisions applied consistently to certain categories of excluded providers, which included rehabilitation hospitals and units (now referred to as IRFs), psychiatric hospitals and units (now referred to as IPFs), LTCHs, children’s hospitals, and cancer hospitals. Payments for services furnished in children’s hospitals and cancer hospitals that are excluded from the IPPS continue to be subject to the rate-of-increase ceiling based on the hospital’s own historical cost experience. (We note that, in accordance with § 403.752(a), RNHCIs are also subject to the rate-of-increase limits established under § 413.40 of the regulations.) In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27777), we proposed that the FY 2014 rate-of-increase percentage for updating the target amounts for the 11 cancer hospitals, children’s hospitals, and RNHCIs would be the estimated percentage increase in the FY 2014 IPPS operating market basket, in accordance with applicable regulations at § 413.40. As described in section IV. of the preamble of the proposed rule, we proposed to revise and rebase the IPPS operating market basket to a FY 2010 base year. Therefore, we proposed to use the percentage increase in the FY 2010-based IPPS operating market basket to update the target amounts for children’s hospitals, 11 cancer hospitals, and RNHCIs for FY 2014 and subsequent fiscal years. Accordingly, we proposed that the FY 2014 rate-of-increase percentage to be applied to the target amount for these cancer hospitals, children’s hospitals, and RNHCIs would be the FY 2014 percentage increase in the FY 2010-based IPPS operating market basket. Based on IHS Global Insight, Inc.’s 2013 first quarter forecast, we estimated that the FY 2010-based IPPS operating market basket update for FY 2014 was 2.5 percent (that is, the estimate of the market basket rate-of-increase). However, we proposed that if more recent data became available for the final rule, we would use them to calculate the IPPS operating market basket update for FY 2014. Therefore, based on IHS Global Insight, Inc.’s 2013 second quarter forecast, with historical data through the 2013 first quarter, we estimate that the final FY 2010based IPPS operating market basket update for FY 2014 is 2.5 percent (that is, the estimate of the market basket rate-ofincrease). For cancer and children’s hospitals and RNHCIs, the final FY 2014 rate-ofincrease percentage that will be applied to the FY 2013 target amounts in order to determine the final FY 2014 target amount is 2.5 percent. IRFs, IPFs, and LTCHs were previously paid under the reasonable cost methodology. However, the statute was amended to provide for the implementation of prospective payment systems for IRFs, IPFs, and LTCHs. In general, the prospective payment systems for IRFs, IPFs, and LTCHs provide transitioning periods of varying lengths of time during which a portion of the prospective payment was based on cost- PO 00000 Frm 00498 Fmt 4701 Sfmt 4700 based reimbursement rules under 42 CFR Part 413 (certain providers do not receive a transition period or may elect to bypass the transition as applicable under 42 CFR Part 412, Subparts N, O, and P.) We note that all of the various transitioning periods provided for under the IRF PPS, the IPF PPS, and the LTCH PPS have ended. The IRF PPS, the IPF PPS, and the LTCH PPS are updated annually. We refer readers to section VIII. of the preamble of this final rule and section V. of the Addendum to this final rule for the update changes to the Federal payment rates for LTCHs under the LTCH PPS for FY 2014. The annual updates for the IRF PPS and the IPF PPS are issued by the agency in separate Federal Register documents. V. Updates to the Payment Rates for the LTCH PPS for FY 2014 A. LTCH PPS Standard Federal Rate for FY 2014 1. Background In section VIII. of the preamble of this final rule, we discuss our updates to the payment rates, factors, and specific policies under the LTCH PPS for FY 2014. Under § 412.523(c)(3)(ii) of the regulations, for LTCH PPS rate years beginning RY 2004 through RY 2006, we updated the standard Federal rate annually by a factor to adjust for the most recent estimate of the increases in prices of an appropriate market basket of goods and services for LTCHs. We established this policy of annually updating the standard Federal rate because, at that time, we believed that was the most appropriate method for updating the LTCH PPS standard Federal rate for years after the initial implementation of the LTCH PPS in FY 2003. Therefore, under § 412.523(c)(3)(ii), for RYs 2004 through 2006, the annual update to the LTCH PPS standard Federal rate was equal to the previous rate year’s Federal rate updated by the most recent estimate of increases in the appropriate market basket of goods and services included in covered inpatient LTCH services. In determining the annual update to the standard Federal rate for RY 2007, based on our ongoing monitoring activity, we believed that, rather than solely using the most recent estimate of the LTCH PPS market basket update as the basis of the annual update factor, it was appropriate to adjust the standard Federal rate to account for the effect of documentation and coding in a prior period that was unrelated to patients’ severity of illness (71 FR 27818). Accordingly, we established under § 412.523(c)(3)(iii) that the annual update to the standard Federal rate for RY 2007 was zero percent based on the most recent estimate of the LTCH PPS market basket at that time, offset by an adjustment to account for changes in case-mix in prior periods due to the effect of documentation and coding that were unrelated to patients’ severity of illness. For RY 2008 through FY 2011, we also made an adjustment for the effect of documentation and coding that was unrelated to patients’ severity of illness in establishing the annual update to the standard Federal rate as set forth in the E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations regulations at §§ 412.523(c)(3)(iv) through (c)(3)(vii). For FYs 2012 and 2013, we updated the standard Federal rate by the most recent estimate of the LTCH PPS market basket at that time, including additional statutory adjustments required by section 1886(m)(3)(A) of the Act as set forth in the regulations at §§ 412.523(c)(3)(viii) through (c)(3)(ix). Section 1886(m)(3)(A) of the Act, as added by section 3401(c) of the Affordable Care Act, specifies that, for rate year 2010 and each subsequent rate year, any annual update to the standard Federal rate shall be reduced: • For rate year 2010 through 2019, by the other adjustment specified in section 1886(m)(3)(A)(ii) and (m)(4) of the Act; and • For rate year 2012 and each subsequent year, by the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act (which we refer to as ‘‘the multifactor productivity (MFP) adjustment’’) as discussed in section VIII.C.2.b. of the preamble of this proposed rule. Section 1886(m)(3)(B) of the Act provides that the application of paragraph (3) of section 1886(m) of the Act may result in the annual update being less than zero for a rate year, and may result in payment rates for a rate year being less than such payment rates for the preceding rate year. (As noted in section VIII.C.2.b. of the preamble of this final rule, the annual update to the LTCH PPS occurs on October 1 and we have adopted the term ‘‘fiscal year’’ (FY) rather than ‘‘rate year’’ (RY) under the LTCH PPS beginning October 1, 2010. Therefore, for purposes of clarity, when discussing the annual update for the LTCH PPS, including the provisions of the Affordable Care Act, we use the term ‘‘fiscal year’’ rather than ‘‘rate year’’ for 2011 and subsequent years.) For FY 2013, consistent with our historical practice, we established an update to the LTCH PPS standard Federal rate based on the full estimated LTCH PPS market basket increase of 2.6 percent and the 0.8 percentage point reductions required by sections 1886(m)(3)(A)(i) and 1886(m)(3)(A)(ii) with 1886(m)(4)(C) of the Act. Accordingly, at § 412.523(c)(3)(ix) of the regulations, we established an annual update of 1.8 percent to the standard Federal rate for FY 2013 (77 FR 53708 through 53711 and 53481). For FY 2014, as discussed in greater detail in section VIII.C.2.e. of the preamble of this final rule, we are establishing an annual update to the LTCH PPS standard Federal rate based on the full estimated increase in the LTCH PPS market basket, less the MFP adjustment consistent with section 1886(m)(3)(A)(i) of the Act, and less the 0.3 percentage point required by sections 1886(m)(3)(A)(ii) and (m)(4)(D) of the Act. In addition, as discussed in greater detail in section VIII.C.2.c., beginning in FY 2014, the annual update is further reduced by 2.0 percentage points for LTCHs that fail to submit quality reporting data in accordance with the LTCHQR Program under section 1886(m)(5) of the Act. Specifically, in this final rule, based on the best available data, we are establishing an annual update to the standard Federal rate of 1.7 percent provided the LTCH submits quality reporting data for FY 2014 in VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 accordance with the LTCHQR Program under section 1886(m)(5) of the Act, which is based on the full estimated increase in the LTCH PPS market basket of 2.5 percent, less the MFP adjustment of 0.5 percentage point consistent with section 1886(m)(3)(A)(i) of the Act, and less the 0.3 percentage point required by sections 1886(m)(3)(A)(ii) and (m)(4)(D) of the Act. As discussed in greater detail in section VIII.C.2.c., for LTCHs that fail to submit quality reporting data for FY 2014 in accordance with the LTCHQR Program, the annual update is further reduced by 2.0 percentage points as required by section 1886(m)(5) of the Act. Accordingly, we are establishing an annual update to the LTCH PPS standard Federal rate of ¥0.3 percent for LTCHs that fail to submit quality reporting data for FY 2014. This is calculated based on the full estimated increase in the LTCH PPS market basket of 2.5 percent, less a MFP adjustment of 0.5 percentage point, less an additional adjustment of 0.3 percentage point required by the statute, and less 2.0 percentage points for failure to submit quality reporting data as required by section 1886(m)(5) of the Act. 2. Development of the FY 2014 LTCH PPS Standard Federal Rate We continue to believe that the annual update to the LTCH PPS standard Federal rate should be based on the most recent estimate of the increase in the LTCH PPS market basket, including any statutory adjustments. Consistent with our historical practice, for FY 2014, we applied the annual update to the LTCH PPS standard Federal rate from the previous year. In determining the standard Federal rate for FY 2014, we also are making certain regulatory adjustments. Specifically, we are applying an adjustment factor under the second year of the 3-year phase-in of the one-time prospective adjustment to the standard Federal rate under § 412.523(d)(3), as discussed in greater detail in section VIII.C.3. of the preamble of this final rule. In addition, in determining the FY 2014 standard Federal rate, we are applying a budget neutrality adjustment factor for the changes related to the area wage adjustment (that is, changes to the wage data and labor-related share) in accordance with § 412.523(d)(4). In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53708 through 53710 and 53481), we established an annual update to the LTCH PPS standard Federal rate of 1.8 percent for FY 2013 based on the full estimated LTCH PPS market basket increase of 2.6 percent, less the MFP adjustment of 0.7 percentage point consistent with section 1886(m)(3)(A)(i) of the Act and less the 0.1 percentage point required by sections 1886(m)(3)(A)(ii) and (m)(4)(C) of the Act. Accordingly, at § 412.523(c)(3)(ix), we established an annual update to the standard Federal rate for FY 2013 of 1.8 percent. That is, we applied an update factor of 1.018 to the FY 2012 Federal rate of $40,222.05 to determine the FY 2013 standard Federal rate. Effective December 29, 2012, we also adjusted the standard Federal rate for FY 2013 by the one-time prospective adjustment factor for FY 2013 of 0.98734 under § 412.523(d)(3)(ii) (this adjustment was not applied to payments for discharges occurring PO 00000 Frm 00499 Fmt 4701 Sfmt 4700 50993 before December 29, 2012, consistent with the statute). Furthermore, for FY 2013, we applied an area wage level budget neutrality factor of 0.999265 to the standard Federal rate to ensure that any changes to the area wage level adjustment (that is, the annual update of the wage index values and laborrelated share) would not result in any change (increase or decrease) in estimated aggregate LTCH PPS payments. Consequently, we established a standard Federal rate for FY 2013 of $40,397.96 (calculated as $40,222.05 × 1.018 × 0.98734 × 0.999265). Furthermore, consistent with the statute, the one-time prospective adjustment factor of 0.98734 applied to the standard Federal rate for FY 2013 is not applied to payments for discharges occurring before December 29, 2012. Therefore, payment for discharges occurring on or after October 1, 2012, and on or before December 28, 2012, does not reflect that adjustment and instead are paid based on a standard Federal rate of $40,915.95 (calculated as $40,397.96 divided by 0.98734). In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27778), we proposed to establish an annual update to the LTCH PPS standard Federal rate of 1.8 percent (that is, an update factor of 1.018) for FY 2014, based on the full estimated increase in the LTCH PPS market basket of 2.5 percent, less the MFP adjustment of 0.4 percentage point, consistent with section 1886(m)(3)(A)(i) of the Act, and less the 0.3 percentage point required by sections 1886(m)(3)(A)(ii) and (m)(4)(D) of the Act, provided the LTCH submits quality data in accordance with the LTCHQR Program under section 1886(m)(5) of the Act. Therefore, under § 412.523(c)(3)(x), we proposed to apply a factor of 1.018 to the FY 2013 standard Federal rate of $40,397.96 to determine the FY 2014 standard Federal rate. These factors were based on IGI’s first quarter 2013 forecast, which were the best available data at that time. Consistent with our historical practice of using the best available data, we also proposed that if more recent data became available to determine the market basket estimate or the MFP adjustment, we would use such data for the final rule, if appropriate (78 FR 27666). For LTCHs that fail to submit quality reporting data for FY 2014 under the LTCHQR Program, under § 412.523(c)(3)(x) in conjunction with § 412.523(c)(4), we proposed to reduce the annual update to the LTCH PPS standard Federal rate by an additional 2.0 percentage points consistent with section 1886(m)(5) of the Act. Therefore, we proposed to establish an annual update to the LTCH PPS standard Federal rate of ¥0.2 percent (that is, 1.8 percent minus 2.0 percentage points = ¥0.2 percent or an update factor of 0.9980) for FY 2014 for LTCHs that fail to submit quality reporting data for FY 2014 under the LTCHQR Program. We also proposed that the standard Federal rate for FY 2014 would be further adjusted by an adjustment factor of 0.98734 for FY 2014 under the second year of the 3-year phase-in of the one-time prospective adjustment at § 412.523(d)(3)(ii). In addition, for FY 2014, we proposed to apply an area wage level budget neutrality factor of 1.000433 to the standard Federal E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50994 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations rate to ensure that any changes to the area wage level adjustment (that is, the annual update of the wage index values and laborrelated share) will not result in any change (increase or decrease) in estimated aggregate LTCH PPS payments. Accordingly, we proposed to establish a standard Federal rate of $40,622.06 (calculated as $40,397.96 × 1.018 × 0.98734 × 1.000433) for discharges occurring in FY 2014, provided the LTCH submits quality reporting data for FY 2014 in accordance with the LTCHQR Program under section 1886(m)(5) of the Act. For LTCHs that fail to submit quality reporting data for FY 2014 in accordance with the LTCHQR Program under section 1886(m)(5) of the Act, we proposed to establish a standard Federal of $39,823.99 (calculated as $40,397.96 × 0.998 × 0.98734 × 1.000433) for discharges occurring in FY 2014. In this final rule, we are establishing an annual update to the LTCH PPS standard Federal rate of 1.7 percent (that is, an update factor of 1.017) for FY 2014, based on the full estimated increase in the LTCH PPS market basket of 2.5 percent, less the MFP adjustment of 0.5 percentage point, consistent with section 1886(m)(3)(A)(i) of the Act, and less the 0.3 percentage point required by sections 1886(m)(3)(A)(ii) and (m)(4)(D) of the Act, provided the LTCH submits quality data in accordance with the LTCHQR Program under section 1886(m)(5) of the Act. Therefore, under § 412.523(c)(3)(x), we are applying a factor of 1.017 to the FY 2013 standard Federal rate of $40,397.96 (as established in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53710)) to determine the FY 2014 standard Federal rate. For LTCHs that fail to submit quality reporting data for FY 2014 under the LTCHQR Program, under § 412.523(c)(3)(x) in conjunction with § 412.523(c)(4), we are reducing the annual update to the LTCH PPS standard Federal rate by an additional 2.0 percentage points consistent with section 1886(m)(5) of the Act. Therefore, we are establishing an annual update to the LTCH PPS standard Federal rate of ¥0.3 percent (that is, 1.7 percent minus 2.0 percentage points = ¥0.3 percent or an update factor of 0.9970) for FY 2014 for LTCHs that fail to submit quality reporting data for FY 2014 under the LTCHQR Program. We also are establishing that the standard Federal rate for FY 2014 is further adjusted by an adjustment factor of 0.98734 for FY 2014 under the second year of the 3-year phase-in of the onetime prospective adjustment at § 412.523(d)(3)(ii). In addition, for FY 2014, we are applying an area wage level budget neutrality factor of 1.0010531 to the standard Federal rate to ensure that any changes to the area wage level adjustment (that is, the annual update of the wage index values and labor-related share) will not result in any change (increase or decrease) in estimated aggregate LTCH PPS payments. Accordingly, we are establishing a standard Federal rate for FY 2014 of $40,607.31 (calculated as $40,397.96 × 1.017 × 0.98734 × 1.0010531) for discharges occurring on or after October 1, 2013, and on or before September 30, 2014, provided the LTCH submits quality reporting data for FY 2014 in accordance with the LTCHQR Program under section 1886(m)(5) VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 of the Act. For LTCHs that fail to submit quality reporting data for FY 2014 in accordance with the LTCHQR Program under section 1886(m)(5) of the Act, we are establishing a standard Federal rate for FY 2014 of $39,808.74 (calculated as $40,397.96 × 0.997 × 0.98734 × 1.0010531) for discharges occurring on or after October 1, 2013, and on or before September 30, 2014. B. Adjustment for Area Wage Levels Under the LTCH PPS for FY 2014 1. Background Under the authority of section 123 of the BBRA as amended by section 307(b) of the BIPA, we established an adjustment to the LTCH PPS standard Federal rate to account for differences in LTCH area wage levels at § 412.525(c). The labor-related share of the LTCH PPS standard Federal rate is adjusted to account for geographic differences in area wage levels by applying the applicable LTCH PPS wage index. The applicable LTCH PPS wage index is computed using wage data from inpatient acute care hospitals without regard to reclassification under section 1886(d)(8) or section 1886(d)(10) of the Act. When we implemented the LTCH PPS, we established a 5-year transition to the full area wage index level adjustment. The area wage level adjustment was completely phased-in for cost reporting periods beginning in FY 2007. Therefore, for cost reporting periods beginning on or after October 1, 2006, the applicable LTCH wage index values are the full LTCH PPS wage index values calculated based on acute care hospital inpatient wage index data without taking into account geographic reclassification under section 1886(d)(8) and section 1886(d)(10) of the Act. For additional information on the phase-in of the area wage level adjustment under the LTCH PPS, we refer readers to the August 30, 2002 LTCH PPS final rule (67 FR 56015 through 56019) and the RY 2008 LTCH PPS final rule (72 FR 26891). 2. Geographic Classifications/Labor Market Area Definitions As discussed in the August 30, 2002 LTCH PPS final rule, which implemented the LTCH PPS (67 FR 56015 through 56019), in establishing an adjustment for area wage levels, the labor-related portion of an LTCH’s Federal prospective payment is adjusted by using an appropriate wage index based on the labor market area in which the LTCH is located. Specifically, the application of the LTCH PPS area wage level adjustment at existing § 412.525(c) is made on the basis of the location of the LTCH in either an urban area or a rural area as defined in § 412.503. Currently under the LTCH PPS at § 412.503, an ‘‘urban area’’ is defined as a Metropolitan Statistical Area (which would include a metropolitan division, where applicable) as defined by the Executive OMB and a ‘‘rural area’’ is defined as any area outside of an urban area. In the RY 2006 LTCH PPS final rule (70 FR 24184 through 24185), in regulations at § 412.525(c), we revised the labor market area definitions used under the LTCH PPS effective for discharges occurring on or after July 1, 2005, based on the Executive OMB’s CBSA designations, which are based on 2000 PO 00000 Frm 00500 Fmt 4701 Sfmt 4700 Census data. We made this revision because we believe that the CBSA-based labor market area definitions will ensure that the LTCH PPS wage index adjustment most appropriately accounts for and reflects the relative hospital wage levels in the geographic area of the hospital as compared to the national average hospital wage level. We note that these are the same CBSA-based designations implemented for acute care hospitals under the IPPS at § 412.64(b) (69 FR 49026 through 49034). (For further discussion of the CBSA-based labor market area (geographic classification) definitions currently used under the LTCH PPS, we refer readers to the RY 2006 LTCH PPS final rule (70 FR 24182 through 24191).) We have generally updated the LTCH PPS CBSAbased labor market area definitions annually since they were adopted for RY 2006 when updates from OMB were available (73 FR 26812 through 26814, 74 FR 44023 through 44204, and 75 FR 50444 through 50445). In OMB Bulletin No. 10–2, issued on December 1, 2009, OMB announced that the CBSA changes in that bulletin would be the final update prior to the 2010 Census of Population and Housing. We adopted those changes under the LTCH PPS in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50444 through 50445), effective beginning October 1, 2010, and adopted their continued use for FY 2012 and FY 2013 (76 FR 51808 and 77 FR 53710, respectively). In the FY 2013 IPPS/ LTCH PPS final rule, we explained that in 2013 OMB planned to announce new area delineations based on its 2010 standards and the 2010 Census data and, therefore, for the FY 2013 LTCH area wage level adjustment, we would continue to use the same labor market areas that we adopted for FY 2012 (77 FR 53710). In fact, on February 28, 2013, OMB issued OMB Bulletin No. 13–01, announcing revisions to the delineation of Metropolitan Statistical Areas, Micropolitian Statistical Areas, and Combined Statistical Areas, and guidance on uses of the delineation of these areas. A copy of this bulletin may be obtained at https:// www.whitehouse.gov/sites/default/files/omb/ bulletins/2013/b-13–01.pdf. According to OMB, this bulletin provides the delineations of all Metropolitan Statistical Areas, Metropolitan Divisions, Micropolitan Statistical Areas, Combined Statistical Areas, and New England City and Town Areas in the United States and Puerto Rico based on the standards published in the Federal Register on June 28, 2010 (75 FR 37246 through 37252) and Census Bureau data. In order to implement these changes for the LTCH PPS (as in the case of the IPPS, as discussed in section III.B. of the preamble of this final rule), it is necessary to identify the new area designations for each county and hospital in the country. While the revisions OMB published on February 28, 2013, are not as sweeping as the changes OMB announced in 2003, the February 28, 2013 bulletin does contain a number of significant changes. For example, there are new CBSAs, urban counties that have become rural, rural counties that have become urban, and existing CBSAs that have been split apart. Because the update was not issued until February 28, 2013, and the changes made by E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations the update and their ramifications must be extensively reviewed and verified, we were unable to undertake such a lengthy process before publication of the FY 2014 proposed rule. As we explained in the FY 2014 IPPS/ LTCH PPS proposed rule (77 FR 27779), by the time the update was issued, that proposed rule was in the advanced stages of development. We had already developed the FY 2014 proposed LTCH PPS wage indexes based on the previous OMB definitions that are currently used under the LTCH PPS. We noted that CMS was faced with a similar situation 10 years ago, when OMB announced changes resulting from the 2000 Census in June 2003. At that time, CMS proposed and implemented the changes under the IPPS for FY 2005, followed by the adoption under the LTCH PPS in RY 2006 (as noted previously). Similarly, to allow for sufficient time to assess the new changes and their ramifications, consistent with the approach proposed under the IPPS (discussed in section III.B. of the preamble of this proposed rule), we intend to propose the adoption of the newest CBSA designations and the corresponding changes to the wage index based on those CBSA changes under the LTCH PPS for FY 2015 through notice and comment rulemaking. Therefore, for FY 2014, we proposed to continue to use the same labor market areas that were used under the LTCH PPS for FY 2013 (77 FR 53710) as we assess the new changes to the CBSA designations and their effect on LTCH PPS payments. We did not receive any public comments specifically on our proposal to continue to use the same labor market areas that were used under the LTCH PPS for FY 2013 with the intention of proposing the adoption of the newest CBSA designations under the LTCH PPS for FY 2015 through notice and comment rulemaking. Accordingly, we are adopting this proposal as final without modification. We note that we received several public comments in support of this proposed approach under the IPPS, which we discuss in section III.B. of the preamble of this final rule. For FY 2014, therefore, we are using the same labor market areas that are being used under the LTCH PPS for FY 2013 (77 FR 53710) as we assess the new changes to the CBSA designations and their effect on LTCH PPS payments. This is consistent with the approach being taken under the IPPS, and as noted previously, the LTCH PPS currently uses the same CBSA-based designations implemented for acute care hospitals under the IPPS. We refer readers to the RY 2006 LTCH PPS final rule (70 FR 24182 through 24191) for further information on the CBSAbased labor market area definitions currently used under the LTCH PPS. In addition, we refer readers to the FY 2005 IPPS final rule (69 FR 49026 through 49032) for those interested in learning about the issues that may need to be addressed in developing a proposal to implement the latest OMB update to the CBSA designations for FY 2015, and some of the policy decisions that may need to be taken into consideration in the development of such a proposal. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 3. LTCH PPS Labor-Related Share Under the adjustment for differences in area wage levels at § 412.525(c), the laborrelated share of an LTCH’s PPS Federal prospective payment is adjusted by the applicable wage index for the labor market area in which the LTCH is located. The LTCH PPS labor-related share currently represents the sum of the labor-related portion of operating costs (Wages and Salaries, Employee Benefits, Professional Fees: LaborRelated, Administrative and Business Support Services, and All-Other: LaborRelated Services) and a labor-related portion of capital costs using the applicable LTCH PPS market basket. (Additional background information on the historical development of the labor-related share under the LTCH PPS and the development of the RPL market basket can be found in the RY 2007 LTCH PPS final rule (71 FR 27810 through 27817 and 27829 through 27830) and the FY 2012 IPPS/LTCH PPS final rule (76 FR 51766 through 51769 and 51808).) For FY 2013, we revised and rebased the market basket used under the LTCH PPS by adopting the newly created FY 2009-based LTCH-specific market basket. In addition, we determined the labor-related share for FY 2013 as the sum of the FY 2013 relative importance of each labor-related cost category of the FY 2009-based LTCH-specific market basket. Specifically, we determined the LTCH PPS labor-related share for FY 2013 based on the relative importance of the labor-related share of operating costs (Wages and Salaries, Employee Benefits, Professional Fees: Labor-Related, Administrative and Business Support Services, and All Other: Labor-Related Services) and the labor-related share of capital costs of the LTCH-specific market basket based on FY 2009 data, as we believed these were the best data available to reflect the cost structure of LTCHs. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53477 through 53479 and 53710 through 53711), we established a labor-related share under the LTCH PPS for FY 2013 of 63.096 percent based on IGI’s second quarter 2012 forecast of the FY 2009-based LTCH-specific market basket for FY 2013, as these were the most recent available data at that time that reflected the cost structure of LTCHs. (For additional details on the development of the LTCH PPS labor-related share for FY 2013, we refer readers to section VII.C.3.f. of the preamble of the FY 2013 IPPS/LTCH PPS final rule.) Consistent with our historical practice, in the FY 2014 IPPS/LTCH PPS proposed rule (77 FR 27779 through 27780), we proposed to determine the LTCH PPS labor-related share for FY 2014 based on the proposed FY 2014 relative importance of each laborrelated cost category, which would reflect the different rates of price change for these cost categories between the base year (FY 2009) and FY 2014. Specifically, based on IGI’s first quarter 2013 forecast of the FY 2009-based LTCH-specific market basket, we proposed a labor-related share under the LTCH PPS for FY 2014 of 62.717 percent. In addition, we proposed that if more recent data become available, we would use those data in determining the labor-related share under the LTCH PPS for FY 2014 in the final rule. PO 00000 Frm 00501 Fmt 4701 Sfmt 4700 50995 Comment: Several commenters requested that CMS explain why the FY 2014 LTCH PPS proposed labor-related share (62.717 percent) is significantly different than the FY 2014 IPPS proposed labor-related share (69.6 percent) and the FY 2014 IRF PPS proposed labor-related share (69.658 percent). Furthermore, the commenters stated that if the primary difference is the use of separate market baskets, CMS should explain whether this was considered at the time the LTCHspecific market basket was adopted for the LTCH PPS. Response: As the commenters suggested, the labor-related share for LTCHs is lower than the labor-related shares for IPPS hospitals and IRFs because of differences in the base year cost weights of the specific market baskets that are used for each PPS. The market basket cost weights that are used to derive the LTCH labor-related share are based on FY 2009 Medicare cost report data from LTCHs. The IPPS proposed laborrelated share is derived using the proposed FY 2010-based IPPS market basket cost weights (based on Medicare cost report data from IPPS hospitals) and the IRF proposed labor-related share is derived using the FY 2008-based RPL market basket cost weights (based on Medicare cost report data from IRFs, IPFs, and LTCHs). When we finalized the use of the LTCHspecific market basket in the FY 2013 IPPS/ LTCH final rule (77 FR 53478 through 53479), we stated that the principal factors contributing to the difference in the laborrelated shares between the FY 2009-based LTCH-specific market basket and the FY 2008-based RPL market basket were the base year cost weight differences found in two specific categories: Wages and Salaries, and Benefits. We stated that the lower share of costs attributable to wages and salaries, and benefits found in the FY 2009-based LTCHspecific market basket was a direct result of incorporating cost data exclusively from LTCHs, as opposed to incorporating cost report data from freestanding IRFs, freestanding IPFs, and LTCHs combined (as is the case in the RPL market basket). Similarly, the IPPS labor-related share is based primarily on IPPS Medicare cost report data and would reflect the cost structure of IPPS hospitals. We continue to believe, as stated in the FY 2013 IPPS/LTCH PPS final rule, that a labor-related share for LTCHs that is based on Medicare cost report data obtained exclusively from the universe of LTCH providers appropriately reflects the national average cost structures of LTCHs, and appropriately identifies the labor-related share for use under the LTCH PPS. Comment: Several commenters stated that CMS should consider whether the methodology for adjusting the LTCH laborrelated share should be modified now that the LTCH PPS no longer uses the RPL market basket. Response: We believe that the methodology for determining the labor-related share is technically appropriate as it estimates the proportion of LTCH costs that are laborintensive and vary with, or are influenced by, the local labor market. The methodology for determining the proposed LTCH labor-related share for FY 2014 is the same general method E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 50996 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations as used to derive the FY 2014 IRF PPS proposed labor-related share, as well as the labor-related shares for other Medicare prospective payment systems such as the IPF PPS and the SNF PPS. That is, the laborrelated share is equal to the sum of the relative importance of each labor-related cost category in the LTCH market basket. We calculate the labor-related relative importance for FY 2014 in four steps. First, we compute the FY 2014 price index level for the total market basket and each cost category of the market basket. Second, we calculate a ratio for each cost category by dividing the FY 2014 price index level for that cost category by the total market basket price index level. Third, we determine the FY 2014 relative importance for each cost category by multiplying this ratio by the base year (FY 2009) weight. Finally, we add the FY 2014 relative importance for each of the labor related cost categories. The purpose of the relative importance is to capture the different rates of price change for each of the market basket cost categories between the base year (FY 2009 for LTCHs) and FY 2014. Therefore, to the extent an individual price proxy for a specific cost category is projected to grow faster from FY 2009 to FY 2014 relative to the proxies for other cost categories, the relative importance for that category in FY 2014 will be higher than the base year cost weight in FY 2009. After consideration of the public comments we received, consistent with our historical practice, as we proposed, we are determining the LTCH PPS labor-related share for FY 2014 based on the FY 2014 relative importance of each labor-related cost category, and reflects the different rates of price change for these cost categories between the base year (FY 2009) and FY 2014. For this final rule, we are determining the LTCH PPS labor-related share for FY 2014 based on IGI’s second quarter 2013 forecast of the FY 2009-based LTCH-specific market basket as this is currently the best available data. The table below shows the FY 2014 laborrelated share relative importance using IGI’s second quarter 2013 forecast of the FY 2009based LTCH-specific market basket. The sum of the relative importance for FY 2014 for operating costs (Wages and Salaries, Employee Benefits, Professional Fees: Laborrelated, Administrative and Business Support Services, and All Other: Labor-related Services) is 58.317 percent. We are establishing that the portion of capital-related costs that is influenced by the local labor market continues to be estimated to be 46 percent. Because the relative importance for capital-related costs is 9.174 percent of the FY 2009-based LTCH-specific market basket in FY 2014, we are taking 46 percent of 9.174 percent to determine the labor-related share of capital-related costs for FY 2014, which results in 4.220 percent (0.46 × 9.174). We then add that 4.220 percent for the capitalrelated cost amount to the 58.317 percent for the operating cost amount to determine the total labor-related share for FY 2014. Therefore, under the broad authority conferred upon the Secretary by section 123 of the BBRA, as amended by section 307(b) of BIPA, to determine appropriate VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 adjustments under the LTCH PPS, we are establishing a labor-related share under the LTCH PPS in FY 2014 of 62.537 percent. This labor-related share is determined using the same methodology as employed in calculating all previous LTCH labor-related shares. FY 2014 LABOR-RELATED SHARE RELATIVE IMPORTANCE BASED ON THE FY 2009-BASED LTCH-SPECIFIC MARKET BASKET FY 2014 Labor-related share relative importance Wages and Salaries ................ Employee Benefits .................. Professional Fees: Labor-Related ..................................... Administrative and Business Support Services ................. All Other: Labor-Related Services ...................................... 45.012 8.094 Subtotal ............................ Labor-Related Portion of Capital Costs (46%) ................... 58.317 Total Labor-Related Share ..................... 2.207 0.499 2.505 4.220 62.537 4. LTCH PPS Wage Index for FY 2014 Historically, under the LTCH PPS, we have established LTCH PPS wage index values calculated from acute care IPPS hospital wage data without taking into account geographic reclassification under sections 1886(d)(8) and 1886(d)(10) of the Act (67 FR 56019). The area wage level adjustment established under the LTCH PPS is based on an LTCH’s actual location without regard to the urban or rural designation of any related or affiliated provider. In the FY 2013 LTCH PPS final rule (77 FR 53711 through 53712), we calculated the FY 2013 LTCH PPS wage index values using the same data used for the FY 2013 acute care hospital IPPS (that is, data from cost reporting periods beginning during FY 2009), without taking into account geographic reclassification under sections 1886(d)(8) and 1886(d)(10) of the Act, as these were the most recent complete data available at that time. In that same final rule, we indicated that we computed the FY 2013 LTCH PPS wage index values consistent with the urban and rural geographic classifications (labor market areas) and consistent with the prereclassified IPPS wage index policy (that is, our historical policy of not taking into account IPPS geographic reclassifications in determining payments under the LTCH PPS). As with the IPPS wage index, wage data for multicampus hospitals with campuses located in different labor market areas (CBSAs) are apportioned to each CBSA where the campus (or campuses) are located. We also continued to use our existing policy for determining wage index values in areas where there are no IPPS wage data. Consistent with our historical methodology, to determine the applicable PO 00000 Frm 00502 Fmt 4701 Sfmt 4700 wage index values under the LTCH PPS for FY 2014, under the broad authority conferred upon the Secretary by section 123 of the BBRA, as amended by section 307(b) of the BIPA, to determine appropriate adjustments under the LTCH PPS, as we proposed, we are using wage data collected from cost reports submitted by IPPS hospitals for cost reporting periods beginning during FY 2010, without taking into account geographic reclassification under sections 1886(d)(8) and 1886(d)(10) of the Act. We are using FY 2010 data because these data are the most recent complete data available. These are the same data used to compute the FY 2014 acute care hospital inpatient wage index, as discussed in section III. of the preamble of this final rule. (For our rationale for using IPPS hospital wage data as a proxy for determining the wage index values used under the LTCH PPS, we refer readers to the FY 2010 IPPS/ RY 2010 LTCH PPS final rule (74 FR 44024 through 44025).) As we proposed, the FY 2014 LTCH PPS wage index values were computed consistent with the urban and rural geographic classifications (labor market areas) discussed above in section V.B.2. of the Addendum to this final rule and consistent with the prereclassified IPPS wage index policy (that is, our historical policy of not taking into account IPPS geographic reclassifications under sections 1886(d)(8) and 1886(d)(10) of the Act in determining payments under the LTCH PPS). As with the IPPS wage index, wage data for multicampus hospitals with campuses located in different labor market areas (CBSAs) are apportioned to each CBSA where the campus or campuses are located (as discussed in section III.G. of the preamble of this final rule). Furthermore, in determining the FY 2014 LTCH PPS wage index values in this final rule, as we proposed, we are continuing to use our existing policy for determining wage index values in areas where there are no IPPS wage data. We established a methodology for determining LTCH PPS wage index values for areas that have no IPPS wage data in the RY 2009 LTCH PPS final rule, and we are continuing to use this methodology for FY 2014. (We refer readers to the RY 2009 LTCH PPS final rule (73 FR 26817 through 26818) for an explanation of and rationale for our policy for determining LTCH PPS wage index values for areas that have no IPPS wage data.) There are currently no LTCHs located in labor areas without IPPS hospital wage data (or IPPS hospitals) for FY 2014. However, we calculated LTCH PPS wage index values for such an area using our established methodology in the event that, in the future, an LTCH should open in one of those areas. Under our existing methodology, the LTCH PPS wage index value for urban CBSAs with no IPPS wage data is determined by using an average of all of the urban areas within the State, and the LTCH PPS wage index value for rural areas with no IPPS wage data is determined by using the unweighted average of the wage indices from all of the CBSAs that are contiguous to the rural counties of the State. Based on the FY 2010 IPPS wage data that we used to determine the FY 2014 LTCH PPS wage index values in this final rule, there are E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations no IPPS wage data for the urban area Hinesville-Fort Stewart, GA (CBSA 25980). Consistent with the methodology discussed above and as we proposed, we calculated the FY 2014 wage index value for CBSA 25980 as the average of the wage index values for all of the other urban areas within the State of Georgia (that is, CBSAs 10500, 12020, 12060, 12260, 15260, 16860, 17980, 19140, 23580, 31420, 40660, 42340, 46660 and 47580), as shown in Table 12A, which is listed in section VI. of the Addendum to this final rule and available via the Internet on the CMS Web site). We note that, as IPPS wage data are dynamic, it is possible that urban areas without IPPS wage data will vary in the future. Based on FY 2010 IPPS wage data that we are using to determine the FY 2014 LTCH PPS wage index values in this final rule, there are no rural areas without IPPS hospital wage data. Therefore, it was not necessary to use our established methodology to calculate an LTCH PPS wage index value for rural areas with no IPPS wage data for FY 2014. We note that, as IPPS wage data are dynamic, it is possible that rural areas without IPPS wage data will vary in the future. The FY 2014 LTCH wage index values that will be applicable for LTCH discharges occurring on or after October 1, 2013, through September 30, 2014, are presented in Table 12A (for urban areas) and Table 12B (for rural areas), which are listed in section VI. of the Addendum of this final rule and available via the Internet on the CMS Web site. 5. Budget Neutrality Adjustment for Changes to the Area Wage Level Adjustment Historically, the LTCH PPS wage index and labor-related share are updated annually based on the latest available data. Under § 412.525(c)(2), any changes to the wage index values or labor-related share are made in a budget neutral manner such that estimated aggregate LTCH PPS payments are unaffected; that is, will be neither greater than nor less than estimated aggregate LTCH PPS payments without such changes to the area wage level adjustment. Under this policy, we determine an area wage level adjustment budget neutrality factor that will be applied to the standard Federal rate to ensure that any changes to the area wage level adjustment are budget neutral such that any changes to the wage index values or labor-related share will not result in any change (increase or decrease) in estimated aggregate LTCH PPS payments. Accordingly, under § 412.523(d)(4), we apply an area wage level adjustment budget neutrality factor in determining the standard Federal rate, and we also established a methodology for calculating an area wage level adjustment budget neutrality factor. (For additional information on the establishment of our budget neutrality policy for changes to the area wage level adjustment, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51771 through 51773 and 51809).) For FY 2014, in accordance with § 412.523(d)(4), as we proposed, we are applying an area wage level adjustment budget neutrality factor to adjust the standard Federal rate to account for the estimated effect of the proposed adjustments or updates VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 to the area wage level adjustment under § 412.525(c)(1) on estimated aggregate LTCH PPS payments using the methodology we established in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51773). Specifically, we determined an area wage level adjustment budget neutrality factor that is applied to the standard Federal rate under § 412.523(d)(4) for FY 2014 using the following methodology: Step 1—We simulated estimated aggregate LTCH PPS payments using the FY 2013 wage index values (as established in Tables 12A and 12B listed in the Addendum to the FY 2013 IPPS/LTCH PPS final rule and available via the Internet on the CMS Web site) and the FY 2013 labor-related share of 63.096 percent (as established in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53477 through 53479 and 53710 through 53711). Step 2—We simulated estimated aggregate LTCH PPS payments using the FY 2014 wage index values (as shown in Tables 12A and 12B listed in the Addendum to this final rule and available via the Internet on the CMS Web site) and the FY 2014 labor-related share of 62.537 percent (based on the latest available data as discussed previously in section V.B.3. of this Addendum). Step 3—We calculated the ratio of these estimated total LTCH PPS payments by dividing the estimated total LTCH PPS payments using the FY 2013 area wage level adjustments (calculated in Step 1) by the estimated total LTCH PPS payments using the FY 2014 area wage level adjustments (calculated in Step 2) to determine the area wage level adjustment budget neutrality factor for FY 2014. Step 4—We then applied the FY 2014 area wage level adjustment budget neutrality factor from Step 3 to determine the FY 2014 LTCH PPS standard Federal rate after the application of the FY 2014 annual update (discussed in section V.A.2. of the Addendum to this final rule). For this final rule, using the steps in the methodology described above, we determined a FY 2014 area wage level adjustment budget neutrality factor of 1.0010531. Accordingly, in section V.A.2. of the Addendum to this final rule, to determine the FY 2014 LTCH PPS standard Federal rate, we are applying an area wage level adjustment budget neutrality factor of 1.0010531, in accordance with § 412.523(d)(4). The FY 2014 LTCH PPS standard Federal rate shown in Table 1E of the Addendum to this final rule reflects this adjustment factor. C. LTCH PPS Cost-of-Living Adjustment for LTCHs Located in Alaska and Hawaii Under § 412.525(b), a cost-of-living adjustment (COLA) is provided for LTCHs located in Alaska and Hawaii to account for the higher costs incurred in those States. Specifically, we apply a COLA to payments to LTCHs located in Alaska and Hawaii by multiplying the nonlabor-related portion of the standard Federal payment rate by the applicable COLA factors established annually by CMS. Higher labor-related costs for LTCHs located in Alaska and Hawaii are taken into account in the adjustment for area wage levels described above. As discussed in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53481 through 53482 PO 00000 Frm 00503 Fmt 4701 Sfmt 4700 50997 and 53712 through 53713), historically, we used the most recent updated COLA factors obtained from the U.S. Office of Personnel Management (OPM) Web site at https:// www.opm.gov/oca/cola/rates.asp to adjust the LTCH PPS payments for LTCHs located in Alaska and Hawaii. Statutory changes have transitioned the Alaska and Hawaii COLAs to locality pay (phased in over a 3year period beginning in January 2010, with COLA rates being frozen as of October 28, 2009, and then proportionately reduced to reflect the phase-in of locality pay). We explained that we did not believe it was appropriate to use either the 2010 or 2011 reduced COLA factors to adjust the nonlaborrelated portion of the standard Federal rate for LTCHs located in Alaska and Hawaii for Medicare payment purposes. In addition, we believe that it was appropriate to use ‘‘frozen’’ COLA factors to adjust payments, while we explored alternatives for updating the COLA factors in the future. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53712 through 53713), we continued to use the same ‘‘frozen’’ COLA factors used in FY 2012 to adjust the nonlabor-related portion of the standard Federal rate for LTCHs located in Alaska and Hawaii in FY 2013 under § 412.525(b). In that same final rule, we also established a methodology to update the COLA factors for Alaska and Hawaii, every 4 years (at the same time as the update to the labor-related share of the IPPS market basket), beginning in FY 2014. The methodology we established to update the COLA factors is based on a comparison of the growth in the CPIs for Anchorage, Alaska and Honolulu, Hawaii relative to the growth in the CPI for the average U.S. city as published by the Bureau of Labor Statistics (BLS). As also explained in that same final rule, we believe that using these updated COLA factors will appropriately adjust the nonlabor-related portion of the standard Federal rate for LTCHs located in Alaska and Hawaii. (For additional details on the methodology we established in the FY 2013 IPPS/LTCH PPS final rule to update the COLA factors for Alaska and Hawaii beginning in FY 2014, we refer readers to section VII.D.3. of the preamble of that final rule (77 FR 53481 through 53482).) For FY 2014, we proposed to update the COLA factors published for Alaska and Hawaii by OPM for 2009 (as these are the last COLA factors OPM published prior to transitioning from COLAs to locality pay) using the methodology that we finalized in the FY 2013 IPPS/LTCH PPS final rule. Under our proposal, we proposed COLA factors for FY 2014 for the three specified urban areas of Alaska (Anchorage, Fairbanks and Juneau) of 1.23; for the City and County of Honolulu, the County of Kauai, the County of Maui, the County of Kalawao, and ‘‘All other’’ areas of Alaska of 1.25; and for the County of Hawaii of 1.19. For additional details on our proposal, we refer readers to the FY 2014 IPPS/LTCH PPS proposed rule (77 FR 27781 through 27782). We did not receive any public comments on our proposed COLA factors for FY 2014, and are adopting them as final in this final rule without modification. The development of the FY 2014 COLA factors for Alaska and Hawaii is described below. E:\FR\FM\19AUR2.SGM 19AUR2 50998 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations In this final rule, for FY 2014, under the broad authority conferred upon the Secretary by section 123 of the BBRA, as amended by section 307(b) of the BIPA, to determine appropriate adjustments under the LTCH PPS, we are updating the COLA factors published by OPM for 2009 (as these are the last COLA factors OPM published prior to transitioning from COLAs to locality pay) using the methodology that we finalized in the FY 2013 IPPS/LTCH PPS final rule for purposes of making a COLA for LTCHs located in Alaska and Hawaii under § 412.525(b). Specifically, the methodology uses a comparison of the growth in the CPIs for Anchorage, Alaska and Honolulu, Hawaii relative to the growth in the CPI for the average U.S. city as published by the BLS. As discussed in that same final rule (77 FR 53481 through 53482), because BLS publishes CPI data for only Anchorage, Alaska and Honolulu, Hawaii, our methodology uses a comparison of the growth in the Consumer Price Indices (CPIs) for those cities relative to the growth in the overall CPI to update the COLA factors for all areas located in Alaska and Hawaii, respectively. We believe that the relative price differences between these cities and the United States (as measured by the CPIs mentioned above) are generally appropriate and necessary proxies for the relative price differences between the ‘‘other areas’’ of Alaska and Hawaii and the United States. The ‘‘CPI for All Items’’ that BLS publishes for Anchorage, Honolulu, and for the average U.S. city are based on a different mix of commodities and services than is reflected in the nonlabor-related share of the IPPS market basket. We note that the mix of commodities and services for the nonlabor-related share based on the LTCH market basket is similar to that of the nonlabor-related share of the IPPS market basket. As such, under the methodology we established to update the COLA factors, we calculated a ‘‘reweighted CPI’’ using the CPI for commodities and the CPI for services for each of the geographic areas to mirror the composition of the IPPS market basket nonlabor-related share. The current composition of BLS’ CPI for All Items for all of the respective areas is approximately 40 percent commodities and 60 percent services. However, the nonlaborrelated share of the IPPS market basket is comprised of approximately 60 percent commodities and 40 percent services. Therefore, under the methodology we established in the FY 2013 IPPS/LTCH PPS final rule we have created reweighted indexes for Anchorage, Alaska and Honolulu, Hawaii, and the average U.S. city using the respective CPI commodities index and CPI services index and applying the approximate 60/40 weights from the proposed IPPS market basket. We believe that this method of reweighting is appropriate because we would continue to make a COLA for LTCHs located in Alaska and Hawaii by multiplying the nonlabor-related portion of the LTCH PPS standard Federal rate by a COLA factor. Under the COLA factor update methodology we established in the FY 2013 IPPS/LTCH PPS final rule, we further exercised our discretionary authority to adjust payments made to LTCHs located in Alaska and Hawaii by incorporating a 25percent cap on the CPI-updated COLA factors used to adjust the nonlabor-related portion of the LTCH PPS standard Federal rate, which is consistent with a statutorily mandated 25percent cap that was applied to OPM’s published COLA factors. We believe that this is appropriate because our CPI-updated COLA factors for FY 2014 uses the 2009 OPM COLA factors as a basis. In addition, we are continuing to establish COLA factors that are rounded to 2 decimal places, which is consistent with the number of decimal places in the 2009 OPM COLA factors that are used as the basis for calculating the FY 2014 COLA factors. This policy will also maintain consistency with the rounding used for the 25-percent cap on the COLA factors (that is, a COLA factor of no more than 1.25). Applying this methodology, we are establishing the COLA factors for FY 2014 that will adjust the nonlabor-related portion of the standard Federal rate for LTCHs located in Alaska and Hawaii as shown in the table below. COST-OF-LIVING ADJUSTMENT FACTORS FOR ALASKA AND HAWAII HOSPITALS UNDER THE LTCH PPS FOR FY 2014 mstockstill on DSK4VPTVN1PROD with RULES6 Alaska: City of Anchorage and 80-kilometer (50-mile) radius by road ..................................................................................................... City of Fairbanks and 80-kilometer (50-mile) radius by road ...................................................................................................... City of Juneau and 80-kilometer (50-mile) radius by road .......................................................................................................... All other areas of Alaska .............................................................................................................................................................. Hawaii: City and County of Honolulu ........................................................................................................................................................ County of Hawaii .......................................................................................................................................................................... County of Kauai ............................................................................................................................................................................ County of Maui and County of Kalawao ...................................................................................................................................... Each of the COLA factors was calculated using data through 2012, as these are the latest historical CPI data published by the BLS. The reweighted CPI for Honolulu, Hawaii grew faster than the reweighted CPI for the average U.S. city over the time period from 2009 to 2012, with a growth rate of 8.9 percent and 8.3 percent, respectively. As a result, for FY 2014, we calculated COLA factors for the City and County of Honolulu, the County of Kauai, the County of Maui, and the County of Kalawao to be 1.26 compared to the FY 2013 COLA factor of 1.25. However, as stated above, our COLA factor update methodology caps the COLA factors at 1.25. In addition, the COLA factor calculated for the County of Hawaii for FY 2014 is 1.19 compared to the FY 2013 COLA factor of 1.18. The reweighted CPI for Anchorage, Alaska grew slower than the reweighted CPI for the average U.S. city over the time period from 2009 to 2012, with a growth rate of 8.0 percent and 8.3 percent, respectively. However, applying this slower relative growth rate to the FY 2009 COLA factors for VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 each of the Alaska areas results in no change to the COLA factors for the Alaska areas for FY 2014 (1.25 for ‘‘All other areas of Alaska’’ and 1.23 for the three specified urban areas of Alaska (Anchorage, Fairbanks, and Juneau) as compared to the FY 2013 COLA factors. D. Adjustment for LTCH PPS High-Cost Outlier (HCO) Cases 1. Background Under the broad authority conferred upon the Secretary by section 123 of the BBRA as amended by section 307(b) of the BIPA, in the regulations at § 412.525(a), we established an adjustment for additional payments for outlier cases that have extraordinarily high costs relative to the costs of most discharges. We refer to these cases as high cost outliers (HCOs). Providing additional payments for outliers strongly improves the accuracy of the LTCH PPS in determining resource costs at the patient and hospital level. These additional payments reduce the financial losses that would otherwise be incurred when treating patients who require more costly care and, therefore, PO 00000 Frm 00504 Fmt 4701 Sfmt 4700 1.23 1.23 1.23 1.25 1.25 1.19 1.25 1.25 reduce the incentives to underserve these patients. We set the outlier threshold before the beginning of the applicable rate year so that total estimated outlier payments are projected to equal 8 percent of total estimated payments under the LTCH PPS. Under § 412.525(a) in the regulations (in conjunction with § 412.503), we make outlier payments for any discharges if the estimated cost of a case exceeds the adjusted LTCH PPS payment for the MS–LTC–DRG plus a fixedloss amount. Specifically, in accordance with § 412.525(a)(3) (in conjunction with § 412.503), we make an additional payment for an HCO case that is equal to 80 percent of the difference between the estimated cost of the patient case and the outlier threshold, which is the sum of the adjusted Federal prospective payment for the MS–LTC–DRG and the fixed-loss amount. The fixed-loss amount is the amount used to limit the loss that a hospital will incur under the outlier policy for a case with unusually high costs. This results in Medicare and the LTCH sharing financial risk in the treatment of extraordinarily costly cases. Under the LTCH E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 PPS HCO policy, the LTCH’s loss is limited to the fixed-loss amount and a fixed percentage of costs above the outlier threshold (adjusted MS–LTC–DRG payment plus the fixed-loss amount). The fixed percentage of costs is called the marginal cost factor. We calculate the estimated cost of a case by multiplying the Medicare allowable covered charge by the hospital’s overall hospital cost-to-charge ratio (CCR). Under the LTCH PPS HCO policy at § 412.525(a), we determine a fixed-loss amount, that is, the maximum loss that an LTCH can incur under the LTCH PPS for a case with unusually high costs before the LTCH will receive any additional payments. We calculate the fixed-loss amount by estimating aggregate payments with and without an outlier policy. The fixed-loss amount results in estimated total outlier payments being projected to be equal to 8 percent of projected total LTCH PPS payments. Currently, MedPAR claims data and CCRs based on data from the most recent Provider-Specific File (PSF) (or from the applicable statewide average CCR if an LTCH’s CCR data are faulty or unavailable) are used to establish a fixed-loss threshold amount under the LTCH PPS. 2. Determining LTCH CCRs Under the LTCH PPS a. Background The following is a discussion of CCRs that are used in determining payments for HCO and SSO cases under the LTCH PPS, at § 412.525(a) and § 412.529, respectively. Although this section is specific to HCO cases, because CCRs and the policies and methodologies pertaining to them are used in determining payments for both HCO and SSO cases (to determine the estimated cost of the case at § 412.529(d)(2)), we are discussing the determination of CCRs under the LTCH PPS for both of these types of cases simultaneously. In determining both HCO payments (at § 412.525(a)) and SSO payments (at § 412.529), we calculate the estimated cost of the case by multiplying the LTCH’s overall CCR by the Medicare allowable charges for the case. In general, we use the LTCH’s overall CCR, which is computed based on either the most recently settled cost report or the most recent tentatively settled cost report, whichever is from the latest cost reporting period, in accordance with § 412.525(a)(4)(iv)(B) and § 412.529(f)(4)(ii) for HCOs and SSOs, respectively. (We note that, in some instances, we use an alternative CCR, such as the statewide average CCR in accordance with the regulations at § 412.525(a)(4)(iv)(C) and § 412.529(f)(4)(iii), or a CCR that is specified by CMS or that is requested by the hospital under the provisions of the regulations at § 412.525(a)(4)(iv)(A) and § 412.529(f)(4)(i).) Under the LTCH PPS, a single prospective payment per discharge is made for both inpatient operating and capital-related costs. Therefore, we compute a single ‘‘overall’’ or ‘‘total’’ LTCH-specific CCR based on the sum of LTCH operating and capital costs (as described in Section 150.24, Chapter 3, of the Medicare Claims Processing Manual (Pub. 100–4)) as compared to total charges. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Specifically, an LTCH’s CCR is calculated by dividing an LTCH’s total Medicare costs (that is, the sum of its operating and capital inpatient routine and ancillary costs) by its total Medicare charges (that is, the sum of its operating and capital inpatient routine and ancillary charges). b. LTCH Total CCR Ceiling Generally, an LTCH is assigned the applicable statewide average CCR if, among other things, an LTCH’s CCR is found to be in excess of the applicable maximum CCR threshold (that is, the LTCH CCR ceiling). This is because CCRs above this threshold are most likely due to faulty data reporting or entry, and CCRs based on erroneous data should not be used to identify and make payments for outlier cases. Therefore, under our established policy, generally, if an LTCH’s calculated CCR is above the applicable ceiling, the applicable LTCH PPS statewide average CCR is assigned to the LTCH instead of the CCR computed from its most recent (settled or tentatively settled) cost report data. In the proposed rule, using our established methodology for determining the LTCH total CCR ceiling (described above), based on IPPS total CCR data from the December 2012 update of the PSF, we proposed to establish a total CCR ceiling of 1.254 under the LTCH PPS for FY 2014 in accordance with § 412.525(a)(4)(iv)(C)(2) for HCOs and § 412.529(f)(4)(iii)(B) for SSOs. Consistent with our historical policy of using the best available data, we also proposed that if more recent data became available, we would use such data to establish a total CCR ceiling for FY 2014 in the final rule. We did not receive any public comments on our proposals related to determining the LTCH total CCR ceiling for FY 2014, and are adopting them as final, without modification, in this final rule. In accordance with § 412.525(a)(4)(iv)(C)(2) for HCOs and § 412.529(f)(4)(iii)(B) for SSOs, in this final rule, using our established methodology for determining the LTCH total CCR ceiling (described above), based on IPPS total CCR data from the March 2013 update of the PSF, we are establishing a total CCR ceiling of 1.305 under the LTCH PPS that will be effective for discharges occurring on or after October 1, 2013 through September 30, 2014. c. LTCH Statewide Average CCRs Our general methodology established for determining the statewide average CCRs used under the LTCH PPS is similar to our established methodology for determining the LTCH total CCR ceiling (described above) because it is based on ‘‘total’’ IPPS CCR data. Under the LTCH PPS HCO policy at § 412.525(a)(4)(iv)(C) and the SSO policy at § 412.529(f)(4)(iii), the fiscal intermediary or MAC may use a statewide average CCR, which is established annually by CMS, if it is unable to determine an accurate CCR for an LTCH in one of the following circumstances: (1) new LTCHs that have not yet submitted their first Medicare cost report (for this purpose, consistent with current policy, a new LTCH is defined as an entity that has not accepted assignment of an existing hospital’s provider agreement in PO 00000 Frm 00505 Fmt 4701 Sfmt 4700 50999 accordance with § 489.18); (2) LTCHs whose CCR is in excess of the LTCH CCR ceiling; and (3) other LTCHs for whom data with which to calculate a CCR are not available (for example, missing or faulty data). (Other sources of data that the fiscal intermediary or MAC may consider in determining an LTCH’s CCR include data from a different cost reporting period for the LTCH, data from the cost reporting period preceding the period in which the hospital began to be paid as an LTCH (that is, the period of at least 6 months that it was paid as a short-term, acute care hospital), or data from other comparable LTCHs, such as LTCHs in the same chain or in the same region.) In the proposed rule, using our established methodology for determining the LTCH statewide average CCRs, based on the most recent complete IPPS total CCR data from the December 2012 update of the PSF, we proposed LTCH PPS statewide average total CCRs for urban and rural hospitals that would be effective for FY 2014 in Table 8C listed in section VI. of the Addendum to that proposed rule and available via the Internet. We did not receive any public comments on our proposals related to determining the LTCH PPS statewide average CCRs for FY 2014, and are adopting them as final, without modification, in this final rule. Consistent with our historical practice of using the best available data, in this final rule, using our established methodology for determining the LTCH statewide average CCRs, based on the most recent complete IPPS ‘‘total CCR’’ data from the March 2013 update of the PSF, we are establishing LTCH PPS statewide average total CCRs for urban and rural hospitals that will be effective for discharges occurring on or after October 1, 2013 through September 20, 2014, in Table 8C listed in section VI. of the Addendum to this final rule (and available via the Internet). All areas in the District of Columbia, New Jersey, and Rhode Island are classified as urban. Therefore, there are no rural statewide average total CCRs listed for those jurisdictions in Table 8C. This policy is consistent with the policy that we established when we revised our methodology for determining the applicable LTCH statewide average CCRs in the FY 2007 IPPS final rule (71 FR 48119 through 48121) and is the same as the policy applied under the IPPS. In addition, although Connecticut has areas that are designated as rural, there are no short-term, acute care IPPS hospitals or LTCHs located in those areas as of March 2013. Therefore, consistent with our existing methodology, we are using the national average total CCR for rural IPPS hospitals for rural Connecticut in Table 8C listed in section VI. of the Addendum to this final rule (and available via the Internet). In addition, consistent with our existing methodology, in determining the urban and rural statewide average total CCRs for Maryland LTCHs paid under the LTCH PPS, we are continuing to use, as a proxy, the national average total CCR for urban IPPS hospitals and the national average total CCR for rural IPPS hospitals, respectively. We are using this proxy because we believe that the CCR data in the PSF for Maryland hospitals may not be entirely accurate (as discussed in E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 51000 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations greater detail in the FY 2007 IPPS final rule (71 FR 48120)). d. Reconciliation of LTCH HCO and SSO Payments We note that under the LTCH PPS HCO policy at § 412.525(a)(4)(iv)(D) and the LTCH PPS SSO policy at § 412.529(f)(4)(iv), the payments for HCO and SSO cases, respectively, are subject to reconciliation. Specifically, any reconciliation of outlier payments is based on the CCR that is calculated based on a ratio of cost-to-charge data computed from the relevant cost report determined at the time the cost report coinciding with the discharge is settled. For additional information, we refer readers to sections 150.26 through 150.28 of the Medicare Claims Processing Manual (Pub. 100–4) as added by Change Request 7192 (Transmittal 2111; December 3, 2010) and the RY 2009 LTCH PPS final rule (73 FR 26820 through 26821). 3. Establishment of the LTCH PPS Fixed-Loss Amount for FY 2014 When we implemented the LTCH PPS, as discussed in the August 30, 2002 LTCH PPS final rule (67 FR 56022 through 56026), under the broad authority of section 123 of the BBRA as amended by section 307(b) of BIPA, we established a fixed-loss amount so that total estimated outlier payments are projected to equal 8 percent of total estimated payments under the LTCH PPS. To determine the fixed-loss amount, we estimate outlier payments and total LTCH PPS payments for each case using claims data from the MedPAR files. Specifically, to determine the outlier payment for each case, we estimate the cost of the case by multiplying the Medicare covered charges from the claim by the LTCH’s CCR. Under § 412.525(a)(3) (in conjunction with § 412.503), if the estimated cost of the case exceeds the outlier threshold, we make an outlier payment equal to 80 percent of the difference between the estimated cost of the case and the outlier threshold (that is, the sum of the adjusted Federal prospective payment for the MS– LTC–DRG and the fixed-loss amount). In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53715), we presented our policies regarding the methodology and data we used to establish the fixed-loss amount of $15,408 for FY 2013. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27784), we proposed to continue to use our existing methodology to calculate the fixed-loss amount for FY 2014 (based on the data and the rates and policies presented in that proposed rule) in order to maintain estimated HCO payments at the projected 8 percent of total estimated LTCH PPS payments. Consistent with our historical practice of using the best data available, in determining the fixed-loss amount for FY 2014, we proposed to use the most recent available LTCH claims data and CCR data, that is, LTCH claims data from the December 2012 update of the FY 2012 MedPAR file and CCRs from the December 2012 update of the PSF, as these data were the most recent complete LTCH data available at that time. Comment: One commenter noted that the year-to year-establishment of the LTCH PPS high-cost outlier fixed-loss threshold amounts has generally resulted in high-cost VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 outlier payments that are estimated to be less than the 8.0 percent of total LTCH PPS payments required under the regulations. The commenter pointed out that in the proposed rule, CMS stated that the high-cost outlier fixed-loss threshold amount established for FY 2013 is projected to ‘‘fall short’’ of the 8.0 percent of total LTCH PPS payment target. Because the commenter believed that CMS’ current methodology for establishing the annual high-cost outlier fixed-loss threshold amount is not adequate and requires correction, the commenter requested that CMS provide for both ‘‘retrospective and prospective corrective actions’’ for high-cost outlier payments in FY 2014, stating that in analogous situations (such as documentation and coding) where CMS has determined its past payment rates were inaccurate, it has instituted corrective payment adjustments in future years payment rates. Specifically, the commenter recommended that CMS implement a positive adjustment in FY 2014 to retroactively account for the cumulative yearto-year underpayment of the 8.0 percent high-cost outlier target. The commenter also recommended that, in the absence of demonstrating that it is able to improve the accuracy of the establishment of high-cost outlier fixed-loss threshold amounts, CMS should prospectively revise (that is, decrease) the fixed-loss threshold amount for FY 2014 and subsequent years to correct for its ‘‘average error rate’’ in past years. The commenter did not provide any specific recommendations for how these ‘‘retrospective and prospective corrective’’ adjustments should be determined. In addition, the commenter did not provide its own analysis of the estimated level of highcost outlier payments under the LTCH PPS. Response: The commenter correctly pointed out that we currently project that high-cost outlier payments will be approximately 7.0 percent of the estimated total LTCH PPS payments in FY 2013. We wish to clarify that this estimate of FY 2013 LTCH PPS payments is only a projected estimate and it is based on payment simulations using FY 2013 claims data, adjusted for estimates of inflation, as these are currently the most recent available claims data. Precise figures on actual outlier payments for a given fiscal year cannot be determined until well after that fiscal year ends. As a result, we do not believe that we currently have sufficient data to make a meaningful adjustment to the outlier threshold at this time. However, in light of the concerns raised by the commenter, we intend to analyze estimated actual FY 2013 high-cost outlier payments once sufficient data are available. Because we proposed to continue to use our existing methodology to calculate the fixed-loss amount for FY 2014 and the commenter did not provide any specific adjustments to our existing methodology, we are not making any changes to our existing methodology to calculate the fixed-loss amount for FY 2014 in this final rule. However, we intend to explore potential adjustments to improve the accuracy of our methodology for the annual establishment of the fixed-loss amount that could be proposed and adopted in the future through noticeand-comment rulemaking. PO 00000 Frm 00506 Fmt 4701 Sfmt 4700 We are not adopting the commenter’s suggestion to make ‘‘retrospective and prospective corrective actions’’ for high-cost outlier payments in FY 2014 to account for the cumulative year-to-year high-cost outlier underpayment, or to correct for the ‘‘average error rate’’ in the fixed-loss amounts in past years. As we have articulated on numerous occasions (primarily in the IPPS context, which has a similar high-cost outlier policy as there is under the LTCH PPS), we believe that an important goal of any PPS is predictability and, therefore, we believe that the fixed-loss outlier threshold should be projected based on the best available historical data and should not include retrospective or prospective ‘‘corrective’’ adjustments. A retrospective or prospective ‘‘corrective’’ adjustment to the fixed-loss outlier threshold would affect all hospitals subject to the LTCH PPS, thereby undercutting the predictability of the system as a whole (68 FR 34502). In addition, the payment simulations that we use to determine the outlier threshold factor in all payments and policies would affect actual payments for the fiscal year at hand in order to ensure accuracy when determining outlier payments that are projected to be 8.0 percent of total LTCH PPS payments. Including a ‘‘corrective adjustment factor’’ that is not relative to the current fiscal year does not lend greater accuracy to the estimate of payments that are projected to be 8.0 percent of total LTCH PPS payments (70 FR 47495). We also note that our high-cost outlier policies under a PPS are intended to reimburse hospitals for treating extraordinarily costly cases and outlier payments are intended to approximate the marginal cost of providing care above the outlier fixed-loss cost threshold. Any adjustment to the outlier threshold or Federal rate in a given year to account for ‘‘overpayments’’ or ‘‘underpayments’’ of high-cost outliers in other years would result in us making outlier payments that were not directly related to the actual cost of furnishing care in extraordinarily costly cases (70 FR 47495). Consistent with our historical high-cost outlier policies and the goals of a prospective payment system, for the reasons discussed above, we do not believe that it is appropriate to make retroactive adjustments to high-cost outlier payments to ensure that total outlier payments in a past year are equal to the estimated ‘‘target,’’ and we are not adopting the commenters suggestion to make ‘‘retrospective and prospective corrective’’ adjustments in determining high-cost outlier payments in FY 2014. Therefore, in this final rule, for FY 2014, in general, we are continuing to use our existing methodology to calculate a fixed-loss amount for FY 2014 using the best available data that will maintain estimated HCO payments at the projected 8 percent of total estimated LTCH PPS payments (based on the rates and policies presented in this final rule). Specifically, for this final rule, we are using LTCH claims data from the March 2013 update of the FY 2012 MedPAR file and CCRs from the March 2013 update of the PSF to determine a fixed-loss amount that will result in estimated outlier payments projected to be equal to 8 percent of total E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations estimated payments in FY 2014 because these data are the most recent complete LTCH data available at this time. (For additional detail on the rationale for setting the HCO payment ‘‘target’’ at 8 percent of total estimated LTCH PPS payments, we refer readers to the FY 2003 LTCH PPS final rule (67 FR 56022 through 56024).) Using our existing methodology, we are establishing a fixed-loss amount of $13,314 for FY 2014. Under the broad authority of section 123(a)(1) of the BBRA and section 307(b)(1) of BIPA, we are establishing a fixed-loss amount of $13,314 for FY 2014. Therefore, we are making an additional payment for an HCO case that is equal to 80 percent of the difference between the estimated cost of the case and the outlier threshold (the sum of the adjusted Federal LTCH payment for the MS– LTC–DRG and the fixed-loss amount of $13,314). We also note that the fixed-loss amount of $13,314 for FY 2014 is lower than the FY 2013 fixed-loss amount of $15,408, and the proposed FY 2014 fixed-loss amount of $14,139. The decrease from the proposed FY 2014 fixed-loss amount ($14,139) to the final FY 2014 fixed-loss amount ($13,314) is primarily due to updated CCRs for many LTCHs between the December 2012 update of the PSF (used to determine the proposed FY 2014 fixed-loss amount) and the March 2013 update of the PSF (used to determine the final FY 2014 fixed-loss amount). Specifically, we found that over 30 percent of LTCHs had a CCR update between the December 2012 update of the PSF and the March 2013 update of the PSF, which results in an overall decrease in the average LTCH CCR of approximately 0.7 percent from the CCRs we used to determine the proposed FY 2014 fixed-loss outlier threshold. CCRs from the March 2013 update of the PSF reflect much more recent hospital-specific data, including CCRs from LTCHs’ most recent tentatively settled cost report. In many cases, for part of FY 2014, MACs will determine actual outlier payment amounts using the same CCRs that are in the March 2013 update of the PSF. Because the estimated cost of the case used in determining HCO payments is calculated by multiplying the LTCH’s CCR by the Medicare allowable charges for the case, an overall decrease in the average CCRs generally results in lower estimated costs and, therefore, lower outlier payments. As a result, based on our payment simulations using the most recent available data at this time, the decrease in the fixed-loss amount for FY 2014 is necessary to maintain the existing requirement that estimated outlier payments would equal 8 percent of estimated total LTCH PPS payments. (As noted above, for further information on the existing 8 percent HCO ‘‘target’’ requirement, we refer readers to the August 30, 2002 LTCH PPS final rule (67 FR 56022 through 56024).) Maintaining the fixed-loss amount at the current level will result in HCO payments that are less than the current regulatory 8percent requirement because a higher fixedloss amount would result in fewer cases qualifying as outlier cases. In addition, maintaining the higher fixed-loss amount will result in a decrease in the amount of the additional payment for an HCO case because the maximum loss that an LTCH must incur before receiving an HCO payment (that is, the fixed-loss amount) would be larger. For these reasons, we believe that lowering the fixedloss amount is appropriate and necessary to maintain that estimated outlier payments would equal 8 percent of estimated total LTCH PPS payments as required under § 412.525(a). 4. Application of Outlier Policy to SSO Cases As we discussed in the August 30, 2002 final rule (67 FR 56026), under some rare circumstances, an LTCH discharge could qualify as an SSO case (as defined in the regulations at § 412.529 in conjunction with § 412.503) and also as an HCO case. In this scenario, a patient could be hospitalized for less than five-sixths of the geometric average length of stay for the specific MS–LTC–DRG, and yet incur extraordinarily high treatment costs. If the estimated costs exceeded the HCO threshold (that is, the SSO payment plus the fixed-loss amount), the discharge is eligible for payment as an HCO. Therefore, for an SSO case in FY 2014, the HCO payment will be 80 percent of the difference between the estimated cost of the case and the outlier threshold (the sum of the fixedloss amount of $13,314 and the amount paid under the SSO policy as specified in § 412.529). E. Computing the Adjusted LTCH PPS Federal Prospective Payments for FY 2014 Section 412.525 sets forth the adjustments to the LTCH PPS standard Federal rate. Under § 412.525(c), the standard Federal rate is adjusted to account for differences in area wages by multiplying the labor-related share of the standard Federal rate by the applicable LTCH PPS wage index (FY 2014 values are shown in Tables 12A and 12B listed in section VI. of the Addendum of this final rule 51001 and are available via the Internet). The standard Federal rate is also adjusted to account for the higher costs of LTCHs located in Alaska and Hawaii by the applicable COLA factors (the proposed FY 2014 factors are shown in the chart in section V.C. of this Addendum) in accordance with § 412.525(b). In this final rule, we are establishing a standard Federal rate for FY 2014 of $40,607.31 (provided the LTCH submits quality reporting data for FY 2014 in accordance with the LTCHQR Program under section 1886(m)(5) of the Act), as discussed above in section V.A.2. of the Addendum to this final rule. We illustrate the methodology to adjust the LTCH PPS Federal standard rate for FY 2014 in the following example: Example: During FY 2014, a Medicare patient is in an LTCH located in Chicago, Illinois (CBSA 16974) and discharged on January 1, 2014. The FY 2014 LTCH PPS wage index value for CBSA 16974 is 1.0418 (obtained from Table 12A listed in section VI. of the Addendum of this final rule and available via the Internet on the CMS Web site). The Medicare patient is classified into MS–LTC–DRG 28 (Spinal Procedures with MCC), which has a relative weight for FY 2014 of 1.6227 (obtained from Table 11 listed in section VI. of the Addendum of this final rule and available via the Internet on the CMS Web site). The LTCH submitted quality reporting data for FY 2014 in accordance with the LTCHQR Program under section 1886(m)(5) of the Act. To calculate the LTCH’s total adjusted Federal prospective payment for this Medicare patient in FY 2014, we computed the wage-adjusted Federal prospective payment amount by multiplying the unadjusted FY 2014 standard Federal rate ($40,607.31, for LTCHs that submit quality reporting data for FY 2014 in accordance with the LTCHQR Program under section 1886(m)(5) of the Act) by the labor-related share (62.537 percent) and the wage index value (1.0418). This wage-adjusted amount was then added to the nonlabor-related portion of the unadjusted standard Federal rate (37.463 percent; adjusted for cost of living, if applicable) to determine the adjusted Federal rate, which was then multiplied by the MS–LTC–DRG relative weight (1.6227) to calculate the total adjusted Federal LTCH PPS prospective payment for FY 2014 ($67,615.96). The table below illustrates the components of the calculations in this example. $40,607.31 × 0.62537 Labor-Related Portion of the Federal Rate ................................................................................................................................... Wage Index (CBSA 16974) ........................................................................................................................................................... mstockstill on DSK4VPTVN1PROD with RULES6 Unadjusted Standard Federal Prospective Payment Rate (provided the LTCH submits quality data in accordance with the LTCHQR Program under section 1886(m)(5) of the Act) .......................................................................................................... Labor-Related Share ..................................................................................................................................................................... = $25,394.59 × 1.0418 Wage-Adjusted Labor Share of Federal Rate ............................................................................................................................... Nonlabor-Related Portion of the Federal Rate ($40,607.31 × 0.37463) ....................................................................................... = $26,456.08 + $15,212.72 Adjusted Federal Rate Amount ..................................................................................................................................................... MS–LTC–DRG 28 Relative Weight ............................................................................................................................................... = $41,668.80 × 1.6227 Total Adjusted Federal Prospective Payment ........................................................................................................................ = $67,615.96 VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 PO 00000 Frm 00507 Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2 51002 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations VI. Tables Referenced in this Final Rule and Available Only through the Internet on the CMS Web site This section lists the tables referred to throughout the preamble of this final rule and in this Addendum. In the past, a majority of these tables were published in the Federal Register as part of the annual proposed and final rules. However, similar to FYs 2012 and 2013, for the FY 2014 rulemaking cycle, the IPPS and LTCH tables will not be published as part of the annual IPPS/LTCH PPS proposed and final rulemakings and will be available only through the Internet. Specifically, IPPS Tables 2, 3A, 3B, 4A, 4B, 4C, 4D, 4E, 4F, 4J, 5, 6B, 6G, 6H, 6I, 6J, 6K, 7A, 7B, 8A, 8B, 9A, 9C, 10, 15, and 16A and LTCH PPS Tables 8C, 11, 12A, 12B, 13A, and 13B will be available only through the Internet. IPPS Tables 1A, 1B, 1C, and 1D, and LTCH PPS Table 1E, displayed at the end of this section, will continue to be published in the Federal Register as part of the annual proposed and final rules. As discussed in section II.G.9. and 11. of the preamble of this final rule, Tables 6A and 6C through 6F will not be issued with this FY 2014 final rule because there are no new, revised, or deleted ICD–9–CM diagnosis codes and no revised or deleted procedures codes. As discussed in section V.C. of the preamble of this final rule, effective FY 2014 and forward, the lowvolume hospital definition and payment adjustment methodology under section 1886(d)(12) of the Act returns to the preAffordable Care Act definition and payment adjustment methodology (we refer readers to section V.C. for complete details on the lowvolume hospital payment adjustment). Therefore, we are no longer including a table (previously Table 14) in this final rule that lists the low-volume payment adjustments. Readers who experience any problems accessing any of the tables that are posted on the CMS Web sites identified below should contact Michael Treitel at (410) 786–4552. The following IPPS tables for this FY 2014 final rule are available only through the Internet on the CMS Web site at: https:// www.cms.gov/Medicare/Medicare-Fee-forService-Payment/AcuteInpatientPPS/ index.html. Click on the link on the left side of the screen titled, ‘‘FY 2014 IPPS Final Rule Home Page’’ or ‘‘Acute Inpatient—Files for Download’’. Table 2.—Acute Care Hospitals Case-Mix Indexes for Discharges Occurring in Federal Fiscal Year 2012; Hospital Wage Indexes for Federal Fiscal Year 2014; Hospital Average Hourly Wages for Federal Fiscal Years 2012 (2008 Wage Data), 2013 (2009 Wage Data), and 2014 (2010 Wage Data); and 3-Year Average of Hospital Average Hourly Wages Table 3A.—FY 2014 and 3-Year* Average Hourly Wage for Acute Care Hospitals in Urban Areas by CBSA Table 3B.—FY 2014 and 3-Year* Average Hourly Wage for Acute Care Hospitals in Rural Areas by CBSA Table 4A.—Wage Index and Capital Geographic Adjustment Factor (GAF) for Acute Care Hospitals in Urban Areas by CBSA and by State—FY 2014 Table 4B.—Wage Index and Capital Geographic Adjustment Factor (GAF) for Acute Care Hospitals in Rural Areas by CBSA and by State—FY 2014 Table 4C.—Wage Index and Capital Geographic Adjustment Factor (GAF) for Acute Care Hospitals That Are Reclassified by CBSA and by State—FY 2014 Table 4D.—States Designated as Frontier, with Acute Care Hospitals Receiving at a Minimum the Frontier State Floor Wage Index; Urban Areas with Acute Care Hospitals Receiving the Statewide Rural Floor or Imputed Floor Wage Index—FY 2014 Table 4E.—Urban CBSAs and Constituent Counties for Acute Care Hospitals—FY 2014 Table 4F.—Puerto Rico Wage Index and Capital Geographic Adjustment Factor (GAF) for Acute Care Hospitals by CBSA— FY 2014 Table 4J.—Out-Migration Adjustment for Acute Care Hospitals—FY 2014 Table 5.—List of Medicare Severity Diagnosis-Related Groups (MS–DRGs), Relative Weighting Factors, and Geometric and Arithmetic Mean Length of Stay—FY 2014 Table 6B.—New Procedure Codes—FY 2014 Table 6G.—Additions to the CC Exclusions List—FY 2014 Table 6H.—Deletions from the CC Exclusions List—FY 2014 Table 6I.—Major CC List—FY 2014 Table 6J.—Complete CC List—FY 2014 Table 6K.—Complete List of CC Exclusions— FY 2014 Table 7A.—Medicare Prospective Payment System Selected Percentile Lengths of Stay: FY 2012 MedPAR Update—March 2013 GROUPER V30.0 MS–DRGs Table 7B.—Medicare Prospective Payment System Selected Percentile Lengths of Stay: FY 2012 MedPAR Update—March 2013 GROUPER V31.0 MS–DRGs Table 8A.—FY 2014 Statewide Average Operating Cost-to-Charge Ratios (CCRs) for Acute Care Hospitals (Urban and Rural) Table 8B.—FY 2014 Statewide Average Capital Cost-to-Charge Ratios (CCRs) for Acute Care Hospitals Table 9A.—Hospital Reclassifications and Redesignations—FY 2014 Table 9C.—Hospitals Redesignated as Rural under Section 1886(d)(8)(E) of the Act—FY 2014 Table 10.—New Technology Add-On Payment Thresholds 1,2 for Applications for FY 2015 Table 15.—FY 2014 Readmissions Adjustment Factors Table 16A.—Updated Proxy Hospital Inpatient Value-Based Purchasing (VBP) Program Adjustment Factors for FY 2014 The following LTCH PPS tables for this FY 2014 final rule are available only through the Internet on the CMS Web site at https:// www.cms.gov/Medicare/Medicare-Fee-forService-Payment/LongTermCareHospitalPPS/ index.html under the list item for Regulation Number CMS–1599–F. Table 8C.—FY 2014 Statewide Average Total Cost-to-Charge Ratios (CCRs) for LTCHs (Urban and Rural) Table 11.—MS–LTC–DRGs, Relative Weights, Geometric Average Length of Stay, ShortStay Outlier (SSO) Threshold, and ‘‘IPPS Comparable Threshold’’ for Discharges Occurring from October 1, 2013 through September 30, 2014 under the LTCH PPS Table 12A.—LTCH PPS Wage Index for Urban Areas for Discharges Occurring from October 1, 2013 through September 30, 2014 Table 12B.—LTCH PPS Wage Index for Rural Areas for Discharges Occurring from October 1, 2013 through September 30, 2014 Table 13A.—Composition of Low-Volume Quintiles for MS–LTC–DRGs—FY 2014 Table 13B.—No-Volume MS–LTC–DRG Crosswalk for FY 2014 TABLE 1A—NATIONAL ADJUSTED OPERATING STANDARDIZED AMOUNTS, LABOR/NONLABOR (69.6 PERCENT LABOR SHARE/30.4 PERCENT NONLABOR SHARE IF WAGE INDEX IS GREATER THAN 1)—FY 2014 Full Update (1.7 Percent) Reduced Update (¥0.3 Percent) Nonlabor-related Labor-related Nonlabor-related $3,737.71 mstockstill on DSK4VPTVN1PROD with RULES6 Labor-related $1,632.57 $3,664.21 $1,600.46 TABLE 1B—NATIONAL ADJUSTED OPERATING STANDARDIZED AMOUNTS, LABOR/NONLABOR (62 PERCENT LABOR SHARE/ 38 PERCENT NONLABOR SHARE IF WAGE INDEX IS LESS THAN OR EQUAL TO 1)—FY 2014 Full Update (1.7 Percent) Reduced Update (¥0.3 Percent) Labor-related Nonlabor-related Labor-related Nonlabor-related $3,329.57 $2,040.71 $3,264.10 $2,000.57 VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 PO 00000 Frm 00508 Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 51003 TABLE 1C—ADJUSTED OPERATING STANDARDIZED AMOUNTS FOR PUERTO RICO, LABOR/NONLABOR (NATIONAL: 62 PERCENT LABOR SHARE/38 PERCENT NONLABOR SHARE BECAUSE WAGE INDEX IS LESS THAN OR EQUAL TO 1; PUERTO RICO: 63.2 PERCENT LABOR SHARE/36.8 PERCENT NONLABOR SHARE IF WAGE INDEX IS GREATER THAN 1 OR 62 PERCENT LABOR SHARE/38 PERCENT NONLABOR SHARE IF WAGE INDEX IS LESS THAN OR EQUAL TO 1—FY 2014 Rates if wage index is greater than 1 Rates if wage index is less than or equal to 1 Standardized amount Labor National 1 ........................................ Puerto Rico ..................................... 1 For Nonlabor Not Applicable ................................ $1,608.90 ....................................... Not Applicable ................................ $936.82 .......................................... Labor Nonlabor $3,329.57 1,578.35 $2,040.71 967.37 FY 2014, there are no CBSAs in Puerto Rico with a national wage index greater than 1. TABLE 1D—CAPITAL STANDARD FEDERAL PAYMENT RATE—FY 2014 Rate National .................................................................................................................... Puerto Rico .............................................................................................................. $429.31 209.82 TABLE 1E—LTCH STANDARD FEDERAL PROSPECTIVE PAYMENT RATE—FY 2014 Full update (1.7 percent) Standard Federal Rate ................................................................................................................................ Reduced update* (¥0.3 percent) $40,607.31 $39,808.74 * For LTCHs that fail to submit quality reporting data for FY 2014 in accordance with the LTCH Quality Reporting (LTCHQR) Program, the annual update is reduced by 2.0 percentage points as required by section 1886(m)(5) of the Act. Appendix A: Economic Analyses mstockstill on DSK4VPTVN1PROD with RULES6 I. Regulatory Impact Analysis A. Introduction We have examined the impacts of this final rule as required by Executive Order 12866 on Regulatory Planning and Review (September 30, 1993), Executive Order 13563 on Improving Regulation and Regulatory Review (February 2, 2011) the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96– 354), section 1102(b) of the Social Security Act, section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 1995, Pub. L. 104–4), Executive Order 13132 on Federalism (August 4, 1999), and the Congressional Review Act (5 U.S.C. 804(2)). Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. A regulatory impact analysis (RIA) must be prepared for major rules with economically significant effects ($100 million or more in any 1 year). We have determined that this final rule is a major rule as defined in 5 U.S.C. 804(2). We estimate that the changes for FY 2014 acute care hospital operating and capital payments will redistribute amounts in excess of $100 million to acute care hospitals. The applicable percentage increase to the IPPS rates required by the statute, in conjunction with other payment changes in this final rule, VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 will result in an estimated $498 million increase in FY 2014 operating payments (or 0.5 percent change) and an estimated $134 million increase in FY 2014 capital payments (or 1.6 percent change). These changes are relative to payments made in FY 2013. The impact analysis of the capital payments can be found in section I.K. of this Appendix. In addition, as described in section I.L. of this Appendix, LTCHs are expected to experience an increase in payments by $72 million in FY 2014 relative to FY 2013. Our operating impact estimate includes the ¥0.8 percent documentation and coding adjustment applied to the IPPS standardized amount, which represents part of the recoupment required under section 631 of the ATRA. It includes the -0.2 percent adjustment applied to the IPPS standardized amount, the hospital-specific rate, and the Puerto Rico-specific rate to offset the cost of the policy on admission and medical review criteria for hospital inpatient services under Medicare Part A. In addition, our operating payment impact estimate includes the 1.7 percent hospital update to the standardized amount (which includes the estimated 2.5 percent market basket update less 0.5 percentage point for the multifactor productivity adjustment and less 0.3 percentage point required under the Affordable Care Act). The estimates of IPPS operating payments to acute care hospitals do not reflect any changes in hospital admissions or real case-mix intensity, which will also affect overall payment changes. The analysis in this Appendix, in conjunction with the remainder of this document, demonstrates that this rule is consistent with the regulatory philosophy and principles identified in Executive Orders 12866 and 13563, the RFA, and section PO 00000 Frm 00509 Fmt 4701 Sfmt 4700 1102(b) of the Act. This final rule will affect payments to a substantial number of small rural hospitals, as well as other classes of hospitals, and the effects on some hospitals may be significant. B. Need This final rule is necessary in order to make payment and policy changes under the Medicare IPPS for Medicare acute care hospital inpatient services for operating and capital-related costs as well as for certain hospitals and hospital units excluded from the IPPS. This final rule also is necessary to make payment and policy changes for Medicare hospitals under the LTCH PPS payment system. C. Objectives of the IPPS The primary objective of the IPPS is to create incentives for hospitals to operate efficiently and minimize unnecessary costs while at the same time ensuring that payments are sufficient to adequately compensate hospitals for their legitimate costs in delivering necessary care to Medicare beneficiaries. In addition, we share national goals of preserving the Medicare Hospital Insurance Trust Fund. We believe that the changes in this final rule will further each of these goals while maintaining the financial viability of the hospital industry and ensuring access to high quality health care for Medicare beneficiaries. We expect that these changes will ensure that the outcomes of the prospective payment systems are reasonable and equitable while avoiding or minimizing unintended adverse consequences. D. Limitations of Our Analysis The following quantitative analysis presents the projected effects of our policy E:\FR\FM\19AUR2.SGM 19AUR2 51004 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations changes, as well as statutory changes effective for FY 2014, on various hospital groups. We estimate the effects of individual policy changes by estimating payments per case while holding all other payment policies constant. We use the best data available, but, generally, we do not attempt to make adjustments for future changes in such variables as admissions, lengths of stay, or case-mix. mstockstill on DSK4VPTVN1PROD with RULES6 E. Hospitals Included in and Excluded From the IPPS The prospective payment systems for hospital inpatient operating and capitalrelated costs of acute care hospitals encompass most general short-term, acute care hospitals that participate in the Medicare program. There were 31 Indian Health Service hospitals in our database, which we excluded from the analysis due to the special characteristics of the prospective payment methodology for these hospitals. Among other short-term, acute care hospitals, 45 such hospitals in Maryland remain excluded from the IPPS pursuant to the waiver under section 1814(b)(3) of the Act. As of March 2013, there were 3,407 IPPS acute care hospitals included in our analysis. This represents approximately 55 percent of all Medicare-participating hospitals. The majority of this impact analysis focuses on this set of hospitals. There also are approximately 1,328 CAHs. These small, limited service hospitals are paid on the basis of reasonable costs rather than under the IPPS. IPPS-excluded hospitals and units include IPFs, IRFs, LTCHs, RNHCIs, children’s hospitals, and 11 cancer hospitals, which are paid under separate payment systems. Changes in the prospective payment systems for IPFs and IRFs are made through separate rulemaking. Payment impacts for these IPPS-excluded hospitals and units are not included in this final rule. The impact of the update and policy changes to the LTCH PPS for FY 2014 is discussed in section I.L. of this Appendix. F. Effects on Hospitals and Hospital Units Excluded From the IPPS As of March 2013, there were 97 children’s hospitals, 11 cancer hospitals, and 18 RNHCIs being paid on a reasonable cost basis subject to the rate-of-increase ceiling under § 413.40. (In accordance with § 403.752(a) of the regulation, RNHCIs are paid under § 413.40.) Among the remaining providers, 234 rehabilitation hospitals and 898 rehabilitation units, and 437 LTCHs, are paid the Federal prospective per discharge rate under the IRF PPS and the LTCH PPS, respectively, and 472 psychiatric hospitals and 1,155 psychiatric units are paid the Federal per diem amount under the IPF PPS. As stated above, IRFs and IPFs are not affected by the rate updates discussed in this final rule. The impacts of the changes on LTCHs are discussed in section I.L. of this Appendix. For children’s hospitals, the 11 cancer hospitals, and RNHCIs, the update of the rate-of-increase limit (or target amount) is the estimated FY 2014 percentage increase in the IPPS operating market basket, consistent with section 1886(b)(3)(B)(ii) of the Act, and VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 §§ 403.752(a) and 413.40 of the regulations. As discussed in section IV. of the preamble of this final rule, we are rebasing the IPPS operating market basket to a FY 2010 base year. Therefore, we are using the percentage increase in the FY 2010-based IPPS operating market basket to update the target amounts for FY 2014 and subsequent years for children’s hospitals, the 11 cancer hospitals, and RNHCIs that are paid based on reasonable costs subject to the rate-ofincrease limits. Consistent with current law, based on IHS Global Insight, Inc.’s 2013 second quarter forecast of the FY 2010-based market basket increase, we are estimating that the FY 2014 update based on the IPPS operating market basket is 2.5 percent (that is, the current estimate of the market basket rate-of-increase). However, the Affordable Care Act requires an adjustment for multifactor productivity (currently estimated to be 0.5 percentage point for FY 2014) and a 0.3 percentage point reduction to the market basket update resulting in a 1.7 percent applicable percentage increase for IPPS hospitals subject to a reduction of 2.0 percentage points if the hospital fails to submit quality data under rules established by the Secretary in accordance with section 1886(b)(3)(B)(viii) of the Act. Children’s hospitals, the 11 cancer hospitals, and RNCHIs that continue to be paid based on reasonable costs subject to rate-of-increase limits under § 413.40 of the regulations are not subject to the reductions in the applicable percentage increase required under the Affordable Care Act. Therefore, for RNHCIs, children’s hospitals, and the 11 cancer hospitals paid under § 413.40 of the regulations, the update is the percentage increase in the FY 2014 IPPS operating market basket, estimated at 2.5 percent, without the reductions required under the Affordable Care Act. The impact of the update in the rate-ofincrease limit on those excluded hospitals depends on the cumulative cost increases experienced by each excluded hospital since its applicable base period. For excluded hospitals that have maintained their cost increases at a level below the rate-of-increase limits since their base period, the major effect is on the level of incentive payments these excluded hospitals receive. Conversely, for excluded hospitals with cost increases above the cumulative update in their rate-ofincrease limits, the major effect is the amount of excess costs that will not be paid. We note that, under § 413.40(d)(3), an excluded hospital that continues to be paid under the TEFRA system and whose costs exceed 110 percent of its rate-of-increase limit receives its rate-of-increase limit plus the lesser of: (1) 50 percent of its reasonable costs in excess of 110 percent of the limit, or (2) 10 percent of its limit. In addition, under the various provisions set forth in § 413.40, hospitals can obtain payment adjustments for justifiable increases in operating costs that exceed the limit. G. Quantitative Effects of the Policy Changes Under the IPPS for Operating Costs 1. Basis and Methodology of Estimates In this final rule, we are announcing policy changes and payment rate updates for the PO 00000 Frm 00510 Fmt 4701 Sfmt 4700 IPPS for FY 2014 for operating costs of acute care hospitals. The FY 2014 updates to the capital payments to acute care hospitals are discussed in section I.K. of this Appendix. Based on the overall percentage change in payments per case estimated using our payment simulation model, we estimate that total FY 2014 operating payments will increase by 0.5 percent compared to FY 2013. In addition to the applicable percentage increase, this amount reflects the FY 2014 recoupment adjustment for documentation and coding described in section II.D. of the preamble of this final rule and the adjustment to offset the cost of the policy on admission and medical review criteria for hospital inpatient services under Medicare Part A: A ¥0.8 percent recoupment adjustment to the IPPS national standardized amounts for the documentation and coding adjustment and a ¥0.2 percent adjustment to the IPPS national standardized amount, the Puerto Rico-specific rate and the hospitalspecific rate for the policy on admission and medical review criteria. The impacts do not reflect changes in the number of hospital admissions or real case-mix intensity, which will also affect overall payment changes. We have prepared separate impact analyses of the changes to each system. This section deals with the changes to the operating inpatient prospective payment system for acute care hospitals. Our payment simulation model relies on the most recent available data to enable us to estimate the impacts on payments per case of certain changes in this final rule. However, there are other changes for which we do not have data available that will allow us to estimate the payment impacts using this model. For those changes, we have attempted to predict the payment impacts based upon our experience and other more limited data. The data used in developing the quantitative analyses of changes in payments per case presented below are taken from the FY 2012 MedPAR file and the most current Provider-Specific File (PSF) that is used for payment purposes. Although the analyses of the changes to the operating PPS do not incorporate cost data, data from the most recently available hospital cost reports were used to categorize hospitals. Our analysis has several qualifications. First, in this analysis, we do not make adjustments for future changes in such variables as admissions, lengths of stay, or underlying growth in real case-mix. Second, due to the interdependent nature of the IPPS payment components, it is very difficult to precisely quantify the impact associated with each change. Third, we use various data sources to categorize hospitals in the tables. In some cases, particularly the number of beds, there is a fair degree of variation in the data from the different sources. We have attempted to construct these variables with the best available source overall. However, for individual hospitals, some miscategorizations are possible. Using cases from the FY 2012 MedPAR file, we simulated payments under the operating IPPS given various combinations of payment parameters. As described above, Indian Health Service hospitals and hospitals in Maryland were excluded from the simulations. The impact of payments under E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations the capital IPPS, or the impact of payments for costs other than inpatient operating costs, are not analyzed in this section. Estimated payment impacts of the capital IPPS for FY 2014 are discussed in section I.K. of this Appendix. We discuss the following changes below: • The effects of the application of the documentation and coding adjustment, the adjustment to offset the costs of the policy on admission and medical review criteria and the applicable percentage increase (including the market basket update, the multifactor productivity adjustment and the applicable percentage reduction in accordance with the Affordable Care Act) to the standardized amount and hospital-specific rates. • The effects of the changes to the relative weights and MS–DRG grouper, including the methodology to calculate the MS–DRG cost based relative weights using 19 departmental CCRs instead of the current 15 departmental CCRs. • The effects of the changes in hospitals’ wage index values reflecting updated wage data from hospitals’ cost reporting periods beginning during FY 2010, compared to the FY 2009 wage data and the changes in the labor related share from 68.8 percent for FY 2013 to 69.6 percent for FY 2014 for hospitals with a wage index greater than 1.0. • The effects of the recalibration of the MS–DRG relative weights as required by section 1886(d)(4)(C) of the Act, including the wage and recalibration budget neutrality factors. • The effects of the geographic reclassifications by the MGCRB as of publication of this final rule that will be effective for FY 2014. • The effects of the rural floor and imputed floor with the application of the national budget neutrality factor applied to the wage index. • The effects of the frontier State wage index adjustment under the statutory provision that requires that hospitals located in States that qualify as frontier States cannot have a wage index less than 1.0. This provision is not budget neutral. • The effects of the implementation of section 1886(d)(13) of the Act, as added by section 505 of Public Law 108–173, which provides for an increase in a hospital’s wage index if the hospital qualifies by meeting a threshold percentage of residents of the county where the hospital is located who commute to work at hospitals in counties with higher wage indexes. • The effects of the policies for implementation of the Hospital Readmissions Reduction Program under section 1886(q) of the Act, as added by section 3025 of the Affordable Care Act, that adjusts hospital’s base operating DRG amount by an adjustment factor to account for a hospital’s excess readmissions. • The effects of the expiration of the special payment status for MDHs under section 606 of the ATRA under which MDHs that currently receive the higher of payments made under the Federal standardized amount or the payments made under the Federal standardized amount plus 75 percent of the difference between the Federal standardized amount and the hospital-specific rate will be VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 paid based on the Federal standardized amount starting in FY 2014. • The effects of the implementation of section 3133 of the Affordable Care Act that reduces Medicare DSH payments to 25 percent of what hospitals had been previously paid under section 1886(d)(5)(F) of the Act and establishes an additional payment to be made to hospitals that receive DSH payments for their relative share of the total amount of uncompensated care. • The total estimated change in payments based on the FY 2014 policies relative to payments based on FY 2013 policies that include the applicable percentage increase of 1.7 percent (or 2.5 percent market basket update with a reduction of 0.5 percentage point for the multifactor productivity adjustment, and a 0.3 percentage point reduction, as required under the Affordable Care Act). To illustrate the impact of the FY 2014 changes, our analysis begins with a FY 2013 baseline simulation model using: the FY 2014 applicable percentage increase of 1.7 percent and the documentation and coding recoupment adjustment of 0.8 percent to the Federal standardized amount and the adjustment 0.2 percent to the Federal standardized amount, the hospital-specific rate, and the Puerto Rico-specific rate for the policy on admission and medical review criteria; the FY 2013 MS–DRG GROUPER (Version 30.0); the most current CBSA designations for hospitals based on OMB’s MSA definitions; the FY 2013 wage index; and no MGCRB reclassifications. Outlier payments are set at 5.1 percent of total operating MS–DRG and outlier payments for modeling purposes. Section 1886(b)(3)(B)(viii) of the Act, as added by section 5001(a) of Public Law 109– 171, as amended by section 4102(b)(1)(A) of the ARRA (Pub. L. 111–5) and by section 3401(a)(2) of the Affordable Care Act (Pub. L. 111–148), provides that, for FY 2007 and each subsequent year, the update factor will include a reduction of 2.0 percentage points for any subsection (d) hospital that does not submit data on measures in a form and manner and at a time specified by the Secretary. (Beginning in FY 2015, the reduction is one-quarter of such applicable percentage increase determined without regard to section 1886(b)(3)(B)(ix), (xi), or (xii) of the Act.) At the time that this impact was prepared, 46 hospitals did not receive the full market basket rate-of-increase for FY 2013 because they failed the quality data submission process or did not choose to participate. For purposes of the simulations shown below, we modeled the payment changes for FY 2014 using a reduced update for these 46 hospitals. However, we do not have enough information at this time to determine which hospitals will not receive the full update factor for FY 2014. Each policy change, statutory or otherwise, is then added incrementally to this baseline, finally arriving at an FY 2014 model incorporating all of the changes. This simulation allows us to isolate the effects of each change. Our final comparison illustrates the percent change in payments per case from FY 2013 to FY 2014. Three factors not discussed PO 00000 Frm 00511 Fmt 4701 Sfmt 4700 51005 separately have significant impacts here. The first factor is the update to the standardized amount. In accordance with section 1886(b)(3)(B)(i) of the Act, we are updating the standardized amounts for FY 2014 using an applicable percentage increase of 1.7 percent. This includes our forecasted IPPS operating hospital market basket increase of 2.5 percent with a reduction of 0.5 percentage point for the multifactor productivity adjustment and a 0.3 percentage point reduction as required under the Affordable Care Act. (Hospitals that fail to comply with the quality data submission requirements would receive an update of ¥0.3 percent (this update includes the 2.0 percentage point reduction for failure to submit these data)). Under section 1886(b)(3)(B)(iv) of the Act, the updates to the hospital-specific amounts for SCHs also are equal to the applicable percentage increase, or 1.7 percent. In addition, we are updating the Puerto Rico-specific amount by an applicable percentage increase of 1.7 percent. A second significant factor that affects the changes in hospitals’ payments per case from FY 2013 to FY 2014 is the change in hospitals’ geographic reclassification status from one year to the next. That is, payments may be reduced for hospitals reclassified in FY 2013 that are no longer reclassified in FY 2014. Conversely, payments may increase for hospitals not reclassified in FY 2013 that are reclassified in FY 2014. A third significant factor is that we currently estimate that actual outlier payments during FY 2013 will be 4.8 percent of total MS–DRG payments. When the FY 2013 final rule was published, we projected FY 2013 outlier payments would be 5.1 percent of total MS–DRG plus outlier payments; the average standardized amounts were offset correspondingly. The effects of the lower than expected outlier payments during FY 2013 (as discussed in the Addendum to this final rule) are reflected in the analyses below comparing our current estimates of FY 2013 payments per case to estimated FY 2014 payments per case (with outlier payments projected to equal 5.1 percent of total MS–DRG payments). 2. Analysis of Table I Table I displays the results of our analysis of the changes for FY 2014. The table categorizes hospitals by various geographic and special payment consideration groups to illustrate the varying impacts on different types of hospitals. The top row of the table shows the overall impact on the 3,407 acute care hospitals included in the analysis. The next four rows of Table I contain hospitals categorized according to their geographic location: All urban, which is further divided into large urban and other urban; and rural. There are 2,485 hospitals located in urban areas included in our analysis. Among these, there are 1,370 hospitals located in large urban areas (populations over 1 million), and 1,115 hospitals in other urban areas (populations of 1 million or fewer). In addition, there are 922 hospitals in rural areas. The next two groupings are by bed-size categories, shown separately for urban and rural hospitals. The final groupings by geographic location are by E:\FR\FM\19AUR2.SGM 19AUR2 51006 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 census divisions, also shown separately for urban and rural hospitals. The second part of Table I shows hospital groups based on hospitals’ FY 2014 payment classifications, including any reclassifications under section 1886(d)(10) of the Act. For example, the rows labeled urban, large urban, other urban, and rural show that the numbers of hospitals paid based on these categorizations after consideration of geographic reclassifications (including reclassifications under sections 1886(d)(8)(B) and 1886(d)(8)(E) of the Act that have implications for capital payments) are 2,496; 1,380; 1,116; and 911, respectively. The next three groupings examine the impacts of the changes on hospitals grouped by whether or not they have GME residency programs (teaching hospitals that receive an VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 IME adjustment) or receive Medicare DSH payments, or some combination of these two adjustments. There are 2,380 nonteaching hospitals in our analysis, 785 teaching hospitals with fewer than 100 residents, and 242 teaching hospitals with 100 or more residents. In the DSH categories, hospitals are grouped according to their DSH payment status, and whether they are considered urban or rural for DSH purposes. The next category groups together hospitals considered urban or rural, in terms of whether they receive the IME adjustment, the DSH adjustment, both, or neither. The next five rows examine the impacts of the changes on rural hospitals by special payment groups (SCHs, RRCs, and former MDHs). There were 207 RRCs, 330 SCHs, 187 PO 00000 Frm 00512 Fmt 4701 Sfmt 4700 former MDHs, and 124 hospitals that are both SCHs and RRCs, and 11 hospitals that were former MDHs and RRCs. The next series of groupings are based on the type of ownership and the hospital’s Medicare utilization expressed as a percent of total patient days. These data were taken from the FY 2011 or FY 2010 Medicare cost reports. The next two groupings concern the geographic reclassification status of hospitals. The first grouping displays all urban hospitals that were reclassified by the MGCRB for FY 2014. The second grouping shows the MGCRB rural reclassifications. The final category shows the impact of the policy changes on the 15 cardiac hospitals. BILLING CODE 4120–01–P E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 VerDate Mar<15>2010 FY2014 DRG,Rel. Wts., Wage Index Changes with Wage and Recalibration Budget Neutralitys FY2014 MGCRB Reclassifications' Rural Floor and Imputed Floor with Application of National Rural Floor Budget Neutrality7 (5) (6) (7) FY2014 Wage Data with Application of Wage Budget Neutrality4 (4) All Hospitals By Geographic Location: 3,407 0.7 0.0 0.0 0.1 0.0 0.0 0.1 0.0 -0.2 -0.2 -0.4 0.5 Urban hospitals Large urban areas Other urban areas 2,485 0.7 0.0 0.0 0.1 -0.2 0.0 0.1 0.0 0.0 -0.2 -0.4 0.7 1,370 0.7 0.0 0.1 0.2 -0.3 0.0 0.0 0.0 0.0 -0.3 -0.2 1.0 1,115 922 0.7 1 0.1 -0.4 -0.1 -0.3 0.0 -0.5 -0.1 1.7 0.1 -0.3 0.1 0.0 0.0 0.1 -0.1 -1.5 -0.2 -0.3 -0.7 -0.5 0.2 -1.6 624 767 462 420 212 0.7 0.7 0.7 0.7 0.7 0.4 -0.1 -0.1 0.1 0.1 -0.1 0.0 0.0 0.0 0.1 0.3 0.0 0.0 0.1 0.3 -0.5 -0.1 0.0 -0.2 -0.2 0.1 0.3 0.0 0.0 -0.1 0.2 0.1 0.1 0.1 0.0 0.0 0.1 0.0 0.0 0.0 -0.4 -0.1 0.0 0.0 0.0 -0.1 -0.2 -0.3 -0.2 -0.2 0.8 -0.7 -0.4 -0.4 -0.4 1.5 0.1 0.5 0.7 1.1 Jkt 229001 Hospital Rate Update and Documentation and Coding Adjustment Z (2) FY 2014 Weights andDRG Changes with Application of Recalibration Budget Neutralitr (3) PO 00000 Frm 00513 No. of Hospitals' (I) Fmt 4701 Sfmt 4725 E:\FR\FM\19AUR2.SGM Rural hospitals Bed Size (Urban): 19AUR2 0-99 beds 100-199 beds 200-299 beds 300-499 beds 500 or more beds Application of the Frontier Wage Index· FY2014 OutMigration Adjustment" (8) (9) Expiration of MDH Status'O (10) Hospital Readmissions Reduction Program" Changes to Medicare DSHlZ (11) (12) All FY 2014 Changes13 (13) Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 21:51 Aug 16, 2013 TABLE I.-IMPACT ANALYSIS OF CHANGES TO THE IPPS FOR OPERATING COSTS FOR FY 2014 51007 ER19AU13.019</GPH> mstockstill on DSK4VPTVN1PROD with RULES6 51008 VerDate Mar<15>2010 Jkt 229001 PO 00000 Frm 00514 (1) (3) FY2014 Wage Data with Application of Wage Budget Neutrality4 (4) FY2014 DRG,ReI. Wts., Wage Index Changes with Wage and Recalibration Budget Neutralitys FY 2014 MGCRB Reclassifications 6 Rural Floor and Imputed Floor with Application of National Rural Floor Budget Neutrality' (5) (6) (7) Application of the Frontier Wage Index8 FY2014 OutMigration Adjustment9 (8) (9) Expiration of MDH Status'O (10) Hospital Readmissions Reduction Program" Changes to Medicare DSH'2 All FY 2014 Changes'3 (11) (12) (13) Bed Size (Rural): Fmt 4701 0-49 beds 50-99 beds Sfmt 4725 100-149 beds 150-199 beds E:\FR\FM\19AUR2.SGM 200 or more beds Urban by Region: New England Middle Atlantic 19AUR2 South Atlantic East North Central East South Central West North Central 341 326 151 59 45 1.0 1.1 1.1 1.0 1.0 -0.7 -0.6 -0.6 -0.2 0.0 -0.4 -0.2 -0.2 -0.3 -0.2 -0.9 -0.7 -0.7 -0.2 -0.2 0.4 1.1 1.9 2.3 2.6 -0.3 -0.3 -0.3 -0.2 -0.3 0.1 0.0 0.1 0.1 0.0 0.2 0.2 0.0 0.0 0.0 -2.8 -4.1 -0.2 0.0 0.0 -0.3 -0.3 -0.3 -0.3 -0.2 0.6 0.3 -0.7 -1.3 -1.3 -2.6 -3.3 -0.6 -0.8 -0.6 120 318 375 0.7 0.7 0.7 -0.1 0.0 0.0 0.2 0.6 -0.4 0.2 0.6 -0.3 0.8 0.3 -0.5 4.3 -0.3 -0.4 0.0 0.0 0.0 0.1 0.0 0.0 0 0.0 -0.1 -0.3 -0.4 -0.2 -1.3 0.4 0.0 0.4 2.0 0.5 395 0.7 0.0 -0.2 -0.1 -0.2 -0.5 0.0 0.0 0.0 -0.3 -0.4 0.3 149 0.7 0.1 -0.3 -0.1 -0.3 -0.4 0.0 0.0 0.0 -0.3 -0.5 0.3 166 0.7 0.2 -0.3 0.0 -0.7 -0.5 0.8 0.0 -0.1 -0.1 -0.4 0.4 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 21:51 Aug 16, 2013 ER19AU13.020</GPH> No. of Hospitals' Hospital Rate Update and Documentation and Coding Adjustment 2 (2) FY 2014 Weights andDRG Changes with Application of Recalibration Budget Neutralit)? mstockstill on DSK4VPTVN1PROD with RULES6 VerDate Mar<15>2010 PO 00000 Frm 00515 Fmt 4701 Sfmt 4725 E:\FR\FM\19AUR2.SGM New England Middle Atlantic 19AUR2 South Atlantic East North Central East South Central West North Central West South Central Mountain (7) 373 156 382 51 0.7 0.8 0.7 0.9 0.1 0.2 0.0 -0.2 -0.5 -0.3 0.8 0.0 -0.3 -0.1 0.9 0.3 -0.7 -0.2 -0.1 -0.8 -0.5 0.0 0.7 0.0 0.0 0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -0.1 -0.1 -0.1 0.0 -0.1 1.2 -2.8 41.3 0.5 1.6 -0.5 41.8 23 69 165 0.9 1.1 0.9 -0.2 -0.5 -0.5 0.0 -0.1 -0.4 -0.1 -0.4 -0.7 3.2 1.7 2.3 -0.5 -0.1 -0.4 0.0 0.0 0.0 0.0 0.1 0.1 -4.2 -3.2 -1.3 0.0 -0.2 -0.3 -0.6 0.8 -0.5 -2.6 -1.1 -1.8 119 1.1 -0.3 -0.2 -0.5 1.2 -0.3 0.0 0.1 -2.3 -0.2 -0.2 -1.4 171 0.9 -0.5 -0.5 -0.7 2.6 -0.5 0.0 0.1 -0.7 -0.4 -1.3 -2.6 99 1.3 -0.3 0.1 -0.1 0.2 -0.2 0.3 0.1 -1.4 -0.1 -0.6 -0.7 181 65 1.0 1.3 -0.6 -0.3 -0.6 0.1 -0.9 -0.1 2.0 0.4 -0.5 -0.1 0.0 0.3 0.2 0.0 -0.9 -0.1 -0.5 -0.1 -0.6 -0.4 -2.3 0.7 Jkt 229001 Puerto Rico Rural by Region: (6) Application of the Frontier Wage Index· FY2014 OutMigration Adjustment" (8) (9) Expiration of MDH Status'O (10) Hospital Readmissions Reduction Program" Changes to Medicare DSH12 (11) (12) All FY 2014 Changes13 (13) Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 21:51 Aug 16, 2013 Pacific (5) FY2014 Wage Data with Application of Wage Budget Neutrality4 (4) (I) Mountain FY2014 MGCRB Reclassifications· Hospital Rate Update and Documentation and Coding Adjustment 2 (2) No. of Hospitals' West South Central FY2014 DRG,Rel. Wts., Wage Index Changes with Wage and Recalibration Budget Neutralitys Rural Floor and Imputed Floor with Application of National Rural Floor Budget Neutrality7 FY 2014 Weights andDRG Changes with Application of Recalibration Budget Neutralitt (3) 51009 ER19AU13.021</GPH> mstockstill on DSK4VPTVN1PROD with RULES6 51010 VerDate Mar<15>2010 -0.6 3.5 0.1 -0.7 -0.5 3.5 0.8 -0.9 0.1 -0.4 0.0 0.0 0.0 0.0 0.1 0.0 -0.1 0.0 -0.7 0.0 0 4.2 2,496 0.7 0.0 0.0 0.1 -0.2 0.0 0.0 0.0 0.0 -0.2 -0.4 0.7 1,380 0.7 0.0 0.1 0.2 -0.3 0.0 0.0 0.0 0.0 -0.3 -0.2 1.0 1,116 911 0.7 1.1 0.1 -0.4 -0.1 -0.3 0.0 -0.5 0.0 1.4 0.1 -0.3 0.1 0.2 0.0 0.1 0.0 -1.6 -0.2 -0.3 -0.7 -0.5 0.2 -1.6 2,380 0.8 -0.1 -0.1 -0.1 0.2 0.1 0.0 0.0 -0.4 -0.2 -0.6 -0.2 785 0.7 0.0 0.0 0.1 -0.1 -0.1 0.1 0.0 0.0 -0.2 -0.5 0.5 242 0.7 0.1 0.2 0.4 -0.1 0.0 0.0 0.0 0.0 -0.2 -0.2 1.4 690 0.7 0.2 0.0 0.2 0.0 0.0 0.1 0.0 -0.3 -0.2 0.0 0.7 PO 00000 Frm 00516 Fmt 4701 Sfmt 4725 E:\FR\FM\19AUR2.SGM 19AUR2 Nonteaching Fewer than 100 residents 100 or more residents (7) 1.3 0.9 Jkt 229001 Rural areas Teaching Status: (6) 29 1 Application of the Frontier Wage Index· FY2014 OutMigration Adjustment" (8) (9) Expiration of MDH Status'O (10) Hospital Readmissions Reduction Program" Changes to Medicare DSH12 (11) (12) All FY 2014 Changes13 (13) Urban DSH: Non-DSH ER19AU13.022</GPH> Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 21:51 Aug 16, 2013 Urban hospitals Large urban areas Other urban areas (5) FY2014 Wage Data with Application of Wage Budget Neutrality4 (4) (I) Puerto Rico By Payment Classification: FY2014 MGCRB Reclassifications· Hospital Rate Update and Documentation and Coding Adjustment 2 (2) No. of Hospitals' Pacific FY2014 DRG,Rel. Wts., Wage Index Changes with Wage and Recalibration Budget Neutralitys Rural Floor and Imputed Floor with Application of National Rural Floor Budget Neutrality7 FY 2014 Weights andDRG Changes with Application of Recalibration Budget Neutralitt (3) mstockstill on DSK4VPTVN1PROD with RULES6 VerDate Mar<15>2010 Jkt 229001 FY2014 MGCRB Reclassifications 6 (5) (6) (7) Application of the Frontier Wage Index8 FY2014 OutMigration Adjustment9 (8) (9) Expiration of MDH StatuslO (10) Hospital Readmissions Reduction Program ll Changes to Medicare DSHI2 All FY 2014 Changesl3 (11) (12) (13) 1,569 0.7 0.0 0.0 0.1 -0.2 0.0 0.0 0.0 0.0 -0.2 -0.5 0.6 331 0.7 -0.4 0.0 -0.3 0.1 0.1 0.2 0.0 -0.6 -0.2 1.4 1.7 265 228 29 1.5 1.0 0.7 -0.8 -0.2 -0.5 -0.1 -0.3 -0.3 -0.9 -0.3 -0.6 0.0 2.2 1.2 0.0 -0.3 -0.4 0.0 0.4 0.0 0.0 0.0 0.1 -0.2 -0.4 -1.9 -0.2 -0.2 -0.3 0.4 -1.5 1.9 -0.7 -1.1 0.4 295 0.7 -0.6 -0.5 -0.9 0.7 -0.4 0.0 0.4 -6.1 -0.4 1.4 -3.9 826 0.7 0.1 0.1 0.2 -0.3 -0.1 0.1 0.0 0.0 -0.2 -0.4 0.9 136 0.7 0.1 0.1 0.3 0.4 0.1 0.0 0.0 0.0 -0.2 0.0 1.3 1,074 0.7 -0.1 -0.1 -0.1 0.0 0.2 0.0 0.0 0.0 -0.2 -0.8 0.1 460 0.7 0.2 0.0 0.3 -0.3 -0.1 0.1 0.1 -0.1 -0.2 0.0 0.9 Fmt 4701 No. of Hospitals l Frm 00517 FY2014 DRG,ReI. Wts., Wage Index Changes with Wage and Recalibration Budget Neutralitys PO 00000 FY2014 Wage Data with Application of Wage Budget Neutrality4 (4) Rural Floor and Imputed Floor with Application of National Rural Floor Budget Neutrality' (I) 100 or more beds Less than 100 beds (3) Rural DSH: Sfmt 4725 SCH RRC E:\FR\FM\19AUR2.SGM 19AUR2 100 or more beds Less than 100 beds Urban teaching and DSH: Both teaching andDSH Teaching and no DSH No teaching and DSH No teaching and noDSH Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 21:51 Aug 16, 2013 Hospital Rate Update and Documentation and Coding Adjustment 2 (2) FY 2014 Weights andDRG Changes with Application of Recalibration Budget Neutralitf 51011 ER19AU13.023</GPH> mstockstill on DSK4VPTVN1PROD with RULES6 51012 VerDate Mar<15>2010 Frm 00518 (6) (7) 207 330 187 124 0.7 1.5 0.7 1.4 -0.1 -0.6 -0.7 -0.3 -0.2 -0.1 -0.7 -0.1 -0.1 -0.7 -1.1 -0.2 3.0 -0.1 0.8 0.4 -0.5 0.0 -0.4 -0.1 0.5 -0.1 0.0 0.0 0.1 0.0 0.3 0.0 -0.6 -0.1 -12.8 0.0 11 0.7 -0.5 0.3 -0.1 2.9 -0.6 0.0 0.1 1,943 900 542 0.7 0.7 0.8 0.0 0.1 -0.1 0.1 -0.2 -0.2 0.1 0.0 -0.2 0.0 0.1 -0.2 0.0 0.0 -0.1 0.1 0.1 0.0 450 2,011 0.7 0.7 0.1 0.0 0.3 0.0 0.5 0.1 -0.4 -0.1 -0.1 0.0 0.0 0.1 Jkt 229001 PO 00000 (5) FY2014 Wage Data with Application of Wage Budget Neutrality4 (4) (I) Application of the Frontier Wage Index' FY2014 OutMigration Adjustment" (8) (9) Expiration of MDH StatuslO (10) Hospital Readmissions Reduction Program l l Fmt 4701 Sfmt 4725 E:\FR\FM\19AUR2.SGM 19AUR2 Changes to Medicare DSHI2 (12) All FY 2014 Changes13 (13) -0.2 -0.2 -0.4 -0.2 -1.5 0.1 0.5 -0.7 -1.0 -0.2 -10.4 0.3 -20 -0.2 -0.4 -15.8 0.0 0.0 0.0 -0.2 -0.2 -0.2 -0.2 -0.3 -0.2 -0.6 -1 0.9 0.4 -0.4 1.7 0.0 0.0 0.0 -0.1 -0.2 -0.2 3.7 -1.1 5.1 0 (11) Special Hospital Types: RRC SCH FormerMDH SCHandRRC FormerMDH andRRC Type of Ownership: Voluntary Proprietary Government Medicare Utilization as a Percent of Inpatient Days: 25-50 ---------- ------ L-_ _ _ _ _ _ _ _ ------- ------- - - - - - - - ------ - - ------ ----- ------- Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 21:51 Aug 16, 2013 FY2014 MGCRB Reclassifications· Hospital Rate Update and Documentation and Coding Adjustment 2 (2) No. of Hospitals l 0-25 ER19AU13.024</GPH> FY2014 DRG,Rel. Wts., Wage Index Changes with Wage and Recalibration Budget Neutralitys Rural Floor and Imputed Floor with Application of National Rural Floor Budget Neutrality7 FY 2014 Weights andDRG Changes with Application of Recalibration Budget Neutrali!)? (3) mstockstill on DSK4VPTVN1PROD with RULES6 VerDate Mar<15>2010 Jkt 229001 PO 00000 (6) (7) Frm 00519 Fmt 4701 Sfmt 4725 E:\FR\FM\19AUR2.SGM 19AUR2 736 139 0.8 0.8 -0.2 -0.4 -0.1 -0.6 -0.2 -0.9 0.6 0.7 0.1 -0.2 0.0 0.0 0.1 0.1 -0.7 -3.4 669 0.8 -0.1 -0.1 -0.1 2.7 0.2 0.0 0.0 2,738 0.7 0.0 0.0 0.1 -0.7 -0.1 0.1 359 0.7 0.0 0.0 0.0 2.7 0.4 2,084 0.7 0.1 0.0 0.2 -0.7 310 1.0 -0.3 -0.3 -0.4 2.7 Application of the Frontier Wage Index· FY2014 OutMigration Adjustment' (8) (9) Expiration of MDH Status'O (10) Hospital Readmissions Reduction Program" Changes to Medicare DSH'2 (12) All FY 2014 Changes13 (13) -0.3 -0.5 -0.6 -0.7 -0.5 -3.5 -0.3 -0.3 -0.8 0.0 0.0 -0.2 -0.2 -0.3 0.6 0.0 0.0 0.0 -0.3 -0.7 0.6 0.0 0.0 0.0 0.0 -0.2 -0.4 0.7 -0.3 0.0 0.0 -1.0 -0.3 -1.2 -1.4 (11) Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 21:51 Aug 16, 2013 (5) FY2014 Wage Data with Application of Wage Budget Neutrality4 (4) (I) Over 65 FY2014 Reclassifications by the Medicare Geographic Classification Review Board: All Reclassified Hospitals Non-Reclassified Hospitals Urban Hospitals Reclassified Urban Nonreclassified Hospitals, FY 2014 All Rural Hospitals Reclassified FY 2014 FY2014 MGCRB Reclassifications· Hospital Rate Update and Documentation and Coding Adjustment 2 (2) No. of Hospitals' 50-65 FY2014 DRG,Rel. Wts., Wage Index Changes with Wage and Recalibration Bndget Neutralitys Rural Floor and Imputed Floor with Application of National Rural Floor Budget Neutrality7 FY 2014 Weights andDRG Changes with Application of Recalibration Budget NeutraliryJ (3) 51013 ER19AU13.025</GPH> mstockstill on DSK4VPTVN1PROD with RULES6 51014 VerDate Mar<15>2010 Frm 00520 (6) (7) 552 1.1 -0.6 -0.2 -0.8 -0.2 -0.3 0.1 0.2 -2.2 49 1.1 -0.3 -0.5 -0.7 0.0 -0.1 2.0 0.0 61 0.9 -0.7 -0.7 -1.2 4.0 -0.4 0.0 15 0.7 1.1 0.1 1.2 -0.8 0.0 0.7 Jkt 229001 PO 00000 (5) FY2014 Wage Data with Application of Wage Budget Neutrality4 (4) (1) Application of the Frontier Wage Index' FY2014 OutMigration Adjustment" (8) (9) Expiration of MDH StatuslO (10) Hospital Readmissions Reduction Program l l Fmt 4701 Sfmt 4725 E:\FR\FM\19AUR2.SGM 19AUR2 Changes to Medicare DSHI2 (12) All FY 2014 Changes13 (13) -0.3 0.6 -2.0 -3.0 -0.1 -0.1 -1.7 0.1 -4.7 -0.2 0.1 -3.2 0.0 0.0 -0.1 -0.2 1.5 (11) 1 Because data necessary to classify some hospitals by category were missing, the total number of hospitals in each category may not equal the national total. Discharge data are from FY 2012, and hospital cost report data are from reporting periods beginning in FY 2010 and FY 2009. 2 This column displays the payment impact of the hospital rate update, the documentation and coding adjustment and the adjustment to offset the costs of the inpatient status policy including the 1.7 percent adjustment to the national standardized amount (the 2.5 percent market basket update reduced by the 0.5 percentage point for the multifactor productivity adjustment and the 0.3 percentage point reduction under the Affordable Care Act) and the 0.8 percent Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 21:51 Aug 16, 2013 ER19AU13.026</GPH> FY2014 MGCRB Reclassifications· Hospital Rate Update and Documentation and Coding Adjustment 2 (2) No. of Hospitals l Rural N onreclassified Hospitals FY 2014 All Section 401 Reclassified Hospitals Other Reclassified Hospitals (Section 1886(d)(8)(B)) Specialty Hospitals Cardiac specialty Hospitals FY2014 DRG,Rel. Wts., Wage Index Changes with Wage and Recalibration Budget Neutralitys Rural Floor and Imputed Floor with Application of National Rural Floor Budget Neutrality7 FY 2014 Weights andDRG Changes with Application of Recalibration Budget Neutrali!)? (3) mstockstill on DSK4VPTVN1PROD with RULES6 VerDate Mar<15>2010 Jkt 229001 PO 00000 Frm 00521 Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 21:51 Aug 16, 2013 documentation and coding adjustment to the national standardized amount and the 0.2 percent adjustment for the policy on admission and medical review criteria applied to the national standardized amount, hospital-specific rate and the Puerto Rico-specific amount. 3 This column displays the payment impact of the changes to the Version 31.0 GROUPER, the changes to the relative weight methodology that uses 19 CCRs as opposed to 15 CCRs, and the recalibration of the MS-DRG weights based on FY 2012 MedPAR data in accordance with section 1886(d)(4)(C)(iii) of the Act. This column displays the application of the recalibration budget neutrality factor of 0.0.997989 in accordance with section 1886(d)(4)(C)(iii) ofthe Act. 4 This column displays the payment impact of the update to wage index data using FY 2010 cost report data and changes to the labor-related share. This column displays the payment impact of the application ofthe wage budget neutrality factor, which is calculated separately from the recalibration budget neutrality factor, and is calculated in accordance with section 1886(d)(3)(E)(i) ofthe Act. The wage budget neutrality factor is 0.999947. 5 This column displays the combined payment impact ofthe changes in Columns 3 through 4 and the cumulative budget neutrality factor for MS-DRG and wage changes in accordance with section 1886(d)(4)(C)(iii) ofthe Act and section 1886(d)(3)(E) of the Act. The cumulative wage and recalibration budget neutrality factor of 0.997936 is the product ofthe wage budget neutrality factor and the recalibration budget neutrality factor. 6 Shown here are the effects of geographic reclassifications by the Medicare Geographic Classification Review Board (MGCRB). The effects demonstrate the FY 2014 payment impact of going from no reclassifications to the reclassifications scheduled to be in effect for FY 2014. Reclassification for prior years has no bearing on the payment impacts shown here. This column reflects the geographic budget neutrality factor of 0.990718. 7 This column displays the effects of the rural floor and imputed floor. The Affordable Care Act requires the rural floor budget neutrality adjustment to be 100 percent national level adjustment. The rural floor budget neutrality factor (which includes the imputed floor) applied to the wage index is 0.990150. 8 This column shows the impact ofthe policy required under section 10324 ofthe Affordable Care Act that hospitals located in frontier States have a wage index no less than 1.0. 9 This column displays the impact of section 1886(d)(13) ofthe Act, as added by section 505 of Pub. L. 108-173, which provides for an increase in a hospital's wage index if the hospital qualifies by meeting a threshold percentage of residents of the county where the hospital is located who commute to work at hospitals in counties with higher wage indexes. 10 This column displays the impact of the expiration ofMDH status for FY 2014, a non-budget neutral payment provision. 11 This column displays the impact of the implementation ofthe Hospital Readmissions Reduction Program, section 3025 of the Affordable Care Act, a nonbudget neutral provision that adjusts a hospital's payment for excess readmissions. 12 This column displays the impact ofthe implementation of section 3133 of the Affordable Care Act that reduces Medicare DSH payments by 75 percent and establishes an additional uncompensated care payment. 13 This column shows the changes in payments from FY 2013 to FY 2014. It reflects the impact of the FY 2014 hospital update, the adjustment for documentation and coding, and the adjustment for the policy on admission and medical review criteria. It also reflects changes in hospitals' reclassification status in FY 2014 compared to FY 2013. It incorporates all ofthe changes displayed in Columns 2, 5, 6, 7, 8, 9, 10, 11 and 12 (the changes displayed in Columns 3 and 4 are included in Column 5). The sum of these impacts may be different from the percentage changes shown here due to rounding and interactive effects. 51015 ER19AU13.027</GPH> 51016 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 BILLING CODE 4120–01–C a. Effects of the Hospital Update, Documentation and Coding Adjustment and Adjustment for the Policy on Admission and Medical Review Criteria (Column 2) As discussed in section II.D. of the preamble of this final rule, this column includes the hospital update, including the 2.5 percent market basket update, the reduction of 0.5 percentage point for the multifactor productivity adjustment, and the 0.3 percentage point reduction in accordance with the Affordable Care Act. In addition, this column includes the FY 2014 documentation and coding recoupment adjustment of ¥0.8 percent on the national standardized amount as part of the recoupment required by section 631 of the ATRA. Finally, we are applying a ¥0.2 percent adjustment to offset the cost of the policy on admission and medical review criteria for hospital inpatient services under Medicare Part A that is applied to the national standardized amount, the hospitalspecific rate, and the Puerto Rico specific rate. As a result, we are making a 0.7 percent update to the national standardized amount. This column also includes the 1.5 percent update to the hospital-specific rates, which includes the 1.7 percent for the hospital update and ¥0.2 percent adjustment to offset the cost of the policy on admission and medical review criteria for hospital inpatient services under Medicare Part A. Overall, hospitals will experience a 0.7 percent increase in payments primarily due to the effects of the hospital update and documentation and coding adjustment on the national standardized amount. Hospitals that are paid under the hospital-specific rate, namely SCHs, will experience a 1.5 percent increase in payments; therefore, hospital categories with SCHs paid under the hospital-specific rate will experience increases in payments of more than 0.7 percent. b. Effects of the Changes to the MS–DRG Reclassifications and Relative Cost-Based Weights With Recalibration Budget Neutrality (Column 3) Column 3 shows the effects of the changes to the MS–DRGs and relative weights with the application of the recalibration budget neutrality factor to the standardized amounts. Section 1886(d)(4)(C)(i) of the Act requires us annually to make appropriate classification changes in order to reflect changes in treatment patterns, technology, and any other factors that may change the relative use of hospital resources. Consistent with section 1886(d)(4)(C)(iii) of the Act, we are calculating a recalibration budget neutrality factor to account for the changes in MS– DRGs and relative weights to ensure that the overall payment impact is budget neutral. As discussed in section II.E. of the preamble of this final rule, the FY 2014 MS– DRG relative weights will be 100 percent cost-based and 100 percent MS–DRGs. For FY 2014, the MS–DRGs are calculated using the FY 2012 MedPAR data grouped to the Version 31.0 (FY 2014) MS–DRGs. In addition, for FY 2014, we are moving from 15 departmental CCRs to 19 departmental VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 CCRs to calculate the cost-based relative weights. The four additional CCRs of implantable devices, CT scan, MRI, and cardiac catheterization have generally increased the relative weight values for surgical MS–DRGs and decreased the relative weight values for medical MS–DRGs. The methodology to calculate the relative weights and the reclassification changes to the GROUPER are described in more detail in section II.H. of the preamble of this final rule. The ‘‘All Hospitals’’ line in Column 3 indicates that changes due to the MS–DRGs and relative weights will result in a 0.0 percent change in payments with the application of the recalibration budget neutrality factor of 0.997989 on to the standardized amount. Hospital categories that generally treat more surgical cases than medical cases will experience increases in their payments due to the changes to the relative weight methodology. Rural hospitals will experience a 0.4 percent decrease in payments because rural hospitals tend to treat fewer surgical cases than medical cases, while teaching hospitals with more than 100 residents will experience an increase in payments by 0.1 percent as those hospitals treat more surgical cases than medical cases. c. Effects of the Wage Index Changes (Column 4) Column 4 shows the impact of updated wage data and the change to the labor-related share with the application of the wage budget neutrality factor. Section 1886(d)(3)(E) of the Act requires that, beginning October 1, 1993, we annually update the wage data used to calculate the wage index. In accordance with this requirement, the wage index for acute care hospitals for FY 2014 is based on data submitted for hospital cost reporting periods beginning on or after October 1, 2009 and before October 1, 2010. The estimated impact of the updated wage data and the laborrelated share on hospital payments is isolated in Column 4 by holding the other payment parameters constant in this simulation. That is, Column 4 shows the percentage change in payments when going from a model using the FY 2013 wage index, based on FY 2009 wage data, the FY 2013 labor-related share of 68.8 percent and having a 100-percent occupational mix adjustment applied, to a model using the FY 2014 pre-reclassification wage index with the labor-related share of 69.6 percent, also having a 100-percent occupational mix adjustment applied, based on FY 2010 wage data (while holding other payment parameters such as use of the Version 31.0 MS–DRG GROUPER constant). The occupational mix adjustment is based on the 2010 occupational mix survey. In addition, the column shows the impact of the application of the wage budget neutrality to the national standardized amount. In FY 2010, we began calculating separate wage budget neutrality and recalibration budget neutrality factors, in accordance with section 1886(d)(3)(E) of the Act, which specifies that budget neutrality to account for wage changes or updates made under that subparagraph must be made without regard to the 62 percent labor-related share guaranteed under section PO 00000 Frm 00522 Fmt 4701 Sfmt 4700 1886(d)(3)(E)(ii) of the Act. Therefore, for FY 2014, we are calculating the wage budget neutrality factor to ensure that payments under updated wage data and the laborrelated share of 69.6 percent are budget neutral without regard to the lower laborrelated share of 62 percent applied to hospitals with a wage index less than or equal to 1.0. In other words, the wage budget neutrality is calculated under the assumption that all hospitals receive the higher laborrelated share of the standardized amount. The wage budget neutrality factor is 0.999947, and the overall payment change is zero percent. Column 4 shows the impacts of updating the wage data using FY 2010 cost reports. Overall, the new wage data and the laborrelated share, combined with the wage budget neutrality adjustment, will lead to a 0.0 percent change for all hospitals as shown in Column 4. In looking at the wage data itself, the national average hourly wage increased 2.4 percent compared to FY 2013. Therefore, the only manner in which to maintain or exceed the previous year’s wage index was to match or exceed the national 2.4 percent increase in average hourly wage. Of the 3,395 hospitals with wage data for both FYs 2013 and 2014, 1,575, or 46.4 percent, will experience an average hourly wage increase of 2.4 percent or more. The following chart compares the shifts in wage index values for hospitals due to changes in the average hourly wage data for FY 2014 relative to FY 2013. Among urban hospitals, none will experience an increase or decrease of more than 5 percent. Among rural hospitals, none will experience an increase or decrease of more than 5 percent. However, 919 rural hospitals will experience increases or decreases of less than 5 percent, while 2,476 urban hospitals will experience increases or decreases of less than 5 percent. These figures reflect changes in the ‘‘prereclassified, occupational mix-adjusted wage index,’’ that is, the wage index before the application of geographic reclassification, the rural and imputed floors, the out-migration adjustment, and other wage index exceptions and adjustments. (We refer readers to sections III.G.2. through III.I. of the preamble of this final rule for a complete discussion of the exceptions and adjustments to the wage index.) We note that the ‘‘post-reclassified wage index’’ or ‘‘payment wage index,’’ the wage index that includes all such exceptions and adjustments (as reflected in Tables 2, 4A, 4B, 4C, and 4F of the Addendum to this final rule, which are available via the Internet on the CMS Web site) is used to adjust the laborrelated share of a hospital’s standardized amount, either 69.6 percent or 62 percent, depending upon whether a hospital’s wage index is greater than 1.0 or less than or equal to 1.0. Therefore, the pre-reclassified wage index figures in the chart below may illustrate a somewhat larger or smaller change than will occur in a hospital’s payment wage index and total payment. The following chart shows the projected impact of changes in the average hourly wage data for urban and rural hospitals. E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 51017 Number of hospitals Percentage change in area wage index values Urban mstockstill on DSK4VPTVN1PROD with RULES6 Increase more than 10 percent ....................................................................................................................................... Increase more than 5 percent and less than 10 percent ................................................................................................ Increase or decrease less than 5 percent ....................................................................................................................... Decrease more than 5 percent and less than 10 percent .............................................................................................. Decrease more than 10 percent ...................................................................................................................................... d. Combined Effects of the MS–DRG and Wage Index Changes (Column 5) Section 1886(d)(4)(C)(iii) of the Act requires that changes to MS–DRG reclassifications and the relative weights cannot increase or decrease aggregate payments. In addition, section 1886(d)(3)(E) of the Act specifies that any updates or adjustments to the wage index are to be budget neutral. We computed a wage budget neutrality factor of 0.999947 and a recalibration budget neutrality factor of 0.997989 (which is applied to the Puerto Rico-specific standardized amount and the hospital-specific rates). The product of the two budget neutrality factors is the cumulative wage and recalibration budget neutrality factor. The cumulative wage and recalibration budget neutrality adjustment is 0.997936, or approximately ¥0.21 percent, which is applied to the national standardized amounts. Because the wage budget neutrality and the recalibration budget neutrality are calculated under different methodologies according to the statute, when the two budget neutralities are combined and applied to the standardized amount, the overall payment impact is not necessarily budget neutral. In this final rule, we are estimating that the changes in the MS–DRG relative weights and updated wage data with wage and budget neutrality applied will result in a 0.1 percent change in payments. e. Effects of MGCRB Reclassifications (Column 6) Our impact analysis to this point has assumed acute care hospitals are paid on the basis of their actual geographic location (with the exception of ongoing policies that provide that certain hospitals receive payments on other bases than where they are geographically located). The changes in Column 6 reflect the per case payment impact of moving from this baseline to a simulation incorporating the MGCRB decisions for FY 2014 which affect hospitals’ wage index area assignments. By Spring of each year, the MGCRB makes reclassification determinations that will be effective for the next fiscal year, which begins on October 1. The MGCRB may approve a hospital’s reclassification request for the purpose of using another area’s wage index value. Hospitals may appeal denials of MGCRB decisions to the CMS Administrator. Further, hospitals have 45 days from publication of the IPPS proposed rule in the Federal Register to decide whether to withdraw or terminate an approved geographic reclassification for the following year. The overall effect of geographic reclassification is required by section 1886(d)(8)(D) of the Act to be budget neutral. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Therefore, for purposes of this impact analysis, we are applying an adjustment of 0.990718 to ensure that the effects of the reclassifications under section 1886(d)(10) of the Act are budget neutral (section II.A. of the Addendum to this final rule). Geographic reclassification generally benefits hospitals in rural areas. We estimate that the geographic reclassification will increase payments to rural hospitals by an average of 1.7 percent. By region, all the rural hospital categories, with the exception of one rural Puerto Rico hospital, will experience increases in payments due to MGCRB reclassifications. Table 9A listed in section VI. of the Addendum to this final rule and available via the Internet on the CMS Web site reflects the reclassifications for FY 2014. f. Effects of the Rural and Imputed Floor, Including Application of National Budget Neutrality (Column 7) As discussed in section III.B. of the preamble of the FY 2009 IPPS final rule, the FY 2010 IPPS/RY 2010 LTCH PPS final rule, the FYs 2011, 2012, and 2013 IPPS/LTCH PPS final rules, and this final rule, section 4410 of Public Law 105–33 established the rural floor by requiring that the wage index for a hospital in any urban area cannot be less than the wage index received by rural hospitals in the same State. We apply a uniform budget neutrality adjustment to the wage index. In addition, the imputed floor, which is also included in the calculation of the budget neutrality adjustment to the wage index, was extended in FY 2012 for 2 additional years. In the past, only urban hospitals in New Jersey received the imputed floor. As discussed in the FY 2013 IPPS/ LTCH PPS final rule (77 FR 53369), we established an alternative temporary methodology for the imputed floor, which resulted in an imputed floor for Rhode Island for FY 2013. For FY 2014, we are extending the imputed rural floor, as calculated under the original methodology and the alternative methodology. The Affordable Care Act requires that we apply one rural floor budget neutrality factor to the wage index nationally, and the imputed floor is part of the rural floor budget neutrality factor applied to the wage index nationally. We have calculated a FY 2014 rural floor budget neutrality factor to be applied to the wage index of 0.990150, which will reduce wage indexes by 0.99 percent. Column 7 shows the projected impact of the rural floor and imputed floor with the national rural floor budget neutrality factor applied to the wage index. The column compares the post-reclassification FY 2014 wage index of providers before the rural floor and imputed floor adjustment and the postreclassification FY 2014 wage index of PO 00000 Frm 00523 Fmt 4701 Sfmt 4700 0 0 2,476 0 0 Rural 0 0 919 0 0 providers with the rural floor and imputed floor adjustment. Only urban hospitals can benefit from the rural and imputed floors. Because the provision is budget neutral, all other hospitals (that is, all rural hospitals and those urban hospitals to which the adjustment is not made) will experience a decrease in payments due to the budget neutrality adjustment that is applied nationally to their wage index. We estimate that 424 hospitals benefit from the rural and imputed floors while the remaining 2,983 IPPS hospitals in our model have their wage index reduced by the rural floor budget neutrality adjustment of 0.990150 (or 0.99 percent). We project that, in aggregate, rural hospitals will experience a 0.3 percent decrease in payments as a result of the application of the rural floor budget neutrality because the rural hospitals do not benefit from the rural floor, but have their wage indexes downwardly adjusted to ensure that the application of the rural floor is budget neutral overall. We project hospitals located in other urban areas (populations of 1 million or fewer) will experience a 0.1 percent increase in payments because those providers benefit from the rural floor. Urban hospitals in the New England region can expect a 4.3 percent increase in payments primarily due to the application of the rural floor in Massachusetts and Connecticut. All 60 urban providers in Massachusetts are expected to receive the rural floor wage index value, including rural floor budget neutrality, of 1.3052 increasing payments, overall, to Massachusetts by an estimated $168 million. During most past years, there have been no IPPS hospitals located in rural areas in Massachusetts. There was one urban IPPS hospital that was reclassified to rural Massachusetts (under section 1886(d)(8)(E) of the Act) which established the Massachusetts rural floor, but the wage index resulting from that hospital’s data was not high enough for any urban hospital to benefit from the rural floor policy. However, for the FY 2012 wage index, the rural floor for Massachusetts was established by the conversion of a CAH to an IPPS hospital that is geographically located in rural Massachusetts. The rural floor in Massachusetts continues to be set by the wage index of the hospital in rural Massachusetts that converted from CAH to IPPS status. We estimate that Massachusetts hospitals will receive approximately a 5.5 percent increase in IPPS payments due to the application of the rural floor in FY 2014. In addition, 19 out of 32 hospitals in Connecticut will increase payments to those rural floor hospitals by $70 million (and, overall, increase payments to the State by an estimated $65 million). Urban Puerto Rico hospitals are expected to experience a 0.0 percent change in E:\FR\FM\19AUR2.SGM 19AUR2 51018 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations payments as a result of the application of a Puerto Rico rural floor with the application of the Puerto Rico rural floor budget neutrality adjustment. Urban Puerto Rico hospitals will receive a rural floor as a result of a one IPPS hospital located in rural Puerto Rico setting the rural floor. We are applying a rural floor budget neutrality factor to the Puerto Rico-specific wage index of 0.990897 or ¥0.9 percent. The Puerto Rico-specific wage index adjusts the Puerto Rico-specific standardized amount, which represents 25 percent of payments to Puerto Rico hospitals. The increases in payments experienced by the urban Puerto Rico hospitals that benefit from a rural floor are offset by the decreases in payments by the nonrural floor urban Puerto Rico hospitals that have their wage indexes downwardly adjusted by the rural floor budget neutrality adjustment. As a result, overall, urban Puerto Rico hospitals will experience a 0.0 percent change in payments due to the application of the rural floor with rural floor budget neutrality. There are 25 hospitals out of the 65 hospitals in New Jersey that benefit from the extension of the imputed floor and will receive the imputed floor wage index value, including the rural floor budget neutrality, of 1.1133, which we estimate will increase payments to those imputed floor hospitals by $29 million (the State, overall, will see an increase in payments of approximately $14 million). Four Rhode Island hospitals will benefit from the imputed rural floor calculated under the alternative methodology and receive an additional $3.5 million (the State, overall, will receive an additional $1.7 million). In response to a public comment addressed in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51593), we are providing the payment impact of the rural floor and imputed floor with budget neutrality at the State level. Column 1 of the table below displays the number of IPPS hospitals located in each State. Column 2 displays the number of hospitals in each State that will receive the rural floor or imputed floor wage index for FY 2014. Column 3 displays the percentage of total payments each State will receive or contribute to fund the rural floor and imputed floor with national budget neutrality. The column compares the postreclassification FY 2014 wage index of providers before the rural floor and imputed floor adjustment and the post-reclassification FY 2013 wage index of providers with the rural floor and imputed floor adjustment. Column 4 displays the estimated payment amount that each State will gain or lose due to the application of the rural floor and imputed floor with national budget neutrality. Comment: Commenters expressed appreciation for the detailed impact analyses provided in the FY 2014 IPPS/LTCH PPS proposed rule. One commenter requested CMS to include an impact table of the rural floor for FY 2015 rule, after the new OMB MSA data are incorporated into our analysis. Response: We appreciate the comments on the analysis in the proposed rule (78 FR 27795 through 27796) and will take this request into consideration for future rulemaking. Comment: Several commenters requested that, for the final rule, CMS include additional analyses related to the national rural floor budget neutrality. The commenters suggested that those analyses include an updated State-by-State impact table that includes the cumulative impact of the rural floor under the IPPS and OPPS, and shows 2 years of the redistribution and a table that projects the estimated 10-year State-specific effects of continuing the current policy. Response: We acknowledge the commenters’ requests for additional analyses on the rural floor budget neutrality policy. We note that the IPPS and OPPS impacts analyses are conducted on different claims data with a different set of providers and set of modeling assumptions; therefore, we cannot logically combine the IPPS and OPPS payment impacts of the rural floor to present in one State-by-State table. Commenters may request to see the OPPS impacts of the rural floor policy through the public comment period for the CY 2014 OPPS/ASC proposed rule that closes on September 6, 2013. In addition, we are unable to provide a Stateby-State impact with 2-year or 10-year projections of the rural floor because the rural floor is based on wage data that are updated annually. Therefore, we believe it would be difficult to accurately portray the rural floor in 10-year projections. We have updated our State-by-State rural floor budget neutrality impact analysis for the FY 2014 IPPS/LTCH PPS final rule. FY 2014 IPPS ESTIMATED PAYMENTS DUE TO RURAL FLOOR AND IMPUTED FLOOR WITH NATIONAL BUDGET NEUTRALITY Number of ospitals (1) mstockstill on DSK4VPTVN1PROD with RULES6 State Number of hospitals receiving rural floor or imputed floor Percent change in payments due to application of rural floor and imputed floor with budget neutrality (2) (3) Alabama ........................................................................................... Alaska .............................................................................................. Arizona ............................................................................................. Arkansas .......................................................................................... California .......................................................................................... Colorado .......................................................................................... Connecticut ...................................................................................... Delaware .......................................................................................... Washington, D.C. ............................................................................. Florida .............................................................................................. Georgia ............................................................................................ Hawaii .............................................................................................. Idaho ................................................................................................ Illinois ............................................................................................... Indiana ............................................................................................. Iowa ................................................................................................. Kansas ............................................................................................. Kentucky .......................................................................................... Louisiana .......................................................................................... Maine ............................................................................................... Massachusetts ................................................................................. Michigan ........................................................................................... Minnesota ........................................................................................ Mississippi ........................................................................................ VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 PO 00000 Frm 00524 Fmt 4701 93 6 57 45 309 46 32 6 7 168 107 14 14 127 89 34 55 65 99 20 61 95 51 65 Sfmt 4700 E:\FR\FM\19AUR2.SGM (4) ¥0.5 3.3 ¥0.3 ¥0.5 1 0.1 4.2 ¥0.6 ¥0.6 ¥0.4 ¥0.5 ¥0.4 ¥0.4 ¥0.6 ¥0.5 ¥0.2 ¥0.4 ¥0.5 ¥0.5 ¥0.5 5.5 ¥0.5 ¥0.5 ¥0.5 3 4 7 0 182 6 19 0 0 7 0 0 0 1 0 0 0 1 3 0 60 0 0 1 19AUR2 Difference (in millions) ¥7.9 4.7 ¥5.3 ¥5.2 94.1 1.3 65.4 ¥2.4 ¥2.6 ¥29.7 ¥12.7 ¥1.2 ¥1.2 ¥27.4 ¥12.8 ¥2.3 ¥3.7 ¥8.3 ¥6.7 ¥2.4 167.6 ¥22.4 ¥9.4 ¥5.3 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 51019 FY 2014 IPPS ESTIMATED PAYMENTS DUE TO RURAL FLOOR AND IMPUTED FLOOR WITH NATIONAL BUDGET NEUTRALITY—Continued Number of ospitals (1) State Number of hospitals receiving rural floor or imputed floor Percent change in payments due to application of rural floor and imputed floor with budget neutrality (2) (3) Missouri ............................................................................................ Montana ........................................................................................... Nebraska .......................................................................................... Nevada ............................................................................................. New Hampshire ............................................................................... New Jersey ...................................................................................... New Mexico ..................................................................................... New York ......................................................................................... North Carolina .................................................................................. North Dakota .................................................................................... Ohio ................................................................................................. Oklahoma ......................................................................................... Oregon ............................................................................................. Pennsylvania .................................................................................... Puerto Rico ...................................................................................... Rhode Island .................................................................................... South Carolina ................................................................................. South Dakota ................................................................................... Tennessee ....................................................................................... Texas ............................................................................................... Utah ................................................................................................. Vermont ........................................................................................... Virginia ............................................................................................. Washington ...................................................................................... West Virginia .................................................................................... Wisconsin ......................................................................................... Wyoming .......................................................................................... mstockstill on DSK4VPTVN1PROD with RULES6 g. Effects of the Application of the Frontier State Wage Index (Column 8) Section 10324(a) of Affordable Care Act requires that we establish a minimum postreclassified wage-index of 1.00 for all hospitals located in ‘‘frontier States.’’ The term ‘‘frontier States’’ is defined in the statute as States in which at least 50 percent of counties have a population density less than 6 persons per square mile. Based on these criteria, four States (Montana, North Dakota, South Dakota, and Wyoming) are considered frontier States and 46 hospitals located in those States will receive a frontier wage index of 1.0000. Although Nevada is also, by definition, a frontier State and was assigned a frontier floor value of 1.0000 for FY 2012, its FY 2013 rural floor value of 1.0256 was greater and, therefore, was the State’s minimum wage index for FY 2013. For FY 2014, its post-reclassification wage index is also above 1.0000, hospitals located in Nevada will not experience a change in payment as a result of this provision. Overall, this provision is not budget neutral and is estimated to increase IPPS operating payments by approximately $60 million or approximately 0.1 percent. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 77 12 23 24 13 64 25 166 87 6 137 86 33 157 52 11 57 19 97 324 32 6 78 49 30 66 11 h. Effects of the Wage Index Adjustment for Out-Migration (Column 9) Section 1886(d)(13) of the Act, as added by section 505 of Public Law 108–173, provides for an increase in the wage index for hospitals located in certain counties that have a relatively high percentage of hospital employees who reside in the county, but work in a different area with a higher wage index. Hospitals located in counties that qualify for the payment adjustment are to receive an increase in the wage index that is equal to a weighted average of the difference between the wage index of the resident county, post-reclassification and the higher wage index work area(s), weighted by the overall percentage of workers who are employed in an area with a higher wage index. There are 250 providers that will receive the out-migration wage adjustment in FY 2014. This out-migration wage adjustment is not budget neutral, and we estimate the impact of these providers receiving the outmigration increase to be approximately $22 million. i. Effects of the Expiration of MDH Special Payment Status (Column 10) Column 10 shows our estimate of the changes in payments due to the expiration of MDH status, a nonbudget neutral payment provision. MDH status had previously PO 00000 Frm 00525 Fmt 4701 Sfmt 4700 (4) ¥0.4 ¥0.1 ¥0.4 1.7 1.9 0.4 ¥0.3 ¥0.6 ¥0.4 ¥0.3 ¥0.4 ¥0.5 ¥0.5 ¥0.5 0 0.5 ¥0.3 ¥0.3 ¥0.3 ¥0.5 ¥0.3 ¥0.4 ¥0.4 ¥0.1 ¥0.4 ¥0.5 ¥0.2 0 4 0 19 9 25 0 0 0 1 7 2 0 11 13 4 5 0 18 3 0 0 1 5 1 2 0 Difference (in millions) ¥10.9 ¥0.4 ¥2.5 11.2 8.6 13.8 ¥1.5 ¥47.7 ¥12.6 ¥0.8 ¥16.9 ¥5.6 ¥4.5 ¥21.0 0.0 1.7 ¥5.4 ¥1.0 ¥7.6 ¥32.2 ¥1.5 ¥0.8 ¥10.7 ¥2.4 ¥3.3 ¥8.0 ¥0.2 expired for FY 2013 under section 3124 of the Affordable Care Act, but was extended for an additional year through FY 2013 under section 606 of the ATRA. Hospitals that qualified to be MDHs receive the higher of payments made under the Federal standardized amount or the payments made under the Federal standardized amount plus 75 percent of the difference between the Federal standardized amount and the hospital-specific rate (a hospital-specific cost-based rate). Because this provision was not budget neutral, the expiration of this payment provision results in a 0.2 percent decrease in payments overall. There are currently 198 MDHs and MDH/RRCs, of which 118 are estimated to be paid under the blended payment of the Federal standardized amount and hospital-specific rate for FY 2013. Because those 118 MDHs will no longer receive the blended payment and will be paid only under the Federal standardized amount in FY 2014, it is estimated that those hospitals will experience an overall decrease in payments of approximately $175 million. j. Effects of the Reductions under the Hospital Readmissions Reduction Program (Column 11) Column 11 shows our estimates of the effects of the policies for reductions in payments under the Hospital Readmissions E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 51020 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Reduction Program, which was established under section 3025 of the Affordable Care Act. The Hospital Readmissions Reduction Program requires a reduction to a hospital’s base operating DRG payments to account for excess readmissions, which is based on a hospital’s risk-adjusted readmission rate during a 3-year period for three applicable conditions: Acute Myocardial Infarction, Heart Failure, and Pneumonia. This provision is not budget neutral. A hospital’s readmission adjustment is the higher of a ratio of the hospital’s aggregate payments for excess readmissions to their aggregate payments for all discharges, or a floor, which has been defined in statute as 0.98 (or a 2.0 percent reduction) for FY 2014. A hospital’s base operating DRG payment (that is, wageadjusted DRG payment amount, as discussed in section V.G. of the preamble of this final rule) is the portion of the IPPS payment subject to the readmissions payment adjustment (DSH, IME, outliers and lowvolume add-on payments are not subject to the readmissions adjustment). In this final rule, we estimate that 2,225 hospitals will have their base operating DRG payments reduced by their hospital-specific readmissions adjustment, resulting in a 0.2 percent decrease, or approximately $227 million, in payments to hospitals overall for FY 2014 relative to no provision. Rural west south central hospitals and hospitals with high Medicare utilization of over 65 percent will experience the highest decreases of 0.5 percent. Puerto Rico hospitals show a zero percent change in payments because they are exempt from the provision. Urban non-DSH hospitals and urban DSH hospitals will experience 0.2 percent decrease in payments under the Hospital Readmissions Reduction Program. k. Effects of the Changes to Medicare DSH Payments (Column 12) Column 12 shows the effects of the implementation of adjustments to Medicare DSH payments made under section 3133 of the Affordable Care Act. Under section 3133, hospitals that are eligible to receive Medicare DSH payments will receive 25 percent of the amount they previously would have received under the current statutory formula for Medicare DSH payments. The remainder, equal to an estimate of 75 percent of what otherwise would have been paid as Medicare DSH payments, reduced to reflect changes in the percentage of individuals under age 65 who are uninsured and additional statutory adjustments, will become available to make additional payments to each hospital that qualifies for Medicare DSH payments. Each Medicare DSH hospital will receive an additional payment based on its estimated share of the total amount of uncompensated care for all Medicare DSHs. The reduction to Medicare DSH payments is not budget neutral. We are establishing that the amount to be distributed on the basis of uncompensated care, which is 75 percent of what otherwise would have been paid for Medicare DSH payment adjustments (that is, Factor 1), is adjusted to 94.3 percent of that amount for changes in the percentage of individuals under age 65 who are uninsured and additional statutory adjustments (that is, VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Factor 1 multiplied by Factor 2). As a result, we project that the reduction of Medicare DSH payments, together with the introduction of the new uncompensated care payment, will reduce payments overall by 0.4 percent as compared to Medicare DSH payments prior to the implementation of section 3133 of the Affordable Care Act. This is less of a reduction to payments than what had been estimated in the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR 27797) because we are finalizing that Factor 2, the changes in the percentage of individuals under age 65 who are uninsured and additional statutory adjustments, is based on a fiscal year estimate of uninsurance, as opposed to a calendar year estimate of uninsurance. The Factor 2 that had been proposed in the FY 2014 IPPS/LTCH PPS proposed rule was 88.8 percent, while the Factor 2 that we are finalizing in this final rule is 94.3 percent, which is less of a reduction to the total amount of payments made for uncompensated care as compared to the proposed rule. The uncompensated care payment has redistributive effects based on a disproportionate share hospital’s low income insured patient days (sum of Medicaid patient days and Medicare SSI patient days) relative to all disproportionate share hospitals Medicaid patient days and Medicare SSI patient days, and the payment amount is not tied to a hospital’s discharges. Urban and rural hospitals located in the Middle Atlantic will experience larger increases of 0.4 percent and 0.8 percent, respectively. Government hospitals and hospitals with low Medicare utilization (Medicare days are less than 25 percent of total inpatient day) will experience some of the largest increases in payments of 0.9 percent and 3.7 percent respectively. l. Effects of All FY 2014 Changes (Column 13) Column 13 shows our estimate of the changes in payments per discharge from FY 2013 and FY 2014, resulting from all changes reflected in this final rule for FY 2014. It includes combined effects of the previous columns in the table. The average increase in payments under the IPPS for all hospitals is approximately 0.5 percent for FY 2014 relative to FY 2013. As discussed in section II.D. of the preamble of this final rule, this column includes the FY 2014 documentation and coding recoupment adjustment of ¥0.8 percent on the national standardized amount as part of the recoupment required under section 631 of the ATRA. In addition, this column includes the annual hospital update of 1.7 percent to the national standardized amount. This annual hospital update includes the 2.5 percent market basket update, the reduction of 0.5 percentage point for the multifactor productivity adjustment, and the 0.3 percentage point reduction under section 3401 of the Affordable Care Act. Finally, it includes the ¥0.2 percent adjustment of the national standardized amount, the hospitalspecific payment rate, and the Puerto Ricospecific rate to offset the costs of the policy on admission and medical review criteria for hospital inpatient services under Medicare Part A. As described in Column 2, the annual hospital update, combined with the PO 00000 Frm 00526 Fmt 4701 Sfmt 4700 documentation and coding adjustment and the adjustment to offset the cost of the policy on admission and medical review criteria for hospital inpatient services under Medicare Part A, will result in a 0.7 percent increase in payments in FY 2014 relative to FY 2013. Column 5 shows an increase in payments by 0.1 percent due to the effects of the cumulative DRG and wage budget neutrality. Column 8 describes an estimated 0.1 percent increase in payments due to the frontier State wage index. Column 10 describes the estimated 0.2 percent decrease in payments due to the expiration of the MDH status under section 606 of the ATRA. Column 11 shows the estimated 0.2 percent decrease in payments due to the reductions in payments under the Hospital Readmissions Reduction Program, which reduce a hospital’s base operating DRG payments by a readmission adjustment factor based on a hospital’s performance on readmissions for specified conditions. Column 12 shows the estimated 0.4 percent decrease in Medicare DSH payments due to the changes made under section 3133 of the Affordable Care Act, which reduces Medicare DSH payments by 75 percent and redistributes the remainder, equal to an estimate of 75 percent of what otherwise would have been paid as Medicare DSH payments, reduced to reflect changes in the percentage of individuals under age 65 who are uninsured, to each hospital that qualifies for Medicare DSH payments as an uncompensated care payment based on the hospital’s relative share of the total amount of uncompensated care. The impact of moving from our estimate of FY 2013 outlier payments, 4.8 percent, to the estimate of FY 2014 outlier payments, 5.1 percent, will result in an increase of 0.3 percent in FY 2014 payments relative to FY 2013. There also might be interactive effects among the various factors comprising the payment system that we are not able to isolate. For these reasons, the values in Column 13 may not equal the sum of the estimated percentage changes described above. Overall payments to hospitals paid under the IPPS are estimated to increase by 0.5 percent for FY 2014. Much of the payment changes among the hospital categories are largely attributed to the reduction in Medicare DSH payment adjustments and the redistribution of a portion of the Medicare DSH payments as an additional payment for a hospital’s relative uncompensated care amount. Hospitals in urban areas will experience a 0.7 percent increase in payments per discharge in FY 2014 compared to FY 2013. Hospital payments per discharge in rural areas are estimated to decrease by 1.6 percent in FY 2014 as compared to FY 2013 largely due to the expiration of MDH status and reductions to Medicare DSH payments. 3. Impact Analysis of Table II Table II presents the projected impact of the changes for FY 2014 for urban and rural hospitals and for the different categories of hospitals shown in Table I. It compares the estimated average payments per discharge for FY 2013 with the average payments per discharge for FY 2014, as calculated under our models. Thus, this table presents, in terms of the average dollar amounts paid per E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations discharge, the combined effects of the changes presented in Table I. The estimated percentage changes shown in the last column of Table II equal the estimated percentage 51021 changes in average payments per discharge from Column 13 of Table I. TABLE II—IMPACT ANALYSIS OF CHANGES FOR FY 2014 ACUTE CARE HOSPITAL OPERATING PROSPECTIVE PAYMENT SYSTEM [Payments per discharge] Average FY 2013 payment per discharge Average FY 2014 payment per discharge All FY 2014 changes (1) mstockstill on DSK4VPTVN1PROD with RULES6 Number of hospitals (2) (3) (4) All Hospitals ................................................................................... By Geographic Location: Urban hospitals ......................................................................... Large urban areas .................................................................... Other urban areas .................................................................... Rural hospitals .......................................................................... Bed Size (Urban): 0–99 beds ................................................................................. 100–199 beds ........................................................................... 200–299 beds ........................................................................... 300–499 beds ........................................................................... 500 or more beds ..................................................................... Bed Size (Rural): 0–49 beds ................................................................................. 50–99 beds ............................................................................... 100–149 beds ........................................................................... 150–199 beds ........................................................................... 200 or more beds ..................................................................... Urban by Region: New England ............................................................................ Middle Atlantic .......................................................................... South Atlantic ........................................................................... East North Central .................................................................... East South Central ................................................................... West North Central ................................................................... West South Central .................................................................. Mountain ................................................................................... Pacific ....................................................................................... Puerto Rico ............................................................................... Rural by Region: New England ............................................................................ Middle Atlantic .......................................................................... South Atlantic ........................................................................... East North Central .................................................................... East South Central ................................................................... West North Central ................................................................... West South Central .................................................................. Mountain ................................................................................... Pacific ....................................................................................... Puerto Rico ............................................................................... By Payment Classification: Urban hospitals ......................................................................... Large urban areas .................................................................... Other urban areas .................................................................... Rural areas ............................................................................... Teaching Status: Nonteaching .............................................................................. Fewer than 100 residents ......................................................... 100 or more residents .............................................................. Urban DSH: Non-DSH .................................................................................. 100 or more beds ..................................................................... Less than 100 beds .................................................................. Rural DSH: SCH .......................................................................................... RRC .......................................................................................... 100 or more beds ..................................................................... Less than 100 beds .................................................................. Urban teaching and DSH: Both teaching and DSH ............................................................ Teaching and no DSH .............................................................. No teaching and DSH .............................................................. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 PO 00000 Frm 00527 Fmt 4701 3,407 10,897 10,948 0.5 2,485 1,370 1,115 922 11,308 11,982 10,487 8,137 11,385 12,106 10,508 8,007 0.7 1 0.2 ¥1.6 624 767 462 420 212 8,716 9,542 10,251 11,643 13,827 8,850 9,550 10,299 11,722 13,973 1.5 0.1 0.5 0.7 1.1 341 326 151 59 45 6,602 7,598 7,911 8,928 9,866 6,428 7,345 7,865 8,860 9,811 ¥2.6 ¥3.3 ¥0.6 ¥0.8 ¥0.6 120 318 375 395 149 166 373 156 382 51 12,375 12,377 10,301 10,497 9,869 11,109 10,341 11,611 14,438 5,593 12,426 12,628 10,356 10,531 9,900 11,150 10,391 11,792 14,363 7,932 0.4 2 0.5 0.3 0.3 0.4 0.5 1.6 ¥0.5 41.8 23 69 165 119 171 99 181 65 29 1 10,933 8,694 7,809 8,333 7,450 8,695 7,058 9,091 11,024 2,799 10,653 8,597 7,672 8,218 7,257 8,636 6,894 9,157 11,021 2,918 ¥2.6 ¥1.1 ¥1.8 ¥1.4 ¥2.6 ¥0.7 ¥2.3 0.7 0.0 4.2 2,496 1,380 1,116 911 11,295 11,971 10,461 8,296 11,374 12,094 10,485 8,165 0.7 1.0 0.2 ¥1.6 2,380 785 242 9,132 10,686 15,910 9,114 10,743 16,128 ¥0.2 0.5 1.4 690 1,569 331 9,471 11,743 8,057 9,538 11,816 8,193 0.7 0.6 1.7 265 228 29 295 8,176 9,080 7,230 6,465 8,118 8,980 7,256 6,215 ¥0.7 ¥1.1 0.4 ¥3.9 826 136 1,074 12,848 10,497 9,634 12,966 10,632 9,640 0.9 1.3 0.1 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2 51022 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations TABLE II—IMPACT ANALYSIS OF CHANGES FOR FY 2014 ACUTE CARE HOSPITAL OPERATING PROSPECTIVE PAYMENT SYSTEM—Continued [Payments per discharge] Number of hospitals Average FY 2013 payment per discharge Average FY 2014 payment per discharge All FY 2014 changes (1) (2) (3) (4) No teaching and no DSH ......................................................... Special Hospital Types: RRC .......................................................................................... SCH .......................................................................................... Former MDH ............................................................................. SCH and RRC .......................................................................... Former MDH and RRC ............................................................. Type of Ownership: Voluntary ................................................................................... Proprietary ................................................................................ Government .............................................................................. Medicare Utilization as a Percent of Inpatient Days: 0–25 .......................................................................................... 25–50 ........................................................................................ 50–65 ........................................................................................ Over 65 ..................................................................................... FY 2014 Reclassifications by the Medicare Geographic Classification Review Board: All Reclassified Hospitals ......................................................... Non-Reclassified Hospitals ....................................................... Urban Hospitals Reclassified ................................................... Urban Nonreclassified Hospitals, FY 2014: ............................. All Rural Hospitals Reclassified FY 2014: ................................ Rural Nonreclassified Hospitals FY 2014: ................................ All Section 401 Reclassified Hospitals: .................................... Other Reclassified Hospitals (Section 1886(d)(8)(B)) .............. Specialty Hospitals Cardiac specialty Hospitals ...................................................... H. Effects of Other Policy Changes mstockstill on DSK4VPTVN1PROD with RULES6 1. Effects of Policy on MS–DRGs for Preventable HACs, Including Infections In section II.F. of the preamble of this final rule, we discuss our implementation of section 1886(d)(4)(D) of the Act, which requires the Secretary to identify conditions that are: (1) High cost, high volume, or both; (2) result in the assignment of a case to an MS–DRG that has a higher payment when present as a secondary diagnosis; and (3) could reasonably have been prevented through application of evidence-based guidelines. For discharges occurring on or after October 1, 2008, hospitals will not receive additional payment for cases in which one of the selected conditions was not present on admission, unless, based on data and clinical judgment, it cannot be determined at the time of admission whether a condition is present. That is, the case will be paid as though the secondary diagnosis were not present. However, the statute also requires the Secretary to continue counting the condition as a secondary diagnosis that results in a higher IPPS payment when doing the budget neutrality calculations for MS– DRG reclassifications and recalibration. Therefore, we will perform our budget neutrality calculations as though the payment provision did not apply, but Medicare will make a lower payment to the hospital for the specific case that includes VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 460 9,061 9,140 0.9 207 330 187 124 11 9,375 8,837 6,904 9,958 9,052 9,281 8,822 6,185 9,993 7,621 ¥1.0 ¥0.2 ¥10.4 0.3 ¥15.8 1,943 900 542 11,053 9,739 11,686 11,102 9,699 11,880 0.4 ¥0.4 1.7 450 2,011 736 139 14,649 11,082 8,856 7,374 15,395 11,080 8,811 7,116 5.1 0.0 ¥0.5 ¥3.5 669 2,738 359 2,084 310 552 49 61 10,264 11,075 11,065 11,375 8,639 7,462 9,838 7,826 10,268 11,139 11,128 11,459 8,523 7,315 9,675 7,579 0.0 0.6 0.6 0.7 ¥1.4 ¥2.0 ¥1.7 ¥3.2 15 11,699 11,878 1.5 the secondary diagnosis. Thus, the provision results in cost savings to the Medicare program. We note that the provision will only apply when one or more of the selected conditions are the only secondary diagnosis or diagnoses present on the claim that will lead to higher payment. Medicare beneficiaries will generally have multiple secondary diagnoses during a hospital stay, such that beneficiaries having one MCC or CC will frequently have additional conditions that also will generate higher payment. Only a small percentage of the cases will have only one secondary diagnosis that would lead to a higher payment. Therefore, if at least one nonselected secondary diagnosis that leads to higher payment is on the claim, the case will continue to be assigned to the higher paying MS–DRG and there will be no Medicare savings from that case. In addition, as discussed in section II.F.3. of the preamble of this final rule, it is possible to have two severity levels where the HAC does not affect the MS–DRG assignment or for an MS–DRG not to have severity levels. In either of these circumstances, the case will continue to be assigned to the higher paying MS–DRG and there will be no Medicare savings from that case. The HAC payment provision went into effect on October 1, 2008. Our savings estimates for the next 5 fiscal years are shown below: PO 00000 Frm 00528 Fmt 4701 Sfmt 4700 Year FY FY FY FY FY 2014 2015 2016 2017 2018 ............................ ............................ ............................ ............................ ............................ Savings (in millions) $26 28 30 33 36 In section V.I. of the preamble of this final rule, we are implementing the HAC Reduction Program. We refer readers to section I.H.6. of this Appendix A for a discussion of the impact of this implementation. 2. Effects of Policy Relating to New Medical Service and Technology Add-On Payments In section II.I. of the preamble to this final rule, we discuss three applications (KcentraTM, Argus® II Retinal Prosthesis System and the Zilver® PTX® Drug Eluting Peripheral Stent) for add-on payments for new medical services and technologies for FY 2014, as well as the status of the new technology that was approved to receive new technology add-on payments in FY 2013. We note that two of the applications (the NeuroPace Responsive Neurostimulator System (RNS) System and the Abbott Vascular MitraClip® System) discussed in the proposed rule did not receive FDA approval by the July 1 deadline as required by the regulations at 42 CFR 412.87(c). Therefore, E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations we did not review these two applications in this final rule. As explained in the preamble to this final rule, add-on payments for new medical services and technologies under section 1886(d)(5)(K) of the Act are not required to be budget neutral. As discussed in section II.I.4. of the preamble of this final rule, we are approving all three applications for new technology add-on payments for FY 2014. As we proposed, in this final rule, we also are continuing to make new technology add-on payments in FY 2014 for Voraxaze®, DificidTM, and the Zenith® F. Graft (because all these technology are still within the 3year anniversary of the product’s entry onto the market). We note that new technology add-on payments per case are limited to the lesser of: (1) 50 percent of the costs of the new technology; or (2) 50 percent of the amount by which the costs of the case exceed the standard MS–DRG payment for the case. Because it is difficult to predict the actual new technology add-on payment for each case, our estimates below are based on the increase in add-on payments for FY 2014 as if every claim that would qualify for a new technology add-on payment would receive the maximum add-on payment. Based on the applicant’s estimate from FY 2013, we currently estimate that new technology addon payments for Voraxaze® will increase overall FY 2014 payments by $6,300,000. Based on the applicant’s estimate from FY 2013, we currently estimate that new technology add-on payments for DificidTM will increase overall FY 2014 payments by $34,839,784. Based on the applicant’s estimate from FY 2013, we currently estimate that new technology add-on payments for the Zenith® F. Graft will increase overall FY 2014 payments by $4,085,750. Based on the applicant’s estimate for FY 2014, we currently estimate that new technology addon payments for KcentraTM will increase overall FY 2014 payments by $5,449,888 (maximum add on payment of $1,587.50 * 3,433 patients). Based on the applicant’s estimate for FY 2014, we currently estimate that new technology add-on payments for the Argus® II Retinal Prosthesis System will increase overall FY 2014 payments by $3,601,437 (maximum add on payment of $72,028.75 * 50 patients). Based on the applicant’s estimate for FY 2014, we currently estimate that new technology addon payments for the the Zilver® PTX® Drug Eluting Peripheral Stent will increase overall FY 2014 payments by $20,463,000 (maximum add on payment of $1,705.25 * 12,000 patients). 3. Effects of the Payment Adjustment for Low-Volume Hospitals for FY 2014 In section V.C. of the preamble to this final rule, we discuss the provisions of the ATRA (Pub. L. 112–240) that extended for an additional year, through FY 2013, the temporary changes to the low-volume hospital definition and the methodology for determining the payment adjustment made by the Affordable Care Act for FYs 2011 and 2012. In accordance with section 1886(d)(12) of the Act, beginning with FY 2014, the lowvolume hospital definition and payment adjustment methodology revert back to the statutory requirements that were in effect VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 prior to the amendments made by the Affordable Care Act. Therefore, effective for FY 2014 and subsequent years, in order to qualify as a low-volume hospital, a subsection (d) hospital must be more than 25 road miles from another subsection (d) hospital and have less than 200 discharges (that is, less than 200 discharges total, including both Medicare and non-Medicare discharges) during the fiscal year. Based on FY 2012 claims data (March 2013 update of the MedPAR file), we estimate that approximately 592 hospitals qualify as a lowvolume hospital in FY 2013, and with the statutory changes to the low-volume hospital payment adjustment for FY 2014, we estimate only approximately 6 hospitals will continue to qualify as a low-volume hospital in FY 2014. We project that the expiration of the temporary changes to the low-volume hospital definition and the payment adjustment methodology made by the Affordable Care Act and extended by the ATRA will result in a decrease in payments of approximately $266 million in FY 2014 as compared to the payments these hospitals would have otherwise received in FY 2014 in the absence of the statutory changes to the low-volume hospital payment adjustment for FY 2014. This estimate accounts for our projection of the 6 IPPS low-volume hospitals remaining in FY 2014 that will continue to receive a low-volume hospital payment adjustment of an additional 25 percent. 4. Effects of Extension of the MDH Program through FY 2013 In section V.F. of the preamble of this final rule, we briefly discuss the statutory extension of the MDH program through FY 2013 made by section 606 of the ATRA. We refer readers to a March 7, 2013 notice that we published in the Federal Register to announce the extension of the MDH program for FY 2013 in accordance with this ATRA provision, where we also stated the impact on Medicare expenditures of the statutory extension (78 FR 14689). 5. Effects of Changes under the FY 2014 Hospital Value-Based Purchasing (VBP) Program Section 1886(o)(1)(B) of the Act directs the Secretary to begin making value-based incentive payments under the Hospital VBP Program to hospitals that meet performance standards during the performance period for discharges occurring on or after October 1, 2012. These incentive payments will be funded for FY 2014 through a reduction to the FY 2014 base operating DRG payment for each discharge of 1.25 percent, as required by section 1886(o)(7)(B) of the Act. The applicable percentage for FY 2014 is 1.25 percent, for FY 2015 is 1.5 percent, for FY 2016 is 1.75 percent, and for FY 2017 and subsequent years is 2 percent. We are required to ensure that the total amount available for value-based incentive payments is equal to the total amount of reduced payments for all hospitals for the fiscal year, as estimated by the Secretary. We finalized numerous policies related to the FY 2014 Hospital VBP Program in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74527 through 74547) and the PO 00000 Frm 00529 Fmt 4701 Sfmt 4700 51023 FY 2013 IPPS/LTCH PPS final rule (77 FR 53567 through 53614), including an additional measure in the Clinical Process of Care domain, minimum numbers of cases and measures for the Outcome domain, performance and baseline periods for FY 2014 measures, performance standards, domain weighting, and requirements for the review and corrections processes. We also refer readers to the Hospital Inpatient VBP Program final rule (76 FR 26495 through 26511) where we finalized three 30-day mortality measures, to be placed in the new Outcome domain for the FY 2014 Hospital VBP Program. In section V.H. of the preamble of this final rule, we estimate the available pool of funds for value-based incentive payments in the FY 2014 Hospital VBP Program, which, in accordance with section 1886(o)(7)(C)(ii) of the Act, will be 1.25 percent of base operating DRG payments, or a total of approximately $1.1 billion. This estimated available pool for FY 2014 is based on the historical pool of hospitals that were eligible to participate in the FY 2013 Hospital VBP Program and the payment information from the March 2013 update to the FY 2012 MedPAR file. The estimated impacts of the FY 2014 Hospital VBP Program by hospital characteristic, found in the table below, are based on historical TPSs. We used the FY 2013 Hospital VBP Program TPSs to calculate the proxy adjustment factors used for this impact analysis. These are the most recently available scores that hospitals were given an opportunity to review and correct. The proxy adjustment factors use estimated annual base operating DRG payment amounts derived from the March 2013 update to the FY 2012 MedPAR file. The proxy adjustment factors can be found in Table 16A associated with this final rule (available on the CMS Web site). The impact analysis shows that, for the FY 2014 Hospital VBP Program, the number of hospitals that will receive an increase in base operating DRG payment amount is slightly higher than the number of hospitals that will receive a decrease. Approximately 44 percent of hospitals would have a change in base operating DRG payment amount that is between ¥0.2 percent and +0.2 percent. Among urban hospitals, those in the West South Central region will have the highest average increase in base operating DRG payment amount, and among rural hospitals, those in the East North Central region will have the highest average increase in base operating DRG payment amount. Both urban and rural hospitals in the Middle Atlantic and Pacific will receive an average decrease in base operating DRG payment amount. As the percent of disproportionate share (DSH) payments increases, we see a decrease in base operating DRG payment amount, while as the Medicare utilization (MCR) percent increases, we see an increase in base operating DRG payment amount. Nonteaching hospitals will have an average positive adjustment to the base operating DRG payment amount, and teaching hospitals will have an average decrease in base operating DRG payment amount. The table, ‘‘Impact Analysis of Base Operating DRG Payment Amount Changes Resulting E:\FR\FM\19AUR2.SGM 19AUR2 51024 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations from the FY 2014 Hospital VBP Program’’ below reflects two changes, as compared to the corresponding table in the proposed rule. First, the table now lists the straight averages of percent change in the base operating DRG payment amount, while the proposed rule displayed case-weighted averages. Second, the variable used to identify teaching hospitals has been updated to the IME adjustment factor for Operating PPS (TCHOP), while the proposed rule used the transfer adjusted cases under Grouper V30, for Medicare Advantage cases submitted by teaching hospitals that receive a Fee-ForService IME payment (IME_CASETA30). IMPACT ANALYSIS OF BASE OPERATING DRG PAYMENT AMOUNT CHANGES RESULTING FROM THE FY 2014 HOSPITAL VBP PROGRAM Number of hospitals mstockstill on DSK4VPTVN1PROD with RULES6 BY GEOGRAPHIC LOCATION: All Hospitals ...................................................................................................................................................... Large Urban .............................................................................................................................................. Other Urban ............................................................................................................................................... Rural Area ................................................................................................................................................. Urban hospitals ................................................................................................................................................. 0–99 beds .................................................................................................................................................. 100–199 beds ............................................................................................................................................ 200–299 beds ............................................................................................................................................ 300–499 beds ............................................................................................................................................ 500 or more beds ...................................................................................................................................... Rural hospitals .................................................................................................................................................. 0–49 beds .................................................................................................................................................. 50–99 beds ................................................................................................................................................ 100–149 beds ............................................................................................................................................ 150–199 beds ............................................................................................................................................ 200 or more beds ...................................................................................................................................... BY REGION: Urban By Region .............................................................................................................................................. New England ............................................................................................................................................. Middle Atlantic ........................................................................................................................................... South Atlantic ............................................................................................................................................ East North Central ..................................................................................................................................... East South Central .................................................................................................................................... West North Central .................................................................................................................................... West South Central ................................................................................................................................... Mountain .................................................................................................................................................... Pacific ........................................................................................................................................................ Rural By Region ............................................................................................................................................... New England ............................................................................................................................................. Middle Atlantic ........................................................................................................................................... South Atlantic ............................................................................................................................................ East North Central ..................................................................................................................................... East South Central .................................................................................................................................... West North Central .................................................................................................................................... West South Central ................................................................................................................................... Mountain .................................................................................................................................................... Pacific ........................................................................................................................................................ BY MCR PERCENT: 0–25 .................................................................................................................................................................. 25–50 ................................................................................................................................................................ 50–65 ................................................................................................................................................................ Over 65 ............................................................................................................................................................. BY DSH PERCENT: 0–25 .................................................................................................................................................................. 25–50 ................................................................................................................................................................ 50–65 ................................................................................................................................................................ Over 65 ............................................................................................................................................................. BY TEACHING STATUS: Teaching ........................................................................................................................................................... Non-Teaching ................................................................................................................................................... We have provided the updated impact analysis for this FY 2014 IPPS/LTCH PPS final rule; however, actual FY 2014 Hospital VBP Program TPSs will not be reviewed and corrected by hospitals until after the FY 2014 IPPS/LTCH PPS final rule has been published. Therefore, the same historical universe of eligible hospitals and corresponding TPSs from the FY 2013 Hospital VBP Program was used for the VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 updated impact analysis. As noted above, the updated impact analysis for this final rule reflects estimated annual base operating DRG payment amount changes based on the March 2013 update to the FY 2012 MedPAR file. 6. Effects of Implementation of the HAC Reduction Program In section V.I. of the preamble of this final rule, we are establishing measures, scoring, PO 00000 Frm 00530 Fmt 4701 Sfmt 4700 Average (in percent) 2,984 1,226 1,015 740 2,241 465 717 435 421 203 740 162 324 150 57 47 0.023 0.018 0.048 ¥0.003 0.032 0.180 ¥0.001 0.017 ¥0.023 ¥0.050 ¥0.003 0.058 ¥0.042 0.007 0.009 0.003 2,241 113 295 356 373 129 155 314 155 351 740 21 64 143 117 114 85 114 54 28 0.032 ¥0.004 ¥0.064 0.072 0.046 0.021 0.104 0.117 0.043 ¥0.040 ¥0.003 0.015 ¥0.139 0.005 0.090 0.014 0.003 ¥0.022 ¥0.044 ¥0.075 288 1,715 853 79 0.016 0.026 0.018 0.038 1,429 1,257 157 138 0.085 ¥0.008 ¥0.070 ¥0.226 995 1,986 ¥0.027 0.048 and a risk adjustment methodology to implement the FY 2015 payment reduction under the HAC Reduction Program. Section 1886(p) of the Act, as added under section 3008(a) of the Affordable Care Act, establishes an adjustment to hospital payments for HACs, or a HAC Reduction program, under which payments to applicable hospitals are adjusted to provide an incentive to reduce HACs, effective for E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations discharges beginning on October 1, 2014 and for subsequent program years. We note that there is no payment impact for FY 2014. For FY 2015, we are presenting the overall impact of the HAC Reduction Program provision along with other IPPS payment provision impacts in section I.G. of this Appendix A. The tables and analyses that we are presenting below show the distributional effect of the measures and scoring system for this program included in this final rule. We note that we intend to finalize a Total HAC Score methodology that assigns weights for Domain 1 and Domain 2 at 35 percent and 65 percent, respectively. Based on this methodology, the table below presents data on the proportion of hospitals, by structural characteristic, in the worst performing quartile based on the 35/65 weighting scheme. The data for this simulation are derived from the AHRQ PSI results based on Medicare fee-for-service (FFS) discharges from July 2009 through June 2011, using the enrollment database ‘‘PARA’’ variable to identify Medicare FFS discharges and version 4.4 of the AHRQ software. The CDC measure results were used based on results posted on the Hospital Compare Web site in December 2012. To analyze the results by hospital characteristic, the hospital characteristics as reported in the American Hospital Association 2010 survey data and the FY 2013 impact file were used. Of the 3,468 hospitals included in this analysis, 3,339 hospitals were included for bed size, teaching status, and ownership; 3,458 hospitals were included for urbanicity; 3,414 hospitals were included in the disproportionate share percentage (DSH); and 3,468 hospitals were included for region. These differences in denominator are due to the source of the hospital characteristic data. The percentages indicate how many hospitals at each level of a characteristic would be penalized by the scoring approach. For example, in regards to bed size, 18.1 percent of hospitals (or 119 hospitals) with fewer than 50 beds would be subject to a payment adjustment, 26.6 percent of hospitals (or 181 hospitals) with a bed size range of 50–99 would be subject to a payment adjustment, 22.8 percent of hospitals (or 204 hospitals) with a bed size range of 100–199 would be subject to a payment adjustment, 26.0 percent of hospitals (or 133 hospitals) with a bed size range of 200–299 would be subject to a payment adjustment, 26.5 percent of hospitals (or 71 hospitals) with a bed size range of 300–399 would be subject to a payment adjustment, 29.6 percent of hospitals (or 37 hospitals) with a bed size range of 400–499 would be subject to a payment adjustment, and 36.6 percent of hospitals (or 75 hospitals) with a bed size range of 500 plus would be subject to a payment adjustment. With regard to the teaching status characteristic of hospitals in the worst performing quartile, 48.6 percent of hospitals (or 134 hospitals) that are teaching facilities would be subject to a payment adjustment, and 22.4 percent (or 686 hospitals) that are nonteaching facilities would be subject to a payment adjustment. With regard to the ownership characteristic of hospitals in the worst performing quartile, 25.2 percent of hospitals (or 511 hospitals) that are non-profit facilities would be subject to a payment adjustment, 26.5 percent of hospitals (or 148 hospitals) that are government facilities would be subject to a payment adjustment, and 21.3 percent (or 161 hospitals) that are for-profit facilities would be subject to a payment adjustment. With regard to the disproportionate share percentage (DSH) characteristic, 19.4 percent 51025 (or 145 hospitals) that are not DSH facilities would be subject to a payment adjustment, 22.6 percent (or 149 hospitals) that are DSH Quartile 1 facilities would be subject to a payment adjustment, 22.6 percent (or 150 hospitals) that are DSH Quartile 2 facilities would be subject to a payment adjustment, 27.8 percent (or 186 hospitals) that are DSH Quartile 3 facilities would be subject to a payment adjustment, and 29.7 percent (or 200 hospitals) that are DSH Quartile 4 facilities would be subject to a payment adjustment. With regard to regional characteristic of hospitals in the worst performing quartile, 22.4 percent (or 32 hospitals) that are located in the New England region would be subject to a payment adjustment, 26.4 percent (or 103 hospitals) that are located in the MidAtlantic region would be subject to a payment adjustment, 24.9 percent (or 131 hospitals) that are located in the East North Central region would be subject to a payment adjustment, 25.8 percent (or 71 hospitals) that are located in the West North Central region would be subject to a payment adjustment, 26.0 percent (or 152 hospitals) that are located in the South Atlantic region would be subject to a payment adjustment, 20.1 percent (or 66 hospitals) that are located in the East South Central region would be subject to a payment adjustment, 21.9 percent (or 124 hospitals) that are located in the West South Central region would be subject to a payment adjustment, 24.2 percent (or 58 hospitals) that are located in the Mountain region would be subject to a payment adjustment, and 25.3 percent (or 105 hospitals) that are located in the Pacific region would be subject to a payment adjustment. PROPORTION OF HOSPITALS IN THE WORST PERFORMING QUARTILE (>75TH PERCENTILE) OF THE TOTAL HAC SCORE BY HOSPITAL CHARACTERISTIC AND BY SIMULATION WITH THE 35/65 WEIGHTING SCHEME Hospital characteristics Simulation with the 35/65 weighting scheme in worst performing quartile Number of hospitals mstockstill on DSK4VPTVN1PROD with RULES6 Characteristic Bed Size: <50 ............................................................................................................ 50–99 ........................................................................................................ 100–199 .................................................................................................... 200–299 .................................................................................................... 300—399 .................................................................................................. 400—499 .................................................................................................. 500+ .......................................................................................................... Teaching Status: Teaching ................................................................................................... NonTeaching ............................................................................................ Ownership: Non-Profit .................................................................................................. Government .............................................................................................. For-Profit ................................................................................................... Urbanicity: Urban ........................................................................................................ Rural ......................................................................................................... Disproportionate Share Percentage: Non-DSH .................................................................................................. DSH Quartile 1 ......................................................................................... DSH Quartile 2 ......................................................................................... VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 PO 00000 Frm 00531 Fmt 4701 Sfmt 4700 Percent Number of hospitals Percent 656 680 893 512 268 125 205 19.6 20.4 26.7 15.3 8.0 3.7 6.1 119 181 204 133 71 37 75 18.1 26.6 22.8 26.0 26.5 29.6 36.6 276 3,063 8.3 91.7 134 686 48.6 22.4 2,026 558 755 60.7 16.7 22.6 511 148 161 25.2 26.5 21.3 2,493 965 72.1 27.9 639 201 25.6 20.8 749 658 665 21.9 19.3 19.5 145 149 150 19.4 22.6 22.6 E:\FR\FM\19AUR2.SGM 19AUR2 51026 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations PROPORTION OF HOSPITALS IN THE WORST PERFORMING QUARTILE (>75TH PERCENTILE) OF THE TOTAL HAC SCORE BY HOSPITAL CHARACTERISTIC AND BY SIMULATION WITH THE 35/65 WEIGHTING SCHEME—Continued Hospital characteristics Simulation with the 35/65 weighting scheme in worst performing quartile Number of hospitals Characteristic mstockstill on DSK4VPTVN1PROD with RULES6 DSH Quartile 3 ......................................................................................... DSH Quartile 4 ......................................................................................... Region: New England ............................................................................................ Mid-Atlantic ............................................................................................... East North Central .................................................................................... West North Central ................................................................................... South Atlantic ........................................................................................... East South Central ................................................................................... West South Central .................................................................................. Mountain ................................................................................................... Pacific ....................................................................................................... 7. Effects of the Policy Changes Relating to Payments for GME and IME In section V.J.2. of the preamble of this final rule, we discuss our policy to include labor and delivery days in the Medicare utilization calculation. We are establishing, consistent with the inpatient day counting rules for DSH as clarified in the FY 2010 IPPS/RY 2010 LTCH PPS final rule, that effective for cost reporting periods beginning on or after October 1, 2013, for purposes of applying the Medicare utilization ratio, we will include labor and delivery inpatient days in the numerator (to the extent that there are any labor and delivery inpatient days associated with Medicare beneficiaries), and all labor and delivery inpatient days in the denominator (associated with all inpatients of the hospital). In addition to payments for direct GME, we believe this policy also will affect other Medicare policies where either the number of inpatient days or a ratio of Medicare inpatient days to total inpatient days is used to determine eligibility or payment. However, this policy will not impact Medicare payments calculated on a reasonable cost basis for routine inpatient services, which are apportioned in accordance with 42 CFR 413.53(a)(1). We believe that including labor and delivery days in the Medicare utilization calculation will result in a savings of approximately $19 million for FY 2014. We note that the projected savings of $19 million included in this final rule are somewhat higher than the projected savings of $15 million included in the FY 2014 IPPS/LTCH PPS proposed rule because there were a greater number of teaching hospitals included in the data used for the purpose of determining the impact of this finalized policy. As discussed in section V.J.3. of the preamble of this final rule, in accordance with section 5506 of the Affordable Care Act which instructs the Secretary to establish a process to increase the FTE resident caps for other hospitals based upon the FTE resident caps in teaching hospitals that closed ‘‘on or after a date that is 2 years before the date of enactment’’ (that is March 23, 2008), we notify the public of the closure of two VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 Frm 00532 Fmt 4701 Sfmt 4700 Number of hospitals Percent 669 673 19.6 19.7 186 200 27.8 29.7 143 390 526 275 584 329 566 240 415 4.1 11.2 15.2 7.9 16.8 9.5 16.3 6.9 12.0 32 103 131 71 152 66 124 58 105 22.4 26.4 24.9 25.8 26.0 20.1 21.9 24.2 25.3 teaching hospitals and the initiation of another round of the section 5506 application and selection process to redistribute FTE resident slots. We are initiating ‘‘Round 6’’ of section 5506, to redistribute the FTE resident slots of Cooper Green Mercy Hospital in Birmingham, AL, which closed on January 1, 2013, and Sacred Heart Hospital in Chicago, IL, which closed July 20, 2013. We are using this final rule as a vehicle to initiate another round of the section 5506 application and selection process, which is an ongoing provision triggered each time a teaching hospital closes. Therefore, there is no impact for this provision. In section V.J.4. of the preamble of this final rule, we are establishing that another IPPS or IPPS-excluded hospital may not count the resident(s) training at the CAH for IME and/or direct GME purposes, even if that hospital is paying for the residents’ salary and fringe benefits. Specifically, we are establishing that, effective for portions of cost reporting periods occurring on or after October 1, 2013, a hospital may not claim the FTE residents that are training at a CAH for IME and/or direct GME purposes. However, under policies that were applicable prior to October 1, 2013 and that continue to apply on and after October 1, 2013, the CAH may incur the costs of training the FTE residents for the time that the FTE residents rotate to the CAH, and receive payment based on 101 percent of its Medicare reasonable costs under 42 CFR 413.70. We do not believe that there is any financial impact of this policy, as we are not precluding all Medicare payment for residents training at CAHs. Rather, we are precluding payment to one group of providers (that is, hospitals), but continuing to allow payment to another group (that is, CAHs). Under the previous policy, either a hospital could receive IME and direct GME payment for the time spent by residents training at a CAH if the hospital incurred the cost of that training, or the CAH could receive payment under § 413.70 if the CAH incurred the training cost. Under the policy finalized in this rule, hospitals will no longer be allowed to receive IME and direct GME payment for the costs associated with PO 00000 Percent training residents at a CAH. However, CAHs can continue to receive payment under § 413.70 for the allowable costs associated with training residents at a CAH in approved residency training programs. In section V.J.5. of the preamble of this final rule, we discuss the provisions of section 711 of the Medicare Modernization Act (Pub. L. 108–173) which amended section of 1886(h)(2)(D)(iv)(I) of the Act to freeze annual CPI–U updates to hospitalspecific PRAs for direct GME payment purposes for those PRAs that exceed the ceiling for FYs 2004 through 2013. Therefore, the ‘‘freeze’’ for PRAs that exceed the ceiling expires beginning in FY 2014. That is, for cost reporting periods beginning on or after October 1, 2013, the usual full CPI–U update, as determined under 42 CFR 413.77(c)(1) will apply to all PRAs for direct GME payment purposes. We note that we are not establishing any policies related to this provision in this final rule. We are merely providing notice to the public that a statutory provision will no longer apply in FY 2014. 8. Effects of Implementation of Rural Community Hospital Demonstration Program In section V.K. of the preamble of this final rule, we discuss our implementation of section 410A of Public Law 108–173, as amended, which requires the Secretary to conduct a demonstration that would modify reimbursement for inpatient services for up to 30 rural community hospitals. Section 410A(c)(2) requires that ‘‘[i]n conducting the demonstration program under this section, the Secretary shall ensure that the aggregate payments made by the Secretary do not exceed the amount which the Secretary would have paid if the demonstration program under this section was not implemented.’’ As discussed in section V.K. of the preamble of this final rule, in the IPPS final rules for each of the previous 9 fiscal years, we have estimated the additional payments made by the program for each of the participating hospitals as a result of the demonstration. In order to achieve budget neutrality, we are adjusting the national IPPS rates by an amount sufficient to account for the added costs of this demonstration. In E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations other words, we are applying budget neutrality across the payment system as a whole rather than across the participants of this demonstration. The language of the statutory budget neutrality requirement permits the agency to implement the budget neutrality provision in this manner. The statutory language requires that ‘‘aggregate payments made by the Secretary do not exceed the amount which the Secretary would have paid if the demonstration . . . was not implemented’’ but does not identify the range across which aggregate payments must be held equal. We are adjusting the national IPPS rates according to the methodology set forth elsewhere in this final rule. The adjustment to the national IPPS rates to account for estimated demonstration cost for FY 2014 for the 7 ‘‘pre-expansion’’ participating hospitals that are currently participating in the demonstration and the 15 additional hospitals participating as a result of the expansion of the demonstration under the Affordable Care Act is $46,549,861. In addition, in this FY 2014 final rule, because the finalized cost reports for hospitals participating in the demonstration in FY 2007 have become available, we are incorporating into the FY 2014 budget neutrality offset amount the amount by which the final settled costs of the demonstration for FY 2007 exceeded the budget neutrality offset amount applicable to that year as finalized in the respective year’s IPPS final rule. The amount is $6,039,880. Therefore, the total adjustment to the national IPPS rates for FY 2014 is the sum of these two amounts, or $52,589,741. We intend to incorporate into the FY 2015 final rule the amounts by which the cost of the demonstration program for hospitals participating in the demonstration for FYs 2008 through 2011 and the amounts that were offset by the budget neutrality adjustment for these years, assuming that these finalized cost reports become available. 9. Effects of the Extended Effective Date for Policy on Hospital Services Furnished under Arrangements In section V.M. of the preamble of this final rule, we discuss our change in the implementation date of our revised policy, as outlined in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51711) under which we limit the circumstances under which a hospital may furnish services to Medicare beneficiaries ‘‘under arrangements.’’ We are changing the implementation date of the requirement to be effective for services provided on or after January 1, 2015 (instead of effective with cost reporting periods beginning on or after October 1, 2013). Because there are hospitals in the midst of significant building projects that, when completed, will enable the hospital to provide routine services in compliance with the requirements of this revised policy, we believe that it is appropriate to further delay the effective date. We expect that, with the additional time before the revised ‘‘under arrangement’’ policy becomes effective, hospitals will complete the work needed to ensure compliance with the new requirement. Effective for services provided on or after January 1, 2015, all hospitals will need to be VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 in full compliance with the revised policy for services furnished under arrangement. We have determined that the impact of this effective date change would be negligible. I. Effects of Policy Relating to the Furnishing of Acute Care Inpatient Services by CAHs In section VII.C. of the preamble of this final rule, we discuss our policy to revise the requirements under the CoPs for CAHs to specify that CAHs must provide acute care inpatient services. We estimate that the costs to CAHs to implement this policy will be minimal. Comment: One commenter expressed concern about the impact a requirement to furnish acute care inpatient services could have upon operational capacity and necessary workforce needs of many CAHs. Response: We appreciate this comment, but we believe the evidence strongly suggests that most CAHs will not experience an increase in operational costs, including costs relating to workforce. The vast majority of CAHs, approximately 99 percent, already are providing acute care inpatient services. Therefore, we believe most CAHs will view these revisions to the regulatory text as a clarification confirming their usual and customary business practices. J. Effects of Changes to the CoPs for Hospitals Relating to the Administration of Pneumococcal Vaccines In section X. of the preamble of this final rule, we discuss our policy to amend the standard under the CoPs for hospitals relating to the administration of pneumococcal vaccine by nursing staff. We are deleting the term ‘‘polysaccharide’’ vaccine in the standard to allow hospitals to include any type of pneumococcal vaccine as part of its physician-approved policy for administration by nurses without a prior practitioner order. While we expect this change to have a positive effect on hospitals by providing them with additional regulatory flexibility in this area, it is difficult to estimate this positive effect in terms of actual cost savings for hospitals. We believe that the change will carry the additional benefit of improving patient access to pneumococcal vaccines if hospitals choose to exercise the potential regulatory flexibility and purchase and stock more than one type of pneumococcal vaccine as a result. This benefit will be particularly apparent if there were a shortage of one type of the pneumococcal vaccine in the future. In conclusion, while we cannot estimate any cost savings that will result from this change, we are confident that it will not impose any burden on hospitals. K. Effects of Changes in the Capital IPPS 1. General Considerations For the impact analysis presented below, we used data from the March 2013 update of the FY 2012 MedPAR file and the March 2013 update of the Provider-Specific File (PSF) that is used for payment purposes. Although the analyses of the changes to the capital prospective payment system do not incorporate cost data, we used the March 2013 update of the most recently available hospital cost report data (FYs 2010 and 2011) PO 00000 Frm 00533 Fmt 4701 Sfmt 4700 51027 to categorize hospitals. Our analysis has several qualifications. We use the best data available and make assumptions about casemix and beneficiary enrollment as described below. Due to the interdependent nature of the IPPS, it is very difficult to precisely quantify the impact associated with each change. In addition, we draw upon various sources for the data used to categorize hospitals in the tables. In some cases (for instance, the number of beds), there is a fair degree of variation in the data from different sources. We have attempted to construct these variables with the best available sources overall. However, it is possible that some individual hospitals are placed in the wrong category. Using cases from the March 2013 update of the FY 2012 MedPAR file, we simulated payments under the capital IPPS for FY 2013 and FY 2014 for a comparison of total payments per case. Any short-term, acute care hospitals not paid under the general IPPS (for example, Indian Health Service hospitals and hospitals in Maryland) are excluded from the simulations. The methodology for determining a capital IPPS payment is set forth at § 412.312. The basic methodology for calculating capital IPPS payments in FY 2014 is as follows: (Standard Federal Rate) × (DRG weight) × (GAF) × (COLA for hospitals located in Alaska and Hawaii) × (1 + DSH Adjustment Factor + IME adjustment factor, if applicable). In addition to the other adjustments, hospitals may also receive outlier payments for those cases that qualify under the threshold established for each fiscal year. We modeled payments for each hospital by multiplying the capital Federal rate by the GAF and the hospital’s case-mix. We then added estimated payments for indirect medical education, disproportionate share, and outliers, if applicable. For purposes of this impact analysis, the model includes the following assumptions: • We estimate that the Medicare case-mix index will increase by 0.5 percent in both FYs 2013 and 2014. • We estimate that Medicare discharges will be approximately 12.4 million in FY 2013 and 12.6 million in FY 2014. • The capital Federal rate was updated beginning in FY 1996 by an analytical framework that considers changes in the prices associated with capital-related costs and adjustments to account for forecast error, changes in the case-mix index, allowable changes in intensity, and other factors. As discussed in section III.A.1.a. of the Addendum to this final rule, the update is 0.90 percent for FY 2014. • In addition to the FY 2014 update factor, the FY 2014 capital Federal rate was calculated based on a GAF/DRG budget neutrality adjustment factor of 0.9987, an outlier adjustment factor of 0.9393, and an adjustment factor of 0.9980 to offset the estimated additional IPPS expenditures that are projected to result from our policy on admission and medical review criteria for hospital inpatient services under Medicare Part A, as discussed in section VI.C. of the preamble of this final rule. E:\FR\FM\19AUR2.SGM 19AUR2 51028 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 2. Results We used the actuarial model described above to estimate the potential impact of our changes for FY 2014 on total capital payments per case, using a universe of 3,407 hospitals. As described above, the individual hospital payment parameters are taken from the best available data, including the March 2013 update of the FY 2012 MedPAR file, the March 2013 update to the PSF, and the most recent cost report data from the March 2013 update of HCRIS. In Table III, we present a comparison of estimated total payments per case for FY 2013 and estimated total payments per case for FY 2014 based on the FY 2014 payment policies. Column 2 shows estimates of payments per case under our model for FY 2013. Column 3 shows estimates of payments per case under our model for FY 2014. Column 4 shows the total percentage change in payments from FY 2013 to FY 2014. The change represented in Column 4 includes the 0.90 percent update to the capital Federal rate and other changes in the adjustments to the capital Federal rate. The comparisons are provided by: (1) Geographic location; (2) region; and (3) payment classification. The simulation results show that, on average, capital payments per case in FY 2014 are expected to increase as compared to capital payments per case in FY 2013. The capital Federal rate for FY 2014 will increase approximately 0.9 percent as compared to the FY 2013 capital Federal rate. Overall, across all hospitals, the changes to the GAFs are expected to have no net effect on capital payments. However, regionally, the effects of the changes to the GAFs on capital payments are consistent with the projected changes in payments due to changes in the wage index (and policies affecting the wage index) as shown in Table I in section I.G. of this Appendix. We are estimating a slight increase in outlier payments in FY 2014 as compared to FY 2013. This is primarily because of the decrease to the outlier fixed-loss amount (discussed in section II.A.4.f. of the Addendum to this final rule). The net impact of these changes is an estimated 1.6 percent change in capital payments per case from FY 2013 to FY 2014 for all hospitals (as shown below in Table III). The geographic comparison shows that, on average, all hospitals are expected to experience an increase in capital IPPS payments per case in FY 2014 as compared to FY 2013. These expected increases are primarily due to the increase in the capital Federal rate, as well as small projected increases in outlier payments. These increases are somewhat offset in all but a few regions by the projected decrease in payments because of the GAFs. Capital IPPS payments per case for large urban hospitals are estimated to increase 1.7 percent, while capital IPPS payments per case for other urban hospitals are estimated to increase 1.6 percent. Rural hospitals, on average, are expected to experience a 0.9 percent increase in capital payments per case from FY 2013 to FY 2014. The primary factors contributing to the difference in the projected increase in capital IPPS payments per case for urban hospitals as compared to rural hospitals are a decrease in capital payments to rural hospitals due to changes to the GAF and a relatively lower projected increase in capital payments to rural hospitals due to the changes to the MS–DRG relative weights. The comparisons by region show that the estimated increases in capital payments per case from FY 2013 to FY 2014 in urban areas ranges from a 2.4 percent increase for the Middle Atlantic urban region to a 1.0 percent increase for the Mountain urban region. For rural regions (excluding Puerto Rico), the Pacific rural region is expected to experience the largest increase in capital IPPS payments per case of 2.3 percent, while the East South Central rural region is projected to have a 0.5 percent increase in capital payments per case. Unlike other urban and rural regions where changes in the GAFs contribute to a decrease in capital payments, the changes in the GAFs contribute to the expected increase in capital IPPS payments per case for the Pacific urban and rural regions, as well as the Middle Atlantic and New England urban regions. The influences of the GAFs to increase payments more or less than the average estimated increase are consistent with the changes in the wage index for hospitals located in these areas, as discussed in section I. of this Appendix. In contrast to other rural regions, the larger than average projected increase in payments (5.2 percent) for the Puerto Rico rural region is primarily due to changes in the MS–DRG relative weights. Hospitals of all types of ownership (that is, voluntary hospitals, government hospitals, and proprietary hospitals) are estimated to experience an increase in capital payments per case from FY 2013 to FY 2014. The increase in capital payments for both government and proprietary hospitals is estimated at 1.4 percent, and voluntary hospitals are estimated to experience a 1.7 percent increase in capital payments per case from FY 2013 to FY 2014. Section 1886(d)(10) of the Act established the MGCRB. Hospitals may apply for reclassification for purposes of the wage index for FY 2014. Reclassification for wage index purposes also affects the GAFs because that factor is constructed from the hospital wage index. To present the effects of the hospitals being reclassified as of the publication of this final rule for FY 2014, we show the average capital payments per case for reclassified hospitals for FY 2014. Urban reclassified hospitals are expected to experience the largest increase in capital payments of 2.0 percent, whereas urban nonreclassified hospitals are expected to experience an increase of 1.6 percent. The estimated percentage increase for rural reclassified hospitals is 1.5 percent. However, rural nonreclassified hospitals are expected to experience a 0.1 percent decrease in capital payments per case. Other reclassified hospitals (that is, hospitals reclassified under section 1886(d)(8)(B) of the Act) are expected to experience a 1.3 percent increase in capital payments from FY 2013 to FY 2014. TABLE III—COMPARISON OF TOTAL PAYMENTS PER CASE [FY 2013 Payments Compared to FY 2014 Payments] mstockstill on DSK4VPTVN1PROD with RULES6 Number of hospitals VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 PO 00000 Frm 00534 815 902 792 563 852 712 737 786 868 1,015 563 457 516 559 627 675 828 917 805 568 866 716 747 798 883 1,035 568 459 520 564 635 684 1.6 1.7 1.6 0.9 1.6 0.6 1.4 1.5 1.7 2.0 0.9 0.3 0.8 0.7 1.3 1.3 2,485 Fmt 4701 Average FY 2014 payments/case 3,407 1,370 1,115 922 2,485 624 767 462 420 212 922 341 326 151 59 45 By Geographic Location: All hospitals ...................................................................... Large urban areas (populations over 1 million) ............... Other urban areas (populations of 1 million of fewer) ..... Rural areas ....................................................................... Urban hospitals ................................................................. 0–99 beds .................................................................. 100–199 beds ............................................................ 200–299 beds ............................................................ 300–499 beds ............................................................ 500 or more beds ...................................................... Rural hospitals .................................................................. 0–49 beds .................................................................. 50–99 beds ................................................................ 100–149 beds ............................................................ 150–199 beds ............................................................ 200 or more beds ...................................................... By Region: Urban by Region .............................................................. Average FY 2013 payments/case 852 866 1.6 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2 Change Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 51029 TABLE III—COMPARISON OF TOTAL PAYMENTS PER CASE—Continued [FY 2013 Payments Compared to FY 2014 Payments] mstockstill on DSK4VPTVN1PROD with RULES6 Number of hospitals VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 PO 00000 Frm 00535 928 899 785 815 741 854 786 889 1,063 383 563 762 580 545 584 516 595 502 616 722 198 947 920 795 827 751 865 795 897 1,087 390 568 777 586 549 590 519 603 505 622 738 208 2.1 2.4 1.2 1.4 1.4 1.3 1.2 1.0 2.3 1.9 0.9 1.9 1.1 0.6 1.0 0.5 1.2 0.6 1.0 2.3 5.2 3,407 1,380 1,116 911 815 901 791 572 828 916 804 577 1.6 1.7 1.6 0.7 2,380 785 242 698 802 1,145 707 815 1,169 1.2 1.6 2.1 1,569 331 872 619 886 628 1.7 1.4 265 228 531 627 532 633 0.3 1.0 29 295 525 461 522 463 ¥0.5 0.3 826 136 1,074 460 942 836 736 771 959 852 746 779 1.8 1.9 1.4 1.1 2,371 73 37 17 857 774 752 775 871 794 765 802 1.6 2.6 1.6 3.5 359 2,084 310 552 53 833 859 600 512 554 849 872 609 512 561 2.0 1.6 1.5 ¥0.1 1.3 1,943 900 542 829 736 846 843 746 857 1.7 1.4 1.4 450 2,011 736 139 Fmt 4701 Average FY 2014 payments/case 120 318 375 395 149 166 373 156 382 51 922 23 69 165 119 171 99 181 65 29 1 New England ............................................................. Middle Atlantic ........................................................... South Atlantic ............................................................ East North Central ..................................................... East South Central .................................................... West North Central .................................................... West South Central ................................................... Mountain .................................................................... Pacific ........................................................................ Puerto Rico ................................................................ Rural by Region ................................................................ New England ............................................................. Middle Atlantic ........................................................... South Atlantic ............................................................ East North Central ..................................................... East South Central .................................................... West North Central .................................................... West South Central ................................................... Mountain .................................................................... Pacific ........................................................................ Puerto Rico ................................................................ By Payment Classification: All hospitals ...................................................................... Large urban areas (populations over 1 million) ............... Other urban areas (populations of 1 million or fewer) ..... Rural areas ....................................................................... Teaching Status: Non-teaching ............................................................. Fewer than 100 Residents ........................................ 100 or more Residents .............................................. Urban DSH: 100 or more beds ............................................... Less than 100 beds ........................................... Rural DSH: Sole Community (SCH/EACH) ........................... Referral Center (RRC/EACH) ............................ Other Rural: 100 or more beds ....................................... Less than 100 beds .................................... Urban teaching and DSH: Both teaching and DSH ............................................ Teaching and no DSH ............................................... No teaching and DSH ............................................... No teaching and no DSH .......................................... Rural Hospital Types: Non special status hospitals ..................................... RRC/EACH ................................................................ SCH/EACH ................................................................ SCH, RRC and EACH ............................................... Hospitals Reclassified by the Medicare Geographic Classification Review Board: FY2014 Reclassifications: All Urban Reclassified ............................................... All Urban Non-Reclassified ....................................... All Rural Reclassified ................................................ All Rural Non-Reclassified ........................................ Other Reclassified Hospitals (Section 1886(d)(8)(B)) Type of Ownership: Voluntary ................................................................... Proprietary ................................................................. Government ............................................................... Medicare Utilization as a Percent of Inpatient Days: 0–25 ........................................................................... 25–50 ......................................................................... 50–65 ......................................................................... Over 65 ...................................................................... Average FY 2013 payments/case 1,020 831 681 548 1,040 845 690 553 2.0 1.6 1.3 0.9 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2 Change mstockstill on DSK4VPTVN1PROD with RULES6 51030 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations L. Effects of Payment Rate Changes and Policy Changes under the LTCH PPS 1. Introduction and General Considerations In section VIII. of the preamble of this final rule and section V. of the Addendum to this final rule, we set forth the annual update to the payment rates for the LTCH PPS for FY 2014. In the preamble of this final rule, we specify the statutory authority for the provisions that are presented, identify those policies, and present rationales for our decisions as well as alternatives that were considered. In this section of Appendix A to this final rule, we discuss the impact of the changes to the payment rate, factors, and other payment rate policies related to the LTCH PPS that are presented in the preamble of this final rule in terms of their estimated fiscal impact on the Medicare budget and on LTCHs. Currently, there are 425 LTCHs included in this impacts analysis, which includes data for 81 nonprofit (voluntary ownership control) LTCHs, 326 proprietary LTCHs, and 18 LTCHs that are government-owned and operated. (We note that although there are currently approximately 440 LTCHs, for purposes of this impact analysis, we excluded the data of all inclusive rate providers and the LTCHs that are paid in accordance with demonstration projects, consistent with the development of the FY 2014 MS–LTC–DRG relative weights (discussed in section VIII.B.3.c. of the preamble of this final rule)). In the impact analysis, we used the payment rate, factors, and policies presented in this final rule, including the 1.7 percent annual update for LTCHs that submit quality data in accordance with section 1886(m)(5)(C) of the Act, which is based on the full estimated increase of the LTCH PPS market basket and the reductions required by sections 1886(m)(3) and (m)(4) of the Act, the second year phase of a one-time prospective adjustment factor of 0.98734 (approximately ¥1.3 percent), the update to the MS–LTC– DRG classifications and relative weights, the update to the wage index values and laborrelated share, and the best available claims and CCR data to estimate the change in payments for FY 2014. (As discussed in section VIII.C. of the preamble of this final rule, in accordance with section 1886(m)(5)(C) of the Act, for LTCHs that fail to submit quality data, the annual update to the LTCH PPS standard Federal rate is reduced by 2.0 percentage points beginning in FY 2014.) The standard Federal rate for FY 2013 is $40,397.96. However, consistent with the statute, the payment for FY 2013 discharges occurring on or before December 28, 2012 does not reflect the one-time prospective adjustment under § 412.523(d)(3) of the regulations, and such discharges are paid based on a standard Federal rate of $40,915.95 (77 FR 53710). For FY 2014, we are establishing a standard Federal rate of $40,607.31, which reflects the 1.7 percent annual update to the standard Federal rate, and the area wage budget neutrality factor of 1.0010531 to ensure that the changes in the wage indexes and labor-related share do not influence aggregate payments, and the second year of the phase-in of the one-time VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 prospective adjustment factor of 0.98734. We note that the factors described above to determine the FY 2014 standard Federal rate are applied to the FY 2013 Federal standard rate set forth under section § 412.523(c)(3)(ix)(A) (that is, $40,397.96). Based on the best available data for the 425 LTCHs in our database, we estimate that the annual update to the standard Federal rate for FY 2014 (discussed in section V.A.2. of the Addendum to this final rule) and the changes to the area wage adjustment for FY 2014 (discussed in section V.B. of the Addendum to this final rule), in addition to an estimated increase in high cost outlier (HCO) payments will result in an increase in estimated payments from FY 2013 of approximately $72 million. Based on the 425 LTCHs in our database, we estimate that the FY 2014 LTCH PPS payments will be approximately $5.610 billion, as compared to estimated FY 2013 LTCH PPS payments of approximately $5.538 billion. Because the combined distributional effects and estimated changes to the Medicare program payments are over approximately $100 million, this final rule is considered a major economic rule, as defined in this section. We note that the approximate $72 million for the projected increase in estimated aggregate LTCH PPS payments from FY 2013 to FY 2014 does not reflect changes in LTCH admissions or case-mix intensity in estimated LTCH PPS payments, which also will affect overall payment changes. (We note that this impact does not include an estimate effect of the 2.0 percentage points reduction to the annual update to the LTCH PPS standard Federal rate for LTCHs that fail to submit quality data, as required by section 1886(m)(5)(C) of the Act, because we have not determined at this time which, if any, LTCHs failed to submit the requisite quality data for FY 2014 under the LTCH Quality Reporting Program.) The projected 1.3 percent increase in estimated payments per discharge from FY 2013 to FY 2014 is attributable to several factors, including the 1.7 percent annual update to the standard Federal rate, the onetime prospective adjustment factor for FY 2014 of 0.98734 (approximately ¥1.3 percent), and projected increases in estimated HCO payments. As Table IV shows, the change attributable solely to the annual update to the standard Federal rate (1.7 percent), including the one-time prospective adjustment factor for FY 2014 under the second year of the phase-in (approximately ¥1.3 percent), is projected to result in an increase of 0.4 percent in payments per discharge from FY 2013 to FY 2014, on average, for all LTCHs. We note, the estimated change in payments solely attributable to the annual update to the standard Federal rate does not take into account that the one-time prospective adjustment to the standard Federal rate for FY 2013 under § 412.523(d)(3) is not applied to payments for discharges occurring before December 29, 2012, consistent with the statute (and, therefore, are paid based on a relatively higher rate). The change in payments solely attributable to the annual update to the standard Federal rate for FY 2014 will be a smaller increase in payments PO 00000 Frm 00536 Fmt 4701 Sfmt 4700 relative to the pre-December 29, 2012 LTCH payment rates (approximately 0.1 percent instead of 0.4 percent). In addition to the 1.7 percent annual update for FY 2014 and the ¥1.3 percent one-time prospective adjustment factor for FY 2014, this estimated increase in aggregate LTCH PPS payments of 0.2 percent also includes estimated payments for SSO cases that are paid using special methodologies that are not affected by the annual update to the standard Federal rate. Therefore, for some hospital categories, the projected increase in payments based on the standard Federal rate is less than the 0.4 percent annual update for FY 2014. Because we are applying an area wage level budget neutrality factor to the standard Federal rate, the annual update to the wage data and labor-related share does not impact the increase in aggregate payments. In addition, we note that the updates to the standard Federal rate to determine the estimated effects described above were applied to the FY 2013 standard Federal rate set forth under section § 412.523(c)(3)(ix)(A) (that is, $40,397.96). As discussed in section V.B. of the Addendum to this final rule, we are updating the wage index values for FY 2014 based on the most recent available data. In addition, we are decreasing the labor-related share from 63.096 percent to 62.537 percent under the LTCH PPS for FY 2014, based on the most recent available data on the relative importance of the labor-related share of operating and capital costs based on the FY 2009-based LTCH-specific market basket. We also are applying an area wage level budget neutrality factor of 1.0010531, which increases the standard Federal rate by approximately 0.1 percent. Therefore, the changes to the wage data and labor-related share do not result in a change in estimated aggregate LTCH PPS payments. Table IV below shows the impact of the payment rate and the policy changes on LTCH PPS payments for FY 2014 presented in this final rule by comparing estimated FY 2013 payments to estimated FY 2014 payments. The projected increase in payments per discharge from FY 2013 to FY 2014 is 1.3 percent (shown in Column 8). This projected increase in payments is attributable to the impacts of the change to the standard Federal rate (0.4 percent in Column 6) and the effect of the estimated increase in payments for HCO cases and SSO cases (1.0 percent and 0.2 percent, respectively). That is, estimated total HCO payments are projected to increase from FY 2013 to FY 2014 in order to ensure that the estimated HCO payments will be 8 percent of the total estimated LTCH PPS payments in FY 2014. An analysis of the most recent available LTCH PPS claims data (that is, FY 2012 claims data from the March 2013 update of the MedPAR file) indicates that the FY 2013 HCO threshold of $15,408 (as established in the FY 2013 IPPS/LTCH PPS final rule) may result in HCO payments in FY 2014 that fall below the estimated 8 percent. Specifically, we currently estimate that HCO payments will be approximately 7.0 percent of the estimated total LTCH PPS payments in FY 2013. We estimate that the impact of the increase in HCO payments will result in E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 approximately a 1.0 percent increase in estimated payments from FY 2013 to FY 2014, on average, for all LTCHs. Furthermore, in calculating the estimated increase in payments from FY 2013 to FY 2014 for HCOs, we increased estimated costs by the applicable market basket percentage increase as projected by our actuaries. This increase in estimated costs also results in a projected increase in SSO payments of approximately 0.2 percent relative to last year. The net result of these projected changes in HCO and SSO payments in FY 2014 is an estimated change in aggregate payments of 1.2 percent. We note that estimated payments for all SSO cases comprise approximately 12 percent of the estimated total LTCH PPS payments, and estimated payments for HCO cases comprise approximately 8 percent of the estimated total FY 2014 LTCH PPS payments. Payments for HCO cases are based on 80 percent of the estimated cost of the case above the HCO threshold, while the majority of the payments for SSO cases (approximately 58 percent) are based on the estimated cost of the case. As we discuss in detail throughout this final rule, based on the most recent available data, we believe that the provisions of this final rule relating to the LTCH PPS will result in an increase in estimated aggregate LTCH PPS payments and that the resulting LTCH PPS payment amounts will result in appropriate Medicare payments. 2. Impact on Rural Hospitals For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of an urban area and has fewer than 100 beds. As shown in Table IV, we are projecting a 0.9 percent increase in estimated payments per discharge for FY 2014 as compared to FY 2013 for rural LTCHs that will result from the changes presented in this final rule, as well as the effect of estimated changes to HCO and SSO payments. This estimated impact is based on the data for the 28 rural LTCHs in our database (out of 425 LTCHs) for which complete data were available. The estimated increase in LTCH PPS payments from FY 2013 to FY 2014 for rural LTCHs (0.9 percent) is less than the national average increase (1.3 percent). The estimated increase in LTCH PPS payments from FY 2013 to FY 2014 for rural LTCHs is primarily due to the increase to the standard Federal rate. However, rural LTCHs are experiencing slightly lower increases than the national average due to decreases in their wage index for FY 2014 compared to FY 2013. 3. Anticipated Effects of LTCH PPS Payment Rate Changes and Policy Changes a. Budgetary Impact Section 123(a)(1) of the BBRA requires that the PPS developed for LTCHs ‘‘maintain budget neutrality.’’ We believe that the statute’s mandate for budget neutrality applies only to the first year of the implementation of the LTCH PPS (that is, FY 2003). Therefore, in calculating the FY 2003 standard Federal rate under § 412.523(d)(2), we set total estimated payments for FY 2003 under the LTCH PPS so that estimated aggregate payments under the LTCH PPS were estimated to equal the amount that VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 would have been paid if the LTCH PPS had not been implemented. As discussed above in section I.L.1. of this Appendix, we project an increase in aggregate LTCH PPS payments in FY 2014 relative to FY 2013 of approximately $72 million based on the 425 LTCHs in our database. b. Expiration of Statutory Delay of Full Implementation of the 25-Percent Threshold Payment Adjustment Policy and 1-Year Extension As discussed in section VIII.D. of the preamble of this final rule, the statutory delay of the full application of the 25-percent threshold payment adjustment for LTCHs under § 412.534 and § 412.536 expired for cost reporting periods beginning on or after July 1, 2012, or October 1, 2012, as applicable. As explained in section VIII.D. of the preamble of this final rule, we established a 1-year regulatory extension of the statutory moratorium for cost reporting periods beginning on or after October 1, 2012, and before October 1, 2013 (and for discharges occurring on or after October 1, 2012, through the end of the cost reporting period of LTCHs with cost reporting periods beginning on or after July 1, 2012, and before September 30, 2012). We are not extending the regulatory moratorium, therefore, it will expire for certain LTCHs for cost reporting periods beginning on or after October 1, 2013, and as discussed in section VIII.D. of the preamble of this final rule. We currently estimate that the expiration of this moratorium will result in a reduction of approximately $90 million in LTCHs PPS payments in FY 2014. We note that our current estimate of the impact of the expiration of moratorium on the full application of the 25-percent threshold payment adjustment policy is significantly lower than our estimate presented in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27498). Based on the best available data at that time, we estimated that the expiration of moratorium on the full application of the 25percent threshold payment adjustment policy would result in a reduction in payments of approximately $190 million to LTCHs in FY 2014. Comment: Based on its own analysis of the 25-percent threshold payment adjustment policy, one commenter believed that we may not have appropriately applied all adjustments under the 25-percent threshold payment adjustment policy in our estimate of the impact presented in the FY 2014 IPPS/ LTCH PPS proposed rule. As a result, the commenter asserted that the estimated $190 million decrease in payments to LTCHs in FY 2014 was overstated. Specifically, the commenter believed that LTCH discharges that qualify for exclusion from the 25-percent threshold payment adjustment policy because Medicare payments for those patients included a high cost outlier payment to the hospital prior to admission to the LTCH may have been mistakenly included as patients subject to the 25-percent threshold payment adjustment. Therefore, the commenter requested that we review our estimated impact of the 25-percent threshold payment adjustment policy for the final rule. PO 00000 Frm 00537 Fmt 4701 Sfmt 4700 51031 Response: Upon review of the payment model that was used to estimate the impact of the expiration of the moratorium on the full application of the 25-percent threshold payment adjustment policy for the proposed rule, we determined that the commenter is correct. We did inadvertently treat LTCH discharges for which Medicare made a high cost outlier payment to the hospital for the patient’s stay prior to admission to the LTCH as being subject to a payment adjustment under the 25-percent threshold payment adjustment policy, which resulted in an overstatement in the projected decrease in payments to LTCHs that would result from the payment adjustment. We appreciate the commenter bringing this inadvertent error to our attention and have made the necessary correction to the payment model we used to estimate the impact of the expiration of the moratorium on the full application of the 25percent threshold payment adjustment policy for this final rule. In addition to that correction, we also updated the actuarial assumptions regarding Medicare utilization that were used in the calculation of our projected impact, including a projected decrease in Medicare Part A Fee-For-Service (FFS) enrollment. Incorporating the high cost outlier correction to our payment model along with the updated actuarial assumptions regarding Medicare utilization results in a significant change to our estimated impact of the full application of the 25-percent threshold payment adjustment policy on LTCH PPS payments in FY 2014 from the proposed rule (a $190 million decrease) to this final rule (a $90 million decrease). c. Impact on Providers The basic methodology for determining a per discharge LTCH PPS payment is set forth under § 412.515 through § 412.536. In addition to the basic MS–LTC–DRG payment (the standard Federal rate multiplied by the MS–LTC–DRG relative weight), we make adjustments for differences in area wage levels, the COLA for LTCHs located in Alaska and Hawaii, and SSOs. Furthermore, LTCHs may also receive HCO payments for those cases that qualify based on the threshold established each year. To understand the impact of the changes to the LTCH PPS payments presented in this final rule on different categories of LTCHs for FY 2014, it is necessary to estimate payments per discharge for FY 2013 using the rates, factors (including the FY 2013 GROUPER (Version 30.0), and relative weights and the policies established in the FY 2013 IPPS/ LTCH PPS final rule (77 FR 53458 through 53502 and 53708 through 53716). It is also necessary to estimate the payments per discharge that will be made under the LTCH PPS rates, factors, policies, and GROUPER (Version 31.0) for FY 2014 (as discussed in section VIII. of the preamble of this final rule and section V. of the Addendum to this final rule). These estimates of FY 2013 and FY 2014 LTCH PPS payments are based on the best available LTCH claims data and other factors, such as the application of inflation factors to estimate costs for SSO and HCO cases in each year. We also evaluated the change in estimated FY 2013 payments to estimated FY 2014 payments (on a per discharge basis) for each category of LTCHs. E:\FR\FM\19AUR2.SGM 19AUR2 51032 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations We are establishing a standard Federal rate for FY 2014 of $40,607.31 that includes the 1.7 percent annual update, the area wage budget neutrality factor of 1.0010531, and the one-time prospective adjustment to the standard Federal rate for FY 2014 of 0.98734 (approximately ¥1.3 percent). Hospital groups were based on characteristics provided in the OSCAR data, FY 2009 through FY 2011 cost report data in HCRIS, and PSF data. Hospital groups included the following: • Location: large urban/other urban/rural. • Participation date. • Ownership control. • Census region. • Bed size. To estimate the impacts of the payment rates and policy changes among the various categories of existing providers, we used LTCH cases from the FY 2012 MedPAR file to estimate payments for FY 2013 and to estimate payments for FY 2014 for 425 LTCHs. We believe that the discharges based on the FY 2012 MedPAR data for the 425 LTCHs in our database, which includes 326 proprietary LTCHs, provide sufficient representation in the MS–LTC–DRGs containing discharges for patients who received LTCH care for the most commonly treated LTCH patients’ diagnoses. d. Calculation of Prospective Payments For purposes of this impact analysis, to estimate per discharge payments under the LTCH PPS, we simulated payments on a case-by-case basis using LTCH claims from the FY 2012 MedPAR files. For modeling estimated LTCH PPS payments for FY 2013, we used the FY 2013 standard Federal rate (that is, $40,915.95 used to make payments for LTCH discharges occurring on or after October 1, 2012 through December 28, 2012, and $40,397.96 for discharges occurring on or after December 29, 2012 through September 30, 2013). For modeling estimated LTCH PPS payments for FY 2014, we used the FY 2014 standard Federal rate of $40,607.31, which includes the one-time prospective adjustment of 0.98734 for FY 2014 for the second year of the 3-year phase-in. The FY 2014 standard Federal rate of $40,607.31 includes the application of an area wage level budget neutrality factor of 1.0010531 (as discussed in section V.B.5. of the Addendum to this final rule). Furthermore, in modeling estimated LTCH PPS payments for both FY 2013 and FY 2014 in this impact analysis, we applied the FY 2013 and the FY 2014 adjustments for area wage levels and the COLA for LTCHs located in Alaska and Hawaii. Specifically, we adjusted for differences in area wage levels in determining estimated FY 2013 payments using the current LTCH PPS labor-related share of 63.096 percent (77 FR 53711) and the wage index values established in the Tables 12A and 12B listed in the Addendum to the FY 2013 IPPS/LTCH PPS final rule (which are available via the Internet (77 FR 53717)). We also applied the FY 2013 COLA factors shown in the table in section V.C. of the Addendum to that final rule (77 FR 53713) to adjust the FY 2013 nonlaborrelated share (36.904 percent) for LTCHs located in Alaska and Hawaii. Similarly, we adjusted for differences in area wage levels in determining the estimated FY 2014 payments using the FY 2014 LTCH PPS labor-related share of 62.537 percent and the FY 2014 wage index values presented in Tables 12A and 12B listed in section VI. of the Addendum to this final rule (and available via the Internet). We also applied the FY 2014 COLA factors shown in the table in section V.C. of the Addendum to this final rule to the FY 2014 nonlabor-related share (37.463 percent) for LTCHs located in Alaska and Hawaii. As discussed above, our impact analysis reflects an estimated change in payments for SSO cases, as well as an estimated increase in payments for HCO cases (as described in section V.D. of the Addendum to this final rule). In modeling payments for SSO and HCO cases in FY 2014, we applied an inflation factor of 4.9 percent (determined by OACT) to estimate the costs of each case using the charges reported on the claims in the FY 2012 MedPAR files and the best available CCRs from the March 2013 update of the PSF. Furthermore, in modeling estimated LTCH PPS payments for FY 2014 in this impact analysis, we used the FY 2014 fixed-loss amount of $13,314 (as discussed in section V.D. of the Addendum to this final rule). These impacts reflect the estimated ‘‘losses’’ or ‘‘gains’’ among the various classifications of LTCHs from FY 2013 to FY 2014 based on the payment rates and policy changes presented in this final rule. Table IV illustrates the estimated aggregate impact of the LTCH PPS among various classifications of LTCHs. • The first column, LTCH Classification, identifies the type of LTCH. • The second column lists the number of LTCHs of each classification type. • The third column identifies the number of LTCH cases. • The fourth column shows the estimated payment per discharge for FY 2013 (as described above). • The fifth column shows the estimated payment per discharge for FY 2014 (as described above). • The sixth column shows the percentage change in estimated payments per discharge from FY 2013 to FY 2014 due to the annual update to the standard Federal rate (as discussed in section V.A.2. of the Addendum to this final rule), including the second year of the phase-in of the one-time prospective adjustment factor for FY 2014. (As noted previously, the estimate payment changes shown in this column do not take into account that the one-time prospective adjustment to the standard Federal rate for FY 2013 under § 412.523(d)(3) is not applied to payments for discharges occurring before December 29, 2012, consistent with the statute.) • The seventh column shows the percentage change in estimated payments per discharge from FY 2013 to FY 2014 for changes to the area wage level adjustment (that is, the wage indexes and labor-related share), including the application of an area wage level budget neutrality factor, (as discussed in section V.B. of the Addendum to this final rule. • The eighth column shows the percentage change in estimated payments per discharge from FY 2013 (Column 4) to FY 2014 (Column 5) for all changes (and includes the effect of estimated changes to HCO and SSO payments). TABLE IV—IMPACT OF PAYMENT RATE AND POLICY CHANGES TO LTCH PPS PAYMENTS FOR FY 2014 [Estimated FY 2013 payments compared to estimated FY 2014 payments] Average FY 2014 LTCH PPS payment per case 1 (6) Percent change in estimated payments per discharge from FY 2013 to FY 2014 for changes to the area wage level adjustment with budget neutrality 3 Percent change in payments per discharge from FY 2013 to FY 2014 for all changes 4 (7) Average FY 2013 LTCH PPS payment per case Percent change in estimated payments per discharge from FY 2013 to FY 2014 for the annual update to the Federal rate 2 (8) mstockstill on DSK4VPTVN1PROD with RULES6 LTCH Classification Number of LTCHs Number of LTCH PPS cases (1) (2) (3) (4) (5) 425 140,888 $39,308 $39,816 0.4 0.0 1.3 28 397 198 199 6,562 134,326 77,789 56,537 34,978 39,519 41,475 36,827 35,304 40,036 42,066 37,243 0.4 0.4 0.4 0.4 ¥0.2 0.0 0.1 ¥0.1 0.9 1.3 1.4 1.1 ALL PROVIDERS .......................................... BY LOCATION: RURAL ................................................... URBAN ................................................... LARGE ................................................... OTHER ................................................... VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 PO 00000 Frm 00538 Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 51033 TABLE IV—IMPACT OF PAYMENT RATE AND POLICY CHANGES TO LTCH PPS PAYMENTS FOR FY 2014—Continued [Estimated FY 2013 payments compared to estimated FY 2014 payments] LTCH Classification Number of LTCHs Number of LTCH PPS cases (1) (2) (3) (5) (4) BY PARTICIPATION DATE: BEFORE OCT. 1983 ............................. OCT. 1983–SEPT. 1993 ........................ OCT. 1993–SEPT. 2002 ........................ OCTOBER 2002 and AFTER ................ BY OWNERSHIP TYPE: VOLUNTARY ......................................... PROPRIETARY ..................................... GOVERNMENT ..................................... BY REGION: NEW ENGLAND .................................... MIDDLE ATLANTIC ............................... SOUTH ATLANTIC ................................ EAST NORTH CENTRAL ...................... EAST SOUTH CENTRAL ...................... WEST NORTH CENTRAL ..................... WEST SOUTH CENTRAL ..................... MOUNTAIN ............................................ PACIFIC ................................................. BY BED SIZE: BEDS: 0–24 ........................................... BEDS: 25–49 ......................................... BEDS: 50–74 ......................................... BEDS: 75–124 ....................................... BEDS: 125–199 ..................................... BEDS: 200 + .......................................... (6) Percent change in payments per discharge from FY 2013 to FY 2014 for all changes 4 (7) Average FY 2014 LTCH PPS payment per case 1 Average FY 2013 LTCH PPS payment per case Percent change in estimated payments per discharge from FY 2013 to FY 2014 for the annual update to the Federal rate 2 Percent change in estimated payments per discharge from FY 2013 to FY 2014 for changes to the area wage level adjustment with budget neutrality 3 (8) 16 44 183 182 5,662 17,322 64,278 53,626 35,125 41,877 38,650 39,707 35,633 42,476 39,076 40,285 0.4 0.4 0.4 0.4 0.0 0.1 ¥0.1 0.1 1.4 1.4 1.1 1.5 81 326 18 19,540 118,352 2,996 39,436 39,176 43,684 40,136 39,645 44,446 0.4 0.4 0.4 0.0 0.0 ¥0.1 1.8 1.2 1.7 14 30 61 70 31 26 136 32 25 7,287 8,389 18,169 20,473 8,813 6,521 50,357 7,055 13,824 35,077 41,642 41,544 40,487 39,444 39,500 35,181 42,904 48,456 35,550 42,355 42,039 41,068 40,016 40,032 35,496 43,500 49,371 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.3 0.1 0.4 ¥0.1 0.0 ¥0.1 ¥0.3 ¥0.2 ¥0.3 0.6 1.3 1.7 1.2 1.4 1.4 1.3 0.9 1.4 1.9 25 202 117 46 22 13 2,723 47,011 37,910 22,720 16,152 14,372 34,215 38,477 40,133 41,224 38,293 38,924 34,417 38,943 40,733 41,781 38,676 39,447 0.4 0.4 0.4 0.4 0.4 0.4 ¥0.3 0.0 0.0 0.1 ¥0.2 0.1 0.6 1.2 1.5 1.4 1.0 1.3 1 Estimated FY 2014 LTCH PPS payments based on the payment rate and policy changes presented in the preamble and the Addendum to this final rule. change in estimated payments per discharge from FY 2013 to FY 2014 for the annual update to the standard Federal rate and the one-time prospective adjustment factor for FY 2014 as discussed in section V.A.2. of the Addendum to this final rule. Note, this column does not take into account that the one-time prospective adjustment to the standard Federal rate for FY 2013 under § 412.523(d)(3) is not applied to payments for discharges occurring before December 29, 2012, consistent with the statute (and therefore, are paid based on a relatively higher rate). 3 Percent change in estimated payments per discharge from FY 2013 to FY 2014 for changes to the area wage level adjustment under § 412.525(c) (as discussed in section V.B. of the Addendum to this final rule). 4 Percent change in estimated payments per discharge from FY 2013 LTCH PPS (shown in Column 4) to FY 2014 LTCH PPS (shown in Column 5), including all of the changes presented in the preamble and the Addendum to this final rule. Note, this column, which shows the percent change in estimated payments per discharge for all changes, does not equal the sum of the percent changes in estimated payments per discharge for the annual update to the standard Federal rate (column 6) and the changes to the area wage level adjustment with budget neutrality (Column 7) due to the effect of estimated changes in both estimated payments to SSO cases that are paid based on estimated costs and aggregate HCO payments (as discussed in this impact analysis), as well as other interactive effects that cannot be isolated. mstockstill on DSK4VPTVN1PROD with RULES6 2 Percent e. Results Based on the most recent available data for 425 LTCHs, we have prepared the following summary of the impact (as shown above in Table IV) of the LTCH PPS payment rate and policy changes presented in this final rule. The impact analysis in Table IV shows that estimated payments per discharge are expected to increase 1.3 percent, on average, for all LTCHs from FY 2013 to FY 2014 as a result of the payment rate and policy changes presented in this final rule, including an estimated increase in HCO payments. This estimated 1.3 percent increase in LTCH PPS payments per discharge from the FY 2013 to FY 2014 for all LTCHs (as shown in Table IV) was determined by comparing estimated FY 2014 LTCH PPS payments (using the payment rate and policies discussed in this final rule) to estimated FY 2013 LTCH PPS payments (as described above in section I.L.1. of this Appendix). VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 We are establishing a standard Federal rate of $40,607.31 for FY 2014. Specifically, we are updating the standard Federal rate for FY 2014 by 1.7 percent, which is based on the latest estimate of the LTCH PPS market basket increase (2.5 percent), the reduction of 0.5 percentage point for the MFP adjustment, and the 0.3 percentage point reduction consistent with sections 1886(m)(3) and (m)(4) of the Act. In addition, we are applying a one-time prospective adjustment factor for FY 2014 of 0.98734 (approximately ¥1.3 percent) to the standard Federal rate for the second year of the 3-year phase-in. We note that consistent with the statute, the onetime prospective adjustment to the standard Federal rate for FY 2013 is not applied to payments for discharges occurring before December 29, 2012. Therefore, payments for FY 2013 discharges occurring on or before December 28, 2012, are paid based on a standard Federal rate that does not reflect PO 00000 Frm 00539 Fmt 4701 Sfmt 4700 that adjustment (and, therefore, are paid based on a relatively higher rate). We noted earlier in this section that, for most categories of LTCHs, as shown in Table IV (Column 6), the payment increase due to the 1.7 percent annual update to the standard Federal rate and the application of the onetime prospective adjustment for FY 2014 of approximately ¥1.3 percent for the second year of the 3-year phase-in is projected to result in approximately a 0.4 percent increase in estimated payments per discharge for all LTCHs from FY 2013 to FY 2014. (As noted previously, the estimate payment changes shown in this column were determined based on the FY 2013 standard Federal rate of $40,915.95, and do not take into account that the one-time prospective adjustment to the standard Federal rate for FY 2013 under § 412.523(d)(3) is not applied to payments for discharges occurring before December 29, 2012, consistent with the statute.) E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 51034 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations In addition, our estimate of the changes in payments due to the update to the standard Federal rate also reflects estimated payments for SSO cases that are paid using special methodologies that are not affected by the update to the standard Federal rate. For these reasons, we estimate that payments may increase by less than 0.4 percent for certain hospital categories due to the annual update to the standard Federal rate and the application of the second phase of the onetime prospective adjustment for FY 2014. (1) Location Based on the most recent available data, the vast majority of LTCHs are located in urban areas. Only approximately 7 percent of the LTCHs are identified as being located in a rural area, and approximately 5 percent of all LTCH cases are treated in these rural hospitals. The impact analysis presented in Table IV shows that the average percent increase in estimated payments per discharge from FY 2013 to FY 2014 for all hospitals is 1.3 percent for all changes. For rural LTCHs, the percent change for all changes is estimated to be 0.9 percent, while for urban LTCHs, we estimate the increase would be 1.3 percent. Large urban LTCHs are projected to experience an increase of 1.4 percent in estimated payments per discharge from FY 2013 to FY 2014, while other urban LTCHs are projected to experience an increase of 1.1 percent in estimated payments per discharge from FY 2013 to FY 2014, as shown in Table IV. (2) Participation Date LTCHs are grouped by participation date into four categories: (1) Before October 1983; (2) between October 1983 and September 1993; (3) between October 1993 and September 2002; and (4) October 2002 and after. Based on the most recent available data, the categories of LTCHs with the largest percentage of LTCH cases (approximately 46 percent) are in hospitals that began participating in the Medicare program between October 1993 and September 2002, and hospitals that began participating in the Medicare program October 2002 and after, and they are projected to experience a 1.1 and 1.5 percent in estimated payments per discharge from FY 2013 to FY 2014, respectively, as shown in Table IV. Approximately 4 percent of LTCHs began participating in the Medicare program before October 1983, and these LTCHs are projected to experience a slightly higher than average percent increase (1.4 percent) in estimated payments per discharge from FY 2013 to FY 2014, as shown in Table IV. Approximately 10 percent of LTCHs began participating in the Medicare program between October 1983 and September 1993. These LTCHs are also projected to experience a 1.4 percent increase in estimated payments from FY 2013 to FY 2014. (3) Ownership Control LTCHs are grouped into three categories based on ownership control type: voluntary, proprietary, and government. Based on the most recent available data, approximately 19 percent of LTCHs are identified as voluntary (Table IV). We expect that LTCHs in the voluntary category will experience a higher VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 than the average increase (1.8 percent) in estimated FY 2014 LTCH PPS payments per discharge as compared to estimated payments in FY 2013 primarily because we project the estimated increase in HCO payments to be higher than the average increase for these LTCHs. The majority (nearly 77 percent) of LTCHs are identified as proprietary and these LTCHs are projected to experience slightly below the national average increase (1.2 percent) in estimated payments per discharge from FY 2013 to FY 2014. Finally, government-owned and operated LTCHs are expected to experience a larger than average increase in payments of 1.7 percent in estimated payments per discharge from FY 2013 to FY 2014. (4) Census Region Estimated payments per discharge for FY 2014 are projected to increase for LTCHs located in all regions in comparison to FY 2013. Of the 9 census regions, we project that the increase in estimated payments per discharge will have the largest positive impact on LTCHs in the Middle Atlantic and Pacific regions (1.7 percent and 1.9 percent, respectively as shown in Table IV). The estimated percent increase in payments per discharge from FY 2013 to FY 2014 for those regions is largely attributable to the changes in the area wage level adjustment. In contrast, LTCHs located in the South Atlantic and West South Central regions are projected to experience the smallest increase in estimated payments per discharge from FY 2013 to FY 2014. The lower than national average estimated increase in payments of 1.2 percent for LTCHs in the South Atlantic and 0.9 percent for LTCHs in the West South Central region is primarily due to estimated decreases in payments associated with the changes to the area wage level adjustment. (5) Bed Size LTCHs are grouped into six categories based on bed size: 0–24 beds; 25–49 beds; 50–74 beds; 75–124 beds; 125–199 beds; and greater than 200 beds. Most bed size categories are projected to receive either a slightly higher or slightly lower than average increase in estimated payments per discharge from FY 2013 to FY 2014. We project that small LTCHs (0–24 beds) will experience a 0.6 percent increase in payments, mostly due to decreases in the area wage level adjustment, while large LTCHs (200+ beds) will experience a 1.3 percent increase in payments. LTCHs with between 50 and 74 beds are expected to experience an above average increase in payments per discharge from FY 2013 to FY 2014 (1.5 percent). 4. Effect on the Medicare Program As noted previously, we project that the provisions of this final rule will result in an increase in estimated aggregate LTCH PPS payments in FY 2014 relative to FY 2013 of approximately $72 million (or approximately 1.3 percent) for the 425 LTCHs in our database. In addition, the effects of the expiration of the regulatory moratorium on the full application of the 25-percent threshold payment adjustment policy effective for cost reporting periods beginning or after October 1, 2013 (as discussed in section VIII.D. of the preamble of this final PO 00000 Frm 00540 Fmt 4701 Sfmt 4700 rule) will result in a payment reduction of approximately $90 million to LTCHs. 5. Effect on Medicare Beneficiaries Under the LTCH PPS, hospitals receive payment based on the average resources consumed by patients for each diagnosis. We do not expect any changes in the quality of care or access to services for Medicare beneficiaries under the LTCH PPS, but we continue to expect that paying prospectively for LTCH services will enhance the efficiency of the Medicare program. M. Effects of Requirements for Hospital Inpatient Quality Reporting (IQR) Program In section IX.A. of the preamble of this final rule, we discuss our requirements for hospitals to report quality data under the Hospital IQR Program in order to receive the full annual percentage increase for the FY 2016 payment determination. Information is not available to determine the precise number of hospitals that would not meet the requirements to receive the full annual percentage increase for the FY 2016 payment determination. At the time that the analysis was prepared, 77 hospitals did not receive the full annual percentage increase for the FY 2014 payment determination. We estimate that the total burden associated with the voluntary electronic quality measure reporting option will be similar to the burden outlined for hospitals in the Medicare EHR Incentive Program Stage 2 final rule (77 FR 53968 through 54162). However, by allowing hospitals to submit data for a maximum of four measure sets (16 measures) that could be used to satisfy the requirements for both programs, each hospital that participates in the voluntary electronic quality measure reporting option could realize a reduction in burden of up to approximately 800 hours. This estimate assumes an annual collection burden for chart-abstracted Stroke, VTE and PC–01 to be a combined 816 hours annually per hospital and an estimated 2.66 hours to submit those measures electronically for one quarter. Since the ED measures are a subset of the global measure set that also includes the Immunization measures, which will continue to be collected via chart-abstraction, we do not believe there will be a significant reduction in burden for electronic submission of the ED–1 and ED–2 measures. We are finalizing our proposals related to validation, including submission of and payment for secure electronic versions of medical information for validation for the FY 2016 payment determination and subsequent years, as described in the ICRs for the Hospital IQR Program, and these changes will result in a cost savings to CMS of approximately $1.3 million. N. Effects of Requirements for the PPSExempt Cancer Hospital Quality Reporting (PCHQR) Program for FY 2014 In section IX.B. of the preamble of this final rule, we discuss our policies for FYs 2015 and 2016 for the quality data reporting program for PPS-exempt cancer hospitals (PCHs), which we refer to as the PCHQR Program. The PCHQR Program is authorized under section 1866(k) of the Act, which was added by section 3005 of the Affordable Care E:\FR\FM\19AUR2.SGM 19AUR2 mstockstill on DSK4VPTVN1PROD with RULES6 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Act. The quality reporting requirements affect all PCHs participating in Medicare. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53556 through 53561), we adopted five quality measures for the FY 2014 payment determination and subsequent years. In this final rule, we are finalizing our program policy that PCHs submit data on 1 additional measure beginning with the FY 2015 program and 12 additional measures beginning with the FY 2016 program, for a total of 18 measures. We did not make changes to the reporting requirements that we have previously finalized for the five measures we first adopted beginning with the FY 2014 PCHQR Program. The anticipated burden to these PCHs consists of the following: training of appropriate staff members on how to use the NSHN for the reporting of the SSI measure, CMS (QualityNet) for the reporting of the SCIP measures, and the CMS Web Measures Tool for the reporting of the clinical process/ oncology care measures; the time required for collection and aggregation of data; and the time required for the reporting of data by the PCH’s representative. In addition, in order for a PCH to participate in the collection of HCAHPS data, a PCH must either: (1) Contract with an approved HCAHPS survey vendor that will conduct the survey and submit data on the PCH’s behalf to the QIO Clinical Warehouse; or (2) self-administer the survey without using a vendor, provided that the PCH attends HCAHPS training. Finally, all PCHs that do not already report data under the PCHQR Program will need to register with QualityNet, identify a QualityNet administrator, complete an online Notice of Participation form, and learn the CMS contractor’s and the CDC’s collection mechanism in order to submit data for those measures. One of our priorities is to help achieve better health and better health care for individuals through collection of valid, reliable, and relevant measures of quality health care data. Such data can be displayed publicly and used to further the development of health care quality, which, in turn, helps to further our objectives and goals. Health care organizations can use their health care quality data for many purposes such as in their risk management programs, health care acquired infection prevention programs and research and development of medical programs, among others. We will share the information collected under the PCHQR Program with the public as is required under the statute. These data will be displayed on the Hospital Compare Web site. The goals of making these data available to the public in a public user-friendly and relevant format, include, but are not limited to: (1) Keeping the public informed of the quality of care that is being provided in PCHs as a whole; (2) keeping the public informed of the quality of care being provided in specific PCHs; (3) allowing the public to compare and contrast the data about specific PCHs, thus enabling the public to make informed health care decisions regarding PCHs; and (4) providing information about current trends in health care. There are many other public uses for these quality data VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 concerning PCHs. Further, keeping the public informed of quality of care provided in health care has always been of high priority to CMS. We also seek to align the PCHQR Program measures and reporting requirements with current HHS high priority conditions and topics and to ultimately provide a comprehensive assessment of the quality of health care delivered in a variety of settings. O. Effects of Requirements for the LTCH Quality Reporting (LTCHQR) Program for FY 2014 through FY 2018 In section IX.C. of the preamble of this final rule, we discuss the implementation of section 3004(a) of the Affordable Care Act, which added section 1886(m)(5) to the Act. Section 1886(m)(5) of the Act provides that, for rate year 2014 and each subsequent year, any LTCH that does not submit data to the Secretary in accordance with section 1886(m)(5)(C) of the Act will receive a 2.0 percentage point reduction to the annual update to the standard Federal rate for discharges for the hospital during the applicable fiscal year. The initial requirements for this LTCHQR Program were finalized in section VII.C. of the FY 2012 IPPS/LTCH PPS final rule (76 FR 51743 through 51756). In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51839 through 51840), we estimated that only a few LTCHs would not receive the full payment update in any fiscal year because they did not submit data under the LTCHQR Program. We believe that the above statement made in the FY 2012 IPPS/LTCH PPS final rule remains valid. Data collection for the LTCHQR Program began October 1, 2012. We are now able to verify, following this first quarter (October 1, 2012-December 31, 2012) of data collection and submission, that a majority of CMS-certified LTCHs are submitting quality data to the LTCHQR Program. We believe that a majority of LTCHs will continue to collect and submit data for the FY 2015 payment determination and subsequent years because they will continue to view the LTCHQR Program as an important step in improving the quality of care patients receive in the LTCHs. As discussed in section VIII.D.3. of the preamble of the FY 2013 IPPS/LTCH PPS final rule, for the FY 2015 payment determination and subsequent years, we retained the three quality measures that were finalized for use in the LTCHQR Program in the FY 2012 IPPS/LTCH PPS final rule, with some modifications. These measures are: (1) NHSN Catheter-Associated Urinary Tract Infections (CAUTI) Outcome Measure (NQF #0138); (2) NHSN Central Line CatheterAssociated Blood Stream Infection Event (CLABSI) Outcome Measure (NQF #0139); and (3) an Application of the Percent of Residents or Patients with Pressure Ulcers That Are New or Worsened (Short-Stay) (NQF #0678). In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51780 through 51781), we estimated that the total yearly cost to all LTCHs that are paid under the LTCH PPS to report these data (including NHSN registration and training for the CAUTI and CLABSI quality measures, data submission for all three measures, and monitoring data PO 00000 Frm 00541 Fmt 4701 Sfmt 4700 51035 submission) will be approximately $756, 326. We adopted this same burden estimate in the FY 2013 IPPS/LTCH PPS final rule. As part of its endorsement maintenance process under NQF’s Patient Safety Measures Project (https://www.qualityforum.org/ projects/patient_safety_measures.aspx), the NQF reviewed the CAUTI and CLABSI measures that we adopted in the FY 2012 IPPS/LTCH PPS final rule. As a result of this review, the NQF expanded the scope of its endorsement to include additional care settings, including LTCHs. In the FY 2013 IPPS/LTCH PPS final rule, we adopted the CAUTI and CLABSI measures in their expanded form for the FY 2014 payment determination and subsequent years. We did not believe that the total burden estimate of $756,326 that we made in the FY 2012 IPPS/LTCH PPS final rule would be affected by this expansion of the CAUTI and CLABSI measures. We made this statement because these expanded measures were the same measures we adopted in the FY 2012 IPPS/LTCH PPS final rule, except that the measure names had been changed and the scope of NQF endorsement expanded so as to be applicable to the LTCH setting. The expanded CAUTI and CLABSI measures made no changes to the way that data were to be collected and reported by LTCHs. Thus, the use of the expanded CAUTI and CLABSI measures continued to place no additional financial burden on LTCHs. In addition, we believed that this financial burden should remain relatively stable over the first several years of this LTCHQR Program, subject to normal inflationary increases, such as increased labor wage rates. As discussed in section VIII.D.4.b. of the preamble of the FY 2013 IPPS/LTCH PPS final rule, for the FY 2016 payment determination and subsequent years, we added two additional quality measures to the LTCHQR Program. These quality measures are: (1) Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) (NQF #0680); and (2) Influenza Vaccination Coverage Among Healthcare Personnel (NQF #0431). LTCHs will submit data for the staff immunization measure to the CDC’s NHSN. Details related to the use of NHSN for data submission and information on definitions, numerator data, denominator data, data analyses, and measure specifications for the Influenza Vaccination Coverage among Healthcare Personnel (NQF #0431) measure can be found at https://www.cdc.gov/nhsn/ LTACH/hcp-flu-vac/. Data for the patient influenza vaccination measure will be collected using the LTCH CARE Data Set Version 2.01, and we confirm that the new data item set consists of 3 additional items added to the LTCH CARE Data Set Version 1.01, creating Version 2.01 of the LTCH CARE Data Set. These items are harmonized with data elements (O0250: Influenza Vaccination Status) from the Minimum Data Set (MDS) 3.0.213 The LTCH 213 Centers for Medicare & Medicaid Services. MDS 3.0 Item Subsets V1.10.4 for the April 1, 2012 Release. Retrieved from https://www.cms.gov/ NursingHomeQualityInits/ 30_NHQIMDS30TechnicalInformation.asp. E:\FR\FM\19AUR2.SGM 19AUR2 51036 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES6 CARE Data Set Version 2.01 was approved by the Office of Management and Budget (OMB) on June 10, 2013 under the Paperwork Reduction Act (PRA).214 The OMB control number is 0938–1163. The specifications and data elements for this measure are available in the CMS Long-Term Care Hospital Quality Reporting Program Manual Version 2.0 (Draft, May 2013) available on our Web site at: https://www.cms.gov/Medicare/QualityInitiatives-Patient-Assessment-Instruments/ LTCH-Quality-Reporting/Downloads/LTCHQR-Program-Manual-v20-DRAFT.zip. On May 15, 2013, the LTCHQR Program ended the submission timeframe for the first quarter of quality measure reporting. As a result, we have become more familiar with the burden of this program. We have now received feedback from LTCH providers about the time burden associated with the completion of the LTCH CARE Data Set. We have considered feedback from LTCHs in the form of public comments to the most recent LTCH proposed rule (FY 2014 IPPS/LTCH PPS proposed rule), questions during Open Door forums, and LTCH helpdesk inquiries. LTCHs have stated that we had underestimated the amount of time that is required of the LTCH staff to complete the LTCH CARE Data Set on each LTCH patient. In response to the feedback received, we have significantly revised our burden estimates. For example, in our previous PRA package burden estimate ($756,326 and 26,100 annual hours for all LTCHs) we estimated burden based solely on LTCH yearly discharges of Medicare beneficiaries, while the revised burden estimate ($2,971,250 and 212,160 annual hours for all LTCHs) has been updated to reflect the requirement that LTCHs submit data for yearly LTCH discharges of both Medicare and non-Medicare patients. CMS has always required LTCHs to submit quality data on both Medicare and non-Medicare patients, however, we did not include estimates encompassing all payers into our proposed rule. In addition, the original burden calculation ($756,326 and 26,100 annual hours for all LTCHs) only took into account one assessment per patient (admission), while the revised estimate ($2,971,250 and 212,160 annual hours for all LTCHs) has been updated to reflect the requirement that LTCHs submit two assessment records per patient (admission and discharge). While the burden calculation for this PRA submission has increased significantly compared to our original calculation, we believe that the calculation now more accurately reflects the burden associated with implementing data collection and submission, as mandated by section 1886(m)(5) of the Act. For a complete discussion on the current LTCH CARE Data Set version 2.01 burden estimate, we refer readers to the PRA package approved by OMB on June 10, 2013.215 214 The LTCH CARE Data Set Version 2.01 was approved on June 10, 2013 by OMB in accordance with the PRA. The OMB Control Number is 0938– 1163. Expiration Date June 30, 2016. 215 The LTCH CARE Data Set Version 2.01 was approved on June 10, 2013 by OMB in accordance with the PRA. The OMB Control Number is 0938– 1163. Expiration Date June 30, 2016. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 In sections IX.C.8.b. and c. of the preamble to this final rule, we are finalizing our proposal to adopt four new quality measures for inclusion in the LTCHQR Program: (1) NHSN Facility-Wide Inpatient HospitalOnset Methicillin-resistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure (NQF #1716); (2) NHSN FacilityWide Inpatient Hospital-Onset Clostridium Difficile (C. Difficile) Outcome Measure (NQF #1717); (3) All-Cause Unplanned Readmission Measure for 30 Days PostDischarge from Long-Term Care Hospitals; and (4) Application of Percent of Residents Experiencing One or More Falls with Major Injury (Long-Stay) (NQF #0674). The first three measures will apply to the FY 2017 payment determination and subsequent years. The fourth measure will apply to the FY 2018 payment determination and subsequent years. Of the measures listed above, we believe that the first two measures (NHSN FacilityWide Inpatient Hospital-Onset Methicillinresistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure (NQF #1716) and NHSN Facility-Wide Inpatient HospitalOnset Clostridium Difficile (C. Difficile) Outcome Measure (NQF #1717)) will only minimally increase burden on LTCHs. These two measures are reported through the CDC’s NHSN. LTCHs are familiar with the submission of quality data using this system as they began submitting required quality data through NHSN on October 1, 2012 for the CAUTI and CLABSI measures. The third measure (All-Cause Unplanned Readmission Measure for 30 Days Post-Discharge from Long-Term Care Hospitals) is a Medicare FFS claims-based measure, and therefore will not increase the reporting burden of LTCHs. Lastly, we believe the fourth measure (application of Percent of Residents Experiencing One or More Falls with Major Injury (Long-Stay) (NQF #0674) will also have a minimal impact on the reporting burden, as calculated for the LTCH CARE Data Set Version 2.01 approved by the Office of Management and Budget (OMB) in accordance with the Paperwork Reduction Act (PRA).216 This measure will be collected using the LTCH CARE Data Set to which a total of two questions will be added in order to allow CMS to collect the data necessary to calculate this measure. The public comments that we received addressing burden and data collection associated with the LTCHQR Program are addressed in sections IX.C. and XIII.B.9. of the preamble of this final rule, where we discuss in detail the information collection requirements and the burden associated with those requirements. P. Effects of Changes to the Requirements for the Inpatient Psychiatric Facilities Quality Reporting (IPFQR) Program In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53644), we finalized policies to implement the Inpatient Psychiatric Facilities Quality Reporting (IPFQR) Program. One goal of the IPFQR Program is 216 The LTCH CARE Data Set Version 2.01 was approved on June 10, 2013 by OMB in accordance with the PRA. The OMB Control Number is 0938– 1163. Expiration Date June 30, 2016. PO 00000 Frm 00542 Fmt 4701 Sfmt 4700 to implement the statutory requirements of section 1886(s)(4) of the Act, as added by sections 3401(f) and 10322(a) of the Affordable Care Act. In addition, one of our priorities is to help achieve better health and better health care for individuals through collection of valid, reliable, and relevant measures of quality health care data. Such data will be publicly posted and, thus, available for use in furthering the development of health care quality, which, in turn, helps to further our objectives and goals. IPFs can use such health care quality data for many purposes such as in their risk management programs, patient safety and quality improvement initiatives and research and development of mental health programs, among others. In section IX.D. of the preamble of this final rule, we are finalizing our proposal that, for the FY 2016 payment determination and subsequent years, IPFs must submit aggregate data on one additional chart-abstracted measure (SUB–1: Alcohol Use Screening), for a total of 7 chart-abstracted measures. We note that, at this time, we have decided to not finalize SUB–4 (Alcohol & Drug Use: Assessing Status After Discharge). Although we proposed to use chart-abstraction, we are finalizing claims-based data collection for the Follow-Up After Hospitalization for Mental Illness (FUH) measure, which reduces burden on IPFs. In addition, we are finalizing a request for voluntary information. We did not make changes to the administrative, reporting or submission requirements for the existing six measures previously finalized in last year’s rule (77 FR 53654 through 53657). However, there will be new reporting and submission requirements associated with the two additional measures and request for voluntary information for the FY 2016 payment determination and subsequent years. II. Alternatives Considered This final rule contains a range of policies. It also provides descriptions of the statutory provisions that are addressed, identifies the finalized policies, and presents rationales for our decisions and, where relevant, alternatives that were considered. III. Overall Conclusion 1. Acute Care Hospitals Table I of section I.G. of this Appendix demonstrates the estimated distributional impact of the IPPS budget neutrality requirements for the MS–DRG and wage index changes, and for the wage index reclassifications under the MGCRB. Table I also shows an overall increase of 0.5 percent in operating payments. As discussed in section I.G. of this Appendix, we estimate that operating payments will increase by approximately $498 million in FY 2014 relative to FY 2013. However, when we account for the impact of the changes in Medicare DSH payments and the impact of the new additional payments based on uncompensated care in accordance with section 3133 of the Affordable Care Act, based on estimates provided by the CMS Office of the Actuary, consistent with our policy discussed in section V.E. of the preamble of this final rule, we estimate that E:\FR\FM\19AUR2.SGM 19AUR2 51037 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations operating payments would increase by approximately $1.3 billion relative to FY 2013. In addition, we estimate a savings of $26 million associated with the HACs policies in FY 2014, which is an additional $2 million in savings as compared to FY 2013. We estimate that the expiration of the expansion of low-volume hospital payments in FY 2014 under section 605 of the ATRA will result in a decrease in payments of approximately $268 million. We estimate new technology payments will increase payments by $29 million in FY 2014. We estimate that the finalized policy to include labor and delivery patient days in the patient day utilization calculation for GME payments will decrease payments to providers by $19 million. Finally, we estimate that the policies related to validation, including submission of and payment for secure electronic versions of medical information for validation for the FY 2016 payment determination and subsequent years, as described in the ICRs for the Hospital IQR Program in section XII.B.6. of the preamble of this final rule, will result in a cost savings to CMS of approximately $1.3 million. These estimates, combined with our FY 2014 operating estimate of $1.3 billion, result in an estimated increase of approximately $1.1 billion for FY 2014. We estimate that hospitals will experience a 1.6 percent increase in capital payments per case, as shown in Table III of section I.I. of this Appendix. We project that there will be a $134 million increase in capital payments in FY 2014 compared to FY 2013. The cumulative operating and capital payments would result in a net increase of approximately $1.2 billion to IPPS providers. The discussions presented in the previous pages, in combination with the rest of this final rule, constitute a regulatory impact analysis. 2. LTCHs Overall, LTCHs are projected to experience an increase in estimated payments per discharge in FY 2014. In the impact analysis, we are using the rates, factors, and policies presented in this final rule, including updated wage index values and relative weights, and the best available claims and CCR data to estimate the change in payments under the LTCH PPS for FY 2014. Accordingly, based on the best available data for the 423 LTCHs in our database, we estimate that FY 2014 LTCH PPS payments will increase approximately $72 million relative to FY 2013 as a result of the payment rates and factors presented in this final rule. In addition, we estimate that the expiration of the moratorium on the full application of the ‘‘25-percent threshold’’ payment adjustment policy under current law, beginning with cost reporting period beginning on or after October 1, 2013 as discussed in section VIII.D. of the preamble of this final rule, will result in a reduction in LTCH PPS payments of $90 million. Additionally, costs to LTCHs associated with the completion of the data for the LTCHQR Program is estimated to be $2.97 million. IV. Accounting Statements and Tables A. Acute Care Hospitals As required by OMB Circular A–4 (available at https://www.whitehouse.gov/ omb/circulars/a004/a-4.pdf), in Table V below, we have prepared an accounting statement showing the classification of the expenditures associated with the provisions of this final rule as they relate to acute care hospitals. This table provides our best estimate of the change in Medicare payments to providers as a result of the changes to the IPPS presented in this final rule. All expenditures are classified as transfers to Medicare providers. The costs to the Federal Government associated with the policies in this final rule are estimated at $1.2 billion. TABLE V—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED EXPENDITURES UNDER THE IPPS FROM FY 2013 TO FY 2014 Category law, is projected to result in a decrease in estimated aggregate LTCH PPS payments in FY 2014 relative to FY 2013 of approximately $18 million based on the data for 423 LTCHs in our database that are subject to payment under the LTCH PPS. Therefore, as required by OMB Circular A–4 (available at https:// www.whitehouse.gov/omb/circulars/a004/a4.pdf), in Table VI below, we have prepared an accounting statement showing the classification of the expenditures associated with the provisions of this final rule as they relate to the changes to the LTCH PPS. Table VI provides our best estimate of the estimated decrease in Medicare payments under the LTCH PPS as a result of the payment rates and factors and other provisions presented in this final rule based on the data for the 425 LTCHs in our database. All expenditures are classified as transfers to Medicare providers (that is, LTCHs). Lastly, we present the costs to LTCHs associated with the completion of the data for the LTCHQR Program at $2.97 million. The savings to the Federal Government associated with the policies for LTCHs in this final rule is estimated at $18 million. TABLE VI—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED EXPENDITURES FROM THE FY 2013 LTCH PPS TO THE FY 2014 LTCH PPS Category Annualized Monetized Transfers. From Whom to Whom Transfers Annualized Monetized Transfers. From Whom to Whom Transfers ¥$18 million. Federal Government to LTCH Medicare Providers. $1.2 billion. Category Federal Government to IPPS Medicare Providers. B. LTCHs As discussed in section I.L. of this Appendix, the impact analysis of the payment rates and factors presented in this final rule under the LTCH PPS, in conjunction with the estimated payment impact of the moratorium on the full application of the ‘‘25-percent threshold’’ payment adjustment policy under current Annualized Monetized Costs for LTCHs to Submit Quality Data. Costs $2.97 million. C. Part B Inpatient Hospital Services The following accounting statement shows the classification of the expenditures associated with our final policy to provide payment for additional Part B inpatient services as discussed in section XI. of the preamble in this final rule. TABLE VII—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED MEDICARE AND BENEFICIARIES’ OUT-OF-POCKET EXPENDITURES FOR THE 12-MONTH TIMELY FILING RESTRICTION POLICY * [In millions of 2013 dollars] Category Transfers mstockstill on DSK4VPTVN1PROD with RULES6 Annualized Monetized Transfers ...................................... Units Discount Rate 7% ¥$830 3% ¥$851 From/To Units Discount Rate 7% 21:51 Aug 16, 2013 CYs 2013–2017. Federal Government to Hospitals Annualized Monetized Transfers ...................................... VerDate Mar<15>2010 Period Covered Jkt 229001 PO 00000 Frm 00543 Fmt 4701 Period Covered 3% Sfmt 4700 CYs 2013–2017. E:\FR\FM\19AUR2.SGM 19AUR2 51038 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations TABLE VII—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED MEDICARE AND BENEFICIARIES’ OUT-OF-POCKET EXPENDITURES FOR THE 12-MONTH TIMELY FILING RESTRICTION POLICY *—Continued [In millions of 2013 dollars] ¥$42 ¥$43 From/To Beneficiaries to Hospitals * These amounts are based on the conversion to constant year dollars of the 12-month timely filing policy impact of this final rule. mstockstill on DSK4VPTVN1PROD with RULES6 V. Regulatory Flexibility Act (RFA) Analysis The RFA requires agencies to analyze options for regulatory relief of small entities. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and small government jurisdictions. We estimate that most hospitals and most other providers and suppliers are small entities as that term is used in the RFA. The great majority of hospitals and most other health care providers and suppliers are small entities, either by being nonprofit organizations or by meeting the SBA definition of a small business (having revenues of less than $7.5 million to $34.5 million in any 1 year). (For details on the latest standards for health care providers, we refer readers to page 33 of the Table of Small Business Size Standards for NAIC 622 found on the SBA Web site at: https://www.sba.gov/ contractingopportunities/sizestandardtopics/ tableofsize/.) For purposes of the RFA, all hospitals and other providers and suppliers are considered to be small entities. Individuals and States are not included in the definition of a small entity. We believe that the provisions of this final rule relating to acute care hospitals would have a significant impact on small entities as explained in this Appendix. Because we lack data on individual hospital receipts, we cannot determine the number of small proprietary LTCHs. Therefore, we are assuming that all LTCHs are considered small entities for the purpose of the analysis in section I.L. of this Appendix. Medicare fiscal intermediaries and MACs are not considered to be small entities. Because we acknowledge that many of the affected entities are small entities, the analysis discussed throughout the preamble of this final rule constitutes our regulatory flexibility analysis. In the FY 2014 IPPS/ LTCH PPS proposed rule, we solicited public comments on our estimates and analysis of the impact of our proposals on those small entities. Any public comments that we received and our responses are presented throughout this final rule. VI. Impact on Small Rural Hospitals Section 1102(b) of the Social Security Act requires us to prepare a regulatory impact analysis for any proposed or final rule that may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 603 of the RFA. With the exception of hospitals located in certain New England counties, for purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of an urban area and has fewer than 100 beds. Section 601(g) of the Social Security Amendments of 1983 (Pub. L. VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 98–21) designated hospitals in certain New England counties as belonging to the adjacent urban area. Thus, for purposes of the IPPS and the LTCH PPS, we continue to classify these hospitals as urban hospitals. (We refer readers to Table I in section I.G. of this Appendix for the quantitative effects of the final policy changes under the IPPS for operating costs.) VII. Unfunded Mandates Reform Act Analysis Section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104–4) also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. In 2013, that threshold level is approximately $141 million. This final rule will not mandate any requirements for State, local, or tribal governments, nor will it affect private sector costs. VIII. Executive Order 12866 In accordance with the provisions of Executive Order 12866, the Executive Office of Management and Budget reviewed this final rule. Appendix B: Recommendation of Update Factors for Operating Cost Rates of Payment for Inpatient Hospital Services I. Background Section 1886(e)(4)(A) of the Act requires that the Secretary, taking into consideration the recommendations of MedPAC, recommend update factors for inpatient hospital services for each fiscal year that take into account the amounts necessary for the efficient and effective delivery of medically appropriate and necessary care of high quality. Under section 1886(e)(5) of the Act, we are required to publish update factors recommended by the Secretary in the proposed and final IPPS rules, respectively. Accordingly, this Appendix provides the recommendations for the update factors for the IPPS national standardized amount, the Puerto Rico-specific standardized amount, the hospital-specific rate for SCHs, and the rate-of-increase limits for certain hospitals excluded from the IPPS, as well as LTCHs. In prior years, we have made a recommendation in the IPPS proposed rule and final rule for the update factors for the payment rates for IRFs and IPFs. However, for FY 2014, we plan to include the Secretary’s recommendation for the update factors for IRFs and IPFs in separate Federal Register documents at the time that we announce the annual updates for IRFs and IPFs. We also discuss our response to PO 00000 Frm 00544 Fmt 4701 Sfmt 4700 MedPAC’s recommended update factors for inpatient hospital services. II. Inpatient Hospital Update for FY 2014 A. FY 2014 Inpatient Hospital Update Section 1886(b)(3)(B) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act, sets the applicable percentage increase under the IPPS for FY 2014 as equal to the rate-of-increase in the hospital market basket for IPPS hospitals in all areas, subject to a reduction of 2.0 percentage points if the hospital fails to submit quality data under rules established by the Secretary in accordance with section 1886(b)(3)(B)(viii) of the Act, and then subject to an adjustment based on changes in economy-wide productivity and an additional reduction of 0.3 percentage point. Sections 1886(b)(3)(B)(xi) and (b)(3)(B)(xii) of the Act, as added by section 3401(a) of the Affordable Care Act, state that the application of the multifactor productivity adjustment and the additional FY 2014 adjustment of 0.3 percentage point may result in the applicable percentage increase being less than zero. We note that, in compliance with section 404 of the MMA, in section IV. of this final rule, we are replacing the FY 2006-based IPPS operating and capital market baskets with revised and rebased FY 2010-based IPPS operating and capital market baskets for FY 2014. In accordance with section 1886(b)(3)(B) of the Act, as amended by section 3401(a) of the Affordable Care Act, in section V.A.1. of the preamble of the FY 2014 IPPS/LTCH PPS proposed rule, we proposed a multifactor productivity (MFP) adjustment (the 10-year moving average of MFP for the period ending FY 2014) of 0.4 percent. Therefore, based on IHS Global Insight Inc.’s (IGI’s) first quarter 2013 forecast of the proposed FY 2010-based IPPS market basket, we proposed an applicable percentage increase to the FY 2013 operating standardized amount of 1.8 percent (that is, the proposed FY 2014 estimate of the market basket rate-of-increase of 2.5 percent less an adjustment of 0.4 percentage point for economy-wide productivity (MFP) and less 0.3 percentage point) for hospitals in all areas, provided the hospital submits quality data in accordance with section 1886(b)(3)(B)(viii) of the Act and our rules. For hospitals that fail to submit quality data, we proposed an applicable percentage increase to the operating standardized amount of ¥0.2 percent (that is, the FY 2014 estimate of the market basket rate-of-increase of 2.5 percent less 2.0 percentage points for failure to submit quality data, less an adjustment of 0.4 percentage point for MFP, and less an additional adjustment of 0.3 percentage point). We also proposed that if E:\FR\FM\19AUR2.SGM 19AUR2 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations more recent data become subsequently available (for example, a more recent estimate of the market basket and MFP adjustment), we would use such data, if appropriate, to determine the FY 2014 market basket update and MFP adjustment in the final rule. For this final rule, in accordance with section 1886(b)(3)(B) of the Act, as amended by section 3401(a) of the Affordable Care Act, in section V.A.1. of the preamble of this final rule, we are making an MFP adjustment (the 10-year moving average of MFP for the period ending FY 2014) of 0.5 percent. Based on IHS Global Insight Inc.’s (IGI’s) second quarter 2013 forecast of the FY 2010-based IPPS market basket, we are making an applicable percentage increase to the FY 2013 operating standardized amount of 1.7 percent (that is, the FY 2014 estimate of the market basket rate-of-increase of 2.5 percent less an adjustment of 0.5 percentage point for MFP and less 0.3 percentage point) for hospitals in all areas, provided the hospital submits quality data in accordance with section 1886(b)(3)(B)(viii) of the Act and our rules. For hospitals that fail to submit quality data, we are making an applicable percentage increase to the operating standardized amount of ¥0.3 percent (that is, the FY 2014 estimate of the market basket rate-of-increase of 2.5 percent less 2.0 percentage points for failure to submit quality data, less an adjustment of 0.5 percentage point for MFP, and less an additional adjustment of 0.3 percentage point). mstockstill on DSK4VPTVN1PROD with RULES6 B. Update for SCHs for FY 2014 Section 1886(b)(3)(B)(iv) of the Act provides that the FY 2014 applicable percentage increase in the hospital-specific rate for SCHs equals the applicable percentage increase set forth in section 1886(b)(3)(B)(i) of the Act (that is, the same update factor as for all other hospitals subject to the IPPS). Therefore, the update to the hospital specific rate for SCHs is subject to section 1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act. Accordingly, we are making an applicable percentage increase to the hospital-specific rate applicable to SCHs of 1.7 percent for hospitals that submit quality data or ¥0.3 percent for hospitals that fail to submit quality data. C. FY 2014 Puerto Rico Hospital Update Section 401(c) of Public Law 108–173 amended section 1886(d)(9)(C)(i) of the Act and states that, for discharges occurring in a fiscal year (beginning with FY 2004), the Secretary shall compute an average standardized amount for hospitals located in any area of Puerto Rico that is equal to the average standardized amount computed under subclause (I) for FY 2003 for hospitals in a large urban area (or, beginning with FY 2005, for all hospitals in the previous fiscal year) increased by the applicable percentage increase under subsection (b)(3)(B) for the fiscal year involved. Therefore, the update to the Puerto Rico-specific operating standardized amount is subject to the applicable percentage increase set forth in section 1886(b)(3)(B)(i) of the Act as amended by sections 3401(a) and 10319(a) of VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 the Affordable Care Act (that is, the same update factor as for all other hospitals subject to the IPPS). Accordingly, we are making an applicable percentage increase to the Puerto Rico-specific standardized amount of 1.7 percent. D. Update for Hospitals Excluded from the IPPS Section 1886(b)(3)(B)(ii) of the Act is used for purposes of determining the percentage increase in the rate-of-increase limits for children’s and cancer hospitals. Section 1886(b)(3)(B)(ii) of the Act sets the percentage increase in the rate-of-increase limits equal to the market basket percentage increase. In accordance with § 403.752(a) of the regulations, RNHCIs are paid under the provisions of § 413.40, which also use section 1886(b)(3)(B)(ii) of the Act to update the percentage increase in the rate-of-increase limits. Currently, children’s hospitals, PPSexcluded cancer hospitals, and RNHCIs are among the remaining three types of hospitals still paid under the reasonable cost methodology, subject to the rate-of-increase limits. In this final rule, for FY 2014 and subsequent fiscal years, the rate-of-increase percentage applicable to the target amount for children’s hospitals, PPS-excluded cancer hospitals, and RNHCIs is the percentage increase in the revised and rebased FY 2010based IPPS operating market basket. Accordingly, the FY 2014 rate-of-increase percentage that will be applied to the target amount for cancer hospitals, children’s hospitals, and RNHCIs is the FY 2014 percentage increase in the revised and rebased FY 2010-based IPPS operating market basket. For this final rule, the current estimate of the FY 2014 IPPS operating market basket percentage increase is 2.5 percent. E. Update for LTCHs for FY 2014 Section 123 of Public Law 106–113, as amended by section 307(b) of Public Law 106–554 (and codified at section 1886(m)(1) of the Act), provides the statutory authority for updating payment rates under the LTCH PPS. As discussed in section V.A. of the Addendum to this final rule, we are establishing an update to the LTCH PPS standard Federal rate for FY 2014 based on the full LTCH PPS market basket increase estimate (for this final rule, estimated to be 2.5 percent), subject to an adjustment based on changes in economy-wide productivity and an additional reduction required by sections 1886(m)(3)(A)(ii) and (m)(4)(D) of the Act, provided the LTCH submits quality data in accordance with section 1886(m)(5)(C) of the act and our rules. Beginning in FY 2014, in accordance with the LTCHQR Program under section 1886(m)(5) of the Act, we are reducing the annual update to the LTCH PPS standard Federal rate by 2.0 percentage points for failure of a LTCH to submit quality data. The MFP adjustment described in section 1886(b)(3)(B)(xi)(ii) of the Act is currently estimated to be 0.5 percent for FY 2014. In addition, section 1886(m)(3)(A)(ii) of the Act requires that any annual update for FY 2014 PO 00000 Frm 00545 Fmt 4701 Sfmt 4700 51039 be reduced by the ‘‘other adjustment’’ at section 1886(m)(4)(D) of the Act, which is 0.3 percentage point. Therefore, based on IGI’s second quarter 2013 forecast of the FY 2014 market basket increase, we are making an annual update to the LTCH PPS standard Federal rate of 1.7 percent (that is, the current FY 2014 estimate of the market basket rate-of-increase of 2.5 percent less an adjustment of 0.5 percentage point for MFP and less 0.3 percentage point), provided the LTCH submits quality data in accordance with the LTCHQR Program under section 1886(m)(5)(C) of the Act. Accordingly, we are applying an update factor of 1.017 in determining the LTCH PPS standard Federal rate for FY 2014 provided the LTCH submits quality data in accordance with section 1886(m)(5)(C) of the Act and our rules. For LTCHs that fail to submit quality data, we are making an annual update to the LTCH PPS standard Federal rate of –0.3 percent (that is, the FY 2014 estimate of the market basket rate-of increase of 2.5 percent less an adjustment of 0.5 percentage point for MFP, less an additional adjustment of 0.3 percentage point, and less 2.0 percentage points for failure to submit quality data) by applying an update factor of 0.997 in determining the LTCH PPS standard Federal rate for FY 2014. Furthermore, we are making an adjustment for the second year of the 3year phase-in of the one-time prospective adjustment to the standard Federal rate under § 412.523(d)(3) by applying a factor of 0.98734 (or approximately –1.3 percent) in FY 2014, consistent with current law. III. Secretary’s Recommendations MedPAC is recommending an inpatient hospital update equal to one percent for FY 2014. MedPAC’s rationale for this update recommendation is described in more detail below. As mentioned above, section 1886(e)(4)(A) of the Act requires that the Secretary, taking into consideration the recommendations of MedPAC, recommend update factors for inpatient hospital services for each fiscal year that take into account the amounts necessary for the efficient and effective delivery of medically appropriate and necessary care of high quality. Consistent with current law, we are recommending an applicable percentage increase to the standardized amount of 1.7 percent (that is, the FY 2014 estimate of the market basket rate-of-increase of 2.5 percent less an adjustment of 0.5 percentage point for MFP and less 0.3 percentage point). We are recommending that the same applicable percentage increase apply to SCHs and the Puerto Rico-specific standardized amount. In addition to making a recommendation for IPPS hospitals, in accordance with section 1886(e)(4)(A) of the Act, we are recommending update factors for certain other types of hospitals excluded from the IPPS. Consistent with our policies for these facilities, we are recommending an update to the target amounts for children’s hospitals, cancer hospitals, and RNHCIs of 2.5 percent. For FY 2014, consistent with policy set forth in section VIII. of the preamble of this final rule, we are recommending an update of 1.7 percent (that is, the current FY 2014 estimate of the market basket rate-of-increase E:\FR\FM\19AUR2.SGM 19AUR2 51040 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations of 2.5 percent less an adjustment of 0.5 percentage point for MFP and less 0.3 percentage point) to the LTCH PPS standard Federal rate. mstockstill on DSK4VPTVN1PROD with RULES6 IV. MedPAC Recommendation for Assessing Payment Adequacy and Updating Payments in Traditional Medicare In its March 2013 Report to Congress, MedPAC assessed the adequacy of current payments and costs, and the relationship between payments and an appropriate cost base. MedPAC recommended an update to the hospital inpatient rates equal to 1.0 percent. MedPAC expects Medicare margins to remain low in 2013. At the same time, MedPAC’s analysis finds that efficient hospitals have been able to maintain positive Medicare margins while maintaining a relatively high quality of care. MedPAC also recommended that Congress should require the Secretary to use the difference between the increase of the applicable percentage increase under the IPPS for FY 2014 and MedPAC’s recommendation of a 1.0 percent update to gradually recover past overpayments due to documentation and coding changes. Response: With regard to MedPAC’s recommendation of an update to the hospital VerDate Mar<15>2010 21:51 Aug 16, 2013 Jkt 229001 inpatient rates equal to 1 percent, for FY 2014, as discussed above, sections 3401(a) and 10319(a) of the Affordable Care Act amended section 1886(b)(3)(B) of the Act. Section 1886(b)(3)(B) of the Act, as amended by these sections, sets the requirements for the FY 2014 applicable percentage increase. Therefore, we are making an applicable percentage increase for FY 2014 of 1.7 percent, provided the hospital submits quality data, consistent with these statutory requirements. With regard to MedPAC’s recommendation that Congress should require the Secretary to use the difference between the increase of the applicable percentage increase under the IPPS for FY 2014 and MedPAC’s recommendation of a 1.0 percent update to gradually recover past overpayments due to documentation and coding changes, we refer readers to section II.D. of the preamble of this final rule for a complete discussion of the FY 2014 documentation and coding adjustment. We note that section 631 of the ATRA amended section 7(b)(1)(B) of Public Law 110–90 to require the Secretary to make a recoupment totaling $11 billion by 2017. This adjustment represents the amount of the increase in aggregate payments as a result of PO 00000 Frm 00546 Fmt 4701 Sfmt 9990 not completing the prospective adjustment authorized under section 7(b)(1)(A) of Public Law 110–90 until FY 2013. Our actuaries estimate that if CMS were to fully account for the $11 billion recoupment required by section 631 of the ATRA in FY 2014, a ¥9.3 percent adjustment to the standardized amount would be necessary. MedPAC estimates that a ¥2.4 percent adjustment made in FY 2014, and not removed until FY 2018, also would recover the required recoupment amount. It is often our practice to delay or phase in rate adjustments over more than 1 year, in order to moderate the effect on rates in any one year. Therefore, consistent with the policies that we have adopted in many similar cases, we are making a –0.8 percent adjustment to the standardized amount in FY 2014. We also note that, because the operating and capital prospective payment systems remain separate, we are continuing to use separate updates for operating and capital payments. The update to the capital rate is discussed in section III. of the Addendum to this final rule. [FR Doc. 2013–18956 Filed 8–2–13; 4:15 pm] BILLING CODE 4120–01–P E:\FR\FM\19AUR2.SGM 19AUR2

Agencies

[Federal Register Volume 78, Number 160 (Monday, August 19, 2013)]
[Rules and Regulations]
[Pages 50495-51040]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-18956]

[[Page 50495]]

Vol. 78

Monday,

No. 160

August 19, 2013

Part II

Department of Health and Human Services

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Center for Medicare & Medicaid Services

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42 CFR Parts 412, 413, 414, et al.

Medicare Program; Hospital Inpatient Prospective Payment Systems for
Acute Care Hospitals and the Long Term Care; Hospital Prospective
Payment System and Fiscal Year 2014 Rates; Quality Reporting
Requirements for Specific Providers; Hospital Conditions of
Participation; Payment Policies Related to Patient Status; Final Rule

Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules
and Regulations

[[Page 50496]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 412, 413, 414, 419, 424, 482, 485, and 489

[CMS-1599-F; CMS-1455-F]
RINs 0938-AR53 and 0938-AR73

Medicare Program; Hospital Inpatient Prospective Payment Systems
for Acute Care Hospitals and the Long-Term Care Hospital Prospective
Payment System and Fiscal Year 2014 Rates; Quality Reporting
Requirements for Specific Providers; Hospital Conditions of
Participation; Payment Policies Related to Patient Status

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

ACTION: Final rules.

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SUMMARY: We are revising the Medicare hospital inpatient prospective
payment systems (IPPS) for operating and capital-related costs of acute
care hospitals to implement changes arising from our continuing
experience with these systems. Some of the changes implement certain
statutory provisions contained in the Patient Protection and Affordable
Care Act and the Health Care and Education Reconciliation Act of 2010
(collectively known as the Affordable Care Act) and other legislation.
These changes will be applicable to discharges occurring on or after
October 1, 2013, unless otherwise specified in this final rule. We also
are updating the rate-of-increase limits for certain hospitals excluded
from the IPPS that are paid on a reasonable cost basis subject to these
limits. The updated rate-of-increase limits will be effective for cost
reporting periods beginning on or after October 1, 2013.
We also are updating the payment policies and the annual payment
rates for the Medicare prospective payment system (PPS) for inpatient
hospital services provided by long-term care hospitals (LTCHs) and
implementing certain statutory changes that were applied to the LTCH
PPS by the Affordable Care Act. Generally, these updates and statutory
changes will be applicable to discharges occurring on or after October
1, 2013, unless otherwise specified in this final rule.
In addition, we are making a number of changes relating to direct
graduate medical education (GME) and indirect medical education (IME)
payments. We are establishing new requirements or have revised
requirements for quality reporting by specific providers (acute care
hospitals, PPS-exempt cancer hospitals, LTCHs, and inpatient
psychiatric facilities (IPFs)) that are participating in Medicare.
We are updating policies relating to the Hospital Value-Based
Purchasing (VBP) Program and the Hospital Readmissions Reduction
Program. In addition, we are revising the conditions of participation
(CoPs) for hospitals relating to the administration of vaccines by
nursing staff as well as the CoPs for critical access hospitals
relating to the provision of acute care inpatient services.
We are finalizing proposals issued in two separate proposed rules
that included payment policies related to patient status: payment of
Medicare Part B inpatient services; and admission and medical review
criteria for payment of hospital inpatient services under Medicare Part
A.

DATES: Effective Date: These final rules are effective on October 1,
2013.

FOR FURTHER INFORMATION CONTACT:
Tzvi Hefter, (410) 786-4487, and Ing-Jye Cheng, (410) 786-4548,
Operating Prospective Payment, MS-DRGs, Hospital-Acquired Conditions
(HAC), Wage Index, New Medical Service and Technology Add-On Payments,
Hospital Geographic Reclassifications, Graduate Medical Education,
Capital Prospective Payment, Excluded Hospitals, and Medicare
Disproportionate Share Hospital (DSH) Issues.
Michele Hudson, (410) 786-4487, and Judith Richter, (410) 786-2590,
Long-Term Care Hospital Prospective Payment System and MS-LTC-DRG
Relative Weights Issues.
Mollie Knight, (410) 786-7948 and Bridget Dickensheets, (410) 786-8670,
Market Basket for IPPS Hospitals and LTCHs Issues.
Siddhartha Mazumdar, (410) 786-6673, Rural Community Hospital
Demonstration Program Issues.
James Poyer, (410) 786-2261, Hospital Inpatient Quality Reporting and
Hospital Value-Based Purchasing--Program Administration, Validation,
and Reconsideration Issues.
Shaheen Halim, (410) 786-0641, Hospital Inpatient Quality Reporting--
Measures Issues Except Hospital Consumer Assessment of Healthcare
Providers and Systems Issues; and Readmission Measures for Hospitals
Issues.
Elizabeth Goldstein, (410) 786-6665, Hospital Inpatient Quality
Reporting--Hospital Consumer Assessment of Healthcare Providers and
Systems Measures Issues.
Mary Pratt, (410) 786-6867, LTCH Quality Data Reporting Issues.
Kim Spalding Bush, (410) 786-3232, Hospital Value-Based Purchasing
Efficiency Measures Issues.
James Poyer, (410) 786-2261, PPS-Exempt Cancer Hospital Quality
Reporting Issues.
Allison Lee, (410) 786-8691 and Jeffrey Buck, (410) 786-0407, Inpatient
Psychiatric Facility Quality Reporting Issues.
Sarah Fahrendorf, (410) 786-3112, Conditions of Participation (CoPs)
for CAHs Issues.
Commander Scott Cooper, USPHS, (410) 786-9465, Hospital Conditions of
Participation (CoPs)--Pneumococcal Vaccine Issues.
Ann Marshall, (410) 786-3059, Medicare Part B Inpatient Billing:
Payable Part B Inpatient and Part B Outpatient Services and Beneficiary
Utilization Days; and Physician Order and Certification for Payment of
Hospital Inpatient Services under Medicare Part A Issues.
Susanne Seagrave, (410) 786-0044, Physician Order and Certification for
Payment of Inpatient Rehabilitation Facility Services under Medicare
Part A Issues.
Jennifer Dupee, (410) 786-6537, and Jennifer Phillips, (410) 786-1023,
Medical Review Criteria for Payment of Hospital Inpatient Services
under Medicare Part A Issues.
David Danek, (617) 565-2682, Medicare Part B Inpatient Billing:
Hospital and Beneficiary Appeals Issues.
Fred Grabau, (410) 786-0206, Medicare Part B Inpatient Billing: Time
Limits for Filing Claims Issues.
Brian Pabst, (410) 786-2487, Medicare Part B Inpatient Billing:
Coordination of Benefits Issues.
Anthony Hodge, (410) 786-6645, Qualification for Coverage of Skilled
Nursing Facilities Services Issues.

SUPPLEMENTARY INFORMATION:

Electronic Access

This Federal Register document is also available from the Federal
Register online database through Federal Digital System (FDsys), a
service of the U.S. Government Printing Office. This database can be
accessed via the Internet at: https://www.gpo.gov/fdsys.

Tables Available Only Through the Internet on the CMS Web Site

In the past, a majority of the tables referred to throughout this
preamble and in the Addendum to the proposed rule and the final rule
were published in the Federal Register as part of the annual proposed
and final rules. However, beginning in FY 2012, some of

[[Page 50497]]

the IPPS tables and LTCH PPS tables are no longer published in the
Federal Register. Instead, these tables will be available only through
the Internet. The IPPS tables for this final rule are available only
through the Internet on the CMS Web site at: https://www.cms.hhs.gov/Medicare/medicare-Fee-for-Service-Payment/AcuteInpatientPPS/.
Click on the link on the left side of the screen titled, ``FY 2014 IPPS
Final Rule Home Page'' or ``Acute Inpatient--Files for Download''. The
LTCH PPS tables for this FY 2014 final rule are available only through
the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/
under the list item for Regulation Number CMS-1599-F. For complete
details on the availability of the tables referenced in this final
rule, we refer readers to section VI. of the Addendum to this final
rule.
Readers who experience any problems accessing any of the tables
that are posted on the CMS Web sites identified above should contact
Michael Treitel at (410) 786-4552.

Acronyms

3M 3M Health Information System
AAMC Association of American Medical Colleges
ACGME Accreditation Council for Graduate Medical Education
ACoS American College of Surgeons
AHA American Hospital Association
AHIC American Health Information Community
AHIMA American Health Information Management Association
AHRQ Agency for Healthcare Research and Quality
ALOS Average length of stay
ALTHA Acute Long Term Hospital Association
AMA American Medical Association
AMGA American Medical Group Association
AOA American Osteopathic Association
APR DRG All Patient Refined Diagnosis Related Group System
APRN Advanced practice registered nurse
ARRA American Recovery and Reinvestment Act of 2009, Public Law 111-
5
ASCA Administrative Simplification Compliance Act of 2002, Public
Law 107-105
ASITN American Society of Interventional and Therapeutic
Neuroradiology
ATRA American Taxpayer Relief Act of 2012, Public Law 112-240
BBA Balanced Budget Act of 1997, Public Law 105-33
BBRA Medicare, Medicaid, and SCHIP [State Children's Health
Insurance Program] Balanced Budget Refinement Act of 1999, Public
Law 106-113
BIPA Medicare, Medicaid, and SCHIP [State Children's Health
Insurance Program] Benefits Improvement and Protection Act of 2000,
Public Law 106-554
BLS Bureau of Labor Statistics
CAH Critical access hospital
CARE [Medicare] Continuity Assessment Record & Evaluation
[Instrument]
CART CMS Abstraction & Reporting Tool
CAUTI Catheter-associated urinary tract infection
CBSAs Core-based statistical areas
CC Complication or comorbidity
CCN CMS Certification Number
CCR Cost-to-charge ratio
CDAC [Medicare] Clinical Data Abstraction Center
CDAD Clostridium difficile-associated disease
CDC Center for Disease Control and Prevention
CERT Comprehensive error rate testing
CDI Clostridium difficile
CFR Code of Federal Regulations
CLABSI Central line-associated bloodstream infection
CIPI Capital input price index
CMI Case-mix index
CMS Centers for Medicare & Medicaid Services
CMSA Consolidated Metropolitan Statistical Area
COBRA Consolidated Omnibus Reconciliation Act of 1985, Public Law
99-272
COLA Cost-of-living adjustment
CoP [Hospital] condition of participation
CPI Consumer price index
CRNA Certified registered nurse anesthetist
CY Calendar year
DACA Data Accuracy and Completeness Acknowledgement
DPP Disproportionate patient percentage
DRA Deficit Reduction Act of 2005, Public Law 109-171
DRG Diagnosis-related group
DSH Disproportionate share hospital
ECI Employment cost index
EDB [Medicare] Enrollment Database
EHR Electronic health record
EMR Electronic medical record
EMTALA Emergency Medical Treatment and Labor Act of 1986, Public Law
99-272
FAH Federation of American Hospitals
FDA Food and Drug Administration
FFY Federal fiscal year
FPL Federal poverty line
FQHC Federally qualified health center
FR Federal Register
FTE Full-time equivalent
FUH Follow-up after hospitalization for mental illness
FY Fiscal year
GAAP Generally Accepted Accounting Principles
GAF Geographic Adjustment Factor
GME Graduate medical education
HAC Hospital-acquired condition
HAI Healthcare-associated infection
HBIPS Hospital-based inpatient psychiatric services
HCAHPS Hospital Consumer Assessment of Healthcare Providers and
Systems
HCFA Health Care Financing Administration
HCO High-cost outlier
HCRIS Hospital Cost Report Information System
HHA Home health agency
HHS Department of Health and Human Services
HICAN Health Insurance Claims Account Number
HIPAA Health Insurance Portability and Accountability Act of 1996,
Public Law 104-191
HIPC Health Information Policy Council
HIS Health information system
HIT Health information technology
HMO Health maintenance organization
HPMP Hospital Payment Monitoring Program
HSA Health savings account
HSCRC [Maryland] Health Services Cost Review Commission
HSRV Hospital-specific relative value
HSRVcc Hospital-specific relative value cost center
HQA Hospital Quality Alliance
HQI Hospital Quality Initiative
ICD-9-CM International Classification of Diseases, Ninth Revision,
Clinical Modification
ICD-10-CM International Classification of Diseases, Tenth Revision,
Clinical Modification
ICD-10-PCS International Classification of Diseases, Tenth Revision,
Procedure Coding System
ICR Information collection requirement
IGI IHS Global Insight, Inc.
IHS Indian Health Service
IME Indirect medical education
I-O Input-Output
IOM Institute of Medicine
IPF Inpatient psychiatric facility
IPFQR Inpatient Psychiatric Facility Quality Reporting [Program]
IPPS [Acute care hospital] inpatient prospective payment system
IRF Inpatient rehabilitation facility
IQR Inpatient Quality Reporting
IVR Interactive voice response
LAMCs Large area metropolitan counties
LOS Length of stay
LTC-DRG Long-term care diagnosis-related group
LTCH Long-term care hospital
LTCHQR Long-Term Care Hospital Quality Reporting
MA Medicare Advantage
MAC Medicare Administrative Contractor
MAP Measure Application Partnership
MCC Major complication or comorbidity
MCE Medicare Code Editor
MCO Managed care organization
MCV Major cardiovascular condition
MDC Major diagnostic category
MDH Medicare-dependent, small rural hospital
MedPAC Medicare Payment Advisory Commission
MedPAR Medicare Provider Analysis and Review File
MEI Medicare Economic Index
MGCRB Medicare Geographic Classification Review Board
MIEA-TRHCA Medicare Improvements and Extension Act, Division B of
the Tax Relief and Health Care Act of 2006, Public Law 109-432
MIPPA Medicare Improvements for Patients and Providers Act of 2008,
Public Law 110-275

[[Page 50498]]

MMA Medicare Prescription Drug, Improvement, and Modernization Act
of 2003, Public Law 108-173
MMEA Medicare and Medicaid Extenders Act of 2010, Public Law 111-309
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Public
Law 110-173
MRHFP Medicare Rural Hospital Flexibility Program
MRSA Methicillin-resistant Staphylococcus aureus
MSA Metropolitan Statistical Area
MS-DRG Medicare severity diagnosis-related group
MS-LTC-DRG Medicare severity long-term care diagnosis-related group
NAICS North American Industrial Classification System
NALTH National Association of Long Term Hospitals
NCD National coverage determination
NCHS National Center for Health Statistics
NCQA National Committee for Quality Assurance
NCVHS National Committee on Vital and Health Statistics
NECMA New England County Metropolitan Areas
NHSN National Healthcare Safety Network
NOP Notice of Participation
NQF National Quality Forum
NTIS National Technical Information Service
NTTAA National Technology Transfer and Advancement Act of 1991 (Pub.
L. 104-113)
NVHRI National Voluntary Hospital Reporting Initiative
OACT [CMS'] Office of the Actuary
OBRA 86 Omnibus Budget Reconciliation Act of 1986, Public Law 99-509
OES Occupational employment statistics
OIG Office of the Inspector General
OMB Executive Office of Management and Budget
OPM U.S. Office of Personnel Management
OQR [Hospital] Outpatient Quality Reporting
O.R. Operating room
OSCAR Online Survey Certification and Reporting [System]
PCH PPS-exempt cancer hospital
PCHQR PPS-exempt cancer hospital quality reporting
PMSAs Primary metropolitan statistical areas
POA Present on admission
PPI Producer price index
PPS Prospective payment system
PRM Provider Reimbursement Manual
ProPAC Prospective Payment Assessment Commission
PRRB Provider Reimbursement Review Board
PRTFs Psychiatric residential treatment facilities
PSF Provider-Specific File
PS&R Provider Statistical and Reimbursement [System]
PQRS Physician Quality Reporting System
QIG Quality Improvement Group, CMS
QIO Quality Improvement Organization
RCE Reasonable compensation equivalent
RHC Rural health clinic
RHQDAPU Reporting hospital quality data for annual payment update
RNHCI Religious nonmedical health care institution
RPL Rehabilitation psychiatric long-term care (hospital)
RRC Rural referral center
RTI Research Triangle Institute, International
RUCAs Rural-urban commuting area codes
RY Rate year
SAF Standard Analytic File
SCH Sole community hospital
SCIP Surgical Care Improvement Project
SFY State fiscal year
SIC Standard Industrial Classification
SNF Skilled nursing facility
SOCs Standard occupational classifications
SOM State Operations Manual
SSI Surgical site infection
SSI Supplemental Security Income
SSO Short-stay outlier
SUD Substance use disorder
TEFRA Tax Equity and Fiscal Responsibility Act of 1982, Public Law
97-248
TEP Technical expert panel
TMA TMA [Transitional Medical Assistance], Abstinence Education, and
QI [Qualifying Individuals] Programs Extension Act of 2007, Public
Law 110-90
TPS Total Performance Score
UHDDS Uniform hospital discharge data set
VBP [Hospital] Value Based Purchasing [Program]
VTE Venous thromboembolism

Table of Contents

I. Executive Summary and Background
A. Executive Summary
1. Purpose and Legal Authority
2. Summary of the Major Provisions
3. Summary of Costs and Benefits
B. Summary
1. Acute Care Hospital Inpatient Prospective Payment System
(IPPS)
2. Hospitals and Hospital Units Excluded from the IPPS
3. Long-Term Care Hospital Prospective Payment System (LTCH PPS)
4. Critical Access Hospitals (CAHs)
5. Payments for Graduate Medical Education (GME)
C. Provisions of the Patient Protection and Affordable Care Act
(Pub. L. 111-148), the Health Care and Education Reconciliation Act
of 2010 (Pub. L. 111-152), and the American Taxpayer Relief Act of
2012 (Pub. L. 112-240)
D. Issuance of a Notice of Proposed Rulemaking
E. Public Comments Received in Response to the FY 2014 IPPS/LTCH
PPS Proposed Rule
F. Finalization of the Proposed Rule on Medicare Part B
Inpatient Billing in Hospitals
II. Changes to Medicare Severity Diagnosis-Related Group (MS-DRG)
Classifications and Relative Weights
A. Background
B. MS-DRG Reclassifications
C. Adoption of the MS-DRGs in FY 2008
D. FY 2014 MS-DRG Documentation and Coding Adjustment
1. Background on the Prospective MS-DRG Documentation and Coding
Adjustments for FY 2008 and FY 2009 Authorized by Public Law 110-90
2. Adjustment to the Average Standardized Amounts Required by
Public Law 110-90
a. Prospective Adjustment Required by Section 7(b)(1)(A) of
Public Law 110-90
b. Recoupment or Repayment Adjustments in FYs 2010 through 2012
Required by Section 7(b)(1)(B) Public Law 110-90
3. Retrospective Evaluation of FY 2008 and FY 2009 Claims Data
4. Prospective Adjustments for FY 2008 and FY 2009 Authorized by
Section 7(b)(1)(A) of Public Law 110-90
5. Recoupment or Repayment Adjustment Authorized by Section
7(b)(1)(B) of Public Law 110-90
6. Recoupment or Repayment Adjustment Authorized by Section 631
of the American Taxpayer Relief Act of 2012 (ATRA).
7. Additional Prospective Adjustments for the MS-DRG
Documentation and Coding Effect through FY 2010 Authorized under
Section 1886(d)(3)(A)(vi) of the Act
E. Refinement of the MS-DRG Relative Weight Calculation
1. Background
2. Discussion and Policies for FY 2014
F. Adjustment to MS-DRGs for Preventable Hospital-Acquired
Conditions (HACs), Including Infections
1. Background
2. HAC Selection
3. Present on Admission (POA) Indicator Reporting
4. HACs and POA Reporting in ICD-10-CM and ICD-10-PCS
5. Current HACs and Previously Considered Candidate HACs
6. RTI Program Evaluation
7. Current and Previously Considered Candidate HACs--RTI Report
on Evidence-Based Guidelines
G. Changes to Specific MS-DRG Classifications
1. Pre-Major Diagnostic Categories (Pre-MDCs): Heart Transplants
and Liver Transplants
2. MDC 1(Diseases and Disorders of the Nervous System): Tissue
Plasminogen Activator (tPA) (rtPA) Administration within 24 Hours
Prior to Admission
3. MDC 4 (Diseases and Disorders of the Ear, Nose, Mouth and
Throat)
a. Endoscopic Placement of a Bronchial Valve
b. Pulmonary Thromboendarterectomy (PTE) with Full Circulatory
Arrest
4. MDC 5 (Diseases and Disorders of the Circulatory System)
a. Discharge/Transfer to Designated Disaster Alternative Care
Site
b. Discharges/Transfers with a Planned Acute Care Hospital
Inpatient Readmission
5. MDC 8 (Diseases and Disorders of the Musculoskeletal System
and Connective Tissue)
a. Reverse Shoulder Procedures
b. Total Ankle Replacement Procedures
6. MDC 15 (Newborns and Other Neonates with Conditions
Originating in the Perinatal Period)

[[Page 50499]]

a. Persons Encountering Health Services for Specific Procedures,
Not Carried Out
b. Discharges/Transfers of Neonates with a Planned Acute Care
Hospital Inpatient Readmission
7. Medicare Code Editor (MCE) Changes
a. Age Conflict Edit
b. Discharge Status Code Updates
8. Surgical Hierarchies
9. Complications or Comorbidity (CC) Exclusions List
a. Background of the CC List and the CC Exclusion List
b. CC Exclusions List for FY 2014
10. Review of Procedure Codes in MS-DRGs 981 through 983, 984
through 986, and 987 through 989
a. Moving Procedure Codes from MS-DRGs 981 through 983 or MS-
DRGs 987 through 989 into MDCs
b. Reassignment of Procedures among MS-DRGs 981 through 983, 984
through 986, and 987 through 989
c. Adding Diagnosis or Procedure Codes to MDCs
11. Changes to the ICD-9-CM Coding System, Including Discussion
of the Replacement of the ICD-9-CM System with the ICD-10-CM and
ICD-10-PCS Systems in FY 2014
a. ICD-9-CM Coding System
b. Code Freeze
c. Processing of 25 Diagnosis Codes and 25 Procedure Codes on
Hospital Inpatient Claims
d. ICD-10 MS-DRGs
H. Recalibration of FY 2014 MS-DRG Relative Weights
1. Data Sources for Developing the Relative Weights
2. Methodology for Calculation of the Relative Weights
3. Development of National Average CCRs
4. Bundled Payments for Care Improvement (BPCI) Initiative
I. Add-On Payments for New Services and Technologies
1. Background
2. Public Input Before Publication of a Notice of Proposed
Rulemaking on Add-On Payments
3. FY 2014 Status of Technology Approved for FY 2013 Add-On
Payments
a. AutoLaser Interstitial Therapy (Auto LITT[supreg]) System
b. Glucarpidase (Trade Brand Voraxaze[supreg])
c. DIFICID[supreg] (Fidaxomicin) Tablets
d. Zenith[supreg] Fenestrated Abdominal Aortic Aneurysm (AAA)
Endovascular Graft
4. FY 2014 Applications for New Technology Add-On Payments
a. Kcentra[supreg]
b. Argus[supreg] II Retinal Prosthesis System
c. Responsive Neurostimulator (RNS) System
d. Zilver[supreg] PTX[supreg] Drug Eluting Stent
e. MitraClip[supreg] System
III. Changes to the Hospital Wage Index for Acute Care Hospitals
A. Background
B. Core-Based Statistical Areas for the Hospital Wage Index
C. Worksheet S-3 Wage Data for the FY 2014 Wage Index
1. Included Categories of Costs
2. Excluded Categories of Costs
3. Use of Wage Index Data by Providers Other Than Acute Care
Hospitals under the IPPS
D. Verification of Worksheet S-3 Wage Data
E. Method for Computing the FY 2014 Unadjusted Wage Index
F. Occupational Mix Adjustment to the FY 2014 Wage Index
1. Development of Data for the FY 2014 Occupational Mix
Adjustment Based on the 2010 Occupational Mix Survey
2. New 2013 Occupational Mix Survey for the FY 2016 Wage Index
3. Calculation of the Occupational Mix Adjustment for FY 2014
G. Analysis and Implementation of the Occupational Mix
Adjustment and the FY 2014 Occupational Mix Adjusted Wage Index
1. Analysis of the Occupational Mix Adjustment and the
Occupational Mix Adjusted Wage Index
2. Application of the Rural, Imputed, and Frontier Floors
a. Rural Floor
b. Imputed Floor
c. Frontier Floor
3. FY 2014 Wage Index Tables
H. Revisions to the Wage Index Based on Hospital Redesignations
and Reclassifications
1. General Policies and Effects of Reclassification/
Redesignation
2. FY 2014 MGCRB Reclassifications
a. FY 2014 Reclassification Requirements and Approvals
b. Applications for Reclassifications for FY 2015
3. Redesignations of Hospitals under Section 1886(d)(8)(B) of
the Act
4. Reclassifications under Section 1886(d)(8)(B) of the Act
Seeking Reclassification by the MGCRB
5. Waiving Lugar Redesignation for the Out-Migration Adjustment
I. FY 2014 Wage Index Adjustment Based on Commuting Patterns of
Hospital Employees
J. Process for Requests for Wage Index Data Corrections
K. Labor-Related Share for the Proposed FY 2014 Wage Index
IV. Rebasing and Revision of the Hospital Market Baskets for Acute
Care Hospitals
A. Background
B. Rebasing and Revising the IPPS Market Basket
1. Development of Cost Categories and Weights
2. Cost Category Computation
3. Selection of Price Proxies
4. Labor-Related Share
C. Market Basket for Certain Hospitals Presently Excluded from
the IPPS
D. Rebasing and Revising the Capital Input Price Index (CIPI)
V. Other Decisions and Changes to the IPPS for Operating Costs and
Graduate Medical Education (GME) Costs
A. Inpatient Hospital Updates for FY 2014 (Sec. Sec. 412.64(d)
and 412.211(c))
1. FY 2014 Inpatient Hospital Update
2. FY 2014 Puerto Rico Hospital Update
B. Rural Referral Centers (RRCs): Annual Update to Case-Mix
Index (CMI) and Discharge Criteria (Sec. 412.96)
1. Case-Mix Index (CMI)
2. Discharges
C. Payment Adjustment for Low-Volume Hospitals (Sec. 412.101)
1. Background
a. Original Implementation of the Low-Volume Hospital Payment
Adjustment
b. Affordable Care Act Provisions for FYs 2011 and 2012
2. Provisions of the ATRA for FY 2013
a. Background
b. Conforming Regulatory Changes
3. Low-Volume Hospital Definition and Payment Adjustment for FY
2014 and Subsequent Years
D. Indirect Medical Education (IME) Adjustment (Sec. 412.105)
1. IME Adjustment Factor for FY 2014
2. Other Policy Changes Affecting GME
E. Payment Adjustment for Medicare Disproportionate Share
Hospitals (DSHs) Sec. 412.106)
1. Background
2. Counting of Patient Days Associated with Patients Enrolled in
Medicare Advantage Plans in the Medicare and Medicaid Fractions of
the Disproportionate Share Patient Percentage (DPP) Calculation
3. New Payment Adjustment Methodology for Medicare DSH under
Section 3133 of the Affordable Care Act
F. Medicare-Dependent, Small Rural Hospital (MDH) Program (Sec.
412.108)
1. Background
2. Provisions of the ATRA for FY 2013
a. Background
b. Conforming Regulatory Changes
c. Expiration of the MDH Program
G. Hospital Readmissions Reduction Program (Sec. Sec. 412.150
through 412.154)
1. Statutory Basis for the Hospital Readmissions Reduction
Program
2. Overview
3. FY 2014 Policies for the Hospital Readmissions Reduction
Program
a. Overview
b. Refinement of the Readmission Measures and Related
Methodology for FY 2014 and Subsequent Years Payment Determinations
c. Expansion of the Applicable Conditions for FY 2015
d. Hospitals Paid under Section 1814(b)(3) of the Act, Including
the Process to be Exempt from the Hospital Readmissions Reduction
Program and Definition of ``Base Operating DRG Payment Amount'' for
Such Hospitals (Sec. 412.152 and Sec. 412.154(d))
e. Floor Adjustment Factor for FY 2014 (Sec. 412.154(c)(2))
f. Applicable Period for FY 2014
g. Refinements of the Methodology to Calculate the Aggregate
Payments for Excess Readmissions
h. Clarification of Reporting Hospital-Specific Information,
Including Opportunity to Review and Submit Corrections
H. Hospital Value-Based Purchasing Program (Sec. Sec. 412.160
through 412.165)
1. Statutory Background
2. Overview of the FY 2013 Hospital VBP Program
3. FY 2014 Payment Details

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4. FY 2014 Hospital VBP Program Measures
5. FY 2015 Hospital VBP Program Measures
6. FY 2016 Hospital VBP Program Measures
a. Measures Previously Adopted and Removal of AMI-8a, PN-3b, and
HF-1 Measures
b. New Measures for the FY 2016 Hospital VBP Program
c. Future Measures for the Efficiency Domain
7. Performance Periods and Baseline Periods
a. Background
b. Clinical Process of Care Domain Performance Period and
Baseline Periods for the FY 2016 Hospital VBP Program
c. Experience of Care Domain Performance Period and Baseline
Period for the FY 2016 Hospital VBP Program
d. Efficiency Domain Measure Performance Period and Baseline
Period for the FY 2016 Hospital VBP Program
e. Outcome Domain Performance Periods and Baseline Periods for
the FY 2017 through FY 2019 Hospital VBP Programs
8. Performance Standards for the Hospital VBP Program
a. Background
b. Performance Standards for the FY 2016 Hospital VBP Program
Measures
c. Certain Performance Standards for the FY 2017, FY 2018, and
FY 2019 Hospital VBP Programs
9. FY 2016 Hospital VBP Program Scoring Methodology
a. General Hospital VBP Program Scoring Methodology
b. Domain Weighting for the FY 2016 Hospital VBP Program for
Hospitals That Receive a Score on All Domains
c. Domain Weighting for the FY 2016 Hospital VBP Program for
Hospitals Receiving Scores on Fewer than Four Domains
d. Domain Reclassification and Domain Weighting for the FY 2017
Hospital VBP Program
e. Disaster/Extraordinary Circumstance Waivers under the
Hospital VBP Program
10. Applicability of the Hospital VBP Program to Hospitals
a. Background
b. Minimum Numbers of Cases and Measures for the FY 2016
Hospital VBP Program Outcome Domain
c. Hospitals Paid under Section 1814(b)(3) of the Act
I. Hospital-Acquired Condition (HAC) Reduction Program
1. Background
2. Statutory Basis for the HAC Reduction Program
3. Implementation of the HAC Reduction Program
a. Definitions
b. Payment Adjustment under the HAC Reduction Program, Including
Exemptions
c. Measure Selection and Conditions, Including a Proposed Risk-
Adjustment Scoring Methodology
d. Criteria for Applicable Hospitals and Performance Scoring
e. Reporting Hospital-Specific Information, Including the Review
and Correction of Information
f. Limitation on Administrative and Judicial Review
J. Payment for Graduate Medical Education (GME) and Indirect
Medical Education (IME) Costs (Sec. Sec. 412.105, 413.75 through
413.83)
1. Background
2. Inclusion of Labor and Delivery Days in the Calculation of
Medicare Utilization for Direct GME Payment Purposes and for Other
Medicare Purposes
3. Notice of Closure of Teaching Hospital and Opportunity to
Apply for Available Slots
4. Payments for Residents Training in Approved Residency
Programs at CAHs
a. Background
b. Residents in Approved Medical Residency Training Programs
That Train at CAHs
5. Expiration of Inflation Update Freeze for High Per Resident
Amounts (PRAs)
K. Rural Community Hospital Demonstration Program
1. Background
2. FY 2014 Budget Neutrality Offset Amount
L. Hospital Emergency Services under EMTALA: Technical Change
(Sec. 489.24(f))
M. Hospital Services Furnished under Arrangements
VI. Changes to the IPPS for Capital-Related Costs
A. Overview
B. Additional Provisions
1. Exception Payments
2. New Hospitals
3. Hospitals Located in Puerto Rico
C. Other Changes for FY 2014--Adjustment to Offset the Cost of
the Policy Proposal on Admission and Medical Review Criteria for
Hospital Inpatient Services under Medicare Part A
D. Annual Update for FY 2014
VII. Changes for Hospitals Excluded from the IPPS
A. Rate-of-Increase in Payments to Excluded Hospitals for FY
2014
B. Report of Adjustment (Exceptions) Payments
C. Critical Access Hospitals (CAHs): Changes to Conditions of
Participation (CoPs)
1. Background
2. Policy Changes
VIII. Changes to the Long-Term Care Hospital Prospective Payment
System (LTCH PPS) for FY 2014
A. Background of the LTCH PPS
1. Legislative and Regulatory Authority
2. Criteria for Classification as a LTCH
a. Classification as a LTCH
b. Hospitals Excluded from the LTCH PPS
3. Limitation on Charges to Beneficiaries
4. Administrative Simplification Compliance Act (ASCA) and
Health Insurance Portability and Accountability Act (HIPAA)
Compliance
B. Medicare Severity Long-Term Care Diagnosis-Related Group (MS-
LTC-DRG) Classifications and Relative Weights for FY 2014
1. Background
2. Patient Classifications into MS-LTC-DRGs
a. Background
b. Changes to the MS-LTC-DRGs for FY 2014
3. Development of the FY 2014 MS-LTC-DRG Relative Weights
a. General Overview of the Development of the MS-LTC-DRG
Relative Weights
b. Development of the MS-LTC-DRG Relative Weights for FY 2014
c. Data
d. Hospital-Specific Relative Value (HSRV) Methodology
e. Treatment of Severity Levels in Developing the MS-LTC-DRG
Relative Weights
f. Low-Volume MS-LTC-DRGs
g. Steps for Determining the FY 2014 MS-LTC-DRG Relative Weights
C. LTCH PPS Payment Rates for FY 2014
1. Overview of Development of the LTCH Payment Rates
2. FY 2014 LTCH PPS Annual Market Basket Increase
a. Overview
b. Revision of Certain Market Basket Updates as Required by the
Affordable Care Act
c. Adjustment to the Annual Update to the LTCH PPS Standard
Federal Rate under the Long-Term Care Hospital Quality Reporting
(LTCHQR) Program
1. Background
2. Reduction to the Annual Update to the LTCH PPS Standard
Federal Rate under the LTCHQR Program
d. Market Basket Under the LTCH PPS for FY 2014
e. Annual Market Basket Update for LTCHs for FY 2014
3. Adjustment for the Second Year of the Phase-In of the One-
Time Prospective Adjustment to the Standard Federal Rate under Sec.
412.523(d)(3)
D. Expiration of Certain Payment Rules for LTCH Services--The
25-Percent Threshold Payment Adjustment
E. Research on the Development of a Patient Criteria-Based
Payment Adjustment under the LTCH PPS
1. Overview
2. MedPAC's 2004 Report to Congress
3. LTCHs in the Medicare Program
4. CMS' Research: The RTI Report
5. CMS' Report to Congress: Determining Medical Necessity and
Appropriateness of Care for Medicare Long-Term Care Hospitals
6. Current Practices in LTCHs
7. Identification of Chronically Critically Ill/Medically
Complex (CCI/MC) Patients
8. LTCH PPS Payments for CCI/MC Patients
IX. Quality Data Reporting Requirements for Specific Providers and
Suppliers
A. Hospital Inpatient Quality Reporting (IQR) Program
1. Background
a. History of Measures Adopted for the Hospital IQR Program
b. Maintenance of Technical Specifications for Quality Measures
c. Public Display of Quality Measures
2. Removal and Suspension of Hospital IQR Program Measures

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a. Considerations in Removing Quality Measures from the Hospital
IQR Program
b. Hospital IQR Program Measures Removed in Previous Rulemaking
c. Removal of Hospital IQR Program Measures for the FY 2016
Payment Determination and Subsequent Years
d. Suspension of Data Collection for the FY 2014 Payment
Determination and Subsequent Years
3. Process for Retaining Previously Adopted Hospital IQR Program
Measures for Subsequent Payment Determinations
4. Additional Considerations in Expanding and Updating Quality
Measures under the Hospital IQR Program
5. Changes to Hospital IQR Program Measures Previously Adopted
for the FY 2015 and FY 2016 Payment Determinations and Subsequent
Years
a. Previously Adopted Hospital IQR Program Measures for the FY
2015 Payment Determination and Subsequent Years
b. Refinements to Existing Measures in the Hospital IQR Program
6. Additional Hospital IQR Program Measures for the FY 2016
Payment Determination and Subsequent Years
a. Hospital 30-Day, All-Cause, Risk-Standardized Readmission
Rate (RSRR) Following Chronic Obstructive Pulmonary Disease (COPD)
Hospitalization Measure (NQF 1891)
b. Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate
(RSMR) Following Chronic Obstructive Pulmonary Disease (COPD)
Hospitalization Measure (NQF 1893)
c. Hospital 30-day, All-Cause Risk-Standardized Rate of
Readmission Following Acute Ischemic Stroke (Stroke Readmission)
Measure
d. Hospital 30-Day, All-Cause Risk-Standardized Rate of
Mortality Following an Admission for Acute Ischemic Stroke (Stroke
Mortality) Measure
e. Hospital Risk-Standardized Payment Associated with a 30-day
Episode-of-Care for Acute Myocardial Infarction (AMI) Measure
7. Electronic Clinical Quality Measures
8. Possible New Quality Measures and Measure Topics for Future
Years
9. Form, Manner, and Timing of Quality Data Submission
a. Background
b. Procedural Requirements for the FY 2016 Payment Determination
and Subsequent Years
c. Data Submission Requirements for Chart-Abstracted Measures
d. Data Submission Requirements for Quality Measures That May be
Voluntarily Electronically Reported for the FY 2016 Payment
Determination
e. Sampling and Case Thresholds for the FY 2016 Payment
Determination and Subsequent Years
f. HCAHPS Requirements for the FY 2017 Payment Determination and
Subsequent Years
g. Data Submission Requirements for Structural Measures for the
FY 2015 and FY 2016 Payment Determinations
h. Data Submission and Reporting Requirements for Healthcare-
Associated Infection (HAI) Measures Reported via NHSN
10. Modifications to the Validation Process for Chart-Abstracted
Measures under the Hospital IQR Program
a. Timing and Number of Quarters Included in Validation
b. Selection of Measures and Sampling of Charts to be Included
in Validation
c. Procedures for Scoring Records for Validation
d. Procedures to Select Hospitals for Validation
e. Procedures for Submitting Records for Validation
11. Data Accuracy and Completeness Acknowledgement Requirements
for the FY 2015 Payment Determination and Subsequent Years
12. Public Display Requirements for the FY 2016 Payment
Determination and Subsequent Years
13. Reconsideration and Appeal Procedures for the FY 2015
Payment Determination and Subsequent Years
14. Hospital IQR Program Extraordinary Circumstances Extensions
or Waivers
B. PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program
1. Statutory Authority
2. Covered Entities
3. Previously Finalized Quality Measures for PCHs for the FY
2014 Program Year and Subsequent Years
4. Considerations in the Selection of the Quality Measures
5. New Quality Measures
a. New Measure Beginning for the FY 2015 Program Year and
Subsequent Years--NHSN Healthcare-Associated Infection (HAI)
Measure: Surgical Site Infection (SSI) (NQF 0753)
b. New Measures Beginning for the FY 2016 PQHQR Program Year and
Subsequent Years
6. Possible New Quality Measure Topics for Future Years
7. Maintenance of Technical Specifications for Quality Measures
8. Public Display Requirements for the FY 2014 Program Year and
Subsequent Years
9. Form, Manner, and Timing of Data Submission Beginning with FY
2015 Program Year and Subsequent Years
a. Background
b. Waivers from Program Requirements
c. Reporting Periods and Submission Timelines for the Finalized
SSI Measure
d. Exceptions to Reporting and Data Submission for HAI Measures
(CAUTI, CLABSI, and SSI)
e. Reporting and Data Submission Requirements for the Finalized
Clincial Process/Oncology Care Measures
f. Reporting and Data Submission Requirements for the Finalized
SCIP Measures
g. HCAHPS Requirements
C. Long-Term Care Hospital Quality Reporting (LTCHQR) Program
1. Statutory History
2. General Considerations Used for Selection of Quality Measures
for the LTCHQR Program
3. Process for Retention of LTCHQR Program Measures Adopted in
Previous Payment Determinations
4. Process for Adopting Changes to LTCHQR Program Measures
5. Previously Adopted Quality Measures for the FY 2014 and FY
2015 Payment Determinations and Subsequent Years
6. Previously Adopted Quality Measures for the FY 2016 Payment
Determination and Subsequent Years
7. Revisions to Previously Adopted Quality Measures
a. Revisions for Influenza Vaccination Coverage among Healthcare
Personnel (NQF 0431)
b. Revisions for Percent of Residents or Patients Who Were
Assessed and Appropriately Given the Seasonal Influenza Vaccine
(Short-Stay) (NQF 0680) for the FY 2016 Payment
Determination and Subsequent Years
c. Revisions for Percent of Residents or Patients with Pressure
Ulcers That Are New or Worsened (Short-Stay) (NQF 0678) for
the FY 2015 Payment Determination and Subsequent Years
8. New LTCHQR Program Quality Measures Affecting the FY 2017 an
FY 2018 Payment Determinations and Subsequent Years
a. Considerations in Updating and Expanding Quality Measures
under the LTCHQR Program for the FY 2017 Payment Determination and
Subsequent Years
b. New LTCHQR Program Quality Measures for the FY 2017 Payment
Determination and Subsequent Years
c. New LTCHQR Program Quality Measure for the FY 2018 Payment
Determination and Subsequent Years
d. LTCHQR Program Quality Measures and Concepts under
Consideration for Future Years Payment Determinations
9. Form, Manner, and Timing of Quality Data Submission for the
FY 2016 Payment Determination and Subsequent Years
a. Background
b. Finalized Timeline for Data Submission under the LTCHQR
Program for the FY 2016 Payment Determination
c. Timeline for Data Submission for the NQF 0431
Influenza Vaccination Coverage Among Healthcare Personnel Measure
for the FY 2016 Payment Determination and Subsequent Years
d. Timeline for Data Submission for the NQF 0680
Percent of Residents or Patients Who Were Assessed and Appropriately
Given the Seasonal Influenza Vaccine (Short Stay) Measure for the FY
2016 Payment Determination and Subsequent Years
e. Timeline for Data Submission under the LTCHQR Program for the
FY 2017 Payment Determination and Subsequent Years
f. Timeline for Data Submission under the LTCHQR Program for the
FY 2018 Payment Determination and Subsequent Years
10. Public Display of Data Quality Measures for the LTCHQR
Program

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11. LTCHQR Program Submission Waiver Requirements for the FY
2015 Payment Determination and Subsequent Years
12. LTCHQR Program Reconsideration and Appeals for the FY 2015
Payment Determination and Subsequent Years
a. LTCHQR Program Reconsideration and Appeals for the FY 2014
Payment Determination
b. LTCHQR Program Reconsideration and Appeals for the FY 2015
Payment Determination
D. Inpatient Psychiatric Facilities Quality Reporting (IPFQR)
Program
1. Statutory Authority
2. Application of the Payment Update Reduction for Failure to
Report for the FY 2014 Payment Determination and Subsequent Years
3. Covered Entities
4. Considerations in Selecting Quality Measures
5. Quality Measures for the FY 2015 Payment Determination and
Subsequent Years
a. Background
b. New Quality Measures for the FY 2016 Payment Determination
and Subsequent Years
c. Maintenance of Technical Specifications for Quality Measures
6. Request for Voluntary Information--IPF Assessment of Patient
Experience of Care
7. Request for Recommendations for New Quality Measures for
Future Years
8. Public Display Requirements for the FY 2014 Payment
Determination and Subsequent Years
9. Form, Manner, and Timing of Quality Data Submission for the
FY 2014 Payment Determination and Subsequent Years
a. Background
b. Procedural Requirements
c. Submission Requirements for the FY 2016 Payment Determination
and Subsequent Years
d. Reporting Requirements for the FY 2016 Payment Determination
and Subsequent Years
e. Population, Sampling, and Minimum Case Threshold for the FY
2016 Payment Determination and Subsequent Years
f. Data Accuracy and Completeness Acknowledgement (DACA)
Requirements
10. Reconsideration and Appeals Procedures for the FY 2014
Payment Determination and Subsequent Years
11. Waivers from Quality Reporting Requirements for the FY 2014
Payment Determination and Subsequent Years
12. Electronic Health Records (EHRs)
E. Electronic Health Records (EHRs) Incentive Program and
Meaningful Use (MU)
1. Background
2. Expanded Electronic Submission Period for CQMs
3. Quality Reporting Data Architecture Category III (QRDA-III)
Option in 2014
4. Case Number Threshold Exemption--Requirements Regarding Data
Submission
X. Change to the Medicare Hospital Conditions of Participation
(CoPs) Relating to the Administration of Pneumococcal Vaccines
XI. Payment Policies Related to Patient Status
A. Background
B. Payment of Medicare Part B Hospital Inpatient Services
1. Payable Medicare Part B Inpatient Services
a. Payment Methodology
b. Other Revisions Resulting from Our Review of the Regulations
2. Billing for Part B Outpatient Services in the 3-Day Payment
Window
3. Applicability: Hospital Self-Audit
4. Applicability: Types of Hospitals
5. Beneficiary Liability under Section 1879 of the Act
6. Applicable Beneficiary Liability: Hospital Services
7. Applicable Beneficiary Liability: Skilled Nursing Facility
Services
8. Time Limits for Filing Claims
9. Appeal Procedures
10. Coordination of Benefits with Supplemental Insurers
11. Public Comments on Other Issues
a. Application to Disproportionate Share Hospital (DSH)
Payments, Indirect Medical Education (IME) and Graduate Medical
Education (GME) Payments, and Other IPPS Adjustments
b. Application to Beneficiary Utilization Days under Medicare
Part A
c. Applicability to the Medicare Advantage (MA) Program
12. Regulatory Impact Analysis: Final Part B Inpatient Payment
Policy
a. Statement of Need
b. Overall Impact
c. Estimated Impacts of the Final Part B Inpatient Payment
Policy
d. Alternatives Considered
e. Accounting Statement and Table
f. Conclusion
13. Collection of Information Requirements
C. Admission and Medical Review Criteria for Hospital Inpatient
Services under Medicare Part A
1. Background
2. Requirements for Physician Orders and Physician Certification
a. Applicability for All Hospitals
b. Applicability to Inpatient Rehabilitation Facilities (IRFs)
3. Inpatient Admission Guidelines
a. Correct Coding Reviews
b. Complete and Accurate Documentation
c. Medical Necessity Reviews
4. Impacts of Changes in Admission and Medical Review Criteria
XII. MedPAC Recommendations
XIII. Other Required Information
A. Requests for Data from the Public
B. Collection of Information Requirements
1. Statutory Requirement for Solicitation of Comments
2. ICRs for Add-On Payments for New Services and Technologies
3. ICRs for the Occupational Mix Adjustment to the FY 2014 Wage
Index (Hospital Wage Index Occupational Mix Survey)
4. Hospital Applications for Geographic Reclassifications by the
MGCRB
5. ICRs for Application for GME Resident Slots
6. ICRs for the Hospital Inpatient Quality Reporting (IQR)
Program
7. ICRs for PPS-Exempt Cancer Hospital Quality Reporting (PCHQR)
Program
8. ICRs for Hospital Value-Based Purchasing (VBP) Program
9. ICRs for the Long-Term Care Hospital Quality Reporting
(LTCHQR) Program
10. ICRs for the Inpatient Psychiatric Facilities Quality
Reporting (IPFQR) Program

Regulation Text
Addendum--Schedule of Standardized Amounts, Update Factors, and
Rate-of-Increase Percentages Effective with Cost Reporting Periods
Beginning on or after October 1, 2013 and Payment Rates for LTCHs
Effective with Discharges Occurring on or after October 1, 2013
I. Summary and Background
II. Changes to the Prospective Payment Rates for Hospital Inpatient
Operating Costs for Acute Care Hospitals for FY 2014
A. Calculation of the Adjusted Standardized Amount
B. Adjustments for Area Wage Levels and Cost-of-Living
C. Calculation of the Prospective Payment Rates
III. Changes to Payment Rates for Acute Care Hospital Inpatient
Capital-Related Costs for FY 2014
A. Determination of Federal Hospital Inpatient Capital-Related
Prospective Payment Rate Update
B. Calculation of the Inpatient Capital-Related Prospective
Payments for FY 2014
C. Capital Input Price Index
IV. Changes to Payment Rates for Excluded Hospitals: Rate-of-
Increase Percentages for FY 2014
V. Updates to the Payment Rates for the LTCH PPS for FY 2014
A. LTCH PPS Standard Federal Rate for FY 2014
B. Adjustment for Area Wage Levels under the LTCH PPS for FY
2014
1. Background
2. Geographic Classifications/Labor Market Area Definitions
3. LTCH PPS Labor-Related Share
4. LTCH PPS Wage Index for FY 2014
5. Budget Neutrality Adjustment for Changes to the Area Wage
Level Adjustment
C. LTCH PPS Cost-of-Living Adjustment (COLA) for LTCHs Located
in Alaska and Hawaii
D. Adjustment for LTCH PPS High-Cost Outlier (HCO) Cases
E. Computing the Adjusted LTCH PPS Federal Prospective Payments
for FY 2014
VI. Tables Referenced in this Final Rulemaking and Available through
the Internet on the CMS Web site
Appendix A--Economic Analyses
I. Regulatory Impact Analysis
A. Introduction
B. Need
C. Objectives of the IPPS
D. Limitations of Our Analysis
E. Hospitals Included in and Excluded from the IPPS
F. Effects on Hospitals and Hospital Units Excluded from the
IPPS

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G. Quantitative Effects of the Policy Changes under the IPPS for
Operating Costs
1. Basis and Methodology of Estimates
2. Analysis of Table I
3. Impact Analysis of Table II
H. Effects of Other Policy Changes
1. Effects of Policy on MS-DRGs for Preventable HACs, Including
Infections
2. Effects of Policy Relating to New Medical Service and
Technology Add-On Payments
3. Effects of Payment Adjustment for Low-Volume Hospitals for FY
2014
4. Effects of Extension of the MDH Program
5. Effects of Changes under the FY 2014 Hospital Value-Based
Purchasing (VBP) Program
6. Effects of the Implementation of the HAC Reduction Program
7. Effects of Policy Changes Relating to Payments for Direct GME
and IME Costs
8. Effects of Implementation of Rural Community Hospital
Demonstration Program
9. Effects of the Extended Effective Date for Policy on Hospital
Services Furnished under Arrangements
I. Effects of Policy Relating to the Furnishing of Acute Care
Inpatient Services by CAHs
J. Effects of Changes to the COPs for Hospitals Relating to the
Administration of Pneumococcal Vaccines
K. Effects of Changes in the Capital IPPS
1. General Considerations
2. Results
L. Effects of Payment Rate Changes and Policy Changes under the
LTCH PPS
1. Introduction and General Considerations
2. Impact on Rural Hospitals
3. Anticipated Effects of LTCH PPS Payment Rate Changes and
Policy Changes
4. Effect on the Medicare Program
5. Effect on Medicare Beneficiaries
M. Effects of Requirements for Hospital Inpatient Quality
Reporting (IQR) Program
N. Effects of Changes in the PPS-Exempt Cancer Hospital Quality
Reporting (PCHQR) Program
O. Effects of Changes in the LTCH Quality Reporting (LTCHQR)
Program
P. Effects of Changes in the Requirements for the Inpatient
Psychiatric Facilities Quality Reporting (IPFQR) Program
II. Alternatives Considered
III. Overall Conclusion
1. Acute Care Hospitals
2. LTCHs
IV. Accounting Statements and Tables
A. Acute Care Hospitals
B. LTCHs
C. Part B Inpatient Hospital Services
V. Regulatory Flexibility Act (RFA) Analysis
VI. Impact on Small Rural Hospitals
VII. Unfunded Mandate Reform Act (UMRA) Analysis
VIII. Executive Order 12866

Appendix B: Recommendation of Update Factors for Operating Cost
Rates of Payment for Inpatient Hospital Services
I. Background
II. Inpatient Hospital Update for FY 2014
A. FY 2014 Inpatient Hospital Update
B. Update for SCHs for FY 2014
C. FY 2014 Puerto Rico Hospital Update
D. Update for Hospitals Excluded from the IPPS
E. Update for LTCHs for FY 2014
III. Secretary's Recommendation
IV. MedPAC Recommendation for Assessing Payment Adequacy and
Updating Payments in Traditional Medicare

I. Executive Summary and Background

A. Executive Summary

1. Purpose and Legal Authority
This final rule makes payment and policy changes under the Medicare
inpatient prospective payment systems (IPPS) for operating and capital-
related costs of acute care hospitals as well as for certain hospitals
and hospital units excluded from the IPPS. In addition, it makes
payment and policy changes for inpatient hospital services provided by
long-term care hospitals (LTCHs) under the long-term care hospital
prospective payment system (LTCH PPS). It also makes policy changes to
programs associated with Medicare IPPS hospitals, IPPS-excluded
hospitals, and LTCHs.
Under various statutory authorities, we are making changes to the
Medicare IPPS, to the LTCH PPS, and to other related payment
methodologies and programs for FY 2014 and subsequent fiscal years.
These statutory authorities include, but are not limited to, the
following:
Section 1886(d) of the Social Security Act (the Act),
which sets forth a system of payment for the operating costs of acute
care hospital inpatient stays under Medicare Part A (Hospital
Insurance) based on prospectively set rates. Section 1886(g) of the Act
requires that, instead of paying for capital-related costs of inpatient
hospital services on a reasonable cost basis, the Secretary use a
prospective payment system (PPS).
Section 1886(d)(1)(B) of the Act, which specifies that
certain hospitals and hospital units are excluded from the IPPS. These
hospitals and units are: rehabilitation hospitals and units; LTCHs;
psychiatric hospitals and units; children's hospitals; and cancer
hospitals. Religious nonmedical health care institutions (RNHCIs) are
also excluded from the IPPS.
Sections 123(a) and (c) of Public Law 106-113 and section
307(b)(1) of Public Law 106-554 (as codified under section 1886(m)(1)
of the Act), which provide for the development and implementation of a
prospective payment system for payment for inpatient hospital services
of long-term care hospitals (LTCHs) described in section
1886(d)(1)(B)(iv) of the Act.
Sections 1814(l), 1820, and 1834(g) of the Act, which
specifies that payments are made to critical access hospitals (CAHs)
(that is, rural hospitals or facilities that meet certain statutory
requirements) for inpatient and outpatient services and that these
payments are generally based on 101 percent of reasonable cost.
Section 1866(k) of the Act, as added by section 3005 of
the Affordable Care Act, which establishes a quality reporting program
for hospitals described in section 1886(d)(1)(B)(v) of the Act,
referred to as ``PPS-Exempt Cancer Hospitals.''
Section 1886(d)(3)(A)(vi) of the Act, which authorizes us
to maintain budget neutrality by adjusting the national standardized
amount, to eliminate the estimated effect of changes in coding or
classification that do not reflect real changes in case-mix.
Section 1886(d)(4)(D) of the Act, which addresses certain
hospital-acquired conditions (HACs), including infections. Section
1886(d)(4)(D) of the Act specifies that, by October 1, 2007, the
Secretary was required to select, in consultation with the Centers for
Disease Control and Prevention (CDC), at least two conditions that: (a)
Are high cost, high volume, or both; (b) are assigned to a higher
paying MS-DRG when present as a secondary diagnosis (that is,
conditions under the MS-DRG system that are CCs or MCCs); and (c) could
reasonably have been prevented through the application of evidence-
based guidelines. Section 1886(d)(4)(D) of the Act also specifies that
the list of conditions may be revised, again in consultation with CDC,
from time to time as long as the list contains at least two conditions.
Section 1886(d)(4)(D)(iii) of the Act requires that hospitals,
effective with discharges occurring on or after October 1, 2007, submit
information on Medicare claims specifying whether diagnoses were
present on admission (POA). Section 1886(d)(4)(D)(i) of the Act
specifies that effective for discharges occurring on or after October
1, 2008, Medicare no longer assigns an inpatient hospital discharge to
a higher paying MS-DRG if a selected condition is not POA.
Section 1886(a)(4) of the Act, which specifies that costs
of approved educational activities are excluded from the operating
costs of inpatient hospital services. Hospitals with approved graduate
medical education (GME) programs are paid for the direct costs of GME
in accordance with section 1886(h) of the Act.
Section 1886(b)(3)(B)(viii) of the Act, which requires the
Secretary to reduce the applicable percentage

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increase in payments to a subsection (d) hospital for a fiscal year if
the hospital does not submit data on measures in a form and manner, and
at a time, specified by the Secretary.
Section 1886(o) of the Act, which requires the Secretary
to establish a Hospital Value-Based Purchasing (VBP) Program under
which value-based incentive payments are made in a fiscal year to
hospitals meeting performance standards established for a performance
period for such fiscal year.
Section 1886(p) of the Act, as added by section 3008 of
the Affordable Care Act, which establishes an adjustment to hospital
payments for hospital-acquired conditions (HACs), or a Hospital-
Acquired Condition (HAC) Reduction Program, under which payments to
applicable hospitals are adjusted to provide an incentive to reduce
hospital-acquired conditions, effective for discharges beginning on
October 1, 2014.
Section 1886(q) of the Act, as added by section 3025 of
the Affordable Care Act and amended by section 10309 of the Affordable
Care Act, which establishes the ``Hospital Readmissions Reduction
Program'' effective for discharges from an ``applicable hospital''
beginning on or after October 1, 2012, under which payments to those
hospitals under section 1886(d) of the Act will be reduced to account
for certain excess readmissions.
Section 1886(r) of the Act, as added by section 3313 of
the Affordable Care Act, which provides for a reduction to
disproportionate share payments under section 1886(d)(5)(F) of the Act
and for a new uncompensated care payment to eligible hospitals.
Specifically, section 1886(r) of the Act now requires that, for
``fiscal year 2014 and each subsequent fiscal year,'' ``subsection (d)
hospitals'' that would otherwise receive a ``disproportionate share
payment . . . made under subsection (d)(5)(F)'' will receive two
separate payments: (1) 25 percent of the amount they previously would
have received under subsection (d)(5)(F) for DSH (``the empirically
justified amount''), and (2) an additional payment for the DSH
hospital's proportion of uncompensated care, determined as the product
of three factors. These three factors are: (1) 75 percent of the
payments that would otherwise be made under subsection (d)(5)(F); (2) 1
minus the percent change in the percent of individuals under the age of
65 who are uninsured (minus 0.1 percentage points for FY 2014, and
minus 0.2 percentage points for FY 2015 through FY 2017); and (3) a
hospital's uncompensated care amount relative to the uncompensated care
amount of all DSH hospitals expressed as a percentage.
Section 1886(s)(4) of the Act, as added and amended by
section 3401(f) and 10322(a) of the Affordable Care Act, respectively,
which requires the Secretary to implement a quality reporting program
for inpatient psychiatric hospitals and psychiatric units. Under this
program, known as the Inpatient Psychiatric Facility Quality Reporting
(IPFQR) Program, beginning with FY 2014, the Secretary must reduce any
annual update to a standard Federal rate for discharges occurring
during a fiscal year by 2.0 percentage points for any inpatient
psychiatric hospital or psychiatric unit that does not comply with
quality data submission requirements with respect to an applicable
fiscal year.
2. Summary of the Major Provisions
a. MS-DRG Documentation and Coding Adjustment
Section 631 of the American Taxpayer Relief Act (ATRA, Pub. L. 112-
240) amended section 7(b)(1)(B) of Public Law 110-90 to require the
Secretary to make a recoupment adjustment to the standardized amount of
Medicare payments to acute care hospitals to account for changes in MS-
DRG documentation and coding that do not reflect real changes in case-
mix, totaling $11 billion over a 4-year period of FYs 2014, 2015, 2016,
and 2017. This adjustment represents the amount of the increase in
aggregate payments as a result of not completing the prospective
adjustment authorized under section 7(b)(1)(A) of Public Law110-90
until FY 2013. Prior to the ATRA, this amount could not have been
recovered under Public Law 110-90.
While our actuaries estimate that a -9.3 percent adjustment to the
standardized amount would be necessary if CMS were to fully recover the
$11 billion recoupment required by section 631 of the ATRA in FY 2014,
it is often our practice to delay or phase in rate adjustments over
more than one year, in order to moderate the effects on rates in any
one year. Therefore, consistent with the policies that we have adopted
in many similar cases, we are making a -0.8 percent recoupment
adjustment to the standardized amount in FY 2014. Although we are not
making an additional prospective adjustment in FY 2014 for the
cumulative MS-DRG documentation and coding effects through FY 2010, we
solicited public comments as to whether any portion of the proposed -
0.8 percent recoupment adjustment to the operating IPPS standardized
amount should be reduced and instead applied as a prospective
adjustment to the operating IPPS standardized amount (and hospital-
specific rates) for the cumulative MS-DRG documentation and coding
effect through FY 2010. The public comments that we received are
addressed in section II.C. of the preamble of this final rule.
b. Refinement of the MS-DRG Relative Weight Calculation
Beginning in FY 2007, we implemented relative weights for DRGs
based on cost report data instead of charge information. To address the
issue of charge compression (the hospital practice of applying higher
charges to lower cost items and applying lesser charges to higher cost
items) when using cost report data to set the MS-DRG relative weights,
in FYs 2009 and 2010, we created additional cost centers on the
Medicare cost report to distinguish implantable devices from other
medical supplies, MRIs and CT scans, respectively, from other radiology
services, and cardiac catheterization from other cardiology services.
As compared to previous years, we currently have a significant volume
of hospitals completing all, or some, of these new cost centers on the
Medicare cost report. Therefore, beginning in FY 2014, we are
calculating the MS-DRG relative weights using 19 CCRs, creating
distinct CCRs from cost report data for implantable devices, MRIs, CT
scans, and cardiac catheterization.
c. Rebasing and Revision of the Hospital Market Baskets for Acute Care
Hospitals
In section IV. of the preamble of this final rule, we are rebasing
and revising the acute care hospital operating and capital market
baskets used to update IPPS payment rates. For both market baskets, we
are updating the base year cost weights from a FY 2006 base year to a
FY 2010 base year. We also are recalculating the labor-related share
using the FY 2010-based hospital market basket, for discharges
occurring on or after October 1, 2013. We used the FY 2010-based market
baskets in developing the FY 2014 update factor for the operating and
capital prospective payment rates and the FY 2014 update factor for the
excluded hospital rate-of-increase limits. We also are setting forth
the data sources used to determine the revised market basket costs
weights.
d. Reduction of Hospital Payments for Excess Readmissions
We are making a number of changes in policies to implement section
1886(q) of the Act, as added by section 3025 of the Affordable Care
Act, which

[[Page 50505]]

establishes the Hospital Readmissions Reduction Program. The Hospital
Readmissions Reduction Program requires a reduction to a hospital's
base operating DRG payment to account for excess readmissions of
selected applicable conditions. For FYs 2013 and 2014, these conditions
are acute myocardial infarction, heart failure, and pneumonia. For FY
2014, we are establishing additional exclusions to the three existing
readmission measures (that is, the excess readmission ratio) to account
for additional planned readmissions. We also are establishing
additional readmissions measures to be used in the Hospital
Readmissions Reduction Program for FY 2015. In addition, we are
specifying that the readmissions payment adjustment factors for FY 2014
can be no more than a 2-percent reduction (there is a 1-percent cap in
FY 2013), in accordance with the statute. We are making a change in the
methodology we use to calculate the readmissions payment adjustment
factors to make it more consistent with the calculation of the excess
readmissions ratio.
e. Hospital Value-Based Purchasing (VBP) Program
Section 1886(o) of the Act requires the Secretary to establish a
Hospital Value-Based Purchasing (VBP) Program under which value-based
incentive payments are made in a fiscal year to hospitals meeting
performance standards established for a performance period for such
fiscal year. Both the performance standards and the performance period
for a fiscal year are to be established by the Secretary.
In this final rule, we are outlining payment details for the FY
2014 Hospital VBP Program. In addition, we are establishing numerous
policies for the FY 2016 Hospital VBP Program, including measures,
performance standards, and performance and baseline periods. We also
are establishing a disaster/extraordinary circumstances exceptions
process, domain reclassification and weighting based on CMS' National
Quality Strategy for the FY 2017 Hospital VBP Program, and certain
measures, performance and baseline periods, and performance standards
for the FY 2017 through FY 2019 Programs.
f. Hospital-Acquired Condition (HAC) Reduction Program
In this final rule, we are establishing measures, scoring, and risk
adjustment methodology to implement the FY 2015 payment adjustment
under the HAC Reduction Program. Section 1886(p) of the Act, as added
under section 3008(a) of the Affordable Care Act, establishes an
adjustment to hospital payments for HACs, or a HAC Reduction program,
under which payments to applicable hospitals are adjusted to provide an
incentive to reduce HACs, effective for discharges beginning on October
1, 2014 and for subsequent program years. The amount of payment shall
be equal to 99 percent of the amount of payment that would otherwise
apply to such discharges under section 1886(d) or 1814(b)(3) of the
Act, as applicable.
g. Counting of Inpatient Days for Medicare Payment or Eligibility
Purposes
In response to a comment we received on the FY 2013 IPPS/LTCH PPS
final rule and consistent with the inpatient day counting rules for DSH
as clarified in the FY 2010 IPPS/RY 2010 LTCH PPS final rule, we are
providing that patient days associated with maternity patients who were
admitted as inpatients and were receiving ancillary labor and delivery
services at the time the inpatient routine census is taken, regardless
of whether the patient actually occupied a routine bed prior to
occupying an ancillary labor and delivery bed and regardless of whether
the patient occupies a ``maternity suite'' in which labor, delivery
recovery, and postpartum care all take place in the same room, would be
included in the Medicare utilization calculation. We understand that
including labor and delivery inpatient days in the Medicare utilization
calculation invariably will reduce direct GME payments because direct
GME payments are based, in part, on a hospital's Medicare utilization
ratio and the denominator of that ratio, which includes the hospital's
total inpatient days, will increase at a higher rate than the numerator
of the ratio, which includes the hospital's Medicare inpatient days.
However, because the Medicare utilization ratio is a comparison of a
hospital's total Medicare inpatient days to its total inpatient days,
we believe that revising the ratio to include labor and delivery days
is appropriate because they are inpatient days and therefore should be
counted as such. We are including labor and delivery days as inpatient
days in the Medicare utilization calculation effective for cost
reporting periods beginning on or after October 1, 2013.
h. Changes to the DSH Payment Adjustment and the Provision of
Additional Payment for Uncompensated Care
Section 3133 of the Affordable Care Act modified the Medicare
disproportionate share hospital (DSH) payment methodology beginning in
FY 2014. Currently, Medicare DSHs qualify for a DSH payment adjustment
under a statutory formula that considers their Medicare utilization due
to beneficiaries who also receive Supplemental Security Income benefits
and their Medicaid utilization. Under section 1886(r) of the Act, which
was added by section 3133 of the Affordable Care Act, starting in FY
2014, DSHs will receive 25 percent of the amount they previously would
have received under the current statutory formula for Medicare DSH
payments. The remaining amount, equal to 75 percent of what otherwise
would have been paid as Medicare DSH payments, will be paid as
additional payments after the amount is reduced for changes in the
percentage of individuals that are uninsured. Each Medicare DSH
hospital will receive its additional amount based on its share of the
total amount of uncompensated care for all Medicare DSH hospitals for a
given time period. In this final rule, we are implementing these
statutory changes.
i. Medicare Part B Inpatient Billing in Hospitals
We are finalizing our proposal that when a Medicare Part A claim
for hospital inpatient services is denied because the inpatient
admission was determined not reasonable and necessary, or if a hospital
determines under 42 CFR 482.30(d) or Sec. 485.641 after a beneficiary
is discharged that his or her inpatient admission was not reasonable
and necessary, the hospital may be paid for the Part B services that
would have been reasonable and necessary if the beneficiary had been
treated as a hospital outpatient rather than admitted as an inpatient,
provided the beneficiary is enrolled in Medicare Part B. We are
finalizing our proposal to continue applying the timely filing
restriction to the billing of all Part B inpatient services, under
which claims for Part B services must be filed within 1 year from the
date of service. However, we are modifying what we stated in the
preamble of the proposed rule regarding the applicability of the CMS
Ruling 1455-R to certain claims. We will permit hospitals to follow the
Part B billing timeframes established in the Ruling after the effective
date of this rule, provided (1) the Part A claim denial was one to
which the Ruling originally applied; or (2) the Part A inpatient claims
has a date of admission before October 1, 2013, and is denied after
September 30, 2013 on the grounds that although the medical care was
reasonable and necessary, the inpatient admission was not. In this
final rule, we

[[Page 50506]]

also describe the beneficiary liability and other impacts of our final
policies.
j. Admission and Medical Review Criteria for Hospital Inpatient
Services Under Medicare Part A
To reduce uncertainty regarding the requirements for payments to
hospitals and CAHs under Medicare Part A related to when a Medicare
beneficiary should be admitted as a hospital inpatient, in this final
rule, we are clarifying the rules governing physician orders of
hospital inpatient admissions for payment under Medicare Part A. We are
clarifying and specifying in the regulations that an individual becomes
an inpatient of a hospital, including a CAH, when formally admitted as
such pursuant to an order for inpatient admission by a physician or
other qualified practitioner described in the final regulations. The
order is required for payment of hospital inpatient services under
Medicare Part A. We are specifying that for those hospital stays in
which the physician expects the beneficiary to require care that
crosses 2 midnights and admits the beneficiary based upon that
expectation, Medicare Part A payment is generally appropriate.
Conversely, we are specifying that hospital stays in which the
physician expects the patient to require care less than 2 midnights,
payment under Medicare Part A is generally inappropriate. This will
revise our guidance to hospitals and physicians relating to when
hospital inpatient admissions are determined reasonable and necessary
for payment under Part A. We also are using our exceptions and
adjustments authority under section 1886(d)(5)(I)(i) of the Act to
offset the additional IPPS expenditures under this policy change by
reducing the standardized amount, the hospital-specific amount, and the
Puerto Rico-specific standardized amount by 0.2 percent.
LTCH PPS Standard Federal Rate
In section VIII.A. of the preamble of this final rule, we present
the LTCH PPS standard Federal rate for FY 2014, which includes an
adjustment factor of 0.98734 for the second year of the 3-year phase-in
of the permanent one-time adjustment to the standard Federal rate. In
addition, under the LTCH Quality Reporting (LTCHQR) Program, the annual
update to the standard Federal rate will be reduced by 2 percentage
points for LTCHs that fail to submit data for FY 2014 on specific
measures under section 3004 of the Affordable Care Act.
l. Expiration of Certain Payment Rules for LTCH Services and Research
on the Development of a Patient Criteria-Based Payment Adjustment Under
the LTCH PPS
In section VIII.D. of the preamble of this final rule, we note the
expiration of the moratorium on the full implementation of the ``25
percent threshold'' payment adjustment to LTCHs under the LTCH PPS for
cost reporting periods beginning on or after October 1, 2013.
In section VIII.E. of the preamble of this final rule, we discuss
the ongoing research being done by a CMS contractor, Kennell and
Associates (Kennell) and its subcontractor, Research Triangle
Institute, International (RTI), on the development of a payment
adjustment under the LTCH PPS based on the establishment of LTCH
patient criteria that was described in the proposed rule.
m. Hospital Inpatient Quality Reporting (IQR) Program
Under section 1886(b)(3)(B)(viii) of the Act, hospitals are
required to report data on measures selected by the Secretary for the
Hospital IQR Program in order to receive the full annual percentage
increase. In past rules, we have established measures for reporting and
the process for submittal and validation of the data.
In this final rule, we are making several changes to: (1) The
measure set, including the removal of some measures, the suspension of
one measure, the refinement of some measures, and the adoption of
several new measures; (2) the administrative processes; and (3) the
validation methodologies. We also are allowing hospitals the option of
reporting up to four measure sets electronically for the FY 2016
payment determination. These changes will improve the timeliness and
efficiency of the Hospital IQR Program and begin the process of
incorporating electronic reporting into the Hospital IQR Program.
n. Inpatient Psychiatric Facility Quality Reporting (IPFQR) Program
Section 1886(s)(4) of the Act authorizes the Secretary to implement
a quality reporting program for inpatient psychiatric hospitals and
psychiatric units. Section 1886(s)(4) of the Act, as added and amended
by sections 3401(f) and 10322(a) of the Affordable Care Act, requires
the Secretary to implement a quality reporting program for inpatient
psychiatric hospitals and psychiatric units. Section 1886(s)(4)(A)(i)
of the Act requires that, for rate year 2014 and each subsequent rate
year, the Secretary shall reduce any annual update to a standard
Federal rate for discharges occurring during such rate year by 2.0
percentage points for any inpatient psychiatric hospital or psychiatric
unit that does not comply with quality data submission requirements
with respect to an applicable rate year.
In this final rule, we are establishing new measures and related
policies for the IPFQR Program beginning with FY 2016.
3. Summary of Costs and Benefits
Adjustment for MS-DRG Documentation and Coding Changes. We
are making a -0.8 percent recoupment adjustment to the standardized
amount for FY 2014 to implement, in part, the requirement of section
631 of the ATRA that the Secretary make an adjustment totaling $11
billion over a 4-year period of FYs 2014, 2015, 2016, and 2017. This
recoupment adjustment represents the amount of the increase in
aggregate payments as a result of not completing the prospective
adjustment authorized under section 7(b)(1)(A) of Public Law 110-90
until FY 2013. Prior to the ATRA, this amount could not have been
recovered under Public Law 110-90.
While our actuaries estimate that a -9.3 percent recoupment
adjustment to the standardized amount would be necessary if CMS were to
fully recover the $11 billion recoupment required by section 631 of the
ATRA in FY 2014, it is often our practice to delay or phase in rate
adjustments over more than one year, in order to moderate the effects
on rates in any one year. Therefore, consistent with the policies that
we have adopted in many similar cases, we are making a -0.8 percent
recoupment adjustment to the standardized amount in FY 2014. We
estimate that this level of adjustment would recover $0.96 billion in
FY 2014, with approximately $10.04 billion remaining to be addressed.
We are not making any future adjustments at this time but note that if
recoupment adjustments of approximately -0.8 percent are implemented in
FYs 2014, 2015, 2016, and 2017, we estimate that the entire $11 billion
will be recovered by the end of the statutory 4-year timeline.
Refinement of the MS-DRG Relative Weight Calculation. We
refer readers to section VI.C. of Appendix A of this final rule for the
overall IPPS operating impact, which includes the impact for the
refinement of the MS-DRG relative weight calculation. This impact
models payments to various hospital types using relative weights
developed from 19 CCRs as compared to 15 CCRs. As

[[Page 50507]]

with other changes to the MS-DRGs, these changes are to be implemented
in a budget neutral manner.
Rebasing and Revision of the Hospital Market Baskets for
Acute Care Hospitals.
The finalized FY 2010-based IPPS market basket update (as measured
by percentage increase) for FY 2014 is currently forecasted to be the
same as the market basket update based on the FY 2006-based IPPS market
basket at 2.5 percent (currently used under the IPPS). Therefore, we
are projecting that there will be no fiscal impact on the IPPS
operating payment rates in FY 2014 as a result of the rebasing and
revision of the IPPS market basket.
The FY 2010-based IPPS capital input price index update (as
measured by percentage increase) for FY 2014 is currently forecasted to
be 1.2 percent, 0.2 percentage point lower than the update based on the
FY 2006-based capital input price index. Therefore, we are projecting
that there will be a fiscal impact of -$16 million to the IPPS capital
payments in FY 2014 as a result of this policy (0.2 percentage point *
annual capital IPPS payments of approximately $8 billion).
In addition, we are updating the labor-related share under the IPPS
for FY 2014 based on the final FY 2010-based IPPS market basket, which
will result in a labor-related share of 69.6 percent (compared to the
FY 2013 labor-related share of 68.8 percent) or 62 percent, depending
on which results in higher payments to the hospital. For FY 2014, the
labor-related share for the Puerto Rico-specific standardized amount
will be either 63.2 percent or 62 percent, depending on which results
in higher payments to the hospital. We are projecting that there will
be no impact on aggregate IPPS payments as a result of this policy due
to the statutory requirement that any changes to the IPPS area wage
adjustment (including the labor-related share) are adopted in a budget
neutral manner.
Reduction to Hospital Payments for Excess Readmissions.
The provisions of section 1886(q) of the Act which establishes the
Hospital Readmissions Reduction Program are not budget neutral. For FY
2014, a hospital's readmissions payment adjustment factor is the higher
of a ratio of a hospital's aggregate payments for excess readmissions
to its aggregate payments for all discharges, or 0.98 (that is, or a 2-
percent reduction). In this final rule, we estimate that the reduction
to a hospital's base operating DRG payment amount to account for excess
readmissions of selected applicable conditions under the Hospital
Readmissions Reduction Program will result in a 0.2 percent decrease,
or approximately -$227 million, in payments to hospitals for FY 2014.
Value-Based Incentive Payments under the Hospital Value-
Based Purchasing (VBP) Program. We estimate that there will be no net
financial impact to the Hospital VBP Program for FY 2014 in the
aggregate because, by law, the amount available for value-based
incentive payments under the program in a given fiscal year must be
equal to the total amount of base operating DRG payment amount
reductions for that year, as estimated by the Secretary. The estimated
amount of base operating DRG payment amount reductions for FY 2014, and
therefore the estimated amount available for value-based incentive
payments for FY 2014 discharges, is approximately $1.1 billion. We
believe that the program's benefits will be seen in improved patient
outcomes, safety, and in the patient's experience of care. However, we
cannot estimate these benefits in actual dollar and patient terms.
Implementation of the HAC Reduction Program for FY 2014.
We note that there is no payment impact for FY 2014 for implementing
the HAC Reduction Program. For FY 2015, we are presenting the overall
impact of the HAC Reduction Program provision along with other IPPS
payment provision impacts in section I.G. of Appendix A of this final
rule.
Counting of Inpatient Days in the Medicare Utilization
Calculation. We believe our policy change to include labor and delivery
days as inpatient days in the Medicare utilization calculation will
result in a savings of approximately $19 million for FY 2014.
Changes to the Medicare DSH Payment Adjustment and
Provision of Additional Payment for Uncompensated Care. Under section
1886(r) of the Act (as added by section 3313 of the Affordable Care
Act), disproportionate share payments to hospitals under section
1886(d)(5)(F) of the Act are reduced and an additional payment to
eligible hospitals will be made beginning in FY 2014. Hospitals that
receive Medicare DSH payments will receive 25 percent of the amount
they previously would have received under the current statutory formula
for Medicare DSH payments. The remainder, equal to 75 percent of what
otherwise would have been paid as Medicare DSH payments, will be the
basis for additional payments after the amount is reduced for changes
in the percentage of individuals that are uninsured and additional
statutory adjustments. Each hospital that receives Medicare DSH
payments will receive an additional payment based on its share of the
total uncompensated care amount reported by Medicare DSHs. The
reduction to Medicare DSH payments is not budget neutral.
We are specifying that 75 percent of what otherwise would have been
paid for Medicare DSH payments is adjusted to 94.3 percent of that
amount for changes in the percentage of individuals that are uninsured
and additional statutory adjustments. In other words, Medicare DSH
payments prior to the application of section 3133 of the Affordable
Care Act are adjusted to 70.7 percent (the product of 75 percent and
94.3 percent) and that resulting payment amount is used to create an
additional payment for a hospital's relative uncompensated care. As a
result, we project that the reduction of Medicare DSH payments and the
inclusion of the additional payments will reduce payments overall by
0.4 percent as compared to Medicare DSH payments prior to the
implementation of section 3133 of the Affordable Care Act. The
additional payments have redistributive effects based on a hospital's
uncompensated care amount relative to the uncompensated care amount for
all hospitals that are estimated to receive Medicare DSH payments.
These additional payments will be made through the claims processing
system for each hospital discharge.
Part B Hospital Inpatient Payment Policy. In this final
rule, we are revising Medicare's policy for payment of Part B hospital
inpatient services following the denial of a Part A hospital inpatient
claim on the basis that the inpatient admission was not reasonable and
necessary, but hospital outpatient services would have been reasonable
and necessary in treating the beneficiary. We estimate that the final
policy will result in an approximately $4.6 billion decrease in
Medicare program expenditures over 5 years. In section XI. of the
preamble of this final rule, we set forth a detailed analysis of the
regulatory and Federalism impacts that the policy changes are expected
to have on affected entities and beneficiaries.
Admission and Medical Review Criteria for Hospital
Inpatient Services under Medicare Part A. In this final rule, we are
making changes relating to admission and medical review criteria for
hospital inpatient admissions under Medicare Part A. One aspect of
these changes is that hospital inpatient admissions spanning 2
midnights in the hospital will generally qualify as appropriate for
payment under Medicare Part A. Our actuaries estimate

[[Page 50508]]

that the change will increase IPPS expenditures by approximately $220
million due to an expected net increase in inpatient encounters. We are
using our exceptions and adjustments authority under section
1886(d)(5)(I)(i) of the Act to make a reduction of 0.2 percent to the
standardized amount, the Puerto Rico standardized amount, and the
hospital-specific payment rate to offset this estimated $200 million in
additional IPPS expenditures. We also are applying that 0.2 percent
reduction to the capital Federal rates using our authority under
section 1886(g) of the Act.
Hospital Inpatient Quality Reporting (IQR) Program. We are
providing that hospitals participating in the Hospital IQR Program will
have the option to report a subset of measures electronically in CY
2014 for the FY 2016 payment determination. Under this policy,
hospitals may choose to report the measures in four measure sets
electronically or as chart-abstracted measures in CY 2014. For the FY
2016 payment determination, we also are removing seven measures (six
chart-abstracted measures and one structural measure) and suspending
one measure. We also are adopting five new claims-based measures for
the FY 2016 payment determination and subsequent years. For the FY 2016
payment determination and subsequent years, we will validate two
additional chart-abstracted HAI measures: MRSA bacteremia, and C.
difficile. We also are reducing the number of records used for HAI
validation from 48 records per year to 36 records per year beginning
with the FY 2015 payment determination. Finally, we are allowing
hospitals to submit patient charts for purposes of validation either in
paper form or by means of electronic transmission. We believe the
changes to the measure set, processes, and validation methodologies,
the electronic submission of records for validation, as well as
allowing hospitals to report certain measures electronically for the FY
2016 payment determination will result in improved program efficiency
and begin the process of incorporating electronic reporting into the
program. We estimate that the combination of these changes and the
reduction in measures mentioned above will reduce burden hours by
700,000 hours annually.
Update to the LTCH PPS Standard Federal Rate and Other
Payment Factors. Based on the best available data for the 425 LTCHs in
our database, we estimate that the changes we are presenting in the
preamble and Addendum of this final rule, including the update to the
standard Federal rate for FY 2014, the changes to the area wage
adjustment for FY 2014, and the changes to short-stay outliers and
high-cost outliers, will result in an increase in estimated payments
from FY 2013 of approximately $72 million (or 1.3 percent). Although we
generally project an increase in payments for all LTCHs in FY 2014 as
compared to FY 2013, we expect rural LTCHs to experience slightly lower
increases than the national average due to decreases in their wage
index for FY 2014 compared to FY 2013. In addition, under current law,
our moratoria on the full implementation of the ``25-percent
threshold'' payment adjustment policy will expire for certain LTCHs for
cost reporting periods beginning on or after October 1, 2013. These
regulatory moratoria extended, for an additional year, the 5-year
statutory moratorium on the application of the ``25-percent threshold''
payment adjustment policy as provided by section 114(c) of the MMSEA,
as amended by section 4302(a) of the ARRA and sections 3106(a) and
10312(a) of the Affordable Care Act, which expired for cost reporting
periods beginning on or after October 1, 2012 (``October LTCHs''), and
for other LTCHs and LTCH satellite facilities for cost reporting
periods beginning on or after July 1, 2012 (``July LTCHs'') (77 FR
53483 through 53484, as amended by the FY 2013 IPPS/LTCH PPS correcting
amendment (77 FR 63751 through 63753)), as explained in section VIII.D.
of the preamble of this proposed rule. We estimate that the expiration
of the regulatory moratoria will result in a reduction in payments of
$90 million to LTCHs. Overall, we estimate that the effect of the
changes we are making for FY 2014 in conjunction with the expiration of
the regulatory moratoria would result in a decrease in aggregate LTCH
PPS payments in FY 2014 relative to FY 2013 of approximately -$18
million (that is, the estimated increase of $72 million plus the
estimated reduction of $90 million, as described above).

B. Summary

1. Acute Care Hospital Inpatient Prospective Payment System (IPPS)
Section 1886(d) of the Social Security Act (the Act) sets forth a
system of payment for the operating costs of acute care hospital
inpatient stays under Medicare Part A (Hospital Insurance) based on
prospectively set rates. Section 1886(g) of the Act requires the
Secretary to use a prospective payment system (PPS) to pay for the
capital-related costs of inpatient hospital services for these
``subsection (d) hospitals.'' Under these PPSs, Medicare payment for
hospital inpatient operating and capital-related costs is made at
predetermined, specific rates for each hospital discharge. Discharges
are classified according to a list of diagnosis-related groups (DRGs).
The base payment rate is comprised of a standardized amount that is
divided into a labor-related share and a nonlabor-related share. The
labor-related share is adjusted by the wage index applicable to the
area where the hospital is located. If the hospital is located in
Alaska or Hawaii, the nonlabor-related share is adjusted by a cost-of-
living adjustment factor. This base payment rate is multiplied by the
DRG relative weight.
If the hospital treats a high percentage of certain low-income
patients, it receives a percentage add-on payment applied to the DRG-
adjusted base payment rate. This add-on payment, known as the
disproportionate share hospital (DSH) adjustment, provides for a
percentage increase in Medicare payments to hospitals that qualify
under either of two statutory formulas designed to identify hospitals
that serve a disproportionate share of low-income patients. For
qualifying hospitals, the amount of this adjustment varies based on the
outcome of the statutory calculations. The Affordable Care Act revised
the Medicare DSH payment methodology and provides for a new additional
Medicare payment that considers the amount of uncompensated care
beginning on October 1, 2013.
If the hospital is an approved teaching hospital, it receives a
percentage add-on payment for each case paid under the IPPS, known as
the indirect medical education (IME) adjustment. This percentage
varies, depending on the ratio of residents to beds.
Additional payments may be made for cases that involve new
technologies or medical services that have been approved for special
add-on payments. To qualify, a new technology or medical service must
demonstrate that it is a substantial clinical improvement over
technologies or services otherwise available, and that, absent an add-
on payment, it would be inadequately paid under the regular DRG
payment.
The costs incurred by the hospital for a case are evaluated to
determine whether the hospital is eligible for an additional payment as
an outlier case. This additional payment is designed to protect the
hospital from large financial losses due to unusually expensive cases.
Any eligible outlier payment is added to the DRG-adjusted base payment
rate, plus any DSH, IME, and new technology or medical service add-on
adjustments.

[[Page 50509]]

Although payments to most hospitals under the IPPS are made on the
basis of the standardized amounts, some categories of hospitals are
paid in whole or in part based on their hospital-specific rate, which
is determined from their costs in a base year. For example, sole
community hospitals (SCHs) receive the higher of a hospital-specific
rate based on their costs in a base year (the highest of FY 1982, FY
1987, FY 1996, or FY 2006) or the IPPS Federal rate based on the
standardized amount. Through and including FY 2006, a Medicare-
dependent, small rural hospital (MDH) received the higher of the
Federal rate or the Federal rate plus 50 percent of the amount by which
the Federal rate is exceeded by the higher of its FY 1982 or FY 1987
hospital-specific rate. As discussed below, for discharges occurring on
or after October 1, 2007, but before October 1, 2013, an MDH will
receive the higher of the Federal rate or the Federal rate plus 75
percent of the amount by which the Federal rate is exceeded by the
highest of its FY 1982, FY 1987, or FY 2002 hospital-specific rate. (We
note that the statutory provision for payments to MDHs expires at the
end of FY 2013, that is, on September 30, 2013.) SCHs are the sole
source of care in their areas, and MDHs are a major source of care for
Medicare beneficiaries in their areas. Specifically, section
1886(d)(5)(D)(iii) of the Act defines an SCH as a hospital that is
located more than 35 road miles from another hospital or that, by
reason of factors such as isolated location, weather conditions, travel
conditions, or absence of other like hospitals (as determined by the
Secretary), is the sole source of hospital inpatient services
reasonably available to Medicare beneficiaries. In addition, certain
rural hospitals previously designated by the Secretary as essential
access community hospitals are considered SCHs. Section
1886(d)(5)(G)(iv) of the Act defines an MDH as a hospital that is
located in a rural area, has not more than 100 beds, is not an SCH, and
has a high percentage of Medicare discharges (not less than 60 percent
of its inpatient days or discharges in its cost reporting year
beginning in FY 1987 or in two of its three most recently settled
Medicare cost reporting years). Both of these categories of hospitals
are afforded this special payment protection in order to maintain
access to services for beneficiaries.
Section 1886(g) of the Act requires the Secretary to pay for the
capital-related costs of inpatient hospital services ``in accordance
with a prospective payment system established by the Secretary.'' The
basic methodology for determining capital prospective payments is set
forth in our regulations at 42 CFR 412.308 and 412.312. Under the
capital IPPS, payments are adjusted by the same DRG for the case as
they are under the operating IPPS. Capital IPPS payments are also
adjusted for IME and DSH, similar to the adjustments made under the
operating IPPS. In addition, hospitals may receive outlier payments for
those cases that have unusually high costs.
The existing regulations governing payments to hospitals under the
IPPS are located in 42 CFR Part 412, Subparts A through M.
2. Hospitals and Hospital Units Excluded From the IPPS
Under section 1886(d)(1)(B) of the Act, as amended, certain
hospitals and hospital units are excluded from the IPPS. These
hospitals and units are: Rehabilitation hospitals and units; long-term
care hospitals (LTCHs); psychiatric hospitals and units; children's
hospitals; and cancer hospitals. Religious nonmedical health care
institutions (RNHCIs) are also excluded from the IPPS. Various sections
of the Balanced Budget Act of 1997 (BBA, Pub. L. 105-33), the Medicare,
Medicaid and SCHIP [State Children's Health Insurance Program] Balanced
Budget Refinement Act of 1999 (BBRA, Pub. L. 106-113), and the
Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act
of 2000 (BIPA, Pub. L. 106-554) provide for the implementation of PPSs
for rehabilitation hospitals and units (referred to as inpatient
rehabilitation facilities (IRFs)), LTCHs, and psychiatric hospitals and
units (referred to as inpatient psychiatric facilities (IPFs)). (We
note that the annual updates to the LTCH PPS are now included as part
of the IPPS annual update document. Updates to the IRF PPS and IPF PPS
are issued as separate documents.) Children's hospitals, cancer
hospitals, and RNHCIs continue to be paid solely under a reasonable
cost-based system subject to a rate-of-increase ceiling on inpatient
operating costs.
The existing regulations governing payments to excluded hospitals
and hospital units are located in 42 CFR Parts 412 and 413.
3. Long-Term Care Hospital Prospective Payment System (LTCH PPS)
The Medicare prospective payment system (PPS) for LTCHs applies to
hospitals described in section 1886(d)(1)(B)(iv) of the Act effective
for cost reporting periods beginning on or after October 1, 2002. The
LTCH PPS was established under the authority of sections 123 of the
BBRA and section 307(b) of the BIPA (as codified under section
1886(m)(1) of the Act). During the 5-year (optional) transition period,
a LTCH's payment under the PPS was based on an increasing proportion of
the LTCH Federal rate with a corresponding decreasing proportion based
on reasonable cost principles. Effective for cost reporting periods
beginning on or after October 1, 2006, all LTCHs are paid 100 percent
of the Federal rate. The existing regulations governing payment under
the LTCH PPS are located in 42 CFR Part 412, Subpart O. Beginning
October 1, 2009, we issue the annual updates to the LTCH PPS in the
same documents that update the IPPS (73 FR 26797 through 26798).
4. Critical Access Hospitals (CAHs)
Under sections 1814(l), 1820, and 1834(g) of the Act, payments made
to critical access hospitals (CAHs) (that is, rural hospitals or
facilities that meet certain statutory requirements) for inpatient and
outpatient services are generally based on 101 percent of reasonable
cost. Reasonable cost is determined under the provisions of section
1861(v)(1)(A) of the Act and existing regulations under 42 CFR Parts
413 and 415.
5. Payments for Graduate Medical Education (GME)
Under section 1886(a)(4) of the Act, costs of approved educational
activities are excluded from the operating costs of inpatient hospital
services. Hospitals with approved graduate medical education (GME)
programs are paid for the direct costs of GME in accordance with
section 1886(h) of the Act. The amount of payment for direct GME costs
for a cost reporting period is based on the hospital's number of
residents in that period and the hospital's costs per resident in a
base year. The existing regulations governing payments to the various
types of hospitals are located in 42 CFR Part 413.

C. Provisions of the Patient Protection and Affordable Care Act (Pub.
L. 111-148), the Health Care and Education Reconciliation Act of 2010
(Pub. L. 111-152), and the American Taxpayer Relief Act of 2012 (ATRA)
(Pub. L. 112-240)

The Patient Protection and Affordable Care Act (Pub. L. 111-148),
enacted on March 23, 2010, and the Health Care and Education
Reconciliation Act of 2010 (Pub. L. 111-152), enacted on March 30,
2010, made a number of changes that affect the IPPS and the LTCH PPS.
(Pub. L. 111-148 and Pub. L. 111-152 are collectively referred to as
the ``Affordable Care Act.'') A number of

[[Page 50510]]

the provisions of the Affordable Care Act affect the updates to the
IPPS and the LTCH PPS and providers and suppliers. The provisions of
the Affordable Care Act that were applicable to the IPPS and the LTCH
PPS for FYs 2010, 2011, and 2012 were implemented in the June 2, 2010
Federal Register notice (75 FR 31118), the FY 2011 IPPS/LTCH PPS final
rule (75 FR 50042) and the FY 2012 IPPS/LTCH PPS final rule (76 FR
51476).
The American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112-240),
enacted on January 2, 2013, also made a number of changes that affect
the IPPS. We announced changes related to certain IPPS provisions for
FY 2013 pursuant to sections 605 and 606 of Public Law 112-240 in a
notice issued in the Federal Register on March 7, 2013 (78 FR 14689).
1. The Patient Protection and Affordable Care Act (Pub. L. 111-148) and
the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-
152)
In this final rule, we are implementing, or continuing in FY 2014
to implement, the following provisions (or portions of the following
provisions) of the Affordable Care Act that are applicable to the IPPS,
the LTCH PPS, and PPS-exempt cancer hospitals:
Section 3001(a) of Public Law 111-148, which requires the
establishment of a hospital inpatient value-based purchasing program
under which value-based incentive payments are made in a fiscal year to
hospitals that meet performance standards for the performance period
for that fiscal year.
Section 3004 of Public Law 111-148, which provides for the
submission of quality data by LTCHs in order for them to receive the
full annual update to the payment rates beginning with the FY 2014 rate
year.
Section 3005 of Public Law 111-148, which provides for the
establishment of a quality reporting program for PPS-exempt cancer
hospitals beginning with FY 2014, and for subsequent program years.
Section 3008 of Public Law 111-148, which establishes the
Hospital-Acquired Condition (HAC) Reduction Program and requires the
Secretary to make an adjustment to hospital payments for applicable
hospitals, effective for discharges beginning on October 1, 2014, and
for subsequent program years.
Section 3025 of Public Law 111-148, which establishes a
hospital readmissions reduction program and requires the Secretary to
reduce payments to applicable hospitals with excess readmissions
effective for discharges beginning on or after October 1, 2012.
Section 3133 of Public Law 111-148, as amended by section
10316 of Public Law 111-148 and section 1104 of Pub. L. 111-152, which
modifies the methodologies for determining Medicare DSH payments and
creates a new additional payment for uncompensated care.
Section 3401 of Public Law 111-148, which provides for the
incorporation of productivity adjustments into the market basket
updates for IPPS hospitals and LTCHs.
Section 10324 of Public Law 111-148, which provides for a
wage adjustment for hospitals located in frontier States.
Sections 3401 and 10319 of Public Law 111-148 and section
1105 of Public Law 111-152, which revise certain market basket update
percentages for IPPS and LTCH PPS payment rates for FY 2014.
Section 5506 of Public Law 111-148, which added a
provision to the Act that instructs the Secretary to establish a
process by regulation under which, in the event a teaching hospital
closes, the Secretary will permanently increase the FTE resident caps
for hospitals that meet certain criteria up to the number of the closed
hospital's FTE resident caps. The Secretary is directed to ensure that
the aggregate number of FTE resident cap slots distributed is equal to
the amount of slots in the closed hospital's direct GME and IME FTE
resident caps, respectively.
2. American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112-240)
In this final rule, we are implementing or making conforming
changes to regulation text in accordance with the following provisions
(or portions of the following provisions) of the American Taxpayer
Relief Act of 2012 that are applicable to the IPPS:
Section 605, which amended sections 1886(d)(12)(B),
(C)(i), and (D) of the Act to extend changes to the payment methodology
for the Medicare inpatient hospital payment adjustment for low-volume
hospitals through September 30, 2013 (FY 2013). Beginning with FY 2014,
the preexisting low-volume hospital qualifying criteria and payment
adjustment, as implemented in FY 2005, will resume.
Section 606(a), which amended sections 1886(d)(5)(G)(i)
and (ii)(II) of the Act to extend the MDH program through September 30,
2013 (FY 2013), and section 606(b), which made conforming amendments to
sections 1886(b)(3)(D)(i) and (iv) of the Act and amended section
13501(e)(2) of the Omnibus Budget Reconciliation Act of 1993 to permit
hospitals to decline reclassification through FY 2013.
Section 631, which amended section 7(b)(1)(B) of Public
Law 110-90 and requires a recoupment adjustment to the standardized
amounts under section 1886(d) of the Act based upon the Secretary's
estimates for discharges occurring in FY 2014 through FY 2017 to fully
offset $11 billion (which represents the amount of the increase in
aggregate payments from FYs 2008 through 2013 for which an adjustment
was not previously applied).

D. Issuance of a Notice of Proposed Rulemaking

On May 10, 2013, we published in the Federal Register (78 FR 27486)
a proposed rule that set forth proposed changes to the Medicare IPPS
for operating costs and for capital-related costs of acute care
hospitals for FY 2014. We also set forth proposed changes relating to
payments for IME and GME costs and payments to certain hospitals that
continue to be excluded from the IPPS and paid on a reasonable cost
basis. In addition, in the proposed rule, we set forth proposed changes
to the payment rates, factors, and other payment rate policies under
the LTCH PPS for FY 2014.
Below is a summary of the major changes that we proposed to make:
1. Proposed Changes to MS-DRG Classifications and Recalibrations of
Relative Weights
In section II. of the preamble of the proposed rule, we included--
Proposed changes to MS-DRG classifications based on our
yearly review.
Proposed application of the documentation and coding
adjustment for FY 2014 resulting from implementation of the MS-DRG
system.
A discussion of the Research Triangle Institute,
International (RTI) reports and analyses relating to charge
compression, including a proposal to calculate the MS-DRG relative
weights using 19 CCRs.
Proposed recalibrations of the MS-DRG relative weights.
Proposed changes to hospital-acquired conditions (HACs)
and a listing and discussion of HACs, including infections, that would
be subject to the statutorily required adjustment in MS-DRG payments
for FY 2014.
A discussion of the FY 2014 status of new technologies
approved for add-on payments for FY 2013 and a presentation of our
evaluation and

[[Page 50511]]

analysis of the FY 2014 applicants for add-on payments for high-cost
new medical services and technologies (including public input, as
directed by Pub. L. 108-173, obtained in a town hall meeting).
2. Proposed Changes to the Hospital Wage Index for Acute Care Hospitals
In section III. of the preamble to the proposed rule, we proposed
revisions to the wage index for acute care hospitals and the annual
update of the wage data. Specific issues addressed include the
following:
The proposed FY 2014 wage index update using wage data
from cost reporting periods beginning in FY 2010.
Analysis and implementation of the proposed FY 2014
occupational mix adjustment to the wage index for acute care hospitals,
including the proposed application of the rural floor, the imputed
rural floor calculated under the original and alternative
methodologies, and the frontier State floor.
Proposed revisions to the wage index for acute care
hospitals based on hospital redesignations and reclassifications.
The proposed adjustment to the wage index for acute care
hospitals for FY 2014 based on commuting patterns of hospital employees
who reside in a county and work in a different area with a higher wage
index.
The timetable for reviewing and verifying the wage data
used to compute the proposed FY 2014 hospital wage index.
Determination of the labor-related share for the proposed
FY 2014 wage index.
3. Proposed Rebasing and Revision of the Hospital Market Baskets for
Acute Care Hospitals
In section IV. of the preamble of the proposed rule, we proposed to
rebase and revise the acute care hospital operating and capital market
baskets to be used in developing the FY 2014 update factor for the
operating and capital prospective payment rates and the FY 2014 update
factor for the excluded hospital rate-of-increase limits. We also set
forth the data sources used to determine the proposed revised market
basket costs weights.
4. Other Decisions and Proposed Changes to the IPPS for Operating Costs
and GME Costs
In section V. of the preamble of the proposed rule, we discussed
proposed changes or clarifications of a number of the provisions of the
regulations in 42 CFR Parts 412 and 413, including the following:
Proposed changes to the inpatient hospital update for FY
2014, including incorporation of a productivity adjustment.
The proposed updated national and regional case-mix values
and discharges for purposes of determining RRC status.
Proposed payment adjustment for low-volume hospitals for
FY 2014.
The statutorily required IME adjustment factor for FY
2014.
Proposed changes to the methodologies for determining
Medicare DSH payments and proposals to implement the new additional
payments for uncompensated care.
Discussion of the extension of the MDH program through FY
2013.
Proposed changes to the rules for payment adjustments
under the Hospital Readmissions Reduction Program based on hospital
readmission measures and the process for hospital review and correction
of those rates.
Proposed changes to the requirements and provision of
value-based incentive payments under the Hospital Value-Based
Purchasing Program.
Proposed requirements for payment adjustments to hospitals
under the HAC Reduction Program.
Proposal for counting labor and delivery inpatient days in
the calculation of Medicare utilization for direct GME purposes and for
other payment and eligibility purposes.
Announcement of an additional closed hospital and
redistribution of resident cap slots relating to direct GME and IME
payments.
Proposed clarifications of policies on payments for
residents training in approved residency programs at CAHs.
Announcement of the expiration of the inflation update
freeze for high per resident amounts (PRAs).
Discussion of the Rural Community Hospital Demonstration
Program and a proposal for making a budget neutrality adjustment for
the demonstration program.
Extending the effective date of policies relating to
hospital services furnished under arrangements.
Proposed medical review policy that hospital stays in
which the physician expects the patient to require a stay that crosses
2 midnights are generally appropriate for payment under Medicare Part
A, while hospital stays in which the physician expects the patient to
require a stay that does not cross 2 midnights are generally
inappropriate for payment under Medicare Part A.
5. Proposed FY 2014 Policy Governing the IPPS for Capital-Related Costs
In section VI. of the preamble to the proposed rule, we discussed
the proposed payment policy requirements for capital-related costs and
capital payments to hospitals for FY 2014 and other related proposed
policy changes.
6. Proposed Changes to the Payment Rates for Certain Excluded
Hospitals: Rate-of-Increase Percentages
In section VII. of the preamble of the proposed rule, we
discussed--
Proposed changes to payments to certain excluded hospitals
for FY 2014.
Proposed changes to the conditions of participation (CoPs)
relating to administration of pneumococcal vaccine and CAH payment for
acute care inpatient services.
7. Proposed Changes to the LTCH PPS
In section VIII. of the preamble of the proposed rule, we set forth
proposed changes to the payment rates, factors, and other payment rate
policies under the LTCH PPS for FY 2014. We also noted that the
moratorium on the full implementation of the ``25-percent threshold''
payment adjustment will expire for certain cost reporting periods
beginning on or after October 1, 2013. In addition, in this section, we
discussed the research being done by Kennell and Associates (Kennell)
and its subcontractor, Research Triangle Institute, International
(RTI), under a contract with CMS that is intended to inform the
development of a payment adjustment under the LTCH PPS based on the
establishment of LTCH patient criteria which were described in the
proposed rule at 78 FR 27668 through 27676.
8. Proposed Changes Relating to Quality Data Reporting for Specific
Providers and Suppliers
In section IX. of the preamble of the proposed rule, we addressed--
Proposed requirements for the Hospital Inpatient Quality
Reporting (IQR) Program as a condition for receiving the full
applicable percentage increase.
Proposed changes to the requirements for the quality
reporting program for PPS-exempt cancer hospitals (PCHQR Program).
Proposed changes to the requirements under the LTCH
Quality Reporting (LTCHQR) Program.
Proposed changes to the requirements under the Inpatient
Psychiatric Facility Quality Reporting (IPFQR) Program.
9. Determining Prospective Payment Operating and Capital Rates and
Rate-of-Increase Limits for Acute Care Hospitals
In the Addendum to the proposed rule, we set forth proposed changes
to

[[Page 50512]]

the amounts and factors for determining the proposed FY 2014
prospective payment rates for operating costs and capital-related costs
for acute care hospitals. We proposed to establish the threshold
amounts for outlier cases. In addition, we addressed the proposed
update factors for determining the rate-of-increase limits for cost
reporting periods beginning in FY 2014 for certain hospitals excluded
from the IPPS.
10. Determining Prospective Payment Rates for LTCHs
In the Addendum to the proposed rule, we set forth proposed changes
to the amounts and factors for determining the proposed FY 2014
prospective standard Federal rate. We proposed to establish the
adjustments for wage levels, the labor-related share, the cost-of-
living adjustment, and high-cost outliers, including the fixed-loss
amount, and the LTCH cost-to-charge ratios (CCRs) under the LTCH PPS.
11. Impact Analysis
In Appendix A of the proposed rule, we set forth an analysis of the
impact that the proposed changes would have on affected acute care
hospitals, LTCHs, PCHs, and IPFs.
12. Recommendation of Update Factors for Operating Cost Rates of
Payment for Hospital Inpatient Services
In Appendix B of the proposed rule, as required by sections
1886(e)(4) and (e)(5) of the Act, we provided our recommendations of
the appropriate percentage changes for FY 2014 for the following:
A single average standardized amount for all areas for
hospital inpatient services paid under the IPPS for operating costs of
acute care hospitals (and hospital-specific rates applicable to SCHs).
Target rate-of-increase limits to the allowable operating
costs of hospital inpatient services furnished by certain hospitals
excluded from the IPPS.
The standard Federal rate for hospital inpatient services
furnished by LTCHs.
13. Discussion of Medicare Payment Advisory Commission Recommendations
Under section 1805(b) of the Act, MedPAC is required to submit a
report to Congress, no later than March 15 of each year, in which
MedPAC reviews and makes recommendations on Medicare payment policies.
MedPAC's March 2013 recommendations concerning hospital inpatient
payment policies address the update factor for hospital inpatient
operating costs and capital-related costs for hospitals under the IPPS.
We addressed these recommendations in Appendix B of the proposed rule.
For further information relating specifically to the MedPAC March 2013
report or to obtain a copy of the report, contact MedPAC at (202) 220-
3700 or visit MedPAC's Web site at: https://www.medpac.gov.

E. Public Comments Received in Response to the FY 2014 IPPS/LTCH PPS
Proposed Rule

We received approximately 721 timely pieces of correspondence
containing multiple comments on the FY 2014 IPPS/LTCH PPS proposed
rule. We note that some of these public comments were outside of the
scope of the proposed rule. These out-of-scope public comments are not
addressed with policy responses in this final rule. Summaries of the
public comments that are within the scope of the proposed rule and our
responses to those public comments are set forth in the various
sections of this final rule under the appropriate heading.

F. Finalization of the Proposed Rule on Medicare Part B Inpatient
Billing in Hospitals

On March 18, 2013, we issued in the Federal Register (78 FR 16632)
a proposed rule that proposed to revise Medicare's payment policies
under Part B when a Part A hospital inpatient claim is denied because
the inpatient admission was not reasonable and necessary, but hospital
outpatient services would have been reasonable and necessary in
treating the beneficiary. We received 392 timely pieces of
correspondence in response to this proposed rule. In section XI. of
this document, we summarize and respond to these public comments and
discuss our final policies after taking into consideration the public
comments we received.

II. Changes to Medicare Severity Diagnosis-Related Group (MS-DRG)
Classifications and Relative Weights

A. Background

Section 1886(d) of the Act specifies that the Secretary shall
establish a classification system (referred to as diagnosis-related
groups (DRGs)) for inpatient discharges and adjust payments under the
IPPS based on appropriate weighting factors assigned to each DRG.
Therefore, under the IPPS, Medicare pays for inpatient hospital
services on a rate per discharge basis that varies according to the DRG
to which a beneficiary's stay is assigned. The formula used to
calculate payment for a specific case multiplies an individual
hospital's payment rate per case by the weight of the DRG to which the
case is assigned. Each DRG weight represents the average resources
required to care for cases in that particular DRG, relative to the
average resources used to treat cases in all DRGs.
Congress recognized that it would be necessary to recalculate the
DRG relative weights periodically to account for changes in resource
consumption. Accordingly, section 1886(d)(4)(C) of the Act requires
that the Secretary adjust the DRG classifications and relative weights
at least annually. These adjustments are made to reflect changes in
treatment patterns, technology, and any other factors that may change
the relative use of hospital resources.

B. MS-DRG Reclassifications

For general information about the MS-DRG system, including yearly
reviews and changes to the MS-DRGs, we refer readers to the previous
discussions in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR
43764 through 43766), the FY 2011 IPPS/LTCH PPS final rule (75 FR 50053
through 50055), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51485
through 51487), and the FY 2013 IPPS/LTCH PPS final rule (77 FR 53273).

C. Adoption of the MS-DRGs in FY 2008

For information on the adoption of the MS-DRGs in FY 2008, we refer
readers to the FY 2008 IPPS final rule with comment period (72 FR 47140
through 47189).

D. FY 2014 MS-DRG Documentation and Coding Adjustment

1. Background on the Prospective MS-DRG Documentation and Coding
Adjustments for FY 2008 and FY 2009 Authorized by Public Law 110-90
In the FY 2008 IPPS final rule with comment period (72 FR 47140
through 47189), we adopted the MS-DRG patient classification system for
the IPPS, effective October 1, 2007, to better recognize severity of
illness in Medicare payment rates for acute care hospitals. The
adoption of the MS-DRG system resulted in the expansion of the number
of DRGs from 538 in FY 2007 to 745 in FY 2008. (Currently, there are
751 MS-DRGs.) By increasing the number of MS-DRGs and more fully taking
into account patient severity of illness in Medicare payment rates for
acute care hospitals, MS-DRGs encourage hospitals to improve their
documentation and coding of patient diagnoses.

[[Page 50513]]

In the FY 2008 IPPS final rule with comment period (72 FR 47175
through 47186), we indicated that the adoption of the MS-DRGs had the
potential to lead to increases in aggregate payments without a
corresponding increase in actual patient severity of illness due to the
incentives for additional documentation and coding. In that final rule
with comment period, we exercised our authority under section
1886(d)(3)(A)(vi) of the Act, which authorizes us to maintain budget
neutrality by adjusting the national standardized amount, to eliminate
the estimated effect of changes in coding or classification that do not
reflect real changes in case-mix. Our actuaries estimated that
maintaining budget neutrality required an adjustment of -4.8 percent to
the national standardized amount. We provided for phasing in this -4.8
percent adjustment over 3 years. Specifically, we established
prospective documentation and coding adjustments of -1.2 percent for FY
2008, -1.8 percent for FY 2009, and -1.8 percent for FY 2010.
On September 29, 2007, Congress enacted the TMA [Transitional
Medical Assistance], Abstinence Education, and QI [Qualifying
Individuals] Programs Extension Act of 2007, Public Law 110-90. Section
7(a) of Public Law 110-90 reduced the documentation and coding
adjustment made as a result of the MS-DRG system that we adopted in the
FY 2008 IPPS final rule with comment period to -0.6 percent for FY 2008
and -0.9 percent for FY 2009, and we finalized the FY 2008 adjustment
through rulemaking, effective October 1, 2007 (72 FR 66886).
For FY 2009, section 7(a) of Public Law 110-90 required a
documentation and coding adjustment of -0.9 percent, and we finalized
that adjustment through rulemaking (73 FR 48447). The documentation and
coding adjustments established in the FY 2008 IPPS final rule with
comment period, which reflected the amendments made by Public Law 110-
90, are cumulative. As a result, the -0.9 percent documentation and
coding adjustment for FY 2009 was in addition to the -0.6 percent
adjustment for FY 2008, yielding a combined effect of -1.5 percent.
2. Adjustment to the Average Standardized Amounts Required by Public
Law 110-90
a. Prospective Adjustment Required by Section 7(b)(1)(A) of Public Law
110-90
Section 7(b)(1)(A) of Public Law 110-90 requires that, if the
Secretary determines that implementation of the MS-DRG system resulted
in changes in documentation and coding that did not reflect real
changes in case-mix for discharges occurring during FY 2008 or FY 2009
that are different than the prospective documentation and coding
adjustments applied under section 7(a) of Public Law 110-90, the
Secretary shall make an appropriate adjustment under section
1886(d)(3)(A)(vi) of the Act. Section 1886(d)(3)(A)(vi) of the Act
authorizes adjustments to the average standardized amounts for
subsequent fiscal years in order to eliminate the effect of such coding
or classification changes. These adjustments are intended to ensure
that future annual aggregate IPPS payments are the same as the payments
that otherwise would have been made had the prospective adjustments for
documentation and coding applied in FY 2008 and FY 2009 reflected the
change that occurred in those years.
b. Recoupment or Repayment Adjustments in FYs 2010 Through 2012
Required by Section 7(b)(1)(B) Public Law 110-90
If, based on a retroactive evaluation of claims data, the Secretary
determines that implementation of the MS-DRG system resulted in changes
in documentation and coding that did not reflect real changes in case-
mix for discharges occurring during FY 2008 or FY 2009 that are
different from the prospective documentation and coding adjustments
applied under section 7(a) of Public Law 110-90, section 7(b)(1)(B) of
Public Law 110-90 requires the Secretary to make an additional
adjustment to the standardized amounts under section 1886(d) of the
Act. This adjustment must offset the estimated increase or decrease in
aggregate payments for FYs 2008 and 2009 (including interest) resulting
from the difference between the estimated actual documentation and
coding effect and the documentation and coding adjustment applied under
section 7(a) of Public Law 110-90. This adjustment is in addition to
making an appropriate adjustment to the standardized amounts under
section 1886(d)(3)(A)(vi) of the Act as required by section 7(b)(1)(A)
of Public Law 110-90. That is, these adjustments are intended to recoup
(or repay, in the case of underpayments) spending in excess of (or less
than) spending that would have occurred had the prospective adjustments
for changes in documentation and coding applied in FY 2008 and FY 2009
precisely matched the changes that occurred in those years. Public Law
110-90 requires that the Secretary only make these recoupment or
repayment adjustments for discharges occurring during FYs 2010, 2011,
and 2012.
3. Retrospective Evaluation of FY 2008 and FY 2009 Claims Data
In order to implement the requirements of section 7 of Public Law
110-90, we performed a retrospective evaluation of the FY 2008 data for
claims paid through December 2008 using the methodology first described
in the FY 2009 IPPS/LTCH PPS final rule (73 FR 43768 and 43775) and
later discussed in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR
43768 through 43772). We performed the same analysis for FY 2009 claims
data using the same methodology as we did for FY 2008 claims (75 FR
50057 through 50068). The results of the analysis for the FY 2011
proposed and final rules, and subsequent evaluations in FY 2012,
supported that the 5.4 percent estimate accurately reflected the FY
2009 increases in documentation and coding under the MS-DRG system. We
were persuaded by both MedPAC's analysis (as discussed in the FY 2011
IPPS/LTCH PPS final rule (75 FR 50064 through 50065)) and our own
review of the methodologies recommended by various commenters that the
methodology we employed to determine the required documentation and
coding adjustments was sound.
As in prior years, the FY 2008, FY 2009, and FY 2010 MedPAR files
are available to the public to allow independent analysis of the FY
2008 and FY 2009 documentation and coding effects. Interested
individuals may still order these files through the Web site at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Files-for-Order/LimitedDataSets/ by clicking on MedPAR Limited Data Set (LDS)-Hospital
(National). This Web page describes the file and provides directions
and further detailed instructions for how to order.
Persons placing an order must send the following: a Letter of
Request, the LDS Data Use Agreement and Research Protocol (refer to the
Web site for further instructions), the LDS Form, and a check for
$3,655 to:

Mailing address if using the U.S. Postal Service: Centers for Medicare
& Medicaid Services, RDDC Account, Accounting Division, P.O. Box 7520,
Baltimore, MD 21207-0520.
Mailing address if using express mail: Centers for Medicare & Medicaid
Services, OFM/Division of Accounting--RDDC, 7500 Security Boulevard,
C3-07-11, Baltimore, MD 21244-1850.

[[Page 50514]]

4. Prospective Adjustments for FY 2008 and FY 2009 Authorized by
Section 7(b)(1)(A) of Public Law 110-90
In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43767
through 43777), we opted to delay the implementation of any
documentation and coding adjustment until a full analysis of case-mix
changes based on FY 2009 claims data could be completed. We refer
readers to the FY 2010 IPPS/RY LTCH PPS final rule for a detailed
description of our proposal, responses to comments, and finalized
policy. After analysis of the FY 2009 claims data for the FY 2011 IPPS/
LTCH PPS final rule (75 FR 50057 through 50073), we found a total
prospective documentation and coding effect of 1.054 percent. After
accounting for the -0.6 percent and the -0.9 percent documentation and
coding adjustments in FYs 2008 and 2009, we found a remaining
documentation and coding effect of 3.9 percent. As we have discussed,
an additional cumulative adjustment of -3.9 percent would be necessary
to meet the requirements of section 7(b)(1)(A) of Public Law 110-90 to
make an adjustment to the average standardized amounts in order to
eliminate the full effect of the documentation and coding changes that
do not reflect real changes in case-mix on future payments. Unlike
section 7(b)(1)(B) of Public Law 110-90, section 7(b)(1)(A) does not
specify when we must apply the prospective adjustment, but merely
requires us to make an ``appropriate'' adjustment. Therefore, as we
stated in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50061), we
believe the law provided some discretion as to the manner in which we
applied the prospective adjustment of -3.9 percent. As we discussed
extensively in the FY 2011 IPPS/LTCH PPS final rule, it has been our
practice to moderate payment adjustments when necessary to mitigate the
effects of significant downward adjustments on hospitals, to avoid what
could be widespread, disruptive effects of such adjustments on
hospitals. Therefore, we stated that we believed it was appropriate to
not implement the -3.9 percent prospective adjustment in FY 2011
because we finalized a -2.9 percent recoupment adjustment for that
year. Accordingly, we did not propose a prospective adjustment under
section 7(b)(1)(A) of Public Law 110-90 for FY 2011 (75 FR 23868
through 23870). We note that, as a result, payments in FY 2011 (and in
each future year until we implemented the requisite adjustment) would
be higher than they would have been if we had implemented an adjustment
under section 7(b)(1)(A) of Public Law 110-90.
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51489 and 51497), we
indicated that, because further delay of this prospective adjustment
will result in a continued accrual of unrecoverable overpayments, it
was imperative that we implement a prospective adjustment for FY 2012,
while recognizing CMS' continued desire to mitigate the effects of any
significant downward adjustments to hospitals. Therefore, we
implemented a -2.0 percent prospective adjustment to the standardized
amount to partially eliminate the full effect of the documentation and
coding changes that do not reflect real changes in case-mix on future
payments.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53274 through
53276), we completed the prospective portion of the adjustment required
under section 7(b)(1)(A) of Public Law 110-90 by finalizing a -1.9
percent adjustment to the standardized amount for FY 2013. We stated
that this adjustment would remove the remaining effect of the
documentation and coding changes that do not reflect real changes in
case-mix that occurred in FY 2008 and FY 2009. We believe it was
imperative to implement the full remaining adjustment, as any further
delay would result in an overstated standardized amount in FY 2013 and
any future years until a full adjustment is made.
We note again that delaying full implementation of the prospective
portion of the adjustment required under section 7(b)(1)(A) of Public
Law 110-90 until FY 2013 resulted in payments in FY 2010 through FY
2012 being overstated. These overpayments could not be recovered by CMS
as section 7(b)(1)(B) of Public Law 110-90 limited recoupments to
overpayments made in FY 2008 and FY 2009.
5. Recoupment or Repayment Adjustment Authorized by Section 7(b)(1)(B)
of Public Law 110-90
As discussed in section II.D.3. of the preamble of this final rule,
section 7(b)(1)(B) of Public Law 110-90 requires the Secretary to make
an adjustment to the standardized amounts under section 1886(d) of the
Act to offset the estimated increase or decrease in aggregate payments
for FY 2008 and FY 2009 (including interest) resulting from the
difference between the estimated actual documentation and coding effect
and the documentation and coding adjustments applied under section 7(a)
of Public Law 110-90. This determination must be based on a
retrospective evaluation of claims data. Our actuaries estimated that
this 5.8 percentage point increase resulted in an increase in aggregate
payments of approximately $6.9 billion. Therefore, as discussed in the
FY 2011 IPPS/LTCH PPS final rule (75 FR 50062 through 50067), we
determined that an aggregate adjustment of -5.8 percent in FYs 2011 and
2012 would be necessary in order to meet the requirements of section
7(b)(1)(B) of Public Law 110-90 to adjust the standardized amounts for
discharges occurring in FYs 2010, 2011, and/or 2012 to offset the
estimated amount of the increase in aggregate payments (including
interest) in FYs 2008 and 2009.
It is often our practice to phase in rate adjustments over more
than one year in order to moderate the effect on rates in any one year.
Therefore, consistent with the policies that we have adopted in many
similar cases, in the FY 2011 IPPS/LTCH PPS final rule, we made an
adjustment to the standardized amount of -2.9 percent, representing
approximately half of the aggregate adjustment required under section
7(b)(1)(B) of Public Law 110-90, for FY 2011. An adjustment of this
magnitude allowed us to moderate the effects on hospitals in one year
while simultaneously making it possible to implement the entire
adjustment within the timeframe required under section 7(b)(1)(B) of
Public Law 110-90 (that is, no later than FY 2012). For FY 2012, in
accordance with the timeframes set forth by section 7(b)(1)(B) of
Public Law 110-90, and consistent with the discussion in the FY 2011
IPPS/LTCH PPS final rule, we completed the recoupment adjustment by
implementing the remaining -2.9 percent adjustment, in addition to
removing the effect of the -2.9 percent adjustment to the standardized
amount finalized for FY 2011 (76 FR 51489 and 51498). Because these
adjustments, in effect, balanced out, there was no year-to-year change
in the standardized amount due to this recoupment adjustment for FY
2012. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53276), we made a
final +2.9 percent adjustment to the standardized amount, completing
the recoupment portion of section 7(b)(1)(B) of Public Law 110-90. We
note that with this positive adjustment, according to our estimates,
all overpayments made in FY 2008 and FY 2009 have been fully recaptured
with appropriate interest, and the standardized amount has been
returned to the appropriate baseline.

[[Page 50515]]

6. Recoupment or Repayment Adjustment Authorized by Section 631 of the
American Taxpayer Relief Act of 2012 (ATRA)
Section 631 of the ATRA amended section 7(b)(1)(B) of Public Law
110-90 to require the Secretary to make a recoupment adjustment or
adjustments totaling $11 billion by FY 2017. This adjustment represents
the amount of the increase in aggregate payments as a result of not
completing the prospective adjustment authorized under section
7(b)(1)(A) of Public Law 110-90 until FY 2013. As discussed earlier,
this delay in implementation resulted in overstated payment rates in
FYs 2010, 2011, and 2012. The resulting overpayments could not have
been recovered under Public Law 110-90.
Similar to the adjustments authorized under section 7(b)(1)(B) of
Public Law 110-90, the adjustment required under section 631 of the
ATRA is a one-time recoupment of a prior overpayment, not a permanent
reduction to payment rates. Therefore, any adjustment made to reduce
rates in one year would eventually be offset by a positive adjustment,
once the necessary amount of overpayment is recovered.
As we stated in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR
27504 through 27505), our actuaries estimate that a -9.3 percent
adjustment to the standardized amount would be necessary if CMS were to
fully recover the $11 billion recoupment required by section 631 of the
ATRA in FY 2014. In its March 2013 ``Report to Congress: Medicare
Payment Policy,'' MedPAC estimates that a -2.4 percent adjustment made
in FY 2014, and not removed until FY 2018, also would recover the
required recoupment amount. It is often our practice to delay or phase
in rate adjustments over more than one year, in order to moderate the
effect on rates in any one year. Therefore, consistent with the
policies that we have adopted in many similar cases, in the FY 2014
IPPS/LTCH PPS proposed rule (78 FR 27504 through 27505), we proposed a
-0.8 percent recoupment adjustment to the standardized amount in FY
2014. As we stated in the proposed rule, we estimate that this level of
adjustment would recover up to $0.96 billion in FY 2014, with at least
$10.04 billion remaining to be recovered by FY 2017. If adjustments of
approximately -0.8 percent are implemented in FYs 2014, 2015, 2016, and
2017, using standard inflation factors, we estimate that the entire $11
billion would be accounted for by the end of the statutory 4-year
timeline. As estimates of any future adjustments are subject to slight
variations in total savings, we did not propose specific adjustments
for FYs 2015, 2016, or 2017 at that time. We stated that we believe
that this level of adjustment for FY 2014 is a reasonable and fair
approach that satisfies the requirements of the statute while
mitigating extreme annual fluctuations in payment rates. In addition,
we again noted that this -0.8 percent recoupment adjustment, and future
adjustments under this authority, will be eventually offset by an
equivalent positive adjustment once the full $11 billion recoupment
requirement has been realized.
We discuss the comments we received on this proposal and our final
policy for FY 2014 in the section below.
7. Additional Prospective Adjustments for the MS-DRG Documentation and
Coding Effect Through FY 2010 Authorized Under Section
1886(d)(3)(A)(vi) of the Act
Section 1886(d)(3)(A)(vi) of the Act authorizes adjustments to the
average standardized amounts if the Secretary determines such
adjustments to be necessary for any subsequent fiscal years in order to
eliminate the effect of coding or classification changes that do not
reflect real changes in case-mix. After review of comments and
recommendations received in a FY 2012 public comment letter from MedPAC
(available on the Internet at: https://www.medpac.gov/documents/06172011_FY12IPPS_MedPAC_COMMENT.pdf), we analyzed claims data in FY
2010 to determine whether any additional adjustment would be
appropriate to ensure that the introduction of MS-DRGs was implemented
in a budget neutral manner. We analyzed FY 2010 data on claims paid
through December 2011 using the same claims-based methodology as
described in previous rulemaking (73 FR 43768 and 43775). We determined
a total additional prospective documentation and coding effect of 0.8
percent through FY 2010 and found that this effect was present for both
IPPS hospitals paid with the standardized amount and IPPS hospitals
paid using their hospital-specific payment rates.
In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27890), we
proposed an additional -0.8 percent prospective adjustment to the
standardized amount to account for this effect. We indicated that this
additional prospective adjustment of -0.8 percent, when combined with
the other prospective MS-DRG documentation and coding adjustments
already made or proposed would eliminate the future effect of MS-DRG
documentation and coding that did not reflect real changes in case-mix
for discharges occurring through FY 2010. As discussed in the FY 2013
IPPS/LTCH PPS final rule (77 FR 53278 through 53280), numerous
commenters objected to the CMS proposal to make an adjustment to
account for payment increases due to MS-DRG documentation and coding
that did not reflect real changes in case-mix for discharges occurring
through FY 2010. Many commenters continued to assert that our estimates
of documentation and coding were overstated, and could be explained by
other factors. These commenters also focused on part of the analysis
provided by MedPAC in its FY 2012 public comment letter indicating that
a slightly smaller additional prospective adjustment of -0.55 percent
rather than -0.8 percent might be required to offset the cumulative MS-
DRG documentation and coding effect through FY 2010. Specifically,
while MedPAC supported the overall methodology, it suggested that it
was possible that changes in documentation and coding to optimize
payments under the MS-DRG GROUPERs and relative weights may have
resulted in slightly less than optimal payments under the FY 2007
GROUPER and relative weights (the denominator of the documentation and
coding change estimate). Many commenters requested that, given the
MedPAC analysis, if CMS were to apply an additional prospective
adjustment to the MS-DRG documentation and coding effect through FY
2010, it should subtract 0.25 percentage points from its estimate, for
an adjustment of -0.55 percent.
After considering the public comments, we recognized that the issue
of the estimate to use for the cumulative MS-DRG documentation and
coding effect through FY 2010 may merit further consideration.
Therefore, as discussed in the FY 2013 IPPS/LTCH PPS final rule (77 FR
53278 through 53280), we decided not to finalize the proposed -0.8
percent adjustment to the standardized amount and the hospital-specific
rate until more analysis could be completed.
CMS is continuing to consider whether MedPAC's recommendation that
an adjustment to offset the cumulative documentation and coding effects
through FY 2010 under section 1886(d)(3)(A)(vi) of the Act is
appropriate and supported by a review of the claims data. After further
consideration of the MedPAC analysis and the request by many public
commenters, if we were to apply an additional prospective adjustment
for the cumulative MS-DRG documentation

[[Page 50516]]

and coding effect through FY 2010, we believe the most appropriate
additional adjustment is -0.55 percent.
As discussed in section II.D.6. of the preamble of the FY 2014
IPPS/LTCH PPS proposed rule (78 FR 27505), because we proposed a -0.8
percent recoupment adjustment, we did not propose a prospective
adjustment in FY 2014 for the cumulative MS-DRG documentation and
coding effect through FY 2010. However, we solicited public comments as
to whether any portion of the proposed -0.8 percent recoupment
adjustment should be reduced and instead applied to a prospective
adjustment for the cumulative MS-DRG documentation and coding effect
through FY 2010. For example, we could apply a -0.25 percent recoupment
adjustment, and a -0.55 prospective adjustment, for a total FY 2014
adjustment of -0.8 percent. Reducing the recoupment adjustment in FY
2014 would require relatively larger adjustments for FYs 2015, 2016,
and/or 2017, but making a prospective adjustment of -0.55 percent would
eliminate future payment increases due to MS-DRG documentation and
coding that did not reflect real changes in case-mix for discharges
occurring through FY 2010. As we discuss above, because the
documentation and coding effect through FY 2010 was found for both IPPS
hospitals paid with the standardized amount and IPPS hospitals paid
under their hospital-specific payment rate, if we were to apply a
prospective adjustment to remove this effect, we also would apply such
an adjustment to the hospital-specific payment rate, using the
Secretary's broad authority under section 1886(d)(5)(I)(i) of the Act
(77 FR 53276 through 53277). Therefore, if we attribute a portion of
the -0.8 percent adjustment for FY 2014 to the prospective adjustment,
we also would make appropriate adjustments to the hospital-specific
payment rates. Puerto Rico-specific rates would not be affected, as we
previously found no significant additional MS-DRG documentation and
coding effect for FY 2010 that would warrant any additional adjustment
to the Puerto Rico-specific rate (77 FR 53279).
Comment: The majority of commenters were satisfied with CMS'
proposal to phase in the $11 billion adjustment required under section
631 of the ATRA. Commenters encouraged CMS to continue to implement the
required adjustment gradually through FY 2017.
Response: We concur with commenters that a gradual implementation
of this adjustment is the most prudent course of action. We believe
that the proposed level of adjustment for FY 2014 is a reasonable and
fair approach that satisfies the requirements of the statute while
mitigating extreme annual fluctuations in payment rates. Therefore, we
are finalizing a -0.8 percent documentation and coding adjustment to
the standardized amount for FY 2014.
Comment: Many commenters, including a national hospital
association, were appreciative that CMS has reduced its original
estimate of FY 2010 documentation and coding effects from 0.8 percent
to 0.55 percent and believed that the 0.8 estimate was overstated.
However, some commenters contended that this overstatement was not
limited to FY 2010 alone. These commenters, while continuing to
fundamentally disagree with the validity of underlying methodology
employed by CMS, as previously described in the FY 2013 IPPS/LTCH PPS
final rule (77 FR 53274-53275), requested that a prospective adjustment
for any documentation and coding effect determined to have occurred in
FY 2010 be partially or wholly offset by any similar overstatement that
occurred in the adjustments made for documentation and coding effects
that occurred during FY 2008 and FY 2009.
Response: In the proposed rule (78 FR 27505), we acknowledged that,
after further consideration of the MedPAC analysis of claims data, if
we were to apply an additional prospective adjustment for the
cumulative MS-DRG documentation and coding effect through FY 2010, we
believe the most appropriate additional adjustment is -0.55 percent,
rather than the adjustment proposed in prior rulemaking of -0.8
percent. With respect to our previously finalized recoupment
adjustments for documentation and coding effects in FY 2008 and FY
2009, however, we note, as discussed earlier, that section 7(b)(1)(B)
of Public Law 110-90 required the Secretary to make the FY 2008 and FY
2009 recoupment adjustments based on estimates and also required that
the Secretary make these adjustments for discharges occurring only in
FYs 2010, 2011, and/or 2012. The Secretary made the FY 2008 and FY 2009
recoupment adjustments to the standardized amounts for discharges
occurring in FY 2011 and FY 2012 based on the best estimates available
at the time. We also note that section 631 of the ATRA states that the
$11 billion recoupment figure ``represents the amount of the increase
in aggregate payments from fiscal years 2008 through 2013 for which an
adjustment was not previously applied.'' Any adjustment to the FY 2008
and FY 2009 recoupment, therefore, is subsumed in the $11 billion
recoupment figure.
Comment: Many commenters requested that CMS not apply any of the
proposed -0.8 percent recoupment adjustment as a prospective adjustment
to account for any MS-DRG documentation and coding effect that occurred
in FY 2010. In addition to overall concerns with CMS' methodology,
commenters indicated that any prospective adjustment in addition to the
recoupment required by section 631 of the ATRA would be too financially
burdensome, and would be contrary to the agency's stated goal of
mitigating extreme fluctuations in payment rates.
MedPAC recommended that CMS implement the full -0.55 percent
prospective adjustment for FY 2010 documentation and coding in FY 2014,
reducing the FY 2014 recoupment adjustment to -0.25 percent. While
MedPAC acknowledged that such an action would require relatively larger
adjustments in FYs 2015 through 2017 to satisfy the $11 billion
recoupment requirement, it pointed out that further delay of FY 2010
documentation and coding adjustments would lead to overpayments in
future fiscal years, and that, in general, prospective adjustments
should be prioritized over retroactive adjustments.
Response: We have considered all of the comments received. While we
are firmly committed to ensuring that changes in documentation and
coding do not lead to increases in payments, we have decided not to
apply a prospective adjustment to account for any documentation and
coding effect that occurred in FY 2010 at this time. We note that the
$11 billion recoupment required by section 631 of the ATRA will require
additional documentation and coding adjustments between FY 2014 and FY
2017. If we were to apply a -0.55 percent prospective documentation and
coding adjustment for FY 2014, we would be concerned that additional
larger adjustments will be needed in future years to recoup the $11
billion required by ATRA. We will continue to take into account public
input and any future legislation on this issue.
Comment: Several commenters opposed the implementation of any
prospective adjustment to the hospital-specific rate. Similar to
comments submitted in response to the FY 2013 IPPS/LTCH PPS proposed
rule, as summarized in the FY 2013 IPPS/LTCH PPS final rule (77 FR
53277),

[[Page 50517]]

commenters stated that the broad authority granted to the Secretary in
section 1886(d)(5)(I)(i) of the Act is not so broad as to extend the
scope of a legislative directive that was specifically limited to
hospitals paid under a prospective payment system. Commenters also
contended that the plain language of section 7(b)(1) of Public Law 110-
90, as amended by the ATRA, provides clear instructions that the
documentation and coding adjustment is only intended to apply to the
standardized amounts.
Response: We continue to disagree that we do not have the authority
to make prospective documentation and coding adjustments to the
hospital-specific rates. We do not believe that the language in section
7(b)(1) of Public Law 110-90, as amended by the ATRA, or in section
1886(d)(3)(A)(iv) of the Act creates a limit on the broad authority
granted under section 1886(d)(5)(I) of the Act. We have discussed the
basis for applying any such prospective adjustment to the hospital-
specific rate in our prior rules, beginning with the FY 2009 IPPS/LTCH
PPS final rule (73 FR 48448). We also note that the proposed -0.8
percent recoupment adjustment for FY 2014 pursuant to section 631 of
ATRA, which we are finalizing in this final rule, applies only to the
standardized amount and not to the hospital-specific rates. Section 631
of the ATRA does not provide authority for a recoupment adjustment to
the hospital-specific rate. However, as discussed in the FY 2010 IPPS/
LTCH final rule (74 FR 24098), the FY 2011 IPPS/LTCH PPS final rule (75
FR 50067 through 50071), the FY 2012 IPPS/LTCH PPS (76 FR 51498 through
51499), and the FY 2013 IPPS/LTCH PPS final rule (75 FR 53277 through
53278), we continue to believe that any prospective documentation and
coding adjustments applied to the standardized amount should also be
similarly applied to the hospital-specific rate. As discussed in the
previous response, we are not making any prospective adjustment in FY
2014 to account for FY 2010 documentation and coding effects.
Therefore, no documentation and coding adjustment will be applied to
the hospital-specific rate in FY 2014.

E. Refinement of the MS-DRG Relative Weight Calculation

1. Background
Beginning in FY 2007, we implemented relative weights for DRGs
based on cost report data instead of charge information. We refer
readers to the FY 2007 IPPS final rule (71 FR 47882) for a detailed
discussion of our final policy for calculating the cost-based DRG
relative weights and to the FY 2008 IPPS final rule with comment period
(72 FR 47199) for information on how we blended relative weights based
on the CMS DRGs and MS-DRGs.
As we implemented cost-based relative weights, some public
commenters raised concerns about potential bias in the weights due to
``charge compression,'' which is the practice of applying a higher
percentage charge markup over costs to lower cost items and services,
and a lower percentage charge markup over costs to higher cost items
and services. As a result, the cost-based weights would undervalue
high-cost items and overvalue low-cost items if a single CCR is applied
to items of widely varying costs in the same cost center. To address
this concern, in August 2006, we awarded a contract to the Research
Triangle Institute, International (RTI) to study the effects of charge
compression in calculating the relative weights and to consider methods
to reduce the variation in the cost-to-charge ratios (CCRs) across
services within cost centers. For a detailed summary of RTI's findings,
recommendations, and public comments that we received on the report, we
refer readers to the FY 2009 IPPS/LTCH PPS final rule (73 FR 48452
through 48453). In addition, we refer readers to RTI's July 2008 final
report titled ``Refining Cost to Charge Ratios for Calculating APC and
MS-DRG Relative Payment Weights'' (https://www.rti.org/reports/cms/HHSM-500-2005-0029I/PDF/Refining_Cost_to_Charge_Ratios_200807_Final.pdf).
In the FY 2009 IPPS/LTCH PPS final rule (73 FR 48458 through
48467), in response to the RTI's recommendations concerning cost report
refinements, we discussed our decision to pursue changes to the cost
report to split the cost center for Medical Supplies Charged to
Patients into one line for ``Medical Supplies Charged to Patients'' and
another line for ``Implantable Devices Charged to Patients.'' We
acknowledged, as RTI had found, that charge compression occurs in
several cost centers that exist on the Medicare cost report. However,
as we stated in the FY 2009 IPPS/LTCH PPS final rule, we focused on the
CCR for Medical Supplies and Equipment because RTI found that the
largest impact on the MS-DRG relative weights could result from
correcting charge compression for devices and implants. In determining
the items that should be reported in these respective cost centers, we
adopted the commenters' recommendations that hospitals should use
revenue codes established by the AHA's National Uniform Billing
Committee to determine the items that should be reported in the
``Medical Supplies Charged to Patients'' and the ``Implantable Devices
Charged to Patients'' cost centers. Accordingly, a new subscripted line
for ``Implantable Devices Charged to Patients'' was created in July
2009. This new subscripted cost center has been available for use for
cost reporting periods beginning on or after May 1, 2009.
As we discussed in the FY 2009 IPPS final rule (73 FR 48458) and in
the CY 2009 OPPS/ASC final rule with comment period (73 FR 68519
through 68527), in addition to the findings regarding implantable
devices, RTI also found that the costs and charges of computed
tomography (CT) scans, magnetic resonance imaging (MRI), and cardiac
catheterization differ significantly from the costs and charges of
other services included in the standard associated cost center. RTI
also concluded that both the IPPS and the OPPS relative weights would
better estimate the costs of those services if CMS were to add standard
cost centers for CT scans, MRIs, and cardiac catheterization in order
for hospitals to report separately the costs and charges for those
services and in order for CMS to calculate unique CCRs to estimate the
costs from charges on claims data. In the FY 2011 IPPS/LTCH PPS final
rule (75 FR 50075 through 50080), we finalized our proposal to create
standard cost centers for CT scans, MRIs, and cardiac catheterization,
and to require that hospitals report the costs and charges for these
services under new cost centers on the revised Medicare cost report
Form CMS-2552-10. (We refer readers to the FY 2011 IPPS/LTCH PPS final
rule (75 FR 50075 through 50080) for a detailed discussion of the
reasons for the creation of standard cost centers for CT scans, MRIs,
and cardiac catheterization.) The new standard cost centers for CT
scans, MRIs, and cardiac catheterization are effective for cost
reporting periods beginning on or after May 1, 2010, on the revised
cost report Form CMS-2552-10.
In the FY 2009 IPPS final rule (73 FR 48468), we stated that, due
to what is typically a 3-year lag between the reporting of cost report
data and the availability for use in ratesetting, we anticipated that
we might be able to use data from the new ``Implantable Devices Charged
to Patients'' cost center to develop a CCR for ``Implantable Devices
Charged to Patients'' in the FY 2012 or FY 2013 IPPS rulemaking cycle.
However, as noted in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74
FR

[[Page 50518]]

43782), due to delays in the issuance of the revised cost report Form
CMS 2552-10, we determined that a new CCR for ``Implantable Devices
Charged to Patients'' might not be available before FY 2013. Similarly,
when we finalized the decision in the FY 2011 IPPS/LTCH PPS final rule
to add new cost centers for CT scans, MRIs, and cardiac
catheterization, we explained that data from any new cost centers that
may be created will not be available until at least 3 years after they
are first used (75 FR 50077). In preparation for the FY 2012 IPPS
rulemaking, we checked the availability of data in the ``Implantable
Devices Charged to Patients'' cost center on the FY 2009 cost reports,
but we did not believe that there was a sufficient amount of data from
which to generate a meaningful analysis in this particular situation.
Therefore, we did not propose to use data from the ``Implantable
Devices Charged to Patients'' cost center to create a distinct CCR for
``Implantable Devices Charged to Patients'' for use in calculating the
MS-DRG relative weights for FY 2012. We indicated that we would
reassess the availability of data for the ``Implantable Devices Charged
to Patients'' cost center for the FY 2013 IPPS/LTCH PPS rulemaking
cycle and, if appropriate, we would propose to create a distinct CCR at
that time.
During the development of the FY 2013 IPPS/LTCH PPS proposed and
final rules, hospitals were still in the process of transitioning from
the previous cost report Form CMS-2552-96 to the new cost report Form
CMS-2552-10. Therefore, we were able to access only those cost reports
in the FY 2010 HCRIS with fiscal year begin dates on or after October
1, 2009, and before May 1, 2010; that is, those cost reports on Form
CMS-2552-96. Data from the Form CMS-2552-10 cost reports were not
available because cost reports filed on the Form CMS-2552-10 were not
accessible in the HCRIS. Further complicating matters was that, due to
additional unforeseen technical difficulties, the corresponding
information regarding charges for implantable devices on hospital
claims was not yet available to us in the MedPAR file. Without the
breakout in the MedPAR file of charges associated with implantable
devices to correspond to the costs of implantable devices on the cost
report, we believed that we had no choice but to continue computing the
relative weights with the current CCR that combines the costs and
charges for supplies and implantable devices. We stated in the FY 2013
IPPS/LTCH PPS final rule (77 FR 53281 through 53283) that when we do
have the necessary data for supplies and implantable devices on the
claims in the MedPAR file to create distinct CCRs for the respective
cost centers for supplies and implantable devices, we hoped that we
would also have data for an analysis of creating distinct CCRs for CT
scans, MRIs, and cardiac catheterization, which could then be finalized
through rulemaking.
2. Discussion of Proposed and Final Policy for FY 2014
As we stated in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR
27506-27507), to calculate the proposed FY 2014 MS-DRG relative
weights, we proposed to continue our current methodology of using the
two most recent data sources: The December 2012 update of the FY 2012
MedPAR file as the claims data source and the December 2012 update of
FY 2011 HCRIS as the cost data source. At the time of the development
of the proposed rule, we had a substantial number of hospitals
completing all, or some, of these new cost centers on the FY 2011
Medicare cost reports, compared to prior years. Specifically, using the
December 2012 update of FY 2011 HCRIS, we were able to calculate a
valid implantable device CCR for 2,285 IPPS hospitals, a valid MRI CCR
for 1,402 IPPS hospitals, a valid CT scan CCR for 1,470 IPPS hospitals,
and a valid cardiac catheterization CCR for 1,022 IPPS hospitals. In
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53281), we stated that
prior to proposing to create these CCRs, we would first thoroughly
analyze and determine the impacts of the data, and that distinct CCRs
for these new cost centers would be used in the calculation of the
relative weights only if they were first finalized through rulemaking.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27507), we stated
that we believe that there is a sufficient amount of data in the FY
2011 cost reports from which to generate a meaningful analysis of using
distinct CCRs for implantable devices, MRIs, CT scans, and cardiac
catheterization. In addition, the corresponding charge data on hospital
claims for implantable devices, MRIs, CT scans, and cardiac
catheterization are available in the FY 2012 MedPAR file. Therefore, in
the proposed rule, we provided various data analyses based on
comparison of the FY 2014 relative weights computed using 15 CCRs, as
we have done in the past, and the FY 2014 relative weights computed
using 19 CCRs, with distinct CCRs for implantable devices, MRIs, CT
scans, and cardiac catheterization. Specifically, rather than having a
single CCR for ``Supplies and Equipment'' which includes low-cost
supplies and high-cost implantable devices, we proposed that a distinct
CCR would be carved out of the ``Supplies and Equipment'' CCR, leaving
one CCR for ``Supplies'' and one CCR for ``Implantable Devices.''
Regarding the Radiology CCR, which currently is comprised of general
radiology ancillary services and MRIs and CT scans, we proposed that
the costs for MRIs and CT scans would be separated from general
radiology, creating two distinct CCRs, one for MRIs and one for CT
scans, respectively. Finally, by separating the costs of cardiac
catheterization out of the CCR for general cardiology, we proposed that
a distinct CCR would be created for cardiac catheterization. Thus, by
breaking out these 4 additional CCRs, the number of CCRs used to
calculate the relative weights would increase from 15 to 19.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27507), for
comparison purposes, we included the following table to show the final
FY 2013 CCRs, the potential FY 2014 CCRs computed with the existing 15
cost centers, and the potential FY 2014 CCRs computed with 19 cost
centers, with 4 new CCRs for implantable devices, MRIs, CT scans, and
cardiac catheterization.

----------------------------------------------------------------------------------------------------------------
Final FY 2013 15 Potential FY Potential FY
Group CCRs 2014 15 CCRs 2014 19 CCRs
----------------------------------------------------------------------------------------------------------------
Routine days.............................................. 0.514 0.502 0.502
Intensive days............................................ 0.442 0.423 0.423
Drugs..................................................... 0.199 0.193 0.193
Supplies & Equipment...................................... 0.335 0.327 0.293
Implantable Devices....................................... n/a n/a 0.361
Therapy Services.......................................... 0.370 0.355 0.355
Laboratory................................................ 0.143 0.133 0.133

[[Page 50519]]

Operating Room............................................ 0.238 0.225 0.225
Cardiology................................................ 0.145 0.134 0.132
Cardiac Catheterization................................... n/a n/a 0.135
Radiology................................................. 0.136 0.128 0.170
MRI....................................................... n/a n/a 0.091
CT Scans.................................................. n/a n/a 0.045
Emergency Room............................................ 0.226 0.207 0.207
Blood..................................................... 0.389 0.371 0.371
Other Services............................................ 0.397 0.399 0.399
Labor & Delivery.......................................... 0.450 0.445 0.445
Inhalation Therapy........................................ 0.189 0.187 0.187
Anesthesia................................................ 0.109 0.120 0.120
----------------------------------------------------------------------------------------------------------------

In order to model the effects on the relative weights in medical
MS-DRGs versus surgical MS-DRGs, in the FY 2014 IPPS/LTCH PPS proposed
rule (78 FR 27507-8), we compared a set of relative weights calculated
with 15 CCRs and 19 CCRs. Based on the data available at the time of
the development of the proposed rule, overall, if the 19 CCRs would be
used to calculate the proposed relative weights for FY 2014, relative
weights for medical MS-DRGs would be expected to decrease by
approximately 1.1 percent, and those for surgical MS-DRGs would be
expected to increase by approximately 1.2 percent. In addition, as
shown in the table below included in the FY 2014 IPPS/LTCH PPS proposed
rule (78 FR 27508), at the MDC level, we expected payments to increase
by approximately 0.64 percent (0.39+0.25) within orthopedic and cardiac
MDCs, with most of the reductions in payment resulting to the medical
MS-DRGs in the nervous system, digestive system, and respiratory system
MDCs.

------------------------------------------------------------------------
Estimated
percentage
MDC Description change within
MDC
------------------------------------------------------------------------
08........................ Musculoskeletal System And 0.39
Connective Tissue.
05........................ Circulatory System........ 0.25
01........................ Nervous System............ -0.16
06........................ Digestive System.......... -0.10
04........................ Respiratory System........ -0.08
------------------------------------------------------------------------

In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27508), we stated
that the largest estimated increase in MS-DRG relative weights would
likely occur for MS-DRGs associated with cardiac catheterization and
implantable cardiac devices. We also stated that the largest estimated
reductions in MS-DRG relative weights would likely occur for MS-DRGs
associated with traumatic head injury and concussion, which are high
users of CT scanning and MRI services. We included in the FY 2014 IPPS/
LTCH PPS proposed rule (78 FR 27508) the table below, which showed,
based on data available at the time of the development of the proposed
rule, the top 10 (nonlabor and delivery) MS-DRGs that we predicted
would experience the largest increases and decreases in relative
weights through use of the expanded 19 CCRs, as compared to previous 15
CCRs.

----------------------------------------------------------------------------------------------------------------
Potential Potential
relative relative Percentage
MS-DRG Type Title weight with 15 weights with change
CCRs 19 CCRs
----------------------------------------------------------------------------------------------------------------
MS-DRGS THAT WOULD EXPERIENCE THE LARGEST DECREASE IN RELATIVE WEIGHT
----------------------------------------------------------------------------------------------------------------
090.......................... MED............. Concussion 0.7614 0.7013 -7.9
without CC/MCC.
084.......................... MED............. Traumatic 0.9137 0.8516 -6.8
Stupor & Coma,
Coma >1 Hour
without CC/MCC.
087.......................... MED............. Traumatic 0.7899 0.7369 -6.7
Stupor & Coma,
Coma <1 Hour
without CC/MCC.
965.......................... MED............. Other Multiple 1.0450 0.980 -6.1
Significant
Trauma without
CC/MCC.
185.......................... MED............. Major Chest 0.7281 0.6845 -6.0
Trauma without
CC/MCC.
089.......................... MED............. Concussion with 0.9959 0.9366 -6.0
CC.
123.......................... MED............. Neurological 0.7355 0.6920 -5.9
Eye Disorder.
343.......................... SURG............ Appendectomy 0.9880 0.9517 -5.7
without
Complicated
Principal
Diagnosis
without CC/MCC.
053.......................... MED............. Spinal 0.9355 0.8825 -5.7
Disorders &
Injuries
without CC/MCC.
066.......................... MED............. Intracranial 0.8034 0.7579 -5.7
Hemorrhage or
Cerebral
Infarction
without CC/MCC.
----------------------------------------------------------------------------------------------------------------

[[Page 50520]]

MS-DRGS THAT WOULD EXPERIENCE THE LARGEST INCREASE IN RELATIVE WEIGHT
----------------------------------------------------------------------------------------------------------------
454.......................... SURG............ Combined 7.6399 8.0563 5.5
Anterior/
Posterior
Spinal Fusion
with CC.
455.......................... SURG............ Combined 5.9862 6.3133 5.5
Anterior/
Posterior
Spinal Fusion
Without CC/MCC.
484.......................... SURG............ Major Joint & 2.1211 2.2380 5.5
Limb
Reattachment
Procedure of
Upper
Extremity
without CC/MCC.
225.......................... SURG............ Cardiac 5.6298 5.9530 5.7
Defibrillator
Implant with
Cardiac
Catheterizatio
n without AMI/
HF/Shock
without MCC.
223.......................... SURG............ Cardiac 6.0956 6.4482 5.8
Defibrillator
Implant with
Cardiac
Catheterizatio
n with AMI/HF/
Shock without
MCC.
458.......................... SURG............ Spinal Fusion 4.8794 5.1630 5.8
Except
Cervical with
Spinal Curve/
Malignant/
Infection OR
9+ Fusion
without CC/MCC.
245.......................... SURG............ AICD Generator 4.4627 4.7320 6.0
Procedures.
849.......................... MED............. Radiotherapy... 1.3423 1.4258 6.2
946.......................... MED............. Rehabilitation 1.1295 1.2024 6.5
without CC/MCC.
227.......................... SURG............ Cardiac 5.2193 5.5714 6.7
Defibrillator
Implant
without
Cardiac
Catheterizatio
n without MCC.
----------------------------------------------------------------------------------------------------------------

During development of the FY 2014 proposed rule, after computing
the analyses described above by comparing both sets of MS-DRG relative
weights computed with FY 2011 cost report data, we revisited RTI's July
2008 final report. We noted that the impacts on relative weight and at
the MDC level are generally consistent with those estimated by RTI in
its modeling. RTI found that disaggregating the CCRs for medical
supplies and devices would have the most impact on reducing charge
compression, and that the largest impact was for MS-DRG 227. Similarly,
as shown in the chart above, we estimated that the potential relative
weight for MS-DRG 227 would experience the largest increase, 6.7
percent. Cardiac implants and spinal fusion procedures accounted for
most of the 10 MS-DRGs with the largest incremental increases. In
addition, RTI's July 2008 final report (pages 103 through 107)
indicates that among the largest expected reductions are the MS-DRG
relative weights for MS-DRGs associated with traumatic head injury and
concussion, which are high users of CT scanning and MRI services. RTI's
analyses were highly predictive for many of the MS-DRGs most sensitive
to the effects of charge compression.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27508), we
indicated that as we stated in prior rulemaking (77 FR 53281 through
53283), once we determined that cost report data were available for
analysis, we would propose, if appropriate, to use the distinct CCRs
described above in the calculation of the MS-DRG relative weights. We
believed that the analytic findings described above using the FY 2011
cost report data and FY 2012 claims data supported our original
decision to break out and create new cost centers for implantable
devices, MRIs, CT scans, and cardiac catheterization, and we saw no
reason to further delay proposing to implement the CCRs of each of
these cost centers. Therefore, beginning in FY 2014, we proposed to
calculate the MS-DRG relative weights using 19 CCRs, creating distinct
CCRs from cost report data for implantable devices, MRIs, CT scans, and
cardiac catheterization. We welcomed public comments on the proposal
and the impacts that it may have. We referred readers to section VI.C.
of Appendix A of the proposed rule for the overall IPPS operating
impact of our proposal, which modeled payments to various hospital
types using relative weights developed from 19 CCRs (as compared to the
previous 15 CCRs). In addition, as part of the FY 2014 IPPS/LTCH PPS
proposed rule, in addition to providing Table 5, which listed the
proposed MS-DRGs and their relative weights using 19 CCRs (available on
the CMS Web site at: https://www.cms.hhs.gov/AcuteInpatientPPS/01_overview.asp; click on the link on the left side of the screen titled
``FY 2014 IPPS Proposed Rule Home Page'' or ``Acute Inpatient--Files
for Download''), we provided a separate table that listed all MS-DRGs
and their relative weights if computed using 15 CCRs (available at the
same CMS Web site cited above). We believed that these two formats
would allow readers to compare our proposal to calculate the MS-DRG
relative weights using 19 CCRs with the relative weights of MS-DRGs if
computed using 15 CCRs.
Comment: Several commenters noted that CMS concluded that there is
sufficient data in the FY 2011 cost reports to support a meaningful
analysis of using distinct CCRs, but did not share how it arrived at
that conclusion. In particular, the commenters were unclear if 1,022
hospitals reporting cardiac catheterization are a representative
sample, because they make up less than a third of the total hospitals.
The commenters urged CMS to clarify how it determined the level of
reporting on these new cost centers is sufficient.
Response: In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27507),
we stated that, as compared to previous years, we have a substantial
number of hospitals completing all, or some, of the MRI, CT scan, and
cardiac catheterization cost centers on the FY 2011 Medicare cost
reports. For the FY 2014 IPPS/LTCH PPS proposed rule, we used cost
report data from the December 2012 update of the FY 2011 HCRIS, and
found that ``we were able to calculate a valid implantable device CCR
for 2,285 IPPS hospitals, a valid MRI CCR for 1,402 IPPS hospitals, a
valid CT scan CCR for 1,470 IPPS hospitals, and a valid cardiac
catheterization CCR for 1,022 IPPS hospitals (78 FR 27507).'' As part
of our methodology for calculating the proposed relative weights, we
first apply various trims to the cost report data of all IPPS hospitals
(we refer readers to the description of the calculation of the relative
weights in the FY 2014 IPPS LTCH PPS proposed rule

[[Page 50521]]

(78 FR 27529 through 27530)). After applying these data trims, the CCRs
in the proposed rule were based on data from 2,697 remaining IPPS
hospitals. Therefore, our use of the term ``valid'' CCRs in the FY 2014
proposed rule meant that these CCRs were the ones associated with the
2,697 IPPS hospitals remaining after the usual trims were applied.
Although the number of hospitals with valid cardiac catheterization
CCRs is less than the number of hospitals with ``valid'' implantable
device, MRI, or CT scan CCRs, it still represented about 38 percent of
the available IPPS hospitals after application of our usual data trims
(that is, 1,022/2,697 = .38). We note that many smaller hospitals do
not separately report cardiac catheterization costs and charges. (This
issue was raised in the FY 2011 IPPS/LTCH PPS final rule, (75 FR
50078), where, in recognition of the fact that not all hospitals
separately account for cardiac catheterization costs and charges, we
stated that hospitals that do not currently maintain distinct
departments or accounts in their internal accounting systems for CT
scanning, MRI, or cardiac catheterization are not required to create
distinct departments or accounts.) Given that not all hospitals would
even have a cardiac catheterization CCR, we considered 38 percent to be
a substantial number, albeit, not a majority, of IPPS hospitals, from
which to base our FY 2014 proposal to calculate the relative weights
with a distinct cardiac catheterization CCR.
We reviewed our data analyses from previous years and note that
typically, because the proposed CCRs for a given year are based on cost
report data from the December update of the applicable HCRIS year, the
proposed CCRs are based on data from less than 3,000 IPPS hospitals.
Then, once the data for each final rule are available, which are
derived from the subsequent March update of the applicable HCRIS year,
the final CCRs are typically based on cost report data of more than
3,000 IPPS hospitals. This is the case for FY 2014 as well. Although
the proposed CCRs were based on data of 2,697 IPPS hospitals, the March
2013 update of FY 2011 HCRIS yields: 3,207 IPPS hospitals (after
various trims are applied--we refer readers to the description of the
relative weight calculation in section II.H. of the preamble of this
final rule); 2,707 IPPS hospitals with an implantable device CCR; 1,717
IPPS hospitals with an MRI CCR; 1,785 IPPS hospitals with a CT scan
CCR; and 1,263 IPPS hospitals with a cardiac catheterization CCR. For
this FY 2014 final rule, although the number of hospitals with cardiac
catheterization CCRs is less than the number of hospitals with
``valid'' implantable device, MRI, or CT scan CCRs, it still represents
approximately 39 percent of the available IPPS hospitals after
application of our usual data trims (that is, 1,263/3,207 = .39).
Accordingly, we believe it is appropriate to use the cardiac
catheterization CCR in the calculation of the FY 2014 relative weights.
Comment: Commenters were generally supportive of the proposals to
implement additional CCRs for implantable devices and cardiac
catheterization. However, many commenters requested that CMS
``reconsider the impact of'' distinct CCRs for MRIs and CT scans
``before adopting them.'' Various commenters representing the medical
imaging industry opposed implementation of distinct MRI and CT scan
CCRs at this point, expressing concern that doing so would result in
very low CCRs for these services because of hospital cost reporting
practices that allocate capital costs for MRIs and CT scan across the
entire hospital, rather than to the appropriate individual radiology
cost centers. Specifically, the commenters reported that some hospitals
currently use an imprecise ``square footage'' allocation methodology
for the costs of large moveable equipment like CT scan and MRI
machines. They indicated that while CMS recommends using two
alternative allocation methods, ``direct assignment'' or ``dollar
value,'' as a more accurate methodology for directly assigning
equipment costs, industry analysis suggests that approximately only
half of the reported cost centers for CT scan and MRI rely on these
preferred methodologies. The commenters expressed concern that ``square
footage'' allocation results in CCRs that ``lack face validity,''
because the proposed CCRs for CT scans and MRIs are less than the
proposed CCR for general radiology, inaccurately reflecting the higher
resources used for MRIs and CT scans relative to the less expensive
plain film x-rays. Commenters asserted that more time is needed by
hospitals to modify their cost reporting practices, and urged CMS to
explore how to develop more accurate data without unduly increasing the
complexity of the cost report. Some other commenters suggested that if
CMS were to finalize the new CCRs, CMS should only use cost report data
that meet minimum data quality standards. For example, these commenters
recommended that CMS adopt the following standards for assuring
validity of CT and MRI cost data:
Check that the hospital uses direct assignment or dollar
value allocation of capital costs.
Check that the hospital's CT scan and MRI cost centers
each have total costs of at least $250,000.
Check that there is evidence that the hospital
reclassified overhead costs from the diagnostic radiology cost center
to the CT scan and/or MRI cost centers.
A different commenter's analysis used cost report data from
hospitals that employ ``procedural accounting,'' also known as
``activity-based costing,'' which the commenter stated is a more
accurate way to determine costs. The commenter's analysis showed
results that were in ``close agreement'' with CMS' proposed CCRs,
giving ``some comfort that the new cost centers are capturing costs as
intended.'' Nevertheless, the commenter urged caution before
proceeding, noting large swings in certain DRG relative weights, and
that many of the negatively affected DRGs are trauma related, and many
of the positively affected DRGs are cardiac and orthopedic related. The
commenter was concerned that specific types of hospitals have more to
gain or lose under the policy based on their mix of services, and CMS
should consider whether finalizing 19 CCRs ``would unduly incent volume
growth'' in certain procedures. The commenter requested that CMS
implement a ``dampening policy'' or a 70/30 transition blend for FY
2014 to give hospitals an opportunity to budget for such shifts and
avoid unintended consequences.
Although many commenters expressed concern about the impact of
implementing distinct CCRs for MRIs and CT scans under the IPPS, they
noted that since MS-DRGs are bundled services, only a fraction of the
negative impact would be manifested in the IPPS MS-DRGs, and that
payment rates for the Ambulatory Patient Classifications (APCs) under
the Hospital Outpatient Prospective Payment System (OPPS) would be
affected more dramatically by the use of inaccurate CCRs. The
commenters mentioned that the Deficit Reduction Act (DRA) of 2005 sets
the technical component (TC) of advanced imaging services to the lesser
of: (1) The Medicare Physician Fee Schedule (MPFS); or (2) the OPPS.
The commenters stated that, as proposed, the separate cost centers for
MRIs and CT scans would result in significant cuts to the MPFS
technical component payments. Another commenter noted

[[Page 50522]]

that as CMS proceeds with cost center refinement, services become
unbundled, and may cause payment swings from year to year. The
commenters urged CMS not to use the proposed CCRs for MRIs and CT scans
in the IPPS, the OPPS, or the MPFS until the effects on all three
systems have been thoroughly analyzed.
Response: We thank the commenters for their analyses and
suggestions regarding use of distinct CCRs for implantable devices,
MRIs, CT scans, and cardiac catheterization. We appreciate the support
for our proposal to use distinct CCRs for implantable devices and
cardiac catheterization, and we have carefully reviewed the comments
objecting to implementation of distinct CCRs for MRIs and CT scans. The
new standard cost centers for CT scans, MRIs, and cardiac
catheterization have been in effect since cost reporting periods
beginning on or after May 1, 2010, on the revised cost report Form CMS-
2552-10. Thus, FY 2011, which is the cost reporting year that CMS is
using to calculate the CCRs for the FY 2014 MS-DRG relative weights,
was either the first or the second opportunity for hospitals to submit
cost reports with the new CT scan and MRI cost centers (lines 57 and 58
of Worksheets A and C, Part I of the Form CMS-2552-10), depending on
the hospital's fiscal year end (FYE). (For example, a hospital with a
June 30 FYE would have completed these lines on its FY 2010 July 1,
2010-June 30, 2011 cost report, and again on its FY 2011 July 1, 2011-
June 30, 2012 cost report, whereas a hospital with a December 31 FYE
would have first completed these cost centers on its FY 2011 January 1,
2011-December 31, 2011 cost report). However, simultaneous with first
implementing the new CT scan and MRI cost centers in the FY 2011 IPPS/
LTCH PPS final rule (75 FR 50077), we also notified hospitals of the
need and importance of properly reporting the capital costs of moveable
equipment on the Medicare cost report. Specifically, in the FY 2011
IPPS/LTCH PPS final rule (75 FR 50078), we explained that, in
accordance with Section 104 of CMS Pub. 15-1, Chapter 1, CT scans and
MRIs are major moveable equipment, and the costs should be reported
together with the rest of the hospital's major moveable equipment cost
in the Capital-Related Costs--Moveable Equipment cost centers on
Worksheet A (lines 2 and 4 on the Form CMS-2552-96 and line 2 on the
Form CMS-2552-10). The costs in these cost centers are allocated to all
the hospital's cost centers that use major moveable equipment
(including CT and MRI), using ``dollar value'' (which is the
``recommended'' or default statistical basis, per the cost reporting
instructions at CMS Pub. 15-2, Section 4095 for the Form CMS 2552-10).
Alternatively, the hospital may have obtained the contractor's approval
under Section 2313 of CMS Pub. 15-1 to use the simplified cost
allocation methodology, ``square feet.'' However, a hospital that
historically has been using ``square feet'' and is concerned that this
method of allocation may result in inaccurate CCRs (on Worksheet C,
Part I) for the CT scan, MRI, and other ancillary cost centers may
request contractor approval in accordance with Section 2307 of the CMS
Pub. 15-1 to use the ``direct assignment'' allocation method, and
directly assign the cost of moveable equipment to all of the hospital's
cost centers that use moveable equipment, including CT and MRIs, using
the provider's routine accounting process. This would ensure that the
high cost of the CT scanning and MRI equipment would be reflected in
the CCR that would be calculated for those departments and that would
be used to estimate the cost of CT scanning and MRI services. In any
case, hospitals should correct their cost reporting practices to come
into compliance with CMS' longstanding policy regarding the ``Capital-
Related Costs--Moveable Equipment'' cost center, by either using the
recommended statistical allocation method of ``dollar value'' for costs
in Worksheet A, Column 2 for Capital-Related Costs--Moveable Equipment,
or by requesting contractor approval in accordance with Section 2307 of
CMS Pub. 15-1 to use the ``direct assignment'' allocation method. In
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53283), we reiterated this
policy, and added that ``Hospitals that still need to correct their
cost reporting practices in this regard should do so soon, so that when
we propose distinct CCRs for MRI and CT scans, hopefully for FY 2014,
these CCRs will represent fairly accurately the cost of these radiology
services.'' Therefore, while the CCRs for CT scan and MRIs may appear
to ``lack face validity,'' as the commenters asserted, these CCRs
nevertheless reflect the cost reporting practices of many IPPS
hospitals as of FY 2011, the cost reports used to calculate the CCRs
for the FY 2014 MS-DRG relative weights. Furthermore, we are unsure of
how the cost reporting practices of hospitals that employ the square
feet allocation method result in CCRs that ``lack face validity'' when
CCRs are calculated separately for CT scan, MRI, and radiology, but
would result in CCRs that are more ``valid'' when aggregated into a
single CCR for all radiology services.
We have considered the public comments recommending that if CMS
does finalize distinct CCRs for CT scans and MRIs for the IPPS MS-DRG
relative weights, CMS should adopt certain minimum quality standards,
such as using only cost report data of hospitals that use either direct
assignment or the dollar value statistical allocation method, have at
least $250,000 of cost in the CT scan or MRI cost center, and have
reclassified overhead costs from the diagnostic radiology cost center
to the CT scan and/or MRI cost centers. We do not agree with adoption
of these minimum data standards because doing so would ignore the fact
that many hospitals have chosen (at least up to this point) to employ
the square feet statistical allocation methodology, perhaps for reasons
unrelated to the costs of MRIs and CT scans, and, therefore, these data
reflect, in large part, the best available data that we have. It also
is not administratively feasible for CMS to determine, using HCRIS
data, whether hospitals have reclassified overhead costs from the
diagnostic radiology cost center to the CT scan and/or MRI cost
centers. However, we appreciate the one commenter's analysis of cost
reports using procedural accounting (another more precise method) that
yielded CCRs that were close to the CCRs that CMS proposed.
We took note of the many comments regarding the ramifications of CT
scan and MRI CCRs under the OPPS and the MPFS. Specifically, commenters
seemed even more concerned about an impending proposal to implement
distinct MRI and CT scan CCRs under the OPPS, which, they asserted,
when coupled with recent payment reductions to MRI and CT scan services
under the Deficit Reduction Act of 2005, are detrimental to hospitals.
(We note that at the time of the comment period for the FY 2014 IPPS/
LTCH PPS proposed rule, the CY 2014 OPPS/ASC proposed rule had not yet
been issued.) We understand that any such change could have significant
payment impacts under the MPFS where the technical component payment
for many imaging services is capped at the OPPS payment. While we
appreciate the concern regarding other Medicare payment systems, we
wish to point out that our decision to implement additional CCRs in
this FY 2014 IPPS/LTCH PPS final rule does not predict what CMS may
finalize for the CY 2014 OPPS/ASC relative payment weights. We will
separately evaluate the impacts of

[[Page 50523]]

implementing any additional CCRs under the OPPS as part of the OPPS
rulemaking process. We note that the public comment periods for both
the CY 2014 MPFS proposed rule and the CY 2014 OPPS/ASC proposed rule
end on September 6, 2013.
We appreciate the concerns expressed by the commenters related to
the swings in the relative weights of certain MS-DRGs, and the
importance of not providing an incentive for hospitals to furnish, or
not furnish, certain services. However, we are not convinced that
further delay or further trimming of CCR values is necessary in order
to implement all of the proposed CCRs. This is consistent with our
historical approach to use cost report data from HCRIS that is 3 years
prior to the IPPS fiscal year that is under development (that is, for
the FY 2014 IPPS relative weights, the CCRs are calculated from FY 2011
HCRIS). Although hospitals have been permitted to use the alternative
basis cost allocation (that is, ``square feet'') under Section 2313 of
CMS Pub. 15-1, this methodology does not ensure precise CCRs for CT
scans and MRIs. Therefore, we encouraged hospitals over the past
several years to use the most precise cost reporting methods in
response to the new cost report lines. Specifically, the longstanding
cost report instructions at CMS Pub. 15-2, Section 4020 (previously at
Section 3617), state that ``The statistical basis shown at the top of
each column on Worksheet B-1 is the recommended basis of allocation of
the cost center indicated which must be used by all providers
completing this form (Form CMS-2552-10), even if a basis of allocation
other than the recommended basis of allocation was used in the previous
iteration of the cost report (Form CMS-2552-96).'' Under Table 1 of the
Medicare cost report, which lists the Record Specifications for the
cost centers on Worksheet B-1, ``dollar value'' is specified as the
recommended statistical allocation method for Column 2, Capital-Related
Costs--Moveable Equipment. While the ``dollar value'' statistical
allocation method is more precise than ``square feet,'' to ensure even
more precise CCRs for CT scans and MRIs, 90 days prior to the beginning
of their next cost reporting period, hospitals may request permission
from their Medicare contractors in accordance with Section 2307 of CMS
Pub. 15-1 to use the ``direct assignment'' allocation method on
Worksheet B, Part II, Column 0. Although ``direct assignment'' is the
preferred and most precise allocation method, hospitals that do not
have the resources to directly assign the costs of every cost center
are strongly encouraged to instead use the ``dollar value'' statistical
allocation method. (We note that, under Section 2313 of CMS Pub. 15-1,
hospitals not currently using ``dollar value'' should notify their
contractor of their intention to switch their statistical allocation
basis to ``dollar value'' at least 90 days prior to the end of a cost
reporting period.) We also intend to communicate with the Medicare
contractors to facilitate approval of hospitals' requests to switch
from the square feet statistical allocation method to the ``direct
assignment'' or ``dollar value'' allocation method for the costs of
major moveable equipment. We believe that by adopting more refined
CCRs, we are fostering more careful cost reporting. Therefore, we do
not believe that the concerns expressed by the commenters warrant
further delay in implementing the proposed CCRs for CT scans and MRIs
for the FY 2014 IPPS/LTCH PPS final rule, nor do we believe that any
type of phase-in methodology is warranted.
As we have stated in prior rulemaking (77 FR 53281 through 53283),
once we determined that cost report data were available for analysis,
we would propose, and finalize, if appropriate, the use of the distinct
CCRs described above in the calculation of the MS-DRG relative weights.
We believe that the analytic findings described in the proposed rule,
and the volume of hospitals that have ``valid'' CCRs described above,
computed using the March 2013 update of FY 2011 HCRIS and the March
2013 update of the FY 2012 MedPAR claims data, support our original
decision to break out and create new cost centers for implantable
devices, MRIs, CT scans, and cardiac catheterization, and we see no
reason to further delay implementation of the CCRs of each of these
cost centers. Therefore, beginning in FY 2014, as we proposed, we are
calculating the MS-DRG relative weights using 19 CCRs, creating
distinct CCRs for implantable devices, MRIs, CT scans, and cardiac
catheterization. We refer readers to section I.G. of Appendix A of this
final rule for the overall IPPS operating impact of our policy, which
models payments to various hospital types using relative weights
developed from 19 CCRs (as compared to the previous 15 CCRs). The
description of the calculation of the CCRs and the MS-DRG relative
weights, including the final 19 CCRs used to calculate the relative
weights for FY 2014, is included in section II.H. of the preamble of
this final rule.

F. Adjustment to MS-DRGs for Preventable Hospital-Acquired Conditions
(HACs), Including Infections

1. Background
Section 1886(d)(4)(D) of the Act addresses certain hospital-
acquired conditions (HACs), including infections. This provision is
part of an array of Medicare tools that we are using to promote
increased quality and efficiency of care. Under the IPPS, hospitals are
encouraged to treat patients efficiently because they receive the same
DRG payment for stays that vary in length and in the services provided,
which gives hospitals an incentive to avoid unnecessary costs in the
delivery of care. In some cases, conditions acquired in the hospital do
not generate higher payments than the hospital would otherwise receive
for cases without these conditions. To this extent, the IPPS encourages
hospitals to avoid complications.
However, the treatment of certain conditions can generate higher
Medicare payments in two ways. First, if a hospital incurs
exceptionally high costs treating a patient, the hospital stay may
generate an outlier payment. Because the outlier payment methodology
requires that hospitals experience large losses on outlier cases before
outlier payments are made, hospitals have an incentive to prevent
outliers. Second, under the MS-DRG system that took effect in FY 2008
and that has been refined through rulemaking in subsequent years,
certain conditions can generate higher payments even if the outlier
payment requirements are not met. Under the MS-DRG system, there are
currently 261 sets of MS-DRGs that are split into 2 or 3 subgroups
based on the presence or absence of a CC or an MCC. The presence of a
CC or an MCC generally results in a higher payment.
Section 1886(d)(4)(D) specifies that, by October 1, 2007, the
Secretary was required to select, in consultation with the Centers for
Disease Control and Prevention (CDC), at least two conditions that: (a)
Are high cost, high volume, or both; (b) are assigned to a higher
paying MS-DRG when present as a secondary diagnosis (that is,
conditions under the MS-DRG system that are CCs or MCCs); and (c) could
reasonably have been prevented through the application of evidence-
based guidelines. Section 1886(d)(4)(D) of the Act also specifies that
the list of conditions may be revised, again in consultation with CDC,
from time to time as long as the list contains at least two conditions.
Effective for discharges occurring on or after October 1, 2008,
under the

[[Page 50524]]

authority of section 1886(d)(4)(D) of the Act, Medicare no longer
assigns an inpatient hospital discharge to a higher paying MS-DRG if a
selected condition is not present on admission (POA). Thus, if a
selected condition that was not POA manifests during the hospital stay,
it is considered a HAC and the case is paid as though the secondary
diagnosis was not present. However, even if a HAC manifests during the
hospital stay, if any nonselected CC/MCC appears on the claim, the
claim will be paid at the higher MS-DRG rate. In addition, Medicare
continues to assign a discharge to a higher paying MS-DRG if a selected
condition is POA. When a HAC is not POA, payment can be affected in a
manner shown in the diagram below.
[GRAPHIC] [TIFF OMITTED] TR19AU13.000

BILLING CODE 4120-01-C
2. HAC Selection
Beginning in FY 2007, we have set forth proposals, and solicited
and responded to public comments, to implement section 1886(d)(4)(D) of
the Act through the IPPS annual rulemaking process. For specific
policies addressed in each rulemaking cycle, including a detailed
discussion of the collaborative interdepartmental process and public
input regarding selected and potential candidate HACs, we refer readers
to the following rules: The FY 2007 IPPS proposed rule (71 FR 24100)
and final rule (71 FR 48051 through 48053); the FY 2008 IPPS proposed
rule (72 FR 24716 through 24726) and final rule with comment period (72
FR 47200 through 47218); the FY 2009 IPPS proposed rule (73 FR 23547)
and final rule (73 FR 48471); the FY 2010 IPPS/RY 2010 LTCH PPS
proposed rule (74 FR 24106) and final rule (74 FR 43782); the FY 2011
IPPS/LTCH PPS proposed rule (75 FR 23880) and final rule (75 FR 50080);
the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25810 through 25816) and
final rule (76 FR 51504 through 51522); and the FY 2013 IPPS/LTCH PPS
proposed rule (77 FR 27892 through 27898) and final rule (77 FR 53283
through 53303). A complete list of the 11 current categories of HACs is
included on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/Hospital-Acquired_Conditions.html.
3. Present on Admission (POA) Indicator Reporting
Collection of POA indicator data is necessary to identify which
conditions were acquired during hospitalization for the HAC payment
provision as well as for broader public health uses of Medicare data.
In previous rulemaking, we provided both CMS and CDC Web site resources
that are available to hospitals for assistance in this reporting
effort. For detailed information regarding these sites and materials,
including the application and use of POA indicators, we refer the
reader to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51506 through
51507).
Currently, as we discussed in the prior rulemaking cited above, the
POA indicator reporting requirement only applies to IPPS hospitals
because they are subject to this HAC provision. Non-IPPS hospitals,
including CAHs, LTCHs, IRFs, IPFs, cancer hospitals, children's
hospitals, hospitals in Maryland operating under waivers, RNHCIs, and
the Department of Veterans Affairs/Department of Defense hospitals, are
exempt from POA reporting. We note that hospitals in Maryland operating
under their waiver are not paid under the IPPS but rather are paid
under the provisions of section 1814(b)(3) of the Act. This waiver
applies to the amount paid to providers of services, and does not
extend to billing requirements and other reporting requirements. In
fact, hospitals in Maryland are required to submit Medicare claims for
Medicare payment and also to submit the same information on their
Medicare claims as hospitals in other parts of the country paid under
the IPPS. Therefore, we believe it is inappropriate to continue to
exempt hospitals in Maryland from the POA indicator reporting
requirement. Under current policy, hospitals in Maryland will continue
to be exempt from the application of this HAC provision so long as they
are not paid under the IPPS. However, we believe it is appropriate to
require them to use POA indicator reporting on their claims so that we
can include their data and have as complete a dataset as possible when
we analyze trends and make further payment policy determinations, such
as those authorized under section 1886(p) of the Act. (We refer readers
to section V.I. of the preamble of this final rule for a discussion of
our FY 2014 proposals and final policies to implement section 1886(p)
of the Act.) Therefore, in the FY 2014 IPPS/LTCH

[[Page 50525]]

PPS proposed rule (78 FR 27510), we proposed that hospitals in Maryland
operating under their waiver under section 1814(b)(3) of the Act would
no longer be exempted from the POA indicator reporting requirement
beginning with claims submitted on or after October 1, 2013, including
all claims for discharges on or after October 1, 2013. We invited
public comment regarding this proposal.
Comment: Commenters supported the CMS proposal. One commenter noted
that Maryland hospitals have been required to report accurate and
complete POA information on secondary diagnoses in the quarterly
discharge abstract data they submit to the state for discharges
beginning on July 1, 2007.
Response: We appreciate the commenters' support. Accordingly, we
are finalizing our proposal to require hospitals in Maryland currently
paid under section 1814(b)(3) to report the POA indicator on their
claims beginning with discharges on October 1, 2013. We note that while
this requirement will not be effective until that date, hospitals in
Maryland may submit data with present on admission indicators before
that time with the expectation that these data will be accepted by
Medicare's claims processing systems.
As discussed in previous IPPS proposed and final rules, there are
five POA indicator reporting options, as defined by the ICD-9-CM
Official Guidelines for Coding and Reporting. Under the HAC policy, we
treat HACs coded with ``Y'' and ``W'' indicators as POA and allow the
condition on its own to cause an increased payment at the CC/MCC level.
We treat HACs coded with ``N'' and ``U'' indicators as Not Present on
Admission (NPOA) and do not allow the condition on its own to cause an
increased payment at the CC/MCC level. We refer readers to the
following rules for a detailed discussion: The FY 2009 IPPS proposed
rule (73 FR 23559) and final rule (73 FR 48486 through 48487); the FY
2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24106) and final rule
(74 FR 43784 through 43785); the FY 2011 IPPS/LTCH PPS proposed rule
(75 FR 23881 through 23882) and final rule (75 FR 50081 through 50082);
the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25812 through 25813) and
final rule (76 FR 51506 through 51507); and the FY 2013 IPPS/LTCH PPS
proposed rule (77 FR 27893 through 27894) and final rule (77 FR 53284
through 53285).

------------------------------------------------------------------------
Indicator Descriptor
------------------------------------------------------------------------
Y........................ Indicates that the condition was present on
admission.
W........................ Affirms that the hospital has determined
that, based on data and clinical judgment,
it is not possible to document when the
onset of the condition occurred.
N........................ Indicates that the condition was not present
on admission.
U........................ Indicates that the documentation is
insufficient to determine if the condition
was present at the time of admission.
1........................ Signifies exemption from POA reporting. CMS
established this code as a workaround to
blank reporting on the electronic 4010A1. A
list of exempt ICD-9-CM diagnosis codes is
available in the ICD-9-CM Official
Guidelines for Coding and Reporting.
------------------------------------------------------------------------

Beginning on or after January 1, 2011, hospitals were required to
begin reporting POA indicators using the 5010 electronic transmittal
standards format. The 5010 format removes the need to report a POA
indicator of ``1'' for codes that are exempt from POA reporting. We
have issued CMS instructions on this reporting change as a One-Time
Notification, Pub. No. 100-20, Transmittal No. 756, Change Request
7024, effective on August 13, 2010, which can be located at the
following link on the CMS Web site: https://www.cms.gov/manuals/downloads/Pub100_20.pdf.
In addition, as discussed elsewhere in section III.G.10. of the
preamble of this final rule, the 5010 format allows the reporting and
effective January 1, 2011, the processing of up to 25 diagnoses and 25
procedure codes. As such, it is necessary to report a valid POA
indicator for each diagnosis code, including the principal and all
secondary diagnoses up to 25.
4. HACs and POA Reporting in ICD-10-CM and ICD-10-PCS
As we stated in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51506
and 51507), in preparation for the transition to the ICD-10-CM and ICD-
10-PCS code sets, further information regarding the use of the POA
indicator with the ICD-10-CM/ICD-10-PCS classifications as they pertain
to the HAC policy will be discussed in future rulemaking.
At the March 5, 2012 and the September 19, 2012 meetings of the
ICD-9-CM Coordination and Maintenance Committee, an announcement was
made with regard to the availability of the ICD-9-CM HAC list
translation to ICD-10-CM and ICD-10-PCS code sets. Participants were
informed that the list of the current ICD-9-CM selected HACs has been
translated into codes using the ICD-10-CM and ICD-10-PCS classification
system. It was recommended that the public review this list of ICD-10-
CM/ICD-10-PCS code translations of the current selected HACs available
on the CMS Web site at: https://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. The translations can be found under
the link titled ``ICD-10-CM/PCS MS-DRG v30 Definitions Manual Table of
Contents--Full Titles--HTML Version in Appendix I--Hospital Acquired
Conditions (HACs).'' The above CMS Web site regarding the ICD-10-MS-DRG
Conversion Project is also available on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/icd10_hacs.html. We encourage the public to submit comments on these
translations through the HACs Web page using the CMS ICD-10-CM/PCS HAC
Translation Feedback Mailbox that has been set up for this purpose
under the Related Links section titled ``CMS HAC Feedback.'' The final
HAC list translation from ICD-9-CM to ICD-10-CM/ICD-10-PCS will be
subject to formal rulemaking.
In the meantime, we continue to encourage readers to review the
educational materials and draft code sets currently available for ICD-
10-CM/ICD-10-PCS on the CMS Web site at: https://www.cms.gov/ICD10/. In
addition, the draft ICD-10-CM/ICD-10-PCS coding guidelines can be
viewed on the CDC Web site at: https://www.cdc.gov/nchs/icd/icd10cm.htm.
5. Current HACs and Previously Considered Candidate HACs
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27511), we did
not propose to add or remove categories of HACs. However, we indicated
that we continue to encourage public dialogue about refinements to the
HAC list by written stakeholder comments about both previously selected
and potential candidate HACs. We refer readers to section II.F.6. of
the FY 2008 IPPS final

[[Page 50526]]

rule with comment period (72 FR 47202 through 47218) and to section
II.F.7. of the FY 2009 IPPS final rule (73 FR 48774 through 48491) for
detailed discussion supporting our determination regarding each of
these conditions. We also refer readers to section III.F.5. of the FY
2013 IPPS/LTCH PPS proposed rule (77 FR 27892 through 27898) and the FY
2013 IPPS/LTCH PPS final rule (77 FR 53285 through 53292) for the HAC
policy for FY 2013, which will continue for FY 2014. In addition,
readers may find updated information on evidence-based guidelines on
the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/Hospital-Acquired_Conditions.html.
Comment: Some commenters stated they were pleased that CMS did not
propose to expand the list of categories or conditions subject to the
Deficit Reduction Act of 2005 provisions that would reduce payment for
hospital acquired conditions not present on admission. However,
commenters made the following suggestions and recommendations:
One commenter recommended CMS expand the HAC list in
future IPPS rulemaking to include iatrogenic pneumothorax with
paracentesis and thoracentesis.
One commenter requested that CMS reconsider its decision
to include ``Surgical Site Infections (SSIs) Following Cardiac
Implantable Electronic Device (CIED)'' under this program. The
commenter also urged CMS to explore how information learned from POA
coding and other data sources, such as EHRs and clinical data
registries, could be used to better understand and prevent HACs.
One commenter suggested that CMS include ``diaper rash''
as a DRA HAC.
One commenter suggested that CMS include ``Surgical Site
Infections (SSIs) Following Hip and Knee Replacement'' as a DRA HAC.
One commenter suggested that CMS include ``Surgical Site
Infections (SSIs) Following Cesarean Section Births'' as a DRA HAC.
Although existing colon and hysterectomy surgical site
infections are not current DRA HACs, one commenter requested that
additional consideration be given to include the following exclusions
for existing colon and hysterectomy surgical site infections:
Chemotherapy for cancer diagnosis, penetrating trauma, obesity, and
transplant. The commenter also requested that additional consideration
be given to excluding trauma (de-gloving/avulsion wounds, burns,
penetrating trauma), chemotherapy, and transplants from the following
HAC categories: post CABG mediastinitis, orthopedic surgery of the
spine/neck/shoulder/elbow and the three existing gastric bypass
surgeries. The commenter indicated that these additional exclusions
will better meet the intent of identifying appropriate HACs, without
unnecessary penalization.
One commenter recommended that ``. . . Where medical
technology can play a role in supporting the goals of improving patient
care in a cost effective manner, such consideration should be made when
reflecting on whether to expand upon the list of preventable HACs,
particularly in relation to infection control prevention and
management.''
Response: We value and appreciate these public comments regarding
the DRA HACs, and we will take all of the public comments and
suggestions we received into consideration in future rulemaking.
Comment: One commenter recommended that two titles of the current
DRA HACs be revised: that ``Catheter-Associated Urinary Tract Infection
(UTI)'' be revised to ``Symptomatic Urinary Tract Infection due to an
Indwelling Urinary Catheter'' and ``Vascular Catheter-Associated
Infection'' be revised to ``Infections due to Central Venous
Catheter'', with the ICD-9-CM codes shown in the following table.

------------------------------------------------------------------------
DRA HACs CC/MCC (ICD-9-CM Codes)
------------------------------------------------------------------------
Catheter-Associated Urinary Tract 996.64 (CC).
Infection (UTI).
Also excludes the following
from acting as a CC/MCC: 112.2
(CC), 590.10 (CC), 590.11
(MCC), 590.2 (MCC), 590.3
(CC), 590.80 (CC), 590.81
(CC), 595.0 (CC), 597.0 (CC),
599.0 (CC).
Vascular Catheter-Associated Infection. 999.31 (CC), 999.32 (CC),
999.33 (CC).
------------------------------------------------------------------------

Response: We appreciate the commenter's recommendations. However,
we believe the titles correctly identify the selected HACs, as
reflected in the chart above, particularly because we have included the
specified codes within the HAC logic.
Comment: One commenter recommended that CMS remove the DRA HAC
category ``Falls and Trauma.'' The commenter stated that ``Falls,
particularly for the vulnerable older population, can be reduced
through interventions; however, they cannot be completely avoided.''
Another commenter noted that some patients, particularly high-risk,
comorbid individuals, may still develop the conditions on the HAC list.
Response: We refer readers to section 1886(d)(4)(D) of the Act
which states that a DRA HAC is one that ``(c) could reasonably have
been prevented through the application of evidence-based guidelines.''
We believe in the appropriate use of guidelines that we have adopted to
support our DRA HAC policy. These evidence-based guidelines are posted
on the DRA HAC Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/Downloads/Evidence-Based-Guidelines.pdf and are reviewed regularly to ensure that if there are
any changes in the status of these guidelines, they are reflected in
the DRA HAC policy.
Comment: One commenter noted that, ``In previous rulemaking cycles,
CMS has proposed adding delirium to the list of HACs [FY 2009 IPPS
proposed rule]. While we support reasonable steps to provide hospitals
with incentives to recognize and treat delirium, we continue to have
significant concerns about adding delirium to the list of `preventable'
HACs to be excluded from the calculation of a hospital's MS-DRG
reimbursement rate.''
Response: We note that this comment regarding delirium is outside
of the scope of the proposals included in the FY 2014 IPPS/LTCH PPS
proposed rule. In the FY 2009 IPPS final rule (73 FR 48482), regarding
delirium, we stated that ``After consideration of the public comments
received, we have decided not to select delirium as an HAC in this
final rule. We will continue to monitor the evidence-based guidelines
surrounding prevention of delirium. If evidence warrants, we may
consider proposing delirium as an HAC in the future.''
6. RTI Program Evaluation
On September 30, 2009, a contract was awarded to RTI to evaluate
the

[[Page 50527]]

impact of the Hospital-Acquired Condition-Present on Admission (HAC-
POA) provisions on the changes in the incidence of selected conditions,
effects on Medicare payments, impacts on coding accuracy, unintended
consequences, and infection and event rates. This was an intra-agency
project with funding and technical support from CMS, OPHS, AHRQ, and
CDC. The evaluation also examined the implementation of the program and
evaluated additional conditions for future selection. The contract with
RTI ended on November 30, 2012. Summary reports of RTI's analysis of
the FYs 2009, 2010, and 2011 MedPAR data files for the HAC-POA program
evaluation were included in the FY 2011 IPPS/LTCH PPS final rule (75 FR
50085 through 50101), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51512
through 51522), and the FY 2013 IPPS/LTCH PPS final rule (77 FR 53292
through 53302). Summary and detailed data also were made publicly
available on the CMS Web site at: https://www.cms.gov/HospitalAcqCond/01_Overview.asp and the RTI Web site at: https://www.rti.org/reports/cms/.
In addition to the evaluation of HAC and POA MedPAR claims data,
RTI also conducted analyses on readmissions due to HACs, the
incremental costs of HACs to the healthcare system, a study of
spillover effects and unintended consequences, as well as an updated
analysis of the evidence-based guidelines for selected and previously
considered HACs. Reports on these analyses have been made publicly
available on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/.
7. Current and Previously Considered Candidate HACs--RTI Report on
Evidence-Based Guidelines
The RTI program evaluation includes a report that provides
references for all evidence-based guidelines available for each of the
selected and previously considered candidate HACs that provide
recommendations for the prevention of the corresponding conditions.
Guidelines were primarily identified using the AHRQ National Guidelines
Clearing House (NGCH) and the CDC, along with relevant professional
societies. Guidelines published in the United States were used, if
available. In the absence of U.S. guidelines for a specific condition,
international guidelines were included.
Evidence-based guidelines that included specific recommendations
for the prevention of the condition were identified for each of the
selected conditions. In addition, evidence-based guidelines also were
found for the previously considered candidate conditions. RTI prepared
a final report to summarize its findings regarding evidence-based
guidelines. This report can be found on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/Hospital-Acquired_Conditions.html. Subsequent to this final report,
RTI has been awarded an FY 2014 Evidence-Based Guidelines Monitoring
contract. Under the contract, RTI will provide a summary report of all
evidence-based guidelines available for each of the selected and
previously considered candidate HACs that provide recommendations for
the prevention of the corresponding conditions. Updates to the
guidelines will be made available to the public.

G. Changes to Specific MS-DRG Classifications

In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27512 through
27529), we invited public comment on each of the MS-DRG classification
proposed changes described below, as well as our proposals to maintain
certain existing MS-DRG classifications, which also are discussed
below. In some cases, we proposed changes to the MS-DRG classifications
based on our analysis of claims data. In other cases, we proposed to
maintain the existing MS-DRG classification based on our analysis of
claims data. The public comments that we received on each of the
proposals and our response, with statements of final policies, are
included below.
CMS encourages input from our stakeholders concerning the annual
IPPS updates when that input is made available to us by early December
of the year prior to the next annual proposed rule update. For example,
to be considered for any updates or changes in FY 2014, comments and
suggestions should have been submitted by early December 2012. The
comments that were submitted in a timely manner are discussed below in
this section.
1. Pre-Major Diagnostic Categories (Pre-MDCs): Heart Transplants and
Liver Transplants
We received a request from an organization that represents
transplant surgeons to eliminate the severity levels for the heart and
liver transplants MS-DRGs. The MS-DRGs for heart transplants are: MS-
DRG 001 (Heart Transplant or Implant of Heart Assist System with MCC)
and MS-DRG 002 (Heart Transplant or Implant of Heart Assist System
without MCC). The MS-DRGs for liver transplants are: MS-DRG 005 (Liver
Transplant with MCC or Intestinal Transplant) and MS-DRG 006 (Liver
Transplant without MCC). We received this comment during the comment
period for the FY 2013 IPPS/LTCH PPS proposed rule. We referred to this
comment briefly in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53325),
but we did not address the issue because we considered this comment
outside of the scope of the proposed rule. However, we addressed this
issue in the FY 2014 IPPS/LTCH PPS proposed rule.
The commenter stated that there are no ``uncomplicated'' heart
transplants or liver transplants, and indicated that all of these
transplant procedures are highly complex, involving numerous
complicating conditions, only some of which may be recognized by the
MS-DRGs. The commenter expressed concern that the continued bifurcation
of the MS-DRGs for heart and liver transplants will result in
unsustainable payment for these cases that are assigned to the
``without MCC'' MS-DRGs 002 and 006. According to the commenter, in
light of the relatively small number of Medicare patients involved and
the significant cost variation involved, it would be preferable to
eliminate the bifurcation of these procedures, thereby increasing the
stability of the DRG weights for these procedures.
For the FY 2014 IPPS/LTCH PPS proposed rule, we examined claims
data from the FY 2012 MedPAR file for heart and liver transplant cases
assigned to MS-DRGs 001, 002, 005, and 006. The following table
illustrates our findings:

----------------------------------------------------------------------------------------------------------------
Number of Average
MS-DRGs cases length of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 001...................................................... 1,247 33.27 $158,556
MS-DRG 002...................................................... 284 18 97,932
MS-DRGs 001 and 002--All cases.................................. 1,531 30.4 147,310
MS-DRG 005...................................................... 828 19 66,746

[[Page 50528]]

MS-DRG 006...................................................... 282 8.75 30,873
MS-DRGs 005 and 006--All cases.................................. 1,110 16.3 57,632
----------------------------------------------------------------------------------------------------------------

The data showed that the majority of the heart transplant cases, a
total of 1,247, are assigned to MS-DRG 001, with average costs of
approximately $158,556 and an average length of stay of approximately
33.27 days. There were 284 cases assigned to MS-DRG 002, with average
costs of approximately $97,932 and an average length of stay of
approximately 18 days.
This table shows that there are significant differences in average
lengths of stay and average costs for the severity level for the heart
transplant MS-DRGs that justify the existing split in MS-DRGs 001 and
002. If we were to combine the heart transplant cases in MS-DRGs 001
and 002 as suggested by the commenter, the payment for the majority of
cases with an MCC would be lower.
The majority of the liver transplant cases, 828 cases, were
assigned to MS-DRG 005, with average costs of approximately $66,746 and
an average length of stay of approximately 19 days. There were 282
cases assigned to MS-DRG 006, with average costs of approximately
$30,873 and an average length of stay of approximately 8.75 days. The
data showed that there are significant differences in average costs and
average lengths of stay in the severity levels for the liver transplant
MS-DRGs. Again, if we were to combine all the liver transplant cases
into one MS-DRG as requested by the commenter, the majority of the
cases would receive lower payment.
Based on these findings, we stated in the proposed rule that we
believe that it would not be prudent to eliminate the severity levels
for the heart and liver transplant MS-DRGs. Our clinical advisors
concurred with this analysis that two severity levels are justified for
the heart and liver transplant MS-DRGs. Therefore, for FY 2014, we did
not propose to make any changes to the severity levels for heart and
liver transplant MS-DRGs 001, 002, 005, and 006. We invited public
comments on this issue.
Comment: Several commenters agreed with CMS' proposal to maintain
the current structure for heart and liver transplant MS-DRGs. The
commenters stated that the proposal seems reasonable based on the data
and information provided. One commenter agreed with CMS that creating
only one MS-DRG for heart transplants or implants of heart assist
systems, regardless of whether or not there is a major complication or
comorbidity (MCC) present, would greatly underpay the complex cases
which currently represent the majority of the volume and overpay for
those less severe cases.
Response: We appreciate the commenters' support for maintaining the
severity levels for the heart and liver transplant MS-DRGs based on
data and our analysis.
After consideration of the public comments we received, we are not
making any changes to MS-DRGs 001, 002, 005, and 006 for FY 2014.
2. MDC 1 (Diseases and Disorders of the Nervous System): Tissue
Plasminogen Activator (tPA) (rtPA) Administration Within 24 Hours Prior
to Admission
During the comment period for the FY 2013 IPPS/LTCH PPS proposed
rule, we received a public comment that we considered to be outside the
scope of that proposed rule. We stated in the FY 2013 IPPS/LTCH PPS
final rule (77 FR 53325) that we would consider this issue in future
rulemaking as part of our annual review process. The commenter
requested that CMS conduct an analysis of diagnosis code V45.88 (Status
post administration of tPA (rtPA) in a different facility within the
last 24 hours prior to admission to current facility). Diagnosis code
V45.88 was created for use beginning October 1, 2008, to identify
patients who are given tissue plasminogen activator (tPA) at one
institution and then transferred and admitted to a comprehensive stroke
center for further care. This situation has been referred to as the
``drip-and-ship'' issue and was discussed at length in the FY 2009 IPPS
proposed rule (73 FR 23563 through 23564) and final rule (73 FR 48493
through 48495), as well as the FY 2011 IPPS/LTCH PPS proposed rule (75
FR 23899 through 23900) and final rule (75 FR 50102 through 50106). We
refer readers to these previous discussions for detailed background
information regarding this topic.
Similar to previous requests, according to the commenter, the
concern at the receiving facilities is that the costs associated with
[caring for] more complex stroke patients that receive tPA are much
higher than the cost of the drug, presumably because stroke patients
initially needing tPA have more complicated strokes and outcomes.
However, because these patients do not receive the tPA at the second or
transfer hospital, the receiving hospital will not be able to assign
the case to one of the higher-weighted tPA stroke MS-DRGs when it
admits these patients whose care requires the use of intensive
resources. The MS-DRGs that currently include the diagnosis code for
the use of tPA are: MS-DRG 061 (Acute Ischemic Stroke with Use of
Thrombolytic Agent with MCC); MS-DRG 062 (Acute Ischemic Stroke with
Use of Thrombolytic Agent with CC); and MS-DRG 063 (Acute Ischemic
Stroke with Use of Thrombolytic Agent without CC/MCC). These MS-DRGs
have higher relative weights than the other MS-DRGs relating to stroke
or cerebral infarction. The commenter requested an analysis of
diagnosis code V45.88 to determine whether new claims data warrant any
change in the MS-DRG structure.
For the FY 2014 IPPS/LTCH PPS proposed rule, we analyzed MedPAR
claims data from FY 2012. We included claims for patient cases assigned
to the following MS-DRGs:
061 (Acute Ischemic Stroke with Use of Thrombolytic Agent
with MCC)
062 (Acute Ischemic Stroke with Use of Thrombolytic Agent
with CC)
063 (Acute Ischemic Stroke with Use of Thrombolytic Agent
without CC/MCC)
064 (Intracranial Hemorrhage or Cerebral Infarction with
MCC)
065 (Intracranial Hemorrhage or Cerebral Infarction with
CC)
066 (Intracranial Hemorrhage or Cerebral Infarction
without CC/MCC).
Our data analysis included MS-DRGs 064, 065, and 066 because claims
involving diagnosis code V45.88 also would be properly reported in the
data for these MS-DRGs. The following table reflects the results of our
analysis of the MedPAR data in which diagnosis code V45.88 was reported
as a secondary diagnosis for FY 2012.

[[Page 50529]]

----------------------------------------------------------------------------------------------------------------
Average
MS-DRG Number of length of Average costs
cases stay
----------------------------------------------------------------------------------------------------------------
MS-DRG 061--All cases........................................... 3,369 7.48 $18,556
MS-DRG 061--Cases with secondary diagnosis code V45.88.......... 140 7.51 19,008
MS-DRG 062--All cases........................................... 5,277 4.92 12,935
MS-DRG 062--Cases with secondary diagnosis code V45.88.......... 179 5.03 13,317
MS-DRG 063--All cases........................................... 1,709 3.45 10,363
MS-DRG 063--Cases with secondary diagnosis code V45.88.......... 48 3.15 9,372
MS-DRG 064--All cases........................................... 64,095 6.30 11,654
MS-DRG 064--Cases with secondary diagnosis code V45.88.......... 955 7.06 14,432
MS-DRG 065--All cases........................................... 101,011 4.29 7,414
MS-DRG 065--Cases with secondary diagnosis code V45.88.......... 1,259 4.91 9,471
MS-DRG 066--All cases........................................... 56,620 2.92 5,414
MS-DRG 066--Cases with secondary diagnosis code V45.88.......... 493 3.28 6,682
----------------------------------------------------------------------------------------------------------------

Based on our review of the data for all of the cases in MS-DRGs
064, 065, and 066, compared to the subset of cases containing diagnosis
code V45.88 as the secondary diagnosis, we again concluded that the
movement of cases with diagnosis code V45.88 as a secondary diagnosis
from MS-DRGs 064, 065, and 066 to MS-DRGs 061, 062, and 063 is not
warranted. We determined that the differences in the average lengths of
stay and the average costs are too small to warrant an assignment to
the higher-weighted MS-DRGs.
However, the data do reflect that the average costs for cases
reporting diagnosis code V45.88 as a secondary diagnosis in MS-DRG 066
are more similar to the average costs of higher severity level cases in
MS-DRG 065. Therefore, for FY 2014, we proposed to move cases with
diagnosis code V45.88 from MS-DRG 066 to MS-DRG 065, and to revise the
title of MS-DRG 065 to reflect the patients status post tPA
administration within 24 hours (78 FR 27513 through 27514). The
proposed revised MS-DRG title was: MS-DRG 065 (Intracranial Hemorrhage
or Cerebral Infarction with CC or tPA in 24 Hours). We invited public
comments on our proposal.
Comment: Several commenters supported CMS' proposal to reassign
cases reporting ICD-9-CM diagnosis code V45.88 from MS-DRG 66 to MS-DRG
65. The commenters stated this proposal would allow for more
appropriate payment and recognition of the resources required to care
for stroke patients who are transferred. Several other commenters
stated that the proposal was reasonable considering the data and
clinical information provided.
Response: We appreciate the commenters' support. We agree that this
modification to the MS-DRGs involving stroke patients will better
reflect the increased costs of caring for these transfer cases.
Comment: One commenter who supported the proposal to reassign cases
reporting ICD-9-CM diagnosis code V45.88 from MS-DRG 66 to MS-DRG 65
also urged CMS to move cases reporting ICD-9-CM diagnosis code V45.88
from MS-DRG 64 (Intracranial Hemorrhage or Cerebral Infarction with
MCC) to MS-DRG 62 (Acute Ischemic Stroke with Use of Thrombolytic Agent
with CC). The commenter noted that ``It is essential that hospitals are
fairly reimbursed for the additional resources associated with caring
for patients treated with IV tPA even when the tPA is administered at
another hospital before transfer. Without adequate reimbursement
through the MS-DRG system, receiving hospitals are financially
penalized for accepting patients and giving them advanced stroke care
which is detrimental to stroke systems and patients suffering
strokes.''
Response: We also acknowledge the commenter's concern regarding
appropriate payment for the additional resources required in caring for
patients treated with tPA and subsequently transferred to another
facility. As stated in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR
27513), we concluded that the movement of cases with diagnosis code
V45.88 as a secondary diagnosis from MS-DRGs 064, 065, and 066 to MS-
DRGs 061, 062, and 063 is not warranted based on our review of the
data. In addition, our clinical advisors did not support movement of
these non-tPA cases into the MS-DRGs where tPA is administered as it
violates the clinical cohesiveness of these two sets of DRGs.
After consideration of the public comments we received, we are
adopting as final policy for FY 2014, our proposal to move cases with
diagnosis code V45.88 from MS-DRG 066 to MS-DRG 065 and to revise the
title to MS-DRG 065 (Intracranial Hemorrhage or Cerebral Infarction
with CC or tPA in 24 Hours).
3. MDC 4 (Diseases and Disorders of the Ear, Nose, Mouth and Throat)
a. Endoscopic Placement of a Bronchial Value
In response to the FY 2013 IPPS/LTCH PPS proposed rule, we received
a request to modify the MS-DRG assignment for bronchial valve(s)
insertion, which we considered to be outside of the scope of that
proposed rule (77 FR 53325 through 53326). The requestor asked that
cases in MS-DRGs 190, 191, and 192 (Chronic Obstructive Pulmonary
Disease with MCC, with CC, and without MCC/CC, respectively) that
involve insertion of a bronchial valve be assigned instead to MS-DRGs
163, 164, and 165 (Major Chest Procedures with MCC, with CC, and
without MCC/CC, respectively). The procedures are captured by procedure
codes 33.71 (Endoscopic insertion or replacement of bronchial valve(s),
single lobe) and 33.73 (Endoscopic insertion or replacement of
bronchial valve(s), multiple lobes), which are considered nonoperating
procedures and do not affect the MS-DRG assignment. When reported
without any other operating room (OR) procedure code, the admission
would be assigned to a medical MS-DRG.
The Spiration[supreg] IBV Valve System device, a bronchial valve,
was approved for new technology add-on payments in the FY 2010 IPPS/RY
2010 LTCH PPS final rule (74 FR 43819 through 43823) with a maximum
payment rate of $3,437.50. In the FY 2012 IPPS/LTCH PPS final rule, the
new technology add-on payments were discontinued for FY 2012 (76 FR
51575 through 51576). The bronchial valve device is used to place, via
bronchoscopy, small, one-way valves into selected small airways in the
lung in order to limit airflow into selected portions of lung tissue
that have prolonged air leaks following surgery while still allowing
mucus, fluids, and air to exit, and thereby reducing the amount of air
that enters

[[Page 50530]]

the pleural space. The device is intended to control prolonged air
leaks following three specific surgical procedures: lobectomy,
segmentectomy, or lung volume reduction surgery (LVRS). According to
Spiration[supreg], an air leak that is present on postoperative day 7
is considered ``prolonged'' unless present only during forced
exhalation or cough. In order to help prevent valve migration, there
are five anchors with tips that secure the valve to the airway. The
implanted valves are intended to be removed no later than 6 weeks after
implantation.
New technology add-on payments were limited to cases involving
prolonged air leaks following lobectomy, segmentectomy, and LVRS in MS-
DRGs 163, 164, and 165 in the FY 2010 IPPS/RY 2010 LTCH PPS final rule
(74 FR 43823). This limitation was based on the indications for use
approved by the FDA in the FDA Humanitarian Device Exemption (HDE)
approval process set forth in section 520(m) of the Federal Food, Drug
& Cosmetic Act. A humanitarian use device (HUD) is a device that is
intended to benefit patients by treating or diagnosing a disease or
condition that affects or is manifested in fewer than 4,000 individuals
in the United States per year. Devices that receive HUD designation may
be eligible for marketing approval, subject to certain restrictions,
under an HDE application. To obtain marketing approval for an HUD, an
HDE application must be submitted to the FDA. An HDE application is a
premarket approval (PMA) application submitted to the FDA under 21 CFR
814.104 that seeks exemption from the PMA requirement under 21 CFR
814.20 demonstrating a reasonable assurance of effectiveness. A device
that has received HUD designation may receive HDE approval if, among
other things, the FDA determines that the device will not expose
patients to an unreasonable or significant risk of illness or injury
and the probable benefit to health from use of the device outweighs the
risk of injury or illness from its use, taking into account the
probable risks and benefits of currently available devices or
alternative forms of treatment. In addition, the applicant must
demonstrate that no comparable devices are available to treat or
diagnose the disease or condition (other than another device approved
under an HDE application or a device under an approved Investigational
Device Exemption), and that the device would not otherwise be available
unless an HDE is granted. An approved HDE authorizes marketing of the
HUD. However, an HUD generally may be used in facilities only after
prior approval by an Institutional Review Board (IRB).
FDA's approval of the HDE application limited the use of the
Spiration[supreg] IBV Valve System device to cases involving prolonged
air leaks following lobectomy, segmentectomy, or LVRS.
The requested MS-DRG change would initiate the same payment for
chronic obstructive pulmonary disease (COPD) cases with a bronchial
valve inserted without a major chest procedure as for cases where both
a major chest procedure and a bronchial valve insertion were performed.
The following table shows the COPD cases that involved the insertion of
a bronchial valve as well as data on cases assigned to MS-DRGs 163,
164, and 165.

----------------------------------------------------------------------------------------------------------------
Average
MS-DRGs Number of length of Average costs
cases stay
----------------------------------------------------------------------------------------------------------------
COPD Cases
----------------------------------------------------------------------------------------------------------------
MS-DRG 190--All cases........................................... 133,566 5.07 $7,815
MS-DRG 190--Cases with procedure code 33.71..................... 0 0 0
MS-DRG 190--Cases with procedure code 33.73..................... 2 14.0 47,034
MS-DRG 191--All cases........................................... 129,231 4.18 6,245
MS-DRG 191--Cases with procedure code 33.71..................... 0 0 0
MS-DRG 191--Cases with procedure code 33.73..................... 0 0 0
MS-DRG 192--All cases........................................... 93,507 3.32 4,776
MS-DRG 192--Cases with procedure code 33.71..................... 0 0 0
MS-DRG 192--Cases with procedure code 33.73..................... 0 0 0
----------------------------------------------------------------------------------------------------------------
Major Chest Procedures
----------------------------------------------------------------------------------------------------------------
MS-DRG 163--All cases........................................... 11,287 13.33 32,728
MS-DRG 164--All cases........................................... 16,113 6.69 17,494
MS-DRG 165--All cases........................................... 9,280 3.94 12,209
----------------------------------------------------------------------------------------------------------------

Based on our analysis of FY 2012 Medicare claims data, there were
only two COPD cases that had bronchial valves inserted in MS-DRGs 190,
191, and 192. While the charges were high, these cases were assigned to
the highest severity level MS-DRG (MS-DRG 190 with MCC). Given the
small number of cases, it is not possible to determine if the high
average costs were due to the bronchial valve insertion or to other
factors such as other secondary diagnoses. The average length of stay
for these two cases was approximately 14 days compared to approximately
5.07 days for all other cases within MS-DRG 190. Because the additional
10 days cannot be clinically attributed to the bronchial valve
insertion, our clinical advisors have determined that other factors
must have impacted these two cases.
Cases in MS-DRGs 163, 164, and 165 include those cases with a major
chest procedure and those cases with both a major chest procedure as
well as a bronchial valve insertion as discussed above. Our clinical
advisors do not support moving COPD cases that have only a bronchial
valve insertion and no other major chest procedure from MS-DRGs 190,
191, and 192 to MS-DRGs 163, 164, and 165. They do not believe the
bronchial valve procedures are clinically similar to other major chest
procedures that require significantly more resources to perform. Our
clinical advisors pointed out that the limited circumstances where this
procedure would be used led the sponsor to seek HDE approval from the
FDA rather than a standard PMA. The indications for use approved by the
FDA are still limited to post-surgery. Our clinical advisors
recommended that we not modify the

[[Page 50531]]

MS-DRG logic so that COPD cases with bronchial valve insertions would
be assigned to MS-DRGs 163, 164, and 165.
Given the limited number of cases for this procedure and the advice
from our clinical advisors, in the FY 2014 IPPS/LTCH PPS proposed rule
(78 FR 27514 through 27515), we did not propose any MS-DRG changes for
bronchial valve(s) insertion for FY 2014. We also did not propose to
change the MS-DRG assignment for procedures involving bronchial
valve(s) insertion (procedure codes 33.71 and 33.73) within MS-DRGs
190, 191, and 192. We invited public comment on this issue.
Comment: A number of commenters supported CMS' proposal not to
change the MS-DRG assignment for procedures involving bronchial
valve(s) insertion (procedure codes 33.71 and 33.73) which are
currently assigned to MS DRGs 190, 191, and 192 and to move them to MS-
DRGs 163, 164, and 165. Several of these commenters stated that the
proposal not to propose any MS-DRG changes for bronchial valve(s)
insertion was reasonable given the data and information provided. Other
commenters agreed with the proposal not to change the MS-DRG assignment
for bronchial valve insertions.
Response: We appreciate the commenters' support.
Comment: One commenter disagreed with the proposal not to change
the MS-DRG assignment for bronchial valves. The commenter recommended
reclassifying bronchial valve procedure codes 33.71 and 33.73 as
operating room procedures rather than nonoperating procedures so that
they will map to a surgical MS-DRG for inpatient hospitalizations. The
commenter also recommended reassigning cases that currently map to
medical MS-DRGs 190, 191, and 192 (Chronic Obstructive Pulmonary
Disease with MCC, with CC, and without MCC/CC, respectively) that
involve insertion of bronchial valves (ICD-9 CM procedures codes 33.71
and 33.73) to surgical MS-DRGs 163, 164, and 165 (Major Chest
Procedures with MCC, with CC, or without MCC/CC, respectively). The
commenter stated that currently, bronchial valve procedures are
performed under a Humanitarian Device Exemption (HDE) under the Food
and Drug Administration (FDA) and indicated for patients with a
prolonged air leak, or air leak likely to become prolonged, following
lobectomy, segmentectomy, or lung volume reduction surgery. The
commenter stated that bronchial valves also are being investigated for
emphysema, but this indication has not yet been approved by the FDA.
The commenter stated that bronchial valve cases are more clinically
complex and costly compared to other types of cases with MS-DRGs 190-
192 and are more appropriately assigned to MS-DRGs 163, 164, and 165.
The commenter acknowledged that there were only two cases involving
bronchial valves within MS-DRGs 190, 191, and 192. However, the
commenter stated that other MS-DRGs such as those for deep brain
stimulation therapy in MS-DRGs 023 and 024 (Craniotomy with Major
Device Implant/Acute Complex CNS PDX with MCC or Chemo Implant and
Craniotomy with Major Device Implant/Acute Complex CNS PDX with MCC or
Chemo Implant without MCC, respectively) and liver and intestinal
transplantation in MS-DRG 005 and 006 (Liver Transplant and/or
Intestinal Transplant with MCC and Liver Transplant and/or Intestinal
Transplant without MCC) contain a small number of cases. The commenter
believed that the two bronchial valve cases currently assigned to the
medical MS-DRG 190 would be better aligned in terms of complexity,
length of stay, and costs to a surgical MS-DRG set.
Response: As stated earlier, our clinical advisors do not believe
the bronchial valve procedures are clinically similar to other major
chest procedures that require significantly more resources to perform.
We once again point out the limited circumstances where the FDA has
approved the bronchial valve are still limited to postsurgery use. The
two cases that were assigned to MS-DRG 190 could have had higher costs
due to a number of other factors other than the bronchial valve. Our
clinical advisors noted the long length of stay for these two cases,
which would not have been the result of the bronchial valve. Therefore,
we do not believe it is appropriate to reclassify the bronchial valve
procedure codes as operating room procedures and reassign the cases
from MS-DRGs 190, 191, and 192 to MS-DRGs 163, 164, and 165.
After consideration of the public comments we received, we are
finalizing our proposal not to change the MS-DRG assignments for
procedures involving bronchial valve(s) insertion (procedure codes
33.71 and 33.75) within MS-DRGs 190, 191, and 192.
b. Pulmonary Thromboendarterectomy (PTE) With Full Circulatory Arrest
We received a request from a university medical center to create a
new MS-DRG or to reassign cases reporting a unique approach to
pulmonary thromboendarterectomy (PTE) surgery performed with full
cardiac arrest and hypothermia. The requestor asked that we move cases
from MS-DRGs 163, 164, and 165 (Major Chest Procedures with MCC, with
CC, and without CC/MCC, respectively) to MS-DRGs 228, 229, and 230
(Other Cardiothoracic Procedures with MCC, with CC, and without CC/MCC,
respectively). Currently, MS-DRGs 163, 164, and 165 are grouped within
MDC 4 (Diseases and Disorders of the Respiratory System) while MS-DRGs
228, 229, and 230 are grouped within MDC 5 (Diseases and Disorders of
the Circulatory System).
The requestor identified two conditions for which a pulmonary
endarterectomy procedure is typically performed. These conditions are
identified by ICD-9-CM diagnosis codes 415.19 (Other pulmonary embolism
and infarction) and 416.2 (Chronic pulmonary embolism). However, the
requestor noted that diagnosis code 415.19 is usually associated with
traditional PTE for acute pulmonary embolism while diagnosis code 416.2
is associated with the medical center's unique approach to PTE
performed with full cardiac arrest and hypothermia.
Currently, there is not a specific ICD-9-CM procedure code to
accurately describe PTE surgery performed with full cardiac arrest and
hypothermia. Rather, a subset of existing ICD-9-CM procedure codes may
be used to identify the various components involved in this unique
approach to PTE surgery; for example, ICD-9-CM procedure codes 38.15
(Endarterectomy, other thoracic vessels); 39.61 (Extracorporeal
circulation auxiliary to open heart surgery); 39.62 (Hypothermia
(systemic) incidental to open heart surgery); and 39.63 (Cardioplegia).
However, it is not clear if the requestor reports any of these codes or
a combination of these codes to identify its unique approach to the
procedure.
According to the requestor, its approach to PTE surgery is
significantly different from traditional pulmonary endarterectomy
procedures in terms of complexity, resource use, and the population for
which the procedure is performed. The requestor noted that the surgery
is ``conducted under profound hypothermia and circulatory arrest which
involves placing the patient on cardiopulmonary bypass and cooling the
body to 20 degrees centigrade or lower.'' In addition, the requestor
explained that ``during this period of cooling and cardiac arrest, the
heart is arrested and all of the patient's blood is removed from the
body.'' Following this, circulation is stopped completely allowing for
``optimal and extensive dissection of the pulmonary arteries and

[[Page 50532]]

identification of an endarterectomy plane which can be delicately
incised into the deepest pulmonary vasculature.'' The requestor further
noted that ``due to the complexity of the surgical technique, a very
high degree of skill is required and the procedure is currently only
performed by a handful of surgeons world-wide.'' Lastly, the requestor
stated the average operating time for a traditional PTE is
approximately 3 to 4 hours compared to the university medical center's
approach to PTE, which averages approximately 10 to 12 hours.
For the FY 2014 IPPS/LTCH PPS proposed rule, we analyzed claims
data from the FY 2012 MedPAR file for cases reporting a principal
diagnosis code of 415.19 or a principal diagnosis code of 416.2 along
with procedure codes 38.15, 39.61, 39.62, and 39.63. As displayed in
the table below, there were a total of 11,287 cases in MS-DRG 163 with
an average length of stay of approximately 13.33 days and average costs
of approximately $32,728. Using the combination of diagnosis and
procedure codes as described above, the total number of cases found in
MS-DRG 163 was 12, with average costs ranging from approximately
$46,959 to $53,048 and an average length of stay ranging from
approximately 13.50 days to 16.20 days. We acknowledge that the average
length of stay and average costs for these cases are somewhat higher in
comparison to the average lengths of stay and average costs of all the
other cases in MS-DRG 163. However, the volume of cases was very low.
The data reflect similar results for MS-DRG 164. Only 4 cases were
identified in the analysis, with average costs ranging from
approximately $21,669 to $37,447 and average lengths of stay ranging
from approximately 7 days to 10 days.
In total, there were only 16 cases reflected in the data using the
combination of diagnosis codes and proxy procedure codes. We believe
there may be other factors contributing to the increased lengths of
stay and costs. (We note that there were no cases found for a principal
diagnosis code of 415.19 with procedure code 38.15 only. There also
were no cases found in MS-DRG 165 using the combination of diagnosis
and procedure codes.)

----------------------------------------------------------------------------------------------------------------
Average
MS-DRG Number of length of Average costs
cases stay
----------------------------------------------------------------------------------------------------------------
MS-DRG 163--All cases........................................... 11,287 13.33 $32,728
MS-DRG 163--Cases with principal diagnosis code 415.19 with 4 13.50 46,959
procedure code 38.15 and 39.61 or 39.62 or 39.63...............
MS-DRG 163--Cases with principal diagnosis code 416.2 with 3 14.33 53,048
procedure code 38.15 only......................................
MS-DRG 163--Cases with principal diagnosis code 416.2 with 5 16.20 50,393
procedure code 38.15 and 39.61 or 39.62 or 39.63...............
MS-DRG 164--All cases........................................... 16,113 6.69 17,494
MS-DRG 164--Cases with principal diagnosis code 415.19 with 2 10.00 37,447
procedure code 38.15 with 39.61 or 39.62 or 39.63..............
MS-DRG 164--Cases with principal diagnosis code 416.2 with 0 0 0
procedure code 38.15 only......................................
MS-DRG 164--Cases with principal diagnosis code 416.2 with 2 7.00 21,669
procedure code 38.15 and 39.61 or 39.62 or 39.63...............
----------------------------------------------------------------------------------------------------------------

As stated in previous rulemaking discussion, the MS-DRG
classification system on which the IPPS is based comprises a system of
averages. As such, it is understood that, in any particular MS-DRG, it
is not unusual for a small number of cases to demonstrate higher than
average costs, nor is it unusual for a small number of cases to
demonstrate lower than average costs. Upon review of the MedPAR data,
our clinical advisors agree that the current MS-DRG assignment for this
unique procedure is appropriate.
We also analyzed claims data from the FY 2012 MedPAR file for MS-
DRGs 228, 229, and 230 as illustrated below.

ICD-9-CM procedure code 38.15 is designated as an operating room
(OR) procedure code and currently groups to MS-DRGs 163, 164, and 165
in MDC 4 when either diagnosis code 415.19 or 416.2 are reported as the
principal diagnosis. As diagnosis codes can only be assigned to one MDC
within the GROUPER logic, it is not possible for a patient to have
diagnosis code 415.19 or diagnosis code 416.2 reported along with
procedure code 38.15 and grouped to MDC 5, which is where MS-DRGs 228,
229, and 230 are assigned.
Therefore, another aspect of this MS-DRG request involved the
evaluation of moving ICD-9-CM diagnosis code 416.2 from MDC 4 to MDC 5.
Our clinical advisors do not support moving diagnosis code 416.2 from
MDC 4 to MDC 5 in order to accommodate this rare procedure performed by
only a small number of physicians worldwide. They pointed out that a
basic change such as moving diagnosis code 416.2 from MDC 4 to MDC 5
would impact a large number of patients who do not undergo this
procedure. It also would disrupt trend data from over 30 years of DRG
and MS-DRG reporting. Given the very small number of potential cases,
and the advice of our clinical advisors, we determined that an MS-DRG
modification was not warranted for FY 2014. Therefore, we did not
propose to create a new MS-DRG or to reassign cases reporting this
university medical center's approach to pulmonary
thromboendarterectomy. We invited public comments on this issue.
Comment: Several commenters supported CMS' proposal to not create a
new MS-DRG or to reassign cases for this alternative approach to
pulmonary

[[Page 50533]]

thromboendarterectomy. The commenters stated that the proposal was
reasonable, given the data and information provided.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to not create a new MS-DRG or to reassign cases
for this alternative approach to pulmonary thromboendarterectomy.
4. MDC 5 (Diseases and Disorders of the Circulatory System)
a. Discharge/Transfer to Designated Disaster Alternative Care Site
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27516), we
proposed to add new patient discharge status code 69 (Discharged/
transferred to a designated disaster alternative care site) to the MS-
DRG GROUPER logic for MS-DRGs 280 (Acute Myocardial Infarction
Discharged Alive with MCC), 281 (Acute Myocardial Infarction Discharged
Alive with CC), and 282 (Acute Myocardial Infarction Discharged Alive
without CC/MCC) to identify patients who are discharged or transferred
to an alternative site that will provide basic patient care during a
disaster response. As discussed in section II.G.7. of the preamble of
the proposed rule, we also proposed to add this new discharge status
code to the Medicare Code Editor (MCE) software. We invited public
comments on this proposal.
Comment: Several commenters supported CMS' proposal to add the new
patient discharge status code 69 to the MS-DRG GROUPER logic for MS-
DRGs 280, 281, and 282 to identify patients who are discharged or
transferred to an alternative site that will provide basic patient care
during a disaster response. One commenter noted that this discharge
status code would seldom be used. However, the commenter believed that
the code is needed.
Response: We appreciate the commenters' support. We agree that this
new discharge status code will be beneficial to identify patients who
are involved in those disaster situations.
Comment: One commenter expressed concern with the proposal and
questioned the purpose of implementing the new patient discharge status
code 69 to only MS-DRGs 280, 281, and 282 within MDC 5.
Response: We take this opportunity to point out that the new
discharge status code 69 was created and approved by the National
Uniform Billing Committee (NUBC) for implementation on October 1, 2013.
The purpose of adding this discharge status code 69 specifically to the
GROUPER logic for MS-DRGs 280, 281, and 282 is to identify those
patients diagnosed with an acute myocardial infarction (AMI) who were
discharged/transferred to a designated disaster alternative care site
alive. The GROUPER logic for these MS-DRGs differs from the GROUPER
logic for MS-DRGs 283, 284, and 285 (Acute Myocardial Infarction,
Expired with MCC, with CC, and without CC/MCC, respectively) where the
patient has expired.
To further clarify, as discussed in section II.G.7.b. of the
preamble of the proposed rule (78 FR 27520), this new discharge status
code was also proposed to be added to the GROUPER and MCE logic.
Therefore, it may be assigned to other MS-DRGs.
However, when the logic for an MS-DRG is defined by specific
requirements, such as discharge status designation, the logic must be
updated if a new discharge status is created to appropriately group a
claim. Within MDC 5, for MS-DRGs 280, 281, and 282, the software logic
is specifically defined by a patient who has been diagnosed with an AMI
and is discharged alive. Assignment of the proposed new discharge
status code 69 would not be valid for MS-DRGs 283, 284, and 285 where
the patient has been diagnosed with an AMI and has expired. In other
words, an AMI patient who has expired would not be discharged/
transferred to a designated disaster alternative care site. Therefore,
the addition of discharge status code 69 to the software logic for
those MS-DRGs (283, 284, and 285) is not applicable within MDC 5.
Alternatively, a patient who has been diagnosed with an AMI and is
discharged alive would clearly have the opportunity to be discharged/
transferred to a designated disaster alternative care site in a given
disaster scenario or circumstance. Therefore, to ensure proper MS-DRG
assignment, we proposed to add discharge status code 69 to MS-DRGs 280,
281, and 282 within MDC 5.
After consideration of the public comments we received, we are
finalizing our proposal to add new patient discharge status code 69 to
the MS-DRG GROUPER logic for MS-DRGs 280, 281, and 282.
b. Discharges/Transfers With a Planned Acute Care Hospital Inpatient
Readmission
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27516), we also
proposed to add 15 new discharge status codes to the MS-DRG GROUPER
logic for MS-DRGs 280, 281, and 282 that will identify patients who are
discharged with a planned acute care hospital inpatient readmission. As
discussed in section II.G.7.b. of the preamble of the proposed rule,
these new discharge status codes was proposed for addition to the MCE
as well.
Shown in the table below are the current discharge status codes
that are assigned to the GROUPER logic for MS-DRGs 280, 281, and 282,
along with the proposed new discharge status codes and their titles.

------------------------------------------------------------------------
New
Current code code Discharge status code title
------------------------------------------------------------------------
01.................. 81 Discharged to home or self-care with a
planned acute care hospital inpatient
readmission.
02.................. 82 Discharged/transferred to a short term
general hospital for inpatient care with
a planned acute care hospital inpatient
readmission.
03.................. 83 Discharged/transferred to a skilled
nursing facility (SNF) with Medicare
certification with a planned acute care
hospital inpatient readmission.
04.................. 84 Discharged/transferred to a facility that
provides custodial or supportive care
with a planned acute care hospital
inpatient readmission.
05.................. 85 Discharged/transferred to a designated
cancer center or children's hospital with
a planned acute care hospital inpatient
readmission.
06.................. 86 Discharged/transferred to home under care
of organized home health service
organization with a planned acute care
hospital inpatient readmission.
21.................. 87 Discharged/transferred to court/law
enforcement with a planned acute care
hospital inpatient readmission.
43.................. 88 Discharged/transferred to a federal health
care facility with a planned acute care
hospital inpatient readmission.
61.................. 89 Discharged/transferred to a hospital-based
Medicare approved swing bed with a
planned acute care hospital inpatient
readmission.

[[Page 50534]]

62.................. 90 Discharged/transferred to an inpatient
rehabilitation facility (IRF) including
rehabilitation distinct part units of a
hospital with a planned acute care
hospital inpatient readmission.
63.................. 91 Discharged/transferred to a Medicare
certified long term care hospital (LTCH)
with a planned acute care hospital
inpatient readmission.
64.................. 92 Discharged/transferred to a nursing
facility certified under Medicaid but not
certified under Medicare with a planned
acute care hospital inpatient
readmission.
65.................. 93 Discharged/transferred to a psychiatric
distinct part unit of a hospital with a
planned acute care hospital inpatient
readmission.
66.................. 94 Discharged/transferred to a critical
access hospital (CAH) with a planned
acute care hospital inpatient
readmission.
70.................. 95 Discharged/transferred to another type of
health care institution not defined
elsewhere in this code list with a
planned acute care hospital inpatient
readmission.
------------------------------------------------------------------------

We invited public comments on our proposal to add the above listed
new discharge status codes to the GROUPER logic for MS-DRGs 280, 281,
and 282.
Comment: Commenters supported CMS' proposal to add the 15 new
discharge status codes to the MS-DRG GROUPER logic for MS-DRGs 280,
281, and 282 that will identify patients who are discharged with a
planned acute care hospital inpatient readmission. The commenters noted
that these new discharge status codes will enable providers to better
track AMI patients with planned versus unplanned readmissions.
Response: We appreciate the commenters' support. We agree that
these new discharge status codes will assist in tracking patients
diagnosed with an acute myocardial infarction who are discharged alive
and expect to be readmitted at a later date.
Comment: One commenter stated that the addition of these 15 new
discharge status codes to MS-DRGs 280-282 is unwarranted and believed
that it will create a burden for providers to report and update
systems. The commenter questioned if there is a timeframe associated
with the use of these new discharge status codes and if this timeframe
involves reporting a new discharge status code if the planned
readmission is to treat the same condition as the current stay. In
addition, the commenter questioned how CMS would verify that providers
are applying these proposed discharge status codes appropriately. The
commenter stated there are ``plenty of descriptive discharge status
codes that describe where the patient is going upon discharge. To add
more to clarify what is planned seems burdensome and unnecessary.''
Another commenter expressed concern with ``targeting only a small
number of DRGs for a large increase in applicable discharge status
codes.''
Response: The new discharge status codes related to a planned acute
care hospital inpatient readmission were developed and approved by the
National Uniform Billing Committee (NUBC) in response to a request by
the provider community. The purpose of the new codes is to allow
providers to track these types of situations when they occur. According
to meeting notes from the NUBC, there is not a designated timeframe (or
limitation) in reporting these new codes.
With respect to ensuring that providers apply these proposed new
discharge status codes correctly, we would like to point out that the
American Health Information Management Association (AHIMA) has
promulgated Standards of Ethical Coding that require accurate coding
that includes the reporting of all health care data elements (for
example, diagnosis and procedure codes, present on admission indicator,
discharge status) required for external reporting purposes (for
example, reimbursement and other administrative uses, population
health, quality and patient safety measurement, and research)
completely and accurately, in accordance with regulatory and
documentation standards and requirements and applicable official coding
conventions, rules, and guidelines. In addition, Medicare program
integrity initiatives closely monitor for inaccurate coding, as well as
coding inconsistent with medical record documentation.
In regard to the commenter's concern with targeting a small number
of MS-DRGs with a large increase in discharge status codes, the
discharge status codes were proposed to be added specifically to the
GROUPER logic for MS-DRGs 280, 281, and 282 to identify those patients
diagnosed with an acute myocardial infarction (AMI) who were
discharged/transferred to another facility with a planned acute care
hospital inpatient readmission alive. The GROUPER logic for these MS-
DRGs differs from the GROUPER logic for MS-DRGs 283, 284, and 285
(Acute Myocardial Infarction, Expired with MCC, with CC, and without
CC/MCC, respectively) where the patient has expired.
Similar to the discussion of discharge status code 69 in section
II.G.4.a. of the preamble of this final rule, the planned readmission
discharge status codes can also be reported for other MS-DRGs. We
reiterate that, as discussed in section II.G.7.b. of the preamble of
the proposed rule (78 FR 27520), these new discharge status codes were
proposed for addition to the GROUPER and MCE logic as well.
When the logic for an MS-DRG is defined by specific requirements,
such as a discharge status designation, the logic must be updated if a
new discharge status is created to appropriately group a claim. Within
MDC 5, for MS-DRGs 280, 281, and 282, the software logic is
specifically defined by a patient who has been diagnosed with an AMI
and is discharged alive. As such, the GROUPER logic requires that these
discharge status codes for planned readmissions be added to the
specific AMI DRGs where the patient has been discharged alive. An AMI
patient who expired would not have a planned readmission. Therefore,
these discharge status codes would not apply to MS-DRGs 283, 284, and
285 within MDC 5. Therefore, to ensure proper MS-DRG assignment, we
proposed to add the 15 discharge status codes describing a planned
readmission to MS-DRGs 280, 281, and 282 within MDC 5.
After consideration of the public comments we received, we are
finalizing our proposal to add the above listed 15 new patient
discharge status codes describing a planned acute care hospital
inpatient readmission to the MS-DRG GROUPER logic for MS-DRGs 280, 281,
and 282, effective October 1, 2013.
5. MDC 8 (Diseases and Disorders of the Musculoskeletal System and
Connective Tissue)
a. Reverse Shoulder Procedures
We received a request to change the MS-DRG assignment for reverse
shoulder replacement procedures which

[[Page 50535]]

is captured with procedure code 81.88 (Reverse total shoulder
replacement). The requestor did not suggest a specific new MS-DRG
assignment, but requested that reverse shoulder replacement procedures
be reassigned from MS-DRGs 483 and 484 (Major Joint/Limb Reattachment
Procedure of, Upper Extremities with CC/MCC and without CC/MCC,
respectively) or that we create a new MS-DRG for reverse shoulder
replacement procedures.
Biomechanically, the reverse shoulder devices move the center of
rotation of the arm laterally and change the direction of the pull of
the deltoid muscle, allowing the deltoid muscle to elevate the arm
without functioning rotator cuff tendons. The requestor stated that the
use of traditional total shoulder devices in patients with a
nonfunctioning rotator cuff frequently leads to long-term complications
and unsatisfactory functional results. Patients with damaged rotator
cuffs or rotator cuff syndrome have poor outcomes with traditional
shoulder replacement devices. The reverse shoulder replacement
procedure was created to address the clinical needs for patients who
would have poor outcomes with a traditional shoulder replacement. The
requestor stated that reverse shoulder replacement devices were
designed to provide a superior functionality and outcomes for patients
with damaged rotator cuffs.
The requestor stated that the reverse shoulder replacement
procedure is technically more complex and requires a higher level of
expertise than traditional shoulder procedures and involves several
issues that make the surgery more complex. Patients who have had prior
rotator cuff surgery have anchors and scar tissue that must be
surgically addressed. Often, there also are severe deformities that
must be addressed in order to establish stability.
The requestor acknowledged that the reverse shoulder replacement
procedure is an upper extremity procedure like other procedures
assigned to MS-DRGs 483 and 484. These MS-DRGs include the longstanding
total shoulder replacement procedures as well as partial shoulder
replacements. While the procedure is similar to other procedures in MS-
DRGs 483 and 484, the requestor stated there are significant
differences between the technical complexity and indications for usage
from the other procedures. The requestor stated there are significant
differences in resource usage and clinical coherence between
longstanding approaches to shoulder replacement and other procedures
assigned to MS-DRGs 483 and 484 and the reverse shoulder replacement
procedure. The requestor stated not only was the resource consumption
significantly higher, the individual supply costs for reserve shoulder
replacement procedures were higher than the costs of other procedures
assigned to MS-DRGs 483 and 484.
MS-DRGs 483 and 484 contain the following procedures:
81.73 (Total wrist replacement)
81.80 (Other total shoulder replacement)
81.81 (Partial shoulder replacement)
81.84 (Total elbow replacement)
81.88 (Reverse total shoulder replacement)
84.23 (Forearm, wrist, or hand reattachment)
84.24 (Upper arm reattachment).
As can be seen from this list, MS-DRGs 483 and 484 contain total
and partial shoulder replacements, as well as replacement and
attachment procedures on the wrist and upper arm. Both the newer
shoulder replacement techniques as well as the longstanding shoulder
replacement techniques are included in these MS-DRGs.

----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 483--All cases........................................... 13,113 3.33 $17,039
MS-DRG 483--Cases with procedure code 81.88..................... 5,690 3.30 19,023
MS-DRG 484--All cases........................................... 21,073 2.01 14,448
MS-DRG 484--Cases with procedure code 81.88..................... 7,505 2.08 16,890
----------------------------------------------------------------------------------------------------------------

As the above table illustrates, the average costs for reverse total
shoulder replacement are approximately $2,000 higher than the average
costs for all other procedures within MS-DRGs 483 and 484 and have
similar average lengths of stays. While the average costs were higher,
each MS-DRG has some cases that are higher and some cases that are
lower than the average costs for the entire MS-DRG. We believe the
average costs for the reverse shoulder replacement procedures are not
inappropriately high compared to other procedures grouped within MS-
DRGs 483 and 484. Therefore, the claims data do not support reassigning
these cases or creating a new MS-DRG.
Our clinical advisors reviewed this issue and determined that the
cases are appropriately assigned to MS-DRGs 483 and 484. As stated
earlier, MS-DRGs 483 and 484 contain other types of shoulder
replacements. Our clinical advisors believe it is appropriate to have
all total shoulder replacement procedures within the same set of MS-
DRGs. They do not believe it is appropriate to reassign those that use
a different technique to accomplish the same goal, a total shoulder
replacement. Therefore, our clinical advisors determined that this is
an appropriate assignment for reverse shoulder replacement procedures
from a clinical perspective. They also do not believe it is appropriate
to move these cases to any other surgical, orthopedic MS-DRGs because
of differences in the clinical makeup of the other surgical orthopedic
MS-DRGs. Our clinical advisors recommended not creating a new MS-DRG
for reverse shoulder replacement procedures because they believe the
procedures are appropriately assigned to MS-DRGs 483 and 484.
Therefore, based on claims data and clinical analysis, in the FY 2014
IPPS/LTCH PPS proposed rule (78 FR 27517 through 27518), we did not
propose to reassign these cases to any other MS-DRGs or to create a new
MS-DRG.
Based on the claims data and our clinical analysis, we did not
propose to reassign cases reporting procedure code 81.88 from their
current assignment to MS-DRGs 483 and 484 or to create a new MS-DRG. We
invited public comments on this issue.
Comment: Several commenters supported CMS' proposal not to reassign
reverse shoulder procedure cases reporting procedure code 81.88 from
their current assignment to MS DRGs 483 and 484 or to create a new MS-
DRG. Several commenters stated the proposal was reasonable given the
data and information provided.
Other commenters disagreed with our recommendation of making no MS-
DRG modifications for reverse shoulder procedures. One commenter stated
that the procedure is unique enough in approach and cost to justify
reassignment, or as an alternative, reassignment of all reverse
shoulder cases to MS-DRG 483, even if the cases do not have a CC or MCC
as a secondary

[[Page 50536]]

diagnosis. The commenter stated that it is important to take into
consideration the high volume of reverse shoulder procedures cases that
have occurred in a very short period of time since this code was
created. The commenter stated that, in the first year of this new code,
more than one-third of the cases in each MS-DRG (483 and 484) are
reverse shoulder procedures. For a newly created code, the commenter
believed that this was extraordinary utilization and should indicate
the importance of this unique procedure. The commenter stated that,
without an examination of each case and the reason why some cases
showed lower costs, it does not seem reasonable to dismiss the
substantially higher average costs of the procedures. The commenter
further stated that while CMS clinical advisors stated that reverse
shoulder is a simply a different technique to accomplish the same goal
of a total shoulder replacement, the procedure (and the device used in
the procedure) is meeting an unmet need, uses significantly different
techniques to implant the device, and requires additional skill,
experience, and time to implant. Another commenter recommended that CMS
create a new MS-DRG for reverse shoulder procedures because the
procedure is used to treat some of the most complex patients and use
greater resources.
Response: We agree with the commenters who stated that the data and
our clinical analysis support the recommendation of making no MS-DRG
changes for reverse shoulder procedures. Our clinical advisors continue
to believe the procedure is a different technique to accomplish the
same goal, a total shoulder replacement. We do not believe the data or
a clinical analysis would support moving all reverse shoulder
procedures into a new MS-DRG or moving all the reverse shoulder
procedures to MS DRG 483. The difference in average costs for reverse
shoulder procedures with a CC/MCC versus those without a CC/MCC is
$2,133. The difference in average costs for all cases in MS-DRG 483 and
MS-DRG 484 is $2,591. Clearly the presence of a CC or MCC has a
consistent impact on the average costs of shoulder replacements. Our
clinical advisors believe that it is important to maintain the clinical
cohesion of MS-DRGs 483 and 484 to maintain severity levels for all
shoulder replacement procedures.
The commenter who disagreed with our proposal pointed out that this
procedure is being adopted at a rapid rate with one-third of the
shoulder replacements using this new technique. Any growth in this
approach of performing total shoulder replacements will be reflected in
our claims data and will impact relative weights. Because the data and
clinical analysis support keeping the reverse shoulder procedure in the
same MS-DRG as other shoulder replacements, we are not modifying the
MS-DRGs for reverse shoulder procedures.
After consideration of the public comments we received, we are
finalizing our proposal to not reassign reverse shoulder cases
reporting procedure code 81.88 from their current assignment in MS DRGs
483 and 484 or to create a new MS-DRG.
b. Total Ankle Replacement Procedures
In response to the FY 2013 IPPS/LTCH PPS proposed rule, we received
a request to develop a new MS-DRG for total ankle replacements, which
we considered to be outside the scope of that proposed rule (77 FR
53325). We are addressing this request as part of the FY 2014 IPPS/LTCH
PPS rulemaking. The cases are captured by procedure code 81.56 (Total
ankle replacement) and are assigned to MS-DRGs 469 and 470 (Major Joint
Replacement or Reattachment of Lower Extremity with MCC and without
MCC, respectively).
The commenter stated that total ankle procedures are much more
clinically complex than total hip or total knee replacement procedures,
which have their own distinct MS-DRGs. The commenter also stated that
total ankle replacement is surgery that involves the replacement of the
damaged parts of the three bones that make up the ankle joint, as
compared to two bones in most other total joint procedures such as hip
or knee replacement. The commenter stated that average costs of total
ankle replacements are higher than those for total knee and hip
replacements. Therefore, the commenter recommended that a new MS-DRG
should be created for total ankle replacements. As an alternative, the
commenter suggested that these cases be reassigned to MS-DRG 469 even
if the cases do not have an MCC as a secondary diagnosis.
MS-DRGs 469 and 470 include a variety of procedures of the lower
extremities including the procedures listed below. This group of lower
extremity joint replacement and reattachment procedures was developed
because they were considered to be clinically cohesive and to have
similar resource consumptions.
00.85 (Resurfacing hip, total, acetabulum and femoral
head)
00.86 (Resurfacing hip, partial, femoral head)
00.87 (Resurfacing hip, partial, acetabulum)
81.51 (Total hip replacement)
81.52 (Partial hip replacement)
81.54 (Total knee replacement)
81.56 (Total ankle replacement)
84.26 (Foot reattachment)
84.27 (Lower leg or ankle reattachment)
84.28 (Thigh reattachment)
As the table below shows, there were 1,275 cases reporting total
ankle replacements with 21 cases in MS-DRG 469 and 1,254 cases in MS-
DRG 470. The 1,254 cases in MS-DRG 470 have higher costs than other
cases in MS-DRG 470 (approximately $17,242 compared to approximately
$13,984). The 21 cases in MS-DRG 469 had average costs of approximately
$23,360 compared to approximately $21,186 in average costs for all
cases within MS-DRG 469. While these procedures are higher in average
costs than other procedures within the MS-DRGs, we point out that cases
are grouped together based on similar clinical and resource criteria.
Some cases will have average costs higher than the overall average
costs for the MS-DRG, while other cases will have lower average costs.
Total ankle replacements represent 0.3 percent of the total number of
cases within MS-DRGs 469 and 470.

----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRGs cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 469--All cases........................................... 25,618 7.33 $21,186
MS-DRG 469--Cases with procedure code 81.56..................... 21 6.81 23,360
MS-DRG 470--All cases........................................... 390,518 3.37 13,984
MS-DRG 470--Cases with procedure code 81.56..................... 1,254 2.19 17,242
Total--All cases............................................ .............. .............. 416,136
Total--Cases with procedure code 81.56...................... .............. .............. 1,275
----------------------------------------------------------------------------------------------------------------

[[Page 50537]]

Our clinical advisors reviewed this issue and determined that the
total ankle replacements are appropriately classified within MS-DRGs
469 and 470. They do not support the commenter's contention that these
cases are significantly more complex than knee and hip replacements.
They believe that total ankle replacements are clinically consistent
with other types of lower extremity joint replacements within MS-DRGs
469 and 470. Our clinical advisors do not support creating a new MS-DRG
for total ankle replacements. After considering the results of
examination of the claims data, the recommendations from our clinical
advisors, and the small number of total ankle replacements, in the FY
2014 IPPS/LTCH PPS proposed rule (78 FR 27518 through 27519), we did
not propose to create a new MS-DRG.
We also examined the request to move all total ankle replacements
to the highest severity level, MS-DRG 469, even when no secondary
diagnosis on the MCC list was reported. Moving all total ankle
replacements to MS-DRG 469 would lead to overpayments of approximately
$3,944 per case because the average costs of total ankle replacements
in MS-DRG 470 was approximately $17,242, while the average costs of all
cases in MS-DRG 469 was approximately $21,186. After considering the
claims data as well as the input from our clinical advisors, in the FY
2014 IPPS/LTCH PPS proposed rule (78 FR 27518 through 27519), we did
not propose that all total ankle procedures be assigned to MS-DRG 469
even when the case does not have an MCC reported as a secondary
diagnosis. We believe the current MS-DRGs are appropriate for total
ankle replacements.
In the FY 2014 IPPS/LTCH PPS proposed rule, we did not propose to
create a new total ankle replacement MS-DRG or to reassign all total
ankle replacements to MS DRG 469. We proposed to maintain the current
MS-DRG assignments for total ankle replacements. We invited public
comment on our proposals.
Comment: Several commenters supported CMS' recommendation to
maintain the current MS-DRG assignments for total ankle replacements.
Several commenters stated that the proposal not to create a new total
ankle replacement MS-DRG or to reassign all total ankle replacements to
MS DRG 469 was reasonable given the data and information provided.
Other commenters offered support for our recommendation to maintain the
current MS-DRG assignments for total ankle replacements.
Response: We appreciate the commenters' support.
Comment: Several commenters disagreed with the proposal. One
commenter stated that total ankle procedures are more clinically
complex than total hip or total knee replacement procedures, and that
the higher average cost for total ankle procedures should qualify it
for reassignment. Another commenter stated that the proposed policy is
detrimental to hospitals' ability to provide in a cost effective manner
clinically-proven intervention, and thus jeopardizes beneficiary access
to total ankle replacement procedures. The commenter pointed out that
CMS suggests that under the MS-DRG system in general, some cases will
have average costs higher than the overall average costs for the MS-
DRG, while other cases will have lower average costs. However, the
commenter believed that, due to the wide variation of procedures that
map to MS-DRGs 469 and 470, this is an insufficient rationale to
systematically underpay for the average cost of the vast majority of
total knee procedures by 28 percent. The commenter stated that total
ankle replacement is a complex surgical procedure involving the
replacement of the damaged parts of the three bones (talus, tibia and
fibula) that make up the articulations of the ankle, as compared to two
bones in most other total joint replacement procedures (for example,
hip or knee). The commenter stated that establishing a separate MS-DRG
for total ankle procedures is the best solution to ensuring that all
joint replacement MS-DRGs are clinically coherent, and similar in
resource use. The commenter recommended that if a separate MS-DRG could
not be created, CMS reassign all total ankle replacements to MS-DRG 469
even if the cases do not report a MCC. Other commenters asked that
total ankle replacements be reassigned to higher paying MS-DRGs because
the procedures were clinically more complex and have higher average
costs than other procedures within the current MS-DRGs.
Response: We disagree with the commenters who stated that the
clinical complexity of total ankle procedures justifies reassigning the
cases. As stated earlier, our clinical advisors reviewed this issue and
determined that the total ankle replacements are appropriately
classified with other lower joint procedures within MS-DRGs 469 and
470. They do not support the commenters' contention that these cases
are significantly more complex than knee and hip replacements. Our
clinical advisors believe that total ankle replacements are clinically
consistent with other types of lower extremity joint replacements
within MS-DRGs 469 and 470. As we also mentioned earlier, moving all
total ankle replacements to MS-DRG 469 would lead to overpayments of
approximately $3,944 per case because the average costs of total ankle
replacements in MS-DRG 470 was approximately $17,242, while the average
costs of all cases in MS DRG 469 was approximately $21,186. Our
clinical advisors do not support creating a new MS-DRG for total ankle
procedures or moving the cases to MS-DRG 469.
After consideration of the public comments we received, we are
finalizing our proposal to maintain the current MS-DRG assignments for
total ankle replacements captured by procedure code 81.56 and assigned
to MS-DRGs 469 and 470.
6. MDC 15 (Newborns and Neonates With Conditions Originating in the
Neonatal Period)
a. Persons Encountering Health Services for Specific Procedures, Not
Carried Out
We received a request to evaluate the MS-DRG assignment of ICD-9-CM
diagnosis codes V64.00 through V64.04, and V64.06 through V64.43 in MS-
DRG 794 (Neonate with Other Significant Problems) under MDC 15. The
requestor noted that the assignment of diagnosis code V64.05
(Vaccination not carried out because of caregiver refusal) was
addressed in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50111 through
50112). We removed diagnosis code V64.05 from MS-DRG 794 and added it
to the ``only secondary diagnosis'' list for MS-DRG 795 (Normal
Newborn). The requestor asked that we consider the reassignment of
these diagnosis codes from MS-DRG 794 to MS-DRG 795. The codes under
existing MS-DRG 794 include:
V64.00 (Vaccination not carried out, unspecified reason)
V64.01 (Vaccination not carried out because of acute
illness)
V64.02 (Vaccination not carried out because of chronic
illness or condition)
V64.03 (Vaccination not carried out because of immune
compromised state)
V64.04 (Vaccination not carried out because of allergy to
vaccine or component)
V64.06 (Vaccination not carried out because of patient
refusal)
V64.07 (Vaccination not carried out for religious reasons)
V64.08 (Vaccination not carried out because patient had
disease being vaccinated against)
V64.09 (Vaccination not carried out for other reason)

[[Page 50538]]

V64.1 (Surgical or other procedure not carried out because
of contraindication)
V64.2 (Surgical or other procedure not carried out because
of patient's decision)
V64.3 (Procedure not carried out for other reasons)
V64.41 (Laparoscopic surgical procedure converted to open
procedure)
V64.42 (Thoracoscopic surgical procedure converted to open
procedure)
V64.43 (Arthroscopic surgical procedure converted to open
procedure).
In a newborn case with one of these diagnosis codes reported as a
secondary diagnosis, the case would be assigned to MS-DRG 794. The
commenter believed that these diagnosis codes, when reported as a
secondary diagnosis for a newborn case, should be assigned to MS-DRG
795 instead of MS-DRG 794.
Our clinical advisors reviewed this request and concur with the
commenter that diagnosis codes V64.00 through V64.04, and V64.06
through V64.3 should not continue to be assigned to MS-DRG 794, as
there is no clinically usable information reported in those codes
identifying significant problems. However, our clinical advisors
recommend that diagnosis codes V64.41, V64.42, and V64.43, which
identify that a surgical procedure converted to an open procedure,
continue to be assigned to MS-DRG 794. These diagnosis codes may
indicate a more significant encounter that required a surgical
intervention.
Therefore, for FY 2014, we proposed to reassign diagnosis codes
V64.00 through V64.04, and V64.06 through V64.3 from MS-DRG 794 to MS-
DRG 795 (78 FR 27519). Diagnosis codes V64.00 through V64.04, and
V64.06 through V64.3 would be added to the ``only secondary diagnosis''
list for MS-DRG 795. Diagnosis codes V64.41, V64.42, and V64.43 would
continue to be assigned to MS-DRG 794. We invited public comments on
this proposal.
Comment: Several commenters supported CMS' proposal to reassign
diagnosis codes V64.00 through V64.04 and V64.06 through V64.3 from MS-
DRG 794 to MS-DRG 795. The commenters stated that the proposed
reassignments were reasonable given the data and information provided.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal of reassigning diagnosis codes V64.00 through
V64.04 and V64.06 through V64.3 from MS-DRG 794 to MS-DRG 795.
b. Discharges/Transfers of Neonates With a Planned Acute Care Hospital
Inpatient Readmission
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27519 and 27520),
we proposed to add the patient discharge status codes shown in the
table below to the MS-DRG GROUPER logic for MS-DRG 789 (Neonates, Died
or Transferred to Another Acute Care Facility) to identify neonates
that are transferred to a designated facility with a planned acute care
hospital inpatient readmission.

------------------------------------------------------------------------
New code Title
------------------------------------------------------------------------
82........................... Discharged/transferred to a short term
general hospital for inpatient care with
a planned acute care hospital inpatient
readmission.
85........................... Discharged/transferred to a designated
cancer center or children's hospital
with a planned acute care hospital
inpatient readmission.
94........................... Discharged/transferred to a critical
access hospital (CAH) with a planned
acute care hospital inpatient
readmission.
------------------------------------------------------------------------

Currently, the GROUPER logic for MS-DRG 789 contains discharge
status codes 02 (Discharged/transferred to a short term general
hospital for inpatient care), 05 (Discharged/transferred to a
designated cancer center or children's hospital), and 66 (Discharged/
transferred to a critical access hospital (CAH)).
As discussed in section II.G.7. of the preamble of the proposed
rule, these new discharge status codes were also proposed for addition
to the Medicare Code Editor (MCE). We invited public comments on our
proposal.
Comment: Several commenters supported CMS' proposal to add the
three new discharge status codes to the MS-DRG GROUPER logic for MS-DRG
789 (Neonates, Died or Transferred to Another Acute Care Facility) to
identify neonates that are transferred to a designated facility with a
planned acute care hospital inpatient readmission. The commenters noted
the proposal was reasonable given the data and information provided.
Response: We appreciate the commenters' support.
Comment: One commenter expressed concern that the addition of these
new discharge status codes to MS-DRG 789 would create a burden to
providers in updating their systems and was unnecessary.
Response: As noted in the previous section, these new discharge
status codes related to a planned acute care hospital inpatient
readmission were developed and approved by the NUBC in response to a
request by the provider community. For the commenters' benefit, we
would like to point out how the GROUPER logic for MS-DRG 789 is
designed. When the logic for an MS-DRG is defined by specific
requirements, such as a discharge status designation, the logic must be
updated if a new discharge status is created to appropriately group a
claim.
With regard to the burden on providers for updating their systems,
effective October 1 of each year, providers have gone through the
process of updating their systems based on changes that were approved
and finalized for the upcoming IPPS fiscal year.
After consideration of the public comments we received, we are
finalizing our proposal to add new discharge status codes 82, 85, and
94 to the MS-DRG GROUPER logic for MS-DRG 789 for FY 2014.
7. Medicare Code Editor (MCE) Changes
The Medicare Code Editor (MCE) is a software program that detects
and reports errors in the coding of Medicare claims data. Patient
diagnoses, procedure(s), and demographic information are entered into
the Medicare claims processing systems and are subjected to a series of
automated screens. The MCE screens are designed to identify cases that
require further review before classification into an MS-DRG.
a. Age Conflict Edit
We received a request to review three ICD-9-CM diagnosis codes
currently listed under the age conflict edit within the MCE. The age
conflict edit detects inconsistencies between a patient's age and any
diagnosis on the patient's record. Specifically, the requestor
recommended that CMS consider the removal of diagnosis codes 751.1
(Atresia and stenosis of small intestine), 751.2 (Atresia and stenosis
of large intestine, rectum, and anal canal), and 751.61 (Biliary
atresia) from the

[[Page 50539]]

pediatric age conflict edit. Generally, diagnoses included in the list
for the pediatric age conflict edit are applicable for ages 0 through
17.
The requestor noted that diagnosis code 751.1 was removed from the
Integrated Outpatient Code Editor (IOCE) effective January 1, 2006. Our
clinical advisors agree that patients described with any one of the
above listed codes, although congenital anomalies, may require a
revision procedure in adulthood. Therefore, we believe that the removal
of these codes appears appropriate and also would be consistent with
the IOCE.
We invited public comments on our proposal to remove diagnosis
codes 751.1, 751.2, and 751.61 from the pediatric age conflict edit
effective October 1, 2013.
Comment: Commenters supported the proposal to remove diagnosis
codes 751.1, 751.2, and 751.61 from the pediatric age conflict edit
effective October 1, 2013.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to remove diagnosis codes 751.1, 751.2, and
751.61 from the pediatric age conflict edit effective October 1, 2013.
b. Discharge Status Code Updates
To reflect changes in the UB-04 code set maintained by the National
Uniform Billing Committee (NUBC), in the FY 2014 IPPS/LTCH PPS proposed
rule (78 FR 27520), we proposed to add the following new discharge
status codes to the CMS GROUPER and the MCE logic effective October 1,
2013.
One of the new discharge status codes corresponds to an alternative
care site. This alternative care site discharge status code is intended
to identify patients being discharged or transferred to an alternative
site that will provide basic patient care during a disaster response.
The new discharge status code is 69 (Discharged/transferred to a
designated disaster alternative care site).
In addition, 15 new discharge status codes correspond with
identifying planned acute care hospital inpatient readmissions. Shown
below are the existing ``base'' discharge status codes and the new
codes that will better identify patients who are discharged with a
planned readmission.

----------------------------------------------------------------------------------------------------------------
Base code New code Title
----------------------------------------------------------------------------------------------------------------
01................................... 81..................... Discharged to home or self-care with a planned
acute care hospital inpatient readmission.
02................................... 82..................... Discharged/transferred to a short term general
hospital for inpatient care.
03................................... 83..................... Discharged/transferred to a skilled nursing
facility (SNF) with Medicare certification with
a planned acute care hospital inpatient
readmission.
04................................... 84..................... Discharged/transferred to a facility that
provides custodial or supportive care with a
planned acute care hospital inpatient
readmission.
05................................... 85..................... Discharged/transferred to a designated cancer
center or children's hospital with a planned
acute care hospital inpatient readmission.
06................................... 86..................... Discharged/transferred to home under care of
organized home health service organization with
planned acute care hospital inpatient
readmission.
21................................... 87..................... Discharged/transferred to court/law enforcement
with a planned acute care hospital inpatient
readmission.
43................................... 88..................... Discharged/transferred to federal health care
facility with a planned acute care hospital
inpatient readmission.
61................................... 89..................... Discharged/transferred to a hospital-based
Medicare approved swing bed with a planned
acute care hospital inpatient readmission.
62................................... 90..................... Discharged/transferred to an inpatient
rehabilitation facility (IRF) including
rehabilitation distinct part units of a
hospital with a planned acute care hospital
inpatient readmission.
63................................... 91..................... Discharged/transferred to a Medicare certified
long term care hospital (LTCH) with a planned
acute care hospital inpatient readmission.
64................................... 92..................... Discharged/transferred to a nursing facility
certified under Medicaid but not certified
under Medicare with a planned acute care
hospital inpatient readmission.
65................................... 93..................... Discharged/transferred to a psychiatric distinct
part unit of a hospital with a planned acute
care hospital inpatient readmission.
66................................... 94..................... Discharged/transferred to a critical access
hospital (CAH) with a planned acute care
hospital inpatient readmission.
70................................... 95..................... Discharged/transferred to another type of health
care institution not defined elsewhere in this
code list with a planned acute care hospital
inpatient readmission.
----------------------------------------------------------------------------------------------------------------

We invited public comments on our proposal to add the above listed
new discharge status codes to the GROUPER and the MCE logic effective
October 1, 2013 (FY 2014).
Comment: Several commenters supported CMS' proposal to add the
above listed discharge status codes to the GROUPER and the MCE logic.
However, some commenters asked CMS to clarify how it intends to use the
new discharge status codes for planned acute care hospital inpatient
readmissions. One commenter stated that, based on the description of a
planned readmission algorithm in the FY 2014 IPPS/LTCH PPS proposed
rule (78 FR 27595), it appears that CMS is planning to use an algorithm
to identify planned readmissions for part of the Hospital Readmissions
Reduction Program, rather than relying on the proposed new planned
readmission discharge status codes reported on claims. This commenter
suggested that CMS work with the NUBC to develop additional guidance on
the proper use of the discharge status codes. The commenter noted:
``for example, it is not clear if there is a limitation on the
timeframe when the planned readmission is expected to occur in order to
use these discharge status codes. It is also not clear whether these
codes are limited to planned readmissions related to the current
admission. For example, the plan of care might mention that the patient
is returning in the future for scheduled treatment of a condition
unrelated to the current hospitalization.''
Response: We appreciate the commenters' support. The new discharge
status codes related to a planned acute care hospital inpatient
readmission were developed and approved by the NUBC in response to a
request by the provider community. Currently, the purpose of the new
codes is to allow providers to track these types of situations when
they occur.

[[Page 50540]]

According to meeting notes from the NUBC, there is not a designated
timeframe (or limitation) in reporting these new codes, and they define
a readmission as ``an intentional readmission after discharge from an
acute care hospital that is a scheduled part of a patient's plan of
care.''
The commenter is correct in its understanding that, under the
Hospital Readmissions Reduction Program, CMS proposed in the FY 2014
IPPS/LTCH PPS proposed rule, and is finalizing in this final rule, an
algorithm to identify planned versus unplanned readmissions and will
continue to utilize this algorithm for the program. Therefore, at this
time, these new discharge status codes are not related in any way to
the Hospital Readmissions Reduction Program and will not be taken into
account in the readmissions measures for that program.
After consideration of the public comments received, we are
finalizing our proposal to add new discharge status code 69
(Discharged/transferred to a designated disaster alternative care
site), as well as the 15 new discharge status codes related to a
planned acute care hospital inpatient readmission listed above.
8. Surgical Hierarchies
Some inpatient stays entail multiple surgical procedures, each one
of which, occurring by itself, could result in assignment of the case
to a different MS-DRG within the MDC to which the principal diagnosis
is assigned. Therefore, it is necessary to have a decision rule within
the GROUPER by which these cases are assigned to a single MS-DRG. The
surgical hierarchy, an ordering of surgical classes from most resource-
intensive to least resource-intensive, performs that function.
Application of this hierarchy ensures that cases involving multiple
surgical procedures are assigned to the MS-DRG associated with the most
resource-intensive surgical class.
Because the relative resource intensity of surgical classes can
shift as a function of MS-DRG reclassification and recalibrations, for
FY 2014, we reviewed the surgical hierarchy of each MDC, as we have for
previous reclassifications and recalibrations, to determine if the
ordering of classes coincides with the intensity of resource
utilization.
A surgical class can be composed of one or more MS-DRGs. For
example, in MDC 11, the surgical class ``kidney transplant'' consists
of a single MS-DRG (MS-DRG 652) and the class ``major bladder
procedures'' consists of three MS-DRGs (MS-DRGs 653, 654, and 655).
Consequently, in many cases, the surgical hierarchy has an impact on
more than one MS-DRG. The methodology for determining the most
resource-intensive surgical class involves weighting the average
resources for each MS-DRG by frequency to determine the weighted
average resources for each surgical class. For example, assume surgical
class A includes MS-DRGs 001 and 002 and surgical class B includes MS-
DRGs 003, 004, and 005. Assume also that the average costs of MS-DRG
001 are higher than that of MS-DRG 003, but the average costs of MS-
DRGs 004 and 005 are higher than the average costs of MS-DRG 002. To
determine whether surgical class A should be higher or lower than
surgical class B in the surgical hierarchy, we would weigh the average
costs of each MS-DRG in the class by frequency (that is, by the number
of cases in the MS-DRG) to determine average resource consumption for
the surgical class. The surgical classes would then be ordered from the
class with the highest average resource utilization to that with the
lowest, with the exception of ``other O.R. procedures'' as discussed
below.
This methodology may occasionally result in assignment of a case
involving multiple procedures to the lower-weighted MS-DRG (in the
highest, most resource-intensive surgical class) of the available
alternatives. However, given that the logic underlying the surgical
hierarchy provides that the GROUPER search for the procedure in the
most resource-intensive surgical class, in cases involving multiple
procedures, this result is sometimes unavoidable.
We note that, notwithstanding the foregoing discussion, there are a
few instances when a surgical class with a lower average cost is
ordered above a surgical class with a higher average cost. For example,
the ``other O.R. procedures'' surgical class is uniformly ordered last
in the surgical hierarchy of each MDC in which it occurs, regardless of
the fact that the average costs for the MS-DRG or MS-DRGs in that
surgical class may be higher than those for other surgical classes in
the MDC. The ``other O.R. procedures'' class is a group of procedures
that are only infrequently related to the diagnoses in the MDC, but are
still occasionally performed on patients with cases assigned to the MDC
with these diagnoses. Therefore, assignment to these surgical classes
should only occur if no other surgical class more closely related to
the diagnoses in the MDC is appropriate.
A second example occurs when the difference between the average
costs for two surgical classes is very small. We have found that small
differences generally do not warrant reordering of the hierarchy
because, as a result of reassigning cases on the basis of the hierarchy
change, the average costs are likely to shift such that the higher-
ordered surgical class has lower average costs than the class ordered
below it.
In the FY 2014 IPPS/LTCH PPS proposed rule, we proposed limited
changes to the MS-DRG classifications for FY 2014, as discussed in
sections II.G.2. and 5. of the preamble of the proposed rule. In our
review of these proposed changes, we did not identify any needed
changes to the surgical hierarchy. Therefore, in the proposed rule (78
FR 27521), we did not propose any changes to the surgical hierarchy for
Pre-MDCs and MDCs for FY 2014.
Comment: Several commenters stated that the CMS proposal to make no
changes to the surgical hierarchy seems reasonable given the data and
information provided.
Response: Based on these public comments and our review of the
proposal to make no revisions to the surgical hierarchy using the March
2013 update of the FY 2012 MedPAR file and the revised GROUPER
software, we found that the proposal to make no revisions is still
supported by the data. Therefore, in this final rule, we are making no
changes to the surgical hierarchy for FY 2104.
9. Complications or Comorbidity (CC) Exclusions List
a. Background of the CC List and the CC Exclusions List
Under the IPPS MS-DRG classification system, we have developed a
standard list of diagnoses that are considered CCs. Historically, we
developed this list using physician panels that classified each
diagnosis code based on whether the diagnosis, when present as a
secondary condition, would be considered a substantial complication or
comorbidity. A substantial complication or comorbidity was defined as a
condition that, because of its presence with a specific principal
diagnosis, would cause an increase in the length of stay by at least 1
day in at least 75 percent of the patients. However, depending on the
principal diagnosis of the patient, some diagnoses on the basic list of
complications and comorbidities may be excluded if they are closely
related to the principal diagnosis. In FY 2008, we evaluated each
diagnosis code to determine its impact on resource use and to determine
the most appropriate CC subclassification (non-CC, CC, or MCC)
assignment. We refer readers to sections II.D.2. and 3. of the preamble
of the FY

[[Page 50541]]

2008 IPPS final rule with comment period for a discussion of the
refinement of CCs in relation to the MS-DRGs we adopted for FY 2008 (72
FR 47152 through 47171).
b. CC Exclusions List for FY 2014
In the September 1, 1987 final notice (52 FR 33143) concerning
changes to the DRG classification system, we modified the GROUPER logic
so that certain diagnoses included on the standard list of CCs would
not be considered valid CCs in combination with a particular principal
diagnosis. We created the CC Exclusions List for the following reasons:
(1) To preclude coding of CCs for closely related conditions; (2) to
preclude duplicative or inconsistent coding from being treated as CCs;
and (3) to ensure that cases are appropriately classified between the
complicated and uncomplicated DRGs in a pair. As we indicated above, we
developed a list of diagnoses, using physician panels, to include those
diagnoses that, when present as a secondary condition, would be
considered a substantial complication or comorbidity. In previous
years, we have made changes to the list of CCs, either by adding new
CCs or deleting CCs already on the list.
In the May 19, 1987 proposed notice (52 FR 18877) and the September
1, 1987 final notice (52 FR 33154), we explained that the excluded
secondary diagnoses were established using the following five
principles:
Chronic and acute manifestations of the same condition
should not be considered CCs for one another;
Specific and nonspecific (that is, not otherwise specified
(NOS)) diagnosis codes for the same condition should not be considered
CCs for one another;
Codes for the same condition that cannot coexist, such as
partial/total, unilateral/bilateral, obstructed/unobstructed, and
benign/malignant, should not be considered CCs for one another;
Codes for the same condition in anatomically proximal
sites should not be considered CCs for one another; and
Closely related conditions should not be considered CCs
for one another.
The creation of the CC Exclusions List was a major project
involving hundreds of codes. We have continued to review the remaining
CCs to identify additional exclusions and to remove diagnoses from the
master list that have been shown not to meet the definition of a CC.\1\
---------------------------------------------------------------------------

\1\ We refer readers to the FY 1989 final rule (53 FR 38485,
September 30, 1988) for the revision made for the discharges
occurring in FY 1989; the FY 1990 final rule (54 FR 36552, September
1, 1989) for the FY 1990 revision; the FY 1991 final rule (55 FR
36126, September 4, 1990) for the FY 1991 revision; the FY 1992
final rule (56 FR 43209, August 30, 1991) for the FY 1992 revision;
the FY 1993 final rule (57 FR 39753, September 1, 1992) for the FY
1993 revision; the FY 1994 final rule (58 FR 46278, September 1,
1993) for the FY 1994 revisions; the FY 1995 final rule (59 FR
45334, September 1, 1994) for the FY 1995 revisions; the FY 1996
final rule (60 FR 45782, September 1, 1995) for the FY 1996
revisions; the FY 1997 final rule (61 FR 46171, August 30, 1996) for
the FY 1997 revisions; the FY 1998 final rule (62 FR 45966, August
29, 1997) for the FY 1998 revisions; the FY 1999 final rule (63 FR
40954, July 31, 1998) for the FY 1999 revisions; the FY 2001 final
rule (65 FR 47064, August 1, 2000) for the FY 2001 revisions; the FY
2002 final rule (66 FR 39851, August 1, 2001) for the FY 2002
revisions; the FY 2003 final rule (67 FR 49998, August 1, 2002) for
the FY 2003 revisions; the FY 2004 final rule (68 FR 45364, August
1, 2003) for the FY 2004 revisions; the FY 2005 final rule (69 FR
49848, August 11, 2004) for the FY 2005 revisions; the FY 2006 final
rule (70 FR 47640, August 12, 2005) for the FY 2006 revisions; the
FY 2007 final rule (71 FR 47870) for the FY 2007 revisions; the FY
2008 final rule (72 FR 47130) for the FY 2008 revisions; the FY 2009
final rule (73 FR 48510); the FY 2010 final rule (74 FR 43799); the
FY 2011 final rule (75 FR 50114); the FY 2012 final rule (76 FR
51542); and the FY 2013 final rule (77 FR 53315). In the FY 2000
final rule (64 FR 41490, July 30, 1999), we did not modify the CC
Exclusions List because we did not make any changes to the ICD-9-CM
codes for FY 2000.
---------------------------------------------------------------------------

(1) No Revisions Based on Changes to the ICD-9-CM Diagnosis Codes for
FY 2014
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27522), we stated
that, for FY 2014, there were no changes made to the ICD-9-CM coding
system effective October 1, 2013, due to the partial code freeze.
However, we did note that there may be ICD-9-CM coding changes
finalized after the proposed rule (78 FR 27526). We are finalizing, for
FY 2014, there were no changes made to the ICD-9-CM diagnosis codes.
However, there are changes made to the ICD-9-CM procedure codes for FY
2014 due to new technology. (We refer readers to section II.G.11. of
the preamble of the FY 2014 IPPS/LTCH PPS proposed rule and this final
rule for a discussion of the ICD-9-CM coding system.)
(2) Changes to the MS-DRG Diagnosis Codes for FY 2014
(A) Coronary Atherosclerosis Due to Calcified Coronary Lesion
We received a request that we consider changing the severity levels
for the following ICD-9-CM diagnosis code: 414.4 (Coronary
atherosclerosis due to calcified coronary lesion). The requestor
suggested that we change the severity level for diagnosis code 414.4
from a non-CC to an MCC.
The following chart shows the analysis of the MedPAR claims data
for FY 2012 for ICD-9-CM diagnosis code 414.4.

--------------------------------------------------------------------------------------------------------------------------------------------------------
Diagnosis
Code description CC level Cnt 1 Cnt 1 impact Cnt 2 Cnt 2 impact Cnt 3 Cnt 3 impact
--------------------------------------------------------------------------------------------------------------------------------------------------------
414.4......................... Coronary Non-CC........... 1,390 1.58 2,174 2.31 2,001 3.11
atherosclerosis
due to calcified
lesion.
--------------------------------------------------------------------------------------------------------------------------------------------------------

We ran the above data as described in the FY 2008 IPPS final rule
with comment period (72 FR 47158 through 47161). The C1 value reflects
a patient with no other secondary diagnosis or with all other secondary
diagnoses that are non-CCs. The C2 value reflects a patient with at
least one other secondary diagnosis that is a CC, but none that is an
MCC. The C3 value reflects a patient with at least one other secondary
diagnosis that is an MCC.
The chart above shows that the C1 finding is 1.58. A value close to
1.0 in the C1 field suggests that the diagnosis produces the same
expected value as a non-CC. A value close to 2.0 suggests the condition
is more like a CC than a non-CC, but not as significant in resource
usage as an MCC. A value close to 3.0 suggests the condition is
expected to consume resources more similar to an MCC than a CC or a
non-CC.
The C2 finding was 2.31. A C2 value close to 2.0 suggests the
condition is more like a CC than a non-CC, but not as significant in
resource usage as an MCC when there is at least one other secondary
diagnosis that is a CC but none that is an MCC.
While the C1 value of 1.58 is above the 1.0 value for a non-CC, it
does not support reclassification to an MCC. As stated earlier, a value
close to 3.0 suggests the condition is expected to

[[Page 50542]]

consume resources more similar to an MCC than a CC or a non-CC. The C2
finding of 2.31 also does not support reclassifying this diagnosis code
to an MCC. We also considered reclassifying the severity level of
diagnosis code 414.4 to a CC; however, the C1 finding of 1.58 also does
not support reclassifying the severity level to a CC. Our clinical
advisors reviewed the data and evaluated this condition. They
recommended that we not change the severity level of diagnosis code
414.4 from a non-CC to an MCC or a CC. They did not believe that this
diagnosis would increase the severity level of patients. They pointed
out that a similar code, diagnosis code 414.2 (Chronic total occlusion
of coronary artery), is a non-CC. Our clinical advisors believe that
diagnosis code 414.4 represents patients who are less severe than
diagnosis code 414.2. Considering the C1 and C2 ratings and the input
from our clinical advisors, in the FY 2014 IPPS/LTCH PPS proposed rule
(78 FR 27522), we did not propose to reclassify diagnosis code 414.4 to
an MCC; the diagnosis code would continue to be considered a non-CC.
Therefore, based on the data and clinical analysis, we proposed to
maintain diagnosis code 414.4 as a non-CC. We invited public comment on
our proposal.
Comment: Commenters supported the CMS proposal not to change
diagnosis code 414.4 from a non-CC to an MCC. Several commenters stated
that the changes seem reasonable given the data and information
provided.
Response: We appreciate the commenters' support.
Comment: Several commenters disagreed with the proposal, stating
that these patients are more expensive to treat.
Response: The claims data mentioned above do not support that
patients with this condition require treatment with average costs at
the MCC level. As stated above, the claims data support maintaining
this code as a non-CC. Our clinical advisors once again reviewed this
issue after reviewing the public comments. Based on their clinical
review, our clinical advisors continue to support our proposal not to
change diagnosis code 414.4 from a non-CC to an MCC.
Comment: One commenter asked CMS to rerun the data but did not
provide a reason why it believed the data are in error nor point out
any errors in the methodology. The commenter purchased the FY 2012
MedPAR data file and tried to replicate this analysis. The commenter
found more cases in its data analysis. The commenter asked for
clarification as to whether CMS used average costs or average charges
in its computations, and why its findings might have been different.
Response: Our analysis is based on average costs. As we stated
earlier, the December 2012 update of the FY 2012 MedPAR file is the
claims data source for our data analysis. Because the commenter used a
later file (the March 2013 update), its data included more cases.
However, our data and clinical analysis support maintaining diagnosis
code 414.4 as a non-CC and not changing it to a MCC.
After consideration of the public comments we received, we are
finalizing our proposal to maintain diagnosis code 414.4 as a non-CC
for FY 2014.
(B) Acute Cholecystitis Diagnosis Code
We received a comment recommending that we add diagnosis code 575.0
(Acute cholecystitis) to the CC Exclusion List when reported as a
secondary diagnosis code with a principal diagnosis code 574.00
(Calculus of gallbladder with acute cholecystitis without mention of
obstruction). We note that there is an ``excludes note'' under
diagnosis code 575.0 which excludes ``that with cholelithiasis
(574.00)''. Therefore, diagnosis codes 575.0 and 574.00 should not be
reported on the same claim. However, the commenter stated that there
may be double reporting.
Our clinical advisors agree with the commenter that diagnosis codes
575.0 and 574.00 capture the same clinical context. Therefore, in the
FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27522), we proposed to add
diagnosis code 575.0 to the CC Exclusion List when reported as a
secondary diagnosis code with a principal diagnosis code 574.00. We
invited public comments on our proposal.
Comment: Several commenters stated that the proposal to add
diagnosis code 575.0 to the CC Exclusion List when reported as a
secondary diagnosis code with principal diagnosis code 574.00 seems
reasonable given the data and information provided.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to add diagnosis code 575.0 to the CC Exclusion
List when reported as a secondary diagnosis code with principal
diagnosis code 574.00 for FY 2014.
(C) Chronic Total Occlusion (CTO) of Artery of the Extremities
Diagnosis Code
We received a request to consider removing atherosclerosis and
aneurysm codes from the CC Exclusion List for diagnosis code 440.4
(Chronic total occlusion of artery of the extremities). For FY 2013, we
changed the designation of diagnosis code 440.4 from a non-CC level to
a CC level. The CC Exclusion List for diagnosis code 440.4 includes the
following diagnosis codes:

------------------------------------------------------------------------
Diagnosis code Code description
------------------------------------------------------------------------
440.20....................... Atherosclerosis of native arteries of the
extremities, unspecified.
440.21....................... Atherosclerosis of native arteries of the
extremities with intermittent
claudication.
440.22....................... Atherosclerosis of native arteries of the
extremities with rest pain.
440.23....................... Atherosclerosis of native arteries of the
extremities with ulceration.
440.24....................... Atherosclerosis of native arteries of the
extremities with gangrene.
440.29....................... Other atherosclerosis of native arteries
of the extremities.
440.30....................... Atherosclerosis of unspecified bypass
graft of the extremities.
440.31....................... Atherosclerosis of autologous vein bypass
graft of the extremities.
440.32....................... Atherosclerosis of nonautologous
biological bypass graft of the
extremities.
440.4........................ Chronic total occlusion of artery of the
extremities.
441.00....................... Dissection of aorta, unspecified site.
441.01....................... Dissection of aorta, thoracic.
441.02....................... Dissection of aorta, abdominal.
441.03....................... Dissection of aorta, thoracoabdominal.
441.1........................ Thoracic aneurysm, ruptured.
441.2........................ Thoracic aneurysm without mention of
rupture.
441.3........................ Abdominal aneurysm, ruptured.
441.4........................ Abdominal aneurysm without mention of
rupture.

[[Page 50543]]

441.5........................ Aortic aneurysm of unspecified site,
ruptured.
441.6........................ Thoracoabdominal aneurysm, ruptured.
441.7........................ Thoracoabdominal aneurysm, without
mention of rupture.
441.9........................ Aortic aneurysm of unspecified site
without mention of rupture.
442.0........................ Aneurysm of artery of upper extremity.
442.2........................ Aneurysm of iliac artery.
442.3........................ Aneurysm of artery of lower extremity.
442.9........................ Aneurysm of unspecified site.
443.22....................... Dissection of iliac artery.
443.29....................... Dissection of other artery.
443.81....................... Peripheral angiopathy in diseases
classified elsewhere.
443.82....................... Erythromelalgia.
443.89....................... Other specified peripheral vascular
diseases.
443.9........................ Peripheral vascular disease, unspecified.
444.01....................... Saddle embolus of abdominal aorta.
444.09....................... Other arterial embolism and thrombosis of
abdominal aorta.
444.1........................ Embolism and thrombosis of thoracic
aorta.
444.21....................... Arterial embolism and thrombosis of upper
extremity.
444.22....................... Arterial embolism and thrombosis of lower
extremity.
444.81....................... Embolism and thrombosis of iliac artery.
444.89....................... Embolism and thrombosis of other
specified artery.
444.9........................ Embolism and thrombosis of unspecified
artery.
445.01....................... Atheroembolism of upper extremity.
445.02....................... Atheroembolism of lower extremity.
445.81....................... Atheroembolism of kidney.
445.89....................... Atheroembolism of other site.
447.0........................ Arteriovenous fistula, acquired.
447.1........................ Stricture of artery.
447.2........................ Rupture of artery.
447.5........................ Necrosis of artery.
447.6........................ Arteritis, unspecified.
447.70....................... Aortic ectasia, unspecified site.
447.71....................... Thoracic aortic ectasia.
447.72....................... Abdominal aortic ectasia.
447.73....................... Thoracoabdominal aortic ectasia.
449.......................... Septic arterial embolism.
------------------------------------------------------------------------

Diagnosis code 440.4 is a CC except if one of the diagnosis codes
listed above is reported as a principal diagnosis. If one of the
diagnosis codes listed above is reported on a claim as a principal
diagnosis and code 440.4 is reported as a secondary diagnosis, code
440.4 would not be counted as a CC. The commenter requested that we
remove atherosclerosis codes 440.20 through 440.32, 443.22, 443.29,
443.81 through 443.9, and aneurysm codes 441.00 through 441.03, 441.1
through 441.7, 441.9, 442.0, 442.2, 442.3, and 442.9 from the CC
Exclusion List for diagnosis code 440.4.
According to the commenter, aneurysm diagnoses are not closely
related clinically to peripheral CTOs. Aneurysm physiology, clinical
symptomology, and patient risk profile are fundamentally different than
CTOs. Aneurysms result from the weakening of an artery wall and
manifest in an out-pouched pocket of the lumen. Conversely, patients
with CTOs present with extended segments of diseased and narrowed
vessels and in most cases, complex lesions containing fibro-calcified
plaques.
The commenter stated that CTOs represent a high severity
complication, which is not closely related to basic atherosclerosis.
Our clinical advisors agree with the commenter that the aneurysm
and most of the atherosclerosis codes should be removed from the CC
Exclusion List for diagnosis code 440.4. A case with a principal
diagnosis of aneurysm with CTO adds substantial complexity and does not
necessarily have the same immediate cause. A case with a principal
diagnosis of atherosclerosis with CTO reported represents a more severe
form of the disease and, therefore, is more complex. Our clinical
advisors do not agree with the commenter that diagnosis codes 443.81
through 443.9 (Other and unspecified peripheral vascular diseases)
should be removed from the CC Exclusion List. These cases are more
likely related to CTO and meet one of the principles for exclusion that
we previously outlined above.
Therefore, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR
27524), we proposed to remove the following diagnosis codes from the CC
Exclusion List for diagnosis code 440.4 for FY 2014: atherosclerosis
codes 440.20 through 440.32, 443.22, and 443.29, and aneurysm codes
441.00 through 441.03, 441.1 through 441.7, 441.9, 442.0, 442.2, 442.3,
and 442.9. Diagnosis codes 443.81 through 443.9 would remain on the CC
Exclusion List for diagnosis code 440.4. We invited public comments on
this proposal.
Comment: Several commenters supported CMS' proposal to remove
atherosclerosis codes 440.20 through 440.32, 443.22, and 443.29, and
aneurysm codes 441.00 through 441.03, 441.1 through 441.7, 441.9,
442.0, 442.2, 442.3, and 442.9 from the CC Exclusion List for diagnosis
code 440.4. Several commenters agreed with CMS' clinical advisors'
assessment on aneurysm and atherosclerosis cases with CTO in that a
case with a principal diagnosis of aneurysm with CTO adds substantial
complexity and does not necessarily have the same immediate cause, and
a case with a principal diagnosis of atherosclerosis with CTO reported
represents a more severe form of the disease and, therefore, is more
complex. Several commenters stated that this proposed change will
compensate hospitals appropriately for the high cost

[[Page 50544]]

and resource use associated with CTO treatment. Several commenters
stated that the proposal seems reasonable given the data and
information provided.
Response: We appreciate the commenters' support and agree that the
change is warranted for these cases.
After consideration of the public comments we received, we are
finalizing our proposal to remove atherosclerosis codes 440.20 through
440.32, 443.22, and 443.29, and aneurysm codes 441.00 through 441.03,
441.1 through 441.7, 441.9, 442.0, 442.2, 442.3, and 442.9 from the CC
Exclusion List for diagnosis code 440.4. Diagnosis codes 443.81 through
443.9 would remain on the CC Exclusion List for diagnosis code 440.4
for FY 2014.
For FY 2014, we proposed changes to Table 6G (Additions to the CC
Exclusion List) and Table 6H (Deletions from the CC Exclusion List) (78
FR 27524). As we discussed earlier, we are finalizing those changes for
acute cholecystitis and chronic total occlusion of artery of the
extremities diagnosis codes for FY 2014. As we discussed in the FY 2014
IPPS/LTCH PPS proposed rule, we did not propose any changes to the
severity level for diagnosis code 414.4. In this final rule, we are
finalizing our decision to maintain diagnosis code 414.4 as a non-CC.
These two tables, which contain codes that are effective for discharges
occurring on or after October 1, 2013, were not published in the
Addendum to the proposed rule (nor are they being published in this
final rule) because of the length of the two tables. Instead, we are
making them available through the Internet on the CMS Web site at:
https://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/
AcuteInpatientPPS/. Each of these principal diagnosis codes
for which there is a CC exclusion is shown in Tables 6G and 6H with an
asterisk, and the conditions that will not count as a CC are provided
in an indented column immediately following the affected principal
diagnosis.
A complete updated MCC, CC, and Non-CC Exclusions List is available
through the Internet on the CMS Web site at: https://www.cms.hhs.gov/
Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/.
Beginning with discharges on or after October 1 of each fiscal year,
the indented diagnoses are not recognized by the GROUPER as valid CCs
for the asterisked principal diagnosis.
There are no new, revised, or deleted diagnosis codes for FY 2014.
Therefore, there are no Tables 6A, 6C, and 6E published for FY 2014.
There are no additions or deletions to the MS-DRG MCC List for FY
2014. There also are no additions or deletions to the MS-DRG CC List
for FY 2014. Therefore, there are no Tables 6I.1 through 6I.2 and 6J.1
through 6J.2 published for FY 2014.
Alternatively, the complete documentation of the GROUPER logic,
including the current CC Exclusions List, is available from 3M/Health
Information Systems (HIS), which, under contract with CMS, is
responsible for updating and maintaining the GROUPER program. The
current MS-DRG Definitions Manual, Version 30.0, is available on a CD
for $225.00. Version 31.0 of this manual, which includes the final FY
2014 MS-DRG changes, is available on a CD for $225.00. These manuals
may be obtained by writing 3M/HIS at the following address: 100 Barnes
Road, Wallingford, CT 06492; or by calling (203) 949-0303, or by
obtaining an order form at the Web site: https://www.3MHIS.com. Please
specify the revision or revisions requested.
10. Review of Procedure Codes in MS DRGs 981 through 983; 984 through
986; and 987 through 989
Each year, we review cases assigned to former CMS DRG 468
(Extensive O.R. Procedure Unrelated to Principal Diagnosis), CMS DRG
476 (Prostatic O.R. Procedure Unrelated to Principal Diagnosis), and
CMS DRG 477 (Nonextensive O.R. Procedure Unrelated to Principal
Diagnosis) to determine whether it would be appropriate to change the
procedures assigned among these CMS DRGs. Under the MS-DRGs that we
adopted for FY 2008, CMS DRG 468 was split three ways and became MS-
DRGs 981, 982, and 983 (Extensive O.R. Procedure Unrelated to Principal
Diagnosis with MCC, with CC, and without CC/MCC, respectively). CMS DRG
476 became MS-DRGs 984, 985, and 986 (Prostatic O.R. Procedure
Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC,
respectively). CMS DRG 477 became MS-DRGs 987, 988, and 989
(Nonextensive O.R. Procedure Unrelated to Principal Diagnosis with MCC,
with CC, and without CC/MCC, respectively).
MS-DRGs 981 through 983, 984 through 986, and 987 through 989
(formerly CMS DRGs 468, 476, and 477, respectively) are reserved for
those cases in which none of the O.R. procedures performed are related
to the principal diagnosis. These MS-DRGs are intended to capture
atypical cases, that is, those cases not occurring with sufficient
frequency to represent a distinct, recognizable clinical group. MS-DRGs
984 through 986 (previously CMS DRG 476) are assigned to those
discharges in which one or more of the following prostatic procedures
are performed and are unrelated to the principal diagnosis:
60.0 (Incision of prostate)
60.12 (Open biopsy of prostate)
60.15 (Biopsy of periprostatic tissue)
60.18 (Other diagnostic procedures on prostate and
periprostatic tissue)
60.21 (Transurethral prostatectomy)
60.29 (Other transurethral prostatectomy)
60.61 (Local excision of lesion of prostate)
60.69 (Prostatectomy, not elsewhere classified)
60.81 (Incision of periprostatic tissue)
60.82 (Excision of periprostatic tissue)
60.93 (Repair of prostate)
60.94 (Control of (postoperative) hemorrhage of prostate)
60.95 (Transurethral balloon dilation of the prostatic
urethra)
60.96 (Transurethral destruction of prostate tissue by
microwave thermotherapy)
60.97 (Other transurethral destruction of prostate tissue
by other thermotherapy)
60.99 (Other operations on prostate)
All remaining O.R. procedures are assigned to MS-DRGs 981 through
983 and 987 through 989, with MS-DRGs 987 through 989 assigned to those
discharges in which the only procedures performed are nonextensive
procedures that are unrelated to the principal diagnosis.\2\
---------------------------------------------------------------------------

\2\ The original list of the ICD-9-CM procedure codes for the
procedures we consider nonextensive procedures, if performed with an
unrelated principal diagnosis, was published in Table 6C in section
IV. of the Addendum to the FY 1989 final rule (53 FR 38591). As part
of the FY 1991 final rule (55 FR 36135), the FY 1992 final rule (56
FR 43212), the FY 1993 final rule (57 FR 23625), the FY 1994 final
rule (58 FR 46279), the FY 1995 final rule (59 FR 45336), the FY
1996 final rule (60 FR 45783), the FY 1997 final rule (61 FR 46173),
and the FY 1998 final rule (62 FR 45981), we moved several other
procedures from DRG 468 to DRG 477, and some procedures from DRG 477
to DRG 468. No procedures were moved in FY 1999, as noted in the
final rule (63 FR 40962), in the FY 2000 (64 FR 41496), in the FY
2001 (65 FR 47064), or in the FY 2002 (66 FR 39852). In the FY 2003
final rule (67 FR 49999), we did not move any procedures from DRG
477. However, we did move procedure codes from DRG 468 and placed
them in more clinically coherent DRGs. In the FY 2004 final rule (68
FR 45365), we moved several procedures from DRG 468 to DRGs 476 and
477 because the procedures are nonextensive. In the FY 2005 final
rule (69 FR 48950), we moved one procedure from DRG 468 to 477. In
addition, we added several existing procedures to DRGs 476 and 477.
In FY 2006 (70 FR 47317), we moved one procedure from DRG 468 and
assigned it to DRG 477. In FY 2007, we moved one procedure from DRG
468 and assigned it to DRGs 479, 553, and 554. In FYs 2008, 2009,
2010, 2011, 2012, and 2013, no procedures were moved, as noted in
the FY 2008 final rule with comment period (72 FR 46241), in the FY
2009 final rule (73 FR 48513), in the FY 2010 final rule (74 FR
43796), in the FY 2011 final rule (75 FR 50122), in the FY 2012
final rule (76 FR 51549), and in the FY 2013 final rule (77 FR
53321).

---------------------------------------------------------------------------

[[Page 50545]]

Our review of MedPAR claims data showed that there were no cases
that merited movement or should logically be assigned to any of the
other MDCs. Therefore, for FY 2014, we did not propose to change the
procedures assigned among these MS-DRGs.
We did not receive any public comments on this proposal. Therefore,
as we proposed, we are not making any changes to the procedures
assigned to MS-DRGs 981 through 983, MS-DRGs 984 through 986, and MS-
DRGs 987 through 989 for FY 2014.
a. Moving Procedure Codes from MS-DRGs 981 through 983 or MS-DRGs 987
through 989 into MDCs
We annually conduct a review of procedures producing assignment to
MS-DRGs 981 through 983 (Extensive O.R. procedure unrelated to
principal diagnosis with MCC, with CC, and without CC/MCC,
respectively) or MS-DRGs 987 through 989 (Nonextensive O.R. procedure
unrelated to principal diagnosis with MCC, with CC, and without CC/MCC,
respectively) on the basis of volume, by procedure, to see if it would
be appropriate to move procedure codes out of these MS-DRGs into one of
the surgical MS-DRGs for the MDC into which the principal diagnosis
falls. The data are arrayed in two ways for comparison purposes. We
look at a frequency count of each major operative procedure code. We
also compare procedures across MDCs by volume of procedure codes within
each MDC.
We identify those procedures occurring in conjunction with certain
principal diagnoses with sufficient frequency to justify adding them to
one of the surgical MS-DRGs for the MDC in which the diagnosis falls.
As noted above, there were no cases that merited movement or that
should logically be assigned to any of the other MDCs. Therefore, for
FY 2014, we did not propose to remove any procedures from MS-DRGs 981
through 983 or MS-DRGs 987 through 989 into one of the surgical MS-DRGs
for the MDC into which the principal diagnosis is assigned.
We did not receive any public comments on our proposal. Therefore,
as we proposed, we are not making any changes to the procedures
assigned to MS-DRGs 981 through 983 or MS-DRGs 987 through 989 for FY
2014.
b. Reassignment of Procedures Among MS-DRGs 981 Through 983, 984
Through 986, and 987 Through 989
We also annually review the list of ICD-9-CM procedures that, when
in combination with their principal diagnosis code, result in
assignment to MS-DRGs 981 through 983, 984 through 986 (Prostatic O.R.
procedure unrelated to principal diagnosis with MCC, with CC, or
without CC/MCC, respectively), and 987 through 989, to ascertain
whether any of those procedures should be reassigned from one of these
three MS-DRGs to another of the three MS-DRGs based on average costs
and the length of stay. We look at the data for trends such as shifts
in treatment practice or reporting practice that would make the
resulting MS-DRG assignment illogical. If we find these shifts, we
would propose to move cases to keep the MS-DRGs clinically similar or
to provide payment for the cases in a similar manner. Generally, we
move only those procedures for which we have an adequate number of
discharges to analyze the data.
There were no cases representing shifts in treatment practice or
reporting practice that would make the resulting MS-DRG assignment
illogical, or that merited movement so that cases should logically be
assigned to any of the other MDCs. Therefore, for FY 2014, we did not
propose to move any procedure codes among these MS-DRGs.
We did not receive any public comments on our proposal. Therefore,
as we proposed, we are not moving any procedures assigned to MS-DRGs
981 through 983, MS-DRGs 984 through 986, and MS-DRGs 987 through 989
for FY 2014.
c. Adding Diagnosis or Procedure Codes to MDCs
Based on the review of cases in the MDCs as described above in
sections II.G.1. through 6. of this preamble, we did not propose to add
any diagnosis or procedure codes to MDCs for FY 2014. We did not
receive any public comments on our proposal. Therefore, as we proposed,
we are not adding any diagnosis or procedure codes to MDCs for FY 2014.
11. Changes to the ICD-9-CM Coding System, Including Discussion of the
Replacement of the ICD-9-CM Coding System With the ICD-10-CM and ICD-
10-PCS Systems in FY 2014
a. ICD-9-CM Coding System
The ICD-9-CM is a coding system currently used for the reporting of
diagnoses and procedures performed on a patient. In September 1985, the
ICD-9-CM Coordination and Maintenance Committee was formed. This is a
Federal interdepartmental committee, co-chaired by the National Center
for Health Statistics (NCHS), the Centers for Disease Control and
Prevention, and CMS, charged with maintaining and updating the ICD-9-CM
system. The Committee is jointly responsible for approving coding
changes, and developing errata, addenda, and other modifications to the
ICD-9-CM to reflect newly developed procedures and technologies and
newly identified diseases. The Committee is also responsible for
promoting the use of Federal and non-Federal educational programs and
other communication techniques with a view toward standardizing coding
applications and upgrading the quality of the classification system.
The Official list of valid ICD-9-CM diagnosis and procedure codes
can be found on the CMS Web site at: https://cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/codes.html.
The NCHS has lead responsibility for the ICD-9-CM diagnosis codes
included in the Tabular List and Alphabetic Index for Diseases, while
CMS has lead responsibility for the ICD-9-CM procedure codes included
in the Tabular List and Alphabetic Index for Procedures.
The Committee encourages participation in the above process by
health related organizations. In this regard, the Committee holds
public meetings for discussion of educational issues and proposed
coding changes. These meetings provide an opportunity for
representatives of recognized organizations in the coding field, such
as the American Health Information Management Association (AHIMA), the
American Hospital Association (AHA), and various physician specialty
groups, as well as individual physicians, health information management
professionals, and other members of the public, to contribute ideas on
coding matters. After considering the opinions expressed at the public
meetings and in writing, the Committee formulates recommendations,
which then must be approved by the agencies.
The Committee presented proposals for coding changes for
implementation in FY 2014 at a public meeting held on September 19,
2012, and finalized the coding changes after consideration of comments
received at the meetings and in writing by November 16, 2012. In the FY
2014 IPPS/LTCH PPS proposed rule (78 FR 27525), we stated that there
were no changes to the ICD-9-CM coding system for FY 2014. There were
no new,

[[Page 50546]]

revised or deleted diagnosis or procedure codes for FY 2014 identified
at the time of the publication of the proposed rule. However, we noted
that there may be ICD-9-CM coding changes finalized after the proposed
rule based on public comments that we receive after the March 5, 2013
ICD-9-CM Coordination and Maintenance Committee meeting.
The Committee held its 2013 meeting on March 5, 2013. Any new codes
for which there was consensus of public support and for which complete
tabular and indexing changes were made by May 2013 are included in the
October 1, 2013 update to ICD-9-CM. Any code revisions that were
discussed at the March 5, 2013 Committee meeting but that could not be
finalized in time to include them in the tables listed in section VI.
of the Addendum to the proposed rule are included in Table 6B, which is
listed in section VI. of the Addendum to this final rule and available
via the Internet on the CMS Web site, and are marked with an asterisk
(*).
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27526), we stated
that, for FY 2014, there were no changes to the ICD-9-CM coding system
due to the partial code freeze or for new technology. However, at the
March 5, 2013 ICD-9-CM Coordination and Maintenance meeting, there were
two requests for codes for new technology. As discussed below, only
codes for new technologies or new diagnoses are being considered during
the partial code freeze. After discussions at the March 5, 2013 meeting
and public comments we received after the meeting, it was decided that
there will be four new procedure codes effective for October 1, 2014.
There are no new, revised, or deleted diagnosis codes and no revised or
deleted procedure codes that are usually announced in Tables 6A (New
Diagnosis Codes), 6C (Invalid Diagnosis Codes), 6D (Invalid Procedure
Codes), 6E (Revised Diagnosis Code Titles), and 6F (Revised Procedure
Codes). The new procedure codes are listed in Table 6B (New Procedure
Codes) for this final rule, which is available via the Internet on the
CMS Web site. Therefore, there are no Tables 6A and 6C through 6F
published as part of this final rule for FY 2014.
Copies of the minutes of the procedure codes discussions at the
Committee's September 19, 2012 meeting and March 5, 2013 meeting can be
obtained from the CMS Web site at: https://cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/?redirect=/icd9ProviderDiagnosticCodes/03_meetings.asp. The minutes of the
diagnosis codes discussions at the September 19, 2012 meeting and March
5, 2013 meeting are found at: https://www.cdc.gov/nchs/icd.htm. These
Web sites also provide detailed information about the Committee,
including information on requesting a new code, attending a Committee
meeting, and timeline requirements and meeting dates.
We encourage commenters to address suggestions on coding issues
involving diagnosis codes to: Donna Pickett, Co-Chairperson, ICD-9-CM
Coordination and Maintenance Committee, NCHS, Room 2402, 3311 Toledo
Road, Hyattsville, MD 20782. Comments may be sent by Email to:
dfp4@cdc.gov.
Questions and comments concerning the procedure codes should be
addressed to: Patricia E. Brooks, Co-Chairperson, ICD-9-CM Coordination
and Maintenance Committee, CMS, Center for Medicare Management,
Hospital and Ambulatory Policy Group, Division of Acute Care, C4-08-06,
7500 Security Boulevard, Baltimore, MD 21244-1850. Comments may be sent
by Email to: patricia.brooks2@cms.hhs.gov.
In the September 7, 2001 final rule implementing the IPPS new
technology add-on payments (66 FR 46906), we indicated we would attempt
to include proposals for procedure codes that would describe new
technology discussed and approved at the Spring meeting as part of the
code revisions effective the following October.
Section 503(a) of Public Law 108-173 included a requirement for
updating ICD-9-CM codes twice a year instead of a single update on
October 1 of each year. This requirement was included as part of the
amendments to the Act relating to recognition of new technology under
the IPPS. Section 503(a) amended section 1886(d)(5)(K) of the Act by
adding a clause (vii) which states that the ``Secretary shall provide
for the addition of new diagnosis and procedure codes on April 1 of
each year, but the addition of such codes shall not require the
Secretary to adjust the payment (or diagnosis-related group
classification) . . . until the fiscal year that begins after such
date.'' This requirement improves the recognition of new technologies
under the IPPS system by providing information on these new
technologies at an earlier date. Data will be available 6 months
earlier than would be possible with updates occurring only once a year
on October 1.
While section 1886(d)(5)(K)(vii) of the Act states that the
addition of new diagnosis and procedure codes on April 1 of each year
shall not require the Secretary to adjust the payment, or DRG
classification, under section 1886(d) of the Act until the fiscal year
that begins after such date, we have to update the DRG software and
other systems in order to recognize and accept the new codes. We also
publicize the code changes and the need for a mid-year systems update
by providers to identify the new codes. Hospitals also have to obtain
the new code books and encoder updates, and make other system changes
in order to identify and report the new codes.
The ICD-9-CM Coordination and Maintenance Committee holds its
meetings in the spring and fall in order to update the codes and the
applicable payment and reporting systems by October 1 of each year.
Items are placed on the agenda for the ICD-9-CM Coordination and
Maintenance Committee meeting if the request is received at least 2
months prior to the meeting. This requirement allows time for staff to
review and research the coding issues and prepare material for
discussion at the meeting. It also allows time for the topic to be
publicized in meeting announcements in the Federal Register as well as
on the CMS Web site. The public decides whether or not to attend the
meeting based on the topics listed on the agenda. Final decisions on
code title revisions are currently made by March 1 so that these titles
can be included in the IPPS proposed rule. A complete addendum
describing details of all changes to ICD-9-CM, both tabular and index,
is published on the CMS and NCHS Web sites in May of each year.
Publishers of coding books and software use this information to modify
their products that are used by health care providers. This 5-month
time period has proved to be necessary for hospitals and other
providers to update their systems.
A discussion of this timeline and the need for changes are included
in the December 4-5, 2005 ICD-9-CM Coordination and Maintenance
Committee Meeting minutes. The public agreed that there was a need to
hold the fall meetings earlier, in September or October, in order to
meet the new implementation dates. The public provided comment that
additional time would be needed to update hospital systems and obtain
new code books and coding software. There was considerable concern
expressed about the impact this new April update would have on
providers.
In the FY 2005 IPPS final rule, we implemented section
1886(d)(5)(K)(vii) of the Act, as added by section 503(a) of Public Law
108-173, by developing a mechanism for approving, in time for

[[Page 50547]]

the April update, diagnosis and procedure code revisions needed to
describe new technologies and medical services for purposes of the new
technology add-on payment process. We also established the following
process for making these determinations. Topics considered during the
Fall ICD-9-CM Coordination and Maintenance Committee meeting are
considered for an April 1 update if a strong and convincing case is
made by the requester at the Committee's public meeting. The request
must identify the reason why a new code is needed in April for purposes
of the new technology process. The participants at the meeting and
those reviewing the Committee meeting summary report are provided the
opportunity to comment on this expedited request. All other topics are
considered for the October 1 update. Participants at the Committee
meeting are encouraged to comment on all such requests. There were no
requests approved for an expedited April l, 2013 implementation of an
ICD-9-CM code at the September 19, 2012 Committee meeting. Therefore,
there were no new ICD-9-CM codes implemented on April 1, 2013.
Current addendum and code title information is published on the CMS
Web site at: https://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/?redirect=/
icd9ProviderDiagnosticCodes/01overview.asp#TopofPage. Information on
ICD-9-CM diagnosis codes, along with the Official ICD-9-CM Coding
Guidelines, can be found on the Web site at: https://www.cdc.gov/nchs/icd9.htm. Information on new, revised, and deleted ICD-9-CM codes is
also provided to the AHA for publication in the Coding Clinic for ICD-
9-CM. AHA also distributes information to publishers and software
vendors.
CMS also sends copies of all ICD-9-CM coding changes to its
Medicare contractors for use in updating their systems and providing
education to providers.
These same means of disseminating information on new, revised, and
deleted ICD-9-CM codes will be used to notify providers, publishers,
software vendors, contractors, and others of any changes to the ICD-9-
CM codes that are implemented in April. The code titles are adopted as
part of the ICD-9-CM Coordination and Maintenance Committee process.
Therefore, although we publish the code titles in the IPPS proposed and
final rules, they are not subject to comment in the proposed or final
rules. We will continue to publish the October code updates in this
manner within the IPPS proposed and final rules. For codes that are
implemented in April, we will assign the new procedure code to the same
MS-DRG in which its predecessor code was assigned so there will be no
MS-DRG impact as far as MS-DRG assignment. Any midyear coding updates
will be available through the Web sites indicated above and through the
Coding Clinic for ICD-9-CM. Publishers and software vendors currently
obtain code changes through these sources in order to update their code
books and software systems. We will strive to have the April 1 updates
available through these Web sites 5 months prior to implementation
(that is, early November of the previous year), as is the case for the
October 1 updates.
b. Code Freeze
The International Classification of Diseases, 10th Revision (ICD-
10) coding system applicable to hospital inpatient services was to be
implemented on October 1, 2013, as described in the Health Insurance
Portability and Accountability Act of 1996 (HIPAA) Administrative
Simplification: Modifications to Medical Data Code Set Standards to
Adopt ICD-10-CM and ICD-10-PCS final rule (74 FR 3328 through 3362,
January 16, 2009). However, the Secretary of Health and Human Services
issued a final rule that delays, from October 1, 2013, to October 1,
2014, the compliance date for the International Classification of
Diseases, 10th Edition diagnosis and procedure codes (ICD-10). The
final rule, CMS-0040-F, was published in the Federal Register on
September 5, 2012 (77 FR 54664) and is available for viewing on the
Internet at: https://www.gpo.gov/fdsys/pkg/FR-2012-09-05/pdf/2012-21238.pdf.
The ICD-10 coding system includes the International Classification
of Diseases, 10th Revision, Clinical Modification (ICD-10-CM) for
diagnosis coding and the International Classification of Diseases, 10th
Revision, Procedure Coding System (ICD-10-PCS) for inpatient hospital
procedure coding, as well as the Official ICD-10-CM and ICM-10-PCS
Guidelines for Coding and Reporting. In the January 16, 2009 ICD-10-CM
and ICD-10-PCS final rule (74 FR 3328 through 3362), there was a
discussion of the need for a partial or total freeze in the annual
updates to both ICD-9-CM and ICD-10-CM and ICD-10-PCS codes. The public
comment addressed in that final rule stated that the annual code set
updates should cease l year prior to the implementation of ICD-10. The
commenters stated that this freeze of code updates would allow for
instructional and/or coding software programs to be designed and
purchased early, without concern that an upgrade would take place
immediately before the compliance date, necessitating additional
updates and purchases.
HHS responded to comments in the ICD-10 final rule that the ICD-9-
CM Coordination and Maintenance Committee has jurisdiction over any
action impacting the ICD-9-CM and ICD-10 code sets. Therefore, HHS
indicated that the issue of consideration of a moratorium on updates to
the ICD-9-CM, ICD-10-CM, and ICD-10-PCS code sets in anticipation of
the adoption of ICD-10-CM and ICD-10-PCS would be addressed through the
Committee at a future public meeting.
The code freeze was discussed at multiple meetings of the ICD-9-CM
Coordination and Maintenance Committee and public comment was actively
solicited. The Committee evaluated all comments from participants
attending the Committee meetings as well as written comments that were
received. The Committee also considered the delay in implementation of
ICD-10 until October 1, 2014. There was an announcement at the
September 19, 2012 ICD-9-CM Coordination and Maintenance Committee
meeting that a partial freeze of both ICD-9-CM and ICD-10 codes will be
implemented as follows:
The last regular annual update to both ICD-9-CM and ICD-10
code sets was made on October 1, 2011.
On October 1, 2012 and October 1, 2013, there will be only
limited code updates to both ICD-9-CM and ICD-10 code sets to capture
new technology and new diseases.
On October 1, 2014, there were to be only limited code
updates to ICD-10 code sets to capture new technology and diagnoses as
required by section 503(a) of Public Law 108-173. There were to be no
updates to ICD-9-CM on October 1, 2014, as the system would no longer
be a HIPAA standard and, therefore, no longer be used for reporting.
On October 1, 2015, one year after the implementation of
ICD-10, regular updates to ICD-10 will begin.
The ICD-9-CM Coordination and Maintenance Committee announced that
it would continue to meet twice a year during the freeze. At these
meetings, the public will be encouraged to comment on whether or not
requests for new diagnosis and procedure codes should be created based
on the need to capture new technology and new diseases. Any code
requests that do not meet the criteria will be evaluated for
implementation within ICD-10 on or

[[Page 50548]]

after October 1, 2015, once the partial freeze is ended.
Complete information on the partial code freeze and discussions of
the issues at the Committee meetings can be found on the ICD-9-CM
Coordination and Maintenance Committee Web site at: https://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/meetings.html. A summary of the September 19, 2012 Committee meeting,
along with both written and audio transcripts of this meeting, are
posted on the Web site at: https://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials-Items/2012-09-19-MeetingMaterials.html.
Comment: Several commenters supported the partial code freeze which
is limited to the creation of new ICD-9-CM and ICD-10-CM/PCS codes to
capture new technologies and diseases through FY 2015. The commenters
stated that if new codes can still be introduced into ICD-10-CM/PCS in
FY 2015, it will make the resolution of any issues more complex and
costly. Specifically, they stated that successful implementation of
ICD-10-CM/PCS will require significant planning, education, and systems
modifications. The commenters stated that while the adoption of ICD-10-
CM/PCS is welcome and long overdue, implementation of the new system
must be carefully orchestrated to minimize the administrative burden on
providers. At a time when in the health care field, all payers and
other stakeholders are struggling to meet deadlines to change their
systems and test their changes with all their trading partners, the
commenters believed it would be catastrophic to have to make additional
changes during nationwide implementation of ICD-10.
Response: We agree with the commenters that the partial code freeze
has been extremely beneficial in minimizing the administrative burden
on providers that are preparing for the implementation of ICD-10 on
October 1, 2014. This partial code freeze has dramatically decreased
the number of codes created each year as shown by the following
information.

Total Number of Codes and Changes in Total Number of Codes per Fiscal Year
----------------------------------------------------------------------------------------------------------------
ICD-9-CM Codes ICD-10-CM and ICD-10-PCS Codes
----------------------------------------------------------------------------------------------------------------
Fiscal Year Number Change Fiscal Year Number Change
----------------------------------------------------------------------------------------------------------------
FY 2009 (October 1, 2008): FY 2009:
Diagnoses.................... 14,025 348 ICD-10-CM....... 68,069 +5
Procedures................... 3,824 56 ICD-10-PCS...... 72,589 -14,327
FY 2010 (October 1, 2009): FY 2010:
Diagnoses.................... 14,315 290 ICD-10-CM....... 69,099 +1,030
Procedures................... 3,838 14 ICD-10-PCS...... 71,957 -632
FY 2011 (October 1, 2010):
Diagnoses.................... 14,432 117 ICD-10-CM....... 69,368 +269
Procedures................... 3,859 21 ICD-10-PCS...... 72,081 +124
FY 2012 (October 1, 2011): FY 2012:
Diagnoses.................... 14,567 135 ICD-10-CM....... 69,833 +465
Procedures................... 3,877 18 ICD-10-PCS...... 71,918 -163
FY 2013 (October 1, 2012): FY 2013:
Diagnoses.................... 14,567 0 ICD-10-CM....... 69,832 -1
Procedures................... 3,878 1 ICD-10-PCS...... 71,920 +2
FY 2014 (October 1, 2013): FY 2014:
Diagnoses.................... 14,567 0 ICD-10-CM....... 69,823 -9
Procedures................... 3,882 4 ICD-10-PCS...... 71,924 +4
----------------------------------------------------------------------------------------------------------------

As mentioned earlier, the public is provided the opportunity to
comment on any requests for new diagnosis or procedure codes discussed
at the ICD-9-CM Coordination and Maintenance Committee meeting. The
public has supported only a limited number of new codes during this
partial code freeze, as can be seen by data shown above. We have gone
from creating several hundred new codes each year to creating only a
limited number of new ICD-9-CM and ICD-10 codes. At the September 18-
19, 2013 and March 19-20, 2014 Committee meetings, we will be
discussing any requests for new ICD-10-CM diagnosis and ICD-10-PCS
procedure codes to be implemented on October 1, 2014. We will not be
discussing ICD-9-CM codes because we will not be using ICD-9-CM for
encounters occurring on or after October 1, 2014. The public will be
given the opportunity to comment on whether or not new ICD-10-CM and
ICD-10-PCS codes should be created effective October 1, 2014, based on
the partial code freeze criteria as to whether they are needed to
capture new diagnoses or new technologies, or whether the codes should
be created after the partial code freeze ends on October 1, 2015. We
welcome public comments on any code requests discussed at the September
18-19, 2013 and March 19-20, 2014 Committee meetings for implementation
on October 1, 2014.
Comment: One commenter requested that CMS publish the list of any
new ICD-10-CM and ICD-10-PCS codes in the IPPS final rule. The
commenter pointed out that annual ICD-9-CM updates are currently
included in the IPPS proposed and final rules. The commenter mentioned
that the ICD-9-CM Coordination and Maintenance Committee is addressing
requests for new ICD-10 codes that would be created during the code
freeze as well as codes that would be created after the code freeze
ends. The commenter wanted to receive interim decisions on any new ICD-
10 codes that might be created after the code freeze ends on October 1,
2015. The commenter also requested that CMS assign ICD-9-CM codes or
temporary Healthcare Common Procedure Coding System (HCPCS) codes to
procedures provided in connection with newly approved ICD-10-PCS codes.
Finally, the commenter requested that CMS establish October 1, 2014 as
the effective date for all ICD-10 code set updates.
Response: We will address the commenter's last request first. As
discussed earlier, October 1, 2014 has been established as the
implementation date for ICD-10. This date was established through
rulemaking (77 FR 54664). We have provided this information on our ICD-
10 Web site at:

[[Page 50549]]

https://www.cms.hhs.gov/Medicare/Coding/ICD10/.
CMS currently posts updates of ICD-9-CM procedure codes in June of
each year on its Web page at: https://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ . CMS also includes information
on ICD-9-CM code updates within the IPPS proposed and final rules
because these codes are used to determine the MS-DRG assignment. Any
new, revised, or deleted ICD-9-CM diagnoses or procedure codes are
described in Tables 6A through 6F. We include this information along
with the proposed and final MS-DRG assignment for new ICD-9-CM codes in
our rules because it impacts inpatient payment. CDC posts updates of
ICD-9-CM diagnosis codes in June of each year on its Web site at:
https://www.cdc.gov/nchs/icd/icd9cm.html. We do not include new,
revised, or deleted ICD-10-CM/PCS codes in the current IPPS rule
because the ICD-10 codes are not currently used with the MS-DRGs. Once
ICD-10 is implemented, and the MS-DRGs are based on ICD-10 codes, we
will provide information on new, revised, or deleted ICD-10 codes in
Tables 6A through 6F.
CMS posts annual updates to ICD-10-CM and ICD-10-PCS codes in June
of each year on its ICD-10 Web page at: https://www.cms.hhs.gov/Medicare/Coding/ICD10/. CDC also posts annual updates to ICD-
10-CM codes in June of each year on its Web site at: https://www.cdc.gov/nchs/icd/icd10cm.htm . We believe we provide the public
complete and regular updates on any annual updates to both ICD-9-CM and
ICD-10 codes. Any new, revised, or deleted ICD-10-CM/PCS codes as part
of the FY 2016 (October 1, 2015) updates will be posted on CMS' ICD-10
Web site in June 2015. No final decisions have been made at this time
on the October 1, 2015 ICD-10 code updates.
On the issue of CMS assigning ICD-9-CM codes or temporary HCPCS
codes to procedures provided in connection with newly approved ICD-10-
PCS codes, we would point out that mapping between ICD-10-PCS and ICD-
9-CM procedure codes is provided in the annual updates to the General
Equivalence Mappings (GEMs). The GEMs are updated annually based on
updates to ICD-10 codes and are posted on our ICD-10 Web site in
October of each year. The ICD-10 Web site can be found at: https://www.cms.hhs.gov/Medicare/Coding/ICD10/. The GEMs map between
ICD-9-CM and ICD-10 codes because the ICD-10 codes will replace ICD-9-
CM codes. The GEMs do not map between ICD-10 and HCPCS codes because
ICD-10 will not replace HCPCS codes. HCPCS codes will continue to be
used for reported ambulatory and physician services.
c. Processing of 25 Diagnosis Codes and 25 Procedure Codes on Hospital
Inpatient Claims
CMS is currently processing all 25 diagnosis codes and 25 procedure
codes submitted on electronic hospital inpatient claims. Prior to
January 1, 2011, hospitals could submit up to 25 diagnoses and 25
procedures. However, CMS' system limitations allowed for the processing
of only the first 9 diagnosis codes and 6 procedure codes. We discussed
this change in processing claims in the FY 2011 IPPS/LTCH PPS final
rule (75 FR 50127), in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR
25843), in a correction notice issued in the Federal Register on June
14, 2011 (76 FR 24633), and in the FY 2012 IPPS/LTCH PPS final rule (76
FR 51553). As discussed in these prior rules, CMS undertook an
expansion of our internal system capability so that we are able to
process up to 25 diagnoses and 25 procedures on hospital inpatient
claims as part of the HIPAA ASC X12 Technical Reports Type 3, Version
005010 (Version 5010) standards system update. We recognize the value
of the additional information provided by this coded data for multiple
uses such as for payment, quality measures, outcome analysis, and other
important uses. We will continue to process up to 25 diagnosis codes
and 25 procedure codes when received on the 5010 format.
d. ICD-10 MS-DRGs
In response to the FY 2011 IPPS/LTCH PPS proposed rule, we received
comments on the creation of the ICD-10 version of the MS-DRGs, which
will be implemented at the same time as ICD-10 (75 FR 50127 and 50128).
As we stated earlier, the Secretary of Health and Human Services has
delayed the compliance date of ICD-10 from October 1, 2013 to October
1, 2014 (77 FR 54664). While we did not propose an ICD-10 version of
the MS DRGs in the FY 2011 IPPS/LTCH PPS proposed rule, we noted that
we have been actively involved in converting our current MS-DRGs from
ICD-9-CM codes to ICD-10 codes and sharing this information through the
ICD-9-CM Coordination and Maintenance Committee. We undertook this
early conversion project to assist other payers and providers in
understanding how to go about their own conversion projects. We posted
ICD-10 MS-DRGs based on Version 26.0 (FY 2009) of the MS-DRGs. We also
posted a paper that describes how CMS went about completing this
project and suggestions for others to follow. All of this information
can be found on the CMS Web site at: https://cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. We have continued
to keep the public updated on our maintenance efforts for ICD-10-CM and
ICD 10-PCS coding systems, as well as the General Equivalence Mappings
that assist in conversion through the ICD-9-CM Coordination and
Maintenance Committee. Information on these committee meetings can be
found on the CMS Web site at: https://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/.
During FY 2011, we developed and posted Version 28.0 of the ICD-10
MS-DRGs based on the FY 2011 MS-DRGs (Version 28.0) that we finalized
in the FY 2011 IPPS/LTCH PPS final rule on the CMS Web site. This ICD-
10 MS-DRGs Version 28.0 also included the CC Exclusion List and the
ICD-10 version of the hospital-acquired conditions (HACs), which was
not posted with Version 26.0. We also discussed this update at the
September 15-16, 2010 and the March 9-10, 2011 meetings of the ICD-9-CM
Coordination and Maintenance Committee. The minutes of these two
meetings are posted on the CMS Web site at: https://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/.
We reviewed comments on the ICD-10 MS-DRGs Version 28.0 and made
updates as a result of these comments. We called the updated version
the ICD-10 MS DRGs Version 28 R1. We posted a Definitions Manual of
ICD-10 MS-DRGs Version 28 R1 on our ICD-10 MS-DRG Conversion Project
Web site at: https://cms.hhs.gov/Medicare/Coding/ICD10/ICD10-MS-DRG-Conversion-Project.html. To make the review of Version 28 R1 updates
easier for the public, we also made available pilot software on a CD-
ROM that could be ordered through the National Technical Information
Service (NTIS). A link to the NTIS ordering page was provided on the
CMS ICD-10 MS-DRG Web page. We stated that we believed that, by
providing the ICD-10 MS-DRG Version 28 R1 Pilot Software (distributed
on CD-ROM), the public would be able to more easily review and provide
feedback on updates to the ICD-10 MS-DRGs. We discussed the updated
ICD-10 MS-DRGs Version 28 R1 at the September 14, 2011 ICD-9-CM
Coordination and Maintenance Committee meeting. We encouraged the

[[Page 50550]]

public to continue to review and provide comments on the ICD-10 MS-DRGs
so that CMS could continue to update the system.
In FY 2012, we prepared the ICD-10 MS-DRGs Version 29.0, based on
the FY 2012 MS-DRGs (Version 29.0) that we finalized in the FY 2012
IPPS/LTCH PPS final rule. We posted a Definitions Manual of ICD-10 MS-
DRGs Version 29.0 on our ICD-10 MS-DRG Conversion Project Web site. We
also prepared a document that describes changes made from Version 28.0
to Version 29.0 to facilitate a review. The ICD-10 MS-DRGs Version 29.0
was discussed at the ICD-9-CM Coordination and Maintenance Committee
meeting on March 5, 2012. Information was provided on the types of
updates made. Once again the public was encouraged to review and
comment on the most recent update to the ICD-10 MS-DRGs.
CMS prepared the ICD-10 MS-DRGs Version 30.0 based on the FY 2013
MS-DRGs (Version 30.0) that we finalized in the FY 2013 IPPS/LTCH PPS
final rule. We posted a Definitions Manual of the ICD-10 MS-DRGs
Version 30.0 on our ICD-10 MS-DRG Conversion Project Web site at:
https://www.cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. We also prepared a document that describes changes made
from Version 29.0 to Version 30.0 to facilitate a review. We produced
mainframe and computer software for Version 30.0, which was made
available to the public in February 2013. Information on ordering the
mainframe and computer software through NTIS can be found on the CMS
Web site at: https://cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html under the ``Related Links'' section. This ICD-
10 MS-DRGs Version 30.0 computer software should facilitate additional
review of the ICD-10 MS-DRGs conversion.
We provided information on a study conducted on the impact on
converting MS-DRGs to ICD-10. Information on this study is summarized
in a paper entitled ``Impact of the Transition to ICD-10 on Medicare
Inpatient Hospital Payments.'' This paper was posted on the CMS ICD-10
MS-DRGs Conversion Project Web site and was distributed and discussed
at the September 15, 2010 ICD-9-CM Coordination and Maintenance
Committee meeting. The paper described CMS' approach to the conversion
of the MS-DRGs from ICD-9-CM codes to ICD-10 codes. The study was
undertaken using the ICD-9-CM MS-DRGs Version 27.0 (FY 2010) and
converted to the ICD-10 MS-DRGs Version 27.0. The study estimated the
impact on aggregate payment to hospitals and the distribution of
payments across hospitals. The impact of the conversion from ICD-9-CM
to ICD-10 on Medicare MS-DRG hospital payments was estimated using 2009
Medicare data. The study found a hospital payment increase of 0.05
percent using the ICD-10 MS-DRGs Version 27.0.
CMS provided an overview of this hospital payment impact study at
the March 5, 2012 ICD-9-CM Coordination and Maintenance Committee
meeting. This presentation followed presentations on the creation of
ICD-10 MS-DRGs Version 29.0. A summary report of this meeting can be
found on the CMS Web site at: https://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/. At this March 2012 meeting, CMS
announced that it would produce an update on this impact study based on
an updated version of the ICD 10 MS-DRGs. This update of the impact
study was presented at the March 5, 2013 ICD-9-CM Coordination and
Maintenance Committee meeting. The updated paper is posted on CMS' Web
site at: https://cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html under the ``Downloads'' section. Information on
the March 5, 2013 ICD-9-CM Coordination and Maintenance Committee
meeting can be found on the CMS Web site at: https://cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials.html. This update of the impact paper and the ICD-10 MS-DRG
Version 30.0 software will provide additional information to the public
who are evaluating the conversion of the MS-DRGs to ICD-10 MS-DRGs.
We will continue to work with the public to explain how we are
approaching the conversion of MS-DRGs to ICD-10 and will post drafts of
updates as they are developed for public review. The final version of
the ICD-10 MS-DRGs will be implemented at the same time as ICD-10 and
will be subject to notice and comment rulemaking. In the meantime, we
will provide extensive and detailed information on this activity
through the ICD-9-CM Coordination and Maintenance Committee.
Comment: Several commenters complimented CMS on making available
the Version 30.0 ICD-10 MS-DRGs software and Definitions Manual. The
commenters found these tools to be useful as hospitals prepare for ICD-
10 implementation. The commenters stated that this information allowed
hospitals to analyze the impact of these changes, including thorough
financial analysis and modeling, and allowed for hands-on training of
medical coders. The commenters stated that information from other
payment systems, such as those for CAHs, IPFs, and IRFs would also be
helpful as hospitals prepare for ICD-10-CM/PCS implementation.
Response: We appreciate the positive feedback on our efforts to
develop an ICD-10 version of the MS-DRGs and to use this approach in
updating other ICD-9-CM based payment systems from ICD-9-CM to ICD-10-
CM/PCS codes.
12. Public Comments on Issues Not Addressed in the Proposed Rule
We received two public comments regarding MS-DRG issues that were
outside of the scope of the proposals included in the FY 2014 IPPS/LTCH
PPS proposed rule. We have summarized these public comments below.
However, because these public comments were outside of the scope of the
proposed rule, we are not addressing them in this final rule. As stated
in section II.G. of the preamble of this final rule, we encourage
individuals with comments about MS-DRG classifications to submit these
comments no later than December of each year so they can be considered
for possible inclusion in the annual proposed rule and, if included,
may be subjected to public review and comment. We will consider these
comments for possible proposals in future rulemaking as part of our
annual review process.
a. Intracerebral Therapies
One commenter requested that CMS create a new MS-DRG for
intracerebral therapies, including implantation of chemotherapeutic
agents.
b. Porphyria
One commenter requested that a new MS-DRG be created for porphyria
cases.

H. Recalibration of the FY 2014 MS-DRG Relative Weights

1. Data Sources for Developing the Relative Weights
In developing the FY 2014 system of weights, we used two data
sources: Claims data and cost report data. As in previous years, the
claims data source is the MedPAR file. This file is based on fully
coded diagnostic and procedure data for all Medicare inpatient hospital
bills. The FY 2012 MedPAR data used in this final rule include
discharges occurring on October 1, 2011, through September 30, 2012,
based on bills received by CMS through March 31,

[[Page 50551]]

2013, from all hospitals subject to the IPPS and short-term, acute care
hospitals in Maryland (which are under a waiver from the IPPS under
section 1814(b)(3) of the Act). The FY 2012 MedPAR file used in
calculating the relative weights includes data for approximately
10,363,200 Medicare discharges from IPPS providers. Discharges for
Medicare beneficiaries enrolled in a Medicare Advantage managed care
plan are excluded from this analysis. These discharges are excluded
when the MedPAR ``GHO Paid'' indicator field on the claim record is
equal to ``1'' or when the MedPAR DRG payment field, which represents
the total payment for the claim, is equal to the MedPAR ``Indirect
Medical Education (IME)'' payment field, indicating that the claim was
an ``IME only'' claim submitted by a teaching hospital on behalf of a
beneficiary enrolled in a Medicare Advantage managed care plan. In
addition, the March 31, 2013 update of the FY 2012 MedPAR file complies
with version 5010 of the X12 HIPAA Transaction and Code Set Standards,
and includes a variable called ``claim type.'' Claim type ``60''
indicates that the claim was an inpatient claim paid as fee-for-
service. Claim types ``61,'' ``62,'' ``63,'' and ``64'' relate to
encounter claims, Medicare Advantage IME claims, and HMO no-pay claims.
Therefore, the calculation of the relative weights for FY 2014 also
excludes claims with claim type values not equal to ``60.'' The data
exclude CAHs, including hospitals that subsequently became CAHs after
the period from which the data were taken. The second data source used
in the cost-based relative weighting methodology is the Medicare cost
report data files from the HCRIS. Normally, we use the HCRIS dataset
that is 3 years prior to the IPPS fiscal year. Specifically, we used
cost report data from the March 31, 2013 update of the FY 2011 HCRIS
for calculating the FY 2014 cost-based relative weights.
2. Methodology for Calculation of the Relative Weights
As we explain in section II.E.2. of the preamble of this final
rule, as we proposed in the FY 2014 IPPS/LTCH PPS proposed rule, we are
calculating the relative weights based on 19 CCRs, instead of the 15
CCRs previously used. The methodology we used to calculate the FY 2014
MS-DRG cost-based relative weights based on claims data in the FY 2012
MedPAR file and data from the FY 2011 Medicare cost reports is as
follows:
To the extent possible, all the claims were regrouped
using the FY 2014 MS-DRG classifications discussed in sections II.B.
and II.G. of the preamble of this final rule.
The transplant cases that were used to establish the
relative weights for heart and heart-lung, liver and/or intestinal, and
lung transplants (MS-DRGs 001, 002, 005, 006, and 007, respectively)
were limited to those Medicare-approved transplant centers that have
cases in the FY 2011 MedPAR file. (Medicare coverage for heart, heart-
lung, liver and/or intestinal, and lung transplants is limited to those
facilities that have received approval from CMS as transplant centers.)
Organ acquisition costs for kidney, heart, heart-lung,
liver, lung, pancreas, and intestinal (or multivisceral organs)
transplants continue to be paid on a reasonable cost basis. Because
these acquisition costs are paid separately from the prospective
payment rate, it is necessary to subtract the acquisition charges from
the total charges on each transplant bill that showed acquisition
charges before computing the average cost for each MS-DRG and before
eliminating statistical outliers.
Claims with total charges or total lengths of stay less
than or equal to zero were deleted. Claims that had an amount in the
total charge field that differed by more than $10.00 from the sum of
the routine day charges, intensive care charges, pharmacy charges,
special equipment charges, therapy services charges, operating room
charges, cardiology charges, laboratory charges, radiology charges,
other service charges, labor and delivery charges, inhalation therapy
charges, emergency room charges, blood charges, and anesthesia charges
were also deleted.
At least 92.7 percent of the providers in the MedPAR file
had charges for 14 of the 19 cost centers. All claims of providers that
did not have charges greater than zero for at least 14 of the 19 cost
centers were deleted. In other words, a provider must have no more than
five blank cost centers. If a provider did not have charges greater
than zero in more than five cost centers, the claims for the provider
were deleted. For FY 2014, as explained in section II.E.2. of the
preamble of this final rule, we are calculating the relative weights
using 19 cost centers instead of the 15 cost centers previously used in
calculating the FY 2013 relative weights. In the FY 2014 IPPS/LTCH PPS
proposed rule, we proposed, in calculating the FY 2014 relative
weights, to continue to remove claims of providers with more than five
blank cost centers from the dataset used to calculate the relative
weights. (We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77
FR 53326) for the edit threshold related to FY 2013 and prior fiscal
years). In recent years, this trim kept approximately 96 percent of
IPPS providers in the MedPAR file upon which we base our relative
weight calculations. (For examples of our FYs 2012 and 2013 relative
weight calculations, we refer readers to the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51558) and the FY 2013 IPPS/LTCH PPS final rule 77 FR
53326).) However, under the proposal to add 4 cost centers to the
relative weight calculations, which we are finalizing in this final
rule, this trim kept approximately 92.7 percent of the IPPS providers
in the MedPAR file upon which we base our final FY 2014 relative weight
calculations.
Although this trim is now removing a greater percentage of
providers' claims from the relative weight calculations than were
previously removed in prior years, we stated in the proposed rule our
belief that it is appropriate to propose to continue to remove
providers' claims that do not have charges greater than zero in more
than five cost centers. We stated that we believe that this proposal is
appropriate because we are not introducing new costs into the relative
weight calculation; we are only making use of more refined, granular
costs by breaking out implantable devices from the Supplies and
Equipment CCR, MRIs and CT scans from the Radiology CCR, and cardiac
catheterization from the Cardiology CCR. Furthermore, because we are
making use of more refined cost report data for these cost centers, we
believe that it is also appropriate to edit the claims with a more
refined threshold. We invited public comments on the proposal to trim
the data used in our relative weight calculations. However, we did not
receive any public comments on this proposal. Therefore, for the
reasons described above, we are finalizing this policy as proposed.
Statistical outliers were eliminated by removing all cases
that were beyond 3.0 standard deviations from the geometric mean of the
log distribution of both the total charges per case and the total
charges per day for each MS-DRG.
Effective October 1, 2008, because hospital inpatient
claims include a POA indicator field for each diagnosis present on the
claim, only for purposes of relative weight-setting, the POA indicator
field was reset to ``Y'' for ``Yes'' for all claims that otherwise have
an ``N'' (No) or a ``U'' (documentation insufficient to determine if
the

[[Page 50552]]

condition was present at the time of inpatient admission) in the POA
field.
Under current payment policy, the presence of specific HAC codes,
as indicated by the POA field values, can generate a lower payment for
the claim. Specifically, if the particular condition is present on
admission (that is, a ``Y'' indicator is associated with the diagnosis
on the claim), it is not a HAC, and the hospital is paid for the higher
severity (and, therefore, the higher weighted MS-DRG). If the
particular condition is not present on admission (that is, an ``N''
indicator is associated with the diagnosis on the claim) and there are
no other complicating conditions, the DRG GROUPER assigns the claim to
a lower severity (and, therefore, the lower weighted MS-DRG) as a
penalty for allowing a Medicare inpatient to contract a HAC. While the
POA reporting meets policy goals of encouraging quality care and
generates program savings, it presents an issue for the relative
weight-setting process. Because cases identified as HACs are likely to
be more complex than similar cases that are not identified as HACs, the
charges associated with HAC cases are likely to be higher as well.
Therefore, if the higher charges of these HAC claims are grouped into
lower severity MS-DRGs prior to the relative weight-setting process,
the relative weights of these particular MS-DRGs would become
artificially inflated, potentially skewing the relative weights. In
addition, we want to protect the integrity of the budget neutrality
process by ensuring that, in estimating payments, no increase to the
standardized amount occurs as a result of lower overall payments in a
previous year that stem from using weights and case-mix that are based
on lower severity MS-DRG assignments. If this would occur, the
anticipated cost savings from the HAC policy would be lost.
To avoid these problems, we reset the POA indicator field to ``Y''
only for relative weight-setting purposes for all claims that otherwise
have an ``N'' or a ``U'' in the POA field. This resetting ``forced''
the more costly HAC claims into the higher severity MS-DRGs as
appropriate, and the relative weights calculated for each MS-DRG more
closely reflect the true costs of those cases.
Once the MedPAR data were trimmed and the statistical outliers were
removed, the charges for each of the 19 cost groups for each claim were
standardized to remove the effects of differences in area wage levels,
IME and DSH payments, and for hospitals located in Alaska and Hawaii,
the applicable cost-of-living adjustment. Because hospital charges
include charges for both operating and capital costs, we standardized
total charges to remove the effects of differences in geographic
adjustment factors, cost-of-living adjustments, and DSH payments under
the capital IPPS as well. Charges were then summed by MS-DRG for each
of the 19 cost groups so that each MS-DRG had 19 standardized charge
totals. These charges were then adjusted to cost by applying the
national average CCRs developed from the FY 2011 cost report data.
The 19 cost centers that we used in the final relative weight
calculation are shown in the following table. The table shows the lines
on the cost report and the corresponding revenue codes that we used to
create the 19 national cost center CCRs. (We note that we have made
several changes to the table, most importantly, to remove the columns
listing the cost centers from the CMS Form 2552-96 cost reports.
Because we are using data from FY 2011 cost reports, which were filed
on the CMS Form 2552-10, the columns referencing the CMS Form 2552-96
cost report are no longer relevant. We also have updated and refined
the table to reflect the 19 CCRs, instead of the previous 15 CCRs, and
we have made some minor corrections to revenue codes and cost report
cost centers that are grouped with each CCR.)
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[[Page 50569]]

In the table above, revenue code 0274 is listed among the revenue
codes included in the Supplies and Equipment CCR. In the actual
calculation of the Supplies and Equipment CCR for the FY 2014 proposed
rule, we inadvertently included charges from MedPAR associated with
revenue 0274 in the Implantable Devices CCR. For this final rule, we
have corrected this oversight and included the MedPAR charges
associated with revenue code 0274 in the calculation of the Supplies
and Equipment CCR. (We refer readers to the FY 2009 IPPS/LTCH PPS final
rule (73 FR 48462) for a discussion on the revenue codes included in
the Supplies and Equipment and Implantable Devices CCRs, respectively.)
3. Development of National Average CCRs
We developed the national average CCRs as follows:
Using the FY 2011 cost report data, we removed CAHs, Indian Health
Service hospitals, all-inclusive rate hospitals, and cost reports that
represented time periods of less than 1 year (365 days). We included
hospitals located in Maryland because we include their charges in our
claims database. We then created CCRs for each provider for each cost
center (see prior table for line items used in the calculations) and
removed any CCRs that were greater than 10 or less than 0.01. We
normalized the departmental CCRs by dividing the CCR for each
department by the total CCR for the hospital for the purpose of
trimming the data. We then took the logs of the normalized cost center
CCRs and removed any cost center CCRs where the log of the cost center
CCR was greater or less than the mean log plus/minus 3 times the
standard deviation for the log of that cost center CCR. Once the cost
report data were trimmed, we calculated a Medicare-specific CCR. The
Medicare-specific CCR was determined by taking the Medicare charges for
each line item from Worksheet D-3 and deriving the Medicare-specific
costs by applying the hospital-specific departmental CCRs to the
Medicare-specific charges for each line item from Worksheet D-3. Once
each hospital's Medicare-specific costs were established, we summed the
total Medicare-specific costs and divided by the sum of the total
Medicare-specific charges to produce national average, charge-weighted
CCRs.
After we multiplied the total charges for each MS-DRG in each of
the 19 cost centers by the corresponding national average CCR, we
summed the 19 ``costs'' across each MS-DRG to produce a total
standardized cost for the MS-DRG. The average standardized cost for
each MS-DRG was then computed as the total standardized cost for the
MS-DRG divided by the transfer-adjusted case count for the MS-DRG. The
average cost for each MS-DRG was then divided by the national average
standardized cost per case to determine the relative weight.
The FY 2014 cost-based relative weights were then normalized by an
adjustment factor of 1.615238977 so that the average case weight after
recalibration was equal to the average case weight before
recalibration. The normalization adjustment is intended to ensure that
recalibration by itself neither increases nor decreases total payments
under the IPPS, as required by section 1886(d)(4)(C)(iii) of the Act.
The 19 national average CCRs for FY 2014 are as follows:

------------------------------------------------------------------------
Group CCR
------------------------------------------------------------------------
Routine Days................................................... 0.500
Intensive Days................................................. 0.414
Drugs.......................................................... 0.193
Supplies & Equipment........................................... 0.300
Implantable Devices............................................ 0.356
Therapy Services............................................... 0.356
Laboratory..................................................... 0.134
Operating Room................................................. 0.221
Cardiology..................................................... 0.130
Cardiac Catheterization........................................ 0.136
Radiology...................................................... 0.171
MRIs........................................................... 0.090
CT Scans....................................................... 0.045
Emergency Room................................................. 0.206
Blood and Blood Products....................................... 0.365
Other Services................................................. 0.400
Labor & Delivery............................................... 0.424
Inhalation Therapy............................................. 0.186
Anesthesia..................................................... 0.119
------------------------------------------------------------------------

Since FY 2009, the relative weights have been based on 100 percent
cost weights based on our MS-DRG grouping system.
When we recalibrated the DRG weights for previous years, we set a
threshold of 10 cases as the minimum number of cases required to
compute a reasonable weight. In the FY 2014 IPPS/LTCH PPS proposed
rule, we proposed to use that same case threshold in recalibrating the
MS-DRG weights for FY 2014. Using data from the FY 2012 MedPAR file,
there were 7 MS-DRGs that contain fewer than 10 cases. Under the MS-
DRGs, we have fewer low-volume DRGs than under the CMS DRGs because we
no longer have separate DRGs for patients aged 0 to 17 years. With the
exception of newborns, we previously separated some DRGs based on
whether the patient was age 0 to 17 years or age 17 years and older.
Other than the age split, cases grouping to these DRGs are identical.
The DRGs for patients aged 0 to 17 years generally have very low
volumes because children are typically ineligible for Medicare. In the
past, we have found that the low volume of cases for the pediatric DRGs
could lead to significant year-to-year instability in their relative
weights. Although we have always encouraged non-Medicare payers to
develop weights applicable to their own patient populations, we have
received frequent complaints from providers about the use of the
Medicare relative weights in the pediatric population. We believe that
eliminating this age split in the MS-DRGs will provide more stable
payment for pediatric cases by determining their payment using adult
cases that are much higher in total volume. Newborns are unique and
require separate MS-DRGs that are not mirrored in the adult population.
Therefore, it remains necessary to retain separate MS-DRGs for
newborns. All of the low-volume MS-DRGs listed below are for newborns.
In FY 2014, because we do not have sufficient MedPAR data to set
accurate and stable cost weights for these low-volume MS-DRGs, we
proposed to compute weights for the low-volume MS-DRGs by adjusting
their FY 2013 weights by the percentage change in the average weight of
the cases in other MS-DRGs. The crosswalk table is shown below:

------------------------------------------------------------------------
Crosswalk to MS-
Low[dash]volume MS-DRG MS-DRG Title DRG
------------------------------------------------------------------------
789............................. Neonates, Died or FY 2013 FR weight
Transferred to (adjusted by
Another Acute percent change in
Care Facility. average weight of
the cases in
other MS-DRGs).
790............................. Extreme Immaturity FY 2013 FR weight
or Respiratory (adjusted by
Distress percent change in
Syndrome, Neonate. average weight of
the cases in
other MS-DRGs).
791............................. Prematurity with FY 2013 FR weight
Major Problems. (adjusted by
percent change in
average weight of
the cases in
other MS-DRGs).
792............................. Prematurity FY 2013 FR weight
without Major (adjusted by
Problems. percent change in
average weight of
the cases in
other MS-DRGs).

[[Page 50570]]

793............................. Full-Term Neonate FY 2013 FR weight
with Major (adjusted by
Problems. percent change in
average weight of
the cases in
other MS-DRGs).
794............................. Neonate with Other FY 2013 FR weight
Significant (adjusted by
Problems. percent change in
average weight of
the cases in
other MS-DRGs).
795............................. Normal Newborn.... FY 2013 FR weight
(adjusted by
percent change in
average weight of
the cases in
other MS-DRGs).
------------------------------------------------------------------------

We did not receive any public comments on this proposal and,
therefore, are finalizing it for FY 2014 as proposed.
4. Bundled Payments for Care Improvement (BPCI) Initiative
The Bundled Payments for Care Improvement (BPCI) initiative,
developed under the authority of section 3021 of the Affordable Care
Act (codified at section 1115A of the Act), is comprised of four
broadly defined models of care, which link payments for multiple
services beneficiaries receive during an episode of care. Under the
BPCI initiative, organizations enter into payment arrangements that
include financial and performance accountability for episodes of care.
On January 31, 2013, CMS announced the health care organizations
selected to participate in the BPCI initiative. For additional
information on the BPCI initiative, we refer readers to the CMS' Center
for Medicare and Medicaid Innovation's Web site at https://innovation.cms.gov/initiatives/Bundled-Payments/ and to
section IV.H.4. of the preamble of the FY 2013 IPPS/LTCH PPS final rule
(77 FR 53341 through 53343) for a discussion on the BPCI initiative.
In the FY 2013 IPPS/LTCH PPS final rule, for FY 2013 and subsequent
fiscal years, we finalized a policy to treat hospitals that participate
in the BPCI initiative the same as prior fiscal years for the IPPS
payment modeling and ratesetting process without regard to a hospital's
participation within these bundled payment models (that is, as if a
hospital were not participating in those models under the BPCI
initiative). Therefore, for FY 2014, we proposed to continue to include
all applicable data from subsection (d) hospitals participating in BPCI
Models 1, 2, and 4 in our IPPS payment modeling and ratesetting
calculations. We did not receive any public comments on this proposal
and, therefore, are finalizing it for FY 2014 as proposed. We refer
readers to the FY 2013 IPPS/LTCH PPS final rule for a complete
discussion on our final policy for the treatment of hospitals
participating in the BPCI initiative in our ratesetting process.

I. Add-On Payments for New Services and Technologies

1. Background
Sections 1886(d)(5)(K) and (L) of the Act establish a process of
identifying and ensuring adequate payment for new medical services and
technologies (sometimes collectively referred to in this section as
``new technologies'') under the IPPS. Section 1886(d)(5)(K)(vi) of the
Act specifies that a medical service or technology will be considered
new if it meets criteria established by the Secretary after notice and
opportunity for public comment. Section 1886(d)(5)(K)(ii)(I) of the Act
specifies that a new medical service or technology may be considered
for new technology add-on payment if, ``based on the estimated costs
incurred with respect to discharges involving such service or
technology, the DRG prospective payment rate otherwise applicable to
such discharges under this subsection is inadequate.'' We note that
beginning with discharges occurring in FY 2008, CMS transitioned from
CMS-DRGs to MS-DRGs.
The regulations at 42 CFR 412.87 implement these provisions and
specify three criteria for a new medical service or technology to
receive the additional payment: (1) The medical service or technology
must be new; (2) the medical service or technology must be costly such
that the DRG rate otherwise applicable to discharges involving the
medical service or technology is determined to be inadequate; and (3)
the service or technology must demonstrate a substantial clinical
improvement over existing services or technologies. Below we highlight
some of the major statutory and regulatory provisions relevant to the
new technology add-on payment criteria as well as other information.
For a complete discussion on the new technology add-on payment
criteria, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76
FR 51572 through 51574).
Under the first criterion, as reflected in Sec. 412.87(b)(2), a
specific medical service or technology will be considered ``new'' for
purposes of new medical service or technology add-on payments until
such time as Medicare data are available to fully reflect the cost of
the technology in the MS-DRG weights through recalibration. We note
that we do not consider a service or technology to be new if it is
substantially similar to one or more existing technologies. That is,
even if a technology receives a new FDA approval, it may not
necessarily be considered ``new'' for purposes of new technology add-on
payments if it is ``substantially similar'' to a technology that was
approved by FDA and has been on the market for more than 2 to 3 years.
In the FY 2006 IPPS final rule (70 FR 47351) and the FY 2010 IPPS/RY
2010 LTCH PPS final rule (74 FR 43813 and 43814), we explained our
policy regarding substantial similarity in detail.
Under the second criterion, Sec. 412.87(b)(3) further provides
that, to be eligible for the add-on payment for new medical services or
technologies, the MS-DRG prospective payment rate otherwise applicable
to the discharge involving the new medical services or technologies
must be assessed for adequacy. Under the cost criterion, to assess the
adequacy of payment for a new technology paid under the applicable MS-
DRG prospective payment rate, we evaluate whether the charges for cases
involving the new technology exceed certain threshold amounts. Table 10
that was released with the FY 2013 IPPS/LTCH PPS final rule contains
the final thresholds that we used to evaluate applications for new
technology add-on payments for FY 2014. We refer readers to the CMS Web
site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY-2013-IPPS-Final-Rule-Home-Page.html for a complete
viewing of Table 10 from the FY 2013 IPPS/LTCH PPS final rule.
In the September 7, 2001 final rule that established the new
technology add-on payment regulations (66 FR 46917), we discussed the
issue of whether the Health Insurance Portability and Accountability
Act (HIPAA) Privacy Rule at 45 CFR Parts 160 and 164 applies to claims
information that providers submit with applications for new technology
add-on payments. We refer readers to the FY 2012 IPPS/LTCH PPS final
rule (76 FR 51573) for complete information on this issue.

[[Page 50571]]

Under the third criterion, Sec. 412.87(b)(1) of our existing
regulations provides that a new technology is an appropriate candidate
for an additional payment when it represents ``an advance that
substantially improves, relative to technologies previously available,
the diagnosis or treatment of Medicare beneficiaries.'' For example, a
new technology represents a substantial clinical improvement when it
reduces mortality, decreases the number of hospitalizations or
physician visits, or reduces recovery time compared to the technologies
previously available. (We refer readers to the September 7, 2001 final
rule for a more detailed discussion of this criterion (66 FR 46902).)
The new medical service or technology add-on payment policy under
the IPPS provides additional payments for cases with relatively high
costs involving eligible new medical services or technologies while
preserving some of the incentives inherent under an average-based
prospective payment system. The payment mechanism is based on the cost
to hospitals for the new medical service or technology. Under Sec.
412.88, if the costs of the discharge (determined by applying cost-to-
charge ratios (CCRs) as described in Sec. 412.84(h)) exceed the full
DRG payment (including payments for IME and DSH, but excluding outlier
payments), Medicare will make an add-on payment equal to the lesser of:
(1) 50 percent of the estimated costs of the new technology (if the
estimated costs for the case including the new technology exceed
Medicare's payment); or (2) 50 percent of the difference between the
full DRG payment and the hospital's estimated cost for the case. Unless
the discharge qualifies for an outlier payment, the additional Medicare
payment is limited to the full MS-DRG payment plus 50 percent of the
estimated costs of the new technology.
Section 503(d)(2) of Public Law 108-173 provides that there shall
be no reduction or adjustment in aggregate payments under the IPPS due
to add-on payments for new medical services and technologies.
Therefore, in accordance with section 503(d)(2) of Public Law 108-173,
add-on payments for new medical services or technologies for FY 2005
and later years have not been subjected to budget neutrality.
In the FY 2009 IPPS final rule (73 FR 48561 through 48563), we
modified our regulations at Sec. 412.87 to codify our longstanding
practice of how CMS evaluates the eligibility criteria for new medical
service or technology add-on payment applications. That is, we first
determine whether a medical service or technology meets the newness
criteria, and only if so, do we then make a determination as to whether
the technology meets the cost threshold and represents a substantial
clinical improvement over existing medical services or technologies. We
also amended Sec. 412.87(c) to specify that all applicants for new
technology add-on payments must have FDA approval or clearance for
their new medical service or technology by July 1 of each year prior to
the beginning of the fiscal year that the application is being
considered.
The Council on Technology and Innovation (CTI) at CMS oversees the
agency's cross-cutting priority on coordinating coverage, coding and
payment processes for Medicare with respect to new technologies and
procedures, including new drug therapies, as well as promoting the
exchange of information on new technologies between CMS and other
entities. The CTI, composed of senior CMS staff and clinicians, was
established under section 942(a) of Public Law 108-173. The Council is
co-chaired by the Director of the Center for Clinical Standards and
Quality (CCSQ) and the Director of the Center for Medicare (CM), who is
also designated as the CTI's Executive Coordinator.
The specific processes for coverage, coding, and payment are
implemented by CM, CCSQ, and the local claims-payment contractors (in
the case of local coverage and payment decisions). The CTI supplements,
rather than replaces, these processes by working to assure that all of
these activities reflect the agency-wide priority to promote high-
quality, innovative care. At the same time, the CTI also works to
streamline, accelerate, and improve coordination of these processes to
ensure that they remain up to date as new issues arise. To achieve its
goals, the CTI works to streamline and create a more transparent coding
and payment process, improve the quality of medical decisions, and
speed patient access to effective new treatments. It is also dedicated
to supporting better decisions by patients and doctors in using
Medicare-covered services through the promotion of better evidence
development, which is critical for improving the quality of care for
Medicare beneficiaries.
To improve the understanding of CMS' processes for coverage,
coding, and payment and how to access them, the CTI has developed an
``Innovator's Guide'' to these processes. The intent is to consolidate
this information, much of which is already available in a variety of
CMS documents and in various places on the CMS Web site, in a user-
friendly format. This guide was published in August 2008 and is
available on the CMS Web site at: https://www.cms.gov/CouncilonTechInnov/Downloads/InnovatorsGuide5_10_10.pdf.
As we indicated in the FY 2009 IPPS final rule (73 FR 48554), we
invite any product developers or manufacturers of new medical
technologies to contact the agency early in the process of product
development if they have questions or concerns about the evidence that
would be needed later in the development process for the agency's
coverage decisions for Medicare.
The CTI aims to provide useful information on its activities and
initiatives to stakeholders, including Medicare beneficiaries,
advocates, medical product manufacturers, providers, and health policy
experts. Stakeholders with further questions about Medicare's coverage,
coding, and payment processes, or who want further guidance about how
they can navigate these processes, can contact the CTI at
CTI@cms.hhs.gov.
We note that applicants for add-on payments for new medical
services or technologies for FY 2015 must submit a formal request,
including a full description of the clinical applications of the
medical service or technology and the results of any clinical
evaluations demonstrating that the new medical service or technology
represents a substantial clinical improvement, along with a significant
sample of data to demonstrate that the medical service or technology
meets the high-cost threshold. Complete application information, along
with final deadlines for submitting a full application, will be posted
as it becomes available on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/newtech.html. To allow interested parties to identify the new medical
services or technologies under review before the publication of the
proposed rule for FY 2015, the Web site also will post the tracking
forms completed by each applicant.
2. Public Input Before Publication of a Notice of Proposed Rulemaking
on Add-On Payments
Section 1886(d)(5)(K)(viii) of the Act, as amended by section
503(b)(2) of Public Law 108-173, provides for a mechanism for public
input before publication of a notice of proposed rulemaking regarding
whether a medical service or technology represents a substantial
clinical improvement or advancement. The process for evaluating new
medical service and

[[Page 50572]]

technology applications requires the Secretary to--
Provide, before publication of a proposed rule, for public
input regarding whether a new service or technology represents an
advance in medical technology that substantially improves the diagnosis
or treatment of Medicare beneficiaries;
Make public and periodically update a list of the services
and technologies for which applications for add-on payments are
pending;
Accept comments, recommendations, and data from the public
regarding whether a service or technology represents a substantial
clinical improvement; and
Provide, before publication of a proposed rule, for a
meeting at which organizations representing hospitals, physicians,
manufacturers, and any other interested party may present comments,
recommendations, and data regarding whether a new medical service or
technology represents a substantial clinical improvement to the
clinical staff of CMS.
In order to provide an opportunity for public input regarding add-
on payments for new medical services and technologies for FY 2014 prior
to publication of the FY 2014 IPPS/LTCH PPS proposed rule, we published
a notice in the Federal Register on November 23, 2012 (77 FR 70163
through 70165), and held a town hall meeting at the CMS Headquarters
Office in Baltimore, MD, on February 5, 2013. In the announcement
notice for the meeting, we stated that the opinions and alternatives
provided during the meeting would assist us in our evaluations of
applications by allowing public discussion of the substantial clinical
improvement criterion for each of the FY 2014 new medical service and
technology add-on payment applications before the publication of the FY
2014 proposed rule.
Approximately 60 individuals registered to attend the town hall
meeting in person, while additional individuals listened over an open
telephone line. We considered each applicant's presentation made at the
town hall meeting, as well as written comments submitted on the
applications that were received by the due date of February 26, 2013,
in our evaluation of the new technology add-on payment applications for
FY 2014 in the proposed rule. In response to the published notice and
the new technology town hall meeting, commenters submitted and
presented public comments that were unrelated to the substantial
clinical improvement criterion in regard to the new technology
applications for FY 2014. We also received public comments in response
to the proposed rule relating to topics such as marginal cost factors
for new technology add-on payments, and the use of external data in
determining the cost threshold and mapping new technologies to the
appropriate MS-DRG. Because we did not request public comments nor
propose to make any changes to any of the issues above, we are not
summarizing these public comments nor responding to them in this final
rule.
We also live-streamed the town hall meeting over the Internet and
received very positive feedback from the public on use of this option.
In the FY 2014 IPPS/LTCH PPS proposed rule, we stated that we are
considering no longer holding an in-person town hall meeting in
Baltimore, MD, and instead holding a virtual town hall meeting that
would be live-streamed on the Internet. We invited public comments on
the possibility of holding a virtual town hall meeting instead of an
in-person town hall meeting in Baltimore, MD.
Comment: Some commenters expressed concern that limiting the town
hall meeting to a virtual town hall meeting may give less of a voice to
applicants. The commenters supported the option to observe the town
hall meeting via live stream on line but recommended that we maintain
the in-person option as well.
Response: In the proposed rule, we noted that we received positive
comments concerning the virtual town hall meeting. We expect that
applicants would still be an integral part of the virtual town hall
meeting as it is typical for applicants to make presentations at the
annual town hall meeting about their technologies and why their
technologies represent a substantial clinical improvement over existing
technologies. However, we note that some applicants have either chosen
not to make a presentation at the town hall meeting and/or to make all
or part of their presentation by phone. Therefore, we do not believe a
virtual town hall would offer less of a voice to applicants. The
purpose of a virtual town hall meeting would be to continue to provide
the information to the public in advance of the proposed rule while
reducing the burden and providing greater access for all applicants and
interested parties by eliminating the need to make special travel
arrangements or by mitigating any other issue that would limit the
public from attending the meeting in person. For example, in 2010, we
postponed the town hall meeting due to inclement weather. We will
consider the issues raised by these commenters as we consider whether
to transition to a virtual town hall meeting. Further information
regarding the mechanism we use to engage the public for future town
hall meetings will be provided via public notice.
3. FY 2014 Status of Technologies Approved for FY 2013 Add-On Payments
a. Auto Laser Interstitial Thermal Therapy (AutoLITT\TM\) System
Monteris Medical submitted an application for new technology add-on
payments for FY 2011 for the AutoLITT\TM\. AutoLITT\TM\ is a minimally
invasive, MRI-guided laser tipped catheter designed to destroy
malignant brain tumors with interstitial thermal energy causing
immediate coagulation and necrosis of diseased tissue. The technology
can be identified by ICD-9-CM procedure codes 17.61 (Laser interstitial
thermal therapy [LITT] of lesion or tissue of brain under guidance),
and 17.62 (Laser interstitial thermal therapy [LITT] of lesion or
tissue of head and neck under guidance), which became effective on
October 1, 2009.
The AutoLITT\TM\ received a 510(k) FDA clearance in May 2009. The
AutoLITT\TM\ is indicated for use to necrotize or coagulate soft tissue
through interstitial irradiation or thermal therapy in medicine and
surgery in the discipline of neurosurgery with 1064 nm lasers. The
AutoLITT\TM\ may be used in patients with glioblastoma multiforme brain
tumors. The applicant stated in its application and through
supplemental information that, due to required updates, the technology
was actually introduced to the market in December 2009. After
evaluation of the newness, costs, and substantial clinical improvement
criteria for new technology add-on payments for the AutoLITT\TM\ and
consideration of the public comments we received in response to the FY
2011 IPPS/LTCH PPS proposed rule, including the additional analysis of
clinical data and supporting information submitted by the applicant, we
approved the AutoLITT\TM\ for new technology add-on payments for FY
2011. In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27935 through
27936), based on the original information provided by the applicant, we
believed that the newness date for the AutoLITT\TM\ began in December
2009. However, as summarized in the FY 2013 IPPS/LTCH PPS final rule
(77 FR 53345 through 53346), the applicant submitted a public

[[Page 50573]]

comment (in response to the FY 2013 proposed rule) demonstrating that
the AutoLITT\TM\ was first available on May 11, 2010. The manufacturer
explained that some of the sterile disposable products were not
released from quarantine until May 11, 2010, which prevented the
AutoLITT\TM\ from being used prior to May 11, 2010. Therefore, the
manufacturer asserted that the first time the AutoLITT\TM\ was
available on the market was May 11, 2010. As a result of this
information, we continued to make new technology add-on payments for
the AutoLITT\TM\ in FY 2013. (We refer readers to the FY 2013 IPPS/LTCH
PPS final rule for a complete discussion on this issue).
Consistent with the applicant's clinical trial, the add-on payment
is intended only for use of the device in cases of glioblastoma
multiforme. Therefore, we limited the new technology add-on payment to
cases involving the AutoLITT\TM\ in MS-DRGs 025 (Craniotomy and
Endovascular Intracranial Procedures with Major Complications or
Comorbidities (MCC)), 026 (Craniotomy and Endovascular Intracranial
Procedures with Complications or Comorbidities (CC)), and 027
(Craniotomy and Endovascular Intracranial Procedures without CC or
MCC). Cases involving the AutoLITT\TM\ that are eligible for the new
technology add-on payment are identified by assignment to MS-DRGs 025,
026, and 027 with a procedure code of 17.61 (Laser interstitial
thermotherapy of lesion or tissue of brain under guidance) in
combination with a principal diagnosis code that begins with a prefix
of 191 (Malignant neoplasm of brain). We note that using the procedure
and diagnosis codes above and restricting the add-on payment to cases
that map to MS-DRGs 025, 026, and 027 is consistent with information
provided by the applicant, which demonstrated that cases of the
AutoLITT\TM\ would only map to MS-DRGs 025, 026, and 027. Procedure
code 17.62 (Laser interstitial thermotherapy of lesion or tissue of
head and neck under guidance) does not map to MS-DRGs 025, 026, or 027
under the GROUPER software and, therefore, is ineligible for new
technology add-on payment.
The average cost of the AutoLITT\TM\ is reported as $10,600 per
case. Under Sec. 412.88(a)(2) of the regulations, new technology add-
on payments are limited to the lesser of 50 percent of the average cost
of the device or 50 percent of the costs in excess of the MS-DRG
payment for the case. As a result, the maximum add-on payment for a
case involving the AutoLITT\TM\ is $5,300.
The new technology add-on payment regulations provide that ``a
medical service or technology may be considered new within 2 or 3 years
after the point at which data begin to become available reflecting the
ICD-9-CM code assigned to the new service or technology'' (Sec.
412.87(b)(2)). Our practice has been to begin and end new technology
add-on payments on the basis of a fiscal year, and we have generally
followed a guideline that uses a 6-month window before and after the
start of the fiscal year to determine whether to extend the new
technology add-on payment for an additional fiscal year. In general, we
extend add-on payments for an additional year only if the 3-year
anniversary date of the product's entry on the market occurs in the
latter half of the fiscal year (70 FR 47362). With regard to the
newness criterion for the AutoLITT\TM\, as stated above, we consider
the beginning of the newness period for the device to commence when the
AutoLITT\TM\ was first available on May 11, 2010. Because the 3-year
anniversary date of the AutoLITT\TM\'s entry onto the market will occur
on May 11, 2013, which is prior to the beginning of FY 2014, we
proposed to discontinue new technology add-on payments for the
AutoLITT\TM\ for FY 2014.
We invited public comments on this proposal. However, we did not
receive any public comments in response to our invitation. Therefore,
we are finalizing our proposal to discontinue new technology add-on
payments for the AutoLITT\TM\ for FY 2014.
b. Glucarpidase (Trade Brand Voraxaze[supreg])
BTG International, Inc. submitted an application for new technology
add-on payments for Glucarpidase (trade brand Voraxaze[supreg]) for FY
2013. Glucarpidase is used in the treatment of patients who have been
diagnosed with toxic methotrexate (MTX) concentrations as of result of
renal impairment. The administration of Glucarpidase causes a rapid and
sustained reduction of toxic MTX concentrations.
Voraxaze[supreg] was approved by the FDA on January 17, 2012.
Beginning in 1993, certain patients could obtain expanded access for
treatment use to Voraxaze[supreg] as an investigational drug. Since
2007, the applicant has been authorized to recover the costs of making
Voraxaze[supreg] available through its expanded access program. We
describe expanded access for treatment use of investigational drugs and
authorization to recover certain costs of investigational drugs in the
FY 2013 IPPS/LTCH PPS final rule (77 FR 53346 through 53350).
Voraxaze[supreg] was available on the market in the United States as a
commercial product to the larger population as of April 30, 2012. In
the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27936 through 27939), we
expressed concerns about whether Voraxaze[supreg] could be considered
new for FY 2013. After consideration of all of the public comments
received, in the FY 2013 IPPS/LTCH PPS final rule, we stated that we
considered Voraxaze[supreg] to be ``new'' as of April 30, 2012, which
is the date of market availability.
After evaluation of the newness, costs, and substantial clinical
improvement criteria for new technology payments for Voraxaze[supreg]
and consideration of the public comments we received in response to the
FY 2013 IPPS/LTCH PPS proposed rule, we approved Voraxaze[supreg] for
new technology add-on payments for FY 2013. Cases of Voraxaze[supreg]
are identified with ICD-9-CM procedure code 00.95 (Injection or
infusion of glucarpidase). The cost of Voraxaze[supreg] is $22,500 per
vial. The applicant stated that an average of four vials is used per
Medicare beneficiary. Therefore, the average cost per case for
Voraxaze[supreg] is $90,000 ($22,500 x 4). Under Sec. 412.88(a)(2),
new technology add-on payments are limited to the lesser of 50 percent
of the average cost of the technology or 50 percent of the costs in
excess of the MS-DRG payment for the case. As a result, the maximum new
technology add-on payment for Voraxaze[supreg] is $45,000 per case.
As stated above, the new technology add-on payment regulations
provide that ``a medical service or technology may be considered new
within 2 or 3 years after the point at which data begin to become
available reflecting the ICD-9-CM code assigned to the new service or
technology'' (Sec. 412.87(b)(2)). With regard to the newness criterion
for Voraxaze[supreg], as stated above, we consider the beginning of the
newness period to commence when Voraxaze[supreg] was first available on
the market on April 30, 2012. Because Voraxaze[supreg] is still within
the 3-year newness period, we proposed to continue new technology add-
on payments for this technology for FY 2014. We invited public comments
on this proposal.
Comment: Several commenters supported the continuation of making
new technology add-on payments for Voraxaze[supreg] in FY 2014.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to continue to make new technology add-on
payments for Voraxaze[supreg] in FY 2014.

[[Page 50574]]

c. DIFICID\TM\ (Fidaxomicin) Tablets
Optimer Pharmaceuticals, Inc. submitted an application for new
technology add-on payments for FY 2013 for the use of DIFICID\TM\
tablets. As indicated on the labeling submitted to the FDA, the
applicant noted that Fidaxomicin is taken twice a day as a daily dosage
(200 mg tablet twice daily = 400 mg per day) as an oral antibiotic. The
applicant asserted that Fidaxomicin provides potent bactericidal
activity against C. Diff., and moderate bactericidal activity against
certain other gram-positive organisms, such as enterococcus and
staphylococcus. Unlike other antibiotics used to treat CDAD, the
applicant noted that the effects of Fidaxomicin preserve bacteroides
organisms in the fecal flora. These are markers of normal anaerobic
microflora. The applicant asserted that this helps prevent pathogen
introduction or persistence, which potentially inhibits the re-
emergence of C. Diff., and reduces the likelihood of overgrowths as a
result of vancomycin-resistant Enterococcus (VRE). Because of this
narrow spectrum of activity, the applicant asserted that Fidaxomicin
does not alter this native intestinal microflora.
In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27939 through
27941), we expressed concern that DIFICID\TM\ may not be eligible for
new technology add-on payments because eligibility is limited to new
technologies associated with procedures described by ICD-9-CM codes. We
further stated that drugs that are only taken orally (such as
DIFICID\TM\) may not be eligible for consideration for new technology
add-on payments because there is no procedure associated with these
drugs and, therefore, no ICD-9-CM code(s). In the FY 2013 IPPS/LTCH PPS
final rule (77 FR 53350 through 53358), after consideration of the
public comments received, we revised our policy to allow the use of
National Drug Codes (NDCs) to identify oral medications that have no
inpatient procedure for the purposes of new technology add-on payments.
The revised policy is effective for payments for discharges occurring
on or after October 1, 2012. We refer readers to the FY 2013 IPPS/LTCH
PPS final rule for a complete discussion on this issue.
With regard to the newness criterion, Fidaxomicin was approved by
the FDA on May 27, 2011, for the treatment of CDAD in adult patients,
18 years of age and older. In the FY 2013 IPPS/LTCH PPS final rule, we
established that the beginning of the newness period for this
technology is its FDA approval date of May 27, 2011.
After evaluation of the newness, costs, and substantial clinical
improvement criteria for new technology add-on payments for DIFICID\TM\
and consideration of the public comments we received in response to the
FY 2013 IPPS/LTCH PPS proposed rule, we approved DIFICID\TM\ for new
technology add-on payments for FY 2013. Cases of DIFICID\TM\ are
identified with ICD-9-CM diagnosis code 008.45 (Intestinal infection
due to Clostridium difficile) in combination with NDC code 52015-0080-
01. Providers must report the NDC on the 837i Health Care Claim
Institutional form (in combination with ICD-9-CM diagnosis code 008.45)
in order to receive the new technology add-on payment. According to the
applicant, the cost of DIFICID\TM\ is $2,800 for a 10-day dosage. The
average cost per day for DIFICID\TM\ is $280 ($2,800/10). Cases of
DIFICID\TM\ within the inpatient setting typically incur an average
dosage of 6.2 days, which results in an average cost per case for
DIFICID\TM\ of $1,736 ($280 x 6.2). Under Sec. 412.88(a)(2), new
technology add-on payments are limited to the lesser of 50 percent of
the average cost of the technology or 50 percent of the costs in excess
of the MS-DRG payment for the case. As a result, the maximum new
technology add-on payment for FY 2013 for DIFICID\TM\ is $868.
As stated above, the new technology add-on payment regulations
provide that ``a medical service or technology may be considered new
within 2 or 3 years after the point at which data begin to become
available reflecting the ICD-9-CM code assigned to the new service or
technology'' (Sec. 412.87(b)(2)). Our practice has been to begin and
end new technology add-on payments on the basis of a fiscal year, and
we have generally followed a guideline that uses a 6-month window
before and after the start of the fiscal year to determine whether to
extend the new technology add-on payment for an additional fiscal year.
In general, we extend add-on payments for an additional year only if
the 3-year anniversary date of the product's entry on the market occurs
in the latter half of the fiscal year (70 FR 47362). With regard to the
newness criterion for DIFICID\TM\, as stated above, we consider the
beginning of the newness period to commence when DIFICID\TM\ was first
approved by the FDA on May 27, 2011. Because the 3-year anniversary
date of DIFICID\TM\ will occur in the second half of the fiscal year
(after April 1, 2014), we proposed to continue new technology add-on
payments for DIFICID\TM\ for FY 2014. We invited public comments on
this proposal.
Comment: Several commenters supported the continuation of making
new technology add-on payments for DIFICID\TM\ in FY 2014. In addition,
the applicant submitted a comment stating that the new technology add-
on payment for DIFICID\TM\ has expanded Medicare beneficiary access for
DIFICID\TM\ in the acute care setting. The manufacturer also provided
supplemental data demonstrating that cases of DIFICID\TM\ within the
inpatient setting continue to incur an average dosage of 6.2 days.
Based on this supplemental data, the manufacturer recommended that we
continue to consider 6.2 days of inpatient administration of
DIFICID\TM\ in its calculations for the cost criterion and the add-on
payment.
Response: We appreciate the commenters' support. We agree that the
supplemental data submitted by the manufacturer continues to support
the use of 6.2 days for the cost criterion and the add-on payment.
After consideration of the public comments we received, we are
finalizing our proposal to continue to make new technology add-on
payments for DIFICID\TM\ in FY 2014.
d. Zenith[supreg] Fenestrated Abdominal Aortic Aneurysm (AAA)
Endovascular Graft
Cook[supreg] Medical submitted an application for new technology
add-on payments for the Zenith[supreg] Fenestrated Abdominal Aortic
Aneurysm (AAA) Endovascular Graft (Zenith[supreg] F. Graft) for FY
2013. The applicant stated that the current treatment for patients who
have had an AAA is an endovascular graft. The applicant explained that
the Zenith[supreg] F. Graft is an implantable device designed to treat
patients who have an AAA and who are anatomically unsuitable for
treatment with currently approved AAA endovascular grafts because of
the length of the infrarenal aortic neck. The applicant noted that,
currently, an AAA is treated through an open surgical repair or medical
management for those patients not eligible for currently approved AAA
endovascular grafts.
With respect to newness, the applicant stated that FDA approval for
the use of the Zenith[supreg] F. Graft was granted on April 4, 2012. In
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53360 through 53365), we
stated that because the Zenith[supreg] F. Graft was approved by the FDA
on April 4, 2012, we believed that the Zenith[supreg] F. Graft met the
newness criterion as of that date.

[[Page 50575]]

After evaluation of the newness, costs, and substantial clinical
improvement criteria for new technology add-on payments for the
Zenith[supreg] F. Graft and consideration of the public comments we
received in response to the FY 2013 IPPS/LTCH PPS proposed rule, we
approved the Zenith[supreg] F. Graft for new technology add-on payments
for FY 2013. Cases involving the Zenith[supreg] F. Graft that are
eligible for new technology add-on payments are identified by ICD-9-CM
procedure code 39.78 (Endovascular implantation of branching or
fenestrated graft(s) in aorta). In the application, the applicant
provided a breakdown of the costs of the Zenith[supreg] F. Graft. The
total cost of the Zenith[supreg] F. Graft utilizing bare metal (renal)
alignment stents was $17,264. Of the $17,264 in costs for the
Zenith[supreg] F. Graft, $921 are for components that are used in a
standard Zenith AAA Endovascular Graft procedure. Because the costs for
these components are already reflected within the MS-DRGs (and are no
longer ``new''), in the FY 2013 IPPS/LTCH PPS final rule, we stated
that we do not believe it is appropriate to include these costs in our
calculation of the maximum cost to determine the maximum add-on payment
for the Zenith[supreg] F. Graft. Therefore, the total maximum cost for
the Zenith[supreg] F. Graft is $16,343 ($17,264-$921). Under Sec.
412.88(a)(2), new technology add-on payments are limited to the lesser
of 50 percent of the average cost of the device or 50 percent of the
costs in excess of the MS-DRG payment for the case. As a result, the
maximum add-on payment for a case involving the Zenith[supreg] F. Graft
is $8,171.50.
As stated above, the new technology add-on payment regulations
provide that ``a medical service or technology may be considered new
within 2 or 3 years after the point at which data begin to become
available reflecting the ICD-9-CM code assigned to the new service or
technology'' (Sec. 412.87(b)(2)). With regard to the newness criterion
for the Zenith[supreg] F. Graft, as stated above, we consider the
beginning of the newness period to commence when the Zenith[supreg] F.
Graft was approved by the FDA on April 4, 2012. Because the
Zenith[supreg] F. Graft is still within the 3-year newness period, we
proposed to continue new technology add-on payments for this technology
for FY 2014. We invited public comments on this proposal.
Comment: Several commenters supported the continuation of new
technology add-on payments for the Zenith[supreg] F. Graft in FY 2014.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to continue to make new technology add-on
payments for the Zenith[supreg] F. Graft in FY 2014.
4. FY 2014 Applications for New Technology Add-On Payments
We received five applications for new technology add-on payments
for FY 2014. In accordance with the regulations under Sec. 412.87(c),
applicants for new technology add-on payments must have FDA approval by
July 1 of each year prior to the beginning of the fiscal year that the
application is being considered. Two of the five technologies for which
we received applications for new technology add-on payments, the
NeuroPace Responsive Neurostimulator System (RNS) System and the Abbott
Vascular MitraClip[supreg] System, did not receive FDA approval by the
July 1 deadline. Therefore, these applications are not eligible for
consideration for new technology add-on payments for FY 2014. In
addition, the applicant for the NeuroPace RNS System withdrew its
application prior to publication of this final rule. We note that we
did receive public comments concerning these two applications. However,
as stated above, because these two technologies did not receive FDA
approval by the July 1 deadline and, therefore, cannot be considered
for new technology add-on payments for FY 2014, we are not summarizing
or responding to these comments in this final rule. We refer readers to
the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27543 through 27545 and
27547 through 27552) for summaries of these two applications. A
discussion of the remaining three applications is presented below.
a. Kcentra\TM\
CSL Behring submitted an application for new technology add-on
payments for Kcentra\TM\ for FY 2014. Kcentra\TM\ is a replacement
therapy for fresh frozen plasma (FFP) for patients with an acquired
coagulation factor deficiency due to warfarin and who are experiencing
a severe bleed. Kcentra\TM\ contains the Vitamin K dependent
coagulation factors II, VII, IX and X, together known as the
prothrombin complex, and antithrombotic proteins C and S. Factor IX is
the lead factor for the potency of the preparation. The product is a
heat-treated, non-activated, virus filtered and lyophilized plasma
protein concentrate made from pooled human plasma. Kcentra\TM\ is
available as a lyophilized powder that needs to be reconstituted with
sterile water prior to administration via intravenous infusion. The
product is dosed based on Factor IX units. Concurrent Vitamin K
treatment is recommended to maintain blood clotting factor levels once
the effects of Kcentra\TM\ have diminished.
Kcentra\TM\ was approved by the FDA on April 29, 2013. The
applicant applied for a new ICD-9-CM procedure code for consideration
at the March 5, 2013 ICD-9-CM Coordination and Maintenance Committee
Meeting. In this final rule, we have approved new ICD-9-CM procedure
code 00.96 (Infusion of 4-Factor Prothrombrin Complex Concentrate)
which uniquely identifies Kcentra\TM\. More information on this request
and approval can be found on the CMS Web site at: https://cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials-Items/2013-03-05-MeetingMaterials.html and https://cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/addendum.html.
In the FY 2014 IPPS/LTCH PPS proposed rule, we noted that we were
concerned that Kcentra\TM\ may be substantially similar to FFP and/or
Vitamin K therapy. If so, Kcentra\TM\ would not meet the newness
criterion because costs associated with FFP and/or Vitamin K therapy
are already reflected within the MS-DRGs. In the FY 2010 IPPS/RY 2010
LTCH PPS final rule (74 FR 43813 through 43814), we established
criteria for evaluating whether a new technology is substantial similar
to an existing technology, specifically: (1) Whether a product uses the
same or a similar mechanism of action to achieve a therapeutic outcome;
(2) whether a product is assigned to the same or a different MS-DRG;
and (3) whether the new use of the technology involves the treatment of
the same or similar type of disease and the same or similar patient
population. If a technology meets all three of the criteria above, it
would be considered substantially similar to an existing technology and
would not be considered ``new'' for purposes of new technology add-on
payments.
In evaluating the first criterion, we stated in the FY 2014 IPPS/
LTCH PPS proposed rule that we believe that both FFP and Kcentra\TM\
use the same mechanism of action of Vitamin K dependent coagulation to
reverse the anti-coagulation effects of warfarin. With respect to the
second criterion, we believe that cases involving both FFP and
Kcentra\TM\ would be assigned to the same MS-DRGs. Finally, with
respect to the third criterion, we stated that we believe that both
technologies treat the same condition and patient population.
Specifically, the patient population for both Kcentra\TM\ and FFP are
patients

[[Page 50576]]

with an iatrogenically acquired coagulation factor deficiency due to
warfarin and who are experiencing severe bleeding. Delay of treatment
of these patients can lead to an increase in complications as well as
an increase of the severity of the blood loss. Although FFP needs to
thaw before it can be administered and can delay treatment compared to
Kcentra\TM\, which can be used in a more timely manner, we stated that
we believe that both Kcentra\TM\ and FFP treat the same patient
population. Based on evaluation of the similarity criteria, we stated
that it appears that Kcentra\TM\ is substantially similar to FFP with
regard to being able to reverse the Warfarin effect of blood
coagulation. Therefore, we stated in the proposed rule that Kcentra\TM\
may not be considered ``new'' for purposes of new technology add-on
payments. We invited public comments regarding whether Kcentra\TM\ is
substantially similar to existing technologies and whether Kcentra\TM\
meets the newness criterion.
Comment: One commenter, the applicant and manufacturer, submitted a
public comment stating that Kcentra\TM\ meets the newness criterion
because it was approved by the FDA and no data on the product will be
available in the DRG payment system until FY 2014. In addition, the
applicant asserted that because a new ICD-9-CM procedure code for
Kcentra\TM\ was created that will be effective October 1, 2013,
Kcentra\TM\ fulfills the regulatory requirements.
Response: As discussed in the proposed rule, because Kcentra\TM\
may be substantially similar to FFP, it is possible that the costs
associated with Kcentra\TM\ may already be reflected in the MS-DRGs.
Below we summarize the applicant's comments and our response concerning
substantial similarity.
With regard to considering the technology ``new'' due to the
issuance of a new ICD-9-CM procedure code, in the FY 2005 IPPS final
rule (69 FR 49002), we discussed how, generally, we use the FDA
approval as the indicator of the time when a technology begins to
become available on the market and data reflecting the costs of the
technology begin to become available for recalibration of the DRGs. In
some specific circumstances, we have recognized a date later than the
FDA approval as the appropriate starting point for the 2-year to 3-year
period. Using the ICD-9-CM code alone is not an appropriate test of
newness because technologies that are new to the market are
automatically placed into the closest ICD-9-CM category when they first
become available on the market, unless the manufacturer requests the
assignment of a new ICD-9-CM code because existing codes do not
adequately reflect or describe the medical service or device. We refer
readers to the FY 2005 IPPS final rule for a complete discussion
concerning the issuance of an ICD-9-CM code and the newness criterion.
Comment: The manufacturer submitted a public comment stating that
Kcentra\TM\ has a different mechanism of action than FFP in the same
way that we determined that the AutoLITT\TM\ had a different mechanism
of action than the Visual-ase in the FY 2011 IPPS/LTCH PPS final rule
(75 FR 50144).
Response: The commenter did not provide any details regarding the
perceived similarities between the AutoLITT\TM\ and the Kcentra\TM\
applications in correlation with the comparison presented in its
comment. For example, in the FY 2011 IPPS/LTCH PPS final rule, we
determined that the AutoLITT\TM\ was different than the Visual-ase due
to its side-firing laser versus elliptical-firing. In addition, the
AutoLITT\TM\ contained a proprietary probe cooling system that removes
heat from tissue not directly in the path of the laser beam, while the
Visual-ase did not contain this cooling system. Therefore, without more
information detailing the comparable differences in mechanism of action
and/or the perceived similarities between these two applications, we
are unable to provide further response to the comment.
Comment: The manufacturer submitted a public comment asserting that
Kcentra\TM\ has a different mechanism of action than FFP. The commenter
explained that Kcentra\TM\'s mechanism of action for Vitamin K
antagonist (VKA) reversal is different from FFP. Kcentra\TM\ is
purified, heat treated, nanofiltered, non-activated four factor
prothorbin complex concentrate. It contains coagulation factors (II,
VII, IX, X) and anti-coagulation proteins (C and S) that are 25 times
more concentrated than plasma. Kcentra\TM\ provides a simple and rapid
repletion within 30 minutes. Unlike FPP, it does not require ABO typing
as it does not contain ABO antibodies, thereby reducing the risk of a
transfusion reaction. The absence of additional proteins removes the
risk of transfusion related acute lung injury or TRALI.
Conversely, the manufacturer stated that FFP is isolated from the
whole blood by the removal of cellular components (erythrocytes,
granulocytes, lymphocytes and platelets), therefore it contains all the
protein components in blood including coagulation proteins among others
at a physiologic level of 1 IO/ml. In addition, FFP is a non-specific
therapy which does not achieve the goal of repleting all coagulation
factors to therapeutic levels. The manufacturer explained that factors
II and X and Protein C remain below 50 percent at 3 hours. The
manufacturer maintained that the reason for lack of correction of these
factors is unclear and suggests that plasma cannot provide simple
repletion or that there is another mechanism resulting in a plateau of
some of the factors at a sub-therapeutic level. In contrast, the
manufacturer noted that Kcentra\TM\ increases all coagulation factors
(II, VII, IX, X) and anti-coagulation proteins (C and S). The
manufacturer added that modest reversal of VKA is also reflected in the
slow return to normal of the International Normalized Ratio (INR). The
manufacturer compared FFP to Kcentra\TM\ and noted that early INR
reduction was achieved in 62 percent of Kcentra\TM\ patients versus
less than 10 percent of FFP patients. The manufacturer also contended
that the different method of production of Kcentra\TM\ contributes to
its distinct mechanism of action by providing a highly specific, highly
concentrated product available on an urgent basis. The manufacturer
explained that Kcentra\TM\'s blood factor constituents are 25 more
times concentrated than those contained in a standard unit of FFP
allowing for markedly decrease of infusion time and infusion of smaller
volumes compared to equivalent doses of FFP; Kcentra\TM\ provides
standardized and known concentrations of factors compared to variable
concentrations for FFP; Kcentra\TM\ is a targeted therapy replacing
only what is deficient in vitamin K antagonists reversal resulting in
rapid reversal without impact of nonspecific protein content;
Kcentra\TM\ does not require ABO typing compared to FFP; and
Kcentra\TM\ is lyophilized powder for reconstitution and is stable for
up to 36 months at room temperature making it ideal for emergency use
compared to FFP.
Response: We appreciate the details provided in the manufacturer's
comment that reference the different reasons why Kcentra\TM\ uses a
different mechanism of action than FFP. We appreciate the issues that
the manufacturer raises that Kcentra\TM\ provides a simple and rapid
repletion relative to FFP and reduces the risk of a transfusion
reaction relative to FFP because it does not contain ABO or RH
antibodies, which require blood typing prior to administration.
However,

[[Page 50577]]

despite the arguments presented in the public comment, we remain
concerned that Kcentra\TM\ still uses the same mechanism of action as
FFP because they both use coagulation factors and proteins to improve
blood coagulation, in the context of an acquired coagulation
deficiency.
Comment: The manufacturer also submitted a public comment asserting
that Kcentra\TM\ provides a therapeutic option for new patient
populations and patient populations not recommended for FFP. The
manufacturer listed the following patient populations that would be
eligible to use Kcentra\TM\ but not FFP:
``Jehovah's Witnesses: Certain religious groups' beliefs
prevent patients from accepting transfusion of whole blood or its
primary components which includes plasma. Fractionated factor
concentrates are considered `secondary components', and thus they may
be acceptable to some followers'' (with these beliefs who would
otherwise not be eligible for FFP).
Immunoglobulin A (IgA) deficient patients can have severe
anaphylactoid reactions due to the formation of anti-IgA antibodies.
Plasma contains immunoglobulins and plasma in amounts as small as 10
ml, which can result in severe reaction. Kcentra\TM\ provides a
treatment option for these patients who were not eligible for FFP.
Rapid reversal of bleeding is important for patients with
intracranial hemorrhaging (ICH) in order to restrict hematoma
enlargement and allow timely neurosurgical intervention. The
manufacturer believed that Kcentra\TM\ provides a therapy for this
population because plasma is not ideal because Warfarin increases the
risk of ICH, which could lead to stroke. The manufacturer cited a study
noting that intervention for ICH within the first hour may improve
outcomes and protocol driven treatment can facilitate timely and
efficient care. The manufacturer also noted that for patients receiving
VKA therapy with an INR less than 1.4, protocol recommends
administering agents to normalize the INR within minutes; Kcentra\TM\
provides a readily available treatment compared to FFP which takes time
to thaw, type the patient and then infuse.
The manufacturer also noted that the most significant
limitations of plasma are the volume and time required to increase
factor levels. Because Kcentra\TM\ is concentrated, schemes can be
designed to achieve targeted factor level for patients, especially
those with cardiac impairment, rather than a maximum tolerated volume.
The manufacturer further explained that plasma volume, rate of
infusion, left ventricular dysfunction and VKA reversal have been
identified as risk factors for the development of Transfusion
Associated Circulatory Overload (TACO). The manufacturer cited data
from its clinical trial that demonstrated that plasma should not be
administered to patients with cardiac impairment or risk of cardiac
overload. The manufacturer asserted that Kcentra\TM\ provides a therapy
for patients with cardiac impairment for whom plasma would not be
ideal.
The manufacturer explained that given the logistical
issues of managing, typing and storing supplies of plasma (fresh/
thawed) as well as the limited supply of AB universal blood plasma,
Kcentra\TM\ provides a new treatment option for hospitals, regardless
of size (small, rural, community) or trauma level, to handle urgent
warfarin reversals. Plasma requires blood-type matching, thawing and is
often located away from the point of care. The applicant cited a study
conducted at a large, urban, tertiary care facility, where the median
time from time of diagnosis to plasma infusion was 90 minutes
(Goldstein STROKE 2006). This did not include time to infuse the
plasma, which can take hours. The manufacturer further explained that
even at leading hospitals, the logistics around obtaining units of
plasma for urgent transfusions is difficult, making good outcomes
difficult to obtain (Goldstein STROKE 2006). Smaller hospitals without
the resources of a Level 1 trauma center find plasma even more
difficult to manage resulting in under-treatment and slow treatment
(Menzin Thromb and Hemostasis 2012). Particularly for smaller,
community, rural, and hospitals less than Level One Trauma Centers,
Kcentra\TM\ represents the best opportunity for providing quality care
to patients with Warfarin-related bleeding.
Response: We agree that Kcentra\TM\ may be used in a patient
population that is experiencing an acquired coagulation factor
deficiency due to Warfarin and who are experiencing a severe bleed
currently but are ineligible for FFP, particularly for use by IgA
deficient patients and other patient populations that have no other
treatment option to resolve severe bleeding in the context of an
acquired Vitamin K deficiency. In addition, as mentioned above, FFP is
limited because it requires special storage conditions while
Kcentra\TM\ is stable for up to 36 months at room temperature thus
allowing hospitals that otherwise would not have access to FFP (for
example, small rural hospitals as discussed by the applicant in its
comments) to keep a supply of Kcentra\TM\ and treat patients who would
possibly have no access to FFP. We note that, FFP is considered
perishable and can be scarce by nature (due to production and other
market limitations) thus making some hospitals unable to store FFP,
which limits access to certain patient populations in certain
locations. Therefore, we believe that Kcentra\TM\ provides a
therapeutic option for a new patient population and is not
substantially similar to FFP. Also, as stated above, we give credence
to the information presented by the manufacturer in its comment that
Kcentra\TM\ provides a simple and rapid repletion relative to FFP and
reduces the risk of a transfusion reaction relative to FFP because it
does not contain ABO antibodies and does not require ABO typing.
Because Kcentra\TM\ is not substantially similar to FFP, we believe
that Kcentra\TM\ meets the newness criterion.
Comment: One commenter recommended that CMS eliminate the
substantial similarity criterion. The commenter believed that there are
several benefits to this proposal including eliminating the risk that
patients would be denied access to new therapies that provide
substantial clinical improvement, improving clarity and predictability
of the add-on rules and conforming to the statutory and regulatory
provisions governing add-on payments, which do not mention substantial
similarity and allowing technologies that enter the market subsequent
to similar products receiving the add-on payment to be eligible for the
add-on payment as well and not giving an advantage to the first product
on the market representing a specific technology.
Response: We appreciate the commenter's suggestion. However, we
note that we did not propose to eliminate the substantial similarity
criterion in the proposed rule. In regard to the commenter's assessment
of the benefits of eliminating the substantial similarity criterion, we
refer readers to the FY 2006 IPPS final rule (70 FR 47351) and the FY
2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43813 and 43814), where we
explain our policy and reasoning regarding substantial similarity in
detail.
According to the applicant, the technology is eligible to be used
across all MS-DRGs. To demonstrate that it meets the cost criterion,
the applicant searched the FY 2011 MedPAR file (across all MS DRGs) for
cases reporting a primary or secondary diagnosis of E934.2 (Adverse
events due to anticoagulants), V58.61 (Long term

[[Page 50578]]

(current) use of anticoagulants), or 964.2 (Poisoning by
anticoagulants) in combination with procedure code 99.07 (Transfusion
of the serum). The applicant believed that this combination identified
cases that suggest the use of a Vitamin K antagonist therapy as well as
a major bleed.
The applicant found 66,749 cases across all MS-DRGs and noted that
18 percent of all cases would map to MS-DRGs 377 (Gastrointestinal
Hemorrhage with MCC), 378 (Gastrointestinal Hemorrhage with CC), and
379 (Gastrointestinal Hemorrhage without CC/MCC), while the top 20 MS-
DRGs would account for 41 percent of all cases. The applicant
standardized charges (for all 66,749 cases) and removed charges for FFP
therapy, which equated to a case-weighted average standardized charge
per case of $49,748. The applicant calculated a case-weighted threshold
of $46,068 across all MS-DRGs. The applicant asserted that the average
case-weighted standardized charge per case without including charges
for Kcentra\TM\ exceeded the case-weighted threshold of $46,068.
Therefore, the applicant maintained that it meets the cost criterion.
We invited public comments regarding whether Kcentra\TM\ meets the cost
criterion, particularly with regard to the assumptions and methodology
used in the applicant's analysis. However, we did not receive any
public comments concerning the cost criterion and, therefore, we
believe that Kcentra\TM\ meets the cost criterion.
With regard to substantial clinical improvement, according to the
applicant, Kcentra\TM\ is the first prothrombin complex concentrate
(PCC) that will be FDA-approved for rapid Warfarin reversal in patients
experiencing an acute major bleed. The applicant maintained that
Kcentra\TM\ represents a substantial clinical improvement in the
treatment of patients with acute severe bleeding who require immediate
reversal of their VKA therapy by (1) providing a rapid, beneficial
resolution of the patient's blood clotting factor deficiency, (2)
decreasing the risk of exposure to blood borne pathogens, and (3)
reducing the rate of transfusion-associated complications.
The applicant cited its pivotal study (a randomized clinical trial)
\3\ and noted that Kcentra\TM\ was noninferior in its ability to
reverse the effects of Warfarin to a target INR of less than or equal
to 1.3 within 30 minutes in 62 percent of patients compared to less
than 10 percent success for plasma. Also, serum levels of the key
coagulant and anti-thrombotic proteins were normalized in less than an
hour with Kcentra\TM\, but these levels remained depressed with plasma
for hours after dosing with FFP.
---------------------------------------------------------------------------

\3\ Sarode R, et al., Efficacy and Safety of a Four Factor
Prothrombin Complex Concentrate in Patients on Vitamin K Antagonists
Presenting with Major Bleeding: A Randomized, Plasma Controlled,
Phase IIIb Study. Circulation. Submitted October 31, 2012. Copy to
be provided upon acceptance.
---------------------------------------------------------------------------

The applicant also explained that Kcentra\TM\ undergoes a dedicated
pathogen detection and removal process as well as purification steps to
produce its specific components and plasma does not. The applicant
asserted that this drastically reduces the risk of transmitting both
known and unknown blood borne pathogens. The applicant cited a
retrospective analysis of scientific publications \4\ on the use of
Kcentra\TM\ in the European Union (EU), including the pharmacovigilance
database from 1996 through 2008. The applicant noted that an estimated
350,000 patients have been treated with Kcentra\TM\ (known as Beriplex
in the EU) with no documented cases of viral transmission.
---------------------------------------------------------------------------

\4\ Hanke A, et al., Efficacy and Long-Term Safety of a
Pasteurized Nanofiltrated Prothrombin Complex Concentrate
(BERIPLEX[supreg] P/N), 2009, J Thromb Haemost, Vol. 7 (Suppl.2) PP-
WE-697.
---------------------------------------------------------------------------

The applicant also stated that, in the United States, blood
suppliers follow a strict set of regulations for screening and testing
the blood supply, but these tests and donor questionnaires do not
account for emerging pathogens that could contaminate the blood supply.
The applicant explained that parasitic infections and bacterial
diseases (such as babesiosis and Chaga's disease) have already been
documented in U.S. patients as a result of FFP transfusion. However,
there is no screening test to date for some of these parasitic
infections and diseases. The applicant believed that the multi-step
manufacturing process for Kcentra\TM\, including heat treatment and
nanofiltration, reduces the risk of transmitting such infections and
diseases.
The applicant also noted that another benefit of Kcentra\TM\ is the
ability to rapidly prepare and administer the product in an emergency
situation. In addition to the benefit of room temperature storage,
Kcentra\TM\ can be rapidly reconstituted and administered. In the
clinical study, the applicant found that the average administration
time for Kcentra\TM\ was less than 30 minutes. However, the applicant
stated, other treatments such as FFP and intravenous Vitamin K
therapies act more slowly, and FFP can be difficult to use. The
applicant explained that FFP therapy requires blood-type matching,
usually requires thawing, and is often located away from the point of
care. The applicant also cited a study \5\ that demonstrated the median
time from time of diagnosis to plasma infusion was 90 minutes, which
did not include the time to infuse the FFP which can take hours.
---------------------------------------------------------------------------

\5\ Goldstein, Joshua N., et al., Timing of Fresh Frozen Plasma
Administration and Rapid Correction of Coagulopathy in Warfarin-
Related Intracerebral Hemorrhage, Stroke 37.1 (2006):151-155.
---------------------------------------------------------------------------

The applicant further noted that essential blood coagulation
factors in one vial of Kcentra\TM\ are approximately 25 times more
concentrated than those in the equivalent plasma dose. According to the
applicant, this translated to an infusion volume that was 87 percent
greater in the FFP group of patients as seen in the pivotal study. The
applicant explained that high transfusion volumes of treatments such as
FFP therapy can lead to TACO. According to the applicant, when TACO
occurs, acute left ventricular failure may occur resulting in shortness
of breath, tachypnea (rapid breathing), and result in other harmful
effects.
Finally, the applicant noted that Kcentra\TM\ is recommended as the
standard of care in the new guidelines issued by the American College
of Chest Physicians (ACCP) for patients needing emergent Warfarin
reversal. In addition, the applicant noted that the American
Association of Blood Banks (AABB) stated that plasma should no longer
be used to reverse Warfarin in bleeding patients when specific factor
concentrates are available.
In conclusion, the applicant maintained that Kcentra\TM\ represents
a substantial clinical improvement over existing technologies. We
invited public comments regarding whether Kcentra\TM\ meets the
substantial clinical improvement criterion.
Comment: Several commenters supported making new technology add-on
payments for Kcentra\TM\. One commenter stated that Kcentra\TM\ is a
new, significantly more rapid way to provide substantial improvement
over existing technologies. The commenter noted that compared to FFP,
Kcentra\TM\ is concentrated and includes natural anticoagulants. In
addition, the commenter noted that Kcentra\TM\ is more targeted than
FFP because it does not contain the full range of proteins and other
molecules found in FFP and believed that this targeted therapy provides
high levels of coagulation factors at a faster rate and a more rapid
correction of deficiencies induced by Warfarin. The commenter further
stated

[[Page 50579]]

that Kcentra\TM\ can be infused in minutes compared to the hours needed
to infuse FFP. The commenter expressed the opinion that this saved time
can be critical when treating patients in a trauma or intensive care
setting, including patients requiring urgent surgical intervention. The
commenter also noted that Vitamin K therapy requires new factor
synthesis/modification, which is dependent on optimal organ function,
which in the context of patient injury or disease, may occur only after
substantial delay, while Kcentra\TM\ provides immediate functioning
factors.
The commenter also noted that a common use of FFP and/or Vitamin K
is sometimes a prophylactic measure for Warfarin reversal prior to an
invasive procedure. The commenter believes that once Kcentra\TM\ is
widely available, it will likely be used in a broader subset of
patients than FFP and/or Vitamin K. The commenter finally noted that
another benefit of Kcentra\TM\ is the low transfusion volume compared
to FFP which decreases the risk of exposure to TACO.
Another commenter noted that FFP has not been prospectively studied
in controlled randomized trials for urgent Warfarin reversal while
current guidelines for Vitamin K antagonist reversal recommend the use
of 4-factor PCC over plasma.
Response: We agree that Kcentra^TM represents a
substantial clinical improvement over existing technologies.
Specifically, Kcentra^TM provides (1) a rapid, beneficial
resolution of the patient's blood clotting factor deficiency, (2)
decreases the risk of exposure to blood borne pathogens, and (3)
reduces the rate of transfusion-associated complications.
Kcentra^TM meets all of the new technology add-on payment
policy criteria. Therefore, we are approving Kcentra^TM for
new technology add-on payments in FY 2014. Cases involving
Kcentra^TM that are eligible for new technology add-on
payments will be identified by ICD-9-CM procedure code 00.96. In the
application, the applicant estimated that the average Medicare
beneficiary would require an average dosage of 2500 International Units
(IU). Vials contain 500 IU at a cost of $635 per vial. Therefore, cases
of Kcentra^TM would incur an average cost per case of $3,175
($635 x 5). Under Sec. 412.88(a)(2), new technology add-on payments
are limited to the lesser of 50 percent of the average cost of the
technology or 50 percent of the costs in excess of the MS-DRG payment
for the case. As a result, the maximum add-on payment for a case of
Kcentra^TM is $1,587.50.
In the FY 2014 IPPS/LTCH PPS proposed rule, we noted that, if
Kcentra^TM were to be approved for new technology add-on
payments, we did not believe such payments would be available with
respect to discharges for which the hospital receives an add-on payment
for blood clotting factor administered to a Medicare beneficiary with
hemophilia who is a hospital inpatient. Under section
1886(d)(1)(A)(iii) of the Act, the national adjusted DRG prospective
payment rate is ``the amount of the payment with respect to the
operating costs of inpatient hospital services (as defined in
subsection (a)(4) of this section)'' for discharges on or after April
1, 1988. Section 1886(a)(4) of the Act excludes from the term
``operating costs of inpatient hospital services'' the costs with
respect to administering blood clotting factors to individuals with
hemophilia. The costs of administering blood clotting factor to
Medicare beneficiaries who have hemophilia and are hospital inpatients
are paid separately from the IPPS. (For information on how the blood
clotting factor add-on payment is made, we refer readers to section
20.7.3 of Chapter Three of the Medicare Claims Processing Manual, which
can be downloaded from the CMS Web site at: https://cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c03.pdf.) In addition, we
stated that if Kcentra^TM is approved by the FDA as a blood
clotting factor, we believe that it may be eligible for blood clotting
factor add-on payments when administered to Medicare beneficiaries with
hemophilia. We would make an add-on payment for Kcentra^TM
for such discharges in accordance with our policy for payment of blood
clotting factor, and it would be excluded from the operating costs of
inpatient hospital services as set forth in section 1886(a)(4) of the
Act.
Section 1886(d)(5)(K)(i) of the Act requires the Secretary to
``establish a mechanism to recognize the costs of new medical services
and technologies under the payment system established under this
subsection'' beginning with discharges on or after October 1, 2001. We
believe that it is reasonable to interpret this requirement to mean
that the payment mechanism established by the Secretary recognizes only
costs for those items that would otherwise be paid based on the
prospective payment system (that is, ``the payment system established
under this subsection''). As noted above, under section
1886(d)(1)(A)(iii) of the Act, the national adjusted DRG prospective
payment rate is the amount of payment for the operating costs of
inpatient hospital services, as defined in section 1886(a)(4) of the
Act, for discharges on or after April 1, 1988. We understand this to
mean that a new medical service or technology must be an operating cost
of inpatient hospital services paid based on the prospective payment
system, and not excluded from such costs, in order to be eligible for
the new technology add-on payment. We point out that new technology
add-on payments are based on the operating costs per case relative to
the prospective payment rate as described in Sec. 412.88. Therefore,
we believe that new technology add-on payments are appropriate only
when the new technology is an operating cost of inpatient hospital
services and are not appropriate when the new technology is excluded
from such costs.
We stated that if Kcentra^TM were to be approved for new
technology add-on payments, we believe that hospitals may only receive
that add-on payment for discharges where Kcentra^TM is an
operating cost of inpatient hospital services. In other words, we do
not believe that a hospital could be eligible to receive the new
technology add-on payment when it is administering Kcentra^TM
in treating a Medicare beneficiary who has hemophilia. In those
instances, Kcentra^TM is specifically excluded from the
operating costs of inpatient hospital services in accordance with
section 1886(a)(4) of the Act and paid separately from the IPPS.
However, when a hospital administers Kcentra^TM to a Medicare
beneficiary who does not have hemophilia, the hospital could be
eligible for a new technology add-on payment because
Kcentra^TM would not be excluded from the operating costs of
inpatient hospital services. Therefore, we do not believe that
discharges where the hospital receives a blood clotting factor add-on
payment are eligible for a new technology add-on payment for the blood
clotting factor.
To summarize, we believe that it would be inappropriate to make an
add-on payment for new technology for a blood clotting factor when a
blood clotting factor add-on payment has been made. We invited public
comments on our proposal to only make new technology add-on payments
for Kcentra^TM in cases when it is included in the operating
costs of inpatient hospital services (that is, when no add-on payment
is made for blood clotting factor). We did not receive any public
comments concerning this proposal. Because we are approving new
technology add-on payments for Kcentra^TM, we are finalizing
our

[[Page 50580]]

proposal not to make a new technology add-on payment for cases of
Kcentraw^TM in treating a Medicare beneficiary who has
hemophilia. We refer readers to Chapter three, section 20.7.3 of the
Medicare Claims Processing Manual for a complete discussion on when a
blood clotting factor add-on payment is made. The manual can be
downloaded from the CMS Web site at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c03.pdf.
b. Argus[supreg] II Retinal Prosthesis System
Second Sight Medical Products, Inc. submitted an application for
new technology add-on payments for the Argus[supreg] II Retinal
Prosthesis System (Argus[supreg] II System) for FY 2014. The
Argus[supreg] II System is an active implantable medical device that is
intended to provide electrical stimulation of the retina to induce
visual perception in patients who are profoundly blind due to retinitis
pigmentosa (RP). These patients have bare or no light perception in
both eyes. The system employs electrical signals to bypass dead photo-
receptor cells and stimulate the overlying neurons according to a real-
time video signal that is wirelessly transmitted from an externally
worn video camera. The Argus[supreg] II implant is intended to be
implanted in a single eye, typically the worse-seeing eye. Currently,
bilateral implants are not intended for this technology. According to
the applicant, the surgical implant procedure takes approximately 4
hours and is performed under general anesthesia.
The Argus[supreg] II System consists of three primary components:
(1) An implant which is an epiretinal prosthesis that is fully
implanted on and in the eye (that is, there are no percutaneous leads);
(2) external components worn by the user; and (3) a ``fitting'' system
for the clinician that is periodically used to perform diagnostic tests
with the system and to custom-program the external unit for use by the
patient. We describe these components more fully below.
Implant: The retinal prosthesis implant is responsible for
receiving information from the external components of the system and
electrically stimulating the retina to induce visual perception. The
retinal implant consists of: (a) A receiving coil for receiving
information and power from the external components of the Argus[supreg]
II System; (b) electronics to drive stimulation of the electrodes; and
(c) an electrode array. The receiving coil and electronics are secured
to the outside of the eye using a standard scleral band and sutures,
while the electrode array is secured to the surface of the retina
inside the eye by a retinal tack. A cable, which passes through the eye
wall, connects the electronics to the electrode array. A pericardial
graft is placed over the extra-ocular portion on the outside of the
eye.
External Components: The implant receives power and data
commands wirelessly from an external unit of components, which include
the Argus II Glasses and Video Processing Unit (VPU). A small
lightweight video camera and transmitting coil are mounted on the
glasses. The telemetry coils and radio-frequency system are mounted on
the temple arm of the glasses for transmitting data from the VPU to the
implant. The glasses are connected to the VPU by a cable. This VPU is
worn by the patient, typically on a belt or a strap, and is used to
process the images from the video camera and convert the images into
electrical stimulation commands, which are transmitted wirelessly to
the implant.
``Fitting System'': To be able to use the Argus[supreg] II
System, a patient's VPU needs to be custom-programmed. This process,
which the applicant called ``fitting'', occurs in the hospital/clinic
shortly after the implant surgery and then periodically thereafter as
needed. The clinician/physician also uses the ``Fitting System'' to run
diagnostic tests (for example, to obtain electrode and impedance
waveform measurements or to check the radio-frequency link between the
implant and external unit). This ``Fitting System'' can also be
connected to a ``Psychophysical Test System'' to evaluate patients'
performance with the Argus[supreg] II System on an ongoing basis.
These three components work together to stimulate the retina and
allow a patient to perceive phosphenes (spots of light), which they
then need to learn to interpret. While using the Argus[supreg] II
System, the video camera on the patient-worn glasses captures a video
image. The video camera signal is sent to the VPU, which processes the
video camera image and transforms it into electrical stimulation
patterns. The electrical stimulation data are then sent to a
transmitter coil mounted on the glasses. The transmitter coil sends
both data and power via radio-frequency (RF) telemetry to the implanted
retinal prosthesis. The implant receives the RF commands and delivers
stimulation to the retina via an array of electrodes that is secured to
the retina with a retinal tack.
In patients with RP, the photoreceptor cells in the retina, which
normally transduce incoming light into an electro-chemical signal, have
lost most of their function. The stimulation pulses delivered to the
retina via the electrode array of the Argus[supreg] II Retinal
Prosthesis System are intended to mimic the function of these
degenerated photoreceptors cells. These pulses induce cellular
responses in the remaining, viable retinal nerve cells that travel
through the optic nerve to the visual cortex where they are perceived
as phosphenes (spots of light). Patients learn to interpret the visual
patterns produced by these phosphenes.
With respect to the newness criterion, according to the applicant,
the FDA designated the Argus[supreg] II System a Humanitarian Use
Device in May 2009 (HUD designation 09-0216). The applicant
submitted a Humanitarian Device Exemption (HDE) application
(H110002) to the FDA in May 2011 to obtain market approval for
the Argus[supreg] II System. The HDE was referred to the Ophthalmic
Devices Panel of the FDA's Medical Devices Advisory Committee for
review and recommendation. At the Panel's meeting held on September 28,
2012, the Panel voted 19 to 0 that the probable benefits of the
Argus[supreg] II System outweigh the risks of the system for the
proposed indication for use. The applicant received the HDE approval
from the FDA on February 14, 2013. Currently there are no other
approved treatments for patients with severe to profound RP. The
Argus[supreg] II System has an IDE number of G050001 and is a Class III
device. The applicant applied for three new ICD-9-CM procedure codes
for consideration at the March 5, 2013 ICD-9-CM Coordination and
Maintenance Committee meeting. For this final rule, we have approved
new ICD-9-CM procedure code 14.81 (Implantation of Epiretinal Visual
Prosthesis) which uniquely identifies the Argus [supreg]II System. The
other two codes approved by CMS are for removal, revision or
replacement of the device. More information on these codes can be found
on the CMS Web site at: https://cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials-Items/2013-03-05-MeetingMaterials.html. We invited public comments on whether
the Argus[supreg] II System meets the newness criterion.
Comment: Many commenters expressed their opinion that the
Argus[supreg] II System meets the newness criterion. The commenters
noted that this technology is the first available treatment approved by
the FDA for profoundly blind RP patients, pointing out that it
``enables patients to interpret the visual patterns and gain
independence and mobility,'' which has not been possible previously for
these

[[Page 50581]]

patients with any other treatment modality. The commenters also noted
that the Argus[supreg] II System has not been sold in the United States
at this time.
Response: We appreciate the commenters' support. We agree that the
Argus[supreg]II System meets the newness criterion based on its FDA
approval date and due to the fact that we are unaware of any other
existing technologies that are substantially similar to it that would
allow Medicare beneficiaries with severe to profound Retinitis
Pigmentosa (RP) who have no vision to have some functional vision.
With regard to the cost criterion, the applicant identified all
discharges from claims in the FY 2011 MedPAR file for MS-DRGs 116
(Intraocular Procedures with CC/MCC) and 117 (Intraocular Procedures
without CC/MCC) with the presence of ICD-9-CM procedure code 14.73
(Anterior vitrectomy), or 14.74 (Posterior vitrectomy). (We note that
because no procedure code previously existed for this technology, these
cases would include patients that are not eligible for or would not
otherwise receive this technology.) The applicant found 199 cases (47.6
percent of all cases) in MS-DRG 116 and 219 cases (52.3 percent of all
cases) in MS-DRG 117. This resulted in an average charge per case of
$40,957 for MS-DRG 116 and $20,621 for MS-DRG 117, equating to a case-
weighted average charge per case of $24,011.
The applicant then standardized the charges using the FY 2011 final
rule impact file and converted the cost of the device to a charge by
dividing the operating costs by a CCR of 0.50 (which equates to a 100
percent markup). Although the applicant submitted data related to the
estimated cost of the Argus[supreg] II System, the applicant noted that
the cost of the technology was proprietary information. The applicant
then added the charges related to the device to the case-weighted
average standardized charge per case and determined a final case-
weighted average standardized charge per case of $311,180. Using the FY
2014 Table 10 thresholds, the case-weighted threshold for MS-DRGs 116
and 117 was $30,328 (all calculations above were performed using
unrounded numbers). Because the final case-weighted average
standardized charge per case for the applicable MS-DRGs exceed the
case-weighted threshold amount, the applicant maintained that the
Argus[supreg] II System would meet the cost criterion. We invited
public comments on whether the Argus[supreg] II System meets the cost
criterion, particularly based on the assumptions and methodology used
in the applicant's analysis. We did not receive any public comments
concerning the cost criterion and, therefore, we believe that the
Argus[supreg] II System meets the cost criterion.
In the FY 2014 IPPS/LTCH PPS proposed rule, we noted that, although
we could not disclose the cost of the technology, the device is very
costly. Because of its high costs, the technology would easily exceed
the case-weighted threshold. In addition, because of the high cost of
the device it is likely that claims with the device would receive an
outlier payment. The applicant anticipates that approximately 65
Argus[supreg] II Systems will be sold in FY 2014, of which
approximately 50 systems would be provided to Medicare patients. The
target disease population is extremely limited as required and
supported by the HDE application. Most patients for whom this
technology is indicated may be eligible for Medicare based on their
age, blindness, or a disability that is associated with profound
blindness.
We also noted that these types of procedures are often performed in
the outpatient setting. We expressed concern that if new technology
add-on payments were to be approved, this would serve as a financial
incentive to inappropriately shift utilization from an outpatient to an
inpatient setting, although medical review may result in very few of
these cases being paid as inpatient hospital services if the patient
can be appropriately treated as an outpatient. We emphasized that it is
critical that physicians use their clinical judgment in determining the
medical necessity of an inpatient admission and stress that care should
be provided in the appropriate setting. We invited public comments on
whether the Argus[supreg] II System meets the cost criterion,
particularly based on the assumptions and methodology used in the
applicant's analysis. We also expressed general concerns relating to
the descriptions of the medical necessity of performing this procedure
on an inpatient basis. Therefore, we invited public comments to further
our understanding regarding whether approving new technology add-on
payments for the Argus[supreg] II System would create a financial
incentive that would shift utilization inappropriately from an
outpatient to an inpatient setting.
Comment: Some commenters stated that approving new technology add-
on payments for the Argus[supreg] II System would not create a
financial incentive for inappropriate inpatient utilization because
these patients are treated in both inpatient and outpatient settings.
These commenters stated that the complex clinical judgment of the
physician must be the basis for determining inpatient status and/or the
site of care. The commenters added that ``decisions on the appropriate
site of service must be based on the individual patient's health status
and expected treatment. . . .''
Response: We appreciate the commenters' input, feedback, and
opinions that the appropriate setting and appropriate patients should
be based on a complex clinical judgment of the physician and note that
this would need to be supported by clinical documentation in the
medical record to maintain appropriate use of inpatient and outpatient
care settings.
With regard to the substantial clinical improvement criterion, the
Argus[supreg] II System is intended to provide electrical stimulation
of the retina to induce visual perception in blind patients with the
indication of severe to profound RP with bare or no light perception in
both eyes. According to the applicant, an estimated 1 in 3,037
Americans suffers from RP, and the incidence of people with severe to
profound RP is significantly lower. According to the applicant, the
need for treatments for RP is high, given the impact of loss of vision.
According to the applicant, numerous experimental research programs
are currently underway to slow, stop, or reverse the progress of RP,
including gene therapy, tissue and cell transplants, and some
pharmacologic neuroprotection therapies. However, these approaches so
far have had fairly limited success in treating RP patients, and some
approaches are intended for an extremely small segment of the RP
population. Currently there are no other approved treatments for
patients with severe to profound RP. Therefore, the Argus[supreg] II
device treats a patient population that has no other treatment options.
The applicant submitted the results of a clinical trial to
demonstrate substantial clinical improvement. This clinical trial
enrolled 30 patients. The median age of patients was 57.9 years at the
time of implantation and the range was 28 to 77 years of age. Thirty
percent of the patients were female, and 70 percent were male. All of
the patients had bare or no light perception in both eyes. Fourteen of
the patients were Medicare eligible. As part of the methods for the
study, the applicant stated that while working within the framework of
clinical trials for other ophthalmic devices, the manufacturer and its
team of scientific advisors selected or designed several tests that
would address the main elements of the

[[Page 50582]]

system that should be assessed for these types of devices--visual
function (that is, how the eye as an organ works [for example, visual
acuity]), functional vision (that is, how the patient performs in
vision-related activities of daily living), and quality of life. The
endpoints that were selected provided a mixture of objective and
subjective data. The study design was strengthened by the fact that
controlled observations could be obtained by performing assessments
with the Argus[supreg] II System ``on'' and ``off'' (that is, control
was available at each time point).
According to the applicant, there were no unexpected adverse
events. Non-serious adverse events represented the majority of events.
The safety review concluded that the Argus[supreg] II System has a
reasonable safety profile for an ophthalmic device that requires
vitreoretinal surgery to implant. In addition, the applicant noted that
the device can be extracted and is reversible. The Argus[supreg] II
System provided all 30 patients with benefit as measured by high-
contrast visual function tests. The applicant stated that the degree of
benefit varied from patient to patient and provided the following
results:
All subjects were able to see visual percepts when the
Argus[supreg] II System was electrically activated.
On the Square Localization Test (that is, object
localization), patients (on average) performed better with the system
``on'' rather than ``off'' at all follow-up time points. At 24 months,
on average, patients missed the target by approximately 50 pixels with
the system ``on'' versus approximately 250 pixels with the system
``off.''
On the Direction of Motion Test, which tested the
patients' ability to determine the direction of a moving bar, patients
had higher mean accuracy with the system ``on'' than they did with the
system ``off'' at all follow-up time points, indicating that the
Argus[supreg] II System improved their performance on a spatial vision
task. At 24 months, the mean response error was approximately 60[deg]
with the system ``on'' versus more than 80[deg] with the system
``off.'' According to the applicant, this is nearly the error expected
by chance.
On the Grating Visual Acuity Test, which assessed the
patients' visual acuity using the principles of acuity charts designed
for extremely low vision patients, 27 percent of the patients were able
to score on the scale (between 1.6 and 2.9 log MAR) at least once with
the system ``on,'' while none of the Argus[supreg] II patients were
able to score on the scale with the system ``off.''
A large number of patients were able to recognize large
letters and numbers with the system ``on'' (but not with the system
``off''), and some of the patients were able to read short words. The
median percent correct with the system ``on'' was approximately 50
percent higher than with the system ``off.''
The trial also measured objectively-scored functional
vision tests. The patients performed better with the Argus[supreg] II
System ``on'' versus ``off'' on orientation and mobility tests (finding
a door and following a line) and on functional vision tasks (sorting
white, black, and gray socks, following an outdoor sidewalk, and
determining the direction of a person walking by).
Analysis of the Functional Low-vision Observer Rated
Assessment (FLORA) results showed that three-quarters of the patients
received a positive benefit in terms of well-being and/or functional
vision, while none of the patients experienced a negative effect.
We also noted that we were concerned that the study did not have
pre-specified endpoints and changed measurements mid-trial. In
addition, we expressed concern about the reliability of the measures
used for the tests and the inconsistency of the results across
different patients, which lead us to question the long-term benefits
associated with this device. We received two comments on the
Argus[supreg]II System during the town hall meeting's public comment
period. These comments were summarized and responded to in the FY 2014
IPPS/LTCH PPS proposed rule. We refer readers to the proposed rule for
a summary of these comments and our detailed responses (78 FR 27542
through 27543). In addition, we invited public comments on whether the
Argus[supreg] II System meets the substantial clinical improvement
criterion, specifically in regard to the measures used in the study and
the lack of pre-specified endpoints.
Comment: One commenter, the applicant, submitted a public comment
in response to CMS' concern about the lack of pre-specified end points
and evolving measures in their studies, noting that at the beginning of
its studies, ``it was clear that there was an absence of measures that
were validated for the intended treatment population (e.g., no
functional vision).'' The commenter noted that as the trial progressed,
new measures were introduced to address the applicability of clinical
results to everyday life, and measurements changed to make the testing
more challenging for the subjects (for example, with both the system
``off'' and ``on'') and to reduce the likelihood of success based on
chance. The applicant further stated that the selection and
modification of endpoint measures was done with a ``tremendous amount
of input from independent third party experts (ophthalmologists,
surgeons, optometrists, retinal degeneration specialists, and low
vision experts) and the FDA (and many times at the request of the
FDA).'' The applicant believed that ``the resulting trial design and
execution was the best possible trial for this target population given
the novelty of the Argus II Retinal Prosthesis System.'' The commenter
asserted that, ``Furthermore, the results of this study clearly
indicate a beneficial effect for the Argus[supreg]II.'' Another
commenter noted that because the target population for this technology
had not previously been studied, there were no pre-existing endpoints.
This commenter opined that the new instruments and methods added during
the study strengthened the results because they each added difficulty
to the tests. Another commenter supported the study design and
responded to our concerns that having no fixed endpoints or lack of
validation for some of the clinical trial measures is an inevitable
consequence of applying this new technology to a population that has
had no other options. This commenter expressed its opinion that the
measures needed to be designed, and refined, because very few tests
existed that could assess such limited vision in quantitative terms.
Response: We appreciate the commenters' views and explanation of
the study design, measures, and endpoints in light of the small and
rare population of patients with severe to profound Retinitis
Pigmentosa being studied for this Argus[supreg]II System. We agree with
the commenters that, in view of these difficulties that very few tests
existed that could assess such limited vision in quantitative terms for
this population of blind patients with the indication of severe to
profound RP with bare or no light perception in both eyes, the
applicant presented data that demonstrated that the Argus[supreg]II
System represents a substantial clinical improvement over existing
technologies.
The Argus[supreg]II System meets all of the new technology add-on
payment policy criteria. Therefore, we are approving the
Argus[supreg]II System for new technology add-on payments in FY 2014.
Cases involving the Argus[supreg]II System that are eligible for new
technology add-on payments will be identified by ICD-9-CM procedure
code 14.81. We note that section 1886(d)(5)(K)(i) of the Act requires
that the Secretary establish a

[[Page 50583]]

mechanism to recognize the costs of new medical services or
technologies under the payment system established under that
subsection, which establishes the system for paying for the operating
costs of inpatient hospital services. The system of payment for capital
costs is established under section 1886(g) of the Act, which makes no
mention of any add-on payments for a new medical service or technology.
Therefore, it is not appropriate to include capital costs in the add-on
payments for a new medical service or technology. In the application,
the applicant provided a breakdown of the costs of the Argus[supreg]II
System. The total operating cost of the Argus[supreg]II System is
$144,057.50. Under Sec. 412.88(a)(2), new technology add-on payments
are limited to the lesser of 50 percent of the average cost of the
device or 50 percent of the costs in excess of the MS-DRG payment for
the case. As a result, the maximum add-on payment for a case involving
the Argus[supreg]II System is $72,028.75.
c. Zilver[supreg] PTX[supreg] Drug Eluting Peripheral Stent
Cook[supreg] Medical submitted an application for new technology
add-on payments for the Zilver[supreg] PTX[supreg] Drug Eluting
Peripheral Stent (Zilver[supreg] PTX[supreg]) for FY 2014. The
Zilver[supreg] PTX[supreg] is intended for use in the treatment of
peripheral artery disease (PAD) of the above-the-knee femoropopliteal
arteries (superficial femoral arteries). According to the applicant,
the stent is percutaneously inserted into the artery(s), usually by
accessing the common femoral artery in the groin. The applicant stated
that an introducer catheter is inserted over the wire guide and into
the target vessel where the lesion will first be treated with an
angioplasty balloon to prepare the vessel for stenting. The applicant
indicated that the stent is self-expanding, made of nitinol (nickel
titanium), and is coated with the drug Paclitaxel. Paclitaxel is a drug
approved for use as an anticancer agent and for use with coronary
stents to reduce the risk of renarrowing of the coronary arteries after
stenting procedures.
The applicant received FDA approval on November 15, 2012, for the
Zilver[supreg] PTX[supreg]. The applicant maintains that the
Zilver[supreg] PTX[supreg] is the first drug-eluting stent used for
superficial femoral arteries. The technology is currently described by
ICD-9-CM procedure code 00.60 (Insertion of drug-eluting stent(s) of
the superficial femoral artery). We invited public comments regarding
how the Zilver[supreg] PTX[supreg] meets the newness criterion.
However, we did not receive any public comments concerning the newness
criterion and, therefore, we believe that the Zilver[supreg]
PTX[supreg] meets the newness criterion.
With regard to the cost criterion, the applicant believed that
cases of superficial femoral arteries typically map to MS-DRGs 252
(Other Vascular Procedures with MCC), 253 (Other Vascular Procedures
with CC), and 254 (Other Vascular Procedures without CC/MCC). The
applicant searched the FY 2010 MedPAR file for cases reporting
procedure code 39.90 (Insertion of non-drug-eluting peripheral vessel
stents) in combination with a diagnosis code of 440.20 (Atherosclerosis
of the extremities, unspecified), 440.21 (Atherosclerosis of the
extremities, with intermittent claudication), 440.22 (Atherosclerosis
of the extremities with rest pain), 440.23 (Atherosclerosis of the
extremities with ulceration), or 440.24 (Atherosclerosis of the
extremities with gangrene). The applicant noted that the Zilver[supreg]
PTX[supreg] is available in an 80 mm size and is approved for lesions
in native vascular disease of the above-the-knee femoropopliteal
arteries having reference vessel diameter from 4 mm to 9 mm and total
lesion lengths up to 140 mm per limb. The applicant further noted that
bare metal stents typically are available up to lengths of 200 mm.
Therefore, in order to target cases eligible for the Zilver[supreg]
PTX[supreg], the applicant believed that it was only appropriate to
target those cases with one or two bare metal stents. The applicant was
able to identify the amount of stents used per claim by searching for
ICD-9-CM procedure codes 00.45 (Insertion of one vascular stent) and
00.46 (Insertion of two vascular stents). The applicant submitted two
methodologies: one with cases that received one bare metal stent and
the other with cases that received one or two bare metal stents.
Under the first methodology (one bare metal stent), the applicant
found 2,062 cases (or 19.7 percent of all cases) in MS-DRG 252, 3,385
cases (or 32.3 percent of all cases) in MS-DRG 253, and 5,019 cases (or
48 percent of all cases) in MS-DRG 254. The average charge per case was
$89,194 for MS-DRG 252, $67,965 for MS-DRG 253, and $46,539 for MS-DRG
254, equating to a case-weighted average charge per case of $60,855.
The case-weighted average charge per case above does not include
charges related to the Zilver[supreg] PTX[supreg]. Therefore, it was
first necessary to remove the amount of charges related to the non-
drug-eluting peripheral vessel stent and replace them with charges
related to the Zilver[supreg] PTX[supreg]. The applicant multiplied the
use of the single stent used per case by the average market price for
non-drug-eluting peripheral vessel stents and then converted the cost
of the stents used per case to a charge by dividing the results by the
hospital-specific CCR (from the FY 2010 IPPS impact file). The
applicant removed the appropriate amount of charges per case and then
standardized the charges per case.
Because the applicant used FY 2010 MedPAR data, it was necessary to
inflate the charges from FY 2010 to FY 2013. Using data from the Bureau
of Labor Statistics Consumer Price Index, the applicant inflated the
average standardized charge per case with an inflation factor of 7
percent. To determine the amount of Zilver[supreg] PTX[supreg] stents
per case, instead of using the amount of stents used per case based on
the ICD-9-CM codes above, the applicant used an average of 1.9 stents
per case based on the Zilver[supreg] PTX[supreg] Global Registry
Clinical Study.\6\ The applicant believed that it is appropriate to use
data from the clinical study (to determine the average amount of stents
used per case) rather than the actual data from the claims because the
length of a non-drug-eluting peripheral vessel stent typically ranges
from 80 mm to 120 mm, while the length of the Zilver[supreg]
PTX[supreg] is 80 mm (which could cause a variance in the actual amount
of stents used per case when using the Zilver[supreg] PTX[supreg]). The
applicant then multiplied the average of 1.9 stents used per case by
the future market price for the Zilver[supreg] PTX[supreg] and then
converted the cost of the stents used per claim to a charge by dividing
the results by the hospital-specific CCR (from the FY 2010 IPPS impact
file). The applicant then added the amount of charges related to the
Zilver[supreg] PTX[supreg] to the inflated average standardized charge
per case and determined a final inflated case-weighted average
standardized charge per case of $58,419. Although the applicant
submitted data that related to the estimated cost of the Zilver[supreg]
PTX[supreg], the applicant noted that the cost of the technology was
proprietary information. Using the FY 2014 Table 10 thresholds, the
case-weighted threshold for MS-DRGs 252, 253, and 254 was $54,547 (all
calculations above were performed using unrounded numbers). Because the
final inflated case-weighted average

[[Page 50584]]

standardized charge per case for the applicable MS-DRGs exceeded the
case-weighted threshold amount, the applicant maintained that the
Zilver[supreg] PTX[supreg] would meet the cost criterion.
---------------------------------------------------------------------------

\6\ Dake, M.D., Ansel, G.M., Jaff, M.R., Ohki, T., Saxon, R.R.,
Smouse, H.B., Zeller, T., Roubin, G.S., Burket, M.W., Khatib, Y.,
Snyder, S.A., Ragheb, A.O., White, J.K., Machan, L.S. (2011),
Paclitaxel-eluting stents show superiority to balloon angioplasty
and bare metal stents in femoropopliteal disease: twelve-month
zilver PTX randomized study results. Circulation Cardiovascular
Interventions, published online September 27, 2011, 495-504.
---------------------------------------------------------------------------

The applicant used the same methodology above to demonstrate that
it meets the cost criterion with the only difference being that it
included cases that used one or two bare metal stents instead of just
one bare metal stent. Using this methodology, the applicant determined
a final inflated case-weighted average standardized charge per case of
$62,455. Using the FY 2014 Table 10 thresholds, the case-weighted
threshold for MS-DRGs 252, 253, and 254 was $54,474 (all calculations
above were performed using unrounded numbers). Because the final
inflated case-weighted average standardized charge per case for the
applicable MS-DRGs exceeded the case-weighted threshold amount, the
applicant maintained that the Zilver[supreg] PTX[supreg] would meet the
cost criterion.
We invited public comments on whether or not the Zilver[supreg]
PTX[supreg] meets the cost criterion. In addition, we invited public
comments on the methodologies used by the applicant in its analysis,
including its assumptions regarding the types of cases in which this
technology could potentially be used and the number of stents required
for each case. However, we did not receive any public comments
concerning the cost criterion and, therefore, we believe that the
Zilver[supreg] PTX[supreg] meets the cost criterion.
In an effort to demonstrate that the technology meets the
substantial clinical improvement criterion, the applicant shared
several findings from the clinical trial data. The applicant stated
that current treatment options for patients who have been diagnosed
with PAD includes angioplasty, bare metal stenting, bypass graft, and
endarterectomy. The applicant asserted that the Zilver[supreg]
PTX[supreg] meets the substantial clinical improvement criterion
because it decreases the recurrence of symptoms arising from restenotic
SFA lesions, the rate of subsequent diagnostic or therapeutic
interventions required to address restenotic lesions, and the number of
future hospitalizations.
The applicant cited a 479-patient, multicenter, multinational
randomized controlled trial that compared the Zilver[supreg]
PTX[supreg] to balloon angioplasty \7\; an additional component of the
study allowed a direct comparison of the Zilver[supreg] PTX[supreg] to
a bare (uncoated) metal Zilver[supreg] stent. Patients were randomized
to treatment with the Zilver[supreg] PTX[supreg] stent (treatment
group) or with a percutaneous transluminal balloon angioplasty (PTA,
control group). Recognizing that balloon angioplasty may not be
successful acutely, the trial design mandated provisional stent
placement immediately after failure of balloon angioplasty in instances
of acute PTA failure. Therefore, patients with suboptimal (failed) PTA
underwent a secondary randomization to stenting with either
Zilver[supreg] PTX[supreg] or bare Zilver[supreg] stents. This
secondary randomization allows evaluation of the Zilver[supreg]
PTX[supreg] stent compared to a bare metal stent. The primary safety
endpoint of the randomized controlled study was ``Event-Free Survival''
(EFS), defined as ``freedom from the major adverse events of death,
target lesion revascularization, target limb ischemia requiring
surgical intervention or surgical repair of the target vessel, and
freedom of worsening systems as described by the Rutherford
classification by 2 classes or to class 5 or 6.'' The primary
effectiveness endpoint was primary patency (defined as a less than 50
percent re-narrowing). In the FY 2014 IPPS/LTCH PPS proposed rule, we
noted that we were concerned that other endpoints such as walking,
walking speed, and climbing were not considered as primary endpoints to
demonstrate the effectiveness of the Zilver[supreg] PTX[supreg].
---------------------------------------------------------------------------

\7\ Dake, M.D., Ansel, G.M., Jaff, M.R., Ohki, T., Saxon, R.R.,
Smouse, H.B., Zeller, T., Roubin, G.S.,Burket, M.W., Khatib, Y.,
Snyder, S.A., Ragheb, A.O., White, J.K., Machan, L.S.(2011),
Paclitaxeleluting stents show superiority to balloon angioplasty and
bare metal stents in femoropopliteal disease: twelve-month zilver
PTX randomized study results. Circulation Cardiovascular
Interventions, published online September 27, 2011, 495-504.
---------------------------------------------------------------------------

According to the applicant, the Zilver[supreg] PTX[supreg] had an
EFS of 90.4 percent compared to balloon angioplasty, which had an EFS
of 83.9 percent, at 12 months demonstrating that the Zilver[supreg]
PTX[supreg] is as safe or safer than balloon angioplasty. The applicant
further stated that this benefit was maintained at 24 months. In
addition, the applicant noted that the Zilver[supreg] PTX[supreg]
demonstrated a 50-percent reduction in restenosis rates compared to
angioplasty and a 20-percent reduction compared to bare metal stents.
The 12-month patency rate for the Zilver[supreg] PTX[supreg] was 82.7
percent, which compared favorably to the balloon angioplasty patency
rate of 32.7 percent. In the provisional stenting arm of the study,
which allowed a direct comparison of the Zilver[supreg] PTX[supreg] and
a bare metal stent, the Zilver[supreg] PTX[supreg] primary patency
exceeded the bare metal stent patency by nearly 20 percent (87.3
percent versus 72.3 percent at 12 months). The applicant stated that
these differences are significant, as they result in a substantial
clinical improvement compared to angioplasty and bare metal stenting,
with patients being spared a recurrence of their leg pain and the need
to be admitted to the hospital for repeat procedures on these treated
lesions. The applicant also submitted 3 years of follow-up data, which
the applicant maintained support that the Zilver[supreg] PTX[supreg] is
more effective in maintaining primary patency.\8\
---------------------------------------------------------------------------

\8\ Dake, MD., VIVA 2012, October 10, 2012; Las Vegas, Nevada.
---------------------------------------------------------------------------

The applicant also cited a prospective, multicenter, multinational,
787-patient single arm study on the Zilver[supreg] PTX[supreg] that
demonstrated similar safety and effectiveness results consistent with
those from the pivotal randomized controlled study above. The applicant
cited an EFS for the Zilver[supreg] PTX[supreg] of 89.0 percent and an
86.2 percent primary patency rate. According to the applicant, these
results confirm the safety and effectiveness of the Zilver[supreg]
PTX[supreg], and compare favorably to current results for angioplasty
and bare metal stenting. The applicant further stated that these
results also demonstrate a 67 to 81 percent relative reduction in
Target Lesion Revascularization (the need to retreat an already treated
lesion that has restenosed, resulting in a recurrence of symptoms)
rates compared to recently published results of contemporary bare metal
stents.\9\
---------------------------------------------------------------------------

\9\ Dake, M. D., Scheinert, D., Tepe, G., Tessarek, J., Fanelli,
F., Bosiers, M., et al., (2011). Nitinol stents with polymer-free
paclitaxel coating for lesions in the superficial femoral and
popliteal arteries above the knee: Twelve-month safety and
effectiveness results from the Zilver PTX single-arm clinical study.
Journal of Endovascular Therapy, 18(5), 613-623.
---------------------------------------------------------------------------

In the FY 2014 IPPS/LTCH PPS proposed rule, we also expressed
concern that on April 24, 2013, the FDA announced that, based on its
investigation into a small number of complaints that the delivery
system of the device had separated at the tip of the inner catheter,
Cook Medical has initiated a nationwide/global voluntary recall of its
Zilver[supreg] PTX[supreg] Drug Eluting Peripheral Stent. We refer
readers to https://www.fda.gov/Safety/Recalls/ucm349421.htm?source=govdelivery for more information regarding this
announcement.
We note that we did not receive any public comments on the
Zilver[supreg] PTX[supreg] during the new technology town hall
meeting's public comment period. However, we invited public comments

[[Page 50585]]

regarding whether the Zilver[supreg] PTX[supreg] meets the substantial
clinical improvement criterion.
Comment: One commenter, the manufacturer and applicant, submitted a
public comment responding to our concerns presented in the proposed
rule. With regard to our first concern that other endpoints such as
walking, walking speed, and climbing were not considered as primary
endpoints, the manufacturer noted that in addition to the primary
endpoint of primary patency at 12 months, the study investigators (for
the Zilver[supreg] PTX[supreg] Global Registry Clinical Study)
understood the importance of including other effective endpoints in the
study. Specifically, the commenter noted that the study included
Rutherford classification, walking ability, and quality of life. Also,
a composite clinical endpoint defined as ``freedom from symptoms of
ischemia'' was calculated based on freedom from worsening claudication,
worsening Rutherford class, tissue loss, and other symptoms indicating
the need for reintervention.
The commenter added that similar improvements in the Rutherford
score, and walking and quality of life scores were observed in both the
PTA control and Zilver[supreg] PTX[supreg] treatment groups of the
Zilver[supreg] PTX[supreg] Global Registry Clinical Study. The
commenter noted that the study was designed to allow ongoing,
clinically indicated care to optimize each patient's health status and
quality of life throughout the course of the study, which would result
in improved clinical outcomes. The commenter asserted that while
allowing for ongoing care within the clinical trial, the study design
confounded the comparison of clinical benefit between the PTA control
and Zilver[supreg] PTX[supreg] treatment groups due to the additional
study and/or non-study related procedures that were performed during
the study and subsequent to the index procedure(s). The commenter
concluded that this confounding aspect of the study design, though in
the patient's best interest, argued against using these clinical
effectiveness endpoints as primary endpoints.
The commenter also explained that because these standard clinical
effectiveness outcomes were not ideally suited to discriminate
differences between treatment arms in clinical trial, a secondary
clinical benefit index of freedom from symptoms of ischemia was
calculated (as described above). The commenter believed that measuring
freedom from symptoms of ischemia provides an important measure of
clinical benefit of the Zilver[supreg] PTX[supreg]. The commenter noted
that freedom from symptoms of ischemia was maintained in 88.5 percent
of the Zilver[supreg] PTX[supreg] treatment group at 12 month versus
75.3 percent of PTA control group patients. The commenter also pointed
out that at the time of submission of the application, only 12-month
data had been published in the peer review literature. Since that time,
the 2-year safety and effectiveness outcomes have been published \10\
and can be accessed on the Internet at: https://www.sciencedirect.com/science/article/pii/S0735109713014149.
---------------------------------------------------------------------------

\10\ Dake, M. D., Ansel, G. M., Jaff, M. R., Takao, O., Saxon,
R. R., Smouse, H. B., Snyder, S. A., O'leary, E. E., Tepe, G.,
Scheinert, D., Zeller, T., (June 18, 2013) Sustained Safety and
Effectiveness of Paclitaxel-Eluting Stents for Femoropopliteal
Leasions: 2 Year-Follow-Up from the Zilver PTX Randomized and
Single-Arm Clinical Studies. Journal of American College of
Cardiology, Vol. 61, Issue 24.
---------------------------------------------------------------------------

With regard to our concerns concerning the recall of the device,
the commenter stated that it has ``identified the root cause of the
underlying failure mode to the delivery device and corrective action
has been implemented'' with the anticipated return of the
Zilver[supreg] PTX[supreg] to the market in early August 2013. The
commenter noted that there are no issues with the Zilver[supreg]
PTX[supreg] itself, only the delivery system to implant the
Zilver[supreg] PTX[supreg].
Response: After consideration of the public comments received in
response to our concerns and proposals presented in the proposed rule,
we agree that the Zilver[supreg] PTX[supreg] represents a substantial
clinical improvement over existing technologies because it decreases
the recurrence of symptoms arising from restenotic SFA lesions, the
rate of subsequent diagnostic or therapeutic interventions required to
address restenotic lesions, and the number of future hospitalizations.
We also believe that the commenter has sufficiently responded to our
concerns presented in the proposed rule. However, we will continue to
monitor the long-term clinical trial data concerning the primary and
secondary endpoints as it becomes available.
Comment: Several commenters supported making new technology add-on
payments for the Zilver[supreg] PTX[supreg] in FY 2014.
Response: We appreciate the commenters' support. The Zilver[supreg]
PTX[supreg] meets all of the new technology add-on payment policy
criteria. Therefore, we are approving the Zilver[supreg] PTX[supreg]
for new technology add-on payments in FY 2014. Cases involving the
Zilver[supreg] PTX[supreg] that are eligible for new technology add-on
payments will be identified by ICD-9-CM procedure code 00.60. As stated
above, to determine the amount of Zilver[supreg] PTX[supreg] stents per
case, instead of using the amount of stents used per case based on the
ICD-9-CM codes, the applicant used an average of 1.9 stents per case
based on the Zilver[supreg] PTX[supreg] Global Registry Clinical Study.
The applicant stated in its application that the anticipated cost per
stent is approximately $1,795. Therefore, cases of the Zilver[supreg]
PTX[supreg] would incur an average cost per case of $3,410.50 ($1,795 x
1.9). Under Sec. 412.88(a)(2), new technology add-on payments are
limited to the lesser of 50 percent of the average cost of the device
or 50 percent of the costs in excess of the MS-DRG payment for the
case. As a result, the maximum add-on payment for a case of the
Zilver[supreg] PTX[supreg] is $1,705.25.

III. Changes to the Hospital Wage Index for Acute Care Hospitals

A. Background

Section 1886(d)(3)(E) of the Act requires that, as part of the
methodology for determining prospective payments to hospitals, the
Secretary adjust the standardized amounts ``for area differences in
hospital wage levels by a factor (established by the Secretary)
reflecting the relative hospital wage level in the geographic area of
the hospital compared to the national average hospital wage level.'' We
currently define hospital labor market areas based on the delineations
of statistical areas established by the Office of Management and Budget
(OMB). A discussion of the FY 2014 hospital wage index based on the
statistical areas appears under section III.B. of the preamble of this
final rule.
Section 1886(d)(3)(E) of the Act requires the Secretary to update
the wage index annually and to base the update on a survey of wages and
wage-related costs of short-term, acute care hospitals. This provision
also requires that any updates or adjustments to the wage index be made
in a manner that ensures that aggregate payments to hospitals are not
affected by the change in the wage index. The adjustment for FY 2014 is
discussed in section II.B. of the Addendum to this final rule.
As discussed below in section III.H. of this preamble, we also take
into account the geographic reclassification of hospitals in accordance
with sections 1886(d)(8)(B) and 1886(d)(10) of the Act when calculating
IPPS payment amounts. Under section 1886(d)(8)(D) of the Act, the
Secretary is required to adjust the standardized amounts so as to
ensure that aggregate payments under the IPPS after implementation of
the provisions of sections 1886(d)(8)(B),

[[Page 50586]]

1886(d)(8)(C), and 1886(d)(10) of the Act are equal to the aggregate
prospective payments that would have been made absent these provisions.
The budget neutrality adjustment for FY 2014 is discussed in section
II.A.4.b. of the Addendum to this final rule.
Section 1886(d)(3)(E) of the Act also provides for the collection
of data every 3 years on the occupational mix of employees for short-
term, acute care hospitals participating in the Medicare program, in
order to construct an occupational mix adjustment to the wage index. A
discussion of the occupational mix adjustment that we are applying
beginning October 1, 2013 (the FY 2014 wage index) appears under
section III.F. of the preamble of this final rule.

B. Core-Based Statistical Areas for the Hospital Wage Index

The wage index is calculated and assigned to hospitals on the basis
of the labor market area in which the hospital is located. Under
section 1886(d)(3)(E) of the Act, beginning with FY 2005, we define
hospital labor market areas based on the Core-Based Statistical Areas
(CBSAs) established by OMB. The current statistical areas are based on
OMB standards published on December 27, 2000 (65 FR 82228) and Census
2000 data and Census Bureau population estimates for 2007 and 2008 (OMB
Bulletin No. 10-02). For a discussion of OMB's delineations of CBSAs
and our implementation of the CBSA definitions, we refer readers to the
preamble of the FY 2005 IPPS final rule (69 FR 49026 through 49032). We
also discussed in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51582)
and the FY 2013 IPPS/LTCH PPS final rule (77 FR 53365) that, in 2013,
OMB planned to announce new area delineations based on new standards
adopted in 2010 (75 FR 37246) and the 2010 Census of Population and
Housing data. As stated in the FY 2014 IPPS/LTCH PPS proposed rule (78
FR 27552), on February 28, 2013, OMB issued OMB Bulletin No. 13-01,
which established revised delineations for Metropolitan Statistical
Areas, Micropolitan Statistical Areas, and Combined Statistical Areas,
and provided guidance on the use of the delineations of these
statistical areas. A copy of this bulletin may be obtained at https://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b-13-01.pdf.
According to OMB, ``[t]his bulletin provides the delineations of all
Metropolitan Statistical Areas, Metropolitan Divisions, Micropolitan
Statistical Areas, Combined Statistical Areas, and New England City and
Town Areas in the United States and Puerto Rico based on the standards
published on June 28, 2010, in the Federal Register (75 FR 37246-37252)
and Census Bureau data.''
In order to implement these changes for the IPPS, it is necessary
to identify the new area designation for each county and hospital in
the country. While the revisions OMB published on February 28, 2013 are
not as sweeping as the changes OMB announced in 2003, the February 28,
2013 bulletin does contain a number of significant changes. For
example, there are new CBSAs, urban counties that become rural, rural
counties that become urban, and existing CBSAs that have been split
apart. In addition, the effect of the new designations on various
hospital reclassifications, the out-migration adjustment (established
by section 505 of Pub. L. 108-173), and treatment of hospitals located
in certain rural counties (that is, ``Lugar'' hospitals) provided for
under section 1886(d)(8)(B) of the Act must be considered. These are
just a few of the many issues that need to be considered regarding the
effects of the new designations prior to proposing and establishing
policies.
However, because the bulletin was not issued until February 28,
2013, with supporting data not available until later, and because the
changes made by the bulletin and their ramifications must be
extensively reviewed and verified, we were unable to undertake such a
lengthy process before publication of the FY 2014 IPPS/LTCH PPS
proposed rule. By the time the bulletin was issued, the FY 2014 IPPS/
LTCH PPS proposed rule was in the advanced stages of development. We
had already developed the FY 2014 proposed wage index based on the
previous OMB definitions. We note that, in June 2003, OMB announced
changes resulting from the 2000 Census, and at that time, CMS proposed
and implemented the changes during the following year's rulemaking
cycle for FY 2005. Although OMB published the data earlier than June
this year, we still are in essentially the same situation as we were in
2003 because the data are not available in time to be incorporated into
this year's rulemaking cycle. To allow for sufficient time to assess
the new changes and their ramifications, we intend to propose changes
to the wage index based on the newest CBSA changes in the FY 2015
proposed rule. We refer readers to the FY 2005 IPPS final rule (69 FR
49026 through 49034) for those interested in learning about the issues
we may need to address next year in proposing to implement the latest
OMB update for FY 2015, and some of the policy decisions that we may
consider making.
Comment: Several commenters recommended that, if CMS were to
implement OMB's MSAs in the FY 2015 final rule, the newly adopted
definitions should not be effective until FY 2016, and even then, CMS
should phase in the new MSAs. Other commenters specifically stated that
CMS should provide a 3-year ``hold harmless'' period for those
hospitals that maintain a specific status under the Medicare program
that is jeopardized by changes to the MSAs. For example, two commenters
suggested that rural hospitals that currently qualify for MDH and SCH
status should be protected from the negative financial consequences of
a change to urban status. Several other commenters urged CMS to hold an
open-door call to review the CMSA changes and outline for hospitals
what may or may not be the next steps for CMS as it plans to proceed,
similar to the 2003 process. One commenter suggested that the Secretary
allow rural teaching hospitals that will be redesignated to urban to
start a new residency training program, and under the GME rules
specific to rural hospitals, allow the hospital to count the FTEs for
an additional time period of 2 years.
Response: We appreciate the comments made by the commenters. As we
indicated in the proposed rule, we intend to assess these new
definitions, which require extensive review and verification to
identify the new area designation for each county and hospital in the
county, before adopting them. Any changes would be made through notice-
and-comment rulemaking. We will address the concerns raised in these
comments and other issues at part of the FY 2015 rulemaking process.

C. Worksheet S-3 Wage Data for the FY 2014 Wage Index

The FY 2014 wage index values are based on the data collected from
the Medicare cost reports submitted by hospitals for cost reporting
periods beginning in FY 2010 (the FY 2013 wage indices were based on
data from cost reporting periods beginning during FY 2009).
1. Included Categories of Costs
The FY 2014 wage index includes the following categories of data
associated with costs paid under the IPPS (as well as outpatient
costs):
Salaries and hours from short-term, acute care hospitals
(including paid lunch hours and hours associated with military leave
and jury duty);

[[Page 50587]]

Home office costs and hours;
Certain contract labor costs and hours (which includes
direct patient care, certain top management, pharmacy, laboratory, and
nonteaching physician Part A services, and certain contract indirect
patient care services (as discussed in the FY 2008 final rule with
comment period (72 FR 47315 through 47318)); and
Wage-related costs, including pension costs (based on
policies adopted in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51586
through 51590)) and other deferred compensation costs.
2. Excluded Categories of Costs
Consistent with the wage index methodology for FY 2013, the wage
index for FY 2014 also excludes the direct and overhead salaries and
hours for services not subject to IPPS payment, such as SNF services,
home health services, costs related to GME (teaching physicians and
residents) and certified registered nurse anesthetists (CRNAs), and
other subprovider components that are not paid under the IPPS. The FY
2014 wage index also excludes the salaries, hours, and wage-related
costs of hospital-based rural health clinics (RHCs), and Federally
qualified health centers (FQHCs) because Medicare pays for these costs
outside of the IPPS (68 FR 45395). In addition, salaries, hours, and
wage-related costs of CAHs are excluded from the wage index, for the
reasons explained in the FY 2004 IPPS final rule (68 FR 45397 through
45398).
3. Use of Wage Index Data by Providers Other Than Acute Care Hospitals
under the IPPS
Data collected for the IPPS wage index are also currently used to
calculate wage indices applicable to other providers, such as SNFs,
home health agencies (HHAs), and hospices. In addition, they are used
for prospective payments to IRFs, IPFs, and LTCHs, and for hospital
outpatient services. We note that, in the IPPS rules, we do not address
comments pertaining to the wage indices for non-IPPS providers, other
than for LTCHs. Such comments should be made in response to separate
proposed rules for those providers.

D. Verification of Worksheet S-3 Wage Data

The wage data for the FY 2014 wage index were obtained from
Worksheet S-3 of the Medicare cost report for cost reporting periods
beginning on or after October 1, 2009, and before October 1, 2010. For
wage index purposes, we refer to cost reports during this period as the
``FY 2010 cost report,'' the ``FY 2010 wage data,'' or the ``FY 2010
data.'' Instructions for completing the wage index sections of
Worksheet S-3 are included in the Provider Reimbursement Manual (PRM),
Part 2 (Pub. No. 15-2), Chapter 36, Sections 3605.2 and 3605.3 for Form
CMS-2552-96 and Chapter 40, Sections 4005.2 through 4005.4 for Form
CMS-2552-10. Hospitals with cost reporting periods beginning on or
after October 1, 2009 and before May 1, 2010 reported FY 2010 data on
Form CMS-2552-96. Hospitals with cost reporting periods beginning on or
after May 1, 2010 and before October 1, 2010 reported FY 2010 data on
the new Form CMS-2552-10. The data file used to construct the final FY
2014 wage index includes FY 2010 data submitted to us as of June 26,
2013. As in past years, we performed an extensive review of the wage
data, mostly through the use of edits designed to identify aberrant
data.
We asked our fiscal intermediaries/MACs to revise or verify data
elements that result in specific edit failures. For the proposed FY
2014 wage index, we identified and excluded 43 providers with data that
were too aberrant to include in the proposed wage index, although we
stated that if data elements for some of these providers are corrected,
we intended to include some of these providers in the final FY 2014
wage index. (We note that in the FY 2014 IPPS/LTCH PPS proposed rule,
we inadvertently stated that we excluded 44 providers.) We have
received corrected data for 11 providers, and therefore, we are
including the data for these 11 providers in the final FY 2014 wage
index. Therefore, in total, we are excluding the data of 32 providers
from the final FY 2014 wage index.
In constructing the proposed FY 2014 wage index, we included the
wage data for facilities that were IPPS hospitals in FY 2010, inclusive
of those facilities that have since terminated their participation in
the program as hospitals, as long as those data did not fail any of our
edits for reasonableness. We believe that including the wage data for
these hospitals is, in general, appropriate to reflect the economic
conditions in the various labor market areas during the relevant past
period and to ensure that the current wage index represents the labor
market area's current wages as compared to the national average of
wages. However, we excluded the wage data for CAHs as discussed in the
FY 2004 IPPS final rule (68 FR 45397 through 45398). For the proposed
rule, we removed 4 hospitals that converted to CAH status on or after
February 14, 2012, the cut-off date for CAH exclusion from the FY 2013
wage index, and through and including February 14, 2013, the cut-off
date for CAH exclusion from the FY 2014 wage index. After removing
hospitals with aberrant data and hospitals that converted to CAH
status, the final FY 2014 wage index is calculated based on 3,440
hospitals.
For the final FY 2014 wage index, we allotted the wages and hours
data for a multicampus hospital among the different labor market areas
where its campuses are located in the same manner that we allotted such
hospitals' data in the FY 2013 wage index (77 FR 53366). Table 2
containing the FY 2014 wage index associated with this final rule
(available on the CMS Web site) includes separate wage data for the
campuses of six multicampus hospitals (two additional multicampus
hospitals have been added to the wage index calculation for FY 2014).

E. Method for Computing the FY 2014 Unadjusted Wage Index

The method used to compute the FY 2014 wage index without an
occupational mix adjustment follows the same methodology that we used
to compute the FY 2012 final wage index without an occupational mix
adjustment (76 FR 51591 through 51593) and which we discussed and used
for the FY 2013 final wage index without an occupational mix adjustment
(77 FR 53366 through 53367).
As discussed in the FY 2012 final rule, in ``Step 5,'' for each
hospital, we adjust the total salaries plus wage-related costs to a
common period to determine total adjusted salaries plus wage-related
costs. To make the wage adjustment, we estimate the percentage change
in the employment cost index (ECI) for compensation for each 30-day
increment from October 14, 2009, through April 15, 2011, for private
industry hospital workers from the BLS' Compensation and Working
Conditions. We have consistently used the ECI as the data source for
our wages and salaries and other price proxies in the IPPS market
basket, and as we proposed, we are not making any changes to the usage
for FY 2014. The factors used to adjust the hospital's data were based
on the midpoint of the cost reporting period, as indicated below.

Midpoint of Cost Reporting Period
------------------------------------------------------------------------
Adjustment
After Before factor
------------------------------------------------------------------------
10/14/2009.................................... 11/15/2009 1.02682
11/14/2009.................................... 12/15/2009 1.02490
12/14/2009.................................... 01/15/2010 1.02299

[[Page 50588]]

01/14/2010.................................... 02/15/2010 1.02116
02/14/2010.................................... 03/15/2010 1.01941
03/14/2010.................................... 04/15/2010 1.01768
04/14/2010.................................... 05/15/2010 1.01591
05/14/2010.................................... 06/15/2010 1.01412
06/14/2010.................................... 07/15/2010 1.01235
07/14/2010.................................... 08/15/2010 1.01064
08/14/2010.................................... 09/15/2010 1.00898
09/14/2010.................................... 10/15/2010 1.00738
10/14/2010.................................... 11/15/2010 1.00584
11/14/2010.................................... 12/15/2010 1.00434
12/14/2010.................................... 01/15/2011 1.00288
01/14/2011.................................... 02/15/2011 1.00143
02/14/2011.................................... 03/15/2011 1.00000
03/14/2011.................................... 04/15/2011 0.99860
------------------------------------------------------------------------

For example, the midpoint of a cost reporting period beginning
January 1, 2010, and ending December 31, 2010, is June 30, 2010. An
adjustment factor of 1.01235 would be applied to the wages of a
hospital with such a cost reporting period.
Using the data as described above and in the FY 2013 IPPS/LTCH PPS
final rule, the FY 2014 national average hourly wage (unadjusted for
occupational mix) is $38.3998. The FY 2014 Puerto Rico overall average
hourly wage (unadjusted for occupational mix) is $16.4890.

F. Occupational Mix Adjustment to the FY 2014 Wage Index

As stated earlier, section 1886(d)(3)(E) of the Act provides for
the collection of data every 3 years on the occupational mix of
employees for each short-term, acute care hospital participating in the
Medicare program, in order to construct an occupational mix adjustment
to the wage index, for application beginning October 1, 2004 (the FY
2005 wage index). The purpose of the occupational mix adjustment is to
control for the effect of hospitals' employment choices on the wage
index. For example, hospitals may choose to employ different
combinations of registered nurses, licensed practical nurses, nursing
aides, and medical assistants for the purpose of providing nursing care
to their patients. The varying labor costs associated with these
choices reflect hospital management decisions rather than geographic
differences in the costs of labor.
1. Development of Data for the FY 2014 Occupational Mix Adjustment
Based on the 2010 Occupational Mix Survey
As provided for under section 1886(d)(3)(E) of the Act, we collect
data every 3 years on the occupational mix of employees for each short-
term, acute care hospital participating in the Medicare program.
As discussed in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53367
through 53368), the occupational mix adjustment to the FY 2013 wage
index was based on data collected on the 2010 Medicare Wage Index
Occupational Mix Survey (Form CMS-10079 (2010)). For the FY 2014 wage
index, as we proposed, we are again using occupational mix data
collected on the 2010 survey to compute the occupational mix adjustment
for FY 2014. We are including data for 3,201 hospitals that also have
wage data included in the FY 2014 wage index.
2. New 2013 Occupational Mix Survey for the FY 2016 Wage Index
As stated earlier, section 304(c) of Public Law 106-554 amended
section 1886(d)(3)(E) of the Act to require CMS to collect data every 3
years on the occupational mix of employees for each short-term, acute
care hospital participating in the Medicare program. We used
occupational mix data collected on the 2010 survey to compute the
occupational mix adjustment for FY 2013 and the FY 2014 wage index
associated with this final rule. We also plan to use the 2010 survey
data for the FY 2015 wage index. Therefore, a new measurement of
occupational mix will be required for FY 2016.
On December 7, 2012, we published in the Federal Register a notice
soliciting comments on the proposed 2013 Medicare Wage Index
Occupational Mix Survey (77 FR 73032 through 73033). The new 2013
survey, which will be applied to the FY 2016 wage index, includes the
same data elements and definitions as the 2010 survey and provides for
the collection of hospital-specific wages and hours data for nursing
employees for calendar year 2013 (that is, payroll periods ending
between January 1, 2013 and December 31, 2013). The comment period for
the notice ended on February 5, 2013. After considering the public
comments that we received on the December 2012 notice, we made a few
minor editorial changes and published the 2013 survey in the Federal
Register on February 28, 2013 (78 FR 13679). This survey was approved
by OMB on May 14, 2013, and is available on the CMS Web site at: https://www.cms.hhs.gov/PaperworkReductionActof1995 by clicking on ``PRA
Listings.'' (The OMB control number for this collection of information
is 0938-0907.) Hospitals are required to submit their completed 2013
surveys to their fiscal intermediaries/MACs by July 1, 2014. The
preliminary, unaudited 2013 survey data will be released afterward,
along with the FY 2012 Worksheet S-3 wage data, for the FY 2016 wage
index review and correction process. The 2013 Occupational Mix Survey
Hospital Form and Instructions and Definitions are available on the CMS
Web site at: https://cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/Medicare-Wage-Index-Occupational-Mix-Survey2013.html.
3. Calculation of the Occupational Mix Adjustment for FY 2014
For FY 2014, we calculated the occupational mix adjustment factor
using the same methodology that we used for the FY 2012 and FY 2013
wage indices (76 FR 51582 through 51586, and 77 FR 53367 through 53368,
respectively). As a result of applying this methodology, the FY 2014
occupational mix adjusted national average hourly wage is $38.3698. The
FY 2014 occupational mix adjusted Puerto Rico-specific average hourly
wage is $16.5319.
Because the occupational mix adjustment is required by statute, all
hospitals that are subject to payments under the IPPS, or any hospital
that would be subject to the IPPS if not granted a waiver, must
complete the occupational mix survey, unless the hospital has no
associated cost report wage data that are included in the FY 2014 wage
index. For the FY 2010 survey, the response rate was 91.7 percent. In
the FY 2014 wage index established in this final rule, we applied proxy
data for noncompliant hospitals, new hospitals, or hospitals that
submitted erroneous or aberrant data in the same manner that we applied
proxy data for such hospitals in the FY 2012 wage index occupational
mix adjustment (76 FR 51586).
In the FY 2011 IPPS/LTCH PPS proposed rule and final rule (75 FR
23943 and 75 FR 50167, respectively), we stated that, in order to gain
a better understanding of why some hospitals are not submitting the
occupational mix data, we will require hospitals that do not submit
occupational mix data to provide an explanation for not complying. This
requirement was effective beginning with the 2010 occupational mix
survey. We instructed fiscal intermediaries/MACs to continue gathering
this information as part of the FY 2014 wage index desk review process.
We will review these data for future analysis and consideration of
potential penalties for noncompliant hospitals.

[[Page 50589]]

G. Analysis and Implementation of the Occupational Mix Adjustment and
the FY 2014 Occupational Mix Adjusted Wage Index

1. Analysis of the Occupational Mix Adjustment and the Occupational Mix
Adjusted Wage Index
As discussed in section III.F. of this preamble, for FY 2014, we
apply the occupational mix adjustment to 100 percent of the FY 2014
wage index. We calculated the final occupational mix adjustment using
data from the 2010 occupational mix survey data, using the methodology
described in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51582 through
51586).
Using the occupational mix survey data and applying the
occupational mix adjustment to 100 percent of the FY 2014 wage index
results in a national average hourly wage of $38.3698 and a Puerto-Rico
specific average hourly wage of $16.5319. After excluding data of
hospitals that either submitted aberrant data that failed critical
edits, or that do not have FY 2010 Worksheet S-3, Parts II and III,
cost report data for use in calculating the FY 2014 wage index, we
calculated the FY 2014 wage index using the occupational mix survey
data from 3,201 hospitals. Using the Worksheet S-3, Parts II and III,
cost report data of 3,440 hospitals and occupational mix survey data
from 3,201 hospitals represents a 93.1 percent survey response rate.
The FY 2014 national average hourly wages for each occupational mix
nursing subcategory as calculated in Step 2 of the occupational mix
calculation are as follows:

------------------------------------------------------------------------
Average hourly
Occupational mix nursing subcategory wage
------------------------------------------------------------------------
National RN............................................. 37.430602011
National LPN and Surgical Technician.................... 21.771626577
National Nurse Aide, Orderly, and Attendant............. 15.323325633
National Medical Assistant.............................. 17.2056709
National Nurse Category................................. 31.80354668
------------------------------------------------------------------------

The national average hourly wage for the entire nurse category as
computed in Step 5 of the occupational mix calculation is $31.80354668.
Hospitals with a nurse category average hourly wage (as calculated in
Step 4) of greater than the national nurse category average hourly wage
receive an occupational mix adjustment factor (as calculated in Step 6)
of less than 1.0. Hospitals with a nurse category average hourly wage
(as calculated in Step 4) of less than the national nurse category
average hourly wage receive an occupational mix adjustment factor (as
calculated in Step 6) of greater than 1.0.
Based on the 2010 occupational mix survey data, we determined (in
Step 7 of the occupational mix calculation) that the national
percentage of hospital employees in the nurse category is 43.45
percent, and the national percentage of hospital employees in the all
other occupations category is 56.55 percent. At the CBSA level, the
percentage of hospital employees in the nurse category ranged from a
low of 21.9 percent in one CBSA, to a high of 62.0 percent in another
CBSA.
We compared the FY 2014 occupational mix adjusted wage indices for
each CBSA to the unadjusted wage indices for each CBSA. As a result of
applying the occupational mix adjustment to the wage data, the wage
index values for 205 (52.4 percent) urban areas and 32 (66.7 percent)
rural areas will increase. One hundred and twenty (30.7 percent) urban
areas will increase by 1 percent or more, and 4 (1.02 percent) urban
areas will increase by 5 percent or more. Thirteen (27.1 percent) rural
areas will increase by 1 percent or more, and no rural areas will
increase by 5 percent or more. However, the wage index values for 182
(46.5 percent) urban areas and 16 (33.3 percent) rural areas will
decrease. Eighty (20.5 percent) urban areas will decrease by 1 percent
or more, and 1 urban area will decrease by 5 percent or more (0.26
percent). Seven (14.6 percent) rural areas will decrease by 1 percent
or more, and no rural areas will decrease by 5 percent or more. The
largest positive impacts are 6.61 percent for an urban area and 2.64
percent for a rural area. The largest negative impacts are 5.28 percent
for an urban area and 3.17 percent for a rural area. Four urban areas'
wage indices, but no rural area wage indices, will remain unchanged by
application of the occupational mix adjustment. These results indicate
that a larger percentage of rural areas (66.7 percent) will benefit
from the occupational mix adjustment than will urban areas (52.4
percent). However, approximately one-third (33.3 percent) of rural
CBSAs will still experience a decrease in their wage indices as a
result of the occupational mix adjustment.
2. Application of the Rural, Imputed, and Frontier Floors
a. Rural Floor
Section 4410(a) of Public Law 105-33 provides that, for discharges
on or after October 1, 1997, the area wage index applicable to any
hospital that is located in an urban area of a State may not be less
than the area wage index applicable to hospitals located in rural areas
in that State. This provision is referred to as the ``rural floor.''
Section 3141 of Public Law 111-148 also requires that a national budget
neutrality adjustment be applied in implementing the rural floor. In
the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27556), we estimated
that 434 hospitals would receive an increase in their FY 2014 proposed
wage index due to the application of the rural floor. Based on the
final FY 2014 wage indices associated with this final rule and
available on the CMS Web site, 424 hospitals are receiving an increase
in their FY 2014 wage index due to the application of the rural floor.
We received some comments concerning the application of the rural floor
and additional tables. We respond to these public comments in Appendix
A of this final rule.
b. Imputed Floor
In the FY 2005 IPPS final rule (69 FR 49109 through 49111), we
adopted the ``imputed floor'' policy as a temporary 3-year regulatory
measure to address concerns from hospitals in all-urban States that
have argued that they are disadvantaged by the absence of rural
hospitals to set a wage index floor for those States. Since its initial
implementation, we have extended the imputed floor policy three times,
the last of which was adopted in the FY 2013 IPPS/LTCH PPS final rule
and is set to expire on September 30, 2013 (we refer readers to the
discussion in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53368 through
53369) and to our regulations at 42 CFR 412.64(h)(4)). There are
currently two all-urban States, New Jersey and Rhode Island, that have
a range of wage indices assigned to hospitals in the State, including
through reclassification or redesignation (we refer readers to
discussions of geographic reclassifications and redesignations in
section III.H. of the preamble of this final rule). However, as we
explain below, the method as of FY 2012 for computing the imputed
floor, which we will refer to as the original methodology, benefitted
only New Jersey, and not Rhode Island.
In computing the imputed floor for an all-urban State under the
original methodology, we calculated the ratio of the lowest-to-highest
CBSA wage index for each all-urban State (that is, New Jersey and Rhode
Island) as well as the average of the ratios of lowest-to-highest CBSA
wage indices of those all-urban States. We compared the State's own
ratio to the average ratio for all-urban States and whichever is higher
was

[[Page 50590]]

multiplied by the highest CBSA wage index value in the State--the
product of which established the imputed floor for the State. Rhode
Island has only one CBSA (Providence-New Bedford-Fall River, RI-MA);
therefore, Rhode Island's own ratio equals 1.0, and its imputed floor
was equal to its original CBSA wage index value. Conversely, New Jersey
has 10 CBSAs. Because the average ratio of New Jersey and Rhode Island
was higher than New Jersey's own ratio, the original methodology
provided a benefit for New Jersey, but not for Rhode Island.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53368 through
53369), for the FY 2013 wage index, the final year of the extension of
the imputed floor policy under Sec. 412.64(h)(4), we did not make any
changes to the original methodology and we finalized a proposed
alternative, temporary methodology for computing the imputed floor wage
index to address the concern that the then-current imputed floor
methodology guaranteed a benefit for one all-urban State with multiple
wage indices but could not benefit the other. The alternative
methodology for calculating the imputed floor was established using
data from the application of the rural floor policy for FY 2013. We
first determined the average percentage difference between the post-
reclassified, pre-floor area wage index and the post-reclassified,
rural floor wage index (without rural floor budget neutrality applied)
for all CBSAs receiving the rural floor. (Table 4D associated with the
FY 2013 final rule, which is available on the CMS Web site, included
the CBSAs receiving a State's rural floor wage index.) The lowest post-
reclassified wage index assigned to a hospital in an all-urban State
having a range of such values would then be increased by this factor,
the result of which established the State's alternative imputed floor.
We refer to this methodology as the alternative methodology. We also
adopted a policy that, for discharges on or after October 1, 2012, and
before October 1, 2013, the minimum wage index value for the State is
the higher of the value determined under the original methodology or
the value computed using the alternative methodology. We amended Sec.
412.64(h)(4) of the regulations to add new paragraph (vi) to
incorporate the finalized alternative methodology policies, and to make
conforming changes.
We stated that we intended to further evaluate the need,
applicability, and methodology for the imputed floor before the
September 30, 2013 expiration of the imputed floor policy and address
these issues in the FY 2014 proposed rule. In the FY 2014 IPPS/LTCH PPS
proposed rule (78 FR 27556), we proposed to extend the imputed floor
policy (both the original methodology and the alternative methodology)
for one additional year, through September 30, 2014, while we continue
to explore potential wage index reforms. We proposed to revise the
regulations at Sec. 412.64(h)(4) to reflect the proposed 1-year
extension. We invited public comments on this extension.
Comment: Many of the commenters supported the CMS proposal, stating
that it provides a remedy to the financial and competitive
disadvantages suffered by hospitals in all-urban States, and that
preserving the current imputed floor policy is the sound course of
action as CMS continues to explore potential wage index reforms. One
commenter who supported the proposal advised CMS that the American
Hospital Association's (AHA's) Medicare Area Wage Index Task Force has
issued draft recommendations (including the imputed floor policy) and
has requested comments from hospitals prior to finalizing the report.
The commenter suggested that the industry have a chance to provide
input to CMS prior to finalizing any decisions regarding the imputed
floor policy. The commenter also suggested that, if CMS decides to
finalize a policy that would result in the expiration of the imputed
floor, CMS afford hospitals a multiyear phase out in order to offset
their lost revenue.
One commenter objected to the proposal and stated that it did not
support the policy behind the imputed floor. The commenter stated that
it agreed with the rationale that CMS previously provided in the FY
2012 IPPS/LTCH PPS proposed rule (76 FR 25878 and 25879) for not
proposing to extend the imputed floor policy, and urged CMS to let the
policy expire. Another commenter opposed the proposal, stating that it
supported CMS' position in the FY 2008 IPPS proposed rule (72 FR 24786)
that the imputed floor policy should apply only when required by
statute.
Response: We appreciate the commenters' support. For those
commenters who objected to the proposed policy and made further
recommendations, we will further consider these comments while we
continue to explore potential wage index reforms. In response to the
commenter who advised that the AHA's Medicare Area Wage Index Task
Force has requested comments from hospitals prior to finalizing its
report and also suggested that the industry have a change to provide
input to CMS prior to finalizing any decisions regarding the imputed
floor policy, we are unclear on exactly what the commenter is
requesting. We have allowed the industry to comment on the proposals
regarding the imputed floor policy; specifically in the FY 2014 IPPS/
LTCH PPS proposed rule (78 FR 27556), we invited public comment on the
proposed 1-year extension. With regard to the comment that requested
that CMS afford hospitals a multiyear phase-out of the imputed floor
policy, we did not propose to let the imputed floor policy expire for
FY 2014. We will consider the commenter's suggestion in future
rulemaking.
After consideration of the public comments we received, in this
final rule, as we proposed, we are providing an extension of the
imputed floor policy (both the original methodology and the alternative
methodology) for one additional year, through September 30, 2014, while
we continue to explore potential wage index reform. We also are
adopting as final the proposed conforming changes at Sec. 412.64(h)(4)
to reflect the 1-year extension.
The wage index and impact tables associated with this final rule
that are available on the CMS Web site include the application of the
imputed floor policy at Sec. 412.64(h)(4) and a national budget
neutrality adjustment for the rural floor (which includes the imputed
floor). There are 25 hospitals in New Jersey that will receive an
increase in their FY 2014 wage index due to the imputed floor
calculated under the original methodology. The wage index and impact
tables for this final rule also reflect the application of the
alternative methodology for computing the imputed floor, which will
benefit 4 hospitals in Rhode Island.
c. Frontier Floor
Section 10324 of Public Law 111-148 requires that hospitals in
frontier States cannot be assigned a wage index of less than 1.0000 (we
refer readers to regulations at 42 CFR 412.64(m) and to a discussion of
the implementation of this provision in the FY 2011 IPPS/LTCH PPS final
rule (75 FR 50160 through 50161)). Forty-six hospitals are receiving
the frontier floor value of 1.0000 for their FY 2014 wage index. These
hospitals are located in Montana, North Dakota, South Dakota, and
Wyoming. Although Nevada is also defined as a frontier State, its FY
2014 rural floor value of 1.1454 was greater than 1.0000, and
therefore, no Nevada hospitals will receive a frontier floor value for
their FY 2014 wage index. We

[[Page 50591]]

did not receive any public comments concerning the frontier floor.
The areas affected by the rural, imputed, and frontier floor
policies for the FY 2014 wage index are identified in Table 4D
associated with this final rule, which is available on the CMS Web
site.
3. FY 2014 Wage Index Tables
The wage index values for FY 2014 (except those for hospitals
receiving wage index adjustments under section 1886(d)(13) of the Act),
included in Tables 4A, 4B, 4C, and 4F, available on the CMS Web site,
include the occupational mix adjustment, geographic reclassification or
redesignation as discussed in section III.H. of the preamble of this
final rule, and the application of the rural, imputed, and frontier
State floors as discussed in section III.G.2. of the preamble of this
final rule.
Tables 3A and 3B, available on the CMS Web site, list the 3-year
average hourly wage for each labor market area before the redesignation
or reclassification of hospitals based on FYs 2008, 2009, and 2010 cost
reporting periods. Table 3A lists these data for urban areas, and Table
3B lists these data for rural areas. In addition, Table 2, which is
available on the CMS Web site, includes the adjusted average hourly
wage for each hospital from the FY 2008 and FY 2009 cost reporting
periods, as well as the FY 2010 period used to calculate the FY 2014
wage index. The 3-year averages are calculated by dividing the sum of
the dollars (adjusted to a common reporting period using the method
described in Step 5 in section III.G. of the preamble of this final
rule) across all 3 years, by the sum of the hours. If a hospital is
missing data for any of the previous years, its average hourly wage for
the 3-year period is calculated based on the data available during that
period. The average hourly wages in Tables 2, 3A, and 3B, which are
available on the CMS Web site, include the occupational mix adjustment.
The wage index values in Tables 4A, 4B, 4C, and 4D also include the
national rural floor budget neutrality adjustment (which includes the
imputed floor). The wage index values in Table 2 also include the out-
migration adjustment for eligible hospitals.

H. Revisions to the Wage Index Based on Hospital Redesignations and
Reclassifications

1. General Policies and Effects of Reclassification and Redesignation
Under section 1886(d)(10) of the Act, the MGCRB considers
applications by hospitals for geographic reclassification for purposes
of payment under the IPPS. Hospitals must apply to the MGCRB to
reclassify not later than 13 months prior to the start of the fiscal
year for which reclassification is sought (generally by September 1).
Generally, hospitals must be proximate to the labor market area to
which they are seeking reclassification and must demonstrate
characteristics similar to hospitals located in that area. The MGCRB
issues its decisions by the end of February for reclassifications that
become effective for the following fiscal year (beginning October 1).
The regulations applicable to reclassifications by the MGCRB are
located in 42 CFR 412.230 through 412.280. (We refer readers to a
discussion in the FY 2002 IPPS final rule (66 FR 39874 and 39875)
regarding how the MGCRB defines mileage for purposes of the proximity
requirements.) The general policies for reclassifications and
redesignations that we are adopting for FY 2014, and the policies for
the effects of hospitals' reclassifications and redesignations on the
wage index, are the same as those discussed in the FY 2012 IPPS/LTCH
PPS final rule for the FY 2012 final wage index (76 FR 51595 and
51596). Also, in the FY 2012 IPPS/LTCH PPS final rule, we discussed the
effects on the wage index of urban hospitals reclassifying to rural
areas under 42 CFR 412.103. Hospitals that are geographically located
in States without any rural areas are ineligible to apply for rural
reclassification in accordance with the provisions of 42 CFR 412.103.
Comment: One commenter noted that CMS did not propose any
amendments to Sec. 412.103, but requested that CMS retract the
statement that hospitals that are geographically located in States
without any rural areas are ineligible to apply for rural
reclassification pursuant to 42 CFR 412.103; the commenter believed
that this statement is a change in policy. The commenter believed that
the statute and regulations permit a hospital in an all-urban State to
be treated as if it were located in a rural area, and that no actual
rural area in the State is necessary for such reclassification.
Response: We disagree with commenter's request, and maintain our
position that hospitals that are geographically located in States
without any rural areas are ineligible for Sec. 412.103
reclassification. This is consistent with the statute and CMS'
longstanding policy, and we did not propose any changes to this policy.
Comment: One commenter questioned the reclassification process
concerning urban hospitals that redesignate from urban status to rural
status under Sec. 412.103, then cancel their rural status and
subsequently seek reclassification to another urban area through the
MGCRB. The commenter also had questions concerning the process of MGCRB
reclassification in the case of hospitals that currently have acquired
rural status under Sec. 412.103.
Response: We thank the commenter for the comments. We did not make
any proposals to change any of the reclassification processes or
criteria. The processes for Sec. 412.103 urban to rural redesignation
and MGCRB reclassification are specified in 42 CFR 412.103 and 412.230
et. seq. The regulations in the sections above clearly define the
process and describe the criteria and conditions for these
reclassifications. We refer the commenter to the regulations for
complete details on wage index reclassifications.
2. FY 2014 MGCRB Reclassifications
a. FY 2014 Reclassification Requirements and Approvals
Under section 1886(d)(10) of the Act, the MGCRB considers
applications by hospitals for geographic reclassification for purposes
of payment under the IPPS. The specific procedures and rules that apply
to the geographic reclassification process are outlined in regulations
under 42 CFR 412.230 through 412.280.
At the time this final rule was constructed, the MGCRB had
completed its review of FY 2014 reclassification requests. Based on
such reviews, there were 296 hospitals approved for wage index
reclassifications by the MGCRB for FY 2014. Because MGCRB wage index
reclassifications are effective for 3 years, for FY 2014, hospitals
reclassified during FY 2012 or FY 2013 are eligible to continue to be
reclassified to a particular labor market area based on such prior
reclassifications. There were 214 hospitals approved for wage index
reclassifications in FY 2012, and 196 hospitals approved for wage index
reclassifications in FY 2013. Of all the hospitals approved for
reclassification for FY 2012, FY 2013, and FY 2014, based upon the
review at the time of this final rule, 679 hospitals are in a
reclassification status for FY 2014.
Under the regulations at 42 CFR 412.273, hospitals that have been

[[Page 50592]]

reclassified by the MGCRB are permitted to withdraw their applications
within 45 days of the publication of a proposed rule. For information
about withdrawing, terminating, or canceling a previous withdrawal or
termination of a 3-year reclassification for wage index purposes, we
refer readers to 42 CFR 412.273, as well as the FY 2002 IPPS final rule
(66 FR 39887 through 39888) and the FY 2003 IPPS final rule (67 FR
50065 through 50066). Additional discussion on withdrawals and
terminations, and clarifications regarding reinstating
reclassifications and ``fallback'' reclassifications, were included in
the FY 2008 IPPS final rule (72 FR 47333).
Changes to the wage index that result from withdrawals of requests
for reclassification, terminations, wage index corrections, appeals,
and the Administrator's review process for FY 2014 are incorporated
into the wage index values published in this FY 2014 IPPS/LTCH PPS
final rule. These changes affect not only the wage index value for
specific geographic areas, but also the wage index value redesignated/
reclassified hospitals receive; that is, whether they receive the wage
index that includes the data for both the hospitals already in the area
and the redesignated/reclassified hospitals. Further, the wage index
value for the area from which the hospitals are redesignated/
reclassified may be affected.
b. Applications for Reclassifications for FY 2015
Applications for FY 2015 reclassifications are due to the MGCRB by
September 3, 2013 (the first working day of September 2013). We note
that this is also the deadline for canceling a previous wage index
reclassification withdrawal or termination under 42 CFR 412.273(d). As
mentioned in section III.B. of the preamble of this final rule,
although OMB issued revisions on February 28, 2013 to its area
delineations, we did not propose to adopt those revisions for the FY
2014 wage index, and we will not be adopting the revisions before the
September 3, 2013 deadline for applications for the FY 2015 wage index.
Therefore, hospitals must apply for reclassifications based on the
delineations we are using for FY 2014. Applications and other
information about MGCRB reclassifications may be obtained via the
Internet on the CMS Web site at: https://www.cms.gov/Regulations-and-Guidance/Review-Boards/MGCRB/, or by calling the MGCRB at
(410) 786-1174. The mailing address of the MGCRB is: 2520 Lord
Baltimore Drive, Suite L, Baltimore, MD 21244-2670.
3. Redesignations of Hospitals under Section 1886(d)(8)(B) of the Act
Section 1886(d)(8)(B) of the Act requires us to treat a hospital
located in a rural county adjacent to one or more urban areas as being
located in the MSA if certain criteria are met. Effective beginning FY
2005, we use OMB's 2000 CBSA standards and the Census 2000 data to
identify counties in which hospitals qualify under section
1886(d)(8)(B) of the Act to receive the wage index of the urban area.
(We note that, as mentioned in section III.B. of the preamble of this
final rule, although OMB issued revisions on February 28, 2013, to its
area delineations based on 2010 census data, we did not propose to
adopt these revisions for the FY 2014 wage index.) Hospitals located in
these counties have been known as ``Lugar'' hospitals and the counties
themselves are often referred to as ``Lugar'' counties. The FY 2014
chart with the listing of the rural counties containing the hospitals
designated as urban under section 1886(d)(8)(B) of the Act is available
via the Internet on the CMS Web site.
4. Hospitals Redesignated under Section 1886(d)(8)(B) of the Act
Seeking Reclassification by the MGCRB
As in the past, hospitals redesignated under section 1886(d)(8)(B)
of the Act are also eligible to be reclassified to a different area by
the MGCRB. Using Table 4C associated with the proposed rule (which is
available via the Internet on the CMS Web site), affected hospitals
were permitted to compare the reclassified wage index for the labor
market area into which they would be reclassified by the MGCRB to the
reclassified wage index for the area to which they are redesignated
under section 1886(d)(8)(B) of the Act. Hospitals could have withdrawn
from an MGCRB reclassification within 45 days of the publication of the
FY 2014 proposed rule. (We refer readers to the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51598 through 51599) for the procedural rules and
requirements for a hospital that is redesignated under section
1886(d)(8)(B) of the Act and seeking reclassification under the MGCRB,
as well as our policy of measuring the urban area, exclusive of the
Lugar County, for purposes of meeting proximity requirements.) We treat
New England deemed counties in a manner consistent with how we treat
Lugar counties. (We refer readers to the FY 2008 IPPS final rule with
comment period (72 FR 47337 through 47338) for a discussion of this
policy.)
5. Waiving Lugar Redesignation for the Out-Migration Adjustment
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51599 through
51600), we adopted the policy that, beginning with FY 2012, an eligible
hospital that waives its Lugar status in order to receive the out-
migration adjustment has effectively waived its deemed urban status
and, thus, is rural for all purposes under the IPPS, including being
considered rural for the DSH payment adjustment, effective for the
fiscal year in which the hospital receives the out-migration
adjustment. (We refer readers to a discussion of DSH payment adjustment
under section V.E. of the preamble of this final rule.)
In addition, we adopted a minor procedural change that would allow
a Lugar hospital that qualifies for and accepts the out-migration
adjustment (through written notification to CMS within the requisite
number of days from the publication of the proposed rule \11\) to
automatically waive its urban status for the 3-year period for which
its out-migration adjustment is effective. That is, such a Lugar
hospital would no longer be required during the second and third years
of eligibility for the out-migration adjustment to advise us annually
that it prefers to continue being treated as rural and receive the
adjustment. Thus, under the procedural change, a Lugar hospital that
requests to waive its urban status in order to receive the rural wage
index in addition to the out-migration adjustment would be deemed to
have accepted the out-migration adjustment and agrees to be treated as
rural for the duration of its 3-year eligibility period, unless, prior
to its second or third year of eligibility, the hospital explicitly
notifies CMS in writing, within the required period (generally 45 days
from the publication of the proposed rule), that it instead elects to
return to its deemed urban status and no longer wishes to accept the
out-migration adjustment.
---------------------------------------------------------------------------

\11\ Hospitals generally have 45 days from publication of the
proposed rule to request an out-migration adjustment in lieu of the
section 1886(d)(8) deemed urban status.
---------------------------------------------------------------------------

We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR
51599 through 51600) for a detailed discussion of the policy and
process for waiving Lugar status for the out-migration adjustment.

[[Page 50593]]

I. FY 2014 Wage Index Adjustment Based on Commuting Patterns of
Hospital Employees

In accordance with the broad discretion granted to the Secretary
under section 1886(d)(13) of the Act, as added by section 505 of Public
Law 108-173, beginning with FY 2005, we established a process to make
adjustments to the hospital wage index based on commuting patterns of
hospital employees (the ``out-migration'' adjustment). The process,
outlined in the FY 2005 IPPS final rule (69 FR 49061), provides for an
increase in the wage index for hospitals located in certain counties
that have a relatively high percentage of hospital employees who reside
in the county but work in a different county (or counties) with a
higher wage index. For FY 2014, we are adopting the out-migration
adjustment based on the same policies, procedures, and computation that
were used for the FY 2012 out-migration adjustment. (We refer readers
to a full discussion of the adjustment, including rules on deeming
hospitals reclassified under section 1886(d)(8) or section 1886(d)(10)
of the Act to have waived the out-migration adjustment, in the FY 2012
IPPS/LTCH PPS final rule (76 FR 51601 through 51602).) Table 4J, which
is available via the Internet on the CMS Web site, lists the out-
migration adjustments for the FY 2014 wage index.
We did not receive any public comments with regard to the out-
migration adjustment for FY 2014.

J. Process for Requests for Wage Index Data Corrections

The preliminary, unaudited Worksheet S-3 wage data and occupational
mix survey data files for the proposed FY 2014 wage index were made
available on October 3, 2012, through the Internet on the CMS Web site
at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY_2014_Wage_Index_Home_Page.html.
In the interest of meeting the data needs of the public, beginning
with the proposed FY 2009 wage index, we post an additional public use
file on our Web site that reflects the actual data that are used in
computing the proposed wage index. The release of this new file does
not alter the current wage index process or schedule. We notify the
hospital community of the availability of these data as we do with the
current public use wage data files through our Hospital Open Door
forum. We encourage hospitals to sign up for automatic notifications of
information about hospital issues and the scheduling of the Hospital
Open Door forums at the CMS Web site at: https://www.cms.gov/Outreach-and-Education/Outreach/OpenDoorForums/.
In a memorandum dated October 19, 2012, we instructed all fiscal
intermediaries/MACs to inform the IPPS hospitals they service of the
availability of the wage index data files and the process and timeframe
for requesting revisions (including the specific deadlines listed
below). We also instructed the fiscal intermediaries/MACs to advise
hospitals that these data were also made available directly through
their representative hospital organizations.
If a hospital wished to request a change to its data as shown in
the October 3, 2012 wage and occupational mix data files, the hospital
was to submit corrections along with complete, detailed supporting
documentation to its fiscal intermediary/MAC by December 10, 2012. (We
note that this date was originally December 3, 2012. However, in a
memorandum dated October 25, 2012, we instructed all fiscal
intermediaries/MACs to inform the IPPS hospitals they service that we
extended the deadline to December 10, 2012.) Hospitals were notified of
this deadline and of all other deadlines and requirements, including
the requirement to review and verify their data as posted in the
preliminary wage index data files on the Internet, through the October
19, 2012 memorandum referenced above.
In the October 19, 2012 memorandum, we also specified that a
hospital requesting revisions to its occupational mix survey data was
to copy its record(s) from the CY 2010 occupational mix preliminary
files posted to the CMS Web site in October, highlight the revised
cells on its spreadsheet, and submit its spreadsheet(s) and complete
documentation to its fiscal intermediary/MAC no later than December 10,
2012.
The fiscal intermediaries/MACs notified the hospitals by mid-
February 2013 of any changes to the wage index data as a result of the
desk reviews and the resolution of the hospitals' early-December
revision requests. The fiscal intermediaries/MACs also submitted the
revised data to CMS by mid-February 2013. CMS published the proposed
wage index public use files that included hospitals' revised wage index
data on February 21, 2013. Hospitals had until March 4, 2013, to submit
requests to the fiscal intermediaries/MACs for reconsideration of
adjustments made by the fiscal intermediaries/MACs as a result of the
desk review, and to correct errors due to CMS' or the fiscal
intermediary's (or, if applicable, the MAC's) mishandling of the wage
index data. Hospitals also were required to submit sufficient
documentation to support their requests.
After reviewing requested changes submitted by hospitals, fiscal
intermediaries/MACs were required to transmit to CMS any additional
revisions resulting from the hospitals' reconsideration requests by
April 10, 2013. The deadline for a hospital to request CMS intervention
in cases where the hospital disagreed with the fiscal intermediary's
(or, if applicable, the MAC's) policy interpretations was April 17,
2013.
Hospitals were given the opportunity to examine Table 2, which was
listed in section VI. of the Addendum to the proposed rule and
available via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY_2014_Wage_Index_Home_Page.html. Table 2 contained
each hospital's adjusted average hourly wage used to construct the wage
index values for the past 3 years, including the FY 2010 data used to
construct the proposed FY 2014 wage index. We noted that the hospital
average hourly wages shown in Table 2 only reflected changes made to a
hospital's data that were transmitted to CMS by March 4, 2013.
We released the final wage index data public use files in early May
2013 on the Internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY_2014_Wage_Index_Home_Page.html. The May 2013 public use files were made
available solely for the limited purpose of identifying any potential
errors made by CMS or the fiscal intermediary/MAC in the entry of the
final wage index data that resulted from the correction process
described above (revisions submitted to CMS by the fiscal
intermediaries/MACs by April 10, 2013). If, after reviewing the May
2013 final public use files, a hospital believed that its wage or
occupational mix data were incorrect due to a fiscal intermediary/MAC
or CMS error in the entry or tabulation of the final data, the hospital
was required to send a letter to both its fiscal intermediary/MAC and
CMS that outlined why the hospital believed an error existed and
provide all supporting information, including relevant dates (for
example, when it first became aware of the error). The hospital was
required to send the letter to CMS and its fiscal

[[Page 50594]]

intermediaries/MACs no later than June 3, 2013.
After the release of the May 2013 wage index data files, changes to
the wage and occupational mix data were only made in those very limited
situations involving an error by the fiscal intermediary/MAC or CMS
that the hospital could not have known about before its review of the
final wage index data files. Specifically, neither the fiscal
intermediary/MAC nor CMS approved the following types of requests:
Requests for wage index data corrections that were
submitted too late to be included in the data transmitted to CMS by
fiscal intermediaries or the MACs on or before April 10, 2013.
Requests for correction of errors that were not, but could
have been, identified during the hospital's review of the February 21,
2013 wage index public use files.
Requests to revisit factual determinations or policy
interpretations made by the fiscal intermediary or the MAC or CMS
during the wage index data correction process.
Verified corrections to the wage index data received timely by CMS
and the fiscal intermediaries or the MACs (that is, by June 3, 2013)
were incorporated into the final wage index in this FY 2014 IPPS/LTCH
PPS final rule, which will be effective October 1, 2013.
We created the processes described above to resolve all substantive
wage index data correction disputes before we finalize the wage and
occupational mix data for the FY 2014 payment rates. Accordingly,
hospitals that did not meet the procedural deadlines set forth above
will not be afforded a later opportunity to submit wage index data
corrections or to dispute the fiscal intermediary's (or, if applicable,
the MAC's) decision with respect to requested changes. Specifically,
our policy is that hospitals that do not meet the procedural deadlines
set forth above will not be permitted to challenge later, before the
Provider Reimbursement Review Board, the failure of CMS to make a
requested data revision. We refer readers also to the FY 2000 IPPS
final rule (64 FR 41513) for a discussion of the parameters for appeals
to the PRRB for wage index data corrections.
Again, we believe the wage index data correction process described
above provides hospitals with sufficient opportunity to bring errors in
their wage and occupational mix data to the fiscal intermediary's (or,
if applicable, the MAC's) attention. Moreover, because hospitals have
access to the final wage index data by early May 2013, they have the
opportunity to detect any data entry or tabulation errors made by the
fiscal intermediary or the MAC or CMS before the development and
publication of the final FY 2014 wage index by August 2013, and the
implementation of the FY 2014 wage index on October 1, 2013. If
hospitals avail themselves of the opportunities afforded to provide and
make corrections to the wage and occupational mix data, the wage index
implemented on October 1 should be accurate. Nevertheless, in the event
that errors are identified by hospitals and brought to our attention
after June 3, 2013, we retain the right to make midyear changes to the
wage index under very limited circumstances.
Specifically, in accordance with 42 CFR 412.64(k)(1) of our
existing regulations, we make midyear corrections to the wage index for
an area only if a hospital can show that: (1) The fiscal intermediary
or the MAC or CMS made an error in tabulating its data; and (2) the
requesting hospital could not have known about the error or did not
have an opportunity to correct the error, before the beginning of the
fiscal year. For purposes of this provision, ``before the beginning of
the fiscal year'' means by the June deadline for making corrections to
the wage data for the following fiscal year's wage index (for example,
June 3, 2013 for the FY 2014 wage index). This provision is not
available to a hospital seeking to revise another hospital's data that
may be affecting the requesting hospital's wage index for the labor
market area. As indicated earlier, because CMS makes the wage index
data available to hospitals on the CMS Web site prior to publishing
both the proposed and final IPPS rules, and the fiscal intermediaries
or the MACs notify hospitals directly of any wage index data changes
after completing their desk reviews, we do not expect that midyear
corrections will be necessary. However, under our current policy, if
the correction of a data error changes the wage index value for an
area, the revised wage index value will be effective prospectively from
the date the correction is made.
In the FY 2006 IPPS final rule (70 FR 47385 through 47387 and
47485), we revised 42 CFR 412.64(k)(2) to specify that, effective on
October 1, 2005, that is, beginning with the FY 2006 wage index, a
change to the wage index can be made retroactive to the beginning of
the Federal fiscal year only when CMS determines all of the following:
(1) The fiscal intermediary (or, if applicable, the MAC) or CMS made an
error in tabulating data used for the wage index calculation; (2) the
hospital knew about the error and requested that the fiscal
intermediary (or, if applicable, the MAC) and CMS correct the error
using the established process and within the established schedule for
requesting corrections to the wage index data, before the beginning of
the fiscal year for the applicable IPPS update (that is, by the June 3,
2013 deadline for the FY 2014 wage index); and (3) CMS agreed before
October 1 that the fiscal intermediary (or, if applicable, the MAC) or
CMS made an error in tabulating the hospital's wage index data and the
wage index should be corrected.
In those circumstances where a hospital requested a correction to
its wage index data before CMS calculated the final wage index (that
is, by the June 3, 2013 deadline for the FY 2014 wage index), and CMS
acknowledges that the error in the hospital's wage index data was
caused by CMS' or the fiscal intermediary's (or, if applicable, the
MAC's) mishandling of the data, we believe that the hospital should not
be penalized by our delay in publishing or implementing the correction.
As with our current policy, we indicated that the provision is not
available to a hospital seeking to revise another hospital's data. In
addition, the provision cannot be used to correct prior years' wage
index data; and it can only be used for the current Federal fiscal
year. In situations where our policies would allow midyear corrections
other than those specified in 42 CFR 412.64(k)(2)(ii), we continue to
believe that it is appropriate to make prospective-only corrections to
the wage index.
We note that, as with prospective changes to the wage index, the
final retroactive correction will be made irrespective of whether the
change increases or decreases a hospital's payment rate. In addition,
we note that the policy of retroactive adjustment will still apply in
those instances where a final judicial decision reverses a CMS denial
of a hospital's wage index data revision request.

K. Labor-Related Share for the FY 2014 Wage Index

Section 1886(d)(3)(E) of the Act directs the Secretary to adjust
the proportion of the national prospective payment system base payment
rates that are attributable to wages and wage-related costs by a factor
that reflects the relative differences in labor costs among geographic
areas. It also directs the Secretary to estimate from time to time the
proportion of hospital costs that are labor-related: ``The Secretary
shall adjust the proportion, (as estimated by the Secretary from time
to time) of hospitals' costs which are attributable to wages and wage-
related costs, of the

[[Page 50595]]

DRG prospective payment rates. . . .'' We refer to the portion of
hospital costs attributable to wages and wage-related costs as the
labor-related share. The labor-related share of the prospective payment
rate is adjusted by an index of relative labor costs, which is referred
to as the wage index.
Section 403 of Public Law 108-173 amended sections 1886(d)(3)(E)
and 1886(d)(9)(C)(iv) of the Act to provide that the Secretary must
employ 62 percent as the labor-related share unless this ``would result
in lower payments to a hospital than would otherwise be made.''
However, these provisions of Public Law 108-173 did not change the
legal requirement that the Secretary estimate ``from time to time'' the
proportion of hospitals' costs that are ``attributable to wages and
wage-related costs.'' Thus, hospitals receive payment based on either a
62-percent labor-related share, or the labor-related share estimated
from time to time by the Secretary, depending on which labor-related
share results in a higher payment.
Comment: Several commenters stated that CMS has not kept pace by
adjusting the labor-related share of the standard rate to which the
wage index is applied. The commenters explained that CMS has provided
incentives for hospitals to reduce costs through a declining wage index
while hospitals have responded and made strides in labor efficiency.
The commenters recommended that CMS adjust the labor-related share of
the standard rate to 42 percent from the current 62 percent for
hospitals with a wage index of less than 1.0. The commenters believed
that a 42-percent labor component is more reflective of hospitals
seeking cost efficiencies in wages.
Response: As stated above, section 403 of Public Law 108-173
amended sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act to
provide that the Secretary must employ 62 percent as the labor-related
share. Therefore, any changes to the application of the 62 percent
labor-related share would require a change to current law by Congress.
In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43850
through 43857), we rebased and revised the IPPS market basket and the
labor-related share, using FY 2006 as the base year. The labor-related
share for FY 2010 through FY 2013 is 68.8 percent.
For FY 2014, as proposed in the FY 2014 IPPS/LTCH PPS proposed rule
(78 FR 27561 through 27572), and as described in section IV. of the
preamble of this final rule, we are rebasing and revising the IPPS
market basket using FY 2010 as the base year. Using the FY 2010-based
IPPS market basket, we also recalculated the labor-related share and
are finalizing a labor-related share of 69.6 percent for discharges
occurring on or after October 1, 2013, as discussed in section IV.B.4.
of the preamble of this final rule. As discussed in Appendix A of this
final rule, we are implementing this revised and rebased labor-related
share in a budget neutral manner. However, consistent with section
1886(d)(3)(E) of the Act, we are not taking into account the additional
payments that would be made as a result of hospitals with a wage index
less than or equal to 1.0 being paid using a labor-related share lower
than the labor-related share of hospitals with a wage index greater
than 1.0.
The labor-related share is used to determine the proportion of the
national IPPS base payment rate to which the area wage index is
applied. For FY 2014, as proposed in the FY 2014 IPPS/LTCH PPS proposed
rule (78 FR 27561 through 27572) and as described in section IV. of the
preamble of this final rule, we are including in the labor-related
share the national average proportion of operating costs that are
attributable to wages and salaries, employee benefits, contract labor,
the labor-related portion of professional fees, administrative and
facilities support services, and all other labor-related services as
measured in the FY 2010-based IPPS market basket.
Therefore, for FY 2014, as discussed in section IV.B.4. of the
preamble of this final rule, we are finalizing our proposals without
modification and adopting a labor-related share of 69.6 percent for
discharges occurring on or after October 1, 2013. Tables 1A and 1B,
which are published in section VI. of the Addendum to this final rule
and are available via the Internet, reflect this labor-related share.
For FY 2014, for all IPPS hospitals whose wage indices are less than
1.0000, we are applying the wage index to a labor-related share of 62
percent of the national standardized amount. For all IPPS hospitals
whose wage indices are greater than 1.0000, for FY 2014, we are
applying the wage index to a labor-related share of 69.6 percent of the
national standardized amount. We note that, for Puerto Rico hospitals,
the national labor-related share is 62 percent because the national
wage index for all Puerto Rico hospitals is less than 1.0.
In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43850
through 43856), we also rebased and revised the labor-related share for
the Puerto Rico-specific standardized amounts using FY 2006 as a base
year. We finalized a labor-related share for the Puerto Rico-specific
standardized amounts for FY 2010 through FY 2013 of 62.1 percent. As
proposed in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27566
through 27568) and as described in section IV.B.4. of the preamble of
this final rule, for FY 2014, we also are rebasing and revising the
labor-related share for the Puerto Rico-specific standardized amounts
using FY 2010 as a base year. In the FY 2014 IPPS/LTCH PPS proposed
rule (78 FR 27566 through 27568), we proposed a labor-related share for
the Puerto Rico-specific standardized amounts of 63.2 percent for
discharges occurring on or after October 1, 2013. For FY 2014, we are
finalizing our proposal and adopting a labor-related share for the
Puerto Rico-specific standardized amounts of 63.2 percent for
discharges occurring on or after October 1, 2013, as discussed in
section IV.B.4. of the preamble of this final rule. Consistent with our
methodology for determining the national labor-related share, we added
the Puerto Rico-specific relative weights for wages and salaries,
employee benefits, and contract labor, with the national proportion of
costs for the labor-related portion of professional fees,
administrative and facilities support services, and all other labor-
related services to determine the labor-related share. Puerto Rico
hospitals are paid based on 75 percent of the national standardized
amounts and 25 percent of the Puerto Rico-specific standardized
amounts. For FY 2014, we are adopting that the labor-related share of a
hospital's Puerto Rico-specific rate will be either the Puerto Rico-
specific labor-related share of 63.2 percent or 62 percent, depending
on which results in higher payments to the hospital. If the hospital
has a Puerto Rico-specific wage index of greater than 1.0 for FY 2014,
we will set the hospital's rates using a labor-related share of 63.2
percent for the 25 percent portion of the hospital's payment determined
by the Puerto Rico standardized amounts because this amount will result
in higher payments. Conversely, a hospital with a Puerto Rico-specific
wage index of less than 1.0 for FY 2014 will be paid using the Puerto
Rico-specific labor-related share of 62 percent of the Puerto Rico-
specific rates because the lower labor-related share will result in
higher payments. The Puerto Rico labor-related share of 63.2 percent
for FY 2014 is reflected in Table 1C, which is published in section VI.
of the Addendum to this final rule and available via the Internet.
Comment: Several commenters supported the proposed increase in the

[[Page 50596]]

labor-related share. We did not receive any public comments on the
proposed Puerto Rico labor-related share.
Response: We appreciate the commenters' support.
As discussed in section IV.B.4. of the preamble of this final rule,
we are finalizing the labor-related share of 69.6 percent as proposed
for all IPPS hospitals whose wage indices are greater than 1.0000. We
also are finalizing the Puerto Rico labor-related share of the labor-
related share of 63.2 percent as proposed. Further discussion of the FY
2014 labor-related share for the national standardized amount and the
Puerto Rico-specific standardized amount can be found in section
IV.B.4. of the preamble of this final rule.

IV. Rebasing and Revision of the Hospital Market Baskets for Acute Care
Hospitals

A. Background

Effective for cost reporting periods beginning on or after July 1,
1979, we developed and adopted a hospital input price index (that is,
the hospital market basket for operating costs). Although ``market
basket'' technically describes the mix of goods and services used in
providing hospital care, this term is also commonly used to denote the
input price index (that is, cost category weights and price proxies
combined) derived from that market basket. Accordingly, the term
``market basket'' as used in this document refers to the hospital input
price index.
The percentage change in the market basket reflects the average
change in the price of goods and services hospitals purchase in order
to provide inpatient care. We first used the market basket to adjust
hospital cost limits by an amount that reflected the average increase
in the prices of the goods and services used to provide hospital
inpatient care. This approach linked the increase in the cost limits to
the efficient utilization of resources.
Since the inception of the IPPS, the projected change in the
hospital market basket has been the integral component of the update
factor by which the prospective payment rates are updated every year.
An explanation of the hospital market basket used to develop the
prospective payment rates was published in the Federal Register on
September 1, 1983 (48 FR 39764). We also refer readers to the FY 2010
IPPS/RY 2010 LTCH PPS final rule (74 FR 43843) in which we discussed
the most recent previous rebasing of the hospital input price index.
The hospital market basket is a fixed-weight, Laspeyres-type price
index. A Laspeyres-type price index measures the change in price, over
time, of the same mix of goods and services purchased in the base
period. Any changes in the quantity or mix of goods and services (that
is, intensity) purchased over time are not measured.
The index itself is constructed in three steps. First, a base
period is selected (as we proposed, in this final rule, we are using FY
2010 as the base period) and total base period expenditures are
estimated for a set of mutually exclusive and exhaustive spending
categories, with the proportion of total costs that each category
represents being calculated. These proportions are called ``cost
weights'' or ``expenditure weights.'' Second, each expenditure category
is matched to an appropriate price or wage variable, referred to as a
``price proxy.'' In almost every instance, these price proxies are
derived from publicly available statistical series that are published
on a consistent schedule (preferably at least on a quarterly basis).
Finally, the expenditure weight for each cost category is multiplied by
the level of its respective price proxy. The sum of these products
(that is, the expenditure weights multiplied by their price index
levels) for all cost categories yields the composite index level of the
market basket in a given period. Repeating this step for other periods
produces a series of market basket levels over time. Dividing an index
level for a given period by an index level for an earlier period
produces a rate of growth in the input price index over that timeframe.
As noted above, the market basket is described as a fixed-weight
index because it represents the change in price over time of a constant
mix (quantity and intensity) of goods and services needed to provide
hospital services. The effects on total expenditures resulting from
changes in the mix of goods and services purchased subsequent to the
base period are not measured. For example, a hospital hiring more
nurses to accommodate the needs of patients would increase the volume
of goods and services purchased by the hospital, but would not be
factored into the price change measured by a fixed-weight hospital
market basket. Only when the index is rebased would changes in the
quantity and intensity be captured, with those changes being reflected
in the cost weights. Therefore, we rebase the market basket
periodically so that the cost weights reflect recent changes in the mix
of goods and services that hospitals purchase (hospital inputs) to
furnish inpatient care between base periods.
We last rebased the hospital market basket cost weights effective
for FY 2010 (74 FR 43843), with FY 2006 data used as the base period
for the construction of the market basket cost weights. In the FY 2014
IPPS/LTCH PPS proposed rule (78 FR 27561 through 27572), we proposed to
rebase the cost structure for the IPPS hospital index from FY 2006 to
FY 2010, as discussed below.

B. Rebasing and Revising the IPPS Market Basket

The terms ``rebasing'' and ``revising,'' while often used
interchangeably, actually denote different activities. ``Rebasing''
means moving the base year for the structure of costs of an input price
index (for example, in this final rule, we are shifting the base year
cost structure for the IPPS hospital index from FY 2006 to FY 2010).
``Revising'' means changing data sources, or price proxies, used in the
input price index. As published in the FY 2006 IPPS final rule (70 FR
47387), in accordance with section 404 of Public Law 108-173, CMS
determined a new frequency for rebasing the hospital market basket. We
established a rebasing frequency of every 4 years and, therefore, for
the FY 2014 IPPS update, as we proposed, we are rebasing and revising
the IPPS market basket from FY 2006 to FY 2010. We invited public
comments on our proposed methodology. A summary of the public comments
we received and our responses are included under the appropriate
subject area.
1. Development of Cost Categories and Weights
a. Medicare Cost Reports
The major source of expenditure data for developing the rebased and
revised hospital market basket cost weights is the FY 2010 Medicare
cost reports. These FY 2010 Medicare cost reports are for cost
reporting periods beginning on and after October 1, 2009 and before
October 1, 2010. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR
27562), we proposed to use FY 2010 as the base year because we believe
that the FY 2010 Medicare cost reports represent the most recent,
complete set of Medicare cost report data available for IPPS hospitals.
As was done in previous rebasings, these cost reports are from IPPS
hospitals only (hospitals excluded from the IPPS and CAHs are not
included) and are based on IPPS Medicare-allowable operating costs.
IPPS Medicare-allowable operating costs are costs that are eligible to
be paid for under the IPPS. For example, the IPPS market basket
excludes home health agency (HHA) costs as these costs would

[[Page 50597]]

be paid under the HHA PPS and, therefore, these costs are not IPPS
Medicare-allowable costs.
We proposed to obtain seven major expenditures or cost categories
for the FY 2010 IPPS market basket from the Medicare cost reports--the
same as in the FY 2006-based hospital market basket: Wages and
salaries, employee benefits, contract labor, pharmaceuticals,
professional liability insurance (malpractice), blood and blood
products, and a residual ``all other.'' The proposed cost weights that
were obtained directly from the Medicare cost reports were reported in
Table IV01 of the proposed rule. We proposed to then supplement these
Medicare cost report cost weights with information obtained from other
data sources to derive the proposed IPPS market basket cost weights.
Comment: One commenter supported the proposal to move to an FY
2010-based market basket.
Response: We appreciate the commenter's support. In this final
rule, we are finalizing our calculation of the FY 2010-based IPPS cost
weights using the Medicare cost reports as proposed and describe our
methods in more detail below.
Table IV01 below shows the major cost categories and their
respective cost weights as calculated directly from the Medicare Cost
Reports for this final rule.

Table IV01--Major Cost Categories and Their Respective Cost Weights as
Calculated Directly From the Medicare Cost Reports
------------------------------------------------------------------------
Proposed and
FY 2006-based final FY 2010-
Major cost categories market basket based market
basket
------------------------------------------------------------------------
Wages and salaries...................... 45.156 45.819
Employee benefits....................... 11.873 12.713
Contract labor.......................... 2.598 1.806
Professional Liability Insurance 1.661 1.330
(Malpractice)..........................
Pharmaceuticals......................... 5.380 5.402
Blood and blood products................ 1.078 1.069
All other............................... 32.254 31.861
------------------------------------------------------------------------

From FY 2006 to FY 2010, the wages and salaries and employee
benefits cost weights as calculated directly from the Medicare cost
reports increased by approximately 0.7 and 0.8 percentage point,
respectively, while the contract labor cost weight decreased by 0.8
percentage point. As we did for the FY 2006-based IPPS market basket
(74 FR 43847), we proposed to allocate contract labor costs to the
wages and salaries and employee benefits cost weights based on their
relative proportions for employed labor under the assumption that
contract labor costs are comprised of both wages and salaries and
employee benefits. The contract labor allocation proportion for wages
and salaries is equal to the wages and salaries cost weight as a
percent of the sum of the wages and salaries cost weight and the
employee benefits cost weight. Using the FY 2010 Medicare cost report
data, this percentage is 78.3 percent; therefore, we proposed to
allocate approximately 78.3 percent of the contract labor cost weight
to the wages and salaries cost weight. Table IV02 in the proposed rule
showed the wages and salaries and employee benefit cost weights after
contract labor allocation for both the FY 2006-based IPPS market basket
and the proposed FY 2010-based IPPS market basket.
We did not receive any specific public comment regarding the
allocation of contract labor cost weight to the wages and salaries and
employee benefits cost weights. In this final rule, we are finalizing
our methodology of allocating the contract labor cost weight as we
proposed. Table IV02 below shows the wages and salaries and employee
benefit cost weights after contract labor allocation for the FY 2006-
based IPPS market basket and the proposed and final FY 2010-based IPPS
market basket.

Table IV02--Wages and Salaries and Employee Benefits Cost Weights After
Contract Labor Allocation
------------------------------------------------------------------------
Proposed and
FY 2006-based final FY 2010-
Major cost categories market basket based market
basket
------------------------------------------------------------------------
Wages and salaries...................... 47.213 47.233
Employee benefits....................... 12.414 13.105
------------------------------------------------------------------------

After the allocation of contract labor, the final FY 2010-based
wages and salaries cost weight is relatively similar to the FY 2006-
based wages and salaries cost weight while the final FY 2010-based
employee benefits cost weight increased 0.7 percentage point. This is
primarily a result of an increase in benefits costs relative to wages
and salaries costs from the Medicare cost report data for employed
workers; in 2006, the ratio of the employee benefits cost weight to the
wages and salaries cost weight was 26.3 percent, while in 2010 this
ratio increased to 27.8 percent.
b. Other Data Sources
In addition to the data from the Medicare cost reports, the other
data source we proposed to use to develop the FY 2010-based IPPS market
basket cost weights is the 2002 Benchmark Input-Output (I-O) Tables
created by the Bureau of Economic Analysis (BEA), U.S. Department of
Commerce. We proposed to use the 2002 BEA Benchmark I-O data to
disaggregate the ``all other'' (residual) cost category (31.861
percent) into more detailed hospital expenditure category shares. The
BEA Benchmark I-O accounts provide the most detailed information on the
goods and services purchased by an industry, which allows for a more

[[Page 50598]]

detailed disaggregation of expenses in the market basket for which we
can then proxy the appropriate price inflation.
The BEA Benchmark I-O data are generally scheduled for publication
every 5 years. At the time of development of the FY 2014 IPPS/LTCH PPS
proposed rule, the most recent data available were for 2002. BEA also
produces Annual I-O estimates; however, the 2002 Benchmark I-O data
represent a much more comprehensive and detailed set of data that are
derived from the 2002 Economic Census. In the FY 2010 IPPS/RY 2010 LTCH
PPS final rule (74 FR 43845), we used the 2002 Benchmark I-O data (aged
to FY 2006) for the FY 2006-based IPPS market basket, to be effective
for FY 2010. Because BEA had not yet released new Benchmark I-O data at
the time we prepared our analysis for the proposed rule, and we believe
the data to be comprehensive and complete as indicated above, we
proposed to use the 2002 Benchmark I-O data in the FY 2010-based IPPS
market basket for the FY 2014 IPPS/LTCH PPS proposed rule.
Therefore, instead of using the less detailed, less accurate Annual
I-O data, we proposed to age the 2002 Benchmark I-O data forward to FY
2010. The methodology we proposed to use to age the data forward
involves applying the annual price changes from the respective price
proxies to the appropriate cost categories. We repeat this practice for
each year. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27563), we
proposed that, if more recent BEA benchmark I-O data for 2007 was
released between the proposed and final rule with sufficient time to
incorporate such data into the final rule, we would incorporate these
data into the FY 2010-based IPPS market basket for the final rule. The
2007 BEA I-O data was expected to be released in the summer of 2013.
However, at the time we prepared our analysis for this final rule, BEA
had not published the 2007 Benchmark I-O data. Therefore, we were
unable to incorporate any revised I-O data in the final FY 2010-based
IPPS market basket.
The ``all other'' cost category expenditure shares are determined
as being equal to each category's proportion to total ``all other''
expenditures based on the aged 2002 Benchmark I-O data. For instance,
if the cost for telephone services represented 10 percent of the sum of
the ``all other'' Benchmark I-O hospital expenditures, telephone
services would represent 10 percent of the ``all other'' cost category
of the IPPS market basket.
Following publication of the FY 2010 IPPS/RY 2010 LTCH PPS proposed
rule, and in an effort to provide greater transparency, we posted on
the CMS market basket Web page at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html an illustrative
spreadsheet that shows how the detailed cost weights in the proposed
rule (that is, those not calculated using Medicare cost reports) were
determined using the 2002 Benchmark I-O data.
2. Cost Category Computation
As stated previously, for the proposed FY 2010-based market basket,
we proposed to use data from the Medicare cost reports to derive seven
major cost categories that were the same detailed cost categories as
used in the FY 2006-based IPPS market basket. Also, we did not propose
to change our definition of the labor-related share. As discussed in
more detail below and similar to the previous rebasings, we classify a
cost category as labor-related and include it in the labor-related
share if the cost category is defined as being labor-intensive and its
cost varies with the local labor market.
Comment: One commenter supported the use of 2002 BEA data if it is
not possible to move to 2007 data in the final rule. We did not receive
any public comments on the specific methodology for calculating the
final cost weights.
Response: Since the 2007 BEA I-O data has not been published, we
are unable to incorporate the data into the FY 2010-based IPPS market
basket. We appreciate the commenter's support to use the 2002 BEA I-O
data, given these data limitations.
In this final rule, we are finalizing the use of the 2002 I-O data
as we proposed in the FY 2014 proposed rule. We also are finalizing our
calculation of the final cost category weights as we proposed.
3. Selection of Price Proxies
After computing the FY 2010 cost weights for the IPPS market
basket, it was necessary to select appropriate wage and price proxies
to reflect the rate of price change for each expenditure category. We
proposed to use the same price proxies that were used in the FY 2006-
based IPPS market basket. A discussion of our rationale for selecting
these price proxies can be found in the FY 2010 IPPS/RY 2010 LTCH PPS
final rule (74 FR 43845).
With the exception of the proxy for professional liability
insurance (PLI), all the proxies we proposed were based on Bureau of
Labor Statistics (BLS) data and are grouped into one of the following
BLS categories:
Producer Price Indexes--Producer Price Indexes (PPIs)
measure price changes for goods sold in markets other than the retail
market. PPIs are preferable price proxies for goods and services that
hospitals purchase as inputs because PPIs better reflect the actual
price changes encountered by hospitals. For example, we proposed to use
a PPI for prescription drugs, rather than the Consumer Price Index
(CPI) for prescription drugs, because hospitals generally purchase
drugs directly from a wholesaler. The PPIs that we proposed to use
measure price changes at the final stage of production.
Consumer Price Indexes--Consumer Price Indexes (CPIs)
measure change in the prices of final goods and services bought by the
typical consumer. Because they may not represent the price faced by a
producer, we proposed to use CPIs only if an appropriate PPI is not
available, or if the expenditures are more like those faced by retail
consumers in general rather than by purchasers of goods at the
wholesale level. For example, the CPI for food purchased away from home
was proposed to be used as a proxy for contracted food services.
Employment Cost Indexes--Employment Cost Indexes (ECIs)
measure the rate of change in employee wage rates and employer costs
for employee benefits per hour worked. These indexes are fixed-weight
indexes and strictly measure the change in wage rates and employee
benefits per hour. Appropriately, they are not affected by shifts in
employment mix.
We evaluated the price proxies using the criteria of reliability,
timeliness, availability, and relevance. Reliability indicates that the
index is based on valid statistical methods and has low sampling
variability. Timeliness implies that the proxy is published regularly,
preferably at least once a quarter. Availability means that the proxy
is publicly available. Finally, relevance means that the proxy is
applicable and representative of the cost category weight to which it
is applied. We stated in the proposed rule that we believed the
proposed PPIs, CPIs, and ECIs selected meet these criteria.
Table IV03 below sets forth the final FY 2010-based IPPS market
basket, including the cost categories and their respective weights and
price proxies. For comparison purposes, the corresponding FY 2006-based
IPPS market basket cost weights also are listed. A summary outlining
the choice of the various proxies follows the table.

[[Page 50599]]

Table IV03--FY 2010-Based IPPS Hospital Market Basket Cost Categories, Cost Weights, and Price Proxies Compared
to FY 2006-Based IPPS Market Basket Cost Weights
----------------------------------------------------------------------------------------------------------------
FY 2006-based FY 2010-based
hospital hospital FY 2010-based hospital market
Cost categories market basket market basket basket price proxies
cost weights cost weights
----------------------------------------------------------------------------------------------------------------
1. Compensation............................ 59.627 60.338 ...................................
A. Wages and Salaries \1\.............. 47.213 47.233 ECI for Wages and Salaries,
Civilian Hospital Workers.
B. Employee Benefits \1\............... 12.414 13.105 ECI for Benefits, Civilian Hospital
Workers.
2. Utilities............................... 2.180 2.246 ...................................
A. Fuel, Oil, and Gasoline............. 0.418 0.447 PPI for Petroleum Refineries.
B. Electricity......................... 1.645 1.666 PPI for Commercial Electric Power.
C. Water and Sewage.................... 0.117 0.133 CPI-U for Water and Sewerage
Maintenance.
3. Professional Liability Insurance........ 1.661 1.330 CMS Professional Liability
Insurance Premium Index.
4. All Other............................... 36.533 36.086 ...................................
A. All Other Products.................. 19.473 19.458 ...................................
(1.) Pharmaceuticals................... 5.380 5.402 PPI for Pharmaceuticals for Human
Use, Prescription.
(2.) Food: Direct Purchases............ 3.982 4.206 PPI for Processed Foods & Feeds.
(3.) Food: Contract Services........... 0.575 0.578 CPI-U for Food Away From Home.
(4.) Chemicals \2\..................... 1.538 1.529 Blend of Chemical PPIs.
(5.) Blood and Blood Products.......... 1.078 1.069 PPI for Blood and Organ Banks.
(6.) Medical Instruments............... 2.762 2.577 PPI for Medical, Surgical, and
Personal Aid Devices.
(7.) Rubber and Plastics............... 1.659 1.637 PPI for Rubber & Plastic Products.
(8.) Paper and Printing Products....... 1.492 1.507 PPI for Converted Paper &
Paperboard Products.
(9.) Apparel........................... 0.325 0.299 PPI for Apparel.
(10.) Machinery and Equipment.......... 0.163 0.151 PPI for Machinery and Equipment.
(11.) Miscellaneous Products........... 0.519 0.503 PPI for Finished Goods less Food
and Energy.
B. Labor-related Services.............. 9.175 9.249 ...................................
(1.) Professional Fees: Labor-related.. 5.356 5.500 ECI for Compensation for
Professional and Related
Occupations.
(2.) Administrative and Facilities 0.626 0.619 ECI for Compensation for Office and
Support Services \3\. Administrative Services.
(3.) All Other: Labor-Related Services. 3.193 3.130 ECI for Compensation for Private
Service Occupations.
C. Nonlabor-Related Services........... 7.885 7.379 ...................................
(1.) Professional Fees: Nonlabor- 4.074 3.687 ECI for Compensation for
Related. Professional and Related
Occupations.
(2.) Financial Services................ 1.281 1.239 ECI for Compensation for Financial
Activities.
(3.) Telephone Services................ 0.627 0.597 CPI-U for Telephone Services.
(4.) Postage........................... 0.963 0.956 CPI-U for Postage.
(5.) All Other: Nonlabor-Related 0.940 0.900 CPI-U for All Items less Food and
Services. Energy.
--------------------------------
Total.............................. 100.000 100.000 ...................................
----------------------------------------------------------------------------------------------------------------
Note: Detail may not add to total due to rounding.
\1\ Contract labor is distributed to wages and salaries and employee benefits based on the share of total
compensation that each category represents.
\2\ To proxy the ``chemicals'' cost category, we used a blended PPI composed of the PPI for industrial gas
manufacturing, the PPI for other basic inorganic chemical manufacturing, the PPI for other basic organic
chemical manufacturing, and the PPI for soap and cleaning compound manufacturing. For more detail about this
proxy, see the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43845).
\3\ We note that this cost category in the FY 2006-based IPPS market basket was ``Administrative and Business
Support Services.'' We changed the name slightly to be more clear what type of costs are included in this cost
category, but we did not change the classification of which costs are included in the category.

As stated above, we proposed to use the same price proxies used in
the FY 2006-based IPPS market basket. A rationale for selecting these
price proxies can be found in the FY 2010 IPPS/RY 2010 LTCH PPS final
rule (74 FR 43845). The price proxies were selected to most closely
match the costs included in each of the cost categories of the FY 2010-
based IPPS market basket. We did not receive any public comments on the
price proxies we proposed to use in the FY 2010-based IPPS market
basket. In this final rule, we are finalizing the use of the price
proxies that we proposed. Below is a list of the price proxies we
proposed, and are finalizing to use, for the FY 2010-based IPPS market
basket.
a. Wages and Salaries
We use the ECI for Wages and Salaries for Hospital Workers (All
Civilian) (BLS series code CIU1026220000000I) to measure the price
growth of this cost category.
b. Employee Benefits
We use the ECI for Employee Benefits for Hospital Workers (All
Civilian) to measure the price growth of this cost category.
c. Fuel, Oil, and Gasoline
We use the PPI for Petroleum Refineries (BLS series code
PCU324110324110) to measure the price growth of this cost category.
d. Electricity
We use the PPI for Commercial Electric Power (BLS series code
WPU0542) to measure the price growth of this cost category.
e. Water and Sewage
We use the CPI for Water and Sewerage Maintenance (All Urban
Consumers) (BLS series code

[[Page 50600]]

CUUR0000SEHG01) to measure the price growth of this cost category.
f. Professional Liability Insurance
We proxy price changes in hospital professional liability insurance
premiums (PLI) using percentage changes as estimated by the CMS
Hospital Professional Liability Insurance Premium Index. To generate
these estimates, we collect commercial insurance premiums for a fixed
level of coverage while holding nonprice factors constant (such as a
change in the level of coverage). This method is also used to proxy PLI
price changes in the Medicare Economic Index (75 FR 73268).
g. Pharmaceuticals
We use the PPI for Pharmaceuticals for Human Use, Prescription (BLS
series code WPUSI07003) to measure the price growth of this cost
category. This is the same proxy that was used in the FY 2006-based
IPPS market basket, although BLS since changed the naming convention
for this series.
h. Food: Direct Purchases
We use the PPI for Processed Foods and Feeds (BLS series code
WPU02) to measure the price growth of this cost category.
i. Food: Contract Services
We use the CPI for Food Away From Home (All Urban Consumers) (BLS
series code CUUR0000SEFV) to measure the price growth of this cost
category.
j. Chemicals
We use a blended PPI composed of the PPI for Industrial Gas
Manufacturing (NAICS 325120) (BLS series code PCU325120325120P), the
PPI for Other Basic Inorganic Chemical Manufacturing (NAICS 325180)
(BLS series code PCU32518-32518-), the PPI for Other Basic Organic
Chemical Manufacturing (NAICS 325190) (BLS series code PCU32519-32519),
and the PPI for Soap and Cleaning Compound Manufacturing (NAICS 325610)
(BLS series code PCU32561-32561-).
k. Blood and Blood Products
We use the PPI for Blood and Organ Banks (BLS series code
PCU621991621991) to measure the price growth of this cost category.
l. Medical Instruments
We use the PPI for Medical, Surgical, and Personal Aid Devices (BLS
series code WPU156) to measure the price growth of this cost category.
m. Rubber and Plastics
We use the PPI for Rubber and Plastic Products (BLS series code
WPU07) to measure price growth of this cost category.
n. Paper and Printing Products
We use the PPI for Converted Paper and Paperboard Products (BLS
series code WPU0915) to measure the price growth of this cost category.
o. Apparel
We use the PPI for Apparel (BLS series code WPU0381) to measure the
price growth of this cost category.
p. Machinery and Equipment
We use the PPI for Machinery and Equipment (BLS series code WPU11)
to measure the price growth of this cost category.
q. Miscellaneous Products
We use the PPI for Finished Goods Less Food and Energy (BLS series
code WPUSOP3500) to measure the price growth of this cost category.
r. Professional Fees: Labor-Related and Professional Fees: Nonlabor-
Related
We use the ECI for Compensation for Professional and Related
Occupations (Private Industry) (BLS series code CIU2010000120000I) to
measure the price growth of these cost categories.
s. Administrative and Facilities Support Services
We use the ECI for Compensation for Office and Administrative
Support Services (Private Industry) (BLS series code CIU2010000220000I)
to measure the price growth of this category.
t. All Other: Labor-Related Services
We use the ECI for Compensation for Service Occupations (Private
Industry) (BLS series code CIU2010000300000I) to measure the price
growth of this cost category.
u. Financial Services
We use the ECI for Compensation for Financial Activities (Private
Industry) (BLS series code CIU201520A000000I) to measure the price
growth of this cost category.
v. Telephone Services
We use the CPI for Telephone Services (BLS series code
CUUR0000SEED) to measure the price growth of this cost category.
w. Postage
We use the CPI for Postage (BLS series code CUUR0000SEEC01) to
measure the price growth of this cost category.
x. All Other: Nonlabor-Related Services
We use the CPI for All Items Less Food and Energy (BLS series code
CUUR0000SA0L1E) to measure the price growth of this cost category.
Table IV04 in the proposed rule compared both the historical and
forecasted percent changes in the FY 2006-based IPPS market basket and
the proposed FY 2010 based IPPS market basket.
Table IV04 below compares both the historical and forecasted
percent changes in the FY 2006-based IPPS market basket and the final
FY 2010-based IPPS market basket. As stated in the FY 2014 IPPS/LTCH
PPS proposed rule (78 FR 27572), we are incorporating a more recent
forecast of the market basket to determine the FY 2014 market basket
updates and MFP adjustment in the final rule. Therefore, the forecasted
growth rates in Table IV04 are based on IHS Global Insight, Inc.'s
(IGI) most recent second quarter 2013 forecast with historical data
through first quarter 2013. The proposed rule presented IGI's first
quarter 2013 forecast with historical data through fourth quarter of
2012.

Table IV04--FY 2006-Based and FY 2010-Based Prospective Payment Hospital
Operating Index Percent Change, FY 2008 Through FY 2016
------------------------------------------------------------------------
FY 2006- based FY 2010- based
IPPS market IPPS market
basket basket
Fiscal year (FY) operating operating
index percent index percent
change change
------------------------------------------------------------------------
Historical data:
FY 2008............................. 4.0 4.0
FY 2009............................. 2.6 2.6
FY 2010............................. 2.1 2.1

[[Page 50601]]

FY 2011............................. 2.7 2.7
FY 2012............................. 2.2 2.2
-------------------------------
Average FYs 2008-2012........... 2.7 2.7
Forecast:
FY 2013............................. 2.2 2.1
FY 2014............................. 2.5 2.5
FY 2015............................. 2.7 2.7
FY 2016............................. 3.0 3.0
-------------------------------
Average FYs 2013-2016........... 2.6 2.6
------------------------------------------------------------------------
Source: IHS Global Insight, Inc., 2nd Quarter 2013 forecast.

There is no difference between the FY 2006-based and the FY 2010-
based IPPS market basket increases for 2008-2012. For FY 2014, the
increase is 2.5 percent for both the FY 2006-based and FY 2010-based
IPPS market baskets.
4. Labor-Related Share
Under section 1886(d)(3)(E) of the Act, the Secretary estimates
from time to time the proportion of payments that are labor-related.
``The Secretary shall adjust the proportion, (as estimated by the
Secretary from time to time) of hospitals' costs which are attributable
to wages and wage-related costs, of the DRG prospective payment rates .
. . .'' We refer to the proportion of hospitals' costs that are
attributable to wages and wage-related costs as the ``labor-related
share.''
The labor-related share is used to determine the proportion of the
national PPS base payment rate to which the area wage index is applied.
We include a cost category in the labor-related share if the costs are
labor intensive and vary with the local labor market. Because of this
approach, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27566), we
proposed to include in the labor-related share the national average
proportion of operating costs that are attributable to wages and
salaries, employee benefits, contract labor, the labor-related portion
of professional fees, administrative and facilities support services,
and all other: Labor-related services, as we did in the FY 2010 IPPS/RY
2010 LTCH PPS final rule (74 FR 43850). Consistent with previous
rebasings, the ``all other: labor-related services'' cost category is
mostly comprised of building maintenance and security services
(including, but not limited to, commercial and industrial machinery and
equipment repair, nonresidential maintenance and repair, and
investigation and security services). Because these services tend to be
labor-intensive and are mostly performed at the hospital facility (and,
therefore, unlikely to be purchased in the national market), we believe
that they meet our definition of labor-related services.
Similar to the FY 2006-based IPPS market basket, we proposed that
the professional fees: Labor-related cost category includes expenses
associated with advertising and a proportion of legal services,
accounting and auditing, engineering, management consulting, and
management of companies and enterprises expenses. As was done in the FY
2006-based IPPS market basket rebasing, we proposed to determine the
proportion of legal, accounting and auditing, engineering, and
management consulting services that meet our definition of labor-
related services based on a survey of hospitals conducted by CMS in
2008. We notified the public of our intent to conduct this survey on
December 9, 2005 (70 FR 73250) and received no comments (71 FR 8588).
With approval from the OMB, we contacted the industry and received
responses to our survey from 108 hospitals. Using data on FTEs to
allocate responding hospitals across strata (region of the country and
urban/rural status), we calculated poststratification weights. A more
thorough discussion of the composition of the survey and
poststratification can be found in the FY 2010 IPPS/RY 2010 LTCH PPS
final rule (74 FR 43850 through 43856). Based on the weighted results
of the survey, we determined that hospitals purchase, on average, the
following portions of contracted professional services outside of their
local labor market:
34 percent of accounting and auditing services;
30 percent of engineering services;
33 percent of legal services; and
42 percent of management consulting services.
We proposed to apply each of these percentages to its respective
Benchmark I-O cost category underlying the professional fees cost
category. This is the methodology that we used to separate the FY 2006-
based IPPS market basket professional fees category into professional
fees: Labor-related and professional fees: nonlabor-related cost
categories. We proposed to use the same methodology and survey results
to separate the FY 2010-based IPPS market basket professional fees
category into professional fees: Labor-related and professional fees:
nonlabor-related cost categories. We believe these survey results are
appropriate to use for the FY 2010-based IPPS market basket rebasing as
they empirically determine the proportion of contracted professional
services purchased by the industry that is attributable to local firms
and the proportion that is purchased from national firms.
We did not receive any specific public comments on the use of the
professional fees survey. Therefore, we are finalizing our methodology
for allocating contracted professional services for FY 2014 as
proposed. In the FY 2010-based IPPS market basket, nonmedical
professional fees that were subject to allocation based on the survey
results represent 2.059 percent of total costs (and are limited to
those fees related to Accounting & Auditing, Legal, Engineering, and
Management Consulting services). Based on our survey results, we are
apportioning 1.301 percentage points of the 2.059 percentage point
figure into the labor-

[[Page 50602]]

related share and designating the remaining 0.758 percentage point as
nonlabor-related.
In addition to the professional services listed above, we also
classify a proportion of the expenses under NAICS 55, Management of
Companies and Enterprises, into the professional fees: Labor-related
cost category as was done in the previous rebasing. The NAICS 55 data
are mostly comprised of corporate, subsidiary, and regional managing
offices, or otherwise referred to as home offices. As was done for the
FY 2006-based IPPS market basket and as we proposed for the FY 2010-
based IPPS market basket, for this final rule, we are including only a
portion of the home office costs in the labor related share as not all
hospitals are located in the same geographic area as their home office.
We did not receive any specific public comments on our proposed
methodology for allocating home office costs to the labor-related
share. Therefore, we are finalizing this methodology as described in
the proposed rule and provided below for FY 2014. Our methodology is
based on data from the Medicare cost reports, as well as a CMS database
of Home Office Medicare Records (HOMER) (a database that provides city
and State information (addresses) for home offices). The Medicare cost
report requires hospitals to report their home office provider numbers
and locations. Using the data reported on the Medicare Cost Report as
well as the HOMER database to determine the home office location for
each home office provider number, we compared the location of the
hospital with the location of the hospital's home office. We determined
the proportion of costs that should be allocated to the labor-related
share based on the percent of total hospital home office compensation
costs for those hospitals that had home offices located in their
respective local labor markets--defined as being in the same
Metropolitan Statistical Area (MSA). We primarily determined a
hospital's and home office's MSAs using their zip code information from
the Medicare cost report. For any home offices for which we could not
identify a MSA from the Medicare cost report, we used the Medicare
HOMER database to identify the home office's city and State.
As proposed, we determined the proportion of costs that should be
allocated to the labor-related share based on the percent of hospital
home office compensation as reported in Worksheet S-3, Part II. Using
this methodology, we determined that 62 percent of hospitals' home
office compensation costs were for home offices located in their
respective local labor markets. Therefore, we are allocating 62 percent
of NAICS 55 expenses to the labor-related share.
In the FY 2010-based IPPS market basket, NAICS 55 expenses that
were subject to allocation based on the home office allocation
methodology represent 5.650 percent of the total operating costs. Based
on the home office results, we are apportioning 3.503 percentage points
of the 5.650 percentage points figure into the labor-related share and
designating the remaining 2.147 percentage points as nonlabor-related.
In sum, based on the two allocations mentioned above, we apportioned
4.804 percentage points into the labor-related share. This amount is
added to the 0.696 percentage point of professional fees that we
already identified as labor-related, resulting in a professional fees:
Labor-related cost weight of 5.500 percent.
Below is a table comparing the FY 2010-based labor-related share
and the FY 2006-based labor-related share. As discussed in section
IV.B.3. of the preamble of this final rule, the wages and salaries and
employee benefits cost weight reflect contract labor costs.

Table IV05--Comparison of the FY 2010-Based Labor-Related Share and the
FY 2006-Based Labor-Related Share
------------------------------------------------------------------------
FY 2006- based FY 2010- based
market basket market basket
cost weights cost weights
------------------------------------------------------------------------
Wages and Salaries...................... 47.213 47.233
Employee Benefits....................... 12.414 13.105
Professional Fees: Labor-Related........ 5.356 5.500
Administrative and Facilities........... 0.626 0.619
Support Services........................
All Other: Labor-Related Services....... 3.193 3.130
-------------------------------
Total Labor-Related Share........... 68.802 69.587
------------------------------------------------------------------------

Using the cost category weights from the FY 2010-based IPPS market
basket, we calculated a labor-related share of 69.587 percent,
approximately 0.8 percentage point higher than the current labor-
related share of 68.802. We continue to believe, as we have stated in
the past, that these operating cost categories are related to,
influenced by, or vary with the local markets. Therefore, our
definition of the labor-related share continues to be consistent with
section 1886(d)(3) of the Act. We note that section 403 of Public Law
108-173 amended sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act
to provide that the Secretary must employ 62 percent as the labor-
related share unless 62 percent ``would result in lower payments to a
hospital than would otherwise be made.''
Comment: Several commenters supported the proposed increase in the
labor-related share.
Response: We appreciate the commenters' support.
In this final rule, we are finalizing the labor-related share of
69.6 percent for FY 2014 as proposed.
As we proposed, we also updated the labor-related share for Puerto
Rico. Consistent with our methodology for determining the national
labor-related share, we calculated the Puerto Rico-specific relative
weights for wages and salaries, employee benefits, and contract labor
using FY 2010 Medicare cost report data for IPPS hospitals located in
Puerto Rico. Because there are no Puerto Rico-specific relative weights
for professional fees and labor intensive services, we use the national
weights as shown in Table IV05. This is the same methodology we used to
determine the FY 2006-based Puerto Rico-specific labor-related share
derived during the FY 2006-based IPPS market basket rebasing (74 FR
43856).
Below is a table comparing the FY 2010-based Puerto Rico-specific
labor-

[[Page 50603]]

related share and the FY 2006-based Puerto Rico-specific labor-related
share.

Table IV06--Comparison of the FY 2010-Based Puerto Rico-Specific Labor-
Related Share and FY 2006-Based Puerto Rico-Specific Labor-Related Share
------------------------------------------------------------------------
FY 2006- based FY 2010- based
market basket market basket
cost weights cost weights
------------------------------------------------------------------------
Wages and Salaries...................... 44.221 44.918
Benefits................................ 8.691 8.990
Professional Fees: Labor-Related........ 5.356 5.500
Administrative and Facilities: Support 0.626 0.619
Services...............................
All Other: Labor-Related Services....... 3.193 3.130
-------------------------------
Total Labor-Related Share........... 62.087 63.157
------------------------------------------------------------------------

Using the FY 2010-based Puerto Rico cost category weights, we
calculated a labor-related share of 63.157 percent, approximately 1.1
percentage points higher than the current Puerto-Rico specific labor-
related share of 62.087.
We did not receive any public comments on the proposal to update
the Puerto Rico labor-related share. Therefore, we are finalizing the
Puerto Rico labor-related share of 63.2 percent for FY 2014 as
proposed.

C. Market Basket for Certain Hospitals Presently Excluded From the IPPS

In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43857), we
adopted the use of the FY 2006-based IPPS operating market basket
percentage increase to update the target amounts for children's
hospitals, PPS-excluded cancer hospitals and religious nonmedical
health care institutions (RNHCIs). Children's hospitals and PPS-
excluded cancer hospitals and RNHCIs are still reimbursed solely under
the reasonable cost-based system, subject to the rate-of-increase
limits. Under these limits, an annual target amount (expressed in terms
of the inpatient operating cost per discharge) is set for each hospital
based on the hospital's own historical cost experience trended forward
by the applicable rate-of-increase percentages.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27568), under the
broad authority in sections 1886(b)(3)(A) and (B), 1886(b)(3)(E), and
1871 of the Act and section 4454 of the BBA, consistent with our use of
the IPPS operating market basket percentage increase to update target
amounts, we proposed to use the FY 2010-based IPPS operating market
basket percentage increase to update the target amounts for children's
hospitals, 11 PPS-excluded cancer hospitals, and RNHCIs that are paid
on the basis of reasonable cost subject to the rate-of-increase limits
under Sec. 413.40.
We did not receive any public comments on this proposal. In this
final rule, we are finalizing the use of the FY 2010-based IPPS
operating market basket percentage increase to update the target
amounts for children's hospitals, 11 PPS-excluded cancer hospitals, and
RNHCIs that are paid on the basis of reasonable cost as we proposed.
Due to the small number of children's and cancer hospitals and
RNHCIs that receive, in total, less than 1 percent of all Medicare
payments to hospitals and because these hospitals provide limited
Medicare cost report data, we are unable to create a separate market
basket specifically for these hospitals. Due to the limited cost report
data available, we believe that the FY 2010-based IPPS operating market
basket most closely represents the cost structure of children's
hospitals, PPS-excluded cancer hospitals, and RNHCIs. We believe this
is appropriate as the IPPS operating market basket would reflect the
input price growth for providing inpatient hospital services (similar
to the services provided by the above excluded hospitals) based on the
specific mix of goods and services required. Therefore, we believe that
the percentage change in the FY 2010-based IPPS operating market basket
is the best available measure of the average increase in the prices of
the goods and services purchased by children hospitals, the 11 cancer
hospitals, and RNHCIs in order to provide care.

D. Rebasing and Revising the Capital Input Price Index (CIPI)

The CIPI was originally described in the FY 1993 IPPS final rule
(57 FR 40016). There have been subsequent discussions of the CIPI
presented in the IPPS proposed and final payment rules. The FY 2010
IPPS/RY 2010 LTCH PPS final rule (74 FR 43857) discussed the most
recent rebasing and revision of the CIPI to a FY 2006 base year, which
reflected the capital cost structure of the hospital industry in that
year.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27568), for the
FY 2014 IPPS update, we proposed to rebase and revise the CIPI to a FY
2010 base year to reflect the more current structure of capital costs
in hospitals. As with the FY 2006-based index, we developed two sets of
weights in order to calculate the FY 2010-based CIPI. The first set of
weights identifies the proportion of hospital capital expenditures
attributable to each expenditure category, while the second set of
weights is a set of relative vintage weights for depreciation and
interest. The set of vintage weights is used to identify the proportion
of capital expenditures within a cost category that is attributable to
each year over the useful life of the capital assets in that category.
A more thorough discussion of vintage weights is provided later in this
section.
Both sets of weights were developed using the best data sources
available. In reviewing source data, we determined that the Medicare
cost reports provided accurate data for all capital expenditure cost
categories. We used the FY 2010 Medicare cost reports for IPPS
hospitals to determine weights for all three cost categories:
depreciation, interest, and other capital expenses.
Lease expenses are unique in that they are not broken out as a
separate cost category in the CIPI, but rather are proportionally
distributed among the cost categories of Depreciation, Interest, and
Other, reflecting the assumption that the underlying cost structure and
price movement of leases is similar to that of capital costs in
general. As was done in previous rebasings of the CIPI, we first
assumed 10 percent of lease expenses represents overhead and assigned
those costs to the Other

[[Page 50604]]

category accordingly. The remaining lease expenses were distributed
across the three cost categories based on the respective weights of
Depreciation, Interest, and Other not including lease expenses.
Depreciation contains two subcategories: (1) Building and Fixed
equipment; and (2) Movable Equipment. The apportionment between
building and fixed equipment and movable equipment was determined using
the Medicare cost reports. This methodology was also used to compute
the apportionment used in the FY 2006-based index.
The total Interest cost category is split between government/
nonprofit interest and for-profit interest. The FY 2006-based CIPI
allocated 85 percent of the total interest cost weight to government/
nonprofit interest and proxied that category by the average yield on
domestic municipal bonds. The remaining 15 percent of the interest cost
weight was allocated to for-profit interest and was proxied by the
average yield on Moody's Aaa bonds (74 FR 43857).
For the FY 2010-based CIPI, as we proposed, we derived the split
using the relative FY 2010 Medicare cost report data on interest
expenses for government/nonprofit and for-profit hospitals. Based on
these data, we calculated an 89/11 split between government/nonprofit
and for-profit interest. We believe it is important that this split
reflects the latest relative cost structure of interest expenses.
We did not receive any public comments on our proposed methodology
for calculating the FY 2010-based CIPI cost weights.
In this final rule, we are finalizing the FY 2010-based CIPI cost
weights as proposed. Table IV07 presents a comparison of the FY 2010-
based CIPI cost weights and the FY 2006-based CIPI cost weights.

Table IV07--FY 2010-Based CIPI Cost Categories, Weights, and Price Proxies With FY 2006-Based CIPI Included for
Comparison
----------------------------------------------------------------------------------------------------------------
FY 2006 FY 2010
Cost categories weights weights Price proxy
----------------------------------------------------------------------------------------------------------------
Total...................................... 100.00 100.00 ...................................
Total depreciation......................... 75.154 74.011 ...................................
Building and fixed equipment depreciation.. 35.789 36.153 BEA chained price index for
nonresidential construction for
hospitals and special care
facilities--vintage-weighted (26
years).
Movable equipment depreciation............. 39.365 37.858 PPI for machinery and equipment--
vintage-weighted (12 years).
Total interest............................. 17.651 19.157 ...................................
Government/nonprofit interest.............. 15.076 17.051 Average yield on domestic municipal
bonds (Bond Buyer 20 bonds)--
vintage-weighted (26 years).
For-profit interest........................ 2.575 2.106 Average yield on Moody's Aaa bonds--
vintage-weighted (26 years).
Other...................................... 7.195 6.832 CPI-U for residential rent.
----------------------------------------------------------------------------------------------------------------

Because capital is acquired and paid for over time, capital
expenses in any given year are determined by both past and present
purchases of physical and financial capital. The vintage-weighted CIPI
is intended to capture the long-term consumption of capital, using
vintage weights for depreciation (physical capital) and interest
(financial capital). These vintage weights reflect the proportion of
capital purchases attributable to each year of the expected life of
building and fixed equipment, movable equipment, and interest. We used
the vintage weights to compute vintage-weighted price changes
associated with depreciation and interest expense. Following
publication of the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule, and in
order to provide greater transparency, we posted on the CMS market
basket Web page at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html an illustrative spreadsheet that contains an
example of how the vintage-weighted price indexes are calculated.
Vintage weights are an integral part of the CIPI. Capital costs are
inherently complicated and are determined by complex capital purchasing
decisions, over time, based on such factors as interest rates and debt
financing. In addition, capital is depreciated over time instead of
being consumed in the same period it is purchased. The CIPI accurately
reflects the annual price changes associated with capital costs, and is
a useful simplification of the actual capital investment process. By
accounting for the vintage nature of capital, we are able to provide an
accurate, stable annual measure of price changes. Annual nonvintage
price changes for capital are unstable due to the volatility of
interest rate changes and, therefore, do not reflect the actual annual
price changes for Medicare capital-related costs. The CIPI reflects the
underlying stability of the capital acquisition process and provides
hospitals with the ability to plan for changes in capital payments.
To calculate the vintage weights for depreciation and interest
expenses, we needed a time series of capital purchases for building and
fixed equipment and movable equipment. We found no single source that
provides a uniquely best time series of capital purchases by hospitals
for all of the above components of capital purchases. The early
Medicare cost reports did not have sufficient capital data to meet this
need. Data we obtained from the American Hospital Association (AHA) do
not include annual capital purchases. However, AHA does provide a
consistent database back to 1963. We used data from the AHA Panel
Survey and the AHA Annual Survey to obtain a time series of total
expenses for hospitals. We then used data from the AHA Panel Survey
supplemented with the ratio of depreciation to total hospital expenses
obtained from the Medicare cost reports to derive a trend of annual
depreciation expenses for 1963 through 2010.
In order to estimate capital purchases using data on depreciation
expenses, the expected life for each cost category (building and fixed
equipment, movable equipment, and interest) is needed to calculate
vintage weights. We used FY 2010 Medicare cost reports to determine the
expected life of building and fixed equipment and of movable equipment.
The expected life of any piece of equipment can be determined by
dividing the value of the asset (excluding fully depreciated assets) by
its current year depreciation amount. This calculation yields the
estimated useful life of an asset if depreciation were to continue at
current year levels,

[[Page 50605]]

assuming straight-line depreciation. From the FY 2010 Medicare cost
reports, the expected life of building and fixed equipment was
determined to be 26 years, and the expected life of movable equipment
was determined to be 12 years. The FY 2006-based CIPI was based on an
expected life of building and fixed equipment of 25 years and 12 years
as the expected life for movable equipment.
As we proposed, we used the building and fixed equipment and
movable equipment weights derived from FY 2010 Medicare cost reports to
separate the depreciation expenses into annual amounts of building and
fixed equipment depreciation and movable equipment depreciation. Year-
end asset costs for building and fixed equipment and movable equipment
were determined by multiplying the annual depreciation amounts by the
expected life calculations from the FY 2010 Medicare cost reports. We
then calculated a time series back to 1963 of annual capital purchases
by subtracting the previous year asset costs from the current year
asset costs. From this capital purchase time series, we were able to
calculate the vintage weights for building and fixed equipment and for
movable equipment. Each of these sets of vintage weights is explained
in more detail below.
For building and fixed equipment vintage weights, we used the real
annual capital purchase amounts for building and fixed equipment to
capture the actual amount of the physical acquisition, net of the
effect of price inflation. This real annual purchase amount for
building and fixed equipment was produced by deflating the nominal
annual purchase amount by the building and fixed equipment price proxy,
BEA's chained price index for nonresidential construction for hospitals
and special care facilities. Because building and fixed equipment have
an expected life of 26 years, the vintage weights for building and
fixed equipment are deemed to represent the average purchase pattern of
building and fixed equipment over 26-year periods. With real building
and fixed equipment purchase estimates available back to 1963, we
averaged twenty-two 26-year periods to determine the average vintage
weights for building and fixed equipment that are representative of
average building and fixed equipment purchase patterns over time.
Vintage weights for each 26-year period are calculated by dividing the
real building and fixed capital purchase amount in any given year by
the total amount of purchases in the 26-year period. This calculation
is done for each year in the 26-year period, and for each of the
twenty-two 26-year periods. We used the average of each year across the
twenty-two 26-year periods to determine the average building and fixed
equipment vintage weights for the FY 2010-based CIPI.
For movable equipment vintage weights, the real annual capital
purchase amounts for movable equipment were used to capture the actual
amount of the physical acquisition, net of price inflation. This real
annual purchase amount for movable equipment was calculated by
deflating the nominal annual purchase amounts by the movable equipment
price proxy, the PPI for machinery and equipment. Based on our
determination that movable equipment has an expected life of 12 years,
the vintage weights for movable equipment represent the average
expenditure for movable equipment over a 12-year period. With real
movable equipment purchase estimates available back to 1963, thirty-six
12-year periods were averaged to determine the average vintage weights
for movable equipment that are representative of average movable
equipment purchase patterns over time. Vintage weights for each 12-year
period are calculated by dividing the real movable capital purchase
amount for any given year by the total amount of purchases in the 12-
year period. This calculation was done for each year in the 12-year
period and for each of the thirty-six 12-year periods. We used the
average of each year across the thirty-six 12-year periods to determine
the average movable equipment vintage weights for the FY 2010-based
CIPI.
For interest vintage weights, the nominal annual capital purchase
amounts for total equipment (building and fixed, and movable) were used
to capture the value of the debt instrument. Because we have determined
that hospital debt instruments have an expected life of 26 years, the
vintage weights for interest are deemed to represent the average
purchase pattern of total equipment over 26-year periods. With nominal
total equipment purchase estimates available back to 1963, twenty-two
26-year periods were averaged to determine the average vintage weights
for interest that are representative of average capital purchase
patterns over time. Vintage weights for each 26-year period are
calculated by dividing the nominal total capital purchase amount for
any given year by the total amount of purchases in the 26-year period.
This calculation is done for each year in the 26-year period and for
each of the twenty-two 26-year periods. We used the average of each
year across the twenty-two 26-year periods to determine the average
interest vintage weights for the proposed FY 2010-based CIPI.
We did not receive any public comments on our proposed methodology
for calculating the FY 2010-based CIPI vintage weights. In this final
rule, we are finalizing the CIPI vintage weights as proposed. The
vintage weights for the FY 2006-based CIPI and the FY 2010-based CIPI
are presented in Table IV08.

Table IV08--FY 2006 Vintage Weights and FY 2010 Vintage Weights for Capital-Related Price Proxies
--------------------------------------------------------------------------------------------------------------------------------------------------------
Building and fixed equipment Movable equipment Interest
-----------------------------------------------------------------------------------------------
Year \1\ FY 2006 25 FY 2010 26 FY 2006 12 FY 2010 12 FY 2006 25 FY 2010 26
Years Years Years Years Years Years
--------------------------------------------------------------------------------------------------------------------------------------------------------
1....................................................... 0.021 0.023 0.063 0.064 0.010 0.012
2....................................................... 0.023 0.024 0.067 0.068 0.012 0.013
3....................................................... 0.025 0.026 0.071 0.071 0.014 0.015
4....................................................... 0.027 0.028 0.075 0.073 0.016 0.017
5....................................................... 0.029 0.029 0.079 0.076 0.018 0.018
6....................................................... 0.031 0.031 0.082 0.078 0.020 0.021
7....................................................... 0.032 0.032 0.085 0.084 0.023 0.023
8....................................................... 0.033 0.034 0.086 0.088 0.025 0.025
9....................................................... 0.036 0.036 0.090 0.092 0.028 0.028
10...................................................... 0.038 0.038 0.093 0.098 0.031 0.030
11...................................................... 0.040 0.040 0.102 0.103 0.034 0.033
12...................................................... 0.042 0.041 0.106 0.106 0.038 0.036

[[Page 50606]]

13...................................................... 0.044 0.042 .............. .............. 0.041 0.038
14...................................................... 0.045 0.042 .............. .............. 0.044 0.040
15...................................................... 0.046 0.043 .............. .............. 0.047 0.043
16...................................................... 0.047 0.044 .............. .............. 0.050 0.045
17...................................................... 0.048 0.044 .............. .............. 0.053 0.047
18...................................................... 0.050 0.044 .............. .............. 0.057 0.048
19...................................................... 0.050 0.044 .............. .............. 0.059 0.051
20...................................................... 0.050 0.044 .............. .............. 0.060 0.052
21...................................................... 0.048 0.045 .............. .............. 0.060 0.056
22...................................................... 0.048 0.045 .............. .............. 0.062 0.057
23...................................................... 0.047 0.045 .............. .............. 0.063 0.060
24...................................................... 0.049 0.046 .............. .............. 0.068 0.062
25...................................................... 0.048 0.045 .............. .............. 0.069 0.064
26...................................................... .............. 0.045 .............. .............. .............. 0.066
-----------------------------------------------------------------------------------------------
Total................................................... 1.000 1.000 1.000 1.000 1.000 1.000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Detail may not add to total due to rounding.
\1\ Year 1 represents the vintage weight applied to the farthest year while the vintage weight for year 26, for example, would apply to the most recent
year.

After the capital cost category weights were computed, it was
necessary to select appropriate price proxies to reflect the rate-of-
increase for each expenditure category. As we proposed, in this final
rule, we used the same price proxies for the FY 2010-based CIPI that
were used in the FY 2006-based CIPI. The rationale for selecting the
price proxies was explained more fully in the FY 1997 IPPS final rule
(61 FR 46196) and the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR
43857). These price proxies are presented in Table IV07.
Table IV09 below compares both the historical and forecasted
percent changes in the FY 2006-based CIPI and the FY 2010-based CIPI.
As stated in the FY 2014 IPPS/LTCH proposed rule (78 FR 27572), we are
incorporating a more recent forecast of the market baskets in the final
rule. Therefore, the forecasted growth rates in Table IV09 are based on
IHS Global Insight Inc.'s (IGI) most recent second quarter 2013
forecast with historical data through first quarter 2013. The proposed
rule presented IGI's first quarter 2013 forecast with historical data
through fourth quarter of 2012.

Table IV09--Comparison of FY 2006-Based and FY 2010-Based Capital Input
Price Index, Percent Change, FY 2008 through FY 2016
------------------------------------------------------------------------
CIPI, FY 2006- CIPI, FY 2010-
Fiscal year Based Based
------------------------------------------------------------------------
FY 2008................................. 1.5 1.1
FY 2009................................. 1.5 1.2
FY 2010................................. 1.0 0.7
FY 2011................................. 1.2 0.9
FY 2012................................. 1.2 1.0
Forecast:............................... .............. ..............
FY 2013................................. 1.3 1.1
FY 2014................................. 1.4 1.2
FY 2015................................. 1.5 1.4
FY 2016................................. 1.7 1.6
Average: .............. ..............
FYs 2008-2012....................... 1.3 1.0
FYs 2013-2016....................... 1.5 1.3
------------------------------------------------------------------------
Source: IHS Global Insight, Inc., 2nd Quarter 2013 forecast.

IHS Global Insight, Inc. forecasts a 1.2 percent increase in the FY
2010-based CIPI for FY 2014, as shown in Table IV09. The underlying
vintage-weighted price increases for depreciation (including building
and fixed equipment and movable equipment) and interest (including
government/nonprofit and for-profit) are included in Table IV10.

[[Page 50607]]

Table IV10--CMS Capital Input Price Index Percent Changes, Total and Depreciation and Interest Components-- FYs
2008 Through 2016
----------------------------------------------------------------------------------------------------------------
Fiscal year Total Depreciation Interest
----------------------------------------------------------------------------------------------------------------
FY 2008......................................................... 1.1 2.0 -3.1
FY 2009......................................................... 1.2 2.0 -2.0
FY 2010......................................................... 0.7 1.7 -2.8
FY 2011......................................................... 0.9 1.7 -2.3
FY 2012......................................................... 1.0 1.7 -2.7
Forecast:....................................................... .............. .............. ..............
FY 2013......................................................... 1.1 1.8 -2.7
FY 2014......................................................... 1.2 1.9 -2.3
FY 2015......................................................... 1.4 2.0 -1.8
FY 2016......................................................... 1.6 2.0 -0.8
----------------------------------------------------------------------------------------------------------------
Source: IHS Global Insight, Inc., 2nd Quarter 2013 forecast.

Rebasing the CIPI from FY 2006 to FY 2010 decreased the percent
change in the forecasted update for FY 2014 by 0.2 percentage point,
from 1.4 percent to 1.2 percent, as shown in Table IV09. The difference
in the forecasted market basket update for FY 2014 is primarily due to
the rebasing of the index to FY 2010 and revising the base year cost
weights to incorporate the FY 2010 Medicare cost report data.

V. Other Decisions and Changes to the IPPS for Operating Costs and GME
Costs

A. Changes in the Inpatient Hospital Update for FY 2014 (Sec. Sec.
412.64(d) and 412.211(c))

1. FY 2014 Inpatient Hospital Update
In accordance with section 1886(b)(3)(B)(i) of the Act, each year
we update the national standardized amount for inpatient operating
costs by a factor called the ``applicable percentage increase.''
Section 1886(b)(3)(B) of the Act, as amended by sections 3401(a) and
10319(a) of the Affordable Care Act, sets the applicable percentage
increase under the IPPS for FY 2014 as equal to the rate-of-increase in
the hospital market basket for IPPS hospitals in all areas, subject to
a reduction of 2.0 percentage points if the hospital fails to submit
quality information under rules established by the Secretary in
accordance with section 1886(b)(3)(B)(viii) of the Act, and then
subject to an adjustment based on changes in economy-wide productivity
(the multifactor productivity (MFP) adjustment), and an additional
reduction of 0.3 percentage point. Sections 1886(b)(3)(B)(xi) and
(b)(3)(B)(xii) of the Act, as added by section 3401(a) of the
Affordable Care Act, state that application of the MFP adjustment and
the additional FY 2014 adjustment of 0.3 percentage point may result in
the applicable percentage increase being less than zero.
We note, in compliance with section 404 of the MMA, in this final
rule, as we proposed, we are replacing the FY 2006-based IPPS operating
and capital market baskets with the revised and rebased FY 2010-based
IPPS operating and capital market baskets for FY 2014. We also are
rebasing the labor-related share to reflect the more recent base year.
For FY 2014, we are adopting a labor-related share of 69.6 percent,
which is based on the rebased and revised FY 2010-based IPPS market
basket (as compared to the FY 2013 labor-related share of 68.8 percent,
which is based on the FY 2006-based IPPS market basket). For a complete
discussion on the rebasing of the market basket and labor-related
share, we refer readers to section IV. of the preamble of this final
rule.
Based on the most recent data available for the FY 2014 proposed
rule, in accordance with section 1886(b)(3)(B) of the Act, we proposed
to base the proposed FY 2014 market basket update used to determine the
applicable percentage increase for the IPPS on the IHS Global Insight,
Inc. (IGI's) first quarter 2013 forecast of the FY 2010-based IPPS
market basket rate-of-increase with historical data through fourth
quarter 2012, which was estimated to be 2.5 percent. We also proposed
that if more recent data become subsequently available (for example, a
more recent estimate of the market basket and the MFP adjustment), we
would use such data, if appropriate, to determine the FY 2014 market
basket update and the MFP adjustment in the final rule. We did not
receive any public comments on our proposal. Therefore, for this final
rule, we based the final FY 2014 market basket update used to determine
the applicable percentage increase for the IPPS on more recently
available data, the IGI's second quarter 2013 forecast of the FY 2010-
based IPPS market basket rate-of-increase, which is estimated to be 2.5
percent.
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51689 through
51692), we finalized our methodology for calculating and applying the
MFP adjustment. We also stated in the FY 2014 IPPS/LTCH PPS proposed
rule that, for FY 2014, we were not proposing to make any change in our
methodology for calculating and applying the MFP adjustment. In the
proposed rule, we proposed a MFP adjustment of 0.4 percent. Similar to
the market basket adjustment, for this final rule, we are using the
most recent data available to compute the MFP adjustment. We did not
receive any public comments on our proposal. Therefore, for this final
rule, using the most recent data available, we computed a MFP
adjustment of 0.5 percent for FY 2014.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27572-27573),
consistent with current law, and based on IGI's first quarter 2013
forecast of the FY 2014 market basket increase, we proposed an
applicable percentage increase to the FY 2014 operating standardized
amount of 1.8 percent (that is, the FY 2014 estimate of the market
basket rate-of-increase of 2.5 percent less an adjustment of 0.4
percentage point for economy-wide productivity (that is, the MFP
adjustment) and less 0.3 percentage point) for hospitals in all areas,
provided the hospital submits quality data under rules established in
accordance with section 1886(b)(3)(B)(viii) of the Act. For hospitals
that do not submit these quality data, we proposed an applicable
percentage increase to the operating standardized amount of -0.2
percent (that is, the FY 2014 estimate of the market basket rate-of-
increase of 2.5 percent, less 2.0 percentage points for failure to
submit quality data, less an adjustment of 0.4 percentage point for the
MFP adjustment, and less an additional adjustment of 0.3 percentage
point). Lastly, as noted above, in the

[[Page 50608]]

proposed rule, we stated that if more recent data become subsequently
available (for example, a more recent estimate of the market basket and
the MFP adjustment), we would use such data, if appropriate, to
determine the FY 2014 market basket update and MFP adjustment in the
final rule. We did not receive any public comments on our proposal.
For this final rule, using the most recent data available,
consistent with current law, and based on IGI's second quarter 2013
forecast of the FY 2014 market basket increase, we are finalizing an
applicable percentage increase to the FY 2014 operating standardized
amount of 1.7 percent (that is, the FY 2014 estimate of the market
basket rate-of-increase of 2.5 percent less an adjustment of 0.5
percentage point for economy-wide productivity (that is, the MFP
adjustment) and less 0.3 percentage point) for hospitals in all areas,
provided the hospital submits quality data under rules established in
accordance with section 1886(b)(3)(B)(viii) of the Act. For hospitals
that do not submit these quality data, we are finalizing an applicable
percentage increase to the operating standardized amount of -0.3
percent (that is, the FY 2014 estimate of the market basket rate-of-
increase of 2.5 percent, less 2.0 percentage points for failure to
submit quality data, less an adjustment of 0.5 percentage point for the
MFP adjustment, and less an additional adjustment of 0.3 percentage
point).
In the proposed rule, we proposed to revise the existing
regulations at 42 CFR 412.64(d) to reflect the current law for the FY
2014 update. Specifically, in accordance with section 1886(b)(3)(B) of
the Act, we proposed to add a new paragraph (v) to Sec. 412.64(d)(1)
to reflect the applicable percentage increase to the FY 2014 operating
standardized amount as the percentage increase in the market basket
index less an MFP adjustment and less an additional reduction of 0.3
percentage point. We did not receive any public comments on this
proposal. Therefore, in this final rule, we are adopting as final,
without modification, the proposed changes to Sec. 412.64(d)(1)(v) to
reflect the current law.
Section 1886(b)(3)(B)(iv) of the Act provides that the applicable
percentage increase to the hospital-specific rates for SCHs equals the
applicable percentage increase set forth in section 1886(b)(3)(B)(i) of
the Act (that is, the same update factor as for all other hospitals
subject to the IPPS). Therefore, the update to the hospital-specific
rates for SCHs is also subject to section 1886(b)(3)(B)(i) of the Act,
as amended by sections 3401(a) and 10319(a) of the Affordable Care Act.
Accordingly, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27572-
27573), we proposed an update to the hospital-specific rates applicable
to SCHs of 1.8 percent for hospitals that submit quality data or -0.2
percent for hospitals that fail to submit quality data. For FY 2014,
the existing regulations in Sec. Sec. 412.73(c)(16), 412.75(d),
412.77(e) and 412.78(e) contain provisions that set the update factor
for SCHs equal to the update factor applied to the national
standardized amount for all IPPS hospitals. Therefore, we did not
propose to make any further changes to these four regulatory provisions
to reflect the FY 2014 update factor for the hospital-specific rates of
SCHs. We did not receive any public comments on this proposal.
Therefore, for this final rule, we are finalizing an update to the
hospital-specific rates applicable to SCHs of 1.7 percent for hospitals
that submit quality data or -0.3 percent for hospitals that fail to
submit quality data. As we noted above, for the proposed rule, we used
the first quarter 2013 forecast of the FY 2010-based IPPS market basket
with historical data through fourth quarter 2012. For this final rule,
we used the most recent data available, which was the second quarter
2013 forecast of the FY 2010-based IPPS market basket with historical
data through first quarter 2013. Similarly, for the proposed rule, we
used IGI's first quarter 2013 forecast of MFP. For this final rule, we
used the most recent data available, which was IGI's second quarter
2013 forecast of MFP.
We note that, as discussed in section V.F. of this preamble,
section 606 of the American Taxpayer Relief Act of 2012 extended the
MDH program from the end of FY 2012 (that is, for discharges occurring
before October 1, 2012) to the end of FY 2013 (that is, for discharges
occurring before October 1, 2013). Under prior law, the MDH program was
to be in effect through the end of FY 2012 only. Absent congressional
action further extending the MDH program, the MDH program will expire
for discharges beginning in FY 2014. Accordingly, we are not including
MDHs in our update of the hospital-specific rates for FY 2014.
2. FY 2014 Puerto Rico Hospital Update
Puerto Rico hospitals are paid a blended rate for their inpatient
operating costs based on 75 percent of the national standardized amount
and 25 percent of the Puerto Rico-specific standardized amount. Section
1886(d)(9)(C)(i) of the Act is the basis for determining the applicable
percentage increase applied to the Puerto Rico-specific standardized
amount. Section 401(c) of Public Law 108-173 amended section
1886(d)(9)(C)(i) of the Act, which states that, for discharges
occurring in a fiscal year (beginning with FY 2004), the Secretary
shall compute an average standardized amount for hospitals located in
any area of Puerto Rico that is equal to the average standardized
amount computed under subclause (I) for fiscal year 2003 for hospitals
in a large urban area (or, beginning with FY 2005, for all hospitals in
the previous fiscal year) increased by the applicable percentage
increase under subsection (b)(3)(B) for the fiscal year involved.
Therefore, the update to the Puerto Rico-specific operating
standardized amount equals the applicable percentage increase set forth
in section 1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a)
and 10319(a) of the Affordable Care Act (that is, the same update
factor as for all other hospitals subject to the IPPS). Accordingly, in
the FY 2014 IPS/LTCH PPS proposed rule (78 FR 27572 through 27573), we
proposed an applicable percentage increase to the Puerto Rico-specific
operating standardized amount of 1.8 percent for FY 2014. The
regulations at Sec. 412.211(c) currently set the update factor for the
Puerto Rico-specific operating standardized amount equal to the update
factor applied to the national standardized amount for all IPPS
hospitals. Therefore, it is not necessary to make any changes to the
existing regulatory text.
We did not receive any public comments on this proposal. Therefore,
for this final rule, we are finalizing an applicable percentage
increase to the Puerto Rico-specific operating standardized amount of
1.7 percent for FY 2014. As we noted above, for the proposed rule, we
used the first quarter 2013 forecast of the FY 2010-based IPPS market
basket with historical data through fourth quarter 2012. For this final
rule, we used the most recent data available, which was the second
quarter 2013 forecast of the FY 2010-based IPPS market basket with
historical data through first quarter 2013. Similarly, for the proposed
rule, we used IGI's first quarter 2013 forecast of MFP. For this final
rule, we used the most recent data available, which was IGI's second
quarter 2013 forecast of MFP.

B. Rural Referral Centers (RRCs): Annual Updates to Case-Mix Index and
Discharge Criteria (Sec. 412.96)

Under the authority of section 1886(d)(5)(C)(i) of the Act, the

[[Page 50609]]

regulations at Sec. 412.96 set forth the criteria that a hospital must
meet in order to qualify under the IPPS as a rural referral center
(RRC). RRCs receive some special treatment under both the DSH payment
adjustment and the criteria for geographic reclassification.
Section 402 of Public Law 108-173 raised the DSH payment adjustment
for RRCs such that they are not subject to the 12-percent cap on DSH
payments that is applicable to other rural hospitals. RRCs are also not
subject to the proximity criteria when applying for geographic
reclassification. In addition, they do not have to meet the requirement
that a hospital's average hourly wage must exceed, by a certain
percentage, the average hourly wage of the labor market area where the
hospital is located.
Section 4202(b) of Public Law 105-33 states, in part, ``[a]ny
hospital classified as an RRC by the Secretary . . . for fiscal year
1991 shall be classified as such an RRC for fiscal year 1998 and each
subsequent year.'' In the August 29, 1997 IPPS final rule with comment
period (62 FR 45999), CMS reinstated RRC status for all hospitals that
lost the status due to triennial review or MGCRB reclassification.
However, CMS did not reinstate the status of hospitals that lost RRC
status because they were now urban for all purposes because of the OMB
designation of their geographic area as urban. Subsequently, in the
August 1, 2000 IPPS final rule (65 FR 47089), we indicated that we were
revisiting that decision. Specifically, we stated that we would permit
hospitals that previously qualified as an RRC and lost their status due
to OMB redesignation of the county in which they are located from rural
to urban, to be reinstated as an RRC. Otherwise, a hospital seeking RRC
status must satisfy all of the other applicable criteria. We use the
definitions of ``urban'' and ``rural'' specified in Subpart D of 42 CFR
Part 412. One of the criteria under which a hospital may qualify as an
RRC is to have 275 or more beds available for use (Sec.
412.96(b)(1)(ii)). A rural hospital that does not meet the bed size
requirement can qualify as an RRC if the hospital meets two mandatory
prerequisites (a minimum CMI and a minimum number of discharges), and
at least one of three optional criteria (relating to specialty
composition of medical staff, source of inpatients, or referral
volume). (We refer readers to Sec. 412.96(c)(1) through (c)(5) and the
September 30, 1988 Federal Register (53 FR 38513).) With respect to the
two mandatory prerequisites, a hospital may be classified as an RRC
if--
The hospital's CMI is at least equal to the lower of the
median CMI for urban hospitals in its census region, excluding
hospitals with approved teaching programs, or the median CMI for all
urban hospitals nationally; and
The hospital's number of discharges is at least 5,000 per
year, or, if fewer, the median number of discharges for urban hospitals
in the census region in which the hospital is located. (The number of
discharges criterion for an osteopathic hospital is at least 3,000
discharges per year, as specified in section 1886(d)(5)(C)(i) of the
Act.)
1. Case-Mix Index (CMI)
Section 412.96(c)(1) provides that CMS establish updated national
and regional CMI values in each year's annual notice of prospective
payment rates for purposes of determining RRC status. The methodology
we used to determine the national and regional CMI values is set forth
in the regulations at Sec. 412.96(c)(1)(ii). The national median CMI
value for FY 2014 includes data from all urban hospitals nationwide,
and the regional values for FY 2014 are the median CMI values of urban
hospitals within each census region, excluding those hospitals with
approved teaching programs (that is, those hospitals that train
residents in an approved GME program as provided in Sec. 413.75).
These values are based on discharges occurring during FY 2012 (October
1, 2011 through September 30, 2012), and include bills posted to CMS'
records through March 2013.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27573), we
proposed that, in addition to meeting other criteria, if rural
hospitals with fewer than 275 beds are to qualify for initial RRC
status for cost reporting periods beginning on or after October 1,
2013, they must have a CMI value for FY 2012 that is at least--
1.5526; or
The median CMI value (not transfer-adjusted) for urban
hospitals (excluding hospitals with approved teaching programs as
identified in Sec. 413.75) calculated by CMS for the census region in
which the hospital is located. (We refer readers to the table set forth
in the FY 2014 IPPS/LTCH PPS proposed rule at 78 FR 27574.)
The final CMI values for FY 2014 are based on the latest available
data (FY 2012 bills received through March 2013). In addition to
meeting other criteria, if rural hospitals with fewer than 275 beds are
to qualify for initial RRC status for cost reporting periods beginning
on or after October 1, 2013, they must have a CMI value for FY 2012
that is at least--
1.5560; or
The median CMI value (not transfer-adjusted) for urban
hospitals (excluding hospitals with approved teaching programs as
identified in Sec. 413.75) calculated by CMS for the census region in
which the hospital is located.
The final median CMI values by region are set forth in the
following table:

------------------------------------------------------------------------
Case-mix index
Region value
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT)................. 1.3319
2. Middle Atlantic (PA, NJ, NY)......................... 1.4015
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV).. 1.4808
4. East North Central (IL, IN, MI, OH, WI).............. 1.4618
5. East South Central (AL, KY, MS, TN).................. 1.4281
6. West North Central (IA, KS, MN, MO, NE, ND, SD)...... 1.5355
7. West South Central (AR, LA, OK, TX).................. 1.5814
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)............ 1.6438
9. Pacific (AK, CA, HI, OR, WA)......................... 1.5605
------------------------------------------------------------------------

A hospital seeking to qualify as an RRC should obtain its hospital-
specific CMI value (not transfer-adjusted) from its fiscal intermediary
or MAC. Data are available on the Provider Statistical and
Reimbursement (PS&R) System. In keeping with our policy on discharges,
the CMI values are computed based on all Medicare patient discharges
subject to the IPPS MS-DRG-based payment.
2. Discharges
Section 412.96(c)(2)(i) provides that CMS set forth the national
and regional numbers of discharges in each year's annual notice of
prospective payment rates for purposes of determining RRC status. As
specified in section 1886(d)(5)(C)(ii) of the Act, the national
standard is set at 5,000 discharges. We would normally propose to
update the regional standards based on discharges for urban hospitals'
cost reporting periods that began during FY 2011 (that is, October 1,
2010 through September 30, 2011), which would normally be the latest
cost report data available at the time of the development of the
proposed rule. However, in the FY 2014 IPPS/LTCH PPS proposed rule (78
FR 27574), due to a transition in our data system, in lieu of a full
year of FY 2011 cost report data, we proposed to use a combination of
FY 2010 and FY 2011 cost report data in order to create a full fiscal
year of cost report data for this

[[Page 50610]]

analysis. Due to CMS' transition to a new cost reporting form effective
for cost reporting periods beginning on or after May 1, 2010, some FY
2011 cost reports were not yet in our system for analysis at the time
of the development of the proposed rule. Therefore, in order to have a
complete fiscal year of cost report data, we utilized FY 2011 cost
report data if available, and for those providers whose FY 2011 cost
report data were not yet in our system, we utilized their FY 2010 cost
report data. This is similar to the process we used to establish the
median number of discharges for urban hospitals in the census region
for FY 2013, where we utilized FY 2009 and 2010 cost report data (77 FR
53406).
At the time of the development of this final rule, a full year of
FY 2011 cost report data became available in our system for analysis.
Therefore, the final FY 2014 discharges criteria is based on only FY
2011 cost reports, that is, data from cost reporting periods that began
in FY 2011.
In the FY 2014 PPS/LTCH PPS proposed rule, we proposed that, in
addition to meeting other criteria, a hospital, if it is to qualify for
initial RRC status for cost reporting periods beginning on or after
October 1, 2013, must have, as the number of discharges for its cost
reporting period that began during FY 2011 (based on a combination of
FY 2010 and FY 2011 cost report data as explained in the preceding
paragraph), at least--
5,000 (3,000 for an osteopathic hospital); or
The median number of discharges for urban hospitals in the
census region in which the hospital is located. (We refer readers to
the table set forth in the FY 2014 IPPS/LTCH PPS proposed rule at 78 FR
27574.)
Based on the latest discharge data available at this time (that is,
based on FY 2011 cost report data as explained earlier in this
section), the final median number of discharges for urban hospitals by
census region are set forth in the following table:

------------------------------------------------------------------------
Number of
Region discharges
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT)................. 7,830
2. Middle Atlantic (PA, NJ, NY)......................... 10,968
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV).. 11,535
4. East North Central (IL, IN, MI, OH, WI).............. 8,507
5. East South Central (AL, KY, MS, TN).................. 7,397
6. West North Central (IA, KS, MN, MO, NE, ND, SD)...... 7,792
7. West South Central (AR, LA, OK, TX).................. 5,374
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)............ 9,024
9. Pacific (AK, CA, HI, OR, WA)......................... 8.857
------------------------------------------------------------------------

We note that the median number of discharges for hospitals in each
census region is greater than the national standard of 5,000
discharges. Therefore, 5,000 discharges is the minimum criterion for
all hospitals under this final rule.
We reiterate that, if an osteopathic hospital is to qualify for RRC
status for cost reporting periods beginning on or after October 1,
2013, the hospital would be required to have at least 3,000 discharges
for its cost reporting period that began during FY 2011 (based on FY
2011 cost report data as explained earlier in this section).

C. Payment Adjustment for Low-Volume Hospitals (Sec. 412.101)

1. Background
Section 1886(d)(12) of the Act provides for an additional payment
to each qualifying low-volume hospital under the IPPS beginning in FY
2005. Section 1886(d)(12) of the Act sets forth the qualifying criteria
for a qualifying low-volume hospital and the methodology for
determining the low-volume hospital payment adjustment.
Sections 3125 and 10314 of the Affordable Care Act provided for a
temporary change in the low-volume hospital payment policy for FYs 2011
and 2012 by expanding the definition of a low-volume hospital and
modifying the methodology for determining the payment adjustment for
hospitals meeting the definition. Therefore, prior to the enactment of
the American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112-240) on
January 2, 2013, beginning with FY 2013, the low-volume hospital
qualifying criteria and payment adjustment requirements would have
reverted to the statutory requirements under section 1886(d)(12) of the
Act that were in effect prior to FY 2011. Section 605 of the ATRA
extended for an additional year, through FY 2013, the temporary changes
in the low-volume hospital definition and methodology for determining
the payment adjustment made by the Affordable Care Act for FYs 2011 and
2012. Beginning with FY 2014, the low-volume hospital qualifying
criteria and payment adjustment will revert to the statutory
requirements that were in effect prior to the amendments made by the
Affordable Care Act and the ATRA. In section V.D.3. of this preamble,
we discuss the low-volume hospital payment adjustment policies for FY
2014.
a. Original Implementation of the Low-Volume Hospital Payment
Adjustment
Section 1886(d)(12) of the Act, as added by section 406(a) of
Public Law 108-173, provides for a payment adjustment to account for
the higher costs per discharge for low-volume hospitals under the IPPS,
effective beginning FY 2005. The additional payment adjustment to a
low-volume hospital provided for under section 1886(d)(12) of the Act
is ``[i]n addition to any payment calculated under this section.''
Therefore, the additional payment adjustment is based on the per
discharge amount paid to the qualifying hospital under section 1886 of
the Act. In other words, the low-volume hospital payment adjustment is
based on total per discharge payments made under section 1886 of the
Act, including capital, DSH, IME, and outlier payments. For SCHs and
MDHs, the low-volume hospital payment adjustment is based in part on
either the Federal rate or the hospital-specific rate, whichever
results in a greater operating IPPS payment.
Section 1886(d)(12)(C)(i) of the Act defined a low-volume hospital
as ``a subsection (d) hospital (as defined in paragraph (1)(B)) that
the Secretary determines is located more than 25 road miles from
another subsection (d) hospital and has less than 800 discharges during
the fiscal year.'' Section 1886(d)(12)(C)(ii) of the Act further
stipulates that the term ``discharge'' means ``an inpatient acute care
discharge of an individual regardless of whether the individual is
entitled to benefits under Part A.'' Therefore, the term ``discharge''
refers to total discharges, regardless of payer (that is, not only
Medicare discharges). Furthermore, under section 406(a) of Public Law
108-173, which initially added subparagraph (12) to section 1886(d) of
the Act, the provision requires the Secretary to determine an
applicable percentage increase for these low-volume hospitals based on
the ``empirical relationship'' between ``the standardized cost-per-case
for such hospitals and the total number of discharges of such hospitals
and the amount of the additional incremental costs (if any) that are
associated with such number of discharges.'' The statute thus mandates
that the Secretary develop an empirically justifiable

[[Page 50611]]

adjustment based on the relationship between costs and discharges for
these low-volume hospitals. Section 1886(d)(12)(B)(iii) of the Act
limits the applicable percentage increase adjustment to no more than 25
percent.
Based on an analysis we conducted for the FY 2005 IPPS final rule
(69 FR 49099 through 49102), a 25-percent low-volume hospital payment
adjustment to all qualifying hospitals with less than 200 discharges
was found to be most consistent with the statutory requirement to
provide relief to low-volume hospitals where there is empirical
evidence that higher incremental costs are associated with low numbers
of total discharges. In the FY 2006 IPPS final rule (70 FR 47432
through 47434), we stated that multivariate analyses supported the
existing low-volume hospital payment adjustment implemented in FY 2005.
Therefore, the low-volume hospital payment adjustment of an additional
25 percent continued to be provided for qualifying hospitals with less
than 200 discharges.
b. Affordable Care Act Provisions for FYs 2011 and 2012
For FYs 2011 and 2012, sections 3125 and 10314 of the Affordable
Care Act expanded the definition of low-volume hospital and modified
the methodology for determining the payment adjustment for hospitals
meeting that definition. Specifically, those provisions of the
Affordable Care Act amended the qualifying criteria for low-volume
hospitals under section 1886(d)(12)(C)(i) of the Act to specify that,
for FYs 2011 and 2012, a subsection (d) hospital qualifies as a low-
volume hospital if it is more than 15 road miles from another
subsection (d) hospital and has less than 1,600 discharges of
individuals entitled to, or enrolled for, benefits under Part A during
the fiscal year. In addition, section 1886(d)(12)(D) of the Act, as
added by the Affordable Care Act, provides that the low-volume hospital
payment adjustment (that is, the percentage increase) is to be
determined ``using a continuous linear sliding scale ranging from 25
percent for low-volume hospitals with 200 or fewer discharges of
individuals entitled to, or enrolled for, benefits under Part A in the
fiscal year to zero percent for low-volume hospitals with greater than
1,600 discharges of such individuals in the fiscal year.''
In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50238 through 50275
and 50414), we revised the regulations at 42 CFR 412.101 to reflect the
changes to the qualifying criteria and the payment adjustment for low-
volume hospitals made by sections 3125 and 10314 of the Affordable Care
Act. In addition, we defined, at Sec. 412.101(a), the term ``road
miles''' to mean ``miles'' as defined at Sec. 412.92(c)(1), and
clarified the existing regulations to indicate that a hospital must
continue to qualify as a low-volume hospital in order to receive the
payment adjustment in that year (that is, it is not based on a one-time
qualification). Furthermore, in that same final rule, we discussed the
process for requesting and obtaining the low-volume hospital payment
adjustment for FY 2011 (75 FR 50240). For the second year of the
changes to the low-volume hospital payment adjustment provided for by
section 3125 and 10314 of the Affordable Care Act (that is, FY 2012),
consistent with the regulations at Sec. 412.101(b)(2)(ii), in the FY
2012 IPPS/LTCH PPS final rule (76 FR 51677 through 51680), we updated
the discharge data source used to identify qualifying low-volume
hospitals and calculate the payment adjustment (percentage increase).
Under Sec. 412.101(b)(2)(ii), for FYs 2011 and 2012, a hospital's
Medicare discharges from the most recently available MedPAR data, as
determined by CMS, are used to determine if the hospital meets the
discharge criteria to receive the low-volume hospital payment
adjustment in the current year. In that same final rule, we established
that, for FY 2012, qualifying low-volume hospitals and their payment
adjustment are determined using Medicare discharge data from the March
2011 update of the FY 2010 MedPAR file, as these data were the most
recent data available at that time. In addition, we noted that
eligibility for the low-volume hospital payment adjustment for FY 2012
was also dependent upon meeting (if the hospital was qualifying for the
low-volume hospital payment adjustment for the first time in FY 2012),
or continuing to meet (if the hospital qualified in FY 2011), the
mileage criterion specified at Sec. 412.101(b)(2)(ii). Furthermore, we
established a procedure for a hospital to request low-volume hospital
status for FY 2012 (which was consistent with the process we employed
for the low-volume hospital payment adjustment for FY 2011).
2. Provisions of the ATRA for FY 2013
a. Background
Section 605 of the ATRA amended sections 1886(d)(12)(B), (C)(i),
and (D) of the Act to extend, for FY 2013, the temporary changes in the
low-volume hospital payment adjustment policy provided for in FYs 2011
and 2012 by the Affordable Care Act. As we have noted previously, prior
to the enactment of section 605 of the ATRA, beginning with FY 2013,
the low-volume hospital definition and payment adjustment methodology
would have reverted to the policy established under statutory
requirements that were in effect prior to the amendments made by the
Affordable Care Act.
Prior to the enactment of the ATRA, in the FY 2013 IPPS/LTCH PPS
final rule (77 FR 53406 through 53409), we discussed the low-volume
hospital payment adjustment for FY 2013 and subsequent fiscal years.
Specifically, we discussed that, in accordance with section 1886(d)(12)
of the Act, beginning with FY 2013, the low-volume hospital definition
and payment adjustment methodology would revert back to the statutory
requirements that were in effect prior to the amendments made by the
Affordable Care Act. Therefore, we explained, as specified under the
existing regulations at Sec. 412.101, effective for FY 2013 and
subsequent years, that in order to qualify as a low-volume hospital, a
subsection (d) hospital must be more than 25 road miles from another
subsection (d) hospital and have less than 200 discharges (that is,
less than 200 total discharges, including both Medicare and non-
Medicare discharges) during the fiscal year. We also established a
procedure for hospitals to request low-volume hospital status for FY
2013 (which was consistent with our previously established procedures
for FYs 2011 and 2012).
In a Federal Register notice published on March 7, 2013 (78 FR
14689) (hereinafter referred to as the FY 2013 IPPS notice), we
announced the extension of the Affordable Care Act amendments to the
low-volume hospital payment adjustment requirements under section
1886(d)(12) of the Act for FY 2013 pursuant to section 605 of the ATRA.
The applicable low-volume hospital percentage increase provided for by
the provisions of the Affordable Care Act and the ATRA is determined
using a continuous linear sliding scale equation that results in a low-
volume hospital payment adjustment ranging from an additional 25
percent for hospitals with 200 or fewer Medicare discharges to a zero
percent additional payment adjustment for hospitals with 1,600 or more
Medicare discharges.
In the FY 2013 IPPS notice (78 FR 14689 through 14694), to
implement the extension of the temporary change in the low-volume
hospital payment adjustment policy for FY 2013 provided for by the
ATRA, we updated the discharge data source used to identify

[[Page 50612]]

qualifying low-volume hospitals and calculate the payment adjustment
(percentage increase). Consistent with our implementation of the low-
volume hospital payment adjustment policy for FYs 2011 and 2012 as set
forth at existing Sec. 412.101(b)(2)(ii), we established that, for FY
2013, qualifying low-volume hospitals and their payment adjustments are
determined using Medicare discharge data from the March 2012 update of
the FY 2011 MedPAR file, as these data were the most recent data
available at the time of the development of the FY 2013 payment rates
and factors established in the FY 2013 IPPS/LTCH PPS final rule. In
addition, we noted that eligibility for the low-volume hospital payment
adjustment for FY 2013 is also dependent upon meeting (in the case of a
hospital that did not qualify for the low-volume hospital payment
adjustment in FY 2012), or continuing to meet (in the case of a
hospital that did qualify for the low-volume hospital payment
adjustment in FY 2012), the mileage criterion specified at existing
Sec. 412.101(b)(2)(ii). We also established a procedure for a hospital
to request low-volume hospital status for FY 2013 (which is consistent
with the process for the low-volume hospital payment adjustment for FYs
2011 and 2012). Furthermore, we noted our intent to make conforming
changes to the regulations text at Sec. 412.101 to reflect the changes
to the qualifying criteria and the payment adjustment for low-volume
hospitals in accordance with the amendments made by section 605 of the
ATRA in future rulemaking. (We refer readers to the FY 2013 IPPS notice
(78 FR 14689 through 14694) for additional information on the extension
of the Affordable Care Act amendments to the low-volume hospital
payment adjustment requirements under section 1886(d)(12) of the Act
through FY 2013 in accordance with section 605 of the ATRA.)
b. Conforming Regulatory Changes
In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50238 through 50275
and 50414), we amended the regulations at Sec. 412.101 to specify
that, beginning with FY 2013, the low-volume hospital definition and
payment adjustment methodology reverted to the policy established under
statutory requirements that were in effect prior to the amendments made
by the Affordable Care Act. In the FY 2014 IPPS/LTCH PPS proposed rule
(78 FR 27576), we proposed to make conforming changes to the existing
regulations text at Sec. 412.101 to reflect the extension of the
changes to the qualifying criteria and the payment adjustment
methodology for low-volume hospitals through FY 2013 in accordance with
section 605 of the ATRA, as announced in the FY 2013 IPPS notice (as
discussed above). Specifically, we proposed to revise paragraphs
(b)(2)(i), (b)(2)(ii), (c)(1), (c)(2), and (d). Under these proposed
changes to Sec. 412.101, beginning with FY 2014, consistent with
section 1886(d)(12) of the Act, as amended, the low-volume hospital
qualifying criteria and payment adjustment methodology would revert to
that which was in effect prior to the amendments made by the Affordable
Care Act and the ATRA (that is, the low-volume hospital payment
adjustment policy in effect for FYs 2005 through 2010).
We did not receive any public comments on the proposed conforming
changes to the existing regulations text at Sec. 412.101 to reflect
the extension of the changes to the qualifying criteria and the payment
adjustment methodology for low-volume hospitals through FY 2013 in
accordance with section 605 of the ATRA. Therefore, in this final rule,
we are adopting as final the proposed revisions to paragraphs
(b)(2)(i), (b)(2)(ii), (c)(1), (c)(2), and (d) of Sec. 412.101 without
modification.
3. Low-Volume Hospital Definition and Payment Adjustment for FY 2014
and Subsequent Fiscal Years
In accordance with section 1886(d)(12) of the Act, as amended,
beginning with FY 2014, the low-volume hospital definition and payment
adjustment methodology will revert back to the statutory requirements
that were in effect prior to the amendments made by the Affordable Care
Act and the ATRA. Therefore, as discussed in the FY 2014 IPPS/LTCH PPS
proposed rule (78 FR 27576 through 27577), consistent with section
1886(d)(12) of the Act, as amended, under the proposed conforming
changes to Sec. 412.101(b)(2), effective for FY 2014 and subsequent
years, in order to qualify as a low-volume hospital, a subsection (d)
hospital must be more than 25 road miles from another subsection (d)
hospital and have less than 200 discharges (that is, less than 200
discharges total, including both Medicare and non-Medicare discharges)
during the fiscal year. Under our existing policy, effective for FY
2014 and subsequent years, qualifying hospitals would receive the low-
volume hospital payment adjustment of an additional 25 percent for
discharges occurring during the fiscal year.
Comment: A few commenters expressed concern about the financial
impact of the expiration of the temporary expansion of the low-volume
hospital payment adjustment provided for by the provisions of
Affordable Care Act and the ATRA, which were similar to the comments we
received on the FY 2013 IPPS/LTCH PPS proposed rule, prior to the 1-
year expansion of the low-volume hospital payment adjustment for FY
2013 provided for by the ATRA. Some commenters supported legislative
action that would continue the temporary expansion of the low-volume
hospital payment adjustment. Other commenters requested that CMS use
the existing statutory authority to make the low-volume adjustment to
qualifying hospitals that have less than 800 total discharges rather
than only to qualifying hospitals that have less than 200 total
discharges. The commenters did not provide any data analysis in support
of their comments to expand the low-volume hospital adjustment to
qualifying hospitals that have less than 800 total discharges.
Response: As noted previously in section V.I.C.a. of the preamble
of this final rule and as discussed in response to public comments in
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53408 through 53409), to
implement the original low-volume hospital payment adjustment
provision, and as mandated by statute, we developed an empirically
justified adjustment based on the relationship between costs and total
discharges of hospitals with less than 800 total (Medicare and non-
Medicare) discharges. Specifically, we performed several regression
analyses to evaluate the relationship between hospitals' costs per case
and discharges, and found that an adjustment for hospitals with less
than 200 total discharges is most consistent with the statutory
requirement to provide for additional payments to low-volume hospitals
where there is empirical evidence that higher incremental costs are
associated with lower numbers of discharges (69 FR 49101 through
49102). Based on these analyses, we established a low-volume hospital
policy where qualifying hospitals with less than 200 total discharges
receive a payment adjustment of an additional 25 percent. (Section
1886(d)(12)(B)(iii) of the Act limits the applicable percentage
increase adjustment to no more than 25 percent.) In the future, we may
reevaluate the low-volume hospital adjustment policy; that is, the
definition of a low-volume hospital and the payment adjustment.
However, because we are not aware of any analysis or empirical evidence
that would support expanding the originally established a low-volume
hospital adjustment policy

[[Page 50613]]

and we did not make any proposals regarding the low-volume hospital
payment adjustment for FY 2014, we are not making any changes to the
low-volume hospital payment adjustment policy in this final rule. Thus,
the low-volume hospital definition and payment adjustment methodology
will revert back to the policy established under statutory requirements
that were in effect prior to the amendments made by the Affordable Care
Act and the ATRA.
As described above, for FYs 2005 through 2010 and FY 2014 and
subsequent fiscal years, the discharge determination will be made based
on the hospital's number of total discharges, that is, Medicare and
non-Medicare discharges. The hospital's most recently submitted cost
report is used to determine if the hospital meets the discharge
criterion to receive the low-volume hospital payment adjustment in the
current year (Sec. 412.101(b)(2)(i)). We use cost report data to
determine if a hospital meets the discharge criterion because this is
the best available data source that includes information on both
Medicare and non-Medicare discharges. As we noted in the proposed rule,
for FYs 2011, 2012, and 2013, we used the most recently available
MedPAR data to determine the hospital's Medicare discharges because
only Medicare discharges were used to determine if a hospital met the
discharge criterion for those years. In addition to a discharge
criterion, the eligibility for the low-volume hospital payment
adjustment also will be dependent upon the hospital meeting the mileage
criterion specified at Sec. 412.101(b)(2)(i). Specifically, to meet
the mileage criterion to qualify for the low-volume hospital payment
adjustment for FY 2014 and subsequent fiscal years, a hospital must be
located more than 25 road miles from the nearest subsection (d)
hospital.
For FY 2014, as we stated in the proposed rule, we will continue to
use the established process for requesting and obtaining the low-volume
hospital payment adjustment. That is, in order to receive a low-volume
hospital payment adjustment under Sec. 412.101, a hospital must notify
and provide documentation to its fiscal intermediary or MAC that it
meets the discharge and distance requirements. The fiscal intermediary
or MAC will determine, based on the most recent data available, if the
hospital qualifies as a low-volume hospital, so that the hospital will
know in advance whether or not it will receive a payment adjustment.
The fiscal intermediary or MAC and CMS may review available data, in
addition to the data the hospital submits with its request for low-
volume hospital status, in order to determine whether or not the
hospital meets the qualifying criteria. (For additional details on our
established process for the low-volume hospital payment adjustment, we
refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53408).)
Consistent with our previously established procedure, for FY 2014,
a hospital must make its request for low-volume hospital status in
writing to its fiscal intermediary or MAC by September 1, 2013, in
order for the 25-percent low-volume hospital payment adjustment to be
applied to payments for its discharges beginning on or after October 1,
2013 (through September 30, 2014). If a hospital's request for low-
volume hospital status for FY 2014 is received after September 1, 2013,
and if the fiscal intermediary or MAC determines the hospital meets the
criteria to qualify as a low-volume hospital, the fiscal intermediary
or MAC will apply the 25-percent low-volume hospital payment adjustment
to determine the payment for the hospital's FY 2014 discharges,
effective prospectively within 30 days of the date of the fiscal
intermediary's or MAC's low-volume hospital status determination.
As we discussed previously in section V.C.2.b. of the preamble of
this final rule, we are adopting as final our proposed conforming
changes to the regulatory text at Sec. 412.101 to reflect the
extension of the changes to the qualifying criteria and the payment
adjustment methodology for low-volume hospitals through FY 2013 made by
section 605 of the ATRA (78 FR 27576). Specifically, we are revising
Sec. 412.101 to conform the regulations to the statutory requirements
that, beginning with FY 2014, the low-volume hospital qualifying
criteria and payment adjustment methodology revert to that which was in
effect prior to the amendments made by the Affordable Care Act and the
ATRA (that is, the low-volume hospital payment adjustment policy in
effect for FYs 2005 through 2010). Under this revision, the low-volume
hospital payment adjustment policy in effect prior for FYs 2005 through
2010 will apply for FY 2014 and subsequent years. Thus, as noted above,
the low-volume hospital definition and payment adjustment methodology
will revert back to the policy established under statutory requirements
that were in effect prior to the amendments made by the Affordable Care
Act and the ATRA.

D. Indirect Medical Education (IME) Payment Adjustment (Sec. 412.105)

1. IME Adjustment Factor for FY 2014
Under the IPPS, an additional payment amount is made to hospitals
with residents in an approved graduate medical education (GME) program
in order to reflect the higher indirect patient care costs of teaching
hospitals relative to nonteaching hospitals. The payment amount is
determined by use of a statutorily specified adjustment factor. The
regulations regarding the calculation of this additional payment, known
as the IME adjustment, are located at Sec. 412.105. We refer readers
to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51680) for a full
discussion of the IME adjustment and IME adjustment factor. Section
1886(d)(5)(B) of the Act states that, for discharges occurring during
FY 2008 and fiscal years thereafter, the IME formula multiplier is
1.35. Accordingly, for discharges occurring during FY 2014, the formula
multiplier is 1.35. We estimate that application of this formula
multiplier for the FY 2014 IME adjustment will result in an increase in
IPPS payment of 5.5 percent for every approximately 10 percent increase
in the hospital's resident to bed ratio.
Comment: Two commenters supported the continuation of the IME
adjustment factor. Both commenters stated that IME payments are vital
to guaranteeing a strong surgery workforce in which there is currently
a growing shortage. One commenter noted that this shortage is
especially prevalent within the cardiothoracic surgery workforce.
Response: We appreciate the commenters' support. We note that the
IME formula multiplier is set by Congress. We are specifying in this
final rule that the IME formula multiplier for FY 2014 is set at 1.35,
which we estimate will result in an increase in IPPS payments of 5.5
percent for every approximately 10-percent increase in the hospital's
resident-to-bed ratio.
2. Other Policy Changes Affecting GME
In section V.J. of the preamble of this final rule, we present
other proposed and final policy changes relating to GME payment. We
refer readers to that section of the preamble of this final rule where
we present the proposed and final policies.

E. Payment Adjustment for Medicare Disproportionate Share Hospitals
(DSHs) (Sec. 412.106)

1. Background
Section 1886(d)(5)(F) of the Act provides for additional Medicare

[[Page 50614]]

payments to subsection (d) hospitals that serve a significantly
disproportionate number of low-income patients. The Act specifies two
methods by which a hospital may qualify for the Medicare
disproportionate share hospital (DSH) adjustment. Under the first
method, hospitals that are located in an urban area and have 100 or
more beds may receive a Medicare DSH payment adjustment if the hospital
can demonstrate that, during its cost reporting period, more than 30
percent of its net inpatient care revenues are derived from State and
local government payments for care furnished to needy patients with low
incomes. This method is commonly referred to as the ``Pickle method.''
The second method for qualifying for the DSH payment adjustment, which
is the most common, is based on a complex statutory formula under which
the DSH payment adjustment is based on the hospital's geographic
designation, the number of beds in the hospital, and the level of the
hospital's disproportionate patient percentage (DPP). A hospital's DPP
is the sum of two fractions: the ``Medicare fraction'' and the
``Medicaid fraction.'' The Medicare fraction (also known as the ``SSI
fraction'' or ``SSI ratio'') is computed by dividing the number of the
hospital's inpatient days that are furnished to patients who were
entitled to both Medicare Part A and Supplemental Security Income (SSI)
benefits by the hospital's total number of patient days furnished to
patients entitled to benefits under Medicare Part A. The Medicaid
fraction is computed by dividing the hospital's number of inpatient
days furnished to patients who, for such days, were eligible for
Medicaid, but were not entitled to benefits under Medicare Part A, by
the hospital's total number of inpatient days in the same period.
Because the DSH payment adjustment is part of the IPPS, the DSH
statutory references (under section 1886(d)(5)(F) of the Act) to
``days'' apply only to hospital acute care inpatient days. Regulations
located at Sec. 412.106 govern the Medicare DSH payment adjustment and
specify how the DPP is calculated as well as how beds and patient days
are counted in determining the Medicare DSH payment adjustment. Under
Sec. 412.106(a)(1)(i), the number of beds for the Medicare DSH payment
adjustment is determined in accordance with bed counting rules for the
IME adjustment under Sec. 412.105(b).
2. Counting of Patient Days Associated With Patients Enrolled in
Medicare Advantage Plans in the Medicare and Medicaid Fractions of the
Disproportionate Patient Percentage (DPP) Calculation
The regulation at 42 CFR 422.2 defines Medicare Advantage (MA) plan
to mean ``health benefits coverage offered under a policy or contract
by an MA organization that includes a specific set of health benefits
offered at a uniform premium and uniform level of cost-sharing to all
Medicare beneficiaries residing in the service area of the MA plan. . .
.'' Generally, each MA plan must at least provide coverage of all
services that are covered by Medicare Part A and Part B, but also may
provide for Medicare Part D benefits and/or additional supplemental
benefits. However, certain items and services, such as hospice
benefits, continue to be covered under Medicare fee-for-service (FFS).
Under Sec. 422.50 of the regulations, an individual is eligible to
elect an MA plan if he or she is entitled to Medicare Part A and
enrolled in Medicare Part B. Dual eligible beneficiaries (individuals
entitled to Medicare and eligible for Medicaid) also may choose to
enroll in a MA plan, and, as an additional supplemental benefit, the MA
plan may pay for Medicare cost-sharing not covered by Medicaid.
In the FY 2004 IPPS proposed rule (68 FR 27208), in response to
questions about whether the patient days associated with patients
enrolled in an MA plan (then called a Medicare + Choice (M+C) plan)
should be counted in the Medicare fraction or the Medicaid fraction of
the disproportionate patient percentage (DPP) calculation, we proposed
that once a beneficiary enrolls in an MA plan, those patient days
attributable to the beneficiary would not be included in the Medicare
fraction of the DPP. Instead, those patient days would be included in
the numerator of the Medicaid fraction, if the patient also were
eligible for Medicaid. In the FY 2004 IPPS final rule (68 FR 45422), we
did not respond to public comments on this proposal, due to the volume
and nature of the public comments we received, and we indicated that we
would address those comments later in a separate document. In the FY
2005 IPPS proposed rule (69 FR 28286), we stated that we planned to
address the FY 2004 comments regarding MA days in the IPPS final rule
for FY 2005. In the FY 2005 IPPS final rule (69 FR 49099), we
determined that, under Sec. 412.106(b)(2)(i) of the regulations, MA
patient days should be counted in the Medicare fraction of the DPP
calculation. We explained that, even where Medicare beneficiaries elect
Medicare Part C coverage, they are still entitled to benefits under
Medicare Part A. Therefore, we noted that if a MA beneficiary is also
an SSI recipient, the patient days for that beneficiary will be
included in the numerator of the Medicare fraction (as well as in the
denominator) and not in the numerator of the Medicaid fraction. We note
that, despite our explicit statement in the final rule that the
regulations also would be revised, due to a clerical error, the
corresponding regulation at Sec. 412.106(b)(2)(i) was not amended to
explicitly reflect this policy until 2007 (72 FR 47384).
On November 15, 2012, in a ruling in the case of Allina Health
Services v. Sebelius (Allina), the Federal District Court for the
District of Columbia (the court) held that the final policy of putting
MA patient days in the Medicare fraction adopted in the FY 2005 IPPS
final rule was not a logical outgrowth of the FY 2004 IPPS proposed
rule (904 F. Supp. 2d 75 (D.D.C. 2012), appeal docketed, No. 13-5011
(D.C. Cir. Jan. 11, 2013). The court held that interested parties had
not been put on notice that the Secretary might adopt a final policy of
counting the days in the Medicare fraction and were not provided an
adequate further opportunity for public comment.
We continue to believe that individuals enrolled in MA plans are
``entitled to benefits under part A'' as the phrase is used in the DSH
provisions at section 1886(d)(5)(F)(vi)(I) of the Act. Section 226(a)
of the Act provides that an individual is automatically ``entitled'' to
Medicare Part A when the person reaches age 65 or becomes disabled,
provided that the individual is entitled to Social Security benefits
under section 202 of the Act. Beneficiaries who are enrolled in MA
plans provided under Medicare Part C continue to meet all of the
statutory criteria for entitlement to Medicare Part A benefits under
section 226 of the Act. Moreover, in order to enroll in Medicare Part
C, or to change from one MA plan to another MA plan offered under Part
C, a beneficiary must be ``entitled to benefits under Part A and
enrolled under Part B'' (section 1852(a)(1)(B)(i) of the Act). Thus, by
definition, a beneficiary must be entitled to Part A to be enrolled in
Part C. There is nothing in the Act that suggests that beneficiaries
who enroll in a Medicare Part C plan forfeit their entitlement to
Medicare Part A benefits. To the contrary, a beneficiary who enrolls in
Medicare Part C is entitled to receive benefits under Medicare Part A
through

[[Page 50615]]

the MA plan in which he or she is enrolled, and the MA organization's
costs in providing such Part A benefits are paid for by CMS with money
from the Medicare Part A Trust Fund. In addition, under certain
circumstances, Medicare Part A pays directly for care furnished to
patients enrolled in Medicare Part C plans, rather than indirectly
through Medicare Part A Trust Fund payments to MA organizations. For
example, if, during the course of the year, the scope of benefits
provided under Medicare Part A expands beyond a certain cost threshold
due to Congressional action or a national coverage determination,
Medicare Part A will pay the provider directly for the cost of those
services (section 1852(a)(5) of the Act). Similarly, Medicare Part A
also pays directly for federally qualified health center services and
hospice care furnished to MA patients (section 1853(a)(4) and section
1853(h)(2) of the Act, respectively). Thus, we continue to believe that
a patient enrolled in an MA plan remains entitled to benefits under
Medicare Part A, and should be counted in the Medicare fraction of the
DPP, and not the Medicaid fraction.
We also believe that our policy of counting patients enrolled in MA
plans in the Medicare fraction was a logical outgrowth of the FY 2004
IPPS proposed rule, and, accordingly, have appealed the decision in
Allina. However, in an abundance of caution and for the reasons
discussed above, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR
27578), we proposed to readopt the policy of counting the days of
patients enrolled in MA plans in the Medicare fraction of the DPP. We
sought public comments from interested parties that may support or
oppose the proposal to include the MA patient days in the Medicare
fraction of the DPP calculation for FY 2014 and subsequent years. We
indicated in the proposed rule that we would evaluate these public
comments and consider whether a further change in policy is warranted,
and would include our final determination in the FY 2014 IPPS/LTCH PPS
final rule. We did not propose any change to the regulation text
because the current text reflects the policy being proposed.
Comment: A few commenters supported CMS' proposal to readopt the
policy of including MA patient days in the numerator and denominator of
the Medicare fraction of the DPP calculation. One commenter
recommended, for consistency purposes, that MA days continue to be
included in the Medicare fraction. Another commenter stated that the
proposal makes logical sense because these patients remain entitled to,
and receive, Medicare Part A benefits, and have simply chosen to
receive them through an MA plan offered under Medicare Part C. The
commenter also opined that the effect on the Medicare fraction would
likely be minimal because the commenter believed that the majority of
patients who enroll in Medicare Part C would not be likely to meet the
income eligibility requirement for SSI benefits. Other commenters
supported CMS' proposal to readopt the policy, stating that CMS will
have provided all interested parties with adequate time and information
to meaningfully participate in the rulemaking process.
Response: We appreciate the commenters' support. We agree with
commenters that a patient enrolled in a MA plan remains entitled to
benefits under Part A and should be included in the Medicare fraction
of the DPP and not the Medicaid fraction. We also agree with commenters
that we have provided adequate notice and opportunity for the public to
comment on our proposal to readopt our policy of counting the days of
patients enrolled in MA plans in the Medicare fraction for FY 2014 and
subsequent years. Furthermore, as discussed in more detail below, we
continue to believe that we also provided adequate notice and
opportunity for review and comment prior to the original adoption of
the policy in the FY 2005 IPPS rule; and, therefore, we have appealed
the court's decision in Allina which concluded that we did not. In
addition, with regard to the commenter's assertion that the majority of
patients who enroll in Medicare Part C would not be likely to meet the
income eligibility requirement for SSI benefits, we disagree and note
that research, such as the findings from the Medicare Current
Beneficiary Survey as listed in the table below, has shown that Part C
enrollees tend to have lower incomes at similar rates as Medicare
beneficiaries who are not enrolled in Part C.

Percentage of Medicare Beneficiaries by Income Level, Fee for Service and Risk
HMO: 2009-2011 \12\
--------------------------------------------------------------------------------------------------------------------------------------------------------
2011 Fee- 2010 Fee- 2009 Fee-
Beneficiaries (%) 2011 for- 2011 Risk 2010 for- 2010 Risk 2009 for- 2009 Risk
Total service HMO Total service HMO Total service HMO
--------------------------------------------------------------------------------------------------------------------------------------------------------
Less than $5,000..................................... 3.47 3.69 2.84 4.17 4.29 3.82 3.86 4.07 3.19
$5,000-$9,999........................................ 10.92 11.03 10.61 10.94 11.00 10.78 11.75 12.01 10.92
$10,000-$14,999...................................... 13.76 13.50 14.50 13.94 13.63 14.86 14.00 13.35 16.03
$15,000-$19,999...................................... 9.51 8.48 12.34 10.13 9.01 13.46 9.97 9.20 12.38
$20,000-$24,999...................................... 9.17 8.52 10.97 8.67 8.15 10.21 9.00 8.33 11.11
$25,000-$29,999...................................... 7.88 7.65 8.53 8.02 7.85 8.53 8.80 8.40 10.03
$30,000-$39,999...................................... 13.18 12.88 14.00 13.44 13.17 14.23 13.30 13.19 13.63
$40,000-$49,999...................................... 9.92 9.96 9.82 9.83 10.21 8.70 9.65 10.02 8.49
$50,000 or more...................................... 22.18 24.28 16.39 20.87 22.71 15.41 19.67 21.43 14.21
--------------------------------------------------------------------------------------------------------------------------------------------------------
\12\ Sources: Medicare Current Beneficiary Survey. 2011 Characteristics and Perceptions of the Medicare Population. 2010 Characteristics and Perceptions
of the Medicare Population. 2009 Characteristics and Perceptions of the Medicare Population. Available at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Research/MCBS/Data-Tables.html.
Note: As described in the sources, income estimates are derived from imputed income data. Standard errors of income estimates may be underestimated as
they have not been adjusted to reflect the imputation of missing data.

Comment: A few commenters stated that the policy proposal promotes
the integrity of the 340B program. The commenters stated that the size
of the 340B program has far exceeded Congress' intent to help safety-
net providers cover the costs of uncompensated pharmaceutical care; and
including MA patient days in the Medicare fraction helps to ensure that
a hospital's DPP is not artificially inflated, thereby helping to curb
some of the recent abuse and promote the program's original goals. In
addition, the commenters stated that, given that section 3133 of the
Affordable Care Act reduces aggregate DSH funding beginning in FY 2014,
providing oversight of the 340B program will be critical. The
commenters stated that, with less DSH funds available, ensuring

[[Page 50616]]

that entities with inflated DPPs do not divert funds from truly DSH
eligible providers is critical to maintain that the support is provided
where it will be the most beneficial, as intended by Congress. In
addition, one commenter stated that CMS has an opportunity to provide
protection for DPP values for hospitals located in States where
Medicaid was not expanded under the intent of the Affordable Care Act.
The commenter recommended that CMS issue rules that grandfather current
providers who qualify for 340B prescription drug discounting until
further impacts of the Affordable Care Act can be reviewed and a new
standard be determined for hospitals located in States that are not
expanding the Medicaid program to levels prescribed under the
Affordable Care Act.
Response: Although we appreciate receiving the commenters' views on
the 340B program, we note that this program is administered by HRSA and
is not within the scope of this rulemaking. Additionally, we note that
we believe the commenter that made the recommendation about issuing
rules that would grandfather current providers who qualify for 340B
prescription drug discounting until further impacts of the Affordable
Care Act can be assessed for hospitals located in States that are not
expanding the Medicaid program, may be confused about how the statute,
specifically the Affordable Care Act, ``protects'' DPP values.
Comment: Many commenters opposed CMS' proposal and urged CMS to
exclude MA patient days from the Medicare fraction of the DPP
calculation. These commenters disagreed that individuals enrolled in
Medicare Advantage are ``entitled'' to benefits under Part A, and
asserted that the policy proposal is not dictated by the statute and is
inconsistent with their view of the intent of Congress. The commenters
argued that, in examining the statute and CMS' regulations, it is clear
to them that MA enrollees are not entitled to benefits under Part A
and, therefore, should be excluded from the Medicare fraction. These
commenters cited three provisions of the statute in support of this
argument:
Section 226(c)(1) of the Act, which states ``entitlement
of an individual to hospital insurance benefits for a month [under Part
A] shall consist of entitlement to have payment made under, and subject
to the limitations in, [P]art A . . . .''
Section 1851(a)(1) of the Act, which states that the
persons eligible for Medicare Advantage are ``entitled to elect to
receive benefits'' either ``through the original [M]edicare fee-for-
service program under [P]arts A and B, or through enrollment in a
[Medicare Advantage] plan under [Part C].''
Section 1851(i)(1) of the Act, which states that
``payments under a contract with a [Medicare Advantage] organization .
. . with respect to an individual electing a [Medicare Advantage] plan
. . . shall be instead of the amounts which (in the absence of the
contract) would otherwise be payable under [P]arts A and B . . . .''
The commenters contended that because individuals who enroll in an
MA plan receive benefits under Part C and not Part A, they cannot be
``entitled'' to benefits under Part A because, in the commenters' view,
they no longer receive benefits under Part A. They argued that
beneficiaries are not ``entitled'' to benefits that the commenters
believe the law denies them, and therefore, CMS' interpretation is
unreasonable.
Response: We disagree that Medicare beneficiaries enrolled in Part
C no longer receive benefits under Part A and that, because the payment
structure of Part C applies (that is, CMS pays the MA plans so that the
plans may make payment to hospitals for the care of the beneficiaries),
those beneficiaries are not entitled to Part A benefits. As we stated
above, section 226(A) of the Act provides that an individual is
automatically ``entitled'' to Medicare Part A when the person reaches
age 65 or becomes disabled, provided that the individual is entitled to
Social Security benefits under section 202 of the Act.
This interpretation is consistent with our conclusion that Congress
uses the phrase ``entitled to benefits under part A'' to consistently
refer to an individual's status as a Medicare beneficiary. We agree
with the United States Court of Appeals for the Sixth Circuit when it
recently explained, ``the phrase `entitled to benefits under [Medicare]
part A' appears in more than 30 other sections of the Medicare statute,
indicating that the phrase has a specific, consistent meaning
throughout the statutory scheme, rather than a varying, context-
specific meaning in each section and subsection. (We refer readers to
Ali v. Fed. Bureau of Prisons, 552 U.S. 214, 222 (2008) (noting that
statutory construction ``must, to the extent possible, ensure that the
statutory scheme is coherent and consistent'') and Metro. Hosp. v. U.S.
Dep't of Health & Human Servs., 712 F.3d 248, 260 (6th Cir. 2013)
(holding that including patients who have exhausted inpatient benefits
in the Medicare fraction is consistent with how ``entitled to benefits
under part A'' is used throughout the Medicare statute).) Enrolling in
Part C does not change an enrollee's status as a Medicare beneficiary
and does not remove or reduce any benefits the beneficiary would
otherwise have received; indeed, the MA plan must provide the benefits
to which the beneficiary is entitled under Part A and may provide
additional benefits as described by section 1852(a)(1)(A) of the Act.
We agree with the Court of Appeals for the District of Columbia Circuit
that ``Congress has not clearly foreclosed the Secretary's
interpretation that [Part C] enrollees are entitled to benefits under
Part A. Rather, it has left a statutory gap, and it is for the
Secretary . . . to fill that gap'' (Northeast Hosp. Corp. v. Sebelius;
657 F.3d 1, 13 (D.C. Cir. 2011)). We further note that the D.C. Circuit
has already rejected many of the commenters' view that the agency's
interpretation is inconsistent with the plain language of the statute
(Id. at 6-13).
Thus, for purposes of section 226(c)(1) of the Act, beneficiaries
enrolled in Part C are having payment made under Part A for the month
in question, via the Part A component of the monthly payment made to
the MA organization, and are receiving Part A benefits subject to the
limitations on such benefits provided for in Part A.
For purposes of section 1851(a)(1) of the Act, the ``benefits''
referenced in the phrase quoted by the commenters (``entitled to elect
to receive benefits'') are the benefits provided for in Part A and Part
B. Thus, this language confirms that beneficiaries enrolled in Part C
remain ``entitled to'' benefits under Part A, and thus supports our
interpretation of the statute. It is only the vehicle ``through'' which
such Part A benefits are received that changes, from the ``fee-for-
service'' method spelled out under Part A, to the capitation payment
method spelled out in Part C.
Section 1851(i)(1) of the Act similarly refers only to whether Part
A benefits are provided via payments to, and by, the MA organization,
or direct payments made under the ``fee-for-service'' payment
procedures provided for in Part A and Part B. It is only the process
for furnishing these benefits that is at issue, not entitlement to such
benefits.
Comment: Another commenter objecting to our proposal noted that
section 1886(d)(5)(F) of the Act, which defines the Medicare and
Medicaid fractions of the DPP calculation, has not undergone any
significant amendments since its enactment, and was never amended to
explicitly address the creation of Medicare Part C. As such, the
commenter asserted that Part C days

[[Page 50617]]

should clearly be excluded from the Medicare fraction because the
commenter believed that services paid for under Part C cannot also
result in a patient being entitled to benefits for those services under
Part A. However, the commenter asserted that Part C days are clearly
not excluded from the Medicaid fraction because ``the numerator of the
Medicaid fraction includes all hospital patient days (regardless of
under which `Part' of Medicare) for which the patient was `eligible'
for Medicaid as well as Medicare, but for which the patient was not
entitled to receive benefits under Part A of Medicare . . . .''
Response: The enactment of the current provisions in Medicare Part
C authorizing an alternative way of receiving Part A benefits did not
alter the criteria for entitlement to such benefits, any more than did
earlier, similar provisions in section 1876 of the Act that were
enacted in 1982. Indeed, language in section 1876 made clear that a
beneficiary was still ``entitled to benefits under Part A'' while
receiving Part A benefits through a private health plan paid by CMS to
provide them because section 1876 provided for two classes of
enrollees, one only enrolled in Part B, and another ``entitled to
benefits under Part A'' and enrolled in Part B, and provided for Part A
Trust Fund payments in the latter case, and only Part B payments in the
former. There is no indication that Part C enrollees are not similarly
``entitled to benefits under Part A'' on an ongoing basis.
With regard to the Medicaid fraction, as stated in section
1886(d)(5)(F) of the Act, the number of patient days for patients who,
for those days, were eligible for medical assistance under a State plan
approved under Title XIX (Medicaid) but who were not entitled to
benefits under Medicare Part A is divided by the total number of
patient days for that same period. MA enrollees are entitled to
benefits under Medicare Part A, and therefore, these patient days
should not be included in the Medicaid portion of the calculation. It
is CMS' interpretation that the statute provides support to include MA
days in the Medicare fraction. The statute requires that the inpatient
days be attributable to inpatients entitled to benefits under Part A.
Section 1851(a)(3) of the Act defines an individual that is eligible to
enroll in an MA plan as an individual who is entitled to benefits under
Part A and enrolled under Part B. We have concluded that, based on
section 1886(d)(5)(F) of the Act, MA enrollee patient days should be
included in calculating the DSH adjustment by finding that such
enrollees are otherwise entitled to benefits under Part A. In other
words, MA patients are entitled to Medicare Part A prior to and after
selecting Part C, and because they do not lose that entitlement when
they choose to enroll in a Part C plan, our position is that the
Medicare Part C days should be included in the Medicare fraction,
regardless of whether the beneficiary opts for Part C coverage.
Comment: Another commenter argued that, while it is true that a
patient must at some point be entitled to benefits under Part A in
order to be eligible to enroll in Part C, once an enrollee has chosen
Part C, he or she is no longer entitled to Part A benefits and instead,
the payment structure in Part C applies, and CMS pays MA organizations
for those beneficiaries, while the MA organizations pay the providers.
The commenter also asserted that this was evidence that Congress did
not intend to include Part C days in the Medicare fraction because if
it had, Congress could have easily revised the DSH statute to indicate
as such.
Response: Again, this commenter confuses the method for covering
Part A benefits with whether an individual is entitled to receive such
benefits. We refer readers to the previous response for a fuller
discussion.
Comment: One commenter stated that the proposed policy would be
inconsistent with prior practice and CMS' longstanding operational
treatment of Part C days in Medicare Part A calculations because
services furnished to Part C enrollees historically were recorded as
non-Medicare days. The commenter further stated that, similarly, CMS
has historically interpreted entitled to benefits under Part A to mean
entitlement to payment for inpatient hospital care under the IPPS. The
commenter also asserted that the proposed policy is inconsistent with
CMS' interpretation of entitled to SSI benefits in the DSH statute
because CMS construes this to mean including only those days for
patients who were entitled to have SSI benefits actually paid to them
on such days. Therefore, the commenter argued, even when an individual
is entitled to payment of SSI benefits, CMS does not count the day as
an SSI patient day if there is some other reason why the Social
Security Administration does not make the payment owed to the
individual.
Response: While we acknowledge that in the past CMS has not always
captured MA patient days as Medicare days, this was an operational
issue, not the result of an authoritative agency legal interpretation
or Medicare payment policy decision not to include MA days in the
Medicare fraction. We note that these operational issues persisted for
a time after we expressly concluded that MA days should be counted in
the Medicare fraction in the FY 2005 IPPS rule. Contrary to the
commenter's assertion, we have not, as a matter of either legal
interpretation or policy, considered the days of patients enrolled in
MA plans to be non-Medicare days. Patients enrolled in Medicare Part C
must be entitled to Medicare Part A and enrolled in Part B. Moreover,
the days of patients enrolled in Medicare HMOs are considered to be
paid or covered days even though the payment may be made indirectly
through a section 1876 HMO or through an MA plan. We note that the
original Medicare DSH regulations indicated that patients receiving
their Part A benefits under section 1876 of the Act were to count as
Medicare patient days.
We further disagree with the commenter that CMS' interpretation is
unreasonable and inconsistently interprets the term ``entitled to
benefits.'' To the contrary, we adopted this interpretation of
``entitled to benefits under part A'' in large part in order to be
consistent with how that phrase is used elsewhere in the Act. Section
1886(d)(5)(F)(vi)(I) of the Act specifically notes that the numerator
of the Medicare fraction must reflect patient days for patients
``entitled to benefits under part A'' who are also ``entitled to
supplementary security income benefits (excluding any State
supplementation) under title XVI of this Act.'' Regarding entitlement
to SSI benefits, we note that section 1602 of the Act states that
``Every aged, blind, or disabled individual who is determined under
part A to be eligible on the basis of his income and resources shall,
in accordance with and subject to the provisions of this title, be paid
benefits by the Commissioner of Social Security.'' Therefore, because
SSI is a cash benefit, only a person who is actually paid these
benefits can be considered entitled to these benefits. This differs
from entitlement to Medicare benefits under Part A, which are a
distinct set of health insurance benefits described under section 1812
of the Act, including coverage of inpatient hospital, inpatient
critical access hospital, and post-acute care services as well as post-
institutional home health and hospice services under certain
conditions. We note that the agency has undertaken extensive effort and
notice-and-comment rulemaking to establish a process to identify
appropriately Medicare patient days for which a beneficiary was
simultaneously eligible for SSI benefits in the FY 2011 IPPS/

[[Page 50618]]

LTCH PPS final rule (75 FR 50275 through 50286).
Comment: One commenter noted that the Medicare fraction does not
include patient days for Medicare beneficiaries enrolled in Medicare
Part B only. The commenter further argued that, similarly, the Medicare
fraction does not include all patient days for some individuals who are
eligible for and enrolled in Part A because Part A patient days in
hospital units excluded from the IPPS are not included in the Medicare
fraction, even if actually paid under Part A. The commenter asserted
that as the DPP calculation is limited to patient days in areas of the
hospital that provide services that are paid for under the IPPS, in the
same way, the Medicare fraction should exclude patient days for
Medicare beneficiaries who have elected to receive benefits under Part
C--because these days are not paid under the IPPS, they should not be
included in the Medicare fraction.
Response: In the case of a Medicare beneficiary enrolled only in
Part B, we agree that such an individual is not ``entitled to benefits
under Part A,'' and thus is clearly distinguishable from a beneficiary
who is entitled to benefits under Part A, but has elected to enroll in
a Part C plan.
We note that commenters may be misunderstanding our policy when
they asserted that the days of patients enrolled in Part C should not
be included in the Medicare/SSI fraction because the DSH calculation
does not include patient days in hospital units excluded from the IPPS
but paid under Part A. The regulation at 42 CFR 412.106(a)(1)(ii)
limits the patient days used in determining a hospital's DPPs to
patient days ``attributable to units or wards of the hospital providing
acute care services generally payable under the [inpatient] prospective
payment system.'' Patient days associated with beds in excluded
distinct part hospital units are explicitly excluded from the DPP
calculation in accordance with 42 CFR 412.105(a)(1)(ii)(A). In
contrast, the days for MA beneficiaries that are counted in the
Medicare/SSI fraction are days on which those beneficiaries received
care that would be (and in some cases actually was) payable under IPPS.
Accordingly, CMS' policies regarding patient days in excluded distinct
part units provide no reason to treat Part C enrollees differently than
other patients also entitled to benefits under Part A.
Comment: One commenter argued that the instances where a Part C
beneficiary can have services paid under Part A are extremely limited,
both in scope and duration, and asserted that CMS' descriptions of the
exceptions overstate the extent to which Part A payments actually can
be obtained by Part C beneficiaries. The commenter also contended that
this illustrates that when Congress has wanted to explain how Part C
and Part A benefits relate to one another, Congress has done so
explicitly, and without ambiguity. Another commenter added that when
Congress added Part C to the Medicare statute, it did not amend the DSH
statute to require CMS to treat Part C days differently for DSH payment
purposes, and that intent should be given effect by continuing to
exclude Part C days from the Medicare fraction and including Medicaid
eligible Part C days in the numerator of the Medicaid fraction.
Response: While we appreciate the comments noting that instances
where a Part C beneficiary can have services paid under Part A are
limited, we disagree that our description of these exceptions
overstates the extent to which Part A payments can be obtained by Part
C beneficiaries. Under the commenters' view of the statute,
beneficiaries enrolled in MA plans are not ``entitled to benefits under
Part A,'' which would suggest that Medicare Part A should not make any
payments on their behalf. However, as discussed above, there are
instances where Part A is required to do just that. The hospice
benefit, for instance, is a significant part of the benefits available
under Part A that is always paid for on a fee-for-service basis, even
if the beneficiary is enrolled in an MA plan. We find these
circumstances impossible to reconcile with the commenter's assertion
that beneficiaries enrolled in MA plans are not ``entitled to benefits
under Part A.'' Rather, these payments make clear that beneficiaries
enrolled in MA plans are ``entitled to benefits under Part A,''
regardless of the frequency or magnitude of these claims for payment.
Comment: Commenters stated that CMS still does not discuss that
including MA days in the Medicare fraction would be a reversal of its
prior position and, therefore, is both substantively and procedurally
flawed. Some commenters argued that CMS did not include a reasoned
explanation for what they characterize as a reversal of policy.
Some commenters contended that CMS, in both the FY 2004 proposed
rule and the FY 2005 final rule, acknowledged that the statute is
susceptible to multiple interpretations, including the agency's own
previous position that individuals enrolled in the MA plans should not
be included in the Medicare fraction, and that the FY 2014 proposed
rule only slightly elaborates on the assertion in the FY 2005 final
rule that individuals enrolled in MA plans ``are still, in some sense
entitled to benefits under Medicare Part A.'' Commenters stated that,
in Allina, the court found the FY 2005 final rule was flawed because
CMS did not acknowledge that the policy was a reversal of the agency's
prior interpretation, and did not give a sufficient explanation for
that reversal in interpretation, and that the FY 2014 proposed rule
does not correct those deficiencies, but instead just states that CMS
``continues'' to believe that MA patient days should be included in the
Medicare fraction.
Response: We disagree that including the MA days in the Medicare
fraction is a reversal of prior policy. No final regulation,
administrative decision, or subregulatory guidance issued by the
Secretary has ever taken the position that MA days were to be excluded
from the Medicare fraction. Similarly, no final regulation,
administrative decision, or subregulatory guidance issued by the
Secretary has ever taken the position that MA days should be included
in the numerator of the Medicaid fraction. Accordingly, commenters are
incorrect insofar as they suggest that including MA days in the
Medicare fraction represents a reversal of a prior policy. However, we
acknowledge that, although the DC Circuit held in Northeast that the
agency had a practice of excluding MA days from the Medicare fraction
prior to the FY 2005 rule (657 F.3d at 17), the court did not hold that
the Secretary had adopted a legal interpretation of the phrase
``entitled to benefits under part A'' or an authoritative agency
Medicare payment policy that would require excluding MA days from the
Medicare fraction (Id. at 14-17).
In fact, in the FY 1990 IPPS final rule (55 FR 35994), CMS made
clear that its policy was to include the days of patients enrolled in
managed care plans in the Medicare fraction:
``Based on the language of section 1886(d)(5)(F)(vi) of the Act,
which states that the disproportionate share adjustment computations
should include `patients who were entitled benefits under Part A', we
believe it is appropriate to include the days associated with Medicare
patients who receive care at a qualified [health maintenance
organization (HMO)]. Prior to December 1, 1987, we were not able to
isolate the days of care associated with Medicare patients in HMOs and,
therefore, were unable to fold this number into the calculation.
However, as of December 1, 1987, a field was

[[Page 50619]]

included on the Medicare Provider Analysis and Review (MedPAR) file
that allows us to isolate those HMO days that are associated with
Medicare patients. Therefore, since that time, we have been including
HMO days in SSI/Medicare percentage.''
We note that a recent review of our records from the years
immediately before the implementation of Part C demonstrates that the
MedPAR data used to calculate Medicare fractions for those years
includes the days of patients enrolled in section 1876 HMOs.
Prior to the FY 2004 proposed rule, this was the only authoritative
agency interpretation relating to the treatment of patient days of
individuals enrolled in managed care plans. When Congress created Part
C in the Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33, 111 Stat.
251 (Aug. 5, 1997)), section 1876 HMO days were being counted in the
Medicare fraction, and were correspondingly being excluded from the
Medicaid fraction. On January 1, 1999, patients enrolled in risk HMOs
under section 1876 of the Act were automatically enrolled in M+C plans.
We issued no guidance discussing how the change in the type of HMO,
from section 1876 to M+C, would have affected the DSH calculation. We
see no reason why the reorganization in the managed care structure,
from section 1876 HMOs into Part C, should have any bearing on how a
day counts in the DSH calculation. The BBA does not specifically
address DSH, and we thus believe it was appropriate that MA patients
should have continued to be counted in the Medicare fraction after its
enactment. Indeed, the BBA provided that to enroll in an MA plan, an
individual must be ``entitled to benefits under part A''--the same
language used in the DSH provision. Individuals enrolled in MA plans
continue to meet the age and disability requirements for entitlement to
benefits under Medicare Part A, and thus should be included in the
Medicare fraction.
Our contractors, having received no instructions to the contrary,
continued to exclude the days of patients enrolled in Medicare HMOs
(now mostly M+C) from the numerator of the Medicaid fraction. However,
at this same time, and for reasons that are not clear to us now, the
agency generally stopped collecting no-pay bills from hospitals and
therefore lacked the data necessary to include Part C days in the
Medicare fraction. We are aware of nothing to suggest that the failure
to include Part C days in the Medicare fraction was the result of any
reasoned decision making or even, in fact, that the relevant policy
makers were aware the Part C days were not being counted in the
Medicare fraction. Consequently, Medicare Part C days were largely not
included in the DSH calculation at all, except for the denominator of
the Medicaid fraction which includes all patient days.
We further note that even when the agency promulgated the FY 2005
IPPS final rule, which expressly stated that MA days should be included
in Medicare fraction, the agency did not begin collecting the data that
would have allowed for their inclusion. We believe that this suggests
that relevant policymakers thought that MA days were being included in
the Medicare fraction. However, as discussed in detail above, CMS has
since taken action to ensure that we are collecting the data necessary
to include these days in the Medicare fraction.
In short, we disagree that the decision in the FY 2005 IPPS rule to
include MA days in the Medicare fraction, and to exclude them from the
numerator of the Medicaid fraction, was a reversal of prior policy. We
had not (in rulemaking or through subregulatory guidance) specifically
addressed the treatment of MA days prior to the FY 2004 proposed rule,
although we acknowledge that, as a matter of practice, MA days
generally had not been counted in either fraction. Accordingly,
commenters are incorrect insofar as they suggested that including MA
days in the Medicare fraction, and excluding them from the Medicaid
fraction, represents a reversal of prior policy.
In the FY 2005 IPPS final rule, CMS determined that M+C days should
be included in the Medicare fraction because M+C beneficiaries ``. . .
are still, in some sense, entitled to benefits under Medicare Part A''
(69 FR 49099). CMS acknowledged that, in the FY 2004 proposed rule, it
had noted that although a beneficiary must be entitled to Medicare Part
A to enroll in an M+C plan, when an individual enrolls in an M+C plan,
his or her benefits are ``no longer administered under Part A,'' and
had proposed to exclude M+C days from the Medicare fraction and to
include them in the Medicaid fraction numerator if the M+C days
enrollee was also eligible for Medicaid (69 FR 49099.) CMS further
noted that the proposed rule recognized that whether MA days should be
included in the Medicare or the Medicaid fraction ``stems from whether
M+C plan enrollees are entitled to benefits under Medicare Part A'' (69
FR 49099). CMS thus made clear its view that MA days should be counted
in one fraction or the other. CMS explained that after considering
comments received to its proposal--including the comment that M+C
enrollees ``are just as much Medicare beneficiaries as those
beneficiaries in the traditional fee-for-service program''--it
ultimately agreed with those that opposed its proposal on the ground
that M+C enrollees remain ``entitled to benefits under part A'' in the
relevant sense for determining whether they should be included in the
Medicare or Medicaid fraction.
CMS thus responded to the comments that were most relevant to the
question before the agency: how to interpret the phrase ``entitled to
benefits under part A'' in the DSH provision and provided a reasoned
explanation for including MA days in the Medicare fraction. As set
forth above, CMS continues to believe that its interpretation reflects
the statutory language and congressional intent. Indeed, when it
enacted the DSH provision, Congress intended that the Medicare fraction
serve as a proxy for the percentage of low-income Medicare patients and
the Medicaid fraction serve as a proxy for the percentage of low-income
non-Medicare patients. When Congress subsequently created Part C, it
provided that to enroll in part C, an individual must be ``entitled to
benefits under part A''--the same language that it used in the DSH
provision. Thus, Part C enrollees are a subset of individuals
``entitled to benefits under part A,'' and therefore should be included
in the Medicare fraction.
Comment: Some commenters added that it is unclear what CMS is
actually proposing because the proposal to readopt the policy of
counting MA patient days in the Medicare fraction is for FY 2014 and
subsequent years, but CMS also stated that it believes the policy
adopted in the FY 2005 final rule was a logical outgrowth of the FY
2004 proposed rule. The commenters asserted that CMS' statements
suggest that CMS is also planning to apply the policy to correct
retroactively invalid past rulemaking. Some commenters stated that CMS
cannot retroactively validate invalid rulemakings by restating the
positions it adopted in FY 2005, through notice-and-comment rulemaking
for FY 2014, and in the absence of a Congressional grant of retroactive
rulemaking authority, an attempt to cure prior deficient proceedings is
similarly invalid.
Response: We disagree that the FY 2014 IPPS/LTCH PPS proposed rule
seeks to validate retroactively an invalid rulemaking as the commenter
asserted. We proposed to readopt the policy of counting the days of
patients enrolled in MA plans in the Medicare fraction of the DPP for
FY 2014 and subsequent years in an abundance of caution and have
considered the public comments

[[Page 50620]]

received in support of and in opposition to our proposal in making our
final determination.
Comment: Commenters stated that CMS cannot finalize its new
proposed policy for FY 2014 because CMS has not corrected the
deficiencies cited by the court in Allina, and by doing so, CMS would
be acting in an arbitrary and capricious manner in violation of the
Administrative Procedure Act. The commenters added that, while they
urge CMS not to finalize its proposal, if it does choose to move
forward, the agency must provide a thorough discussion and allow
stakeholder comment on it before deciding whether to finalize its
proposal. Some commenters also stated that the ambiguity in CMS'
proposal does not provide affected parties adequate notice to properly
comment on the proposal. Commenters stated that a complete and thorough
discussion is critical because, citing the decision in FCC v. Fox
Television Stations (556 U.S. 502 (2009), when stakeholders come to
rely on a certain policy, an agency must give a more detailed
explanation for changing its policy than would be necessary for a
policy created on a blank slate.
Response: Our proposed rule did not propose a change in policy, but
rather to readopt a policy that we finalized in the FY 2005 IPPS final
rule. We believe that commenters favoring our proposal and those
opposed have had a fair opportunity to comment both in response to the
FY 2004 proposed rule and the present proposed rule. We also believe
that we have fully explained why our proposal is an appropriate and
consistent interpretation of the DSH statute.
Comment: Commenters stated that the court in Northeast Hospital v.
Sebelius (657 F.3d at 5) opined that the fiscal impact of this policy
change was a number in the hundreds of millions of dollars, and they
requested that CMS release data as to whether this estimate is correct
and, if not, provide the dollar impact so that hospitals can
meaningfully assess this policy change in advance of issuing the final
rule.
Response: We note that we proposed to readopt this policy for FY
2014 and subsequent years. Because this proposal is consistent with our
longstanding policy, it is not considered a change in our policy.
Accordingly, we do not believe that there will be additional savings or
costs to the Medicare program, and by inference, to hospitals, as a
result of this policy.
Comment: One commenter stated that the issue is further confused by
the fact that, as discussed in the proposed budget presented by the
President on April 10, 2013, the agency intends to ask Congress to
``clarify that individuals who have exhausted inpatient benefits under
Part A or who have elected to enroll in part C plans should be included
in the calculation of the Medicare fraction of hospitals' [DPP
calculation].'' The commenter stated that the agency's position
regarding where such days should be counted has been rejected by the
courts in several cases such as Northeast v. Sebelius and Allina v.
Sebelius. The commenter asserted that asking Congress to clarify how
these days should be treated in the DSH calculation is an attempt to
reverse unfavorable court decisions. The commenter also asserted that
from the beginning of the DSH program until the FY 2005 final rule, CMS
administered the program exactly as the commenter asserted that it
should have been administered then and today stating that: ``1. CMS did
not count Medicare managed care days in the SSI fraction; 2. From the
outset of the Medicare + Choice program CMS instructed hospitals not
receiving IME/GME reimbursement to not shadow bill M+C claims, which is
the very data CMS needed to include the days in the SSI fraction; 3.
CMS' practice from the beginning of the program was to count all
Medicaid paid days in the Medicaid fraction, which included Part A
exhausted days.''
Response: Although we appreciate receiving the commenter's views,
proposals in the President's budget and/or pending legislation are
outside the scope of this rulemaking. As we have previously stated, it
has never been CMS policy that MA days were to be included in the
Medicaid fraction. We remind commenters that CMS issued Change Request
6329 on March 6, 2009, and Change Request 5647 on July 20, 2007, to
instruct hospitals to submit informational claims for MA patients for
FY 2006 and FY 2007 and subsequent periods when it was brought to our
attention that hospitals were not submitting these claims, and contrary
to our regulations, we were administratively unable to include these MA
days in the Medicare fraction. Furthermore, we note that CMS issued
Change Request 5647 to provide hospitals additional time to submit FY
2007 claims when it was brought to our attention that compliance with
our policy was uneven, partly due to the fact that teaching hospitals
have a financial incentive to submit these claims because they receive
IME payments for MA discharges while nonteaching hospitals receive no
additional IME payment.
Comment: One commenter stated that if CMS maintains its view that
MA days properly belong in the Medicare fraction, then IPPS hospitals
should receive a DSH add-on payment for every MA beneficiary discharge
in the same manner that IPPS hospitals receive an IME payment add-on
for every MA beneficiary discharge.
Response: We appreciate receiving the commenters' views. However,
we note that while section 1886(d)(11) of the Act explicitly provides
for an IME payment add-on for each MA beneficiary discharge, section
1886(d)(5)(F) of the Act does not provide for a similar DSH payment
add-on for each MA beneficiary discharge. A legislative change would be
necessary to authorize such DSH payments to IPPS hospitals that treat
MA beneficiaries.
After consideration of the public comments we received, we are
finalizing our proposal to readopt the policy of counting the days of
patients enrolled in MA plans in the Medicare fraction of the DPP for
FY 2014 and subsequent years. We continue to believe this policy is
most consistent with the language of the statute, congressional intent,
and the structure of the DSH calculation.
3. New Payment Adjustment Methodology for Medicare Disproportionate
Share Hospitals (DSHs) Under Section 3133 of the Affordable Care Act
(Sec. 412.106)
a. General Discussion and Legislative Change
Section 3133 of the Patient Protection and Affordable Care Act
(PPACA), as amended by section 10316 of PPACA and section 1104 of the
Health Care and Education Reconciliation Act (Pub. L. 111-152), added a
new section 1886(r) to the Act that modifies the methodology for
computing the Medicare DSH payment adjustment beginning in FY 2014. For
purposes of this rule, we refer to these provisions collectively as
section 3133 of the Affordable Care Act.
Currently, Medicare DSH adjustment payments are calculated under a
statutory formula that considers the hospital's Medicare utilization
attributable to beneficiaries who also receive Supplemental Security
Income (SSI) benefits and the hospital's Medicaid utilization.
Beginning for discharges in FY 2014, hospitals that qualify for
Medicare DSH payments under section 1886(d)(5)(F) will receive 25
percent of the amount they previously would have received under the
current statutory formula for Medicare DSH payments. This provision

[[Page 50621]]

applies equally to all hospitals that qualify for DSH payments under
section 1886(d)(5)(F)(i)(II) of the Act. Section 1886(d)(5)(F)(i)(II)
of the Act provides for a method known as the ``Pickle'' adjustment
under which a hospital that is located in an urban area and has 100 or
more beds may receive a Medicare DSH payment adjustment if the hospital
can demonstrate that, during its cost reporting period, more than 30
percent of its net inpatient care revenues are derived from State and
local government payments for care furnished to needy patients with low
incomes. Pursuant to new section 1886(r) of the Act, hospitals that
qualify for the Pickle method of the DSH payment adjustment would
receive 25 percent of the 35-percent add-on adjustment for which they
would otherwise qualify under section 1886(d)(5)(F)(i)(II) of the Act.
The remaining amount, equal to an estimate of 75 percent of what
otherwise would have been paid as Medicare DSH payments, reduced to
reflect changes in the percentage of individuals under age 65 who are
uninsured, will become available to make additional payments to each
hospital that qualifies for Medicare DSH payments and that has
uncompensated care. The payments to each hospital for a fiscal year
will be based on the hospital's amount of uncompensated care for a
given time period relative to the total amount of uncompensated care
for that same time period reported by all hospitals that receive
Medicare DSH payments for that fiscal year.
As provided by section 3133 of the Affordable Care Act, section
1886(r) of the Act requires that, for ``fiscal year 2014 and each
subsequent fiscal year,'' a ``subsection (d) hospital'' that would
otherwise receive a ``disproportionate share hospital payment . . .
made under subsection (d)(5)(F)'' will receive two separately
calculated payments. Specifically, section 1886(r)(1) of the Act
provides that the Secretary shall pay to such a subsection (d) hospital
(including a Pickle hospital) 25 percent of the amount the hospital
would have received under section 1886(d)(5)(F) of the Act for
disproportionate share payments, which represents ``the empirically
justified amount for such payment, as determined by the Medicare
Payment Advisory Commission in its March 2007 Report to the Congress.''
We refer to this payment as the ``empirically justified Medicare DSH
payment.''
In addition to this payment, section 1886(r)(2) of the Act provides
that, for fiscal year 2014 and each subsequent fiscal year, the
Secretary shall pay to ``such subsection (d) hospital an additional
amount equal to the product of'' three factors. The first factor is the
difference between ``the aggregate amount of payments that would be
made to subsection (d) hospitals under subsection (d)(5)(F) if this
subsection did not apply'' and ``the aggregate amount of payments that
are made to subsection (d) hospitals under paragraph (1)'' for each
fiscal year. Therefore, this factor amounts to 75 percent of the
payments that would otherwise be made under section 1886(d)(5)(F) of
the Act.
The second factor is, for FYs 2014 through 2017, 1 minus the
percent change in the percent of individuals under the age of 65 who
are uninsured, determined by comparing the percent of such individuals
who are uninsured in 2013, the last year before coverage expansion
under the Affordable Care Act (as calculated by the Secretary based on
the most recent estimates available from the Director of the
Congressional Budget Office before a vote in either House on the Health
Care and Education Reconciliation Act of 2010 that, if determined in
the affirmative, would clear such Act for enrollment), minus 0.1
percentage point for FY 2014, and minus 0.2 percentage point for FYs
2015 through 2017. For FYs 2014 through 2017, the baseline for the
estimate of the change in uninsurance is fixed by the most recent
estimate of the Congressional Budget Office before the final vote on
the Health Care and Education Reconciliation Act of 2010, which is
contained in a March 20, 2010 letter from the then Director of the
Congressional Budget Office to the Speaker of the House. A link to this
letter is included in section V.E.3.d.2. of the preamble of the
proposed rule (and this final rule).
For FY 2018 and subsequent years, the second factor is 1 minus the
percent change in the percent of individuals who are uninsured, as
determined by comparing the percent of individuals ``who are uninsured
in 2013 (as estimated by the Secretary, based on data from the Census
Bureau or other sources the Secretary determines appropriate, and
certified by the Chief Actuary'' of CMS, and ``who are uninsured in the
most recent period for which data is available (as so estimated and
certified) minus 0.2 percentage points for FYs 2018 and 2019.'' Thus,
for FY 2018 and subsequent years, the statute provides some greater
flexibility in the choice of the data sources to be used in the
estimate of the change in the percent of uninsured individuals.
The third factor is a percent that, for each subsection (d)
hospital, ``represents the quotient of . . . the amount of
uncompensated care for such hospital for a period selected by the
Secretary (as estimated by the Secretary, based on appropriate data . .
.),'' including the use of alternative data ``where the Secretary
determines that alternative data is available which is a better proxy
for the costs of subsection (d) hospitals for . . . treating the
uninsured,'' and ``the aggregate amount of uncompensated care for all
subsection (d) hospitals that receive a payment under this
subsection.'' Therefore, this third factor represents a hospital's
uncompensated care amount for a given time period relative to the
uncompensated care amount for that same time period for all hospitals
that receive Medicare DSH payments in that fiscal year, expressed as a
percent. For each hospital, the product of these three factors
represents its additional payment for uncompensated care for the
applicable fiscal year. We refer to the additional payment determined
by these factors as the ``uncompensated care payment.''
Section 1886(r) of the Act states that this provision is effective
for ``fiscal year 2014 and each subsequent fiscal year.'' In the FY
2014 IPPS/LTCH PPS proposed rule (78 FR 27578 through 27592), we set
forth our proposals for implementing the required changes to the DSH
payment methodology. We noted that, because section 1886(r) modifies
the payment required under section 1886(d)(5)(F) of the Act, it affects
only the DSH payment under the operating IPPS. It does not revise or
replace the capital IPPS DSH payment provided under the regulations at
42 CFR Part 412, Subpart M, which were established through the exercise
of the Secretary's discretion in implementing the capital IPPS under
section 1886(g)(1)(A) of the Act.
Finally, section 1886(r)(3) of the Act provides that there shall be
``no administrative or judicial review under section 1869, section
1878, or otherwise'' of ``any estimate of the Secretary for purposes of
determining the factors described in paragraph (2),'' or of ``any
period selected by the Secretary'' for the purpose of determining those
factors. Therefore, there can be no administrative or judicial review
of the estimates developed for purposes of applying the three factors
used to determine uncompensated care payments, or the periods selected
in order to develop such estimates.
Comment: Several commenters expressed concerns about the change in
the payment methodology used to calculate Medicare DSH payments as a

[[Page 50622]]

result of the implementation of section 3133 of the Affordable Care
Act, which limits the Medicare DSH payment to 25 percent of what would
have otherwise been paid prior to the enactment of section 3133 and
establishes an uncompensated care payment calculated under a different
payment methodology. The commenters were concerned about large
redistributions in payments and hospitals experiencing large increases
or decreases in payment with little notice. Some commenters requested
that CMS implement a stop-loss and stop-gain policy that would limit
the amount by which a hospital's Medicare DSH payments could change in
a single year in order to minimize the effects of annual Medicare DSH
payment adjustment changes. Some of these commenters suggested a stop-
loss and stop-gain policy that would limit the amount by which a
hospital's Medicare DSH payments could change in a single year by no
more than 2 percent. Other commenters suggested that CMS institute a
cap on the annual payment adjustments, or phase in the transition from
Medicare DSH payments calculated prior to the enactment of section 3133
of the Affordable Care Act and Medicare DSH payments calculated under
the new payment methodology mandated by section 3133 of the Affordable
Care Act to mitigate drastic decreases in payments to eligible
hospitals. The commenters noted that CMS has historically implemented
transitions for policies that may cause significant changes in
payments. The commenters recognized CMS' policy position regarding data
finality, but expressed concern that significant increases or decreases
in payments may suggest that the data are inaccurate. The commenters
further stated that a stop-loss and stop-gain policy would protect
against such problems. The commenters believed that the authority to
implement a stop-loss and stop-gain policy is a logical extension of
CMS' proxy authority granted under section 1886(r)(2)(C) of the Act to
ensure data integrity.
Response: We appreciate the commenters' input. We do not believe
that we have the statutory authority to phase in the transition from
Medicare DSH payments calculated prior to the enactment of section 3133
of the Affordable Care Act to Medicare DSH payments calculated under
the new payment methodology established by section 3133 of the
Affordable Care Act, or to apply a cap on the change in Medicare DSH
payments to eligible hospitals. Rather, we believe that we are required
to reduce Medicare DSH payments to 25 percent of the amount that would
otherwise be paid under section 1886(d)(5)(F) of the Act, effective for
discharges occurring on or after October 1, 2013. In addition, we
believe that we are required to make the additional payment for
uncompensated care under the new payment methodology prescribed in
section 1886(r)(2) of the Act effective for FY 2014. The change to the
payment methodology for Medicare DSH payments for FY 2014 was designed
to have redistributive effects in order to provide payments to eligible
hospitals based upon their amount of uncompensated care relative to the
total amount of uncompensated care furnished by all eligible hospitals.
We also do not believe that the statute provides authority for adopting
a stop-loss and stop-gain policy, or any other transitional
methodology. Rather, the statute designates an effective date of
October 1, 2013, for implementing both empirically justified Medicare
DSH payments and uncompensated care payments.
Comment: Some commenters requested that CMS delay the
implementation of this provision. These commenters cited factors such
as uncertainties over the rate of reduction in uninsurance due to the
decisions of some States not to adopt Medicaid expansion as reasons for
recommending a delay. Some of these commenters indicated that a delay
until FY 2016 would allow time to assess the effect of health care
reform on the rates of insured and uninsured Americans and, therefore,
would allow implementation of this provision in a manner that would be
least disruptive to hospitals, especially those vulnerable hospitals
that provide large amounts of uncompensated care.
Response: The statute provides that this provision will be
effective ``for fiscal year 2014 and each subsequent fiscal year'' and,
therefore, does not provide us with the flexibility to delay
implementation.
b. Eligibility
As indicated above, the new payment methodology applies to
``subsection (d) hospitals'' that would otherwise receive a
``disproportionate share payment . . . made under subsection
(d)(5)(F).'' Therefore, eligibility for empirically justified Medicare
DSH payments is unchanged under this new provision. Consistent with the
law, hospitals must receive empirically justified Medicare DSH payments
in FY 2014 or a subsequent year to receive an additional Medicare
uncompensated care payment for that year. Specifically, section
1886(r)(2) of the Act states that, ``[i]n addition to the payment made
to a subsection (d) hospital under paragraph (1) . . . the Secretary
shall pay to such subsection (d) hospital an additional amount . . .''
(Emphasis supplied.) Because paragraph (1) refers to empirically
justified Medicare DSH payments, the additional payment under section
1886(r)(2) of the Act is, therefore, limited to hospitals that receive
empirically justified Medicare DSH payments pursuant to section
1886(r)(1) of the Act for FY 2014 and subsequent years.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27580), we
proposed that hospitals that are not eligible to receive empirically
justified Medicare DSH payments in FY 2014 and subsequent years would
not receive uncompensated care payments for those respective years. We
also proposed to make a determination concerning eligibility for
interim uncompensated care payments based on each hospital's estimated
DSH status for FY 2014 or the applicable year (using the most recent
data that are available). We indicated that our final determination on
the hospital's eligibility for uncompensated care payments would be
based on the hospital's actual DSH status on the cost report for that
payment year. (We discuss these proposals and our final policies in
more detail below.)
In the course of developing the proposed policies for implementing
section 1886(r) of the Act, we considered whether several specific
classes of hospitals are included within the scope of the statutory
provision. In particular, we considered whether the provision applies
to (1) hospitals in the Commonwealth of Puerto Rico, (2) hospitals in
the State of Maryland paid under a waiver as provided in section
1814(b) of the Act, (3) sole community hospitals (SCHs), (4) hospitals
participating in the Bundled Payments for Care Improvement Initiative
developed by the Center for Medicare and Medicaid Innovation
(Innovation Center), and (5) hospitals participating in the Rural
Community Hospital demonstration. We discuss each of these specific
classes of hospitals below.
(1) Puerto Rico Hospitals
Under section 1886(d)(9)(A) of the Act, Puerto Rico hospitals
subject to the IPPS are not ``subsection (d) hospitals,'' but rather
constitute a distinct class of ``subsection (d) Puerto Rico
hospitals.'' However, section 1886(d)(9)(D)(iii) of the Act specifies
that subparagraph (d)(5)(F) (the provision governing the current DSH
payment methodology) ``shall apply to subsection (d) Puerto

[[Page 50623]]

Rico hospitals . . . in the same manner and to the extent as [it
applies] to subsection (d) hospitals.'' While the new section 1886(r)
of the Act does not specifically address whether the methodology
established there applies to ``subsection (d) Puerto Rico hospitals,''
section 3133 of the Affordable Care Act does make a revision to section
1886(d)(5)(F)(i) of the Act that is crucial for determining the
eligibility of Puerto Rico hospitals for empirically justified Medicare
DSH payments and uncompensated care payments under the new provision.
Specifically, section 3133 of the Affordable Care Act amended section
1886(d)(5)(F)(i) of the Act to provide that this section is ``[s]ubject
to subsection (r).'' One effect of this amendment is to provide that
all hospitals subject to section 1886(d)(5)(F)(i) of the Act, including
``subsection (d) Puerto Rico hospitals,'' also are subject to the new
payment methodology established in section 1886(r) of the Act.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27580), we
proposed that subsection (d) Puerto Rico hospitals that are eligible
for DSH payments also would be eligible to receive empirically
justified Medicare DSH payments and uncompensated care payments under
the new payment methodology. We invited public comments on this
proposal.
Comment: Several commenters supported the proposal to include
subsection (d) Puerto Rico hospitals that are eligible for Medicare DSH
payments as hospitals eligible to receive empirically justified
Medicare DSH payments and uncompensated care payments under the new
payment methodology. However, some commenters, including hospitals from
Puerto Rico and associations representing Puerto Rico hospitals,
maintained that Puerto Rico hospitals have been unfairly deprived of
''DSH money'' due to Puerto Rico's exclusion from the national SSI
program. These commenters noted that because of the proposed
methodologies for determining the empirically justified DSH payments
and Factor 3 of the uncompensated care payment, Puerto Rico will
continue to be unfairly deprived of DSH dollars despite having
significant uncompensated care expenses.
Response: We are finalizing our proposal to include subsection (d)
Puerto Rico hospitals that are eligible for Medicare DSH payments as
hospitals eligible to receive empirically justified Medicare DSH
payments and uncompensated care payments under the new payment
methodology. With respect to the comment that Puerto Rico hospitals
will continue to be unfairly deprived of Medicare DSH payments because
the new methodology continues to rely on SSI days, we acknowledge the
commenters' concerns and note that it is our view that section
1886(r)(1) of the Act requires us to use Medicare SSI days to determine
the empirically justified Medicare DSH payments. We further note that,
for the reasons discussed below, low-income insured days (which include
Medicare SSI days) are currently the best data available that CMS can
use as a proxy for the treatment costs of the uninsured and CMS intends
to continue to develop an appropriate data source from which to
determine the amount of uncompensated care provided by hospitals.
However, we note that for FY 2014 the 51 hospitals in Puerto Rico are
expected to experience a 41.3 percent increase in Medicare DSH payments
(from approximately $8 million to $82 million, or a $74 million
increase) due to the implementation of the changes to the DSH payment
methodology under section 3133 of the Affordable Care Act, which
represents a 41.8 percent increase in overall payments to these
hospitals. Generally, Puerto Rico hospitals had a relatively low, less
than 10 percent, Medicare utilization (as measured by a percentage of
Medicare patient days to total patient days), therefore the changes in
section 1886(r)(2) of the Act result in the significant increase for
Puerto Rico. We refer readers to the appendix of this rule for a more
detailed impact analysis.
(2) Hospitals Paid Under a Waiver Under Section 1814(b) of the Act
Under section 1814(b) of the Act, hospitals in the State of
Maryland are subject to a waiver from the Medicare payment
methodologies under which they would otherwise be paid. We have taken
the position in other contexts, for example, for purposes of EHR
incentive payments (75 FR 44448), that Maryland acute care hospitals
remain subsection (d) hospitals. This is because these hospitals are
``located in one of the fifty States or the District of Columbia'' (as
provided in the definition of subsection (d) hospitals) and do not meet
the definitions of the hospitals that are specifically excluded from
that category, such as cancer hospitals and psychiatric hospitals.
However, section 1886(r) of the Act applies to hospitals that are both
subsection (d) hospitals and hospitals that would otherwise receive a
disproportionate share payment made under the previous DSH payment
methodology. Because Maryland waiver hospitals are paid under section
1814(b)(3) of the Act and not under section 1886(d)(5)(F) of the Act,
they are not eligible to receive empirically justified Medicare DSH
payments and uncompensated care payments under the new payment
methodology of section 1886(r) of the Act.
Comment: Several commenters supported the proposal to exclude
Maryland hospitals, which are paid under section 1814(b)(3) of the Act
and not under section 1886(d)(5)(F) of the Act, from hospitals eligible
to receive empirically justified Medicare DSH payments and
uncompensated care payments under the new payment methodology
established under section 1886(r) of the Act.
Response: We appreciate the commenters' support and are finalizing
this policy, as proposed.
(3) Sole Community Hospitals (SCHs)
SCHs are paid based on their hospital-specific rate from certain
specified base years or the IPPS Federal rate, whichever yields the
greatest aggregate payment for the hospital's cost reporting period.
Payments based on the Federal rate are based on the IPPS standardized
amount and include all applicable IPPS add-on payments, such as
outliers, DSH, and IME, while payments based on the hospital-specific
rate have no add-on payments. For each cost reporting period, the
fiscal intermediary/MAC determines which of the payment options will
yield the highest aggregate payment. Interim payments are automatically
made on a claim-by-claim basis at the highest rate using the best data
available at the time the fiscal intermediary/MAC makes the payment
determination for each discharge. However, it may not be possible for
the fiscal intermediary/MAC to determine in advance precisely which of
the rates will yield the highest aggregate payment by year's end. In
many instances, it is not possible to forecast outlier payments or the
final amount of the DSH payment adjustment or the IME adjustment until
cost report settlement. As noted above, these adjustment amounts are
applicable only to payments based on the Federal rate and not to
payments based on the hospital-specific rate. The fiscal intermediary/
MAC makes a final adjustment at cost report settlement after it
determines precisely which of the payment rates would yield the highest
aggregate payment to the hospital for its cost reporting period. This
payment methodology makes SCHs unique as they can change on a yearly
basis from receiving hospital-specific rate payments to receiving
Federal rate payments, or vice versa.

[[Page 50624]]

In order to implement the provisions of section 1886(r) of the Act,
in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27580), we proposed
to continue to determine interim payments for SCHs based on what we
estimate and project their DSH status to be prior to the beginning of
the Federal fiscal year (based on the best available data at that
time), subject to settlement through the cost report. We also proposed
that SCHs that receive interim empirically justified Medicare DSH
payments in a fiscal year would receive interim uncompensated care
payments that fiscal year, subject as well to settlement through the
cost report. Final eligibility determinations would be made at the end
of the cost reporting period at settlement, and both interim
empirically justified Medicare DSH payments and uncompensated care
payments would be adjusted accordingly. Therefore, we proposed to
follow the same processes of interim and final payments for SCHs that
we proposed to follow for eligible IPPS DSH hospitals generally. (We
discuss these processes in more detail below.)
Comment: Many commenters supported the proposal to allow SCHs that
receive interim empirically justified Medicare DSH payments in a fiscal
year to receive interim uncompensated care payments that fiscal year,
subject to settlement through the cost report. However, one commenter
stated that even an SCH paid under the hospital-specific rate during a
fiscal year that, therefore, would not receive empirically justified
Medicare DSH payments in that year should still receive uncompensated
care payments, provided that the SCH otherwise qualifies for
empirically justified Medicare DSH payments under Sec. 412.106(c). The
commenter stated that, ``Since such payments are not discharge-related
payments, uncompensated care payments should be paid in addition to any
discharge-related payments for an SCH, whether such discharge-related
payments are calculated on the basis of the federal standardized
amount, plus DSH payments, or on the basis of the HSP, without DSH
payments. In other words, if an SCH has aggregate HSP payments that
exceed the sum of federal standardized amount and DSH payments, the SCH
should still receive uncompensated care payments under 42 CFR
412.106(g)-(h), as long as it is DSH-eligible under 42 CFR
412.106(c).''
Response: We do not agree with the commenter who stated that SCHs
paid under the hospital-specific rate during a fiscal year should still
receive uncompensated care payments provided that the SCH otherwise
qualifies for empirically justified Medicare DSH payments under Sec.
412.106(c). As we have noted above, section 1886(r)(2) of the Act
specifically states that, ``[i]n addition to the payment made to a
subsection (d) hospital under paragraph (1) . . . the Secretary shall
pay to such subsection (d) hospital an additional amount . . .''
(Emphases supplied.) Because paragraph (2) provides that the
uncompensated care payment is to be made ``in addition to'' the
empirically justified Medicare DSH payments made under paragraph (1), a
hospital must receive empirically justified Medicare DSH payments under
section 1886(r)(1) in order to receive the additional payment under
section 1886(r)(2) of the Act for FY 2014 and subsequent years.
As previously noted, under the SCH payment methodology, SCHs are
paid the higher of the Federal rate or a hospital-specific payment
rate. This payment methodology is defined under sections
1886(d)(5)(D)(i) and 1886(d)(1)(A)(iii) of the Act. Section 1886(d)(3)
of the Act specifically provides that SCH payments are to be made on a
per-discharge basis. Accordingly, as we also note below, in the FY 2014
IPPS/LTCH PPS proposed rule (78 FR 27581), we proposed that the
uncompensated care payments would not be accounted for in determining
whether an SCH is paid the higher of the Federal rate or the hospital-
specific rate. This is because we proposed that the uncompensated care
payments would not be discharge-driven payments, but rather payments
made on the basis of a hospital's overall share of uncompensated care
during a payment year. The amount of a hospital's uncompensated care
payments for a year is not directly affected by the number of the
hospital's discharges for the year. Therefore, we did not believe that
uncompensated care payments should be taken into account in a
comparison based on discharge driven hospital-specific and Federal rate
payments. Furthermore, as we proposed later in the proposed rule, we
intended to make interim uncompensated care payments on a periodic
basis rather than a per discharge basis in order to create more
predictability for hospitals and to increase administrative efficiency.
To the extent the payments are intended to reflect the relative amount
of uncompensated care furnished by the hospital, we considered it both
reasonable and appropriate to view this payment as an amount for the
year, which in the interests of predictability and consistency is made
periodically through interim payments.
We invited public comments on all of these proposals affecting
SCHs.
Comment: Several commenters objected to the proposal not to take
uncompensated care payments into account in the comparison of payments
under the hospital-specific rate and the Federal rate that occurs on a
discharge basis and at cost report settlement for SCHs. These
commenters contended that the proposed policy amounted to imposing a
payment cut on many SCHs. This is because the proposed policy would
have the result that more SCHs would be paid under their hospital-
specific rate rather than the higher Federal rate because the
equivalent of 75 percent of the former DSH payment amounts would no
longer be included in the Federal rate side of the comparison. The
commenters maintained that it was not the intention of the new payment
adjustment methodology for disproportionate share hospitals to impose
reductions in payments indirectly on hospitals paid under different
provisions of the statute.
Response: We agree with these commenters that it is not the
intention of the new payment adjustment methodology for
disproportionate share hospitals to impose reductions in payments
indirectly on hospitals paid under different provisions of the statute.
We continue to believe that the periodic biweekly payments approach
would be consistent with the statute, and that it would be, in
isolation, the most administratively efficient means to distribute the
fixed amount of a hospital's uncompensated care payment in a manner
that would avoid the potential for large over- and/or under- payments
during the year and, therefore, limit the need for reconciliation at
cost report settlement. However, after a thorough review of the above
policy considerations reflected in the numerous public comments we
received, we believe that distributing these payments on a per-
discharge basis would allow these payments to be considered in the
comparison of payments under the Federal rate and the hospital-specific
rate for SCHs. We believe that this is an appropriate policy because
this approach provides all SCHs an opportunity to be eligible for
uncompensated care payments. To the extent that their payments under
their hospital-specific rate are higher, we believe that it is
appropriate that they do not receive uncompensated care payments
because they are no longer eligible for DSH payments, as we describe
above. However, after consideration of the public comments we received,
we believe that it is appropriate for the uncompensated care payment to
be considered as part of an

[[Page 50625]]

SCH's payment under the Federal rate. For this and other reasons which
we discuss later in this preamble, we have decided not to finalize our
proposed policy to make interim uncompensated care payments on a
periodic basis rather than a per-discharge basis for FY 2014. We
discuss the operational details of including the uncompensated care
amount in the payment for each IPPS hospital discharge in greater
detail below in section V.E.3.f. of the preamble of this final rule.
However, one result of including the uncompensated care payments in the
payment for each hospital discharge is that such payments can now also
be included in the comparison of the hospital-specific and Federal rate
payments for SCHs. That is, we will now be able to employ the claims
processing system to compare each SCH's payment under the hospital-
specific rate to its Federal rate, including uncompensated care
payments.
(4) Hospitals Participating in the Bundled Payments for Care
Improvement Initiative
IPPS hospitals that have elected to participate in the Bundled
Payments for Care Improvement initiative receive a payment that links
multiple services furnished to a patient during an episode of care. We
have stated in previous rulemaking that those hospitals continue to be
paid under the IPPS (77 FR 53342). Hospitals that elect to participate
in the initiative can still receive DSH payments while participating in
the initiative, if they otherwise meet the requirements for receiving
such payments.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27581), we
proposed to apply the new DSH payment methodology to the hospitals in
this initiative, so that eligible hospitals would receive empirically
justified Medicare DSH payments and uncompensated care payments. We
invited public comments on this proposal.
Comment: Several commenters supported the proposal to apply the new
Medicare DSH payment adjustment methodology to the hospitals in the
Bundled Payments for Care Improvement initiative so that eligible
hospitals would receive empirically justified Medicare DSH payments and
uncompensated care payments.
Response: We appreciate the commenters' support and are finalizing
this policy, as proposed.
(5) Hospitals Participating in the Rural Community Hospital
Demonstration
Section 410A of the Medicare Modernization Act established the
Rural Community Hospital Demonstration Program. After the initial 5-
year period, the demonstration was extended for an additional 5-year
period by sections 3123 and 10313 of the Affordable Care Act. There are
23 hospitals currently participating in the demonstration. Under the
payment methodology provided in section 410A, participating hospitals
receive payment for Medicare inpatient services on the basis of a cost
methodology. Specifically, for discharges occurring in the hospitals'
first cost reporting period of the initial 5-year demonstration or the
first cost reporting period of the 5-year extension, they receive
payments for the reasonable cost of providing such services. For
discharges occurring in subsequent cost reporting periods during the
applicable 5-year demonstration period, hospitals receive the lesser of
the current year's reasonable cost amount, or the previous year's
amount updated by the percentage increase in the IPPS market basket
(the target amount). (We refer readers to section V.K. of the preamble
of this final rule for further information on the demonstration.) The
instructions (CR 5020 (April 14, 2006) and CR 7505 (July 22, 2011)) for
the demonstration require that the fiscal intermediary/MAC not pay
Medicare DSH payments in addition to the amount received under the
cost-based payment methodology. Although the amounts that would
otherwise be paid for Medicare DSH payments (absent the demonstration)
are calculated and identified on the hospital cost report for
statistical and research purposes, as in the case of Maryland waiver
hospitals, hospitals in this demonstration do not receive a separate or
identifiable DSH payment.
Because hospitals participating in the Rural Community Hospital
Demonstration do not receive DSH payments, these hospitals also are
excluded from receiving empirically justified Medicare DSH payments and
uncompensated care payments under the new payment methodology.
Comment: Several commenters supported the proposal to exclude
hospitals participating in the Rural Community Hospital Demonstration
program from receiving empirically justified Medicare DSH payments and
uncompensated care payments under the new payment methodology.
Response: We appreciate the commenters' support and are finalizing
this policy, as proposed.
c. Empirically Justified Medicare DSH Payments
As we have discussed above, section 1886(r)(1) of the Act requires
CMS to pay 25 percent of the ``amount of disproportionate share
hospital payment that would otherwise be made under subsection
(d)(5)(F) to a subsection (d) hospital.'' Currently, we have a system
for interim payment and final settlement of DSH payments made under
section 1886(d)(5)(F). Specifically, interim payments are made for each
claim based on the best available data concerning each hospital's
eligibility for DSH payments and the appropriate level of such
payments. Final eligibility for Medicare DSH payments and the final
amount of such payments for eligible hospitals are determined at the
time of cost report settlement. Because section 1886(r)(1) of the Act
merely requires the program to pay a designated percentage of these
payments, without revising the criteria governing eligibility for DSH
payments or the underlying payment methodology, we stated in the
proposed rule that we did not believe that it is necessary to develop
and propose any new operational mechanisms for making such payments.
Therefore, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR
27581), we proposed to implement this provision simply by revising the
claims payment methodologies to adjust the interim claim payments to
the requisite 25 percent of what would have otherwise been paid. We
also indicated that we would make corresponding changes to the hospital
cost report so that these empirically justified Medicare DSH payments
can be settled at the appropriate level at the time of cost report
settlement. We stated that we would provide more detailed operational
instructions and cost report instructions following display of the
final rule in the Federal Register.
We proposed to implement this provision by adding a new paragraph
(f) under the regulations at Sec. 412.106. This proposed new paragraph
provides for reducing Medicare DSH payments by 75 percent beginning in
FY 2014.
We invited public comments on this proposal.
Comment: Several commenters supported the proposal to implement
this provision by revising the claims payment methodologies to adjust
the interim claim payments to the requisite 25 percent of what would
have otherwise been paid. The commenters also supported the proposal to
make

[[Page 50626]]

corresponding changes to the hospital cost report so that these
empirically justified Medicare DSH payment adjustments can be settled
at the appropriate level at the time of cost report settlement.
Response: We appreciate the commenters' support and are finalizing
these policies, as proposed, by adding a new paragraph (f) under Sec.
412.106 to reflect the policies.
Comment: Several commenters requested that CMS undertake additional
audits to verify the data used to compute the 25-percent empirically
justified Medicare DSH payment adjustments. Other commenters requested
that CMS grant additional time for hospitals to verify the data and
adjust their cost reports to ensure that the data used to compute the
adjustment are accurate and up to date. Some commenters requested that
CMS establish procedures to allow a hospital initially determined not
to be eligible for Medicare DSH payments to begin receiving empirically
justified Medicare DSH payments if data become available that indicate
that the hospital would be eligible.
Response: As we have emphasized, we are maintaining the well-
established methodology and payment processes used under the current
Medicare DSH payment adjustment methodology for purposes of making the
empirically justified Medicare DSH payment adjustments. Hospitals are
quite familiar with the cost reporting requirements and auditing
procedures employed under the current Medicare DSH payment adjustment
methodology. Hospitals are also familiar with the current process of
determining interim eligibility for Medicare DSH payments with final
determination at cost report settlement. Therefore, we do not believe
that it would be warranted to add additional complexity to these
procedures by adopting any of these recommendations.
Comment: Several commenters noted that, under the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003, a 12-
percent cap was placed on DSH payment adjustment percentages for
certain rural hospitals, including those with SCH status. These
commenters also noted that CMS' proposal was silent about how this cap
provision will apply to calculations under the revised Medicare DSH
payment adjustment methodology. The commenters agreed that the cap
should apply to the calculation of the empirically justified Medicare
DSH payment adjustment amounts and the Factor 1 computation in the
uncompensated care payment determination. However, the commenters
expressed concern that the cap could be applied again when formulating
the overall Medicare DSH payment adjustment amount that a hospital
receives. If the cap were to apply to the overall Medicare DSH payment
adjustment amount, the commenters asserted that hospitals would in
effect be penalized twice, once when calculating the empirically
justified Medicare DSH payment adjustment amount and the amount of
Factor 1, which is equal to 75 percent of the DSH payments that would
otherwise have been made under section 1886(d)(5)(F), and again when
formulating the overall Medicare DSH payment adjustment amount that the
hospital receives. Therefore, the commenters asked CMS to clarify and
confirm that the cap provision will not be applied to the overall
Medicare DSH payment adjustment amount that each hospital receives.
Response: Under the Medicare DSH statute, certain hospitals are
subject to a 12-percent cap on their DSH payment adjustment percentage.
For these hospitals, the maximum DSH payment adjustment factor has
historically been 12 percent, regardless of how high the DPP for these
hospitals was. We note that the 12-percent cap only applies to the
following hospital types: hospitals located in urban areas with less
than 100 beds, and hospitals located in rural areas with less than 500
beds (however, we note that the 12-percent cap does not apply to Rural
Referral Centers or to Medicare Dependent Hospitals, regardless of bed
size). We agree with the commenters that the cap should not be applied
to payments under section 1886(r)(2) of the Act. Although we did not
state so specifically, the commenters were correct to infer, from our
proposal to continue employing the current Medicare DSH payment
adjustment methodology in determining the empirically justified
Medicare DSH payment amount, that the cap should and would be applied
when calculating payments under section 1886(r)(1) of the Act (which is
25 percent of the amount otherwise payable under section 1886(d)(5)(F).
This is because the cap under section 1886(d)(5)(F)(xiv)(II) limits the
amount of the payment adjustment under section 1886(d)(5)(F), and
payments under section 1886(r)(1) are 25 percent of the payments that
would otherwise be made under section 1886(d)(5)(F), we believe the cap
necessarily applies to payments under section 1886(r)(1) as well.
Similarly, the commenters were correct to infer that the application of
the cap on Medicare DSH payment adjustments to those hospitals would be
taken into account in determining Factor 1 of the uncompensated care
payment determination, which is equal to 75 percent of the aggregate
amount of payments that would otherwise be made under section
1886(d)(5)(F). However, there is nothing in the statute that requires
an application of this cap to the final amount of uncompensated care
payments hospitals receive, beyond taking it into consideration in the
estimate of Factor 1. Therefore, we are taking this opportunity to
confirm that our proposal did not imply that the cap would be applied
to payments to hospitals under section 1886(r)(2) of the Act.
Comment: One commenter asked CMS to clarify how it will apply the
cap to the empirically justified Medicare DSH payments. The commenter
offered the following example:
``If a hospital subject to the twelve-percent cap has a
disproportionate share patient percentage sufficient to generate a
disproportionate share adjustment percentage of 16 percent pursuant to
[section] 1886(d)(5)(F)(vii) [of the Act], under the proposed formula,
CMS could use either 16 percent or 12 [percent] as the empirically
justified amount. If the Agency uses 16 percent, then the empirically
justified amount portion of the formula would be 4 percent (16 * 0.25);
if the agency uses 12 percent, then the empirically justified amount
portion of the formula would be 3 percent (12 * 0.25).''
Response: Section 1886(r)(1) of the Act clearly provides that
Medicare shall pay 25 percent of the amount that would otherwise be
paid ``under subsection (d)(5)(F) to a subsection (d) hospital.'' The
cap provision is stipulated under section 1886(d)(5)(F)(xiv)(II) of the
Act. Therefore, for purposes of the empirically justified Medicare DSH
payment adjustment amount under section 1886(r)(1) of the act, Medicare
is only authorized to pay 25 percent of the amount otherwise payable
under section 1886(d)(5)(F), subject to the 12-percent cap. We note
that the 12-percent cap only applies to the following hospital types:
hospitals located in urban areas with less than 100 beds, and hospitals
located in rural areas with less than 500 beds (however, we note that
the 12-percent cap does not apply to Rural Referral Centers or to
Medicare Dependent Hospitals, regardless of bed size). In the
commenter's example, the empirically justified Medicare DSH payment
adjustment amount paid under section 1886(r)(1) of the Act would be 25
percent of the maximum 12-percent

[[Page 50627]]

DSH adjustment factor under section 1886(d)(5)(F) of the Act, or 3
percent (12 * 0.25). That is, the empirically justified Medicare DSH
payment adjustment amount paid under section 1886(r)(1) of the Act
could not exceed 25 percent of the maximum 12-percent DSH adjustment
factor under section 1886(d)(5)(F) of the Act and, therefore, could not
exceed 3 percent.
d. Uncompensated Care Payments
As we have discussed above, section 1886(r)(2) of the Act provides
that, for each eligible hospital in FY 2014 and subsequent years, the
new uncompensated care payment is the product of three factors. These
three factors represent our estimate of 75 percent of the amount of
Medicare DSH payments that would otherwise have been paid, an
adjustment to this amount for the percent change in the national rate
of uninsurance compared to a base of 2013, and each eligible hospital's
estimated uncompensated care amount relative to the estimated
uncompensated care amount for all eligible hospitals. Below we discuss
the proposed data sources and methodologies for computing each of these
factors and our final policies.
Before we begin to discuss these data sources and methodologies, it
is necessary to discuss the timing and manner for determining the
eligibility of hospitals for uncompensated care payments. The statute
provides that subsection (d) hospitals that receive a payment under
section 1886(d)(5)(F) of the Act are eligible to receive a payment
under section 1886(r)(2) of the Act. Specifically, section 1886(r)(2)
of the Act states that, ``[i]n addition to the payment made to a
subsection (d) hospital under paragraph (1) . . . the Secretary shall
pay to such subsection (d) hospitals an additional amount. . . .''
Therefore, because paragraph (1) refers to empirically justified
Medicare DSH payments, the additional payment for FY 2014 and
subsequent years is limited to hospitals that receive empirically
justified Medicare DSH payments for the respective year. However, as we
have discussed above, we currently have a system for interim payment
and final settlement of DSH payments. Specifically, interim payments
are made for each claim based on the best available data concerning
each hospital's eligibility for DSH payments and the appropriate level
of such payments. Final determination of eligibility for Medicare DSH
payments and the final amount of such payments for eligible hospitals
are determined at the time of cost report settlement.
As we describe above, because section 1886(r)(1) of the Act does
not revise the criteria governing eligibility for DSH payments or the
underlying payment methodology, we do not believe that it is necessary
to develop any new operational mechanisms for making such payments and,
therefore, will continue using the existing system of interim
eligibility and payment determination with final cost report settlement
for the empirically justified Medicare DSH payments. In the FY 2014
IPPS/LTCH PPS proposed rule (78 FR 27582), we proposed to adopt a
similar system of interim eligibility and payment determination with
final cost report settlement for purposes of uncompensated care
payments. We discussed our proposals regarding the specific operational
details of this system in section V.E.3.f. of the preamble of the
proposed rule.
We invited public comments on these proposals.
Comment: Some commenters requested that if CMS has initially
projected that a hospital is ineligible for uncompensated care
payments, but data later become available to indicate that the hospital
is eligible, the hospital be able to receive the uncompensated care
payments prior to cost report settlement.
Response: For the reasons discussed above regarding the empirically
justified Medicare DSH payments, we do not believe that it is necessary
or advisable to depart from our longstanding process of making interim
eligibility determinations for Medicare DSH payments with final
determination at cost report settlement. As we discuss in greater
detail in section V.E.3.f. of the preamble to this final rule, we will
make interim eligibility determinations based on data from the most
recently available SSI ratios and Medicaid fractions prior to the
beginning of the payment year. We will then make final determinations
of eligibility at the time of settlement of each hospital's cost
report. Therefore, if a hospital is initially determined to be
ineligible for payments under sections 1886(r)(1) and 1886(r)(2) of the
Act, but is later determined to indeed be eligible, we are adopting as
final our proposal to make those payments at cost report settlement. We
also note that, consistent with our decision, as discussed in the next
section, to determine Factor 1 prospectively, we will not revise Factor
1 retrospectively to account for the effects of these final
determinations of eligibility for payments under sections 1886(r)(1)
and 1886(r)(2) of the Act at cost report settlement.
(1) Methodology To Calculate Factor 1
Section 1886(r)(2)(A) of the Act establishes Factor 1 in the
calculation of the uncompensated care payment. Section 1886(r)(2)(A) of
the Act states that it is a factor ``equal to the difference between
(i) the aggregate amount of payments that would be made to subsection
(d) hospitals under subsection (d)(5)(F) if this subsection did not
apply for such fiscal year (as estimated by the Secretary); and (ii)
the aggregate amount of payments that are made to subsection (d)
hospitals under paragraph (1) for such a fiscal year (as so
estimated).'' Therefore, section 1886(r)(2)(A)(i) of the Act represents
the estimated Medicare DSH payment that would have been made under
section 1886(d)(5)(F) if section 1886(r) of the Act did not apply for
such fiscal year. Section 1886(r)(2)(A)(i) of the Act specifies that,
for each fiscal year to which the provision applies, such amount is to
be ``estimated by the Secretary.'' Under a prospective payment system,
we would not know the precise aggregate Medicare DSH payment amount
that would be paid for a Federal fiscal year until cost report
settlement for all IPPS hospitals is completed, which occurs several
years after the end of the Federal fiscal year. Therefore, the statute
gives CMS authority to estimate this amount, by specifying that, for
each fiscal year to which the provision applies, such amount is to be
``estimated by the Secretary.'' Similarly, section 1886(r)(2)(A)(ii) of
the Act represents the estimated empirically justified Medicare DSH
payments to be made in FY 2014 and subsequent years, as prescribed
under section 1886(r)(1) of the Act. Again, section 1886(r)(2)(A)(ii)
of the Act gives CMS authority to estimate this amount.
Therefore, Factor 1 is the difference between our estimates of: (1)
The amount that would have been paid in Medicare DSH payments for FY
2014 and subsequent years, in the absence of the new payment provision;
and (2) the amount of empirically justified Medicare DSH payments that
are made for FY 2014 and subsequent years, which takes into account the
requirement to pay 25 percent of what would have otherwise been paid
under section 1886(d)(5)(F) of the Act. In other words, this factor
represents our estimate of 75 percent (100 percent minus 25 percent) of
our estimate of Medicare DSH payments that would otherwise be made, in
the absence of section 1886(r) of the Act, for FY 2014 and subsequent
years.

[[Page 50628]]

In order to determine Factor 1 in the uncompensated care payment
formula, we proposed to develop final estimates of both the aggregate
amount of Medicare DSH payments that would be made in the absence of
section 1886(r)(1) and the aggregate amount of empirically justified
Medicare DSH payments to hospitals under section 1886(r)(1) of the Act
prior to each fiscal year to which the new provision applies. We
believe this will create some level of predictability and finality for
hospitals eligible for these payments, in addition to being
administratively efficient. Specifically, in order to determine the two
elements of Factor 1 (Medicare DSH payments prior to the application of
section 1886(r)(1) of the Act, and empirically justified Medicare DSH
payments after application of section 1886(r)(1)), we proposed to use
the most recently available projections of Medicare DSH payments for FY
2014 and each subsequent year, as calculated by CMS' Office of the
Actuary. The Office of the Actuary projects Medicare DSH payments on a
biannual basis, typically in February of each year (based on data from
December of the previous year) as part of the President's Budget, and
in July (based on data from June) as part of the Midsession Review. The
estimates are based on the most recently filed Medicare hospital cost
report with Medicare DSH payment information and the most recent
Medicare DSH patient percentages and Medicare DSH payment adjustments
provided in the IPPS Impact File.
Therefore, for the Office of the Actuary's February 2013 estimate,
the data are based on the December 2012 update of the Medicare Hospital
Cost Report Information System (HCRIS) and the FY 2013 IPPS/LTCH PPS
final rule IPPS Impact file, published in conjunction with the
publication of the FY 2013 IPPS/LTCH PPS final rule. For the July 2013
estimate, we anticipated that the data would be based on the March 2013
update of the Medicare Hospital Cost Report data and the proposed
rule's IPPS Impact file, published in conjunction with the proposed
rule. For purposes of the proposed rule, we used the February 2013
Medicare DSH estimates to calculate Factor 1 and to model the proposed
impact of this provision. We stated that if our proposal to use the
Office of the Actuary's projections for Factor 1 is finalized, we would
use the July 2013 Medicare DSH estimates to determine Factor 1 for this
FY 2014 IPPS/LTCH PPS final rule.
In addition, because we proposed to exclude SCHs paid under their
hospital-specific payment rate from the application of section 1886(r)
of the Act, we also proposed to exclude these hospitals from our
Medicare DSH estimate. Similarly, because Maryland hospitals and
hospitals participating in the Rural Community Hospital Demonstration
do not receive DSH payments, we also proposed to exclude these
hospitals from our Medicare DSH estimate.
Using the data sources discussed above, the Office of the Actuary
uses the most recently submitted Medicare cost report data to identify
current Medicare DSH payments and the most recent DSH payment
adjustments provided in the IPPS Impact File, and applies inflation
updates and assumptions for future changes in utilization and case-mix
to estimate Medicare DSH payments for the upcoming fiscal year. The
February 2013 Office of the Actuary estimate for Medicare DSH payments
for FY 2014, without regard to the application of section 1886(r)(1) of
the Act, was $12.338 billion. This estimate excludes Maryland
hospitals, SCHs paid under their hospital-specific payment rate and
hospitals participating in the Rural Community Hospital Demonstration
as discussed above. Therefore, based on this estimate, the estimate for
empirically justified Medicare DSH payments for FY 2014, with the
application of section 1886(r)(1) of the Act, was $3.084 billion (25
percent of the total amount estimated). Under our proposal, Factor 1 is
the difference of these two estimates of the Office of the Actuary.
Therefore, for the purpose of modeling Factor 1, we calculated Factor 1
to be $9.2535 billion.
We also proposed to develop and use the estimates necessary for
Factor 1 on a purely prospective basis. We proposed to use the
Actuary's most recent February Medicare DSH estimates each year to
calculate Factor 1 and to model the impact of this provision for the
IPPS/LTCH PPS proposed rule. Similarly, we proposed to use the
Actuary's most recent July Medicare DSH estimates to determine Factor 1
for the IPPS/LTCH PPS final rule each year. In other words, we would
not revise or update our estimates after we know the final Medicare DSH
payments for FY 2014 and subsequent years. As we discussed earlier, we
do not know the aggregate Medicare DSH payment amount that would be
paid for each federal fiscal year until the time of cost report
settlements, which occur several years after the end of the fiscal
year. Because the statute provides that CMS use estimates in order to
determine Factor 1 each year, we stated that we believe that applying
our best estimates prospectively would be most conducive to
administrative efficiency, finality, and predictability in payments. We
proposed to add a new paragraph (g)(1)(i) under Sec. 412.106 of our
regulations to define the methodology for calculating Factor 1.
We invited public comments on all the elements of this proposed
methodology to calculate Factor 1.
Comment: Some commenters pointed out that the summary analysis that
CMS provided of the uncompensated care Factor 1 estimate indicates that
the 2009 Medicare DSH payments were used as the starting point to
project expected empirically justified Medicare DSH payment adjustments
for FY 2014. The commenters noted that the current 2009 Medicare DSH
payments do not reflect several key issues that have yet to be settled
by the courts, such as dual eligible days and MA days, or issues that
have already been settled such as labor and delivery room days. In
addition, the commenters noted that the majority of the 2009 cost
reports remain unaudited. Therefore, commenters maintained that we
should not use 2009 as a base year for empirically justified Medicare
DSH payment adjustment eligibility without finalizing all 2009 cost
reports and appeals.
Response: In this final rule, our Office of the Actuary has based
its projections on cost reports for fiscal year 2010 as a starting
point. This is the most recent year for which cost report data has been
submitted by almost all the hospitals, which is very important for
purposes of estimating the full amount of empirically justified
Medicare DSH payments. We do not believe that we should employ a cost
reporting period for which cost report data have all been audited
because doing so would require using much earlier data as the basis for
the projection. This would create the potential for much larger
projection errors and would, therefore, not tend to increase the
accuracy of the projection.
Comment: Some commenters noted that CMS proposed to use 2009 cost
report data as the base year for Factor 1, but to use 2010-2012 cost
report data for purposes of the Factor 3 calculations. The commenters
asked why the baseline information cannot be derived from the same
period as the data used in the Factor 3 calculation and urged CMS to
reconcile this discrepancy.
Response: In order to determine the total amount of Medicare DSH
spending for Factor 1, it is important to use the latest available data
year for which almost all hospitals have submitted their cost reports,
which for purposes of this final rule is 2010 cost report data. This is
because we are computing a total

[[Page 50629]]

number that must include all hospitals and, therefore, to avoid
discrepancies, we believe that it is important to use data from the
same time period for all hospitals. Therefore, we believe that it is
appropriate to use a data year that does not include some hospitals.
However, for purposes of determining hospital-specific factors used to
compute Factor 3, it is important to use the most recent data for each
hospital. In this way, the projections for each hospital will be as
accurate as possible because we use the most recent available data. It
is more important in this case to provide for the most accurate
projection for each hospital than to employ data from the same cost
reporting period for each hospital. Therefore, using different years in
making these two determinations actually enhances, rather than detracts
from, the accuracy of these projections.
Comment: One commenter maintained that we underestimated the 2009
Medicare DSH amount by not including adjustments required by the recent
decision in Allina v. Sebelius. The commenter estimated that the
projected 2014 Medicare DSH payments, which are based on 2009 DSH
payments, are understated by $1.1 billion as a result of the incorrect
treatment of MA days. Therefore, the commenter argued that CMS must use
proper 2009 Medicare DSH data, including corrections required as a
result of court cases, before it can appropriately extrapolate the data
for current year calculations.
Response: The commenter is correct that we did not include the
effects of any court cases that are not already reflected in the cost
reports in developing our estimate for Factor 1. We continue to believe
that Allina was wrongly decided and have appealed the decision.
Therefore, a final decision has not yet been rendered in the case. We
note that elsewhere in this final rule, we are finalizing our proposal
to readopt our policy to include Medicare Advantage days in the
Medicare SSI ratio, which we believe further makes it unnecessary to
revise our Factor 1 estimate. A secondary reason for not including such
an adjustment in our estimate is that we are not aware of a methodology
that could accurately estimate the impact of any court cases and so
introducing another estimate would likely reduce, not improve, the
accuracy of our calculations. We appreciate that the commenter has
offered an estimate but we are unable to verify the methodology and
computations used to develop it.
Comment: One commenter noted that the summary analysis of the
uncompensated care Factor 1 estimate that we provided after the
publication of the proposed rule includes a column for ``other''
adjustment factors used in developing the estimate. However, the
commenter stated that CMS did not provide the detail explaining and
supporting this factor. The commenter further noted that the footnote
to the ``other'' column states: ``Other column includes impact of only
IPPS discharges and impact of DSH payments increasing or decreasing at
a different rate than other IPPS payments.'' The commenter requested
that CMS provide the details behind this factor.
Response: The ``other'' ``adjustment factors as mentioned in the
data file supporting our estimate of Factor 1 reflect two identifiable
factors: The impacts of (1) only including IPPS discharges in the
calculation, and (2) of Medicare DSH payments increasing or decreasing
at a different rate than other IPPS payments. In relation to the first
factor, an adjustment is made to reflect the fact that IPPS discharges
increase at a different rate than total inpatient hospital discharges
(which are reflected in the discharge column of the data file). The
second factor comes into play if the Medicare DSH payments under IPPS
are increasing faster or slower than all payments to IPPS hospitals,
which is determined by looking at prior year's impact files. We note
that the application of these ``other'' adjustment factors has caused
the total Medicare DSH estimate to increase. If we were to ignore these
factors, the final Medicare DSH payment estimate used for purposes of
estimating Factor 1 would be much lower.
Comment: Some commenters stated that the same summary analysis of
the Medicare DSH payments estimate includes an adjustment factor for
discharges. However, the commenters noted that CMS had not provided the
detail supporting the discharge factor it used. In addition, the
commenters stated that the footnote to the discharge column states that
all inpatient hospitals were included, not just IPPS hospitals. The
commenters suggested that because the purpose of the projection is to
estimate the amount of Medicare DSH payments that will go to a subset
of all inpatient hospitals, CMS should use only the hospitals'
projected share in the payments when determining the factors that drive
the estimate.
Response: We agree that the Medicare DSH payment projections
ideally should reflect only the number of discharges for IPPS
hospitals. However, the Office of the Actuary only has projections of
total inpatient hospital discharges. As a result, in this calculation
we have included an adjustment to reflect the impact of IPPS hospitals'
discharges as part of the ``other'' adjustment factors that we have
just discussed.
Comment: Several commenters asserted that CMS' assumption that
actual Medicare DSH payments made for FY 2012 amounted to only $11.59
billion is illogical and unsupported by any substantial evidence. The
commenters stated that, first, this assumption conflicts with other
recent estimates by the same Actuary concerning total Medicare DSH
payments for the same year, 2012. The commenters noted that within 1
month of the release of the proposed rule, CMS released data, which it
attributed to the Office of the Actuary indicating that aggregate
Medicare DSH payments for FY 2012 totaled $11.93 billion. The
commenters pointed out that this number is nearly $400 million greater
than the 2012 estimate (extrapolated from 2009 data) used to calculate
Factor 1 in the proposed rule.
Response: The estimate of $11.93 billion in Medicare DSH payments
for FY 2012 was based on all reported Medicare DSH payments, which are
shown on the cost reports. We note that Maryland hospitals, SCHs, and
hospitals participating in the Rural Community Hospital Demonstration
program report DSH payments on their cost reports even if ultimately
they are not paid a DSH payment adjustment. Therefore, this estimate
included payments for three categories of hospitals that will not
receive uncompensated care payments: Maryland hospitals; SCHs paid on a
hospital-specific basis; and hospitals that are part of the Rural
Community Hospital Demonstration program. Therefore, we removed the
estimated DSH payments for these three categories of hospitals for
purposes of determining Factor 1 in the proposed rule. The removal of
these hospitals reduced the Factor 1 estimate to $11.59 billion
compared to the $11.93 billion estimate of all reported Medicare DSH
payments.
Comment: Several commenters stated that the summary analysis of the
Medicare DSH payment estimate includes an adjustment factor for case-
mix. However, the commenters noted that CMS had not provided the detail
supporting the case-mix factor used. The commenters suggested that CMS
provide the details behind this factor to allow for comprehensive
comments. In addition, these commenters requested that CMS clarify how
the case-mix change from year to year was derived as it relates to the
documentation and coding adjustment. The commenters

[[Page 50630]]

pointed out that the trend in the change in case-mix from year to year
does not seem to support the need for a documentation and coding
adjustment and, in fact, the year-to-year change in two cases is a
decrease. The commenters urged CMS to ensure that the case-mix being
used does not already reflect the documentation and coding adjustment
so providers can be certain the adjustment is not being made twice.
Response: The case-mix increase is calculated using the weighted
average of the relative weights for each year. These relative weights
are weighted by the number of discharges in the first year. The case-
mix numbers used in the estimate of Medicare DSH payments do not
include the documentation and coding adjustments. The years which have
been adjusted for documentation and coding (as required by law)
occurred before the years shown in this data file.
Comment: Several commenters noted that, based on projections made
by CBO, the number of uninsured people is projected to drop 11.2
percentage points in 2014 compared to 2013. The commenters expressed
the view that the projected decline in the uninsured rate is due in
part to the potential addition of 9 million new Medicaid recipients,
according to the May 2013 CBO projections to be used by CMS. However,
the commenters stated that it does not appear that the projected 2014
Medicare DSH amount includes expected additional Medicare DSH payments
due to Medicaid expansion and requested that CMS provide additional
information.
Response: We agree with the commenters that the number of Medicaid
days will likely increase as a result of Medicaid expansion, therefore
likely increasing the aggregate amount of payments that would have been
made to subsection (d) hospitals under section 1886(d)(5)(F) of the Act
if section 1886(r) of the Act did not apply. Medicaid days are included
as part of a hospital's disproportionate patient percentage as
described at Sec. 412.106(b)(4) of the regulations. Accordingly, we
have included an estimate of the impact of the Medicaid expansion in
our projection of Factor 1 for this final rule.
Comment: Several commenters objected to the proposal to apply our
best estimates of Factor 1 on a prospective basis only. These
commenters maintained that the administrative efficiency, finality, and
predictability in payments that CMS cited in favor of the proposal were
less important than accuracy in payments. The commenters noted that
there were a number of questions and uncertainties about the Actuary's
proposed projection for FY 2014, and that it would therefore be most
appropriate to establish a final value for Factor 1 only at the time of
final cost report settlements, using actual data or at a later time,
when more informed projections will be available. Other commenters
supported the proposal to employ prospective estimates from the Office
of the Actuary and not to update these estimates once final data become
available. However, some of these commenters urged CMS to publish final
amounts of Factor 1 so that any consistent errors can be addressed to
improve the accuracy of future projections.
Response: As we noted in the proposed rule (78 FR 27583), we would
not know the precise aggregate Medicare DSH payment amount that would
be paid for a Federal fiscal year until cost report settlement for all
IPPS hospitals is completed, which occurs several years after the end
of the Federal fiscal year. The statute gives us authority to estimate
this amount by specifying that, for each fiscal year to which the
provision applies, such amount is to be ``estimated by the Secretary.''
We believe that it is, therefore, most consistent with the statute to
employ estimates for purposes of determining Factor 1. Otherwise, final
settlement of these payments could be delayed as much as 6 years or
more after the payment year. As in the case of other payment factors
that we determine on the basis of prospective estimates (for example,
the aggregate amount of annual payments for outliers), we will
continually examine our estimates compared to actual data for each year
in order to improve our future projections.
Comment: Several commenters pointed out that CMS assumed a 2-
percent documentation and coding adjustment for FY 2014 in estimating
Factor 1 for the proposed rule, but that CMS actually proposed a
documentation and coding adjustment of 0.8 percent. These commenters
urged CMS to correct this assumption in the final rule.
Response: We agree with these commenters. Accordingly, for this
final rule, the Office of the Actuary has employed a documentation and
coding adjustment of 0.8 percent for FY 2014 in developing our estimate
of Factor 1 for FY 2014.
After consideration of the public comments we received, we are
finalizing our proposal to add a new paragraph (g)(1)(i) under Sec.
412.106 of our regulations to define the methodology for calculating
Factor 1. As we noted in the proposed rule (78 FR 27582 through 27583),
the Office of the Actuary projects Medicare DSH payments on a biannual
basis, typically in February of each year (based on data from December
of the previous year) as part of the President's Budget, and in July
(based on data from June) as part of the Midsession Review. The
estimates are based on the most recently filed Medicare hospital cost
report with Medicare DSH payment information and the most recent
Medicare DSH patient percentages and Medicare DSH payment adjustments
provided in the IPPS Impact File.
Therefore, for the Office of the Actuary's February 2013 estimate,
the data are based on the December 2012 update of the Medicare Hospital
Cost Report Information System (HCRIS) and the FY 2013 IPPS/LTCH PPS
final rule IPPS Impact file, published in conjunction with the
publication of the FY 2013 IPPS/LTCH PPS final rule. For the July 2013
estimate, we anticipated that the data would be based on the March 2013
update of the Medicare Hospital Cost Report data and the IPPS Impact
file published in conjunction with the proposed rule. For purposes of
the proposed rule, we used the February 2013 Medicare DSH estimates to
calculate Factor 1 and to model the proposed impact of this provision.
We stated that if our proposal to use the Office of the Actuary's
projections for Factor 1 is finalized, we would use the July 2013
Medicare DSH estimates to determine Factor 1 for this FY 2014 IPPS/LTCH
PPS final rule.
For this final rule, the Office of the Actuary has used the July
2013 Medicare DSH estimates, based on the March 2013 update of the
Medicare Hospital Cost Report data and the proposed rule's IPPS Impact
file, to determine Factor 1. The July 2013 Office of the Actuary
estimate for Medicare DSH payments for FY 2014, without regard to the
application of section 1886(r)(1) of the Act, is approximately $12.772
billion (for purposes of the proposed rule, we estimated this amount to
be approximately $12.338 billion). As in the proposed rule, this
estimate excludes Maryland hospitals, SCHs paid under their hospital-
specific payment rate, and hospitals participating in the Rural
Community Hospital Demonstration program. Therefore, based on this
estimate, the estimate for empirically justified Medicare DSH payments
for FY 2014, with the application of section 1886(r)(1) of the Act, is
approximately $3.193 billion (25 percent of the total amount
estimated). Under our proposal, Factor 1 is the difference of these two
estimates of the Office of the Actuary.

[[Page 50631]]

Therefore, for the purpose of this final rule, we calculate Factor 1 to
be approximately $9.579 billion (for purposes of the proposed rule,
Factor 1 was estimated to be approximately $9.2535).
(2) Methodology To Calculate Factor 2
Section 1886(r)(2)(B) of the Act establishes Factor 2 in the
calculation of the uncompensated care payment. Specifically, section
1886(r)(2)(B)(i) of the Act provides: ``For each of fiscal years 2014,
2015, 2016, and 2017, a factor equal to 1 minus the percent change in
the percent of individuals under the age of 65 who are uninsured, as
determined by comparing the percent of such individuals (I) who are
uninsured in 2013, the last year before coverage expansion under the
Patient Protection and Affordable Care Act (as calculated by the
Secretary based on the most recent estimates available from the
Director of the Congressional Budget Office before a vote in either
House on the Health Care and Education Reconciliation Act of 2010 that,
if determined in the affirmative, would clear such Act for enrollment);
and (II) who are uninsured in the most recent period for which data is
available (as so calculated), minus 0.1 percentage points for fiscal
year 2014 and minus 0.2 percentage points for each of fiscal years
2015, 2016, and 2017.''
Section 1886(r)(2)(B) of the Act establishes, as Factor 2 in the
uncompensated care payment formula, the percent change in uninsurance,
based on a comparison of the percent of individuals under 65 without
insurance in 2013 to the percent of such individuals without insurance
in the most recent period for which we have data, minus 0.1 percentage
points for FY 2014 and 0.2 percentage points for each of FYs 2015,
2016, and 2017.
Section 1886(r)(2)(B)(i)(I) of the Act further indicates that the
percent of individuals under 65 without insurance in 2013 must be the
percent of such individuals ``who are uninsured in 2013, the last year
before coverage expansion under the Patient Protection and Affordable
Care Act (as calculated by the Secretary based on the most recent
estimates available from the Director of the Congressional Budget
Office before a vote in either House on the Health Care and Education
Reconciliation Act of 2010 that, if determined in the affirmative,
would clear such Act for enrollment).'' The Health Care and Education
Reconciliation Act (Pub. L. 111-152) was enacted on March 30, 2010. It
was passed in the House of Representatives on March 21, 2010, and by
the Senate on March 25, 2010. Because the House of Representatives was
the first House to vote on the Health Care and Education Reconciliation
Act of 2010 on March 21, 2010, we have determined that the most recent
estimate available from the Director of the Congressional Budget Office
``before a vote in either House on the Health Care and Education
Reconciliation Act of 2010 . . .'' appeared in a March 20, 2010 letter
from the director of the CBO to the Speaker of the House. (Emphasis
supplied.) Therefore, we believe that only the estimates in this March
20, 2010 letter meet the statutory requirement under section
1886(r)(2)(B)(i)(I) of the Act. (To view the March 20, 2010 letter, we
refer readers to the Web site at: https://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/113xx/doc11379/amendreconprop.pdf.
In its March 20, 2010 CBO letter to the Speaker of the House of
Representatives, the CBO provided two estimates of the ``post-policy
uninsured population.'' The first estimate is of the ``Insured Share of
the Nonelderly Population Including All Residents'' (which is 82
percent) and the second estimate is of the ``Insured Share of the
Nonelderly Population Excluding Unauthorized Immigrants'' (83 percent).
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27583), we proposed
to use the first estimate that includes all residents, including
unauthorized immigrants. We stated that we believe this estimate is
most consistent with the statute which requires us to measure ``the
percent of individuals under the age of 65 who are uninsured,'' and
provides no exclusions except for individuals over the age 65. In
addition, we stated that we believe that this estimate would more fully
reflect the levels of uninsurance in the United States that influence
uncompensated care for hospitals than the estimate that reflects only
legal residents. Therefore, using this estimate would seem more
consistent with the statutory requirement of establishing a payment for
uncompensated care. For these reasons, we proposed to use the estimate
of the ``Insured Share of the Nonelderly Population Including All
Residents'' for 2013 to calculate the baseline percentage of
individuals under age 65 without insurance.
We invited public comments on this proposal.
Comment: Several commenters supported the proposal to use the CBO
estimate of the ``Insured Share of the Nonelderly Population Including
All Residents'' for purposes of determining Factor 2. The commenters
agreed that this estimate more fully reflects the levels of uninsurance
in the United States that influence uncompensated care for hospitals
than the estimate that excludes unauthorized immigrants and is,
therefore, more consistent with the statutory requirement of
establishing a payment for uncompensated care.
Response: We appreciate the commenters' support for this proposal,
and we are finalizing our proposal to employ the CBO estimate of the
``Insured Share of the Nonelderly Population Including All Residents''
contained in its March 20, 2010 letter to the Speaker of the House of
Representatives to determine the percentage of individuals under age 65
without insurance for purposes of Factor 2.
The March 20, 2010 CBO letter reports these figures as the
estimated percentage of individuals with insurance. However, because
section 1886(r)(2)(B)(i) of the Act requires that we compare the
percent of individuals ``who are uninsured in 2013,'' in the FY 2014
IPPS/LTCH PPS proposed rule (78 FR 27584), we proposed to use the CBO
insurance rate figure and subtract that amount from 100 percent (that
is, the total population, without regard to insurance status) to
estimate the 2013 baseline percentage of individuals without insurance.
In its March 20, 2010 letter, the CBO reported its estimate of the
``Insured Share of the Nonelderly Population Including All Residents''
as 82 percent. Therefore, we proposed that, for FYs 2014 through 2017,
our estimate of the uninsurance percentage for 2013 would be 18
percent. As provided for in the CBO March 20, 2010 letter, the CBO
estimate for insurance for the nonelderly (under age of 65) population
only includes residents of the 50 States and the District of Columbia,
and the count of uninsured people includes unauthorized immigrants, as
well as individuals who are eligible for, but not enrolled in,
Medicaid. We note that, although we proposed that acute care hospitals
located in Puerto Rico that receive DSH payments would be eligible to
receive payments under section 1886(r) of the Act, this estimate for
insurance does not account for residents in Puerto Rico. We believe
that the impact of the exclusion of Puerto Rico from the insurance
estimate is negligible.
We invited public comments on this proposal.
We did not receive any public comments on our proposal to employ an
estimate for insurance among the nonelderly that includes only
residents of the 50 States and the District of Columbia and, therefore,
does not account for residents in Puerto Rico.

[[Page 50632]]

Therefore, we are finalizing the policy, as proposed.
Section 1886(r)(2)(B)(i) of the Act requires that we compare the
baseline uninsurance rate to the percent of such individuals ``who are
uninsured in the most recent period for which data is available (as so
calculated).'' In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR
27584), we proposed to use the same data source, CBO estimates, to
calculate this percent of individuals without insurance. Section
1886(r)(2)(B)(i)(I) of the Act refers to the percent of uninsured in
2013 ``as calculated by the Secretary based on'' the CBO data.
Similarly, section 1886(r)(2)(B)(i)(II) of the Act immediately
afterwards refers to the percent of uninsured for 2014 ``as so
calculated.'' (Emphasis supplied.) The phrase ``as so calculated'' in
the latter section can be reasonably interpreted to require the
calculation to similarly be based on CBO estimates. In addition, we
believe that it is preferable from a statistical point of view to
calculate a percent change in insurance over time using a consistent
data source. Furthermore, rather than using the estimates included in
the March 20, 2010 CBO letter, we believe it is appropriate to use more
recent CBO estimates of the percent of individuals with insurance. The
more recent CBO projections take into account changes in the
environment that can impact insurance rates, such as more recent
economic conditions and the Supreme Court's decision in National
Federation of Independent Business. v. Sebelius--U.S.--, 132 S. Ct.
2566 (2012), regarding Medicaid expansions authorized by the Affordable
Care Act. Because the statute requires that we use ``the most recent
period for which data is available'' to calculate the comparison
percentage of individuals without insurance, we proposed to use the
most recent update (that is, the most recent update available at the
time of rulemaking with respect to a particular fiscal year) to the
percent of individuals with insurance provided by the CBO to calculate
this comparison figure.
In addition, for FY 2014, we proposed to use CBO's most recent
estimate for the percent of individuals with insurance in 2014 for
purposes of section 1886(r)(2)(B)(i)(II) of the Act because this is the
year in which this provision is effective. This figure is used for
Factor 2 and later applied to Factor 1, which is also based on an
estimate for FY 2014. On February 5, 2013, the CBO released its annual
Budget and Economic Outlook. The report included updated economic and
budget projections that incorporated the effects of the legislation
enacted prior to the start of the year, a revised economic forecast
consistent with the budget projections, and other changes to CBO's
estimates. (To view the report, we referred readers to the Web site at:
https://www.cbo.gov/sites/default/files/cbofiles/attachments/43900_ACAInsuranceCoverageEffects.pdf.)
In the proposed rule (78 FR 27584), we used the February 5, 2013,
CBO health insurance estimates in order to calculate the percentage of
individuals without insurance for 2014. As we did for the uninsurance
percentage estimate for 2013 (based on the March 20, 2010 CBO letter
discussed above), we proposed to use the ``Insured Share of the
Nonelderly Population Including All Residents'' to calculate the
comparison of the percentage of people without insurance for 2014.
Consistent with the CBO estimate used to calculate the baseline
uninsurance estimate, this estimate for insurance only includes
residents of the 50 States and the District of Columbia, and the count
of uninsured people includes unauthorized immigrants, as well as
individuals who are eligible for, but not enrolled in, Medicaid. The
CBO report projects that the ``Insured Share of the Nonelderly
Population Including All Residents'' for 2014 will be 84 percent.
Therefore, in the same manner that we calculated the uninsurance
percentage for the baseline, we proposed that the uninsurance
percentage for 2014 would be 16 percent (that is, 100 percent minus 84
percent) for the purpose of this proposed rule. We indicated that if
our proposal was finalized, and there is a more recent estimate of the
percentage of individuals with insurance in 2014 by the CBO available
for the FY 2014 IPPS/LTCH PPS final rule, we would use that estimate to
calculate Factor 2. However, we would not adjust Factor 2 retroactively
to account for estimates that become available after publication of the
final rule.
Comment: Some commenters agreed with the proposal to use CBO
estimates of rates of insurance coverage in 2014 and subsequent years
as a basis for calculating Factor 2. One commenter stated that the CBO
estimates were both sufficient and accurate for the purpose of
determining Factor 2. However, other commenters expressed concern about
the accuracy of CBO projections of insurance coverage in 2014 and
subsequent years. These commenters mentioned uncertainties in the wake
of the Supreme Court decision about Medicaid expansion. These
commenters also noted that the statewide exchanges that are to be
established under the Affordable Care Act will not be in operation
until January 2014, so that the CBO projections of an increase in the
rate of insurance coverage may be overstated. Other commenters stated
that the CBO projections are unsupported by substantial data and
requested that Factor 2 be reconciled on the basis of actual data for
2014.
Response: We continue to believe that the CBO projections of
insurance coverage in 2014 and subsequent years are the most reliable
and consistent basis on which to calculate Factor 2. As we noted in the
proposed rule, section 1886(r)(2)(B)(i)(I) of the Act refers to the
percent of uninsured in 2013 ``as calculated by the Secretary based
on'' the CBO data. Similarly, section 1886(r)(2)(B)(i)(II) of the Act
immediately afterwards refers to the percent of uninsured for 2014 ``as
so calculated.'' (Emphasis supplied.) The phrase ``as so calculated''
in the latter section can be reasonably interpreted to require the
calculation to similarly be based on CBO estimates. In addition, we
continue to believe that it is preferable from a statistical point of
view to calculate a percent change in insurance over time using a
consistent data source. The more recent CBO projections take into
account changes in the environment that can impact insurance rates,
such as more recent economic conditions and the Supreme Court's
decision in National Federation of Independent Business. v. Sebelius--
U.S.--, 132 S. Ct. 2566 (2012), regarding Medicaid expansions
authorized by the Affordable Care Act. As is the case with regard to
reconciling the estimates used to determine Factor 1, we believe that
employing actual data as the basis for reconciling the projections
employed to determine Factor 2 would impose an unacceptable delay in
the final determination of uncompensated care payments. Actual data on
the rates of insurance and uninsurance would not become available until
several years after the payment year, and the initial data for the year
would continue to be adjusted for several years after that as further
data become available. Furthermore, by stating that the Secretary's
calculations should be based on ``estimates'' provided by the CBO, the
statute clearly contemplates the use of such estimates on a prospective
basis without reconciliation. Therefore, we are finalizing our proposal
to use the most recently available CBO estimates of insurance rates for
each payment year, and not to adjust Factor 2 retroactively to account
for estimates that become available after publication of the final
rule.
Section 1886(r)(2)(B)(i) of the Act states that Factor 2 for FY
2014 is equal

[[Page 50633]]

to 1 minus the percent change in the percent of individuals under the
age of 65 who are uninsured, as determined by comparing the percent of
such individuals without insurance in the baseline and in the most
recent period for which we have data (minus 0.1 percentage points for
FY 2014). Therefore, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR
27584), we proposed that Factor 2 is 1 minus the percent change between
the baseline percentage of individuals without insurance in 2013 (which
was, for the proposed rule, 18 percent) and the most recent percentage
of individuals without insurance for 2014 (which was, for this proposed
rule, 16 percent) minus 0.1 percentage points.
Using the March 20, 2010 CBO projection for 2013 and the February
5, 2013 CBO projection of uninsurance for all residents for 2014, we
proposed to use the following computation for Factor 2 for FY 2014:

Percent of individuals without insurance for CY 2013 (March 2010 CBO
estimate): 18 percent
Percent of individuals without insurance for CY 2014 (February 2013
CBO estimate): 16 percent
1-[verbar][(0.16-0.18)/0.18][verbar] = 1-0.111 = 0.889 (88.9
percent)
0.889 (88.9 percent)-0.001 (0.1 percentage points) = 0.888 (88.8
percent)
0.888 = Factor 2.

Accordingly, we proposed Factor 2 to be 88.8 percent for FY 2014.
In conjunction with this proposal, we proposed that the amount
available for uncompensated care payments for FY 2014 would be $8.217
billion (0.888 times our proposed Factor 1 estimate of $9.2535
billion). As we noted previously, in the FY 2014 IPPS/LTCH PPS proposed
rule (78 FR 27585), we stated that our proposal for Factor 2 may be
subject to change if more recent CBO estimates of the insurance rate
for 2014 become available prior to the preparation of the final rule.
In the proposed rule, we proposed to add a new paragraph (g)(1)(ii)
under Sec. 412.106 of our regulations to define the methodology for
calculating Factor 2.
We invited public comment on our proposed methodology to calculate
Factor 2.
Comment: Many commenters noted that the CBO estimates of the effect
of the Affordable Care Act on the level of insurance coverage are made
on a calendar year basis (for example, calendar year 2014). However,
the commenters stated, the new payment methodology for uncompensated
care payments will go into effect for FY 2014 (that is, on October 1,
2013). The commenters stated that, therefore, the CBO estimate for
calendar year 2014 represents the first full year during which the
exchanges and Medicaid expansion under the Affordable Care Act will be
in effect. However, the commenters further stated, the new payment
methodology will be in effect for 3 months of the previous calendar
year before these Affordable Care Act provisions that should lower the
uninsurance rate go into effect. Therefore, these commenters urged CMS
to normalize the CBO estimate to reflect FY 2014 more accurately,
specifically by calculating a weighted average of the CBO estimate for
October-December 2013 and the estimate for January-September 2014.
Several commenters illustrated the effect of calculating a weighted
average using the February 5, 2013 CBO projections that CMS employed in
the proposed rule as follows:

CY 2013 rate of insurance coverage (February 2013 CBO estimate): 80
percent
CY 2014 rate of insurance coverage (February 2013 CBO estimate): 84
percent
FY 2014 rate of insurance coverage: (80 percent * .25) + (84 percent
* .75) = 83 percent.
Percent of individuals without insurance for CY 2013 (March 2010 CBO
estimate): 18 percent
Percent of individuals without insurance for FY 2014 (weighted
average): 17 percent
1-[verbar][(0.17-0.18)/0.18][verbar] = 1-0.056 = 0.944 (94.4
percent)
0.944 (94.4 percent)-0.001 (0.1 percentage points) = 0.943 (94.3
percent)
0.943 = Factor 2

Response: We are finalizing our proposal to employ the most recent
CBO estimates of the rates of insurance for FY 2014 and subsequent
payment years. We agree with the recommendation of the commenters that
we should normalize the estimate of uninsurance for FY 2014 by
calculating a weighted average of the CBO estimates for CY 2013 and CY
2014, respectively. We agree that normalizing the estimate to cover FY
2014 rather than CY 2014 will more accurately reflect the actual rate
of uninsurance that hospitals will experience during the FY 2014
payment year. We also believe that we have sufficient discretion under
the statute to employ a normalized estimate for FY 2014 in place of the
CBO estimate for CY 2014 because section 1886(r)(2)(B)(i) of the Act
merely requires us to develop such estimates ``based on the most recent
estimates available from'' the CBO. (We note that the base year
estimate for 2013 remains the same whether it is normalized to FY 2013
or not. This is because the CBO estimates that the statute requires us
to use for the base year indicate a rate of uninsurance of 18 percent
for both CY 2012 and CY 2013, the calendar years which we would employ
to normalize the estimate for FY 2013.)
In this final rule, we are employing the most recent available
estimate, specifically CBO's May 2013 estimates of the effects of the
Affordable Care Act on health insurance coverage, which are available
at https://www.cbo.gov/sites/default/files/cbofiles/attachments/44190_EffectsAffordableCareActHealthInsuranceCoverage_2.pdf, as amended by
CBO's July 2013 estimates of changes in estimates of the effects of
insurance coverage provisions in the Affordable Care Act issued in
conjunction with a memo regarding ``Analysis of the Administration's
Announced Delay of Certain Requirements Under the Affordable Care
Act,'' which are available at https://www.cbo.gov/sites/default/files/cbofiles/attachments/44465-ACA.pdf. The CBO's May 2013 estimate of the
rate of insurance for CY 2013 is 80 percent, and for CY 2014 is 84
percent. (These estimates are unchanged from the February 5, 2013 CBO
projections that we employed in the proposed rule.) The CBO's May 2013
estimate includes an estimate of the change in the number of uninsured
non-elderly people (including unauthorized immigrants) of -14 million
in CY 2014. Based on this estimate of the change in the number of
uninsured non-elderly people, in May 2013, the CBO estimated that in CY
2014 there will be 44 million uninsured non-elderly people. In
addition, the CBO's May 2013 estimate stated that there will be a total
of 274 million non-elderly people in CY 2014. Accordingly, we concluded
that in the May 2013 CBO estimates that there will be 230 million
insured non-elderly people (that is, 274 million total non-elderly
people minus 44 million uninsured non-elderly people), which supports
their estimate that the insured share of the non-elderly population is
84 percent (that is, 230 million insured non-elderly people divided by
274 million total non-elderly people). The CBO's July 2013 estimates do
not include a revised estimate of the insured share of the non-elderly
population in CY 2014, and instead include estimates of the changes in
the number of non-elderly people by type of insurance coverage. In
other words, the CBO's July 2013 estimate includes an estimate of the
change in the number of uninsured non-elderly people (including
unauthorized immigrants). The CBO's July 2013 estimate includes a
revised estimate of the change in the number of uninsured non-elderly
people (including unauthorized immigrants) of -13 million in CY 2014.

[[Page 50634]]

Based on this July 2013 revised estimate of the change in the number of
uninsured non-elderly people and the May 2013 estimate of uninsured
non-elderly people, we conclude that it is appropriate to infer that in
CY 2014 there will be 45 million uninsured non-elderly people. We also
believe that is appropriate to conclude that the CBO made no change to
its estimates of total non-elderly people in July 2013, so that it
remains the same as in their May 2013 estimates of 274 million.
Accordingly, we believe that the number of insured non-elderly people
based on the July 2013 CBO estimates for CY 2014 is 229 million (that
is, 274 million total non-elderly people minus 45 million uninsured
non-elderly people), which results in the insured share of the non-
elderly population of 84 percent (that is, 229 million insured non-
elderly people divided by 274 million total non-elderly people).
Therefore, the calculation of Factor 2 for FY 2014, employing a
weighted average of the CBO projections for CY 2013 and CY 2014, is as
follows:

CY 2013 rate of insurance coverage (May 2013 CBO estimate): 80
percent
CY 2014 rate of insurance coverage (May 2013 CBO estimate, updated
with July 2013 CBO estimate): 84 percent
FY 2014 rate of insurance coverage: (80 percent * .25) + (84 percent
* .75) = 83 percent.
Percent of individuals without insurance for 2013 (March 2010 CBO
estimate): 18 percent
Percent of individuals without insurance for FY 2014 (weighted
average): 17 percent
1-[verbar][(0.17-0.18)/0.18][verbar] = 1-0.056 = 0.944 (94.4
percent)
0.944 (94.4 percent)-0.001 (0.1 percentage points) = 0.943 (94.3
percent)
0.943 = Factor 2

We note that, as a result of this change, we will reduce the total
amount of uncompensated care payments by a smaller amount than the
reductions that would have resulted from our proposed methodology for
Factor 2.
Therefore, in this final rule, we are adopting 0.943 as the final
determination of Factor 2 for FY 2014. In conjunction with this
determination, we have also determined, for the purpose of this final
rule, that the amount available for uncompensated care payments for FY
2014 will be approximately $9.033 billion (0.943 times our Factor 1
estimate of $9.579 billion).
Comment: One commenter opined that the new Medicare DSH payment
adjustment policy will hurt Massachusetts hospitals, which will see no
reduction in uninsured rates because the State has already expanded
health insurance coverage under its own health care reform. The
commenter requested that CMS exempt Massachusetts and any other State
which expands health care coverage from any cuts driven by the
reduction in uninsurance at the national level under the Affordable
Care Act. At minimum, the commenter requested that CMS adjust Factor 2
to account for changes in uninsurance at the State level so that
hospitals in States that are not expected to see reductions in their
uninsured rates--because they have already expanded access in alignment
with the Affordable Care Act--will not see large reductions in their
Medicare DSH payments.
Response: We appreciate receiving the commenter's concerns.
However, the statute provides no authority to exempt some States from
the provision or to adjust the calculation of Factor 2 to reflect
uninsurance rates at a State level. Therefore, we are unable to accept
the commenter's recommendations.
(3) Methodology to Calculate Factor 3
Section 1886(r)(2)(C) of the Act defines Factor 3 in the
calculation of the uncompensated care payment. As we have discussed
above, section 1886(r)(2)(C) of the Act states that Factor 3 is ``equal
to the percent, for each subsection (d) hospital, that represents the
quotient of (i) the amount of uncompensated care for such hospital for
a period selected by the Secretary (as estimated by the Secretary,
based on appropriate data (including, in the case where the Secretary
determines alternative data is available which is a better proxy for
the costs of subsection (d) hospitals for treating the uninsured, the
use of such alternative data)); and (ii) the aggregate amount of
uncompensated care for all subsection (d) hospitals that receive a
payment under this subsection for such period (as so estimated, based
on such data).''
Therefore, Factor 3 is a hospital-specific value that expresses the
proportion of the estimated uncompensated care amount for each
subsection (d) hospital and subsection (d) Puerto Rico hospital with
the potential to receive DSH payments relative to the estimated
uncompensated care amount for all hospitals estimated to receive DSH
payments in the fiscal year for which the uncompensated care payment is
to be made. Factor 3 is applied to the product of Factor 1 and Factor 2
to determine the amount of the uncompensated care payment that each
eligible hospital will receive for FY 2014 and subsequent years. In
order to implement the statutory requirements for this factor of the
uncompensated care payment formula, we must determine the following:
(1) The definition of uncompensated care, or in other words, the
specific items that are to be included in the numerator (that is, the
estimated uncompensated care amount for an individual hospital) and
denominator (that is, the estimated uncompensated care amount for all
hospitals estimated to receive DSH payments in the applicable FY); (2)
the data source(s) for the estimated uncompensated care amount; and (3)
the timing and manner of computing the quotient for each hospital
estimated to receive DSH payments. The statute instructs the Secretary
to estimate the amounts of uncompensated care for a period ``based on
appropriate data.'' In addition, we note that the statute permits the
Secretary to use alternative data ``in the case where the Secretary
determines that alternative data is available,'' which is a better
proxy for the costs of subsection (d) hospitals for treating uninsured
individuals.
In the course of considering how to determine Factor 3, we
considered proposing to define the amount uncompensated care for a
hospital as the uncompensated care costs of that hospital and
considered potential data sources for those costs. In doing so, we
first considered which costs should be included in the definition of
``uncompensated care costs.'' We examined the broad literature on
uncompensated care and the concepts of uncompensated care used in
various public and private programs. We also considered input from
stakeholders and public comments in various forums, including the
national provider call that we held in January 2013. Our review of the
information from these sources indicated that there is some variation
in how different States, provider organizations, and Federal programs
define ``uncompensated care.'' However, a common theme of almost all
these definitions is that they include both ``charity care'' and ``bad
debt'' as constituents of ``uncompensated care.'' After considering the
various factors that are included in different definitions of
``uncompensated care,'' we considered proposing to adopt a definition
which incorporated those factors that are most commonly included within
the term. Thus, we considered proposing to define ``uncompensated
care'' as the cost of charity care plus bad debt which includes the
cost of non-Medicare bad debt and non-reimbursed Medicare bad debt. In
turn, we also considered proposing to define ``charity care costs'' as
the cost of care for patients that meet hospitals' individual criteria
for charity care net of any partial payment received by the hospital
from patients for that

[[Page 50635]]

care, and to define ``non-Medicare bad debt costs'' as the cost of
hospital care for non-Medicare patients that have the financial
capacity to pay, but are unwilling to settle the claim. In addition, we
considered proposing to define ``non-reimbursed Medicare bad debt
costs'' as the amount of allowable coinsurance and deductible for
Medicare patients from whom the hospital has sought to collect payment
through reasonable collection efforts as described in Sec. 413.89(e)
of the Medicare regulations and not reimbursed by Medicare. We
discussed these possible elements of uncompensated care in more detail
in the proposed rule (78 FR 27585)
For purposes of selecting an appropriate data source for this
possible definition of uncompensated care costs, we reviewed the
literature and available data sources and determined that the Medicare
cost report Worksheet S-10 could potentially provide the most complete
data for Medicare hospitals. (We refer readers to the report
``Improvements to Medicare Disproportionate Share (DSH) Payments'' for
a full discussion and evaluation of the available data sources. The
report can be found on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh.html.)
However, we noted that Worksheet S-10 is a relatively new data source
that has been used for specific payment purposes only in relatively
restricted ways (for example, to provide a source of charity care
charges in the computation of EHR incentive payments; 75 FR 44456.). We
also noted that some stakeholders have expressed concern that hospitals
have not had enough time to learn how to submit accurate and consistent
data through this reporting mechanism. Other stakeholders have
maintained that some instructions for Worksheet S-10 still require
clarification in order to ensure standardized and consistent reporting
by hospitals. We understand and appreciate the concerns of these
stakeholders. At the same time, Worksheet S-10 is the only national
data source that includes data for all Medicare hospitals and is
designed to elicit data that are both accurate and consistent with the
definition of uncompensated care costs that we considered proposing to
use. We discussed the possible use of data reported on Worksheet S-10
to determine uncompensated care costs in more detail in the proposed
rule (78 FR 27586).
In order to apply a definition of uncompensated care costs based
upon information reported on the Worksheet S-10, it would be necessary
to use the 2010/2011 cost reports, which were submitted on or after May
1, 2010, when the new Worksheet S-10 went into effect. These are the
most recently available full year of cost reports and the first cost
reports with detailed uncompensated care data on the Worksheet S-10
that would be available for use in implementing the new methodology for
uncompensated care payments for FY 2014. Concerns about the
standardization and completeness of the Worksheet S-10 data could be
more acute for data collected in the first year of the Worksheet's use.
Because of these concerns, we did not propose to define uncompensated
care in a way that would require use of the Worksheet S-10 data.
However, we stated our belief that Worksheet S-10 of the Medicare Cost
Report would otherwise be an appropriate data source to determine
uncompensated care costs. In particular, we noted that Worksheet S-10
was developed specifically to collect information on uncompensated care
costs in response to interest by MedPAC and other stakeholders
regarding the topic (for example, MedPAC's March 2007 Report to
Congress) and that it is not unreasonable to expect information on the
cost report to be used for payment purposes. Furthermore, hospitals
attest to the accuracy and completeness of the information reported in
the cost report at the time of submission. While we realize that
hospitals may wish to have a more specific understanding of how these
data will be used, we believe that the discussion in the proposed rule
will help to increase their understanding and also inform our efforts
to refine the cost report and cost report instructions so that
hospitals may continue to gain experience in reporting accurate
information. We also expect reporting on Worksheet S-10 to improve over
time, particularly in the area of charity care which is already being
used and audited for payment determinations related to the electronic
health record incentive program, and will continue to monitor these
data. Accordingly, we stated in the proposed rule that we may proceed
with a proposal to use data on the Worksheet S-10 to determine
uncompensated care costs in the future, once hospitals are submitting
accurate and consistent data through this reporting mechanism.
As we describe above, in the FY 2014 IPPS/LTCH PPS proposed rule,
we indicated that we were concerned about stakeholder input that the
variations in the data reported on Worksheet S-10 of the Medicare cost
report regarding uncompensated care may be due to hospitals' relative
lack of experience reporting all of the data elements on that
worksheet. A large number of stakeholders noted that there is
considerable variation and numerous inconsistencies in how
uncompensated care is calculated and reported in Worksheet S-10 and
they point out that these inconsistencies can produce divergent
results. Some stakeholders went as far as noting that data from
Worksheet S-10 is ``flawed'' and many suggested more precision in
reporting instructions to help hospitals report data in a more
consistent manner. We noted that most of the data elements reported on
Worksheet S-10 have been previously unused for payment purposes, with
only some data elements recently being used for determining a
hospital's electronic health record incentive payments, and these data
elements have not been subject to audit prior to this time. We stated
that we believe it is important that data used to determine Factor 3
are data that have been historically publicly available, subject to
audit, and used for payment purposes (or that the public understands
will be used for payment purposes). We indicated that it is our belief
that hospitals expend more resources to ensure data accuracy when data
are publicly available and used for payments. For example, the National
Quality Forum (NQF) first endorsed quality measures for readmissions
for heart failure (HF) in May 2008 and acute myocardial infarction
(AMI) and pneumonia (PN) in October 2008. HF was subsequently adopted
in the Hospital Inpatient Quality Reporting (IQR) Program in the FY
2009 IPPS rule and AMI and PN in the CY 2009 OPPS rule. All three were
adopted for the FY 2010 Hospital IQR program and publicly reported in
Hospital Compare in 2009. More recently, starting in FY 2013, all three
were used to determine a payment adjustment under section 1886(q) of
the Act. As the measures became linked with payment, CMS has received
an increasing number of questions regarding and requests to refine
these measures, leading us to believe that hospitals are increasingly
focused on ensuring that their data are correct. Furthermore, it is
also our belief that auditing plays an important role in ensuring data
accuracy by identifying and remediating problem areas and/or hospitals
as well as by having a sentinel effect in others. For example, each
year, CMS and its intermediaries work with hospitals to review salary
and wage data reported on Worksheet S-3 of the

[[Page 50636]]

Medicare cost report for use in determining the wage index. This
extensive process identifies errors and ensures that anomalous data are
reviewed, corrected as needed, and documented. Due to stakeholder
concerns and our belief in the importance of using data that have been
historically publicly available, subject to audit, and used for payment
purposes (or that the public understands will be used for payment
purposes), for FY 2014, we stated in the proposed rule that we had
serious concerns about proposing to use Worksheet S-10 to determine the
amount of uncompensated care.
While the statute instructs the Secretary to estimate the amounts
of uncompensated care for a period ``based on appropriate data,''
section 1886(r)(2)(C)(i) of the Act permits the Secretary to use
alternative data ``in the case where the Secretary determines that
alternative data is available which is a better proxy for the costs of
subsection (d) hospitals for treating the uninsured'' for the numerator
of Factor 3. For the denominator of that quotient, section
1886(r)(2)(C)(ii) of the Act requires the Secretary to use ``the
aggregate amount of uncompensated care for all subsection (d) hospitals
that receive a payment under this subsection for such period (as so
estimated, based on such data). (Emphasis added.) The phrase ``as so
estimated, based on such data'' in the latter section can be reasonably
interpreted to require the calculation to similarly be based on the
same data as is used to estimate the numerator of the quotient in
Factor 3, including any alternative data which is determined to be a
better proxy for the costs of treating the uninsured.
As a result of our concerns regarding variations in the data
reported on the Worksheet S-10, we stated in the proposed rule that we
believe it is appropriate to consider the use of alternative data, at
least in FY 2014, the first year that this provision is effective, and
possibly additional years until hospitals have adequate experience
reporting all of the data elements on Worksheet S-10. We noted that
this is consistent with input we received from some stakeholders in
response to the CMS National Provider Call in January 2013, who stated
their belief that existing FY 2010 and FY 2011 data from the Worksheet
S-10 cannot be used for implementation of section 1886(r) and who
requested the opportunity to re-submit the data once more specific
instructions were issued by CMS. Accordingly, we examined alternative
data sources that could be used to allow time for hospitals to gain
experience with and to improve the accuracy of their S-10 reporting.
In order to implement the statutory requirements for Factor 3 using
alternative data, we must: (1) Determine whether alternative data would
be a better proxy for the treatment costs of the uninsured than the
information available on the Worksheet S-10; (2) identify a source for
this alternative data; and (3) determine the timing and manner of
computing the quotient for each hospital.
We stated in the FY 2014 IPPS/LTCH PPS proposed rule that we
believe that data on utilization for insured low-income patients can be
a reasonable proxy for the treatment costs of uninsured patients.
Moreover, due to the concerns regarding the accuracy and consistency of
the data reported on the Worksheet S-10, we believe that this
alternative data, which is currently reported on the Medicare cost
report, would be a better proxy for the amount of uncompensated care
provided by hospitals. Accordingly, in the FY 2014 IPPS/LTCH PPS
proposed rule (78 FR 27587 through 27588), we proposed to use the
utilization of insured low-income patients defined as inpatient days of
Medicaid patients plus inpatient days of Medicare SSI patients as
defined in 42 CFR 412.106(b)(4) and 412.106(b)(2)(i), respectively to
determine Factor 3. We describe our proposal and rationale, on which we
sought public comment, more fully below.
As a preliminary matter, we noted that precise data on health care
costs are difficult to obtain. For Medicare payment purposes, we
estimate those costs using reported charges and cost-to-charge ratios.
This approach to estimating costs is what is used on Worksheet S-10 to
determine costs for charity care and bad debt. We do believe that the
Medicare cost report is the most comprehensive data source regarding
hospital costs reported to Medicare, and note that alternative data on
uninsured patients are difficult to find in a comprehensive manner on a
hospital-specific basis. In a September 2002 report, Analysis of the
Joint Distribution of Disproportionate Share Hospital Payments, RAND
and Urban Institute researchers describe this difficulty, citing as an
example how detailed inpatient utilization data on self-pay patients
were available only for the sample of hospitals (20 percent sample)
from the 24 States included in AHRQ's HCUP database.\13\
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\13\ Wynn, B. et al. Analysis of the Joint Distribution of
Disproportionate Share Hospital Payments. PM-1387-ASPE. September
20, 2002. Available at: https://www.urban.org/UploadedPDF/410975_ASPEDSH_final.pdf.
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While Worksheet S-10 does contain some information regarding the
treatment costs of the uninsured, most notably of those uninsured
patients who qualify for charity care at an individual hospital, for
the reasons described above, we stated that we were concerned about the
use of information reported on the Worksheet S-10 as appropriate data
for FY 2014 and possibly additional years. As a result of these
concerns, in identifying alternative data that could serve as a proxy
for the treatment costs of the uninsured, we acknowledged that we must
consider methods other than costs to approximate the resources expended
by hospitals to treat uninsured patients. One such method is
utilization. A hospital's costs for treating uninsured patients are a
function of its input costs and utilization of services. In accordance
with the statute, in order to determine Factor 3, a hospital-level
estimate of uncompensated care is required. Such an estimate can be
constructed using detailed data regarding specific items or services.
However, such data are not available to us. In contrast, hospital-level
data measuring utilization as inpatient days or discharges are
available. While we noted that inpatient days or discharges would be
more precise if they took into account the relative resource
utilization of individual patients, such as case-mix, no such data are
available to us. In the September 2002 report discussed above, RAND and
Urban Institute researchers asserted that without specific case-mix
data for low-income populations, inpatient days are preferable to
discharges as a way to measure utilization. Therefore, we stated our
belief that utilization based upon inpatient days is an appropriate
method to approximate costs for the treatment costs of the uninsured.
We further stated that we believe that utilization by insured low-
income patients, such as Medicaid patients or Medicare patients that
receive SSI benefits (Medicare SSI), can be a reasonable proxy for
utilization by uninsured patients. In its 2000 report on American's
Health Care Safety Net, the Institute of Medicine considers uninsured
individuals, low-income underinsured individuals, Medicaid
beneficiaries, and patients with special health care needs all as
vulnerable populations.\14\ We note that when

[[Page 50637]]

studying access to care, researchers may study Medicaid and/or low-
income populations (for example, health outcomes, utilization, etc.) in
order to understand more broadly the impact of similar policy
interventions for other vulnerable populations.\15\ For example,
recently, researchers have studied the effects of Medicaid expansions
to gauge the effects of these expansions on health status and other
indicators to inform policymakers as these expansion efforts
continue.\16\ Researchers have also studied the ability of Medicaid
patients to gain access to outpatient care in an effort to highlight
the ramifications of various policy interventions, such as mandatory
co-payments and utilization restrictions.\17\ We noted that we believe
that this type research is often used by state and other policy makers
to evaluate how Medicaid and other public health insurance can expand
access to care to uninsured populations.
---------------------------------------------------------------------------

\14\ Marion Ein Lewin and Stuart Altman, Editors; Committee on
the Changing Market, Managed Care, and the Future Viability of
Safety Net Providers, Institute of Medicine. America's Health Care
Safety Net: Intact but Endangered. 2000. Available at: https://www.nap.edu/catalog/9612.html.
\15\ John K. Iglehart. Medicaid. N Engl J Med 1993; 328:896-900.
March 25, 1993.
\16\ Benjamin D. Sommers, M.D., Ph.D., Katherine Baicker, Ph.D.,
and Arnold M. Epstein, M.D. Mortality and Access to Care among
Adults after State Medicaid Expansions. N Engl J Med 2012; 367:1025-
1034. September 13, 2012.
\17\ The Medicaid Access Study Group. Access of Medicaid
Recipients to Outpatient Care. N Engl J Med 1994; 330:1426-1430. May
19, 1994.
---------------------------------------------------------------------------

While the report by RAND and the Urban Institute cited above found
shortcomings in how well both Medicaid and Medicare DSH target funds
towards safety net hospitals, another key finding of the report was
that the allocation methods used by these programs target funds to
safety net hospitals at least as well as the alternative allocation
methods they examined. The allocation method used by Medicare for
Medicare DSH is the sum of two computations. The first computation,
defined at 42 CFR 412.106(b)(2), known as the SSI ratio or Medicare
fraction, is the proportion of a hospital's Medicare SSI days relative
to Medicare days. The second computation, defined at 42 CFR
412.106(b)(4), known as the Medicaid fraction, is the proportion of a
hospital's Medicaid days relative to total days. The RAND and the Urban
Institute study also found that the choice of patient populations used
to evaluate how well Medicare and Medicaid DSH funds are allocated is
important. The study notes that including Medicare SSI beneficiaries
along with all other low-income patients generally performed better,
resulting in a better targeting of these payments towards safety net
hospitals. Therefore, we indicated that we believe the utilization of
insured low-income patients defined as insured low-income days, or
inpatient days of Medicaid patients plus inpatient days of Medicare-SSI
patients could be a proxy for the treatment costs of uninsured
patients. Currently, for the Medicare DSH adjustment, hospitals report
utilization for Medicaid and Medicare SSI patients in accordance with
the regulations at 42 CFR 412.106(b)(4) and 412.106(b)(2)(i),
respectively. Specifically, we would define inpatient days for Medicaid
patients as they are defined in Sec. 412.106(b)(4) and inpatient days
for Medicare-SSI patients as they are defined at Sec.
412.106(b)(2)(i). A hospital's individual insured low-income insured
days based on this calculation would represent that hospital's
numerator for Factor 3. The sum of the low-income insured days under
this calculation for all the hospitals that we estimate would receive
DSH payments (and thus the uncompensated care payment) for FY 2014
would represent the denominator of Factor 3.
It is important to point out that when these insured low-income
utilization data are used to determine Medicare DSH payments, they are
subject to additional computations as described in 42 CFR 412.106(b)
and 412.106(d). Therefore, using these data to determine Factor 3 will
lead to a different set of results than using these data to determine
hospitals' Medicare DSH payments.
In the FY 2014 IPPS/LTCH PPS proposed rule, we stated that we
believe the data in the Medicare cost report (and the data that are
used to update the SSI ratios in the cost report) are acceptable for
use as a source for this alternative data because they include data for
all Medicare hospitals. For the reasons described above, we considered
data elements from the Medicare cost report that have been historically
publicly available, subject to audit, and used for payment purposes, as
alternative data for the costs of subsection (d) hospitals for treating
the uninsured. Worksheet S-3, Part I of the CMS-2552-96 version of the
Medicare cost report and Worksheet S-2, Part I of the CMS 2552-10
version of the Medicare cost report contain information on the
utilization of Medicaid patients. Specifically, they contain
information regarding Medicaid days (that is, the numerator of the
Medicaid fraction). The SSI ratios can be found in Worksheet E, Part A
and hospitals' SSI ratios are reported by CMS on the Medicare DSH Web
site, by Federal fiscal year, and include a hospital's Medicare SSI
days. We pointed out that CMS calculates the SSI ratios using the
MedPAR claims data and updates them annually in accordance with the
process and timing set forth in the FY 2011 IPPS/LTCH PPS final rule
(75 FR 50282), generally issuing them in the Spring of each year for
the Federal fiscal year 2 years prior. For instance, we would expect
that the SSI ratios for FY 2011 would be made available in the Spring
of 2013. SSI ratios can be downloaded from https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh.html. The SSI
ratios for a Federal fiscal year are the data that would ultimately be
used in Worksheet E, Part A to determine a hospital's Medicare DSH
adjustment for that fiscal year. While a hospital may choose to have
its DSH payments settled using an SSI ratio based on the hospital's
cost reporting period, this choice will vary by hospital and the timing
of this choice will vary. As a result, a hospital's decision whether to
have its SSI ratio calculated on the basis of its cost reporting period
may not be available at the time we determine Factor 3 for a specific
federal fiscal year. Therefore, in an effort to balance consistency and
administrative efficiency with precision, we stated our belief that it
is appropriate to use the SSI ratios based on the Federal fiscal year.
Except for the data on Worksheet S-10, the Medicare cost report
does not currently include information that would allow calculation of
the treatment costs of uninsured patients. For the reasons described
previously, for FY 2014 and possibly additional years, we have concerns
with using these data. Accordingly, in the FY 2014 IPPS/LTCH PPS
proposed rule (78 FR 27589), we proposed to use Worksheet S-3 Part I of
the CMS-2552-96 version of the Medicare cost report and Worksheet S-2,
Part I of the CMS 2552-10 version of the Medicare cost report and data
that are used to update the SSI ratios on that Worksheet E, Part A as
the source of the alternative data to determine Factor 3 for FY 2014.
In the proposed rule, we stated that we may propose to use data from
Worksheet S-10 to determine uncompensated care costs in the future,
once hospitals are submitting accurate and consistent data through this
reporting mechanism.
The statute also allows the Secretary the discretion to determine
the time periods from which we will derive the data to estimate the
numerator and the denominator of the Factor 3 quotient. Specifically,
the statute defines the numerator of the quotient as ``the amount of
uncompensated care for such hospital for a period selected by the
Secretary * * *'' (Emphasis added.) The

[[Page 50638]]

statute defines the denominator as ``the aggregate amount of
uncompensated care for all subsection (d) hospitals that receive a
payment under this subsection for such period.'' (Emphasis added.) As
we have discussed above, we proposed a process of making interim
payments with final cost report settlement for both the empirically
justified Medicare DSH payments and the uncompensated care payments
required by section 3133 of the Affordable Care Act. Consistent with
that proposed process, we also proposed to determine the time period
from which to estimate the numerator and denominator of the Factor 3
quotient in a way that will be consistent with making interim and final
payments. Specifically, we must have Factor 3 values available for
hospitals that we estimate will qualify for Medicare DSH payments using
most recently available historical data and for those hospitals that we
do not estimate will qualify for Medicare DSH payments but that may
ultimately qualify for Medicare DSH payments at the time of cost report
settlement.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27589), we
proposed to estimate the numerator and the denominator of Factor 3 for
hospitals based on the most recently available full year of Medicare
cost report data (including the most recently available data that may
be used to update the SSI ratios) with respect to a Federal fiscal
year. In other words, we proposed to use data from the most recently
available cost report for the Medicaid days and the most recently
available SSI ratios (that is, latest available SSI ratios before the
beginning of the Federal fiscal year) for the Medicare-SSI days. We
noted that these data are publicly available, subject to audit, and
used for payment purposes. While we recognized that older data also
meet these criteria, we often use the most recently available data for
payment determinations. Therefore, for FY 2014, we proposed to use data
from the 2010/2011 cost reports for the Medicaid days and the FY 2011
SSI ratios for the Medicare-SSI days (or, if the FY 2011 SSIs are
unavailable, the FY 2010 SSI ratios) to estimate Factor 3 for FY 2014.
To summarize, for FY 2014, in response to stakeholder concerns
regarding data variability and lack of reporting experience with
Worksheet S-10, we proposed to determine Factor 3 using insured low-
income patient days from the 2010/2011 cost reports (including the
FY2011 or FY 2010 SSI ratios, whichever represents the most recently
available inputs prior to October 1, 2013) as alternative data which
are a better proxy for the treatment costs of uninsured patients. We
further proposed to define insured low-income patient days as inpatient
days of Medicaid patients plus inpatient days of Medicare SSI patients
as defined in 42 CFR 412.106(b)(4) and 412.106(b)(2)(i), respectively.
We proposed to add a new paragraph (g)(1)(iii) under Sec. 412.106
of our regulations to define the methodology for calculating Factor 3.
We invited public comments on this proposal. Notwithstanding our
concerns regarding Worksheet S-10, we stated that we were interested in
hearing commenters' views on the quality of the data reported on the
Worksheet S-10, and whether it would be sufficient for use in
determining uncompensated care amounts for fiscal year 2014, either by
itself or in combination with other data. We also sought public comment
on how fast we could transition to the use of Worksheet S-10 data based
upon increased reliability over time, including whether the data could
be used to determine uncompensated care in FY 2014 either alone or in
combination with other data.
Comment: Most commenters supported the proposal not to employ the
Worksheet S-10 data to determine uncompensated care costs. These
commenters agreed with CMS' assessment that, at the least, hospitals
need more time to learn how to accurately and consistently report the
Worksheet S-10 data before CMS employs the data to determine Factor 3
in the uncompensated care cost calculation. Some commenters discouraged
CMS from considering the use of these data at any point in the future,
and asked CMS to provide sufficient notice that we may propose use of
the Worksheet S-10 data so that stakeholders will have sufficient time
to express remaining concerns about employing such data. Other
commenters encouraged CMS to clarify and revise the reporting
instructions as appropriate to ensure consistent and accurate reporting
of Worksheet S-10 data so that it can eventually be employed in the
determination of Factor 3.
Response: We appreciate the comments in support of our proposal not
to employ Worksheet S-10 data at this time for purposes of determining
Factor 3. However, we remain convinced that the Worksheet S-10 could
ultimately serve as an appropriate source of more direct data regarding
uncompensated care costs. Therefore, we will review Worksheet S-10 in
order to determine what revisions or clarifications may be necessary so
that it can yield accurate and consistent data. We will consider the
commenters' specific recommendations for such revisions and
clarifications as we do so. It is our intention to propose introducing
use of the Worksheet S-10 to determine Factor 3 within a reasonable
amount of time.
Comment: Some commenters objected to our proposal not to employ the
Worksheet S-10 data to determine uncompensated care costs. These
commenters noted that Worksheet S-10 was developed specifically to
collect information on uncompensated care costs. In addition, MedPAC
expressed reservations about CMS' proposal to employ insured low-income
days as a proxy for uncompensated care costs, and recommended
consideration of charity care and/or a blend of the insured low-income
days and uncompensated care data over a transition of several years to
sole use of the Worksheet S-10 uncompensated care data in determining
Factor 3.
Response: We agree with the commenters that the Worksheet S-10 was
developed specifically to collect information on uncompensated care
costs. However, we also agree with the many commenters who stated that
the data reported on the Worksheet S-10 are not yet reported accurately
and consistently enough to be adopted for purposes of determining
Factor 3. Specifically, we agree that because this is the first year
these data are being reported, confusion could exist about how to
report information on Worksheet S-10. This confusion could affect the
accuracy and completeness of the information reported on Worksheet S-
10. In addition, for the reasons described in the FY 2014 IPPS/LTCH PPS
proposed rule and above, we believe that it would be most appropriate
to use data elements that have been historically publicly available,
subject to audit, and used for payment purposes (or that the public
understands will be used for payment purposes) to determine the amount
of uncompensated care. For FY 2014, we do not believe that data
regarding uncompensated care from Worksheet S-10 meet these criteria
and, therefore, are not reliable enough to use for determining FY 2014
uncompensated care payments. We do not think they meet these criteria
because it is the first year they are available and while we recognize
that a limited portion of these data will be used for payment purposes
(for example, for EHR payments) and, therefore, subject to audit for
those purposes they are still not generally used for payment purposes
and subject to audit. Accordingly, we continue to believe that
alternative data will provide a better proxy for the amount of

[[Page 50639]]

uncompensated care during first year or years of implementation.
As we discuss below, we will work on reviewing the instructions for
Worksheet S-10 to determine whether any revisions or clarifications may
be necessary to ensure that the data reported on this Worksheet can
eventually be employed to determine Factor 3. We also appreciate
MedPAC's recommendation that we consider alternative proxies and also a
transition period of several years to sole use of the Worksheet S-10
uncompensated care data in determining Factor 3, possibly with use of a
blend of the insured low-income days and uncompensated care data. While
we acknowledge the appeal of a transition to the sole use of the
uncompensated care data, we believe that we would need to further
analyze the appropriateness of blending Worksheet S-10 uncompensated
care data with other data for use in determining Factor 3. We note that
it is possible that we would consider a more refined proxy or other
proxies for the treatment costs of the uninsured until such a time that
we can propose a methodology to calculate Factor 3 based directly on
reported amounts of uncompensated care. Regardless, we believe that
hospitals should have a full opportunity to comment on any such
proposals before their adoption. Therefore, we may consider including
this recommendation among our proposals in future rulemaking.
Comment: Most commenters supported CMS' proposal to employ each
Medicare disproportionate share hospital's insured low-income inpatient
days relative to the total insured low-income inpatient days provided
by Medicare disproportionate share hospitals as a better proxy for the
costs of the uninsured. These commenters agreed with CMS' assessment
that the data reported on the Worksheet S-10 are not yet reported
accurately and consistently enough to be adopted for purposes of
determining Factor 3. Most commenters endorsed the adoption of the
proxy approach as an interim measure as CMS proceeds to refine the
definition of uncompensated care costs and the instructions for
reporting data on the Worksheet S-10. An association representing
hospitals in a major metropolitan area requested that CMS use the wage
index to adjust insured low-income days to account for the differences
in ``purchasing power'' in different regions of the country. The
association, along with several other commenters, requested that CMS
include insured low-income days from exempt units (for example,
inpatient rehabilitation units paid under the IRF PPS or inpatient
psychiatric units paid under the IPF PPS) of the hospital in order to
better capture the treatment costs of the uninsured by the hospital.
Some commenters, including a beneficiary advocacy organization and a
hospital system, objected to CMS' proposal to use insured low-income
inpatient days as the proxy for distributing uncompensated care
payments. These commenters believed that the proposed method unfairly
rewards States that expand Medicaid to the detriment of States that do
not, despite their belief that the latter group of States should have
larger relative uncompensated care costs. The commenters also believed
that this approach was not an appropriate proxy for uncompensated care
because, by definition, insured low-income days are not uncompensated.
Response: We agree with the commenters who supported our proposal
to employ insured low-income days as a proxy for uncompensated care
costs. For the reasons we detailed in the proposed rule, we believe
that this proxy provides a reasonable basis on which to determine
Factor 3 during an interim period while we work with the hospital
community to review and make any necessary revisions and clarifications
to the instructions to ensure that the data on Worksheet S-10 is
reported accurately and consistently enough to employ in the
determination of this factor. As is noted above, it remains our
intention to propose introducing use of the Worksheet S-10 to determine
Factor 3 within a reasonable amount of time. We do not agree with the
commenters who stated that our proposal inappropriately rewards States
that expand Medicaid coverage to the detriment of States that do not.
Using some of the uncompensated care data discussed in the proposed
rule, we recognize it would be possible for hospitals in States that
choose to expand Medicaid to receive lower uncompensated care payments
because they are less likely to have uninsured patients than hospitals
in a State that does not choose to expand Medicaid. Nevertheless, for
the reasons discussed above, we believe that data on insured low-income
days remains the best proxy for uncompensated care costs currently
available to determine Factor 3.
With respect to the comments requesting that we use the wage index
to adjust low-income days, we agree that there may be regional
variation in uncompensated care costs due to regional variations in the
costs of care generally. However, we do not believe that there is
sufficient basis for believing that the wage index reflects the
variations in uncompensated care costs well enough to adopt it as the
basis for adjusting Factor 3. The wage index reflects the relative
hospital wage level in the geographic area of the hospital compared to
the national average hospital wage level. In computing the wage index,
we derive an average hourly wage for each labor market area (total wage
costs divided by total hours for all hospitals in the geographic area)
and a national average hourly wage (total wage costs divided by total
hours for all hospitals surveyed in the nation). A labor market area's
wage index value is the ratio of the area's average hourly wage to the
national average hourly wage. We note that, for FY 2014, 69.6 percent
of the standardized amount is considered to be the labor-related share
and, therefore, adjusted by the wage index. However, in addition to the
labor-related share of the standardized amount being adjusted by the
wage index, the entire standardized amount is also adjusted for the
relative weight of the MS-DRG for each individual patient. In other
words, the wage index only adjusts for a portion of the variation in
costs, and does not address variations in resource use and patient
severity. Therefore, we think that there is insufficient basis for
believing that adjusting low-income patient days by the wage index
would better reflect variations in uncompensated care costs.
Furthermore, as we discuss above, we are aware of no other data that
may adequately capture these variations, such as case-mix.
Finally, we believe that there may be some merit to the comments
recommending inclusion of insured low-income days from exempt units of
the hospital in order to better capture the full costs of the treatment
of the uninsured by the hospital insofar as those data may be publicly
available, subject to audit, and used for payment purposes. We believe
that it would be prudent to more carefully consider the degree to which
these data meet these conditions before adopting this recommendation.
Therefore, we will consider including this recommendation among our
proposals in future rulemaking.
In the FY 2014 IPPS/LTCH PPS proposed rule, we proposed to estimate
which hospitals would receive an empirically justified Medicare DSH
payment in a given Federal fiscal year using the most recent data
available. As we described previously, only hospitals that receive
empirically justified Medicare DSH payments in a fiscal year may
receive an uncompensated care payment. However, because whether or

[[Page 50640]]

not a hospital will actually receive an empirically justified Medicare
DSH payment is not known until cost report settlement and cost report
settlement occurs several years after end of the federal fiscal year,
we stated that we believe it is necessary to estimate which hospitals
will receive Medicare DSH payments for a given fiscal year. Because the
uncompensated care amounts for these hospitals are used to determine
the denominator of Factor 3, this allows for the calculation of Factor
3 in advance of or during the federal fiscal year so that interim
payments can begin during the fiscal year. We indicated in the proposed
rule that we believe this will create some level of predictability and
finality for hospitals eligible for these payments, in addition to
being administratively efficient.
Therefore, for FY 2014, we proposed that the denominator for Factor
3 would reflect the estimated Medicaid and Medicare SSI patient days
based on data from the 2010/2011 Medicare cost report (including the
most recently available data that may be used to update the SSI ratios)
for all hospitals that we estimate would receive an empirically
justified Medicare DSH payment in FY 2014. The numerator of Factor 3
would be the estimated Medicaid and Medicare SSI patient days for the
individual hospital based on its most recent 2010/2011 Medicare cost
report data (including the most recently available data that may be
used to update the SSI ratios). We proposed to calculate a numerator
for all subsection (d) hospitals and subsection (d) Puerto Rico
hospitals that have the potential of receiving a DSH payment regardless
of whether we estimate that the hospital would receive DSH payments in
the respective Federal fiscal year. In that way, if a hospital becomes
eligible to receive the empirically justified Medicare DSH payment and
also an uncompensated care payment, we will be able to finalize its
uncompensated care payment efficiently and without affecting the
uncompensated care payments of other hospitals.
We noted that we believe this proposed approach strikes an
appropriate balance between administrative efficiency, finality, and
predictability in payments. Therefore, we also proposed to publish a
table or tables listing Factor 3 for all hospitals that we estimate
would receive empirically justified Medicare DSH payments in a fiscal
year (that is, hospitals that would receive interim uncompensated care
payments during the fiscal year), and for the remaining subsection (d)
and subsection (d) Puerto Rico hospitals that have the potential of
receiving a DSH payment in the event that they receive an empirically
justified Medicare DSH payment for the fiscal year as determined at
cost report settlement. We also proposed that hospitals would have 60
days from the date of display of the IPPS/LTCH PPS proposed rule to
review these tables and notify CMS in writing of a change in a
hospital's subsection (d) hospital status, such as if a hospital has
closed or converted to a CAH. We stated that we would notify hospitals
concerning the specifics of this process in program instructions after
the final rule. For FY 2014, we stated that we would allow hospitals 60
days from the date of display of the IPPS/LTCH PPS proposed rule to
review these tables and notify CMS in writing of a change in a
hospital's subsection (d) hospital status, and we indicated that we may
allow an additional (perhaps shorter) such period after the publication
of the final rule.
For hospitals that were not estimated to receive an empirically
justified Medicare DSH payment for a fiscal year, but ultimately
qualify for such a payment at cost report settlement, we proposed to
make the full uncompensated care payment at that time. In the case of
hospitals that we estimated would receive an empirically justified
Medicare DSH payment for a fiscal year and that received interim
empirically justified Medicare DSH payments and uncompensated care
payments, but are found to be ineligible for DSH payments at cost
report settlement, we would recover the overpayment. However, we
proposed only to calculate the denominator (that is, the estimated
Medicaid and Medicare SSI patient days based on data from the 2010/2011
Medicare cost report (including the most recently available data that
may be used to update the SSI ratios) for all hospitals that we
estimate would receive an empirically justified Medicare DSH payment in
FY 2014) once, at the time of the IPPS/LTCH PPS final rule each year.
We did not propose to recalculate the denominator at the time when cost
reports are settled and final eligibility determinations for
uncompensated care (and empirically justified Medicare DSH) payments
are made. We discuss our proposals and final polices for interim
payments and reconciliation processes below in section V.E.3.f. of the
preamble of this final rule.
For the purpose of the proposed rule, we posted proposed tables
listing Factor 3 for the hospitals that we estimated would receive
Medicare DSH payments for FY 2014 on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh.html. We requested that hospitals review these
tables. In order to ensure that we would have sufficient time to
incorporate any updated information in the tables for the final rule,
we indicated that hospitals should notify CMS in writing within 60 days
from the date of display of the proposed rule of any change in a
hospital's subsection (d) hospital status. For FY 2014, we stated that
we may allow an additional (perhaps shorter) such period after the
publication of the final rule for hospitals to notify CMS of such
changes.
Comment: Several commenters questioned their hospitals' Medicare
DSH eligibility because many of these hospitals, particularly SCHs,
were projected not to receive empirically justified Medicare DSH
payment adjustments in the FY 2014 IPPS/LTCH PPS proposed rule and,
therefore, to be ineligible to receive uncompensated care payments.
Many of the commenters submitted documentation that they had received
Medicare DSH payments in the past, so the hospitals reasoned that they
should be considered eligible for empirically justified Medicare DSH
payment adjustments and uncompensated care payments.
Response: For the FY 2014 IPPS/LTCH PPS proposed rule, we
identified hospitals as being eligible for empirically justified
Medicare DSH payment adjustments and, therefore, eligible to receive
uncompensated care payments, based on our projections of whether a
hospital would receive Medicare DSH payments for FY 2014. Many SCHs
were determined to be ineligible for empirically justified Medicare DSH
payment adjustments and uncompensated care payments because SCHs are
paid the higher of the hospital-specific rate (which, by definition,
excludes Medicare DSH payments), or the Federal rate (which includes
Medicare DSH payments). With the 75-percent reduction to Medicare DSH
payments in FY 2014 pursuant to section 1886(r)(1) of the Act, and
because we did not propose to include the uncompensated care payment as
part of the Federal payment rate in the proposed rule, more SCHs were
projected to receive payments under their hospital-specific rate. As a
result, these SCHs were determined to be ineligible for empirically
justified Medicare DSH payment adjustments and, therefore, were also
ineligible for uncompensated care payments.
In the FY 2014 IPPS/LTCH PPS proposed rule, we noted that we would
calculate a Factor 3 for hospitals found to be ineligible for
empirically justified Medicare DSH payment adjustments in

[[Page 50641]]

our projections, in the event that they become eligible for empirically
justified Medicare DSH payment adjustments at cost report settlement
and, therefore, able to receive uncompensated care payments. However,
unlike the hospitals projected to receive empirically justified
Medicare DSH payment adjustments for FY 2014, those non-DSH hospitals
would not receive uncompensated care payments on an interim basis.
For the final rule, we are finalizing our methodology to identify
hospitals eligible for empirically justified Medicare DSH payment
adjustments and, therefore, eligible to receive interim uncompensated
care payments based on our projections of whether the hospital would
receive Medicare DSH payments for FY 2014. We will identify those
subsection (d) and Puerto Rico subsection (d) hospitals that we project
to have a disproportionate patient percentage (DPP) of at least 15
percent, which is the minimum required DPP to be eligible for Medicare
DSH payments under section 1886(d)(5)(F) of the Act and, by extension,
under 1886(r)(1) of the Act (that is, empirically justified Medicare
DSH payments). The DPP is the sum of a hospital's SSI fraction and
Medicaid fraction. We are using the most recent data available to us at
the time of this rulemaking to calculate the DPP for all subsection (d)
hospitals and Puerto Rico subsection (d) hospitals and to identify
those hospitals projected to be eligible for empirically justified
Medicare DSH payment adjustments for FY 2014. For purposes of this
final rule, the most recent SSI fraction is the FY 2011 SSI fraction.
We posted the FY 2011 SSI fractions for each subsection (d) hospital on
the CMS DSH Web site (https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh.html) on June 27, 2013. The most
recently available Medicaid fraction is that reported on the March 2013
update of the Provider Specific File.
However, we are modifying our methodology so that an estimated
uncompensated care payment amount will be included as part of the
Federal rate when comparing payments under the hospital-specific rate
versus the Federal rate for SCHs. Once we identify which SCHs we
project will be paid on their hospital-specific rate, we will consider
these hospitals to be ineligible to receive interim uncompensated care
payments because we do not project them to be eligible for the
empirically justified Medicare DSH payment adjustments.
We will calculate Factor 3 for all hospitals that are eligible for
empirically justified Medicare DSH payment adjustments under our
revised methodology based on their proportion of low-income insured
days relative to the low-income insured days for all hospitals
projected to receive DSH payments, and the hospital will receive
uncompensated care payments on an interim basis. As we describe more
fully below, hospitals that receive uncompensated care payments on an
interim basis but are not eligible for Medicare DSH payments at the
time of cost report settlement would no longer be eligible to receive
an uncompensated care payment and would need to repay those interim
payments.
However, we are adopting a policy to calculate Factor 3 for all
subsection (d) hospitals, including hospitals that are projected to be
ineligible to receive Medicare DSH payments (that is, those hospitals
with a DPP less than 15 percent or SCHs that are projected to be paid
based on their hospital-specific rate). If these hospitals are later
determined to be eligible to receive Medicare DSH payments, those
payments (under both sections 1886(r)(1) and 1886(r)(2) of the Act)
would be made at the time of cost report settlement. We note that in
calculating Factor 3, we include in the denominator data only for those
hospitals that we estimate will be eligible to receive empirically
justified Medicare DSH payments for FY 2014. As part of our estimation
of the hospitals eligible for Medicare DSH payments, we consider
whether a SCH is projected to receive Medicare DSH payments in FY 2014
and exclude those SCHs we project to be paid on their hospital-specific
rate. The remaining hospitals with an estimated DPP of 15 percent of
higher are considered to be eligible for Medicare DSH payments and
their SSI days and Medicaid days are included in the calculation of the
denominator for Factor 3.
Comment: Two hospitals submitted public comments regarding their
subsection (d) status. One hospital, Missouri Baptist Sullivan (CCN:
260115), commented that it converted to a CAH and is no longer a
subsection (d) hospital and, therefore, not eligible for uncompensated
care payments. Davie County Hospital submitted a public comment that
stated it was converting from CAH status to become a subsection (d)
hospital as of August 1, 2013, and the hospital requested to have a
Factor 3 calculated so it could be determined eligible for
uncompensated care payments.
Response: As discussed earlier, a hospital is eligible for
uncompensated care payments if the hospital is eligible for the
empirically justified Medicare DSH payment adjustment. Only subsection
(d) hospitals are eligible for these payments. We have removed Missouri
Baptist Hospital as a subsection (d) hospital as we have documentation
that it has converted to a CAH, and we have adjusted our calculation of
Factor 3 to ensure that its data are excluded from the denominator of
this calculation. We do not have documentation to confirm that Davie
County Hospital has been approved to convert from a CAH to an IPPS
hospital. Therefore, we are not calculating a Factor 3 amount for that
provider. If the CAH has converted to an IPPS hospital with the
appropriate supporting documentation, the new IPPS hospital would
receive a new CCN and would be treated as a new hospital. We discuss
how we will calculate uncompensated care payments for new hospitals
later in this final rule.
In the FY 2014 IPPS/LTCH PPS proposed rule our estimates of
eligibility to receive FY 2014 Medicare DSH payments were based on the
Medicaid fraction listed in the December 2012 update of the Provider
Specific File and the FY 2010 SSI ratios. We stated in the proposed
rule that we intended to update in the final rule the list of hospitals
that we estimate will be eligible for Medicare DSH payments for FY 2014
and our estimate of Factor 3 using more recent data and verified
hospital notifications regarding hospital status for example,
closures).
Accordingly, we have updated our data, and, for this final rule,
our estimates of eligibility to receive FY 2014 Medicare DSH payments
are now based on the Medicaid fraction listed in the March 2013 update
of the Provider Specific File and the FY 2011 SSI ratios published on
June 27, 2013 on the CMS Web site. This is the most recently available
data on the DPP for hospitals that are qualified to receive Medicare
DSH payments. We identified 2,695 hospitals with a DPP greater than or
equal to 15 percent and, therefore, eligible to receive Medicare DSH
payments. However, we project that only 2,437 of these DSH-eligible
hospitals would receive a Medicare DSH payment in FY 2014, as the
remaining 257 hospitals are SCHs that we project would be paid under
the hospital-specific rate and, therefore, ineligible for Medicare DSH
and the uncompensated care payments. (As discussed above, in
determining whether a SCH is projected to receive Medicare DSH payments
in FY 2014, we included an estimated uncompensated care payment amount
in the Federal rate when comparing payments under the hospital-specific

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rate versus the Federal rate.) We estimate that 2,437 hospitals, or 72
percent of all subsection (d) hospitals and subsection (d) Puerto Rico
hospitals, would be eligible for Medicare DSH payments in FY 2014. The
data from these 2,437 hospitals was used to determine the denominator
for Factor 3. However, we will estimate a Factor 3 numerator for each
subsection (d) and subsection (d) Puerto Rico hospital that has the
potential of receiving Medicare DSH payments for FY 2014 and,
therefore, qualifying for the uncompensated care payment in FY 2014.
Comment: Several hospitals submitted public comments regarding the
accuracy of the data used in the calculation of the hospital's Factor 3
amount provided in the FY 2014 IPPS/LTCH PPS proposed rule. These
hospitals either indicated that their Medicaid days were understated
and had not been updated in the HCRIS database used to calculate the
Medicaid days for Factor 3, or they indicated that the Medicaid days
reported on Worksheet S-2 of the Medicare Hospital Cost Report version
2552-10 did not match the Medicaid days reported on Worksheet S-3 of
the Medicare Hospital Cost Report version 2552-10. Many hospitals
submitted supporting documentation of the additional Medicaid days. The
hospitals requested that their Medicaid days used in the calculation of
Factor 3 be corrected for the final rule.
Response: We appreciate the information submitted by commenters
regarding the accuracy of the number of Medicaid days used in the
calculation of Factor 3. For this final rule, we are using the March
2013 update of HCRIS and we are identifying a hospital's Medicaid days
based on the Medicaid days reported on the 2011, or if not available,
the 2010 Medicare Hospital Cost Report. In addition, for hospitals that
we project to be eligible to receive empirically justified Medicare DSH
payment adjustments for FY 2014, we are using Medicaid days reported on
Worksheet S-2 of the Medicare Hospital Cost Report version 2552-10 to
determine Factor 3 and not Medicaid days reported on Worksheet S-3 of
the Medicare Hospital Cost Report version 2552-10. The Medicaid days
reported on Worksheet S-2 are used in the computation of the Medicaid
fraction for Medicare DSH payments. Therefore, because they are used
for the payment of Medicare DSH, we believe that these data are more
reliable than data not used for payment purposes. We understand that
there are inconsistencies between the reporting of the days on
Worksheet S-2 and Worksheet S-3. We also understand that hospitals were
not able to report their Medicaid days on Worksheet S-2 if they were
not eligible to receive Medicare DSH payments on that cost report. A
Transmittal has since been released allowing these hospitals to report
their Medicaid days on Worksheet S-2 and to ensure that the Medicaid
days reported on Worksheet S-3 align with the Medicaid days reported on
Worksheet S-2, but those changes may not be reflected in the March 2013
update of HCRIS. Accordingly, for hospitals that did not claim Medicare
DSH payments on their CMS Form 2552-10 Medicare Hospital Cost Report
for FY 2011 or FY 2010, we are calculating Medicaid days from Worksheet
S-3 of the Medicare Hospital Cost Report from the most recently
available cost report from 2011 or 2010. For disproportionate share
hospitals, we are calculating Medicaid days from Worksheet S-2 of the
Medicare Hospital Cost Report from the most recently available cost
report from 2011 or 2010. By using this more updated data, we believe
that we will address many of the issues and questions raised by
commenters. We also remind hospitals that the data we are using are
data that they submit and attest are accurate on the Medicare cost
report.
Comment: Two hospitals merged in 2011 with one surviving provider
number. These hospitals had two cost reports and two SSI ratios in
2011. However, in the proposed rule, CMS calculated Factor 3 using only
the surviving hospital's cost report data and SSI ratio data. The
hospital submitted a public comment requesting that we account for the
merger and include both hospitals' data in the calculation of the
Factor 3 amount.
Response: A hospital's Factor 3 is calculated based on the data
tied to its CCN. This is consistent with the treatment of other IPPS
payment factors, where data used to calculate a hospital's Medicare DSH
payment adjustment, CCRs for outlier payments, and wage index values is
tied to a hospital's CCN. Data associated with a CCN that is no longer
in use are not used to determine those IPPS hospital payments under the
surviving CCN. Furthermore, data reported on the Medicare hospital cost
report under the CCN associated with the old provider agreement would
not necessarily be used to determine hospital payments for the CCN
associated with the surviving provider agreement. Accordingly, in the
case of a merger between two hospitals, Factor 3 will be calculated
based on the low-income insured patient days (that is, Medicaid days
and SSI days) under the surviving CCN, based on the most recent
available data for that CCN from the cost report for 2011 or 2010.
Comment: Several commenters asked how new providers will be treated
in the calculation of Factor 3, specifically what data will be used for
the Factor 3 calculation and how this approach will impact existing
providers. In addition, the commenters questioned how providers
``terminated'' from participation in the Medicare program as a
subsection (d) hospital prior to 2014 would be treated and whether they
would be removed from the Factor 3 calculation and how that would have
an impact on the remaining providers.
Response: In the FY 2014 IPPS/LTCH PPS proposed rule, we requested
that the public verify the accuracy of the list of hospitals that we
identified to be subsection (d) hospitals. As discussed above, one
hospital submitted a public comment stating that it had converted to a
CAH and was no longer a subsection (d) hospital. We have removed that
hospital from our list and calculation of Factor 3. We are using this
process of allowing the public to review the accuracy of our list of
hospitals eligible to receive empirically justified Medicare DSH
payment adjustments and uncompensated care payments as a mechanism of
identifying and removing terminating providers, and adjusting the
calculation of Factor 3 for the remaining providers accordingly. For
the final rule, we have published an updated list of the hospitals we
have identified to be subsection (d) hospitals and subsection (d)
Puerto Rico hospitals eligible to receive empirically justified
Medicare DSH payment adjustments and uncompensated care payments for FY
2014. For FY 2014, we will allow the public an additional period after
the issuance of this final rule to contact us with comments on whether
any of these hospitals should be removed from the list or if any
hospitals should be added to the list, based on their subsection (d)
status. The public can submit input on these two topics via the
Internet on the CMS Web site at: Section3133DSH@cms.hhs.gov. All
information, including relevant documentation, must be received by
August 31, 2013. If we identify changes to the list of hospitals, we
will publish a revised list of hospitals and updated Factor 3 values on
the CMS Medicare DSH Web site after August 31, 2013.
For new providers, meaning hospitals with a CCN established after
2011, we do not have data currently available to calculate a Factor 3
amount and we do not have data to determine if the new hospital is
eligible for empirically

[[Page 50643]]

justified Medicare DSH payment adjustments and, therefore, eligible for
uncompensated care payments for FY 2014. Accordingly, we will treat new
hospitals in the same manner as hospitals that are not found to be
eligible to receive empirically justified Medicare DSH payment
adjustments based upon the most recently available cost report from
2011 or 2010, such that the hospital may not receive either interim
empirically justified Medicare DSH payment adjustments or interim
uncompensated care payments. However, should a hospital later be
determined to be eligible to receive an empirically justified Medicare
DSH payment adjustment based on its FY 2014 cost report, the hospital
will also be eligible to receive uncompensated care payments.
Consistent with our policy to calculate the Factor 3 for all subsection
(d) hospitals regardless of whether or not they are projected to
qualify for Medicare DSH payments, we will also calculate a Factor 3
for new hospitals, although we note that new hospitals would only
require a Factor 3 calculation to receive their uncompensated care
payment if they are ultimately determined to be eligible for the
empirically justified Medicare DSH payment at cost report settlement.
The denominator of every hospital's Factor 3, including new hospitals,
is set to be the sum of the low-income insured days for all hospitals
projected to receive empirically justified Medicare DSH payment
adjustments for FY 2014 as calculated in this final rule using the FY
2011 SSI ratios and the 2011 cost reports. We do not have Medicaid days
or SSI days for new hospitals at the time of this final rule and we do
not know when we will have Medicaid days or SSI days for new hospitals.
Accordingly, we will use the Medicaid days and SSI days for FY 2014 for
new hospitals to serve as the numerator in their Factor 3 calculations
for their FY 2014 uncompensated care payments because we believe that
at minimum, all new hospitals will have data on Medicaid and SSI
patient days for FY 2014.
e. Limitations on Review
Section 1886(r)(3) of the Act provides that there will be no
administrative or judicial review under section 1869 of the Act, 1878
of the Act, or otherwise for any of the following:
Any estimate of the Secretary for purposes of determining
the factors described in paragraph (2) of section 1886(r) of the Act.
Any period selected by the Secretary for such purposes.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27590), we
proposed to codify this policy in new Sec. 412.106(g)(2) of our
regulations. We invited public comment on this proposal.
We did not receive any public comments on our proposal to implement
the statutory limitations on administrative or judicial review.
We are finalizing the proposed new provisions at Sec. 412.106(f)
and (g) to codify these policies. We note, however, that we have made a
minor change to the provision at Sec. 412.106(g)(1)(i) to clarify that
we intend to revisit the issue of the data that should be used to
determine hospitals' uncompensated care amounts for FY 2015. In
addition, we have also made a minor technical correction to the
provision at Sec. 412.106(g)(2)(iii).
f. Operational Considerations
As discussed in section V.F.3.d. of the preamble of the proposed
rule and this final rule, and in accordance with section 1886(r)(2) of
the Act, only subsection (d) hospitals that receive empirically
justified Medicare DSH payments in a given Federal fiscal year will
also receive the uncompensated care payment (that is, Factor 1 times
Factor 2 times Factor 3) for that given Federal fiscal year. In
addition, as discussed above in this section, in the FY 2014 IPPS/LTCH
PPS proposed rule (78 FR 27580), we proposed that subsection (d) Puerto
Rico hospitals that receive empirically justified Medicare DSH payments
in a given Federal fiscal year would also receive the uncompensated
care payment (that is, Factor 1 times Factor 2 times Factor 3) for that
given Federal fiscal year. As we discussed above, we proposed to
estimate Factor 3 for each subsection (d) and subsection (d) Puerto
Rico hospital with the potential to receive a DSH payment prior to the
beginning of the Federal fiscal year and intend to make that
information available via our Web site. https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh.html.
Specifically, we proposed to make interim uncompensated care
payments on the basis of our best available estimates concerning the
eligibility of each hospital for empirically justified Medicare DSH
payments and our best available calculations concerning the amount of
the uncompensated care payments that the hospital is eligible to
receive. We stated that we intended to make these interim uncompensated
care payments on a periodic basis and not on a per discharge basis as
Medicare DSH payments are currently made and as empirically justified
Medicare DSH payments will be made. As discussed above, we made this
proposal because we believed that this approach was more consistent
with the language in the statute describing the additional payment,
from which we inferred that the payment should not be made on a per-
discharge basis. We also believed that this would be the most
administratively efficient means to distribute a set dollar amount to
individual hospitals and would also create predictability for
hospitals. In the proposed rule, we acknowledged that if we were to
make these interim uncompensated care payments on a per-discharge basis
as Medicare DSH payments are currently made, unless a hospital's
Medicare utilization is identical to the period used to determine the
per-discharge payment level, it is certain that Medicare would overpay
or underpay. We stated further in the proposed rule that by making
interim payments periodically, we could virtually eliminate the
possibility that Medicare would pay a higher or lower amount than
intended and limit the need for reconciliation to whether a hospital is
eligible for Medicare DSH payments and, therefore, the entire
uncompensated care payment at cost report settlement. In response to
the comments on this suggested approach discussed below, in this final
rule, we are instead adopting a policy to make the uncompensated care
payment on a per-discharge basis, which will require reconciliation of
the interim payments made during the year to the total uncompensated
care payment derived as the product of Factors 1, 2, and 3.
Comment: Many commenters, including national hospital associations,
disagreed with CMS' proposal to make interim uncompensated care
payments, and to distribute them on a periodic basis rather than a per-
discharge basis. The commenters expressed concern about the impact this
proposal would have on certain providers, and stated that providers'
cash flow would be adversely affected if payments are distributed on a
periodic bi-weekly basis, as we proposed. Many commenters were
specifically concerned about the potential effects of this proposal on
hospitals treating MA enrollees. One of the commenters, a national
hospital association stated that, ``[t]he contracts between the MA
Plans and hospitals typically provide for payment based upon Medicare
rates and reimbursements. Though the specific contract terms may vary,
they often refer to Medicare DSH payments as one component of the
Medicare reimbursement on which the MA Plan payments are based.'' The
commenters

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further noted that under such contracts MA organizations typically use
vendor software that utilizes the CMS Medicare Inpatient PPS PC PRICER,
as a claim adjudication tool for paying acute care hospital claims. The
commenters also pointed out that MA organizations are required by
statute to pay non-contracted hospitals a floor amount based on what
the provider would have received under original Medicare (what a
hospital would be paid if the beneficiary were not enrolled in an MA
plan), and they understand that MA organizations use the CMS Medicare
Inpatient PPS PC PRICER to determine what that floor amount is. The
commenters expressed concern that if the uncompensated care payment is
not distributed on a per-discharge basis, it would not be incorporated
into the CMS Medicare Inpatient PPS PC PRICER and that because they
believe MA plans employ tools that rely on this software, MA plans
would not be able to calculate an appropriate payment amount, which the
commenters believed should include an amount representing a given
Medicare patient's share of the hospital's uncompensated care payment.
Another commenter added that the proposal would lead to confusion and
underpayment from MA plans to providers. Several commenters requested
that CMS also add a line in the CMS Medicare Inpatient PPS PC PRICER
software for additional DSH ``A-DSH'' that would represent the per-
discharge payment for Medicare Part A and the per-discharge payments
for MA claims paid by MA plans when the MA-paid claim option is
selected, and these commenters requested that the per-discharge
payments be reconciled at cost report settlement. One commenter
recommended that CMS calculate the interim payment by dividing each
hospital's uncompensated care payment amount by the number of its
transfer-adjusted cases.
In addition, these commenters expressed concerns about the impact
to SCHs under the proposal to make interim uncompensated care payments
on a periodic basis because only the empirically justified Medicare DSH
payment adjustments would be included in the comparison that determines
whether an SCH is paid the Federal rate or the hospital-specific rate.
Some commenters asserted under this approach that the comparison
between payments under the Federal rate and under the hospital-specific
rate would be inaccurate, causing several hospitals that were
previously eligible for Medicare DSH payments to instead receive the
hospital-specific rate. These commenters asserted that this would
impose unwarranted payment cuts for SCHs because uncompensated care
payments were not accounted for in determining whether SCHs are paid
the Federal rate or hospital-specific rate. Therefore, the commenters
reasoned that such SCHs would be unfairly penalized. One commenter
expressed concern that a hospital-specific rate based on costs creates
incentives for SCHs to have higher costs of operation. Several
commenters discussed how the uncompensated care payment should be
considered when determining outlier payments and the fixed-loss
threshold, and expressed their concerns about the impact of excluding
uncompensated care payments from these determinations. These comments
will be summarized and addressed fully in section II.A.4.g. of Appendix
A to this final rule under the discussion of outlier payments, where we
finalize our policy decision that uncompensated care payments also
should be included in the determination of outlier payments.
Response: We appreciate the commenters' input with regard to fact
that under our proposed approach, the new uncompensated care payments
would not be accounted for in the CMS PC PRICER tool. While we
acknowledge that many MA plans use this tool to estimate fee-for-
service payments, we note that there is no official CMS requirement
that MA plans use this specific tool. For those MA plans that may elect
to use the CMS PC PRICER, we acknowledge that our proposed interim
payment approach would make it a more complex task for MA organizations
to determine the amount of the uncompensated care payment that would be
attributable to a given discharge. We agree with the commenters that
the uncompensated care payment must be treated as part of a hospital's
Medicare payment for purposes of section 1866(a)(1)(O) of the Act. We
note that under section 1866(a)(1)(O) of the Act, hospitals treating MA
enrollees are entitled to receive payment from an MA organization with
which they have no contract governing payment of an amount representing
the amount the hospital would have received from Medicare if the
beneficiary were not enrolled in an MA plan. We understand the
commenters' reasoning that because the new uncompensated care payments
are intended to replace a portion of the DSH payments previously made
by CMS, and MA organizations have always included the amount of
applicable DSH payment in their payments to non-contracting hospitals
under section 1866(a)(1)(O) of the Act and to contracting hospitals
that contract to be paid at the section 1866(a)(1)(O) rate, MA
organizations should similarly be required to include amounts
representing these uncompensated care payments in their payments for
inpatient services furnished to their MA plan enrollees. It was not our
intention to suggest otherwise in the proposed rule. We also note that
while some commenters expressed concern regarding the payment
arrangements between MA organizations and contracted providers, section
1854(a)(6)(B)(iii) of the Act prohibits CMS from interfering in the
payment arrangements between MA organizations and contract providers
and these arrangements are not within the scope of this rulemaking. We
are only addressing an MA organization's obligations under section
1866(a)(1)(O) of the Act with respect to payments to non-contracting
hospitals. Of course, insofar as both parties to a contract agree that
the contract provides for payment of the rate the MA organization is
required under section 1866(a)(1)(O) to pay to non-contracting
providers, that contract would be indirectly affected. However, this
does not constitute an interference in the terms of the contracts, only
on the indirect effects of our interpretation of section 1866(a)(1)(O)
of the Act on those terms.
We also recognize the potential impact on SCHs if the interim
uncompensated care payments were to be paid on a periodic biweekly
basis rather than a per-discharge basis. As we discuss previously in
the preamble, after a thorough review of the above policy
considerations reflected in the numerous public comments we received,
we believe that distributing these payments on a per-discharge basis
would allow these payments to be considered in the comparison of
payments under the Federal rate and the hospital-specific rate for SCHs
and that this would be an appropriate policy. We also note that we
disagree with the commenter who stated that this could create an
incentive for higher costs of operation for SCHs because hospital-
specific payment rates are based on costs in past years and would not
be affected by higher costs of operation in the current or future
years.
Similarly, after a thorough review of the above policy
considerations reflected in the numerous public comments we received,
we believe that distributing these payments on a per-discharge basis
would make it easier for MA organizations to take these payments into
account when making payments to non-contracting hospitals

[[Page 50645]]

under section 1866(a)(1)(O) of the Act. We have always intended that
this occur as current payments by MA organizations under this provision
include 100 percent of DSH payments and the uncompensated care payment
is intended to replace 75 percent of those payments, after adjusting
for the uninsured percentage. The inclusion of amounts representing
uncompensated care payments in MA organization payments to non-
contracting hospitals does not change the amount of CMS' uncompensated
care payments nor overall IPPS payment, but ensures that payments by MA
organizations under section 1866(a)(1)(O) of the Act reflect the full
amount that would otherwise have been paid by CMS in the case of a
given discharge. We also note that our decision to make uncompensated
care payments on a per-discharge basis will make more SCHs eligible for
uncompensated care payments and, therefore, also change the
distribution of the uncompensated care payments.
Accordingly, for FY 2014 we are finalizing a process to distribute
interim uncompensated care payments under the IPPS on a per-discharge
basis through our claims processing system, with a reconciliation of
the hospital's payments at cost report settlement to ensure that
hospitals receive no more than the estimated amount included in this
final rule. We do not intend to reconcile Factor 3 using data from the
FY 2014 cost reports because we believe that the statute provides the
authority to make these payments on the basis of estimates for Factors
1, 2, and 3, and that it is preferable to do so. If we were to use data
from the FY2014 cost reports to recompute Factor 3, we would need to
wait until such a time that all of these data were submitted by
hospitals and then available to CMS, likely 2 years. Furthermore, it
would be administratively difficult to recompute Factor 3 values for
all hospitals. Under the methodology we are finalizing, because the
per-discharge payment amounts are based on a hospital's historic
Medicare utilization, we would expect the amount of over- or under-
payments to reflect the year to year changes in a hospital's
utilization patterns. We intend to calculate an estimated per-discharge
amount (or per claim amount) for each hospital eligible to receive
interim uncompensated care payments and we will pay that estimated
amount on a per-discharge basis by adding it to the payment otherwise
made on that claim. The estimated per-discharge amount is based on the
amount of the uncompensated care payment that we have calculated for
the hospital for a fiscal year divided by the average number of
discharges, or claims, in the most recently available three fiscal
years of the Medicare claims dataset. For FY 2014 payments, we will use
the average number of claims from the most recent 3 years of MedPAR
claims data, FY 2010, FY 2011 and FY 2012, as this is the most recently
available data on hospital utilization. We believe that it is
appropriate to use a 3-year average to reduce the degree to which we
would over- or under-pay the uncompensated care payment on an interim
basis. In any given year, a hospital could have low or high Medicare
utilization that differs from other years. For example, if a hospital
had two Medicare discharges in its most recent cost report but
experienced four discharges in FY2014, during the fiscal year, we would
pay two times the amount the hospital should receive and need to adjust
for that at cost report settlement. Similarly, if a hospital had four
Medicare discharges on its most recent cost report, but experienced two
discharges in FY2014, during the fiscal year, we would only pay half
the amount the hospital should receive and need to adjust for that at
cost report settlement. We note that because this fee-for-service per-
claim payment will be reconciled against actual hospital utilization at
the end of a hospital's cost year, it may be necessary to make
actuarial adjustments so that the MA organizations can more accurately
and appropriately take these payments into account when making payment
to non-contracting hospitals under section 1866(a)(1)(O) of the Act.
Furthermore, because we do not intend to reduce the uncompensated
care payment based on any claim-specific factors, such as DRG weight or
transfer status, for discharges that are transfers, we do not believe
that it is appropriate to determine the per-discharge interim payment
using the number of transfer-adjusted discharges. In other words, we
will not be using transfer-adjusted discharges to determine per-claim
payments. In order to determine per-claim payments, we will use the 3-
year average of the most recent periods to determine discharges. At
cost report settlement, we will reconcile the total amounts paid on a
per-discharge basis during the Federal fiscal year with the amount of
the uncompensated care payment that we have calculated for the hospital
for the fiscal year and issue further instructions as needed.
Comment: MedPAC submitted a comment supporting the proposal to make
interim uncompensated care payments on a periodic basis, and further
stated that this payment approach was appropriate and would prevent
unnecessary cash flow problems for the hospitals. Other commenters also
supported the proposal. One commenter urged CMS to make direct lump sum
uncompensated care payments to hospitals on a biweekly basis to avoid
the need for hospital-specific reconciliations.
Response: Although we appreciate the commenters' support for our
proposal, for the reasons stated above, we are not adopting our
proposed policy to make interim uncompensated care payments on a
periodic basis. After consideration of the public comments we received,
in this final rule, for FY2014, we are adopting a process to distribute
interim uncompensated care payments on a per-discharge basis through
the claims processing system. We believe that the inclusion of the
uncompensated care per-claim amount on each claim paid will address
MedPAC's concerns about cash flow problems for the hospitals. Because
the per-discharge uncompensated care payments will be made on a claim-
by-claim basis in the claims processing system, we anticipate that the
FY 2014 CMS Medicare Inpatient PPS PC PRICER software tool will also
display the uncompensated care per-claim amount in the pricing
information it calculates. This should assist those MA plans that opt
to use the CMS Medicare Inpatient PPS PC PRICER tool to estimate fee-
for-service like payments.
Comment: Some commenters urged CMS to clarify in the final rule
that MA plans must include payment for uncompensated care in their
payments to hospitals, and requested that CMS take steps to ensure MA
plans have access to the information they need to make payments for
uncompensated care costs as of October 1, 2013.
Response: We appreciate receiving the commenters' feedback. As
stated above, we agree with the commenters that MA organizations have
the obligation to include these payment amounts for purposes of
payments under section 1866(a)(1)(O) of the Act, and, as noted above,
are taking steps to ensure that these amounts are included in the
software used by MA organizations.
After consideration of the public comments we received, in this
final rule we are not adopting our proposed policy to make interim
uncompensated care payments on a periodic basis, and instead for FY
2014 are adopting a process to distribute interim uncompensated care
payments on a per-discharge basis through the claims processing system,
and also such tools

[[Page 50646]]

that we make available to the public, including MA organizations.
In the FY 2014 IPPS/LTCH PPS proposed rule, we also proposed to
make a final determination concerning eligibility for uncompensated
care payments at the time of cost report settlement. As a result of
this proposal, our operational system must be able to handle the
various situations that may arise between interim and final eligibility
determinations. For example, a hospital may receive empirically
justified Medicare DSH payments and uncompensated care payments based
on an initial determination that the hospital is eligible for such
payments, but the hospital may then be determined to be ineligible for
such payments at cost report settlement. In such situations, we must be
prepared and able to recoup the interim empirically justified Medicare
DSH payments and uncompensated care payments that the hospital
received.
For each Federal fiscal year, we proposed to estimate which
hospitals will receive an empirically justified Medicare DSH payment
(that is, eligible hospitals). We proposed to provide periodic payments
to these hospitals during the relevant Federal fiscal year so that they
can receive their uncompensated care payments on an interim basis. For
a fiscal year, each eligible hospital's interim uncompensated care
payments will be determined by multiplying the final values for Factor
1, Factor 2, and Factor 3 for that year and dividing the amount by the
number of periods over which the interim payments will be made.
Because we would be using historical data to estimate each
hospital's eligibility for empirically justified Medicare DSH payments
in FY 2014 and subsequent years, we acknowledged that a reconciliation
process would be necessary to account for cases in which a hospital's
eligibility for such payments changes after we have published our
estimates during the rulemaking process. For example, a hospital that
had not been estimated to be eligible for these payments may become
eligible during the course of a given payment period. In such cases,
our estimates would have indicated that the hospital was ineligible for
empirically justified Medicare DSH payments and, therefore, ineligible
for uncompensated care payments. That hospital would not receive
interim payments. However, if the data available at cost report
settlement were to indicate that the hospital is eligible for an
empirically justified Medicare DSH payment, the hospital would become
eligible for an uncompensated care payment based on that hospital's
Factor 3 value.
Therefore, we proposed that, at cost report settlement, the fiscal
intermediary/MAC will issue a notice of program reimbursement that
includes a determination concerning whether each hospital is eligible
for empirically justified Medicare DSH payments and, therefore,
eligible for uncompensated care payments in FY 2014 and each subsequent
year. In the case where a hospital received interim payments for its
empirically justified Medicare DSH payments and uncompensated care
payments for FY 2014 or a subsequent year on the basis of estimates
prior to the payment year, but is determined to be ineligible for the
empirically justified Medicare DSH payment at cost report settlement,
the hospital would no longer be eligible for either payment and CMS
would recoup those monies. For a hospital that did not receive interim
payments for its empirically justified Medicare DSH payments and
uncompensated care payments for FY 2014 or a subsequent year, but at
cost report settlement is determined to be eligible for DSH payments,
the uncompensated care payment for such a hospital is calculated based
on the Factor 3 value determined prospectively for that fiscal year.
We proposed to codify this policy regarding the manner and timing
of payments in new Sec. 412.106(h) of our regulations.
We invited public comment on this proposal.
The reconciliations at cost report settlement would be based on the
values for Factor 1, Factor 2, and Factor 3 that we have finalized
prospectively for a Federal fiscal year. For example, a hospital that
was estimated by CMS to receive empirically justified Medicare DSH
payments for FY 2014 and received interim uncompensated care payments
would not receive a different uncompensated care payment amount if the
hospital remained eligible for empirically justified Medicare DSH
payments at cost report settlement. In other words, we did not propose
to include a reestimation of Factor 1, Factor 2, or Factor 3 in the
reconciliation process. Rather, Factor 1, Factor 2, and Factor 3 are
estimates determined prospectively using methodologies we establish
through rulemaking. We recognize that, under this proposal, we may pay
a total amount that could either be more or less than the product of
Factor 1 and Factor 2. However, we believed this risk is inherent in
the use of estimates to determine the Factors, similar to the manner in
which we estimate the amount of total outlier payments under section
1886(d)(5)(A)(iv) although, as in this case, the amount of actual total
outlier payments might vary from that estimate. In the FY 2014 IPPS/
LTCH PPS proposed rule, we indicated that we do not know of any reason
to believe that there will be a bias toward systematic overpayment or
underpayment from year to year.
We proposed to codify this policy at Sec. 412.106(g)(1)(iv) of our
regulations.
We invited public comments on this proposal, especially in regard
to whether we should include Factor 3 within the reconciliation
process. We stated that, depending on the public comments received, we
may revise our proposed policy in the final rule so that at the time of
cost report settlement and reconciliation a hospital's final
uncompensated care payments could be based on Factor 3 numerators and
denominators estimated using more recent cost report data (and
associated inputs). In addition, we stated that we may revise our
proposed reconciliation process, as appropriate, to account for any
policy changes that we make in the final rule.
We also note that the uncompensated care payment will be reported
on the Medicare Hospital Cost Report. We recognized that hospitals have
their own cost reporting periods that may differ from the Federal
fiscal year and that may span more than one Federal fiscal year. In the
FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27592), we proposed that
hospitals would receive their uncompensated care payments with respect
to the fiscal year in which their cost report begins. For example, if a
hospital is estimated to be eligible for the empirically justified DSH
payment and also an uncompensated care payment in FY 2014 and has a
cost report period of January 1, 2014 through December 31, 2014, this
hospital would begin to receive interim payments for its uncompensated
care on October 1, 2013. If, at cost report settlement, this hospital
remained eligible for an empirically justified DSH payment, then the
hospital would receive its FY 2014 uncompensated care payment on its
cost report for the cost reporting period beginning on January 1, 2014
(that is, the hospital would neither owe nor be owed monies for its
uncompensated care payment). As another example, if that same hospital
is no longer eligible for an empirically justified Medicare DSH payment
at the time of settlement of its cost report for the cost reporting
period beginning January 1, 2014, the hospital would be required to pay
back the interim payments it received for its uncompensated care
payments. We

[[Page 50647]]

noted that this methodology would not delay the full payment of FY 2014
payments to hospitals with cost reporting periods that begin after
October 1, 2013. While it is possible to align interim and final
payments for the uncompensated care payment with individual hospital's
cost reporting periods, we noted that we believe it would be
administratively efficient and practical to pay the uncompensated care
payment on the basis of the Federal fiscal year because that is how it
is determined, and to reconcile that amount in the cost reporting
period that begins in the respective Federal fiscal year. We stated in
the proposed rule that if this proposal is finalized, we would revise
the cost report accordingly. We invited public comments on our
proposal.
Comment: Many commenters, including national hospital associations,
expressed concerns regarding the accuracy of the data used to determine
insured low-income days and requested that we establish a limited time
period after the final rule for data corrections to afford hospitals an
opportunity to provide the most current and best available data.
Specifically, the commenters were concerned about the accuracy and
completeness of the HCRIS data used to calculate Factor 3 in the
proposed rule, noting that the inaccuracies could be due to timing
issues related to when the HCRIS files are created, revised, and
reissued. Therefore, the commenters requested that we allow hospitals
an opportunity to validate the estimates and data used to determine the
uncompensated care payments. Some commenters also stated that the
Worksheet S-2 and Worksheet S-3 data being used are primarily from
unaudited cost reports and there are discrepancies between Medicaid
days reported on Worksheet S-2 versus Worksheet S-3. The commenters
also noted that many of the as-filed cost reports would not necessarily
include the final count of Medicaid days due to the nature of
retroactive Medicaid eligibility determination. These commenters
pointed out that this is more problematic because some States have a
longer Medicaid eligibility determination timeline than others, and
believed that hospitals in these States rely on secondary research to
identify a large volume of retroactive Medicaid eligible days. One
commenter stated that providers should be given sufficient time to
review SSI data before the Factor 3 percentages are used, and stated
that the 2011 SSI data should be published to allow for this. In
addition, some commenters urged us to allow a 30-day period after the
publication of the final rule for hospitals to submit corrections to
their cost reports; some commenters requested a 90-day period for
corrections.
Response: We understand the commenters' concerns regarding the
accuracy of the data used to calculate Factor 3, and as discussed
above, for this final rule we are taking several steps to address these
inconsistencies, including using the March 2013 update of HCRIS and
identifying a hospital's Medicaid days based on the Medicaid days
reported on the 2011, or if not available 2010, Medicare Hospital Cost
Report. For FY 2014 Factor 3 determinations, for hospitals filing CMS
Form 2552-10 that claimed DSH on their cost reports, we will determine
Medicaid days using Worksheet S-2, even if those data conflict with the
Medicaid days reported on Worksheet S-3. We believe that this is
appropriate because those hospitals' DSH payments are determined using
the data from Worksheet S-2. We also note that we believe that there
should be no discrepancy between the Medicaid days reported on
Worksheet S-2 and Worksheet S-3 and, therefore, have updated our
processes so that Medicaid days reported on Worksheet S-2 may no longer
be inconsistent with Medicaid days reported on Worksheet S-3. However,
we understand that for FY 2014 Factor 3 determinations for hospitals
filing CMS Form 2552-10 for either 2011 or 2010, that did not claim DSH
on their cost report, it may have been impossible for some of these
hospitals to enter data on Worksheet S-2 due to Medicare systems
issues. Therefore, for all hospitals that did not claim DSH on their
cost report for either 2011 or 2010, for the FY 2014 Factor 3
determination, we will use Medicaid days from Worksheet S-3. We believe
that this is appropriate so as not to disadvantage any group of
hospitals that were unable to report information on Worksheet S-2 for
their FY 2011 (or FY 2010) cost reporting period. Hospitals certify the
accuracy of the information on their cost reports at the time of
submission. As a result, we do not agree that providing hospitals
additional time to submit data will necessarily improve the accuracy of
the estimate used to calculate Factor 3 because such data could not be
audited in a meaningful timeframe and still allow payments to be made
in FY 2014. Therefore, we are not providing additional time after the
publication of the final rule for hospitals to submit changes to their
data.
In response to the comment requesting that CMS publish the 2011 SSI
ratios, on June 27, 2013, the FY 2011 SSI ratios were posted on the CMS
Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh.html. We note that CMS generally
publishes SSI ratios annually in the spring.
We are finalizing the proposed new provisions at Sec. 412.106(g)
and (h) to codify these policies. However, we note that we have made a
minor change to the provision at Sec. 412.106(h) to clarify that we
intend to make interim payments during the year, and not interim
payments on a periodic basis as we had proposed.

F. Medicare-Dependent, Small Rural Hospital (MDH) Program (Sec.
412.108)

1. Backgound
Section 1885(d)(5)(G) of the Act provides special payment
protections, under the IPPS, to a Medicare-dependent, small rural
hospital (MDH). (For additional information on the MDH program and the
payment methodology, we refer readers to the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51683 through 51684.) As we discussed in the FY 2011
IPPS/LTCH PPS final rule (75 FR 50287) and in the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51683 through 51684), section 3124 of the Affordable
Care Act extended the expiration of the MDH program from the end of FY
2011 (that is, for discharges occurring before October 1, 2011) to the
end of FY 2012 (that is, for discharges occurring before October 1,
2012). Under prior law, as specified in section 5003(a) of Public Law
109-171 (DRA 2005), the MDH program was to be in effect through the end
of FY 2011 only. Section 3124(a) of the Affordable Care Act amended
sections 1886(d)(5)(G)(i) and 1886(d)(5)(G)(ii)(II) of the Act to
extend the MDH program and payment methodology by striking out
``October 1, 2011'' and inserting ``October 1, 2012''. Section 3124(b)
of the Affordable Care Act made conforming amendments to sections
1886(b)(3)(D) and 1886(b)(3)(D)(iv) of the Act.
In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50287 and 50414), we
amended the regulations at Sec. 412.108(a)(1) and (c)(2)(iii) to
reflect the statutory extension of the MDH program through FY 2012. In
the FY 2012 IPPS/LTCH PPS final rule (76 FR 51683 through 51684), we
did not make any additional changes to the MDH regulatory text for FY
2012. As discussed below, the ATRA (Pub. L. 112-240) amended the Act to
extend the MDH program through the end of FY 2013.

[[Page 50648]]

2. Provisions of the ATRA for FY 2013
a. Background
Prior to the enactment of the ATRA, under section 3124 of the
Affordable Care Act, the MDH program authorized by section
1886(d)(5)(G) of the Act was set to expire at the end of FY 2012.
Section 606 of the ATRA amended sections 1886(d)(5)(G)(i) and
1886(d)(5)(G)(ii)(II) of the Act to provide for an additional 1-year
extension of the MDH program, effective from October 1, 2012 to
September 30, 2013 (FY 2013). Section 606 of the ATRA also made
conforming amendments to sections 1886(b)(3)(D)(i) and
1886(b)(3)(D)(iv) of the Act. Prior to the enactment of the ATRA, in
the FY 2013 IPPS/LTCH PPS final rule, we discussed the expiration of
the MDH program at the end of FY 2012 (77 FR 53413 through 53414) and
revised the SCH regulation at Sec. 412.92(b) to change the effective
date of SCH status for MDHs that apply for SCH status with the
expiration of the MDH program (77 FR 53404 through 53405).
In a FY 2013 IPPS notice issued in the Federal Register on March 7,
2013 (78 FR 14689), we announced the extension of the MDH program for
FY 2013 in accordance with the provisions of section 606 of the ATRA.
In that notice, we explained that, as a result of section 606 of the
ATRA, the MDH program is now extended for 1 additional year, through
the end of FY 2013 (that is, effective October 1, 2012 through
September 30, 2013). The FY 2013 IPPS notice explained how providers
may be affected by the ATRA extension of the MDH program and described
the steps to reapply for MDH status for FY 2013, as applicable.
Generally, a provider that was classified as an MDH at the end of FY
2012 (that is, as of September 30, 2012) was reinstated as an MDH
effective October 1, 2012, with no need to reapply for MDH
classification. However, if the MDH had classified as a sole community
hospital (SCH) or cancelled its rural classification under Sec.
412.103(g) effective on or after October 1, 2012, the effective date of
MDH status was not retroactive to October 1, 2012. In the FY 2013 IPPS
notice, we also stated that we intended to make conforming changes to
the regulations at Sec. Sec. 412.108(a)(1) and (c)(2)(iii) in future
rulemaking to reflect the statutory changes made by section 606 of the
ATRA. We refer readers to the FY 2013 IPPS notice (78 FR 14689 through
14694) for additional information on the extension of the MDH program
through FY 2013 pursuant to section 606 of the ATRA and for additional
information on how and when MDH status was determined for hospitals
classified as MDHs prior to the September 30, 2012 expiration of the
program.
b. Conforming Regulatory Changes
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27593), we
proposed to make conforming changes to the regulations at Sec. Sec.
412.108(a)(1) and (c)(2)(iii) to reflect the statutory extension of the
MDH program through FY 2013 made by section 606 of the ATRA.
We did not receive any public comments on the proposed conforming
changes to the existing regulations text at Sec. 412.108 to reflect
the extension of the MDH program through FY 2013 in accordance with
section 606 of the ATRA. Therefore, in this final rule, we are adopting
as final the proposed revisions to paragraphs (a)(1) and (c)(2)(iii) of
Sec. 412.108 without modification.
c. Expiration of the MDH Program
Since section 606 of the ATRA extended the MDH program through FY
2013 only, the MDH program will no longer be in effect in FY 2014
absent a change in law to extend the program. Therefore, beginning in
FY 2014, all hospitals that previously qualified for MDH status will no
longer have MDH status and will be paid based solely on the Federal
rate.
As noted earlier, in the FY 2013 IPPS/LTCH PPS final rule (77 FR
53404 through 53405), we revised our SCH policies to allow MDHs to
apply for SCH status and be paid as such under certain conditions,
following expiration of the MDH program at the end of FY 2012. We
codified these changes in the regulations at Sec. 412.92(b)(2)(i) and
Sec. 412.92(b)(2)(v). For additional information, we refer readers to
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53404 through 53405 and
53674). We note that those same conditions apply to MDHs that intend to
apply for SCH status with the expiration of the MDH program at the end
of FY 2013. Specifically, the existing regulations at Sec.
412.92(b)(2)(i) and (b)(2)(v) allow for an effective date of approval
of SCH status that is the day following the expiration date of the MDH
program. In accordance with these regulations, in order for an MDH to
receive SCH status effective October 1, 2013, it must apply for SCH
status at least 30 days before the end of the MDH program; that is, the
MDH must apply for SCH status by August 31, 2013. The MDH also must
request that, if approved as an SCH, the SCH status be effective with
the expiration of the MDH program provision; that is, the MDH must
request that the SCH status, if approved, be effective October 1, 2013,
immediately after its MDH status expires with the expiration of the MDH
program at the end of FY 2013, on September 30, 2013.
We note that an MDH that applies for SCH status in anticipation of
the expiration of the MDH program would not qualify for the October 1,
2013 effective date upon approval if it does not apply by the August
31, 2013 deadline. The provider would instead be subject to the usual
effective date for SCH classification, that is, 30 days after the date
of CMS' written notification of approval as specified at Sec.
412.92(b)(2)(i).
Comment: Several commenters expressed concern with the expiration
of the MDH program, citing serious detrimental effects that would
result to patients, hospitals, and communities. The commenters
encouraged the continuation of the MDH program.
Response: The MDH program, which provides special treatment of and
payment to small, rural, Medicare-dependent hospitals, is authorized by
statute through FY 2013. Therefore, a change in law would be necessary
in order for the MDH program to continue, or in order to reinstate it
once it expires. While we understand the commenters' concerns, CMS does
not have the authority under current law to continue the MDH program.
Comment: Several commenters continued to express their support of
the ``seamless transition'' policy we finalized in last year's rule.
However, some commenters requested that, in the event that the MDH
provision is reinstated, CMS allow providers that transitioned to SCH
status to revert back to MDH status retrospectively without the need to
reapply for MDH status. Similarly, these commenters requested that, if
providers cancel their rural status in anticipation of the expiration
of the MDH provision, CMS allow the providers to waive their
cancellation and revert to MDH status retroactively should the MDH
provision be reinstated. These commenters stated that CMS' current
regulations, which do not allow providers that transition to SCH status
or cancel their rural classification in anticipation of the expiration
of the MDH provision to be reinstated as MDHs retroactively upon the
reinstatement of the MDH provision, put providers in the unfair
position of having to guess whether or not Congress will reinstate the
MDH provision and weigh the effects of applying for SCH classification
or cancelling their rural status. A few others commenters pointed out
that CMS' policy to transition MDHs to SCH classification does not
address the needs of many of

[[Page 50649]]

the hospitals currently classified as an MDH because those hospitals do
not meet the criteria for an SCH, and recommended that CMS revise the
criteria for an MDH to become an SCH.
Response: The statute specifies that, in order to be an MDH, among
other requirements, a hospital must be located in a rural area and not
classified as an SCH. Hospitals that convert to an SCH or canceled
their rural status no longer meet the statutory criteria to be
classified as an MDH. If legislation is passed to authorize the
continuation of the MDH program, we will develop policy to implement
the specific provisions of such legislation. While we understand the
commenters' concerns about the expiration of the MDH program, the
statute specifies the criteria for a hospital to be classified as an
SCH and CMS does not have the authority to revise those statutory
criteria as requested by the commenters.
Comment: Some commenters requested that, if the MDH provision is
reinstated after October 1, 2013, CMS expedite the MDH reinstatement
process because many hospitals were not reinstated until several weeks
after the enactment of the ATRA.
Response: We understand those hospitals' concerns regarding the
time involved in the implementation of the reinstatement of their MDH
status after the enactment of the ATRA. While we have made every effort
to issue public notification and instructions to the MACs on our
implementation of the extension of the MDH program as provided for in
the provisions of the ATRA in a timely manner, we also are limited by
the time necessary to develop the policy and systems changes to
implement the specific provisions of the newly enacted legislation, as
well as the time required to undergo the issuance process. If
legislation is enacted to continue the MDH program, we will keep these
concerns in mind in the implementation of the specific provisions of
such legislation.

G. Hospital Readmissions Reduction Program (Sec. Sec. 412.150 through
412.154)

1. Statutory Basis for the Hospital Readmissions Reduction Program
Section 3025 of the Affordable Care Act, as amended by section
10309 of the Affordable Care Act, added a new subsection (q) to section
1886 of the Act. Section 1886(q) of the Act establishes the ``Hospital
Readmissions Reduction Program,'' effective for discharges from an
``applicable hospital'' beginning on or after October 1, 2012, under
which payments to those applicable hospitals may be reduced to account
for certain excess readmissions.
Section 1886(q)(1) of the Act sets forth the methodology by which
payments to ``applicable hospitals'' will be adjusted to account for
excess readmissions. Pursuant to section 1886(q)(1) of the Act,
payments for discharges from an ``applicable hospital'' will be an
amount equal to the product of the ``base operating DRG payment
amount'' and the adjustment factor for the hospital for the fiscal
year. That is, ``base operating DRG payments'' are reduced by a
hospital-specific adjustment factor that accounts for the hospital's
excess readmissions. Section 1886(q)(2) of the Act defines the base
operating DRG payment amount as ``the payment amount that would
otherwise be made under subsection (d) (determined without regard to
subsection (o) [the Hospital VBP Program]) for a discharge if this
subsection did not apply; reduced by . . . any portion of such payment
amount that is attributable to payments under paragraphs (5)(A),
(5)(B), (5)(F), and (12) of subsection (d).'' Paragraphs (5)(A),
(5)(B), (5)(F), and (12) of subsection (d) refer to outlier payments,
IME payments, DSH adjustment payments, and add-on payments for low-
volume hospitals, respectively.
Furthermore, section 1886(q)(2)(B) of the Act specifies special
rules for defining ``the payment amount that would otherwise be made
under subsection (d)'' for certain hospitals. Specifically, section
1886(q)(2)(B) of the Act states that ``[i]n the case of a Medicare-
dependent, small rural hospital (with respect to discharges occurring
during fiscal years 2012 and 2013) or a sole community hospital . . .
the payment amount that would otherwise be made under subsection (d)
shall be determined without regard to subparagraphs (I) and (L) of
subsection (b)(3) and subparagraphs (D) and (G) of subsection (d)(5).''
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53374), we finalized
policies to implement the statutory provisions related to the
definition of ``base operating DRG payment amount''.
Section 1886(q)(3)(A) of the Act defines the ``adjustment factor''
for an applicable hospital for a fiscal year as equal to the greater of
``(i) the ratio described in subparagraph (B) for the hospital for the
applicable period (as defined in paragraph (5)(D)) for such fiscal
year; or (ii) the floor adjustment factor specified in subparagraph
(C).'' Section 1886(q)(3)(B) of the Act, in turn, describes the ratio
used to calculate the adjustment factor. It states that the ratio is
``equal to 1 minus the ratio of--(i) the aggregate payments for excess
readmissions . . .; and (ii) the aggregate payments for all discharges.
. . .'' Section 1886(q)(3)(C) of the Act describes the floor adjustment
factor, which is set at 0.99 for FY 2013, 0.98 for FY 2014, and 0.97
for FY 2015 and subsequent fiscal years.
Section 1886(q)(4) of the Act sets forth the definitions of the
terms ``aggregate payments for excess readmissions'' and ``aggregate
payments for all discharges'' for an applicable hospital for the
applicable period. The term ``aggregate payments for excess
readmissions'' is defined in section 1886(q)(4)(A) of the Act as ``the
sum, for applicable conditions . . . of the product, for each
applicable condition, of (i) the base operating DRG payment amount for
such hospital for such applicable period for such condition; (ii) the
number of admissions for such condition for such hospital for such
applicable period; and (iii) the ``Excess Readmission Ratio . . . for
such hospital for such applicable period minus 1.'' The ``excess
readmission ratio'' is a hospital-specific ratio based on each
applicable condition. Specifically, section 1886(q)(4)(C) of the Act
defines the excess readmission ratio as the ratio of ``risk-adjusted
readmissions based on actual readmissions'' for an applicable hospital
for each applicable condition, to the ``risk-adjusted expected
readmissions'' for the applicable hospital for the applicable
condition.
Section 1886(q)(5) of the Act provides definitions of ``applicable
condition,'' ``expansion of applicable conditions,'' ``applicable
hospital,'' ``applicable period,'' and ``readmission.'' The term
``applicable condition'' (which is addressed in detail in section
IV.C.3.a. of the FY 2012 IPPS/LTCH PPS final rule (76 FR 51665 through
51666)) is defined as a ``condition or procedure selected by the
Secretary among conditions and procedures for which: (i) Readmissions .
. . represent conditions or procedures that are high volume or high
expenditures . . . and (ii) measures of such readmissions . . . have
been endorsed by the entity with a contract under section 1890(a) . . .
and such endorsed measures have exclusions for readmissions that are
unrelated to the prior discharge (such as a planned readmission or
transfer to another applicable hospital).'' Section 1886(q)(5)(B) of
the Act also requires the Secretary, beginning in FY 2015, ``to the
extent practicable, [to] expand the applicable conditions beyond the 3
conditions for which measures have been endorsed . . . to the
additional 4 conditions that have been identified by the Medicare
Payment Advisory Commission in its report to Congress in

[[Page 50650]]

June 2007 and to other conditions and procedures as determined
appropriate by the Secretary.''
Section 1886(q)(5)(C) of the Act defines ``applicable hospital,''
that is, a hospital subject to the Hospital Readmissions Reduction
Program, as a ``subsection (d) hospital or a hospital that is paid
under section 1814(b)(3) [of the Act], as the case may be.'' The term
``applicable period,'' as defined under section 1886(q)(5)(D) of the
Act, ``means, with respect to a fiscal year, such period as the
Secretary shall specify.'' As explained in the FY 2012 IPPS/LTCH PPS
final rule, the ``applicable period'' is the period from which data are
collected in order to calculate various ratios and adjustments under
the Hospital Readmissions Reduction Program.
Section 1886(q)(6) of the Act sets forth the public reporting
requirements for hospital-specific readmission rates. Section
1886(q)(7) of the Act limits administrative and judicial review of
certain determinations made pursuant to section 1886(q) of the Act.
Finally, section 1886(q)(8) of the Act requires the Secretary to
collect data on readmission rates for all hospital inpatients for
``specified hospitals'' in order to calculate the hospital-specific
readmission rates for all hospital inpatients and to publicly report
these readmission rates.
2. Overview
The payment adjustment factor set forth in section 1886(q) of the
Act did not apply to discharges until FY 2013. In the FY 2012 IPPS/LTCH
PPS final rule, we addressed the issues of the selection of readmission
measures and the calculation of the excess readmission ratio, which
will be used, in part, to calculate the readmission adjustment factor.
Specifically, in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51660
through 51676), we addressed the portions of section 1886(q) of the Act
related to the following provisions:
Selection of applicable conditions;
Definition of ``readmission'';
Measures for the applicable conditions chosen for
readmission;
Methodology for calculating the excess readmission ratio;
and
Definition of ``applicable period''.
With respect to the topics of ``measures for readmission'' for the
applicable conditions, and ``methodology for calculating the excess
readmission ratio,'' we specifically addressed the following:
Index hospitalizations;
Risk adjustment;
Risk standardized readmission rate;
Data sources; and
Exclusion of certain readmissions.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53374 through
53401), we finalized our policies that relate to the calculation of the
hospital readmission payment adjustment factor and the process by which
hospitals can review and correct their data. Specifically, in the final
rule, we addressed the portions of section 1886(q) of the Act related
to the following provisions:
Base operating DRG payment amount, including policies for
SCHs and MDHs and hospitals paid under section 1814(b) of the Act;
Adjustment factor (both the ratio and floor adjustment
factor);
Aggregate payments for excess readmissions and aggregate
payments for all discharges;
Applicable hospital;
Limitations on review; and
Reporting of hospital-specific information, including the
process for hospitals to review readmission information and submit
corrections.
In the FY 2013 IPPS/LTCH PPS final rule, we established a new
Subpart I under 42 CFR Part 412 (Sec. Sec. 412.150 through 412.154) to
codify rules for implementing the Hospital Readmissions Reduction
Program.
3. FY 2014 Policies for the Hospital Readmissions Reduction Program
a. Overview
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27594), for FY
2014 and beyond, we proposed to--
Refine the readmissions measures and related methodology
for the current applicable conditions (section V.G.3.b. of this
preamble);
Expand the ``applicable conditions'' for FY 2015 (section
V.G.3.c. of this preamble);
Specify additional policies for hospitals paid under
section 1814(b)(3) of the Act (Sec. 412.154(d)), including the process
to be exempted from the Hospital Readmissions Reduction Program and the
definition of ``base operating DRG payment amount'' (section V.G.3.d.
of this preamble);
Specify the proposed adjustment factor floor for FY 2014
(section V.G.3.e. of this preamble);
Specify the proposed applicable period for FY 2014
(section V.G.3.f. of this preamble);
Refine the methodology to calculate the aggregate payments
for excess readmissions (section V.G.3.g. of this preamble); and
Clarify the process for reporting hospital-specific
information, including the opportunity to review and submit corrections
(section V.G.3.h. of this preamble).
Comment: Some commenters requested that CMS conduct additional
analyses on the Hospital Readmissions Reduction Program. One commenter
suggested that CMS evaluate how hospitals work towards reducing
readmissions and determine if the Hospital Readmissions Reduction
Program is successful. Another commenter suggested that CMS analyze the
Hospital Readmissions Reduction Program to determine its impact on
mortality rates. One commenter stated that CMS should monitor the
program for unintended consequences, such as avoiding admissions for
difficult patients or placing more patients in observations to avoid
readmissions. Other commenters requested that CMS conduct additional
analyses on any unintended consequences with avoiding readmissions.
Response: We appreciate the commenters' feedback and suggestions.
However, we believe that there does not appear to be a meaningful
correlation between hospital risk-standardized mortality rates and
readmission rates. We believe that a hospital's performance on
mortality and readmissions measures represents different aspects of
quality. While a recent MedPAC report \18\ indicates that there may be
an inverse correlation between readmission and mortality rates, we note
that this inverse relationship has been found to be modest.\19\ We
recognize the commenter's concern and will monitor changes in the
strength of these inverse correlations over time. Further, we recognize
that performance-based payment programs, as with any pay-for-
performance or pay-for-reporting program, may create the potential for
unintended consequences. However, we remain committed to monitoring the
Hospital Readmissions Reduction Program and assessing unintended
consequences such as changes in utilization and patient outcomes over
time, and adjusting the program as needed. We will also continue to
make these analyses available to the public in the Chartbook posted
annually each Fall on the CMS Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/OutcomeMeasures.html. We are especially cognizant
of those areas of concern raised by stakeholders, including
inappropriate shifting of care,

[[Page 50651]]

increased patient morbidity and mortality, and increases in the use of
observation services to avoid hospital readmissions. We remain
committed to quickly addressing these areas, as well as any other
unintended consequences that may arise as the Hospital Readmissions
Reduction Program progresses.
---------------------------------------------------------------------------

\18\ https://www.medpac.gov/documents/Jun13_EntireReport.pdf.
\19\ Krumholz HM, Lin Z, Keenan PS, et al. Relationship between
hospital readmission and mortality rates for patients hospitalized
with acute myocardial infarction, heart failure, or pneumonia. JAMA.
2013; 309(6): 587-593.
---------------------------------------------------------------------------

b. Refinement of the Readmission Measures and Related Methodology for
FY 2014 and Subsequent Years Payment Determinations
(1) Overview of the Inclusion of Planned Readmissions for the
Calculation of the FY 2014 Readmissions Adjustment Factors
In the FY 2012 IPPS/LTCH PPS final rule, we adopted AMI, HF, and PN
readmission measures for the Hospital Readmissions Reduction Program
payment determinations beginning with FY 2013. During development of
the three readmission measures for AMI, HF, and PN, we consulted with
medical experts to identify readmissions that are typically scheduled
as follow-up care for each specific condition within 30 days of
discharge. We categorized these readmissions as planned follow-up care
and excluded them from being counted as a readmission. The AMI measure
finalized for the Hospital Readmissions Reduction Program included two
revascularization procedures (coronary artery bypass graft surgery
(CABG) and percutaneous coronary intervention (PCI) (76 FR 51667)). We
considered these procedures planned readmissions and excluded them from
the readmission calculation as long as the readmissions were not for
one of five acute conditions (HF, AMI, other acute/subacute forms of
ischemic heart disease, arrhythmia, and cardiac arrest).
During development of the HF and PN readmission measures, we did
not identify any readmissions that were typically planned as follow-up
care at the time of the patient's discharge. Therefore, the readmission
measures finalized for the Hospital Readmissions Reduction Program for
these two conditions did not exclude any planned readmissions from the
readmission calculation.
(2) Refinement of the Readmission Measures and Related Methodology for
the FY 2014 and Subsequent Years Payment Determinations
Since the development and implementation of the initial three
readmission measures adopted under the Hospital Readmissions Reduction
Program, we have received comments from the medical community, other
stakeholders, and the general public encouraging us to identify and not
count as readmissions a broader range of planned readmissions.
Stakeholders also made recommendations for expanding the number and
types of planned readmissions during the public comment period for the
FY 2013 IPPS/LTCH PPS proposed rule (as discussed in the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53382 through 53398)).
Stakeholders commented that readmission measures are intended to
capture unplanned readmissions that arise from acute clinical events
requiring urgent rehospitalization within 30 days of discharge. In
addition, stakeholders commented that planned readmissions do not
generally signal poor quality of care. In response to stakeholders'
concerns, we have worked with experts in the medical community, other
stakeholders, and the public to broadly identify planned readmissions
for procedures and treatments for exclusion from the readmission
measures. Specifically, we developed an expanded ``planned readmission
algorithm'' in the CMS Planned Readmission Algorithm Version 2.1 Report
to identify planned readmissions across our readmission measures. In
the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27595), we proposed to
apply the algorithm to the AMI, HF, and PN measures for FY 2014. The
CMS Planned Readmission Algorithm Version 2.1 Report is available on
the CMS Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
As discussed in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR
27595), we developed the algorithm based on a hospital-wide (not
condition-specific) cohort of patients. We began the development by
using the Agency for Healthcare Research and Quality's (AHRQ's)
Clinical Classification Software (CCS) codes to group thousands of
individual procedures and diagnoses codes into clinically coherent,
mutually exclusive procedure and diagnosis categories (PROC-CCS
categories and Diagnosis-CCS categories, respectively). A panel of
independent, non-CMS clinicians then reviewed the procedure categories
and identified those that are commonly planned and require admission.
Clinicians also reviewed the diagnosis categories and identified those
that were acute diagnoses likely requiring hospitalization. Using these
procedure and diagnosis categories and some individual ICD-9-CM
procedure and diagnoses codes in the categories, we developed an
initial algorithm for identifying planned readmissions for a hospital-
wide cohort of patients.
The algorithm underwent several reviews by stakeholders. We
initially posted the detailed algorithm for informal public comment
during the measurement development process in August 2011. The National
Quality Forum (NQF) reviewed and made the algorithm available for
public comment during its endorsement review of the Hospital-Wide All-
Cause Unplanned Readmission Measure (NQF 1789). We also
recruited 27 surgical subspecialists nominated by their specialty
societies to review the algorithm and suggest refinements, which
resulted in Version 2.1 of the Planned Readmission Algorithm. In the
proposed rule, we proposed to use this algorithm in the readmission
measures under the Hospital Readmissions Reduction Program beginning
with FY 2014. A detailed description of this algorithm is included
later in this section.
As required by section 1886(q)(5)(A)(ii) of the Act, the first
three applicable conditions of AMI, HF and PN, must use readmission
measures that have been endorsed by the entity with a contract under
section 1890(a) of the Act; and such endorsed measures must have
exclusions for readmissions that are unrelated to the prior discharge
(such as planned readmission or transfer to another applicable
hospital). Because the statute requires that the readmission measures
for the three current applicable conditions (AMI, HF and PN) be NQF-
endorsed, we sought NQF's endorsement of the measures that were revised
to include the CMS Planned Readmission Algorithm Version 2.1. NQF
reviewed these revised measures through its ad hoc review process,
which reviews previously endorsed measures that undergo material
changes. Following ad hoc review, NQF endorsed the revised AMI (NQF
0505) and HF (NQF 0330) measures in January 2013 and
the PN measure (NQF 0506) in March 2013.
Comment: Several commenters stated that the Hospital Readmissions
Reduction Program uses unreliable measures. One commenter suggested
that the method used to calculate the number of excess readmissions
adjusts for the volume of eligible patients served by the hospital, and
weakens the incentive for low-volume hospitals to reduce their
readmission rates. Another commenter stated that it is not reasonable
to give a pass to hospitals with consistently high readmission rates
year after year because they are low volume.

[[Page 50652]]

Response: We appreciate the commenters' feedback. However, we
disagree that the Hospital Readmissions Reduction Program uses
unreliable measures for two reasons. First, the NQF both reviewed and
endorsed the measures used in the Hospital Readmissions Reduction
Program. As part of this endorsement process, the NQF requires that
measures meet criteria for scientific acceptability, which include
validity and reliability. Specifically, reliability under the NQF
measure evaluation criteria means that the measure both allows for
comparability and is well defined and precisely specified so it can be
implemented consistently within and across organizations.\20\ Second,
as previously addressed in the FY 2013 IPPS/LTCH PPS final rule (77 FR
53379), ``We determined the 25-case threshold for public reporting
based on a reliability statistic that is calculated from the
intercluster correlation, a parameter of the model. We are maintaining
the minimum 25-case threshold that we adopted through rulemaking last
year.''
---------------------------------------------------------------------------

\20\ National Quality Forum (NQF), Measure Evaluation Criteria
(November, 2012). Available at: https://www/qualityforum.org/docs/
measure--evaluation--criteria.aspx.
---------------------------------------------------------------------------

We acknowledge that smaller hospitals typically have less certain
estimates because they have fewer cases for use in assessing quality.
This challenge is inherent in outcome measurements. However, one
advantage of the statistical model that we use for the measures is that
it allows for the inclusion of small hospitals while characterizing the
certainty of their estimates. The hierarchical logistic regression
model that we use to calculate the risk-standardized outcome measures
allows the inclusion of hospitals with relatively few observations, but
takes into account the uncertainty associated with sample size in
estimating their risk-standardized outcome rates. The model takes into
account the uncertainty in the estimate of outcome rates for low-volume
hospitals by assuming that each hospital is a typically performing
hospital. It weighs that assumption along with the outcomes for the
particular hospital in calculating the outcome rate. Therefore, the
estimated outcome rates for smaller hospitals will likely be closer to
the national rate because the limited number of eligible cases in the
hospital tells little about that hospital's true outcome rate.
Comment: One commenter suggested that CMS exclude patients coded
under ICD-9-CM code V15.81 (Personal history of non-compliance with
medical treatment) from the readmission measures.
Response: We appreciate the commenter's suggestion. We recognize
that some patients choose not to follow a recommended treatment plan,
even when they have access to the care they need. However, all
hospitals have the opportunity to reduce the rate of readmission, even
among less compliant patients. Improving readmission rates is the joint
responsibility of hospitals and clinicians. Measuring readmissions will
create incentives to invest in interventions to improve hospital care,
better assess the readiness of patients for discharge, and facilitate
transitions to outpatient status.
(a) Description of CMS Planned Readmission Algorithm Version 2.1
As described in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR
27595), this algorithm is a set of criteria for classifying
readmissions as ``planned'' using Medicare claims. The algorithm
identifies typical planned admissions that may occur within 30 days of
discharge from the hospital.
We based the CMS Planned Readmission Algorithm on three principles:
A few specific, limited types of care are always
considered planned (obstetrical delivery, transplant surgery,
maintenance chemotherapy, rehabilitation);
Otherwise, a planned readmission is defined as a nonacute
readmission for a scheduled procedure; and
Admissions for acute illness or for complications of care
are never planned.
The Planned Readmission Algorithm uses a flow chart and four tables
of procedures and conditions to implement these principles and to
classify readmissions as planned or unplanned. The flow chart and
tables are available in a report, CMS Planned Readmission Algorithm
Version 2.1, which is available on the CMS Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
We incorporated the algorithm into each condition-specific and
procedure-specific readmission measure. For most readmission measures,
including the AMI, HF, and PN measures, we used one standard version of
the algorithm--the CMS Planned Readmission Algorithm Version 2.1.
However, for a subset of readmission measures, we revised the list of
potentially planned procedures or acute primary diagnosis after
applying the standard algorithm version because it was clinically
indicated. For example, for the Total Hip Arthroplasty (THA) and Total
Knee Arthroplasty (TKA) readmission measure that we proposed in the FY
2014 IPPS/LTCH PPS proposed rule and are adopting in this final rule
for FY 2015, we removed diagnostic cardiac catheterization from the
potentially planned procedure list because patients in the hip/knee
measure are typically well enough to undergo elective surgery and would
not be expected to need a catheterization within 30 days of discharge.
The details of these adaptations are available in the CMS Planned
Readmission Algorithm Version 2.1 report (https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html).
Comment: Several commenters supported the refinement of the
readmission measures using the planned readmission algorithm. The
commenters appreciated that CMS considered and acted upon public
comments and suggestions made in last year's rule, and supported CMS'
continued efforts to exclude planned readmissions from the penalty
calculation.
Response: We appreciate the commenters' support of our proposal to
include a planned readmission algorithm for readmissions measures in
the Hospital Readmissions Reduction Program.
Comment: Several commenters suggested that CMS continually assess
the algorithm for planned readmissions to determine whether additional
diagnoses or procedures should be considered ``planned.''
Response: We appreciate the commenters' suggestion. We intend to
continually review the planned readmissions algorithm. Our measures
continually undergo maintenance to determine the need for updated
specifications, and to monitor for trends and any relevant coding
changes associated with the measures. With such updates, we will modify
the planned readmission algorithm as needed. If substantive updates are
required, we will inform the public of any changes to the planned
readmissions algorithm through rulemaking.
Comment: Some commenters stated that relying solely on claims data
is insufficient for proper risk-adjustment. One commenter stated that
risk-adjustment based solely on claims data loses clinical detail for
proper adjustment for severity. The commenter added, for example, that
our coding does not capture those patients who are readmitted from
hospice care.

[[Page 50653]]

Response: We have performed validation work to confirm the
scientific rigor of using claims data for risk adjustment in outcome
measures. We validated the AMI, HF, and PN mortality and readmission
measures with models that use medical record-abstracted data for risk-
adjustment. These analyses demonstrated that using claims data produces
estimated hospital-level risk-standardized mortality rates (RSMRs) and
risk-standardized readmission rates (RSRRs) that are very similar to
the rates estimated by models based solely on medical record data
(available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html).
This high level of agreement in the results based on the two different
approaches supports the use of the claims-based models for public
reporting. These analyses are available in the methodology report
located on the CMS Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
Our approach to gathering risk factors for patients also mitigates
the potential limitations of claims data. Because not every diagnosis
is coded at every visit, we use claims data for the year prior to the
index admission, as well as secondary diagnosis codes during the index
admission, for risk-adjustment.
Comment: One commenter requested that the measures be risk-adjusted
for hospitals located in rural areas because this may cause their
readmission rate to be higher than hospitals in more concentrated
markets.
Response: We routinely monitor the impact of readmission measures
on hospitals and have examined if hospitals in rural areas tend to have
higher risk-standardized readmission rates. Our most recent analyses
(available on our Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Downloads/MedicareHospitalQualityChartbook2012.pdf) examined hospital
readmission rates for different hospital referral regions and did not
find a relationship between rural referral regions and increased
readmission rates.
Comment: Several commenters addressed the proposed policy to not
risk-adjust measures for socioeconomic status and other factors. Some
commenters supported the policy and urged CMS to resist making any
changes to the Hospital Readmissions Reduction Program based on
socioeconomic status concerns. These commenters stated that the same
care protocols that work with a different population may also work with
patients of lower socioeconomic circumstances. The commenters added
that until CMS can disprove that notion, CMS should not modify the
program in a way that would shield certain hospitals, based on fairness
concerns about socioeconomic factors, from truly participating in a
program to change the way Medicare and Medicaid services and payments
are delivered.
Other commenters suggested that the readmission measures should
include adjustments for socioeconomic status and other factors that are
either outside the hospitals' or providers' immediate control or that
may adversely affect certain types of hospitals more than others.
Suggestions for variables to include in either the patient-level or the
hospital-level model included: patient race, ethnicity, language,
income, lifestyle, health literacy, dual-eligible status (that is,
eligibility for both Medicare and Medicaid), insurance status,
functional status, cognitive impairment, post-discharge care support
structure, and access to primary care. Some commenters suggested
stratification of the hospital calculations by the percentage of dual-
eligible patients. One commenter stated that a patient's ability to
afford medication should be included as a risk-adjustment variable
because socioeconomic status impacts the patient's ability to be
compliant with medications and a patient's ability to pay for
medications is separate and apart from care provided by the hospital.
Another commenter recommended that CMS conduct a thorough analysis of
the role economic factors play in readmissions. This commenter also
suggested that the analysis be conducted at the claims level, with
matching zip codes to existing poverty data to provide an accurate
understanding of the role of economic conditions. The commenter stated
that readmission measures should fully account for economic drivers.
Another commenter stated that chronic diseases as well as socioeconomic
status are related to hospital readmissions, and these factors comprise
major determinants of outcomes.
Response: We appreciate the commenters' feedback and suggestions on
this issue. We have continued to consider and evaluate stakeholder
concerns regarding the influence of patient socioeconomic status on
readmission and mortality rates. The Hospital Readmissions Reduction
Program, as pointed out by one commenter, seeks to transform the
Medicare payment and delivery system by financially incentivizing
providers to change the way they deliver care. The program's design
encourages hospitals to make changes to avoid payment penalties while
simultaneously enhancing the quality of health care provided to
patients. We routinely monitor the impact of socioeconomic status on
hospitals' results and have consistently found that hospitals that care
for large proportions of patients of low socioeconomic status are
capable of performing well on our measures. Our most recent analyses,
available on our Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-AssessmentInstruments/HospitalQualityInits/Downloads/MedicareHospitalQualityChartbook2012.pdf, again confirmed
this finding. The definition of low SES we used was whether the
beneficiary was enrolled in Medicaid, which is a proxy for low-income.
Many safety-net providers and teaching hospitals do as well or better
on the measures than hospitals without substantial numbers of patients
of low socioeconomic status. Our analyses also show that adding
socioeconomic status to the risk-adjustment has a negligible impact on
hospitals' risk-standardized rates. The risk-adjustment for clinical
factors likely captures much of the variation due to socioeconomic
status, therefore leading to more modest impact of socioeconomic status
on hospitals' results than stakeholders expect. We note that the goal
of risk-adjustment is to account for factors that are inherent to the
patient at the time of admission, such as severity of disease, so as to
put hospitals on a level playing field. The measures should not be
risk-adjusted to account for differences in practice patterns that lead
to lower or higher risk for patients to be readmitted or die. The
measures aim to reveal differences related to the patterns of care. The
measures do not adjust for socioeconomic status because the association
between socioeconomic status and health outcomes can be due, in part,
to differences in the quality of health care received by groups of
patients with varying socioeconomic status. The measures also do not
adjust for socioeconomic status, or other patient factors such as race
because we do not want to hold hospitals to different standards for the
outcomes of their patients of low socioeconomic status. Finally, we do
not want to mask potential disparities or minimize incentives to
improve the outcomes of disadvantaged populations. This approach also
is consistent with the guidance from the NQF, which states that risk
models should not obscure

[[Page 50654]]

disparities by adjusting for factors associated with inequality (such
as race or socioeconomic status). Furthermore, the statutory language
in section 1886(q)(5)(A)(ii)(I) of the Act requires that the measures
included in the Hospital Readmissions Reduction Program be NQF-
endorsed, and the measures as endorsed by the NQF are not currently
adjusted for socioeconomic status. However, we are committed to
tracking this issue and will continue to evaluate disparities in care
and the impact of patient's socioeconomic status on hospital's
readmissions rates moving forward.
Comment: Some commenters suggested that CMS separate Hospital
Readmissions Reduction Program-eligible hospitals into quartiles based
on the proportion of their patients that are dually eligible, such that
readmissions penalties would then be dependent on how hospitals perform
compared to hospitals with a similar proportion of dually eligible
patients. Several commenters expressed concern that hospitals with
higher proportions of low socioeconomic status patients are at a
disadvantage, and suggested that CMS stratify the measure score
calculation to address this concern. One commenter suggested that CMS
stratify hospitals by their proportion of dual-eligible patients and
calculate the measure score in four different hospital strata. Based on
commenters' understanding of the proposal, the commenters suggested
that CMS rank hospitals by their proportion of dual-eligible patients,
and divide hospitals into quartiles based on their rank. The commenters
further suggested that CMS apply the NQF-approved measure to each group
of hospitals to calculate the risk-standardized ratio that is used for
the Hospital Readmissions Reduction Program. Under this approach, each
hospital's ``expected'' (denominator) rate would be derived based on
how hospitals within its quartile perform with similar patients. In
other words, the benchmark for performance would be set within each
quartile of hospitals, rather than by including all hospitals in the
calculation and setting a uniform performance benchmark.
Another commenter suggested that CMS stratify patients by their
dual-eligible status and calculate two readmission ratios for each
hospital for each measure--one using dual-eligible patients and one
using all other patients. The commenter further suggested that CMS
combine these scores to derive a single, ``blended'' excess readmission
ratio for each hospital.
Response: We appreciate these suggestions. However, we continue to
believe that it is appropriate to include all hospitals and patients in
a single comparison group. The measures do not stratify hospitals or
patients by socioeconomic status or risk adjust for socioeconomic
status because the association between socioeconomic status and health
outcomes can be due, in part, to differences in the quality of health
care received by groups of patients with varying socioeconomic status.
We have consistently found that hospitals that care for large
proportions of patients of low socioeconomic status are capable of
performing well on our measures. Our most recent analyses (located on
our Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Downloads/MedicareHospitalQualityChartbook2012.pdf) again confirmed this finding.
Many safety-net providers and teaching hospitals do as well or better
on the measures than hospitals without substantial numbers of patients
of low socioeconomic status. Our analyses also show that adding
socioeconomic status to the risk-adjustment has a negligible impact on
hospitals' risk-standardized rates. The risk-adjustment for clinical
factors likely captures much of the variation due to socioeconomic
status, therefore leading to more modest impact of socioeconomic status
on hospitals' results than stakeholders expect. These findings suggest
that using all hospitals and patients to calculate excess readmission
ratios is most appropriate.
We will continue to monitor this issue carefully. We note that we
continue to provide support to hospitals with high numbers of dual-
eligible patients through other programs and to assist hospitals with
high excess readmission ratios with lowering their readmission rates
through the Partnership for Patients Program and the Quality
Improvement Organization Program.
Comment: One commenter suggested that the readmission measures
risk-adjust for the acuity of the condition at the time of admission.
Response: The measures, endorsed by the NQF and finalized in the FY
2012 IPPS/LTCH PPS final rule, risk-adjust for key factors that are
clinically relevant and have strong relationships with the outcome (for
example, patient demographic factors, patient coexisting medical
conditions, and indicators of patient frailty). Under the current NQF-
endorsed methodology, these covariates are obtained from Medicare
claims extending 12 months prior to, and including, the index
admission. This risk-adjustment approach adjusts for differences in the
clinical status of the patient at the time of the index admission, as
well as for demographic variables. A complete list of the variables
used for risk-adjustment and the clinical and statistical process for
selecting the variables for each NQF-endorsed measure, as proposed, is
available on the NQF Web site at: https://qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1219069855841.
Comment: Some commenters stated that the planned readmission
algorithm does not account for the full range of planned readmissions,
or for unrelated readmissions. Other commenters suggested that CMS
exclude unrelated admissions from the payment adjustment. One commenter
added that the unintended consequences of our position to not exclude
unrelated readmissions may affect patient care. Other commenters stated
that CMS has ignored the Affordable Care Act requirements by not
excluding unrelated readmissions from the Hospital Readmissions
Reduction Program.
Response: We appreciate the commenters' feedback and suggestions.
However, we disagree that we have ignored the statutory requirements at
section 1886(q)(5) of the Act as established by section 3025 of the
Affordable Care Act relating to unrelated admissions. Section
1886(q)(5) of the Act requires us to use measures that contain
appropriate exclusions for readmissions that are unrelated to the prior
discharge. Section 1886(q)(5) of the Act then cites specific examples
of such unrelated readmissions, including planned readmissions and
transfers to another hospital. We note that we incorporated both
examples of unrelated readmissions cited by the statute in the Hospital
Readmissions Reduction Program. Further, we continue to review and
revise the area of unrelated readmissions through our expansion of
planned readmissions. For example, we included the planned readmissions
algorithm to address public comments raised last year relating to
expanding the number of planned readmissions.
Regarding other types of unrelated readmissions, we currently do
not seek to differentiate between related and unrelated readmissions
because readmissions not directly related to the index condition may
still be a result of the care received during the index
hospitalization. For example, a patient hospitalized for COPD who
develops a hospital-acquired infection may ultimately be readmitted for
sepsis. It

[[Page 50655]]

would be inappropriate to treat this readmission as unrelated to the
care the patient received during the index hospitalization.
Furthermore, the range of potentially avoidable readmissions also
includes those not directly related to the initial hospitalization,
such as those resulting from poor communication at discharge or
inadequate follow-up. As such, creating a comprehensive list of
potential complications related to the index hospitalization would be
arbitrary, incomplete, and, ultimately, extremely difficult to
implement. However, in coordination with medical experts, we expanded
the list of conditions considered planned. Generally speaking, planned
readmissions are not a signal of quality of care. Therefore, we have
worked with experts in the medical community, as well as other
stakeholders to carefully identify procedures and treatments that
should be considered ``planned'' and, therefore, not counted as
readmissions. For FY 2014, we have proposed that the measures identify
planned readmissions by using an expanded algorithm, which is a set of
criteria for classifying readmissions as planned using Medicare claims.
This algorithm identifies admissions that are typically planned and may
occur within 30 days of discharge from the hospital.
Comment: One commenter suggested that Left Ventricular Assist
Devices (LVADs) and heart transplants be excluded as planned
readmissions for HF patients.
Response: As part of the planned readmissions algorithm, patients
who are readmitted for a transplant are always classified as planned
readmissions and will not count as readmissions in the measures. The
same is true for LVADs because they are classified under CCS 49 (Other
or heart procedures).
Comment: One commenter suggested that hospitals have the ability to
code when a readmission is considered planned.
Response: We note that discharge status codes for planned
readmissions have been adopted by the NUBC, as discussed earlier in
this final rule, and allow for hospitals to identify planned
readmissions on the claim through the use of specific discharge status
codes. However, prior to considering use of such codes in our quality
measures, we will need to establish that hospitals are using these
codes in a valid and reliable manner relative to our planned
readmission algorithm. Accordingly, these discharge status codes are
not currently taken into account in the Hospital Readmissions Reduction
Program.
Comment: One commenter suggested that CMS exclude more admissions
from the AMI, HF, and PN measures because the penalties associated with
these conditions are very high.
Response: We appreciate the commenter's feedback. We are
continuously evaluating the AMI, HF, and PN measures and may consider
further exclusions to these measures in future rulemaking.
Comment: One commenter recommended the inclusion of AMI codes with
``0'' in the fifth digit in the ICD-9-CM code on the claim, indicating
``episode of care unspecified.'' The commenter noted that if the
episode of care is unspecified, it could be outside the 30-day
readmission timeframe. The commenter added that under the ICD-9-CM
guidelines, the ICD-9-CM codes 410.XX for AMI are used for ``acute''
condition for up to 8 weeks duration.
Response: We appreciate the commenter's suggestion and note that we
addressed this question in the FY 2013 IPPS/LTCH PPS final rule. In
that final rule (77 FR 53377), we stated that the AMI ICD-9-CM codes
described by the commenter are used to identify index hospitalizations,
not readmissions. The measures only identify the index admissions based
on the use of the principal discharge diagnosis, which should represent
the reason the patient was admitted to the hospital. Therefore, despite
the use of the word ``unspecified,''' in most cases, the AMI diagnosis
is the primary reason for admission and appropriately included as an
index case.
Comment: Several commenters suggested exclusions from the index
hospitalizations included in the measures, which included exclusions
for patients under ``extreme circumstances'' such as transplants, end-
stage renal disease, burn, trauma, psychosis, and substance abuse.
Response: We appreciate the commenters' suggestions. We addressed
this comment in the FY 2013 IPPS/LTCH PPS final rule. In that final
rule (77 FR 53377), we stated that, ``we appreciate the concern
expressed by some commenters that patients of these `extreme
circumstances' clinically could be sicker and more likely to be
readmitted. The measures address clinical differences in hospitals'
case-mix through risk adjustment rather than through excluding patients
from the measure as suggested by the commenter. The goal in developing
outcomes measures is to create a clinically cohesive cohort that
includes as many patients as possible admitted with the given
condition. Greatly expanding our list of exclusions would result in a
measure that was less useful and meaningful, because it would reflect
the care of fewer patients. In addition, we believe that by excluding
patients with significant comorbidities, the measure would not assess
of the quality of care for those patients. To fairly profile hospitals'
performance, it is critical to place hospitals on a level playing field
and account for their differences in the patients that present for
care. This is accomplished through adequate risk-adjustment for
patients' clinical presentation rather than exclusion of patients.''
After consideration of the public comments we received, we are
finalizing our proposal, without modification, to refine the
readmission measures and to adopt the planned readmissions algorithm
for the Hospital Readmissions Reduction Program.
(b) Counting of Readmissions That Occur After a Planned Readmission
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27596), we
proposed a related change to the AMI, HF, and PN measures to address
unplanned readmissions that occur after a planned readmission but
within 30 days of the patient's initial index discharge. The AMI
measure finalized in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51666)
counted unplanned readmissions for the index admission if they occurred
within 30 days of discharge from the index admission, even if they
occurred following planned readmissions (because the two other measures
did not have any planned readmissions, this method of counting only
applied to the AMI measure).
For the proposed revised AMI, HF, and PN measures, all of which now
account for planned readmissions by incorporating the CMS Planned
Readmission Algorithm Version 2.1, we proposed the following additional
change: If the first readmission is planned, it will not count as a
readmission, nor will any subsequent unplanned readmission within 30
days of the index readmission. In other words, unplanned readmissions
that occur after a planned readmission and fall within the 30-day post
discharge timeframe would no longer be counted as readmissions for the
index admission. The rationale for this proposed change was that, in
this case, either the index or the planned readmission could have
contributed to the patient's unplanned readmission. Therefore, it was
unclear whether the unplanned readmission should be attributed back to
the index admission.

[[Page 50656]]

We stated in the proposed rule that this proposed change in counting
practice would affect a very small percentage of readmissions
(approximately 0.3 percent of index admissions nationally for AMI, 0.2
percent for HF, and less than 0.1 percent for PN). However, we stated
that we intend to monitor trends in the proportion of planned
readmissions for evidence of misuse or misapplication, and other
unintended consequences.
Comment: Several commenters supported the proposal to change the
manner in which readmissions are counted following a planned
readmission.
Response: We appreciate the commenters' support of our proposal
relating to the counting of a readmission following a planned
readmission.
After consideration of the public comments we received, we are
finalizing the proposed change to the AMI, HF, and PN measures to
address unplanned readmissions that occur after a planned readmission
but within 30 days of the patient's initial index discharge, without
modification.
(c) Anticipated Effect of the Changes of CMS Planned Readmission
Algorithm Version 2.1 and Counting of Readmissions on the Readmission
Measures
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27596), we stated
that the proposed changes to the measures in the proposed rule would
have had the following effects on the measures based on our analyses of
discharges between July 2008 and June 2011, if these changes had been
applied for FY 2013. We noted that these statistics were for
illustrative purposes only, and we did not propose to revise the
measure calculations for the FY 2013 payment determination. Rather, in
the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27596), we proposed to
apply these changes to the readmissions measures for the FY 2014
payment determination and subsequent years.
In the proposed rule, we stated that among hospitals that were
subject to the Hospital Readmissions Reduction Program in FY 2013
(Table V.G.1), the number of eligible discharges based on the July 2008
through June 2011 data were 501,765 discharges for AMI; 1,195,967
discharges for HF; and 957,854 discharges for PN:
The proposed 30-day readmission rate (excluding the
planned readmissions) would decrease by 1 percentage point for AMI; 1.5
percentage points for HF; and 0.7 percentage point for PN.
The new national measure (unplanned) rate for each
condition would have been 18.2 percent for AMI; 23.1 percent for HF;
and 17.8 percent for PN.
The number of readmissions considered planned (and,
therefore, not counted as a readmission) would increase by 4,942 for
AMI; 17,512 for HF; and 7,084 for PN.
In the proposed rule, we proposed to update the measures to: (1)
Incorporate the CMS Planned Readmission Algorithm Version 2.1 to
identify planned readmissions; and (2) not count unplanned readmissions
that follow planned readmissions. We invited public comments on this
proposal.

Table V.G.1--Comparison of Original AMI/HF/PN Measures Finalized in FY 2013 Relative to Revised AMI/HF/PN
Measures for FY 2014
[Based on July 2008 through June 2011 discharges from 3,025 hospitals]
----------------------------------------------------------------------------------------------------------------
AMI PN HF
-----------------------------------------------------------------------------
Revised Original Revised Original Revised Original
measure measure measure measure measure measure
----------------------------------------------------------------------------------------------------------------
Number of Admissions.............. 501,765 501,765 957,854 957,854 1,195,967 1,195,967
Number of Unplanned Readmissions.. 91,360 96,302 170,396 177,480 276,748 294,260
Readmission Rate.................. 18.2% 19.2% 17.8% 18.5% 23.1% 24.6%
Number of Planned Readmissions.... 12,811 7,869 7,084 0 17,512 0
Planned Readmission Rate.......... 2.6% 1.6% 0.7% 0.0% 1.5% 0.0%
Percent of Readmissions that are 12.3% 7.6% 4.0% 0.0% 6.0% 0.0%
Planned..........................
----------------------------------------------------------------------------------------------------------------

Comment: One commenter suggested that CMS clarify aspects of what
is counted as a readmission, including whether a patient's death during
a hospital readmission is counted for purposes of the Hospital
Readmissions Reduction Program.
Response: We appreciate the commenter's feedback. A patient's death
during the index hospitalization is excluded from the readmission
measure because no opportunity exists for a subsequent admission. The
same rationale applies when a patient dies after the index discharge
but within the 30-day post discharge period. However, a patient's death
during a readmission in the hospital is included in the measure because
they were discharged alive from the index admission and are, therefore,
eligible for readmission. For more information relating to the
exclusion criteria for a readmission, we refer readers to the FY 2012
IPPS/LTCH PPS final rule (76 FR 51660 through 51676).
Comment: One commenter requested clarification on what is meant
that patients without at least 30 days post-discharge enrollment in
Medicare Parts A and B are excluded from the readmission measures.
Response: Patients without at least 30 days post-discharge
enrollment in FFS Medicare are excluded from the readmission measures
because the 30-day readmission outcome cannot be assessed in this
group. An example of a patient without 30 days of post discharge
enrollment in Medicare Parts A and B would be a patient who enrolled in
Medicare Advantage within 30 days of being discharged. However,
patients who die during or after a readmission would be included in the
measures because the readmission measures assign readmission status as
a dichotomous ``yes/no'' value. Once a patient has been readmitted, the
readmission measures would assign readmission status as a ``yes'' even
if the patient subsequently died after the readmission.
Comment: One commenter suggested that CMS modify the definition of
transfer exclusion in the Hospital Readmissions Reduction Program to
take into account the level of care provided at the transferring
hospital.
Response: We appreciate the commenter's suggestion. We recognize
that a readmission for a patient transferred to a second acute care
hospital and then discharged to the subacute setting from that second
hospital may be related to events that

[[Page 50657]]

occurred at the first admitting hospital. In developing the measures,
we reviewed the approach to attributing the outcome carefully with
clinical experts and with technical expert panels, and developed the
attribution strategy that was most appropriate for each patient cohort.
For the medical admissions of AMI, HF, and PN, the hospital discharging
the patient retains primary responsibility for preparing the patient
for discharge and developing a post-discharge care plan to minimize
readmission risk, even if that risk was increased by management at a
prior hospital. We have addressed this issue differently for other
patient groups as appropriate. For example, for our readmissions
measure for patients undergoing elective hip or knee replacement, we
excluded patients who were transferred into the index hospital because
it is likely that the procedure for these patients was not elective. In
addition, we exclude patients who were admitted for the index procedure
and subsequently transferred to another acute care facility because the
index hospital that performed the joint replacement did not discharge
the patient to the subacute care setting and, therefore, cannot fairly
be held accountable for the readmission.
In summary, we are finalizing our proposal, without modification,
to use the revised versions of the AMI, HF, and PN measures to
calculate the payment adjustments for the Hospital Readmissions
Reduction Program in FY 2014. We believe that the revised measures will
address stakeholder suggestions to broaden the number of planned
readmissions and will result in a more accurate readmission calculation
for purposes of the payment adjustment.
c. Expansion of the Applicable Conditions for FY 2015
(1) Background
Under section 1886(q)(5)(B) of the Act, beginning with FY 2015,
``the Secretary shall, to the extent practicable, expand the applicable
conditions beyond the three conditions for which measures have been
endorsed as described in subparagraph (A)(ii)(I) . . . to the
additional 4 conditions that have been identified by the Medicare
Payment Commission in its report to Congress in June 2007, and to other
conditions and procedures as determined appropriate by the Secretary.''
The four conditions and procedures recommended by MedPAC are: (1)
coronary artery bypass graft (CABG) surgery; (2) chronic obstructive
pulmonary disease (COPD); (3) percutaneous coronary intervention (PCI);
and (4) other vascular conditions. Section 1886(q)(5)(A)(i) of the Act
directs the Secretary, in selecting an ``applicable condition,'' to
choose from among conditions and procedures ``that represent conditions
or procedures that are high volume or high expenditures under this
title (or other criteria specified by the Secretary).''
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27597), in
accordance with section 1886(q)(5)(A) of the Act, effective for the
calculation of the readmissions payment adjustment factors in FY 2015,
we proposed to expand the applicable conditions and procedures to
include: (1) Patients admitted for an acute exacerbation of COPD; and
(2) patients admitted for elective total hip arthroplasty (THA) and
total knee arthroplasty (TKA). At this point, it was not feasible for
CMS to add readmission measures for three of the conditions identified
by MedPAC in its 2007 Report to Congress (CABG, PCI, and other vascular
conditions). We noted that inpatient admissions for PCI and other
vascular conditions seem to be decreasing, and these procedures are
being performed more in hospital outpatient departments. We stated that
this shift in setting for these procedures may make their future
inclusion in the Hospital Readmission Reduction Program more difficult
and impracticable because: (1) The statutory definition of a
readmission in section 3025 of the Affordable Care Act does not allow
admissions following procedures performed on an outpatient basis to
count as a readmission for purposes of this program, and (2) the shift
of this procedure to the outpatient setting may result in much lower
inpatient counts for this procedure, and hence potential statistical
modeling issues.
We also stated that we would explore how we may address CABG in
this program at a future time.
Comment: Several commenters addressed delaying implementation of
CABG and PCI measures in the Hospital Readmissions Reduction Program.
Some commenters supported delayed inclusion of a CABG readmission
measure and stated that CMS should explore options on developing a CABG
readmission measure for the Hospital Readmissions Reduction Program in
the future. Other commenters generally supported the proposal to
exclude vascular and PCI measures from the Hospital Readmissions
Reduction Program at this time. However, other commenters opposed the
proposal to exclude these measures from the program and requested
clarification on the proposal. These commenters suggested that CMS
include measures for CABG, PCI, and other vascular conditions because
MedPAC previously recommended inclusion of these measures in the
Hospital Readmissions Reduction Program. One commenter further stated
that, instead of THA/TKA, CMS should have focused on CABG, COPD,
Percutaneous transluminal coronary angioplasty, and other vascular
conditions for the Hospital Readmissions Reduction Program.
Response: We appreciate the commenters' feedback and suggestions.
However, did not propose to include measures for these conditions
because inclusion would not be feasible at this time. First, we found
that inpatient admissions for PCI and other vascular conditions appear
to be decreasing. Second, it appears that hospitals are increasingly
performing procedures relating to these conditions in outpatient
departments. Therefore, given the apparent shift in settings for these
procedures, inclusion of these measures in the Hospital Readmissions
Reduction Program is not currently practical. However, moving forward,
we will continue to review these conditions and may consider them in
future rulemaking.
Comment: Several commenters addressed the expansion of measures for
the Hospital Readmissions Reduction Program. One commenter suggested
that CMS make the process for selecting measures for the Hospital
Readmissions Reduction Program more transparent moving forward. Another
commenter suggested that CMS add a wider variety of conditions to the
program. Other commenters stated that CMS should ensure that hospitals
are aware of the proposed expansion of the Hospital Readmissions
Reductions Program and how the program works.
Response: We appreciate the commenters' suggestions and will take
them into consideration for future rulemaking. We will continue to
review and monitor the program to determine whether additional
conditions should be added. We also have taken a number of steps to
ensure that hospitals are aware of the proposed expansion and how the
program works, including press releases, open door forums, as well as
through the Federal rulemaking process. However, we maintain that our
measure selection process for the Hospital Readmissions Reduction
Program strives to ensure transparency and allows the public several
opportunities to comment on measures being selected for the Hospital
Readmissions Reduction Program. First, prior to being proposed in the
proposed rule, we place our measures on a measure under consideration
list, which is made public

[[Page 50658]]

by December 1 of each year. The Measure Application Partnership (MAP),
a multi-stakeholder group convened by the NQF, then reviews the
measures being proposed for Federal programs and provides input on
those measures to the Secretary. The MAP process also allows an
opportunity for the public to comment on the proposed measures being
considered for selection and to participate in the MAP process. Second,
should a measure be proposed through rulemaking for use in the Hospital
Readmissions Reduction Program, the public may comment on any measure
through the public comment period for the proposed rule. Therefore, we
believe that the various opportunities available both before and during
the rulemaking process provide safeguards to ensure public
transparency. However, we will continue to review the measure selection
process and make adjustments as needed to continue maintaining high
levels of public transparency.
Comment: One commenter agreed with all of MedPAC's public comments
on the Hospital Readmissions Reduction Program except for MedPAC's
recommendation to incorporate a hospital-wide readmission measure in
the program. Specifically, in its public comment, MedPAC recommended
that the law be redefined to address the following: The readmission
penalty formula; random variation with single condition readmissions
rates due to a small number of observations; readmission and mortality
related to heart failure, and readmission rates and penalties being
correlated with a low-income patient share.
Response: We appreciate the commenter's feedback. We emphasize that
we have included several of MedPAC's previously recommended conditions
for the Hospital Readmissions Reduction Program, including the
incorporation of the COPD readmission measure in the program. However,
other MedPAC recommendations could not be implemented for a number of
reasons. First, some of MedPAC's recommendations, such as those
relating to changes to the readmission penalty, would require a
legislative change. Second, in regard to those MedPAC recommendations
to include a PCI measure in the Hospital Readmissions Reduction
Program, we cannot implement the measure at this time because the
current PCI measure also uses outpatient data, which makes it
ineligible for the Hospital Readmissions Reduction Program. However, we
are working towards finding a suitable PCI measure for the Hospital
Readmissions Reduction Program and may introduce such a measure in
future rulemaking.
Comment: Some commenters expressed concern with measures
overlapping with other programs. One commenter suggested that CMS not
use the same measures in more than one program, such as the Hospital
IQR Program. Another commenter raised concerns about penalties that
would incur as a result of measures overlapping.
Response: We appreciate the commenter's feedback. We acknowledge
stakeholders' concern with potential measure overlap in our programs.
However, several stakeholders requested that we align our programs and
measures to decrease provider burden associated with multiple reporting
programs. Further, the Hospital Readmissions Reduction Program and the
Hospital IQR Program are separate hospital reporting programs with
different purposes and policy goals. The Hospital Readmissions
Reduction Program is a program that reduces payments to hospitals for
excess readmissions to increase patient safety in hospitals, therefore,
the payment adjustment is based on hospital performance on the
readmissions measures. On the other hand, the Hospital IQR Program is a
reporting program in which the applicable percentage increase applied
to the hospital's payment rate is dependent on whether the hospital
satisfactorily reported data on the Hospital IQR measures. Therefore,
although we acknowledge that similar measures may exist in both
programs, the measures are used and calculated for different purposes.
We maintain that the safety of our beneficiaries, coupled with the
overwhelming requests by stakeholders to align all programs and
measures, justify the use of some measures in more than one program.
However, we will in the future monitor this issue and revise and update
the program's measures, if needed.
Comment: MedPAC recommended that CMS include an all-condition
readmission measure in the Hospital Readmissions Reduction Program.
Response: We appreciate MedPAC's suggestion and will take it into
consideration in future rulemaking for the Hospital Readmissions
Reduction Program.
Comment: One commenter suggested that CMS include ESRD patients
under the age of 65 from the readmission measures. While the commenter
understood our current policy to exclude patients under the age of 65
from the readmissions measures and excessive readmissions data, the
commenter encouraged CMS to reconsider this policy for FY 2014 for
those with end-stage renal disease (ESRD) who are on dialysis and
readmitted for any of the diagnosis codes under the readmissions and
excessive readmissions reduction program.
Response: We appreciate the commenter's suggestion. However, we
exclude Medicare patients under the age of 65, including ESRD patients,
from the readmission measures because patients under the age of 65 have
markedly different clinical risk profiles from other patients in the 65
and over category that are included in the measure. In general, we seek
to address clinical differences in hospitals' case-mix through risk-
adjustment rather than through excluding patients from the measure
because the goal in developing outcomes measures is to create a
clinically cohesive cohort that includes as many patients as possible
admitted with the given condition. We include patients 65 and over,
including ESRD patients, in our measure and our risk-adjustment
methodology takes into consideration ESRD-related comorbidities such as
ESRD or dialysis and renal failure.
Comment: One commenter requested that CMS develop process and
outcomes measures to be reported alongside the readmission measures to
evaluate transitions of care.
Response: We appreciate the commenter's suggestion and will take it
into consideration in future rulemaking for the Hospital Readmissions
Reduction Program.
After consideration of the public comments we received and in light
of the MedPAC recommendation, we are finalizing our proposal to include
a measure of patients admitted for an acute exacerbation of COPD. Also,
although MedPAC did not recommend inclusion of patients admitted for
elective THA and TKA, we consider this category appropriate for the
Hospital Readmissions Reduction Program because it is a high-volume and
high-expenditure procedure and are finalizing the adoption of this
measure in this final rule.
For example, in 2003, 202,500 primary hip arthroplasties and
402,100 primary total knee arthroplasties were performed.\21\ The
number of procedures performed has increased steadily over the past
decade.\22\ Although these

[[Page 50659]]

procedures can dramatically improve patient health-related quality-of-
life, they are costly. In 2005, annual hospital charges totaled $3.95
billion and $7.42 billion for primary THA and TKA, respectively.\23\
The aggregate costs for THA are projected to increase by 340 percent
over a 10-year period, to $17.4 billion per fiscal year by FY 2015, and
for TKA, by 450 percent to $40.8 billion per fiscal year by 2015.\24\
Medicare is the single largest payer for these procedures, covering
approximately two-thirds of all THAs and TKAs performed in the United
States.\25\ THA and TKA procedures combined account for the largest
procedural cost in the Medicare budget.\26\ Therefore, as explained in
detail below, we believe that it is appropriate to include THA/TKA as
an applicable condition.
---------------------------------------------------------------------------

\21\ Kurtz S, Ong K, Lau E, Mowat F, Halpern M.: Projections of
primary and revision hip and knee arthroplasty in the United States
from 2005 to 2030. J Bone Joint Surg Am. Apr 2007;89(4):780-785.
\22\ Ong KL, Mowat FS, Chan N, Lau E, Halpern MT, Kurtz SM.
Economic burden of revision hip and knee arthroplasty in Medicare
enrollees. Clin Orthop Relat Res. May 2006;446:22-28.
\23\ Kurtz SM, Ong KL, Schmier J, et al.: Future clinical and
economic impact of revision total hip and knee arthroplasty. J Bone
Joint Surg Am. Oct 2007;89 Suppl 3:144-151.
\24\ Ibid.
\25\ Ong KL, Mowat FS, Chan N, Lau E, Halpern MT, Kurtz SM.
Economic burden of revision hip and knee arthroplasty in Medicare
enrollees. Clin Orthop Relat Res. May 2006;446:22-28.
\26\ Bozic KJ, Rubash HE, Sculco TP, Berry DJ. An analysis of
medicare payment policy for total joint arthroplasty. Journal of
Arthroplasty. 2008;23(6 Suppl 1):133-138.
---------------------------------------------------------------------------

We developed a hospital-level, 30-day, all-cause, risk-standardized
readmission measure for THA/TKA. NQF endorsed the measure (NQF
1551) in January of 2012. The measure incorporated the Planned
Readmission Version 2.1 algorithm and excludes transfers. Accordingly,
we believe that the THA/TKA measure met the criteria of applicable
condition and are finalizing it for the Hospital Readmissions Reduction
Program.
The rationale for expanding the applicable conditions and the
measures used to estimate the Excess Readmission Ratios are described
in detail below, as discussed in the FY 2014 IPPS/LTCH PPS proposed
rule (78 FR 27597 through 27599).
(2) COPD Readmission Measure
COPD is a leading cause of readmissions to hospitals.\27\ In 2007,
the MedPAC published a report to Congress in which it identified the
seven conditions associated with the most costly potentially
preventable readmissions. Among these seven conditions, COPD ranked
fourth.\28\ Evidence also shows variation in readmissions for patients
with COPD, supporting the finding that opportunities exist for
improving care. The median, 30-day, risk-standardized readmission rate
among Medicare fee-for-service patients aged 65 or older hospitalized
for COPD in 2008 was 22.0 percent, and ranged from 18.33 percent to
25.03 percent across 4,546 hospitals.\29\ Clinical trials and
observational studies suggest that several aspects of care provided to
patients hospitalized for exacerbations of COPD can have significant
effects on readmission.^{30 31 32 33} In addition, inclusion of
this measure in the Hospital Readmissions Reduction Program aligns with
CMS' priority objectives to promote successful transitions of care for
patients from the acute care setting to the outpatient setting, and
reduces short-term readmission rates. Therefore, as we stated in the FY
2014 IPPS/LTCH PPS proposed rule, we believe the COPD measure warrants
inclusion in the Hospital Readmissions Reduction Program for FY 2015.
We invited public comments on this proposal.
---------------------------------------------------------------------------

\27\ Jencks SF, Williams MV, Coleman EA. Rehospitalizations
among patients in the Medicare fee-for-service program. N Engl J
Med. April 2 2009;360(14):1478-1428.
\28\ Committee MPA. Report to the Congress: Promoting Greater
Efficiency in Medicare. 2007.
\29\ Grosso L.M., Lindenauer P., Wang C., et al.: Hospital-level
30-day Readmission Following Admission for an Acute Exacerbation of
Chronic Obstructive Pulmonary Disease: Report prepared for the
Centers for Medicare & Medicaid Services. 2011; Available at: https://www.qualitynet.org/.
\30\ Global Strategy for Diagnosis M, and Prevention of COPD.
2009; Available at: https://www.goldcopd.org/.
\31\ National Institute for Health and Clinical Excellence.
Chronic Obstructive Pulmonary Disease: Management of Chronic
Obstructive Pulmonary Disease in Adults in Primary and Secondary
Care (Partial Update):. National Collaborating Centre for Acute and
Chronic Conditions. Available at: https://www.nice.org.uk/nicemedia/live/13029/49397/49397.pdf.
\32\ Walters JA, PG Gibson, R Wood-Baker, M Hannay, EH Walters.
Systemic corticosteroids for acute exacerbations of chronic
obstructive pulmonary disease. Cochrane Database Syst Rev.
2009;CD001288(1).
\33\ Lightowler JV, Wedzicha JA, Elliott MW, Ram FS. Non-
invasive positive pressure ventilation to treat respiratory Failure
resulting from exacerbations of chronic obstructive pulmonary
disease: Cochrane systematic review and meta-analysis. Bmj.
2003;326(7382).
---------------------------------------------------------------------------

Comment: Several commenters supported the proposed expansion of
applicable conditions to include patients admitted for an acute
exacerbation of COPD and patients admitted for elective THA and TKA.
Response: We appreciate the commenters' support of the expansion of
the Hospital Readmissions Reduction Program.
Comment: One commenter suggested that CMS not expand the Hospital
Readmissions Reduction Program to include additional measures due to
lack of risk-adjustment of pre-existing conditions.
Response: The COPD and hip/knee measures risk-adjust for key
factors that are clinically relevant and are strongly correlated with
the likelihood for readmission (for example, patient demographic
factors, patient coexisting medical conditions, and indicators of
patient frailty). Under the current NQF-endorsed methodology, these
covariates are obtained from Medicare claims extending 12 months prior
to, and including, the index admission. This risk-adjustment approach
adjusts for differences in the clinical status of the patient at the
time of the index admission, as well as for demographic variables. A
complete list of the variables used for risk-adjustment and the
clinical and statistical process for selecting the variables for each
NQF-endorsed measure, as proposed, is available on our Web site at:
https://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
Comment: Some commenters recommended that CMS not expand the
Hospital Readmissions Reduction Program to include additional
conditions because the measures for the program are not reliable. The
commenters suggested that CMS raise the minimum case threshold required
for hospitals to quality for the Hospital Readmissions Reduction
Program to well over 25 cases in order to improve reliability.
Response: We appreciate the commenters' feedback. However, we
disagree that the Hospital Readmissions Reduction Program uses
unreliable measures. First, the NQF both reviewed and endorsed all
measures used in the Hospitals Readmissions Reduction Program. Second,
as previously stated in the FY 2013 IPPS/LTCH PPS final rule (77 FR
53379), ``We determined the 25-case threshold for public reporting
based on a reliability statistic that is calculated from the
intercluster correlation, a parameter of the model. We are maintaining
the minimum 25-case threshold that we adopted through rulemaking last
year.''
We have further considered how to best measure quality for low-
volume hospitals in order to address the concerns raised by
stakeholders. We acknowledge that smaller hospitals do typically have
less certain estimates because they have fewer cases for use in
assessing quality. However, this challenge is inherent in outcome
measurement. One advantage of the statistical model that we use for the
measures is that it allows for the

[[Page 50660]]

inclusion of small hospitals while characterizing the certainty of
their estimates. The hierarchical logistic regression model that we use
to calculate the risk-standardized outcome measures allows the
inclusion of hospitals with relatively few observations, but takes into
account the uncertainty associated with sample size in estimating their
risk-standardized outcome rates. The model takes into account the
uncertainty in the estimate of outcome rates for low-volume hospitals
by assuming that each hospital is a typically performing hospital. It
weighs that assumption along with the outcomes for the particular
hospital in calculating the outcome rate. Therefore, the estimated
outcome rates for smaller hospitals will likely be closer to the
national rate because the limited number of eligible cases in the
hospital tells little about that hospital's true outcome rate.
Comment: One commenter suggested that CMS provide hospitals with a
preview of their COPD and THA/TKA readmission data before these
measures are included in the Hospital Readmissions Reduction Program.
Response: We appreciate the commenter's suggestion. Hospitals will
have an opportunity to review and correct the readmissions data
relating to these measures prior to its release to the public on the
Hospital Compare Web site. We expect that these data will be provided
around June of 2014.
Comment: Several commenters addressed risk-adjusting the COPD, THA,
and TKA measures to account for socioeconomic status. One commenter
stated that CMS should not further expand the Hospital Readmissions
Reduction Program beyond current and proposed conditions without
properly planning to risk-adjust for education level and socioeconomic
status. Another commenter stated that a patient's ability to afford
medication should be included as a risk-adjustment variable because
socioeconomic status impacts the patient's ability to be compliant with
medications and a patient's ability to pay for medications is separate
and apart from the care provided by the hospital. One commenter
suggested that a hospital's performance on the COPD measure be compared
to its peer hospitals that serve a similar population, rather than to
all hospitals. For example, safety-net hospitals with large minority
populations should be compared only to each other, rather than to all
hospitals in the country.
Response: We appreciate the commenters' feedback. We have continued
to consider and evaluate stakeholder concerns regarding the influence
of patient socioeconomic status on readmission and mortality rates. The
Hospital Readmissions Reduction Program, as pointed out by one
commenter, seeks to transform the Medicare payment and delivery system
by financially incentivizing providers to change the way they deliver
care. The program's design encourages hospitals to make changes to
avoid payment penalties while simultaneously enhancing the quality of
health care provided to patients. We routinely monitor the impact of
low socioeconomic status, using the proportion of patients enrolled in
Medicaid as a proxy for low-income, on hospitals' results and have
consistently found that hospitals that care for large proportions of
patients of low socioeconomic status are capable of performing well on
our measures. Our most recent analyses, available on our Web site at:
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-AssessmentInstruments/HospitalQualityInits/Downloads/MedicareHospitalQualityChartbook2012.pdf, again confirmed this finding.
Many safety-net providers and teaching hospitals do as well or better
on the measures than hospitals without substantial numbers of patients
of low socioeconomic status. Our analyses also show that adding
socioeconomic status to the risk-adjustment has a negligible impact on
hospitals' risk-standardized rates. The risk-adjustment for clinical
factors likely captures much of the variation due to socioeconomic
status, therefore leading to more modest impact of socioeconomic status
on hospitals' results than stakeholders expect. We note that the goal
of risk-adjustment is to account for factors that are inherent to the
patient at the time of admission, such as severity of disease, so as to
put hospitals on a level playing field. The measures should not be
risk-adjusted to account for differences in practice patterns that lead
to lower or higher risk for patients to be readmitted or die. The
measures aim to reveal differences related to the patterns of care. The
measures do not risk-adjust for socioeconomic status because the
association between socioeconomic status and health outcomes can be
due, in part, to differences in the quality of health care received by
groups of patients with varying socioeconomic status. The measures also
are not risk-adjusted for socioeconomic status, or other patient
factors such as race, because we do not want to hold hospitals to
different standards for the outcomes of their patients of low
socioeconomic status. Finally, we do not want to mask potential
disparities or minimize incentives to improve the outcomes of
disadvantaged populations. This approach also is consistent with the
guidance from the NQF,\34\ which states that risk models should not
obscure disparities by adjusting for factors associated with inequality
(such as race or socioeconomic status). Furthermore, the statutory
language in section 1886(q)(5)(A)(ii)(I) of the Act requires that the
measures included in the Hospital Readmissions Reduction Program for
FYs 2013 and 2014 be NQF-endorsed. However, we are committed to
tracking this issue and will continue to evaluate disparities in care
and the impact of patient's socioeconomic status on hospital's rates.
---------------------------------------------------------------------------

\34\ National Quality Forum, Measure Evaluation Criteria
(November, 2012). Available at: https://www.qualityforum.org/docs/measure_evaluation_criteria.aspx.
---------------------------------------------------------------------------

(3) Overview of COPD Measure: Hospital-Level, 30-Day, All-Cause,
Risk-Standardized Readmission Rate (RSRR) following Chronic Obstructive
Pulmonary Disease (COPD) Hospitalization (NQF 1891)
The COPD readmission measure assesses hospitals' 30-day, all-cause
risk-standardized rate of readmission for an acute exacerbation of COPD
(AECOPD). In general, the measure uses the same approach to risk-
adjustment and hierarchical logistic modeling (HLM) methodology that is
specified for CMS' AMI, HF, and PN readmission measures previously
adopted for this program. Information on how the measure employs HLM
can be found in the 2011 COPD Readmission Measure Methodology Report
(available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html).
This approach appropriately accounts for the types of patients a
hospital treats (that is, hospital case-mix), the number of patients it
treats, and the quality of care it provides. The HLM methodology is an
appropriate statistical approach to measuring quality based on patient
outcomes when the patients are clustered within hospitals (and,
therefore, the patients' outcomes are not statistically independent)
and sample sizes vary across hospitals. The measure methodology defines
hospital case-mix based on the clinical diagnoses provided in the
hospitals' claims for the hospitals' patient inpatient and outpatient
visits for the 12 months prior to the hospitalization for COPD, as well
as those present in the claims for care at admission. However, the
methodology specifically does not

[[Page 50661]]

account for diagnoses present in the index admission that may indicate
complications rather than patient comorbidities.
As we did in the proposed rule, we are providing a summary of the
measure methodology below. For further details on the risk-adjustment
statistical model, we refer readers to the 2011 COPD Readmission
Measure Methodology Report that we have posted on the CMS Web site at:
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. NQF endorsed
the measure (NQF 1891) in March 2013 (https://www.qualityforum.org/QPS/1891).
Data Sources. The COPD measure is claims-based. It uses
Medicare administrative data from hospitalizations for
fee[hyphen]for[hyphen]service Medicare beneficiaries hospitalized with
an acute exacerbation of COPD (AECOPD).
Outcome. The outcome for the COPD measure is 30-day, all-
cause readmission, defined as an unplanned subsequent inpatient
admission to any applicable acute care facility from any cause within
30 days of the date of discharge from the index hospitalization. A
number of studies demonstrate that improvements in care at the time of
discharge can reduce 30[hyphen]day readmission rates.^{35 36}
It is a timeframe that a readmission may reasonably be attributed to
the hospital care and transitional period to a subacute care setting.
---------------------------------------------------------------------------

\35\ Gulshan Sharma, Kou Yong-Fang, Freeman Jean L, Zhang Dong
D, Goodwin James S.: Outpatient Follow-up Visit and 30-Day Emergency
Department Visit and Readmission in Patients Hospitalized for
Chronic Obstructive Pulmonary Disease. Arch Intern Med. Oct.
2010;170:1664-1670.
\36\ Nelson EA, Maruish ME, Axler JL.: Effects of Discharge
Planning and Compliance with Outpatient Appointments on Readmission
Rates. Psychiatr Serv. July 1 2000;51(7):885-889.
---------------------------------------------------------------------------

The COPD readmissions measure assesses all-cause unplanned
readmissions (excluding planned readmissions) rather than readmissions
for acute exacerbations of COPD only. As we stated in the proposed
rule, we proposed this measure for several reasons. First, from the
patient perspective, a readmission for any reason is likely to be an
undesirable outcome of care, even though not all readmissions are
preventable. Second, limiting the measure to COPD[hyphen]related
readmissions may limit the effort focus too narrowly rather than
encouraging broader initiatives aimed at improving the overall care
within the hospital and transitions from the hospital setting.
Moreover, it is often hard to exclude quality issues and accountability
based on the documented cause of readmission. For example, a patient
with COPD who develops a hospital-acquired infection may ultimately be
readmitted for sepsis. It would be inappropriate to consider such a
readmission to be unrelated to the care the patient received for COPD.
Finally, while the measure does not presume that each readmission is
preventable; interventions generally have shown reductions in all types
of readmissions.
The measure does not count planned readmissions as readmissions.
Planned readmissions are identified in claims data using the CMS
Planned Readmission Algorithm Version 2.1 that detects planned
readmissions that may occur within 30 days of discharge from the
hospital. This algorithm is described briefly in section V.G.3.b.(2)(a)
of the preamble of this final rule and more detailed information can be
found on the CMS Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. For the COPD measure, unplanned readmissions
that fall within the 30-day post discharge timeframe from the index
admission would not be counted as readmissions for the index admission
if they were preceded by a planned readmission (we refer readers to
section V.G.3.b.(2)(b) of the preamble of this final rule on the
counting of readmissions that occur after a planned readmission).
Cohort of Patients. COPD is a group of lung diseases
characterized by airway obstruction. Patients hospitalized for an acute
exacerbation of COPD (AECOPD) present with varying degrees of severity
ranging from a worsening of baseline symptoms (dyspnea, cough, and/or
sputum) to respiratory failure. To capture the full spectrum of
severity of patients hospitalized for an AECOPD, the measure includes
patients with a principal diagnosis of COPD, as well as those with a
principal diagnosis of respiratory failure with a secondary diagnosis
of an AECOPD. Requiring AECOPD as a secondary diagnosis helps to
identify respiratory failure due to COPD exacerbation versus another
condition (for example, heart failure). For detailed information on the
cohort definition, we refer readers to the 2013 COPD Readmission
Measure Updates and Specifications Report on the CMS Web site at:
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
Inclusion and Exclusion Criteria. The COPD measure
includes hospitalizations for patients who are 65 years of age or older
at the time of index admission and for whom there was a complete 12
months of Medicare fee-for-service (FFS) enrollment to allow for
adequate risk-adjustment. The measure excludes the following admissions
from the measure cohort: (1) Admissions for patients who die during the
initial hospitalization (these patients are not eligible for
readmission); (2) admissions for patients having a principal diagnosis
of COPD during the index hospitalization and subsequently transferred
to another acute care facility (these are excluded because the measure
focuses on discharges to a nonacute care setting such as the home or a
SNF); (3) admissions for patients that are discharged against medical
advice (AMA) (excluded because providers do not have the opportunity to
deliver full care and prepare the patient for discharge); (4)
admissions for patients without at least a 30-day post-discharge
enrollment in Medicare FFS (excluded because the 30-day readmission
outcome cannot be assessed in this group); and (5) additional COPD
admissions for patients within 30 days of discharge from an index COPD
admission will be considered readmissions and not additional index
admissions.
Risk-Adjustment. The COPD measure adjusts for differences
across hospitals in how at risk their patients are for readmission
relative to patients cared for by other hospitals. The measure uses
claims data to identify patient clinical conditions and comorbidities
to adjust patient risk for readmission across hospitals, but does not
adjust for potential complications of care. Consistent with NQF
guidelines, the model does not adjust for socioeconomic status or race
because risk-adjusting for these characteristics would hold hospitals
with a large proportion of patients of minority race or low
socioeconomic status to a different standard of care than other
hospitals. Rather, this measure seeks to illuminate quality
differences, and risk-adjustment for socioeconomic status or race would
obscure such quality differences.
Calculating the Excess Readmission Ratio. The COPD
readmission measure uses the same methodology and statistical modeling
approach as the AMI, HF, and PN measures. We published a detailed
description of how the readmission measures estimate the Excess
Readmission Ratio used in the Hospital Readmissions Reduction

[[Page 50662]]

Program in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53380 through
53381).
Comment: Several commenters stated that CMS should not adopt the
COPD all-cause readmission measure. Some commenters stated that
unrelated readmissions are outside the hospital's control or are not
preventable. The commenters added that COPD patients often have other
conditions for which they are admitted. Another commenter added that
the hospital could not adequately plan for such readmissions and,
therefore, should not be accountable. That commenter recommended that
the causes for readmission be narrowed to more closely align with the
index diagnosis.
Response: We appreciate the commenters' feedback. However, we do
not seek to differentiate between related and unrelated readmissions
because readmissions not directly related to the index condition may
still be a result of the care received during the index
hospitalization. For example, a patient hospitalized for COPD who
develops a hospital-acquired infection may ultimately be readmitted for
sepsis. It would be inappropriate to treat this readmission as
unrelated to the care the patient received during the index
hospitalization. Furthermore, the range of potentially avoidable
readmissions also includes those not directly related to the initial
hospitalization, such as those resulting from poor communication at
discharge or inadequate follow-up. As such, creating a comprehensive
list of potential complications related to the index hospitalization
would be arbitrary, incomplete, and, ultimately, impossible to
implement. However, in coordination with medical experts we expanded
the list of conditions considered planned.
Generally speaking, planned readmissions are not a signal of
quality of care. Therefore, we have worked with experts in the medical
community, as well as other stakeholders to carefully identify
procedures and treatments that should be considered ``planned'' and
therefore not counted as readmissions. For the FY 2014 program, we have
proposed that the measures identify planned readmissions by using an
expanded algorithm, which is a set of criteria for classifying
readmissions as planned using Medicare claims. This algorithm
identifies admissions that are typically planned and may occur within
30 days of discharge from the hospital.
We developed the COPD measure to reflect the quality of care
delivered to patients who are hospitalized with COPD. The goal of this
measure is to improve patient outcomes by providing patients,
physicians, and hospitals with information about hospital-level, risk-
standardized readmission rates following hospitalization for COPD. The
measure is not intended to drive hospitals to a zero readmission rate,
but rather is designed to encourage hospitals to identify opportunities
to systematically reduce readmission risks in their environment. We do
not assume all readmissions are preventable. The goal of the
readmission measure is to identify hospitals that seem to have excess
readmissions above and beyond what would be expected for their case-
mix. Careful discharge planning and instructions, communication with
outpatient providers, attention to patient safety, and prevention of
infections are all important for reducing readmissions. Hospitals that
take these and other steps to reduce readmissions will have lower
overall readmission rates and will likely have better rates on this
measure.
Comment: Some commenters stated that the current measures will
encourage hospitals to not accept COPD patients or hip/knee patients to
avoid high readmission rates and because its poses a financial risk.
Response: We recognize that performance-based payment programs may
have the potential for unintended consequences. We are committed to
monitoring the COPD measure and assessing unintended consequences over
time, such as the inappropriate shifting of care, increased patient
morbidity and mortality, and other negative unintended consequences for
patients.
Comment: One commenter suggested that CMS implement standard
intervention strategies to reduce COPD readmissions.
Response: We appreciate the commenter's suggestion, but note that
the Hospital Readmissions Reduction Program does not implement
intervention strategies.
Comment: Some commenters stated that the COPD readmission measure
should not be included in the program because the MAP did not recommend
the measure.
Response: We appreciate the commenters' feedback. However, the MAP
did support the measure for use in the Hospital IQR Program and does
further support the direction of the measure for use in the Hospital
Readmissions Reduction Program. Further, the NQF, the entity who
convenes the MAP, subsequently reviewed and endorsed the COPD
readmissions measure for use in the Hospital Readmissions Reduction
Program. We refer readers to the MAP February 2013 Pre-rulemaking
report for more information about their recommendations regarding these
measures. The report can be found on the following Web site at: https:/
/www.qualityforum.org/Publications/2013/02/MAP_Pre-Rulemaking_
Report__-February_2013.aspx.
We also received several comments supporting using the COPD
readmission measure in the Hospital Readmissions Reduction Program. We
believe that this support, coupled with MedPAC's recommendation to
include the measure into the program, warrants adoption of the COPD
readmissions measure in the Hospital Readmissions Reduction Program.
Comment: One commenter suggested that the COPD measure be added to
the Hospital VBP Program.
Response: Section 1886(o)(2)(A) of the Act statutorily prohibits us
from including readmission measures in the Hospital VBP Program.
Comment: One commenter suggested that the COPD readmission measure
should risk-adjust for environmental factors, such as pollution.
Response: We appreciate the commenter's suggestion. During measure
development, we conducted a literature review and consulted with
experts to explore risk-adjustment for environmental factors, such as
levels of particulate matter, affecting respiratory patients. We found
that the literature suggests that ambient levels of particulate matter
affect short-term mortality and admission rates for COPD (and for other
cardiovascular and respiratory conditions). Although important from a
public health standpoint, the increases in risk are relatively small.
We did not find any studies of the effect of ambient particulates on
mortality and readmission rates among patients hospitalized for COPD.
The purpose of risk-adjustment is to account for differences across
hospitals in factors unrelated to quality, such as patient
comorbidities, that may affect the outcome of mortality and
readmission. It is important to risk-adjust for factors that could bias
the measure results (for example, could favor hospitals in low
pollution areas). Risk-adjusting for environmental factors would make
sense if it were technically feasible and if it would improve the model
by reducing or eliminating a potential bias. We believe that variables
for environmental factors are unlikely to affect hospital-level risk-
standardized rates. The studies to date focus on the general
nonhospitalized population, and it is not clear how they apply to the
patients in our models--that is, patients hospitalized with an acute
exacerbation

[[Page 50663]]

of COPD. We believe that the effect of risk-adjusting for particulate
matter would likely be small or negligible, given that the model
applies to patients already hospitalized for COPD. Second, there are
feasibility issues with respect to collecting such information.
Modeling the effect appropriately would be complex. Our review of the
issues suggests it would be inappropriate to use ambient air quality
levels as a risk-adjuster without also adjusting for other factors that
affect the strength and direction of the potential association between
particulate levels and outcomes, including temperature, humidity,
seasonal variation, and city-level factors such as smoking and air
conditioning use rates. Given these challenges, and our expectation
that building particulate levels into the model is not likely to
significantly improve the models' performance even with the best
methods, we do not plan to pursue adding air pollution variables to the
models at this time.
Comment: One commenter did not support the COPD readmission measure
in the Hospital Readmissions Reduction Program because the commenter
believed that the measure is closely related to heart failure
readmissions measure.
Response: We appreciate the commenter's feedback. However, we
disagree that the measures are closely related. COPD is a group of lung
diseases characterized by airway obstruction. Patients hospitalized for
an acute exacerbation of COPD (AECOPD) present with varying degrees of
severity ranging from a worsening of baseline symptoms (dyspnea, cough,
and/or sputum) to respiratory failure. To capture the full spectrum of
severity of patients hospitalized for an AECOPD, we included patients
with a principal diagnosis of COPD, as well as those with a principal
diagnosis of respiratory failure who had a secondary diagnosis of an
AECOPD. Requiring AECOPD as a secondary code helps to identify
respiratory failure due to COPD exacerbation versus another condition
(for example, heart failure).
(4) Adoption of the COPD Measure for the Hospital Readmissions
Reduction Program
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27599), we
proposed to adopt the COPD measure in the Hospital Readmissions
Reduction Program beginning in FY 2015. We also proposed the COPD
measure for use in the Hospital IQR Program for FY 2014 (discussed in
section IX.A. of this preamble). We noted that the set of hospitals for
which this measure was calculated for the Hospital Readmissions
Reduction Program differs from those used in calculations for the
Hospital IQR Program. The Hospital Readmissions Reduction Program
includes only subsection (d) hospitals as defined in 1886(d)(1)(B) of
the Act and hospitals paid under section 1814(b)(3) of the Act (that
is, Maryland hospitals), while the Hospital IQR Program calculations
include non-IPPS hospitals such as CAHs, cancer hospitals, and
hospitals located in the Territories of the United States. However, we
believe that the COPD measure is appropriate for use in both programs.
We invited public comments on this proposal.
Comment: Several commenters supported adding COPD to the Hospital
Readmissions Reduction Program, but suggested that CMS not add the COPD
readmission measure to Hospital Readmissions Reduction Program until it
has been in the Hospital IQR Program for a period of time first. The
commenters suggested a timeframe of between 1 to 2 years to allow
hospitals to improve performance prior to the measure being adopted
under any pay-for-performance program. One commenter explained that
hospitals have no experience with this measure and no data from CMS
and, therefore, will not be able to incorporate changes before
penalties are assessed.
Response: We appreciate the commenters for their suggestions. We
are cognizant of stakeholder requests to have the COPD readmission
measure in the Hospital IQR Program first, given the lack of experience
with this measure. However, we note that the COPD measure is being
adopted under the Hospital IQR Program in FY 2014 and under the
Hospital Readmissions Reduction Program in FY 2015. Therefore,
stakeholders will have the opportunity to become familiar with the
measure prior to its inclusion in the Hospital Readmissions Reduction
Program. Further, we note that the COPD readmissions measure represents
both a high-impact and high-cost condition that warrants inclusion in
the Hospital Readmissions Reduction Program. In addition, MedPAC
recommended the measure for inclusion in the Hospital Readmissions
Reduction Program. Including this measure in the Hospital Readmissions
Reduction Program aligns with our priority objectives to promote
successful transitions of care for patients from the acute care setting
to the outpatient setting, and reduces short-term readmission rates.
Comment: One commenter suggested that CMS study the relationship
between COPD readmissions and mortality before adopting the COPD
readmissions measure in the Hospital Readmissions Reduction Program.
Response: We appreciate the commenter's suggestion. However, in
general, we believe that there does not appear to be a meaningful
correlation between hospital risk-standardized mortality rates and
readmission rates. We consider that hospital performance on mortality
and readmission measures represent different aspects of quality.
Researchers have found that performance on risk-standardized mortality
rates was not strongly correlated with performance on risk-standardized
readmission rates for HF, and not at all for AMI and PN.\37\ We
recognize the commenter's concern and will monitor the correlation as
part of our hospital quality surveillance.
---------------------------------------------------------------------------

\37\ Citation Krumholz HM, Lin Z, Keenan PS, et al. Relationship
between hospital readmission and mortality rates for patients
hospitalized with acute myocardial infarction, heart failure, or
pneumonia. JAMA. 2013; 309(6):587-593)''.
---------------------------------------------------------------------------

After consideration of the public comments we received, we are
finalizing our proposal to include the COPD readmissions measure in the
Hospital Readmissions Reduction Program.
(5) Total Hip Arthroplasty (THA) and Total Knee Arthroplasty (TKA)
Measure
As discussed in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR
27599), THA and TKA are commonly performed procedures that improve
quality of life. Between 2008 and 2010, over 1.4 million THA and TKA
procedures were performed on Medicare FFS patients aged 65 years and
older.\38\ However, the costs of these procedures, especially to
Medicare, are very high. Combined, THA and TKA procedures account for
the largest procedural cost in the Medicare budget.\39\ Evidence also
shows variation in readmissions of patients with THA/TKA procedures,
supporting the finding that opportunities exist for improving care. The
median 30-day risk-standardized readmission rate among Medicare FFS
patients aged 65 or older undergoing THA/TKA procedures between 2008
and 2010 was 5.7 percent, and ranged from 3.2 percent to 9.9

[[Page 50664]]

percent across 3,497 hospitals.\40\ In addition, inclusion of a THA/TKA
measure in the Hospital Readmissions Reduction Program aligns with CMS'
priority objectives to promote successful transitions of care for
patients from the acute care inpatient setting to the outpatient
setting, and reduces short-term readmission rates. Therefore, we
believe the THA/TKA measure warrants inclusion in the Hospital
Readmissions Reduction Program for FY 2015.
---------------------------------------------------------------------------

\38\ Gross, L.M., Curtis, J.P., Lin, Z., et al.: Hospital-level
30-Day All-Cause Risk-Standardized Readmission Rate Following
Elective Primary total Hip Arthroplasty (THA) and/or Total Knee
Arthroplasty (TKA): Report prepared for the Centers for Medicare &
Medicaid Services, 2012. Available on the Web site at: https://www.qualitynet.org/.
\39\ Bozic KJ, Rubash HE, Sculco TP.: Berry DJ. An analysis of
medicare payment policy for total joint arthroplasty. J
Arthroplasty. Sep 2008;23(6 Suppl 1):133-138.
\40\ Grosso L.M., Curtis J.P., Lin Z., et al.: Hospital-level
30-Day All-Cause Risk-Standardized Readmission Rate Following
Elective Primary Total Hip Arthroplasty (THA) And/Or Total Knee
Arthroplasty (TKA): Report prepared for the Centers for Medicare &
Medicaid Services. 2012. Available on the Web site at: https://www.qualitynet.org/.
---------------------------------------------------------------------------

(6) Overview of the THA/TKA Measure: Hospital-Level 30-Day All-Cause
Risk-Standardized Readmission Rate (RSRR) Following Elective Total Hip
Arthroplasty (THA) and Total Knee Arthroplasty (TKA) (NQF
1551)
To better assess hospital care and care transitions for patients
with elective THA/TKA procedures, we developed a hospital-level
readmission measure for patients undergoing elective primary THA and/or
TKA procedures. We finalized this measure for use in the Hospital IQR
Program in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53519 through
53521). In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27599), we
proposed to include this measure, updated with the CMS Planned
Readmission Algorithm Version 2.1 adapted for THA/TKA (discussed in
section V.G.3.b.(2) of this preamble) to: (1) Expand the applicable
conditions for the Hospital Readmissions Reduction Program; (2) derive
the Excess Readmission Ratio for patients with THA/TKA procedures; and
(3) calculate the readmission payment adjustments in FY 2015. We refer
readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53519 through
53521) for details of the measure specifications as well as the 2013
Hip/Knee Readmission Measures Updates and Specifications Report which
is available on the CMS Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. NQF endorsed the measure
in January 2012 (https://www.qualityforum.org/QPS/1551).
Comment: Many commenters supported the inclusion of the THA/TKA
readmissions measure in the Hospital Readmissions Reduction Program.
Response: We appreciate the commenters' support.
Comment: Some commenters stated that the THA/TKA readmissions
measure should not be included at this time because the expansion of
the program is new, MedPAC did not recommend these measures for the
Hospital Readmissions Reduction Program, and the measure's inclusion
poses a financial risk to hospitals. One commenter further suggested
that CMS conduct additional analyses before including the THA and TKA
measure in the program. Another commenter suggested that CMS defer
adding the THA/TKA measure until hospitals have had more experience
with the Hospital Readmissions Reduction Program.
Response: We appreciate the commenters' feedback and suggestions.
We believe that the THA/TKA readmissions measure represents both a
high-impact and high-cost condition that warrants inclusion in the
Hospital Readmissions Reduction Program. This measure aligns with our
priority objectives to promote successful transitions of care for
patients from the acute care inpatient setting to the outpatient
setting. We further believe that this measure, which consists of one of
the most frequently performed procedures on the Medicare population,
will also reduce short-term readmission rates, while at the same time,
improve the care provided to patients. We also note that the MAP
supported inclusion of this condition in the Hospital Readmissions
Reduction Program. We are cognizant of stakeholder concerns relating to
increased financial risks to hospitals, the fact that this was not
specifically one of the conditions previously listed by MedPAC, and
hospitals' inexperience with the measure. Therefore, we will monitor
the THA/TKA readmissions measure closely for any unintended
consequences that may arise from implementation of this measure, and
adjust the Hospital Readmissions Reduction Program, accordingly.
Comment: One commenter supported the exclusion of diagnostic
cardiac catheterization from the list of planned procedures for the
elective THA/TKA readmissions measure.
Response: We appreciate the commenter's support for our proposal.
After consideration of the public comments we received, we are
finalizing our proposal to include the THA/TKA readmissions measure in
the Hospital Readmissions Reduction Program.
(7) Calculating the Excess Readmission Ratio
The THA/TKA readmission measure uses the same methodology and
statistical modeling approach as the AMI, HF, and PN measures. We
published a detailed description of how the readmission measures
estimate the Excess Readmission Rate used in the Hospital Readmissions
Reduction Program in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53380
through 53381).
(8) THA/TKA Measure for the Hospital Readmissions Reduction Program
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27599), we
proposed to adopt the THA/TKA measure in the Hospital Readmissions
Reduction Program beginning in FY 2015. We also finalized this measure
for use in the Hospital IQR Program in the FY 2013 IPPS/LTCH PPS final
rule (77 FR 53519 through 53521). In the proposed rule, we noted that
the set of hospitals for which this measure is calculated for the
Hospital Readmissions Reduction Program differs from the set of
hospitals used in calculations for the Hospital IQR Program. The
Hospital Readmissions Reduction Program includes only subsection (d)
hospitals as defined in 1886(d)(1)(B) of the Act and hospitals paid
under section 1814(b)(3) of the Act (that is, Maryland hospitals),
while the Hospital IQR Program calculations include non-IPPS hospitals
such as CAHs, cancer hospitals, and hospitals in the Territories.
However, we believe that the THA/TKA measure is appropriate for use in
both programs. We invited public comments on this proposal.
Comment: Several commenters suggested that CMS not add the THA/TKA
readmission measure to Hospital Readmissions Reduction Program until it
has been in the Hospital IQR Program. The commenters suggested a
timeframe of between 1 to 2 years to allow hospitals to improve
performance prior to the measure being adopted under any pay-for-
performance program. One commenter explained that hospitals have no
experience with this measure and no data from CMS and, therefore, will
not be able to incorporate changes before penalties are assessed.
Response: We adopted the measure in the Hospital IQR Program in the
FY 2013 IPPS/LTCH PPS final rule. We conducted a dry run of the measure
with hospitals last year, and will be reporting the measure in an
upcoming release of the Hospital Compare Web site.
After consideration of the public comments we received, we are
finalizing our proposal to adopt the THA/TKA readmissions measure in
the Hospital Readmissions Reduction Program for FY 2015.

[[Page 50665]]

d. Hospitals Paid Under Section 1814(b)(3) of the Act, Including the
Process To Be Exempt From the Hospital Readmissions Reduction Program
and Definition of ``Base Operating DRG Payment Amount'' for Such
Hospitals (Sec. 412.152 and Sec. 412.154(d))
As finalized in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53397),
the definition of ``applicable hospital'' under section 1886(q)(5)(C)
of the Act also includes hospitals paid under section 1814(b)(3) of the
Act (that is, acute care Maryland hospitals that would have otherwise
been paid under the IPPS, but for the waiver under section 1814(b)(3)
of the Act). As discussed in the FY 2014 IPPS/LTCH PPS proposed rule
(78 FR 27600 through 27601), section 1886(q)(2)(B)(ii) of the Act
allows the Secretary to exempt such hospitals from the Hospital
Readmissions Reduction Program, provided that the State submits an
annual report to the Secretary describing how a similar program to
reduce hospital readmissions in that State achieves or surpasses the
measured results in terms of health outcomes and cost savings
established by Congress for the program as applied to ``subsection (d)
hospitals.'' Accordingly, a program established by the State of
Maryland that could serve to exempt the State from the Hospital
Readmissions Reduction Program would focus on those ``applicable''
Maryland hospitals operating under the waiver provided by section
1814(b)(3) of the Act; that is, those hospitals that would otherwise
have been paid by Medicare under the IPPS absent this provision.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53384), we
established criteria for evaluation of an annual report to CMS to
determine whether Maryland should be exempted from the program each
year. We codified this requirement at Sec. 412.154(d) of the
regulations. In addition, we specified that we will evaluate a report
submitted by the State of Maryland documenting how its program meets
those criteria. However, because the Hospital Readmissions Reduction
Program was in its first year and Maryland's program was completing its
first year, we specified that the evaluation of Maryland's program for
measurable health outcomes and cost savings would not begin until FY
2014. In that same final rule, we explained that it would be premature
to evaluate Maryland's readmission program on health outcomes and cost
savings at that time, as we did not have sufficient information on
which to evaluate Maryland's program because FY 2013 was the first year
of the Hospital Readmissions Reduction Program.
We noted that our finalized criteria to evaluate Maryland's program
is for FY 2013, the first year of the program, and our evaluation
criteria may change through notice-and-comment rulemaking as the
Hospital Readmissions Reduction Program evolves.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27600 through
27601), we proposed to establish a deadline by which the State must
submit its annual report to the Secretary under proposed revised Sec.
412.154(d)(2) of the regulations. We also proposed the criteria to
determine whether or not the State would be exempted from the Hospital
Readmissions Reduction Program beginning with FY 2014. In addition, we
proposed to define the ``base operating DRG payment amount'' for
Maryland hospitals under Sec. 412.152 of the regulations in the event
that the State is not exempted from the Hospital Readmissions Reduction
Program.
We proposed that the State of Maryland must submit its preliminary
report to CMS no later than January 15 of each year for CMS to
consider, through the IPPS/LTCH PPS proposed rule for a Federal fiscal
year, its exemption from the Hospital Readmissions Reduction Program
for the upcoming Federal fiscal year. For example, the State of
Maryland would have to submit the report by January 15, 2014 for
consideration for the FY 2015 (beginning October 1, 2014) program year.
This deadline would provide CMS sufficient time to evaluate the report,
have any discussions with the State regarding its program, and prepare
a presentation of that report for the IPPS/LTCH PPS proposed rule.
Under this proposal, we also would require that the State submit a
final report, with updated information on the State's readmissions
program and updated cost savings and health outcomes information, to
CMS no later than June 1 of each year in order for CMS to determine,
through the IPPS/LTCH PPS final rule for a Federal fiscal year, whether
the State meets the requirements for exemption from the Hospital
Readmissions Reduction Program in that upcoming Federal fiscal year. As
such, for FY 2015, under proposed Sec. 412.154(d)(2)(ii), the State of
Maryland would submit its preliminary report to the Secretary no later
than January 15, 2014, and its final report to the Secretary no later
than June 1, 2014, for consideration of exemption from the Hospital
Readmissions Reduction Program.
As discussed in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR
27600 through 27601), for FY 2014, we received a preliminary report
from Maryland describing its readmissions program. Similar to its
report submitted for FY 2013, Maryland described its current
readmissions program, the Admissions-Readmission Revenue (ARR) Program.
Under the voluntary program, the State pays hospitals under a case-mix
adjusted bundled payment per episode of care, where the episode of care
is defined as the initial admission and any subsequent readmissions to
the same hospital or linked hospital system that occur within 30 days
of the original discharge. According to the State, an initial admission
with no readmissions provides the hospital with the same weight as an
initial admission with multiple readmissions. Therefore, hospitals
receive a financial reward for decreased readmissions (as determined
through the case-mix adjusted episode of care weights). In the report,
Maryland indicated that the reduction in intra-hospital readmission
rates (that is, readmissions to the same hospital as the initial
admission) resulted in approximately $25 million, or 0.27 percent, in
savings to the participating hospitals for 2011 and 2012. In addition,
Maryland reported that its readmission rate per 1,000 Medicare
beneficiaries declined from 17.14 percent (CY 2011, Quarter 2) to 15.21
percent (CY 2012, Quarter 2). The State also acknowledged in that
report that it has begun to track inter-hospital readmissions, where a
patient is admitted to one hospital and readmitted to another hospital,
which is comparable to how readmissions are measured under the Hospital
Readmissions Reduction Program. In the FY 2013 IPPS/LTCH PPS final
rule, we estimated that, under the Hospital Readmissions Reduction
Program, for FY 2013, Medicare IPPS operating payments would decrease
nationally by approximately $300 million (or 0.3 percent of total
Medicare IPPS operating payments). Maryland indicated that, for FY
2013, it would achieve comparable savings because it intends to reduce
the rate update factor for all hospitals by 0.3 percent, regardless of
a hospital's performance on readmissions.
Furthermore, in its FY 2014 preliminary report to the Secretary,
the State of Maryland indicated that, for FY 2014, subject to approval
by the Commission, it is proposing a shared savings approach, which
would be applied to all hospitals in the State. Under that shared
savings approach, hospitals in the State would be ranked

[[Page 50666]]

based on their performance on readmissions. Hospitals with high
readmissions above an established standard would experience a reduction
in their revenue and the hospitals below the established standard would
not experience a reduction in their revenue. For Maryland hospitals
that are in the voluntary ARR Program paid under the case-mix adjusted
bundled payment per episode of care that are performing worse than the
established standard for readmissions, their payment per episode of
care would be reduced. In addition, the State proposes that hospitals
that improve in readmissions above a certain standard would experience
no reduction in their payments and those hospitals below the standard
would experience a reduction. Based on this preliminary information, we
believe that the State can achieve savings on readmissions that are
tied to hospitals' performance on readmissions, which is comparable to
the Hospital Readmissions Reduction Program applied throughout the rest
of the country.
For FY 2014, we proposed to evaluate Maryland based on whether,
under the shared savings approach, it can achieve comparable health
outcomes and cost savings to the Hospital Readmissions Reduction
Program. We noted that, for FY 2014, we project that the Hospital
Readmissions Reduction Program will result in a 0.2 percent decrease,
or approximately $175 million nationally, in payments to hospitals. We
invited public comments on this proposal.
Comment: Several commenters supported the proposals regarding the
process by which Maryland may seek exemption from the Hospital
Readmissions Reduction Program, on an annual basis. One commenter
requested that Maryland be able to submit one annual report to seek
exemption from the Hospital Readmissions Reduction Program under
subsection (q), the Hospital VBP Program under subsection (p), and the
HAC Reduction Program under subsection (o), and that if CMS exempts
Maryland from the requirements of these provisions, that the State
should be exempt for 3 years.
Response: We believe that the section 1886(q)(2)(B)(ii) of the Act
requires that in order for hospitals paid under section 1814(b)(3) of
the Act to be exempt from the Hospital Readmissions Reduction Program,
the State must submit a report demonstrating a similar State program
that achieves or surpasses measured results in terms of cost savings
and patient health outcomes, and the State must submit this report on
an annual basis to receive an annual exemption. Therefore, the statute
does not provide for a 3-year exemption. Accordingly, we are finalizing
the requirement that the State of Maryland submit its preliminary
report to us no later than January 15 of each year and a final report
no later than June 1 of each year for us to consider, through the IPPS/
LTCH PPS proposed and final rules for a Federal fiscal year, its
exemption from the Hospital Readmissions Reduction Program for the
upcoming Federal fiscal year.
Comment: Maryland provided additional information on Maryland's
readmissions program for FY 2014. The commenter stated that Maryland
has implemented a population-based ratesetting model for 10 hospitals
called the Total Patient Revenue (TPR) system and an episode-of-care
ratesetting model called the Admissions Readmissions Revenue (ARR)
Program for most other hospitals in the State, which reduces payments
to hospitals that do not meet an established readmissions performance
target. The ARR Program will become effective January 1, 2014, and
because it will be effective in the middle of Maryland's 2014 rate
year, the reduction is expected to be twice the amount it would have
been had the program been effective for the entire 2014 rate year. The
TPR and ARR Program have reduced readmissions and is estimated to
achieve savings in FY 2014 in excess of the national savings: 0.3
percent of all payer inpatient revenue compared to an expected national
savings of 0.2 percent of national Medicare base payments.
Response: We appreciate the additional information on Maryland's
readmissions program. We believe that the program will provide for
comparable savings to the Hospital Readmissions Reduction Program for
FY 2014, and we believe that Maryland's program for FY 2014 meets the
requirement for Maryland hospitals to be exempt from the Hospital
Readmissions Reduction Program for FY 2014. In the future, we intend to
evaluate actual savings and health outcomes from the Hospital
Readmissions Reduction Program, as compared to actual savings and
health outcomes to Maryland's readmissions program. In addition, we
intend to evaluate how Maryland hospitals would perform in terms of
readmissions measures and payment reductions if these hospitals were in
the Hospital Readmissions Reduction Program, to potentially serve as
another metric by which to evaluate Maryland when seeking an exemption
from the Hospital Readmissions Reduction Program.
Comment: Several commenters suggested that CMS also exempt certain
categories of hospitals from the Hospital Readmissions Reduction
Program. Specifically, the commenters suggested that CMS exclude
hospitals participating in Accountable Care Organizations (ACOs),
including the Pioneer ACO Program. The commenters also suggested that
hospitals enrolled in the Bundled Payment demonstrations with a focus
on hip/knee replacement should be exempt from the Hospital Readmissions
Reduction Program and stated that because CMS is adding the THA/TKA
readmissions measure to the Hospital Readmissions Reduction Program,
hospitals in demonstrations that focus on THA/TKA should not be
penalized twice for the same activity.
Response: We appreciate the suggestions to exempt hospitals from
the Hospital Readmissions Reduction Program if they already participate
in an ACO program or other demonstrations. We addressed this comment in
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53398) where we explained
that we did not have the authority under section 1886(q) of the Act to
exempt any subsection (d) hospitals participating in the Bundled
Payment Care Improvement Demonstration or in an Accountable Care
Organization from the Hospital Readmissions Reduction Program. In
addition, we were not compelled to waive hospitals in Accountable Care
Organizations through their waiver authority because the incentives of
the Hospital Readmissions Reduction Program and the Medicare ACO
initiatives are aligned, and we did not see a need to waive the
requirements of the Hospital Readmissions Reduction Program in order to
test the Pioneer ACO Model. We found that because the incentives of the
two programs are aligned, we believe that hospitals successful in
reducing avoidable readmissions could be important allies for ACOs that
share similar goals. Because it is unlikely that the beneficiaries
assigned to an ACO will use only a single inpatient facility, ACOs will
need to work effectively with all local hospitals that their Medicare
FFS beneficiaries choose to use. Finally, we stated that as we gain
experience with the program and other new payment incentives in the
Medicare FFS program, we will monitor their interactions with the
Hospital Readmissions Reduction Program and continue our efforts to
align measures and incentives to achieve the best outcomes for our
patients and the program.
Comment: One commenter stated that CMS should permit a one-time
opportunity to waive the payment reduction to safety-net hospitals or
hospitals that serve a large proportion of low socioeconomic status
patients, and

[[Page 50667]]

in return, require those hospitals to submit to CMS their
implementation plan to improve readmission rates and the waiver would
be time limited in order to give hospitals the time to implement their
readmission reduction strategies.
Response: In the FY 2013 IPPS/LTCH PPS final rule, we finalized our
definition of applicable hospitals, or hospitals included in the
Hospital Readmissions Reduction Program, as hospitals that are (1)
subsection (d) hospitals, that is hospitals paid under the IPPS, and
(2) hospitals in Maryland that are paid under section 1814(b)(3) of the
Act, and absent the ``waiver'' specified by section 1814(b)(3) of the
Act, would have been paid under the IPPS. We do not believe that we
have the authority to implement a process described above, whereby we
provide a waiver for safety-net hospitals that submit to us an
implementation plan to reduce readmissions. We believe that all
hospitals should be working towards the goal of reducing readmissions,
on an ongoing basis, regardless of patient population. Therefore, we do
not believe that we need to provide additional time through a waiver to
hospitals to implement readmission reduction programs.
After consideration of the public comments we received, we are
finalizing the requirement that the State of Maryland must submit its
preliminary report to us no later than January 15 of each year and a
final report no later than June 1 of each year for us to consider,
through the IPPS/LTCH PPS proposed and final rules for a Federal fiscal
year, its exemption from the Hospital Readmissions Reduction Program
for the upcoming Federal fiscal year. In addition, we are finalizing
the policy to exempt Maryland hospitals paid under section 1814(b)(3)
of the Act from the Hospital Readmissions Reduction Program for FY
2014.
As proposed in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27600
through 27601), in this final rule we are defining ``base operating DRG
payment amount'' for hospitals paid under section 1814(b)(3) of the Act
in the event that we do not exempt Maryland hospitals from the Hospital
Readmissions Reduction Program in a given year. Consistent with section
1886(q)(2) of the Act, in the FY 2013 IPPS/LTCH PPS final rule (77 FR
53382), under the regulations at Sec. 412.152, we defined the ``base
operating DRG payment amount'' under the Hospital Readmissions
Reduction Program as the wage-adjusted DRG operating payment plus any
applicable new technology add-on payments. As required by the statute,
the definition of ``base operating DRG payment amount'' does not
include adjustments or add-on payments for IME, DSH, outliers, and low-
volume hospitals provided for under sections 1886(d)(5)(A), (d)(5)(B),
(d)(5)(F), and (d)(12) of the Act, respectively. Section 1886(q)(2) of
the Act does not exclude new technology payments made under section
1886(d)(5)(K) of the Act in the definition of ``base operating DRG
payment amount''; therefore, any payments made under section
1886(d)(5)(K) of the Act are included in the definition of ``base
operating DRG payment amount.'' In addition, under the regulations at
Sec. 412.152, we define ``wage-adjusted DRG operating payment'' as the
applicable average standardized amount adjusted for resource
utilization by the applicable MS-DRG relative weight and adjusted for
differences in geographic costs by the applicable area wage index (and
by the applicable COLA for hospitals located in Alaska and Hawaii).
Acute care hospitals located in the State of Maryland currently are
not paid under the IPPS but are, instead, paid under a special waiver
as provided by section 1814(b)(3) of the Act. For these applicable
hospitals, as we proposed, we are finalizing that the term ``base
operating DRG payment amount'' means the base operating DRG payment
amount defined at Sec. 412.152. In other words, we are revising
existing Sec. 412.152, to specify that, for Maryland hospitals, the
``base operating DRG payment amount'' is an amount equal to the IPPS
wage adjusted DRG payment amount or the average standardized amount
adjusted for resource utilization by the applicable MS-DRG relative
weight and adjusted for differences in geographic costs by the
applicable area wage index plus new technology payments that would be
paid to Maryland hospitals absent section 1814(b)(3) of the Act.
Although Maryland hospitals are currently paid under this waiver and
not under the IPPS, if, for any year, Maryland is not exempt from the
Hospital Readmissions Reduction Program in, we are finalizing that, to
determine the amount by which the hospitals' payments under section
1814(b)(3) of the Act would be reduced under the Hospital Readmissions
Reduction Program, the readmission payment adjustment under Sec.
412.154(b) would be determined using the estimated base operating DRG
payment amount that would have applied had the hospital been paid under
the IPPS. To implement this policy, as proposed, we are finalizing that
claims submitted by Maryland hospitals will be ``priced'' under the
IPPS payment methodology, and if a Maryland hospital has a readmissions
payment adjustment factor, that factor would be applied to that base
operating DRG payment amount to determine the payment adjustment under
Sec. 412.154(b) (that is, the amount of the payment reduction). We are
adopting that the amount of the payment reduction, if any, would be
applied to (that is, subtracted from) the payments made to the affected
Maryland hospital under the waiver. This methodology would result in
Maryland hospitals having the readmissions adjustment factor applied in
a manner similar to that which is applied to hospitals that are paid
under the IPPS.
Furthermore, as proposed, we are finalizing that if Maryland is not
exempt from the Hospital Readmissions Reduction Program in a given
year, the definition of ``base operating DRG payment amount'' for
Maryland hospitals discussed above (that is, the base operating DRG
payment amount calculated as if the hospital were paid under the IPPS),
and not any payment amount made under the waiver under section
1814(b)(3) of the Act, would be used to calculate both the ``aggregate
payments for excess readmissions'' and ``aggregate payments for all
discharges'' (defined at Sec. 412.152) for purposes of determining the
hospital's readmission adjustment factor that accounts for excess
readmissions under Sec. 412.154(c).
Comment: Several commenters supported the proposed definition of
``base operating DRG payment amount'' for Maryland hospitals, which is
the base operating DRG payment amount calculated as if the hospital
were paid under the IPPS, in the event that Maryland is not exempt from
the Hospitals Readmissions Reduction Program in a given year. One
commenter stated that the proposed definition of ``base operating DRG
payment amount'' for Maryland hospitals for the Hospital Readmissions
Reduction Program is inconsistent with both the definition of ``base
operating DRG payment amount'' under the Hospital VBP Program and how
Maryland hospitals are actually paid by Medicare for inpatient hospital
services. The commenter recommended that CMS use a consistent
definition of base operating DRG payment amount for Maryland hospitals.
Response: We believe that the statute at section 1886(q)(2) of the
Act clearly defines the base operating DRG payment amount as the wage-
adjusted DRG payment amount excluding adjustments or add-on payments
for IME, DSH, outliers, and low-volume hospitals

[[Page 50668]]

provided for under sections 1886(d)(5)(A), (d)(5)(B), (d)(5)(F), and
(d)(12) of the Act, respectively. Section 1886(q)(2) of the Act does
not exclude new technology add-on payments made under section
1886(d)(5)(K) of the Act in the definition of ``base operating DRG
payment amount''; therefore, any payments made under section
1886(d)(5)(K) of the Act are included in the definition of ``base
operating DRG payment amount.'' Section 1886(q) of the Act does not
provide a separate definition for base operating DRG payment amount for
Maryland hospitals. The definition under the Hospital Readmissions
Reduction Program may be inconsistent with the definition of base
operating DRG payment amount under the Hospital VBP Program because
these two programs are governed by different sections of the statute
that provide different statutory definitions of base operating DRG
payment amounts. As such, we do not believe that we have latitude to
change our definition of ``base operating DRG payment amount'' and we
are finalizing the definition, as proposed.
e. Floor Adjustment Factor for FY 2014 (Sec. 412.154(c)(2))
Section 1886(q)(3)(A) of the Act defines the ``adjustment factor''
for an applicable hospital for a fiscal year as equal to the greater of
``(i) the ratio described in subparagraph (B) for the hospital for the
applicable period (as defined in paragraph (5)(D)) for such fiscal
year; or (ii) the floor adjustment factor specified in subparagraph
(C).'' Section 1886(q)(3)(B) of the Act, in turn, describes the ratio
used to calculate the adjustment factor. Specifically, it states that
the ratio is ``equal to 1 minus the ratio of--(i) the aggregate
payments for excess readmissions . . . and (ii) the aggregate payments
for all discharges . . . .'' In the FY 2013 IPPS/LTCH PPS final rule
(77 FR 53386), we codified the calculation of this ratio at Sec.
412.154(c)(1) of the regulations. Section 1886(q)(3)(C) of the Act
specifies the floor adjustment factor, which is set at 0.99 for FY
2013, 0.98 for FY 2014, and 0.97 for FY 2015 and subsequent fiscal
years. We codified the floor adjustment factor at Sec. 412.154(c)(2)
of the regulations.
For FY 2013, under Sec. 412.154(c), we specified that an
applicable hospital will receive an adjustment factor that is either
the greater of the ratio or a floor adjustment factor of 0.99. In the
FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27601), for FY 2014, we
proposed that the floor adjustment factor be 0.98, consistent with
section 1886(q)(3) of the Act, as codified at Sec. 412.154(c)(2). As
finalized in the FY 2013 IPPS/LTCH PPS final rule, the ratio is rounded
to the fourth decimal place. In other words, for FY 2014, a hospital
subject to the Hospital Readmissions Reduction Program would have an
adjustment factor that is between 1.0 and 0.9800. We invited public
comments on this proposal.
Comment: One commenter stated that doubling the readmission payment
reduction would be harmful to hospitals and would be particularly
harmful to safety-net hospitals.
Response: We recognize the commenter's concern regarding the
magnitude of the payment reduction for FY 2014. Section 1886(q)(3) of
the Act requires that, effective for discharges occurring in FY 2014,
the maximum readmissions adjustment factor or the floor adjustment
factor be 0.98, or a 2-percent reduction, applied to a hospital's base
operating DRG payment amount. While the maximum reduction will increase
for FY 2014, only 18 hospitals are subject to the maximum reduction of
2.0 percent and all but one of those hospitals were subject to the
maximum reduction of 1.0 percent in FY 2013, suggesting that these
hospitals have poor performance on these readmissions measures compared
to the national average. In addition, we believe that our other
proposed changes to the Hospital Readmissions Reduction Program,
including the application of a planned readmissions algorithm to the
readmissions measures and the change to the calculation of the
readmission payment adjustment factors to be more consistent with the
calculation of the excess readmission ratios, provide refinements to
the readmissions penalties that mitigate severe payment impacts to the
hospitals in the program. As such, we are finalizing our proposal that
the floor adjustment factor be 0.98, consistent with section 1886(q)(3)
of the Act, as codified at Sec. 412.154(c)(2).
Comment: One commenter suggested that, if CMS added the additional
readmissions measures for the conditions COPD and TKA/THA proposed in
the FY 2014 IPPS/LTCH PPS proposed rule to be included as part of the
readmissions payment adjustment for FY 2015, CMS should phase in the
payment penalty over time so that the maximum reduction due to these
two additional measures is 1 percent for FY 2015 rather than the full 3
percent for FY 2015. The commenter stated that the method for computing
penalties will result in relatively large penalties for readmissions of
THA and TKA because there are low readmissions rates for these cases.
Response: We appreciate the commenter's suggestion regarding the
readmission payment adjustment factors for FY 2015. However, we believe
that this comment is outside the scope of this rulemaking as we have
not made any proposals on the calculation of the payment adjustment for
FY 2015, with the inclusion of the two additional readmissions measures
of COPD and TKA/THA. We intend to propose the calculation of the
readmissions payment adjustment with the additional readmissions
measures for FY 2015 in future rulemaking.
After consideration of the public comments we received, we are
finalizing our proposal that, for FY 2014, the floor adjustment factor
is 0.98, consistent with section 1886(q)(3) of the Act, as codified at
Sec. 412.154(c)(2).
f. Applicable Period for FY 2014
Under section 1886(q)(5)(D) of the Act, the Secretary has the
authority to specify the applicable period with respect to a fiscal
year under the Hospital Readmissions Reduction Program. We finalized
our policy to use 3 years of claims data to calculate the readmission
measures in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51671). In the
FY 2013 IPPS/LTCH PPS final rule (77 FR 53675), we codified the
definition of ``applicable period'' in the regulations at 42 CFR
412.152 as the 3-year period from which data are collected in order to
calculate excess readmission ratios and adjustments for the fiscal
year, which includes aggregate payments for excess readmissions and
aggregate payments for all discharges used in the calculation of the
payment adjustment.
For the Hospital Readmissions Reduction Program for FY 2013, we
established an applicable period under Sec. 412.152 as July 1, 2008,
to June 30, 2011. Specifically, to calculate the excess readmission
ratios and to calculate the payment adjustments for FY 2013 (including
aggregate payments for excess readmissions and aggregate payments for
all discharges used in the calculation of the payment adjustment), we
used Medicare claims data from the 3-year time period of July 1, 2008
to June 30, 2011 (76 FR 51671 and 77 FR 53388).
In the FY 2014 IPPS/LTCH PPS proposed rule, consistent with the
definition at Sec. 412.152 of the existing regulations, we proposed
that the applicable period for FY 2014 under the Hospital Readmissions
Reduction Program would be the 3-year period from July 1, 2009, to June
30, 2012. That is, we would determine the excess readmission ratios and
calculate the

[[Page 50669]]

payment adjustment (including aggregate payments for excess
readmissions and aggregate payments for all discharges) for FY 2014
using data from the 3-year time period of July 1, 2009 to June 30,
2012, as this was the most recent available 3-year period of data upon
which to base these calculations. As discussed later in this section,
although we proposed an applicable period of July 1, 2009 through June
30, 2012 for FY 2014, for purposes of determining the readmissions
payment adjustment factors for the FY 2014 proposed rule, we used
excess readmission ratios based on older data, that is, from the FY
2013 applicable period of July 1, 2008 to June 30, 2011 (that includes
the application of the planned readmission algorithm discussed earlier
in this section). However, for this FY 2014 final rule, we are using
excess readmission ratios based on data from the applicable period of
July 1, 2009 to June 30, 2012, because the data for that period are now
finalized.
Comment: Some commenters supported the proposed 3-year applicable
period of July 1, 2009 to June 30, 2012 to calculate the excess
readmission ratios and the readmissions payment adjustment factors.
Some commenters supported the 3-year applicable period because it
aligns with the reporting data on Hospital Compare.
The commenters also expressed concern regarding the use of 3 years
of data to calculate the excess readmission ratios and the readmissions
payment adjustment factors. The commenters stated that the payment
penalties should be assessed every 3 years instead of every year;
otherwise, CMS would be penalizing hospitals more than once for the
same years of data and it would make it difficult for low-performing
hospitals to improve.
Several commenters suggested shorter timeframes for the applicable
period. One commenter stated that the 3-year measurement period
penalizes hospitals for performance before the focus on readmissions
began. Other commenters suggested that the measures be reported on a
quarterly basis.
Response: We recognize the concerns raised by the commenters. As
discussed in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53394), we use
3 years of data in order to have sufficient data to reliably measure a
hospital's performance, and we update the data annually with the most
recently available 3 years of data. We continue to believe that
hospitals do have the opportunity to not be subject to a readmission
reduction to payments due to excess readmissions if they can perform
better than the average hospital in the future. We also believe that
using the most recent 3 years of data may help hospitals in the event
that a hospital's poor performance in 1 year due to anomalous
circumstances may be mitigated with the inclusion of 2 additional years
of data.
After consideration of the public comments we received, we are
finalizing, as proposed, the policy to use data from the 3-year time
period from July 1, 2009 to June 30, 2012 to calculate the excess
readmission ratio and to calculate the readmission payment adjustment
factors for FY 2014.
g. Refinements of the Methodology To Calculate the Aggregate Payments
for Excess Readmissions
Section 1886(q)(3)(B) of the Act specifies the ratio used to
calculate the adjustment factor under the Hospital Readmissions
Reduction Program. It states that the ratio is ``equal to 1 minus the
ratio of--(i) the aggregate payments for excess readmissions . . . and
(ii) the aggregate payments for all discharges . . . .'' In the FY 2013
IPPS/LTCH PPS final rule (77 FR 53387), we defined ``aggregate payments
for excess readmissions'' and ``aggregate payments for all
discharges,'' as well as a methodology for calculating the numerator of
the ratio (aggregate payments for excess readmissions) and the
denominator of the ratio (aggregate payments for all discharges).
Section 1886(q)(4) of the Act sets forth the definitions of
``aggregate payments for excess readmissions'' and ``aggregate payments
for all discharges'' for an applicable hospital for the applicable
period. The term ``aggregate payments for excess readmissions'' is
defined in section 1886(q)(4)(A) of the Act as ``for a hospital for an
applicable period, the sum, for applicable conditions . . . of the
product, for each applicable condition, of (i) the base operating DRG
payment amount for such hospital for such applicable period for such
condition; (ii) the number of admissions for such condition for such
hospital for such applicable period; and (iii) the `Excess Readmission
Ratio'. . . for such hospital for such applicable period minus 1.'' In
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53675), we included this
definition of ``aggregate payments for excess readmissions'' under the
regulations at Sec. 412.152.
The ``Excess Readmission Ratio'' is a hospital-specific ratio
calculated for each applicable condition. Specifically, section
1886(q)(4)(C) of the Act defines the excess readmission ratio as the
ratio of ``risk-adjusted readmissions based on actual readmissions''
for an applicable hospital for each applicable condition, to the
``risk-adjusted expected readmissions'' for the applicable hospital for
the applicable condition. The methodology for the calculation of the
excess readmission ratio was finalized in the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51673). ``Aggregate payments for excess
readmissions'' is the numerator of the ratio used to calculate the
adjustment factor under the Hospital Readmissions Reduction Program.
The term ``aggregate payments for all discharges'' is defined at
section 1886(q)(4)(B) of the Act as ``for a hospital for an applicable
period, the sum of the base operating DRG payment amounts for all
discharges for all conditions from such hospital for such applicable
period.'' ``Aggregate payments for all discharges'' is the denominator
of the ratio used to calculate the adjustment factor under the Hospital
Readmissions Reduction Program. In the FY 2013 IPPS/LTCH PPS final rule
(77 FR 53387), we included this definition of ``aggregate payments for
all discharges'' under the regulations at Sec. 412.152.
As proposed in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR
27602), we note that we are taking this opportunity to finalize a
technical change to the definition of ``base operating DRG payment
amount'' in the existing regulations at Sec. 412.152 to reflect our
policy that the difference between the applicable hospital-specific
payment rate and the Federal payment rate for SCHs and MDHs is excluded
from the base operating DRG amount for these hospitals. We note that
section 1886(q)(2)(B)(i) of the Act provides ``special rules'' for MDHs
with respect to discharges occurring during FYs 2012 and 2013, and not
for subsequent years. Under current law, as discussed in section V.F.
of the preamble of this final rule, the MDH program expires at the end
of FY 2013 (that is, the MDH program is in effect through September 30,
2013); therefore, the technical change would reflect that our policy
applies to MDHs for FY 2013 only.
We did not receive any public comments on this technical change on
the definition of ``base operating DRG payment amount'' for MDHs, and
we are finalizing the definition, as proposed.
As discussed above, when calculating the numerator (aggregate
payments for excess readmissions), we determined the base operating DRG
payments for the applicable period. ``Aggregate payments for excess
readmissions'' (the numerator) is defined as ``the sum, for applicable
conditions . . . of the product, for each applicable condition,

[[Page 50670]]

of (i) the base operating DRG payment amount for such hospital for such
applicable period for such condition; (ii) the number of admissions for
such condition for such hospital for such applicable period; and (iii)
the `Excess Readmission Ratio'. . . for such hospital for such
applicable period minus 1.''
When determining the base operating DRG payment amount for an
individual hospital for such applicable period for such condition, we
use Medicare inpatient claims from the MedPAR file with discharge dates
that are within the same applicable period that was finalized in the FY
2012 IPPS/LTCH PPS final rule (76 FR 51671) to calculate the excess
readmission ratio. We use MedPAR claims data as our data source for
determining aggregate payments for excess readmissions and aggregate
payments for all discharges, as this data source is consistent with the
claims data source used in IPPS rulemaking to determine IPPS rates.
For FY 2014, as proposed in the FY 2014 IPPS/LTCH PPS proposed rule
(78 FR 27603), we are using MedPAR claims with discharge dates that are
on or after July 1, 2009, and no later than June 30, 2012. As specified
in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53387), we use the
update of the MedPAR file for each Federal fiscal year, which is
updated 6 months after the end of each Federal fiscal year within the
applicable period, as our data source (that is, the March updates of
the respective Federal fiscal year MedPAR files) for the final rules.
The FY 2009 through FY 2012 MedPAR data files can be purchased from
CMS. Use of these files allows the public to verify the readmission
adjustment factors. Interested individuals may order these files
through the Web site at: https://www.cms.hhs.gov/LimitedDataSets/ by
clicking on MedPAR Limited Data Set (LDS)-Hospital (National). This Web
page describes the files and provides directions and further detailed
instructions for how to order the data sets. Persons placing an order
must send the following: a Letter of Request, the LDS Data Use
Agreement and Research Protocol (refer to the Web site for further
instructions), the LDS Form, and a check for $3,655 to:
If using the U.S. Postal Service: Centers for Medicare and
Medicaid Services, RDDC Account, Accounting Division, P.O. Box 7520,
Baltimore, MD 21207-0520.
If using express mail: Centers for Medicare and Medicaid
Services, OFM/Division of Accounting- RDDC, Mailstop C-07-11,
7500 Security Boulevard, Baltimore, MD 21244-1850.
In the FY 2014 IPPS/LTCH PPS proposed rule (FR 27603), we proposed
to determine aggregate payments for excess readmissions and aggregate
payments for all discharges using data from MedPAR claims with
discharge dates that are on or after July 1, 2009, and no later than
June 30, 2012. However, we noted that, for the purposes of modeling the
proposed readmissions payment adjustment factors in the proposed rule,
we used excess readmission ratios based on an older performance period
of July 1, 2008 to June 30, 2011, with the application of the planned
readmission algorithm.
Consistent with the approach taken in the FY 2013 IPPS/LTCH PPS
proposed rule (77 FR 27964), for the purpose of modeling the FY 2014
readmissions payment adjustment factors for the FY 2014 proposed rule,
we used excess readmission ratios for applicable hospitals from the FY
2013 Hospital Readmission Reduction Program applicable period. For FY
2014, applicable hospitals have had the opportunity to review and
correct data from the FY 2014 applicable period of July 1, 2009 to June
30, 2012 before they were made public under our policy regarding the
reporting of hospital-specific information, which is discussed later in
this section.
In the FY 2014 IPPS/LTCH PPS proposed rule, we proposed for FY 2014
to use MedPAR data from July 1, 2009 through June 30, 2012, and we used
the March 2010 update of the FY 2009 MedPAR file to identify claims
within FY 2009 with discharges dates that are on or after July 1, 2009,
the March 2011 update of the FY 2010 MedPAR file to identify claims
within FY 2010, the March 2012 update of the FY 2011 MedPAR file to
identify claims within FY 2010, and the December 2012 update of the FY
2012 MedPAR file to identify claims within FY 2012 with discharge dates
no later than June 30, 2012. For this FY 2014 IPPS/LTCH PPS final rule,
we are using the same MedPAR files as listed above, with the exception
of using the March 2013 update of the FY 2012 MedPAR file.
In order to identify the admissions for each condition for an
individual hospital for calculating the aggregate payments for excess
readmissions, as we did for FY 2013, we proposed in the FY 2014 IPPS/
LTCH PPS proposed rule (78 FR 27603), for FY 2014, to identify each
applicable condition using the same ICD-9-CM codes used to identify
applicable conditions to calculate the excess readmission ratios. In
the FY 2012 IPPS/LTCH PPS final rule (76 FR 51669), in our discussion
of the methodology of the readmissions measures, we stated that we
identify eligible hospitalizations and readmissions of Medicare
patients discharged from an applicable hospital having a principal
diagnosis for the measured condition in an applicable period. The
discharge diagnoses for each applicable condition are based on a list
of specific ICD-9-CM codes for that condition. These codes are posted
on the Web site at: https://www.QualityNet.org > Hospital-Inpatient >
Claims-Based Measures > Readmission Measures > Measure Methodology.
In order to identify the applicable conditions to calculate the
aggregate payments for excess readmissions, as we did for FY 2013, we
proposed, for FY 2014, to identify the claim as an applicable condition
if the ICD-9-CM code for that condition is listed as the principal
diagnosis on the claim, consistent with the methodology to identify
conditions to calculate the excess readmission ratio. Based on public
comments that we received on the FY 2013 IPPS/LTCH PPS proposed rule,
which stated that the index admissions that are not considered
readmissions for the purpose of the readmissions measures, and are thus
excluded from the calculation of the excess readmission ratio, should
also not be considered admissions for the purposes of determining a
hospital's aggregate payments for excess readmissions, we proposed to
further modify our methodology to identify the admissions included in
the calculation of ``aggregate payments for excess readmissions.'' As
we did for FY 2013 in response to public comments (77 FR 53390), using
our MedPAR data source, we identified admissions for the purposes of
calculating aggregate payments for excess readmissions making the
following exclusions: (1) Hospitalizations for patients discharged with
an in hospital death; (2) hospitalization for patients discharged
against medical advice; (3) transfers; (4) hospitalizations for
patients under 65; (5) hospitalizations for patients enrolled in
Medicare Part C; and (6) same day discharges for AMI cases. These
admissions were excluded based on how they were identified in the
MedPAR file.
For FY 2014, as proposed in the FY 2014 IPPS/LTCH proposed rule (78
FR 27603 through 27604), we are adopting our proposal to make the same
exclusions as we did in FY 2013, but, for some of the exclusions, to
identify them using a different methodology which is more consistent
with the manner in which exclusions are made to the admissions used to
calculate the

[[Page 50671]]

excess readmission ratio. For FY 2014, in order to have the same types
of admissions to calculate aggregate payments for excess readmissions,
as is used to calculate the excess readmission ratio, we are finalizing
our proposal to identify admissions for the purposes of calculating
aggregate payments for excess readmissions as follows; we note where
our methodology for exclusions for FY 2014 differs from our methodology
in FY 2013:
We will exclude admissions that are identified as an
applicable condition based on the ICD-9-CM code listed as the primary
diagnosis if the patient died in the hospital, as identified by the
discharge status code on the MedPAR claim. This is consistent with how
we identified patients who died in the hospital in the FY 2013 IPPS/
LTCH PPS final rule.
We will exclude admissions identified as an applicable
condition based on the ICD-9-CM code listed as the primary diagnosis
for which the patient was transferred to another acute care hospital
(that is, a CAH or an IPPS hospital), as identified through examination
of contiguous stays in MedPAR at other hospitals. (We note that this
step differs from the methodology we used in the FY 2013 IPPS/LTCH PPS
final rule to identify transfers based on discharge destination codes
in the MedPAR file.)
We will exclude admissions identified as an applicable
condition based on the ICD-9-CM code listed as the primary diagnosis
for patients who are under the age of 65, as identified by linking the
claim information to the information provided in the Medicare
Enrollment Database. (We note that this step differs from the
methodology we used in the FY 2013 IPPS/LTCH PPS final rule in that we
previously used claims in the MedPAR file to identify a patient's age.)
For conditions identified as AMI, we will exclude claims
that are same day discharges, as identified by the admission date and
discharge date on the MedPAR claim. (This is consistent with how we
identified patients with same day discharges for AMI in the FY 2013
IPPS/LTCH PPS final rule. In addition, it is consistent with the
calculation of the excess readmission ratio for AMI where same day
discharges for AMI are not included as an index admission.)
Furthermore, as proposed, we will only identify Medicare FFS claims
that meet the criteria (that is, claims paid for under Medicare Part C
(Medicare Advantage) would not be included in this calculation),
consistent with the methodology to calculate excess readmission ratios
based solely on admissions and readmissions for Medicare FFS patients.
For FY 2013, we excluded admissions for Medicare Advantage patients
based on whether the claim was identified as a Medicare Advantage claim
in the MedPAR file or whether the FFS payment amount on the claim was
for an IME payment only, also indicative of an admission for a Medicare
Advantage patient. For FY 2014, we will exclude admissions for patients
enrolled in Medicare Advantage as identified in the Enrollment
Database, which is consistent with how admissions for Medicare
Advantage patients are identified in the calculation of the excess
readmission ratios.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53390), we noted
that there were additional exclusions to the admissions used to
calculate the excess readmission ratio that we could not apply to the
calculation of aggregate payments for excess readmissions at the time
of rulemaking. However, we stated our intention to modify our systems
to identify the additional exclusions in order to calculate the
aggregate payments for excess readmissions in a manner that would be
more consistent with the calculation of the excess readmission ratio.
Therefore, in addition to the exclusions to the admissions we finalized
in FY 2013, as proposed for FY 2014, we are finalizing additional
exclusions so that the criteria used to identify admissions for the
purposes of calculating aggregate payments for excess readmissions will
be the same as the criteria used to identify admissions for the
purposes of calculating the excess readmission ratios. We are adopting
as final the proposal to link our MedPAR claims data with the Medicare
Enrollment Database to make additional exclusions to the admissions
used to calculate aggregate payments for excess readmissions, which is
consistent with our established methodology for calculating the excess
readmission ratios. The Medicare Enrollment Database contains
information on all individuals entitled to Medicare, including
demographic information, enrollment dates, third party buy-in
information, and Medicare managed care enrollment. For FY 2014, as
proposed, we are including the following additional steps to identify
admissions for the purposes of calculating aggregate payments for
excess readmissions:
We are excluding admissions for patients who did not have
Medicare Parts A and B FFS enrollment in the 12 months prior to the
index admission, based on the information provided in the Medicare
Enrollment Database.
We are excluding admissions for patients without at least
30 days post-discharge enrollment in Medicare Parts A and B FFS, based
on the information provided in the Medicare Enrollment Database.
We are excluding all multiple admissions within 30 days of
a prior index admission, as identified in the MedPAR file, consistent
with how multiple admissions within 30 days of an index admission are
excluded from the calculation of the excess readmission ratio.
The tables below list the ICD-9-CM codes we are using, as proposed,
to identify each applicable condition to calculate the aggregate
payments for excess readmissions for FY 2014. These ICD-9-CM codes also
will be used to identify the applicable conditions to calculate the
excess readmission ratios, consistent with our policy finalized in the
FY 2012 IPPS/LTCH PPS final rule. The list of ICD-9-CM codes for each
condition has not changed from the list provided in the FY 2013 IPPS/
LTCH PPS final rule.

ICD-9-CM CODES TO IDENTIFY PNEUMONIA (PN) CASES
------------------------------------------------------------------------
ICD-9-CM Code Description of code
------------------------------------------------------------------------
480.0.................... Pneumonia due to adenovirus.
480.1.................... Pneumonia due to respiratory syncytial virus.
480.2.................... Pneumonia due to parainfluenza virus.
480.3.................... Pneumonia due to SARS-associated coronavirus.
480.8.................... Viral pneumonia: pneumonia due to other virus
not elsewhere classified.
480.9.................... Viral pneumonia unspecified.
481...................... Pneumococcal pneumonia [streptococcus
pneumoniae pneumonia].
482.0.................... Pneumonia due to klebsiella pneumoniae.

[[Page 50672]]

482.1.................... Pneumonia due to pseudomonas.
482.2.................... Pneumonia due to hemophilus influenzae [h.
influenzae].
482.30................... Pneumonia due to streptococcus unspecified.
482.31................... Pneumonia due to streptococcus group a.
482.32................... Pneumonia due to streptococcus group b.
482.39................... Pneumonia due to other streptococcus.
482.40................... Pneumonia due to staphylococcus unspecified.
482.41................... Pneumonia due to staphylococcus aureus.
482.42................... Methicillin Resistant Pneumonia due to
Staphylococcus Aureus.
482.49................... Other staphylococcus pneumonia.
482.81................... Pneumonia due to anaerobes.
482.82................... Pneumonia due to escherichia coli [e.coli].
482.83................... Pneumonia due to other gram-negative
bacteria.
482.84................... Pneumonia due to legionnaires' disease.
482.89................... Pneumonia due to other specified bacteria.
482.9.................... Bacterial pneumonia unspecified.
483.0.................... Pneumonia due to mycoplasma pneumoniae.
483.1.................... Pneumonia due to chlamydia.
483.8.................... Pneumonia due to other specified organism.
485...................... Bronchopneumonia organism unspecified.
486...................... Pneumonia organism unspecified.
487.0.................... Influenza with pneumonia.
488.11................... Influenza due to identified novel H1N1
influenza virus with pneumonia.
------------------------------------------------------------------------

ICD-9-CM Codes To Identify Heart Failure (HF) Cases
------------------------------------------------------------------------
ICD-9-CM Code Code description
------------------------------------------------------------------------
402.01................... Hypertensive heart disease, malignant, with
heart failure.
402.11................... Hypertensive heart disease, benign, with
heart failure.
402.91................... Hypertensive heart disease, unspecified, with
heart failure.
404.01................... Hypertensive heart and chronic kidney
disease, malignant, with heart failure and
with chronic kidney disease stage I through
stage IV, or unspecified.
404.03................... Hypertensive heart and chronic kidney
disease, malignant, with heart failure and
with chronic kidney disease stage V or end
stage renal disease.
404.11................... Hypertensive heart and chronic kidney
disease, benign, with heart failure and with
chronic kidney disease stage I through stage
IV, or unspecified.
404.13................... Hypertensive heart and chronic kidney
disease, benign, with heart failure and with
chronic kidney disease stage I through stage
IV, or unspecified failure and chronic
kidney disease stage V or end stage renal
disease.
404.91................... Hypertensive heart and chronic kidney
disease, unspecified, with heart failure and
chronic kidney disease stage V or end stage
renal disease heart failure and with chronic
kidney disease stage I through stage IV, or
unspecified.
404.93................... Hypertensive heart and chronic kidney
disease, unspecified, with heart failure and
chronic kidney disease stage V or end stage
renal disease.
428.xx................... Heart Failure.
------------------------------------------------------------------------

ICD-9-CM Codes To Identify Acute Myocardial Infarction (AMI) Cases
------------------------------------------------------------------------
ICD-9-CM Code Description of code
------------------------------------------------------------------------
410.00................... AMI (anterolateral wall)--episode of care
unspecified.
410.01................... AMI (anterolateral wall)--initial episode of
care.
410.10................... AMI (other anterior wall)--episode of care
unspecified.
410.11................... AMI (other anterior wall)--initial episode of
care.
410.20................... AMI (inferolateral wall)--episode of care
unspecified.
410.21................... AMI (inferolateral wall)--initial episode of
care.
410.30................... AMI (inferoposterior wall)--episode of care
unspecified.
410.31................... AMI (inferoposterior wall)--initial episode
of care.
410.40................... AMI (other inferior wall)--episode of care
unspecified.
410.41................... AMI (other inferior wall)--initial episode of
care.
410.50................... AMI (other lateral wall)--episode of care
unspecified.
410.51................... AMI (other lateral wall)--initial episode of
care.
410.60................... AMI (true posterior wall)--episode of care
unspecified.
410.61................... AMI (true posterior wall)--initial episode of
care.
410.70................... AMI (subendocardial)--episode of care
unspecified.
410.71................... AMI (subendocardial)--initial episode of
care.
410.80................... AMI (other specified site)--episode of care
unspecified.
410.81................... AMI (other specified site)--initial episode
of care.

[[Page 50673]]

410.90................... AMI (unspecified site)--episode of care
unspecified.
410.91................... AMI (unspecified site)--initial episode of
care.
------------------------------------------------------------------------

For FY 2014, as proposed, we are calculating aggregate payments for
excess readmissions, using MedPAR claims from July 1, 2009 to June 30,
2012, to identify applicable conditions based on the same ICD-9-CM
codes used to identify the conditions for the readmissions measures and
to apply the exclusions for the types of admissions discussed above.
Comment: Several commenters supported the proposal to calculate
excess payments for readmissions, or the numerator of the readmissions
payment adjustment factor, using MedPAR claims with the proposed trims
such that the calculation is more consistent with the calculation of
the excess readmission ratio.
Response: We appreciate the commenters' support for our proposed
modifications to the MedPAR data to calculate the excess payments for
readmissions, which is the numerator of the readmissions payment
adjustment factor. As such, we are finalizing, as proposed, our
methodology to apply the trims to the admissions used to calculate
excess payments for readmissions discussed earlier.
Comment: Some commenters stated that the data currently available
are insufficient to replicate the readmission payment adjustment
factors. The commenters requested that CMS provide sufficient data in
the public MedPAR file to fully replicate the readmission payment
adjustment factors.
Response: We recognize the limitations on the public's ability to
replicate our calculations based on the data that are currently
available. In response to those comments, we are providing additional
provider-level information on the calculation of the readmissions
payment adjustment factors in the Hospital Readmissions Reduction
Program Supplemental Data File that can be found on our Web site at:
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2014-IPPS-Final-Rule-Home-Page.html.
Comment: One commenter believed that the proposed calculation of
the readmission payment adjustment factor creates excessive payment
reductions. The commenter contended that the excess readmission ratio,
which is a ratio of actual readmissions to expected readmissions,
should be applied to the number of a hospital's readmissions, not
admissions, in order to determine the hospital's excess payments for
readmissions. The commenter believed that CMS has the discretionary
authority to implement the policy as Congress intended, and that
regulatory action could be confirmed by Congress with a technical
amendment. Furthermore, the commenter found that the Congressional
Budget Office (CBO) score for the provision exceeds the estimated
savings that we calculated. The commenter provided an alternative
approach whereby CMS would determine the magnitude of the readmission
reduction using the 25th percentile of hospital performance on the
readmission measures rather than the current policy of comparing a
hospital's performance to the national average hospital performance.
Response: We received a similar comment in response to the FY 2013
IPPS/LTCH PPS proposed rule and responded to it in the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53393). We stated in the FY 2013 IPPS/LTCH
PPS final rule that we believe that the statute is prescriptive with
respect to the calculation of ``aggregate payments for excess
readmissions'' where the statute specifies that the ``aggregate
payments for excess readmissions'' is the sum for each condition of the
product of ``the operating DRG payment amount for such hospital for
such applicable period for such condition'' and ``the number of
admissions for such condition'' and ``the excess readmission ratio''
minus one. We believe that section 1886(q)(4)(A) of the Act requires us
to include all admissions for a condition in the calculation of
``aggregate payments for excess readmissions.'' We continue to believe
that we are implementing the provision as required by law.
Comment: Several commenters requested that CMS make additional
adjustments to the calculation of the readmissions payment adjustment
factor to account for differences in the readmissions payment
adjustment factors for hospitals that treat a high proportion of
patients of low socioeconomic status. The commenters also suggested
that CMS make an adjustment to the readmission payment adjustment
factors to account for a hospital's proportion of dual-eligible
patients. The commenters contended that dual-eligible status is a
better predictor of readmission rates because it reflects Medicare
beneficiaries, which is what the readmissions measures are based on.
Response: We appreciate the commenters' suggestions on modifying
the readmission payment adjustment factors to account for differences
in the socioeconomic status of patients treated by hospitals. As stated
earlier and in prior rules, we continue to believe that we need to
examine the relationship of patient socioeconomic status and
readmissions as it applies to the readmissions measures. As we have
stated above, the readmissions measures, as endorsed by the NQF, are
not risk-adjusted for socioeconomic status. Currently, the NQF does not
support risk-adjustments based on socioeconomic status, as the NQF
believes it can create different standards of quality for hospitals
that treat a higher proportion of patients with low socioeconomic
status. Risk-adjusting the readmissions measures for socioeconomic
status can obscure differences in the quality of health care.
Similarly, applying an adjustment to the readmissions payment
adjustment factors can also create different standards of quality for
hospitals based on the socioeconomic status of the patients treated.
Applying an adjustment to the readmissions payment adjustment factors
at this point to account for socioeconomic status rather than
determining whether a risk-adjustment for socioeconomic status would be
appropriate for the readmissions measures could appear as circumventing
the NQF's position on the application of a risk-adjustment for
socioeconomic status on the readmissions measures. We note that, to the
extent that dual-eligible patients or patients of low socioeconomic
status have higher readmission rates because they are sicker or have
more comorbidities, we already account for comorbidities in the risk-
adjustment for the excess readmission ratios. While we are not
incorporating any special adjustments for socioeconomic status in the
Hospital Readmissions Reduction Program at this time, we remain

[[Page 50674]]

concerned about the impact of this provision on hospitals that serve a
high proportion of low-income patients. We will continue to monitor the
issue of the relationship of a patient's socioeconomic status and a
hospital's readmission performance, and how it affects payments to
hospitals.
Comment: Several commenters requested various modifications to the
calculation of the readmissions payment adjustment factor. One
commenter suggested that CMS give credit to hospitals that have better
than average national mortality rates for AMI, HF, and PN because the
commenter believed it shows that hospitals are not sacrificing
performance on the mortality measures in order to improve performance
on readmission measures. Another commenter suggested that CMS reward
hospitals that reduce their readmissions rate each year. The commenter
suggested that CMS structure the Hospital Readmissions Reduction
Program like the Hospital VBP Program that rewards hospitals for their
performance. Another commenter suggested that readmissions that occur
later in the 30-day window should count less towards the calculation of
the readmission payment adjustment factor than readmissions that occur
earlier in the 30-day window. Another commenter suggested that a
hospital's readmissions payment adjustment be based on whether or not
the hospital can meet a fixed performance target. Another commenter
believed that CMS should exclude additional admissions because the
penalties are excessive, at $26,000 per excess readmission. The
commenter suggested that CMS exclude admissions for patients over the
age of 80 from the readmissions measures and payment adjustment
calculations, risk-adjust for patient-mix, or apply alternative
policies to obtain savings for the Medicare program.
Response: We appreciate the comments on various ways to change the
calculation of the readmissions payment adjustment factors that account
for improvement in readmissions or provide incentives for readmissions,
as opposed to a penalty for readmissions. We received similar comments
in response to the FY 2012 IPPS/LTCH PPS proposed rule that we
addressed in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53394). We
believe that the Hospital Readmissions Reduction Program is structured
to apply a payment reduction to hospitals with excess readmissions, as
measured by having worse performance on readmissions for certain
conditions compared to the average hospital. Section 1886(q)(4) of the
Act is prescriptive in the methodology to calculate the readmissions
payment adjustment factor such that we are limited to readmissions
payment adjustment factor being the higher of a ratio of a hospital's
excess payments for readmissions relative to their total payments for
all discharges or a floor defined in the statute. In addition, we
believe that the statute does not provide us with the authority to
reward hospitals for improvement, which is allowed under section
1886(p) of the Act for the Hospital VBP Program. However, we continue
to believe that if a hospital improves over time and those improvements
result in performance on readmissions on the three readmissions
measures that is better than the average hospital, the hospital would
not be subject to a payment reduction.
Comment: MedPAC submitted a comment that was similar to comments
from several other commenters, stating that the readmission penalty
formula is flawed where the aggregate penalties will remain constant
even if national readmission rates decline. MedPAC recommended
establishing a fixed performance target by which to compare hospitals
against in order to evaluate a hospital's performance on readmissions
and to determine the readmissions payment adjustment. MedPAC is
particularly concerned that the readmission penalties will increase
more significantly with the introduction of additional readmissions
measures in FY 2015 because the condition-specific penalty per excess
readmission is higher for conditions with low readmission rates, such
as for TKA/THA. Finally, MedPAC noted a correlation between readmission
rates and a hospital's share of low-income patients, and recommended
that CMS evaluate hospital readmission rates against a group of peer
hospitals with a similar share of low-income Medicare beneficiaries, as
measured by proportion of patients with Supplemental Security Income
(SSI), as a way to risk-adjust readmission penalties for socioeconomic
status. MedPAC acknowledged that the proposals to implement the
Hospital Readmissions Reduction Program are consistent with the statute
and that its recommendations were beyond the scope of the statute and
would require a legislative change by Congress.
Response: We appreciate the comments and suggestions made by MedPAC
and will be certain to explore in future rulemaking the payment
implications of adding additional measures to the Hospital Readmissions
Reduction Program for FY 2015. We also appreciate MedPAC's observations
and suggestions to refine the payment formula for the Hospital
Readmissions Reduction Program. We agree that their recommendations are
currently beyond the scope of the statute, particularly because we
believe that we are required by sections 1886(q)(4)(C) and
1886(q)(5)(A) of the Act to use readmissions measures that are endorsed
by the NQF, and the readmissions measures currently endorsed by the NQF
measure a hospital's performance on readmissions relative to the
average hospital at the national level.
We will evaluate MedPAC's comment, particularly with regards to
MedPAC's recommendation that we evaluate hospital readmission rates
against a group of peer hospitals with a similar share of low-income
Medicare beneficiaries, as measured by proportion of patients with
Supplemental Security Income (SSI), as a way to risk-adjust readmission
penalties for socioeconomic status. However, as stated earlier in this
final rule, our analyses also show that adding socioeconomic status to
the risk-adjustment has a negligible impact on hospitals' risk-
standardized rates. The risk-adjustment for clinical factors likely
captures much of the variation due to socioeconomic status, therefore
leading to a more modest impact of socioeconomic status on hospitals'
results than stakeholders may expect.
As we discussed earlier in this final rule, we remain concerned
about the impact of the Hospital Readmissions Reduction Program on
hospitals that serve a high proportion of low-income patients. We will
continue to assess various metrics of low-income patients and how to
identify hospitals that serve a large share of low-income patients. In
addition, we will continue to monitor the relationship of patient's
socioeconomic status and a hospital's performance on readmissions as it
applies to the readmissions measures and how this relationship impacts
payments to hospitals.
Comment: Some commenters suggested that CMS show the impact of the
Hospital Readmissions Reduction Program by DSH decile, as it had done
for the FY 2013 rule, in the interest of transparency.
Response: In response to these comments, we have provided a table
displaying the number of hospitals subject to the 2-percent maximum
reduction, the number of hospitals subject to a reduction between 1
percent and 2 percent, the number of hospitals subject to a reduction
less than 1 percent, and the number of hospitals that will not be
subject to any reduction

[[Page 50675]]

by DSH Patient Percentage (DPP) decile. The DPP is reported in the FY
2014 IPPS Final Rule Impact file. The analysis excludes new hospitals
as they would not receive a readmissions payment adjustment and would
not have a DPP. New providers were identified as providers in the March
2013 update of the provider specific file and not in the March 2012
update of the provider specific file (used in the FY 2013 IPPS/LTCH PPS
final rule). We will continue to explore different measures of
socioeconomic status, including the potential to evaluate the
relationship of a hospital's readmissions payment adjustment and their
uncompensated care costs as reported on their Worksheet S-10 of the
Medicare Hospital Cost Report.

Distribution of Hospitals Readmissions Adjustment Factor By DSH Patient Percentage (DPP)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Payment
Payment adjustment Any No
Number of adjustment up between -1 -2 percent adjustment readmissions
Decile hospitals to -1 percent percent and 2 floor (sum of col. adjustment
(inclusive) percent (not adjustment 2-4) factor
inclusive)
(1) (2) (3) (4) (5) (6)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Lowest DPP.............................................. 336 116 2 2 120 216
Second.................................................. 336 204 11 0 215 121
Third................................................... 336 202 16 1 219 117
Fourth.................................................. 336 205 19 1 225 111
Fifth................................................... 336 203 17 0 220 116
Sixth................................................... 336 219 14 3 236 100
Seventh................................................. 336 218 12 3 233 103
Eighth.................................................. 336 213 25 3 241 95
Ninth................................................... 336 240 16 3 259 77
Highest DPP............................................. 335 234 21 2 257 78
-----------------------------------------------------------------------------------------------
Total............................................... 3,359 2,054 153 18 2,225 1,134
--------------------------------------------------------------------------------------------------------------------------------------------------------

Comment: Some commenters requested that the inpatient claims denied
by the CMS Recovery Audit Contractors (RACs) not be included in the
calculation of the readmissions payment adjustment or readmissions
measures, as those claims were not considered as inpatient for payment
purposes.
Response: As discussed earlier in this final rule, MedPAR claims
data is our data source to calculate readmissions payment adjustment
factors, specifically the excess payments for readmissions and payment
for all discharges. We are finalizing the policy to use MedPAR data for
discharges from July 1, 2009 through June 30, 2012, and we are
finalizing the policy to use the March 2010 update of the FY 2009
MedPAR file, the March 2011 update of the FY 2010 MedPAR file, the
March 2012 update of the FY 2011 MedPAR, and the March 2013 update of
the FY 2012 MedPAR file to identify the discharges occurring from July
1, 2009 through June 30, 2012. In addition, the Standard Analytic File
is the data source used to calculate the excess readmission ratios. We
use the June 2010 update of the 2009 SAF file, the June 2011 update of
the 2010 file, the June 2012 update of the 2011 file, and the September
2012 update of the 2012 file. As discussed in the FY 2013 IPPS/LTCH PPS
final rule (77 FR 53390), the RACs have up to 3 years to review claims
to determine whether a claim was inappropriately billed as inpatient
when it should have been an outpatient claim. If a claim is denied as
an inpatient stay, the claim is adjusted through the standard Medicare
claims processing systems, going through the CWF, SAF and MedPAR.
However, given the timing of the RAC audits and the updates of the SAF
and MedPAR files used to calculate the readmissions measures and
readmissions payment adjustment factors, it is not certain that all
denied claims will be reflected in our claims files at the time of our
calculations. However, we continue to believe that using these updates
of the MedPAR and SAF files is consistent with IPPS ratesetting and
allows for transparency for the public to obtain this dataset for
replication. Furthermore, inpatient stays that are denied payment under
Medicare Part A remain classified as inpatient stays, and can be billed
to Medicare Part B as an Medicare Part B inpatient stay. These
inpatient stays that are denied payment under Medicare Part A will
typically continue to count as a qualifying inpatient stay for other
payment purposes such as qualifying for SNF benefits and Medicare DSH
patient days. Therefore, we believe that it is appropriate to include
these admissions in the Hospital Readmissions Reduction Program.
After consideration of the public comments we received, we are
finalizing the proposed methodology to calculate the readmissions
payment adjustment factors, including our methodology to apply the
trims to the admissions used to calculate excess payments for
readmissions discussed earlier.

Formulas To Calculate the Readmission Adjustment Factor
------------------------------------------------------------------------

-------------------------------------------------------------------------
Aggregate payments for excess readmissions = [sum of base operating DRG
payments for AMI x (Excess Readmission Ratio for AMI-1)] + [sum of base
operating DRG payments for HF x (Excess Readmission Ratio for HF-1)]
+[sum of base operating DRG payments for PN x (Excess Readmission Ratio
for PN-1)].

Aggregate payments for all discharges = sum of base operating DRG
payments for all discharges.

Ratio = 1-(Aggregate payments for excess readmissions/Aggregate payments
for all discharges).

[[Page 50676]]

Readmissions Adjustment Factor for FY 2014 is the higher of the ratio or
0.9800.

*Based on claims data from July 1, 2009 to June 30, 2012 for FY 2014.
------------------------------------------------------------------------

Comment: Some commenters provided suggestions regarding waivers for
hospitals located in areas that experience disasters or other
extraordinary circumstances. One commenter suggested that CMS establish
a formal waiver process for disaster or other extraordinary
circumstances. Another commenter suggested that CMS suppress reporting
readmission rates for the last quarter of 2012 and the first quarter of
2013 pending analysis of potential bias in readmission rates due to
Hurricane Sandy.
Response: We appreciate the suggestions to establish a potential
exception process from the Hospital Readmissions Reduction Program for
hospitals located in areas that experience disasters or other
extraordinary circumstances. We did not make any proposals related to a
waiver process for the Hospital Readmissions Reduction Program in the
proposed rule. Therefore, these comments are outside the scope of the
provisions of the proposed rule. There are several policy and
operational considerations in developing an exception process for
extraordinary circumstances (such as natural disasters) for the
Hospital Readmissions Reduction Program. If we consider implementing an
exception application and approval process for hospitals located in
areas that experience disasters or other extraordinary circumstances,
we will propose that process through notice-and-comment rulemaking.
h. Clarification of Reporting Hospital-Specific Information, Including
Opportunity To Review and Submit Corrections
In the FY 2013 IPPS/LTCH PPS final rule, we finalized our policy
for the public reporting of the information for this program as well as
providing hospitals with an opportunity to review and submit
corrections to the information prior to public reporting. For FY 2014,
we did not propose changes to the reporting, review, and submittal of
corrections policy and the regulatory text that we finalized in the FY
2013 IPPS/LTCH final rule (77 FR 53399 through 53401). However, we wish
to clarify that requests to incorporate claims previously billed under
a different CMS Certification Number (CCN) by recently acquired
entities into calculations for a particular CCN will not be considered.
This is because the particular CCN was not responsible for the patients
under the other CCN prior to the hospital merger at the time of
service.
Comment: One commenter suggested that CMS make all data used in
measure calculations available so hospitals can replicate readmissions
and perform an independent analysis.
Response: In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53401), we
finalized the policies of providing applicable hospitals with: ``(1) a
period of 30 days to review and submit corrections for their excess
readmission ratios for the Hospital Readmissions Reduction Program; and
(2) confidential reports and accompanying confidential discharge-level
information (this includes the excess readmission ratios, the risk-
factors for the discharges that factor into the calculation of the
excess readmission ratio, as well as information about the readmissions
associated with these discharges.''
After consideration of the public comments received, for the review
and correction process, we are finalizing additional clarification on
what constitutes a correction for the Hospital Readmissions Reduction
Program. Specifically, requests to incorporate claims previously billed
under a different CMS Certification Number (CCN) by recently acquired
entities into calculations for a particular CCN shall not be considered
a correction under the Hospital Readmissions Reduction Program.

H. Hospital Value-Based Purchasing (VBP) Program

1. Statutory Background
Section 1886(o) of the Act, as added by section 3001(a)(1) of the
Affordable Care Act, requires the Secretary to establish a hospital
value-based purchasing program (the Hospital Value-Based Purchasing
(VBP) Program) under which value-based incentive payments are made in a
fiscal year to hospitals that meet performance standards established
for a performance period for such fiscal year. Both the performance
standards and the performance period for a fiscal year are to be
established by the Secretary.
Section 1886(o)(1)(B) of the Act states that the Hospital VBP
Program applies to payments for hospital discharges occurring on or
after October 1, 2012. In accordance with section 1886(o)(6)(A) of the
Act, we are required to make value-based incentive payments under the
Hospital VBP Program to hospitals that meet or exceed performance
standards for a performance period for a fiscal year. As further
required by section 1886(o)(6)(C)(ii)(I) of the Act, we base each
hospital's value-based payment percentage on the hospital's Total
Performance Score (TPS) for a specified performance period. In
accordance with section 1886(o)(7) of the Act, the total amount
available for value-based incentive payments for a fiscal year will be
equal to the total amount of the payment reductions for all
participating hospitals for such fiscal year, as estimated by the
Secretary. For FY 2013, the available funding pool was equal to 1.00
percent of the base-operating DRG payments to all participating
hospitals, as estimated by the Secretary, and the size of the
applicable percentage will increase to 1.25 percent for FY 2014, 1.50
percent for FY 2015, 1.75 percent for FY 2016, and 2.0 percent for FY
2017 and successive fiscal years.
Section 1886(o)(1)(C) of the Act generally defines the term
``hospital'' for purposes of the Hospital VBP Program as a subsection
(d) hospital (as that term is defined in section 1886(d)(1)(B) of the
Act), but excludes from the definition of the term ``hospital,'' with
respect to a fiscal year: (1) A hospital that is subject to the payment
reduction under section 1886(b)(3)(B)(viii)(I) of the Act (the Hospital
IQR Program) for such fiscal year; (2) a hospital for which, during the
performance period for the fiscal year, the Secretary has cited
deficiencies that pose immediate jeopardy to the health or safety of
patients; and (3) a hospital for which there are not a minimum number
(as determined by the Secretary) of measures that apply to the hospital
for the performance period for the fiscal year involved, or for which
there are not a minimum number (as determined by the Secretary) of
cases for the measures that apply to the hospital for the performance
period for such fiscal year.
Comment: Several commenters opposed the increased reduction to the
base operating DRG payment amount for FY 2014 because they believed
that the measures under the Hospital VBP Program were not adequately
risk-adjusted.

[[Page 50677]]

Response: As noted above, the 1.25 percent reduction to base
operating DRG payment amounts for FY 2014 is required by statute. It is
a part of the gradual increase to 2.0 percent by 2017 in the applicable
percent used to fund value-based incentive payments under the Hospital
VBP Program.
Comment: One commenter asked whether CMS could combine all CMS
incentive payment program adjustments that affect payment to subsection
(d) hospitals under the IPPS into one aggregate annual percent update
(APU) adjustment.
Response: While we appreciate the complexity of the multiple
payment adjustments that are applicable to hospitals under various
incentive payment programs, we are unable to combine the Hospital IQR
Program, Hospital VBP Program, HAC Reduction Program, and Hospital
Readmissions Reduction Program adjustments into one aggregate
adjustment to the APU, because by law, they affect different portions
of the Medicare payment made to subsection (d) hospitals under the
IPPS. The Hospital IQR Program adjustment is made to the applicable
percentage increase that applies to the standardized amount (referred
to by the commenters as the APU), the HAC adjustment is a percentage
reduction to the amount otherwise payable under the IPPS, and the
Hospital VBP and Hospital Readmissions Reduction Programs' adjustments
are made to the base operating DRG payment amount. We also believe that
it is useful for hospitals to be able to distinguish the effect of each
program, so that they can focus their resources for improvement.
2. Overview of the FY 2013 Hospital VBP Program
In April 2011, we issued the Hospital Inpatient VBP Program final
rule to implement section 1886(o) of the Act (76 FR 26490 through
26547). As described more fully in that final rule, for the FY 2013
Hospital VBP Program, we adopted 13 measures, including 12 clinical
process of care measures and 8 dimensions from the Hospital Consumer
Assessment of Healthcare Providers and Systems Survey (HCAHPS) measure
that we categorized into two domains (76 FR 26495 through 26511). We
grouped the 12 clinical process-of-care measures into a clinical
process of care domain, and placed the HCAHPS survey measure into a
patient experience of care domain. We adopted a 3-quarter performance
period from July 1, 2011 through March 31, 2012 for these measures (76
FR 26494 through 26495), and performance standards on which hospital
performance would be evaluated. To determine whether a hospital meets
or exceeds the performance standards for these measures, we assessed
each hospital's achievement during this specified performance period,
as well as its improvement during this period as compared with its
performance during a 3-quarter baseline period from July 1, 2009
through March 31, 2010 (76 FR 26493 through 26495).
We then calculated a TPS for each hospital by combining the greater
of the hospital's achievement or improvement points for each measure to
determine a score for each domain, weighting each domain score (for the
FY 2013 Hospital VBP Program, the weights were clinical process of care
= 70 percent, patient experience of care = 30 percent), and adding
together the weighted domain scores. We converted each hospital's TPS
into a value-based incentive payment percentage using a linear exchange
function and then converted the value-based incentive payment
percentage into a per discharge value-based incentive payment amount.
We incorporated the reduction to each hospital's base operating DRG
payment amount for each discharge, as well as the value-based incentive
payment amounts that the hospital earned as a result of its performance
(if applicable) into our claims processing systems in January 2013, and
these adjustments applied to FY 2013 discharges.
We finalized the Hospital VBP Program's payment adjustment
calculation methodology, including codifying certain definitions
related to the program, in the FY 2013 IPPS/LTCH PPS final rule (77 FR
53569 through 53571). We also finalized our methodology for estimating
the total amount available for value-based incentive payments in a
fiscal year under the Hospital VBP Program (77 FR 53571 through 53573),
our methodology to calculate the value-based incentive payment
adjustment factor (77 FR 53573 through 53576), the delayed application
of the base-operating DRG payment amount reduction for FY 2013
discharges until incorporation of the value-based incentive payment
adjustments into our claims processing system (77 FR 53577), and our
process for reducing the base-operating DRG payment amount and applying
the value-based incentive payment adjustment for FY 2013 (77 FR 53577
through 53578).
We refer readers to the Hospital Inpatient VBP Program final rule
(76 FR 26490 through 26547), the CY 2012 OPPS/ASC final rule with
comment period (76 FR 74527 through 74547) and the FY 2013 IPPS/LTCH
PPS final rule (77 FR 53567 through 53614) for further explanation of
the details of the FY 2013 Hospital VBP Program and our other finalized
policies related to future fiscal years.
We received a number of general comments on the proposed rule
related to the Hospital VBP Program.
Comment: Commenters requested that CMS begin the Hospital VBP
demonstration programs authorized by the Affordable Care Act for small
hospitals and critical access hospitals as soon as possible.
Response: We thank commenters for this input. We intend to begin
those demonstrations as soon as is feasible within our planning and
resource constraints.
Comment: Commenters were concerned about the level of risk-
adjustment in use under the Hospital VBP Program, arguing that
adjusting only for patients' age, illness severity, and for geographic
payment adjustments is insufficient, particularly for urban and safety-
net hospitals.
Response: We disagree. We believe that the Hospital VBP Program has
adopted measures that incorporate risk-adjustment where appropriate,
and we further believe that the risk-adjusted measures we have adopted
for the Hospital VBP Program properly take into account hospital
characteristics that impact the delivery of high-quality patient care.
Comment: Commenters requested that CMS post Hospital VBP Program
performance information on the Hospital Compare Web site as soon as
possible. Commenters noted, for example, that CMS has not yet posted
any quantitative values for the PSI-90 measure on the Web site, even
though the measure has been finalized for the FY 2015 Hospital VBP
Program and proposed for inclusion in the HAC Reduction Program.
Response: In addition to the PSI-90 performance data that we have
published on the Hospital Compare Web site in the past, we have also
posted PSI-90 quantitative data on our data.medicare.gov Web site
(https://data.medicare.gov/data/hospital-compare) as part of the
Hospital IQR Program's public reporting display. We note that the July
2013 update for this measure was suppressed on this Web site, but we
anticipate updating the quantitative data later in 2013. We intend to
continue posting performance data for each fiscal year on the Web site,
including scoring information on PSI-90 for the FY 2015 Hospital VBP
Program, in the future.

[[Page 50678]]

3. FY 2014 Payment Details
Section 1886(o)(7)(B) of the Act instructs the Secretary to reduce
the base operating DRG payment amount for a hospital for each discharge
in a fiscal year by an applicable percent. Under section 1886(o)(7)(A)
of the Act, the sum total of these reductions in a fiscal year must
equal the total amount available for value-based incentive payments for
all eligible hospitals for the fiscal year, as estimated by the
Secretary. We finalized details on how we would implement these
provisions in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53571 through
53573), and refer readers to that final rule for more details.
Under section 1886(o)(7)(c)(ii) of the Act, the applicable percent
for the FY 2014 Hospital VBP Program is 1.25 percent. In the FY 2014
IPPS/LTCH PPS proposed rule (78 FR 27607), we estimated that the total
amount available for value-based incentive payments for FY 2014 is $1.1
billion, based on the December 2012 update of the FY 2012 MedPAR file.
We stated that we intended to update this estimate for the final rule,
using the March 2013 update of the FY 2012 MedPAR file. Based on the
March 2013 update of the FY 2012 MedPAR file, we continue to estimate
that the amount available for value-based incentive payments for FY
2014 is $1.1 billion.
As finalized in the FY 2013 IPPS/LTCH PPS final rule, as referenced
above, we will utilize a linear exchange function to translate this
estimated amount available into a value-based incentive payment
percentage for each hospital, based on its TPS. We will then calculate
a value-based incentive payment adjustment factor which will be applied
to the base operating DRG payment amount for each discharge occurring
in FY 2014, on a per-claim basis. We published proxy value-based
incentive payment adjustment factors in Table 16 of the FY 2014 IPPS/
LTCH PPS proposed rule (which is available on the CMS Web site). The
proxy factors are based on the TPSs from the FY 2013 Hospital VBP
Program. These FY 2013 performance scores are the most recently
available performance scores that hospitals have been given the
opportunity to review and correct. We stated that the slope of the
linear exchange function used to calculate those proxy value-based
incentive payment adjustment factors was 1.8362446088. This slope,
along with the estimated amount available for value-based incentive
payments, was also published in Table 16. As we indicated in the FY
2014 IPPS/LTCH PPS proposed rule (78 FR 27607), we are updating this
table, as Table 16A, in this final rule (which is available on the CMS
Web site) to reflect changes based on the March 2013 update to the FY
2012 MedPAR file. The slope of the linear exchange function used to
calculate those updated proxy value-based incentive payment adjustment
factors is 1.8363321306. The updated proxy value-based incentive
payment adjustment factors for FY 2014 continue to be based on historic
FY 2013 Program TPSs because hospitals will not have been given the
opportunity to review and correct their actual TPSs for the FY 2014
Hospital VBP Program until after the final rule is published. After
hospitals have been given an opportunity to review and correct their
actual TPSs for FY 2014, we will add a new table, Table 16B (which will
be available on the CMS Web site) to display the actual value-based
incentive payment adjustment factors, exchange function slope, and
estimated amount available for the FY 2014 Hospital VBP Program. We
expect that Table 16B will be posted on the CMS Web site in October
2013.
4. FY 2014 Hospital VBP Program Measures
For FY 2014, we adopted 17 measures for the Hospital VBP Program,
including the 12 clinical process of care measures and the HCAHPS
measure that we adopted for the FY 2013 Hospital VBP Program, 1 new
clinical process of care measure (SCIP-Inf-9: Postoperative Urinary
Catheter Removal on Postoperative Day 1 or 2), and 3 mortality outcome
measures (Acute Myocardial Infarction (AMI) 30-Day Mortality Rate,
Heart Failure (HF) 30-Day Mortality Rate, Pneumonia (PN) 30-Day
Mortality Rate). The clinical process of care, HCAHPS, and mortality
measures are discussed in more detail in the Hospital Inpatient VBP
Program final rule (76 FR 26510 through 26511) and SCIP-Inf-9 is
discussed in more detail in the CY 2012 OPPS/ASC final rule with
comment period (76 FR 74530).
We previously adopted 8 HAC measures, 2 AHRQ composite measures,
and a Medicare Spending per Beneficiary (MSPB) measure for the FY 2014
Hospital VBP Program, then suspended the effective dates of these
measures, with the result that these measures were not included in the
FY 2014 Hospital VBP Program (76 FR 74528 through 74530). However, as
discussed further below, we finalized adoption of a MSPB measure and an
AHRQ composite measure for the FY 2015 Hospital VBP Program in the FY
2013 IPPS/LTCH PPS final rule (77 FR 53582 through 53592).
Set out below is a complete list of the measures we adopted for the
FY 2014 Hospital VBP Program:

Finalized Quality Measures for the FY 2014 Hospital VBP Program
------------------------------------------------------------------------
Measure ID Measure description
------------------------------------------------------------------------
Clinical Process of Care Measures
------------------------------------------------------------------------
Acute myocardial infarction:
AMI-7a.................................. Fibrinolytic Therapy
Received Within 30
Minutes of Hospital
Arrival.
AMI-8a.................................. Primary PCI Received
Within 90 Minutes of
Hospital Arrival.
Heart Failure:
HF-1.................................... Discharge Instructions.
Pneumonia:
PN-3b................................... Blood Cultures Performed
in the Emergency
Department Prior to
Initial Antibiotic
Received in Hospital.
PN-6.................................... Initial Antibiotic
Selection for CAP in
Immunocompetent Patient.
Healthcare-associated infections:
SCIP-Inf-1.............................. Prophylactic Antibiotic
Received Within One Hour
Prior to Surgical
Incision.
SCIP-Inf-2.............................. Prophylactic Antibiotic
Selection for Surgical
Patients.
SCIP-Inf-3.............................. Prophylactic Antibiotics
Discontinued Within 24
Hours After Surgery End
Time.
SCIP-Inf-4.............................. Cardiac Surgery Patients
with Controlled 6AM
Postoperative Serum
Glucose.
SCIP-Inf-9.............................. Postoperative Urinary
Catheter Removal on Post
Operative Day 1 or 2.
Surgeries:

[[Page 50679]]

SCIP-Card-2............................. Surgery Patients on a Beta
Blocker Prior to Arrival
That Received a Beta
Blocker During the
Perioperative Period.
SCIP-VTE-1.............................. Surgery Patients with
Recommended Venous
Thromboembolism
Prophylaxis Ordered.
SCIP-VTE-2.............................. Surgery Patients Who
Received Appropriate
Venous Thromboembolism
Prophylaxis Within 24
Hours Prior to Surgery to
24 Hours After Surgery.
------------------------------------------------------------------------
Patient Experience of Care Measures
------------------------------------------------------------------------
HCAHPS...................................... Hospital Consumer
Assessment of Healthcare
Providers and Systems
Survey*.
------------------------------------------------------------------------
Outcome Measures
------------------------------------------------------------------------
MORT-30-AMI................................. Acute Myocardial
Infarction (AMI) 30-Day
Mortality Rate.
MORT-30-HF.................................. Heart Failure (HF) 30-Day
Mortality Rate.
MORT-30 PN.................................. Pneumonia (PN) 30-Day
Mortality Rate.
------------------------------------------------------------------------
* The finalized dimensions of the HCAHPS survey for use in the FY 2014
Hospital VBP Program are: Communication with Nurses, Communication
with Doctors, Responsiveness of Hospital Staff, Pain Management,
Communication about Medicines, Cleanliness and Quietness of Hospital
Environment, Discharge Information and Overall Rating of Hospital.
These are the same dimensions that we adopted for the FY 2013 Hospital
VBP Program.

5. FY 2015 Hospital VBP Program Measures
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53582 through
53592), we adopted 12 Clinical Process of Care measures, one Patient
Experience of Care measure in the form of the HCAHPS survey, 5 Outcome
measures, including three 30-day mortality measures, the AHRQ PSI
composite measure, and the CLABSI measure, and one Efficiency measure
for the FY 2015 Hospital VBP Program.
We did not adopt two clinical process measures (SCIP-Inf-10 and
AMI-10) that we determined were ``topped-out'' according to our
criteria finalized in the Hospital Inpatient VBP Program final rule (76
FR 26496 through 26497). We also did not adopt SCIP-VTE-1 for the FY
2015 Hospital VBP Program because we believed that the measure is very
similar to another measure we have adopted for the program (SCIP-VTE-2)
and, in our view, is not as closely linked to better surgical outcomes
because it assesses the ordering of VTE prophylaxis, rather than the
patient's actual receipt of such prophylaxis within 24 hours of
surgery. We also noted that, during a recent maintenance review of
SCIP- VTE-1, the National Quality Forum (NQF) concluded that it would
no longer endorse this measure.
Set out below is a complete list of the measures we adopted for the
FY 2015 Hospital VBP Program:

Finalized Quality Measures for FY 2015 Hospital VBP Program
------------------------------------------------------------------------
Measure ID Measure description
------------------------------------------------------------------------
Clinical Process of Care Measures
------------------------------------------------------------------------
AMI-7a...................................... Fibrinolytic Therapy
Received Within 30
Minutes of Hospital
Arrival.
AMI-8a...................................... Primary PCI Received
Within 90 Minutes of
Hospital Arrival.
HF-1........................................ Discharge Instructions.
PN-3b....................................... Blood Cultures Performed
in the Emergency
Department Prior to
Initial Antibiotic
Received in Hospital.
PN-6........................................ Initial Antibiotic
Selection for CAP in
Immunocompetent Patient.
SCIP-Inf-1.................................. Prophylactic Antibiotic
Received Within One Hour
Prior to Surgical
Incision.
SCIP-Inf-2.................................. Prophylactic Antibiotic
Selection for Surgical
Patients.
SCIP-Inf-3.................................. Prophylactic Antibiotics
Discontinued Within 24
Hours After Surgery End
Time.
SCIP-Inf-4.................................. Cardiac Surgery Patients
with Controlled 6AM
Postoperative Serum
Glucose.
SCIP-Inf-9.................................. Urinary Catheter Removed
on Postoperative Day 1 or
Postoperative Day 2.
SCIP-Card-2................................. Surgery Patients on Beta-
Blocker Therapy Prior to
Arrival Who Received a
Beta-Blocker During the
Perioperative Period.
SCIP-VTE-2.................................. Surgery Patients Who
Received Appropriate
Venous Thromboembolism
Prophylaxes Within 24
Hours Prior to Surgery to
24 Hours After Surgery.
------------------------------------------------------------------------
Patient Experience Measures
------------------------------------------------------------------------
HCAHPS*..................................... Hospital Consumer
Assessment of Healthcare
Providers and Systems
Survey.
------------------------------------------------------------------------
Outcome Measures
------------------------------------------------------------------------
AHRQ PSI composite.......................... Complication/patient
safety for selected
indicators (composite).
CLABSI...................................... Central Line-Associated
Blood Stream Infection.
MORT-30-AMI................................. Acute Myocardial
Infarction (AMI) 30-day
mortality rate.
MORT-30-HF.................................. Heart Failure (HF) 30-day
mortality rate.
MORT-30-PN.................................. Pneumonia (PN) 30-day
mortality rate.
------------------------------------------------------------------------

[[Page 50680]]

Efficiency Measures
------------------------------------------------------------------------
MSPB-1...................................... Medicare Spending per
Beneficiary.
------------------------------------------------------------------------
* Dimensions of the HCAHPS survey for use in the FY 2015 Hospital VBP
Program are: Communication with Nurses, Communication with Doctors,
Responsiveness of Hospital Staff, Pain Management, Communication about
Medicines, Cleanliness and Quietness of Hospital Environment,
Discharge Information and Overall Rating of Hospital. These are the
same dimensions of the HCAHPS survey that have been finalized for
prior Hospital VBP Program years.

6. FY 2016 Hospital VBP Program Measures
a. Measures Previously Adopted and Removal of AMI-8a, PN-3b, and HF-1
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53592 through
53593), we adopted for the FY 2016 Hospital VBP Program the three 30-
day mortality measures that we had finalized for the Hospital VBP
Program for FYs 2014 and 2015. We also adopted the AHRQ patient safety
composite (PSI-90) for the Hospital VBP Program for FY 2016. We adopted
those measures at that time in order to adopt a longer performance
period and collect more data for performance scoring than would be
possible if we waited to make those proposals until this proposed rule.
We also adopted those measures at that time because we recognized that
under section 1886(o)(3)(C) of the Act, we must establish and announce
performance standards not later than 60 days prior to the beginning of
the performance period for the fiscal year involved. We also
automatically readopted the remaining FY 2015 measures (with the
exception of the CLABSI measure), in accordance with our policy of
automatic readoption of measures (77 FR 53592).
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27609), we
proposed to remove three measures from the measure set previously
adopted that we have discussed above. First, we analyzed the clinical
process of care measures for ``topped out'' status and concluded that
AMI-8a: Primary PCI Received within 90 Minutes of Hospital Arrival is
``topped-out.'' Our methodology for evaluating whether a measure is
topped-out focuses on two criteria: (1) National measure data show
statistically indistinguishable performance levels at the 75th and 90th
percentiles; and (2) national measure data show a truncated coefficient
of variation (TCV) less than 0.10. We believe that topped-out measures
should not be included in the Hospital VBP Program because measuring
hospital performance on those measures has no meaningful effect on a
hospital's TPS. Therefore, in the FY 2014 IPPS/LTCH PPS proposed rule
we proposed to remove AMI-8a from the FY 2016 Hospital VBP Program
measure set.
We welcomed public comments on our proposal to remove AMI-8a from
the FY 2016 Hospital VBP Program measure set and on whether any other
existing Hospital VBP Program measures are topped-out and, therefore,
should be removed from the previously adopted FY 2016 measure set. We
stated our intent to update our topped-out analysis using the most
recently available data and to announce in the FY 2014 IPPS/LTCH PPS
final rule whether any of the other FY 2016 measures will be removed
due to topped-out status.
We completed an analysis of the proposed and readopted Clinical
Process of Care measures based on CY 2012 data. We have concluded that,
in addition to AMI-8a discussed above, SCIP-Inf-1 now meets our
criteria for being ``topped out,'' and we will therefore remove the
measure for FY 2016 and subsequent years.
Second, we proposed to remove PN-3b, Blood Cultures Performed in
the Emergency Department Prior to Initial Antibiotic Received in
Hospital, and HF-1, Discharge Instructions, from the FY 2016 Hospital
VBP Program. Both PN-3b and HF-1 are no longer endorsed by the NQF, and
we noted that in its 2013 Pre-Rulemaking Report, the Measure
Applications Partnership (MAP) did not recommend those measures for use
in the Hospital VBP Program.
As of February 28, 2012, the NQF Pneumonia Thoracic CT Work Group
of the Pulmonary and Critical Care Endorsement Maintenance Project
believed there was insufficient evidence that performing blood cultures
prior to initiation of antibiotics led to better outcomes. The
workgroup also cited significant issues with documentation of the
timing of the blood cultures with respect to the initiation of the
antibiotics. Documentation is often done retrospectively providing
opportunities for data entry errors. The issue is compounded with EHRs
as data entry is electronically time-stamped and may not accurately
indicate when blood cultures were drawn or antibiotics given. Although
the measure is currently chart-abstracted, the data might be abstracted
from an EHR, instead of from a paper record.
We noted further that NQF reviewed HF-1 during the summer of 2012.
The NQF Steering Committee determined that there was insufficient
evidence to link the HF-1 measure of discharge instructions with better
outcomes. The committee noted that discharge instructions, as measured
by HF-1, did not cover several important issues, including patient
understanding of the instructions and their appropriateness for
patients' education and literacy levels.
Therefore, we stated that we do not believe that these measures
appropriately capture relevant inpatient quality information for
purposes of the Hospital VBP Program, and, as indicated above, we
proposed to remove them from the FY 2016 Hospital VBP Program.
We welcomed public comments on our proposals on removing measures
from the FY 2016 Hospital VBP Program.
Comment: Many commenters supported the proposal to remove AMI-8a,
HF-1, and PN-3b from the FY 2016 Hospital VBP Program.
Response: We thank commenters for their support.
Comment: Some commenters expressed concern about the proposals not
to adopt ``topped out'' measures, arguing that CMS had not proposed to
monitor performance on these measures to ensure that it does not
decrease. Other commenters argued that CMS should not remove AMI-8a
from the measure set due to its importance to quality improvement
efforts and its adoption by The Joint Commission.
Response: We appreciate commenters' concerns. However, as we
indicated in the Hospital Inpatient VBP Program final rule (76 FR
26496), we believe that measuring hospital performance on topped-out
measures would have no meaningful effect on a hospital's total
performance score. We therefore do not

[[Page 50681]]

believe it is appropriate to adopt Clinical Process of Care measures
for the Hospital VBP Program when they are ``topped out'' according to
our finalized criteria. However, we intend to continue to work with
quality measurement stakeholders to ensure that performance on measure
topics covered by ``topped out'' measures does not drop significantly.
Comment: Some commenters supported the proposal to remove HF-1 from
the FY 2016 measure set, but expressed concern about the numerous heart
failure measures that are no longer included in the program. Commenters
urged CMS to work with stakeholders to develop and implement more heart
failure measures.
Response: We thank commenters for the suggestion, and intend to
continue working with stakeholders to develop robust quality measures,
particularly in areas of clinical need.
Comment: Some commenters expressed concerns about the proposal not
to adopt HF-1 for the FY 2016 Program. Commenters noted that the STK-8
measure requires similar discharge processes for the stroke patient
population, but was not proposed for removal. Commenters argued that
any lack of evidence linking hospital discharge processes to patient
outcomes should apply to both measures.
Response: We thank commenters for the input, but note that STK-8
has never been proposed or adopted for the Hospital VBP Program. As
discussed above, our proposal not to adopt HF-1 for FY 2016 is based in
part on NQF's review of the measure, which concluded that there is
insufficient evidence to link it with better outcomes. We will consider
any such reviews of STK-8 in rulemaking on the Hospital IQR Program.
Comment: Some commenters expressed specific support for the
proposal not to adopt HF-1 for the FY 2016 Hospital VBP Program.
Commenters suggested that CMS consider adopting a measure of post-
discharge appointments for heart failure patients, which commenters
noted will be submitted to NQF during its next call for cardiovascular
measures. Commenters further suggested that CMS consider additional
measures in this clinical area, including beta blocker therapy for left
ventricular systolic dysfunction and time to intravenous thrombolytic
therapy. One commenter also argued that diligence on the measure has
not improved outcomes for heart failure patients.
Response: We thank commenters for these suggestions. Under section
1886(o)(2)(A) of the Act, the Hospital VBP Program may only adopt
measures that have been specified under the Hospital IQR Program. We
will consider these measure topics in the future if they become
available to us under the Hospital VBP Program's statutory
requirements.
We did not receive any comments on our intention to update the
``topped-out'' analysis using the most recent data. After consideration
of the public comments we received, we are finalizing our proposal to
remove AMI-8a, HF-1, PN-3b, and SCIP-Inf-1 from the FY 2016 Hospital
VBP Program.
b. New Measures for the FY 2016 Hospital VBP Program
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27609 through
27611), we considered if we should adopt additional measures for the FY
2016 Hospital VBP Program. We considered what measures are eligible for
adoption based on the statutory requirements, including specification
under the Hospital IQR Program and posting dates on the Hospital
Compare Web site, as well as our priorities for quality improvement as
outlined in the National Quality Strategy, which is available for
download at https://www.healthcare.gov/news/reports/nationalqualitystrategy032011.pdf.
We stated that we believe the following measures meet the statutory
requirements for inclusion in the Hospital VBP Program. We also stated
that we believe that these measures represent important components of
quality improvement in the acute inpatient hospital setting.
Influenza Immunization (IMM-2, NQF 1659) is a chart-
abstracted prevention measure that addresses acute care hospitalized
inpatients age 6 months or older who were screened for seasonal
influenza immunization status and were vaccinated prior to discharge,
if indicated. We believe this measure is important to quality
improvement efforts because about 36,000 adults die and over 200,000
are hospitalized annually for flu-related causes. Older adults are more
vulnerable to influenza, and adults over age 65 comprise about 90
percent of deaths related to flu. Vaccinations can significantly reduce
the number of flu-related illnesses and deaths.
This measure was incorporated into the Hospital IQR Program for FY
2014 in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50211), and data
collection began with January 1, 2012 discharges. Measure data were
posted on Hospital Compare on December 13, 2012, and MAP supported its
inclusion in the Hospital VBP Program in its February 2013 report
(available at https://www.qualityforum.org/Publications/2013/02/MAP_
Pre-Rulemaking_Report__-February_2013.aspx), noting that it
addresses a high-impact condition not adequately addressed in the
program's current measure set. Therefore, we proposed to adopt IMM-2
into the Clinical Process of Care domain for the FY 2016 Hospital VBP
Program.
Comment: Numerous commenters urged CMS strongly to finalize the
proposal to adopt IMM-2, congratulating CMS on recognizing the value of
immunization measures. Commenters also suggested that CMS consider
other preventative measures, such as immunizations for diphtheria,
tetanus, and pertussis for patients during inpatient stays. Some
commenters suggested that the IMM-2 measures should be inclusive of all
influenza vaccinations available to patients and clinicians today.
Response: We thank commenters for their support. As described
above, we will consider new measures for the Hospital VBP Program as
they become available to us under the statutory requirements. We will
consider comments on the specific vaccinations that should count
towards the IMM-2 measure as we continue working with measure
developers to refine quality measures.
Comment: Some commenters opposed adoption of IMM-2, arguing that
many patients receive this immunization prior to hospital admission,
complicating its measurement by participating hospitals.
Response: The IMM-2 measure does not require that all patients be
immunized, but rather, that they ``are screened for seasonal influenza
immunization status and were vaccinated prior to discharge if
indicated.'' We believe that screening patients for appropriate
immunizations is an important component of care provided during acute
hospitalizations.
After consideration of the public comments we received, we are
finalizing our proposal to adopt IMM-2 for the FY 2016 Hospital VBP
Program.
Catheter-Associated Urinary Tract Infection (CAUTI, NQF
0138) is an HAI measure reported via CDC's National Healthcare
Safety Network (NHSN). This measure is important to quality improvement
efforts because the urinary tract is the most common site of HAIs,
accounting for more than 30 percent of infections reported by acute
care hospitals. Complications associated with CAUTI cause discomfort to
patients, prolonged hospital stays, increased costs, and mortality.
More

[[Page 50682]]

than 13,000 deaths each year are associated with UTIs.
This measure was finalized for the Hospital IQR Program in the FY
2012 IPPS/LTCH PPS final rule (76 FR 51617 through 51618), and data
collection began with January 1, 2012 discharges. Measure data were
posted on Hospital Compare on December 13, 2012, and MAP supported its
inclusion in the Hospital VBP Program in its February 2013 report,
noting that it addresses the National Quality Strategy (NQS) priorities
not adequately addressed in the program's current measure set.
Therefore, we proposed to adopt the NHSN CAUTI measure into the Outcome
domain for the FY 2016 Hospital VBP Program.
Surgical Site Infection (SSI, NQF 0753) is an HAI measure
reported via CDC's NHSN. As currently specified under the Hospital IQR
Program, the measure is restricted to colon procedures, including
incision, resection, or anastomosis of the large intestine, and large-
to-small and small-to-large bowel anastomosis, and abdominal
hysterectomy procedures, including those done by laparoscope. The
measure is reported separately on Hospital Compare for those two
surgery sites, and does not include rectal operations.
This measure was incorporated into the Hospital IQR Program in the
FY 2011 IPPS/LTCH PPS final rule (75 FR 50211), and data collection
began with January 1, 2012 discharges. Measure data were posted on
Hospital Compare on December 13, 2012, and MAP supported its inclusion
in the Hospital VBP Program in its February 2013 report, noting that it
addresses NQS priorities not adequately addressed in the program's
current measure set. The SSI measure was stratified by surgery site
when it was adopted for the Hospital IQR Program, and is both collected
and publicly reported as a stratified measure. However, because we
adopted SSI as one measure under the Hospital IQR Program, in the FY
2014 IPPS/LTCH PPS proposed rule (78 FR 27610), we proposed to score
the measure for purposes of the Hospital VBP Program as a weighted
average of the measure's strata by applicable cases per stratum. Under
this proposed scoring methodology, if a hospital meets the Hospital IQR
Program's threshold for public display of its SSI measure strata scores
during a Hospital VBP performance period--that is, at least one
predicted infection during the applicable time period--we will
calculate a weighted average of the measure's strata to score under the
Hospital VBP Program.
We stated our belief that this proposal enables us to score
participating hospitals on the underlying components of the SSI measure
fairly. We noted further that, for purposes of calculating performance
standards displayed subsequently, we would equally weight the SSI
measure's strata. We sought public comment on our proposed adoption of
this measure and its proposed scoring methodology under the Hospital
VBP Program.
We adopted the NHSN-based CLABSI measure in the FY 2013 IPPS/LTCH
PPS final rule (77 FR 53583), and refer readers to that regulation for
further discussion of the measure. We stated that we continue to
believe that the CLABSI measure is consistent with the Hospital VBP
Program's statutory requirement that we consider measures of HAIs for
the FY 2013 Hospital VBP Program's measure set. We also noted that the
measure was included in the HHS Action Plan to Prevent HAIs, which is
referenced in section 1886(o)(2)(B)(i)(I)(ee) of the Act.
In the FY 2013 IPPS/LTCH PPS final rule, we stated that we would
not automatically readopt CLABSI for the FY 2016 Program (77 FR 53592),
although we stated our intent to adopt the measure in the future. We
did not automatically readopt CLABSI because we understood that CDC was
planning to submit a revised version of this measure to NQF for
endorsement, and that there may have been substantive changes to the
measure associated with reliability adjustment to the standardized
infection ratio.
The reliability-adjusted standardized infection ratio (SIR) is an
outcome measure that summarizes the healthcare-associated infection
experience by type of infection (for example, central-line associated
bloodstream infection, surgical site infection) for individual
hospitals. The reliability-adjusted measure enables more meaningful
statistical differentiation between hospitals by accounting for
differences in patient case-mix, exposures to medical devices or
procedures (for example, central line-days, surgical procedure volume),
and unmeasured factors that are not reflected in the unadjusted SIR and
that cause variation in outcomes between hospitals. Accounting for
these sources of variability enables better measure discrimination
between hospitals and leads to more reliable quality measurements.
We stated that we are aware the CDC has submitted the reliability-
adjusted version of the CLABSI measure to the NQF for endorsement. We
noted further that, in its February 2013 report, MAP recommended
adoption of the reliability-adjusted CLABSI measure ``contingent on NQF
endorsement,'' and noted that the ``most recent NQF-endorsed version
should be applied.'' We stated our belief that our proposal to adopt
the current CLABSI measure is consistent with this recommendation, and
we stated our intent to consider adopting the reliability-adjusted
CLABSI measure in future rulemaking.
We stated our intent to monitor CDC's activity on this measure,
particularly as it moves toward reliability adjustment, and intent to
adopt the revised measure in future program years. However, in the
absence of NQF endorsement of the reliability-adjusted measure, unless
and until the Hospital IQR Program adopts the reliability adjustments,
in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27610 through 27611),
we proposed to adopt the CLABSI measure as it currently exists into the
Outcome domain for the FY 2016 Hospital VBP Program.
Comment: Some commenters noted that NHSN has initiated a CAUTI
review and revision process, and requested that CMS reconsider its
proposal to adopt the measure until that process has been completed.
Response: We do not agree with the commenters' suggestion. We
intend to monitor any changes made to the CAUTI measure, or any other
measures that we have proposed for the program. However, we believe
strongly that hospitals must be encouraged through the Hospital VBP
Program to minimize infection events that present significant health
risks to patients. We also believe that the CAUTI measure provides
information critical to this quality improvement effort by tracking
infection events.
Comment: Commenters requested that CMS clarify whether or not it
will include CAUTI's expansion into non-ICU settings in the Hospital
VBP Program.
Response: We may consider adopting the expanded CAUTI measure in
future rulemaking. If we decide to adopt the expanded measure, we will
do so in accordance with the Hospital VBP Program's statutory
requirements.
Comment: Some commenters requested that CMS consider revising the
CAUTI measure before adopting it for the Hospital VBP Program, and
argued that the measure should exclude certain patients and should
allow doctors some discretion in catheter removal in order to avoid
complications. Commenters also argued that CAUTI has not been subject
to sufficient data validation and that the

[[Page 50683]]

measure has undergone definition changes effective January 1, 2013.
Response: We disagree. As described above, we believe that CAUTI is
an important measure for patient safety and quality improvement
efforts. CAUTI addresses an NQS priority, and has been recommended for
adoption into the Hospital VBP Program by the MAP. Further, the
Hospital VBP Program awards value-based incentive payments based on
data submitted through the Hospital IQR Program. The Hospital VBP
Program is therefore dependent on Hospital IQR data, and unless and
until the CAUTI measure is revised under Hospital IQR, we do not
believe it to be appropriate to revise it under the Hospital VBP
Program. We also believe that the CAUTI measure, as currently
structured, is sufficiently reliable for scoring purposes under the
Hospital VBP Program.
Comment: Some commenters expressed support for the continued
adoption of the NHSN CLABSI measure, as well as adoption of the NHSN
CAUTI and SSI measures. Commenters further stated their support for the
proposal to stratify the SSI measure for reporting and scoring
purposes. Commenters requested that CMS work with CDC to ensure that
performance data for these measures are made available to facilities as
soon as possible.
Response: We thank commenters for their support. We intend to
continue distributing hospitals' performance information via our
Program's scoring reports, and hospitals should also have had a chance
to review their data submissions through the Hospital IQR Program.
Comment: Commenters suggested that CLABSI and CAUTI should be
reliability-adjusted before their adoption into the Hospital VBP
Program.
Response: We disagree. While we understand that CDC is undertaking
an effort to adjust its NHSN measures' reliability, we do not believe
that we should wait for that effort to conclude before adopting these
measures for purposes of the Hospital VBP Program. CAUTI, CLABSI, and
SSI all track infections that present real health risks to patients,
and we believe it is critical to quality improvement and patient safety
to ensure that hospitals are making every possible effort to minimize
those infection events. We believe that these measures, in their
current forms, are sufficiently reliable for scoring purposes under the
Hospital VBP Program. However, if the Hospital IQR Program should adopt
reliability-adjusted versions of these measures in the future, we will
consider how to adopt them into the Hospital VBP Program.
Comment: Some commenters were opposed to the proposal to adopt NHSN
measures that are also proposed for the HAC Reduction Program, arguing
that hospitals would therefore be subjected to ``double jeopardy.''
Some commenters also argued that the Affordable Care Act expressly
prohibits measure duplication between the Hospital Readmissions
Reduction Program and the Hospital VBP Program.
Response: Section 1886(o)(2)(A) of the Act states that, for
purposes of the Hospital VBP Program, the Secretary ``shall select
measures other than measures of readmissions.'' We have interpreted
this requirement solely to prohibit the adoption of measures of
readmissions under the Hospital VBP Program.
While we are aware that some commenters object to the possibility
of scoring the CAUTI and CLABSI measures under both the Hospital VBP
and HAC Reduction Programs, we note that these measures cover topics of
critical importance to quality improvement in the inpatient hospital
setting, and to patient safety. The NHSN measures that we have proposed
to adopt track infections that could cause significant health risks to
Medicare patients, and we believe it is appropriate to provide
incentives for hospitals to avoid them under more than one program.
Comment: Some commenters expressed concern about the proposal to
adopt CLABSI for the FY 2016 Hospital VBP Program, because they
believed that there is significant variation in coding for this
condition. Commenters requested that CMS adopt CDC's guidelines for
identifying and reporting the CLABSI measure, and suggested that CMS
discontinue use of the current CLABSI measure once its reliability-
adjusted version is available.
Response: It is our understanding that the reliability-adjusted
CLABSI measure is not currently NQF-endorsed. The MAP does not
recommend adopting the reliability-adjusted CLASBI measure until it has
been endorsed by NQF. In addition, the Hospital VBP Program only uses
measures adopted by the Hospital IQR Program, and measure data
collected by the Hospital IQR Program. Given the importance that we
place on measures of outcomes, as well as on the CLABSI measure's topic
of infection events that could cause health risks to patients, we
believe that adopting the measure as currently structured represents
the best policy to ensure that hospitals are incentivized to provide
high-quality care that minimizes these infections.
Comment: Some commenters suggested that CMS align the Hospital VBP,
HAC Reduction, and Hospital Readmissions Reduction Programs to avoid
measure duplication. Commenters argued that some proposed Outcome
measures are more properly placed in the HAC Reduction Program, which
could be considered the Hospital VBP Program's Safety domain under the
proposed realigned domains.
Response: We disagree. While we continue to align our quality
measurement and pay-for-performance programs in order to minimize
provider burden and incentivize high-quality care, we do not believe it
to be feasible at this time to treat one of our quality programs as a
component of another quality program. We believe that it would present
significant methodological challenges to combine performance scores
from separate programs. However, as part of our ongoing alignment work,
we will continue examining these issues. We note further that by
adopting certain Outcome measures into more than one quality program,
we believe we may encourage hospitals to focus intently on these
measures, which we note capture information important to patient safety
and to quality improvement efforts.
Comment: Commenters supported the proposal to adopt the NHSN SSI
measure, noting that it is NQF-endorsed and provides critical
information for tracking and reducing infections. Some commenters
cautioned, however, that it should be validated and further risk-
adjusted before being adopted under the Hospital VBP Program.
Response: The SSI measure is risk-adjusted based on the patient's
age and American Society of Anesthesiologists (ASA) score, a global
score that assesses the physical status of patients before surgery. We
refer commenters to https://www.cdc.gov/nhsn/PDFs/FINAL-ACH-SSI-Guidance.pdf for more information on risk-adjustment performed on the
SSI measure. SSI validation is performed as part of the Hospital IQR
Program's validation of HAI measures. We believe these risk-adjustment
and validation processes to be sufficient for purposes of ensuring the
accuracy of the data under the Hospital VBP Program.
Comment: Commenters suggested that CMS consider removing SCIP-Inf-
9, Post-Operative Urinary Catheter Removal on Post-Op Day 1 or Day 2,
from the Hospital VBP Program in favor of the proposed CAUTI measure.
Commenters argued that the process measure is less meaningful than

[[Page 50684]]

measures of the rate of CAUTI in a hospital.
Response: We thank commenters for the suggestion. However, SCIP-
Inf-9 is not currently ``topped out,'' meaning that hospitals have not,
in the aggregate, reached high enough performance on the measure to
merit removing it according to those finalized criteria. Further, we
believe that the two measures complement each other and appropriately
encourage hospitals to focus on performance improvement in this
clinical area. As we stated in the Hospital Inpatient VBP Program final
rule (76 FR 26491), we believe that public reporting and value-based
payment systems should rely on a mix of standards, process, outcomes,
and patient experience measures, including measures of care transitions
and changes in patient functional status.
Comment: Commenters argued that CMS should delay adopting the SSI
measure for the Hospital VBP Program because the current CDC risk-
adjustment methods are insufficient to ensure fair comparisons between
hospitals. Commenters argued that the impacts of teaching status and
bed size should be visible to the public, and requested that CMS delay
adopting SSI until new risk-adjustment models are validated.
Response: As described above, the SSI measure is already risk-
adjusted, and is subject to validation under the Hospital IQR Program.
We note further that the SSI measure addresses the HHS NQS priority of
``Safety.'' The measure is NQF-endorsed and has been recommended for
inclusion in the Hospital VBP Program by the MAP. We therefore believe
that the measure will fairly represent hospitals' performance at
controlling measured surgical site infections, and do not believe we
should delay its adoption into the Hospital VBP Program.
Comment: Commenters raised concerns about the proposed weighted-
average SIR calculation for SSI, noting that differences in post-
surgical surveillance programs, lacking data validation, problems with
small volume calculations, and risk-adjustment could all present issues
for our proposed scoring methodology. Some commenters suggested that
CMS weight the SSI measure's strata based on national procedure volume
for each surgical site, or that CMS weight the strata by predicted
number of infections.
Response: We thank commenters for their feedback. We do not believe
that weighting the underlying SSI strata by national procedure volume
would appropriately capture each hospital's patient mix, and could
result in hospitals being scored unfairly. However, we concur with
commenters' suggestions that we incorporate hospitals' predicted
infections into our strata scoring.
We continue to believe that we must score the SSI measure's strata
separately, but have reconsidered our proposal to create a weighted-
average SIR based on applicable cases per stratum. In response to
public comments, we will finalize instead a policy under which we will
award achievement and improvement points to each stratum of the SSI
measure, then compute a weighted average of the points awarded to each
stratum by predicted infections. The weighted average of the points
awarded will be the hospital's SSI measure score.
As an example, a hospital that received 5 improvement points for
the SSI-Colon stratum, with 1.0 predicted SSI-Colon infections, and 8
achievement points for the SSI-Abdominal Hysterectomy stratum, with 2.0
predicted SSI-Abdominal Hysterectomy infections, would receive a
composite SSI measure score as follows:

((5 * 1.0) + (8 * 2.0))/(1.0 + 2.0) = 7 points

We believe this finalized policy appropriately addresses
commenters' concerns about creating a weighted-average SIR, and instead
computes a weighted-average SSI score that reflects each individual
hospital's patient mix and risk-profile.
Comment: Commenters argued that CMS should consider expanding the
Hospital VBP Program to include clinical topics with larger measured
differences among hospitals. Some commenters specifically suggested
that CMS invest in development and testing of palliative care measures
for the hospital population to ensure that quality measurement does not
overlook the preferences and care needs of seriously ill patients.
Other commenters suggested that CMS consider new measures for the
program, such as complication rates following hip and knee replacement
and other topics. Commenters also suggested that CMS consider measures
related to smoking cessation, immunizations, urinary incontinence, pain
assessment, imaging resource use, and other topics.
Response: We thank commenters for these suggestions. We intend to
continue adding to the Hospital VBP Program's measure set as new
measures and topics become available to us under the statutory
requirements.
Comment: Some commenters were opposed to further adoption of the
AHRQ PSI composite measure for the Hospital VBP Program, citing
concerns about non-uniform coding for its underlying indicators.
Commenters also argued that the measure's structure makes it difficult
for hospitals to identify the specific cases during which measured
events occur, and noted that the MAP did not believe the measure should
be tied to payment. Commenters further argued that the measure is not
appropriately risk-adjusted and may exaggerate problems at hospitals
that treat sicker or more complex patients.
Response: We believe that adopting the AHRQ PSI composite measure
provides strong incentives for hospitals to ensure that patients are
not harmed by the medical care they receive, which is a critical
consideration for quality improvement. As we stated in the FY 2013
IPPS/LTCH PPS final rule (77 FR 53589 through 53590), we are
particularly concerned about the effects that not finalizing the AHRQ
PSI composite might have on hospitals' quality performance. We believe
that the PSI measure, as a composite measure of patient safety,
appropriately encourages robust hospital attention to patient safety
events. As we have stated in prior rulemaking, we believe that the
Hospital VBP Program drives quality improvement in the acute inpatient
setting, and we believe strongly that measures of patient safety, such
as the AHRQ PSI measure and the NHSN measures, are important metrics on
which hospitals should focus their quality improvement efforts.
On the subject of the PSI composite measure's risk adjustment, we
note that we use the risk-adjustment factors listed in specifications
for the AHRQ measures selected for this program. We do not believe that
the measure's current risk-adjustment factors unfairly penalize
teaching and large hospitals. PSI-90 is comprised of component measures
that are risk- and reliability-adjusted. The composite measure is a
component-weighted average of these risk- and reliability-adjusted
observed-to-expected ratios. The risk adjustment methodology's adequacy
is a function of the adequacy of the risk adjustment for each of the
component indicators, and the average c-statistic for the component
measures in the PSI composite in version 4.5 of the AHRQ QI software is
0.775, accounting for component weighting, and we believe that level of
risk adjustment to be adequate to ensure that we do not penalize
teaching and large hospitals, or others that treat relatively sicker
patient populations. We refer readers to AHRQ's Web site for the
mathematical specifications of the

[[Page 50685]]

composite.\41\ Should changes to the risk-adjustment models for the
measures be adopted during NQF endorsement maintenance processes, we
will adopt these changes as soon as possible.
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\41\ https://qualityindicators.arhq.gov/Downloads/Modules/PSI/PSI%90Composite%20Development.pdf.
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We encourage hospitals that are unsure how to improve their
performance on the AHRQ PSI measure or on any other measure finalized
for the Hospital VBP Program to contact their QIO for assistance.
Comment: Commenters urged CMS to reassess how it adjusts HCAHPS
survey scores for the severity of patient illness, arguing that the
survey's patient-mix adjustment model does not adequately account for
the effect of severity of illness or patient's mental health status,
and that the HCAHPS Survey is biased against large urban hospitals and
safety-net hospitals. Commenters also argued that the HCAHPS survey
lacks sufficient risk-adjustment.
Response: Since its national implementation in 2006, the HCAHPS
Survey has included an item that asks for patients' assessments of
their overall health. We use this information in a transparent manner
in our standard patient-mix adjustment of HCAHPS scores, as we have
explained on the official HCAHPS On-Line Web site, https://www.hcahpsonline.org, in the research documents and patient-mix
adjustment coefficients that are posted on this Web site, and in
published research listed on this Web site.
In response to comments about HCAHPS in previous Rules, we added an
item to the HCAHPS Survey in January 2013 that asks patients to assess
their overall mental or emotional health. At this time, we are
analyzing the effect of patients' overall mental or emotional health on
HCAHPS scores. Based on the results of this analysis, we will determine
whether we believe a further patient-mix adjustment for mental or
emotional health may be warranted.
With respect to a Cleveland Clinic analysis mentioned by a
commenter that is said to show a greater than expected impact of
severity of illness on HCAHPS scores, we understand that this analysis
does not examine associations between patient characteristics and
HCAHPS scores after the standard HCAHPS patient-mix adjustment has been
applied. The standard HCAHPS patient-mix adjustment would be expected
to remove most or all of the association mentioned. We also understand
that the Cleveland Clinic analysis mentioned by the commenter is not
based on national data.
As we stated in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53585),
we have examined the association between safety net status and the
Patient Experience of Care (HCAHPS) domain score in the Hospital VBP
Program. We stated that we analyzed Patient Experience of Care scores
during the Hospital VBP Program Dry Run period (Baseline Period: April-
December 2008; Performance Period: April to December 2010), both
overall and among urban hospitals.
Although we do not have an official definition or designation of
``safety net'' hospital, safety net status typically entails one or
more of three criteria: high Medicaid share; high proportion of
uncompensated patients; and high county-associated poverty rate. During
the Hospital VBP Program Dry Run, 28 hospitals (7 of them urban) met
all three criteria, 157 hospitals (83 of them urban) met two of the
three criteria, 625 hospitals (391 urban) met one of the three
criteria, and 2,219 hospitals (1,718 urban) met none of the three
criteria.
In general, during the Hospital VBP Program Dry Run, after all
HCAHPS adjustments are applied (patient mix and survey mode), safety
net hospitals performed similarly to other hospitals. For example, 24
percent of the hospitals that meet any of the three safety net criteria
(198/810) scored in the top quartile of Hospital VBP Patient Experience
of Care domain (versus 25 percent (550/2219) of hospitals that met none
of the safety net criteria). For urban hospitals, the figures are 110/
481 safety net hospitals (23 percent) vs. 454/1718 other hospitals (26
percent). If we consider only those hospitals that meet two of the
three safety net criteria, then 36/185 safety net hospitals (20
percent) and 12/90 urban safety net hospitals (13 percent) are in the
top quartile (with 5 of these 12 in the top decile).
The HCAHPS patient mix adjustment model controls for patient
characteristics not under the control of the hospital that directly
impact response tendencies. It also controls for socioeconomic status
of the patient population through education, which is a well-accepted
method for controlling for socioeconomic status, in particular, in the
elderly population. Other characteristics, such as hospital
characteristics or geographic location, are not included in the
adjustment models because controlling for hospital characteristics
would mask potential quality differences across different types of
hospitals.
Comment: Some commenters argued that HCAHPS consistency scores were
not thoroughly tested and are not functioning as envisioned. Commenters
argued that CMS should discontinue the use of HCAHPS consistency points
because hospitals with consistently low HCAHPS scores were assigned a
greater than average consistency score.
Response: We designed the components and scoring formula for the
HCAHPS measure in the Hospital VBP Program in order to achieve our
stated policy goals, including relying on a mix of standards, process,
outcomes, and patient experience measures in public reporting and
value-based payment systems (76 FR 26491). We tested the HCHAPS scoring
process thoroughly prior to proposing it in the 2011 Hospital Inpatient
VBP Program proposed rule, and have continued to monitor and evaluate
it since implementation of the Hospital VBP Program in October 2012.
The Patient Experience of Care Domain score in the Hospital VBP
Program is currently based on a hospital's score on one measure, the
HCAHPS Survey measure, which is scored as (1) the greater of the
Achievement Points or Improvement Points for each of the eight HCAHPS
dimensions included in the Hospital VBP Program (0 to 10 points for
each dimension), plus (2) 0 to 20 Consistency Points, which are derived
from the lowest HCAHPS dimension. In order to assess the separate
contribution of Achievement Points and Improvement Points, the HCAHPS
Project Team, using results from the HCAHPS scores in the FY 2013
Hospital VBP Program (Baseline Period: July 2009-March 2010;
Performance Period: July 2011-March 2012),decomposed the scores into
three separate components: Achievement Points; Improvement Supplement
(the extra contribution of Improvement Points to the Base Score beyond
the contribution of Achievement Points); and Consistency Points.
Briefly, we found that Consistency Points are strongly and
positively correlated with Achievement Points (0.68), which means that
Consistency Points go mainly to hospitals with higher scores during the
Performance Period. Although Achievement Points are the principal
driver and account for nearly all of the variance in the HCAHPS score,
Consistency Points play a small but important role by incentivizing
targeted improvement in hospitals with below average scores, as well as
augmenting the scores of lower-performing hospitals. See March 2013
HCAHPS Update Training, slides 91-101, at: https://www.hcahpsonline.org/trainingmaterials.aspx.
Comment: One commenter specifically argued that the HCAHPS survey
and its scoring methodology

[[Page 50686]]

need to be modified to incorporate risk-stratification to ensure more
appropriate peer comparisons, particularly for patients that are
English language learners and with whom communication may be more
difficult for hospital staff. The commenter suggested that patients'
communications difficulty could be incorporated into HCAHPS risk-
stratification. The commenter also contended that some hospitals may be
unfairly penalized by the HCAHPS survey's use of a ``quietness'' item,
arguing that hospitals may not easily control ambient noise outside the
hospital. The commenter presented analysis showing a negative
correlation between population density and the HCAHPS ``quietness''
item.
Response: We thank the commenter for the comments and research.
Differences at the hospital level could be due to either patient
differences or true differences in average hospital quality in urban
and rural areas. Urban/rural differences have been demonstrated for a
variety of quality measures, including clinical quality measures. In
order to ensure that true differences in hospital quality are not
``adjusted away,'' we only adjust HCAHPS scores for patient-level
factors. One of the patient-mix adjustment factors that we employ is
``language spoken at home,'' currently categorized as ``English'' and
``Non-English.'' Having taken this factor into account through patient-
mix adjustment, we believe that the remaining difference is due to true
variation in the quality of hospitals in which English and non-English
speaking patients seek care. We believe that these hospital-level
differences should not be adjusted away.
Recently, we began to collect information on additional languages
that patients speak at home, including English, Spanish, Chinese,
Russian, Vietnamese, and ``some other language.'' We are conducting
research to determine whether the patient-mix adjustment for ``language
spoken at home'' would be measurably improved by including distinctions
among these specific languages. Should we determine that, based on this
data and research, a revised patient-mix adjustment for ``language
spoken at home'' is warranted, we will seek to adopt the adjustment for
the HCAHPS measure.
The commenter contends that a major contributor to hospital total
noise level is ambient noise from outside the hospital, which varies
systematically with hospital location, that is, urban or rural setting.
We have not seen evidence that ambient noise from outside the
hospital is the cause of lower scores on the HCAHPS ``quietness'' item,
which asks ``how often the area around your room was quiet at night.''
Developmental work on the HCAHPS Survey, including cognitive interviews
and focus groups with patients and caregivers, indicated that patients
distinguish between noise from outside of the hospital, which is more
difficult to control, and noise from within the hospital, which the
hospital can more readily reduce, mitigate or eliminate, such as that
from loud conversations outside of patient rooms, equipment trolleys,
alarms and announcements, maintenance operations, etc.
We are aware of noise reduction efforts in a number of hospitals,
in both urban and rural settings, that have successfully reduced
within-hospital noise. In addition, in the Hospital VBP scoring system,
hospitals are assessed on both achievement and improvement. Thus,
regardless of location, hospitals can earn improvement points if
patients experience greater quietness in the performance period than in
the prior baseline period.
Comment: One commenter was concerned about HCAHPS survey responses
where patients refuse to answer. The commenter believed that this
action could result in inaccurate survey data. The commenter also
expressed concerns about cleanliness throughout the hospital to reduce
the risk of infections, not just the cleanliness of the patient's room
and bathroom.
Response: We thank the commenter for these concerns. With respect
to the HCAHPS survey, which is administered after discharge, patients
may refuse to answer any item by not filling in a response on the mail
version of the survey, or not providing an answer on the telephone or
Interactive Voice Response versions of the survey. This non-response is
then captured in our data collection process. The national response
rate for the HCAHPS Survey is 33 percent. Based on our analyses of the
HCAHPS Survey, we found that the patient-mix adjustment model accounts
for any nonresponse bias that could have been addressed through
nonresponse weighting. Therefore, no further weighting or adjustment
for nonresponse is needed (see https://www.hcahpsonline.org/modeadjustment.aspx#ME2 and The Effects of Survey Mode, Patient Mix,
and Nonresponse on CAHPS Hospital Survey Scores. M.N. Elliott, A.M.
Zaslavsky, E. Goldstein, W. Lehrman, K. Hambarsoomian, M.K. Beckett and
L. Giordano. Health Services Research, 44: 501-518. 2009).
We share the commenter's concern about the importance of clean and
hygienic conditions in hospitals. The HCAHPS Survey contains an item
about hospital cleanliness, ``During this hospital stay, how often were
your room and bathroom kept clean?'' The HCAHPS Survey is designed to
ask patients about important aspects of their hospital stay. While we
agree that all hospital areas ought to be clean, we believe that
patients are most aware of the cleanliness of their own room and
bathroom, and this item is targeted accordingly.
Comment: One commenter requested that CMS propose a process to
account for changes in measure specifications to ensure fair treatment
to participating hospitals. Commenters specifically suggested that CMS
suppress the SCIP-Inf-4 measure for FY 2014 and propose a new benchmark
and achievement threshold once enough data has been collected with the
new specifications.
Response: We are aware that the SCIP-Inf-4 measure underwent
significant specifications changes for discharge quarters beginning on
or after January 1, 2014. Since we are finalizing below a performance
period of CY 2014 and a baseline period of CY 2012 for the clinical
process of care measures under the FY 2016 Hospital VBP Program, we
believe these specifications changes will have significant impacts on
hospitals' SCIP-Inf-4 performance during the FY 2016 performance
period. We are therefore not finalizing the SCIP-Inf-4 measure for the
FY 2016 Hospital VBP Program, or any other proposal we made that would
relate to that measure (for example, the measure's performance
standards).
However, these specifications changes will not affect either the
finalized performance periods or baseline periods for FY 2014 or FY
2015. We do not believe it appropriate to remove the measure from the
Hospital VBP Program measure set for either of those program years,
because the changes to the measure specifications do not affect
hospitals' performance rates on the measure during the finalized
performance periods for FY 2014 and FY 2015.
While we have not established a Hospital VBP Program-specific
process to date to account for specifications changes, we may consider
doing so in future rulemaking.
After consideration of the public comments we received, we are
finalizing the FY 2016 measure set as proposed, with the exception of
SCIP-Inf-1 and SCIP-Inf-4, described above,

[[Page 50687]]

and with the changes outlined above to the SSI measure's scoring.
The following table outlines the final measures for the FY 2016
Hospital VBP Program that we previously adopted, as well as the new
measures that we are finalizing.

Newly Finalized and Readopted Measures for the FY 2016 Hospital VBP
Program Clinical Process of Care Measures
------------------------------------------------------------------------

------------------------------------------------------------------------
AMI-7a................... Fibrinolytic Therapy Received Within 30
Minutes of Hospital Arrival.
IMM-2**.................. Influenza Immunization.
PN-6..................... Initial Antibiotic Selection for CAP in
Immunocompetent Patient.
SCIP-Inf-2............... Prophylactic Antibiotic Selection for
Surgical Patients.
SCIP-Inf-3............... Prophylactic Antibiotics Discontinued Within
24 Hours After Surgery End Time.
SCIP-Inf-9............... Urinary Catheter Removed on Postoperative Day
1 or Postoperative Day 2.
SCIP-Card-2.............. Surgery Patients on Beta-Blocker Therapy
Prior to Arriva Who Received a Beta-Blocker
During the Perioperative Period
SCIP-VTE-2............... Surgery Patients Who Received Appropriate
Venous Thromboembolism Prophylaxes Within 24
Hours Prior to Surgery to 24 Hours After
Surgery.
------------------------------------------------------------------------
Patient Experience Measures
------------------------------------------------------------------------
HCAHPS................... Hospital Consumer Assessment of Healthcare
Providers and Systems Survey.
------------------------------------------------------------------------
Outcome Measures
------------------------------------------------------------------------
CAUTI**.................. Catheter-Associated Urinary Tract Infection.
CLABSI***................ Central Line-Associated Blood Stream
Infection.
MORT-30-AMI*............. Acute Myocardial Infarction (AMI) 30-day
mortality rate.
MORT-30-HF*.............. Heart Failure (HF) 30-day mortality rate.
MORT-30-PN*.............. Pneumonia (PN) 30-day mortality rate.
PSI-90*.................. Complication/patient safety for selected
indicators (composite).
SSI**.................... Surgical Site Infection:
Colon.
Abdominal Hysterectomy.
------------------------------------------------------------------------
Efficiency Measures
------------------------------------------------------------------------
MSPB-1................... Medicare Spending per Beneficiary.
------------------------------------------------------------------------
* Measures previously finalized for the FY 2016 Hospital VBP Program.
** New measures.
*** Measures finalized for FY 2015 but not subject to immediate
readoption.

In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27611), we also
sought public comment on our intent to adopt the Methicillin-resistant
Staphylococcus aureus (MRSA) Bacteremia and the Clostridium difficile
(C. difficile) standardized infection ratio measures for the FY 2017
Hospital VBP Program. Both of these measures are high-priority HAI
measures listed in the HHS Action Plan to Prevent HAIs. We anticipate
posting performance data for these measures on Hospital Compare later
this year, and anticipate proposing to adopt these measures for the
Hospital VBP Program in the FY 2015 IPPS/LTCH PPS proposed rule.
Comment: Commenters expressed support for CMS' intent to adopt the
MRSA and C. difficile measures into the Hospital VBP Program in future
years. Commenters argued that MRSA is especially problematic in both
hospital ICUs and in long-term care facilities, and noted significant
increases in HAIs over the past 10 years. Commenters also noted that C.
difficile-associated complications are linked to 14,000 deaths
annually. Some commenters suggested that these measures would be better
additions to the Hospital VBP Program than immunization measures
because immunization measures do not cover the most effective topics.
Response: We thank commenters for their support and for their
input. We agree that these measures capture quality information that is
critical to patient safety, and intend to consider adopting these
measures in future rulemaking.
Comment: Some commenters urged CMS to provide measure
specifications for MRSA and C. difficile in order to enable
constructive feedback on the measures. Commenters also suggested that
it will be necessary to control for known regional variation in
infection rates if CMS adopts these measures, and argued that CMS
should consider ways to differentiate community-acquired infections
from healthcare-associated strains.
Response: We refer readers to the QualityNet Web site (https://www.qualitynet.org/) for details on the specifications for both
measures. The finalized Hospital VBP Program methodologies for
developing performance standards and for calculating measure rates do
not adjust for regional variation in infection rates, and we have not
considered adopting such an adjustment for current measures of
healthcare-associated infections. As we stated in the Hospital
Inpatient VBP Program final rule (76 FR 26512), we believe that
achievement thresholds and benchmarks based on national data provide
balanced, appropriate standards of high quality care for hospitals to
work towards under the Hospital VBP Program. We also stated in that
final rule that we do not wish to lower the performance standards for a
hospital simply because average performance in its local region is
subpar compared to national performance, nor do we wish to raise or
lower performance standards for hospitals based on observations that
different types of hospitals differ in the average performance on
individual measures. However, we encourage commenters to provide more
detail on how we might make such adjustments in the future.
Comment: Some commenters were concerned about CMS' possible
adoption of MRSA and C. difficile in future program years, noting
methodological flaws associated with defining when infections are
incubating at the time of admission. Commenters

[[Page 50688]]

also argued that the definition of ``hospital acquired infection'' must
be clearly set out for both measures. Some commenters did not support
CMS' intent to adopt MRSA or C. difficile in future program years,
arguing that the measures are insufficiently risk-adjusted and should
therefore not be adopted for Hospital VBP. Commenters noted that both
measures are relatively new to the Hospital IQR Program, and commenters
urged CMS to allow hospitals to gain additional experience with the
measures before adopting them for Hospital VBP.
Response: We thank commenters for their input. We intend to
consider these comments when developing our policies for future
rulemaking.
c. Future Measures for the Efficiency Domain
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27611 through
27612), we stated that we are considering including additional measures
in the Efficiency Domain for future years of both the Hospital IQR
Program and the Hospital VBP Program. If we were to expand the
Efficiency Domain in the future, we would do so through future
rulemaking and in accordance with the requirements of section 1886(o)
of the Act.
We stated that we are considering adding a measure of hospitals'
performance on treating Medicare beneficiaries appropriately as a
hospital inpatient or a hospital outpatient. Specifically, we stated
that we are considering constructing a measure to assess the rate and/
or dollar amount of billing hospital inpatient services to Medicare
Part B, subsequent to the denial of a Part A hospital inpatient claim.
We are considering such a measure in light of our recent proposal that
when a Medicare Part A claim for inpatient hospital services is denied
because the inpatient admission was determined not to be reasonable and
necessary, or when a hospital determines under Sec. 482.30(d) or Sec.
485.641 after a beneficiary is discharged that his or her inpatient
admission was not reasonable and necessary, the hospital may be paid
for all of the Part B services that would have been reasonable and
necessary had the beneficiary been treated as a hospital outpatient
rather than admitted as an inpatient, if the beneficiary is enrolled in
Medicare Part B (78 FR 16632 through 16646). We invited public comments
on this or other approaches to include a measure of appropriateness of
hospital inpatient services in future years of the Hospital IQR Program
and the Efficiency Domain for the Hospital VBP Program.
We also are considering the addition of Medicare spending measures
specific to physician services such as Radiology, Anesthesiology, and
Pathology that occur during a hospital stay. We invited public comment
on how to best to construct measures of Medicare spending for these or
other physician services provided during a hospital stay, for future
inclusion in the Hospital IQR Program and the Efficiency Domain in the
Hospital VBP Program.
Comment: One commenter expressed support for a future measure of
appropriateness of treating Medicare beneficiaries as hospital
inpatients or hospital outpatients, stating that it would improve
outcomes and help ensure that prices paid for prescription drugs under
the 340B discount program are appropriate. Other commenters opposed the
development of such a measure. The reasons they provided included:
perceived inconsistencies or inaccuracies in Recovery Audit Contractor
(RAC) denials across hospitals; the concern that the measure would not
reflect successful appeals of RAC denials; the belief that such a
measure would represent a double penalty in addition to any
overpayments already collected; the belief that confusion exists
regarding CMS' inpatient versus outpatient policies; that belief that
services that are rebilled are not medically unnecessary, but rather
that they are billed incorrectly, and therefore do not represent a
quality issue; that such a measure would increase the use of the
appeals system; and that the physician, rather than the hospital is
responsible for the decision whether or not to admit a patient.
Response: We thank the commenters for their input and will take it
into consideration as we develop any future policies related to this
issue. In response to the comment about 340B drug pricing, we are not
aware of any effect that inclusion of a future measure of
appropriateness of treating Medicare beneficiaries as hospital
inpatients or hospital outpatients would have on the 340B drug pricing
program.
Comment: A few commenters noted that any new efficiency measures
would first have to be adopted in the Hospital IQR Program.
Response: We agree and wish to clarify that we would finalize any
future efficiency measure for the Hospital IQR Program through notice
and comment rulemaking. We would include it in the Hospital IQR Program
for at least one year and display performance information on the
Hospital Compare Web site in accordance with section 1886(o)(2)(C)(i)
of the Act before including it in the Hospital VBP Program. That was
our intent in stating above that, if we were to expand the Efficiency
Domain in the future, we would do so through future rulemaking and in
accordance with the requirements of section 1886(o) of the Act.
Comment: Some commenters supported CMS' intent to adopt additional
measures of efficiency in future program years, and suggested that CMS
consider new measure topics such as Medicare Total Costs Per Capita and
Rates of Medicare Service Utilization. Commenters also suggested that
CMS consider measures that compare actual observed costs with expected
costs both regionally and nationally.
Response: We thank commenters for their support. We will consider
additional measure topics as they become available to us under the
Hospital VBP Program's statutory requirements.
Comment: One commenter expressed support for development of a
measure of physician services occurring during a hospital stay, in
order to align incentives for hospitals and physicians to provide high
quality, efficient care. The commenter suggested that such a measure
should not be overly risk-adjusted, so as to avoid incorporating
payment inequities.
Response: We thank this commenter for the input and will take it
into consideration as we develop any future measures for the Efficiency
Domain.
Comment: The majority of commenters did not support the development
of a measure of physician services occurring during a hospital stay.
These commenters' concerns included the belief that hospitals should
not be held accountable for physician services, with some commenters
stating that the nature of the employment relationship between the
hospital and its physicians dictate the level of control by the
hospital over those physicians. Commenters also expressed concern that
there is not adequate data on the appropriate level of utilization for
the purpose of setting benchmarks and avoiding the reduction in needed
care. These commenters also expressed a belief that such a measure
would be duplicative of the MSPB measure.
Response: We thank the commenters for their input, and we will take
it into consideration as we develop any future measures for the
Efficiency domain.
Comment: Several commenters expressed concern that specialty-
specific spending measures would be better suited for the Physician
Value-Based Payment Modifier Program or generally stated that
accountability for physician services should be shared

[[Page 50689]]

with physicians, not placed solely with the hospital. Many of the
commenters expressed the opinion that incentives should be aligned for
physicians and hospitals, expressing the concern that parallel
incentives do not yet exist.
Response: We thank the commenters for their input and we will take
it into consideration as we develop any future measures for the
Efficiency domain. As we stated in the FY 2012 IPPS/LTCH PPS final rule
(76 FR 51626), we agree that alignment of incentives is an important
goal.
Comment: Several commenters offered suggestions of additional
measures for future inclusion in the Efficiency domain. These
suggestions included measures of appropriate use, especially for
cardiovascular conditions; national and regional total per capita cost
measures; resource service utilization measures that compare overuse of
services for patients with the same condition across the country;
radiology efficiency measures; anesthesia efficiency measures; and DRG-
specific spending measures. Two commenters also suggested adding
radiation dose measures to the Hospital VBP Program.
Response: We thank the commenters for their input and we will take
it into consideration as we develop any future measures for the
efficiency domain.
7. Performance Periods and Baseline Periods
a. Background
Section 1886(o)(4) of the Act requires the Secretary to establish a
performance period for the Hospital VBP Program for a fiscal year that
begins and ends prior to the beginning of such fiscal year.
b. Clinical Process of Care Domain Performance Period and Baseline
Period for the FY 2016 Hospital VBP Program
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53594 through
53595), we finalized a 12-month performance period for FY 2015 Clinical
Process of Care measures of CY 2013, or January 1, 2013 through
December 31, 2013, with a corresponding baseline period of CY 2011, or
January 1, 2011 through December 31, 2011, for purposes of calculating
improvement points and performance standards. As we stated in that
rule, a 12-month performance period provides us more data on which to
score hospital performance, which is an important goal both for CMS and
for stakeholders. We also noted that a 12-month performance period is
consistent with the reporting periods used for these measures under the
Hospital IQR Program.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27612), we
proposed to adopt a 12-month performance period for FY 2016 Clinical
Process of Care measures of CY 2014, or January 1, 2014 through
December 31, 2014, for the FY 2016 Hospital VBP Program. We also
proposed to adopt a corresponding 12-month baseline period of CY 2012,
or January 1, 2012 through December 31, 2012, for purposes of
calculating improvement points and calculating performance standards.
We invited public comment on these proposals.
Comment: One commenter argued that CMS should not adopt the
entirety of CY 2012 as the performance period for the IMM-2 measure
within the Clinical Process of Care domain for FY 2016. The commenter
explained that the measure was not collected during the 2nd and 3rd
quarters of that year, and recommended that CMS also omit those
quarters from the proposed baseline period to ensure fair comparisons.
Response: According to the IMM-2 measure's specifications, the
measure is to be collected for discharges during the months of October,
November, December, January, February, and March. The commenter is
therefore correct that it is not collected during the second and third
quarters of the calendar year. However, we do not believe this requires
us to specify a separate performance or baseline period for this
measure. We believe that CY 2012 is an appropriate baseline period for
this measure, as it captures the measure's reporting period and aligns
the measure with the other measures in the Clinical Process of Care
domain.
After consideration of the public comments we received, we are
finalizing the FY 2016 performance and baseline periods for the
Clinical Process of Care domain as proposed.
c. Patient Experience of Care Domain Performance Period and Baseline
Period for the FY 2016 Hospital VBP Program
Consistent with our goal of adopting a full 12-month period for
this domain in order to collect a larger amount of HCAHPS survey data
compared to a 9-month period, in the FY 2013 IPPS/LTCH PPS final rule
(77 FR 53595), we finalized a 12-month performance period for FY 2015
Patient Experience of Care measures of CY 2013, or January 1, 2013
through December 31, 2013, with a corresponding baseline period of CY
2011, or January 1, 2011 through December 31, 2011, for purposes of
calculating improvement points and performance standards. As we stated
in that rule, a 12-month performance period provides us more data on
which to score hospital performance, which is an important goal both
for CMS and for stakeholders.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27612), we
proposed to adopt a 12-month performance period for FY 2016 Patient
Experience of Care measures of CY 2014, or January 1, 2014 through
December 31, 2014, for the FY 2016 Hospital VBP Program. We also
proposed to adopt a corresponding 12-month baseline period of CY 2012,
or January 1, 2012 through December 31, 2012, for purposes of
calculating improvement points and calculating performance standards.
We invited public comment on these proposals. However, we did not
receive any specific comments on the proposed FY 2016 performance and
baseline periods for the Patient Experience of Care domain. We are
therefore finalizing these periods as proposed.
d. Efficiency Domain Measure Performance Period and Baseline Period for
the FY 2016 Hospital VBP Program
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53595 through
53596), we finalized a performance period for the MSPB measure for the
FY 2015 Hospital VBP Program of May 1, 2013 through December 31, 2013,
with a corresponding baseline period of May 1, 2011 through December
31, 2011. We finalized that performance period based on the measure's
posting date on Hospital Compare, our desire to ensure consistency
across domains where possible, and in order to ensure that data have
been posted for at least 1 year prior to the beginning of the measure
performance period.
In order to expand the dataset available for performance scoring on
this measure, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27612)
we proposed to adopt a 12-month performance period for the MSPB measure
for the FY 2016 Hospital VBP Program of CY 2014, or January 1, 2014
through December 31, 2014, with a corresponding baseline period of CY
2012, or January 1, 2012 through December 31, 2012. These proposed
performance and baseline periods align with the performance and
baseline periods for Clinical Process of Care Domain measures. These
proposed performance and baseline periods also enable us to collect
sufficient measure data, while allowing time to calculate and
incorporate MSPB measure data into the Hospital VBP Program scores in a
timely manner.
We invited public comments on the proposed performance and baseline
periods for the MSPB measure.

[[Page 50690]]

Although we received no specific comments regarding the proposed
performance and baseline periods for the MSPB measure, we did receive a
number of general comments on the MSPB measure, which we respond to
below.
Comment: Some commenters fully supported the inclusion of the MSPB
measure in the Hospital VBP Program as proposed, noting the importance
of measuring resource use. One of these commenters noted the MSPB
measure's importance in the establishment of an effective Hospital VBP
Program that begins to bend the cost curve for Medicare and emphasized
the measure's apparent importance to Congress, given that it was the
only measure specifically required by statute for inclusion in the
Hospital VBP Program.
Response: We thank these commenters for their support, and we agree
that the measure's inclusion is important because it helps to address
the critical issue of health care costs and furthers Medicare's
transformation from a system that rewards volume of service to one that
rewards efficient, effective care and reduces delivery system
fragmentation, as we stated in the FY 2012 IPPS/LTCH PPS final rule (77
FR 51618).
Comment: The majority of commenters expressed concern with use of
the MSPB measure in the Hospital VBP Program. The commenters' concerns
included: concern that there may not be a clear connection between cost
variance and patient outcomes or other quality measurements; concern
that hospitals might not provide necessary services, in order to
improve measure performance; concern that the measure includes factors
that are outside the hospital's control; questioning whether claims
data is sufficient for measure calculation; concern that the measure is
not adjusted for socioeconomic factors; concern that the measure has
not been adequately tested; question as to whether the risk-adjustment
methodology is sufficient, with one commenter questioning the ordinary
least squares (OLS) approach; perception that the measure is not yet
fully specified; concern that the measure is not NQF endorsed; and
comments on the NQF endorsement process that is currently underway.
Response: In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51619
through 51627), we finalized the MSPB measure for inclusion in the
Hospital IQR Program and addressed concerns with the measure's general
construction, the degree of hospital control over performance on the
measure, and its risk-adjustment. We continue to believe that the MSPB
measure is appropriately constructed to capture Medicare spending
surrounding a hospitalization. As we stated in the FY 2012 IPPS/LTCH
PPS final rule, the measure incentivizes hospitals to work on
redesigning care systems and coordinating with other providers of care,
which can have a significant impact on the quality and efficiency of
services provided to the Medicare beneficiaries they serve. We also
continue to believe that hospitals have a significant influence on
Medicare spending during the episode surrounding a hospitalization,
through the provision of appropriate, high-quality care before and
during inpatient hospitalization and through proper hospital discharge
planning, care coordination, and care transitions. This measure will
add an additional incentive for hospitals to apply this influence in
ways that will promote the provision of the highest quality, most
efficient care for hospitalized Medicare beneficiaries.
We will work to incorporate any suggestions from hospitals on how
to improve the hospital-specific reports to make them more actionable.
With regard to the use of the OLS regression, we note that it is
consistent with the risk-adjustment model used for several CMS
initiatives, including Medicare Advantage rate setting. We believe that
the variant of the model used for MSPB is appropriate, because it
allows for a different coefficient on each HCC in each major diagnostic
category based on index admission. In this sense, the model uses
categorical condition indicators to flexibly capture differences in
spending by condition.
We finalized the measure for inclusion in the Hospital VBP Program
in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53592), and we addressed
a number of public comments related to the measure in that rule. With
regard to linking the MSPB measure to other quality metrics, we
addressed the importance of measuring cost independently and emphasized
that within the Hospital VBP Program, the MSPB measure is combined with
other quality measures in order to calculate the TPS (77 FR 53586).
With regard to the measure being fully specified, at the preceding
citation, we re-emphasized that the measure was fully detailed in the
FY 2012 IPPS/LTCH PPS proposed and final rules, and was then
subsequently publicly vetted through a national provider call during an
MSPB hospital data preview period. We have also since conducted two
additional MSPB data previews, and we have not received substantive
comments on the validity of the claims data used to calculate the
measure. This measure had been extensively tested. We refer readers to
the discussion of the reliability analysis in the FY 2013 IPPS/LTCH PPS
final rule (77 FR 53589). We agree with commenters that NQF endorsement
is valuable, though we note, as mentioned in the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51619), that it is not required before adopting
measures under the Hospital VBP Program. We are working with the NQF
during the endorsement process that is currently in progress. We
anticipate that we will receive the NQF's decision on endorsement in
October of 2013.
Comment: A few commenters expressed their belief that there was a
lack of national data on the MSPB measure and a lack of transparency
into the service types included in the measure. One commenter requested
the impact of each ``adjustment factor'' including area wage, case mix,
outlier, IME, and DSH, had on the pre-index, during-index, and post-
index spending categories during the MSPB episode. One commenter stated
that, in addition to providing hospitals with confidential hospital-
specific reports that identify the highest-spending providers in each
of their MSPB episodes, CMS should provide a report to each of those
providers listed.
Response: We appreciate the importance of data related to
performance on this measure. We posted a Medicare spending breakdown by
claim type file publicly, so that hospitals and other stakeholders
could compare their Medicare payments for various service types to
those in their state and the nation. We will consider further breaking
down the inpatient spending that is attributed to a hospital into
specific inpatient settings, such as acute inpatient, LTCH, IPF and
IRF, as the commenter suggests. We also provide extensive data to
hospitals in their hospital-specific reports. For a description of the
hospital-specific data files, and the spending breakdown by claim type
file, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR
53588). We will also explore the possibility of providing reports to
those providers listed in hospitals' confidential hospital-specific
reports, as the commenter suggests.
With regard to ``adjustment factors,'' we believe that the
commenter is referring to adjustments to inpatient payments, which are
only one part of an MSPB episode. We remove area wage, IME, and DSH
during the standardization process, so that geographic payment policy
differences and other Medicare program goals are not reflected in
hospitals' MSPB

[[Page 50691]]

amounts. Case-mix and outlier adjustments are not removed from the
standardized amount used to calculate the MSPB measures, because the
MS-DRG is used in risk adjustment and outlier payments represent costs
to Medicare incurred due to the treatment provided by the hospital. The
CMS standardization methodology may be accessed on the QualityNet Web
site at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1228772057350. Although the hospital-specific reports include only payment-
standardized MSPB numbers, data files available in QualityNet also
include non-standardized payment amounts. We refer readers to the
``Hospital-Specific Data Files Description'' link for further details
of the MSPB hospital-specific data files available for download in
QualityNet. We will consider reporting total outlier payments for an
MSPB episode as an additional data point in hospitals' confidential
hospital-specific reports.
Comment: Some commenters expressed the opinion that it was
difficult to improve performance on the MSPB measure because they
believed that improvement was not scored based on comparison to a
hospital's own historical performance but rather against a national
median.
Response: We wish to clarify that, consistent with improvement
scoring for other Hospital VBP Program measures, improvement on the
MSPB measure is based upon comparisons between the hospital's own
performance during the baseline period and the performance period. The
MSPB measure is structured as a ratio of the hospital's own MSPB amount
to the national median MSPB amount, but improvement points are
calculated by comparing the hospital's individual performance during
the specified periods. For additional information on MSPB improvement
points, we refer readers to the discussion of improvement scoring on
the MSPB measure in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51655
through 51656). We note that although the measure's implementation was
delayed subsequent to the issuance of that final rule, we retained the
scoring methodology when the measure was finalized in the FY 2013 IPPS/
LTCH PPS final rule for inclusion in the Hospital VBP Program for FY
2015 and subsequent years.
Comment: Some of the commenters suggested that the MSPB measure
should be applied within the Physician Value Modifier Program
concurrently.
Response: We agree with the suggestion made by these commenters
that this measure is appropriate for inclusion in the Medicare
Physician Fee Schedule Program. Accordingly, we have proposed to
include the MSPB amount in the cost composite portion of the physician
value-based payment modifier, for the CY 2016 payment year (CY 2014
performance period), in the CY 2014 Medicare Physician Fee Schedule
proposed rule (78 FR 43493 through 43496). As we have stated in the
past, alignment of incentives across programs is an important goal for
us.
Comment: Several of these commenters suggested that CMS delay
implementation of the measure based on the concerns discussed above,
including concern with measure reliability, risk-adjustment, degree of
hospital control over spending, measure specification, linkage of
spending to other quality measures, lack of NQF endorsement, lack of
parallel incentives for physicians, and lack of performance data.
Response: We responded above to these concerns, on which commenters
based their recommendation that we delay implantation of the MSPB
measure. We disagree with the suggestion that the MSPB measure's
implementation should be further delayed. As noted above, we believe
that the MSPB measure is appropriately risk-adjusted, that its
reliability has been established, and that it incentivizes hospitals to
exert their control of episode spending. We continue to believe that a
measure of cost is integral in recognizing and incentivizing hospitals
involved in providing high quality care to the beneficiaries they
serve, at a lower cost to Medicare. We note that the MAP, convened by
the NQF, identified measures of cost as a high-priority gap area for
the Hospital VBP Program and supported the measure for inclusion in the
Hospital IQR and Hospital VBP Programs in its February 2013 Pre-
Rulemaking Report. As we also noted above, the measure is currently
under review for endorsement by the NQF.
With regard to establishing parallel incentives, we have proposed a
similar measure for inclusion in the Physician Value Modifier Program
in the CY 2014 Physician Fee Schedule Proposed Rule (78 FR 43493
through 43496). With regard to provision of performance data, the
measure has been displayed on Hospital Compare since April 2012, and
performance data was updated in December of 2012. In October 2013, we
intend to publicly post CY 2012 performance data, which hospitals had
the opportunity to review during a data preview period from May to June
2013. We have provided detailed data to hospitals regarding their
performance on this measure. As we stated in the FY 2013 IPPS/LTCH PPS
final rule (77 FR 53586), we believe that implementation of this
measure without further delay is an important step in improving quality
of care for Medicare beneficiaries through provision of quality
inpatient care, improving post-acute care delivery and follow-up, and
reduction in the provision of unnecessary services and preventable
readmissions.
After consideration of the public comments we received, we are
finalizing a 12-month performance period for the MSPB measure for the
FY 2016 Hospital VBP Program of CY 2014, or January 1, 2014 through
December 31, 2014, with a corresponding baseline period of CY 2012, or
January 1, 2012 through December 31, 2012, as proposed.
We received a few general comments on our performance period
proposals.
Comment: Commenters expressed concerns about the varied baseline
and performance periods currently in operation under the Hospital VBP
Program. Commenters argued that CMS should attempt to align performance
and baseline periods across all Hospital VBP domains.
Response: We thank commenters for this feedback. We have attempted
to align performance and baseline periods to the fullest extent
possible under the Hospital VBP Program, and for most domains, we have
proposed to adopt baseline and performance periods aligned to the
calendar year. As discussed further below, we have proposed to adopt
baseline and performance periods of longer duration than the calendar
year for certain Outcome measures, but we have made these proposals in
order to maximize quality measure data reliability and to align those
periods with the Hospital Compare Web site's reporting periods. We are
aware that the various time periods involved in the Hospital VBP
Program may be confusing for hospitals, and will continue to work with
the provider community to ensure that participating hospitals fully
understand the Hospital VBP Program.
When we published the FY 2014 IPPS/LTCH PPS proposed rule, we
inadvertently did not make FY 2016 performance and baseline period
proposals for CLABSI, CAUTI, and SSI. We received a number of comments
on this issue.
Comment: Many commenters noted that CMS did not propose performance
periods for these measures in the proposed rule and requested that we
publish them as soon as possible. Commenters suggested that CMS defer

[[Page 50692]]

finalizing these measures until we issue a proposed rule with the
proposed baseline and performance periods.
Response: We thank commenters for noting this policy omission from
the proposed rule. We have proposed to adopt a FY 2016 performance
period of CY 2014, with a corresponding baseline period of CY 2012, for
these measures in the CY 2014 OPPS/ASC proposed rule (78 FR 43659). We
refer readers to that proposed rule for further discussion, and we will
consider public comments on this proposal in the CY 2014 OPPS/ASC final
rule with comment period.
Final baseline and performance periods for FY 2016 (with the
exception of the NHSN measures, described above, and the Outcome
domain, discussed further below) are summarized in the following table.

Finalized Performance and Baseline Periods for the FY 2016 Hospital VBP
Program--Clinical Process of Care, Patient Experience of Care, and
Efficiency Domains
------------------------------------------------------------------------
Domain Baseline period Performance period
------------------------------------------------------------------------
Clinical Process of Care.... January 1, 2012- January 1, 2014-
December 31, 2012. December 31, 2014.
Patient Experience of Care.. January 1, 2012- January 1, 2014-
December 31, 2012. December 31, 2014.
Efficiency.................. January 1, 2012- January 1, 2014-
December 31, 2012. December 31, 2014.
------------------------------------------------------------------------

e. Outcome Domain Performance Periods and Baseline Periods for the FY
2017 through FY 2019 Hospital VBP Programs
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53598 through 53599)
we finalized performance periods and baseline periods for the FY 2016
mortality and AHRQ PSI composite measures. These periods are summarized
in the table below.

Finalized FY 2016 Performance Periods and Baseline Periods for 30-Day
Mortality and AHRQ PSI Measures
------------------------------------------------------------------------
Measure Baseline period Performance period
------------------------------------------------------------------------
Mortality................... October 1, 2010-June October 1, 2012-June
30, 2011. 30, 2014.
AHRQ PSI composite.......... October 15, 2010- October 15, 2012-
June 30, 2011. June 30, 2014.
------------------------------------------------------------------------

In light of the time needed to process measure data for the three
30-day mortality and AHRQ PSI composite measures and our policy goal to
collect enough data to generate the most reliable scores possible, in
the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27613) we proposed to
adopt performance periods for the three 30-day mortality and AHRQ PSI
composite measures for the FY 2017 through FY 2019 program years. We
also seek to increase transparency about performance of the Hospital
VBP Program measures through use of Hospital Compare as a monitoring
tool for hospitals to assess their performance on the Hospital VBP
Program measures. We believe that aligning the Hospital VBP Program
performance periods with the Hospital IQR Program reporting period
duration would allow hospitals to review Hospital Compare measure rates
when they are updated and incorporate this information into their
quality improvement efforts, rather than having to wait until the
Hospital VBP Program provides its scoring reports to hospitals.
Further, we believe that aligning the Hospital IQR Program and the
Hospital VBP Program in this manner will minimize the burden on
participating hospitals by aligning the time periods during which they
must monitor their performance on these measures.
Therefore, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR
27613), we proposed to adopt the following performance and baseline
periods for the three 30-day mortality and AHRQ PSI composite measures
for the FY 2017 through FY 2019 Hospital VBP Programs. We noted that
the performance periods proposed below for the AHRQ PSI composite
measure reach 24 months at their maximum, compared to the 36 months
proposed for the 30-day mortality measures. We proposed those durations
for the AHRQ PSI measure in order to adopt performance periods that
align with AHRQ's recommended data period for public reporting.

Proposed Performance and Baseline Periods for 30-Day Mortality and AHRQ
PSI Composite Measures
------------------------------------------------------------------------
Domain Baseline period Performance period
------------------------------------------------------------------------
FY 2017 Hospital VBP Program
------------------------------------------------------------------------
Outcome:
Mortality...... October 1, October 1,
2010-June 30, 2012. 2013-June 30, 2015
AHRQ PSI....... October 1, October 1,
2010-June 30, 2012. 2013--June 30, 2015
------------------------------------------------------------------------
FY 2018 Hospital VBP Program
------------------------------------------------------------------------
Outcome:
Mortality...... October 1, October 1,
2009-June 30, 2012. 2013-June 30, 2016.
AHRQ PSI....... July 1, July 1,
2010-June 30, 2012. 2014--June 30,
2016.
------------------------------------------------------------------------

[[Page 50693]]

FY 2019 Hospital VBP Program
------------------------------------------------------------------------
Outcome:
Mortality...... July 1, July 1,
2009-June 30, 2012. 2014-June 30, 2017.
AHRQ PSI....... July 1, July 1,
2010-June 30, 2012. 2015--June 30,
2017.
------------------------------------------------------------------------

We invited public comments on our proposal to adopt performance
periods and corresponding baseline periods for these measures for the
FY 2017 through FY 2019 Hospital VBP Programs.
Comment: Commenters expressed support for the proposal to adopt
lengthier performance periods for these Outcome measures for FY 2017
through FY 2019, though some commenters were also concerned about
performance periods that overlap between payment years.
Response: We thank commenters for their support. We understand
commenters' concerns about performance periods that overlap between
payment years, but we view that overlap as unavoidable as long as we
intend to adopt performance periods for these measures with a longer
duration than 12 months, and as long as we intend to maintain a
relatively consistent measure set between Program years. For example,
while we could consider adopting measures with performance periods
longer than 12 months in alternate program years in order to avoid
overlap, we believe that this policy would result in substantial
confusion in the provider community. We view overlapping performance
periods as an acceptable compromise to enable increased performance
period length and therefore increased measure data reliability.
Comment: Some commenters raised continued objections to the
finalized FY 2016 performance period and baseline period for the AHRQ
PSI measure.
Response: We thank commenters for their concerns. However, we
finalized this policy in the FY 2013 IPPS/LTCH PPS final rule (77 FR
53597) after considering public comments. We believe these comments to
be beyond the scope of the policies addressed in this final rule.
Comment: Some commenters argued that the proposed performance
periods for these measures could increase the chances that a hospital
would be excluded from the Hospital VBP Program due to immediate
jeopardy citations, and suggested that, instead of aligning the
Hospital VBP performance periods to Hospital IQR Program reporting
periods, CMS consider making the Hospital IQR Program reporting periods
shorter.
Response: We thank commenters for their concerns. However, we
believe that the possibly increased risks of a hospital being excluded
from the Hospital VBP Program due to immediate jeopardy citations is
outweighed by the data reliability we gain from collecting mortality
and AHRQ PSI measures for longer periods.
Comment: Some commenters believe that CMS had displayed incorrect
dates for the proposed baseline and performance periods for FY 2017
through FY 2019 for certain Outcome measures. Commenters noted that the
baseline periods for FY 2018 and FY 2019 would begin in 2009, while the
baseline period for FY 2017 would begin in 2010.
Response: We believe commenters are referring to the second table
displayed in the FY 2013 IPPS/LTCH PPS proposed rule at 78 FR 27613.
However, we did not err in displaying the dates specified. When
developing the performance and baseline period proposals for the
proposed rule, we attempted to align performance and baseline periods'
durations, beginning dates, and end dates as much as possible in order
to ensure fair comparisons between the two periods for each year.
Because we proposed performance and baseline periods of increasing
length between FY 2017 and FY 2019, we proposed to begin baseline
periods for the mortality measures earlier in FY 2018 and FY 2019 than
FY 2017. As we stated in the proposed rule (78 FR 27613), we proposed
this policy to meet our policy goal of collecting enough data to
generate the most reliable measure scores possible. We view this policy
as necessary in order to finalize a 36-month performance period for the
mortality measures by FY 2019.
However, since performance on the AHRQ PSI measure is only reported
on Hospital Compare for a maximum of 24 months, we do not believe it is
necessary to finalize the measure's performance and baseline periods
for FY 2019 at this time. By declining to finalize the measure's FY
2019 performance and baseline periods in this final rule, we will be
able to adopt a more recent baseline period than was initially
proposed. We intend to adopt these periods for the AHRQ PSI measure for
FY 2019 in future rulemaking.
Comment: Some commenters expressed opposition to the proposal to
adopt lengthier performance periods for the mortality measures for FY
2017 through FY 2019. Commenters expressed their continued belief that
these measures are not adequately reliable and should be removed from
the Hospital VBP Program altogether. Commenters argued that the
measures do not meet the lower limit of moderate reliability, even with
a 24-month performance period. Commenters were appreciative of the
proposal to adopt a 36-month performance period for these measures, but
noted that CMS had not provided an updated reliability analysis, and
argued that CMS should instead explore proposing other outcome measures
in future rulemaking.
Response: We disagree. We believe that the mortality measures
capture important quality data for purposes of the Hospital VBP
Program. As we noted in the FY 2013 IPPS/LTCH PPS final rule (77 FR
53591), we believe that the three 30-day mortality measures are
sufficiently reliable for inclusion in the Hospital VBP Program,
particularly in light of our finalized policy to set a 25 case minimum
for these measures. We further believe that extending the performance
and baseline periods for these measures to 36 months by FY 2019
improves the measures' reliability beyond the range originally analyzed
by Mathematica Policy Research in its 2011 study, which we note
estimated reliability for these measures for a maximum of 24 months and
did not take into account a 25 case minimum for these measures.
Further, by aligning the measures' performance period with the duration
of the reporting period for Hospital IQR data posted on Hospital
Compare, we believe we are achieving more transparency with regard to
hospitals' performance on these measures under the Hospital VBP Program
because we are more closely matching the time periods involved in

[[Page 50694]]

current Hospital IQR public reporting with Hospital VBP performance.
After consideration of the public comments we received, we are
finalizing performance and baseline periods for the mortality and AHRQ
PSI measures for FY 2017 through FY 2019 as proposed, with the
exception of the AHRQ PSI measure's performance and baseline periods
for FY 2019, as described above.
Set out below are the finalized performance and baseline periods
for the 30-day mortality measures for the Hospital VBP Program for FY
2017 through FY 2019, and for the AHRQ PSI composite measure for FY
2017 and FY 2018.

Finalized Performance and Baseline Periods for 30-day Mortality and AHRQ
PSI Composite Measures
------------------------------------------------------------------------
Domain Baseline Period Performance Period
------------------------------------------------------------------------
FY 2017 Hospital VBP Program
------------------------------------------------------------------------
Outcome:
Mortality...... October 1, October 1,
2010-June 30, 2012. 2013-June 30, 2015.
AHRQ PSI....... October 1, October 1,
2010-June 30, 2012. 2013-June 30, 2015.
------------------------------------------------------------------------
FY 2018 Hospital VBP Program
------------------------------------------------------------------------
Outcome:
Mortality...... October 1, October 1,
2009-June 30, 2012. 2013-June 30, 2016.
AHRQ PSI....... July 1, July 1,
2010-June 30, 2012. 2014-June 30, 2016.
------------------------------------------------------------------------
FY 2019 Hospital VBP Program
------------------------------------------------------------------------
Outcome:
Mortality...... July 1, July 1,
2009-June 30, 2012. 2014-June 30, 2017.
------------------------------------------------------------------------

8. Performance Standards for the Hospital VBP Program
a. Background
Section 1886(o)(3)(A) of the Act requires the Secretary to
establish performance standards for the measures selected under the
Hospital VBP Program for a performance period for the applicable fiscal
year. The performance standards must include levels of achievement and
improvement, as required by section 1886(o)(3)(B) of the Act, and must
be established and announced not later than 60 days before the
beginning of the performance period for the fiscal year involved, as
required by section 1886(o)(3)(C) of the Act. Achievement and
improvement standards are discussed more fully in the Hospital
Inpatient VBP Program final rule (76 FR 26511 through 26513).
In addition, when establishing the performance standards, section
1886(o)(3)(D) of the Act requires the Secretary to consider appropriate
factors, such as: (1) Practical experience with the measures, including
whether a significant proportion of hospitals failed to meet the
performance standard during previous performance periods; (2)
historical performance standards; (3) improvement rates; and (4) the
opportunity for continued improvement. In the FY 2013 IPPS/LTCH PPS
final rule, (77 FR 53599 through 53604), we codified our interpretation
of the Hospital VBP statute with respect to performance standards in
our regulations at 42 CFR Sec. 412.165.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53599 through
53604), we adopted performance standards for FY 2015 and FY 2016
Hospital VBP Program measures. We also finalized our policy to update
performance periods and performance standards for future Hospital VBP
Program years via notice on our Web site or another publicly available
Web site.
b. Performance Standards for the FY 2016 Hospital VBP Program Measures
We refer readers to the Hospital Inpatient VBP Program final rule
(76 FR 26511 through 26513) for a detailed discussion of the
methodology we adopted for calculating performance standards with
respect to the clinical process of care, patient experience of care,
and outcome measures, and the FY 2012 IPPS/LTCH PPS final rule (76 FR
51654 through 51656) for a discussion of the methodology we adopted for
the MSPB measure. We have defined the ``achievement threshold'' as the
median, or 50th percentile, of all hospitals' performance on a measure
during a baseline period (or during the performance period in the case
of the MSPB measure) with respect to a fiscal year (42 CFR 412.160). In
the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27614), we proposed to
revise this definition, in order to clarify that while this is true for
the majority of Hospital VBP Program measures, it does not apply to the
MSPB measure. The performance standards for the MSPB measure are based
on performance period data, as finalized in the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51655). Accordingly, we proposed to revise the
definition of ``achievement threshold'' at 42 CFR 412.160 to read:
``Achievement threshold (or achievement performance standard) means the
median (50th percentile) of hospital performance on a measure during a
baseline period with respect to a fiscal year, for Hospital VBP Program
measures other than the Medicare Spending per Beneficiary measure, and
the median (50th percentile) of hospital performance on a measure
during the performance period with respect to a fiscal year, for the
Medicare Spending per Beneficiary measure.''
We have defined the ``benchmark'' as the arithmetic mean of the top
decile of all hospitals' performance on a measure during the baseline
period (42 CFR 412.160). Similar to the codified definition of
``achievement threshold'' above, this definition of ``benchmark'' does
not apply to the MSPB measure. In the FY 2014 IPPS/LTCH PPS proposed
rule (78 FR 27614), we proposed to revise the definition of
``benchmark'' at 42 CFR 412.160 to read: ``Benchmark means the
arithmetic mean of the top decile of hospital performance on a measure
during the baseline period with respect to a fiscal year, for Hospital
VBP Program measures other than the Medicare Spending per Beneficiary
measure, and the arithmetic mean of the top decile of hospital
performance on a measure during the performance period with respect to
a fiscal year, for the

[[Page 50695]]

Medicare Spending per Beneficiary measure.'' The ``improvement
threshold'' is an individual hospital's performance level on a measure
during the baseline period with respect to a fiscal year,'' and that
definition applies to all measures.
We welcomed public comments on these proposed regulation text
changes. However, we did not receive specific comments on the proposed
changes. We are therefore finalizing the regulation text changes as
proposed.
We stated that we continue to believe that the finalized
methodology for calculating performance standards is appropriate for
the Hospital VBP Program, and we recognize that we have an obligation
to calculate the numerical values for each of these standards
accurately. However, we also explained our concern that if we display
the numerical values of the performance standards in a particular
rulemaking document, but then discover that we made a data or
calculation error, the result might be that hospitals are held to
inaccurate performance standards. Examples of the types of errors that
could occur are inaccurate variables on Medicare claims, programming
errors, excluding hospitals that should have been included from
performance standards calculations, or other errors that result in
inaccuracies. For example, if our quality measurement software
incorrectly excluded a number of hospitals from a given measure's
performance standards calculation, the resulting achievement thresholds
and benchmarks could force participating hospitals to meet inaccurate
performance standards, which could have unpredictable effects on
hospitals' scores.
We stated that we are also aware that hospitals rely on the
performance standards that we publicly display in order to target
quality improvement efforts, and do not believe that it would be fair
to participating hospitals to update repeatedly our finalized
performance standards if we were to identify multiple errors.
We stated our belief that the best method to balance our obligation
to publicly display accurate performance standards with the need to
correct such performance standards if we subsequently discover data
errors is to make a single correction to a given measure's performance
standards for a fiscal year. Under this proposed policy, if we
identified data problems, calculation issues, or other errors with a
significant impact on performance standards, we would have the ability
to update the measure's performance standards once for a fiscal year.
Therefore, we proposed to interpret the finalized definitions of
``achievement threshold'' and ``benchmark'' found under 42 CFR 412.160
to not include the numerical values that result when the performance
standards are calculated. Further, we proposed to update a measure's
performance standards for a fiscal year once if we identify data
issues, calculation errors, or other problems that would significantly
change the displayed performance standards. However, as has been our
practice, and to remain fully transparent with participating hospitals,
we stated our intent to continue to display the performance standards'
numerical values in rulemaking.
We invited public comments on this proposed interpretation.
However, we did not receive any public comments on this policy. We are
therefore finalizing our proposal to interpret the finalized
definitions of ``achievement threshold'' and ``benchmark'' found under
Sec. 412.160 to not include the numerical values that result when the
performance standards are calculated.
We finalized FY 2016 performance standards for the three 30-day
mortality measures and the AHRQ PSI composite measure in the FY 2013
IPPS/LTCH PPS final rule (77 FR 53603) and are displaying them again in
the first table below. The numerical values for the proposed FY 2016
performance standards for the clinical process, outcome, and efficiency
measures appear in the second table below, while numerical values for
the proposed FY 2016 performance standards for the patient experience
of care (HCAHPS survey) measure appear in the third table below. We
note that the numerical values for the performance standards displayed
below represent estimates at the time that the proposed rule was
published based on what was the most recently-available data. In the FY
2014 IPPS/LTCH PPS proposed rule (78 FR 27614), we stated that we
intended to update the numerical values in the FY 2014 IPPS/LTCH PPS
final rule. Because the MSPB measure's performance standards are based
on performance period data, we are unable to provide numeric
equivalents for the standards at this time. In the proposed rule, we
provided historical performance standards, for information purposes.
During the period of May 1, 2011 through December 31, 2011, the
achievement threshold would have been a MSPB ratio of 0.99, which
corresponds to a standardized, risk-adjusted MSPB amount of $18,079,
and the benchmark would have been 0.82, which corresponds to an MSPB
amount of $14,985. In this final rule, we are providing more recent
historical performance standards, also for information purposes. During
the period of January 1, 2012 through December 31, 2012, the
achievement threshold would have been an MSPB ratio of 0.98, which
corresponds to a standardized, risk-adjusted MSPB amount of $18,412,
and the benchmark would have been 0.82, which corresponds to an MSPB
amount of $15,311. We also noted that the performance standards for the
NHSN-based CLABSI, CAUTI, and SSI measures, the AHRQ PSI composite
measure, and the MSPB measure are calculated with lower values
representing better performance, in contrast to other measures, on
which higher values indicate better performance. As discussed above,
the proposed performance standards displayed below for SSI are an
equally weighted average of the measure's strata.

Finalized Performance Standards for Certain FY 2016 Hospital VBP Program
Outcome Domain Measures
------------------------------------------------------------------------
Achievement
Measure ID Description threshold Benchmark
------------------------------------------------------------------------
Outcome Measures
------------------------------------------------------------------------
MORT-30-AMI........... Acute Myocardial 0.847472 0.862371
Infarction
(AMI) 30-day
mortality rate.
MORT-30-HF............ Heart Failure 0.881510 0.900315
(HF) 30-day
mortality rate.
MORT-30-PN............ Pneumonia (PN) 0.882651 0.904181
30-day
mortality rate.
PSI-90................ Complication/ 0.622879 0.451792
patient safety
for selected
indicators
(composite).
------------------------------------------------------------------------

[[Page 50696]]

Proposed Performance Standards for the FY 2016 Hospital VBP Program
Clinical Process of Care, Outcome, and Efficiency Domain Measures
------------------------------------------------------------------------
Achievement
Measure ID Description threshold Benchmark
------------------------------------------------------------------------
Clinical Process of Care Measures
------------------------------------------------------------------------
AMI-7a............... Fibrinolytic 0.88625........ 1.00000
Therapy
Received
Within 30
Minutes of
Hospital
Arrival.
IMM-2................ Influenza 0.89947........ 0.99036
Immunization.
PN-6................. Initial 0.96429........ 1.00000
Antibiotic
Selection for
CAP in
Immunocompeten
t Patient.
SCIP-Inf-1........... Prophylactic 0.98942........ 1.00000
Antibiotic
Received
Within One
Hour Prior to
Surgical
Incision.
SCIP-Inf-2........... Prophylactic 0.98951........ 1.00000
Antibiotic
Selection for
Surgical
Patients.
SCIP-Inf-3........... Prophylactic 0.97971........ 1.00000
Antibiotics
Discontinued
Within 24
Hours After
Surgery End
Time.
SCIP-Inf-4........... Cardiac Surgery 0.96797........ 0.99977
Patients with
Controlled 6AM
Postoperative
Serum Glucose.
SCIP-Inf-9........... Urinary 0.96743........ 1.00000
Catheter
Removed on
Postoperative
Day 1 or
Postoperative
Day 2.
SCIP-Card-2.......... Surgery 0.97561........ 1.00000
Patients on
Beta-Blocker
Therapy Prior
to Arrival Who
Received a
Beta-Blocker
During the
Perioperative
Period.
SCIP-VTE-2........... Surgery 0.98086........ 1.00000
Patients Who
Received
Appropriate
Venous
Thromboembolis
m Prophylaxes
Within 24
Hours Prior to
Surgery to 24
Hours After
Surgery.
------------------------------------------------------------------------
Outcome Measures
------------------------------------------------------------------------
CAUTI................ Catheter- 0.826.......... 0.000
Associated
Urinary Tract
Infection.
CLABSI............... Central Line- 0.473.......... 0.000
Associated
Blood Stream
Infection.
SSI.................. Surgical Site 0.737.......... 0.000
Infection.
------------------------------------------------------------------------
Efficiency Measures
------------------------------------------------------------------------
MSPB-1............... Medicare Median Medicare Mean of the
Spending per Spending per lowest decile
Beneficiary. Beneficiary Medicare
ratio across Spending per
all hospitals Beneficiary
during the ratios across
performance all hospitals
period. during the
performance
period
------------------------------------------------------------------------

Proposed Performance Standards for the FY 2016 Hospital VBP Program Patient Experience of Care Domain
----------------------------------------------------------------------------------------------------------------
Achievement
HCAHPS Survey Dimension Floor threshold Benchmark
(percent) (percent) (percent)
----------------------------------------------------------------------------------------------------------------
Communication with Nurses....................................... 53.33 77.59 85.98
Communication with Doctors...................................... 61.22 80.33 88.59
Responsiveness of Hospital Staff................................ 36.44 64.65 79.72
Pain Management................................................. 47.93 70.16 78.24
Communication about Medicines................................... 42.23 62.28 72.67
Hospital Cleanliness & Quietness................................ 42.16 64.93 79.12
Discharge Information........................................... 62.85 84.45 90.26
Overall Rating of Hospital...................................... 36.45 69.05 83.89
----------------------------------------------------------------------------------------------------------------

We invited public comments on the proposed performance standards.
Comment: One commenter suggested that CMS phase out the Hospital
VBP Program's use of improvement points when calculating hospitals'
TPSs. The commenter explained that the Hospital VBP Program's initial
implementation made improvement points necessary to encourage
historically poor-performing hospitals to improve by giving them an
opportunity to earn a value-based incentive payment based on their
improvement. Other commenters argued, however, that the Hospital VBP
Program should instead offer only achievement points in order to stop
rewarding hospitals for catching up after providing subpar care
delivery in the past.

[[Page 50697]]

Response: We thank commenters for this suggestion. However, the
Hospital VBP statute requires that the performance standards include
levels of both achievement and improvement. Our finalized scoring
methodology awards points for improvement based on performance during
the baseline period compared to performance during the performance
period, and we continue to believe that this methodology enables us to
incentivize hospitals both to achieve high performance on quality
measures and to improve their performance over time. We will consider
further revising our scoring methodology in the future.
Comment: Commenters requested that CMS address how hospitals'
measured performance will change under CMS' pay-for-performance
programs when the transition to ICD-10-CM/PCS codes occurs on October
1, 2014. Commenters argued that it would be unfair to compare baseline
period data coded under one system to performance period data coded
under another.
Response: We intend to address this topic with respect to the
Hospital VBP Program in future rulemaking.
After consideration of the public comments we received, we are
finalizing our FY 2016 performance standards for the Clinical Process
of Care, Efficiency, and Patient Experience of Care domains as
proposed, with the exception of the performance standards for SCIP-Inf-
4, described further above. In addition, we are finalizing a modified
SSI measure performance standards calculation, as described above in
section V.H.6.b. of the preamble of this final rule.
Set out below are the finalized performance standards for the
Clinical Process of Care, Outcome, Efficiency, and Patient Experience
of Care Domains.

Finalized Performance Standards for the FY 2016 Hospital VBP Program
Clinical Process of Care, Outcome, and Efficiency Domain Measures
------------------------------------------------------------------------
Achievement
Measure ID Description threshold Benchmark
------------------------------------------------------------------------
Clinical Process of Care Measures
------------------------------------------------------------------------
AMI-7a............... Fibrinolytic 0.91154........ 1.00000
Therapy
Received
Within 30
Minutes of
Hospital
Arrival.
IMM-2................ Influenza 0.90607........ 0.98875
Immunization.
PN-6................. Initial 0.96552........ 1.00000
Antibiotic
Selection for
CAP in
Immunocompeten
t Patient.
SCIP-Inf-2........... Prophylactic 0.99074........ 1.00000
Antibiotic
Selection for
Surgical
Patients.
SCIP-Inf-3........... Prophylactic 0.98086........ 1.00000
Antibiotics
Discontinued
Within 24
Hours After
Surgery End
Time.
SCIP-Inf-9........... Urinary 0.97059........ 1.00000
Catheter
Removed on
Postoperative
Day 1 or
Postoperative
Day 2.
SCIP-Card-2.......... Surgery 0.97727........ 1.00000
Patients on
Beta-Blocker
Therapy Prior
to Arrival Who
Received a
Beta-Blocker
During the
Perioperative
Period.
SCIP-VTE-2........... Surgery 0.98225........ 1.00000
Patients Who
Received
Appropriate
Venous
Thromboembolis
m Prophylaxes
Within 24
Hours Prior to
Surgery to 24
Hours After
Surgery.
------------------------------------------------------------------------
Outcome Measures
------------------------------------------------------------------------
CAUTI................ Catheter- 0.801.......... 0.000
Associated
Urinary Tract
Infection.
CLABSI............... Central Line- 0.465.......... 0.000
Associated
Blood Stream
Infection.
SSI.................. Surgical Site
Infection.
Colon 0.668 0.000
0.752 0.000
Abdominal
Hysterectomy
------------------------------------------------------------------------
Efficiency Measures
------------------------------------------------------------------------
MSPB-1............... Medicare Median Medicare Mean of the
Spending per Spending per lowest decile
Beneficiary. Beneficiary Medicare
ratio across Spending per
all hospitals Beneficiary
during the ratios across
performance all hospitals
period. during the
performance
period
------------------------------------------------------------------------

Finalized Performance Standards for the FY 2016 Hospital VBP Program Patient Experience of Care Domain
----------------------------------------------------------------------------------------------------------------
Achievement
HCAHPS Survey dimension Floor threshold Benchmark
(percent) (percent) (percent)
----------------------------------------------------------------------------------------------------------------
Communication with Nurses....................................... 53.99 77.67 86.07
Communication with Doctors...................................... 57.01 80.40 88.56

[[Page 50698]]

Responsiveness of Hospital Staff................................ 38.21 64.71 79.76
Pain Management................................................. 48.96 70.18 78.16
Communication about Medicines................................... 34.61 62.33 72.77
Hospital Cleanliness & Quietness................................ 43.08 64.95 79.10
Discharge Information........................................... 61.36 84.70 90.39
Overall Rating of Hospital...................................... 34.95 69.32 83.97
----------------------------------------------------------------------------------------------------------------

c. Certain Performance Standards for the FY 2017, FY 2018, and FY 2019
Hospital VBP Programs
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27616) we
proposed to adopt the following performance standards for the three 30-
day mortality and AHRQ PSI composite measures for the FY 2017, FY 2018,
and FY 2019 Hospital VBP Program years:

Proposed Performance Standards for the Three 30-Day Mortality and AHRQ
Composite Measures for the FY 2017 Hospital VBP Program
------------------------------------------------------------------------
Achievement
Measure ID Description threshold Benchmark
------------------------------------------------------------------------
Outcome Measures
------------------------------------------------------------------------
MORT-30-AMI........... Acute Myocardial 0.851458 0.871669
Infarction
(AMI) 30-day
mortality rate.
MORT-30-HF............ Heart Failure 0.881794 0.903985
(HF) 30-day
mortality rate.
MORT-30-PN............ Pneumonia (PN) 0.882986 0.908124
30-day
mortality rate.
PSI-90................ Complication/ 0.580808 0.399880
patient safety
for selected
indicators
(composite).
------------------------------------------------------------------------

Proposed Performance Standards for the Three 30-Day Mortality and AHRQ
Composite Measures for the FY 2018 Hospital VBP Program
------------------------------------------------------------------------
Achievement
Measure ID Description threshold Benchmark
------------------------------------------------------------------------
Outcome Measures
------------------------------------------------------------------------
MORT-30-AMI........... Acute Myocardial 0.850916 0.873053
Infarction
(AMI) 30-day
mortality rate.
MORT-30-HF............ Heart Failure 0.883421 0.907656
(HF) 30-day
mortality rate.
MORT-30-PN............ Pneumonia (PN) 0.882860 0.907900
30-day
mortality rate.
PSI-90................ Complication/ 0.585397 0.400502
patient safety
for selected
indicators
(composite).
------------------------------------------------------------------------

Proposed Performance Standards for the Three 30-Day Mortality and AHRQ
Composite Measures for the FY 2019 Hospital VBP Program
------------------------------------------------------------------------
Achievement
Measure ID Description threshold Benchmark
------------------------------------------------------------------------
Outcome Measures
------------------------------------------------------------------------
MORT-30-AMI........... Acute Myocardial 0.850671 0.873263
Infarction
(AMI) 30-day
mortality rate.
MORT-30-HF............ Heart Failure 0.883472 0.908094
(HF) 30-day
mortality rate.
MORT-30-PN............ Pneumonia (PN) 0.882334 0.907906
30-day
mortality rate.
PSI-90................ Complication/ 0.585397 0.400502
patient safety
for selected
indicators
(composite).
------------------------------------------------------------------------

We invited public comment on these proposed performance standards.
However, we did not receive any comments specific to these proposed
performance standards. We are therefore finalizing the performance
standards as proposed, with the exception of the FY 2019 performance
standards for the AHRQ PSI measure. As discussed further above in
section V.H.7.e. of the preamble of this final rule, we intend to adopt
the AHRQ PSI measure for FY 2019 in future rulemaking, and believe that
by declining to finalize its performance periods and performance
standards at this time, we may select a more recent baseline period for
that measure for FY 2019. We note further that the performance
standards for the mortality measures for FY 2017 through FY 2019 have
not changed since they were displayed in the proposed rule.

[[Page 50699]]

Finalized Performance Standards for the Three 30-Day Mortality and AHRQ
Composite Measures for the FY 2017 Hospital VBP Program
------------------------------------------------------------------------
Achievement
Measure ID Description threshold Benchmark
------------------------------------------------------------------------
Outcome Measures
------------------------------------------------------------------------
MORT-30-AMI........... Acute Myocardial 0.851458 0.871669
Infarction
(AMI) 30-day
mortality rate.
MORT-30-HF............ Heart Failure 0.881794 0.903985
(HF) 30-day
mortality rate.
MORT-30-PN............ Pneumonia (PN) 0.882986 0.908124
30-day
mortality rate.
PSI-90................ Complication/ 0.577321 0.397051
patient safety
for selected
indicators
(composite).
------------------------------------------------------------------------

Finalized Performance Standards for the Three 30-Day Mortality and AHRQ
Composite Measures for the FY 2018 Hospital VBP Program
------------------------------------------------------------------------
Achievement
Measure ID Description threshold Benchmark
------------------------------------------------------------------------
Outcome Measures
------------------------------------------------------------------------
MORT-30-AMI........... Acute Myocardial 0.850916 0.873053
Infarction
(AMI) 30-day
mortality rate.
MORT-30-HF............ Heart Failure 0.883421 0.907656
(HF) 30-day
mortality rate.
MORT-30-PN............ Pneumonia (PN) 0.882860 0.907900
30-day
mortality rate.
PSI-90................ Complication/ 0.582626 0.398030
patient safety
for selected
indicators
(composite).
------------------------------------------------------------------------

Finalized Performance Standards for the Three 30-Day Mortality and AHRQ
Composite Measures for the FY 2019 Hospital VBP Program
------------------------------------------------------------------------
Achievement
Measure ID Description threshold Benchmark
------------------------------------------------------------------------
Outcome Measures
------------------------------------------------------------------------
MORT-30-AMI........... Acute Myocardial 0.850671 0.873263
Infarction
(AMI) 30-day
mortality rate.
MORT-30-HF............ Heart Failure 0.883472 0.908094
(HF) 30-day
mortality rate.
MORT-30-PN............ Pneumonia (PN) 0.882334 0.907906
30-day
mortality rate.
------------------------------------------------------------------------

9. FY 2016 Hospital VBP Program Scoring Methodology
a. General Hospital VBP Program Scoring Methodology
In the Hospital Inpatient VBP Program final rule, we adopted a
methodology for scoring clinical process of care, patient experience of
care, and outcome measures. As noted in that rule, this methodology
outlines an approach that we believe is well understood by patient
advocates, hospitals, and other stakeholders because it was developed
during a lengthy process that involved extensive stakeholder input, and
was based on a scoring methodology we presented in a report to
Congress. We also noted in that final rule that we had conducted
extensive additional research on a number of other important
methodology issues to ensure a high level of confidence in the scoring
methodology (76 FR 26514). In addition, we believe that, for reasons of
simplicity, transparency, and consistency, it is important to score
hospitals using the same general methodology each year, with
appropriate modifications to accommodate new domains and measures. We
finalized a scoring methodology for the MSPB measure in the FY 2012
IPPS/LTCH PPS final rule (76 FR 51654 through 51656).
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 28087), for the FY
2015 Hospital VBP Program, we finalized our proposal to use these same
scoring methodologies to score hospital performance for the FY 2015
Hospital VBP Program. In that rule, we stated that we believe these
scoring methodologies continue to appropriately capture hospital
quality as reflected by the finalized quality measure sets. We also
noted that readopting the finalized scoring methodology from prior
program years represents the simplest and most consistent policy for
providers and the public.
We continue to believe that the finalized scoring methodology for
the Hospital VBP Program is well understood by patient advocates,
hospitals, and other stakeholders because it was developed during a
lengthy process that involved extensive stakeholder input, and was
based on a scoring methodology we presented in a report to Congress. As
we stated in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53604), we
believe that, for reasons of simplicity, transparency, and consistency,
it is important to score hospitals using the same general methodology
each year, with appropriate modifications to accommodate new domains
and measures.
Therefore, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27616
through 27617), we proposed to readopt the finalized scoring
methodology adopted for the FY 2015 Hospital VBP Program for the FY
2016 Hospital VBP Program. We welcomed public comment on this proposal.
However, we did not receive any public comments specific to the
proposed scoring methodology. Therefore, we are finalizing the scoring
methodology as proposed.
b. Domain Weighting for the FY 2016 Hospital VBP Program for Hospitals
That Receive a Score on All Domains
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53582 through
53592), we added the Efficiency domain to the Hospital VBP Program
beginning with the FY 2015 Hospital VBP Program. We

[[Page 50700]]

also finalized our proposal for the following domain weights for the FY
2015 Hospital VBP Program for hospitals that receive a score on all
four proposed domains (77 FR 53605 through 53606):

Final Domain Weights for the FY 2015 Hospital VBP Program for Hospitals
Receiving a Score on All Proposed Domains
------------------------------------------------------------------------
Domain Weight %
------------------------------------------------------------------------
Clinical Process of Care................................... 20
Patient Experience of Care................................. 30
Outcome.................................................... 30
Efficiency................................................. 20
------------------------------------------------------------------------

We stated that we believed this domain weighting appropriately
reflects our priorities for quality improvement in the inpatient
hospital setting and begins aligning with the National Quality
Strategy's priorities. We believe that the domain weighting will
continue to improve the link between Medicare payments to hospitals and
patient outcomes, efficiency and cost, and the patient experience. We
note that the weighting places the strongest relative emphasis on
outcomes and the patient experience, which we view as two critical
components of quality improvement in the inpatient hospital setting. We
further note that the domain weighting, for the first time,
incorporates a measure of efficiency and continues to provide
substantial weight to clinical processes.
As we stated in the Hospital Inpatient VBP Program final rule (76
FR 26491), we believe that domains need not be given equal weight, and
that over time, scoring methodologies should be weighted more towards
outcomes, patient experience of care, and functional status measures
(for example, measures assessing physical and mental capacity,
capability, well-being and improvement). We took these considerations
into account when developing the domain weighting proposal outlined
below.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27617), we
proposed domain weights for hospitals that receive a score in all
proposed domains. We believe that the proposed domain weighting
specified below will continue to improve the link between Medicare
payments to hospitals and patient outcomes, efficiency and cost, and
the patient experience. We note that the proposed domain weighting
places the highest relative weight on measures of outcomes and
continues to place significant weight on the patient experience and on
efficiency, while maintaining clinical processes as an important
component of the program's quality measurement.
Therefore, we proposed the following domain weighting for the FY
2016 Hospital VBP Program:

Proposed Domain Weights for the FY 2016 Hospital VBP Program for
Hospitals Receiving a Score on All Proposed Domains
------------------------------------------------------------------------
Domain Weight %
------------------------------------------------------------------------
Clinical Process of Care................................... 10
Patient Experience of Care................................. 25
Outcome.................................................... 40
Efficiency................................................. 25
------------------------------------------------------------------------

We welcomed public comment on this proposed domain weighting.
Comment: Commenters supported the proposal to place more emphasis
on the Outcome domain compared to Clinical Process of Care domain.
Commenters also recommended that CMS consider the relative magnitude of
quality incentives across programs when developing our domain
weighting.
Response: We thank commenters for their support.
Comment: Some commenters strongly supported significant domain
weighting for the Patient Experience of Care domain, arguing that it is
imperative that hospitals continue to focus on the patient's experience
when developing quality improvement efforts. Commenters suggested that
CMS consider retaining the 30 percent weight finalized for FY 2015's
Patient Experience of Care domain for FY 2016 and future years.
Response: We thank commenters for their support for substantial
weighting for the Patient Experience of Care Domain. We agree that
hospitals should be provided strong incentives to focus on the
patient's experience of care during acute inpatient hospitalizations,
and believe that our proposed weighting for the Patient Experience of
Care domain for FY 2016 reflects that priority. We do not believe that
the minor change to the Patient Experience of Care domain's weighting
proposed for FY 2016 will diminish significantly the strong emphasis
that hospitals place on the patient's experience during acute
hospitalizations.
Comment: Some commenters opposed the proposed domain weighting,
arguing that the Patient Experience of Care domain received too much
weight as proposed. Commenters cited several studies and articles and
argued that highly satisfied patients often have worse health outcomes,
and that emphasizing patient satisfaction has contributed to narcotics
abuse. These commenters recommended that CMS reconsider this domain's
weighting. Commenters also expressed concern about the proposal to
weight the Patient Experience of Care domain more heavily than the
Clinical Process of Care domain, arguing that Patient Experience of
Care measures do not necessarily correlate with medical outcomes, and
suggested that CMS more evenly balance the domain weighting given to
those two domains. Commenters also suggested that the HCAHPS measure
lacks sufficient risk-adjustment, and that the survey systematically
disadvantages hospitals that take on complex and sicker patients.
Response: We thank the commenters for their feedback. CMS and the
HCAHPS Project Team are familiar with the studies cited. We are also
aware of a number of studies published in peer-reviewed journals that
have found that patient experience of care, as measured by the HCAHPS
survey, is strongly and positively related to clinical process
measures, outcomes, readmissions, and mortality. For brief reviews of
these findings, we refer readers to: ``The Patient Experience and
Health Outcomes.'' Matthew Manary, William Boulding, Richard Staelin,
and Seth Glickman. New England Journal of Medicine, 368 (3): 201-203.
2013 and ``What does the patient know about quality?'' Karen Luxford.
International Journal for Quality in Health Care. 24 (5): 439-440.
2012.
With respect to the articles cited by the commenter, we note that
other researchers have cited flaws in the approach, data and
methodology employed in the Fenton, et al., study, which did not
directly examine the HCAHPS Survey. The study by Lyu, et al. is
premised upon the misunderstanding that CMS uses patient experience as
the sole criterion for measuring and assessing hospital quality. In
addition, their findings, based on examination of 31 hospitals, may
insufficiently represent the over 3,000 hospitals that participate in
the Hospital VBP Program and the approximately 4,000 hospitals that
participate in the Hospital IQR Program.
The focus of the Forbes magazine article \42\ the commenter cited
is surveys of physicians, not of the inpatient hospital experience. The
HCAHPS Survey asks inpatients how often doctors treated them with
courtesy and respect, listened carefully to the patient,

[[Page 50701]]

and explained things in a way they could understand. HCAHPS does not
identify or differentiate among the physicians who treated the patient.
We are not aware of documented evidence or research that demonstrates
that HCAHPS or other patient surveys have led hospitals or physicians
to give patients ``exactly what they want,'' including medically
unnecessary pain medications, in order to influence patients' responses
to such surveys.
---------------------------------------------------------------------------

\42\ Falkenberg, K., ``Why rating your doctor is bad for your
health.'' Forbes: January 21, 2013.
---------------------------------------------------------------------------

We believe that patient experience of care is a fundamental and
intrinsically important aspect of hospital quality which merits its
proposed weighting in the Hospital VBP Program TPS.
As we stated in the Hospital Inpatient VBP final rule (76 FR
26526), we believe that delivery of high-quality, patient-centered care
requires us to carefully consider the patient's experience in the
hospital inpatient setting. Moreover, as we stated in the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53606), we are aware of no data suggesting
that patient characteristics result in bias in the HCAHPS patient-mix
adjusted data used in the Hospital VBP Program.
We thoroughly tested the HCAHPS patient-mix adjustment model before
the national implementation of the HCAHPS Survey in 2006 and have
checked it regularly since. We use a patient-mix adjustment, also known
as case-mix adjustment, in a transparent manner in our standard
patient-mix adjustment of HCAHPS scores, as explained on the official
HCAHPS On-Line Web site, https://www.hcahpsonline.org, in our research
documents, in the patient-mix adjustment coefficients that are posted
on this Web site, and in our published research.
The HCAHPS Survey includes an item that asks for patients'
assessment of their overall health that we use in our standard patient-
mix adjustment of HCAHPS scores to account for patient acuity.
While we continue to believe that this adjustment adequately
captures patient acuity, in response to comments about HCAHPS in
previous IPPS rules, we added an item to the HCAHPS Survey in January
2013 that asks patients to assess their overall mental or emotional
health. At this time, we are analyzing the effect of patients' overall
mental or emotional health on HCAHPS scores. Based on the results of
this analysis, we will determine whether we believe a further patient-
mix adjustment for mental or emotional health may be warranted.
Therefore, we do not believe that the proposed weighting for the
Patient Experience of Care domain is too high, and we believe that
placing significant weighting on the Patient Experience of Care
appropriately encourages hospitals to focus intently on this clinical
area.
Comment: Some commenters fully supported the proposed increase in
the Efficiency domain weight, and a few of those commenters expressed
support for an aggressive increase in its weight over time. MedPAC also
supported the proposed domain weights.
Response: We thank the commenters for their support, and we agree
that shift in emphasis on efficiency is one important goal for the
Hospital VBP Program.
Comment: Many commenters opposed the increased weight for the
Efficiency domain from 20 percent in FY 2015 to 25 percent for FY 2016.
The commenters' opposition was based on concerns related to the MSPB
measure and the fact that the domain is comprised of only one measure.
Response: We responded to commenters' concerns with the MSPB
measure in general in section V.H.7.d of the preamble to this final
rule. With regard to the concern that the domain is comprised of only
one measure, we acknowledge the potential for building a more robust
efficiency measure set, as we stated in the FY 2013 IPPS/LTCH PPS final
rule (77 FR 53585 through 53586), and we solicited and received public
comments on how we might pursue that goal in this rule. We intend to
ensure that any additional efficiency measures are fully developed,
tested, included in the Hospital IQR Program, and posted on the
Hospital Compare Web site before they are included in the Hospital VBP
Program, in accordance with the program's statutory requirements. In
the interim, we continue to believe that increased emphasis on
efficiency is an important goal for the Hospital VBP Program, and that
the efficiency domain weight should be increased accordingly.
Comment: Some commenters opposed the proposed FY 2016 domain
weighting, arguing that the Outcome, Patient Experience of Care, and
Efficiency domains were accorded too much weighting as proposed.
Commenters argued that the Clinical Process of Care domain should be
given increased weight given those measures' long inclusion in both the
Hospital IQR and Hospital VBP Programs. Other commenters argued that
because of reliability concerns about certain Outcome measures, the
proposed weight for the Outcome domain is inappropriate.
Response: We disagree that we have placed too much weight on the
Outcome, Patient Experience, and Efficiency domains. In the Hospital
Inpatient VBP Program final rule (76 FR 26526), we stated our intent to
consider placing greater weight on measures of outcomes than measures
of clinical processes as we developed our domain weighting proposals
for FY 2014, and we believe we have appropriately done so when
proposing domain weights for FY 2014 and FY 2015. We believe it is
appropriate to continue placing a strong emphasis on measures of
clinical outcomes under the Hospital VBP Program. As described further
above, we also believe it to be appropriate to place significant weight
on the Patient Experience of Care and Efficiency domains.
While we agree that Clinical Process of Care measures are important
to quality measurement, we believe that placing emphasis on measures of
Outcomes necessarily requires some reduction to the domain weight
placed on Clinical Processes, in particular because the Clinical
Process of Care domain was weighted as 70 percent of the TPS under the
FY 2013 Hospital VBP Program.
After consideration of the public comments we received, we are
finalizing the FY 2016 domain weighting for hospitals receiving a score
on all domains as proposed.
Set out below are the finalized domain weights for hospitals that
receive a score in all proposed domains.

Finalized Domain Weights for the FY 2016 Hospital VBP Program for
Hospitals Receiving a Score on All Proposed Domains
------------------------------------------------------------------------
Domain Weight %
------------------------------------------------------------------------
Clinical Process of Care................................... 10
Patient Experience of Care................................. 25
Outcome.................................................... 40
Efficiency................................................. 25
------------------------------------------------------------------------

c. Domain Weighting for the FY 2016 Hospital VBP Program for Hospitals
Receiving Scores on Fewer Than Four Domains
In prior program years, we finalized a policy that hospitals must
have received domain scores on all finalized domains in order to
receive a TPS. However, since the Hospital VBP Program has evolved from
its initial two domains to an expanded measure set with additional
domains, we considered whether it was appropriate to continue this
policy.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53608 through
53609), we finalized our proposal for a higher minimum number of cases
for the three

[[Page 50702]]

30-day mortality measures for the FY 2015 Hospital VBP Program than was
finalized for the FY 2014 Hospital VBP Program. We made this change in
our policy in order to improve these measures' reliability given the
relatively short performance period for these measures. However, we
were concerned that the relatively higher minimum number of cases could
result in a substantially larger number of hospitals being excluded
from the Hospital VBP Program. We believe that we should make a
concerted effort to include as many hospitals as possible in the
program in order to offer quality incentives and encourage quality
improvement.
Therefore, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53606
through 53607), we finalized our proposal that, for the FY 2015
Hospital VBP Program and subsequent years, hospitals with sufficient
data to receive at least two domain scores (that is, sufficient cases
and measures to receive a domain score on at least two domains) will
receive a TPS. We also finalized our proposal that, for hospitals with
at least two domain scores, TPSs would be reweighted proportionately to
the scored domains to ensure that the TPS is still scored out of a
possible 100 points and that the relative weights for the scored
domains remain equivalent to the weighting which occurs when there are
scores in all four domains. We believe that this approach allows us to
include relatively more hospitals in the Hospital VBP Program while
continuing to focus on reliably scoring hospitals on their quality
measure performance. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR
27617 through 26718), we proposed to continue this approach for the FY
2016 Hospital VBP Program and subsequent fiscal years for purposes of
eligibility for the program. However, as detailed further below, we
proposed to reclassify the Hospital VBP Program's quality measurement
domains beginning with the FY 2017 Hospital VBP Program to align more
closely with CMS' National Quality Strategy, and we sought public
comments on how we should determine minimum numbers of cases and
measures under that proposed policy.
We invited public comment on this proposed reweighting for
hospitals with sufficient data on at least two finalized domains.
However, we did not receive any comments specific to this policy. We
are therefore finalizing this policy as proposed.
d. Domain Reclassification and Domain Weighting for the FY 2017
Hospital VBP Program
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53593 through
53594), we outlined one possible set of measure classifications based
on the National Quality Strategy. However, we did not finalize our
proposal to adopt quality measurement domains based on the National
Quality Strategy for the FY 2016 Hospital VBP Program, because we
understood stakeholders to be concerned about our proposal to reshape
the Hospital VBP Program's scoring methodology before hospitals had
actual experience with the program and its value-based incentive
payments.
However, we now believe that hospitals have accumulated practical
experience with all components of the Hospital VBP Program, including
performance periods and payment periods. As a result of our extensive
outreach efforts to hospitals and stakeholders, as well as the
practical experience with the first year of the program, we also
believe that hospitals and other stakeholders generally understand the
program's operations and scoring methodology. Therefore, we believe
that we have addressed commenters' concerns, summarized in the FY 2013
IPPS/LTCH PPS final rule (77 FR 53594), that we should wait until
hospitals have experienced the program fully before fundamentally
reshaping its structure.
We are attempting to align all of our quality improvement efforts
with the NQS, particularly because it is a patient-centered approach
that aligns public and private efforts. We are aware that NQF uses NQS-
based domains, and we also use those domains in development of other
agency-specific efforts. We note further that stakeholders frequently
request that HHS align its quality improvement efforts so that
providers are not subjected to different measurement approaches, and we
believe that adapting the Hospital VBP Program domain structure is one
approach to achieving that goal. We believe that the longer we wait to
adapt the Hospital VBP Program to the NQS domains, the more difficult
it will be, and we believe we need a common framework as we begin
alignment efforts between the Hospital IQR Program, the Hospital VBP
Program, and the Medicare EHR Incentive Program. CMS's quality
measurement strategic plan also centers on the NQS, and we believe that
using these domains rewards hospitals for providing more efficient and
more patient-centered care. The most recent Annual Progress Report to
Congress addressing the NQS can be found on the Web site at: https://www.ahrq.gov/workingforquality/nqs/nqs2012annlrpt.pdf.
Therefore, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27618
through 27619), we proposed to align the Hospital VBP Program's quality
measurement domains with the NQS' quality priorities, with certain
modifications discussed further below. We proposed to adopt this
realignment beginning with the FY 2017 Hospital VBP Program.
We proposed to combine the priorities of Care Coordination and
Patient and Caregiver Centered Experience of Care into one domain for
purposes of aligning the Hospital VBP Program domains with the NQS
priorities. Care Coordination aligns with the NQS priority stated as
promoting effective communication and coordination of care. Patient and
Caregiver Centered Experience of Care aligns with the NQS priority
stated as ensuring that each person and family are engaged as partners
in their care. We stated our belief that, in order to be engaged as
partners, effective communication and coordination of care must
coexist. This notion is further exemplified by one of the 10 principles
of the NQS, found at https://www.ahrq.gov/workingforquality/nqs/principles.html, which notes that ``Person-centeredness and family
engagement, including understanding and valuing patient preferences,
will guide all strategies, goals, and health care improvement efforts.
The most successful health care experiences are often those in which
clinicians, patients, and their families work together to make
decisions.'' We stated our belief that care coordination includes this
shared decision-making among clinicians, patients, and their families,
and further believe that a component of these important concepts can be
captured with the HCAHPS measure.
Therefore, we stated that we believe that placing the HCAHPS
measure into the proposed combined domain below will continue to
encourage hospitals to focus on improving the patient's experience
during acute care hospitalizations and will enable us to continue
providing incentives that focus on patient and caregiver experience and
coordination of care. However, with the exception of the HCAHPS measure
described above, we did not believe that any of the other proposed
measures for the FY 2016 Hospital VBP Program, which would form the
basis for the FY 2017 Hospital VBP Program's measure set, should be
placed into the proposed combined Patient and Caregiver

[[Page 50703]]

Experience of Care/Care Coordination domain. We stated our intent to
consider proposing to adopt measures of care coordination in the future
as they become available.
We stated that we may propose further refinements to the Hospital
VBP Program domain structure in future years to accommodate the NQS'
population health priority or other quality improvement priorities as
appropriate, but did not propose to adopt a Population Health domain at
this time.
We noted that the proposed NQS-based domain structure combines
measures of clinical processes and outcomes under the ``Clinical Care''
priority. In order to ensure that outcomes remain a principal focus of
hospitals' quality improvement efforts, as well as to continue our
effort to shift the program over time to include more measures of
outcomes and efficiency, we proposed to stratify the NQS-based Clinical
Care domain into ``Clinical Care--Outcomes'' and ``Clinical Care--
Process,'' which will enable us to provide significant weight to
measures of outcomes and avoid diluting hospitals' focus on measures of
outcomes.
We noted further that the proposed NQS-based domains include
``Efficiency and Cost Reduction,'' a domain priority that we believe is
analogous to the current ``Efficiency'' domain finalized for the
Hospital VBP Program, and a ``Safety'' domain. We placed measures of
outcomes into both the Clinical Care--Outcome and Safety domains below
and generally distinguished between the two by focusing on the
measures' direct impact on patients. The measures we proposed to place
into the Safety domain include measures of healthcare-associated
infections and the AHRQ patient safety composite. We stated our belief
that hospitals must continue to focus quality improvement efforts on
these outcome safety measures, which track infection and safety events
that pose direct harm to patients.
Finally, as we stated in the Hospital Inpatient VBP Program final
rule (76 FR 26491), we believe that domains need not be given equal
weight, and that over time, scoring methodologies should be weighted
more towards outcomes, patient experience of care, and functional
status measures (for example, measures assessing physical and mental
capacity, capability, well-being and improvement). We took these
considerations into account when developing the domain weighting
proposal outlined below. We stated our belief that the proposed domain
weighting will continue to improve the link between Medicare payments
to hospitals and patient outcomes, efficiency and cost, and the patient
and care giver experience.
We noted further that the proposed domain weighting below places
significant weight on measures of clinical outcomes, efficiency, and
the patient experience, while also prioritizing safety and clinical
processes. We stated our belief that the proposed domain weighting
appropriately balances the clinical quality priorities described by the
NQS.
Therefore, we proposed to adopt the following domains and domain
weights for the FY 2017 Hospital VBP Program:

Proposed Domains and Domain Weights for the FY 2017 Hospital VBP Program
for Hospitals Receiving a Score on All Proposed Domains
------------------------------------------------------------------------
Domain Weight
------------------------------------------------------------------------
Safety.............................. 15 percent.
Clinical Care....................... 35 percent.
Clinical Care--Outcomes 25 percent.
Clinical Care--Process. 10 percent.
Efficiency and Cost Reduction....... 25 percent.
Patient and Caregiver Centered 25 percent.
Experience of Care/Care
Coordination.
------------------------------------------------------------------------

We welcomed public comments on this proposal.
While we stated our belief there are advantages to aligning the
Hospital VBP Program domains with the NQS domains, we also recognized
that there may be advantages associated with maintaining consistency
with previous years' domains. Accordingly, as an alternative to
realigning the Hospital VBP Program's domain structure more closely
with the NQS beginning with FY 2017, we also invited public comments on
whether we should adopt the following domains and domain weighting,
which would be consistent with the proposals outlined for FY 2016
above:

Alternative Domain Weights for the FY 2017 Hospital VBP Program for
Hospitals Receiving a Score on All Proposed Domains
------------------------------------------------------------------------
Weight
Domain (percent) %
------------------------------------------------------------------------
Clinical Process of Care................................... 10
Patient Experience of Care................................. 25
Outcome.................................................... 40
Efficiency................................................. 25
------------------------------------------------------------------------

We also sought public comments on how we should assign proposed
measures to the new NQS-aligned domains, if finalized for FY 2017, and
sought public comments on the following domain assignments for proposed
FY 2016 measures, which would form the initial basis for the FY 2017
Hospital VBP Program's measure set:

------------------------------------------------------------------------
Measure ID Current domain NQS-based domain
------------------------------------------------------------------------
AMI-7a...................... Clinical Process of Clinical Care--
Care. Process.
IMM-2....................... Clinical Process of Clinical Care--
Care. Process.
PN-6........................ Clinical Process of Clinical Care--
Care. Process.
SCIP-Inf-2.................. Clinical Process of Clinical Care--
Care. Process.
SCIP-Inf-3.................. Clinical Process of Clinical Care--
Care. Process.
SCIP-Inf-9.................. Clinical Process of Clinical Care--
Care. Process.
SCIP-Card-2................. Clinical Process of Clinical Care--
Care. Process.
SCIP-VTE-2.................. Clinical Process of Clinical Care--
Care. Process.

[[Page 50704]]

HCAHPS...................... Patient Experience Patient and
of Care. Caregiver Centered
Experience of Care/
Care Coordination.
CAUTI....................... Outcome............. Safety.
CLABSI...................... Outcome............. Safety.
MORT-30-AMI................. Outcome............. Clinical Care--
Outcomes.
MORT-30-HF.................. Outcome............. Clinical Care--
Outcomes.
MORT-30-PN.................. Outcome............. Clinical Care--
Outcomes.
PSI-90...................... Outcome............. Safety.
SSI......................... Outcome............. Safety.
MSPB-1...................... Efficiency.......... Efficiency and Cost
Reduction.
------------------------------------------------------------------------

Comment: Many commenters expressed support for the proposal to
adopt new quality domains based on the National Quality Strategy for FY
2017 and future program years. Commenters further suggested that CMS
consider carefully how to score Mortality and Process measures under
the revised domain structure, arguing that the Outcome portion of the
Total Performance Score should receive no more than 25 percent weight,
while Processes should receive at least 45 percent. Other commenters
argued that CMS placed too much emphasis on the Outcome measures under
the new domain structure given their concerns about the measures'
reliability, and argued that CMS should adopt a more balanced mix of
process and outcome measures in the program.
Response: We thank commenters for their support. We do not believe
we placed too much domain weight on measures of Outcomes under the
revised domain structure, as some commenters suggested. As we indicated
in the Hospital Inpatient VBP Program final rule (76 FR 26491), we are
attempting to move our quality programs ``as quickly as possible to
using primarily outcome and patient experience measures.'' We believe
that our proposed domain structure and domain weighting appropriately
continues the program's transition from being based primarily on
measures of clinical processes towards a focus on measures of outcomes
and the patient experience.
Comment: Commenters suggested that CMS consider the Hospital
Readmissions Reduction Program as the Care Coordination domain for the
Hospital VBP Program, particularly because CMS did not propose to
include any measures in the Care Coordination domain.
Response: We thank commenters for this suggestion. However, as
described above in section V.H.6.b. of the preamble of this final rule,
we do not believe it to be feasible under the statute to treat the
Hospital Readmissions Reduction Program as a component of the Hospital
VBP Program. We note further that we are prohibited by section
1886(o)(2)(A) of the Act from selecting measures of readmissions for
the Hospital VBP Program.
Comment: Commenters argued that CMS should select measures that
assess the hospital's role in Care Coordination given the Hospital VBP
Program's focus on providing quality-based incentives to hospitals.
Some commenters suggested that CMS work with QIOs to develop new
measures of care coordination for use in the Hospital VBP Program.
Response: We thank commenters for this feedback. We agree that care
coordination, and specifically, care transition, is a vital aspect of
health care providers' services and patients' experience of care. In
order to measure and assess inpatients' experience with preparation for
transition to post-acute care, we added the three-item Care Transition
Measure to the HCAHPS Survey in January 2013. Once we have collected
four quarters (12 months) of data on these items, we intend to publicly
report results on the Hospital Compare Web site in the form of a Care
Transition Composite measure. Whether, when, and how this information
might be used in the Hospital VBP Program will be addressed in future
rulemaking.
We intend to continue working with stakeholders to develop new,
robust quality measures for the Hospital VBP Program, including new
measures of care coordination.
After consideration of the public comments we received, we are
finalizing our proposal to adopt new quality measurement domains based
on the CMS National Quality Strategy for the FY 2017 Hospital VBP
Program as proposed. We intend to propose more details about this
policy in future rulemaking.
We also sought comment on how we should address minimum numbers of
cases and measures under sections 1886(o)(1)(C)(ii)(III) and (IV) of
the Act if we finalize this domain structure for the FY 2017 Hospital
VBP Program. If we adopted the NQS-based domains solely for purposes of
constructing the TPS, we could retain the general case and measure
minimums structure adopted for prior program years. However, given the
requirement in section 1886(o)(1)(C)(iii) of the Act that the Secretary
conduct an independent analysis of what numbers are appropriate, we are
also considering if we should commission such an analysis for the NQS
domains, as modified. We sought public comments on this issue. However,
we did not receive any comments on this issue. We intend to address
this issue in future rulemaking.
e. Disaster/Extraordinary Circumstance Exception \43\ Under the
Hospital VBP Program
---------------------------------------------------------------------------

\43\ We described this process in the FY 2014 IPPS/LTCH PPS
proposed rule as a ``Disaster/Extraordinary Circumstances Waiver''
process.
---------------------------------------------------------------------------

We are concerned that hospital performance under the Hospital VBP
Program might be adversely impacted as a direct result of a significant
natural disaster or other extraordinary circumstance. We are aware, for
example, that Hurricane Sandy forced some hospitals in the New York-New
Jersey-Connecticut area to close during the autumn of 2012, which
impacted their ability to report quality measure data that will be used
for both the FY 2014 and FY 2015 Hospital VBP Programs. We also
recognize that hospitals that are closed during a portion of a
performance period might still be eligible to receive a TPS and value-
based incentive payments based on their measured quality performance
during the remaining portion of the performance period for a fiscal
year.
However, we also are aware that many hospitals that were affected
by Hurricane Sandy nevertheless remained open both during and after the
storm, and we are concerned more generally that these hospitals, as
well as other hospitals that are able to remain open despite being
impacted by a local disaster or other extraordinary circumstance, might
experience a decline in performance as a direct result of remaining
open. For example, a hospital might be able to demonstrate

[[Page 50705]]

that its performance on the HCAHPS survey was adversely impacted as a
direct result of remaining open during or after a natural disaster if
the hospital became overcrowded due to a neighboring hospital's
closure, or understaffed due to the inability of staff to get to work.
We believe that these types of unforeseen extraordinary circumstances
could substantially affect the ability of the hospital to perform at
the same level at which it might otherwise have performed if the
natural disaster or extraordinary circumstance had not occurred, and we
are concerned that using cases and claims from this period to generate
the TPS might negatively, and unfairly, impact the value-based
incentive payment amount that the hospital would otherwise receive.
Currently, hospitals participating in the Hospital IQR Program may
request that we grant an extension or waiver of one or more data
submission deadlines in the event of extraordinary circumstances beyond
the control of the hospital. However, we do not believe this process is
entirely sufficient for the Hospital VBP Program. The Hospital IQR
Program's extraordinary circumstances extensions/waiver process allows
hospitals that have been granted an extension/waiver to receive the
full annual percentage increase under the IPPS for the applicable
fiscal year even though they did not submit data on measures in the
same time, form, and manner required of other hospitals. To the extent
that a hospital, as a result of receiving an extension or waiver under
the Hospital IQR Program, does not report the minimum number of cases
or measures under the Hospital VBP Program (as determined appropriate
by the Secretary under sections 1886(o)(1)(C)(ii)(III) and (IV) of the
Act), that hospital will be excluded from the Hospital VBP Program for
the applicable fiscal year.
However, the Hospital IQR Program extraordinary circumstance
extension/waiver process does not address the situation we are
concerned with here; namely, where a hospital is able to continue to
report data on measures that are included in both the Hospital IQR
Program and the Hospital VBP Program, but can demonstrate that its
Hospital VBP measure rates are negatively impacted as a result of a
natural disaster or other extraordinary circumstance and, as a result,
the hospital receives a lower value-based incentive payment. Therefore,
in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27619 through 27621),
we proposed to adopt a Hospital VBP Program extraordinary circumstances
exception process.
In developing our proposed approach, we considered the feasibility
of adopting an exception that would allow a hospital to not have the
measure data submitted during the affected time period included in its
measure scores. This type of exception policy would enable affected
hospitals to continue to participate in the Hospital VBP Program for a
given fiscal year if they continued to meet applicable measure and case
minimums despite the fact that their TPS would not include data that is
the subject of the exception. Therefore, this policy could prevent the
possibility that a hospital's TPS is significantly, and negatively,
affected by a natural disaster or other extraordinary circumstance,
which we believed would alleviate our concerns.
However, implementing this type of data exception process presents
certain operational difficulties. While chart-abstracted measures
generally are reported using a date of service that would enable us to
correctly identify which data should be excluded, the same is not
necessarily true of patient experience of care measure data because
HCAHPS survey dates do not align with service dates; instead, they are
dependent on the timing of the survey's completion after discharge.
A further complication arises with certain claims-based measures.
For example, the risk-adjustment methodology currently in use for the
30-day mortality measures requires a fixed dataset for computation of
all hospitals' risk-adjusted measure rates. Adding or removing data
from the national claims set used to calculate a mortality measure's
rates for a given time period therefore requires recalculation of all
hospitals' measure rates, as the risk-profile used to adjust hospitals'
measured performance for the time period would have changed. In
addition, in light of our policy to generate a TPS for hospitals that
receive scores on fewer than all domains, we were concerned that
proposing to adopt an extraordinary circumstances exception process
that would apply only to the clinical process of care domain data that
we may relatively easily remove from scoring would be ineffective. We
stated that we did not believe that creating an exception for only
clinical process of care domain data would mitigate the effects of a
disaster or other extraordinary circumstances on hospitals' TPSs under
the Hospital VBP Program, particularly if hospitals' performance on all
measures is affected significantly by those circumstances. An increase
in measured mortality rates, for example, would not be mitigated by a
clinical process of care-centered exception, and could penalize the
hospital.
Given the operational constraints discussed above, we stated our
belief that the best way to implement an extraordinary circumstances
exception process under the Hospital VBP Program is to interpret the
minimum numbers of cases and measures requirement in sections
1886(o)(1)(C)(ii)(III) and (IV) of the Act to enable us to not score
(we used the term ``waive'' in the proposed rule) all applicable
quality measure data from a performance period and, thus, exclude the
hospital from the Hospital VBP Program for a fiscal year during which
the hospital has experienced a disaster or other extraordinary
circumstance.
Under this policy, a hospital struck by a natural disaster or other
extraordinary circumstance would be able to request a Hospital VBP
Program disaster/extraordinary circumstance exception at the same time
that it requests an extraordinary circumstance waiver under the
Hospital IQR Program. The hospital would submit the Hospital IQR
Program extension/waiver request form, including any available evidence
of the impact of the extraordinary circumstances on the hospital's
quality measure performance, and would note that it also seeks an
exception from the Hospital VBP Program for the program year in which
the same data could be used as performance period data to generate a
TPS based on the measures included in the Hospital VBP Program. In the
FY 2012 IPPS/LTCH PPS final rule (76 FR 51652), we finalized a
requirement for Hospital IQR waivers that affected hospitals submit
their requests within 30 days of the date that the extraordinary
circumstance occurred. We stated our belief that this timeframe was
appropriate for our proposed exception process for the Hospital VBP
Program as it aligned with the current requirements under the Hospital
IQR Program and forestalled the possibility of hospitals attempting to
``game'' their Hospital VBP Program scores by requesting an exception
after they receive their Percentage Payment Summary Reports for a given
fiscal year.
We stated our intent to review exception requests and, at our
discretion based on our evaluation of the impact of the disaster/
extraordinary circumstances on the hospital's quality measure
performance, provide a response to the hospital. We stated our intent
to notify hospitals about our Hospital VBP Program exception decisions
concurrent with decisions made under the Hospital IQR Program's waiver
process.

[[Page 50706]]

For these reasons, we proposed that the phrases ``minimum number of
measures that apply to the hospital'' in section 1886(o)(1)(C)(iii) of
the Act and ``minimum number of cases for the measures that apply to
the hospital'' in section 1886(o)(1)(C)(iv) of the Act do not include
any measures or cases that a hospital has submitted during a
performance period for which it is granted a Hospital VBP Program
disaster/extraordinary circumstance exception.
We stated our intent to implement this policy in a limited fashion,
and based on prior experience with the Hospital IQR Program, anticipate
providing such exceptions only to a small number of hospitals. We did
not intend to allow hospitals to use this proposed process to seek
exclusion from the Hospital VBP Program solely because of comparatively
poor performance under the program's scoring methodology; rather, we
intended only to provide relief to hospitals whose performance suffered
as a result of a disaster or other extraordinary circumstances.
We invited public comments on this proposal. We stated that we were
specifically interested in public comments on the structure of the
proposed process, and if we should consider implementing the process
differently.
Comment: Many commenters supported the proposal to adopt a
disaster/extraordinary circumstances exception process. Commenters were
concerned, however, that 30 days might not be enough time for hospitals
to determine if an exception is necessary, and suggested that CMS
extend the request window to 60 or 90 days. Commenters also suggested
that CMS decouple the Hospital VBP Program exception request from the
Hospital IQR Program waiver process, noting that it may take longer
than 30 days for hospitals to assess a disaster's impact on their
measured performance. Commenters also suggested that CMS consider
providing exceptions to hospitals whose paper medical records are
destroyed during natural disasters.
Response: We thank commenters for their input. As described further
below, we intend to decouple the Hospital VBP Program's exception
process from the Hospital IQR Program's waiver process, and to extend
the deadline for Hospital VBP Program-specific exception requests.
Comment: Some commenters suggested that CMS reconsider the
structure of its proposed exception process. Commenters noted that some
types of disasters or circumstances may not completely inhibit a
hospital's reporting capability for long durations, and may simply
require extended data reporting deadlines. Commenters recommended that
CMS grant extensions of the data reporting deadlines without granting
hospitals an exception from the entirety of the Hospital VBP Program.
Commenters also referred us to letters submitted to CMS in May 2013
explaining how Hurricane Sandy affected hospitals, and suggested that
we conduct an assessment of Hospital VBP scores for FY 2014 and 2015 to
determine whether they are lower than expected, and consider
adjustments to scores if necessary.
Response: We thank commenters for this feedback. However, we
believe the type of exception envisioned by the commenters--that is,
extensions of the data reporting deadlines--is already available under
current Hospital IQR Program policy. Because the Hospital VBP Program
generally uses data that was also submitted under the Hospital IQR
Program, we believe that Hospital IQR data, even when submitted late in
accordance with a Hospital IQR data reporting extension, can be scored
under the Hospital VBP Program. We proposed the Hospital VBP Program-
specific exception process in order to avoid penalizing hospitals under
the Hospital VBP Program that are able to report Hospital IQR Program
data but whose measured performance suffers due to disasters or other
circumstances beyond their control. We intend to accommodate extensions
or waivers of data reporting deadlines under the Hospital IQR Program
as circumstances warrant. We also intend to continue monitoring
Hospital VBP scores, and will examine the issue of performance affected
by Hurricane Sandy in the future.
After consideration of the public comments we received, we are
finalizing a policy under which we will consider, upon a hospital's
request and after our review, providing an exception from a Hospital
VBP Program year to hospitals affected by natural disasters or other
extraordinary circumstances. Specifically, we are finalizing our
proposal that the phrases ``minimum number of measures that apply to
the hospital'' in section 1886(o)(1)(C)(iii) of the Act and ``minimum
number of cases for the measures that apply to the hospital'' in
section 1886(o)(1)(C)(iv) of the Act do not include any measures or
cases that a hospital has submitted during a performance period for
which it is granted a Hospital VBP Program disaster or extraordinary
circumstance exception. We will evaluate a hospital's requests, along
with supporting evidence provided by the hospital, and if we agree that
the disaster or extraordinary circumstance significantly affected the
hospital's performance under the Hospital VBP Program, we will grant an
exception from a Hospital VBP Program year.
However, we are not finalizing our proposal that these exception
requests must be made at the same time as waiver requests under the
Hospital IQR Program. We agree with commenters' stated concerns about
the time necessary to understand how a disaster or extraordinary
circumstance affects measured performance under the Hospital VBP
Program. We therefore will require that disaster exception requests be
submitted within 90 calendar days of the date that the natural disaster
or other extraordinary circumstance occurred. We believe that this
extended timeline for disaster exception requests is responsive to
commenters' concerns and enables hospitals to evaluate fully the
impacts of natural disasters or other extraordinary circumstances on
their performance under the Hospital VBP Program.
10. Applicability of the Hospital VBP Program to Hospitals
a. Background
Section 1886(o)(1)(C) of the Act specifies how the Hospital VBP
Program applies to hospitals. Specifically, the term ``hospital'' is
defined under section 1886(o)(1)(C)(i) of the Act as a ``subsection (d)
hospital (as defined in section 1886(d)(1)(B [of the Act])).'' Section
1886(o)(1)(C)(ii) of the Act sets forth a list of exclusions to the
definition of the term ``hospital'' with respect to a fiscal year,
including a hospital that is subject to the payment reduction under
section 1886(b)(3)(B)(viii)(I) of the Act (the Hospital IQR Program), a
hospital for which, during the performance period for the fiscal year,
the Secretary has cited deficiencies that pose immediate jeopardy to
the health or safety of patients, a hospital for which there are not a
minimum number of measures that apply to the hospital for the
applicable performance period for the fiscal year, and a hospital for
which there are not a minimum number of cases for the measures that
apply to the hospital for the performance period for the fiscal year.
In addition, section 1886(o)(1)(C)(iv) of the Act states that in
the case of a hospital that is paid under section 1814(b)(3) of the
Act, the Secretary may exempt the hospital from the Hospital VBP
Program if the State submits an

[[Page 50707]]

annual report to the Secretary describing how a similar program in the
State for a participating hospital or hospitals achieves or surpasses
the measured results in terms of patient health outcomes and cost
savings established under the Hospital VBP Program. We interpret the
reference to section 1814(b)(3) of the Act to mean those Maryland
hospitals that are paid under section 1814(b)(3) of the Act and that,
absent the ``waiver'' specified by section 1814(b)(3) of the Act, would
have been paid under the IPPS.
b. Minimum Numbers of Cases and Measures for the FY 2016 Hospital VBP
Program Outcome Domain
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53608 through
53609), we finalized minimum numbers of cases and measures for the FY
2015 Hospital VBP Program's Outcome domain. For the finalized 30-day
mortality measures, we finalized a 25-case minimum for FY 2015. For the
AHRQ PSI composite measure, we adopted AHRQ's methodology, which
provides a score on the measure to any hospital with at least three
cases on any underlying indicator. For the CLABSI measure, we adopted
CDC's minimum case criteria, which calculates a standardized infection
ratio for a hospital on the CLABSI measure if the hospital has 1
predicted infection during the applicable period. We also finalized our
policy to provide a TPS to hospitals with sufficient cases in at least
two of the four finalized quality measure domains (77 FR 53607).
In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74532
through 74534) we concluded, based on an independent analysis, that the
minimum number of measures that a hospital must report in order to
receive a score on the Outcome domain is two measures. We continue to
believe that this minimum number is appropriate for the expanded
Outcome domain because adding measure scores beyond the minimum number
of measures has the effect of enhancing the domain score's reliability.
Therefore, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27621
through 27622), we proposed to retain the finalized minimum number of
measures for the Outcome domain for the FY 2016 Hospital VBP Program.
We invited public comment on these proposals. However, we did not
receive any specific comments on the minimum number of measures for the
Outcome domain. We are therefore finalizing this minimum number as
proposed.
c. Hospitals Paid Under Section 1814(b)(3) of the Act
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53607 through
53608), beginning with the FY 2014 Hospital VBP Program, we adopted a
new procedure for submission of the report in order for a Maryland
hospital to be exempt from the Hospital VBP Program for a fiscal year.
Under this finalized procedure, if the State seeks an exemption with
respect to a particular program year, it would need to submit a report
that meets the requirements of section 1886(o)(1)(C)(iv) of the Act in
a timeframe that allows it to be received by the Secretary on or before
November 15 prior to the effective fiscal year (for example, the report
seeking an exemption from the FY 2014 Hospital VBP Program would have
to be received by the Secretary no later than November 15, 2012). We
stated that we anticipate notifying the State, as well as each hospital
for which the State has requested an exemption, of our decision whether
to grant the request no later than 90 days following the exemption
request deadline.
We received an FY 2014 exemption request from the Maryland Health
Services Cost Review Commission and the State of Maryland Department of
Health and Mental Hygiene in November 2012, and the Secretary approved
the exemption request on December 19, 2012.
We determined that Maryland meets or exceeds the patient health
outcomes and cost savings requirements for exemption from the FY 2014
Hospital VBP Program. In terms of patient health outcomes, the Maryland
Quality-Based Reimbursement (MQBR) Program focuses rewarding high
quality care on hospital performance in similar clinical areas as the
Hospital VBP Program (heart attack, heart failure, and pneumonia,
surgical processes of care and infection control). In general, the
relevant health outcomes for the State's hospitals cited in its request
achieve or surpass the current national results for comparable quality
process and closely related clinical outcomes. In terms of cost
savings, both the Hospital VBP Program and the MQBR Program reward high
performers in a revenue-neutral manner. In this way, Maryland has
achieved cost savings under its quality programs that meet any
documented savings under the Hospital VBP Program, thereby meeting the
standard specified in section 1886(o)(1)(C)(iv) of the Act for
hospitals paid under section 1814(b)(3) of the Act.
We received a few general comments on our procedures for
considering exemption requests for hospitals paid under section
1814(b)(3) of the Act.
Comment: One commenter argued that Maryland hospitals' performance
on quality measures reported to CMS does not surpass national averages
for Clinical Process of Care and Patient Experience of Care measures.
The commenter further argued that Maryland should not receive an
exemption from the Hospital VBP Program for any years under
consideration at CMS because it is not meeting or exceeding national
standards on quality measures.
Response: We thank the commenter for the input. We determined that
Maryland meets or exceeds the cost savings requirement for exemption
from the FY 2014 Hospital VBP Program, based on the fact that both
programs reward high performers in a revenue-neutral manner. In this
way, Maryland has achieved cost savings under its quality programs that
meet any documented savings under the Hospital VBP Program. In general,
the relevant health outcomes for Maryland hospitals achieve or surpass
the current national results for comparable quality process of care
measures, and AMI, HF, and PN 30-day mortality rates included in the FY
2014 Hospital VBP Program. Maryland hospitals are therefore exempt from
the FY 2014 Hospital VBP Program.
If we receive a timely exemption request for the FY 2015 Hospital
VBP Program, we will evaluate Maryland hospitals in accordance with the
standard specified in section 1886(o)(1)(C)(iv) of the Act for
hospitals paid under section 1814(b)(3) of the Act.
Comment: Commenters requested that CMS enable Maryland to combine
the State's exemption requests from CMS' quality programs, including
the Hospital Readmissions Reduction Program, the HAC Reduction Program,
and the Hospital VBP Program, into a single request, and for CMS to
approve a waiver request for a three-year period with annual reports
submitted to CMS describing Maryland's program results and any
modifications.
Response: We thank commenters for this feedback and may consider
this suggestion in the future.

I. Implementation of Hospital-Acquired Condition (HAC) Reduction
Program for FY 2015

1. Background
a. Overview
CMS is committed to promoting higher quality of care and improving
outcomes for Medicare beneficiaries. Accordingly, as part of that
effort, we have in recent years undertaken a

[[Page 50708]]

number of initiatives to reduce the number of hospital-acquired
conditions (HACs) among Medicare beneficiaries. HACs are conditions
that patients acquire while receiving treatment for another condition
in an acute care health setting. HACs include hospital-acquired
infections (HAIs) such as surgical site infections, as well as
conditions such as foreign objects retained after surgery. HACs
constitute an adverse event for the patient and a financial burden on
the health care system. HACs, especially those stemming from medical
errors, represent a leading cause of mortality in the United
States.\44\ Deaths from HAIs alone are twice as high as those from HIV/
AIDS and breast cancer combined.\45\ Many common HACs can be prevented
through the proper application of evidence-based guidelines. Yet,
surveys reveal that 87 percent of hospitals have not followed such
guidelines.\46\ Further, HACs constitute a significant economic burden
on the health care system. For example, in 2009, the CDC estimated that
preventable HAIs alone added nearly $6 billion to U.S. health care
costs each year.\47\ Accordingly, we believe that our continued efforts
to reduce HACs are vital to improving patients' quality of care and
reducing complications and mortality, while simultaneously decreasing
costs.
---------------------------------------------------------------------------

\44\ Kohn L T, Corrigan J M., Donaldson MS (Institute of
Medicine) To Err is Human: Building a Safer Health System.
Washington, DC: National Academy Press, 2000.
\45\ Binder, Leah F., The Leapfrog Group Testimony before the
House of Representatives Committee of Oversight and Government
Reform, April 16, 2008. Available at: https://www.leapfroggroup.org/policy_leadership/leapfrog_news/4732651.
\46\ Id.
\47\ Centers for Disease Control, The Direct Medical Costs of
Healthcare Associated Infections in US Hospitals and the Benefits of
Prevention, March, 2009. Available at: https://www.cdc.gov/hai/pdfs/hai/scott_costpaper.pdf.
---------------------------------------------------------------------------

In section II.F. of the preamble of this final rule, we discuss
prior and ongoing rulemakings to implement the provisions of section
5001(c) of the Deficit Reduction Act (DRA) of 2005. Section 5001(c) of
the DRA requires the Secretary to identify conditions by October 1,
2007 that: (a) Are high cost or high volume or both; (b) result in the
assignment of a case to a DRG that has a higher payment when present as
a secondary diagnosis; and (c) could reasonably have been prevented
through the application of evidence-based guidelines. An adjustment to
the MS-DRG payment under the IPPS is made for identified HACs. This
regulatory action has supported our efforts to encourage hospitals to
reduce HACs.
Our initiatives to reduce HACs continued in 2009, when we developed
National Coverage Determinations (NCDs) for the Medicare Program to
eliminate ``never events.'' These ``never events'' stemmed from a 2002
report conducted by the NQF that listed 27 adverse events, listed as
serious reportable events, that were both serious and largely
preventable.\48\ Under these NCDs, we have specified that Medicare does
not cover a particular surgical or other invasive procedure to treat a
particular medical condition when a practitioner erroneously performs:
(1) A different procedure altogether; (2) the correct procedure but on
the wrong body part; or (3) the correct procedure but on the wrong
patient.\49\
---------------------------------------------------------------------------

\48\ National Quality Forum (NQF), Serious Reportable Events in
Healthcare--2011 Update: A Consensus Report, Washington, DC: NQF
(2011).
\49\ Center for Medicare and Medicaid Services (CMS), National
Coverage Determination (NCD) for, Surgical or Other Invasive
Procedure Performed on the Wrong Body Part (140.7), Pub-100-3
(2009); Surgical or Other Invasive Procedure Performed on the Wrong
Patient (140.8), Pub 100-3 (2009); Wrong Surgery Performed on a
Patient (140.9), Pub 100-3 (2009).
---------------------------------------------------------------------------

In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50196), we adopted 8
HAC measures into the Hospital IQR Program for the FY 2012 payment
determination. These quality measures comprise additional efforts to
promote quality of care by reducing the number of HACs in an acute care
health setting. We have been publicly reporting on these eight HAC
measures successfully on the Hospital Compare Web site since September
2010.
As described above, the reduction of HACs is an important marker of
quality of care and has a positive impact on both patient outcomes and
costs of care. In accordance with section 1886(p) of the Act, the HAC
Reduction Program aligns with our national strategy to improve health
care quality by promoting the prevention of HACs, such as ``never
events'' and HAIs. Our goal for the HAC Reduction Program is to
heighten the awareness of HACs and reduce the number of incidences that
occur through implementing the adjustments required by section 1886(p)
of the Act. We believe that our efforts in using payment adjustments
and our measurement authority will encourage hospitals to eliminate the
incidence of HACs that could be reasonably prevented by applying
evidence-based guidelines.
2. Statutory Basis for the HAC Reduction Program
Section 3008 of the Affordable Care Act added section 1886(p) to
the Act to provide an incentive for applicable hospitals to reduce
HACs. Section 1886(p) of the Act requires the Secretary to make an
adjustment to payments to ``applicable hospitals'' effective beginning
on October 1, 2014 and for subsequent programs years. Section
1886(p)(1) of the Act sets forth the requirements by which payments to
``applicable hospitals'' will be adjusted to account for HACs with
respect to discharges occurring during FY 2015 or later. The amount of
payment shall be equal to 99 percent of the amount of payment that
would otherwise apply to such discharges under section 1886(d) or
1814(b)(3) of the Act, as applicable. Section 1886(p)(2)(A) of the Act
defines ``applicable hospitals'' as subsection (d) hospitals that meet
certain criteria. Section 1886(p)(2)(B)(i) of the Act defines these
criteria and specifies that the payment adjustment would apply to an
applicable hospital that ranks in the top quartile (25 percent) of all
subsection (d) hospitals, relative to the national average, of
conditions acquired during the applicable period, as determined by the
Secretary. Section 1886(p)(2)(B)(ii) of the Act requires the Secretary
to establish and apply a risk-adjustment methodology.
Sections 1886(p)(3) and (p)(4) of the Act define ``hospital-
acquired conditions'' and ``applicable period'', respectively. The term
``hospital-acquired condition'' means ``a condition identified in
subsection 1886(d)(4)(D)(iv) of the Act and any other condition
determined appropriate by the Secretary that an individual acquires
during a stay in an applicable hospital, as determined by the
Secretary.'' The term ``applicable period'' means, with respect to a
fiscal year, a period specified by the Secretary.
Section 1886(p)(5) of the Act requires that, prior to FY 2015 and
each subsequent fiscal year, the Secretary provides the delivery of
confidential reports to applicable hospitals with respect to HACs of
the applicable hospital during the applicable period. Section
1886(p)(6)(A) of the Act sets forth the reporting requirements by which
the Secretary would make information available to the public regarding
HACs for each applicable hospital. Section 1886(p)(6)(B) of the Act
requires the Secretary to ensure that an applicable hospital has the
opportunity to review, and submit corrections for, the information to
be made public with respect to the HACs of the applicable hospital
prior to such information being made public. Section 1886(p)(6)(C) of
the Act requires that, once corrected, the HAC information be posted on
the Hospital Compare Web

[[Page 50709]]

site on the Internet in an easily understandable format.
Section 1886(p)(7) of the Act limits administrative and judicial
review of certain determinations made pursuant to section 1886(p) of
the Act. These determinations include what qualifies as an applicable
hospital, the specifications of a HAC, the Secretary's determination of
an applicable period, the provision of confidential reports submitted
to the applicable hospital, and the information publically reported on
the Hospital Compare Web site.
3. Implementation of the HAC Reduction Program
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27622 through
27636), we proposed the general framework for implementation of the HAC
Reduction Program for the FY 2015 implementation. We included the
following proposals for the program: (a) The relevant definitions
applicable to the program; (b) the payment adjustment under the
program; (c) the measure selection and conditions for the program,
including a risk-adjustment and scoring methodology; (d) performance
scoring; (e) the process for making hospital-specific performance
information available to the public, including the opportunity for a
hospital to review the information and submit corrections; and (f)
limitation of administrative and judicial review.
In this FY 2014 IPPS/LTCH PPS final rule, we are establishing the
rules governing the payment adjustment under the HAC Reduction Program
at Subpart I of 42 CFR Part 412 (Sec. Sec. 412.170 and 412.172). We
also are amending existing Sec. 412.150 (the section that describes
the basis and scope of Subpart I of Part 412, which contains the
regulations governing adjustments to the base operating DRG payment
amounts under the IPPS for inpatient operating costs) to incorporate
the basis and scope of Sec. Sec. 412.170 and 412.172 for the HAC
Reduction Program. We discuss each of the regulatory provisions under
the appropriate subject area below.
Comment: Numerous commenters supported the HAC Reduction Program.
One commenter supported the program because it addresses aims outlined
in the National Quality Strategy. Other commenters supported the
program because it requires public reporting of HAC data. Another
commenter supported the program but requested clarification regarding
the quality controls that will be in place to assure consistent and
accurate coding.
Response: We appreciate the commenters' support. With respect to
quality controls to assure consistent and accurate coding, we note that
the American Health Information Management Association (AHIMA) has
promulgated Standards of Ethical Coding that require accurate coding
that includes the reporting of all health care data elements (for
example, diagnosis and procedure codes, the POA indicator, and
discharge status) required for external reporting purposes (for
example, reimbursement and other administrative uses, population
health, quality and patient safety measurement, and research)
completely and accurately, in accordance with regulatory and
documentation standards and requirements and applicable official coding
conventions, rules, and guidelines. In addition, Medicare program
integrity initiatives closely monitor for inaccurate coding, as well as
coding inconsistent with medical record documentation.
Comment: Several commenters did not generally support the HAC
Reduction program. These commenters asked CMS to delay implementing the
program in FY 2015 in order to further refine the program and stated
that the program does not adequately assess or differentiate hospital
performance.
Response: We believe that the measures selected and scoring
methodology allow adequate differentiation of hospital performance,
such that the payment reduction for the top quartile of hospitals can
begin with FY 2015.
Comment: One commenter believed that hospitals will need
significant clinical and administrative resources to implement the HAC
Reduction Program and execute the steps necessary to reduce or
eliminate HACs.
Response: The conditions being assessed for this program have
either been targeted by the existing nonpayment program, or have been
in the Hospital IQR Program for a number of years. Therefore, we
believe that hospitals are already aware of and are taking steps to
reduce these conditions.
a. Definitions
In accordance with the provisions of section 1886(p) of the Act, in
the FY 2014 IPPS/LTCH PPS proposed rule, we proposed to include, under
proposed Sec. 412.170, definitions for the terms ``hospital-acquired
condition,'' ``applicable hospital,'' and ``applicable time period''
(78 FR 27623).
Hospital-acquired condition. In accordance with the
definition of ``hospital-acquired condition'' in section 1886(p)(3) of
the act, we would include a definition of the term in the regulations
to read: ``Hospital-acquired condition is a condition as described in
section 1886(d)(4)(D)(iv) of the Act and any other condition determined
appropriate by the Secretary that an individual acquires during a stay
in an applicable hospital, as determined by the Secretary.''
We also refer readers to section II.F. of the preamble of this
final rule where we discuss the HACs that have been identified and
selected by the Secretary through FY 2013 in accordance with the
provisions of section 1886(d)(4)(D)(iv) of the Act as established by
section 5001(c) of the DRA of 2005.
Applicable Hospital. Section 1886(p)(2)(A) of the Act
specifies that, for the purpose of the HAC Reduction Program, an
``applicable hospital'' is a subsection (d) hospital that meets certain
criteria. A subsection (d) hospital is defined in section 1886(d)(1)(B)
of the Act, in part, as a ``hospital located in one of the fifty States
or the District of Columbia'', subject to certain exceptions. We also
note that, for purposes of determining applicable hospitals under the
HAC Reduction Program, subsection (d) hospitals include hospitals paid
under a waiver under section 1814(b)(3) of the Act (that is, Maryland
hospitals). Section 1886(p)(2)(B) of the Act specifies that ``with
respect to a subsection (d) hospital, [a hospital is considered to be
an applicable hospital if] . . . the subsection (d) hospital is in the
top quartile of all subsection (d) hospitals, relative to the national
average, of hospital acquired conditions during the applicable period,
as determined by the Secretary.'' Therefore, in the FY 2014 IPPS/LTCH
PPS proposed rule we proposed to define an ``applicable hospital'' as
``a hospital described in section 1886(d)(1)(B) of the Act (including a
hospital in Maryland that is paid under section 1814(b)(3) of the Act
and that, absent the waiver specified by section 1814(b)(3) of the Act,
would have been paid under the hospital inpatient prospective payment
system) so long as the hospital meets the criteria specified under
Sec. 412.172(e)'' (78 FR 27623).
We noted that while all subsection (d) hospitals, including
hospitals paid under section 1814(b)(3) of the Act, would be used to
determine which hospitals are ``applicable hospitals,'' as required by
section 1886(p)(2)(B) of the Act, we identified several types of
hospitals that would not be subject to the provisions of the HAC
Reduction Program. A subsection (d) hospital as defined in section
1886(d)(1)(B) of the Act does not include hospitals and hospital units
excluded from the IPPS, such as LTCHs, cancer hospitals, children's
hospitals, IRFs, IPFs.

[[Page 50710]]

Therefore, hospitals and hospital units that are excluded from the IPPS
would not be considered when determining ``applicable hospitals'' nor
would they be determined to be ``applicable hospitals'' subject to the
payment adjustment under the HAC Reduction Program.
Similarly, CAHs would not be considered when determining
``applicable hospitals,'' nor would they be determined to be
``applicable hospitals'' subject to the payment adjustment under the
HAC Reduction Program because they do not meet the definition of a
``subsection (d) hospital.'' CAHs are separately defined under section
1886(mm) of the Act and are paid under a reasonable cost methodology
under section 1814(l) of the Act. An Indian Health Services hospital
enrolled as a Medicare provider meets the definition of a subsection
(d) hospital and, therefore, would be considered in determining
``applicable hospitals'' and would be considered to be an ``applicable
hospital'' under the HAC Reduction Program. In addition, hospitals that
are SCHs, although they may be paid under a hospital-specific rate
instead of the Federal rate under the IPPS, are subsection (d)
hospitals and, therefore, would be included in determining ``applicable
hospitals'' and would be considered to be an applicable hospital under
the HAC Reduction Program. Hospitals located in the Territories,
including Puerto Rico, are not subsection (d) hospitals. Section
1886(d)(9)(A) of the Act separately defines a ``subsection (d) Puerto
Rico hospital'' as a hospital that is located in Puerto Rico and that
``would be a subsection (d) hospital . . . if it were located in one of
the 50 States.'' However, because they are not located in ``one of the
fifty States,'' Puerto Rico hospitals are not subsection (d) hospitals
and, therefore, would not be included in determining ``applicable
hospitals,'' nor would they be considered to be an ``applicable
hospital'' under the HAC Reduction Program.
Finally, hospitals paid under the authority of section 1814(b)(3)
of the Act are located in Maryland, which is ``one of the fifty
States'' as described under section 1886(d)(1)(B) of the Act.
Therefore, these Maryland hospitals are subsection (d) hospitals and
would be included in determining ``applicable hospitals'' and, unless
the Secretary exempts them from the application of the payment
adjustment under the HAC Reduction Program under the authority of
section 1886(p)(2)(C) of the Act, would be considered to be
``applicable hospitals'' under the HAC Reduction Program.
We invited public comments on whether clarification is required for
additional types of hospitals.
Comment: Several commenters addressed the proposed definition of
``applicable hospitals''. Most commenters supported the proposed
definition. One commenter specifically supported excluding CAHs from
the definition of applicable hospitals. However, another commenter
suggested expanding the definition of applicable hospital to include
CAHs and Maryland and U.S. Territory hospitals. One commenter suggested
that CMS collect and report data for most of the hospitals in a timely
manner and include hospitals in Maryland, the U.S. Territories, and
CAHs.
Response: We appreciate the commenters' support and acknowledge the
commenter's suggestion for expanding the definition of an applicable
hospital. However, as stated above, section 1886(p)(2)(A) of the Act
specifies that, for the purpose of the HAC Reduction Program, an
``applicable hospital'' is a subsection (d) hospital that meets certain
criteria. CAHs do not meet the definition of a ``subsection (d)
hospital.'' CAHs are separately defined under section 1886(mm) of the
Act and are paid under a reasonable cost methodology under section
1814(l) of the Act. We also provided information regarding Maryland
hospitals, which are paid under the authority of section 1814(b)(3) of
the Act. As we describe above, because these hospitals are located in
Maryland, which is ``one of the fifty States'' as described under
section 1886(d)(1)(B) of the Act, these Maryland hospitals are
subsection (d) hospitals and would be included in determining
``applicable hospitals'' and, unless the Secretary exempts them from
the application of the payment adjustment under the HAC Reduction
Program under the authority of section 1886(p)(2)(C) of the Act, would
be considered to be ``applicable hospitals'' under the HAC Reduction
Program. With regard to hospitals in Puerto Rico and the U.S.
Territories, as we stated above, hospitals located in the Territories,
including Puerto Rico, are not subsection (d) hospitals because they
are not located in ``one of the fifty States.''
After consideration of the public comments we received, we are
finalizing our proposal to codify the definition of ``applicable
hospital'' at Sec. 412.170 without modification.
Applicable Time Period. In accordance with the proposal
and discussion in section V.I.3.d. of the preamble of the FY 2014 IPPS/
LTCH PPS proposed rule regarding the proposed performance scoring
methodology for proposed measures for selected conditions and a risk-
adjustment methodology under the HAC Reduction Program, we proposed to
define the ``applicable period'' as, with respect to a fiscal year, the
2-year period (specified by the Secretary) from which data are
collected in order to calculate the Total HAC Score for the Hospital-
Acquired Condition Reduction Program.
We invited public comments on this proposed definition.
Comment: A few commenters addressed the proposed definition of
``applicable time period.'' One commenter opposed the definition for
applicable time period because of general opposition to the scoring
methodology proposed for the HAC Reduction Program. Other commenters
opposed the definition because of different reporting periods for the
measures in the HAC Reduction Program versus other reporting programs.
The commenters suggested that CMS align the duration of performance
periods for the Hospital IQR Program, the Hospital VBP Program, and the
HAC Reduction Program using 2 years of data for PSI measures and 1 year
of data for NHSN measures. Another commenter requested that the data be
submitted quarterly.
Response: We appreciate the commenters' feedback and suggestions.
The Secretary retains the statutory authority to determine the
applicable period for the HAC Reduction Program. We strive, to the
extent possible, to align reporting periods within our programs,
acknowledging that some provider burden exists with reporting in
multiple programs. However, given the varying policy, statutory, and
data collections differences among each program, such exact alignment
is not always feasible. For the HAC Reduction Program, we proposed and
are finalizing a Total HAC score using two domains or sets of measures
to determine the payment adjustment. We believe using 2 years of data
for both domains would balance the needs of the program and allow for
sufficient time to process the claims data and calculate the measures
to meet the program implementation timeline. Further, we believe that
the longer performance period on the NHSN measures is better for
reliability. Finally, we note that the Hospital VBP Program has the
restriction of needing to announce performance standards 60 days prior
to the beginning of the performance period, which may necessitate, in
some cases, shorter

[[Page 50711]]

performance periods in the Hospital VBP Program. As these programs grow
in future years, we will explore aligning the performance periods to
the extent possible.
After consideration of the public comments we received, we are
finalizing our proposal to codify the definition of ``applicable time
period'' at Sec. 412.170 without modification.
b. Payment Adjustment under the HAC Reduction Program, Including
Exemptions
(1) Basic Payment Adjustment
Section 1886(p)(1) of the Act sets forth the requirements by which
payments to ``applicable hospitals'' will be adjusted to account for
HACs with discharges beginning on October 1, 2014. Section 1886(p)(1)
of the Act specifies that the amount of payment shall be equal to 99
percent of the amount of payment that would otherwise apply to such
discharges under section 1886(d) or 1814(b)(3) of the Act, as
applicable. As specified in the statute, this payment adjustment is
calculated and made after payment adjustments under sections 1886(o)
and 1886(q) of the Act, the Hospital VBP Program and the Hospital
Readmissions Reduction Program respectively, are calculated and made.
(We note that the Hospital VBP Program is discussed in section V.H. of
the preamble of this final rule and the Hospital Readmissions Reduction
Program is discussed in section V.G. of the preamble of this final
rule.) Section 1886(p)(2)(A) of the Act defines ``applicable
hospitals'' as subsection(d) hospitals that meet certain criteria.
Section 1886(p)(2)(B)(i) of the Act defines these criteria and
specifies that the payment adjustment would apply to an applicable
hospital that ranks in the top quartile (25 percent) of all subsection
(d) hospitals, relative to the national average, of conditions acquired
during the applicable period, as determined by the Secretary.
Therefore, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27624), we
proposed to specify in proposed Sec. 412.172(b) that, ``For applicable
hospitals, beginning with discharges occurring during FY 2015, the
amount of payment under this section [proposed Sec. 412.172], or
section 1814(b)(3) of the Act, as applicable, for such discharges shall
be equal to 99 percent of the amount of payment that would otherwise
apply to such discharges under this section [proposed Sec. 412.172],
or section 1814(b)(3) of the Act. This amount of payment will be
determined after the application of the payment adjustment under the
Hospital Readmissions Reduction Program under Sec. 412.154, and the
adjustment made under the Hospital Value-Based Purchasing Program under
Sec. 412.162, and section 1814(l)(4) but without regard to this
section 1886(p) of the Act)'' (78 FR 27624).
We invited public comments on this proposal.
Comment: Several commenters addressed the proposed payment
adjustment under the HAC Reduction Program. Most commenters supported
the proposal to use financial incentives to reduce the number of HACs.
One commenter stated that the payment adjustment is required under
section 3008 of the Affordable Care Act. Another commenter supported
the proposal but further requested application of the adjustment to MS-
DRG payment amounts and overall consistency in payment adjustments
administered under the Hospital Readmissions Reduction Program and the
Hospital VBP Program. Other commenters opposed the basic payment
adjustment. Some commenters stated that it was inappropriate to
penalize one fourth of the nation's hospitals with a payment adjustment
simply because they fall in the top quartile. Another commenter stated
that tying payments to HACs may not encourage high-quality care.
Another commenter suggested that CMS consider modification to the
proposed 1-percent penalty applied to the top 25 percent of hospitals
with the worst HAC rates, but treat the 25th and 26th percentile
hospitals differently by graduating the penalty.
Response: We appreciate the commenters' support and agree with the
commenter that the payment adjustment is required under section 3008 of
the Affordable Care Act. As stated previously, our goal for the HAC
Reduction Program is to heighten the awareness of HACs and reduce the
number of incidences that occur through implementing the adjustments
required by section 1886(p) of the Act. We believe that our efforts in
using payment adjustments and our measurement authority will encourage
hospitals to eliminate the incidence of HACs that could be reasonably
prevented by applying evidence-based guidelines. We note that, in
accordance with section 1886(q)(1) of the Act, the hospital
readmissions reduction program adjustment is applied to the base
operating DRG payment amount, which is defined at section 1886(q)(2) of
the Act to exclude certain payments under subsection (d). Similarly, in
accordance with sections 1886(o)(7)(A) and 1886(o)(7)(B) of the Act,
the Hospital VBP Program applies adjustments to the based operating DRG
payment amount, which is defined at section 1886(o)(7)(D) of the Act to
exclude certain payments under subsection (d). For the HAC Reduction
Program, no such statutory exclusion exists and section 1886(p)(1) of
the Act states that the payment for applicable hospitals ``shall be
equal to 99 percent of the amount of payment that would otherwise
apply.'' Therefore, we are unable to accept the commenters'
recommendations to change the application of the payment adjustment. We
will address this issue of the actual application of the payment
adjustment to hospital payments more specifically next year in the FY
2015 IPPS/LTCH PPS rule.
Comment: A few commenters commented on the waivers for hospitals
located in areas that experience disasters or other extraordinary
circumstances. One commenter suggested that CMS establish a formal
waiver process for disaster or other extraordinary circumstances,
including possible changes to the applicable periods for affected
hospitals.
Response: We appreciate the comments on establishing a potential
exemption process for the HAC Reduction Program for hospitals located
in areas that experience disasters or other extraordinary
circumstances. We did not make any proposals related to disasters or
other extraordinary circumstances for the HAC Reduction Program in the
proposed rule; therefore, we consider this comment out of the scope of
the proposed rule. However, we are reviewing this issue and may
consider such a proposal in future rulemaking. If we do, we intend to
focus on several policy and operational considerations in developing a
disaster exemption process for the HAC Reduction Program, including the
feasibility of aligning this process across other similar programs.
Comment: One commenter expressed concern regarding the penalty for
25 percent of hospitals. The commenter believed it may be appropriate
for the HAC Reduction Program to use a fixed performance target so that
total penalties will decrease if overall HAC rates lower significantly.
Response: We understand the commenter's concerns. However, as we
stated earlier, because section 1886(p)(1) of the Act states that the
payment for applicable hospitals ``shall be equal to 99 percent of the
amount of payment that would otherwise apply,'' we are unable to accept
the commenter's recommendations to change the application of the
payment adjustment.

[[Page 50712]]

After consideration of the public comments we received, we are
finalizing our proposal to codify the payment adjustment at Sec.
412.172(b) without modification.
(2) Applicability to Maryland Hospitals
Section 1886(p)(2)(c) of the Act specifies that the Secretary may
exempt hospitals paid under 1814(b)(3) ``from the application of this
subsection if the State which is paid under such section submits an
annual report to the Secretary describing how a similar program in the
state for a participating hospital or hospitals achieves or surpasses
the measured results in terms of patient health outcomes and cost
savings established under this subsection.'' Accordingly, a program
established by the State of Maryland that could serve to exempt
hospitals in the State from the HAC Reduction Program would focus on
hospitals operating under the waiver provided by section 1814(b)(3) of
the Act, that is, those hospitals that would otherwise have been paid
by Medicare under the IPPS, absent this provision. As we describe in
section V.I.3. of the preamble of this final rule, because hospitals
paid under section 1814(b)(3) of the Act are subsection (d) hospitals,
they would be included in determining ``applicable hospitals'' (subject
to the payment adjustment under the HAC Reduction Program), and unless
the Secretary exempts these hospitals from the application of payment
adjustments under the HAC Reduction Program under the authority of
section 1886(p)(2)(C) of the Act, they are considered to be
``applicable hospitals'' (subject to the payment adjustments in the HAC
Reduction Program) under the HAC Reduction Program.
In the FY 2014 IPPS/LTCH PPS proposed rule, we proposed to
establish criteria for evaluation to determine whether Maryland should
be exempted from the application of the payment adjustments under the
HAC Reduction Program for a given fiscal year (78 FR 27624). Under
proposed Sec. 412.172(c), we proposed to specify that ``CMS will
determine whether to exempt Maryland hospitals that are paid under
section 1814(b)(3) of the Act and not under the hospital inpatient
prospective payment system . . . .'' and that, absent the provisions of
section 1814(b)(3) of the Act, to make payment under section 1886(d) of
the Act exempt from the application of payment adjustments under the
HAC Reduction Program, provided that the State submits an annual report
to the Secretary describing how a similar program to reduce hospital
acquired conditions in that State achieves or surpasses the measured
results in terms of health outcomes and cost savings for the HAC
Reduction Program as applied to hospitals described in section
1886(d)(1)(B) of the Act. We proposed to specify in the proposed
regulations that ``CMS will establish criteria for evaluation of
Maryland's annual report to the Secretary to determine whether Maryland
will be exempted from the application of payment adjustments under this
program for a given fiscal year.'' We also proposed to specify that
``Maryland's annual report to the Secretary and request for exemption
from the Hospital-Acquired Condition Reduction Program must be
resubmitted and reconsidered annually.'' We proposed that, for FY 2015,
Maryland would submit a preliminary report to us by January 15,\,\ 2014
and a final report to us by June 1, 2014.
We noted that our proposed criteria to evaluate Maryland's program
is for FY 2015, the first year of the payment adjustment under the HAC
Reduction Program, and that our evaluation criteria may change through
notice and comment rulemaking as this program evolves.
We invited public comments on our proposals.
Comment: Several commenters supported the Maryland waiver proposal
for the HAC Reduction program. One commenter believed the clear
prevention guidelines that exist with its State hospital-acquired
condition program will help Maryland's hospitals focus on key areas of
harm and that recent revisions to the methodology will enable providers
to continue making improvements in the program.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to codify the payment adjustment pertaining to
hospitals paid under section 1814(b)(3) of the Act (certain Maryland
hospitals) at Sec. 412.172(c), without modification.
c. Measure Selection and Conditions, Including a Proposed Risk-
Adjustment Scoring Methodology
(1) General Selection of Proposed Measures
In the FY 2014 IPPS/LTCH PPS proposed rule, we proposed measures
and a scoring methodology for the HAC Reduction Program (78 FR 27625
through 27628). We believe that it is important to set forth such
scoring methodologies for each individual HAC measure, in order for the
public to understand how the measures discussed and finalized in this
year's rulemaking relate to the performance methodology used to
determine the applicable hospitals subject to the payment adjustment
under the HAC Reduction Program.
(2) Measure Selection and Scoring Methodology
We proposed initially to adopt eight measures for the FY 2015
determination under the HAC Reduction Program. Several of these
measures are already part of the Hospital IQR Program and are reported
on the Hospital Compare Web site. We noted that all measures proposed
for the HAC Reduction Program follow the criteria established by the
DRA of 2005 in that they consist of high-volume or high-cost conditions
that could be prevented by the use of evidence-based guidelines (we
refer readers to section II.F. of the preamble of this final rule for
further information).
In the FY 2014 IPPS/LTCH PPS proposed rule, we proposed the measure
selection and methodology used to determine the Total HAC Score (78 FR
27629 through 27633). For measure scoring under the HAC Reduction
Program, we proposed to group the measures into separate domains
(Domain 1 and Domain 2) to calculate a Total HAC Score in order to
determine the payment adjustment. For measure selection under Domain 1,
we discussed a proposed and alternative approach, and sought to
finalize a policy based upon public comment received regarding these
approaches. For a detailed discussion of the measure selection and
methodology proposed for the HAC Reduction Program, including a list of
measures proposed for the Program, we refer readers to section V.I. of
the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27625 through 27632).
We invited public comments on the measures proposed for the HAC
Reduction Program, including whether the proposed or alternative
approach for Domain 1 would better serve the HAC Reduction Program.
Comment: Numerous commenters addressed the proposed measures for
the HAC Reduction Program. Several commenters, who also supported the
HAC Reduction Program generally, also supported all measures proposed
for the HAC Reduction Program.
Other commenters provided feedback covering one of the following
areas: Domain 1 measure methodology and proposed inclusion in the HAC
Reduction Program; Domain 2 measure methodology and proposed inclusion
in the HAC Reduction Program; or general

[[Page 50713]]

measure feedback on the HAC Reduction Program.
In regard to Domain 1, commenters provided several suggestions on
the proposal and alternative approach in which either six individual
AHRQ PSI measures or a single AHRQ PSI-90 composite were to be used as
part of calculating the Total HAC score. In regard to the six
individual AHRQ PSI measures proposed under Domain 1, commenters
appreciated this approach because these measures did not overlap with
the CDC measures in Domain 2. Further, commenters stated that the
measures proposed for Domain 1 addressed several key areas of patient
safety, including addressing ``never events'' and aligning with the
National Quality Strategy domain of patient safety. One commenter
specifically supported the proposed Domain 1 approach to include
iatrogenic pneumothorax rate in the HAC Reduction Program because it
was highly preventable with ultrasound guidance and encouraged
appropriate use of ultrasound for placement of venous catheters.
Another commenter further suggested that if CMS adopted PSI-3 in Domain
1, CMS should exclude pressure ulcers that were undetectable at
admission.
Some commenters' support of the Domain 1 proposal varied, depending
on preference for each of the PSI measures themselves. Some commenters
supported the proposed Domain 1 approach, subject to the removal of one
or more measures. Other commenters did not support the proposed Domain
1 approach because they opposed one or more measures in the domain. For
example, one commenter opposed PSI-7 because current research suggests
it has poor sensitivity and poor positive predictive value in
determining CLABSI. However, that commenter supported the proposed
Domain 1 approach without inclusion of that measure. Another commenter
stated that PSI-3 relies on ICD-9-CM diagnosis codes, which may not
provide complete information, and leads to underreporting of pressure
ulcers. This commenter did not generally support the Domain 1 proposal
because this measure existed in the domain. Other commenters suggested
removal of PSI-3 because it only covered Stage 3 and 4 pressure ulcers.
Several commenters opposed one or more of the Domain 1 measures
proposed for the HAC Reduction Program because they did not believe the
measures were properly reviewed by the MAP in the manner required by
the pre-rulemaking process that CMS must follow prior to proposing
rules. Some commenters opposed PSI-3, PSI-6, and PSI-10 because they
were not MAP-reviewed. Another commenter did not support PSI-90 because
the MAP did not review each component of the composite measure
individually. One commenter suggested that all measures be endorsed
with clear prevention guidelines. Another commenter stated that CMS did
not provide MAP with sufficient notice on implementation to allow for
meaningful input for the HAC Reduction Program and proposed measures.
One commenter suggested additional revisions to the PSI measures.
This included the following changes: For PSI-3 (pressure ulcer rate),
the commenter recommended exclusion of nascent pressure ulcers
undetectable at admission; for PSI-5, the commenter recommended
exclusion of hardware or devices intentionally left in the body; for
PSI-6, the commenter recommended exclusions for lines placed under
emergency conditions; and for PSI-12, the commenter recommended
exclusions for patients with diagnosis of cancer, brain tumors, or
trauma which are at higher risk of embolus. The commenter objected to
PSI-15 because of a lack of coding guidelines to define accidental
puncture.
For the PSI-90 proposed Domain 1 alternative, commenters supported
the composite because the composite received NQF endorsement and MAP
review. In addition, one commenter preferred the composite because it
included PSI-13 and PSI-14 which are indicators related to sepsis
management. Another commenter favored this approach because PSI-90 is
included in the Hospital VBP Program. Another commenter suggested
additional measures to the Domain 1 alternative. For example, one
commenter suggested adding PSI-4 along with the preferred PSI-90
composite.
The greatest concern for the proposed alternative Domain 1 PSI-90
composite related to overlapping with Domain 2 measures in the
calculation of the Total HAC Score, and overlapping with measures in
the Hospital VBP Program. Some commenters stated that because some of
the measures in the PSI-90 composite are also used for the Hospital VBP
Program, hospitals would be penalized more than once for the same
preventable HAC. Other commenters suggested that CMS remove the
overlapping measures from the PSI-90 composite or retire overlapping
measures from the Hospital VBP Program. Other commenters expressed
concerns regarding the inclusion of PSI-90 as the measure results are
complicated and skew individual hospitals' results.
However, for either the proposed or alternative Domain 1 proposal,
some commenters did not support using any AHRQ PSI measures. Commenters
cited these measures are only tested for reliability on CMS claims
data, not all-payer data. Other commenters stated that the proposed PSI
measures focus primarily on surgical care, have false positive rates,
and the proposed risk adjustment in the HAC Reduction is insufficient
to mitigate that bias. Other commenters urged CMS to develop measures
and not use the PSI measures, and added that all measures should be in
the Hospital IQR Program prior to inclusion in the HAC Reduction
Program. One commenter stated that AHRQ, the measure developer of the
PSI measures, indicated in an update that AHRQ PSI measures are not
appropriate for payment programs.
For the Domain 2 CDC measures, several commenters supported the CDC
measures. Commenters stated generally that the HAI measures are
statistically more reliable than PSIs at the hospital level. Many
commenters stated a preference for chart-abstracted over claim based
data measures. MedPAC stated that the success of each HAC measure
selected will depend on hospitals using evidence-based care processes,
a statistically reliable data method, and a consistent date source.
MedPAC then recommended CDC HAI data because they met such criteria.
Other commenters suggested renaming CAUTI and CLABSI or adding
additional exclusions to the measures. Another commenter suggesting
retaining CLABSI and CAUTI measures for the HAC Reduction Program and
retiring them from the Hospital VBP Program. Some supported the
proposed Domain 2 proposed approach because of its importance in
measuring nosocomial infections. Other commenters supported the Domain
2 proposed measures, but expressed concern about the burden to the
industry and the nature of the measures. Another commenter suggested
that CMS work with AHRQ, CDC, and ONC to improve electronic reporting
of these measures to remove subjectivity.
Other commenters supported the inclusion of MRSA and clostridium
difficile (CDI) into the HAC Reduction Program for FY 2017. One
commenter stated that inclusion of the CDI measure in the HAC Reduction
Program potentially may motivate hospitals to improve patient care and
outcomes, and signals our important commitment to reducing CDIs in
hospitals and raising awareness about the disease.

[[Page 50714]]

However, some commenters opposed one or more of the Domain 2
measures. One commenter stated that the Domain 2 measures will unfairly
penalize large and teaching hospitals. Other commenters did not support
inclusion of MRSA or CDI in FY 2017. The commenters stated that the
measures have low reliability, may be impacted by providers not within
the hospital, and the testing vehicles used may have influenced results
creating unfair comparisons between hospitals. Another commenter
requested that CMS provide clarification on the specifications for
these measures and added that CMS exclude community-acquired MRSA.
Another commenter stated that the SSI measure was more appropriate for
the Hospital VBP Program than the HAC Reduction Program. One commenter
opposed using only health care-associated infection measures as they
are not a true indicator of hospital performance.
Still other commenters did not support either Domain 1 or Domain 2
measures proposed for the HAC Reduction program. One commenter stated
that the measures are overly complex, methodologically challenged, and
need further refinement. A few commenters asked that CMS provide
additional alternatives for the program and extend the comment period.
Some commenters suggested that CMS delay the finalization of the
implementation of the HAC Reduction Program and collaborate with
provider and consumer communities to improve the selection of HAC
program measures. Other commenters requested that additional impact
data be provided to stakeholders prior to implementation of the
program. Another commenter opposed a payment adjustment for HACs when
such HACs are not reasonably preventable through evidence based
guidelines, or based on randomized, well-designed, prospective, and
nonbiased studies developed by specialty medical organizations. This
commenter believed that, under these circumstances, a payment
adjustment should not occur in any payment setting. Other commenters
stated that the AHRQ PSI measures cannot be calculated, are claims-
based measures, and require additional tools for use by hospitals.
Response: We appreciate all of the numerous comments and
suggestions on the measures proposed for the HAC Reduction Program, and
value this feedback. We have reviewed and considered every comment. To
those commenters who supported one or more measures proposed for the
HAC Reduction Program, we appreciate their support.
We emphasize that the measures proposed for this program aim to
increase patient safety. Therefore, we stress that patient safety
remains the primary objective to the measures proposed and ultimately
selected under the HAC Reduction Program.
We note that several commenters raised concerns with using claims-
based measures in the HAC Reduction Program. However, we believe that
PSI measures proposed for Domain 1 are suitable for use in the HAC
Reduction Program. We acknowledge stakeholders' preference to use
chart-abstracted measures, such as those found under Domain 2, but
stress that both types of measures possess advantages. For example,
claims data cover a larger population in the hospital and can provide
signals where quality improvement may need to occur. Claims data, which
are collected for payment purposes, are also readily available, while
registry data, as also pointed out by several commenters, are costly to
collect and present a potentially greater administrative and financial
burden on hospitals. Therefore, we believe the use of such claim-based
measures, such as the AHRQ PSIs proposed in Domain 1, are suitable for
the HAC Reduction Program because they are already collected for use
and widely accepted by States and other health care purchasers for
payment purposes. We note that the MAP reviewed all finalized measures
for the HAC Reduction Program. For Domain 1, the MAP supported the
direction of the PSI-90 composite for the HAC Reduction Program. We
note that we are not finalizing the other measures mentioned by the
commenters.
In response to one commenter stating that AHRQ PSI measures are
unsuitable for a payment program, we consulted with AHRQ on this issue.
AHRQ stated that new evidence has been developed, which changes some of
the information on which this commenter likely previously relied. AHRQ
is in the process of reevaluating the measures and updating the
documents to reflect the changes.
In regard to those commenters who objected to one or more of the
proposed Domain 1 measures, we acknowledge that commenters wanted
additional exclusions or clarifications to the measures proposed for
the HAC Reduction Program. However, we believe that such exclusions are
not warranted at this time. For example, we are aware that PSI-3
(pressure ulcer rate) captures Stage 3 and 4 pressure ulcers only, and
does not capture all data, such as Stage 1 and 2. However, we stress
that no other publically available data source captures these events,
which comprise a critical area of patient safety. Further, with respect
to additional exclusions for PSI-3, we note that PSI-3 already excludes
patients admitted from nursing facilities, patients who had a pressure
ulcer present on admission (including an ulcer of a lower stage that
progressed after admission), and patients who stayed 4 or fewer days in
the hospital. Therefore, we believe that such exclusions should already
address the concerns raised by commenters.
For PSI-5, some commenters raised concern that exclusions should be
clearly added for hardware or other items placed purposely in the body.
However, we note that the AHA's Coding Clinic for ICD-9-CM addressed
this issue. The codes that drive this indicator (998.4 and 998.7)
account for at least 90 percent of flagged cases, and are limited to
foreign bodies ``accidentally left during procedure.'' The Coding
Clinic (First Quarter 1989, 2009, and 2011) has instructed coders that
this code (998.4) should only be used when a foreign body has been
accidentally left behind at the end of the procedure; foreign bodies
that are discovered and retrieved in the operating room, or
deliberately left behind, are not assigned code 998.4 or 998.7.
Therefore, such circumstances would not be counted under this measure.
For PSI-6, several commenters raised concern over the denominator
used in the measure. We have consulted AHRQ on this issue and
appreciate its assistance. For PSI-6, we acknowledge that the
denominator of PSI 6 reflects the fact that many different procedures
are associated with a nonzero risk of iatrogenic pneumothorax and note
that not all of these procedures are consistently coded in
administrative data sets. One viable strategy for preventing
complications such as iatrogenic pneumothorax, CLABSI, and CAUTI is to
reduce discretionary use of the procedures that place patients at risk
and recognize and reward all hospital efforts to prevent undesired
complications such as iatrogenic pneumothorax, including safer
selection of patients for high-risk procedures as well as safer
performance of these procedures. Further, we note that preventability
remains a concern. However, exclusions are reexamined and adjusted on
an annual basis. Further, the denominator of PSI 6 already excludes all
trauma cases and most cases with urgent or emergent thoracic or cardiac
procedures. In addition, other factors, such as

[[Page 50715]]

malnutrition, obesity, and chronic lung disease, are included in risk-
adjustment.
We note that some commenters raised validity and coding concerns
with underreporting with some of the PSI components of PSI-90 as well
as the individual PSI measures. According to recent and prior studies
by the Agency for Healthcare Research and Quality, there is little
evidence of underreporting of diagnoses, and a high degree of true
positives (90 percent sensitivity) with respect to diagnoses used for
the AHRQ measures. We believe that, regardless of data source (claims/
administrative or chart/EHR), focusing on outcomes of interest, such as
those represented in the PSI-90 composite, leads providers to focus
more on prevention, which is the goal of the HAC Reduction Program.
Regarding commenters' concern with false positive results with AHRQ
measures, we do note that some indicators of the composite presented a
false positive rate on initial evaluation (for example, PSI 12).
However, subsequent efforts to refine specifications or improve ICD-9-
CM codes led to documented reductions in false positive rates. Moving
forward, with assistance from AHRQ, we will continually evaluate and
refine the measure as part of our continuous improvement process to
further alleviate this concern.
We acknowledge coding trepidations raised by commenters. However,
many of the concerns raised by commenters can be alleviated with proper
coding. For example, for PSI-15, some commenters expected enterotomies
to be excluded (in the case of patients with small bowel obstruction)
and added that the measure lacked specificities as to what has been
punctured or lacerated. However, according to explicit guidance from
the AHA's Coding Clinic for ICD-9-CM (Second Quarter 2007 and First
Quarter 2010), ``expected'' enterotomies are not coded with code 998.2.
By definition, this code is limited to ``accidental'' punctures and
lacerations that are not ``intrinsic'' or ``inherent'' in a major
procedure. Therefore, we maintain that proper coding and education on
such coding will address stakeholders' concerns.
We designed the HAC Reduction Program to include currently
available, risk-adjusted measures that are reflective of hospital
performance. All of the measures proposed were either: Recommended for
inclusion by the NQF Measures Application Partnership either on their
own or as part of a composite, or represent 1 of the 12 HACs that have
been identified by the Secretary and which are referenced in section
1886(p) of the Act for the HAC Reduction Program. We refer readers to
the MAP Pre-Rulemaking Report: 2013 Recommendations on Measures Under
Consideration by HHS, February 2013, pp 145-153, for further
detail.\50\ As the number of risk-adjusted HAC measures increases over
time, we will continue to conduct research on the impact of adding
additional and/or different measures to the program.
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\50\ Available at: https://www.qualityforum.org/Publications/
2013/02/MAP_Pre-Rulemaking_Report__-February_2013.aspx.
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Some commenters opposed one or more of the Domain 1 measures
because they lacked MAP review or NQF endorsement. Other commenters
wanted additional time for more public engagement. However, we believe
that both the pre-rulemaking and rulemaking process provides ample
opportunity for public involvement. Second, we note that the MAP
reviewed all measures for the HAC Reduction Program. For Domain 1, the
MAP supported PSI-5, PSI-15, PSI-12 in December, 2012 as well as the
PSI-90 composite. NQF also endorsed these measures. We do acknowledge
the comments that PSI-3, PSI-6, and PSI-10 were not on the measure
under consideration list (MUC) in December 2012. However, PSI-3 and
PSI-6 were part of the PSI-90 composite which the MUC list did include
and which was discussed by the MAP in December 2012. For PSI-10, we
considered this measure for the HAC Reduction Program after the MUC
list had posted, and immediately arranged review of the measure with
the MAP in an ad hoc process. With regard to concerns that some
measures, such as PSI-3 and PSI-6, were not NQF-endorsed, we spoke to
AHRQ on this issue. AHRQ clarified that these measures did not fail NQF
endorsement, as commenters stated, but, rather, have not yet been
submitted to NQF for endorsement. However, AHRQ is considering doing so
in the near future. Further, we note that section 1886(p)(3) of the Act
does not require NQF endorsement for a condition to be considered for
the HAC Reduction Program. Rather, section 1886(p)(3) of the Act
defines a ``hospital-acquired condition'' to means a condition
identified for purposes of subsection (d)(4)(D)(iv) and any other
condition determined appropriate by the Secretary that an individual
acquires during a stay in an applicable hospital, as determined by the
Secretary. The conditions covering PSI-3 and PSI-6, as well as all
other conditions proposed for the HAC Reduction Program, meet the
statutory definition under section 1886(p)(3) of the Act and,
therefore, were properly considered for the HAC Reduction Program.
We acknowledge that the PSI-90 alternative is also contained in the
Hospital VBP Program. However, we believe that this measure, covering
HACs, comprise some of the most critical of patient safety areas.
Several commenters, many from Medicare beneficiaries themselves,
overwhelming supported our efforts to reduce HAIs and these measures.
Therefore, we believe that the importance of these measures to patient
safety, coupled with the numerous comments asking for measure
alignment, justifies the use of PSI-90 in more than one program.
However, we will, in the future, monitor the HAC Reduction Program and
the measures selected for it and revise the measures as needed.
We further understand that some commenters are concerned with a
double payment adjustment with the use of PSI-90 because a condition
overlaps with the CDC NHSN CLABSI measure that we are finalizing for
Domain 2. However, we further stress that the HAC Reduction Program and
the Hospital VBP Program are separate hospital reporting programs with
different purposes and policy goals. For example, the HAC Reduction
Program is a penalty program that reduces payments to hospitals for
excess HACs to increase patient safety in hospitals. On the other hand,
the Hospital VBP Program is an incentive program that redistributes
reductions made to the base operating DRG payment amount, based on
certain performance measures. Therefore, although we acknowledge that
the measures exist in more than one program, the measures are used and
calculated for very distinct purposes. Accordingly, as stated above, we
believe that the critical importance of these measures to patient
safety warrants the inclusion in both programs. We will, in the future,
monitor the HAC Reduction program and analyze the impact of our
measures selection, including any unintended consequences with having a
measure in more than one program, and will revise the program if
needed.
For Domain 2, we appreciate the support shown for these measures,
including the favorable recommendations made by MedPAC. We acknowledge
commenters' concern that some provider burden is required in using
these measures, but note that the majority of commenters supported
these measures for the HAC Reduction Program. We also have consulted
with the CDC on the public comments for the proposed Domain 2 measures
and appreciate the assistance provided.

[[Page 50716]]

With regard to additional modifications to CAUTI, we note that NQF
reviewed the measure and took into account the concerns about
unintended consequences and preventability. However, following detailed
discussions of these concerns, the NQF endorsed the CAUTI measure for
use in acute care hospitals and other health care facility types. We
understand the potential for unintended consequences and concerns about
preventability of this measure, but stress that these issues were
discussed thoroughly by the NQF committee that considered and
ultimately endorsed the measure.
We also do not believe renaming CLAUTI and CLABSI is warranted. The
NHSN CAUTI measure endorsed by the NQF, namely the Catheter-Associated
Urinary Tract Infection (CAUTI) Outcome Measure (0138),
includes in its scope both symptomatic urinary tract infection (SUTI)
and asymptomatic bacteremic UTI (ABUTI). For that reason, ``symptomatic
urinary tract infections due to an indwelling urinary catheter'' does
not accurately describe the NHSN measure. Second, the NHSN CLABSI
measure endorsed by the NQF, namely the Central-Line Associated
Bloodstream Infection Measure (0139), does not include in its
scope skin and soft tissue infections at the catheter insertion site.
For that reason, ``infection due to a central venous catheter'' does
not accurately describe the NHSN measure.
With respect to some commenters' concerns about MRSA and CDI
reporting, we note that the LabID event measures do not require
screening of all patients and do enable differentiation between
community- and health care-associated LabID events. Therefore, we do
not believe that an additional exclusion for community-acquired MRSA is
required at this time.
Finally, some commenters raised concerns that the Domain 2 measures
do not adequately measure hospital performance. We note that
measurement of healthcare-associated infections has been a mainstay of
infection prevention for over 30 years in the United States, and the
data are widely used by providers, policymakers, and the public to
measure hospital performance and drive changes in patient care
practices that make a difference in performance. Therefore, we disagree
that quality measurement does not adequately measure hospital
performance.
We believe that the HAC Reduction Program exists, in part, to
encourage quality improvement in the acute inpatient setting, and we
believe that patient safety measures, such as the AHRQ PSI-90 measure
and the CDC NHSN measures, comprise important metrics on which
hospitals should focus their quality improvement efforts. While we
acknowledge the commenters' concerns about the composite measure's
complexity, we note that the composite is NQF-endorsed, and being
utilized in both public reporting and pay for performance initiatives.
Furthermore, the PSI-90 composite measure consists of underlying safety
indicators on which hospitals should focus their attention. We
encourage hospitals that are unsure how to improve their performance on
the AHRQ PSI measure or on any other measure finalized for the HAC
Reduction Program to utilize the quality improvement resources that
CMS, AHRQ, and CDC have made available to assist hospitals with
improvement in these areas (that is, QIOs, PSOs, QI toolkits, and NHSN
State-based prevention initiatives and member meetings).
Comment: Several commenters expressed concern about the
disproportionate impact on teaching hospitals and other large hospitals
because they treat more complex patients with more comorbidities.
Response: We acknowledge the commenters' concern with the potential
negative impact to large and teaching hospitals. As discussed further
under section V.I.3.d. of the preamble of this final rule, we believe
that the scoring changes made to the HAC Reduction Program will
alleviate that concern. However, we will continue to examine and
analyze the issue and will consider releasing additional analysis in
future rulemaking.
Comment: One commenter opposed inclusion of AHRQ PSI-5 because it
is included in the AHRQ PSI-90 composite.
Response: We appreciate the commenter's feedback. However, we would
like to clarify that PSI-5 is not part of the PSI-90 composite.
Comment: One commenter suggested a third approach for Domain 1. The
commenter suggested including Domain 1 PSIs with the addition of PSI-4,
which is part of the Hospital IQR Program, and PSI-8, PSI-13, and PSI-
14.
Response: We appreciate the commenter's suggestion and will
consider it in future rulemaking.
Comment: Several commenters suggested additional measures for the
HAC Reduction Program. One commenter suggested adding iatrogenic
pneumothorax with paracentesis and thoracentesis for future IPPS
rulemaking. Other commenters recommended the addition of SSIs following
hip and knee arthroplasty because there is a need to control high
infection rates and subsequent managed care costs following post hip
and knee replacement surgery. Another commenter requested a measure for
the HAC Reduction Program on C-section births. One commenter asked CMS
to consider identifying particular organisms of infection to better
address quality issues such as multidrug resistant organism infections.
One commenter suggested that, in an effort to reduce hospital
infections, other areas of the hospital, such as the ice machines,
should be considered for quality measurement.
Response: We appreciate the commenters' feedback and suggestions
and will consider these measures in future rulemaking.
Comment: Some commenters recommended that overlapping measures with
the Hospital VBP Program be removed from the Hospital VBP Program.
Another commenter asked that the measure adoption cycles for the HAC
Reduction Program and the Hospital VBP Program be aligned.
Response: The statute does not prohibit use of the same measures in
both the HAC Reduction Program and the Hospital VBP Program.
Furthermore, these two programs have different scoring methodologies
and completely different incentive structures for different types of
performance on these measures. By including certain measures under more
than one program, we seek to emphasize topics of critical importance
for quality improvement in the inpatient hospital setting, and to
patient safety. We believe it is appropriate to provide incentives for
hospitals to avoid HACs under more than one program. However, we intend
to continue working to improve and align our quality improvement
programs, and will consider whether we should attempt to minimize
measure duplication between programs in the future.
Comment: One commenter expressed concern about mixing measures
based on all-payer data with those based on Medicare claims data.
Response: We appreciate the commenter's feedback. However, we do
not believe any biases or inaccuracies are introduced to the program by
basing the Total HAC Score on measures that use all-payer data, and
measures that use Medicare data.
Comment: One commenter believed that CMS should use measures with
valid and reliable results and clear and concise definitions toward
areas of quality improvement.
Response: We appreciate the commenter's feedback. We believe that

[[Page 50717]]

the measures selected for the HAC Reduction Program do meet these
criteria. The measures finalized for FY 2015 have been MAP-reviewed and
NQF-endorsed.
Comment: One commenter expressed concerns regarding the proposed
methodology and recommended modifications to avoid unintended
consequences. The commenter believed the options are difficult to
comprehend as there is a lack of data and urged CMS to extend the
comment period and release data files for an accurate analysis of
scoring methodologies and an accurate analysis of measure selection.
Response: We will consider hosting educational provider calls to
further explain the scoring methodology for the program, and will
design the confidential reports in a manner that provides step-by-step
explanations of the scoring. We note that data for the PSI-90 measure
and the CAUTI and CLABSI measures are currently publicly available on
the Hospital Compare Web site. Additionally, we will be making updated
information available to the public on the individual indicators in
PSI-90 in an upcoming release on the Hospital Compare Web site.
After consideration of the public comments we received, we are
adopting the PSI-90 composite for Domain 1 and the CDC measures for
Domain 2 (CAUTI and CLABSI for FY 2015, SSI for FY 2016, and MRSA and
C-Difficile for FY 2017). We believe that, given that PSI-90 has been
both NQF-endorsed and fully MAP-supported for the HAC Reduction
Program, it is more suitable. We also believe that the PSI-90 measure,
as a composite measure of patient safety, appropriately encourages
robust hospital attention to patient safety events.
(3) Applicable Time Period
In the FY 2014 IPPS/LTCH PPS proposed rule, we proposed a 2-year
applicable period to collect data that would be used to calculate the
Total HAC Score (78 FR 27628). For Domain 1 (AHRQ measures), we
proposed a 2-year data period to calculate the measures based on
recommendations from AHRQ, the measure developer. In addition, an
analysis by Mathematica Policy Research, a CMS contractor,\51\ shows
that, with a 24-month data period, 50 to 90 percent of hospitals attain
a moderate or high level of reliability for the proposed AHRQ measures.
We believe that the proposed 24-month data period described below would
provide hospitals and the general public the most current data
available. The proposed 24-month data period also would allow time to
complete the complex calculation process for these measures, to perform
comprehensive quality assurance to enhance the accuracy of measure
results, and to disseminate confidential reports on hospital-level
results to individual hospitals.
---------------------------------------------------------------------------

\51\ Mathematica Policy Research (November 2011). Reporting
period and reliability of AHRQ, CMS 30-day and HAC Quality
Measures--Revised. Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/hospital-value-based-purchasing/Downloads/HVBP_Measure_Reliability-.pdf.
---------------------------------------------------------------------------

For FY 2015, we proposed to use the 24-month period from July 1,
2011 through June 30, 2013 as the applicable time period for the AHRQ
measures. The claims for all Medicare FFS beneficiaries discharged
during this period would be included in the calculation of measure
results for FY 2015. This includes claims data from the 2011, 2012, and
2013 Inpatient Standard Analytic Files (SAFs). The national and
hospital-specific rates for PSI-6, PSI-12, and PSI-15 are available on
the Hospital Compare Web site. The hospital level PSI-90 composite
bucket also is available on the Hospital Compare Web site.\52\
---------------------------------------------------------------------------

\52\ Available at: https://www.medicare.gov/hospitalcompare/About/HOSInfo/RCD.aspx#ssi.
---------------------------------------------------------------------------

The CDC measures are currently collected and calculated on a
quarterly basis. However, for purposes of the HAC Reduction Program, we
proposed to use 2 years of data to calculate the Domain 2 score so
Domain 1 and Domain 2 are calculated using 24 months of data. For FY
2015, we proposed to use calendar years 2012 and 2013 for the HAC
Reduction Program.
Comment: A few commenters addressed the proposed definition of
``applicable time period.'' One commenter opposed the definition for
applicable time period because of general opposition to the scoring
methodology proposed for the HAC Reduction Program. Other commenters
opposed the definition because of different reporting periods for the
measures in the HAC Reduction Program versus other reporting programs
and suggested that CMS align the duration of performance periods for
the Hospital IQR Program, the Hospital VBP Program, and the HAC
Reduction Program using 2 years of data for PSI measures and 1 year of
data for NHSN measures.
Response: We appreciate the commenters' feedback and suggestions.
The Secretary maintains the statutory authority to determine the
applicable period for the HAC Reduction Program. We strive, to the
extent possible, to align reporting periods within our programs,
acknowledging that some provider burden exists with reporting in
multiple programs. However, given the varying policy, statutory, and
data collections differences between each program, such exact alignment
is not always feasible. For the HAC Reduction program, we proposed and
are finalizing a Total HAC score using two domains or sets of measures
to determine the payment adjustment. We believe that using 2 years of
data for both domains would balance the needs of the program and allow
for sufficient time to process the claims data and calculate the
measures to meet the program implementation timeline. Further, we
believe that the longer performance period on the NHSN measures is
better for reliability. Finally, we note that the Hospital VBP Program
has certain restrictions (announcing performance standards 60 days
prior to the beginning of the performance period and beginning a
performance period no sooner than 1 year after a measure is publicly
reported on the Hospital Compare Web site) which may result in
different performance periods in the Hospital VBP Program than what is
used in other programs. As these programs grow and are implemented in
future years, we will examine the possibility of aligning the
performance periods to the extent possible.
After consideration of the public comments we received, we are
finalizing our proposal to codify the definition of ``applicable time
period'' at Sec. 412.170 without modification.
(4) Measure Calculations
In the FY 2014 IPPS/LTCH PPS proposed rule, we proposed measure
calculations for the AHRQ PSI measures under Domain 1 and the CDC NHSN
measures under Domain 2. Measure calculations for the AHRQ PSI measures
included using ICD-9-CM diagnosis and/or procedure codes for the
primary diagnosis and, for the secondary diagnosis, POA value
associated with the secondary diagnosis on the claim. We also proposed
to extend the requirement under the FY 2008 IPPS final rule, requiring
that all hospitals paid under the IPPS report on whether a diagnosis is
present on admission (72 FR 47201) to subsection (d) Maryland hospitals
paid under the waiver at section 1814(b)(3) of the Act. (We refer
readers to section II. F.3. of the preamble of this final rule for a
discussion of the POA coding requirement for Maryland hospitals.) In
addition, we proposed that the same rules under the Hospital IQR
Program be applied to determine how the AHRQ PSI and CDC NSHN measures
are

[[Page 50718]]

applied and calculated and proposed to expand both of the populations
for the CDC NHSN CAUTI and CLABSI measures to care provided in areas
outside of the ICU in the future (78 FR 27628). For further details on
these proposals for the HAC Reduction Program, we refer readers to
section V.I. of the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27628).
For the Hospital IQR Program, we refer readers to section IX.A. of the
preamble of the final rule.
Comment: One commenter recommended limiting CAUTI and CLABSI to
ICUs for the HAC program because there are major risks of
underreporting and surveillance/assessment bias in self-reporting of
hospitals. The commenter believed that because the validity of CLABSI
and CAUTI in non-ICU locations remains uncertain, the measure be
restricted to ICU locations until and further validation research is
performed.
Response: We appreciate the commenter's feedback. In the future, we
do intend to expand the CDC NHSN measures to non-ICU locations. The
Hospital IQR Program will begin collecting non-ICU data for CLABSI and
CAUTI beginning January 2015. For further detail, we refer readers to
the section IX.A. of the preamble of this final rule for information
regarding expanding the CAUTI and CLABSI measure to non-ICU locations
under the Hospital IQR Program.
Comment: One commenter supported the expansion of CLABSI and CAUTI
beyond the ICUs.
Response: We appreciate the commenter's support. As stated above,
we refer readers to the section IX.A. of the preamble of this final
rule for information regarding expanding the CAUTI and CLABSI measures
to non-ICU locations under the Hospital IQR Program.
Comment: One commenter recommended delaying the implementation of
the proposed approach until validated data submission to NHSN is in
place. The commenter believed this new process of data submission was
unclear and that there is a need for precise NHSN definitions. The
commenter suggested revising the NHSN definitions with more firm
definitions which will cause less to be subject to interpretation and
result in more accurate reporting.
Response: We appreciate the commenter's suggestion. We have
received feedback from CDC on this issue. Numerous data validation
efforts already are underway or have been completed for HAI data that
were submitted to NHSN. The CDC then reports these data to us for the
Hospital IQR Program. These efforts include our validation of the 2012
CLABSI data and State health departments' validation of CLABSI data
submitted to NHSN as part of mandatory HAI reporting within their
jurisdictions. We have plans in place to validate data across all of
the HAIs required for reporting in 2013, and the CDC plans to expand
its HAI Data Validation Guidance and Toolkits for States to use for
validation of all NHSN HAIs reported in 2013. Changes made to HAI
criteria and definitions for reporting HAIs to NHSN in 2013 were posted
in protocols before January 1, 2013, so users would know in advance
what guidance to follow. These changes were made to eliminate much of
the subjectivity in determining whether an HAI exists per NHSN
surveillance definitions. Although the CDC recognizes these changes
could potentially shift the number of reported HAIs in 2013, this
potential shift was evaluated and not expected to be significant.
Comment: One commenter believed that the lower level of reliability
for claims-based measures is not sufficient to use in a pay for
performance program. The commenter recommended that CMS apply the same
reliability benchmark as it does for chart-abstracted measures.
Response: We appreciate the commenter's feedback and support of the
reliability benchmark that we use for chart-abstracted measures. Both
claims and chart-based data are valid methods for gathering data for
quality measurement and quality improvement. Claims data cover a larger
population in the hospital and can provide signals of where quality
improvement may need to occur. Chart-based data provide more clinical
detail and, therefore, more specificity, but often cover a limited
population. Claims data, which are collected for payment purposes, are
readily available, while registry data are costly to collect and have a
potentially high burden on the hospital. However, both types of data
comprise important tools in the assessment of HAIs. Both the claims-
based PSIs and the chart-based HAI measures have met NQF criteria for
scientific acceptability, which include validity and reliability;
therefore, we believe they are suitable for use in the HAC Reduction
Program.
Comment: One commenter stated that measures calculated from claims-
based data are dependent on coding processes. The commenter provided an
example that PSI-3 captured data may be incomplete if it is based
solely on physician documentation because nurses may have more
information. The commenter added that claims-based measures may not
fully account for all patient risk factors.
Response: We have received feedback from AHRQ on this issue and
appreciate the commenter's and AHRQ's feedback. First, we want to
stress that CMS has no other data source that currently captures
pressure ulcers for subsection (d) hospitals. We find that these events
comprise a serious patient health safety issue in need of quality
improvement.
We note that underreporting of pressure ulcers has improved over
time, because if a hospital does not document a pressure ulcer when it
is POA, then it takes the risk of being penalized later in the
hospitalization when the pressure ulcer is clearly documented and it
may appear to be acquired in the hospital (when it actually was not).
We further add that we and our Federal partners, including AHRQ,
consistently strive to maintain high quality measurement and have
reviewed alternatives. For example, the National Database of Nursing
Quality Indicators offers a promising alternative, but its measure is
based on a quarterly prevalence survey of all eligible patients, and
therefore it does not reflect the risk of acquiring a pressure ulcer
during an incident hospitalization. Therefore, we believe that the PSI-
3 measure remains a suitable measure for the HAC Reduction Program.
However, because we have opted to finalize the alternative PSI-90
proposal at this time, we are not finalizing PSI-3. We stress that in
the future, given the critical patient safety area this measure
encompasses, and numerous stakeholder comments supporting the pressure
ulcer measure, we may consider this measure in future rulemaking for
the HAC Reduction Program.
After consideration of the public comments received, we are
finalizing the measure calculations proposed for the PSI 90 composite
measure for Domain 1 and the measure calculations proposed for the CDC
measures for Domain 2. Measure calculations for the AHRQ PSI measures
included using ICD-9-CM diagnosis and/or procedure codes for the
primary diagnosis and, for the secondary diagnosis, the POA value
associated with the secondary diagnosis on the claim. We also are
finalizing that subsection (d) Maryland hospitals paid under the waiver
at section 1814(b)(3) of the Act must also report on whether a
diagnosis is present on admission as discussed in section II.F.3. of
the preamble of this rule. We are finalizing that the same rules under
the Hospital IQR Program be applied to determine how the AHRQ PSI and
CDC NSHN measures are applied and calculated.

[[Page 50719]]

We note that the Hospital IQR Program is finalizing expanded collection
for the non-ICU population (78 FR 27628). We intend to propose use of
these data for the HAC Reduction Program in the future.
(5) Measure Risk-Adjustment Methodology
Section 1886(p)(2)(B)(ii) of the Act requires the Secretary to
establish and apply an appropriate risk-adjustment methodology with
respect to determining the top quartile of subsection (d) hospitals
with respect to HACs subject to the 1 percent payment adjustment. In
the FY 2014 IPPS/LTCH PPS proposed rule, we proposed to use the
existing measure-level risk-adjustment that is already part of the
methodology for the individual measures being proposed for Domains 1
and 2 in order to fulfill this requirement (78 FR 27629). We proposed
to codify the use of this methodology under proposed Sec. 412.172(d).
First, with the exception of PSI 5, all of the proposed PSI measures
are risk-adjusted and reliability-adjusted. Specifically, risk factors
such as the patient's age, gender, comorbidities, and complications
would be considered in the calculation of the measure rates so that
hospitals serving a large proportion of sicker patients would not be
unfairly penalized. We believe that such risk-adjustment is
appropriate, pursuant to section 1886(p) of the Act. We noted that the
PSI-5 measure (foreign object left in body) is not risk-adjusted.
However, a foreign object left in the body constitutes an adverse event
that should never occur. Therefore, such adverse events cannot be risk-
adjusted because these events should not occur, regardless of patient-
related or hospital-related characteristics.
We invited public comments on the proposed risk-adjustment
methodology.
Comment: One commenter was pleased that the measures proposed for
the HAC Reduction Program will be risk-adjusted to account for factors
such as the patient's age, gender, and comorbidities. The commenter
stated that this feature will ensure that hospitals servicing a large
proportion of sicker patients will not be unfairly penalized.
Response: We appreciate the commenter's support.
Comment: One commenter supported the inclusion of the PSI measures
in the HAC Reduction Program even though the commenter stated there are
limitations. The commenter suggested that CMS refine the measures in
the future to have a better predictive ability and risk adjustment.
Response: We appreciate the commenter's feedback and support. We
note that our measures continually undergo maintenance to determine the
need for updated specifications, and to monitor for trends and any
relevant risk-adjustment changes needed for the measures.
Comment: One commenter expressed concern regarding the proposal to
add additional components to the HAC Reduction program without fully
understanding the impact of appropriate risk adjustment. The commenter
requested additional information on how this will be incorporated into
the Hospital VBP Program.
Response: We will examine the impact of the additional risk-
adjusted measures in the program, and propose refinements to the
program if necessary. The Hospital VBP Program is a separate program
with a separate scoring methodology from the HAC Reduction Program. We
refer readers to section V.H. of this final rule for information about
the scoring of specific measures for purposes of the Hospital VBP
Program.
Comment: Several commenters provided comments regarding risk-
adjustment for the HAC program. One commenter requested confirmation
that the risk-adjustment factors listed in the specifications for the
various measures will be used for the HAC reduction program. Several
commenters believed that the risk-adjustment methodology will penalize
teaching and large hospitals. One commenter suggested that the risk-
adjustment methodology take into account patient location and primary
language.
Response: We confirm that we are using the risk-adjustment factors
listed in specifications for the AHRQ and CDC measures selected for
this program. We note that the risk-adjustment methodology for these
measures meets NQF endorsement criteria. We do not believe that the
current risk-adjustment factors for the measures in and of themselves
unfairly penalize teaching and large hospitals, but will monitor this.
Should changes to the risk-adjustment models for the measures be
adopted during NQF endorsement maintenance processes, CMS will adopt
these changes as soon as possible.
After consideration of the public comments we received, we are
finalizing our proposal relating to the risk-adjustment methodology
without modification.
d. Criteria for Applicable Hospitals and Performance Scoring
In the FY 2014 IPPS/LTCH PPS proposed rule, we proposed a scoring
methodology similar to the achievement scoring methodology currently
used under the Hospital VBP Program (78 FR 27629). We proposed to
implement a methodology for assessing the top quartile of applicable
hospitals for HACs based on performance standards, where we would score
each hospital based on whether they fall in the top quartile for each
applicable measure and where in the top quartile they fall. In
addition, we proposed to calculate a Total HAC Score for each hospital
by summing the hospital's performance score on each measure within a
domain to determine a score for each domain, then multiplying each
domain score by a proposed weight (Domain 1-AHRQ Patient Safety
Indicators 50 percent, Domain 2-CDC NHSN Measures 50 percent), and
adding together the weighted domain scores to determine the Total HAC
Score. For further detail of the general scoring methodology proposed
for the HAC Reduction Program, we refer readers to the FY 2014 IPPS/
LTCH PPS proposed rule (78 FR 27629 through 27633).
With respect to a subsection (d) hospital, we proposed that CMS
would identify the top quartile of all hospitals that are subsection
(d) hospitals with respect to their rate of HACs during the applicable
period (proposed Sec. 412.172(e)(1)). We proposed that CMS would use
Total HAC Scores to identify applicable hospitals and would identify
the 25 percent of hospitals with the highest Total HAC Scores as
applicable hospitals (proposed Sec. 412.172(e)(2)). In addition, we
proposed that CMS would calculate the Total HAC Score by weighing
Domain 1 score plus Domain 2 equally at 50 percent (proposed Sec.
412.172(e)(3)).
We proposed that hospital performance under section 1886(p) of the
Act would be based on a Total HAC Score, which combines a hospital's
results for Domains 1 and 2. For Domain 1, we presented a proposed and
alternative set of measures and provided an overall description of how
the measures in the Domain 1 proposed approach would be handled in a
Total HAC Score. We further proposed several rules that would be used
to calculate AHRQ measures, including specific rules pertaining to both
the proposed and alternative approach for Domain 1. For further detail
on these proposals, we refer readers to the FY 2014 IPPS/LTCH PPS
proposed rule (78 FR 27629 through 27633).
For Domain 2, we proposed a method to calculate the CDC NHSN
measures for Domain 2, which would use the SIR. For further details on
this proposal, we refer readers to the FY 2014 IPPS/LTCH PPS

[[Page 50720]]

proposed rule (78 FR 27630 through 27633).
Because of the differences among the measures proposed for the HAC
Reduction Program and the distribution of measure results, simply
adding up the measure results to calculate the domain or Total HAC
Scores would make the scores less meaningful to hospitals and the
general public. As a result, we proposed that points be assigned to
hospitals' performance for each measure (78 FR 27630). For all proposed
measures for the HAC Reduction Program, with the exception of PSI 5, we
proposed several rules to determine the number of points assigned to a
measure that is within the top (or worse performing) quartile. We refer
readers to the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27630 through
27632) for a detailed description of the rules explaining the points
assigned to the measures for the HAC Reduction Program.
For Domain 2, we proposed: how we would obtain measures results for
the CDC NHSN measures; how we would treat ICUs and an ICU's waiver; and
how we would calculate Domain 2 with incomplete data. We proposed
several rules to explain how we would calculate and use the CDC NHSN
measures in the Domain 2 scoring methodology. For further details on
these proposals, we refer readers to the FY 2014 IPPS/LTCH PPS proposed
rule (78 FR 27630 through 27633).
We proposed a Total HAC Score where Domain 1 and Domain 2 would be
weighed equally (78 FR 27629). We described how complete data would
factor into the calculation of the Total HAC Score, and what would
occur if complete data was not available in one or more domains. We
also described differences between the Domain 1 proposed and
alternative approach. For further detail on these proposals, we refer
readers to the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27629 through
27633).
We invited public comments on this proposed scoring methodology. In
addition, we invited public comments on alternate methodologies for
scoring hospitals and determining most accurately those hospitals that
are in the top quartile for the selected HACs. For example, instead of
awarding points for each measure only to those hospitals that fall in
the top quartile for that specific measure, an alternative option would
be to award points to each hospital for each measure in deciles from
the best performing hospital to the worst performing hospital. Another
example would be to award points in deciles for each measure between
the median rate for a particular measure and the rate of the worst
performing hospital. We sought to identify hospitals that are in the
top quartile for all of the HACs combined and invited public comments
on approaches to best identify this group of hospitals.
Comment: One commenter recommended that CMS develop a third domain
for calculating total HAC scores made up of two additional measures:
(1) NQF 0753 Procedure-Specific Surgical Site Infections; and
(2) a measure of medication reconciliation or a proxy measure for
medication error prevention since both are high-volume or significant
patient safety events.
Response: We appreciate the commenter's feedback and may consider
the suggestion in future rulemaking.
Comment: A number of commenters addressed the proposed scoring
methodology for the HAC Reduction Programs. The comments fell in one of
three categories. The first group of commenters supported the scoring
proposal for the HAC Reduction Program.
The second group of commenters did not support the scoring
proposal. One commenter in this group stated that the proposed scoring
methodology was confusing. Other commenters opposed the scoring
proposal because they believed it would unreasonably penalize teaching
and large hospitals. Some commenters stated that the scoring
methodology gives undue weight to very rare events and may
disproportionately impact a small subset of hospitals more likely to
treat these types of patients. These commenters further concluded that
the scoring proposal would not sufficiently assess hospital
performance. Specifically, they expressed concern that the proposed
performance scoring methodology awards points to hospitals with
performance that is statistically the same as the national average and,
in some cases, to hospitals performing above the average due to their
placement in the top quartile. Other commenters objected to the
methodology creating artificial thresholds in determining the top
quartile for each measure, and then again in assessing the Total HAC
Scores. These commenters suggested that CMS revise the methodology to
account for statistical differences, increase score differentiation
between hospitals, and address challenges brought on by such artificial
thresholds. They also recommend that CMS delay implementing the program
until further enhancements occur. One commenter requested that CMS
release additional information so that facilities can replicate the
methodology that will be employed. Other commenters stated that the
PSI-90 alternative composite measure scores for CLABSI in Domain 1,
which also represents a condition scored by the CDC NHSN CLABSI measure
in Domain 2.
The third group of commenters suggested changes and provided
alternatives to the scoring proposal. One commenter believed that the
PSI-90 measures in Domain 1 should be weighed individually rather than
as a composite. Some commenters opposed weighing Domain 1 at 50 percent
and suggested weighing Domain 2 measures higher. Another commenter
suggested that CMS only use one domain for the first year, in order to
become more familiar with the program.
MedPAC recommended using only CDC measures for the HAC Reduction
program. Another commenter suggested eliminating the two domains
altogether. The commenter asked CMS to test the weighting effects of
the measures and identify ways in which the weights may shift as more
NHSN measures are introduced. The commenter believed that the NHSN and
PSI composite measures should be equally weighted and that PSI-5 should
be scored similarly to the other PSIs. Several commenters reiterated
that PSI-5 should be equally weighed with the other PSIs.
One commenter stated the current scoring process may not accurately
assess poor performance across all measures. The commenter suggested
that CMS not assign points to hospitals with no events, or those with
less than expected events, just to meet the 25-percent threshold.
Rather, the commenter believed that CMS should use an index rather than
a rank order approach for the top quartile hospitals at the measure
level. The commenter further suggested that CMS assess the unintended
consequences of the proposed scoring methodologies for the HAC
Reduction Program.
Response: We thank all of the commenters who provided comments,
suggestions, and feedback on the scoring methodology. We appreciate the
comments from those commenters who supported the scoring proposal and
the HAC Reduction Program in general.
For those commenters who did not support the scoring proposal, or
who provided suggested revisions for the scoring methodology for the
HAC Reduction Program, we thank you for the invaluable feedback. We
reviewed all comments and suggestions, and, as explained further below,
agree that we need to change some aspects of the scoring methodology.

[[Page 50721]]

However, at the outset, we disagree with some comments made on the
proposed scoring methodology. First, we disagree with the comments
citing confusion over the scoring methodology. As stated in other parts
of this preamble, we chose this particular scoring methodology to align
with the scoring methodology used in the Hospital VBP Program. This
approach sought to reduce confusion associated with multiple scoring
methodologies. Because the HAC Reduction Program does not contain
specific statutory directives on scoring methods, as found with other
programs, we believe aligning the HAC Reduction Program scoring
methodology with the Hospital VBP Program scoring methodology will
reduce confusion, given stakeholders' prior experience with the
Hospital VBP Program. We do acknowledge the newness of the HAC
Reduction Program, and, as with any new program, the time needed to
gain familiarity. However, we believe that adopting similar scoring to
that used in the Hospital VBP Program, in conjunction with the
education and outreach available on the HAC Reduction Program, will
likely alleviate any confusion that may inadvertently arise.
Second, we do not believe in delaying the HAC Reduction Program. As
stated further below, we made several revisions to the scoring
methodology that addresses the majority of stakeholder concerns,
including undue weight for rare events, the potential impact to large
and teaching hospitals, and the potential for artificial thresholds.
Further, the HAC Reduction Program directly addresses an area of
critical importance--the safety of our beneficiaries in an acute care
setting. Therefore, we believe that any delay to this program would not
benefit the public. Accordingly, although we intend to monitor the
program and make adjustments to the HAC Reduction Program as the
program evolves, we do not intend to delay the program. Rather, we
believe that, in the interest of public safety, this program should be
implemented as soon as possible.
Third, to those commenters who believed that the scoring
methodology would penalize hospitals that are statistically the same as
the national average, or even better than the national average, we
disagree. Section 1886(p) of the Act states that the payment adjustment
applies to the top quartile of hospitals, relative to the national
average of hospital acquired conditions. Our proposed scoring
methodology does not lead to the likelihood that hospitals performing
at or above the national average would be subject to the payment
adjustment.
However, we acknowledge the potential impact to large and teaching
hospitals with the proposed scoring methodology. The potential impact
to large and teaching hospitals comprised the majority of opposition to
the scoring methodology for the HAC Reduction Program. We further
acknowledge comments relating to the equal weights proposed in the rule
for the two domains as well as opposition to using the 75th percentile
as the benchmark for scoring on individual measures. For example,
several commenters stated that hospitals may be unfairly penalized for
rare events given such scoring. Other commenters, specifically MedPAC,
suggested that we weigh Domain 2 measures higher and even suggested
solely Domain 2 measures for the entire HAC Reduction Program. Other
commenters stated that the benchmark proposed (75th percentile) would
not accurately assess the worst performing hospitals with respects to
HACs.
Following consideration of the public comments received, we agree
that Domain 2 measures should be weighed higher and are finalizing a
scoring change where Domain 1 is weighed at 35 percent and Domain 2 is
weighed at 65 percent. The support for Domain 2 measures in general,
coupled with multiple recommendations to provide more weight to Domain
2 measures, specifically those from MedPAC, has led us to conclude that
such scoring changes are necessary. We also considered public comments
relating to the 75th percentile benchmark proposed, and agree that a
change to the minimum benchmark for scoring each measure is necessary.
As discussed further below, we are finalizing a scoring methodology
where points will be assigned for each measure in deciles between the
score of the best performing hospital and the worst performing
hospital.
This scoring change to the domain weights does not indicate that we
agree with comments suggesting either the single domain approach or the
elimination of the AHRQ PSI-measures from the HAC Reduction Program.
Rather, we maintain the AHRQ PSI measures play a vital role in patient
safety and comprise an integral part of the HAC Reduction Program. As
stated in section V.I.3.c.. of the preamble of this final rule, we are
finalizing the alternative PSI-90 for Domain 1. The selection of PSI-90
over the proposed approach eliminates several concerns regarding
weighing PSI-5 differently from other measures, as well as general
comments disagreeing with the use of the individual AHRQ PSI measures.
The PSI-90 composite measure received support from the MAP and
endorsement from the NQF for the HAC Reduction Program. We acknowledge
comments that wanted PSI-90's components weighed individually in
scoring for the HAC Reduction Program. However, the MAP supported and
the NQF endorsed this measure as a composite; therefore, we believe
that the measure must be scored as such. We further believe that
adopting the AHRQ PSI composite measure provides strong incentives for
hospitals to ensure that patients are not harmed by the medical care
they receive, which is a critical consideration for quality
improvement. Despite comments to the contrary, we maintain that not
using the AHRQ PSI-90 composite in the HAC Reduction Program may have a
negative impact on a hospital's quality performance. We believe that
the PSI measure, as a composite measure of patient safety,
appropriately encourages robust hospital attention to patient safety
events.
As explained earlier in this preamble, the CDC measures received
positive support from a number of commenters, including MedPAC.
Therefore, we believe there is ample support to use these measures in
the HAC Reduction Program.
We believe that the HAC Reduction Program exists, in part, to drive
quality improvement in the acute inpatient setting, and we believe
strongly that patient safety measures, such as the AHRQ PSI-90 measure
and the CDC NHSN measures, comprise important metrics on which
hospitals should focus their quality improvement efforts. While we
sympathize with commenters about the composite measure's complexity, we
note that the measure consists of underlying safety indicators on which
hospitals should focus their attention. We encourage hospitals that are
unsure how to improve their performance on the AHRQ PSI measure or on
any other measure finalized for the HAC Reduction Program to contact
their QIO for assistance.
Next, as also stated earlier, we acknowledge that some conditions
included in the PSI-90 measure of Domain 1 are also conditions included
with the CDC NHSN measures of Domain 2. While we are aware that some
commenters objected to the possibility of subjecting hospitals to
``double jeopardy'' by scoring the CLABSI measure in both domains, we
note that this measure covers a topic of critical importance to quality
improvement in the inpatient hospital setting and to patient safety. We
intend

[[Page 50722]]

to continue evaluating and working to improve our quality improvement
programs, and will consider whether we should attempt to avoid any such
measure duplication in the future.
However, we believe that a scoring change that assigns more weight
to the CDC NHSN measures and assigns points along a scale from the best
performing hospital's score to the worst performing hospital's score,
rather than beginning at the 75th percentile, alleviates several
commenters' concerns, including those made by MedPAC. First, we believe
that the scoring change providing Domain 2 greater weight will
decreases the impact to large and teaching hospitals from the proposed
method where weights were equally distributed between the domains.
Second, the scoring change, both from the change in weighting and the
change in the scoring methodology, also more accurately reflects the
variation in performance on measures. Therefore, such changes address
comments that the proposed scoring methodology does not adequately
assess the worst performing hospitals with respect to HACs. Finally, we
believe that such scoring changes will also reduce any potential
artificial cut-off points for the measures suggested by the commenters,
given the fact that we are using the entire distribution of the
measures in the scoring.
Regarding the request for additional data, the data used to
calculate the scoring for this program will be provided to each
hospital as outlined in the review and correction section of this
preamble. In the future, as we reassess and further analyze the HAC
Reduction program, we may present additional findings, data, and
analysis in future rulemaking.
Comment: Several commenters raised concerns about multiple
penalties being assessed with the scoring methodology proposed. For the
alternative domain 1 approach, commenters stated that the measures
contained in the AHRQ PSI-90 composite overlap with the CDC HAI
measures of Domain 2, resulting in the same measures being counted
twice in the Total HAC Score.
Commenters also raised concerns that the scoring for the HAC
Reduction program overlaps with the Hospital VBP program, which could
potentially result in penalties being assessed in more than one
program. One commenter stated that the criteria used for evaluating
hospitals in the HAC Reduction program for Domain 2 are almost
identical to the criteria used in the outcome domain in the Hospital
VBP Program. Therefore, the commenter suggested that because both
programs are so similar, there is potential to penalize hospitals
twice.
Response: We appreciate the concerns raised by the commenters and
acknowledge that we do have the same measures in both the Hospital VBP
Program and the HAC Reduction Program. As stated earlier with regard to
measure selection, the HAC Reduction Program and the Hospital VBP
Program are separate hospital reporting programs with different
purposes and policy goals. For example, the HAC Reduction Program is a
penalty program that reduces payments to hospitals for excess HACs to
increase patient safety in hospitals. The Hospital VBP Program is an
incentive program that redistributes reductions made to the base
operating DRG payment amount, based on certain performance measures.
Therefore, although we acknowledge that measures appear in both
programs, the measures are used and calculated for very distinct
purposes. We also add that the measures in both programs relate to
HACs, an area which numerous commenters stressed should be included in
every program because it comprised a critical area of patient safety.
Therefore, we maintain that the safety of Medicare beneficiaries,
coupled with the overwhelming requests by stakeholder to align all
programs, justify the use of these measures in the HAC Reduction
program. However, we will, in the future, monitor the HAC Reduction
Program, the measures selected for it, and the scoring methodology, and
revise them as needed.
In this FY 2014 IPPS/LTCH PPS final rule, based upon consideration
of comments received, we are finalizing the following modified scoring
methodology. As we proposed in the proposed rule (78 FR 27629), we are
finalizing a scoring methodology similar to the achievement scoring
methodology for the individual measures that is currently used under
the Hospital VBP Program. However, in response to public comments, the
scoring will begin at the minimum value for each measure rather than
the 75th percentile, as originally proposed. The finalized methodology
will assess the top quartile of applicable hospitals for HACs based on
the Total HAC Score. However, based on comments received requesting
that we give greater weight to Domain 2 measures, we are finalizing a
different weight for each Domain than originally proposed. As provided
in this final rule, we will calculate a Total HAC Score for each
hospital by using the hospital's performance score on each measure
within a domain to determine a score for each domain, then multiplying
each domain score by the following weights: Domain 1-(AHRQ PSI-90), 35
percent; and Domain 2-(CDC NHSN Measures), 65 percent; and combining
the weighted domain scores to determine the Total HAC Score. We will
use each hospital's Total HAC Score to determine the top quartile of
subsection (d) hospitals (applicable hospitals) that will be subject to
the payment adjustment beginning with discharges on or after October 1,
2014.
With respect to a subsection (d) hospital, we will identify as
proposed the top quartile of all hospitals that are subsection (d)
hospitals with respect to their rate of HACs during the applicable
period (Sec. 412.172(e)(1)). As proposed, we will use a Total HAC
scores to identify applicable hospitals and will identify the 25
percent of hospitals with the highest Total HAC scores as applicable
hospitals (Sec. 412.172(e)(2)). In addition, we will calculate the
Total HAC score by weighing Domain 1 at 35 percent plus Domain 2 at 65
percent (Sec. 412.172(e)(3)). As stated above, we have modified the
proposed weighing scheme of 50 percent in each Domain to respond to
public comments asking us to give more weight to Domain 2 CDC NHSN
measures.
As discussed earlier, we are finalizing the PSI-90 composite
measure for Domain 1. As proposed, because hospitals may not have
complete data for every AHRQ indicator in the composite measure for
this Domain 1 measure, we are finalizing the same methodology used for
the Hospital VBP Program to determine the minimum number of indicators
with complete data to be included in the calculation of the Domain
measure.
We are finalizing the following rules we proposed to determine the
number of AHRQ indicators to be included in the calculation for a
hospital's Domain 1 score. In this discussion, ``complete data'' refers
to whether a hospital has enough eligible discharges to calculate a
rate for a measure. Complete data for the AHRQ PSI-90 composite measure
means the hospital has three or more eligible discharges for at least
one component indicator. Specifically--
If a hospital does not have ``complete data'' for the PSI-90
composite, we will not calculate a Domain 1 score for that hospital.
If a hospital has ``complete data'' for at least one indicator for
the AHRQ PSI-90 composite, we will calculate a Domain 1 score.
The calculation of the SIR for the CDC measures requires the
facility have >1 predicted HAI event. The predicted number of events is
calculated using the national HAI rate and the observed number of the
specific HAIs. In the

[[Page 50723]]

event an SIR cannot be calculated because the facility has <1 predicted
infection, Domain 1 scores exclusively will be used to calculated a HAC
score. In other words, we will exclude from the overall HAC score
calculation any measure for which an SIR cannot be calculated for the
reason set out above.
Because of the differences among the measures proposed for the HAC
Reduction Program and the distribution of measure results, simply
adding up the measure results to calculate the domain or Total HAC
Scores will make the scores less meaningful to hospitals and the
general public. As a result, in this FY 2014 IPPS/LTCH PPS final rule,
points will be assigned to hospitals' performance for each measure (78
FR 27630). This approach aligns with the Hospital VBP Program for
measuring hospital achievement. In particular, the Hospital VBP Program
assigns up to 10 points for each measure based on a hospital's
performance result for that measure for a given time period. We note
that, for the HAC Reduction Program, unlike the Hospital VBP Program
where a higher score means better performance, the more points a
hospital receives on a measure corresponds with a poorer score. For the
HAC Reduction Program, as we proposed, for this final rule we are using
a slightly different methodology for scoring points, depending on the
specific measure (Table C). Specifically--
For the AHRQ Patient Safety for Selected Condition (PSI
90) composite in Domain 1, point assignment will be based on a
hospital's score for the composite measure.
We will assign 1 to 10 points to the hospital for the PSI-
90 composite measure.
For the CDC NHSN measures in Domain 2, point assignment
for each measure will be based on the SIR for that measure.
For each SIR, we will assign 1 to 10 points to the
hospital for each measure (CAUTI and CLABSI for FY 2015).
The Domain 2 score will consist of the average of points
assigned to the SIR (CAUTI and CLABSI for FY 2015).

Table C--Calculation of Domain 1 and 2 Measures for FY 2015
----------------------------------------------------------------------------------------------------------------
Individual measure score
Measure name Measure result Scenario (points)
----------------------------------------------------------------------------------------------------------------
Domain 1 PSI 90 ***............ Weighted average Composite value.............. 1-10.
of rates of
component
indicators.
Domain 2 CDC NHSN CAUTI CLABSI. Standard Infection SIR.......................... 1-10 (see Figure A).
Ratio (SIR).
----------------------------------------------------------------------------------------------------------------
*** These measure rates are risk-adjusted and reliability-adjusted.

For all measures finalized for the HAC Reduction Program, we will
use the following rules, as we proposed, to determine the number of
points assigned to a measure. Base on the distribution for PSI 90 rates
for all the hospitals, we will divide the results into percentiles in
increments of 10 with the lowest percentile ranges meaning better
performance. Hospitals with PSI-90 rates within the lowest tenth
percentile will be given one point; those with PSI-90 rates within the
second lowest percentile range (between the 10th and 20th percentile)
will be given 2 points, etc.

Figure A--Point Assignment for Hospital A's PSI-90 Score
------------------------------------------------------------------------
If Hospital A's PSI-90 rate falls into this Then assign this
percentile number of points
------------------------------------------------------------------------
1st-10th............................................ 1
11th-20th........................................... 2
21st-30th........................................... 3
31st-40th........................................... 4
41st-50th........................................... 5
51st-60th........................................... 6
61st-70th........................................... 7
71st-80th........................................... 8
81-90th............................................. 9
91st-100th.......................................... 10
------------------------------------------------------------------------

For Domain 2, as proposed, we will obtain measure results that
hospitals submitted to the CDC NHSN for the Hospital IQR Program. The
CDC HAI measures capture adverse events that occurred within intensive
care units (ICUs), including pediatric and neonatal units. For the
Hospital IQR Program, hospitals that elected to participate in the
reporting program (that is, had an active IQR pledge), but did not have
ICUs, can apply for an ICU waiver so that they will not be subject to
the 2-percent payment reduction for nonsubmission of quality reporting
data.
In the second quarter of 2012, among the 3,321 IPPS hospitals with
an active IQR pledge for data submission, 377 (or 10.1 percent) applied
and received an ICU waiver. At the same time, 2,939 hospitals (88.5
percent) of the IPPS hospitals did not have an ICU waiver and submitted
data for the CDC HAI CLABSI measure, while 4 hospitals (0.1 percent)
that had no ICU waiver failed to submit data to the NHSN. For the same
quarter, of the 3,321 IPPS hospitals with an active IQR pledge, 2,935
(88.4 percent) that did not have an ICU waiver submitted data for the
CDC HAI CAUTI measure, whereas 8 hospitals (0.2 percent) did not submit
data. Because data availability for the two CDC HAI measures impact the
score for Domain 2 and eventually the Total HAC Score, we aim to
encourage hospitals with an ICU that did not submit data to begin data
submission, and to reward hospitals that have already submitted data to
continue data submission for all the CDC HAI measures. To this end, as
we proposed, we are finalizing the following rules (Figure B):
If a hospital has an ICU waiver for the CDC HAI measures,
we will use only the Domain 1 score to calculate its Total HAC Score.
If a hospital does not have an ICU waiver for a CDC HAI
measure:
[cir] If the hospital does not submit data for the CDC HAI
measures, we will assign 10 points to that measure for that hospital.
[cir] If the hospital does submit data for at least one CDC NHSN
measure:
[ssquf] If there are ``complete data'' (that is, enough adverse
events to calculate the SIR) for at least one measure, we will use
those data to calculate a Domain 2 score and use the hospital's Domain
1 and Domain 2 scores to calculate the Total HAC Score.
[ssquf] If there are not enough adverse events to calculate the SIR
for any of the measures, we will use only the hospital's Domain 1 score
to calculate its Total HAC Score.

[[Page 50724]]

[GRAPHIC] [TIFF OMITTED] TR19AU13.017

As discussed earlier, if a hospital has enough data to calculate
PSI 90 for Domain 1 and ``complete data'' for at least one measure in
Domain 2, the scores of the two domains will contribute to the Total
HAC Score at 35

[[Page 50725]]

percent for Domain 1 and 65 percent at Domain 2. However, if a hospital
does not have enough data to calculate PSI 90 for Domain 1 but it has
``complete data'' for at least one measure in Domain 2, its Total HAC
Score will depend entirely on its Domain 2 score. Similarly, if a
hospital has ``complete data'' to calculate PSI 90 in Domain 1 but none
of the measures in Domain 2, its Total HAC Score will be based entirely
on its Domain 1 score. If the hospital does not have ``complete data''
to calculate PSI 90 for Domain 1 or any of the measures in Domain 2, we
will not calculate a Total HAC Score for this hospital.
e. Reporting Hospital-Specific Information, Including the Review and
Correction of Information
(1) Confidential Reports to Applicable Hospitals
Section 1886(p)(5) of the Act requires the Secretary to provide
confidential reports to the applicable hospitals with respect to HACs.
To meet the requirements under section 1886(p)(5) of the Act, in the FY
2014 IPPS/LTCH PPS proposed rule, we proposed that confidential reports
for the HAC Reduction Program contain information related to claims-
based measure data for the PSI measures, the domain score for each
domain, and the Total HAC Score (78 FR 27633). We note that we proposed
to use chart-abstracted measures in the HAC Reduction Program, and such
information will be contained in the reports hospitals currently
receive as part of the Hospital IQR Program and can be reviewed and
corrected through the process specified for that program. We believe
that this method would reduce the burden on hospitals, by alleviating
the need to correct data present in two different programs. However, we
welcomed any public comments and suggestions on this proposal.
Comment: One commenter supported the proposal to provide hospitals
with confidential reports and allow them the opportunity to submit
corrections to HAC-related data prior to assessing a payment
adjustment.
Response: We appreciate the commenter's support to our proposal on
confidential reports.
After consideration of the public comments we received, we are
finalizing our proposal regarding confidential reports provided under
the HAC Reduction program without modification.
(2) Availability of Information to the Public
Section 1886(p)(6)(A) of the Act requires the Secretary to ``make
information available to the public regarding HAC rates of each
subsection (d) hospital'' under the HAC Reduction Program. Section
1886(p)(6)(C) of the Act requires the Secretary to post the HAC
information for each applicable hospital on the Hospital Compare Web
site in an easily understood format. Section 1886(p)(6)(B) of the Act
also requires the Secretary to ``ensure that an applicable hospital has
the opportunity to review, and submit corrections for, the HAC
information to be made public for each hospital.''
To meet the requirements under section 1886(p)(6)(C) of the Act, in
the FY 2014 IPPS/LTCH PPS proposed rule, we proposed that the following
information would be made public on the Hospital Compare Web site
relating to the HAC Reduction Program: (1) Hospital scores with respect
to each measure; (2) each hospital's domain specific score; and (3) the
hospital's Total HAC Score (78 FR 27633). However, because this is a
new program, we invited public comments and suggestions on other
information to be posted on the Hospital Compare Web site.
Comment: Several commenters supported the public reporting of HAC
data. One commenter generally supported public reporting and continued
availability of HAC data for third party use. Other commenters
supported full transparency of medical error reporting and strongly
believed that the general public must have access to hospital safety
measures for making informed decisions about hospital care. One
commenter suggested that government funding be withheld to any hospital
that would not publish their medical errors as part of a public Web
site. The commenter added that patients should have reliable
information in which to choose doctors and hospitals. One commenter
supported full transparency of all medical error data.
Response: We appreciate all the commenters' recognition and support
of the information we plan to publically report. We remain committed to
fostering transparency for the public we serve and providing accurate
data to hospitals to improve quality and increase patient safety.
Comment: One commenter recommended that all quality measures be in
the Hospital IQR Program for 1 year before being considered for
performance programs.
Response: Although it is not required for this program, the
measures we are finalizing for the HAC Reduction Program for FY 2015
have all been in the Hospital IQR Program for at least 1 year, and have
been publicly reported.
Comment: One commenter did not support publically reporting AHRQ
PSI data.
Response: We appreciate the commenter's feedback. We believe that
public reporting of PSI data is critical because we are using PSI-90 as
part of calculating the Total HAC Score, which will be used to
determine the payment adjustment under the HAC Reduction Program. We
also already report these data on the Hospital Compare Web site.
Therefore, in order to foster transparency and further provide safety
information to the public in order to assist them with their healthcare
decisions, we believe public reporting of the PSI-90 data is warranted.
We are aware of stakeholders' concerns regarding the use of claims-
based measures. However, we maintain that because such claim
information is suitable to determine payment under the Medicare
program, it is also suitable to be reported to the public. We stress
that we have provided a review and correction process to hospitals to
revise data if hospitals recognize errors within their submitted data.
We also are willing to assist hospitals with outreach and education in
order to ensure they submit accurate claims information.
After consideration of the public comments we received, we are
finalizing that the following will be publically reported: (1) Hospital
scores with respect to each measure; (2) each hospital's domain
specific score; and (3) the hospital's Total HAC Score.
(3) Review and Correction of Information
Section 1886(p)(6)(B) of the Act requires the Secretary to ensure
that each hospital has the opportunity to review and submit corrections
for the information to be made available to the public with respect to
each hospital under section 1886(p)(6)(A) of the Act prior to such
information being made available to the public. In the FY 2014 IPPS/
LTCH PPS proposed rule, we proposed that hospitals be allowed to review
and correct the following information as part of the HAC Reduction
Program prior to it being made available to the public: The claims-
based measure rates in Domain 1; the point allocations for the measures
in each domain; the domain scores; and the Total HAC Score (78 FR
27633).
For the FY 2015 HAC Reduction Program, we proposed to use
individual HAC measures consisting of CDC HAI measures as well as
claims-based measures. Further, we proposed for the HAC Reduction
Program that hospitals have an opportunity to review and correct chart-
abstracted data and claims-

[[Page 50726]]

based data for each measure through the processes discussed below.
These individual measures will be used to calculate the domain and
Total HAC Score, which will determine those applicable hospitals within
the top quartile, or those hospitals with the highest number of HACs.
We also proposed that hospitals have the opportunity to review and
submit corrections on its Domain and Total HAC Score for the HAC
Reduction Program, which is also described below.
Comment: Several commenters supported the review and correction
process proposed for the HAC Reduction Program.
Response: We appreciate the commenters' support and feedback.
Comment: One commenter suggested that CMS provide ample data for
hospitals to fully review the program details, including hospital
results and data files with tables to illustrate results by hospital
and quartile type.
Response: We considered several factors in deciding the amount of
information that we would provide to hospitals for the review and
correction process. These factors include confidentiality of
information, our resources, and feasibility for hospital providers to
process the data. For the purposes of the HAC Reduction Program data,
we have decided to provide as much information that is pertinent to the
calculation of the Domain and Total HAC Scores so that hospitals can
verify the accuracy of these calculations. Providing extensive data
information would be more than necessary in hospitals' effort to review
their Total HAC Score. To protect sensitive patient information, and to
avoid burden and confusion to hospitals, we are careful not to include
data elements that are not relevant for the review and correction
process. Furthermore, providing all subsection (d) and Maryland
hospitals with data requested by some commenters will require a large
amount of resources, infrastructure changes and exert significant
financial burden on these hospitals and on taxpayers. We have already
provided hospitals with discharge level information about patient
comorbidities, demographic characteristics, and dates of service that
are pertinent to the calculation of the claims-based measures, and will
continue to do so.
Therefore, we believe that the proposed review and correction
policies are adequate. We are working to identify new methods to
provide hospitals with accurate and timely data to improve their care
delivery processes to reduce HACs and increase patient safety in the
acute care setting. We encourage hospitals and other health care
providers to provide us with recommendations for this effort.
(a) Chart-Abstracted Measures (Domain 2--CDC HAI Measures)
In the FY 2014 IPPS/LTCH PPS proposed rule, we proposed to use the
same process that hospitals currently have to review and correct data
submitted on the Hospital IQR Program chart-abstracted measures to
review and correct chart-abstracted measures in Domain 2 under the HAC
Reduction Program (78 FR 27633). Under this proposed process, hospitals
would continue to have the opportunity to review and correct data they
submit on all Hospital IQR Program chart abstracted measures, whether
or not the measure was adopted as a measure for the HAC Reduction
Program. We proposed to use the Hospital IQR Program's data submission,
review, and correction processes, which would allow for review and
correction of data on a continuous basis as data are being submitted
for the Hospital IQR Program, which in turn would allow hospitals to
correct data used to calculate the Total HAC Score for those hospitals
that participate in both the Hospital IQR Program and the HAC Reduction
Program. We believe that this process would satisfy the requirement in
section 1886(p)(6) of the Act to allow hospitals to review and submit
corrections for information that will be made public with respect to
each hospital. Under the Hospital IQR Program, hospitals currently have
an opportunity to submit, review, and correct any of the chart-
abstracted information for the full 4\1/2\ months following the last
discharge date in a calendar quarter. Hospitals can begin submitting
data on the first discharge day of any reporting quarter. Hospitals are
encouraged to submit data early in the submission schedule to identify
errors and resubmit data before the quarterly submission deadline.
Users may view and make corrections to the data that they submit
starting immediately following submission. The data are populated into
reports that are updated immediately with all data that have been
submitted successfully. Hospitals are able to view a report each
quarter which shows the numerator, denominator, and percentage of total
for each Clinical Measure Set and Stratum. That report contains the
hospital's performance on each measure set/stratum submitted quarterly
by CDC on behalf of hospitals to CMS' QIO Clinical Warehouse. We
believe that 4\1/2\ months is sufficient time for hospitals to be able
to submit, review data, make corrections to the data, and view their
percentage of total, or measure rate, on each Clinical Measure Set/
Strata for use in both the Hospital IQR Program and the HAC Reduction
Program. In addition, because this process is familiar to most
hospitals, use of this existing framework reduces the burden that could
have been placed on hospitals that participate in the Hospital IQR
Program if they had to learn a new process for submitting chart-
abstracted data for the HAC Reduction Program. Subsequent to the period
during which hospitals could review and correct data and measure rates
for chart-abstracted measures as specified, they would have no further
opportunity to correct such data or measure rates. We proposed that
once the hospital had an opportunity to review and correct quarterly
data related to chart-abstracted measures submitted in the Hospital IQR
Program, we would consider that the hospital had been given the
opportunity to review and correct the data for the HAC Reduction
Program. We proposed to use these data to calculate the measure scores
for purposes of the HAC Reduction Program, and these measure scores
would be used to calculate domain and Total HAC Scores for the HAC
Reduction Program without further review and correction. We invited
public comments on this proposal.
Comment: One commenter supported the review and correction process
for chart-abstracted measures.
Response: We appreciate the commenter's support.
After consideration of the public comments we received, we are
finalizing our proposal relating the review and correction process for
chart-abstracted measures without modification.
(b) Claims-Based Measures (Domain 1 AHRQ PSI Measures)
For purposes of the HAC Reduction Program for FY 2015, in the FY
2014 IPPS/LTCH PPS proposed rule, we proposed to calculate Domain 1
measure rates using the 2-year applicable period for the FY 2015
payment determination that spans from July 1, 2011 through June 30,
2013 and apply the minimum number of discharges criteria shown in Table
B for each hospital as proposed (78 FR 27634). We intend to make this
information available to the public, consistent with the requirements
of section 1886(p)(6)(B) of the Act, as will be specified in further
detail as part of the FY 2015 rulemaking process, in addition to
posting this information on the Hospital Compare Web site in a
subsequent release.
We proposed to provide hospitals an opportunity to review and
submit

[[Page 50727]]

corrections for claim-based measures using a process similar to the
process currently used for posting results on the Hospital Compare Web
site, which is also the process currently used in the Hospital
Readmissions Reduction Program. We also proposed the details regarding
the process for hospitals to review and submit corrections to their
data score prior to making this information available to the public on
the Hospital Compare Web site.
For FY 2015, for the HAC Reduction Program, we proposed to deliver
confidential reports and accompanying confidential discharge level
information to hospitals as defined in section V.I.3.d. of the preamble
of the proposed rule. These reports would be delivered in hospitals'
secure QualityNet accounts. The information in the confidential reports
and accompanying confidential discharge-level information would be
calculated using the claims information we had available approximately
90 days after the last discharge date in the applicable period, which
is when we would create the data extract for the calculations. The
discharge-level information accompanying the Domain 1 PSI measure rates
would include the risk factors for the discharges that factor into the
calculation of these measures, dates of admission and discharge,
discharge characteristics, and other information relevant to the
measure calculations, that is, exclusions. Our intent in providing this
information is twofold: (1) To facilitate hospitals' verification of
the Domain 1 PSI measure calculations we provide during the review and
correction period based upon the information we had available at the
time our data extract was created; and (2) to facilitate hospitals'
quality improvement efforts with respect to the PSI measures.
The review and correction process we proposed for claims-based
measures in Domain 1 would not include submitting additional
corrections related to the underlying claims data we used to calculate
the measures for Domain 1, or adding new claims to the data extract we
used to calculate the measures used in Domain 1. This is because it is
necessary to take a static ``snapshot'' of the claims in order to
perform the calculations. For purposes of this program, we would
calculate the measures in Domain 1 using a static snapshot (data
extract) taken at the conclusion of the 90-day period following the
last date of discharge used in the applicable period. We recognize that
under our current timely claims filing policy, hospitals have up to 1
year from the date of discharge to submit a claim to us. However, in
using claims data to calculate measures for this program, we proposed
to create data extracts using claims in CMS' Common Working File (CWF)
90 days after the last discharge date in the applicable period which we
will use for the calculations. For example, if the last discharge date
in the applicable period for a measure is June 30, 2013, we would
create the data extract on September 30, 2013, and use that data to
calculate the claims based measures for that applicable period.
Hospitals would then receive the Domain 1 Score in their confidential
reports and accompanying discharge-level information, and they would
have an opportunity to review and submit corrections for the
calculations of the measures in Domain 1. As we stated above, hospitals
would not be able to submit corrections to the underlying claims
snapshot used for the Domain 1 measure calculations after the extract
date, and also would not be able to add claims to this data set.
Therefore, we would consider hospitals' claims data to be complete for
purposes of calculating the Domain 1 for the HAC Reduction Program at
the conclusion of the 90-day period following the last date of
discharge used in the applicable period. We considered a number of
factors in determining that a 90-day ``run-out'' period is appropriate
for purposes of calculating claims based measures. First, we seek to
provide timely quality data to hospitals for the purpose of quality
improvement and to the public for the purpose of transparency. Next, we
seek to make payment adjustments to hospitals based on their
performance on measures as close in time to the performance period as
possible. Finally, with respect to claims-based measures, we seek to
have as complete a data set as possible, recognizing that hospitals
have up to 1 year from the date of discharge to submit a claim under
CMS' timely claims filing policy. After the data extract is created, it
takes several months to incorporate other data needed for the
calculations (particularly in the case of risk-adjusted, and/or
episode-based measures). We then need to generate and check the
calculations, as well as program, populate, and deliver the
confidential reports and accompanying data to be delivered to
hospitals. We also are aware that hospitals would prefer to receive the
calculations to be used for the HAC Reduction Program as soon as
possible. Because several months lead time is necessary after acquiring
the data to generate these claims-based calculations, if we were to
delay our data extraction point to 12 months after the last date of the
last discharge in the applicable period, we would not be able to
deliver the calculations to hospitals sooner than 18 to 24 months after
the last discharge. We believe this would create an unacceptably long
delay both for hospitals and for us to deliver timely calculations to
hospitals for quality improvement and transparency, and, ultimately,
timely HAC adjustment factors for purposes of this program. Therefore,
we proposed to extract the data needed to calculate the Domain 1 for
this program 90 days after the last date of discharge for the
applicable period so that we can balance the need to provide timely
program information to hospitals with the need to calculate the claims
based measures using as complete a data set as possible. We noted that,
under the proposed process, hospitals would retain the ability to
submit new claims and corrections to submitted claims for payment
purposes in line with CMS' timely claims filing policies. However, we
emphasized that the administrative claims data used to calculate the
Domain 1 measures and the resulting Domain Score reflect the state of
the claims at the time of extraction from CMS' Common Working File.
Under the proposed process, a hospital's opportunity to submit
corrections to the calculation of the Total HAC Score ends at the
conclusion of the review and correction period.
Comment: One commenter supported the proposal.
Response: We appreciate the commenter's support.
After consideration of the public comments we received, we are
finalizing our proposal relating to the review and correction process
of the claims-based measures with the clarification that we are
finalizing the AHRQ-PSI-90 composite claims based measure for Domain 1.
(c) Total HAC Score
In the FY 2014 IPPS/LTCH PPS proposed rule, we proposed to provide
hospitals with a period of 30 days to review and submit corrections for
their Total HAC Scores for the HAC Reduction Program (78 FR 27635).
This 30-day period would begin when the hospitals' confidential reports
and accompanying discharge-level information are posted to their
QualityNet accounts. This proposed requirement will enable us to
evaluate correction requests and provide decisions on those requests in
a timely manner.
We believe that this proposed review and corrections process will
ensure that hospitals are able to fully and fairly review their domain
and Total HAC

[[Page 50728]]

Score. We view the review and corrections process as a means to ensure
that the information posted on the Hospital Compare Web site is
accurate. We invited public comments on the proposed review and
corrections process for the HAC Reduction Program. Based on previous
experience with public reporting of measures under the Hospital IQR
Program, and review and correction processes currently in place for the
Hospital Readmission Reduction Program and the Hospital VBP Program, we
believe this 30-day period allows enough time for hospitals to review
their data and notify us of calculation errors, and for us to
incorporate appropriate corrections to the HAC calculations prior to
making the data available to the public. We proposed that the Total HAC
Score would be made available to the public via the Hospital Compare
Web site after the review and correction period. During the review and
correction period, hospitals should notify us of suspected errors in
their Total HAC Score using the technical assistance contact
information provided in their confidential reports.
During the 30-day review and correction process for the Total HAC
Score, if a subsection (d) hospital suspects that discrepancies exist
in our application of the HAC scoring methodology (assignment of points
to measures, domain scoring, domain weighting), it should notify us
during the review and correction period using the technical support
contacts provided in the hospital's confidential report. We would
investigate the validity of each submitted correction and notify
hospitals of the results. If we confirm that we made an error in
creating the data extract or in calculating the Total HAC Score, we
would correct the calculations, issue new confidential reports to
affected subsection (d) hospitals, and then publicly report the
corrected Total HAC Score. However, if the errors take more time than
anticipated to correct, we would notify hospitals that corrected HAC
Scores will be made available through delivery of confidential reports
followed by a second 30-day review and correction period, subsequent
publication, and posting on the Hospital Compare Web site. In addition,
we proposed that any corrections to a hospital's Total HAC Score would
then be used to recalculate a hospital's quartile under section
1886(p)(2)(B)(i) of the Act in order to determine the hospital's
adjustment factor in accordance with section 1886(p)(2)(B)(ii) of the
Act.
We stated that this proposed process would fulfill the statutory
requirements at section 1886(p)(2)(B), section 1886(p)(6)(B), and
section 1886(p)(6)(C) of the Act. We stated that we further believe
that the proposed process would allow hospitals to review and correct
their total HAC Scores.
We proposed to codify this review and correction process at
proposed Sec. 412.172(f). In summary, we would specify that CMS would
make information available to the public regarding HAC rates of all
hospitals described in section 1886(d)(1)(B) of the Act, including
hospitals in Maryland paid under section 1814(b)(3) of the Act, under
the HAC Reduction Program (proposed paragraph (f)). To ensure that a
hospital has the opportunity to review and submit corrections for its
HAC rates for the applicable conditions for a fiscal year that are used
to determine its total hospital acquired conditions score, we would
specify that CMS will provide each hospital with confidential hospital-
specific reports and discharge level information used in the
calculation of its total hospital acquired conditions score (proposed
paragraph (f)(2)). Hospitals would have a period of 30 days after
receipt of the information provided to review and submit corrections
for the hospital-acquired conditions domain score for each condition
that is used to calculate the Total HAC score for the fiscal year
(proposed paragraph (f)(2)). The administrative claims data used to
calculate a hospital's total hospital acquired conditions score for the
conditions for a fiscal year would not be subject to review and
correction (proposed paragraph (f)(3)). CMS would post the total
hospital-acquired condition score for the applicable conditions for a
fiscal year for each applicable hospital on the Hospital Compare Web
site (proposed paragraph (f)(4)).
Comment: One commenter suggested that CMS provide a minimum of 60
days to review and correct the Total HAC Score.
Response: We appreciate the commenter's suggestion. We are adopting
the same review and correction process and timeframes already used for
the Hospital Readmissions Reduction Program and Hospital VBP Program.
We will provide hospitals with an opportunity to preview their Total
HAC Score for 30 days prior to posting on the Hospital Compare Web
site. This process meets the statutory requirement in section
1886(p)(6)(B) of the Act which requires the Secretary to ensure that a
subsection (d) hospital has the opportunity to review and submit
corrections with respect to the hospital prior to such information
being made public. Aside from the statutory requirements, we also
considered hospital experience with the measure and data production
timeline in proposing the 30-day preview period. In terms of hospital
experience with the measures, while the HAC Reduction Program is new,
subsection (d) hospitals are already familiar with some of these
measures given their inclusion in the Hospital IQR Program. Because
hospitals are working with measures in which they have some prior
experience from the Hospital IQR Program, and because the timeframe
aligns with the 30-day preview period already in place for the Hospital
Readmissions Reduction Program and the Hospital VBP Program, we believe
that a 30-day preview period is sufficient for hospitals to review and
correct their information on their Total HAC Score. In terms of the
data production timeline, the complexity of these measures and the
required calculations will involve a significant amount of programming
resources. Therefore, we cannot extend the preview period to more than
30 days. Moreover, if hospitals find data problems that we determine to
be attributable to our calculation or programming errors, we will need
adequate time between mid-July and the end of September to: (1)
Recalculate the Total HAC Score; (2) regenerate and redisseminate
corrected results to hospitals in time for payment adjustment in early
October (the beginning of the subsequent fiscal year); and (3) publicly
report the Total HAC Score on the Hospital Compare Web site to meet the
statutory reporting requirements under section 1886(p)(6) of the Act.
Accordingly, we cannot change the review and correction timeframe to 60
days.
After consideration of the public comments we received, for the
review and correction process, we are finalizing the policies of
providing subsection (d) hospitals with: (1) Confidential reports and
accompanying discharge-level information (this includes information
related to claims-based measure data for the PSI measures, the domain
score for each domain, and the Total HAC Score); (2) publically
reporting hospital scores with respect to each measure, each hospital's
domain specific score; and the hospital's Total HAC Score on the
Hospital Compare Web site; and (3) a period of 30 days to review and
correct their claims-based measures in Domain 1, the point allocations
for the measures in each domain, the domain score, and the Total HAC
Score.

[[Page 50729]]

f. Limitation on Administrative and Judicial Review
Section 1886(p)(7) of the Act provides that there will be no
administrative or judicial review under Section 1869 of the Act, under
Section 1878 of the Act, or otherwise for any of the following:
The criteria describing an applicable hospital under
section 1886(p)(2)(A) of the Act.
The specification of hospital acquired conditions under
section 1886(p)(3) of the Act.
The specification of the applicable period under section
1886(p)(4) of the Act.
The provision of reports to applicable hospitals under
section 1886(p)(5) of the Act.
The information made available to the public under section
1886(p)(6) of the Act.
In the FY 2014 IPPS/LTCH PPS proposed rule, we proposed to include
these statutory provisions under proposed Sec. 412.172(g) (78 FR 27636
and 27759). We note that section 1886(p)(6) of the Act requires the
Secretary to make information available to the public regarding HAC
scores of each applicable hospital under the HAC Reduction Program.
Section 1886(p)(6)(B) of the Act also requires the Secretary to ensure
that an applicable hospital has the opportunity to review, and submit
corrections for, the information to be made available to the public,
prior to that information being made public. We believe that the review
and correction process explained above will provide hospitals with the
opportunity to correct data prior to its release on the Hospital
Compare Web site.
Comment: One commenter stated that limited judicial and
administrative review exists with respect to what qualifies as an
applicable hospital, the specifications of a HAC, the determination of
an applicable period, and what information is publically reported.
Therefore, the commenter recommended that CMS provide additional data,
information, and analysis of the HAC Reduction Program in order for
commenters to provide meaningful comment on the HAC Reduction Program
and adequately replicate CMS' findings with regard to the program.
Response: We appreciate the commenter's suggestion. However, in
this year's rule, we have provided information and rationale on the
qualifications of an applicable hospital, the specifications of the
HAC, the determination of an applicable period, and the information
that shall be reported to the public. Therefore, we believe that
commenters can and did provide meaningful comment on the HAC Reduction
Program. In the future, as we reassess and further analyze the HAC
Reduction Program, we may, if significant, present additional findings,
data, and analysis in future rulemaking.
After consideration of the public comments we received, we are
finalizing our proposals, including the regulatory text at Sec.
412.172(g), relating to the limitations on administrative and judicial
review.

J. Payments for Direct Graduate Medical Education (GME) Costs
(Sec. Sec. 412.105 and 413.75 Through 413.83

1. Background
Section 1886(h) of the Act, as added by section 9202 of the
Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 (Pub. L.
99-272) and as currently implemented in the regulations at 42 CFR
413.75 through 413.83, establishes a methodology for determining
payments to hospitals for the direct costs of approved graduate medical
education (GME) programs. Section 1886(h)(2) of the Act sets forth a
methodology for the determination of a hospital-specific base-period
per resident amount (PRA) that is calculated by dividing a hospital's
allowable direct costs of GME in a base period by its number of full-
time equivalent (FTE) residents in the base period. The base period is,
for most hospitals, the hospital's cost reporting period beginning in
FY 1984 (that is, October 1, 1983 through September 30, 1984). The base
year PRA is updated annually for inflation. In general, Medicare direct
GME payments are calculated by multiplying the hospital's updated PRA
by the weighted number of FTE residents working in all areas of the
hospital complex (and at nonprovider sites, when applicable), and the
hospital's Medicare share of total inpatient days.
Section 1886(d)(5)(B) of the Act provides for a payment adjustment
known as the indirect medical education (IME) adjustment under the
hospital inpatient prospective payment system (IPPS) for hospitals that
have residents in an approved GME program, in order to account for the
higher indirect patient care costs of teaching hospitals relative to
nonteaching hospitals. The regulations regarding the calculation of
this additional payment are located at 42 CFR 412.105. The hospital's
IME adjustment applied to the DRG payments is calculated based on the
ratio of the hospital's number of FTE residents training in either the
inpatient or outpatient departments of the IPPS hospital to the number
of inpatient hospital beds.
The calculation of both direct GME and IME payments is affected by
the number of FTE residents that a hospital is allowed to count.
Generally, the greater the number of FTE residents a hospital counts,
the greater the amount of Medicare direct GME and IME payments the
hospital will receive. In an attempt to end the implicit incentive for
hospitals to increase the number of FTE residents, Congress, through
the Balanced Budget Act of 1997 (Pub. L. 105-33), established a limit
on the number of allopathic and osteopathic residents that a hospital
may include in its FTE resident count for direct GME and IME payment
purposes. Under section 1886(h)(4)(F) of the Act, for cost reporting
periods beginning on or after October 1, 1997, a hospital's unweighted
FTE count of residents for purposes of direct GME may not exceed the
hospital's unweighted FTE count for direct GME in its most recent cost
reporting period ending on or before December 31, 1996. Under section
1886(d)(5)(B)(v) of the Act, a similar limit based on the FTE count for
IME during that cost reporting period is applied effective for
discharges occurring on or after October 1, 1997. Dental and podiatric
residents are not included in this statutorily mandated cap.
The Affordable Care Act made a number of statutory changes relating
to the determination of a hospital's FTE resident count for direct GME
and IME payment purposes and the manner in which FTE resident limits
are calculated and applied to hospitals under certain circumstances.
Regulations implementing these changes are discussed in the November
24, 2010 final rule (75 FR 72133) and the FY 2013 IPPS/LTCH PPS final
rule (77 FR 53416).
2. Inclusion of Labor and Delivery Days in the Calculation of Medicare
Utilization for Direct GME Purposes and for Other Medicare Purposes
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53411), we discussed
Medicare's policies with respect to the treatment of labor and delivery
services in the calculation of the Medicare DSH payment adjustment. We
noted that, in the FY 2010 IPPS/LTCH PPS final rule (74 FR 43899
through 43901), we made a change to include, in the disproportionate
patient percentage (DPP) calculation of the Medicare DSH payment
adjustment, all patient days associated with patients occupying labor
and delivery beds once the patient has been admitted to the hospital as
an

[[Page 50730]]

inpatient, regardless of whether the patient days are associated with
patients who occupied a routine bed prior to occupying an ancillary
labor and delivery bed. We stated that we made the change because the
costs associated with labor and delivery patient days of patients who
are admitted as inpatients are generally payable under the IPPS.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53413), we finalized
a policy extending our current approach of including labor and delivery
patient days in the DPP of the Medicare DSH payment adjustment to our
rules for bed counting for purposes of both the IME payment adjustment
and the Medicare DSH payment adjustment. We stated that if a patient
day is counted for DSH payment purposes because the services furnished
are generally payable under the IPPS, the bed in which the services are
furnished also should be considered to be available for IPPS-level
care. To implement this policy, we amended the regulations at 42 CFR
412.105(b)(4) to remove from the list of excluded beds those beds
associated with ``ancillary labor/delivery services.'' This change was
effective for cost reporting periods beginning on or after October 1,
2012.
In response to our proposal in the FY 2013 IPPS/LTCH proposed rule
to include labor and delivery bed days as available bed days for DSH
and IME payment adjustment purposes, commenters noted that if these
days are considered inpatient days, they also should be considered
patient days for purposes of allocating direct GME payments. However,
the Medicare cost report currently does not allow for labor and
delivery patient days to be counted in the direct GME patient load. In
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53413), we stated that we
would undertake further review to determine whether it was necessary to
make any changes in the manner in which patient days are reported on
the Medicare cost report and whether these labor and delivery patient
days should be excluded from or included in the calculation of the
Medicare patient load.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27637), we stated
that we had analyzed the calculation of the Medicare patient load and
the cost reporting implications. Direct GME payments are calculated
using three variables: the hospital's per resident amount; the number
of FTE residents a hospital is training subject to its FTE cap and the
rolling average; and the hospital's Medicare patient load. ``Medicare
patient load'' is defined at 42 CFR 413.75(b) as ``with respect to a
hospital's cost reporting period, the total number of hospital
inpatient days during the cost reporting period that are attributable
to patients for whom payment is made under Medicare Part A divided by
total hospital inpatient days. In calculating inpatient days, inpatient
days in any distinct part of the hospital furnishing a hospital level
of care are included and nursery days are excluded.'' We agree with the
commenters who stated that because labor and delivery days are
considered inpatient days for DSH purposes, they also should be
considered inpatient days for purposes of determining the Medicare
share for direct GME payments. We believe that the best way to
calculate a hospital's Medicare patient load or the ``Medicare
utilization'' (the term we will use for the remainder of this section)
is to include all of the hospital's inpatient days. Consistent with the
inpatient day counting rules for DSH as clarified in the FY 2010 IPPS/
RY 2010 LTCH PPS final rule (74 FR 43899 through 43901), in the FY 2014
IPPS/LTCH PPS proposed rule (78 FR 27637), we proposed that patient
days associated with maternity patients who were admitted as inpatients
and were receiving ancillary labor and delivery services at the time
the inpatient routine census is taken, will be included in the Medicare
utilization calculation, regardless of whether the patient actually
occupied a routine bed prior to occupying an ancillary labor and
delivery bed and regardless of whether the patient occupies a
``maternity suite'' in which labor, delivery, recovery, and postpartum
care all take place in the same room. We understand that including
labor and delivery inpatient days in the Medicare utilization ratio
invariably would reduce direct GME payments because the denominator of
the ratio, which includes the hospital's total inpatient days, would
usually increase at a higher rate than the numerator of the ratio.
However, because the Medicare utilization ratio is a comparison of a
hospital's total Medicare inpatient days to its total inpatient days,
we believe that revising the ratio to include labor and delivery days
is appropriate because they are inpatient days and, therefore, should
be counted as such. Therefore, we proposed that, effective for cost
reporting periods beginning on or after October 1, 2013, for purposes
of applying the Medicare utilization ratio, we would include labor and
delivery inpatient days in the numerator (to the extent that there are
any labor and delivery inpatient days associated with Medicare
beneficiaries), and all labor and delivery inpatient days (associated
with all inpatients of the hospital) in the denominator. In order to
implement the proposed change, we noted that we would need to amend the
applicable cost report worksheets and instructions (in particular,
Worksheet S-3, Part I) to allow for the inclusion of labor and delivery
inpatient days in the Medicare utilization ratio on the Medicare cost
report.
In addition to direct GME, which uses the ratio of Medicare
inpatient days to total inpatient days to determine payment, we stated
that the proposal also impacts other Medicare policies where either the
number of inpatient days or a ratio of Medicare inpatient days to total
inpatient days is used to determine eligibility or payment. Regarding
eligibility, for example, including labor and delivery days as
inpatient days could affect a hospital's eligibility for SCH status. A
hospital can be classified as an SCH if it is located more than 35
miles from other like hospitals or is located in a rural area (as
defined at Sec. 412.64 of the regulations) and meets one of the
conditions listed in the regulations at Sec. 412.92(a). In determining
whether a nearby hospital is a like hospital, CMS compares the total
inpatient days of the SCH applicant hospital with the total inpatient
days of the nearby hospital. If the total inpatient days of the nearby
hospital are greater than 8 percent of the total inpatient days
reported by the SCH applicant hospital, the nearby hospital is
considered a like hospital for purposes of evaluating the applicant
hospital's eligibility for SCH status. Therefore, including labor and
delivery days as inpatient days may impact the count of inpatient days
for both the SCH applicant hospital and the nearby hospital and may
affect the applicant hospital's eligibility for SCH status.
In summary, we proposed to include labor and delivery days as
inpatient days in the Medicare utilization calculation and for other
Medicare purposes, effective for cost reporting periods beginning on or
after October 1, 2013. However, we stated that this proposal would not
impact Medicare payments calculated on a reasonable cost basis for
routine inpatient services, which are apportioned in accordance with 42
CFR 413.53(a)(1).
Comment: Many commenters objected to the inclusion of labor and
delivery days in the Medicare utilization ratio absent a Congressional
mandate to do so. Commenters asserted that labor and delivery days have
no relevance to Medicare because only a minute percentage of U.S.
births are covered by Medicare, and their inclusion would
inappropriately dilute a hospital's

[[Page 50731]]

Medicare share. The commenters stressed that the inclusion of labor and
delivery days would disproportionately affect production of generalist
practitioners of medicine and surgeons and teaching hospitals that
depend on substantial volumes of obstetrics/gynecology, family
medicine, and pediatric services, which could also lead to a physician
workforce shortage across the board. Many commenters also requested
that CMS reverse its FY 2010 decision on including labor and delivery
inpatient days for DSH purposes and its FY 2013 decision on including
labor and delivery beds for IME and DSH purposes. One commenter
requested a comprehensive analysis of the impact of including labor and
delivery days across IME, DSH, and direct GME rather than implementing
the inclusion piecemeal because there might be unintended consequences
when changes are made to parts rather than the whole.
Response: As noted above, the ``Medicare patient load'' (``Medicare
utilization'' used interchangeably) is defined in regulations at 42 CFR
413.75(b), as follows: The total number of hospital inpatient days
during the cost reporting period that are attributable to patients for
whom payment is made under Medicare Part A divided by total hospital
inpatient days. The volume of labor and delivery services paid under
the Medicare program, regardless of whether it is as low as asserted by
the commenters, does not alter the fact that these services are covered
by Medicare and many patients receiving these services are admitted as
inpatients and are receiving an IPPS-level of care. We do not believe
it would be appropriate to adopt a policy to exclude patient days from
a hospital's number of inpatient days based on the volume of services
paid for by Medicare. The issue at hand is the calculation of a
hospital's Medicare utilization, and the determination of what
constitutes an inpatient day, in making such a calculation. Whether
inpatient days are attributable exclusively to Medicare beneficiaries
is not at issue, and the commenters' assertion that labor and delivery
days have no relevance to Medicare and, therefore, should be excluded
from the Medicare utilization ratio has no bearing on how Medicare's
direct GME payments are calculated in the formula specified in the law.
The definition of ``Medicare patient load'' at section 1886(h)(3)(C) of
the Act does not specify inclusions or exclusions in the inpatient day
count based on volume. An inpatient day has historically been counted
in the Medicare utilization calculation for direct GME purposes in
situations where a maternity patient admitted as an inpatient occupied
a routine bed at some time before going to the ancillary labor and
delivery room or receiving labor and delivery services at the time of
the routine census (Provider Reimbursement Manual-I (PRM-I), Section
2205.2). Therefore, it is an established policy that even if the number
of inpatient days applicable to the maternity patients who occupied a
routine bed before going to the labor and delivery room was low, both
the Medicare and total inpatient days of these maternity patients have
been included in the determination of the Medicare utilization
calculation (in the denominator, and even in the numerator in the rare
circumstance that the maternity patient is a Medicare beneficiary due
to disability). Consequently, it is equally appropriate to include in
the Medicare utilization calculation the inpatient days pertaining to
the maternity patients who have been admitted as inpatients, but have
not yet occupied a routine bed because they proceed directly to receive
ancillary labor and delivery services, and are in the ancillary labor
and delivery room at the time the inpatient routine census is taken.
(We also note that the inpatient day is counted for that maternity
patient only in the routine unit, and not in the routine unit and again
in the ancillary labor and delivery room; this avoids counting 2 days
for the same patient (PRM-I, Sections 2205 and 2205.2). However,
because 42 CR 412.105(b) prescribes counting of available beds, the
ancillary labor and delivery bed, for the time occupied by a particular
maternity inpatient, and while unoccupied, would be counted as an
available bed in addition to the routine bed occupied later by the
maternity inpatient (FY 2013 IPPS/LTCH PPS final rule (77 FR 53413)).
Furthermore, it is CMS' general policy to treat inpatient days and beds
consistently. That is why we believe that because labor and delivery
days are considered inpatient days for DSH purposes, and the beds are
considered available inpatient beds for IME and DSH purposes, the labor
and delivery inpatient days also should be considered inpatient days
for purposes of determining the Medicare share for direct GME payments.
We also note that a hospital's total number of inpatients includes
pediatric patients, who would rarely be Medicare patients, yet their
patient days, and the inpatient days of all other non-Medicare
patients, are included in the Medicare utilization ratio. Furthermore,
direct GME payments are made to hospitals for all types of residency
programs, including obstetrics/gynecology and pediatrics specialty
programs, which train physicians to treat primarily the non-Medicare
population. Therefore, we believe that the commenters' concerns that
the inclusion of labor and delivery inpatient days in the Medicare
utilization ratio would have a harmful effect on the physician
workforce are unfounded. Accordingly, we continue to believe that
patient days associated with maternity patients who are admitted as
inpatients and are receiving ancillary labor and delivery services at
the time the inpatient routine census is taken, regardless of whether
the patient actually occupied a routine bed prior to occupying an
ancillary labor and delivery bed and regardless of whether the patient
occupies a ``maternity suite'' in which labor, delivery, recovery, and
postpartum care all take place in the same room, should be included in
the Medicare utilization calculation.
Comment: Several commenters argued that the inclusion of labor and
delivery days in the Medicare utilization calculation is inconsistent
with CMS' longstanding policy regarding services that are not typically
covered by Medicare. The commenters cited CMS' policy on healthy
newborn days which, for DSH purposes, are included in the patient day
count but excluded from the bed day count (68 FR 45417). The commenters
asserted that the rationale behind that policy is that Medicare does
not typically cover these services while Medicaid does. Therefore, the
commenters believed that CMS should exclude labor and delivery bed days
from the IME intern and resident to bed (IRB) ratio and for DSH bed-day
counting purposes but should continue to include labor and delivery
patient days for calculating the disproportionate patient percentage
(DPP). In addition, the commenters stated that the exclusion of bed
days from these calculations is consistent with CMS' longstanding
definition of beds in the cost report.
Response: We disagree with the commenters' statement that inclusion
of labor and delivery days in the Medicare utilization calculation is
inconsistent with CMS' longstanding policy regarding services that are
not typically covered by Medicare. In the circumstance, albeit rare,
that the maternity patient is disabled and qualifies for Medicare, the
labor and delivery services of that maternity patient would be covered
by Medicare. Therefore, the frequency of Medicare coverage is not at
issue, and the days associated with the maternity inpatient would be
included in both the

[[Page 50732]]

numerator and the denominator of the Medicare patient load calculation.
We further believe that the commenters are confusing CMS' (previously
HCFA's) longstanding policy regarding the inclusion of patient days
associated with healthy newborns in the Medicaid fraction of the DSH
DPP calculation. CMS' policy of including healthy newborn days in the
patient day count of the Medicaid fraction of the DSH DPP calculation
is unique to DSH because of the way the days to be used in the Medicaid
fraction are defined by law. Initially, after the enactment of the
Consolidated Omnibus Reconciliation Act (COBRA) of 1985, HCFA's policy
was not to count healthy newborn days in determining a hospital's
Medicaid percentage, based on the fact that healthy newborn beds are
not included in the bed size determination. However, not long
afterward, we reconsidered the language at section
1886(d)(5)(F)(vi)(II) of the Act, which specifically states with
respect to the Medicaid fraction of the DPP that the numerator consists
of ``the number of the hospital's patient days for such period which
consist of patients who (for such days) were eligible for medical
assistance under a State plan approved under title XIX, but who were
not entitled to benefits under part A of this title, and the
denominator of which is the total number of the hospital's patient days
for such period.'' (Emphasis added.) Because healthy newborns may be
``eligible'' for coverage by Medicaid, HCFA changed its policy and
began to include patient days associated with healthy newborns in the
Medicaid fraction of the Medicare DSH DPP. However, the treatment of
nursery days and beds has no bearing on the treatment of patient days
associated with maternity patients who are receiving ancillary labor
and delivery services at the time the inpatient routine census is
taken, yet who are admitted as inpatients, and therefore, the
associated days should be included in the count of inpatient days. We
continue to believe that patient days associated with such maternity
patients should be included in the calculation of Medicare patient load
defined at Sec. 413.75(b), regardless of whether these patients
occupied an inpatient routine bed prior to receiving the ancillary
labor and delivery services at the time of the census because they are
admitted as inpatients and they are receiving IPPS-level acute care.
Comment: One commenter suggested that even though there is
consistency in considering labor and delivery days to be inpatient days
for direct GME purposes, along with consideration of those days to be
inpatient days for DSH and IME purposes, the application of such a
policy for direct GME purposes as compared to DSH and IME purposes is
different, because for DSH and IME, Medicare utilization is not
directly tied to determining reimbursement. Rather, the commenter
stated that it is used to determine if certain hospitals would qualify
for those payments.
Response: The commenter is correct that the ramifications of
inpatient status are different for IME, DSH, and direct GME payments,
respectively, because each has a different statutory payment formula.
Nevertheless, as stated previously, the measure by which patient days
are counted is the determination of whether the patient is admitted as
an inpatient and those services furnished are at an IPPS-level of care.
This applies whether or not the calculation involved determines an
actual payment amount or whether it is used to determine eligibility
for additional payment. As we explained in the FY 2013 IPPS/LTCH PPS
final rule (77 FR 53413), if a patient day is counted for DSH payment
purposes because the services furnished are generally payable under the
IPPS, the bed in which the services are furnished also should be
considered to be available for IPPS-level care. Therefore, it follows
that if the days in question are indeed inpatient, they should also be
counted as inpatient days for other purposes, such as inclusion in the
calculation of a hospital's Medicare utilization ratio, or
determination of eligibility for SCH status. In addition, regarding the
commenter's assertion that Medicare utilization is not directly tied to
reimbursement for DSH and IME, while we note that the DSH and IME
formulas are not paid based on a hospital's Medicare utilization, as
with direct GME, these payments are dependent on, and are made, for
each Medicare inpatient discharge from a hospital.
Comment: One commenter was concerned about the impact of including
labor and delivery days in the Medicare utilization calculation on the
payments for meaningful use of electronic health records under the
Medicare and Medicaid EHR Incentive Programs. As many labor and
delivery days are for Medicaid patients, in theory, such a proposal
might result in an increase in Medicaid utilization and a decrease in
Medicare utilization and, therefore may have no significant impact on
hospitals eligible for both Medicare and Medicaid meaningful use
reimbursement. The commenter noted that the Medicaid meaningful use
reimbursement calculation is essentially a ``one-time'' calculation
using historical data, spread over 3 years in most States, while the
Medicare utilization is recalculated each year. Therefore, this
proposed policy may result in a reduction in Medicare meaningful use
reimbursement with no increase in Medicaid reimbursement. If CMS does
finalize this policy, the commenter requested that the labor and
delivery days be excluded from the Medicare utilization calculated to
determine meaningful use reimbursement.
Response: We understand the commenter's concern regarding the
potential effect of including labor and delivery inpatient days in the
hospital's number of total inpatient days, and the calculation of the
incentive payments for meaningful use of certified EHR technology under
Medicare, but we are not commenting in this Medicare IPPS final rule on
the ramifications, if any, on Medicaid payment. However, regardless of
the impact on a particular hospital, because labor and delivery
inpatients are, in fact, inpatients, we continue to believe that these
inpatient days should be included in the determination of a hospital's
total number of inpatient days. Furthermore, we note that in the final
rule for Stage 1 of the EHR Incentive Program (75 FR 44453), we stated
that ``we proposed to determine the number of Medicare Part A and Part
C inpatient bed [sic] days using the same data sources and methods for
counting those days that we may employ in determining Medicare's share
for purposes of making payments for direct graduate medical education
costs. . . .'' Therefore, we note that there is already consistency
between Medicare's policies regarding inpatient days for EHR and direct
GME.
Comment: Some commenters pointed out that the labor and delivery
beds are unique in that even though the bed might be occupied by a
patient, that patient may not be ``ready'' to be admitted as an
inpatient. These commenters requested clarification of our proposal on
whether or not to include in the patient day count the scenario where
the patient is occupying a labor and delivery bed but is under
observation status. They also wanted confirmation that the counting of
beds as inpatient beds would only occur after the patient's admission
as an inpatient.
Response: Patients under observation status are outpatients; they
are not admitted as inpatients. As we noted in the FY 2010 IPPS/RY 2010
LTCH PPS final rule (74 FR 43900) and the FY 2013 IPPS/LTCH PPS final
rule (77 FR 53412), our policy for counting labor and delivery patient
days does not allow for the inclusion of days of labor and delivery
patients who are not admitted

[[Page 50733]]

to the hospital as inpatients. For example, if a woman presents at a
hospital for labor and delivery services, but is determined by medical
staff to be in false labor and is sent home without ever being admitted
to the hospital as an inpatient, any days associated with such services
furnished by the hospital would not be included in the DPP for purposes
of the calculation of the Medicare DSH payment adjustment. This same
policy would apply with regard to inpatient days in the Medicare
utilization ratio, and any time spent in the hospital prior to
admission as an inpatient would not be counted toward the determination
of an inpatient day. With regard to the counting of beds, the
regulations at 42 CFR 412.105(b)(4) explicitly exclude ``beds otherwise
countable under this section used for outpatient observation
services,'' and therefore, the bed in a unit or ward that is otherwise
occupied to provide a level of care that would be payable under the
IPPS would be counted as available generally while it is unoccupied, or
occupied with a patient admitted as an inpatient.
Comment: Another commenter observed that CMS' proposal does not
take into account two different types of labor and delivery beds that
are in place at some hospitals. The commenter noted that there are
labor and delivery beds that are used for postpartum purposes and there
are those that are used for delivery only. In addition, some hospitals
with traditional labor and delivery beds have adopted the policy of
setting aside a recovery room in the hospital's obstetrical unit for
the mother and baby once the mother is committed to delivery, even
though she may still be in a traditional labor and delivery room. The
commenter pointed out that CMS did not address how to avoid the double
counting of these two types of beds during the same time period.
Response: We refer readers to the FY 2013 IPPS/LTCH PPS final rule
(77 FR 53413) where we responded to a similar comment and clarified our
policy regarding the bed count for various types of labor and delivery
beds. We disagree with the commenter that there would be ``double
counting'' of post-partum and ancillary labor and delivery beds for the
same mother. Rather, under our existing policies, we include all beds
in a unit that is providing services that are generally payable under
the IPPS because we believe such beds to be available for IPPS-level
acute care hospital services. Specifically, postpartum beds have
historically been included in the definition of an available inpatient
bed and, therefore, are already included in the routine adult and
pediatric services bed count on line 1 of Worksheet S-3, Part I (68 FR
45420). Moreover, the definition of an available inpatient bed has been
revised to eliminate the exclusion for ancillary labor and delivery
beds because they are available for IPPS-level acute care hospital
services. That is, effective for cost reporting periods beginning on or
after October 1, 2012, beds in distinct ancillary labor and delivery
rooms, when occupied by an inpatient receiving IPPS-level acute care
hospital services or when unoccupied, are considered to be part of a
hospital's inpatient available bed count in accordance with 42 CFR
412.105(b) (77 FR 53411 through 53413). However, we understand that
hospital practices may vary with regard to the types of beds used for
the various stages of labor and delivery. To the extent that some
hospitals set aside beds in the ancillary labor and delivery unit for
recovery purposes, separate from the beds that are used for actual
labor and delivery services, we would agree that these beds are not
permanently maintained for inpatient use and would not be considered
available for IPPS-level care.
Comment: One commenter noted that the cost report now separates
labor and delivery room days for DSH purposes, and does not include
them in the calculation of Medicare utilization. Because the days in
question will not be included in the days used for apportionment (for
payment calculated on a reasonable cost basis), the commenter
questioned whether the cost report would be revised to reflect the new
policy. The commenter also requested clarification on whether labor and
delivery days would be used for pass-through costs for nursing and
allied health education programs, and whether or not the new policy
would apply to existing SCHs or only to hospitals seeking SCH status
once the proposal is finalized. The commenter recommended only applying
the new policy to new SCH applicants due to the administrative burden
of applying the policy to all existing SCHs.
Response: We appreciate the commenter's information regarding the
need for changes to the Medicare hospital cost report and the cost
reporting instructions. As noted the FY 2014 IPPS/LTCH PPS proposed
rule (78 FR 27637), we plan to amend the applicable cost report
worksheets and instructions (in particular, Worksheet S-3, Part I) to
be able to include labor and delivery inpatient days in the Medicare
utilization ratio on Worksheet E-4. As mentioned in the FY 2014 IPPS/
LTCH PPS proposed rule (78 FR 27637), this change regarding inclusion
of labor and delivery inpatient days in the Medicare utilization ratio
would not impact Medicare payments calculated on a reasonable cost
basis for routine inpatient services, which are apportioned in
accordance with 42 CFR 413.53(a)(1). Therefore, this change regarding
labor and delivery patient days would not affect the policy currently
in place for determining nursing and allied health education pass-
through payments. In addition, this change applies for cost reporting
periods beginning on or after October 1, 2013. Therefore, this policy
would apply to hospitals seeking SCH status after the effective date of
this rule. However, if CMS or the Medicare contractor reviews the
status of an existing SCH after October 1, 2013, the new policy
regarding inclusion of inpatient labor and delivery days would also
apply.
After consideration of the public comments we received, we are
finalizing our proposed policy, without modification, to include
patient days associated with maternity patients who have been admitted
as inpatients and are receiving ancillary labor and delivery services
at the time the inpatient routine census is taken, regardless of
whether the patient actually occupied a routine bed prior to occupying
an ancillary labor and delivery bed and regardless of whether the
patient occupies a ``maternity suite'' in which labor, delivery,
recovery, and postpartum care all take place in the same room, in the
Medicare utilization calculation for cost reporting periods beginning
on or after October 1, 2013. This final policy does not impact Medicare
payments calculated on a reasonable cost basis for routine inpatient
services, which are apportioned in accordance with 42 CFR 413.53(a)(1).
3. Notice of Closure of Teaching Hospitals and Opportunity To Apply for
Available Slots
a. Background
Section 5506 of the Affordable Care Act authorizes the Secretary to
redistribute residency cap slots after a hospital that trained
residents in an approved medical residency program(s) closes.
Specifically, section 5506 amended the Act by adding a subsection (vi)
to section 1886(h)(4)(H) and modifying the language at section
1886(d)(5)(B)(v) to instruct the Secretary to establish a process to
increase the FTE resident caps for other hospitals based upon the FTE
resident caps in teaching hospitals that closed ``on or after a date
that is 2 years before the

[[Page 50734]]

date of enactment'' (that is March 23, 2008). In the CY 2011 OPPS/ASC
final rule with comment period issued in the Federal Register on
November 24, 2010 (75 FR 72212), we established regulations and an
application process for qualifying hospitals to apply to CMS to receive
direct GME and IME FTE resident cap slots from a hospital that closed.
The procedures we established apply both to teaching hospitals that
closed after March 23, 2008, and on or before August 3, 2010, and to
teaching hospitals that closed after August 3, 2010. We made
clarifications and revisions to the policy regarding applications under
section 5506 in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53434
through 53477).
b. Notice of Closure of Teaching Hospitals
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27637), we
provided notice to the public of the closure of a teaching hospital,
and of the initiation of another round of the section 5506 application
and selection process. This round was the fourth round of the section
5506 (``Round 4'') application and selection process, which announced
the closure of Peninsula Hospital Center in Far Rockaway, NY, and
applications were due to CMS no later than July 25, 2013.
In a notice published in the Federal Register on May 31, 2013 (CMS-
1459-N, 78 FR 32663), CMS announced the closure of two additional
hospitals, Infirmary West Hospital in Mobile, AL, and Montgomery
Hospital in Norristown, PA, and initiated the fifth round of the
section 5506 (``Round 5'') application and selection process. Round 5
applications are due to CMS no later than August 29, 2013 (CMS-1459-CN,
78 FR 39730).
In addition, we have learned of the closure of two more teaching
hospitals, Cooper Green Mercy Hospital, in Birmingham, AL, and Sacred
Heart Hospital, in Chicago, IL. The purpose of this notice is to notify
the public of the closure of these teaching hospitals, and to initiate
another round of the application and selection process described in
section 5506 of the Affordable Care Act. This round will be the sixth
round (``Round 6'') of the application and selection process. The
following closed teaching hospitals are part of the Round 6 application
process under section 5506:

----------------------------------------------------------------------------------------------------------------
Direct GME cap
IME Cap (including +/-
CBSA (including +/- MMA Section 422
Provider No. Provider name City and state code Terminating date MMA Sec. 422 \1\ \1\ and ACA
adjustment) Section 5503 \2\
adjustments)
----------------------------------------------------------------------------------------------------------------
010137....... Cooper Green Birmingham, AL.. 13820 January 1, 2013. 35.45-5.80 35.45-9.21
Mercy Hospital. section 422 section 422
decrease = decrease =
29.65 \3\. 26.24.\4\
140151....... Sacred Heart Chicago, IL..... 16974 July 20, 2013... 4.00............ 4.00-2.60
Hospital. section 5503
decrease =
1.40.\5\
----------------------------------------------------------------------------------------------------------------
\1\ Section 422 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), Public Law
108-173, redistributed unused residency slots effective July 1, 2005.
\2\ Section 5503 of the Affordable Care Act, Public Law 111-148, redistributed unused residency slots effective
July 1, 2011.
\3\ Cooper Green Mercy Hospital's 1996 IME FTE cap is 35.45. Under section 422 of the MMA, the hospital received
a decrease of 5.80 to its IME FTE cap: 35.45-5.80 = 29.65.
\4\ Cooper Green Mercy Hospital's 1996 direct GME FTE cap is 35.45. Under section 422 of the MMA, the hospital
received a decrease of 9.21 to its direct GME FTE cap: 35.45-9.21 = 26.24.
\5\ Sacred Heart Hospital's 1996 direct GME FTE cap is 4.00. Under section 5503 of the Affordable Care Act, the
hospital received a decrease of 2.60 to its direct GME FTE cap: 4.00-2.60 = 1.40.

c. Application Process for Available Resident Slots
The application period for hospitals to apply for slots under
section 5506 is set at 90 days following notification to the public of
a hospital closure. Therefore, hospitals wishing to apply for and
receive slots from the above hospitals' FTE resident caps under Round 6
must submit applications directly to the CMS Central Office no later
than October 31, 2013. Unlike in the first 2 rounds of section 5506,
under this round, hospitals are not required to submit applications to
their respective CMS Regional Office. The mailing address for the CMS
Central Office is included on the application form. Applications must
be received, not postmarked, by October 31, 2013. After an applying
hospital sends a hard copy of a section 5506 application to the CMS
Central Office mailing address, we strongly encourage it to send an
email to: ACA5506application@cms.hhs.gov. In the email, the hospital
should state: ``I am sending this email to notify CMS that I have
mailed a hard copy of a section 5506 application to CMS.'' An applying
hospital should not attach an electronic copy of the application to the
email. The email only serves to notify CMS Central Office that a hard
copy application has been mailed to CMS Central Office.
In the CY 2011 OPPS/ASC final rule with comment period (75 FR
72212), we did not establish a deadline by when CMS would issue the
final determinations to hospitals that receive slots under section 5506
of the Affordable Care Act. However, we will review all applications
for Round 6 slots received by the October 31, 2013 deadline, and will
notify applicants of our determinations as soon as possible.
We refer readers to the CMS Web site at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dgme.html
for a copy of the application form (Section 5506 CMS Application Form)
that hospitals must use to apply for slots under section 5506. We also
refer readers to this same Web site to access a copy of the CY 2011
OPPS/ASC final rule with comment period (75 FR 72212), a copy of the FY
2013 IPPS/LTCH PPS final rule (CMS-1488-F, 77 FR 53434 through 53447),
and a list of additional section 5506 guidelines for an explanation of
the policy and procedures for applying for slots, and the
redistribution of the slots under sections 1886(h)(4)(H)(vi) and
1886(d)(5)(B)(v) of the Act.
4. Payments for Residents Training in Approved Residency Programs at
CAHs
a. Background
Recently, we have received questions regarding how CMS would make
payment for residency training occurring in a CAH. In the past, we have
advised that (1) CAHs may be paid directly under the CAH payment
methodology (that is, 101 percent of the reasonable costs of the CAH in
accordance with sections 1814(l) and 1834(g) of the Act), or (2) CAHs
could

[[Page 50735]]

function as nonhospital settings and therefore, as such, a hospital may
be paid if it incurred the costs of training occurring in the CAH as
provided under section 1886(d)(5)(B)(iv) of the Act for IME and section
1886(h)(4)(E) of the Act for direct GME.
Section 5504 of the Affordable Care Act, titled ``Counting Resident
Time in Non-Provider Settings,'' amended the Act in connection with
``cost reporting periods beginning on or after July 1, 2010,'' for
direct GME, and for discharges on or after July 1, 2010 for IME, to
permit hospitals to count the time that a resident trains in activities
related to patient care in a nonprovider site in its FTE count if the
hospital incurs the costs of the residents' salaries and fringe
benefits for the time that the resident spends training in the
nonprovider site. In connection with those periods and discharges, if
more than one hospital incurs the residency training costs in a
nonprovider setting, under certain circumstances, section 5504 of the
Affordable Care Act allows each hospital to count a proportional share
of the training time that a resident spends training in that setting,
as determined by a written agreement between the hospitals. When
Congress enacted section 5504 of the Affordable Care Act, it retained
the statutory language which provides that a hospital can only count
the time so spent by a resident under an approved medical residency
training program in its FTE count if that one single hospital by itself
``incurs all, or substantially all, of the costs for the training
program in that setting.'' Congress made that longstanding substantive
standard and requirement applicable to ``cost reporting periods
beginning before July 1, 2010'' for direct GME, and to ``discharges
occurring on or after October 1, 1997, and before July 1, 2010'' for
IME (Sections 1886(d)(5)(B)(iv)(I) and 1886(h)(4)(E)(i) of the Act).
Section 5504 of the Affordable Care Act also changed the manner in
which the Act refers to sites outside the hospital in which residents
train. Specifically, section 5504(a)(4) of the Affordable Care Act,
amended the Act by adding at the end of section 1886(h)(4)(E) a
sentence that specifically identified such ``outpatient settings'' as
``nonprovider setting[s].'' That is, prior to the enactment of the
Affordable Care Act, section 1886(h) of the Act did not include a
specific term, but rather used the phrase, ``without regard to the
setting'' in which the residents train, and now, with amendments from
the Affordable Care Act, the Act specifically refers both to the
phrase, ``without regard to the setting'' and to the phrase ``time
spent in a nonprovider setting.'' (We invite readers to compare section
1886(h)(4)(E)(i) of the Act as of 2010 with sections 1886(h)(4)(E)(i)
and 1886(h)(4)(E)(ii) of the Act as of 2011.)
We also note that prior to the amendment in section 5504(b) of the
Affordable Care Act, section 1886(d)(5)(B)(iv) of the Act relating to
IME referenced training in a ``nonhospital'' setting. This remains true
after the enactment of the Affordable Care Act for ``discharges
occurring on or after October 1, 1997 and before July 1, 2010.'' (We
refer readers to section 1886(d)(5)(B)(iv)(I) of the Act.) However,
effective for ``discharges occurring on or after July 1, 2010,'' the
IME statutory language refers to training in a ``nonprovider'' setting.
(We refer readers to section 5504(b) of the Affordable Care Act and
section 1886(d)(5)(B)(iv)(II) of the Act.)
We acknowledge that, prior to the effective date of section 5504 of
the Affordable Care Act (July 1, 2010), in the preamble of rules and in
other policy discussions, we have used both the term ``nonhospital''
and ``nonprovider'' interchangeably in the context of allowing a
hospital to count residents training at locations outside the hospital.
We amended the regulations at Sec. 412.105(f)(1)(ii)(E) for IME and
Sec. 413.78(g) for direct GME to reflect the changes made by section
5504 of the Affordable Care Act to explicitly use the term
``nonprovider'' instead of ``nonhospital'' setting (although we note
that some references to ``nonhospital'' inadvertently remained, and we
are correcting those references in the regulation text accordingly in
this final rule). Section 413.78(g) is explicitly made applicable only
to ``cost reporting periods beginning on or after July 1, 2010,''
whereas earlier cost reporting periods are governed by other preceding
paragraphs of Sec. 413.78.
b. Residents in Approved Medical Residency Training Programs That Train
at CAHs
Section 4201 of the BBA of 1997 (Pub. L. 105-33) amended section
1820 of the Act to create facilities called ``Critical Access
Hospitals'' (CAHs). Following the enactment of the BBA, but before the
enactment of the Affordable Care Act, we were asked if and how CMS
would pay for residents that rotate to a CAH for some portion of the
residency training program when another hospital pays for the costs of
the training at the CAH. To answer this question, we considered that a
CAH is a unique facility that, by definition, is not always a hospital.
That is, section 1861(e) of the Act states that ``the term `hospital'
does not include, unless the context otherwise requires, a critical
access hospital (as defined in section 1861(mm)(1)).'' Because a CAH is
generally not considered a ``hospital'' under section 1861(e) of the
Act, we concluded that a CAH could be treated as a nonhospital site for
GME purposes. If a CAH could be treated as a nonhospital site for GME
purposes, we also concluded that if another hospital (such as an IPPS
hospital that is subject to payment under section 1886(h) of the Act or
an IPPS-excluded hospital), incurred the costs of training the FTE
residents for the portion of the time that they train at the CAH, and
met the requirements of the regulations at Sec. 413.78(d) through (f),
the hospital could claim the FTE residents training at the CAH for IME
and/or direct GME purposes.
We recently determined that, as a result of the amendments made by
section 5504 of the Affordable Care Act, we should reevaluate our
policy regarding whether payment can be made to a hospital that incurs
the costs of the FTE residents training at a CAH.
Section 1861(u) of the Act states that a ``provider of services''
is ``a hospital, critical access hospital, skilled nursing facility,
comprehensive outpatient rehabilitation facility, home health agency,
hospice program, or . . . a fund.'' Therefore, while section 1861(e) of
the Act states that a CAH is excluded from the definition of
``hospital'' unless the context requires otherwise, a CAH is a
``provider.''
Because section 5504(a) of the Affordable Care Act amended sections
1886(d)(5)(B)(iv)(II) and 1886(h)(4)(E) of the Act on a prospective
basis to specifically identify the setting in which time spent by
residents training outside of the hospital setting may be counted for
both direct GME and IME purposes, a hospital's ability to count
residents not training in the hospital is now limited to only those
settings that are ``nonproviders.'' Although the term ``nonprovider''
is not defined in the statute, we believe it is reasonable to define
the term as meaning those settings that do not meet the definition of
``provider'' at section 1861(u) of the Act.
Accordingly, because a CAH is defined as a provider in the statute,
in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27639), we proposed
that, effective for portions of cost reporting periods occurring on or
after October 1, 2013, a hospital may not claim the time FTE residents
are training at a CAH for IME and/or direct GME purposes. However,
under policies that were

[[Page 50736]]

applicable prior to October 1, 2013, and that continue to apply on and
after October 1, 2013, a CAH may incur the costs of training the FTE
residents for the time that the FTE residents rotate to the CAH, and
receive payment based on 101 percent of its Medicare reasonable costs
under Sec. 413.70 of the regulations. We also noted that, consistent
with the regulations at Sec. 413.24(d)(7), a CAH may not include as an
allowable cost the portion of any training costs associated with the
time that a resident is not training at the CAH.
Comment: Commenters urged CMS not to finalize its proposal but
rather to continue to allow teaching hospitals to count residency
training time at CAHs for direct GME and IME payment purposes if the
teaching hospitals incur the costs of the residents' salaries and
fringe benefits while the residents are training at the CAH. Commenters
stated that not allowing hospitals to count residency training time at
CAHs is inconsistent with CMS' current regulations, CMS' regulations
implementing section 5504 of the Affordable Care Act, and the
legislative intent of section 5504 of the Affordable Care Act.
Commenters stated that the terms ``nonhospital'' and
``nonprovider'' have been used interchangeably by CMS and that it is
inappropriate for the Agency to suddenly assign different meanings to
those terms. Commenters stated that CMS cannot pretend that a
distinction between those terms and the implication of using one term
versus the other has always been clear and well-defined. Commenters
stated that, ``it also casts some doubt on the agency's conclusion as
part of the proposed rule that the Congress intended to exclude
residents' rotation to CAHs by choosing to use the term `nonprovider'
rather than `nonhospital' in section 5504.''
Commenters stated that in the final rule implementing section 5504
of the Affordable Care Act (the CY 2011 OPPS/ASC final rule with
comment period (75 FR 72134)), the use of the term ``nonhospital''
versus ``nonprovider'' was not addressed. One commenter stated that in
that final rule, CMS stated that a nonprovider site means a setting
that is not a provider-based facility or organization as defined at
Sec. 413.65 of the regulations, yet CMS made no mention in that final
rule of the definition of ``provider of services'' at section 1861(u)
of the Act. The commenter stated that if CMS believed a valid
distinction existed between ``nonprovider'' and ``nonhospital,'' it
would have provided definitions of these two terms in that final rule.
Instead of discussing any distinction between the two terms, CMS
focused on the determination of whether a facility is one that is
primarily engaged in patient care. The commenter stated that clearly
CAHs are facilities that are primarily engaged in patient care and,
therefore, should be included as a nonprovider setting under section
5504 of the Affordable Care Act.
Commenters stated that the intention of section 5504 of the
Affordable Care Act was not to exclude CAHs from nonprovider site
training, but rather to reduce the administrative burden associated
with counting residency training time in settings engaged in patient
care outside of the IPPS hospital setting and to increase flexibility
in GME rules that support primary care residency training programs in
outpatient and community-based settings located in rural and
underserved areas. Commenters referenced the Senate Finance Committee's
``Chairman's Mark of the America's Health Future Act of 2009,'' and
stated the purpose of section 5504 of the Affordable Care Act was to
count all residency training time for direct GME payment purposes
``without regard to where the activities are performed'' if the
hospital pays for the residents' salaries and fringe benefits
associated with the training time and also to count all patient care
time for IME payment purposes in a nonhospital setting if the hospital
or entities participating in the residency training program continue to
incur the resident salaries and fringe benefits of the residents while
they are training in the nonhospital setting. One commenter stated,
``through CMS's varied use of the word `hospital', many family medicine
programs in small communities were, in fact, harmed by interpretations
of BBA 1997, the specific obstacle targeted by Section 5504.''
Commenters stated that the purpose of section 5504 of the Affordable
Care Act was to correct the error and not to prevent CAHs from
collaborating with urban facilities for residency training programs.
Commenters stated that the language included in section 5504 of the
Affordable Care Act indicates that the drafters were using the terms
``nonprovider'' and ``nonhospital'' interchangeably. Commenters stated
the sentence in section 5504 of the Affordable Care Act reads: ``Any
hospital claiming under this subparagraph for time spent in a
`nonprovider setting','' and that the sentence needs to be read in
coordination with the previous paragraph that indicates the hospital
should be able to count residency training time ``without regard to the
setting in which the activities are performed, if a hospital incurs the
costs of the stipends and fringe benefits of the resident during the
time the resident spends in that setting.'' Commenters stated that
reading these sentences consecutively, and in the context of one
another, indicates that Congress was using the terms ``nonprovider''
and ``nonhospital'' interchangeably. Commenters reasoned that the term
``nonprovider'' should not be interpreted as a qualifier to the phrase
``without regard to the setting'' but rather as language affirming the
intent of Congress ``. . . to reimburse those facilities incurring the
costs associated with training residents outside of a metropolitan
hospital setting.'' Another commenter noted that the language added
under section 1886(h)(4)(E) of the Act includes the language ``without
regard to the setting'' and does not focus on the difference between
nonprovider setting and nonhospital settings. One commenter recommended
two alternative options to CMS' proposal. The commenter stated that CMS
could refer to section 1861(e) of the Act which states that a CAH is
not a hospital ``unless the context requires otherwise.'' The commenter
stated this statutory language permits CMS to consider CAHs as
hospitals for the purposes of GME reimbursement. The commenter stated a
second option would be for CMS to define the term ``nonprovider'' for
purposes of section 5504 of the Affordable Care Act. The commenter
further stated that in doing so, CMS would have the authority to
include CAHs as nonproviders for purposes of section 5504 of the
Affordable Care Act.
Response: As we stated in the FY 2014 IPPS/LTCH PPS proposed rule
(78 FR 27639), we acknowledge that in the past CMS has used the terms
``nonhospital'' and ``nonprovider'' interchangeably. We regret that we
did not include this clarification in the CY 2011 OPPS/ASC final rule
with comment period (75 FR 72134) in which we implemented section 5504
of the Affordable Care Act. We are taking the opportunity to explain
the revised statutory language, and provide a prospective policy
change, in this FY 2014 rulemaking process. The language added by
section 5504 of the Affordable Care Act specifically refers to a
``nonprovider'' setting. Although the term ``nonprovider'' is not
defined in the statute, as we proposed, we believe it is reasonable to
define the term as meaning those settings that do not meet the
definition of ``provider'' at section 1861(u) of the Act. Therefore,
because CAHs are explicitly included in the

[[Page 50737]]

definition of ``provider of services'' for purposes of Title XVIII
under section 1861(u) of the Act, we do not believe we have the
discretion to regard a CAH as something other than a provider for
purposes of determining whether a hospital can count residency training
time at a CAH. For this same reason, despite one commenter's assertion
that because CAHs are facilities that are ``engaged primarily in
patient care,'' they should be considered nonprovider settings under
section 5504 of the Affordable Care Act, we believe it is reasonable to
define the term ``nonprovider'' as meaning those settings that do not
meet the definition of ``provider'' at section 1861(u) of the Act, and
therefore, we cannot ignore the fact that a CAH is defined as such
under section 1861(u) of the Act. We also strongly disagree with the
commenter's suggestion that the phrase at section 1886(h)(4)(E) of the
Act, ``without regard to the setting in which the activities are
performed,'' may be read so loosely as to refer to CAHs. While it is
true that Congress intended, as the commenter noted, to facilitate
training in settings other than the traditional inpatient hospital,
historic conference report language also clearly indicates that this
provision is intended to encourage training in ambulatory settings,
such as clinics, physician offices, and other community-based settings,
and not other inpatient facilities. The Conference committee report
accompanying Public Law 99-509 indicates that ``[s]ince it is difficult
to find sufficient other sources of funding [than hospitals and
Medicare] for the costs of such training [that is, training in
freestanding primary care settings such as family practice clinics or
ambulatory surgery centers], assignments to these settings are
discouraged. It is the Committee's view that training in these settings
is desirable, because of the growing trend to treat more patients out
of the inpatient hospital setting and because of the encouragement it
gives to primary care'' (emphasis added)). (H.R. Rep. No. 99-727, 99th
Cong., 1st Sess., 70 (1986.) Furthermore, we believe that the last
sentence of section 1886(h)(4)(E) of the Act, ``Any hospital claiming
under this subparagraph for time spent in a nonprovider setting shall
maintain and make available to the Secretary records regarding the
amount of such time and such amount in comparison with amounts of such
time in such base year as the Secretary shall specify'' (emphasis
added), clearly indicates that the entire provision at section
1886(h)(4)(E) of the Act is referring to the requirements for counting
residents training in nonprovider settings, and as we reiterate
throughout this preamble, we do not believe CAHs can be considered
nonprovider settings.
In addition, we note that in the CY 2011 OPPS/ASC final rule with
comment period (75 FR 72135), we defined a ``nonprovider site'' as ``a
setting that does not qualify as a provider-based facility or
organization in accordance with the criteria in the regulations at 42
CFR 413.65.'' Therefore, as discussed above, under the policy finalized
in this rule, an IPPS hospital cannot count residency training time at
a CAH or a facility or organization that is provider-based to a CAH.
For example, if a CAH has a provider-based RHC, even though an RHC is
not included in the definition of ``provider of services'' at section
1861(u) of the Act, an IPPS hospital cannot claim residency training
time at that provider-based RHC. However, we note that the CAH-based
RHC could separately claim and receive payment for direct GME costs it
incurs, as discussed in the regulations at 42 CFR 405.2468(f). We do
not agree that considering CAHs to be ``hospitals'' under section
1861(e) of the Act in the context of section 5504 of the Affordable
Care Act, as one commenter suggested, would provide any benefit,
because under 42 CFR 413.78(b), one hospital may not count the time
spent training at another hospital for IME or direct GME purposes.
Therefore, under this regulation, an IPPS hospital is precluded from
counting residents training at a CAH ``hospital,'' even if the IPPS
hospital incurs the costs of training those residents. We also do not
believe that we have the authority to adopt a separate definition for
``nonprovider'' for purposes of GME. The definition of ``provider of
services'' for purposes of Title XVIII already exists in the statute,
and as such, we believe the statute requires that we consider any
entity not included in that definition a ``nonprovider.''
Comment: One commenter stated that it supported CMS' proposal.
However, the commenter also stated that a CAH which is located in a
medically underserved area and has a rotation with a teaching hospital
could affect the provision of care to that area. Specifically, the
commenter expressed concern that a CAH could pay for the residency
training that occurs at the CAH and be reimbursed based on 101 percent
of reasonable costs for that training but such an arrangement could be
difficult for both the CAH and the teaching hospital because of
contractual arrangements that would need to occur between the CAH and
the hospital. Many commenters stated that they were concerned the
proposed policy would reduce training in rural and underserved areas,
thereby affecting primary care and community-based residency training
programs such as family medicine, many of which have the mission to
train residents to serve in these areas. Commenters expressed concern
that the proposal would ultimately reduce the supply of physicians in
these areas because many residents practice where they train. One
commenter made reference to a publication from the Robert Graham Center
for Academic Medicine, which they stated shows that the return on
investment for training residents in rural areas is high. Commenters
stated that providing care in rural areas requires collaboration among
rural entities such as CAHs and IPPS hospitals so as to facilitate
recruiting and retaining physicians in rural areas. One commenter
stated that because Minnesota is the State with the third highest
number of CAHs in the country and because facilities in Minnesota
already struggle to recruit physicians, the proposed rule would
disproportionately affect residency programs in Minnesota and be
harmful to the CAHs and IPPS hospitals that coordinate residency
training programs. Another commenter stated that Iowa hospitals are
concerned that if a teaching hospital needs to train residents at a CAH
to fully use its cap, not permitting hospitals to count residency
training time at CAHs would mean that CAHs will not be able to train
residents because hospitals will be incentivized to rotate residents
through a teaching hospital or other non-CAH setting. The commenter
stated that if a CAH wants to train residents, it would have to incur
the costs of training those residents and a teaching hospital could be
at risk of losing cap because of not fully utilizing its cap. One
commenter provided information on the Wisconsin Academy of Rural
Medicine and the Wisconsin Rural Training Track Collaborative, which
aim to promote training and increase the supply of physicians in rural
Wisconsin as well as improve the health of communities located in rural
Wisconsin. The commenter stated the Affordable Care Act focused on
training and referral programs in rural areas by increasing the funding
for Area Health Education Centers and establishing the Rural Physician
Training Grant. The commenter stated CMS' proposal ``. . . threatens to
reverse the great good that may come about through the focus

[[Page 50738]]

on training, recruitment, and retention in the PPACA for rural
communities.'' Commenters also stated that some CAHs may be too small
to support residency training programs on their own and that some CAHs
may not be in a financial position to incur the costs associated with
residency training programs. Commenters added that CAHs support a
policy that allows teaching hospitals to be reimbursed for residency
training that occurs at CAHs because CAHs want to make sure that IPPS
hospitals continue rotating residents to CAHs.
In addition, one commenter stated that IME payments are patient
care payments which compensate teaching hospitals for providing
specialized care that is not provided at other facilities. The
commenter stated that if a teaching hospital rotates residents to a
CAH, the hospital's IME payments should not change because the teaching
hospital will continue to provide these specialized services even if
they rotate some of their residents to a CAH. The commenter also noted
that, for direct GME payment purposes, if a teaching hospital pays the
costs of the residents' salaries and fringe benefits for the time they
are training at the CAH, the teaching hospital should be able to
receive direct GME payments for that training time.
Response: It is not clear that not allowing hospitals to claim the
time of FTE residents training at CAHs for direct GME and IME payment
would have a negative impact on residency training in rural areas. The
proposed rule did not in any way propose to change the training
arrangements that CAHs may have with other providers, including IPPS
hospitals. That is, we did not propose that CAHs are required to
support or sponsor residency training programs on their own. Rather,
CAHs may continue to function as participating institutions for
purposes of training residents in a single or multiple residency
training programs. Regarding the comments asserting that CAHs face
challenges incurring costs associated with residency training, we note
that whatever allowable costs the CAH would incur would be paid for
based on Medicare's share of 101 percent of those reasonable costs. We
do not believe that treating CAHs as providers limits growth in
residency training programs in rural areas. On the contrary, the policy
of treating CAHs as providers has the potential to promote additional
residency training in rural areas because CAHs are not restricted by
the FTE resident caps, as IPPS hospitals are, and therefore, assuming
appropriate education and accreditation standards are adhered to, there
is no limit on the number of residents training at a CAH for which
Medicare will provide reimbursement when the CAH incurs the costs of
training the residents at the CAH. Furthermore, by having the CAH count
residency training time at the CAH, instead of the IPPS hospital
counting that time towards its cap, an IPPS hospital that is training
over its cap could now receive Medicare payment for FTE residents that
were previously causing it to exceed its cap. Additional cap space
could also provide an incentive for an IPPS hospital training below its
cap to start a new residency training program or expand an existing
residency training program.
Regarding the potential reduction in IME payments to teaching
hospitals paid under the IPPS if hospitals can no longer count
residency training time at CAHs, we disagree with the commenter's
assertions. We believe that, generally, teaching hospitals' IME
payments will not change. Many teaching hospitals are currently
training over their caps. As referenced above, by allowing the CAH to
incur and be paid for the portion of the residency costs associated
with training at the CAH, instead of the teaching hospital counting
that time, a teaching hospital could substitute that FTE resident time
with other residents training in its hospital or other nonprovider
sites, and maintain generally the same intern and resident-to-bed ratio
and level of IME payment. Under this scenario, teaching hospitals could
continue to receive IME payments for FTE residents training up to the
hospitals' caps and the hospitals would no longer have to incur
additional costs associated with FTE residents training over the
hospital's caps. If a teaching hospital is currently training below its
caps, allowing the CAH to incur and be paid for the portion of the
residency costs associated with training at the CAH could give the
teaching hospital more space under its cap and provide an incentive for
the teaching hospital to either start a new residency training program
or expand an existing residency training program. We also note that to
the extent that IPPS IME payments are made in recognition of the higher
indirect patient care costs that teaching hospitals incur, CMS'
payments to the CAH would also inherently reflect applicable indirect
patient care costs because payment to a CAH is based on 101 percent of
Medicare's share of the CAH's reasonable costs for treating patients,
including the costs which are a result of the CAH's involvement with an
approved residency training program.
Comment: Commenters expressed concern regarding potential impacts
on teaching health centers and rural training tracks. Commenters asked
whether calculation of the rural track FTE limitation would be
affected. One commenter stated that 9 out of 26 rural training tracks
involve CAHs. In addition, an unknown number of other integrated rural
training tracks or rurally-located programs, including one in Yakima,
WA, rely on CAHs as training sites. The commenter also noted that while
osteopathic programs currently do not use rural training tracks, it is
anticipated they will use them in the future. The commenter stated that
these rural track programs, in addition to allopathic and osteopathic
programs which include more limited rotations to CAHs, would be
negatively impacted if CAHs are not considered nonprovider settings.
Response: Our proposal does not preclude a CAH from participating
as a rural site in a rural training track(s) (a residency training
program in which an urban teaching hospital sends its residents to
train at a rural site for more than one-half of the total duration of
the residency training program). The regulations for rural training
tracks at Sec. 413.79 require that the rural component of the training
occur at either a rural hospital or rural nonhospital site. We believe
that CAHs are captured within the universe of rural facilities. That
is, as part of an accredited rural training track program, an urban
hospital may rotate residents to a CAH and/or other facilities located
in the rural area for greater than 50 percent of the duration of the
entire program. Because there is no impact on CAHs' participation in
rural training tracks, there is no effect on the calculation of the FTE
limitation provided to urban hospitals that participate in training
residents in a rural track program(s).
Comment: One commenter recommended that CMS require hospitals to
clearly identify any CAH rotations on their rotation schedules. The
commenter recommended that if there are any future changes to the
Intern and Resident Information System (IRIS), these changes should
include a provider-type identification for all rotations, which would
include off-site rotations to CAHs. The commenter stated that the
proposed rule indicates that in order for Medicare to pay for rotations
at a CAH, the CAH has to incur the costs for the time the resident is
training at the CAH. The commenter asked whether the CAH needs a
written agreement with the sponsoring hospital that indicates the
amount the CAH has to pay the hospital for the rotation or whether the
CAH would need to have

[[Page 50739]]

its own agreement with the entity operating the residency training
program and pay that entity directly. The commenter asked how the cost
of the rotation to the CAH should be quantified, whether the costs
would include the salary and fringe benefits of the resident, or
whether other costs such as supervision costs would also be included.
Response: We agree that it would be extremely helpful if a
hospital's rotation schedule would clearly designate the location of
the rotation sites, regardless of whether the rotations are to CAHs,
clinics, doctors' offices, or other settings. This would help the
Medicare contractor determine the hospital's FTE count accurately. We
appreciate the comment concerning IRIS and we will consider the
commenter's recommendation for any future IRIS changes. Regarding the
commenter's questions about written agreements, a CAH is not a
nonprovider setting and, therefore, it is not required to have a
written agreement with a hospital for the purpose of receiving payment
for its GME costs under 42 CFR 413.70. CAHs are generally reimbursed
based on 101 percent of their reasonable costs for the cost they incur
associated with inpatient and outpatient services. Therefore, the costs
that a CAH itself (either directly or through payment to a medical
school or a hospital that first incurs the costs such as salaries)
incurs associated with training residents in an approved residency
training program would be reimbursed based on Medicare's share of that
reasonable cost. These costs include the costs associated with training
residents in an approved medical residency training program, such as
resident salaries and fringe benefits, the portion of the teaching
physician's salaries associated with GME activities, and other direct
GME costs. In order to facilitate accurate payment of its GME or any
other costs, the CAH would be required to have source documentation for
these costs that would be available to the Contractor upon audit.
After consideration of the public comments received, we are
finalizing our proposed policy without modification to state that
effective for portions of cost reporting periods beginning on or after
October 1, 2013, a hospital may not claim the time FTE residents are
training at a CAH for IME and/or direct GME purposes. However, under
policies that were applicable prior to October 1, 2013, and that
continue to apply on and after October 1, 2013, a CAH may incur the
costs of training the FTE residents for the time that the FTE residents
rotate to the CAH, and receive payment based on 101 percent of its
Medicare reasonable costs under Sec. 413.70 of the regulations. A CAH
may not include as an allowable cost the portion of any training costs
associated with the time that a resident is not training at the CAH. We
also are revising the regulations at Sec. 413.78(g) to replace the
term ``nonhospital'' with the term ``nonprovider.''
5. Expiration of Inflation Update Freeze for High Per Resident Amounts
(PRAs)
The Balanced Budged Refinement Act (BBRA) of 1999 (Pub. L. 106-113)
amended section 1886(h)(2) of the Act to establish a methodology for
the use of a national average per resident amount (PRA) in computing
direct GME payments for cost reporting periods beginning on or after
October 1, 2000, and on or before September 30, 2005. The BBRA
established a ``floor'' for hospital-specific PRAs at 70 percent of the
locality-adjusted national average PRA. In addition, the BBRA
established a ``ceiling'' that limited the annual adjustment to a
hospital-specific PRA if the PRA exceeded 140 percent of the locality-
adjusted national average PRA. Section 511 of the Benefits Improvement
and Protection Act (BIPA) of 2000 (Pub. L. 106-554) further amended
section 1886(h)(2) of the Act by increasing the floor established by
the BBRA to 85 percent of the locality-adjusted national average PRA,
for cost reporting periods beginning in FY 2002. For purposes of
calculating direct GME payments, each hospital-specific PRA is compared
to the floor and ceiling to determine whether the hospital-specific PRA
should be revised. Section 711 of the Medicare Modernization Act of
2003 (Pub. L. 108-173) amended section 1886(h)(2)(D)(iv)(I) of the Act
by freezing the annual CPI-U updates to hospital-specific PRAs for
those PRAs that exceed the ceiling for FYs 2004 through 2013. The
implementing regulations for these statutory provisions are located at
42 CFR 413.77(d).
As we did in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27639),
we are providing notice here that the ``freeze'' for PRAs that exceed
the ceiling expires beginning in FY 2014. That is, for cost reporting
periods beginning on or after October 1, 2013, the usual full CPI-U
update, as determined under 42 CFR 413.77(c)(1), would apply to all
PRAs for direct GME payment purposes.
Comment: Several commenters supported the expiration in FY 2014 of
the ``freeze'' for PRAs that exceed the ceiling.
Response: We appreciate the commenters' support. However, we did
not propose any changes related to this provision; we merely provided
notification regarding it.
Outside the Scope of the Proposed Rule Comments. We received a
comment regarding pass-through payment under 42 CFR 413.85 for
hospital-operated pharmacy residency programs and a comment stating
that GME cuts will adversely impact the physician workforce and reduce
access to care, particularly to specialty care. Because we did not
propose any changes regarding payments under 42 CFR 413.85, nor did we
specifically propose any provisions related to reductions in GME
payments, we consider these comments outside the scope of the proposed
rule, and we are not responding to them.

K. Rural Community Hospital Demonstration Program

1. Background
Section 410A(a) of Public Law 108-173 required the Secretary to
establish a demonstration program to test the feasibility and
advisability of establishing ``rural community'' hospitals to furnish
covered inpatient hospital services to Medicare beneficiaries. The
demonstration pays rural community hospitals under a reasonable cost-
based methodology for Medicare payment purposes for covered inpatient
hospital services furnished to Medicare beneficiaries. A rural
community hospital, as defined in section 410A(f)(1), is a hospital
that--
Is located in a rural area (as defined in section
1886(d)(2)(D) of the Act) or is treated as being located in a rural
area under section 1886(d)(8)(E) of the Act;
Has fewer than 51 beds (excluding beds in a distinct part
psychiatric or rehabilitation unit) as reported in its most recent cost
report;
Provides 24-hour emergency care services; and
Is not designated or eligible for designation as a CAH
under section 1820 of the Act.
Section 410A(a)(4) of Public Law 108-173 specified that the
Secretary was to select for participation no more than 15 rural
community hospitals in rural areas of States that the Secretary
identified as having low population densities. Using 2002 data from the
U.S Census Bureau, we identified the 10 States with the lowest
population density in which rural community hospitals were to be
located in order to participate in the demonstration: Alaska, Idaho,
Montana, Nebraska, Nevada, New Mexico, North Dakota, South Dakota,
Utah, and

[[Page 50740]]

Wyoming. (Source: U.S. Census Bureau, Statistical Abstract of the
United States: 2003).
CMS originally solicited applicants for the demonstration in May
2004; 13 hospitals began participation with cost reporting periods
beginning on or after October 1, 2004. In 2005, 4 of these 13 hospitals
withdrew from the program and converted to CAH status. This left nine
hospitals participating at that time. In 2008, we announced a
solicitation for up to six additional hospitals to participate in the
demonstration program. Four additional hospitals were selected to
participate under this solicitation. These four additional hospitals
began under the demonstration payment methodology with the hospital's
first cost reporting period starting on or after July 1, 2008. At that
time, 13 hospitals were participating in the demonstration.
Five hospitals (3 of the hospitals were among the 13 hospitals that
were original participants in the demonstration program and 2 of the
hospitals were among the 4 hospitals that began the demonstration
program in 2008) withdrew from the demonstration program during CYs
2009 and 2010. (Three of these hospitals indicated that they would be
paid more for Medicare inpatient hospital services under the rebasing
option allowed under the SCH methodology provided for under section 122
of the Medicare Improvements for Patients and Providers Act of 2008
(Pub. L. 110-275). One hospital restructured to become a CAH, and one
hospital closed.) In CY 2011, one hospital that was among the original
set of hospitals that participated in the demonstration withdrew from
the demonstration. These actions left 7 of the originally participating
hospitals (that is, hospitals that were selected to participate in
either 2004 or 2008) participating in the demonstration program as of
June 1, 2011.
Sections 3123 and 10313 of the Affordable Care Act (Pub. L. 111-
148) amended section 410A of Public Law 108-173, which established the
rural community hospital demonstration program. Sections 3123 and 10313
of the Affordable Care Act changed the rural community hospital
demonstration program in several ways. First, the Secretary is required
to conduct the demonstration program for an additional 5-year period
that begins on the date immediately following the last day of the
initial 5-year period. Further, the Affordable Care Act requires, in
the case of a rural community hospital that is participating in the
demonstration program as of the last day of the initial 5-year period,
the Secretary to provide for the continued participation of such rural
hospital in the demonstration program during the 5-year extension,
unless the hospital makes an election, in such form and manner as the
Secretary may specify, to discontinue participation (section
410A(g)(4)(A) of Public Law 108-173, as added by section 3123(a) of the
Affordable Care Act and further amended by section 10313 of such Act).
In addition, the Affordable Care Act provides that, during the 5-
year extension period, the Secretary shall expand the number of States
with low population densities determined by the Secretary to 20
(section 410A(g)(2) of Public Law 108-173, as added by section 3123(a)
and amended by section 10313 of the Affordable Care Act). Further, the
Secretary is required to use the same criteria and data that the
Secretary used to determine the States under section 410A(a)(2) of
Public Law 108-173 for purposes of the initial 5-year period. The
Affordable Care Act also allows not more than 30 rural community
hospitals in such States to participate in the demonstration program
during the 5-year extension period (section 410A(g)(3) of Public Law
108-173, as added by section 3123(a) of the Affordable Care Act and as
further amended by section 10313 of such Act).
We published a solicitation for applications for additional
participants in the rural community hospital demonstration program in
the Federal Register on August 30, 2010 (75 FR 52960). Applications
were due on October 14, 2010. The 20 States with the lowest population
density that are eligible for the demonstration program are: Alaska,
Arizona, Arkansas, Colorado, Idaho, Iowa, Kansas, Maine, Minnesota,
Mississippi, Montana, Nebraska, Nevada, New Mexico, North Dakota,
Oklahoma, Oregon, South Dakota, Utah, and Wyoming (Source: U.S. Census
Bureau, Statistical Abstract of the United States: 2003). We approved
19 new hospitals for participation in the demonstration program. We
determined that each of these new hospitals would begin participating
in the demonstration with its first cost reporting period beginning on
or after April 1, 2011.
Three of these 19 hospitals declined participation prior to the
start of the cost reporting periods for which they would have begun the
demonstration. In addition to the 7 hospitals that were selected in
either 2004 or 2008, the new selection led to a total of 23 hospitals
in the demonstration. So far, during CY 2013, one additional hospital
among the set selected in 2011 has withdrawn from the demonstration,
similarly citing a relative financial advantage to returning to the
customary SCH payment methodology, such that there are now 22 hospitals
participating in the demonstration.
In addition, section 410A(c)(2) of Public Law 108-173 required
that, ``[i]n conducting the demonstration program under this section,
the Secretary shall ensure that the aggregate payments made by the
Secretary do not exceed the amount which the Secretary would have paid
if the demonstration program under this section was not implemented.''
This requirement is commonly referred to as ``budget neutrality.''
Generally, when we implement a demonstration program on a budget
neutral basis, the demonstration program is budget neutral in its own
terms; in other words, the aggregate payments to the participating
hospitals do not exceed the amount that would be paid to those same
hospitals in the absence of the demonstration program. Typically, this
form of budget neutrality is viable when, by changing payments or
aligning incentives to improve overall efficiency, or both, a
demonstration program may reduce the use of some services or eliminate
the need for others, resulting in reduced expenditures for the
demonstration program's participants. These reduced expenditures offset
increased payments elsewhere under the demonstration program, thus
ensuring that the demonstration program as a whole is budget neutral or
yields savings. However, the small scale of this demonstration program,
in conjunction with the payment methodology, makes it extremely
unlikely that this demonstration program could be viable under the
usual form of budget neutrality.
Specifically, cost-based payments to participating small rural
hospitals are likely to increase Medicare outlays without producing any
offsetting reduction in Medicare expenditures elsewhere. Therefore, a
rural community hospital's participation in this demonstration program
is unlikely to yield benefits to the participant if budget neutrality
were to be implemented by reducing other payments for these same
hospitals.
In the past nine IPPS final regulations, spanning the period for
which the demonstration program has been implemented, we have adjusted
the national inpatient PPS rates by an amount sufficient to account for
the added costs of this demonstration program, thus applying budget
neutrality across the payment system as a whole rather than merely
across the participants in the demonstration

[[Page 50741]]

program. As we discussed in the FYs 2005 through 2013 IPPS final rules
(69 FR 49183; 70 FR 47462; 71 FR 48100; 72 FR 47392; 73 FR 48670; 74 FR
43922, 75 FR 50343, 76 FR 51698, and 77 FR 53449, respectively), we
believe that the language of the statutory budget neutrality
requirements permits the agency to implement the budget neutrality
provision in this manner. In light of the statute's budget neutrality
requirement, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27639
through 27643), we proposed to continue to use the methodology we
finalized in FY 2013 to calculate a budget neutrality adjustment factor
to the FY 2014 national IPPS rates.
In general terms, in each of these previous years, we used
available cost reports for the participating hospitals to derive an
estimate of the additional costs attributable for the demonstration.
Prior to FY 2013, we used finalized, or settled, cost reports, as
available, and ``as submitted'' cost reports for hospitals for which
finalized cost reports were not available. Annual market basket
percentage increase amounts provided by the CMS Office of the Actuary
reflecting the growth in the prices of inputs for inpatient hospitals
were applied to these cost amounts. In the FY 2013 IPPS/LTCH PPS final
rule (77 FR 53452), we used ``as submitted'' cost reports (for cost
reporting periods ending in CY 2010) for each hospital participating in
the demonstration in estimating the costs of the demonstration. In
addition, in FY 2013, we incorporated different update factors (the
market basket percentage increase and the applicable percentage
increase, as applicable, to several years of data as opposed to solely
using the market basket percentage increase) for the calculation of the
budget neutrality offset amount. Finally, in each of the previous
years, an annual update factor provided by the CMS Office of the
Actuary reflecting growth in the volume of inpatient operating services
was also applied. For the budget neutrality calculations in the IPPS
final rules for FYs 2005 through 2011, the annual volume adjustment
applied was 2 percent; for the IPPS final rules for FYs 2012 and 2013,
it was 3 percent. For a detailed discussion of our budget neutrality
offset calculations, we refer readers to the IPPS final rule applicable
to the fiscal year involved.
In general, for FYs 2005 through 2009, we based the budget
neutrality offset estimate on the estimated cost of the demonstration
in an earlier given year. For these periods, we derived that estimated
cost by subtracting the estimated amount that would otherwise be paid
without the demonstration in an earlier given year from the estimated
amount for the same year that would be paid under the demonstration
under the reasonable cost-based methodology authorized by section 410A
of Public Law 108-173. (We note that section 410A of Public Law 108-173
was later amended by the Affordable Care Act.) The reasonable cost-
based methodology authorized by section 410A of Public Law 108-173, as
amended, is hereafter referred to as the ``reasonable cost
methodology.'' (We ascertained the estimated amount that would be paid
in an earlier given year under the reasonable cost methodology and the
estimated amount that would otherwise be paid without the demonstration
in an earlier given year from ``as submitted'' cost reports that were
submitted by the hospitals prior to the inception of the
demonstration.) We then updated the estimated cost described above to
the current year by multiplying it by the market basket percentage
increases applicable to the years involved and the applicable annual
volume adjustment. For the FY 2010 IPPS/RY 2010 LTCH PPS final rule,
data from finalized cost reports reflecting the participating
hospitals' experience under the demonstration were available.
Specifically, the finalized cost reports for the first 2 years of the
demonstration, that is, cost reports for cost reporting years beginning
in FYs 2005 and 2006 (CYs 2004, 2005, and 2006) were available. These
data showed that the actual costs of the demonstration for these years
exceeded the amounts originally estimated in the respective final rules
for the budget neutrality adjustment. In the FY 2010 IPPS/RY 2010 LTCH
PPS final rule, we included in the budget neutrality offset amount an
amount in addition to the estimate of the demonstration costs in that
fiscal year. This additional amount was based on the amount that the
costs of the demonstration for FYs 2005 and 2006 exceeded the budget
neutrality offset amounts finalized in the IPPS rules applicable for
those years.
Following upon the FY 2010 IPPS/RY 2010 LTCH PPS final rule, we
have continued to propose a methodology for calculating the budget
neutrality offset amount to account for both the estimated
demonstration costs in the upcoming fiscal year and an amount by which
the actual demonstration costs corresponding to an earlier, given year
(which would be known once we have finalized cost reports for that
year) exceeded the budget neutrality offset amount finalized in the
corresponding year's IPPS final rule. However, we noted that because of
a delay affecting the settlement process for cost reports for IPPS
hospitals occurring on a larger scale than merely for the
demonstration, we were unable to finalize this component of the budget
neutrality offset amount accounting for the amount by which the actual
demonstration costs in a given year exceeded the budget neutrality
offset amount finalized in the corresponding year's IPPS final rule for
cost reports of demonstration hospitals dating to those beginning in FY
2007.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53449 through
53453), we adopted changes to the methodology for calculating the
budget neutrality offset amount in an effort to further improve and
refine it. We noted that the revised methodology varied, in part, from
that finalized in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51698
through 51705). Specifically, in adopting refinements to the
methodology, our objective was to simplify the calculation so that it
included as few steps as possible. In addition, we incorporated
different update factors (the market basket percentage increase and the
applicable percentage increase, as applicable, to several years of data
as opposed to solely using the market basket percentage increase) for
the calculation of the budget neutrality offset amount. We stated that
we believed this approach would maximize the precision of our
calculation because it would more closely replicate payments made with
and without the demonstration. We refer readers to the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53449 through 53453) for a detailed
discussion of the methodology we used for FY 2013. We noted that,
although we were making changes to certain aspects of the budget
neutrality offset amount calculation for FY 2013, several core
components of the methodology would remain unchanged. For example, we
continued to include in the budget neutrality offset amount methodology
the estimate of the demonstration costs for the upcoming fiscal year
and the amount by which the actual demonstration costs corresponding to
an earlier year (which would be determined once we have finalized cost
reports for that year) exceeded the budget neutrality offset amount
finalized in the corresponding year's IPPS final rule. However,
finalized cost reports for the hospitals participating in the
demonstration were not available for FYs 2007, 2008, 2009, and 2010 at
the time of development of the FY 2013 IPPS/LTCH PPS final rule.
Therefore, we were unable to finalize this component of the budget
neutrality

[[Page 50742]]

offset calculation. We stated in the final rule that we expected
settled cost reports for all of the demonstration hospitals that
participated in the applicable fiscal year (FYs 2007, 2008, 2009, and
2010) to be available prior to the FY 2014 IPPS/LTCH PPS proposed rule.
2. FY 2014 Budget Neutrality Offset Amount
For the reasons discussed in the FY 2013 IPPS/LTCH PPS final rule
(77 FR 53449 through 53453), we proposed in the FY 2014 IPPS/LTCH PPS
proposed rule to continue to use the methodology finalized in the FY
2013 IPPS/LTCH PPS final rule to calculate a budget neutrality
adjustment factor to be applied to the FY 2014 national IPPS payment
rates. As we stated in the FY 2013 IPPS/LTCH PPS final rule (77 FR
53451), we revised our methodology in that final rule to further
improve and refine the calculation of the budget neutrality offset
amount and to simplify the methodology so that it includes only a few
steps. Consistent with the methodology finalized in the FY 2013 IPPS/
LTCH PPS final rule, the proposed methodology for calculating the
estimated FY 2014 demonstration cost for the participating hospitals
was as follows:
Step 1: For each of the participating hospitals, we proposed to
identify the general reasonable cost amount calculated under the
reasonable cost methodology for covered inpatient hospital services (as
indicated on the ``as submitted'' cost report for the hospital's cost
reporting period ending in CY 2011). The general reasonable cost amount
calculated under the reasonable cost methodology is hereafter referred
to as the ``reasonable cost amount.'' As we explained in the FY 2013
IPPS/LTCH PPS final rule (77 FR 53451), we believe that a way to
streamline our methodology for calculating the budget neutrality offset
amount would be to use cost reports with the same status and from the
same time period for all hospitals participating in the demonstration.
Because ``as submitted'' cost reports ending in CY 2011 are the most
recent available cost reports, we believe they would be an accurate
predictor of the costs of the demonstration in FY 2014 because they
give us a recent picture of the participating hospitals' costs.
Because section 410A of Public Law 108-173 stipulates swing-bed
services are to be included among the covered inpatient hospital
services for which the demonstration payment methodology applies, we
proposed to include the cost of these services, as reported on the cost
reports for the hospitals that provide swing-bed services, within the
general total estimated FY 2011 reasonable cost amount for covered
inpatient hospital services under the demonstration. As indicated
above, we proposed to use ``as submitted'' cost reports for the
hospital's cost reporting period ending in CY 2011 for this
calculation.
We proposed to sum the two above-referenced amounts to calculate
the general total estimated FY 2011 reasonable cost amount for covered
inpatient hospital services for all participating hospitals.
We proposed to multiply this sum (that is, the general total
estimated FY 2011 reasonable cost amount for covered inpatient hospital
services for all participating hospitals) by the FYs 2012, 2013, and FY
2014 IPPS market basket percentage increases, which are formulated by
the CMS Office of the Actuary. In the proposed rule, we used the then
current estimate of the FY 2014 IPPS market basket percentage increase
provided by the CMS Office of the Actuary. We proposed to use the final
FY 2014 IPPS market basket percentage increase in the final rule. We
also proposed to then multiply the product of the general total
estimated FY 2011 reasonable cost amount for all participating
hospitals and the market basket percentage increases applicable to the
years involved by a 3-percent annual volume adjustment for the years
2012 through 2014--the result would be the general total estimated FY
2014 reasonable cost amount for covered inpatient hospital services for
all participating hospitals.
We proposed to apply the IPPS market basket percentage increases
applicable for FYs 2012 through 2014 to the FY 2011 reasonable cost
amount described above to model the estimated FY 2014 reasonable cost
amount under the demonstration. We proposed to use the IPPS market
basket percentage increases because we believe that these update
factors appropriately indicate the trend of increase in inpatient
hospital operating costs under the reasonable cost methodology for the
years involved. The 3-percent annual volume adjustment was stipulated
by the CMS Office of the Actuary and was proposed because it is
intended to accurately reflect the tendency of hospitals' inpatient
caseloads to increase. We acknowledged the possibility that inpatient
caseloads for small hospitals may fluctuate, and proposed to
incorporate into the estimate of demonstration costs a factor to allow
for a potential increase in inpatient hospital services.
Step 2: For each of the participating hospitals, we proposed to
identify the general estimated amount that would otherwise be paid in
FY 2011 under applicable Medicare payment methodologies for covered
inpatient hospital services (as indicated on the ``as submitted'' cost
report for cost reporting periods ending in CY 2011) if the
demonstration was not implemented. Similarly, as in Step 1, for the
hospitals that provide swing-bed services, we proposed to identify the
estimated amount that generally would otherwise be paid for these
services (as indicated on the ``as submitted'' cost report for cost
reporting periods ending in CY 2011) and include it in the total FY
2011 general estimated amount that would otherwise be paid for covered
inpatient hospital services without the demonstration. We proposed to
sum these two amounts in order to calculate the estimated FY 2011 total
payments that generally would otherwise be paid for covered inpatient
hospital services for all participating hospitals without the
demonstration.
We proposed to multiply the above amount (that is, the estimated FY
2011 total payments that generally would otherwise be paid for covered
inpatient hospital services for all participating hospitals without the
demonstration) by the FYs 2012 through 2014 IPPS applicable percentage
increases. This methodology differs from Step 1, in which we proposed
to apply the market basket percentage increases to the sum of the
hospitals' general total FY 2011 estimated reasonable cost amount for
covered inpatient hospital services. We believe that the IPPS
applicable percentage increases are appropriate factors to update the
estimated amounts that generally would otherwise be paid without the
demonstration. This is because IPPS payments would constitute the
majority of payments that would otherwise be made without the
demonstration and the applicable percentage increase is the factor used
under the IPPS to update the inpatient hospital payment rates.
Hospitals participating in the demonstration would be participating
under the IPPS payment methodology if they were not in the
demonstration. Then we proposed to multiply the product of the
estimated FY 2011 total payments that generally would otherwise be made
without the demonstration and the IPPS applicable percentage increases
applicable to the years involved by a 3-percent annual volume
adjustment for FYs 2012 through 2014. The result would be the general
total estimated FY 2014 costs that would otherwise be paid

[[Page 50743]]

without the demonstration for covered inpatient hospital services to
the participating hospitals.
Step 3: We proposed to subtract the amount derived in Step 2
(representing the sum of estimated amounts that generally would
otherwise be paid to the participating hospitals for covered inpatient
hospital services for FY 2014 if the demonstration was not implemented)
from the amount derived in Step 1 (representing the sum of the
estimated reasonable cost amount that generally would be paid under the
demonstration to all participating hospitals for covered inpatient
hospital services for FY 2014). We proposed that the resulting
difference would be the estimated amount for which an adjustment to the
national IPPS rates would be calculated.
For the proposed rule, the resulting difference was $46,515,865.
This estimated amount was based on the specific assumptions identified
regarding the data sources used, that is, ``as submitted'' recently
available cost reports. Also, we noted that if updated data became
available prior to the FY 2014 final rule, we would use them to the
extent appropriate to estimate the costs of the demonstration program
in FY 2014. Therefore, we stated that this estimated budget neutrality
offset amount might change in the final rule, depending on the
availability of updated data.
In addition, similar to previous years, we proposed to include in
the budget neutrality offset amount the amount by which the actual
demonstration costs corresponding to an earlier given year (which would
be determined once we had finalized cost reports for that year)
exceeded the budget neutrality offset amount finalized in the
corresponding year's IPPS final rule. Because of delays affecting the
settlement process for cost reports for IPPS hospitals occurring on a
larger scale than merely for the demonstration, we were unable to
determine prior to publication of the FY 2014 IPPS/LTCH PPS proposed
rule the specific component of the budget neutrality offset amount
accounting for the amount by which the actual demonstration costs in a
given year exceeded the budget neutrality offset amount finalized in
the corresponding year's IPPS final rule for cost reports of
demonstration hospitals dating to those beginning in FY 2007. Similar
to previous years, we proposed that if settled cost reports for all of
the demonstration hospitals that participated in the applicable fiscal
year (FY 2007, 2008, 2009, or 2010) were available prior to the FY 2014
IPPS/LTCH PPS final rule, we would include in the budget neutrality
offset amount any additional amounts by which the final settled costs
of the demonstration for the year (FY 2007, 2008, 2009, or 2010)
exceeded the budget neutrality offset amount applicable to such year as
finalized in the respective year's IPPS final rule. (The final settled
costs of the demonstration for a year would be calculated by
subtracting the total amount that would otherwise be paid under the
applicable Medicare payment systems without the demonstration for the
year from the amount paid to those hospitals under the reasonable cost
methodology for such year.)
We did not receive any public comments on the budget neutrality
offset methodology proposed in the FY 2014 IPPS/LTCH PPS proposed rule.
Therefore, we are finalizing the methodology we proposed in the FY 2014
IPPS/LTCH PPS proposed rule (78 FR 27639 through 27643). In addition,
as proposed, we are using updated data not available at the time the
proposed rule was developed to calculate the budget neutrality
adjustment amount for the demonstration for FY 2014. As discussed
above, we have completed Steps 1, 2, and 3 using ``as submitted'' cost
reports for the participating hospitals' cost reporting periods ending
in CY 2011. (The rationale for using this set of cost reports is the
same as stated in the FY 2014 IPPS/LTCH proposed rule (78 FR 27642).)
In this FY 2014 IPPS/LTCH PPS final rule, we are now finalizing the
calculation of the budget neutrality adjustment amount for FY 2014,
based on updated data that has become available since the publication
of the proposed rule. The following are the updated data used to
determine this budget neutrality adjustment factor for FY 2014 for the
final rule:
We have removed data pertaining to the hospital that
withdrew from the demonstration in CY 2013 from the estimated costs for
FY 2014 with the demonstration and absent the demonstration. Thus, the
estimate of costs for FY 2014 pertains to 22 participating hospitals.
For Step 1 discussed above, we are using the final FY 2014
IPPS market basket percentage increase (which is identified in section
V.A. of this final rule) instead of the proposed market basket
percentage increase that was used in the proposed rule, to determine
the estimated FY 2014 reasonable cost amount for covered inpatient
hospital services under the demonstration for the 22 participating
hospitals.
Similarly, for Step 2, we are using the final FY 2014
applicable percentage increase (which is identified in section V.A. of
the preamble of this final rule) instead of the applicable percentage
increase that was used in the proposed rule, to determine the estimated
amount that would otherwise be paid to the participating hospitals in
FY 2014 for covered inpatient hospital services without the
demonstration.
Using the budget neutrality offset methodology finalized above and
the updated data discussed above, the final resulting difference
between the estimated reasonable cost amount for the 22 participating
hospitals for FY 2014 under the demonstration and the estimated amount
that would otherwise be paid in FY 2014 without the demonstration is
$46,549,861.
In addition, we note that the complete set of finalized cost
reports for cost reporting periods beginning in FY 2007 has become
available since the publication of the FY 2014 IPPS/LTCH PPS proposed
rule. As we proposed in the FY 2014 IPPS/LTCH PPS proposed rule, we
have calculated the amount by which the actual costs of the
demonstration for FY 2007, as shown in the finalized cost reports for
the hospitals that participated in the demonstration during FY 2007,
exceeded the budget neutrality offset amount that was finalized in the
FY 2007 IPPS final rule. This amount--$6,039,880--is derived from
finalized cost reports for cost reporting periods beginning in FY 2007
for the 9 hospitals that participated in the demonstration during that
year. (Finalized cost reports for all participating hospitals are not
yet available for FYs 2008, 2009, 2010, or 2011. We anticipate that
these finalized cost reports will be available prior to publication of
the FY 2015 IPPS/LTCH PPS proposed rule).
Therefore, the final total budget neutrality offset amount that
will be applied to the FY 2014 IPPS rates is $52,589,741. This is the
sum of two separate components: (1) The difference between the total
estimated FY 2014 reasonable cost amount to be paid under the
demonstration to the 22 participating hospitals for covered inpatient
hospital services, and the total estimated amount that would otherwise
be paid to the participating hospitals in FY 2014 without the
demonstration ($46,549,861); and (2) the amount by which the actual
costs of the demonstration for FY 2007, as shown in the finalized cost
reports for the hospitals that participated in the demonstration during
FY 2007, exceeded the budget neutrality offset amount that was
finalized in the FY 2007 IPPS final rule ($6,039,880). We discuss the
final payment rate adjustment that is required to ensure the budget
neutrality of the demonstration

[[Page 50744]]

program for FY 2014 (the budget neutrality adjustment factor) in
section II.A. of the Addendum of this final rule.

L. Hospital Emergency Services Under EMTALA: Technical Change (Sec.
489.24(f))

In a final rule issued in the Federal Register on May 16, 2012 (77
FR 29002 through 29031), we made changes to a number of regulations
under 42 CFR Chapter IV governing the Medicare and Medicaid programs to
achieve regulatory reforms under Executive Order 13563 on Improving
Regulation and Regulatory Review and the Department's Plan for
Retrospective Review of Existing Rules. In the May 16, 2012 final rule
(77 FR 29021), we stated that, in response to comments from the public
recommending that we discontinue our use of the term ``recipient''
under Medicaid, we made a nomenclature change to replace ``recipient''
with ``beneficiary'' throughout 42 CFR Chapter IV in order to conform
our regulations to our current use of the term ``beneficiary.''
However, we inadvertently replaced ``recipient'' with ``beneficiary''
in the title of the regulations at 42 CFR 489.24(f), which now reads
``Beneficiary hospital responsibilities.'' The regulations at 42 CFR
489.24(f) specifically discuss the responsibilities of a hospital with
specialized capabilities to accept the appropriate transfer of an
individual as required by the Emergency Medical Treatment and Labor
Act. The use of the word ``recipient'' in the title of 42 CFR 489.24(f)
is appropriate because the regulations are discussing the requirements
of the ``receiving'' hospital. The term ``recipient'' in this context
is not referring to a Medicare or Medicaid patient, but rather to the
hospital. Therefore, in the FY 2014 IPPS/LTCH PPS proposed rule, we
proposed to replace the word ``beneficiary'' with the word
``recipient'' so that the section heading of paragraph (f) of 42 CFR
489.24 is corrected to read as it did prior to the nomenclature change.
The corrected regulation text at 42 CFR 489.24(f) would read
``Recipient hospital responsibilities.''
We did not receive any public comments on our proposed change to 42
CFR 489.24(f) to replace the word ``beneficiary'' with the word
``recipient.'' Therefore, we are adopting as final without modification
our proposed change. The final title of the regulation reads ``(f)
Recipient hospital responsibilities.''

M. Hospital Routine Services Furnished Under Arrangements

In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51711 through
51714), we included a provision that limits the circumstances under
which a hospital may furnish services to Medicare beneficiaries ``under
arrangement.'' Under the revised policy, therapeutic and diagnostic
services are the only services that may be furnished under arrangements
outside of the hospital to Medicare beneficiaries. ``Routine services''
(that is, bed, board, and nursing and other related services) must be
furnished in the hospital. Under this revised policy, routine services
furnished to Medicare beneficiaries as inpatients in the hospital are
considered services furnished by the hospital. If these services are
furnished outside of the hospital, the services are considered to be
furnished ``under arrangement.'' As we stated in the FY 2013 IPPS/LTCH
PPS final rule (77 FR 53453 through 53454), we have become aware that a
number of hospitals affected by this policy need additional time to
restructure existing arrangements and establish necessary operational
protocols to comply with the requirement that therapeutic and
diagnostic services are the only services that may be furnished outside
of the hospital to Medicare beneficiaries ``under arrangement,'' and
that ``routine services'' must be furnished in the hospital.
In the FY 2013 IPPS/LTCH PPS final rule, we stated that while we
believe the policy to be correct and consistent with the statutory
language, because a number of hospitals were actively pursuing
compliance that involved building construction or restructuring, we
postponed the effective date of the requirement to give hospitals
additional time to comply with the provision. In the FY 2013 IPPS/LTCH
PPS final rule, we changed the implementation date of the requirement
to be effective for cost reporting periods beginning on or after
October 1, 2013. We stated that we expected that, during FY 2013,
hospitals would have completed the work needed to ensure compliance
with the requirement.
While we still believe that our policy is correct and consistent
with the statutory language, we are aware that a number of hospitals
are still actively pursuing compliance with the requirement through
major building construction to be completed in 2014. Therefore, we
believe it is appropriate to further postpone the effective date of
this requirement to give those hospitals additional time to comply. In
the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27643 through 27644), we
proposed to change the implementation date of the requirement to be
effective for services provided on or after January 1, 2015 (instead of
effective with cost reporting periods beginning on or after October 1,
2013). Because there are hospitals in the midst of significant building
projects that, when completed, will enable the hospital to provide
routine services in compliance with the requirements of this revised
policy, we believe it is appropriate to further delay the effective
date. We stated that we expect that, with the additional time before
the revised ``under arrangement'' policy becomes effective, hospitals
will complete the work needed to ensure compliance with the new
requirement. Effective for services provided on or after January 1,
2015, all hospitals would need to be in full compliance with the
revised policy for services furnished under arrangement. As we stated
in the proposed rule, we will continue to work with affected hospitals
to communicate the requirement established by this provision, and to
provide continued guidance regarding compliance with the provision.
Comment: Most commenters reiterated comments made last year in
response to the proposal to delay the effective date of the services
under arrangement policy (77 FR 53453 through 53454) and comments made
in response to CMS' proposal in the FY 2012 IPPS/LTCH PPS proposed rule
(76 FR 25964 through 25965). Some commenters were thankful for the
delay; however, all commenters wanted the policy rescinded or, at the
least, wanted a grandfathering provision included for those hospitals
that were providing routine services under arrangement at the time of
our original proposal in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR
25964 and 25965).
PPS-excluded cancer hospitals that are co-located with IPPS
hospitals are most affected by the proposed policy and, along with the
alliance representing these hospitals, made further comments that
repeated their objections to this policy raised in last year's rule.
These commenters expressed concern that it could compromise patient
care, that the policy is a reversal of CMS' guidance the hospitals
received while each hospital was seeking co-located status, that there
is no statutory mandate or policy rationale, that it is not needed to
guard against inappropriate use of services under arrangement, and that
it is administratively burdensome and costly to Medicare as well as the
cancer hospitals. Two of the cancer hospitals

[[Page 50745]]

and the alliance further commented that if CMS ``refused'' to rescind
the policy or add a grandfathering provision, CMS must allow these
hospitals to operate under their ``back-end'' proposal. They believed
that their proposal would allow the hospital to continue moving
patients to its host hospital for particular services, without
discharging the patient, as is currently done. The commenters added
that after the patient is formally discharged, each hospital would
separately bill Medicare for the services it provided the discharged
patient.
Response: The commenters' concerns with the services under
arrangement policy reiterate public comments received on the FY 2012
IPPS/LTCH PPS proposed rule and the FY 2013 IPPS/LTCH PPS proposed
rule. We refer the commenters to the responses provided in the FY 2012
IPPS/LTCH PPS final rule (76 FR 51711 through 51714) and the FY 2013
IPPS/LTCH PPS final rule (77 FR 53453 through 53454) where those
comments were addressed.
In response to the commenters' ``virtual discharge'' proposal, the
proposal is unacceptable from a CoP perspective because the co-located
hospital and the cancer hospital are two separately certified hospitals
for purposes of Medicare participation. Therefore, moving the patient
from the cancer hospital to the co-located IPPS hospital would require
the patient to be discharged. To address hospitals' concerns that
discharging the patient from the cancer hospital to the IPPS hospital
could have a detrimental effect on patient care, as we stated in
response to comments in the FY 2013 IPPS/LTCH PPS final rule (77 FR
53453 through 53454), the hospital may want to consider merging the
cancer hospital into the host hospital, rather than keeping them as two
separately certified hospitals, which could alleviate those concerns.
After consideration of the public comments we received and for the
reasons set forth in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51711
through 51714), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53453
through 53454), and the FY 2014 IPPS/LTCH PPS proposed rule (78 FR
27643 and 27644), we are finalizing our proposal to change the
effective date of the revised policy. Therefore, effective for services
provided on or after January 1, 2015, routine services provided in the
hospital to its inpatients are considered as being provided by the
hospital. However, if services are provided outside the hospital, the
services are considered as being provided under arrangement, and only
therapeutic and diagnostic items and services may be furnished under
arrangement outside of the hospital. Services identified at section
1861(b)(1) and section 1861(b)(2) of the Act may not be furnished under
arrangements.

VI. Changes to the IPPS for Capital-Related Costs

A. Overview

Section 1886(g) of the Act requires the Secretary to pay for the
capital-related costs of inpatient acute hospital services ``in
accordance with a prospective payment system established by the
Secretary.'' Under the statute, the Secretary has broad authority in
establishing and implementing the IPPS for acute care hospital
inpatient capital-related costs. The IPPS for capital-related costs was
initially implemented in the Federal fiscal year (FY) 1992 IPPS final
rule (56 FR 43358), in which we established a 10-year transition period
to change the payment methodology for Medicare hospital inpatient
capital-related costs from a reasonable cost-based methodology to a
prospective methodology (based fully on the Federal rate).
FY 2001 was the last year of the 10-year transition period
established to phase in the IPPS for hospital inpatient capital-related
costs. For cost reporting periods beginning in FY 2002, capital IPPS
payments are based solely on the Federal rate for almost all acute care
hospitals (other than hospitals receiving certain exception payments
and certain new hospitals). (We refer readers to the FY 2002 IPPS final
rule (66 FR 39910 through 39914) for additional information on the
methodology used to determine capital IPPS payments to hospitals both
during and after the transition period.)
The basic methodology for determining capital prospective payments
using the Federal rate is set forth in Sec. 412.312 of the
regulations. For the purpose of calculating capital payments for each
discharge, the standard Federal rate is adjusted as follows:

(Standard Federal Rate) x (DRG Weight) x (Geographic Adjustment Factor
(GAF)) x (COLA for hospitals located in Alaska and Hawaii) x (1 +
Capital DSH Adjustment Factor + Capital IME Adjustment Factor, if
applicable).

In addition, under Sec. 412.312(c), hospitals also may receive
outlier payments under the capital IPPS for extraordinarily high-cost
cases that qualify under the thresholds established for each fiscal
year.

B. Additional Provisions

1. Exception Payments
The regulations at Sec. 412.348 provide for certain exception
payments under the capital IPPS. The regular exception payments
provided under Sec. Sec. 412.348(b) through (e) were available only
during the 10-year transition period. For a certain period after the
transition period, eligible hospitals may have received additional
payments under the special exceptions provisions at Sec. 412.348(g).
However, FY 2012 was the final year hospitals could receive special
exceptions payments. For additional details regarding these exceptions
policies, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76
FR 51725).
Under Sec. 412.348(f), a hospital may request an additional
payment if the hospital incurs unanticipated capital expenditures in
excess of $5 million due to extraordinary circumstances beyond the
hospital's control. Additional information on the exception payment for
extraordinary circumstances in Sec. 412.348(f) can be found in the FY
2005 IPPS final rule (69 FR 49185 and 49186).
2. New Hospitals
Under the capital IPPS, Sec. 412.300(b) of the regulations defines
a new hospital as a hospital that has operated (under previous or
current ownership) for less than 2 years and lists examples of
hospitals that are not considered new hospitals. In accordance with
Sec. 412.304(c)(2), under the capital IPPS a new hospital is paid 85
percent of its allowable Medicare inpatient hospital capital-related
costs through its first 2 years of operation, unless the new hospital
elects to receive full prospective payment based on 100 percent of the
Federal rate. We refer readers to the FY 2012 IPPS/LTCH PPS final rule
(76 FR 51725) for additional information on payments to new hospitals
under the capital IPPS.
3. Hospitals Located in Puerto Rico
Section 412.374 of the regulations provides for the use of a
blended payment amount for prospective payments for capital-related
costs to hospitals located in Puerto Rico. Accordingly, under the
capital IPPS, we compute a separate payment rate specific to Puerto
Rico hospitals using the same methodology used to compute the national
Federal rate for capital-related costs. In general, hospitals located
in Puerto Rico are paid a blend of the applicable capital IPPS Puerto
Rico rate and the applicable capital IPPS Federal rate. Capital IPPS
payments to hospitals located in Puerto Rico are

[[Page 50746]]

computed based on a blend of 25 percent of the capital IPPS Puerto Rico
rate and 75 percent of the capital IPPS Federal rate. For additional
details on capital IPPS payments to hospitals located in Puerto Rico,
we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51725).

C. Other Changes for FY 2014--Adjustment To Offset the Cost of the
Policy Proposal on Admission and Medical Review Criteria for Hospital
Inpatient Services Under Medicare Part A

In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27650 through
27651), we discussed our proposal that would clarify that a beneficiary
becomes a hospital inpatient when formally admitted following a
physician order for hospital inpatient admission, and that would also
clarify when we believe hospital inpatient admissions are reasonable
and necessary based on how long beneficiaries have spent, or are
reasonably expected to spend, in the hospital as inpatients. Under this
proposal, Medicare's external review contractors would presume that
hospital inpatient admissions are reasonable and necessary for
beneficiaries who require more than 1 Medicare utilization day (defined
by encounters crossing 2 ``midnights'') in the hospital receiving
medically necessary services after inpatient admission. Similarly, we
would generally presume that services spanning less than 2 midnights
and not involving services designated by CMS as inpatient-only should
have been provided on an outpatient basis, unless there is clear
physician documentation in the medical record supporting the
physician's order and expectation that the beneficiary required care
spanning at least 2 midnights even though that did not ultimately
transpire. In general, after consideration of public comments, we are
adopting this proposal as final in this final rule. For a complete
discussion of our proposed inpatient admission guidelines and the
policy we are adopting in this final rule, including our time-based
benchmark and presumption of medical necessity for hospital inpatient
services based on the beneficiary's length of stay as part of our
medical review criteria for payment of hospital inpatient services
under Medicare Part A, we refer readers to section XI.C. of the
preamble of this final rule.
As discussed in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR
27651) and in section XI.C.4. of the preamble of this final rule, our
actuaries estimated that our proposed policy would increase IPPS
expenditures by approximately $220 million. These additional
expenditures result from an expected net increase in hospital inpatient
encounters due to some encounters spanning more than 2 midnights moving
to the IPPS from the OPPS, and some encounters of less than 2 midnights
moving from the IPPS to the OPPS. In making this projection, the
actuaries analyzed Medicare claims data for extended hospital
outpatient encounters and shorter stay hospital inpatient encounters,
and estimated the number of encounters that are expected to shift from
outpatient to inpatient and vice versa (that is, the number that are
expected to shift from inpatient to outpatient). These estimated shifts
of encounters represent a significant portion of the total encounters
paid under the IPPS. Our actuaries estimated that this projected net
increase in inpatient encounters would increase IPPS expenditures by
approximately $220 million. In light of the widespread impact on the
IPPS of our proposed policy and the systemic nature of the issue, in
the FY 2014 IPPS/LTCH PPS proposed rule, we stated our belief that it
is appropriate to propose to use our exceptions and adjustments
authority under section 1886(d)(5)(I)(i) of the Act to offset the
estimated $220 million in additional IPPS expenditures associated with
this proposed policy by proposing to apply a -0.2 percent adjustment to
the operating IPPS standardized amount, the hospital-specific rates,
and the Puerto Rico-specific standardized amount. (For additional
information on our actuarial estimate, we refer readers to section
XI.C.4. of the preamble of this final rule.)
Consistent with the proposal to apply a -0.2 percent adjustment to
the operating national and Puerto Rico-specific standardized amounts
and the hospital-specific rates, we stated our belief that it is also
appropriate, under the Secretary's broad authority under section
1886(g) of the Act, to propose to reduce the national capital Federal
rate and Puerto Rico-specific capital rate by 0.2 percent (an
adjustment factor of 0.998) to offset the estimated increase in capital
IPPS expenditures associated with the projected increase in inpatient
encounters that is expected to result from our proposed inpatient
admission guidelines (78 FR 27651). Because hospitals receive an
operating IPPS payment and also a capital IPPS payment for each
discharge, we stated that we believe it would be appropriate to reduce
payments under both the operating and capital IPPS to fully offset the
projected increase in expenditures associated with these inpatient
discharges. (We refer readers to section V.N. of the preamble of the
proposed rule and section XI.C. of the preamble of this final rule for
a complete discussion of our proposed and final inpatient admission
guidelines and medical review criteria, including our time-based
benchmark and presumption of medical necessity for hospital inpatient
services based on the beneficiary's length of stay as part of our
medical review criteria for hospital inpatient services under Medicare
Part A.)
While we did not receive any comments that specifically addressed
our proposal to make the -0.2 percent adjustment to the national
capital Federal rate and Puerto Rico-specific capital rate, in section
XI.C.4. of the preamble of this final rule, we discuss the public
comments we received on our proposal to make a -0.2 percent adjustment
to the operating IPPS standardized amount, the hospital-specific rates,
and the Puerto Rico-specific standardized amount to offset the
estimated $220 million in additional IPPS expenditures associated with
the projected increase in inpatient encounters that is expected to
result from our final inpatient admission guidelines. As we state in
section XI.C.4. of the preamble of this final rule, our actuaries
continue to estimate that there will be approximately $220 million in
additional expenditures resulting from the net increase in hospital
inpatient encounters due to some encounters spanning more than 2
midnights moving to the IPPS from the OPPS, and some encounters of less
than 2 midnights moving from the IPPS to the OPPS. After consideration
of the public comments we received, which we discuss in section XI.C.4.
of the preamble of this final rule, under the Secretary's broad
authority under section 1886(g) of the Act, we are finalizing the
proposed 0.2 percent reduction (that is, an adjustment factor of 0.998)
to the national capital Federal rate and the Puerto Rico-specific
capital rate to offset the estimated increase in capital IPPS
expenditures associated with the projected increase in inpatient
encounters that is expected to result from the inpatient admission
guidelines policy we are adopting in this final rule. As noted above,
this is the same adjustment that we are finalizing to the standardized
amount, the hospital-specific rates, and the Puerto Rico-specific
standardized amount. Because hospitals receive an operating IPPS
payment and also a capital IPPS payment for each discharge, we continue
to believe it is appropriate to

[[Page 50747]]

reduce payments under both the operating and capital IPPS to fully
offset the projected increase in expenditures associated with these
inpatient discharges.

D. Annual Update for FY 2014

The annual update to the capital PPS Federal and Puerto Rico-
specific rates, as provided for at Sec. 412.308(c), for FY 2014 is
discussed in section III. of the Addendum to this final rule.
We note that, in section II.D. of the preamble of this final rule,
we present a discussion of the MS-DRG documentation and coding
adjustment, including previously finalized policies and historical
adjustments, as well as the recoupment adjustment to the standardized
amounts under section 1886(d) of the Act that we are finalizing for FY
2014 pursuant to the amendments made to section 7(b)(1)(B) of Public
Law 110-90 by section 631 of the ATRA. As we explained in the FY 2014
IPPS/LTCH PPS proposed rule (78 FR 27652), because section 631 of the
ATRA requires CMS to make a recoupment adjustment only to the operating
IPPS standardized amount, we did not propose a similar adjustment to
the national or Puerto Rico capital IPPS rates (or to the operating
IPPS hospital-specific rates or Puerto Rico-specific standardized
amount). This approach is consistent with our historical approach
regarding the application of the recoupment adjustment authorized by
section 7(b)(1)(B) of Public Law 110-90. In that same proposed rule (78
FR 27505), we also discussed additional prospective adjustments for the
MS-DRG documentation and coding effect through FY 2010 authorized under
section 1886(d)(3)(A)(vi) of the Act, and stated that, after further
consideration of the MedPAC analysis of claims data, if we were to
apply an additional prospective adjustment for the cumulative MS-DRG
documentation and coding effect through FY 2010, we believe the most
appropriate additional adjustment is -0.55 percent, rather than the
adjustment proposed in prior rulemaking of -0.8 percent. While we did
not propose an additional prospective adjustment in FY 2014 for the
cumulative MS-DRG documentation and coding effects through FY 2010 at
the time of the proposed rule, we solicited comments on the issue of
applying a prospective adjustment to the operating IPPS standardized
amount (and hospital-specific rates) for the cumulative MS-DRG
documentation and coding effect through FY 2010.
Consistent with our historical approach, in the FY 2014 IPPS/LTCH
PPS proposed rule (78 FR 27652), we stated that, because the cumulative
documentation and coding effect through FY 2010 results in
inappropriately high capital IPPS payments, if we were to apply a
prospective adjustment to the operating IPPS standardized amount and
the hospital-specific rates to remove this effect, we would also do so
for the national capital IPPS Federal rate. Therefore, if we attributed
a portion of the proposed -0.8 percent recoupment adjustment to the
operating IPPS standardized amount for FY 2014 to the prospective
adjustment, we would also make an appropriate adjustment to the
national capital IPPS Federal rate under the Secretary's broad
authority under section 1886(g) of the Act. (We also noted that the
capital IPPS Puerto Rico rate (and operating IPPS Puerto Rico-specific
standardized amount) would not be affected as we previously found no
significant additional MS-DRG documentation and coding effect through
FY 2010 for Puerto Rico that would warrant any additional adjustment
(77 FR 53279 and 53457).)
In section II.D.7. of the preamble of this final rule, we
summarize, and respond to, public comments that we solicited as to
whether any portion of the aforementioned -0.8 percent recoupment
adjustment to the operating IPPS standardized amount should be reduced
and instead applied as a prospective adjustment to the operating IPPS
standardized amount (and hospital-specific rates) for the cumulative
MS-DRG documentation and coding effect through FY 2010. As discussed in
that same section, after consideration of public comments, CMS is not
allocating any portion of the -0.8 percent recoupment adjustment in FY
2014 as a prospective adjustment to account for FY 2010 documentation
and coding effects. Therefore, consistent with our proposal, we are not
making an additional documentation and coding adjustment to the FY 2014
national or Puerto Rico capital IPPS rates.

VII. Changes for Hospitals Excluded from the IPPS

A. Rate of Increase in Payments to Excluded Hospitals for FY 2014

[[Page 50748]]

target amounts for these cancer hospitals, children's hospitals, and
RNHCIs for the reasons discussed in the FY 2006 IPPS final rule.
In addition, because we also proposed in the FY 2014 IPPS/LTCH PPS
proposed rule to revise and rebase the IPPS operating market to a FY
2010 base year, we proposed to use the percentage increase in the FY
2010-based IPPS operating market basket to update the target amounts
for children's hospitals, the 11 cancer hospitals, and RNHCIs for FY
2014 and subsequent fiscal years. As described in section IV. of the
preamble of this final rule, we are finalizing our proposal (as
presented in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27561
through 27572)) to revise and rebase the IPPS operating market basket
to a FY 2010 base year. As we did not receive any public comments on
our proposal to use the percentage increase in the FY 2010-based IPPS
operating market basket to update the target amounts for children's
hospitals, the 11 cancer hospitals, and RNHCIs for FY 2014 and
subsequent fiscal years, we are finalizing this proposal as well.
Accordingly, for FY 2014 and subsequent fiscal years, the rate-of-
increase percentage to be applied to the target amount for these cancer
hospitals, children's hospitals, and RNHCIs is the percentage increase
in the FY 2010-based IPPS operating market basket.
For the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27652 and
27653), based on IHS Global Insight, Inc.'s 2013 first quarter
forecast, we estimated that the FY 2010-based IPPS operating market
basket update for FY 2014 was 2.5 percent (that is, the estimate of the
market basket rate-of-increase). We proposed that if more recent data
became available for the final rule, we would use them to calculate the
IPPS operating market basket update for FY 2014. For this final rule,
based on IHS Global Insight, Inc.'s 2013 second quarter forecast (which
is the most recent data available), we calculated the FY 2010-based
IPPS operating market basket update for FY 2014 to be 2.5 percent.
Thus, the FY 2014 rate-of-increase percentage that is applied to the FY
2013 target amounts in order to calculate the final FY 2014 target
amounts for children's hospitals, the 11 cancer hospitals, and RNHCIs
is 2.5 percent, in accordance with the applicable regulations at 42 CFR
413.40.
The IRF PPS, the IPF PPS, and the LTCH PPS are updated annually. We
refer readers to section IV. of the Addendum to this final rule for the
specific update changes to the Federal payment rates for LTCHs under
the LTCH PPS for FY 2014. The annual updates for the IRF PPS and the
IPF PPS are issued by the agency in separate Federal Register
documents.

B. Report on Adjustment (exceptions) Payments

Section 4419(b) of Public Law 105-33 requires the Secretary to
publish annually in the Federal Register a report describing the total
amount of adjustment payments made to excluded hospitals and hospital
units by reason of section 1886(b)(4) of the Act during the previous
fiscal year.
The process of requesting, adjusting, and awarding an adjustment
payment is likely to occur over a 2-year period or longer. First,
generally, an excluded hospital must file its cost report for a fiscal
year in accordance with Sec. 413.24(f)(2). The fiscal intermediary or
MAC reviews the cost report and issues a notice of provider
reimbursement (NPR). Once the hospital receives the NPR, if its
operating costs are in excess of the ceiling, the hospital may file a
request for an adjustment payment. After the fiscal intermediary or MAC
receives the hospital's request in accordance with applicable
regulations, the fiscal intermediary or MAC or CMS, depending on the
type of adjustment requested, reviews the request and determines if an
adjustment payment is warranted. This determination is sometimes not
made until more than 180 days after the date the request is filed
because there are times when the applications are incomplete and
additional information must be requested in order to have a completed
application. However, in an attempt to provide interested parties with
data on the most recent adjustments for which we do have data, we are
publishing data on adjustment payments that were processed by the
fiscal intermediary or MAC or CMS during FY 2012.
The table below includes the most recent data available from the
fiscal intermediaries or MACs and CMS on adjustment payments that were
adjudicated during FY 2012. As indicated above, the adjustments made
during FY 2012 only pertain to cost reporting periods ending in years
prior to FY 2011. Total adjustment payments given to excluded hospitals
during FY 2012 are $3,457,953. The table depicts for each class of
hospitals, in the aggregate, the number of adjustment requests
adjudicated, the excess operating costs over the ceiling, and the
amount of the adjustment payments.

----------------------------------------------------------------------------------------------------------------
Excess cost Adjustment
Class of hospital Number over ceiling payments
----------------------------------------------------------------------------------------------------------------
Children's...................................................... 2 $785,960 $540,658
Cancer.......................................................... 1 19,193,933 2,818,076
Religious Nonmedical Health Care Institution (RNHCI)............ 1 194,363 99,219
-----------------------------------------------
Total....................................................... .............. .............. 3,457,953
----------------------------------------------------------------------------------------------------------------

C. Critical Access Hospitals (CAHs): Changes to the Conditions of
Participation

1. Background
Sections 1820 and 1861(mm) of the Act, as amended by section 4201
of the Balanced Budget Act (BBA) of 1997, replaced the Essential Access
Community Hospitals and Rural Primary Care Hospitals (EACH/RPCH)
program with the Medicare Rural Hospital Flexibility Program (MRHFP),
under which a qualifying facility can be designated as a CAH. CAHs
participating in the MRHFP must meet the conditions for designation by
the State and be certified by the Secretary in accordance with section
1820 of the Act. Further, in accordance with section 1820(e)(3) of the
Act, a CAH must meet other criteria that the Secretary specifies.
The regulations that codify the conditions of participation (CoPs)
to implement the statutory requirements of section 1820 are codified at
42 CFR Part 485, Subpart F.
2. Proposed and Final Policy Changes
As we discussed in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR
27653 through 27654), we have received a number of questions from
stakeholders in the CAH provider community

[[Page 50749]]

relating to whether CAHs are required to furnish acute care inpatient
services under the CAH CoPs. Our interpretation is that CAHs must
provide acute care inpatient services, and in the proposed rule (78 FR
27653 through 27654 and 27486), we proposed revisions to clarify and
restate this requirement. In particular, we proposed to add paragraph
(b)(1)(ii) to 42 CFR 485.635 as clarification that a CAH must provide
acute care inpatient services. We stated that we expected that these
services would be provided as appropriate to a CAH's resources and as
appropriate to meet the needs of its patients.
In the proposed rule, we discussed our review of data for 1,230 of
the existing 1,328 CAHs \53\ using the July 2010 through June 2011 cost
reports, and found that 99 percent of CAHs are regularly providing
acute care inpatient services and are in compliance with the
requirements under the CAH CoPs. However, we indicated that the data
regarding the remaining 1 percent, together with the questions we had
received, suggested that there may be some service gaps. We further
stated that we believe that a few CAHs would benefit from clarification
that CAHs must furnish acute care inpatient services.
---------------------------------------------------------------------------

\53\ Produced by the Cecil G. Sheps Center for Health Services
Research at the University of North Carolina under a Cooperative
Agreement with the Federal ORHP.
---------------------------------------------------------------------------

As set forth in section 1820 of the Act, the CAH program was
established to improve access to hospital and other health services for
rural residents of a State. We believe that the statutory requirements
related to the provision of emergency care and acute care inpatient
services, including those at section 1820(c)(2)(B) of the Act, suggest
that a CAH must furnish these acute care inpatient services, albeit, in
a more limited fashion than would be expected of a hospital. Hospitals
are subject to a different set of CoPs, found in 42 CFR Part 482.
In the proposed rule, we stated that we recognize that, given its
resources and the needs of the community it serves, a CAH may not be
actively treating inpatients at all times. Indeed, the Act fully
recognizes the variable nature of a CAH's inpatient census, as it
provides specific contingency language for the staffing requirements
under section 1820(c)(2)(B)(iv) of the Act. We noted that a CAH is not
specifically required to maintain a minimum average daily census (ADC)
of inpatients receiving inpatient acute care services or a minimum
number of certified inpatient beds. We indicated that we are aware that
there are significant seasonal variations in the inpatient occupancy
rates as well as variations that are a function of the size of the
community in which a CAH is located. We also stated that we recognize
the need for inpatient acute care services to be furnished in the best
setting for the patient. However, we stated that while it may be true
that CAHs generally are not able to handle patients requiring complex,
specialized inpatient services, such as those services provided by
trauma centers, or cardiac surgery centers, CAHs should be able to
handle a range of patient needs requiring admission. We stated that we
believe it is not in the best interest of patients for them to
routinely be transferred to a more distant hospital if instead their
care can be provided locally without compromising quality.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27486), we also
wished to clarify the relationship between a CAH's written policies and
the services it offers. The regulations at 42 CFR 485.635(a) require a
CAH to furnish health care services in accordance with appropriate
written policies. Among other items, the CAH must describe its
procedures for emergency medical services and its procedures for
inpatient services. We explained that we would expect CAHs to be
appropriately prepared to provide the services described in their
policies and procedures. For example, we would expect a CAH's policies
and procedures to be reflected in the number of certified beds,
appropriate equipment, and available staffing (whether as employees or
through arrangements or agreements). We also stated that we would
expect to see a relationship between CAHs' policies and procedures and
the actual services furnished, as appropriate to the needs of
individual patients. To further clarify the interrelated standards at
Sec. 485.635(a) and (b) of the regulations, we proposed to amend the
regulatory language at Sec. 485.635(b), as noted below, and we
proposed to revise the language under the standard for ``Patient care
policies'' under Sec. 485.635(a)(3)(vii) to remove the conditional
phrase ``If a CAH furnishes inpatient services.'' By proposing to
remove this conditional phrase, we stated that we would eliminate
regulatory language that could be creating ambiguity where none was
intended. We stated that the elimination of this language would clarify
that CAHs are required to provide acute care inpatient services. We
also stated that our revision would align the standard with the
structure of neighboring standards under Sec. 485.635(a).
Comment: One commenter thanked CMS for the continued emphasis on
expanding access to critical health care services to all rural
beneficiaries. The commenter believed that the CAH program has
dramatically expanded access to critical health care services in rural
areas for all rural residents. Another commenter noted that, often, the
CAH provider is the foundation of all health care services in the
community.
Response: We appreciate the positive feedback regarding the CAH
program. We are mindful of the fact that the CAH program was
established to improve access for rural residents to essential health
care services, including hospital services. We believe the clarifying
changes that we are finalizing in this rule will maintain the integrity
of the CAH program and ensure continued access to these critical
services, including acute care inpatient services.
Comment: One commenter stated that section 1820(c)(2)(B) of the
Act, which sets forth criteria for designation as a CAH, does not
include a requirement that CAHs provide inpatient acute care services.
The commenter questioned CMS' authority and underlying reasoning for
proposing the regulatory changes. Another commenter asked why CMS would
consider adding one of the defining features of a ``hospital,'' namely,
inpatient care, given that the definition of a hospital at section
1861(e) of the Act provides that a CAH is not always considered a
hospital.
Response: While we acknowledge that section 1820(c)(2)(B) of the
Act does not expressly require CAHs to provide inpatient acute care
services, we note that section 1820(e)(3) of the Act authorizes the
Secretary to require other criteria for a facility to be certified as a
CAH. As set forth in section 1820 of the Act, the CAH program was
established to improve access to hospital and other health services for
rural residents of a State. We believe that the statutory requirements
related to the provision of emergency care and acute care inpatient
services, including those at section 1820(c)(2)(B) of the Act, suggest
that a CAH must furnish these acute care inpatient services, albeit, in
a more limited fashion than would be expected of a hospital. We further
acknowledge that section 1861(e) of the Act specifies that the term
``hospital'' does not always include a CAH. At the same time, we note
that section 1861(e) of the Act qualifies this statement with the
phrase ``unless the context otherwise requires.'' For purposes of
determining what services should be furnished by a CAH, we have
concluded that the context

[[Page 50750]]

requires CAHs to furnish inpatient acute care services.
Comment: One commenter noted that CMS' interpretive guidelines
state that the ``CAH must provide outpatient and emergency room
services as direct services at the CAH campus through the use of CAH
personnel.'' Further, the commenter stated, the interpretive guidelines
allow for a CAH to ``choose the level of services to be offered . . .
[and that a] CAH is not required to offer outpatient services 24/7
except for emergency room services.'' In addition, the commenter stated
that the interpretive guidelines only state that the CAH's ``outpatient
services must be integrated with inpatient services, as appropriate to
the outpatient services offered.''
Response: We appreciate the commenter's questions. The guidance
noted by the commenter related to the furnishing of services at Sec.
485.635(b), which, under an earlier version of the regulation, were to
have been provided by the CAH directly, by its own employees, rather
than through an arrangement. As such, it would not have been
appropriate to have viewed the guidance as identifying an exclusive
list of services that a CAH must provide. Rather, the provision
identified only those services that a CAH was required to provide
directly.
In any event, we note that the interpretive guidelines referenced
in the comment are outdated. The above referenced guidelines were
applicable to a prior version of Sec. 485.635(b) that addressed
services that CAHs were then required to provide as ``direct
services,'' that is, services provided by CAH employees (and not
through an arrangement). We note that, in an effort to reduce burden on
CAHs, we amended Sec. 485.635(b) in the May 16, 2012 final rule,
``Medicare and Medicaid Programs; Reform of Hospital and Critical
Access Hospital Conditions of Participation,'' that sought to reduce
outmoded and unnecessarily burdensome regulations, and to increase the
ability of CAHs to devote more resources to providing high quality
patient care (77 FR 29034). In that final rule, we removed the
requirement under Sec. 485.635(b) for these services to be provided
directly by CAH employees. We issued revised interpretative guidelines
in S&C13-20 on March 15, 2013, and updated the State Operations Manual
accordingly via Transmittal No. 84, issued on June 7, 2013. With the
publication of this final rule, we will further update the
interpretative guidelines for CAHs.
Comment: One commenter asked how CMS intended to monitor CAHs'
compliance with the proposed requirement to provide inpatient services.
The commenter was concerned that a requirement to provide inpatient
acute care services would be enforced arbitrarily or that it might
create a ``slippery slope'' leading to a misguided approach, such as a
future requirement for a minimum average daily census (ADC). The
commenter acknowledged CMS' commentary in the proposed rule that listed
several reasons why maintaining a minimum ADC would not be desirable.
At the same time, the commenter believed that CMS had not specified a
compliance mechanism in the proposed rule.
Response: As we stated in the FY 2014 IPPS/LTCH PPS proposed rule
(78 FR 27653 through 27654), a CAH is not specifically required to
maintain a minimum ADC of inpatients receiving inpatient acute care
services or a minimum number of certified inpatient beds. We are aware
that there are significant seasonal variations in the inpatient
occupancy rates as well as variations that are a function of the size
of the community in which a CAH is located. We agree with the commenter
that requiring a minimum daily census would not allow for the seasonal
and regional variability within the CAH system. We also recognize the
need for inpatient acute care services to be furnished in the best
setting for the beneficiary. For these reasons, we did not propose a
minimum ADC requirement.
However, while it may be true that CAHs generally are not able to
handle patients requiring complex, specialized inpatient services, such
as those services provided by trauma centers or cardiac surgery
centers, CAHs should be able to handle a range of needs for
beneficiaries requiring admission, particularly in the case of patients
who present to the CAH seeking emergency services. As stated above, we
believe it is not in the best interest of CAH patients requiring
admission to be routinely transferred to a more distant hospital if
their care can be provided by the CAH locally without compromising
quality. We anticipate developing more detailed guidance that would
consider the volume of emergency services provided by a CAH, along with
the volume of transfers to hospitals, compared to inpatient CAH
admissions through the emergency department. While we do not envision
developing specific formulas for minimum inpatient admissions, we do
believe this approach would enable identification of cases for further
scrutiny where there is a significant disproportion between the
emergency services and the inpatient services a CAH provides. We
believe our proposal facilitates beneficiary care on both an individual
and a population level.
Comment: One commenter agreed with CMS that CAHs and all rural
facilities should maintain an accurate listing of the services they
offer. The commenter acknowledged that patients in rural areas rely on
accurate and timely notices of the services available at their local
hospital. The commenter encouraged all CAHs to maintain and regularly
update their written policies as they relate to services available in
their facility.
Response: We appreciate the commenter's remarks and encouragement
to CAHs to maintain and regularly update their written policies as they
relate to services available in their facility. The regulations at 42
CFR 485.635(a) require a CAH to furnish health care services in
accordance with appropriate written policies. Among other items, the
CAH must describe its procedures for emergency medical services and its
procedures for inpatient services. Therefore, we expect CAHs to be
appropriately prepared to provide the described services. For example,
a CAH's policies and procedures should be reflected in the number of
certified beds, appropriate equipment, and available staffing (whether
as employees or through arrangements or agreements). Similarly, we
would expect CAHs to, in fact, be providing the same services outlined
in their policies and procedures, as appropriate to the needs of
individual patients.
Comment: A few commenters urged that greater consideration be given
to this proposed change in policy; one commenter described the proposal
as a major departure from the CAH CoPs that have been in place for the
past 20 years. The commenters suggested that the proposed change could
thwart the provision of health care services to rural and frontier
communities. The commenter noted that, particularly in the West,
inpatient volumes are decreasing as hospitals better manage patients'
disease processes and care. Another commenter expressed concern that a
requirement to furnish acute care inpatient services could have a major
impact on the operational capacity and necessary workforce needs of
many CAHs.
One commenter remarked that the CoPs, as written, have given CAH
providers an option to change as time goes on to meet the needs of
their communities. The commenter opposed an express requirement for
CAHs to furnish inpatient services and expressed concern that, as the
health care system evolves, the providers in a community

[[Page 50751]]

continue to be able to respond to and meet the needs of its residents.
Another commenter stated that provision that restricts or dictates how
services are provided in these communities would necessarily limit
innovations designed to meet the goals of the ``Triple Aim.'' The
commenter also stated that proposals to reduce CAH payments or revoke
status for current CAHs would do significant damage to the gains made
since the establishment of this program in 1997.
Response: We share the commenters' concern for ensuring access to
health care services in rural and frontier communities. At the same
time, as we have stated, we have received a number of questions from
stakeholders in the CAH provider community relating to whether CAHs are
required to furnish acute care inpatient services under the CAH CoPs.
As we stated in the proposed rule and as noted above, the data analysis
that we conducted suggest that 99 percent of CAHs are regularly
providing acute care inpatient services and are in compliance with such
requirements. However, the data regarding the remaining 1 percent,
along with the questions we have received, suggest that there may be
some service gaps. We believe our proposed language to explicitly
require CAHs to furnish inpatient acute care services would address
these gaps in service.
In light of the fact that 99 percent of CAHs are already providing
inpatient acute care services, we do not agree that the establishment
of an express requirement for CAHs to provide inpatient services
represents a major change to the CAH program. Moreover, we note that
none of the commenters submitted evidence or specific examples
demonstrating how finalizing a general requirement for CAHs to provide
acute care inpatient services could have a major impact upon or thwart
the provision of health care services to rural and frontier
communities. In the event that a CAH decides that it is no longer able
to comply, or that the circumstances no longer warrant compliance, with
all of the CAH requirements, such a facility may wish to engage in a
dialogue with CMS to explore its options, including avenues other than
the CAH program, for continued participation in the Medicare program.
For example, if it does not meet the CAH CoPs, a CAH could convert to a
certified Medicare hospital.
We disagree with the comment that a requirement for CAHs to furnish
inpatient acute care services is inconsistent with the goals of the
``Triple Aim,'' which calls for better care for individuals, better
health for populations, and lower cost through improvement (without any
harm to individuals). The CAH program was established to improve access
for rural residents to essential health care services and,
particularly, hospital services. Hospital services include acute care
inpatient services, and, when a CAH does not provide them, the
individuals residing in that rural community may be at risk. Indeed,
once a facility has been designated and certified as a CAH, that
facility is expected to provide services as a CAH, and it is entrusted
with the reliance of the general public and of the local community. We
recognize that, given its resources and the needs of the community it
serves, a CAH may not be actively treating inpatients at all times. As
stated above, we believe it is not in the best interest of a CAH's
beneficiaries to be routinely transferred to a more distant hospital if
instead their care could be provided locally without compromising
quality.
Finally, we note that because we did not make any proposals in this
section to change CAH payments, we believe the comments concerning
payments to CAHs are outside the scope of the proposed rule. Therefore,
for the reasons discussed above, we are finalizing the provisions at
Sec. 485.635(a) and (b), as proposed.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27654), we
proposed further changes at Sec. 485.635(c), regarding ``Services
provided through agreements or arrangements.'' We are removing
paragraph (c)(1)(i) under Sec. 485.635 requiring CAHs to furnish
inpatient hospital care services through agreements or arrangements;
redesignating the existing language of paragraph (b)(1) as paragraph
(b)(1)(i); and adding a new paragraph (b)(1)(ii) under the standard
``Patient services'' that more clearly requires CAHs to furnish acute
care inpatient services. (Because we are removing paragraph (c)(1)(i),
we are redesignating existing paragraphs (c)(1)(ii) through (c)(1)(iv)
as paragraphs (c)(1)(i) through (c)(1)(iii), respectively.)
We regard the services furnished in accordance with Sec.
485.635(c) as other additional services, which a CAH may also provide
through agreements or arrangements. Notwithstanding these
clarifications and revisions, in accordance with section 1820(d) of the
Act, each CAH member of a Rural Health Network will still be required
to have an agreement with at least one full-service acute care hospital
member of the network regarding patient referral and transfer.
We did not receive any public comments on our proposal to make the
above-described changes at Sec. 485.635(c). Therefore, we are
finalizing these changes as proposed.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27654), we also
proposed a technical change at Sec. 485.620(a), the section addressing
the ``Number of Beds'' standard. Specifically, we proposed to remove
the phrase ``after January 1, 2004,'' a prospective effective date
established in the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA) (Pub. L. 108-173) and which was
subsequently restated in regulation at Sec. 485.620(a) (69 FR 49215).
The effective date of January 1, 2004 has passed and the revised
maximum bed limit of 25 continues to apply. We did not receive any
public comments on this proposed technical revision at Sec.
485.620(a). Therefore, we are finalizing the technical revision without
change.

VIII. Changes to the Long-Term Care Hospital Prospective Payment System
(LTCH PPS) for FY 2014

A. Background of the LTCH PPS

1. Legislative and Regulatory Authority
Section 123 of the Medicare, Medicaid, and SCHIP (State Children's
Health Insurance Program) Balanced Budget Refinement Act of 1999 (BBRA)
(Pub. L. 106-113) as amended by section 307(b) of the Medicare,
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000
(BIPA) (Pub. L. 106-554) provides for payment for both the operating
and capital-related costs of hospital inpatient stays in long-term care
hospitals (LTCHs) under Medicare Part A based on prospectively set
rates. The Medicare prospective payment system (PPS) for LTCHs applies
to hospitals that are described in section 1886(d)(1)(B)(iv) of the
Act, effective for cost reporting periods beginning on or after October
1, 2002.
Section 1886(d)(1)(B)(iv)(I) of the Act defines a LTCH as ``a
hospital which has an average inpatient length of stay (as determined
by the Secretary) of greater than 25 days.'' Section
1886(d)(1)(B)(iv)(II) of the Act also provides an alternative
definition of LTCHs: specifically, a hospital that first received
payment under section 1886(d) of the Act in 1986 and has an average
inpatient length of stay (LOS) (as determined by the Secretary of
Health and Human Services (the Secretary)) of greater than 20 days and
has 80 percent or more of its annual Medicare inpatient discharges with
a principal diagnosis

[[Page 50752]]

that reflects a finding of neoplastic disease in the 12-month cost
reporting period ending in FY 1997.
Section 123 of the BBRA requires the PPS for LTCHs to be a ``per
discharge'' system with a diagnosis-related group (DRG) based patient
classification system that reflects the differences in patient
resources and costs in LTCHs.
Section 307(b)(1) of the BIPA, among other things, mandates that
the Secretary shall examine, and may provide for, adjustments to
payments under the LTCH PPS, including adjustments to DRG weights, area
wage adjustments, geographic reclassification, outliers, updates, and a
disproportionate share adjustment.
In the August 30, 2002 Federal Register, we issued a final rule
that implemented the LTCH PPS authorized under the BBRA and BIPA (67 FR
55954). For the initial implementation of the LTCH PPS (FYs 2003
through FY 2007), the system used information from LTCH patient records
to classify patients into distinct long-term care diagnosis-related
groups (LTC-DRGs) based on clinical characteristics and expected
resource needs. Beginning in FY 2008, we adopted the Medicare severity
long-term care diagnosis-related groups (MS-LTC-DRGs) as the patient
classification system used under the LTCH PPS. Payments are calculated
for each MS-LTC-DRG and provisions are made for appropriate payment
adjustments. Payment rates under the LTCH PPS are updated annually and
published in the Federal Register.
The LTCH PPS replaced the reasonable cost-based payment system
under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA)
(Pub. L. 97-248) for payments for inpatient services provided by a LTCH
with a cost reporting period beginning on or after October 1, 2002.
(The regulations implementing the TEFRA reasonable cost-based payment
provisions are located at 42 CFR Part 413.) With the implementation of
the PPS for acute care hospitals authorized by the Social Security
Amendments of 1983 (Pub. L. 98-21), which added section 1886(d) to the
Act, certain hospitals, including LTCHs, were excluded from the PPS for
acute care hospitals and were paid their reasonable costs for inpatient
services subject to a per discharge limitation or target amount under
the TEFRA system. For each cost reporting period, a hospital-specific
ceiling on payments was determined by multiplying the hospital's
updated target amount by the number of total current year Medicare
discharges. (Generally, in section VIII. of this preamble, when we
refer to discharges, we describe Medicare discharges.) The August 30,
2002 final rule further details the payment policy under the TEFRA
system (67 FR 55954).
In the August 30, 2002 final rule, we provided for a 5-year
transition period from payments under the TEFRA system to payments
under the LTCH PPS. During this 5-year transition period, a LTCH's
total payment under the PPS was based on an increasing percentage of
the Federal rate with a corresponding decrease in the percentage of the
LTCH PPS payment that is based on reasonable cost concepts, unless a
LTCH made a one-time election to be paid based on 100 percent of the
Federal rate. Beginning with LTCHs' cost reporting periods beginning on
or after October 1, 2006, total LTCH PPS payments are based on 100
percent of the Federal rate.
In addition, in the August 30, 2002 final rule, we presented an in-
depth discussion of the LTCH PPS, including the patient classification
system, relative weights, payment rates, additional payments, and the
budget neutrality requirements mandated by section 123 of the BBRA. The
same final rule that established regulations for the LTCH PPS under 42
CFR Part 412, Subpart O, also contained LTCH provisions related to
covered inpatient services, limitation on charges to beneficiaries,
medical review requirements, furnishing of inpatient hospital services
directly or under arrangement, and reporting and recordkeeping
requirements. We refer readers to the August 30, 2002 final rule for a
comprehensive discussion of the research and data that supported the
establishment of the LTCH PPS (67 FR 55954).
We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR
51733 through 51743) for a chronological summary of the main
legislative and regulatory developments affecting the LTCH PPS through
the annual update cycles prior to the FY 2013 rulemaking cycle.
2. Criteria for Classification as a LTCH
a. Classification as a LTCH
Under the existing regulations at Sec. Sec. 412.23(e)(1) and
(e)(2)(i), which implement section 1886(d)(1)(B)(iv)(I) of the Act, to
qualify to be paid under the LTCH PPS, a hospital must have a provider
agreement with Medicare and must have an average Medicare inpatient
length of stay of greater than 25 days. Alternatively, Sec.
412.23(e)(2)(ii) states that, for cost reporting periods beginning on
or after August 5, 1997, a hospital that was first excluded from the
PPS in 1986 and can demonstrate that at least 80 percent of its annual
Medicare inpatient discharges in the 12-month cost reporting period
ending in FY 1997 have a principal diagnosis that reflects a finding of
neoplastic disease must have an average inpatient length of stay for
all patients, including both Medicare and non-Medicare inpatients, of
greater than 20 days.
b. Hospitals Excluded From the LTCH PPS
The following hospitals are paid under special payment provisions,
as described in Sec. 412.22(c) and, therefore, are not subject to the
LTCH PPS rules:
Veterans Administration hospitals.
Hospitals that are reimbursed under State cost control
systems approved under 42 CFR Part 403.
Hospitals that are reimbursed in accordance with
demonstration projects authorized under section 402(a) of the Social
Security Amendments of 1967 (Pub. L. 90-248) (42 U.S.C. 1395b-1) or
section 222(a) of the Social Security Amendments of 1972 (Pub. L. 92-
603) (42 U.S.C. 1395b-1 (note)) (Statewide all-payer systems, subject
to the rate-of-increase test at section 1814(b) of the Act).
Nonparticipating hospitals furnishing emergency services
to Medicare beneficiaries.
3. Limitation on Charges to Beneficiaries
In the August 30, 2002 final rule, we presented an in-depth
discussion of beneficiary liability under the LTCH PPS (67 FR 55974
through 55975). In the RY 2005 LTCH PPS final rule (69 FR 25676), we
clarified that the discussion of beneficiary liability in the August
30, 2002 final rule was not meant to establish rates or payments for,
or define Medicare-eligible expenses. Under Sec. 412.507, if the
Medicare payment to the LTCH is the full LTC-DRG payment amount, as
consistent with other established hospital prospective payment systems,
a LTCH may not bill a Medicare beneficiary for more than the deductible
and coinsurance amounts as specified under Sec. Sec. 409.82, 409.83,
and 409.87 and for items and services as specified under Sec.
489.30(a). However, under the LTCH PPS, Medicare will only pay for days
for which the beneficiary has coverage until the short-stay outlier
(SSO) threshold is exceeded. Therefore, if the Medicare payment was for
a SSO case (Sec. 412.529) that was less than the full LTC-DRG payment
amount because the beneficiary had insufficient remaining Medicare
days, the LTCH could also charge the beneficiary for services delivered
on those uncovered days (Sec. 412.507).

[[Page 50753]]

4. Administrative Simplification Compliance Act (ASCA) and Health
Insurance Portability and Accountability Act (HIPAA) Compliance
Claims submitted to Medicare must comply with both the
Administrative Simplification Compliance Act (ASCA) (Pub. L. 107-105),
and the Health Insurance Portability and Accountability Act of 1996
(HIPAA) (Pub. L. 104-191). Section 3 of the ASCA requires that the
Medicare Program deny payment under Part A or Part B for any expenses
incurred for items or services ``for which a claim is submitted other
than in an electronic form specified by the Secretary.'' Section
1862(h) of the Act (as added by section 3(a) of the ASCA) provides that
the Secretary shall waive such denial in two specific types of cases
and may also waive such denial ``in such unusual cases as the Secretary
finds appropriate'' (68 FR 48805). Section 3 of the ASCA operates in
the context of the HIPAA regulations, which include, among other
provisions, the transactions and code sets standards requirements
codified as 45 CFR Parts 160 and 162, Subparts A and I through R
(generally known as the Transactions Rule). The Transactions Rule
requires covered entities, including covered health care providers, to
conduct certain electronic health care transactions according to the
applicable transactions and code sets standards.

B. Medicare Severity Long-Term Care Diagnosis-Related Group (MS-LTC-
DRG) Classifications and Relative Weights for FY 2014

1. Background
Section 123 of the BBRA requires that the Secretary implement a PPS
for LTCHs (that is, a per discharge system with a diagnosis-related
group (DRG)-based patient classification system reflecting the
differences in patient resources and costs). Section 307(b)(1) of the
BIPA modified the requirements of section 123 of the BBRA by requiring
that the Secretary examine ``the feasibility and the impact of basing
payment under such a system [the long-term care hospital (LTCH) PPS] on
the use of existing (or refined) hospital DRGs that have been modified
to account for different resource use of LTCH patients, as well as the
use of the most recently available hospital discharge data.''
When the LTCH PPS was implemented for cost reporting periods
beginning on or after October 1, 2002, we adopted the same DRG patient
classification system (that is, the CMS DRGs) that was utilized at that
time under the IPPS. As a component of the LTCH PPS, we refer to this
patient classification system as the ``long-term care diagnosis-related
groups (LTC-DRGs).'' Although the patient classification system used
under both the LTCH PPS and the IPPS are the same, the relative weights
are different. The established relative weight methodology and data
used under the LTCH PPS result in relative weights under the LTCH PPS
that reflect ``the differences in patient resource use . . .'' of LTCH
patients (section 123(a)(1) of the BBRA (Pub. L. 106-113)).
As part of our efforts to better recognize severity of illness
among patients, in the FY 2008 IPPS final rule with comment period (72
FR 47130), the MS-DRGs and the Medicare severity long-term care
diagnosis-related groups (MS-LTC-DRGs) were adopted under the IPPS and
the LTCH PPS, respectively, effective beginning October 1, 2007 (FY
2008). For a full description of the development, implementation, and
rationale for the use of the MS-DRGs and MS-LTC-DRGs, we refer readers
to the FY 2008 IPPS final rule with comment period (72 FR 47141 through
47175 and 47277 through 47299). (We note that, in that same final rule,
we revised the regulations at Sec. 412.503 to specify that for LTCH
discharges occurring on or after October 1, 2007, when applying the
provisions of 42 CFR Part 412, Subpart O applicable to LTCHs for policy
descriptions and payment calculations, all references to LTC-DRGs would
be considered a reference to MS-LTC-DRGs. For the remainder of this
section, we present the discussion in terms of the current MS-LTC-DRG
patient classification system unless specifically referring to the
previous LTC-DRG patient classification system that was in effect
before October 1, 2007.)
The MS-DRGs adopted in FY 2008 represent an increase in the number
of DRGs by 207 (that is, from 538 to 745) (72 FR 47171). The MS-DRG
classifications are updated annually. As described in section II.G. of
this preamble, for FY 2014 we did not create or delete any MS-DRGs, and
as such we continue to have a total of 751 MS-DRG groupings for FY
2014. Consistent with section 123 of the BBRA, as amended by section
307(b)(1) of the BIPA, and Sec. 412.515 of the regulations, we use
information derived from LTCH PPS patient records to classify LTCH
discharges into distinct MS-LTC-DRGs based on clinical characteristics
and estimated resource needs. We then assign an appropriate weight to
the MS-LTC-DRGs to account for the difference in resource use by
patients exhibiting the case complexity and multiple medical problems
characteristic of LTCHs. Below we provide a general summary of our
existing methodology for determining the MS-LTC-DRG relative weights.
In a departure from the IPPS, and as discussed in greater detail
below in section VIII.B.3.f. of this preamble, we are continuing to use
low-volume MS-LTC-DRGs (that is, MS-LTC-DRGs with less than 25 LTCH
cases) in determining the MS-LTC-DRG relative weights because LTCHs do
not typically treat the full range of diagnoses as do acute care
hospitals. For purposes of determining the relative weights for the
large number of low-volume MS-LTC-DRGs, we group all of the low-volume
MS-LTC-DRGs into five quintiles based on average charge per discharge.
(A detailed discussion of the initial development and application of
the quintile methodology appears in the August 30, 2002 LTCH PPS final
rule (67 FR 55978).) Under our existing methodology, we account for
adjustments to payments for SSO cases (that is, cases where the covered
length of stay at the LTCH is less than or equal to five-sixths of the
geometric average length of stay for the MS-LTC-DRG). Furthermore, we
make adjustments to account for nonmonotonically increasing weights,
when necessary. That is, theoretically, cases under the MS-LTC-DRG
system that are more severe require greater expenditure of medical care
resources and will result in higher average charges such that, in the
severity levels within a base MS-LTC-DRG, the relative weights should
increase monotonically with severity from the lowest to highest
severity level. (We discuss nonmonotonicity in greater detail and our
methodology to adjust the MS-LTC-DRG relative weights to account for
nonmonotonically increasing relative weights in section VIII.B.3.g.
(Step 6) of this preamble.)
2. Patient Classifications Into MS-LTC-DRGs
a. Background
The MS-DRGs (used under the IPPS) and the MS-LTC-DRGs (used under
the LTCH PPS) are based on the CMS DRG structure. As noted above in
this section, we refer to the DRGs under the LTCH PPS as MS-LTC-DRGs
although they are structurally identical to the MS-DRGs used under the
IPPS.
The MS-DRGs are organized into 25 major diagnostic categories
(MDCs), most of which are based on a particular organ system of the
body; the remainder involve multiple organ systems (such as

[[Page 50754]]

MDC 22, Burns). Within most MDCs, cases are then divided into surgical
DRGs and medical DRGs. Surgical DRGs are assigned based on a surgical
hierarchy that orders operating room (O.R.) procedures or groups of
O.R. procedures by resource intensity. The GROUPER software program
does not recognize all ICD-9-CM procedure codes as procedures affecting
DRG assignment. That is, procedures that are not surgical (for example,
EKG), or minor surgical procedures (for example, biopsy of skin and
subcutaneous tissue (procedure code 86.11)) do not affect the MS-LTC-
DRG assignment based on their presence on the claim.
Generally, under the LTCH PPS, a Medicare payment is made at a
predetermined specific rate for each discharge and that payment varies
by the MS-LTC-DRG to which a beneficiary's stay is assigned. Cases are
classified into MS-LTC-DRGs for payment based on the following six data
elements:
Principal diagnosis;
Additional or secondary diagnoses;
Surgical procedures;
Age;
Sex; and
Discharge status of the patient.
Through FY 2010, the number of diagnosis and procedure codes
considered for MS-DRG assignment was limited to nine and six,
respectively. However, for claims submitted on the 5010 format
beginning January 1, 2011, we increased the capacity to process
diagnosis and procedure codes up to 25 diagnoses and 25 procedures.
This includes one principal diagnosis and up to 24 secondary diagnoses
for severity of illness determinations. We refer readers to section
II.G.11.c. of the preamble of the FY 2011 IPPS/LTCH PPS final rule for
a complete discussion of this change (75 FR 50127).
Under HIPAA transactions and code sets regulations at 45 CFR Parts
160 and 162, covered entities must comply with the adopted transaction
standards and operating rules specified in Subparts I through S of Part
162. Among other requirements, by January 1, 2012, covered entities
were required to use the ASC X12 Standards for Electronic Data
Interchange Technical Report Type 3--Health Care Claim: Institutional
(837), May 2006, ASC X12N/005010X223, and Type 1 Errata to Health Care
Claim: Institutional (837) ASC X12 Standards for Electronic Data
Interchange Technical Report Type 3, October 2007, ASC X12N/
005010X233A1 for the health care claims or equivalent encounter
information transaction (45 CFR 162.1102).
HIPAA requires covered entities to use the applicable medical data
code set requirements when conducting HIPAA transactions (45 CFR
162.1000). Currently, upon the discharge of the patient, the LTCH must
assign appropriate diagnosis and procedure codes from the most current
version of the Internal Classification of Diseases, Ninth Revision,
Clinical Modification (ICD-9-CM). For additional information on the
ICD-9-CM Coding System, we refer readers to the FY 2008 IPPS final rule
with comment period (72 FR 47241 through 47243 and 47277 through
47281). We also refer readers to the detailed discussion on correct
coding practices in the August 30, 2002 LTCH PPS final rule (67 FR
55981 through 55983). Additional coding instructions and examples are
published in the Coding Clinic for ICD-9-CM, a product of the American
Hospital Association. (We refer readers to section II.G.11. of this
preamble for additional information on the annual revisions to the ICD-
9-CM codes.)
On October 1, 2014, covered entities must begin using the ICD-10-CM
and ICD-10-PCS coding systems (45 CFR 162.1102(c)). We have been
discussing the conversion to the ICD-10-CM and the ICD-10-PCS coding
systems for many years. In prior rules published in the Federal
Register (for example, in the FY 2011 IPPS/LTCH PPS final rule (75 FR
50122 through 50128)), we discussed the implementation date for the
conversion to the ICD-10-CM and ICD-10-PCS coding systems. We refer
readers to section II.G.11. of this preamble for additional information
on the implementation of the ICD-10-CM and ICD-10-PCS systems.
To create the MS-DRGs (and by extension, the MS-LTC-DRGs), base
DRGs were subdivided according to the presence of specific secondary
diagnoses designated as complications or comorbidities (CCs) into one,
two, or three levels of severity, depending on the impact of the CCs on
resources used for those cases. Specifically, there are sets of MS-DRGs
that are split into 2 or 3 subgroups based on the presence or absence
of a CC or a major complication or comorbidity (MCC). We refer readers
to section II.D. of the FY 2008 IPPS final rule with comment period for
a detailed discussion about the creation of MS-DRGs based on severity
of illness levels (72 FR 47141 through 47175).
Medicare contractors (that is, fiscal intermediaries and MACs)
enter the clinical and demographic information submitted by LTCHs into
their claims processing systems and subject this information to a
series of automated screening processes called the Medicare Code Editor
(MCE). These screens are designed to identify cases that require
further review before assignment into a MS-LTC-DRG can be made. During
this process, certain cases are selected for further development (74 FR
43949).
After screening through the MCE, each claim is classified into the
appropriate MS-LTC-DRG by the Medicare LTCH GROUPER software on the
basis of diagnosis and procedure codes and other demographic
information (age, sex, and discharge status). The GROUPER software used
under the LTCH PPS is the same GROUPER software program used under the
IPPS. Following the MS-LTC-DRG assignment, the Medicare contractor
determines the prospective payment amount by using the Medicare PRICER
program, which accounts for hospital-specific adjustments. Under the
LTCH PPS, we provide an opportunity for LTCHs to review the MS-LTC-DRG
assignments made by the Medicare contractor and to submit additional
information within a specified timeframe as provided in Sec.
412.513(c).
The GROUPER software is used both to classify past cases to measure
relative hospital resource consumption to establish the MS-LTC-DRG
relative weights and to classify current cases for purposes of
determining payment. The records for all Medicare hospital inpatient
discharges are maintained in the MedPAR file. The data in this file are
used to evaluate possible MS-DRG and MS-LTC-DRG classification changes
and to recalibrate the MS-DRG and MS-LTC-DRG relative weights during
our annual update under both the IPPS (Sec. 412.60(e)) and the LTCH
PPS (Sec. 412.517), respectively.
b. Changes to the MS-LTC-DRGs for FY 2014
As specified by our regulations at Sec. 412.517(a), which require
that the MS-LTC-DRG classifications and relative weights be updated
annually, and consistent with our historical practice of using the same
patient classification system under the LTCH PPS as is used under the
IPPS, as we proposed, we are updating the MS-LTC-DRG classifications
effective October 1, 2013, through September 30, 2014 (FY 2014)
consistent with the changes to specific MS-DRG classifications
presented in section II.G. of this preamble (that is, GROUPER Version
31.0). Therefore, the MS-LTC-DRGs for FY 2014 presented in this final
rule are the same as the MS-DRGs that are being used under the IPPS for
FY 2014. In addition, because the MS-LTC-DRGs for FY 2014 are the same
as the MS-DRGs for FY 2014, the other changes that affect MS-DRG (and

[[Page 50755]]

by extension MS-LTC-DRG) assignments under Version 31.0 of the GROUPER
discussed in section II.G. of the preamble of this final rule,
including the changes to the MCE software and the ICD-9-CM coding
system, are also applicable under the LTCH PPS for FY 2014.
3. Development of the FY 2014 MS-LTC-DRG Relative Weights
a. General Overview of the Development of the MS-LTC-DRG Relative
Weights
One of the primary goals for the implementation of the LTCH PPS is
to pay each LTCH an appropriate amount for the efficient delivery of
medical care to Medicare patients. The system must be able to account
adequately for each LTCH's case-mix in order to ensure both fair
distribution of Medicare payments and access to adequate care for those
Medicare patients whose care is more costly (67 FR 55984). To
accomplish these goals, we have annually adjusted the LTCH PPS standard
Federal prospective payment system rate by the applicable relative
weight in determining payment to LTCHs for each case.
The basic methodology used to develop the MS-LTC-DRG relative
weights generally continues to be consistent with the general
methodology established when the LTCH PPS was implemented in the August
30, 2002 LTCH PPS final rule (67 FR 55989 through 55991), with the
exception of some modifications of our historical procedures for
assigning relative weights in cases of zero volume and/or
nonmonotonicity resulting from the adoption of the MS-LTC-DRGs. (For
details on the modifications to our historical procedures for assigning
relative weights in cases of zero volume and/or nonmonotonicity, we
refer readers to the FY 2008 IPPS final rule with comment period (72 FR
47289 through 47295) and the FY 2009 IPPS final rule (73 FR 48542
through 48550).) Under the LTCH PPS, relative weights for each MS-LTC-
DRG are a primary element used to account for the variations in cost
per discharge and resource utilization among the payment groups (Sec.
412.515). To ensure that Medicare patients classified to each MS-LTC-
DRG have access to an appropriate level of services and to encourage
efficiency, we calculate a relative weight for each MS-LTC-DRG that
represents the resources needed by an average inpatient LTCH case in
that MS-LTC-DRG. For example, cases in a MS-LTC-DRG with a relative
weight of 2 will, on average, cost twice as much to treat as cases in a
MS-LTC-DRG with a relative weight of 1.
b. Development of the MS-LTC-DRG Relative Weights for FY 2014
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53462 through
53467), we presented our policies for the development of the MS-LTC-DRG
relative weights for FY 2013. The basic methodology we used to develop
the FY 2013 MS-LTC-DRG relative weights was the same as the methodology
we used to develop the FY 2012 MS-LTC-DRG relative weights in the FY
2012 IPPS/LTCH PPS final rule and was consistent with the general
methodology established when the LTCH PPS was implemented in the August
30, 2002 LTCH PPS final rule (67 FR 55989 through 55991). In the FY
2014 IPPS/LTCH PPS proposed rule (78 FR 27658 through 27664), we
proposed to continue to apply our established methodology to develop
the FY 2014 MS-LTC-DRG relative weights for FY 2014, which includes
application of established policies related to the data, the hospital-
specific relative value (HSRV) methodology, the treatment of severity
levels in the MS-LTC-DRGs, low-volume and no-volume MS-LTC-DRGs,
adjustment for nonmonotonicity, and the steps for calculating the MS-
LTC-DRG relative weights with a budget neutrality factor. Below we
present the methodology that we continue to use to determine the MS-
LTC-DRG relative weights for FY 2014, which is consistent with the
methodology presented in the FY 2013 IPPS/LTCH PPS final rule.
Beginning with the FY 2008 update, we established a budget
neutrality requirement for the annual update to the MS-LTC-DRG
classifications and relative weights at Sec. 412.517(b) (in
conjunction with Sec. 412.503), such that estimated aggregate LTCH PPS
payments would be unaffected, that is, would be neither greater than
nor less than the estimated aggregate LTCH PPS payments that would have
been made without the classification and relative weight changes (72 FR
26882 through 26884). Consistent with Sec. 412.517(b), and as we
proposed, we continue to apply our established two-step budget
neutrality methodology, which is based on the current year MS-LTC-DRG
classifications and relative weights. We are continuing to apply our
established two-step budget neutrality methodology such that the annual
update to the MS-LTC-DRG classifications and relative weights for FY
2014 are based on the FY 2013 MS-LTC-DRG classifications and relative
weights established in Table 11 listed in section VI. of the Addendum
to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53716 through 53717).
(For additional information on the established two-step budget
neutrality methodology, we refer readers to the FY 2008 IPPS final rule
(72 FR 47295 through 47296).)
c. Data
For the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27658 through
27659), to calculate the MS-LTC-DRG relative weights for FY 2014, we
obtained total charges from FY 2012 Medicare LTCH bill data from the
December 2012 update of the FY 2012 MedPAR file, which were the best
available data at that time, and used the proposed Version 31.0 of the
GROUPER to classify LTCH cases. Consistent with our existing
methodology, we also proposed that if more recent data became
available, we would use those data and the finalized Version 31.0 of
the GROUPER in establishing the FY 2014 MS-LTC-DRG relative weights in
the final rule. Consistent with our proposal, to calculate the MS-LTC-
DRG relative weights for FY 2014 in this final rule, we obtained total
charges from the FY 2012 Medicare LTCH bill data from the March 2013
update of the FY 2012 MedPAR file, which are the best available data,
and used the finalized Version 31.0 of the GROUPER to classify LTCH
cases.
As proposed and consistent with our historical methodology, we
excluded the data from LTCHs that are all-inclusive rate providers and
LTCHs that are reimbursed in accordance with demonstration projects
authorized under section 402(a) of Public Law 90-248 or section 222(a)
of Public Law 92-603. Furthermore, consistent with our historical
practice, we excluded Medicare Advantage (Part C) claims, which are now
included in the MedPAR files, in the calculations for the relative
weights under the LTCH PPS that are used to determine payments for
Medicare fee-for-service claims. Specifically, as we proposed, we did
not use any claims from the MedPAR files that have a GHO Paid indicator
value of ``1,'' which effectively removes Medicare Advantage claims
from the relative weight calculations (73 FR 48532). Accordingly, in
the development of the FY 2014 MS-LTC-DRG relative weights in this
final rule, we excluded the data of 14 all-inclusive rate providers and
the 2 LTCHs that are paid in accordance with demonstration projects
that had claims in the March 2013 update of the FY 2012 MedPAR file, as
well as any Medicare Advantage claims.

[[Page 50756]]

d. Hospital-Specific Relative Value (HSRV) Methodology
By nature, LTCHs often specialize in certain areas, such as
ventilator-dependent patients and treatment of infections and wound
care. Some case types (MS-DRGs) may be treated, to a large extent, in
hospitals that have, from a perspective of charges, relatively high (or
low) charges. This nonrandom distribution of cases with relatively high
(or low) charges in specific MS-LTC-DRGs has the potential to
inappropriately distort the measure of average charges. As we proposed,
to account for the fact that cases may not be randomly distributed
across LTCHs, consistent with the methodology we have used since the
implementation of the LTCH PPS, we continue to use a hospital-specific
relative value (HSRV) methodology to calculate the MS-LTC-DRG relative
weights for FY 2014. We believe this method removes this hospital-
specific source of bias in measuring LTCH average charges (67 FR
55985). Specifically, under this methodology, we reduce the impact of
the variation in charges across providers on any particular MS-LTC-DRG
relative weight by converting each LTCH's charge for a case to a
relative value based on that LTCH's average charge.
Under the HSRV methodology, we standardize charges for each LTCH by
converting its charges for each case to hospital-specific relative
charge values and then adjust those values for the LTCH's case-mix. The
adjustment for case-mix is needed to rescale the hospital-specific
relative charge values (which, by definition, average 1.0 for each
LTCH). The average relative weight for a LTCH is its case-mix, so it is
reasonable to scale each LTCH's average relative charge value by its
case-mix. In this way, each LTCH's relative charge value is adjusted by
its case-mix to an average that reflects the complexity of the cases it
treats relative to the complexity of the cases treated by all other
LTCHs (the average case-mix of all LTCHs).
In accordance with our established methodology, we continue to
standardize charges for each case by first dividing the adjusted charge
for the case (adjusted for SSOs under Sec. 412.529 as described in
section VIII.B.3.g. (Step 3) of this preamble) by the average adjusted
charge for all cases at the LTCH in which the case was treated. SSO
cases are cases with a length of stay that is less than or equal to
five-sixths the average length of stay of the MS-LTC-DRG (Sec. 412.529
and Sec. 412.503). The average adjusted charge reflects the average
intensity of the health care services delivered by a particular LTCH
and the average cost level of that LTCH. The resulting ratio is
multiplied by that LTCH's case-mix index to determine the standardized
charge for the case (67 FR 55989).
Multiplying the resulting ratio by the LTCH's case-mix index
accounts for the fact that the same relative charges are given greater
weight at a LTCH with higher average costs than they would at a LTCH
with low average costs, which is needed to adjust each LTCH's relative
charge value to reflect its case-mix relative to the average case-mix
for all LTCHs. Because we standardize charges in this manner, we count
charges for a Medicare patient at a LTCH with high average charges as
less resource intensive than they would be at a LTCH with low average
charges. For example, a $10,000 charge for a case at a LTCH with an
average adjusted charge of $17,500 reflects a higher level of relative
resource use than a $10,000 charge for a case at a LTCH with the same
case-mix, but an average adjusted charge of $35,000. We believe that
the adjusted charge of an individual case more accurately reflects
actual resource use for an individual LTCH because the variation in
charges due to systematic differences in the markup of charges among
LTCHs is taken into account.
e. Treatment of Severity Levels in Developing the MS-LTC-DRG Relative
Weights
For purposes of determining the MS-LTC-DRG relative weights, under
our historical methodology, there are three different categories of MS-
DRGs based on volume of cases within specific MS-LTC-DRGs. MS-LTC-DRGs
with at least 25 cases are each assigned a unique relative weight; low-
volume MS-LTC-DRGs (that is, MS-LTC-DRGs that contain between 1 and 24
cases based on a given year's claims data) are grouped into quintiles
(as described below) and assigned the relative weight of the quintile.
No-volume MS-LTC-DRGs (that is, no cases in the given year's claims
data are assigned to those MS-LTC-DRGs) are cross-walked to other MS-
LTC-DRGs based on the clinical similarities and assigned the relative
weight of the cross-walked MS-LTC-DRG (as described in greater detail
below). As we proposed, we are continuing to utilize these same three
categories of MS-LTC-DRGs for purposes of the treatment of severity
levels in determining the MS-LTC-DRG relative weights for FY 2014. (We
provide in-depth discussions of our policy regarding weight-setting for
low-volume MS-LTC-DRGs in section VIII.B.3.f. of the preamble of this
final rule and for no-volume MS-LTC-DRGs, under Step 5 in section
VIII.B.3.g. of this preamble.)
Furthermore, in determining the FY 2014 MS-LTC-DRG relative
weights, when necessary, as we proposed, we are making adjustments to
account for nonmonotonicity, as discussed in greater detail below in
Step 6 of section VIII.B.3.g. of this preamble. We refer readers to the
discussion in the FY 2010 IPPS/RY 2010 LTCH PPS final rule for our
rationale for including an adjustment for nonmonotonicity (74 FR 43953
through 43954).
f. Low-Volume MS-LTC-DRGs
In order to account for MS-LTC-DRGs with low volume (that is, with
fewer than 25 LTCH cases), consistent with our existing methodology for
purposes of determining the FY 2014 MS-LTC-DRG relative weights, as we
proposed, we are continuing to employ the quintile methodology for low-
volume MS-LTC-DRGs, such that we group the ``low-volume MS-LTC-DRGs''
(that is, MS-LTC-DRGs that contained between 1 and 24 cases annually)
into one of five categories (quintiles) based on average charges (67 FR
55984 through 55995 and 72 FR 47283 through 47288). In determining the
FY 2014 MS-LTC-DRG relative weights in this final rule, in cases where
the initial assignment of a low-volume MS-LTC-DRG to quintiles results
in nonmonotonicity within a base-DRG, in order to ensure appropriate
Medicare payments, consistent with our historical methodology, as we
proposed, we are making adjustments to the treatment of low-volume MS-
LTC-DRGs to preserve monotonicity, as discussed in detail below in
section VIII.B.3.g. (Step 6) of this preamble.
In this final rule, using LTCH cases from the March 2013 update of
the FY 2012 MedPAR file (which is currently the best available data),
we identified 281 MS-LTC-DRGs that contained between 1 and 24 cases.
This list of MS-LTC-DRGs was then divided into one of the 5 low-volume
quintiles, each containing 56 MS-LTC-DRGs (281/5 = 56 with one MS-LTC-
DRG as the remainder). As we proposed, we assigned a low-volume MS-LTC-
DRG to a specific low-volume quintile by sorting the low-volume MS-LTC-
DRGs in ascending order by average charge in accordance with our
established methodology. Based on the data available for this final
rule, the number of MS-LTC-DRGs with less than 25 cases is not evenly
divisible by 5. Therefore, as noted in the proposed rule, consistent
with our historical approach, we used the average charge of

[[Page 50757]]

the low-volume quintile to determine which of the low-volume quintiles
contain the additional low-volume MS-LTC-DRG. Specifically for this
final rule, after organizing the MS-LTC-DRGs by ascending order by
average charge, as we proposed, we assigned the first fifth (1st
through 56th) of low-volume MS-LTC-DRGs (with the lowest average
charge) into Quintile 1. The MS-LTC-DRGs with the highest average
charge cases were assigned into Quintile 5. Because the average charge
of the 57th low-volume MS-LTC-DRG in the sorted list was closer to the
average charge of the 56th low-volume MS-LTC-DRG (assigned to Quintile
1) than to the average charge of the 58th low-volume MS-LTC-DRG
(assigned to Quintile 3), we assigned it to Quintile 1 (such that
Quintile 1 contains 57 low-volume MS- LTC-DRGs before any adjustments
for nonmonotonicity, as discussed below). This resulted in 4 of the 5
low-volume quintiles containing 56 MS-LTC-DRGs (Quintiles 2, 3, 4 and
5) and the other low-volume quintile containing 57 MS-LTC-DRGs
(Quintile 5). Table 13A, which is listed in section VI. of the Addendum
to this final rule and is available via the Internet, lists the
composition of the low-volume quintiles for MS-LTC-DRGs for FY 2014.
Accordingly, in order to determine the FY 2014 relative weights for
the MS-LTC-DRGs with low volume, as we proposed, we are using the five
low-volume quintiles described above. We determined a relative weight
and (geometric) average length of stay for each of the five low-volume
quintiles using the methodology that we applied to the MS-LTC-DRGs (25
or more cases), as described below in section VIII.B.3.g. of this
preamble. As we proposed, we assigned the same relative weight and
average length of stay to each of the low-volume MS-LTC-DRGs that make
up an individual low-volume quintile. We note that, as this system is
dynamic, it is possible that the number and specific type of MS-LTC-
DRGs with a low volume of LTCH cases will vary in the future.
Furthermore, we note that we will continue to monitor the volume
(that is, the number of LTCH cases) in the low-volume quintiles to
ensure that our quintile assignments used in determining the MS-LTC-DRG
relative weights result in appropriate payment for such cases and do
not result in an unintended financial incentive for LTCHs to
inappropriately admit these types of cases.
g. Steps for Determining the FY 2014 MS-LTC-DRG Relative Weights
In this final rule, as we proposed, we determined the FY 2014 MS-
LTC-DRG relative weights based on our existing methodology. (For
additional information on the original development of this methodology,
and modifications to it since the adoption of the MS-LTC-DRGs, we refer
readers to the August 30, 2002 LTCH PPS final rule (67 FR 55989 through
55995) and the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43951
through 43966).) In summary, to determine the FY 2014 MS-LTC-DRG
relative weights, we grouped LTCH cases to the appropriate MS-LTC-DRG,
while taking into account the low-volume quintile (as described above).
After grouping the cases to the appropriate MS-LTC-DRG (or low-volume
quintile), we calculated the FY 2014 relative weights by first removing
statistical outliers and cases with a length of stay of 7 days or less
(Steps 1 and 2 below). Next, we adjusted the number of cases in each
MS-LTC-DRG (or low-volume quintile) for the effect of SSO cases (Step 3
below). After removing statistical outliers (Step 1 below) and cases
with a length of stay of 7 days or less (Step 2 below), the SSO
adjusted discharges and corresponding charges were then used to
calculate ``relative adjusted weights'' for each MS-LTC-DRG (or low-
volume quintile) using the HSRV method.
Below we discuss in detail the steps for calculating the FY 2014
MS-LTC-DRG relative weights. We note that, as we discussed in section
VIII.B.3.c. of this preamble, we excluded the data of all-inclusive
rate LTCHs, LTCHs that are paid in accordance with demonstration
projects, and any Medicare Advantage claims in the March 2013 update of
the FY 2012 MedPAR file.
Step 1--Remove statistical outliers.
The first step in the calculation of the FY 2014 MS-LTC-DRG
relative weights is to remove statistical outlier cases. Consistent
with our historical relative weight methodology, as we proposed, we are
continuing to define statistical outliers as cases that are outside of
3.0 standard deviations from the mean of the log distribution of both
charges per case and the charges per day for each MS-LTC-DRG. These
statistical outliers are removed prior to calculating the relative
weights because we believe that they may represent aberrations in the
data that distort the measure of average resource use. Including those
LTCH cases in the calculation of the relative weights could result in
an inaccurate relative weight that does not truly reflect relative
resource use among the MS-LTC-DRGs. (For additional information on this
step of the relative weight methodology, we refer readers to 67 FR
55989 and 74 FR 43959.)
Step 2--Remove cases with a length of stay of 7 days or less.
The MS-LTC-DRG relative weights reflect the average of resources
used on representative cases of a specific type. Generally, cases with
a length of stay of 7 days or less do not belong in a LTCH because
these stays do not fully receive or benefit from treatment that is
typical in a LTCH stay, and full resources are often not used in the
earlier stages of admission to a LTCH. If we were to include stays of 7
days or less in the computation of the FY 2014 MS-LTC-DRG relative
weights, the value of many relative weights would decrease and,
therefore, payments would decrease to a level that may no longer be
appropriate. We do not believe that it would be appropriate to
compromise the integrity of the payment determination for those LTCH
cases that actually benefit from and receive a full course of treatment
at a LTCH by including data from these very short stays. Therefore,
consistent with our historical relative weight methodology, in
determining the FY 2014 MS-LTC-DRG relative weights, as we proposed, we
removed LTCH cases with a length of stay of 7 days or less. (For
additional information on this step of the relative weight methodology,
we refer readers to 67 FR 55989 and 74 FR 43959.)
Step 3--Adjust charges for the effects of SSOs.
After removing cases with a length of stay of 7 days or less, we
were left with cases that have a length of stay of greater than or
equal to 8 days. As the next step in the calculation of the FY 2014 MS-
LTC-DRG relative weights, consistent with our historical relative
weight methodology, as we proposed, we adjusted each LTCH's charges per
discharge for those remaining cases for the effects of SSOs (as defined
in Sec. 412.529(a) in conjunction with Sec. 412.503).
As we proposed, we made this adjustment by counting an SSO case as
a fraction of a discharge based on the ratio of the length of stay of
the case to the average length of stay for the MS-LTC-DRG for non-SSO
cases. This has the effect of proportionately reducing the impact of
the lower charges for the SSO cases in calculating the average charge
for the MS-LTC-DRG. This process produces the same result as if the
actual charges per discharge of an SSO case were adjusted to what they
would have been had the patient's length of stay been equal to the
average length of stay of the MS-LTC-DRG.

[[Page 50758]]

Counting SSO cases as full discharges with no adjustment in
determining the FY 2014 MS-LTC-DRG relative weights would lower the FY
2014 MS-LTC-DRG relative weight for affected MS-LTC-DRGs because the
relatively lower charges of the SSO cases would bring down the average
charge for all cases within an MS-LTC-DRG. This would result in an
``underpayment'' for non-SSO cases and an ``overpayment'' for SSO
cases. Therefore, we are adjusting for SSO cases under Sec. 412.529 in
this manner because it results in more appropriate payments for all
LTCH cases. (For additional information on this step of the relative
weight methodology, we refer readers to 67 FR 55989 and 74 FR 43959.)
Step 4--Calculate the FY 2014 MS-LTC-DRG relative weights on an
iterative basis.
Consistent with our historical relative weight methodology, as we
proposed, we calculated the FY 2014 MS-LTC-DRG relative weights using
the HSRV methodology, which is an iterative process. First, for each
LTCH case, we calculated a hospital-specific relative charge value by
dividing the SSO adjusted charge per discharge (see Step 3) of the LTCH
case (after removing the statistical outliers (see Step 1) and LTCH
cases with a length of stay of 7 days or less (see Step 2)) by the
average charge per discharge for the LTCH in which the case occurred.
The resulting ratio was then multiplied by the LTCH's case-mix index to
produce an adjusted hospital-specific relative charge value for the
case. An initial case-mix index value of 1.0 was used for each LTCH.
For each MS-LTC-DRG, we calculated the FY 2014 relative weight by
dividing the average of the adjusted hospital-specific relative charge
values (from above) for the MS-LTC-DRG by the overall average hospital-
specific relative charge value across all cases for all LTCHs. Using
these recalculated MS-LTC-DRG relative weights, each LTCH's average
relative weight for all of its cases (that is, its case-mix) is
calculated by dividing the sum of all the LTCH's MS-LTC-DRG relative
weights by its total number of cases. The LTCHs' hospital-specific
relative charge values (from above) were then multiplied by the
hospital-specific case-mix indexes. The hospital-specific case-mix
adjusted relative charge values were then used to calculate a new set
of MS-LTC-DRG relative weights across all LTCHs. This iterative process
was continued until there was convergence between the weights produced
at adjacent steps, for example, when the maximum difference was less
than 0.0001.
Step 5--Determine a FY 2014 relative weight for MS-LTC-DRGs with no
LTCH cases.
As we stated above, we determined the FY 2014 relative weight for
each MS-LTC-DRG using total Medicare allowable total charges reported
in the best available LTCH claims data (that is, the March 2013 update
of the FY 2012 MedPAR file for this final rule). Using these data, we
identified the MS-LTC-DRGs for which there were no LTCH cases in the
database, such that no patients who would have been classified to those
MS-LTC-DRGs were treated in LTCHs during FY 2012 and, therefore, no
charge data were available for these MS-LTC-DRGs. Therefore, in the
process of determining the MS-LTC-DRG relative weights, we were unable
to calculate relative weights for the MS-LTC-DRGs with no LTCH cases
using the methodology described in Steps 1 through 4 above. However,
because patients with a number of the diagnoses under these MS-LTC-DRGs
may be treated at LTCHs, consistent with our historical methodology, as
we proposed, we assigned a relative weight to each of the no-volume MS-
LTC-DRGs based on clinical similarity and relative costliness (with the
exception of ``transplant'' MS-LTC-DRGs and ``error'' MS-LTC-DRGs, as
discussed below). (For additional information on this step of the
relative weight methodology, we refer readers to 67 FR 55991 and 74 FR
43959 through 43960.)
In general, we determined FY 2014 relative weights for the MS-LTC-
DRGs with no LTCH cases in the March 2013 update of the FY 2012 MedPAR
file used in this final rule (that is, ``no-volume'' MS-LTC-DRGs) by
cross-walking each no-volume MS-LTC-DRG to another MS-LTC-DRG with a
calculated relative weight (determined in accordance with the
methodology described above). Then, the ``no-volume'' MS-LTC-DRG was
assigned the same relative weight (and average length of stay) of the
MS-LTC-DRG to which it was cross-walked (as described in greater detail
below).
Of the 751 MS-LTC-DRGs for FY 2014, we identified 235 MS-LTC-DRGs
for which there are no LTCH cases in the database (including the 8
``transplant'' MS-LTC-DRGs and 2 ``error'' MS-LTC-DRGs). As stated
above, we assigned relative weights for each of the 235 no-volume MS-
LTC-DRGs (with the exception of the 8 ``transplant'' MS-LTC-DRGs and
the 2 ``error'' MS-LTC-DRGs, which are discussed below) based on
clinical similarity and relative costliness to one of the remaining 516
(751 - 235= 516) MS-LTC-DRGs for which we were able to determine
relative weights based on FY 2012 LTCH claims data using the steps
described above. (For the remainder of this discussion, we refer to the
``cross-walked'' MS-LTC-DRGs as the MS-LTC-DRGs to which we crosswalked
one of the 235 ``no volume'' MS-LTC-DRGs, with the exception of the 8
``transplant'' MS-LTC-DRGs and the 2 ``error'' MS-LTC-DRGs, for
purposes of determining a relative weight.) Then, we assigned the no-
volume MS-LTC-DRG the relative weight of the cross-walked MS-LTC-DRG.
(As explained below in Step 6, when necessary, we made adjustments to
account for nonmonotonicity.)
For this final rule, we cross-walked the no-volume MS-LTC-DRG to a
MS-LTC-DRG for which there were LTCH cases in the March 2013 update of
the FY 2012 MedPAR file, and to which it was similar clinically in
intensity of use of resources and relative costliness as determined by
criteria such as care provided during the period of time surrounding
surgery, surgical approach (if applicable), length of time of surgical
procedure, postoperative care, and length of stay. We evaluated the
relative costliness in determining the applicable MS-LTC-DRG to which a
no-volume MS-LTC-DRG was cross-walked in order to assign an appropriate
relative weight for the no-volume MS-LTC-DRGs in FY 2014. (For more
details on our process for evaluating relative costliness, we refer
readers to the FY 2010 IPPS/RY 2010 LTCH PPS final rule (73 FR 48543).)
We believe in the rare event that there would be a few LTCH cases
grouped to one of the no-volume MS-LTC-DRGs in FY 2014, the relative
weights assigned based on the cross-walked MS-LTC-DRGs would result in
an appropriate LTCH PPS payment because the crosswalks, which are based
on similar clinical similarity and relative costliness, generally
require equivalent relative resource use.
We then assigned the relative weight of the cross-walked MS-LTC-DRG
as the relative weight for the no-volume MS-LTC-DRG such that both of
these MS-LTC-DRGs (that is, the no-volume MS-LTC-DRG and the cross-
walked MS-LTC-DRG) have the same relative weight for FY 2014. We note
that if the cross-walked MS-LTC-DRG had 25 cases or more, its relative
weight, which was calculated using the methodology described in Steps 1
through 4 above, was assigned to the no-volume MS-LTC-DRG as well.
Similarly, if the MS-LTC-DRG to which the no-volume MS-LTC-DRG was
cross-walked had 24 or less cases and, therefore, was designated to one
of the low-volume quintiles for purposes of determining the relative

[[Page 50759]]

weights, we assigned the relative weight of the applicable low-volume
quintile to the no-volume MS-LTC-DRG such that both of these MS-LTC-
DRGs (that is, the no-volume MS-LTC-DRG and the cross-walked MS-LTC-
DRG) have the same relative weight for FY 2014. (As we noted above, in
the infrequent case where nonmonotonicity involving a no-volume MS-LTC-
DRG resulted, additional adjustments as described in Step 6 were
required in order to maintain monotonically increasing relative
weights.)
For this final rule, a list of the no-volume MS-LTC-DRGs and the
MS-LTC-DRGs to which each was cross-walked (that is, the cross-walked
MS-LTC-DRGs) for FY 2014 is shown in Table 13B, which is listed in
section VI. of the Addendum to this final rule and is available via the
Internet.
To illustrate this methodology for determining the relative weights
for the FY 2014 MS-LTC-DRGs with no LTCH cases, we are providing the
following example, which refers to the no-volume MS-LTC-DRGs crosswalk
information for FY 2014 provided in Table 13B.
Example: There were no cases in the FY 2012 MedPAR file used for
this final rule for MS-LTC-DRG 61 (Acute Ischemic Stroke with Use of
Thrombolytic Agent with MCC). We determined that MS-LTC-DRG 70
(Nonspecific Cerebrovascular Disorders with MCC) was similar clinically
and based on resource use to MS-LTC-DRG 61. Therefore, we assigned the
same relative weight of MS-LTC-DRG 70 of 0.8212 for FY 2014 to MS-LTC-
DRG 61 (obtained from Table 11, which is listed in section VI. of the
Addendum to this final rule and is available via the Internet).
Again, we note that, as this system is dynamic, it is entirely
possible that the number of MS-LTC-DRGs with no volume of LTCH cases
based on the system will vary in the future. We used the most recent
available claims data in the MedPAR file to identify no-volume MS-LTC-
DRGs and to determine the relative weights in this final rule.
Furthermore, for FY 2014, consistent with our historical relative
weight methodology, as we proposed, we are establishing the MS-LTC-DRG
relative weight of 0.0000 for the following transplant MS-LTC-DRGs:
Heart Transplant or Implant of Heart Assist System with MCC (MS-LTC-DRG
1); Heart Transplant or Implant of Heart Assist System without MCC (MS-
LTC-DRG 2); Liver Transplant with MCC or Intestinal Transplant (MS-LTC-
DRG 5); Liver Transplant without MCC (MS-LTC-DRG 6); Lung Transplant
(MS-LTC-DRG 7); Simultaneous Pancreas/Kidney Transplant (MS-LTC-DRG 8);
Pancreas Transplant (MS-LTC-DRG 10); and Kidney Transplant (MS-LTC-DRG
652). This is because Medicare will only cover these procedures if they
are performed at a hospital that has been certified for the specific
procedures by Medicare and presently no LTCH has been so certified. At
the present time, we include these eight transplant MS-LTC-DRGs in the
GROUPER program for administrative purposes only. Because we use the
same GROUPER program for LTCHs as is used under the IPPS, removing
these MS-LTC-DRGs would be administratively burdensome. (For additional
information regarding our treatment of transplant MS-LTC-DRGs, we refer
readers to the RY 2010 LTCH PPS final rule (74 FR 43964).)
Step 6--Adjust the FY 2014 MS-LTC-DRG relative weights to account
for nonmonotonically increasing relative weights.
As discussed earlier in this section, the MS-DRGs contain base DRGs
that have been subdivided into one, two, or three severity of illness
levels. Where there are three severity levels, the most severe level
has at least one secondary diagnosis code that is referred to as an MCC
(that is, major complication or comorbidity). The next lower severity
level contains cases with at least one secondary diagnosis code that is
a CC (that is, complication or comorbidity). Those cases without an MCC
or a CC are referred to as ``without CC/MCC.'' When data do not support
the creation of three severity levels, the base MS-DRG is subdivided
into either two levels or the base MS-DRG is not subdivided. The two-
level subdivisions could consist of the MS-DRG with CC/MCC and the MS-
DRG without CC/MCC. Alternatively, the other type of two-level
subdivision may consist of the MS-DRG with MCC and the MS-DRG without
MCC.
In those base MS-LTC-DRGs that are split into either two or three
severity levels, cases classified into the ``without CC/MCC'' MS-LTC-
DRG are expected to have a lower resource use (and lower costs) than
the ``with CC/MCC'' MS-LTC-DRG (in the case of a two-level split) or
both the ``with CC'' and the ``with MCC'' MS-LTC-DRGs (in the case of a
three-level split). That is, theoretically, cases that are more severe
typically require greater expenditure of medical care resources and
will result in higher average charges. Therefore, in the three severity
levels, relative weights should increase by severity, from lowest to
highest. If the relative weights decrease as severity increases (that
is, if within a base MS-LTC-DRG, an MS-LTC-DRG with CC has a higher
relative weight than one with MCC, or the MS-LTC-DRG ``without CC/MCC''
has a higher relative weight than either of the others), they are
nonmonotonic. We continue to believe that utilizing nonmonotonic
relative weights to adjust Medicare payments would result in
inappropriate payments because the payment for the cases in the higher
severity level in a base MS-LTC-DRG (which are generally expected to
have higher resource use and costs) would be lower than the payment for
cases in a lower severity level within the same base MS-LTC-DRG (which
are generally expected to have lower resource use and costs).
Consequently, in determining the FY 2014 MS-LTC-DRG relative weights in
this final rule, consistent with our historical methodology, as we
proposed, we combined MS-LTC-DRG severity levels within a base MS-LTC-
DRG for the purpose of computing a relative weight when necessary to
ensure that monotonicity was maintained. For a comprehensive
description of our existing methodology to adjust for nonmonotonicity,
we refer readers to the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR
43964 through 43966). Any adjustments for nonmonotonicity that were
made in determining the FY 2014 MS-LTC-DRG relative weights in this
final rule by applying this methodology are denoted in Table 11, which
is listed in section VI. of the Addendum to this final rule and is
available via the Internet.
Step 7--Calculate the FY 2014 budget neutrality factor.
In accordance with the regulations at Sec. 412.517(b) (in
conjunction with Sec. 412.503), the annual update to the MS-LTC-DRG
classifications and relative weights is done in a budget neutral manner
such that estimated aggregate LTCH PPS payments would be unaffected,
that is, would be neither greater than nor less than the estimated
aggregate LTCH PPS payments that would have been made without the MS-
LTC-DRG classification and relative weight changes. (For a detailed
discussion on the establishment of the budget neutrality requirement
for the annual update of the MS-LTC-DRG classifications and relative
weights, we refer readers to the RY 2008 LTCH PPS final rule (72 FR
26881 and 26882).)
The MS-LTC-DRG classifications and relative weights are updated
annually based on the most recent available LTCH claims data to reflect
changes in relative LTCH resource use (Sec. 412.517(a) in conjunction
with Sec. 412.503). Under the budget neutrality requirement at Sec.
412.517(b), for each annual update, the MS-LTC-DRG relative weights are
uniformly adjusted to ensure that

[[Page 50760]]

estimated aggregate payments under the LTCH PPS would not be affected
(that is, decreased or increased). Consistent with that provision, as
we proposed, we updated the MS-LTC-DRG classifications and relative
weights for FY 2014 based on the most recent available LTCH data, and
applied a budget neutrality adjustment in determining the FY 2014 MS-
LTC-DRG relative weights.
To ensure budget neutrality in the update to the MS-LTC-DRG
classifications and relative weights under Sec. 412.517(b), as we
proposed, we are continuing to use our established two-step budget
neutrality methodology. In this final rule, in the first step of our
MS-LTC-DRG budget neutrality methodology, for FY 2014, we calculated
and applied a normalization factor to the recalibrated relative weights
(the result of Steps 1 through 6 above) to ensure that estimated
payments were not influenced by changes in the composition of case
types or the changes to the classification system. That is, the
normalization adjustment is intended to ensure that the recalibration
of the MS-LTC-DRG relative weights (that is, the process itself)
neither increases nor decreases the average CMI.
To calculate the normalization factor for FY 2014 (the first step
of our budget neutrality methodology), we used the following three
steps: (1.a.) we used the most recent available LTCH claims data (FY
2012) and grouped them using the FY 2014 GROUPER (Version 31.0) and the
recalibrated FY 2014 MS-LTC-DRG relative weights (determined in steps 1
through 6 of the Steps for Determining the FY 2014 MS-LTC-DRG Relative
Weights above) to calculate the average CMI; (1.b.) we grouped the same
LTCH claims data (FY 2012) using the FY 2013 GROUPER (Version 30.0) and
FY 2013 MS-LTC-DRG relative weights and calculated the average CMI; and
(1.c.) we computed the ratio of these average CMIs by dividing the
average CMI for FY 2013 (determined in Step 1.b.) by the average CMI
for FY 2014 (determined in Step 1.a.). In determining the MS-LTC-DRG
relative weights for FY 2014, each recalibrated MS-LTC-DRG relative
weight was multiplied by 1.11579 (determined in Step 1.c.) in the first
step of the budget neutrality methodology, which produced ``normalized
relative weights.''
In the second step of our MS-LTC-DRG budget neutrality methodology,
we determined a budget neutrality factor to ensure that estimated
aggregate LTCH PPS payments (based on the most recent available LTCH
claims data) after reclassification and recalibration (that is, the FY
2014 MS-LTC-DRG classifications and relative weights) are equal to
estimated aggregate LTCH PPS payments before reclassification and
recalibration (that is, the FY 2013 MS-LTC-DRG classifications and
relative weights). Accordingly, consistent with our existing
methodology, we used FY 2012 discharge data to simulate payments and
compared estimated aggregate LTCH PPS payments using the FY 2013 MS-
LTC-DRGs and relative weights to estimate aggregate LTCH PPS payments
using the FY 2014 MS-LTC-DRGs and relative weights. Specifically, for
this final rule, as discussed previously in section VIII.B.3.c. of this
preamble, we used LTCH claims data from the March 2013 update of the FY
2012 MedPAR file, as these are the best available data at this time.
For this final rule, we determined the FY 2014 budget neutrality
adjustment factor using the following three steps: (2.a.) we simulated
estimated total LTCH PPS payments using the normalized relative weights
for FY 2014 and GROUPER Version 31.0 (as described above); (2.b.) we
simulated estimated total LTCH PPS payments using the FY 2013 GROUPER
(Version 30.0) and the FY 2013 MS-LTC-DRG relative weights in Table 11
of the Addendum to the FY 2013 IPPS/LTCH PPS final rule available on
the Internet (76 FR 53716); and (2.c.) we calculated the ratio of these
estimated total LTCH PPS payments by dividing the estimated total LTCH
PPS payments using the FY 2013 GROUPER (Version 30.0) and the FY 2013
MS-LTC-DRG relative weights (determined in Step 2.b.) by the estimated
total LTCH PPS payments using the FY 2014 GROUPER (Version 31.0) and
the normalized MS-LTC-DRG relative weights for FY 2014 (determined in
Step 2.a.). In determining the FY 2014 MS-LTC-DRG relative weights,
each normalized relative weight was multiplied by a budget neutrality
factor of 0.9955629 (determined in Step 2.c.) in the second step of the
budget neutrality methodology to determine the budget neutral FY 2014
relative weight for each MS-LTC-DRG.
Accordingly, in determining the FY 2014 MS-LTC-DRG relative weights
in this final rule, consistent with our existing methodology, we
applied a normalization factor of 1.11579 and a budget neutrality
factor of 0.9955629 (computed as described above). Table 11, which is
listed in section VI. of the Addendum to this final rule and is
available via the Internet, lists the MS-LTC-DRGs and their respective
relative weights, geometric mean length of stay, five-sixths of the
geometric mean length of stay (used to identify SSO cases under Sec.
412.529(a)), and the ``IPPS Comparable Thresholds'' (used in
determining SSO payments under Sec. 412.529(c)(3)), for FY 2014 (and
reflect both the normalization factor of 1.11579 and the budget
neutrality factor of 0.9955629).

C. LTCH PPS Payment Rates for FY 2014

1. Overview of Development of the LTCH Payment Rates
The basic methodology for determining LTCH PPS Federal prospective
payment rates is set forth at Sec. 412.515 through Sec. 412.536. In
this section, we discuss the factors that we used to update the LTCH
PPS standard Federal rate for FY 2014, that is, effective for LTCH
discharges occurring on or after October 1, 2013 through September 30,
2014.
For further details on the development of the FY 2003 standard
Federal rate when the LTCH PPS was initially implemented, we refer
readers to the August 30, 2002 LTCH PPS final rule (67 FR 56027 through
56037). For subsequent updates to the LTCH PPS standard Federal rate as
implemented under Sec. 412.523(c)(3), we refer readers to the
following final rules: RY 2004 LTCH PPS final rule (68 FR 34134 through
34140); RY 2005 LTCH PPS final rule (68 FR 25682 through 25684); RY
2006 LTCH PPS final rule (70 FR 24179 through 24180); RY 2007 LTCH PPS
final rule (71 FR 27819 through 27827); RY 2008 LTCH PPS final rule (72
FR 26870 through 27029); RY 2009 LTCH PPS final rule (73 FR 26800
through 26804); FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 44021
through 44030); FY 2011 IPPS/LTCH PPS final rule (75 FR 50443 through
50444); FY 2012 IPPS/LTCH PPS final rule (76 FR 51769 through 51773);
and FY 2013 IPPS/LTCH PPS final rule (77 FR 53479 through 53481).
The update to the LTCH PPS standard Federal rate for FY 2014 is
presented in section V.A. of the Addendum to this final rule. The
components of the annual market basket update to the LTCH PPS standard
Federal rate for FY 2014 are discussed below, including the reduction
to the annual update for LTCHs that fail to submit quality reporting
data for fiscal year FY 2014 as required by the statute (as discussed
below in section VIII.C.2.c. of this preamble). Furthermore, as
discussed below in section VIII.C.3. of this preamble, for FY 2014, in
addition to the update factor, under the second year of the 3-year
phase-in under the current regulations at Sec. 412.523(d)(3), as we

[[Page 50761]]

proposed, we made a one-time prospective adjustment to the standard
Federal rate for FY 2014 so that the effect of any significant
difference between the data used in the original computations of budget
neutrality for FY 2003 and more recent data to determine budget
neutrality for FY 2003 is not perpetuated in the prospective payment
rates for future years . In addition, as discussed in section V.A. of
the Addendum of this final rule, as we proposed, we made an adjustment
to the standard Federal rate to account for the estimated effect of the
changes to the area wage level adjustment for FY 2014 on estimated
aggregate LTCH PPS payments, in accordance with Sec. 412.523(d)(4).
(We refer readers to the discussion of the reduction to the annual
update for LTCHs that fail to submit quality reporting data in section
VIII.C.2.c. of this preamble, the application of the one-time
prospective adjustment under the second year of the 3-year phase-in in
section VIII.C.3. of this preamble, and the budget neutrality
adjustment for changes in the area wage levels in section V.A. of the
Addendum of this final rule.)
2. FY 2014 LTCH PPS Annual Market Basket Update
a. Overview
Historically, the Medicare program has used a market basket to
account for price increases in the services furnished by providers. The
market basket used for the LTCH PPS includes both operating and
capital-related costs of LTCHs because the LTCH PPS uses a single
payment rate for both operating and capital-related costs. As discussed
in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53468 through 53476), we
adopted the newly created FY 2009-based LTCH-specific market basket for
use under the LTCH PPS beginning in FY 2013. For additional details on
the historical development of the market basket used under the LTCH
PPS, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR
53467 through 53468) and this preamble.
Section 3401(c) of the Affordable Care Act provides for certain
adjustments to any annual update to the standard Federal rate and
refers to the timeframes associated with such adjustments as a ``rate
year'' (which are discussed in more detail in section VIII.C.2.b. of
this preamble.) We note that because the annual update to the LTCH PPS
policies, rates, and factors now occurs on October 1, we adopted the
term ``fiscal year'' (FY) rather than ``rate year'' (RY) under the LTCH
PPS beginning October 1, 2010, to conform with the standard definition
of the Federal fiscal year (October 1 through September 30) used by
other PPSs, such as the IPPS (75 FR 50396 through 50397). Although the
language of sections 3004(a) 3401(c), 10319, and 1105(b) of the
Affordable Care Act refers to years 2010 and thereafter under the LTCH
PPS as ``rate year,'' consistent with our change in the terminology
used under the LTCH PPS from ``rate year'' to ``fiscal year,'' for
purposes of clarity, when discussing the annual update for the LTCH
PPS, including the provisions of the Affordable Care Act, we use
``fiscal year'' rather than ``rate year'' for 2011 and subsequent
years.
b. Revision of Certain Market Basket Updates as Required by the
Affordable Care Act
Section 1886(m)(3)(A) of the Act, as added by section 3401(c) of
the Affordable Care Act, specifies that, for rate year 2010 and each
subsequent rate year through 2019, any annual update to the standard
Federal rate shall be reduced:
For rate year 2010 through 2019, by the ``other
adjustment'' specified in sections 1886(m)(3)(A)(ii) and (m)(4) of the
Act; and
For rate year 2012 and each subsequent year, by the
productivity adjustment (which we refer to as ``the multifactor
productivity (MFP) adjustment'') described in section
1886(b)(3)(B)(xi)(II) of the Act.
Section 1886(m)(3)(B) of the Act provides that the application of
paragraph (3) of section 1886(m) of the Act may result in the annual
update being less than zero for a rate year, and may result in payment
rates for a rate year being less than such payment rates for the
preceding rate year.
Section 1886(b)(3)(B)(xi)(II) of the Act defines the MFP adjustment
as equal to the 10-year moving average of changes in annual economy-
wide, private nonfarm business multifactor productivity (as projected
by the Secretary for the 10-year period ending with the applicable
fiscal year, calendar year, cost reporting period, or other annual
period). Under our methodology, the end of the 10-year moving average
of changes in the MFP coincides with the end of the appropriate FY
update period. In addition, the MFP adjustment that is applied in
determining any annual update to the LTCH PPS standard Federal rate is
the same adjustment that is required to be applied in determining the
applicable percentage increase under the IPPS under section
1886(b)(3)(B)(i) of the Act as they are both based on a fiscal year.
The MFP adjustment is derived using a projection of MFP that is
currently produced by IHS Global Insight, Inc. (For additional details
on the development of the MFP adjustment and its application under the
LTCH PPS, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76
FR 51691 through 51692 and 51770 through 51771).)
For FY 2014, as we proposed, we are continuing to use our
methodology for calculating and applying the MFP adjustment to
determine the annual update to the LTCH PPS standard Federal rate for
FY 2014. (For details on the development of the MFP adjustment,
including our finalized methodology for calculating and applying the
MFP adjustment, we refer readers to the FY 2012 IPPS/LTCH PPS final
rule (76 FR 51689 through 51692).)
c. Adjustment to the Annual Update to the LTCH PPS Standard Federal
Rate under the Long-Term Care Hospital Quality Reporting (LTCHQR)
Program
1. Background
In accordance with section 1886(m)(5) of the Act, as added by
section 3004(a) of the Affordable Care Act, the Secretary established
the Long-Term Care Hospital Quality Reporting (LTCHQR) Program. (As
noted above, although the language of section 3004(a) of the Affordable
Care Act refers to years 2011 and thereafter under the LTCH PPS as
``rate year,'' consistent with our change in the terminology used under
the LTCH PPS from ``rate year'' to ``fiscal year,'' for purposes of
clarity, when discussing the annual update for the LTCH PPS, including
the provisions of the Affordable Care Act, we use ``fiscal year''
rather than ``rate year'' for 2011 and subsequent years.) Under the
LTCHQR Program, as required by section 1886(m)(5)(A)(i) of the Act, for
FY 2014 and each subsequent year, in the case of an LTCH that does not
submit quality reporting data to the Secretary in accordance with
section 1886(m)(5)(C) of the Act with respect to such a year, any
annual update to a standard Federal rate for discharges for the
hospital during the year, and after application of section 1886(m)(3)
of the Act, shall be reduced by 2.0 percentage points. Section
1886(m)(5)(A)(ii) of the Act provides that the application of the 2.0
percentage points reduction may result in an annual update that is less
than 0.0 for a year, and may result in LTCH PPS payment rates for a
year being less than such LTCH PPS payment rates for the preceding
year. Furthermore, section 1886(m)(5)(B) of the Act specifies that the
2.0 percentage points reduction is applied in a

[[Page 50762]]

noncumulative manner, such that any reduction made under section
1886(m)(5)(A) of the Act shall apply only with respect to the year
involved, and shall not be taken into account in computing the LTCH PPS
payment amount for a subsequent year.
Section 1886(m)(5)(D)(iii) of the Act requires the Secretary to
publish the selected measures for the LTCHQR Program that will be
applicable with respect to the FY 2014 payment determination no later
than October 1, 2012. Under section 1886(m)(5)(D)(i) of the Act, the
quality measures for the LTCHQR Program are measures selected by the
Secretary that have been endorsed by an entity that holds a contract
with the Secretary under section 1890(a) of the Act, unless section
1886(m)(5)(D)(ii) of the Act applies. This contract is currently held
by the National Quality Forum (NQF). Section 1886(m)(5)(D)(ii) of the
Act provides that an exception may be made in the case of a specified
area or medical topic determined appropriate by the Secretary for which
a feasible and practical measure has not been endorsed by the entity
that holds a contract with the Secretary under section 1890(a) of the
Act. In such a case, section 1886(m)(5)(D)(ii) of the Act authorizes
the Secretary to specify a measure(s) that is not so endorsed, as long
as due consideration is given to measures that have been endorsed or
adopted by a consensus organization identified by the Secretary. The
LTCHQR Program was implemented in section VII.C. of the FY 2012 IPPS/
LTCH PPS final rule (76 FR 51743 through 51756). In that same final
rule, as discussed in section IX.C. of the preamble of this final rule,
we adopted the following three quality measures for the FY 2014 payment
determination: Urinary Catheter-Associated Urinary Tract Infection
(CAUTI) rate per 1, 000 urinary catheter days, for Intensive Care Unit
Patients (NQF 013); Central Line Catheter-Associated Blood
Stream Infection (CLABSI) Rate for ICU and High-Risk Nursery Patients
(NQF 0139); and Percent of Residents with Pressure Ulcers That
are New or Worsened (Application of NQF 0678). For additional
discussion and details of the history of the LTCHQR Program, including
the statutory authority and further details on the three measures
previously finalized for the FY 2014 payment determination, we refer
readers to section IX.C. of the preamble of this final rule and to the
FY 2012 IPPS/LTCH PPS final rule (76 FR 51743 through 51756).
2. Reduction to the Annual Update to the LTCH PPS Standard Federal Rate
Under the LTCHQR Program
Consistent with section 1886(m)(5)(A)(i) of the Act, for FY 2014
and subsequent fiscal years, we proposed that for LTCHs that do not
submit quality reporting data under the LTCHQR Program with respect to
such a fiscal year, any annual update to a standard Federal rate for
discharges for the LTCH during the fiscal year and after application of
the market basket update adjustments required by section 1886(m)(3) of
the Act, would be further reduced by 2.0 percentage points. That is, in
establishing an update to the LTCH PPS standard Federal rate for FY
2014 and subsequent fiscal years, the full LTCH PPS market basket
increase estimate, subject to an adjustment based on changes in
economy-wide productivity (``the MFP adjustment'') required under
section 1886(m)(3)(A)(i) of the Act and an additional reduction
required by sections 1886(m)(3)(A)(ii) and 1886(m)(4) of the Act, would
be further reduced by 2.0 percentage points for LTCHs that fail to
submit quality reporting data under the LTCHQR Program.
We did not receive any public comments on our proposed
implementation of the requirements of section 1886(m)(5)(A)(i) of the
Act, and are adopting that proposal as final, without modification.
Accordingly, in this final rule, as we proposed, we are implementing
the reduction in the annual update to the LTCH PPS standard Federal
rate for failure to report quality data under the LTCHQR Program for FY
2014 and subsequent fiscal years under Sec. 412.523(c)(4).
Specifically, consistent with section 1886(m)(5)(A)(i) of the Act,
under Sec. 412.523(c)(4)(i), as we proposed, for an LTCH that does not
submit quality reporting data in the form and manner and at the time
specified by the Secretary under the LTCHQR Program, the annual update
to the standard Federal rate under Sec. 412.523(c)(3) is further
reduced by 2.0 percentage points. (Note, as discussed previously in
this section, the annual update to the standard Federal rate
implemented under Sec. 412.523(c)(3) reflects the application of the
adjustments to any annual update as required by sections 1886(m)(3) and
(m)(4) of the Act.) In addition, as we proposed, consistent with
section 1886(m)(5)(A)(ii) of the Act, we are specifying under Sec.
412.523(c)(4)(ii), that any reduction of the annual update to the
standard Federal rate under Sec. 412.523(c)(4)(i) will apply only to
the fiscal year involved and would not be taken into account in
computing the annual update to the standard Federal rate for a
subsequent fiscal year. Lastly, consistent with section 1886(m)(5)(B)
of the Act, under Sec. 412.523(c)(4)(iii), as we proposed, the
application of any reduction of the annual update to the standard
Federal rate under Sec. 412.523(c)(4)(i) may result in an annual
update that is less than 0.0 percent for a fiscal year, and may result
in payment rates for a fiscal year that would be less than such payment
rates for the preceding rate year.
We also discuss this application of the 2.0 percentage point
reduction under Sec. 412.523(c)(4)(i) in our discussion of the annual
market basket update to the LTCH PPS standard Federal rate for FY 2014
below in section VIII.C.2.e. of this preamble.
d. Market Basket under the LTCH PPS for FY 2014
Under the authority of section 123 of the BBRA as amended by
section 307(b) of the BIPA, in the FY 2013 IPPS/LTCH PPS final rule (77
FR 53468), we adopted a newly created FY 2009-based LTCH-specific
market basket for use under the LTCH PPS beginning in FY 2013. The FY
2009-based LTCH-specific market basket is based solely on the Medicare
cost report data submitted by LTCHs and, therefore, specifically
reflects the cost structures of only LTCHs. For additional details on
the development of the FY 2009-based LTCH-specific market basket, we
refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53467
through 53476).
For FY 2014, as we proposed, we are continuing to use the FY 2009-
based LTCH-specific market basket to update the LTCH PPS for FY 2014.
We continue to believe that the FY 2009-based LTCH-specific market
basket appropriately reflects the cost structure of LTCHs for the
reasons discussed when we adopted the FY 2009-based LTCH-specific
market basket for use under the LTCH PPS in the FY 2013 IPPS/LTCH PPS
final rule (77 FR 53467 through 53476).
e. Annual Market Basket Update for LTCHs for FY 2014
Consistent with our historical practice, we proposed to estimate
the market basket update and the MFP adjustment based on IGI's forecast
using the most recent available data. Based on IGI's second quarter
2013 forecast, the FY 2014 full market basket estimate for the LTCH PPS
using the FY 2009-based LTCH-specific market basket is 2.5 percent.
Using our established methodology for determining the MFP adjustment,
the current estimate of the MFP adjustment for FY 2014 based on

[[Page 50763]]

IGI's second quarter 2013 forecast is 0.5 percent, as discussed in
section V.A.1. of this preamble.
For FY 2014, section 1886(m)(3)(A)(i) of the Act requires that any
annual update to the standard Federal rate be reduced by the
productivity adjustment (``the MFP adjustment'') described in section
1886(b)(3)(B)(xi)(II) of the Act. Consistent with the statute, as we
proposed, we reduced the full FY 2014 market basket update by the FY
2014 MFP adjustment. To determine the market basket update for LTCHs
for FY 2014, as reduced by the MFP adjustment, consistent with our
established methodology, as we proposed, we subtracted the FY 2014 MFP
adjustment from the FY 2014 market basket update. Furthermore, sections
1886(m)(3)(A)(ii) and 1886(m)(4)(D) of the Act requires that any annual
update to the standard Federal rate for FY 2014 be reduced by the
``other adjustment'' described in paragraph (4), which is 0.3
percentage point for FY 2014. Therefore, following application of the
productivity adjustment, as we proposed, we reduced the adjusted market
basket update (that is, the full market basket increase less the MFP
adjustment) by the ``other adjustment'' specified by sections
1886(m)(3)(A)(ii) and 1886(m)(4) of the Act. (For additional details on
our established methodology for adjusting the market basket increase by
the MFP and the ``other adjustment'' required by the statute, we refer
readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51771).)
As discussed previously in section VIII.C.2.c. of this preamble,
for FY 2014, section 1886(m)(5) of the Act requires that for LTCHs that
do not submit quality reporting data under the LTCHQR Program, any
annual update to a standard Federal rate, after application of the
adjustments required by section 1886(m)(3) of the Act, is further
reduced by 2.0 percentage points. Therefore, the update to the LTCH PPS
standard Federal rate for FY 2014 for LTCHs that fail to submit quality
reporting data under the LTCHQR Program, the full LTCH PPS market
basket increase estimate, subject to an adjustment based on changes in
economy-wide productivity (``the MFP adjustment'') as required under
section 1886(m)(3)(A)(i) of the Act and an additional reduction
required by sections 1886(m)(3)(A)(ii) and 1886(m)(4) of the Act, is
also further reduced by 2.0 percentage points.
In this final rule, in accordance with the statute, we reduced the
FY 2014 full market basket estimate of 2.5 percent (based on IGI's
second quarter 2013 forecast of the FY 2009-based LTCH-specific market
basket) by the FY 2014 MFP adjustment (that is, the 10-year moving
average of MFP for the period ending FY 2014, as described in section
V.A.1. of the preamble of this final rule) of 0.5 percentage point
(based on IGI's second quarter 2013 forecast). Following application of
the productivity adjustment, the adjusted market basket update of 2.0
percent (2.5 percent minus 0.5 percentage point) is then reduced by 0.3
percentage point, as required by sections 1886(m)(3)(A)(ii) and
1886(m)(4)(D) of the Act. Therefore, in this final rule, under the
authority of section 123 of the BBRA as amended by section 307(b) of
the BIPA, consistent with our proposal, we are establishing an annual
market basket update under the LTCH PPS for FY 2014 of 1.7 percent
(that is, the most recent estimate of the LTCH PPS market basket update
at this time of 2.5 percent, less the MFP adjustment of 0.5 percentage
point, and less the 0.3 percentage point required under section
1886(m)(4)(D) of the Act), provided the LTCH submits quality reporting
data in accordance with section 1886(m)(5) of the Act (as discussed
above in section VIII.C.2.c. of this preamble). Accordingly, consistent
with our proposal, we are revising Sec. 412.523(c)(3) by adding a new
paragraph (x), which specifies that the standard Federal rate for FY
2014 is the standard Federal rate for the previous LTCH PPS year
updated by 1.7 percent, and as further adjusted, as appropriate, as
described in Sec. 412.523(d). For LTCHs that fail to submit quality
reporting data under the LTCHQR Program, under Sec. 412.523(c)(3)(x)
in conjunction with Sec. 412.523(c)(4), as we proposed, we further
reduce the annual update to the LTCH PPS standard Federal rate by 2.0
percentage points in accordance with section 1886(m)(5) of the Act (as
discussed previously in section VIII.C.2.c. of this preamble).
Accordingly, consistent with our proposal, we are establishing an
annual update to the LTCH PPS standard Federal rate of -0.3 percent
(that is, 1.7 percent minus 2.0 percentage points) for FY 2014 for
LTCHs that fail to submit quality reporting data under the LTCHQR
Program. (We note that, as we proposed, we are also adjusting the FY
2014 standard Federal rate by the application of the one-time
prospective adjustment under the second year of the 3-year phase-in
under Sec. 412.523(d)(3) (discussed below in section VIII.C.3. of this
preamble) and by an area wage level budget neutrality factor in
accordance with Sec. 412.523(d)(4) (as discussed in section V.B.5. of
the Addendum of this final rule).)
3. Adjustment for the Second Year of the Phase-In of the One-Time
Prospective Adjustment to the Standard Federal Rate under Sec.
412.523(d)(3)
We set forth regulations implementing the LTCH PPS, based upon the
broad authority granted to the Secretary, under section 123 of the BBRA
(as amended by section 307(b) of the BIPA). Section 123(a)(1) of the
BBRA required that the system ``maintain budget neutrality'' in the
August 30, 2002 LTCH PPS final rule (67 FR 55954). The statutory budget
neutrality requirement means that estimated aggregate payments under
the LTCH PPS for FY 2003 would be equal to the estimated aggregate
payments that would have been made if the LTCH PPS were not implemented
for FY 2003. The methodology for determining the LTCH PPS standard
Federal rate for FY 2003 that would ``maintain budget neutrality'' is
described in considerable detail in the August 30, 2002 final rule (67
FR 56027 through 56037). Our methodology for estimating payments for
the purposes of budget neutrality calculations used the best available
data, and necessarily reflected several assumptions (for example,
costs, inflation factors, and intensity of services provided) in
estimating aggregate payments that would have been made if the LTCH PPS
had not been implemented (without accounting for certain statutory
provisions that affect the level of payments to LTCHs in years prior to
the implementation of the LTCH PPS, as required by the statute).
In the August 30, 2002 final rule, we also stated our intentions to
monitor LTCH PPS payment data to evaluate whether later data varied
significantly from the data available at the time of the original
budget neutrality calculations (for example, data related to inflation
factors, intensity of services provided, or behavioral response to the
implementation of the LTCH PPS). To the extent the later data
significantly differed from the data employed in the original
calculations, the aggregate amount of payments during FY 2003 based on
later data may be higher or lower than the estimates upon which the
budget neutrality calculations were based. Therefore, in that same
final rule, under the broad authority conferred upon the Secretary in
developing the LTCH PPS, including the authority for establishing
appropriate adjustments, under section 123(a)(1) of the BBRA, as
amended by section 307(b) of the BIPA, we provided in Sec.
412.523(d)(3) of the regulations for the possibility of making a one-
time prospective adjustment to the LTCH PPS rates, so that the effect
of any significant difference between

[[Page 50764]]

actual payments and estimated payments for the first year of the LTCH
PPS would not be perpetuated in the LTCH PPS rates for future years. We
refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53487
through 53488) for a complete discussion of the history of the
development of the one-time prospective adjustment to the LTCH PPS
standard Federal rate at Sec. 412.523(d)(3).
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53495), we finalized
our policy to make a one-time prospective adjustment to the standard
Federal rate so that it will be permanently reduced by approximately
3.75 percent to account for the estimated difference between projected
aggregate FY 2003 LTCH PPS payments and the projected aggregate
payments that would have been made in FY 2003 under the TEFRA payment
system if the LTCH PPS had not been implemented. Specifically, using
the methodology we adopted in that same final rule, we determined that
permanently applying a factor of 0.9625 (that is, a permanent reduction
of approximately 3.75 percent) to the standard Federal rate is
necessary to ensure estimated total FY 2003 LTCH PPS payments equal
estimated total FY 2003 TEFRA payments consistent with our stated
policy goal of the one-time prospective adjustment under Sec.
412.523(d)(3) (that is, to ensure that the difference between estimated
total FY 2003 LTCH PPS payments and estimated total FY 2003 TEFRA
payments is not perpetuated in the LTCH PPS payment rates in future
years). (We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77
FR 53487 through 53502) for a complete discussion of the evaluation
approach, methodology, and determination of the one-time prospective
adjustment to the LTCH PPS standard Federal rate at Sec.
412.523(d)(3).)
Given the magnitude of this adjustment, in the FY 2013 IPPS/LTCH
PPS final rule (77 FR 53501 through 53502), under Sec. 412.523(d)(3),
we established a policy to phase-in the permanent adjustment of 0.9625
to the standard Federal rate over a 3-year period. To achieve a
permanent adjustment of 0.9625, under the phase-in of this adjustment,
in that same final rule, we explained that we will apply a factor of
0.98734 to the standard Federal rate in each year of the 3-year phase-
in, that is, in FY 2013 (which does not apply to payments for
discharges occurring on or after October 1, 2012, and on or before
December 28, 2012, consistent with current law), FY 2014, and FY 2015.
By applying a permanent factor of 0.98734 to the standard Federal rate
in each year for FYs 2013, 2014, and 2015, we will completely account
for the entire adjustment by having applied a cumulative factor of
0.9625 (calculated as 0.98734 x 0.98734 x 0.98734 = 0.9625) to the
standard Federal rate. Accordingly, in the FY 2014 IPPS/LTCH PPS
proposed rule (78 FR 27668), in accordance with the existing
regulations at Sec. 412.523(d)(3), we proposed to apply a permanent
factor of 0.98734 for FY 2014 to the standard Federal rate under the
second year of the 3-year phase-in of the one-time prospective
adjustment.
Comment: Several commenters reiterated the objections raised in
response to the one-time prospective adjustment under Sec.
412.523(d)(3) proposal presented in the FY 2013 IPPS/LTCH PPS proposed
rule, and continued to assert that the adjustment is ``unnecessary'' or
``overstated.'' Specifically, some of these commenters asserted that
the adjustment is ``unnecessary'' because they believed that the policy
objective behind the one-time prospective adjustment has already been
accomplished by other adjustments and payment policy changes under the
LTCH PPS since its implementation in FY 2003. The commenters who
believe that the adjustment is ``overstated'' maintained that CMS has
not accounted for the change in the percentage of cases paid under the
Federal (base) rate since FY 2003 when determining the adjustment
necessary to ensure that the difference between estimated total FY 2003
LTCH PPS payments and estimated total FY 2003 TEFRA payments is not
perpetuated in the LTCH PPS payment rates in future years. These
commenters did not raise objections to CMS' finding that estimated FY
2003 LTCH PPS payments are 2.5 percent higher than estimated total FY
2003 TEFRA payments, but, based on their analysis, these commenters
believed that only a 2.75 percent reduction to the current standard
Federal rate (rather than the approximate 3.75 percent reduction
determined by CMS) is necessary to reduce total current LTCH PPS
spending by 2.5 percent because there are now more cases paid under the
standard Federal rate today than there were in FY 2003 (approximately
70 percent of cases in FY 2012 compared to approximately 50 percent of
cases in FY 2003). Therefore, these commenters suggested that CMS
eliminate the one-time prospective adjustment, or correct the amount of
the adjustment for the remaining 2 years of the existing 3-year phase-
in (FYs 2014 and 2015). Other commenters supported our proposed
continuation of the 3-year phase-in of the one-time prospective
adjustment, if after further analysis we determine that the adjustment
is necessary.
Response: We continue to disagree with the commenters that the one-
time prospective adjustment under Sec. 412.523(d)(3) of approximately
3.75 percent established in the FY 2013 IPPS/LTCH PPS proposed and
final rules is ``unnecessary'' or ``overstated.'' As we explained in
our responses to similar comments in the FY 2013 IPPS/LTCH PPS final
rule (78 FR 53493 through 53494), the other payment policy changes and
adjustments made since the implementation of the LTCH PPS were not made
to address any budget neutrality requirement related to the initial
implementation of the LTCH PPS, and do not serve as a substitute for
the one-time prospective adjustment under Sec. 412.523(d)(3). The
policy changes and adjustments that have been made to the LTCH PPS
since its inception are part and parcel of fine-tuning a new
prospective payment system, and were made to address explicitly stated
policy goals, none of which were duplicative of the stated purpose and
end-result of the one-time prospective adjustment. The purpose of the
one-time prospective adjustment under Sec. 412.523(d)(3) is to ensure
that any significant difference between estimated total FY 2003 LTCH
PPS payments and estimated total FY 2003 TEFRA payments is not
perpetuated in the LTCH PPS payment rates (that is, the standard
Federal rate) in future years. Our policy has always been that the one-
time prospective adjustment be applied to the standard Federal rate.
Our policy objective in providing for this one-time prospective
adjustment has always been to ensure that computations based on the
earlier, necessarily limited (but at the time best available) data at
the inception of the LTCH PPS would not be built permanently into the
payment rates if data available at a later date could provide more
accurate results. The intended goal of the one-time prospective
adjustment is to establish the LTCH PPS standard Federal rate in a
manner that results in bringing the LTCH PPS standard Federal rate to
the level it would have been had the estimated total FY 2003 LTCH PPS
payments been 2.5 percent lower. Our goal is not to reduce current
total LTCH PPS spending by 2.5 percent, as mistakenly believed by some
commenters. We continue to believe that the one-time prospective
adjustment is based on the difference between what would have otherwise

[[Page 50765]]

been paid under the TEFRA payment system and payments made under the
LTCH PPS as it was implemented in FY 2003, consistent with our policy
goal of the one-time prospective adjustment. For these reasons, we
continue to disagree with the commenters' assertions that the payment
impact of policy changes and adjustments that have been made since the
implementation of the LTCH PPS should be accounted for when evaluating
the necessity of the one-time prospective adjustment under Sec.
412.523(d)(3).
We also disagree with the commenters that the one-time prospective
adjustment of approximately 3.75 percent is overstated because our
methodology does not account for the fact that there are now more cases
paid under the standard Federal rate (and relatively fewer cases paid
as short-stay outliers (SSOs)) than there were paid under the standard
Federal rate in FY 2003 (where there were relatively more cases paid as
SSOs). Although the relative level of cases paid under the standard
Federal rate (and cases paid as SSOs) has changed since the inception
of the LTCH PPS, the policy objective of the one-time prospective
adjustment has always been to ensure that the LTCH PPS standard Federal
rate originally determined for FY 2003 does not perpetuate any
significant difference between the data used in the original
computation of budget neutrality for FY 2003 and more recent data to
determine budget neutrality for FY 2003. Consistent with this policy
objective, our methodology for determining a one-time prospective
adjustment compares estimated payments that would have been made in FY
2003 under the TEFRA payment system to estimated payments under the
LTCH PPS in FY 2003. Therefore, the data and methodology that we used
for this purpose is limited to the types of Medicare cases projected to
have been treated in LTCHs in 2003, and the current levels of cases
paid under the standard Federal rate (or paid under the SSO policy) are
not germane to the computations of budget neutrality for FY 2003 under
the one-time prospective adjustment under Sec. 412.523(d)(3).
The intended goal of the one-time prospective adjustment, to ensure
that any significant difference between estimated total FY 2003 LTCH
PPS payments and estimated total FY 2003 TEFRA payments is not
perpetuated in the LTCH PPS payment rates (that is, the standard
Federal rate) in future years, is not to reduce current total LTCH PPS
spending by 2.5 percent, as mistakenly stated by some commenters.
Rather, the intended goal of the one-time prospective adjustment is to
adjust the LTCH PPS standard Federal rate in a manner that results in
bringing the standard Federal rate to the level it should be had the FY
2003 standard Federal rate resulted in estimated aggregate LTCH PPS
payments that were equal to the level they would have been if the LTCH
PPS had not been implemented (that is, FY 2003 payments under the TEFRA
system), based on actual FY 2003 data. The current mix of cases paid
under the standard Federal rate has no relationship to estimated FY
2003 LTCH PPS payments, which were used to evaluate and calculate the
one-time prospective adjustment under Sec. 412.523(d)(3). Our
methodology for determining the one-time prospective adjustment of
approximately 3.75 percent is consistent with our stated goal because
it makes an adjustment to the current standard Federal rate to bring it
to the level that the FY 2003 standard Federal (base) rate would have
been if we had determined that rate based on the best data currently
available to estimate FY 2003 payments to LTCHs. Therefore, we continue
to believe that the one-time prospective adjustment should be based on
any difference in payment in FY 2003 between what would have otherwise
been paid under the TEFRA payment system and payments made under the
LTCH PPS as it was implemented in FY 2003, only. For these reasons, we
disagree with the commenters' assertions that the one-time prospective
adjustment of approximately 3.75 percent is overstated, and we are not
adopting the commenters' suggestion to reduce the adjustment by making
an adjustment to our methodology for calculating the one-time
prospective adjustment to account for the change in the levels of cases
paid under the standard Federal rate.
Finally, we appreciate the commenters' support for our proposal to
continue the established 3-year phase-in of the one-time prospective
adjustment. Therefore, after consideration of public comments, we are
finalizing our proposal to apply a permanent factor of 0.98734 for FY
2014 to the standard Federal rate under the second year of the 3-year
phase-in of the one-time prospective adjustment, without modification.
4. Summary of Other Public Comments on the Proposed LTCH PPS Payment
Rates for FY 2014
We received a number of public comments that were not within the
scope of this regulation, but we appreciate the commenters for sharing
their concerns. We also received public comments on several other
issues related to the proposed LTCH PPS payment rates for FY 2014, but
not specifically addressed by the proposals and related discussion
presented in the FY 2014 IPPS/LTCH PPS proposed rule.
Comment: One commenter questioned how the changes to the Medicare
disproportionate share hospital (DSH) payment methodology for inpatient
operating costs under the IPPS beginning in FY 2014, provided for by
section 3133 of the Affordable Care Act, would affect payments under
the LTCH PPS. Specifically, the commenter questioned how those changes
to the IPPS DSH payment methodology would affect the LTCH PPS payment
adjustments that are based on ``IPPS rates'' for some patients (that
is, the ``IPPS-comparable amount'' under the SSO policy at Sec.
412.529(d)(4) and the ``IPPS-equivalent amount'' under the 25-percent
threshold payment adjustment policy at Sec. 412.534(f) and Sec.
412.536(e)). Under the provisions of section 3133 of the Affordable
Care Act, starting in FY 2014, IPPS hospitals that qualify for Medicare
DSH payments will receive an empirically justified Medicare DSH payment
equal to 25 percent of the payment amount they previously would have
received under the existing methodology under section 1886(d)(5)(F).
The remaining amount, equal to 75 percent of the amount that would
otherwise have been paid in Medicare DSH payments, will be adjusted to
reflect changes in the percentage of individuals that are uninsured.
Hospitals that receive empirically justified Medicare DSH payments will
then receive an additional payment (referred to as an uncompensated
care payment) that reflects the hospital's amount of uncompensated care
relative to the total uncompensated care amount for all eligible
hospitals. (For additional information on the changes to the Medicare
DSH payment adjustment methodology as provided by Section 3133 of the
Affordable Care Act, we refer readers to section V.E.3. of this
preamble.) The commenter asserted that, although the new uncompensated
care payment is only applicable to subsection (d) hospitals that are
paid under the IPPS, LTCH PPS payments that are based on ``IPPS rates''
would be incomplete without the inclusion of an uncompensated care
payment derived on the same basis as is the case for IPPS hospitals.
The commenter also pointed out that the current ``IPPS-comparable
amount'' and ``IPPS-equivalent amount'' under the LTCH PPS include

[[Page 50766]]

adjustments for LTCHs treating low-income patients.
Response: We appreciate the commenter bringing this issue to our
attention. In the FY 2014 IPPS/LTCH PPS proposed rule, we inadvertently
neglected to specifically indicate how the changes to the Medicare IPPS
DSH payment adjustment methodology beginning in FY 2014 provided for by
section 3133 of the Affordable Care Act, including the new
uncompensated care payment, would be reflected in the ``IPPS-comparable
amount'' under the SSO policy at Sec. 412.529(d)(4) and the ``IPPS-
equivalent amount'' under the 25-percent threshold payment adjustment
policy at Sec. 412.534(f) and Sec. 412.536(e). The determination of
both the ``IPPS-comparable amount'' and the ``IPPS-equivalent amount''
under the current regulations specifically includes amounts for
inpatient operating costs ``for the costs of serving a disproportionate
share of low-income patients.'' (We refer readers to Sec.
412.529(d)(4)(ii)(C), Sec. 412.534(f)(2)(iii), and Sec.
412.536(e)(2)(iii) of the regulations.) When we adopted the ``IPPS-
comparable amount'' under the SSO policy in the RY 2007 LTCH PPS final
rule (71 FR 27848), we explained that this payment under the LTCH PPS
is generally comparable to a payment under the IPPS payment
methodology, and would be calculated based on the sum of the applicable
operating and capital IPPS rates in effect at the time of the discharge
from the LTCH, as established in the applicable IPPS final rule
published in the Federal Register. We also explained that there are
specific features of the IPPS that do not directly translate into the
LTCH PPS, and that ``IPPS-comparable amount'' payments would be
calculated by applying IPPS principles to achieve a close approximation
of payments that would be made under the IPPS, recognizing the fact
that not all components of the IPPS can be carried out precisely in the
LTCH PPS context. Similarly, in that same final rule (71 FR 28879), we
clarified the meaning of the ``IPPS-comparable amount'' under the 25
percent threshold payment adjustment policy, and stated that it is our
intention under the ``IPPS-equivalent amount'' to utilize and build
upon IPPS payment principles to develop a payment adjustment under the
LTCH PPS that approximates for LTCHs the payment for a particular case
that would have been made under the IPPS. Therefore, we agree with the
commenter that it is appropriate that the statutory changes to the
Medicare IPPS DSH payment adjustment methodology provided by section
3133 of the Affordable Care Act, including the new uncompensated care
payment that will begin in FY 2014, should be reflected in the
calculation of the ``IPPS-comparable amount'' and the ``IPPS-equivalent
amount'' under the LTCH PPS.
As described above, under the statutory changes to the Medicare DSH
payment adjustment methodology as implemented in the regulations at
Sec. 412.106(f), (g), and (h), in general, eligible IPPS hospitals
will receive an empirically justified Medicare DSH payment equal to 25
percent of the amount they otherwise would have received under the
current statutory formula for Medicare DSH payments. The remaining
amount, equal to an estimate of 75 percent of the amount that otherwise
would have been paid as Medicare DSH payments, reduced to reflect
changes in the percentage of individuals under the age of 65 who are
uninsured, will become available to make additional payments to each
hospital that qualifies for Medicare DSH payments and that has
uncompensated care. The additional uncompensated care payments will be
based on the hospital's amount of uncompensated care for a given time
period relative to the total amount of uncompensated care for that same
time period reported by all hospitals that receive Medicare DSH
payments. Under these changes, aggregate Medicare IPPS operating DSH
payments are projected to be reduced to 95.7 percent of the amount that
would otherwise have been paid under the current statutory Medicare DSH
payment formula. As discussed in greater detail in section V.E.3.d.(2)
of this preamble, we are specifying that under the methodology outlined
in section 1886(r)(2) of the Act, our estimate of 75 percent of the
amount that would otherwise have been paid as Medicare DSH payments
will be adjusted to 94.3 percent of that amount to reflect the change
in the percentage of individuals that are uninsured. The resulting
amount is then used to determine the amount of additional uncompensated
care payments that will be made to eligible IPPS hospitals. In other
words, Medicare DSH payments prior to the application of section 3133
of the Act are adjusted to 70.7 percent (the product of 75 percent and
94.3 percent) and the resulting amount is used to calculate the
additional uncompensated care payments to eligible hospitals. As a
result, for FY 2014, we project that the reduction in the amount of
Medicare DSH payments pursuant to section 1886(r)(1) of the Act, along
with the new additional payments for uncompensated care under section
1886(r)(2) of the Act, will result in overall Medicare DSH payments of
95.7 percent of the amount of Medicare DSH payments that would
otherwise have been made in the absence of section 3133 of the Act
(that is, 25 percent + 70.7 percent = 95.7 percent).
The current calculation of the ``IPPS-comparable amount'' and the
``IPPS-equivalent amount'' under the LTCH PPS includes an applicable
IPPS operating DSH payment amount that is based on the current
statutory Medicare DSH payment formula under section 1886(d)(5)(F) of
the Act, as implemented at Sec. Sec. 412.106(a) through (e).
Therefore, we agree with the commenter that it is appropriate to
reflect the statutory changes to the Medicare DSH payment adjustment
methodology that will begin in FY 2014 in the calculation of the
``IPPS-comparable amount'' and the ``IPPS-equivalent amount'' under the
LTCH PPS because section 3133 of the Affordable Care Act revised
section 1886(d)(5)(F) of the Act to make payments under that section
``[s]ubject to subsection (r), and the ``IPPS-comparable'' and the
``IPPS-equivalent'' amounts in the current LTCH PPS payment methodology
specifically incorporate the DSH payments under section 1886(d)(5)(F)
of the Act. To reflect the statutory changes to the Medicare DSH
payment adjustment methodology in the calculation of the ``IPPS-
comparable amount'' and the ``IPPS-equivalent amount'' under the LTCH
PPS for FY 2014 and subsequent years, we will include a reduced
Medicare DSH payment amount that reflects the projected percentage of
the payment amount calculated based on the current statutory Medicare
DSH payment formula that will be paid to eligible hospitals as
empirically justified Medicare DSH payments and uncompensated care
payments in FY 2014 and subsequent years (that is, a percentage of the
current operating DSH payment amount that is reflected in the LTCH PPS
payments that are based on IPPS rates). The projected percentage would
be updated annually consistent with the annual determination of the
amount of uncompensated care payments that will be made to eligible
hospitals under the IPPS.
We believe that this approach will result in appropriate payments
under the LTCH PPS and is consistent with our intention that the
``IPPS-comparable amount'' and the ``IPPS-equivalent amount'' under the
LTCH PPS closely resembles what an IPPS payment would have been for the
same episode of care, while recognizing that some features of the IPPS
cannot be translated directly into the LTCH PPS (71 FR 28879). We

[[Page 50767]]

believe this approach is consistent with the way we have interpreted
``IPPS-comparable amount'' and ``IPPS-equivalent amount'' because it
represents a reasonable approximation of the overall change in payments
to IPPS hospitals that is projected to result from the statutory
changes to the Medicare DSH payment adjustment methodology while
recognizing that not all components of the IPPS can be carried out
precisely in the LTCH PPS context and without imposing the
administrative burden to approximate the new uncompensated care payment
amount under the provisions of section 1886(r)(2) of the Act as
implemented at Sec. 412.106(f) through (h) for each LTCH. As described
in greater detail in section V.E.3.d.(3) of this preamble, an eligible
IPPS hospital's uncompensated care payment is determined using a
hospital-specific value that expresses the proportion of the estimated
uncompensated care amount for each eligible IPPS hospital with the
potential to receive empirically justified Medicare DSH payments
relative to the estimated uncompensated care amount for all hospitals
estimated to receive empirically justified Medicare DSH payments in the
fiscal year for which the uncompensated care payment is to be made.
Because the portion of the ``IPPS-comparable amount'' that is based on
the operating Medicare DSH payment amount derived from the current
statutory Medicare DSH payment formula is a very small percentage of
total LTCH PPS payments annually (approximately 0.1 percent) and we
have acknowledged in our initial implementation of the ``IPPS-
comparable amount'' and the ``IPPS-equivalent amount'' under the LTCH
PPS that not all components of the IPPS can be carried out precisely in
the LTCH PPS context, we do not believe that it is necessary to
undertake the calculations necessary to more precisely replicate the
statutory IPPS uncompensated care payment amount when a straightforward
and administratively simpler approximation results in a payment amount
that reflects the overall payment change IPPS hospitals are projected
to experience under the statutory changes to the Medicare DSH payment
adjustment methodology that will begin in FY 2014.
Accordingly, for FY 2014, the calculation of the ``IPPS-comparable
amount'' under Sec. 412.529(d)(4) and the ``IPPS-equivalent amount''
under Sec. 412.534(f) and Sec. 412.536(e) will include an applicable
operating Medicare DSH payment amount that is equal to 95.7 percent of
the operating Medicare DSH payment amount based the current statutory
Medicare DSH payment formula (that is, the operating Medicare DSH
payment amount currently included in those calculations).
Comment: Two commenters suggested that CMS provide additional
payment for end-stage renal disease (ESRD) patients under the LTCH PPS
for the same circumstances that such payments are made under the IPPS,
noting that section 1881(b) of the Act does not limit the adjustment to
subsection (d) hospitals. The commenters cited our regulations at Sec.
412.104 that provide for an ESRD add-on payment where the beneficiary
received dialysis services during the inpatient stay (excepting
specified MS-DRGs), constitute 10 percent or more of the IPPS
hospital's total Medicare discharges. One of the commenters included a
copy of the conclusions derived from its research, which indicate the
significant frequency and high costs of dialysis patients that are
being treated in a small number of LTCHs. This commenter also suggested
that in the alternative to an ESRD add-on payment, CMS adjust the MS-
DRG system to provide a CC or MCC for patients on dialysis.
Response: This comment is beyond the scope of the provisions of the
proposed rule. However, we note that we have responded previously to
the issue that these commenters raise in a detailed response included
in the RY 2009 LTCH PPS final rule (73 FR 26826 through 26827), which
is reiterated, in part, below. We are aware of the situation of the
particular LTCH described by both commenters, which typically treats
between 17 to 20 percent of patients that would qualify for an ESRD
add-on payment under the IPPS regulations at Sec. 412.104(a). As we
noted in the RY 2009 LTCH PPS final rule, we continue to believe that
applying an ESRD add-on payment adjustment to LTCHs would be
inappropriate. LTCH's typically treat very sick patients with a number
of serious secondary illnesses (multi-comorbidities) that require
hospital-level care for, on average, greater than 25 days for any one
episode of care. We believe that given the patient population treated
at LTCHs, a higher proportion of LTCH patients would require dialysis
than would be treated at an acute care hospital and paid for under the
IPPS. Although the LTCH PPS uses the same patient classification system
as is used by the IPPS, the relative weights assigned to the MS-LTC-
DRGs under the LTCH PPS are based on LTCH cases, which reflect
``differences in patient resource use and costs'' in LTCHs as mandated
by the statute that provides for the establishment of the LTCH PPS. A
patient classification system using relative weights, such as the DRG-
based system used by both the IPPS and the LTCH PPS, determines the
amount that Medicare pays for particular types of cases based on the
hospital resources used in treating such cases as compared to the
resources utilized in treating other types of cases, and assigns all
cases numerical values called ``relative weights.'' Data, such as
charges, used to measure hospital resource use for each MS-LTC-DRG is
captured on patient claims, which Medicare uses in the annual update of
the relative weights.
In light of the commenters' request and their analysis, we recently
reviewed LTCH claims data from the FY 2012 MedPAR files to determine
the prevalence of LTCH patients with ESRD as a secondary diagnosis as
identified by the ICD-9-CM code 585.6 (excluding cases in MS-LTC-DRGs
652 and 682 through 685, which are not included in the IPPS ESRD add-on
payment). Our analysis indicated the following:
56 percent of the LTCHs have at least 10 percent of their
cases with ESRD as a secondary diagnosis, which represents 78.8 percent
of all the cases with ESRD as a secondary diagnosis;
The average percent of cases in a MS-LTC-DRG with ESRD as
a secondary diagnosis is approximately 20 percent;
Almost 40 percent of MS-LTC-DRGs have cases with ESRD as a
secondary diagnosis, of which 71 percent of those MS-LTC-DRGs have more
than 10 percent of the cases in that MS-LTC-DRG with ESRD as a
secondary diagnosis; and
59 MS-LTC-DRGs have more than 25 percent of the cases with
ESRD as a secondary diagnosis.
Based on these findings, we continue to believe that ESRD patients
in LTCHs are adequately reflected in data used to determine the MS-LTC-
DRG relative weights for non-dialysis MS-LTC-DRGs. Therefore, we
believe that payments based on the LTCH PPS will generally reflect the
relative use of resources necessary to treat those MS-LTC-DRGs, except
for cases with unusually high costs, which could qualify for high-cost
outlier payments. Accordingly, we believe that the additional resources
associated with renal dialysis treatments are include in the LTCH PPS
payments, and we are not adopting the commenters' suggestion to provide
for an additional payment for ESRD patients under the LTCH PPS.

[[Page 50768]]

D. Expiration of Certain Payment Rules for LTCH Services--The 25-
Percent Threshold Payment Adjustment

Section 114(c) of the MMSEA, as amended by section 4302(a) of the
ARRA and sections 3106(c) and 10312(a) of the Affordable Care Act
provided for a 5-year moratorium on the full application of the 25-
percent threshold payment adjustment policy that expired for some LTCHs
and LTCH satellites for cost reporting periods beginning on or after
October 1, 2012 (``October'' LTCHs) and for other LTCHs and LTCH
satellites for cost reporting periods beginning on or after July 1,
2012 (``July'' LTCHs). In the FY 2013 IPPS/LTCH PPS final rule (77 FR
53483 through 53484) as amended by the FY 2013 IPPS/LTCH PPS correcting
amendment (77 FR 63751 through 63753), we provided for extensions to
the expiring statutory moratoria for both ``October'' and ``July''
LTCHs and LTCH satellites.
Specifically, we established a 1-year extension (that is, for cost
reporting periods beginning on or after October 1, 2012, and before
October 1, 2013) on the full application of the 25-percent threshold
payment adjustment policy for ``October'' LTCHs, and for those ``July''
LTCHs that would have been affected by the ``gap'' between the
expiration of the statutory moratorium (for cost reporting periods
beginning on or after July 1, 2012) and our prospective regulatory
relief (for cost reporting periods beginning on or after October 1,
2012), we also provided for an additional moratorium based on LTCH
discharges occurring on or after October 1, 2012 and ending at the
start of their next cost reporting period. For those ``July'' LTCHs
with cost reporting periods beginning on or after October 1, 2012, the
regulatory extension of the statutory moratorium, described above,
effective for the hospital's first cost reporting period beginning on
or after October 1, 2012, resulted in seamless coverage for that group.
However, for those ``July'' LTCHs with cost reporting periods beginning
on or after July 1, 2012, and before October 1, 2012, that would have
otherwise been subject to the ``gap'' between the expiration of the
statutory moratorium and the effective date of the regulatory
moratoria, we established a second regulatory moratorium effective with
discharges occurring beginning October 1, 2012, through the end of the
hospital cost reporting period (that is, the end of the cost reporting
period that began on or after July 1, 2012, and before October 1,
2012). For more details about these moratoria, we refer readers to the
FY 2013 IPPS/LTCH PPS final rule (77 FR 53483 through 53484).
Under current law, the regulatory moratorium on the full
application of the 25-percent threshold payment adjustment policy will
expire for all LTCHs (both ``October'' and ``July'' LTCHs) for cost
reporting periods beginning on or after October 1, 2013. As discussed
in greater detail below, we are not extending the regulatory moratorium
of the 25-percent threshold payment adjustment policy. Therefore, LTCHs
are encouraged to familiarize themselves with the prior rulemakings
that established the adjustments for the various types of LTCHs and
LTCH satellites. (We refer readers to the FY 2005 IPPS final rule (69
FR 49205 through 49214) and the RY 2007 LTCH PPS final rule (72 FR
26929). We note that the 25-percent threshold payment adjustment policy
does not apply to ``subclause (II)'' LTCHs, that is, an LTCH described
under section 1886(d)(1)(B)(iv)(II) of the Act as implemented at Sec.
412.23(e)(2)(ii) of the regulations. Subclause (II) LTCHs meeting that
definition continue to be exempted from this policy.
In the proposed rule, we noted that we were allowing the moratoria
to expire because we continue to be concerned that LTCHs that admitted
more than the applicable percentage of patients from a particular
referring hospital were, in effect, behaving like step-down units of
the referring hospital, which results in two separate Medicare
payments--one to the referring hospital and one to the LTCH--for what
we believe should be structured as one episode of care. In light of our
duties to protect the fiscal integrity of the Medicare program, we
stated that we believed that it would be inappropriate to continue to
offer the moratoria pending the implementation of the policy outcomes
of the research discussed below. We welcomed public comments on this
approach.
Comment: Several commenters questioned CMS' decision to allow the
moratorium on the full application of the 25-percent threshold payment
adjustment policy to expire. The commenters opined that CMS implied in
the FY 2013 IPPS/LTCH final rule that the regulatory moratorium
implemented for FY 2013 was being established as a bridge to new
payment policies under the LTCH PPS. The commenters assumed that CMS'
ongoing research on patient-level criteria for LTCHs would serve as the
basis for (and would result in) payment policy proposals that would
render the 25-percent threshold payment adjustment policy unnecessary.
The commenters further viewed CMS' decision to allow the moratorium to
expire, as stated in the proposed rule, as being inconsistent with the
approach taken by CMS last year in light of its consideration of a
developed framework to support potential policy proposals for FY 2015.
These commenters suggested that CMS eliminate the 25-percent threshold
payment adjustment policy or to extend the moratorium on the full
application of the 25-percent threshold payment adjustment policy for
an additional year to mitigate the potentially negative impact on the
continued economic viability of LTCHs under this policy.
Response: While we understand that the FY 2013 IPPS/LTCH PPS final
rule did not specify that we intended to fully implement the 25-percent
threshold payment adjustment policy in FY 2014, there are no statutory
or regulatory prohibitions on the Secretary that would bar her from
allowing the moratorium to expire. The FY 2013 IPPS/LTCH PPS final rule
did indicate that we had awarded research contracts for the purposes of
developing patient-level criteria that could render the 25-percent
threshold payment adjustment policy unnecessary. With that said, while
the framework resulting from interim findings of these research
projects was described in the FY 2014 IPPS/LTCH PPS proposed rule, we
did not propose to implement patient-level criteria for LTCH admissions
in FY 2014. Rather, based on the interim findings of these research
projects, we were able to present a draft framework for potential
payment policy proposals and solicited feedback.
In light of the extensive public comments that we received in
response to our initial thoughts about what the framework might entail,
in the absence of patient-level criteria being in place, we continue to
believe that the 25-percent threshold payment adjustment policy serves
as an effective instrument to protect the Medicare Trust Fund from
significant and inappropriate expenditures. (We refer readers to our
detailed discussions of the 25-percent threshold payment adjustment
policy for HwHs and LTCH satellites in the FY 2005 IPPS final rule (69
FR 49191 through 49214) and its application to all other LTCHs in the
RY 2008 LTCH PPS final rule (72 FR 26919 through 26944).) We further
believe that the partial implementation of the 25-percent threshold
payment adjustment policy has begun to serve this purpose. We note that
the Office of the Assistant Secretary for Planning and Evaluation
(ASPE) has conducted an analysis of LTCH referral patterns as part of
its contract with Acumen, LLC. The results

[[Page 50769]]

of Acumen's analysis indicate that, from 2010 through 2012
approximately 9-10 percent of total LTCH stays would have been subject
to a payment adjustment under the 25-percent threshold payment
adjustment policy. We note that a subset of those stays (for example,
in rural LTCHs) would have been subject to the higher 50 percent
threshold. Material supplied by an LTCH trade association as part of
its comments to the FY 2014 IPPS/LTCH PPS proposed rule also support
this conclusion.
With regard to the potentially negative impact of the 25-percent
threshold payment adjustment policy on the economic viability of LTCHs,
we note that although we understand that some LTCHs have much lower
margins and some much higher margins, LTCHs have generally adapted and
succeeded under the 25-percent threshold payment adjustment policy as
it was modified by the statutory and regulatory moratoria. (We refer
readers to MedPAC's March 2013 Report to the Congress, page 251, which
notes that aggregate Medicare margins for LTCHs in 2013 would be 5.9
percent). Therefore, we believe that allowing the regulatory moratorium
to expire and the 25-percent threshold payment adjustment policy to be
fully implemented for cost reporting periods beginning on or after
October 1, 2013, is the appropriate policy at least until such time as
payments under the LTCH PPS are based on the adoption of clinically
based, patient-level criteria.
Comment: MedPAC submitted a public comment regarding the expiration
of the moratorium on the full implementation of the 25-percent
threshold payment adjustment policy. MedPAC noted in its comment that
the policy was implemented to ensure that LTCHs did not ``. . . serve
as de facto units of IPPS hospitals,'' and stated that it considers
this policy, in the absence of LTCH admission criteria, as a ``blunt
but necessary'' instrument.'' MedPAC encouraged the use of clinical
patient-level admission criteria such as our CCI/MC framework, but
stated ``[n]evertheless, we cannot ignore the possibility of a new set
of inappropriate provider responses to payment incentives under the
CCI/MC framework. Therefore, if CMS moves forward with its CCI/MC
criteria, we urge the agency to continue to apply the 25 percent rule
during the implementation until the robustness of the CCI/MC criteria
can be assessed and unintended consequences can be observed and
addressed.''
Response: We appreciate MedPAC's support and for sharing its
concerns regarding the future implementation of LTCH patient-level
admissions criteria.
Comment: One commenter opposed full implementation of the 25-
percent threshold payment adjustment policy and believed that, in an
effort to avoid the payment reduction for admitting patients in excess
of the applicable threshold, LTCHs would ``swap'' patients among
themselves from referring hospitals to stay within their threshold. The
commenter also noted that LTCHs would be presented with significant
financial consequences for exceeding their thresholds as a result of
the full implementation of the 25-percent threshold payment adjustment
policy. The commenter also believed that the 25-percent threshold
payment adjustment policy is not appropriate because of the differences
between the care provided in LTCHs and IPPS hospitals, and stated that
``LTCH patients are sicker and receive a unique set of services for
their medical severity'' and ``. . . these are not the same short term
acute interventions that are the focus of PPS hospitals.''
Response: We note that the 25-percent threshold payment adjustment
policy was not proposed in the FY 2014 IPPS/LTCH PPS proposed rule.
Rather, in the absence of proposing regulatory changes or a further
extension of the moratorium, the policy simply becomes effective as set
forth in our regulations at Sec. Sec. 412.534 and 412.536. We are
aware that, in areas where there are a number of LTCHs, patient
``swapping'' may enable hospitals to avoid exceeding their applicable
thresholds. The ability of some LTCHs to side-step the intent of the
25-percent threshold payment adjustment policy is another reason why we
believe that it is important to develop patient-level criteria for
LTCHs, as we discussed in the FY 2014 IPPS/LTCH PPS proposed rule, that
will more clearly identify those patients that we believe are the most
appropriate for treatment in an LTCH. In the meantime, it is incumbent
upon us to attempt to limit the percentage of beneficiaries for whom
the Medicare program generates two PPS payments for what is essentially
one episode of care. Furthermore, the financial impact mentioned by the
commenter can be minimized if an LTCH treats patients who achieve high
cost outlier status at the referring hospital because those patients
are not counted towards the percentage threshold.
Although adapting to the full implementation of the 25-percent
threshold payment adjustment policy may be challenging for a particular
LTCH, we do not agree with the commenter's assertion that this policy
will compromise an LTCH's ability to provide care for those Medicare
beneficiaries that the LTCH appropriately admits. In addition, the
conclusions that we draw from the data reported by the Acumen analysis
regarding LTCH compliance with the 25-percent threshold payment
adjustment policy for the ASPE project, in combination with MedPAC's
report on aggregate LTCH margins for FY 2013, both explained in the
previous response, do not appear to support the claims that there will
be widespread economic consequences for LTCHs as a result of the full
application of the 25-percent threshold payment adjustment policy.
While we understand that some LTCHs are equipped to provide medical
care for high-acuity severely sick patients, as described in the
proposed rule, our data indicate that there are many patients admitted
to LTCHs that do not fit this description. In addition, we disagree
with the commenter's assertion that hospitals paid under the IPPS focus
solely on short-term interventions and are not equipped to handle these
high-acuity patients. As we noted in the FY 2014 IPPS/LTCH PPS proposed
rule, ``Our 2012 data indicates that less than 2 percent of all
Medicare beneficiaries who were hospitalized in CY 2010 were treated in
LTCHs.
Our 2013 data indicates that New Hampshire, Maine, and Vermont have
no LTCHs and the following States have five or fewer LTCHs:
Connecticut, Delaware, Hawaii, Iowa, Idaho, Kansas, Maryland,
Minnesota, Montana, Nebraska, New Mexico, New York, Wisconsin, West
Virginia, Wyoming, and the District of Columbia. Therefore, the number
of LTCHs and their geographic distribution suggest to us that LTCHs are
only treating a small percentage of the patients that the LTCH industry
has identified as their target population nationwide'' (78 FR 27669).
Clearly, in areas where there is little or no LTCH presence, general
acute care hospitals are effectively providing treatment for the same
types of patients that are treated in LTCHs in areas where there is one
or more LTCH present.
Comment: Several commenters expressed concern with the full
application of the 25-percent threshold payment adjustment policy to
freestanding LTCHs and ``grandfathered'' HwHs ``for the first time'' as
these hospitals had previously been exempted from any application of
the 25-percent threshold payment adjustment policy. Some commenters
identified specific problems that groups of LTCHs that receive
``special'' treatment under the regulations (rural LTCHs and LTCHs
admitting from MSA-dominant or urban single referring hospitals) have
encountered even under

[[Page 50770]]

the moratorium on the full implementation of the 25-percent threshold
payment adjustment policy. Several commenters representing LTCHs in
rural areas with few referring hospitals and a single-hospital MSA
described the negative consequences they anticipated if the 25-percent
threshold payment adjustment policy were to be fully implemented,
including possible hospital closures, access issues for beneficiaries,
the diversion of patients to geographic areas away from their homes,
and the lack of family and community support. One comment from an LTCH
noted that, while it supported our goals under the 25-percent threshold
payment adjustment policy, the policy would be unworkable in a single-
hospital MSA. This commenter offered several suggestions to amend the
existing policy, including exempting the six single-hospital MSAs in
the United States or at least exempting the three freestanding LTCHs in
those MSAs; grandfathering LTCHs currently operating as freestanding
LTCHs in single-hospital MSAs in accordance with our policies to
``protect existing hospitals from potentially adverse impacts,''
exempting LTCHs based on their distance from other LTCHs; or increasing
the threshold percentage for single-hospital MSAs. The commenter also
suggested excluding cases that exceed a specific length of stay from
the 25-percent threshold payment adjustment policy, for example, cases
that exceed 2 standard deviations from the average length of stay of
the designated DRG at the referring hospital, in addition to excluding
high cost outlier cases from the percentage threshold calculation and
presuming that such cases received the full course of treatment;
blending the otherwise unadjusted LTCH PPS payment and the IPPS-
comparable payment instituted for cases exceeding the applicable
threshold (as in the short-stay outlier (SSO) policy at Sec.
412.529(c)(2)(iv)); or reinstating the ``transition'' to the full
implementation of the 25-percent threshold payment adjustment policy.
Response: We agree with the commenter that, with the expiration of
the moratoria, full implementation of the 25-percent threshold payment
adjustment policy would apply to freestanding LTCHs and grandfathered
co-located LTCHs for the first time. In addition, it would lower the
percentage threshold for LTCHs in rural areas and LTCHs admitting
patients from MSA-dominant and urban single referring hospitals from
the present 75 percent to 50 percent. We understand some of the
commenters' concern that the full application of the 25-percent
threshold payment adjustment policy could result in negative
consequences for the LTCHs in rural areas and in MSAs with one
referring hospital, but we continue to believe that LTCHs are free to
admit any patient from any source without limit or restriction and that
the 25-percent threshold payment adjustment policy addresses how
Medicare will pay for patients and establishes the applicable
thresholds that are the basis for such payment (69 FR 49207).
We also appreciate the support expressed by the commenter from the
single-hospital MSA for our policy goals, in general, and the
suggestions made by this commenter. The application of the 25-percent
threshold payment adjustment policy to freestanding LTCHs and
grandfathered HwHs was finalized in RY 2008 (72 FR 26919 through
26944), and at that time we did provide a 3-year transition to the full
implementation of the policy at Sec. Sec. 412.536(f) and 412.534(h) of
the regulations, respectively. Typically, we provide transitions when
we have implemented significant policy changes in order to allow those
entities affected by the policy change a reasonable time in which to
adapt to whatever changes they need to make to come into compliance
with the new regulatory scheme. The enactment of section 114(c) of the
MMSEA of 2007, extended by section 4302 of the ARRA, sections 3106(c)
and 10312(a) of the Affordable Care Act, and our regulations finalized
for FY 2013, which will expire for cost reporting periods beginning on
or after October 1, 2013, delayed the implementation of the full
application of the 25-percent threshold payment adjustment policy under
Sec. Sec. 412.534 and 412.536 of the regulations. Congress only
delayed application of the 25-percent threshold payment adjustment
policy; it did not reverse that policy in 2008, but rather left the
decision on full implementation to the Secretary's discretion, once the
statutory moratorium expired for cost reporting periods beginning on or
after July 1, 2012 and October 1, 2012, respectively. Furthermore, we
believe that the moratorium period has allowed LTCHs adequate time to
adapt to and prepare for the full implementation of the 25-percent
threshold payment adjustment policy. In addition, we believe that it is
important to reiterate that patients that are admitted to an LTCH
having reached the high-cost outlier threshold at those referring
hospitals are not counted towards the percentage threshold.
Comment: Several commenters challenged CMS' restatement of its
original policy rationale for the establishment of the 25-percent
threshold payment adjustment that was presented in the proposed rule,
stating, that ``LTCHs that admit more than the applicable percentage of
patients from a particular referring hospital are, in effect, behaving
like step-down units of the referring hospital . . .'' The commenters
cited the report from Kennell/RTI's July 2012 ``follow-up'' research on
``Determining Medical Necessity and Appropriateness of Care for
Medicare Long-Term Care Hospitals,'' which they asserted differentiated
LTCHs from step-down units of IPPS hospitals. The commenters pointed
out that CMS' contractors stated that LTCHs treat far more high-acuity
patients than do step-down units. One commenter asserted that CMS has
``no basis to suggest that step-down units in IPPS hospitals exist of
the type and scope needed to care for patients admitted to LTCHs.''
Response: The reality of LTCHs serving as defacto step-down units
for IPPS hospitals has been at the center of our rationale for
establishing the 25-percent threshold payment adjustment policy,
beginning in FY 2005 for co-located LTCHs and LTCH satellites and in RY
2008 for all other LTCHs. Specifically, our data indicated that
Medicare patients were being discharged to LTCHs after being stabilized
at IPPS hospitals for additional hospital-level care, care that
Medicare had already paid the general acute care hospital to provide
under the IPPS. The IPPS stays for these patients were shorter than for
similar patients in communities where there was little or no LTCH
presence (69 FR 49201, 49211).
The commenters included excerpts from our report, ``Determining
Medical Necessity and Appropriateness of Care for Medicare Long-Term
Care Hospitals,'' (the follow-up report, as opposed to the Report to
Congress, as discussed in greater detail below in section VIII.E. of
this proposed rule) which indicated the percentage of critically ill
patients treated in LTCHs as compared to step-down units in support of
their contention that the distinction between LTCHs and step-down units
indicated that our 25-percent threshold payment adjustment policy was
based on a flawed premise. We disagree with the commenters. We believe
that the basis of our 25-percent threshold payment adjustment policy
has been well justified since its inception and that our recent data
support the policy. We also note that, based on the FY 2010 MedPAR
data, there were 13.8 million IPPS admissions, of which 450,989 met the
CCI/MC patient profile. In FY 2010,

[[Page 50771]]

there were 127,969 LTCH admissions, of which only 32,743 (or 31
percent) met the CCI/MC patient profile. Therefore, while it may be
correct that as a percentage of total patients, LTCHs treat a ``higher
percentage'' of critically ill patients, these numbers are useful as a
``reminder'' that IPPS step-down units do treat critically ill CCI/MC
patients, and are paid to treat those patients under the IPPS.
Comment: Several commenters, including the American College of
Thoracic Surgeons (ACTS) urged the adoption of clinical, as opposed to
systems factors, for determining admissions to LTCHs. The ACTS stated,
``[t]he [25 percent] policy is not grounded in evidence and may
restrict appropriate transfers for some patients . . .'' and further
expressed concern that although existing payment models could provide
inappropriate incentives to transfer some patients to LTCHs ``. . . we
believe that the best solution for the majority of patients is to
standardize admission criteria by creating an operational definition of
chronic critical illness, not by restricting LTCH transfers via the 25
percent rule.''
Response: We agree with the commenters regarding the value of
evidence-based clinical factors for determining which LTCH patients
Medicare should pay for under the LTCH PPS. We believe that the CCI/MC
patient profile material that we presented in the proposed rule, which
was derived from our contractor's preliminary report on the patient-
level criteria project, provided a robust framework for further
development. We note that, included among the many comments that we
received on this matter, comments on independently commissioned
research will be shared with our contractor, Kennell/RTI.
Comment: Several commenters noted that there are a number of major
changes occurring in the Medicare program for LTCHs with a wide array
of regulatory demands: the roll out of quality programs, transition to
ICD-10, implementation of requirements for electronic medical records,
efforts to integrate with other providers and payers in their
communities, and stated that LTCHs are presented with what some of
these commenters call ``substantial regulatory challenges and
uncertainty.'' Given these factors, commenters urged CMS to maintain
the 25-percent threshold payment adjustment policy's current threshold
levels and (referring to the CCI/MC patient profile framework) to ``. .
. reconsider the direction and scope of its current research and
concentrate on less severe means of raising the minimum clinical
standards for LTCHs.''
One commenter quoted a recent preliminary report by the Institute
of Medicine (IOM) on Geographic Variation in Medicare Services that
stated ``we are at a crossroads in post-acute care'' and a ``call to
action'' was issued jointly by the House of Representatives Ways and
Means Committee and Senate Finance Committee on June 19, 2013, which
requested stakeholders' input on concerns related post-acute care in
the changing medical landscape by August 19, 2013. This commenter urged
CMS to delay the full implementation of the 25-percent threshold
payment adjustment policy until the IOM's final report has been issued
and also pending the response to Congress' request for stakeholder
input.
Response: We do not believe that the forthcoming Federal fiscal
year presents uniquely burdensome regulatory demands for LTCHs. Several
of the commenters specifically mentioned the ``roll-out'' of quality
measures; transition to the ICD-10 code sets used to report medical
diagnoses and inpatient procedures from ICD-9; implementation of
requirements for electronic medical records; and efforts to integrate
with other providers and payers in their communities. However, it is
not clear to us that the presence of these programs would affect an
LTCH's ability to comply with the 25-precent threshold payment
adjustment policy. Furthermore, we note that these are not all
mandatory programs. These programs have been publicly known for some
time and LTCHs have had considerable notice of the adopted policies.
For example, the Long-Term Care Hospital Quality Reporting (LTCHQR)
Program, which was initially introduced in section 3004 of the
Affordable Care Act of 2010, required us to design and implement a pay-
for-reporting program for LTCHs by 2014, and stipulated that these
quality measures be made available by 2012, with reporting on these
measures to begin in FY 2013, and payment affected for FY 2014. The
ICD-10 code sets were originally set to be implemented on January 1,
2012, a deadline that was changed first, to October 1, 2013, and then
October 1, 2014. The Health Information Technology for Economic and
Clinical Health (HITECH) Act of 2009 provides for incentive payments
for providers who adopt and demonstrate meaningful use of certified
EHRs with the goal of widespread adoption by 2014, but this is a
voluntary program. Participation in our demonstrations for provider
integration/bundling are also purely voluntary at this time. Therefore,
we do not agree that the programs listed provide the LTCH community
with substantial regulatory challenges, or that the expiration of the
moratorium on the full application of the 25-percent threshold payment
adjustment policy constitutes an additional burden.
In addition, we do not align or link the full implementation of the
25-percent threshold payment adjustment policy and the issuance of a
final IOM report on Geographic Variation in Medicare Services and the
request by Congress for stakeholder input on the broad topic of post-
acute care. Each one of these items, independently, improves the
Medicare program.
Comment: Several commenters stated that LTCHs continue to be unable
to obtain high cost outlier (HCO) details from discharging IPPS
hospitals prior to admitting patients, therefore making it difficult
for LTCHs to benefit from our exemption of HCO patients from the
percentage calculation under the 25-percent threshold payment
adjustment policy.
Response: We have provided publicly available software for IPPS
hospitals for the purposes of tracking their charges, costs, and
determining their anticipated payments (that is, the PC PRICER, which
is available on the CMS Web site). In addition, we are aware that
commercial software is also available for such purposes. It has been
our expectation that this information would, or at least should, freely
pass between an IPPS discharge planner and an LTCH admissions officer.
We also expect LTCHs to aggressively pursue obtaining this information
from their referring IPPS hospitals and for IPPS hospitals to cooperate
with these efforts.
As we discuss the mechanics of implementing this policy, we are
taking this opportunity to note the recent findings from the Department
of Health and Human Services' Office of the Inspector General (OIG) in
an Early Alert Memorandum Report entitled, ``Co-Located Long-Term Care
Hospitals Remain Unidentified, Resulting in Potential Overpayments,''
(OEI-04-12-00491). The regulations at Sec. Sec. 412.22(e), 412.22(h),
and 412.532(i) require co-located LTCHs (HwHs or LTCH satellites) to
report their co-located status to us and the Medicare claims processing
contractor. The regulatory penalty for not reporting co-located status
as provided in Sec. 412.505 (b) is that ``. . . CMS may withhold (in
full or in part) or reduce Medicare payment to the hospital.'' The OIG
estimates that nearly half of the 211 LTCHs whose co-located status it
had determined have

[[Page 50772]]

not reported this information to contractors. We urge LTCHs that have
not met the regulatory notification requirement to do so immediately.
Comment: Several commenters stated that there is widespread
confusion about the difference between the IPPS-comparable payment,
which is an option under the SSO policy and has been suggested for
payment for non-CCI/MC patients under the preliminary framework
presented in the proposed rule, and the IPPS-equivalent payment that is
utilized under the 25-percent threshold payment adjustment policy.
Response: There are similarities between an ``IPPS-comparable''
amount under the SSO policy and an ``IPPS-equivalent'' amount under the
25-percent threshold payment adjustment policy, but there are also
differences. Both are initially calculated as one would calculate an
IPPS payment amount, including the applicable IPPS payment adjustments
that would respectively be applied to each. We refer readers to Sec.
412.529(d)(4) of the regulations for a description of the ``IPPS-
comparable'' amount and Sec. 412.534(f) for a description of the
``IPPS-equivalent'' amount. We also note that, under the SSO policy if
a case is paid an ``IPPS-comparable'' amount and is also a HCO, the
LTCH PPS fixed-loss amount is applied, whereas under the 25-percent
threshold payment adjustment policy, if the case is paid an ``IPPS-
equivalent'' amount and is also a HCO, the fixed-loss amount is based
on the IPPS fixed-loss amount. Furthermore, the ``IPPS-comparable''
amount under the SSO policy is one of four options for payment. Under
the 25-percent threshold payment adjustment policy, a case is paid
``the lesser of'' the otherwise unadjusted amount under the LTCH PPS or
``an amount payable under this subpart that is equivalent, as set forth
in paragraph (f) of this section, to the amount that would be
determined under the rules at Sec. 412.1(a).'' The most significant
difference between these two adjusted LTCH payments is also the issue
that seemed to confound the commenters; for purposes of the SSO policy,
the ``IPPS-comparable'' amount is paid as a per diem not to exceed the
full MS-DRG amount for that case. However, for purposes of the 25-
percent threshold payment adjustment policy, the ``IPPS-equivalent''
amount is the entire MS-DRG amount such as would be payable under the
IPPS (not converted to a per diem). We refer readers to a detailed
explanation of the ``IPPS-equivalent'' amount in the RY 2007 LTCH
proposed rule (71 FR 4648, 4698 through 4700).
Comment: Several commenters requested that CMS, in addition to
excluding patients from the threshold calculation under the 25-percent
threshold payment adjustment policy that had reached the HCO threshold
at the referring IPPS hospital, exclude patients that Kennell/RTI have
identified as ``appropriate'' for treatment at an LTCH, CCI/MC
patients.
Response: We understand the rationale behind the commenters'
request, that is, if we use HCO status at the referring hospital as a
proxy for a patient having completed a full course of treatment and,
therefore, a patient for whom it would be reasonable for Medicare to
generate a second payment, it is logical that we also exclude patients
from the threshold calculation that are, by definition, appropriate for
treatment in an LTCH. We agree that this rationale and request are
logical, but the CCI/MC patient profile framework has just been
presented to LTCH stakeholders for discussion and feedback. If we are
able to propose and finalize the CCI/MC patient profile framework and
we retain the 25-percent threshold payment adjustment policy, we could
consider excluding CCI/MC patients from the 25-percent threshold.
After consideration of the public comments we received, and as we
did not propose any policy changes, the regulatory moratorium on full
implementation of the 25-percent threshold payment adjustment will
expire on October 1, 2013, which means that the 25-percent threshold
payment adjustment policy will be applied to discharges occurring on or
after October 1, 2013.

E. Research on the Development of a Patient Criteria-Based Payment
Adjustment Under the LTCH PPS

1. Overview
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27668 through
27676), we presented a description of our research on the development
of patient and/or facility-level criteria for LTCHs and presented a
potential framework for developing potential payment policy proposals
based on the preliminary findings of two projects conducted by Kennell
and Associates (Kennell) and its subcontractor, RTI, under the guidance
of CMS' Center for Medicare and Medicaid Innovation (the Innovation
Center). We stated that we believed that the findings from these
projects, in large part, could be used to identify the subpopulation of
Medicare beneficiaries that should form the core of patients under the
LTCH PPS. Although this research is still not completed, we believe
that the preliminary findings suggest that certain types of patients,
namely those who are chronically critically ill and considered
medically complex, as identified by specific clinical factors, are more
appropriate candidates for high-cost treatment at an LTCH than other
types of patients.
The resulting interim framework was presented in the FY 2014 IPPS/
LTCH PPS proposed rule (78 FR 27668 through 27676). As stated in the
proposed rule, we believe that the potential policy changes discussed
are consistent with a significant body of research, which identifies
the CCI/MC patient criteria as a useful indicator of an appropriate
LTCH admission. Furthermore, the CCI/MC patient criteria appear to
coincide with the kinds of patients that LTCHs have asserted they are
best equipped to treat (78 FR 27675).
As stated in the proposed rule, we were interested in receiving
feedback from the public on the findings of this research study, as
well as the potential impact that our framework could have on hospital
markets with the expectation of formulating a proposal for FY 2015. As
a result, we received several public comments on the framework from
hospital associations, groups and coalitions of LTCHs, individual
LTCHs, and attorneys representing LTCHs. Some of these comments
included detailed data analyses. While we are not addressing these
comments in this final rule, we will be sharing the comments and the
data analyses with CMMI's contractors and soliciting their responses to
the commenters' assertions and any data that may bring into question
our contractor's interim framework.
As previously stated, although we are not addressing these comments
in this final rule, we believe that it is important to note several
specific issues mentioned by the commenters regarding the CCI/MC
patient profile framework:
CMS' identification of the CCI/MC patient is more rigorous
than MedPAC's, which is based solely on 8 ICU/CCI days prior to
discharge from an IPPS hospital without a list of additional medically
complex clinical factors. Because the research conducted by Kennell/RTI
stated that identification of the CCI/MC patient group based on
Medicare claims data was ``conservative and erring on side of being too
restrictive rather than too inclusive,'' CMS should use a less
``restrictive'' framework.
CCI/MC patients identified with the ``ICU metric'' are too
limited. Patients with high acuity and significant resource use should
be the focus of

[[Page 50773]]

LTCH-patient reform. This policy will dramatically lower payments for
high-severity cases that are not identified as CCI/MC. CMS is not
``establishing criteria to identify the types of patients who benefit
from the unique services that LTCHs provide.''
There is a group of patients that are not captured by the
CCI/MC clinical factors who could benefit from treatment in an LTCH.
Rather than establishing a framework based on a data-driven
``restrictive'' definition of which patients ``should'' be treated in
LTCHs for the full LTCH PPS payment, CMS ``. . . should assess broader
array of clinical conditions that can and should be treated in LTCHs,''
as well as an inclusive consideration of those patients presently
treated in LTCHs requiring hospital-level care.
LTCH industry-sponsored research is evaluating data on
LTCH patients that have lower cost than patients not treated in LTCHs.
The commenters suggested that CMS should consider this research.
Outcomes for patients in LTCHs are superior to those for
similar patients not treated in LTCHs.
Paying for treatment of non-CCI/MC patients under an IPPS-
comparable amount based on a per diem up to the full IPPS amount is not
appropriate and violates the statutory intent of the establishment of
the LTCH PPS, totally ``skewing'' the averaging systems of PPS payment
settings. Like all PPSs, payments should be structured as per discharge
payments subject to HCO payments.
Under the framework presented, LTCHs will be receiving the
majority of their payments based on IPPS data.
LTCHs fill a unique role in the continuum of care and our
data verifies that LTCHs case mix is becoming more complex. Clinical
standards should be established to incent treating the highest acuity,
long-stay patients and discourage admission of patients with low
acuity, suitable for admission to a lower level of care.
MedPAC summarized its comment on the CCI/MC patient profile
framework as follows:
``With respect to CMS's discussion of possible policy changes to
the long-term care hospital (LTCH) PPS that would encourage the LTCH
industry to refocus its admitting practices on serving chronically
critically ill and medically complex (CCI/MC) patients, we believe the
policy potentially represents a first real step towards criteria for
LTCH patients that would appropriately limit high LTCH payment rates to
the most medically complex patients who may be most likely to benefit
from an LTCH program of care. This approach has the potential for
significant Medicare savings, at least in the short run. The approach
also may expand the concept of site neutrality by limiting payments for
other cases admitted to LTCHs to IPPS payment rates for the same MS-
DRGs. The Commission remains concerned, however, about the level of
payments for medically complex patients in both LTCHs and ACHs. While
the Commission continues to support the use of criteria to justify
higher LTCH payments, we urge CMS to continue to strive toward site-
neutral payments so that Medicare pays the same, subject to risk
differentials for the same services, regardless of where the services
are provided.'' (p. 3).
We also want to take this opportunity to address and correct
misperceptions regarding the studies and the chronology that appeared
in the majority of the public comments. These commenters asserted that
at the time that the proposed rule was published, we had not submitted
the 2011 Report to Congress. This is incorrect. As stated in the
proposed rule, the Report to Congress on ``Determining Medical
Necessity and Appropriateness of Care for Medicare Long-Term Care
Hospitals'' required by section 114(b) of the Medicare and Medicaid
State Children's Expansion Act of 2007 (MMSEA) (Pub.L. 110-173) was
submitted in March of 2011 (78 FR 27670 through 27671). As we also
noted in the proposed rule, the report may be found on the CMS Web site
at: https://www.cms.gov/officeoflegislation/downloads/RTC-long-term-care-hospitals-final.pdf. Our contractors' research findings for the
2011 Report to Congress can be found in Appendix A of the 2011 Report
to Congress.
In addition, the description of the framework that was presented in
the FY 2014 IPPS/LTCH PPS proposed rule was also premised on
``additional follow-up research that CMS was sponsoring [to] . . .
update and refine our understanding of Medicare LTCH patients and
payments'' (78 FR 27671). One component of the follow-up research (as
opposed to the research required by section 114(b) of the MMSEA for the
2011 Report to Congress), is described in the identically-named final
report entitled ``Determining Medical Necessity and Appropriateness of
Care for Medicare Long-Term Hospitals,'' which was finalized in July
2012. This July 2012 report factored in findings resulting from the
implementation of the CARE tool, providing foundations for the
remaining follow-up research, namely the to-be-completed research
project to design a payment framework. The follow-up research on the
development of a payment framework will ultimately generate an
additional report, namely the ``Long-Term Care Hospitals and the
Chronically Critically Ill Population--Payment Recommendations (CCIP-
PR). We refer readers to the FY 2014 IPPS/LTCH PPS proposed rule (78 FR
27671 through 27672) for further discussion of this ongoing research.
We refer readers to the following Web site: www.rti.org/reports/cms/Kennell/Determine-Med-Necessity-Appropriate-Care-Medicine-LTCHs.pdf for
additional information on Kennell/RTI's work. For additional
information on the CARE tool, we refer reader to the following Web
sites: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Reports/downloads/Flood_PACPRD_RTC_CMS_Report_Jan_2012.pdf and https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Reports/downloads/GAGE_PACPRD_RTC_Supp_Materials_May_2011.pdf.
We also note that several commenters asserted that we were acting
in ``near total secrecy'' as we carried out our research, and expressed
concern regarding the lack of ``transparency'' because ``none of the
data, findings, or other information from this research [the CCI/MC
framework] has been made available to the public.'' We do not agree
with these assertions. The FY 2014 IPPS/LTCH PPS proposed rule provided
a recap of prior work (including citations to published findings) and
put the public on notice as to ongoing research, as well as preliminary
findings. Such information was made available to the public to ensure
transparency and it included a description of a possible payment
approach that ultimately may or may not figure into future proposals in
LTCH PPS rulemakings. As part of the proposed rule, interested
stakeholders were offered the opportunity to comment on a general
approach. When our research is complete, the results will be made
available to the public and, if such research leads to policy
proposals, the public will have an opportunity to review our proposals
and the data/findings supporting those proposals.
We do not expect the stakeholders to be able to perform a detailed
analysis of a specific plan because a specific plan has not yet been
formulated and has not been proposed at this time. If we do determine
that we intend to proceed with rulemaking in this area, a specific plan
will be proposed, along with relevant supporting materials.
Stakeholders will be provided the opportunity to submit comments on
this material as part of the rulemaking

[[Page 50774]]

process. The specifics of any future proposals will be determined by us
at the appropriate time during the development of any such policy.
Review of contractor reports may ultimately prove useful if policies
are ultimately proposed based on those findings, but interested parties
should plan on referring to and commenting on the documentation
associated with any future proposals during the rulemaking process as
opposed to prior to any such proposals. The payment approach detailed
in the FY 2014 IPPS/LTCH PPS proposed rule was influenced by a variety
of projects and analyses. Publicly available reports for these projects
can be found on the following Web sites: for the LTCH FPC Report to
Congress at: https://www.cms.gov/About-CMS/LegislativeAffairs/OfficeofLegislation/Downloads/RTC-Long-Term-Care-Hospitals-Final.pdf;
and for the LTCH FPC Final Report at: https://www.rti.orglreports/cms/kennell/Determine-Med-NecessityAppropriate-Care-Medicare-LTCHs.pdf. The
presented approach was additionally influenced by work performed under
the Chronically Critically Ill Population Payment Recommendation (CCIP-
PR) project. CCIP-PR is an active project, and there are no finalized
documents available at this time. There will be a final report for this
project, anticipated to be delivered to us in the Fall 2013. It is our
intention to make this report publicly available.

IX. Quality Data Reporting Requirements for Specific Providers and
Suppliers

CMS is seeking to promote higher quality and more efficient health
care for Medicare beneficiaries. This effort is supported by the
adoption of widely agreed-upon quality measures. CMS has worked with
relevant stakeholders to define measures of quality for most settings
and to measure various aspects of care for most Medicare beneficiaries.
These measures assess structural aspects of care, clinical processes,
patient experiences with care, and, increasingly, outcomes.
CMS has implemented quality reporting programs for multiple
settings of care, including:
Hospital inpatient services, under the Hospital Inpatient
Quality Reporting (IQR) Program (formerly referred to as the Reporting
Hospital Quality Data for Annual Payment Update (RHQDAPU) Program);
Hospital outpatient services, under the Hospital
Outpatient Quality Reporting (OQR) Program (formerly referred to as the
Hospital Outpatient Quality Data Reporting Program (HOP QDRP));
Care furnished by physicians and other eligible
professionals, under the Physician Quality Reporting System (PQRS,
formerly referred to as the Physician Quality Reporting Program
Initiative (PQRI));
Inpatient rehabilitation facilities, under the Inpatient
Rehabilitation Facility Quality Reporting Program (IRF QRP);
Long term care hospitals, under the Long Term Care
Hospital Quality Reporting (LTCHQR) Program;
PPS-exempt cancer hospitals, under the PPS-Exempt Cancer
Hospital Quality Reporting (PCHQR) Program;
Ambulatory surgical centers, under the Ambulatory Surgical
Center Quality Reporting (ASCQR) Program;
Inpatient psychiatric facilities, under the Inpatient
Psychiatric Facilities Quality Reporting (IPFQR) Program;
Home health agencies, under the home health quality
reporting program (HH QRP); and,
Hospices, under the Hospice Quality Reporting Program.
CMS has also implemented an end-stage renal disease quality
improvement program that links payment to performance.
In implementing the Hospital IQR Program and other quality
reporting programs, we have focused on measures that have high impact
and support CMS and HHS priorities for improved quality and efficiency
of care for Medicare beneficiaries. Our goal for the future is to align
the clinical quality measure requirements of the Hospital IQR Program
with various other Medicare and Medicaid programs, including those
authorized by the Health Information Technology for Economic and
Clinical Health (HITECH) Act, so that the burden for reporting will be
reduced. As appropriate, we will consider the adoption of measures with
electronic specifications, so that the electronic collection of
performance information is part of care delivery. Establishing such a
system will require interoperability between EHRs and CMS data
collection systems, additional infrastructural development on the part
of hospitals and CMS, and the adoption of standards for capturing,
formatting, and transmitting the data elements that make up the
measures. However, once these activities are accomplished, the adoption
of many measures that rely on data obtained directly from EHRs will
enable us to expand the Hospital IQR Program measure set with less cost
and burden to hospitals. We believe that in the near future, automatic
collection and reporting of data elements for many measures through
EHRs will greatly simplify and streamline reporting for various CMS
quality reporting programs, and that hospitals will be able to switch
primarily to EHR-based reporting of data for many measures that are
currently manually chart-abstracted and submitted to CMS for the
Hospital IQR Program.
We have also implemented a Hospital Value-Based Purchasing (VBP)
Program under section 1886(o) of the Act. In 2011, we issued the
Hospital Inpatient VBP Program final rule (76 FR 26490 through 26547).
We adopted additional policies for the Hospital VBP Program in section
IV.B. of the FY 2012 IPPS/LTCH PPS final rule (76 FR 51653 through
51660), in section XVI. of the CY 2012 OPPS/ASC final rule with comment
period (76 FR 74527 through 74547) and in section VIII.C. of the FY
2013 IPPS/LTCH PPS final rule (77 FR 53567 through 53614). We are
finalizing additional policies for this program in section V.H. of this
final rule. Under the Hospital VBP Program, hospitals will receive
value-based incentive payments if they meet performance standards with
respect to measures for a performance period for the fiscal year
involved. The measures under the Hospital VBP Program must be selected
from the measures (other than readmission measures) specified under the
Hospital IQR Program as required by section 1886(o)(2)(A) of the Act.
In selecting measures for the Hospital IQR Program, we are mindful
of the conceptual framework of the Hospital VBP Program. Section
1886(o)(2)(B)(i)(I) of the Act states that for FY 2013, the selected
measures for the Hospital VBP Program must cover at least the following
five specified conditions or procedures: Acute myocardial infarction
(AMI), Heart failure (HF), Pneumonia (PN), surgical care, as measured
by the Surgical Care Improvement Project (SCIP), and Healthcare-
Associated Infections (HAIs), as measured by the prevention metrics and
targets established in the HHS Action Plan to Prevent HAIs (or any
successor HHS plan). Section 1886(o)(2)(B)(i)(II) of the Act provides
that, for FY 2013, measures selected for the Hospital VBP Program must
also be related to the Hospital Consumer Assessment of Healthcare
Providers and Systems survey (HCAHPS).
The Hospital IQR Program is linked with the Hospital VBP Program
because the measures and reporting infrastructure for both programs
overlap. We view the Hospital VBP Program as the next step in promoting
higher quality care for Medicare

[[Page 50775]]

beneficiaries by transforming Medicare from a passive payer of claims
into an active purchaser of quality healthcare for its beneficiaries.
Value-based purchasing is an important step to revamping how care and
services are paid for, moving increasingly toward rewarding better
value, outcomes, and innovations instead of merely volume. As we stated
in the Hospital Inpatient VBP Program proposed rule (76 FR 2455), we
applied the following principles for the development and use of
measures and scoring methodologies:
Public reporting and value-based payment systems should
rely on a mix of standards, process, outcomes, and patient experience
of care measures, including measures of care transitions and changes in
patient functional status. Across all programs, we seek to move as
quickly as possible to the use of primarily outcome and patient
experience measures. To the extent practicable and appropriate, outcome
and patient experience measures should be adjusted for risk or other
appropriate patient population or provider characteristics.
To the extent possible and recognizing differences in
payment system maturity and statutory authorities, measures should be
aligned across public reporting and payment systems under Medicare and
Medicaid. The measure sets should evolve so that they include a focused
core set of measures appropriate to the specific provider category that
reflects the level of care and the most important areas of service and
measures for that provider.
The collection of information should minimize the burden
on providers to the extent possible. As part of this effort, we will
continuously seek to align our measures with the adoption of e-
specified measures, and reporting of quality data via Certified
Electronic Health Record Technology (CEHRT), so the electronic
collection of performance information is part of care delivery.
To the extent practicable, measures used by CMS should be
nationally endorsed by a multi-stakeholder organization. Measures
should be aligned with best practices among other payers and the needs
of the end users of the measures.
We also view the Hospital-Acquired Condition (HAC) payment
adjustment program authorized by section 3008 of the Affordable Care
Act and the Hospital VBP Program as related, but separate, efforts to
reduce HACs. The Hospital VBP Program is an incentive program that
awards payments to hospitals based on quality performance on a wide
variety of measures, while the program established by section 3008 of
the Affordable Care Act, the HAC Reduction Program, creates a payment
adjustment resulting in payment reductions for the lowest performing
hospitals based on their rates of HACs. Policies for the Hospital VBP
Program are included in section V.H. of the preamble of this final
rule. Policies for the HAC Reduction Program are included in section
V.I. of the preamble of this final rule.
Although we intend to monitor the various interactions of programs
authorized by the Affordable Care Act and their overall impact on
providers and suppliers, we also view programs that could potentially
affect a hospital's Medicaid payment as separate from programs that
could potentially affect a hospital's Medicare payment.
In the preamble of this final rule, we are adopting changes to the
following Medicare quality reporting systems:
In section IX.A., the Hospital IQR Program.
In section IX.B., the PCHQR Program.
In section IX.C., the LTCHQR Program.
In section IX.D., the IPFQR Program.
In addition, in section IX.E. of the preamble of this final rule,
we are adopting changes to the Medicare EHR Incentive Program and
meaningful use.

A. Hospital Inpatient Quality Reporting (IQR) Program

1. Background
a. History of Measures Adopted for the Hospital IQR Program
We refer readers to the FY 2010 IPPS/RY 2010 LTCH PPS final rule
(74 FR 43860 through 43861) and the FY 2011 IPPS/LTCH PPS final rule
(75 FR 50180 through 50181) for detailed discussions of the history of
the Hospital IQR Program, including the statutory history, and to the
FY 2013 IPPS/LTCH PPS final rule (77 FR 53503 through 53555) for the
measures we have adopted for the Hospital IQR measure set through FY
2016.
b. Maintenance of Technical Specifications for Quality Measures
The technical specifications for the Hospital IQR Program measures,
or links to Web sites hosting technical specifications, are contained
in the CMS/The Joint Commission (TJC) Specifications Manual for
National Hospital Quality Measures (Specifications Manual). This
Specifications Manual is posted on the QualityNet Web site at https://www.QualityNet.org. We generally update the Specifications Manual on a
semiannual basis and include in the updates detailed instructions and
calculation algorithms for hospitals to use when collecting and
submitting data on required measures. These semiannual updates are
accompanied by notifications to users, providing sufficient time
between the change and the effective date in order to allow users to
incorporate changes and updates to the specifications into data
collection systems. We will provide ICD-9 to ICD-10 crosswalks for the
measure specifications in the manual for preview and comment in the
July 2013 manual release.
The technical specifications for the HCAHPS patient experience of
care survey are contained in the current HCAHPS Quality Assurance
Guidelines manual, which is available at the HCAHPS On-Line Web site,
https://www.hcahpsonline.org. We maintain the HCAHPS technical
specifications by updating the HCAHPS Quality Assurance Guidelines
manual annually, and include detailed instructions on survey
implementation, data collection, data submission and other relevant
topics. As necessary, HCAHPS Bulletins are issued to provide notice of
changes and updates to technical specifications in HCAHPS data
collection systems.
Many of the quality measures used in different Medicare and
Medicaid reporting programs are endorsed by the National Quality Forum
(NQF). The NQF is a voluntary consensus standard-setting organization
with a diverse representation of consumer, purchaser, provider,
academic, clinical, and other healthcare stakeholder organizations. The
NQF was established to standardize healthcare quality measurement and
reporting through its consensus development process. As part of its
regular maintenance process for endorsed performance measures, the NQF
requires measure stewards to submit annual measure maintenance updates
and undergo maintenance of endorsement review every 3 years. In the
measure maintenance process, the measure steward (owner/developer) is
responsible for updating and maintaining the currency and relevance of
the measure and will confirm existing or minor specification changes to
NQF on an annual basis. NQF solicits information from measure stewards
for annual reviews and in order to review measures for continued
endorsement in a specific 3-year cycle.
Through NQF's measure maintenance process, NQF-endorsed measures
are sometimes updated to incorporate changes that we believe do not
substantially change the nature of the measure. Examples of such
changes

[[Page 50776]]

could be updated diagnosis or procedure codes, medication updates for
categories of medications, changes to exclusions to the patient
population, definitions, or extension of the measure endorsement to
apply to other settings. We believe these types of maintenance changes
are distinct from more substantive changes to measures that result in
what are considered new or different measures, and that they do not
trigger the same agency obligations under the Administrative Procedure
Act.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53504 through
53505), we finalized a policy under which we will use a subregulatory
process to make non-substantive updates to NQF-endorsed measures used
for the Hospital IQR Program. With respect to what constitutes
substantive versus nonsubstantive changes, we expect to make this
determination on a case-by-case basis. Examples of non-substantive
changes to measures might include updated diagnosis or procedure codes,
medication updates for categories of medications, broadening of age
ranges, and exclusions for a measure (such as the addition of a hospice
exclusion to the 30-day mortality measures). We believe that non-
substantive changes may also include updates to NQF-endorsed measures
based upon changes to guidelines upon which the measures are based. We
will revise the Specifications Manual so that it clearly identifies the
updates and provide links to where additional information on the
updates can be found. We also will post the updates on the QualityNet
Web site at https://www.QualityNet.org. We will provide sufficient lead
time for hospitals to implement the changes where changes to the data
collection systems would be necessary.
We will continue to use rulemaking to adopt substantive updates
made by the NQF to the endorsed measures we have adopted for the
Hospital IQR Program. Examples of changes that we might consider to be
substantive would be those in which the changes are so significant that
the measure is no longer the same measure, or when a standard of
performance assessed by a measure becomes more stringent (for example,
changes in acceptable timing of medication, procedure/process, or test
administration). Another example of a substantive change would be where
the NQF has extended its endorsement of a previously endorsed measure
to a new setting, such as extending a measure from the inpatient
setting to hospice.
The quality measure SCIP INF 4, Controlled 6AM Glucose for Cardiac
Surgery Patients (NQF 300), is an example of a measure that
has undergone extensive changes as a result of the NQF maintenance
process. The specifications have substantively changed and we proposed
to adopt these changes in the FY 2014 IPPS/LTCH PPS proposed rule (78
FR 27684). As we discuss below, the NQF Steering Committee voted to
change the measure from controlled glucose at 6AM to controlled glucose
18-24 hours post-surgery for cardiac surgery patients. The
specifications also require corrective action to be documented if a
post-operative glucose is over 180mg/dl. The specifications for the
proposed updated measure can be found at: https://www.qualityforum.org.
We believe that this policy adequately balances our need to
incorporate non-substantive NQF updates to NQF-endorsed Hospital IQR
Program measures in the most expeditious manner possible, while
preserving the public's ability to comment on updates that so
fundamentally change an endorsed measure that it is no longer the same
measure that we originally adopted. We also note that the NQF process
incorporates an opportunity for public comment and engagement in the
measure maintenance process. These policies regarding what is
considered substantive versus non-substantive apply to all measures in
the Hospital IQR Program.
Comment: One commenter suggested that measure maintenance changes
such as broadening of age ranges, and exclusions for a measure (for
example, addition of a hospice exclusion to the 30-day mortality
measures), as well as updates to NQF-endorsed measures based upon
changes to guidelines upon which the measure was based) are substantive
and should be proposed via rulemaking. One commenter urged that any
changes involving individuals under the age of 18 in measures that were
initially developed for adult populations include a process for review
and input by a panel of pediatric experts and stakeholders.
Response: As stated previously in this section, we will continue to
use rulemaking to adopt substantive updates made to the endorsed
measures we have adopted for the Hospital IQR Program. We believe that
measure maintenance changes can be either substantive, which could
result in what are considered new or different measures, or
nonsubstantive, which does not trigger the same agency obligations
under the Administrative Procedure Act. With respect to what
constitutes substantive versus nonsubstantive changes, we expect to
make this determination on a case-by-case basis to assess changes such
as those suggested by the commenter--broadening of age ranges,
additional exclusions for a measure, guideline changes, etc. We thank
the commenter for the suggestion for getting input by a panel of
pediatric experts and stakeholders when a measure applying to adults
are changed to include individuals under the age of 18 and will
consider doing so in the future.
c. Public Display of Quality Measures
Section 1886(b)(3)(B)(viii)(VII) of the Act, as amended by section
3001(a)(2) of the Affordable Care Act, requires that the Secretary
establish procedures for making information regarding measures
submitted available to the public after ensuring that a hospital has
the opportunity to review its data before they are made public. In the
FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27678 through 27679), we
proposed, for the FY 2014 Hospital IQR Program and subsequent years, to
continue our current policy of reporting data from the Hospital IQR
Program as soon as it is feasible on CMS Web sites such as the Hospital
Compare Web site, https://www.hospitalcompare.medicare.gov, and/or the
interactive https://data.medicare.gov Web site, after a 30-day preview
period.
The Hospital Compare Web site is an interactive Web tool that
assists beneficiaries by providing information on hospital quality of
care to those who need to select a hospital. It further serves to
encourage beneficiaries to work with their doctors and hospitals to
discuss the quality of care hospitals provide to patients, thereby
providing an additional incentive to hospitals to improve the quality
of care that they furnish. The Hospital IQR Program currently includes
process of care measures, risk-adjusted outcome measures, the HCAHPS
patient experience-of-care survey, structural measures, Emergency
Department Throughput timing measures, hospital acquired condition
measures, immunization measures, and hospital acquired infection
measures, all of which are featured on the Hospital Compare Web site.
However, information that may not be relevant to or easily
understood by beneficiaries and information for which there are
unresolved display issues or design considerations for inclusion on
Hospital Compare may be made available on other CMS Web sites that are
not intended to be used as an interactive Web tool, such as https://www.cms.hhs.gov/HospitalQualityInits/ or https://data.medicare.gov.
Publicly reporting the information in this

[[Page 50777]]

manner, although not on the Hospital Compare Web site, allows CMS to
meet the requirement under section 1886(b)(3)(B)(viii)(VII) of the Act
for establishing procedures to make information regarding measures
submitted under the Hospital IQR Program available to the public
following a preview period. In such circumstances, affected parties are
notified via CMS listservs, CMS email blasts and memorandums, Hospital
Open Door Forums, national provider calls, and QualityNet announcements
regarding the release of preview reports followed by the posting of
data on a Web site other than Hospital Compare.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53507 through
53508), we removed five Agency for Healthcare Research and Quality
(AHRQ) Patient Safety Indicators (PSIs). We did so noting that four of
these indicators were part of the AHRQ PSI-90 measure, and that this
information could be made publically available in the future in
addition to the PSI-90 composite measure results that we currently make
publically available. We recently received feedback from consumer
advocacy groups and large purchasers that data on the individual PSI
indicators that are part of the PSI-90 composite measure are highly
relevant to consumers, and not publically reporting them would be a
disservice to consumers of healthcare. Therefore, we proposed to make
publicly available hospital level data for the PSI indicators that are
part of the PSI-90 composite in addition to the composite results. We
invited public comment on this proposal.
Comment: Some commenters supported the proposal to break out the
reporting of hospital-level data for the PSI indicators that are part
of the PSI-90 composite, in addition to the composite results. The
commenters stated that while the display of specific adverse event data
is more valuable to hospitals to determine areas for quality
improvement, the composite rates are useful for beneficiaries.
One commenter did not support the disaggregating the data on PSI-90
because several of the underlying measures are not NQF-endorsed, and
therefore may not be stable at the individual level. The commenter
contended that incomplete or unstable data does not serve the patients
well when making informed decisions on the data.
One commenter recommended excluding the display of PSI-7: Central
venous catheter related bloodstream infection rate results in the PSI-
90 composite for concerns that the public may confuse this claims-based
measure with the NHSN Central line associated bloodstream infection
(CLABSI) measure in Hospital IQR Program. The commenter noted these two
measures are significantly different as they are collected from
different data sources.
Response: We thank the commenters for recognizing the value of
reporting separate hospital-level data for the PSI-90 indicators that
are part of the PSI-90 composite, aside from the reporting of the
composite results. We recognize that not all of the indicators in PSI-
90 are NQF endorsed. However, we do not believe that this means these
measures are unreliable. We also recognize that one or more of the
measures in PSI-90 may be similar to other measures displayed for
consumers like the PSI-7. However, we believe that it would be
beneficial for both hospitals and consumers to have access to
performance information for the individual measures upon which the
composite is based--hospitals for quality improvement purposes,
consumers for greater understanding of what the composite score means.
We will continue to provide data to the public in an easily
understandable, user-friendly manner. We will report the composite
score for PSI-90, and the individual hospital level rates in the
downloadable database, https://data.medicare.gov/, that is available to
users free of charge.
After consideration of the public comments we received, we are
finalizing our proposal to make publicly available hospital level data
for the PSI indicators that are part of the PSI-90 composite in
addition to the composite results.
We also invited public comment on what additional quality measures
and information featured on Hospital Compare may be highly relevant to
patients and other consumers of healthcare, and how we may better
display this information on the Hospital Compare Web site. One option
we have considered is aggregating measures in a graphical display, such
as star ratings.
Comment: One commenter suggested that CMS report additional
information on medical errors on Hospital Compare. Another commenter
suggested that CMS report the information on pressure ulcer Stages III
or IV.
Response: We thank the commenters for these suggestions for
additional information to report that may be highly relevant to
patients, and we will consider mechanisms that we may use to do so.
Comment: Some commenters supported CMS' goal of improving the
display of quality information for the public's use. One commenter
believed that the public would embrace a ``star rating'' system due to
its simplicity. However, the commenter was concerned if confidence
intervals and statistically significant differences can be displayed
appropriately and correctly. One commenter recommended maintaining the
availability of actual raw measure rates and testing different graphic
depictions of measure results to improve the beneficiary-friendliness
of the Hospital Compare Web site. Another commenter recommended that,
prior to implementing graphical display, CMS should conduct an analysis
of the appropriate domains or elements that would comprise the
graphical rating, the relative weights assigned to each domain, and how
risk-adjustment will be applied and get input from stakeholders.
A few commenters opposed the ``star rating'' system as they
believed that this kind of system requires arbitrary cutoffs. The
commenters asserted that the pursuit for the small differences in high
performance levels, as in the case of many Hospital IQR Program
measures, is neither helpful to consumers nor fair to hospitals.
Commenters believed that differentiation of hospital performance is
best represented by the actual score or performance rate. The
commenters were concerned that the use of star ratings may lead to
hasty, snap decisions by the public.
Response: We understand the commenter's concerns and thank them for
sharing their insight on star rating system and graphical display. We
work continuously to develop our Web site into a positive, user-
friendly experience. We will take the commenters' suggestions into
consideration as we work to further improve Hospital Compare.
Comment: A few commenters believed the platform of Hospital Compare
offers the best hub for all kinds of measures of hospital performance.
One commenter believed that the term ``Hospital Compare'' on the site
is not appropriate due to the fact that no hospital attributes are used
in any of the methodologies, and therefore, the data is not
``comparative'' of ``hospitals.'' Some commenters contended that
patient outcomes should be compared only against ``like'' facilities to
truly measure outcomes that are meaningful. For example, the commenters
believed that comparing a Trauma Level I facility to a Trauma Level III
facility is not an appropriate compare. Likewise, tertiary facilities
may unfairly be represented due to receiving higher acuity patients.
The commenters urged adding more

[[Page 50778]]

transparency in hospital reports by including hospital attributes and
regional patient demographics including volume, and numerators and
denominators used to determine values, so that comparisons are
realistic and a national standard within each stratum is user friendly
and meaningful.
Response: We thank the commenters for these suggestions for how to
better display information on Hospital Compare, and will consider
whether these enhancements are feasible for a future release of the Web
site. We currently report characteristics including type of hospital
and whether or not that hospital has an Emergency Department. We are
fully committed to the display of hospital quality information for the
general public to make informed decisions.
Comment: One commenter recommended that CMS provide raw rates in
Excel File format to meet provider and researchers' needs. In addition,
the commenter also asked CMS to post hospital-level data for any
measures that are used in calculating payments in a timely and routine
fashion.
Response: We currently make available data in a downloadable format
which includes both an Access Database and CSV file formats which can
be imported into an Excel spreadsheet. We will continue to offer these
formats for downloading Hospital Compare data. We provide this data
each quarter on https://www.medicare.gov/Download/DownloadDB.asp and on
https://data.medicare.gov/. The process of care, HCAHPS and HAI measure
rates are calculated on this quarterly schedule. Due to the nature of
the calculation requirements, the outcome measures are only calculated
annually.
Comment: A few commenters were concerned that the outcome measures
do not adequately identify outliers since the vast majority of
hospitals are classified as average.
Response: We have chosen to classify hospitals as Higher than
Expected only when there is a high degree of certainty in order to
avoid misleading consumers. To fall in the Higher than Expected
category, the 95 percent interval estimate surrounding the hospital's
rate must be higher than the national observed rate; the Lower than
Expected category includes hospitals with 95 percent interval estimates
lower than the national observed rate. The point estimate is also
available for these hospitals, however, and shows a range of
performance.
2. Removal and Suspension of Hospital IQR Program Measures
a. Considerations in Removing Quality Measures From the Hospital IQR
Program
Generally, we retain measures from the previous year's Hospital IQR
Program measure set for subsequent years' measure sets except when they
are removed or replaced as indicated. We refer readers to the FY 2013
IPPS/LTCH PPS final rule (77 FR 53505 through 53506) for a discussion
of the considerations we use in removing (formerly referred to as
retiring) previously adopted Hospital IQR Program measures.
Comment: One commenter stated that ``topped-out'' should not be the
sole criterion to remove process measures from the Hospital IQR Program
measure set because the commenter was concerned about unintended
consequences. The commenter contended that data collection for process
measures that are strongly linked to the desired health outcomes (that
is, accountability measures) should be continued since it is hard to
predict the impact on performance once the measurement stops. The
commenter strongly encouraged CMS to adopt the TJC accountability
classification system in determining which process measures to remove.
Response: We wish to clarify that when we propose to remove or
suspend measures, we consider not only the measure's ``topped-out''
status, but also many other factors such as the MAP recommendation, NQF
endorsement, the measure's tie to better patient outcomes, the
potential negative impact on performance, whether the practices
addressed by these measures continue to be routinely practiced, as well
as public comments. The four measures we suspended beginning with the
FY 2015 payment determination (77 FR 53509) were examples of how we
apply such considerations.
We also wish to clarify that measure suspension from the Hospital
IQR Program results in a discontinuation of routine data collection for
the measure for Hospital IQR Program purposes until further notice.
However, unlike measure removal, data collection for a suspended
measure may be re-initiated through subregulatory notification
processes should there be evidence to support doing so and the
specifications do not require substantive revision. After suspension,
we may choose to reinstate measure data collection at a future time.
Some circumstances under which we may choose to reinstate collection
include, but are not limited to: Evidence indicating declines in
performance after the suspension of a topped-out measure; changes in
performance targets or best practices that informed the original
measure; or MAP recommendations to reinstate the measure. If changes in
the measure prompt us to consider reinstating data collection and such
changes are substantive in nature, any modifications to a previously
NQF-endorsed measure may require supplemental NQF review as well as
rulemaking.
We thank the commenter for the recommendation that we use the TJC
accountability classification system and will take it into
consideration when we contemplate measure removal and suspension.
b. Hospital IQR Program Measures Removed in Previous Rulemaking
In previous rulemakings, we have removed numerous Hospital IQR
Program quality measures, including:
PN-1: Oxygenation Assessment for Pneumonia, a ``topped-
out'' measure, because measures with very high performance among
hospitals present little opportunity for improvement and do not provide
meaningful distinctions in performance for consumers (73 FR 48604).
AMI-6: Beta Blocker at Arrival measure from the Hospital
IQR Program because it no longer ``represent[ed] the best clinical
practice,'' as required under section 1886(b)(3)(B)(viii)(VI) of the
Act. We stated that when there is reason to believe that the continued
collection of a measure as it is currently specified raises potential
patient safety concerns, it is appropriate for CMS to take immediate
action to remove a measure from the Hospital IQR Program and not wait
for the annual rulemaking cycle. Therefore, we adopted the policy (74
FR 43864 and 43865) that we would promptly remove such a measure,
confirm the removal in the next IPPS rulemaking cycle, and notify
hospitals and the public of the decision to promptly remove measures
through the usual hospital and QIO communication channels used for the
Hospital IQR Program. These channels include memos, email notification,
and QualityNet Web site postings. To this end, we confirmed the removal
of the AMI-6 measure in the FY 2010 IPPS/LTCH PPS rulemaking cycle
after immediate suspension because the measure posed patient safety
risks.
Mortality for Selected Procedures Composite measure
because the measure is not considered suitable for purposes of
comparative reporting by the measure developer (75 FR 50186).

[[Page 50779]]

Three adult smoking cessation measures: AMI-4: Adult
Smoking Cessation Advice/Counselling; HF-4: Adult Smoking Cessation
Advice/Counselling; and PN-4: Adult Smoking Cessation Advice/
Counselling, because these measures are ``topped-out'' and no longer
NQF-endorsed (76 FR 51611).
PN-5c: Timing of Receipt of Initial Antibiotic Following
Hospital Arrival measure out of concerns that the continued collection
of this measure might lead to the unintended consequence of antibiotic
overuse (76 FR 51611).
17 measures set out below (77 FR 53506 through 53509)

------------------------------------------------------------------------
17 Measures removed from hospital
IQR program measure set for the FY
Topic 2015 payment determination and
subsequent years
------------------------------------------------------------------------
Surgical Care Improvement Project (SCIP) Measure
------------------------------------------------------------------------
SCIP INF-VTE-1: Surgery
patients with recommended Venous
Thromboembolism (VTE) prophylaxis
ordered *
------------------------------------------------------------------------
AHRQ Patient Safety Indicators (PSIs), Inpatient Quality Indicators
(IQIs) and Composite Measures
------------------------------------------------------------------------
PSI 06: Iatrogenic
pneumothorax, adult **
PSI 11: Post Operative
Respiratory Failure **
PSI 12: Post Operative PE
or DVT **
PSI 14: Postoperative wound
dehiscence **
PSI 15: Accidental puncture
or laceration **
IQI 11: Abdominal aortic
aneurysm (AAA) mortality rate (with
or without volume) **
IQI 19: Hip fracture
mortality rate **
IQI 91: Mortality for
selected medical conditions
(composite) **
------------------------------------------------------------------------
Hospital Acquired Condition Measures
------------------------------------------------------------------------
Foreign Object Retained
After Surgery **
Air Embolism **
Blood Incompatibility **
Pressure Ulcer Stages III &
IV **
Falls and Trauma:
(Includes: Fracture Dislocation
Intracranial Injury Crushing Injury
Burn Electric Shock) **
Vascular Catheter-
Associated Infection **
Catheter-Associated Urinary
Tract Infection (UTI) **
Manifestations of Poor
Glycemic Control **
------------------------------------------------------------------------
* Chart-abstracted measure
** Claims-based measure

Comment: A commenter recommended expediting the removal date of the
17 measures targeted for FY 2015 payment determination removal to FY
2014.
Response: We note that although the payment determination in which
these measures would cease to be used is FY 2015, the collection
requirement for the measures will cease December 31, 2014. It is not
feasible to cease collection sooner.
c. Removal of Hospital IQR Program Measures for the FY 2016 Payment
Determination and Subsequent Years
As we move toward more outcome-related measures, we have considered
the removal of additional measures using our stated removal criteria.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27680 through 27681),
we proposed to remove 8 measures from the Hospital IQR Program. Three
measures are chart-abstracted (one pneumonia measure, one heart failure
measure, and one immunization measure), and one is a structural measure
(Systematic Clinical Database Registry for Stroke Care). We also
proposed to remove 4 additional chart-abstracted measures from the
Hospital IQR Program because they were either recommended for removal
by the MAP during the pre-rulemaking process or are considered ``topped
out.''
(1) Removal of PN-3b: Blood Culture Performed in the Emergency
Department Prior to First Antibiotic Received in the Hospital Measure
In the FY 2007 IPPS final rule, we adopted PN-3b: Blood Culture
Performed in the Emergency Department Prior to First Antibiotic
Received in the Hospital. We proposed to remove this measure based on
several considerations. First, the measure is no longer NQF-endorsed.
Second, the MAP recommended removal of the measure from the Hospital
IQR Program in a February 2013 pre-rulemaking report that made
recommendations on measures under consideration by HHS. The MAP
believed the measure was topped-out with no room for improvement.
Third, the measure lacks an adequate association between processes of
care and patient outcomes. Accordingly, since there is only limited
data showing impact from drawing blood cultures prior to administering
antibiotics and to address concerns of overuse of blood cultures, we
proposed to remove PN-3b from the Hospital IQR Program.
Comment: Many commenters strongly agreed with the rationale for
removing PN-3b and acknowledged CMS' concerns about the unintended
consequences of measuring the timing of drawing blood cultures,
starting of antibiotics and its effect on the overuse of antibiotics
and the emergence of drug resistant organisms.
Response: We thank the commenters for supporting the removal of
this measure and agreeing with our concerns for this measure.
After consideration of the public comments we received, we are
finalizing the removal of this measure from the Hospital IQR Program
measure set.
(2) Removal of HF-1: Discharge Instructions Measure
In the FY 2007 IPPS final rule we adopted HF-1: Discharge
Instructions. We proposed to remove this measure based on several
considerations. First, the measure is no longer NQF-endorsed. In
addition, the MAP was concerned

[[Page 50780]]

because research showed a weak correlation between this measure and
patient outcomes. Third, while we consider discharge instructions an
important aspect of patient care, we face a challenge in validating the
efficacy of the information received with this measure. Therefore, we
proposed to remove HF-1 from the Hospital IQR Program.
Comment: Some commenters supported the proposal to remove the HF-1
measure, but also recommended the removal of STK-8 Stroke education
measure as they are similar in nature since they are both discharge
instruction measures.
Response: We thank the commenter for the support for the removal of
HF-1. We have not proposed to remove STK-8 because the assessment of
stroke care quality is a relatively new topic in the Hospital IQR
Program, and we have not had an opportunity to evaluate data on the
measure because collection just began earlier this year. Also, for
electronic reporting alignment purposes, STK-8 is one of the measures
that we are going to allow hospitals to voluntarily report
electronically.
Comment: Many commenters strongly supported the proposed removal of
the HF-1 Discharge Instruction Measure, which they believed contributes
no real value in patient outcome. Commenters pointed out that the
measure has been retired from the American College of Cardiology/
America Hospital Association performance measure list for heart failure
patients because there is no strong link to outcomes. One commenter
stated that the medication reconciliation aspect of this measure is
labor intensive. One commenter encouraged CMS to continue to evaluate
potential heart failure measures to maintain a comprehensive
perspective, including medication reconciliation, because this
condition affects so many high risk beneficiaries in the Medicare
population. The commenter was concerned that the removal of the HF-1
measure would cause a void in the measurement of medication
reconciliation.
Response: We thank the commenters for the support of our proposal
to remove this measure. We agree with the commenter that heart failure
is a high-risk condition affecting a large percentage of the Medicare
population. We recognize the commenter's concerns that the HF-1 measure
is not strongly tied to patient outcomes and that the medication
reconciliation component of the measure is cumbersome to implement.
However, there are currently three other measures in Hospital IQR
Program measure set that address heart failure: HF-2: Evaluation of
left ventricular systolic function; Heart Failure 30-day risk
standardized readmission; and Heart Failure 30-day risk standardized
mortality rate. Regarding the commenter's concern about a void in
medication reconciliation from the removal of HF-1, we will continue to
seek potential measures that address this HF issue for future
rulemaking.
After consideration of the public comments we received, we are
finalizing the removal of this measure from the Hospital IQR Program
measure set as proposed.
(3) Removal of IMM-1: Immunization for Pneumonia Measure
We adopted IMM-1: Immunization for Pneumonia for the Hospital IQR
Program for the FY 2014 payment determination with data collection
beginning with January 1, 2012 discharges. We proposed to remove this
measure based on the following consideration. In October of 2012, the
Advisory Committee on Immunization Practices (ACIP) released new
guidelines on the administration of pneumococcal vaccination for
various populations. Because IMM-1 was already required as part of the
Hospital IQR Program before the new guidelines were published, we
cannot feasibly implement the measure to incorporate the potential
iterations of the new guidelines. We believe that maintaining the
measure in the Hospital IQR Program during this period of rapid
guideline changes would detract from hospitals efforts to administer
vaccines appropriately.
We emphasize that, despite the proposed removal of IMM-1 from the
Hospital IQR Program, we expect hospitals to continue to keep up-to-
date with the vaccination recommendations for various populations.
Comment: Many commenters supported the proposed removal of IMM-1
from the Hospital IQR Program measure set.
Some commenters did not support the proposed removal of IMM-1
Immunization for Pneumonia measure because they believed that removing
the measure would undermine efforts to continually improve pneumococcal
immunization rates. In addition, the commenters noted that optimal
vaccination rates for the older patient population have yet to be
achieved. Commenters believed immunization for pneumonia in older
adults, especially the Medicare population, is of paramount importance
to prevent admissions due to pneumonia. The commenters believed that
the latest CMS measure specifications updates in the Specifications
Manual should be broad enough to accommodate the new ACIP guidelines
for the administration of pneumococcal vaccination to various
populations. Commenters expressed concern that efforts to increase
adult vaccination for pneumonia would decline if the measure were
removed from the program altogether. One commenter recommended allowing
an interim period for hospitals to prepare to report on the measure
based on the ACIP recommendations. Also, the commenter urged CMS to
maintain a comprehensive pneumonia measure set in the Hospital IQR
Program.
Response: We appreciate the comments that support the removal IMM-1
from the Hospital IQR Program. Our original intent was to propose and
finalize the removal of the measure from the Hospital IQR Program
measure set based on the reasons indicated in the FY 2014 IPPS/LTCH PPS
proposed rule (78 FR 27680). Since the publication of the proposed
rule, we have carefully assessed our measure removal criteria, measure
suspension criteria as discussed in the IX.A.2.a. of the preamble of
this final rule, the considerations in removing quality measures from
the Hospital IQR Program set out in the FY 2012 IPPS/LTCH PPS final
rule (76 FR 51609 through 51611), as well as public comments received
from this rulemaking. We have, as explained more fully below, decided
it is more suitable to suspend the collection of the IMM-1 measure
until further notice rather than remove it from the program altogether
in order that we may update the measure and reinstate the collection of
the measure in electronic form in the future, should evidence arise of
a decline in performance. As indicated in this example of measure
suspension, we note our measure suspension policy entails flexibility
in that suspension decisions can be made on a case by case basis.
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51609 through
51610), we removed measures because they were ``topped-out.'' In the FY
2013 IPPS/LTCH PPS final rule (77 FR 53506 through 53509), we removed
measures for several reasons: (1) They lost NQF endorsement; (2) an
alternative measure that is more proximal to or that has a stronger
relationship to outcome was available; (3) a more broadly applicable
measure was available; (4) to reduce redundancy; (5) MAP
recommendation; or (6) the measure would not be used in Hospital VB
Program.
The IMM-1 measure does not meet one or more of the criteria for
removal

[[Page 50781]]

stated above, and therefore, we believe warrants suspension rather than
removal. In the case of the IMM-1 measure, since the October 1, 2012
release of the ACIP guidelines on the administration of the
pneumococcal vaccination for various populations, we investigated
numerous options to refine the IMM-1 measure to be consistent with
those guidelines. Following discussions with technical experts, we
learned that creating several algorithms to capture all possible
scenarios prior to pneumococcal vaccination was not the only challenge
of implementing a feasible and reliable chart-abstracted measure. We
learned that achieving reproducibly meaningful measure results depended
on patient charts that consistently contained detailed information
about the date and type of prior vaccination, and comorbid conditions.
We determined that our current data source for the measure (that is,
paper medical records that undergo chart abstraction) often do not
contain this level of detailed historical data and patients often do
not recall dates of prior vaccines received and specific vaccine types.
When considering possible clinical scenarios of screening and
vaccinating for pneumonia, current chart and electronic data do not
consistently allow for successful abstraction of these varied and
detailed historical facts, all of which are needed to appropriately
administer a pneumococcal vaccine. The measure, as updated by ACIP
guidelines, would burden hospitals with data abstraction yielding
questionably meaningful and reliable results, and could potentially
encourage hospitals to vaccinate inappropriate patients in order to not
perform poorly on a measure. Furthermore, we also learned that the ACIP
recommendations are likely to further evolve in the near future.
However, we agree with the commenters that immunization for
pneumonia in older adults, especially the Medicare population, is of
paramount importance to prevent admissions due to pneumonia. Ideally,
patients 65 years of age and older should be routinely screened and
vaccinated during all points of contact with healthcare providers, not
just in the acute care setting. Hospital IQR Program measures play a
pivotal role in improving health care and we believe that IMM-1 has
contributed to achieving desirable pneumococcal rates. We stress that
is not our intent to discourage appropriate pneumococcal vaccination of
adults. We reiterate that hospitals should adhere to preventive
medicine principles by being up-to-date with evidenced-based ACIP
recommendations and CDC pneumococcal vaccination guidelines and
vaccinate accordingly.
In summary, we believe the IMM-1 measure is more appropriate for
suspension than removal because it does not meet the previously stated
removal criteria, but cannot be implemented in its current state.
Therefore, in an effort to balance our goals to incentivize high
quality care while minimizing data collection burden for hospitals, we
have decided to suspend data collection for IMM-1 in the Hospital IQR
Program until such time when the guidelines stabilize and are well-
established.
In addition, due to the detailed aspects of the current ACIP
guidelines, we believe a pneumococcal measure is best implemented with
information from electronic health records. Based on the above comments
and issues, instead of removing, we will suspend the IMM-1 measure from
the Hospital IQR Program beginning with the FY 2016 payment
determination until further notice.
(4) Removal of the Structural Measure: Participation in a Systematic
Clinical Database Registry for Stroke Care
We adopted the structural measure Participation in a Systematic
Clinical Database Registry for Stroke Care for the Hospital IQR Program
for the FY 2013 payment determination with data collection beginning
with January 1, 2011 discharges. We proposed to remove this measure
based on the following consideration. Since the adoption of this
structural measure, we have adopted a Stroke measure set with data
collection beginning with January 1, 2013 discharges. We believe that
the Stroke measure set will provide more meaningful and detailed
information regarding how well stroke care is being managed in a
hospital setting than the current structural measure, which consists of
a general yes/no response.
Comment: Many commenters supported the proposed removal of the
measure in light of the proposed addition of clinically driven process
of care measures of stroke care. The commenters believed that
participation in a registry is not correlated with improved patient
care. A few commenters did not support the removal of this measure for
concern that hospitals may be dis-incentivized to participate in
registry data collection. The commenters added that the stroke registry
collects more information than the Stroke measure set specified for e-
reporting.
Response: We thank the commenters for their support of the removal
of the measure. The purpose of this measure was to assess registry
participation and not to incentivize it. We do not believe that removal
of this measure would dis-incentivize hospitals from participating in
registries. Currently, the Hospital IQR Program measure set still
contains other structural measures regarding registry participation. We
believe that registries continue to provide valuable quality
improvement feedback to hospitals that may be useful beyond what we are
reporting. We do not anticipate hospitals would discontinue
participation in registry even though we remove this structural
measure.
After consideration of the public comments we received, we are
finalizing the removal of this measure from the Hospital IQR Program
measure set as proposed.
(5) Removal of Four Additional Chart-Abstracted Measures
We also proposed to remove four chart-abstracted measures from the
Hospital IQR Program because these measures were either recommended for
removal by the MAP during the pre-rulemaking process or are considered
``topped out.''
AMI-2: Aspirin prescribed at discharge
AMI-10: Statin prescribed at discharge
HF-3: ACEI or ARB for LVSD
SCIP-Inf-10: Surgery Patients with perioperative
temperature management
We invited public comment on our proposal to remove these measures.
Comment: Many commenters supported the proposed removal of the four
additional chart-abstracted measures.
Response: We thank the commenters for their support for the removal
of these proposed measures.
Comment: A few commenters did not support the proposed removal of
the AMI-2 Aspirin prescribed at discharge and AMI-10 Statin prescribed
at discharge measures. The commenters were concerned that removal of
these two measures may change the topped-out performance to sub-par
performance. One commenter urged CMS to put these four measures in
suspension rather than removal. The commenters noted that the first
three of these measures are TJC accountability measures and are worthy
of monitoring and continued review to ensure that performance do no
inappropriately decline.
Response: We recognize the commenters' concern and appreciate the
feedback. However, we consider many

[[Page 50782]]

factors before proposing to remove a measure from the Hospital IQR
Program. These factors include the measure's ``topped-out'' status, MAP
recommendation, NQF endorsement, the measure's tie to better patient
outcomes, the likelihood of a potential negative effect on performance,
whether the practices addressed by these measures continue to be
routinely practiced, as well as public comments. We believe that even
with removal of the these measures, the remaining AMI and HF measures
in Hospital IQR Program measure set will ensure that hospitals continue
to monitor appropriate medication use for patients with AMI and HF
conditions, and we also believe (based on our experience with other
measures that we have removed) that performance of these routine care
processes is unlikely to decline. Taking all these factors into
consideration, we will finalize removal of these measures.
Comment: One commenter did not support the removal of the HF-3 ACE-
I or ARB for left ventricular systolic dysfunction measure. The
commenter believed that the measure collects valuable data for HF
patients as the ACE-I/ARB dose could shed light on best practices. The
commenter urged CMS to put this measure in suspension rather than
removal.
Response: We appreciate the commenters concerns. However, the data
collected from HF-3 only captures if an ACE-I or ARB was prescribed at
discharge and does not capture dosing practices. We believe that the
remaining measures in the Hospital IQR Program will continue to monitor
and evaluate the quality of HF care within hospitals.
After consideration of the public comments we received and based on
the reasons provided in the proposed rule (78 FR 27680), we are
finalizing our proposal to remove this measure from the Hospital IQR
Program.
Comment: One commenter recommended the removal of all structural
measures.
Response: In our view, the structural measures currently in the
Hospital IQR Program measure set still yield valuable information in
the improvement of healthcare quality and we have no plans to remove
all structural measures unless evidence indicates otherwise.
Comment: Many commenters requested immediate removal of the removed
measures from Hospital Compare once their removal is finalized.
Response: We note that once the measures are removed from the
Hospital IQR Program, they are also removed from Hospital Compare.
After consideration of the public comments we received, we are
finalizing the removal of six chart-abstracted measures and one
structural measure listed in the tables below; we are also suspending
the IMM-1 measure from the Hospital IQR Program measure set beginning
with the FY 2016 payment determination and until further notice.

------------------------------------------------------------------------
Hospital IQR program measures
removed in this Final Rule beginning
Topic with the FY 2016 Payment
Determination
------------------------------------------------------------------------
Acute Myocardial Infarction....... AMI-2 Aspirin prescribed at
discharge.
AMI-10 Statin prescribed at
discharge.
------------------------------------------------------------------------
Pneumonia......................... PN-3b Blood culture
performed in the emergency
department prior to first
antibiotic received in hospital.
------------------------------------------------------------------------
Heart Failure..................... HF-1 Discharge
instructions.
HF-3 ACEI or ARB for LVSD.
------------------------------------------------------------------------
Surgical Care Improvement Project. SCIP-Inf-10 Surgery
patients with perioperative
temperature management.
------------------------------------------------------------------------
Structural Measure................ Participation in a
systematic clinical database
registry for stroke care.
------------------------------------------------------------------------

------------------------------------------------------------------------
Hospital IQR program measures
suspended in this Final Rule
Topic beginning with the FY 2016 payment
determination
------------------------------------------------------------------------
Immunization...................... IMM-1 Immunization for
pneumonia.
------------------------------------------------------------------------

d. Suspension of Data Collection for the FY 2014 Payment Determination
and Subsequent Years
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51611), we suspended
data collection for four measures beginning with January 1, 2012
discharges, affecting the FY 2014 payment determination and subsequent
years.

------------------------------------------------------------------------
Hospital IQR program measures
Topic previously suspended beginning with
the FY 2014 payment determination
------------------------------------------------------------------------
Acute Myocardial Infarction (AMI). AMI-1 Aspirin at arrival.
AMI-3 ACEI/ARB for left
ventricular systolic dysfunction.
AMI-5 Beta-blocker
prescribed at discharge.
------------------------------------------------------------------------
Surgical Care Improvement Project SCIP INF-6 Appropriate Hair
(SCIP). Removal.
------------------------------------------------------------------------

We suspended, rather than removed, these measures, despite having
evidence that these measures may be topped-out (that is, their
performance is uniformly high nationwide, with little variability among
hospitals) because we believe that the processes assessed by these
measures are tied to better patient outcomes, and that permanent
removal of the measures from the Hospital IQR Program may result in
declines in performance and, therefore, worse outcomes. Therefore, we
decided not to remove these measures from the Hospital IQR Program. The
suspension

[[Page 50783]]

of data collection for these four measures will be continued unless we
have evidence that performance on the measures is in danger of
declining. Should we determine that hospital adherence to these
practices has unacceptably declined, we would resume data collection
using the same form and manner and on the same quarterly schedule that
we finalize for these and other chart abstracted measures, providing at
least 3 months of notice prior to resuming data collection. Hospitals
would be notified of this via CMS listservs, CMS email blasts, national
provider calls, and QualityNet announcements. In addition, we would
comply with any requirements imposed by the Paperwork Reduction Act
before resuming data collection of these four measures.
3. Process for Retaining Previously Adopted Hospital IQR Program
Measures for Subsequent Payment Determinations
For the purpose of streamlining the rulemaking process, in the FY
2013 IPPS/LTCH PPS final rule (77 FR 53512 through 53513), we finalized
our policy that when we adopt measures for the Hospital IQR Program
beginning with a particular payment determination, these measures are
automatically adopted for all subsequent payment determinations unless
we propose to remove, suspend, or replace the measures.
4. Additional Considerations in Expanding and Updating Quality Measures
Under the Hospital IQR Program
We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR
53510 through 53512) for a discussion of the considerations we use to
expand and update quality measures under the Hospital IQR Program and
our policy, beginning with the FY 2013, to use one calendar year of
data for chart-abstracted measures for payment determinations.
Comment: Many commenters commended CMS for its overarching plans
and efforts to advance the Hospital IQR Program to its current success.
Many commenters applauded CMS' program direction in strengthening
the portfolio of hospital inpatient quality measures, removing some
chart-abstracted clinical process measures and adding more claims-based
outcome measures in the Hospital IQR Program. Many commenters greatly
appreciated CMS' efforts to strive for measures that meet the
objectives of the National Priorities Partnership, HHS Strategic Plan
and National Quality Strategy and moving towards using EHR for data
collection. Commenters anticipated that streamlining the reporting
requirements, aligning and harmonizing measures for the EHR Incentive
Program and the Hospital IQR Program will significantly ease the
reporting burden on hospitals as well as on clinicians who can devote
more time to direct patient care.
Response: We are strongly encouraged by the positive support from
the public and hospitals. We will continue to embrace our goals and
commitment to inspire hospitals to continually improve the quality of
care.
We are very pleased with the public support of our program
direction and our efforts to shift our focus to more outcome measures
and use the NQS as the framework to attain a cohesive public national
quality strategy to achieve high quality care across the healthcare
spectrum.
Comment: One commenter suggested CMS consider issuing a prioritized
set of medical conditions for which CMS seeks to adopt quality measures
in proposed rulemaking to solicit stakeholders' feedback.
Response: We thank the commenter for this suggestion, and will
consider doing so in future rulemaking.
Comment: One commenter suggested consolidating all the hospital
payment incentives and related reporting program requirements into one
big program to alleviate the reporting burden on providers.
Response: We understand the commenter's concerns. However, it would
not be feasible for us to implement such a program at this time. To
alleviate burden for hospital providers, we are striving to align
measures across settings as well as moving toward electronic reporting.
Comment: One commenter supported the established NQF/MAP process to
review and endorse measures. However, the commenter recommended that
CMS adhere to the scheduled NQF/MAP meetings for endorsement without
using ad hoc meetings to review measures that did not receive NQF
endorsement.
Response: We thank the commenters for their support of the Measure
Applications Partnership (MAP) and the NQF. We acknowledge that their
contributions to quality measurement remain a valuable part of our
programs. However, because it appears that some confusion may have
arisen, we are clarifying the roles that these two groups play in this
process.
First, we would like to state that the MAP pre-rulemaking process
and the NQF endorsement process are very different processes, even
though they both involve the NQF. The NQF endorsement process involves
reviewing measures for endorsement and deals with substantive changes
to measures because such changes often affect measure endorsement.
Section 1890 of the Act governs the contract that the Secretary has
with the NQF and the duties related to endorsement. On the other hand,
the MAP pre-rulemaking process does not address the review and
development of measures for endorsement, nor does the MAP endorse
measures. Rather, section 1890A of the Act, which establishes the pre-
rulemaking process, requires that the entity under contract with the
Secretary under section 1890 of the Act (currently the NQF) convene
multi-stakeholder groups to provide input into the selection of certain
categories of quality and efficiency measures being considered by the
Secretary for use in a number of federal programs and other quality-
related initiatives. This process provides another opportunity, in
addition to opportunities provided during the rulemaking process
itself, for the public to comment on measures being considered for use
in certain federal healthcare programs and initiatives. The NQF
convenes such multi-stakeholder groups and has labeled these multi-
stakeholder groups the MAP. The MAP's input is based on, among other
things, a list that the Secretary must make available to the public by
December 1st of each year (the List of Measures Under Consideration or
MUC List). The MUC List sets forth the measures that the Secretary is
considering for inclusion in certain federal programs at the time that
the list is made public. The MAP must provide its input on selecting
measures by February 1st of the following year, and can provide input
on the measures on the MUC List. We note that there is no statutory
requirement for us to follow every MAP recommendation. As stated in the
statute, the Secretary need only consider the MAP input. We follow many
MAP recommendations and have considered all MAP input, as required by
statute.
We did request that the MAP set up meetings with a Hospital
Workgroup for an ad hoc review of four measures for hospital programs
that were not on the MUC list. However, none of those measures were IQR
measures. As such, the ad hoc meetings had no effect on the IQR
program.
Comment: A few commenters strongly recommended that CMS only adopt
measures reviewed by the MAP and endorsed by NQF. The commenters
contended that consensus achieved during the measure development
process, through broad acceptance and

[[Page 50784]]

use of a measure, or through public comment do not entail the robust
and comprehensive process used to establish NQF endorsement.
Response: We have adhered to the pre-rulemaking process as required
under section 1890A of the Act in proposing and finalizing all measures
in the Hospital IQR program. This includes receiving and taking into
consideration input from the MAP. We reiterate that, as stated in 77 FR
53510, to the extent practicable, measures we use should be nationally
endorsed by a multi-stakeholder organization. Section 3001(a)(2) of the
Affordable Care Act added new sections 1886(b)(3)(B)(viii)(IX)(aa) and
(bb) of the Act. These sections state that ``* * * effective for
payments beginning with fiscal year 2013, each measure specified by the
Secretary under this clause shall be endorsed by the entity with a
contract under section 1890(a) [of the Act],'' and ``[i]n the case of a
specified area or medical topic determined appropriate by the Secretary
for which a feasible and practical measure has not been endorsed by the
entity with a contract under section 1890(a) [of the Act], the
Secretary may specify a measure that is not so endorsed as long as due
consideration is given to measures that have been endorsed or adopted
by a consensus organization identified by the Secretary.'' Accordingly,
we attempt to utilize endorsed measures whenever possible.
5. Changes to Hospital IQR Program Measures Previously Adopted for the
FY 2015 and FY 2016 Payment Determinations and Subsequent Years
a. Previously Adopted Hospital IQR Program Measures for the FY 2015
Payment Determination and Subsequent Years
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53512 through
53531), we finalized 59 measures for the Hospital IQR Program measure
set for the FY 2015 payment determination and subsequent years. These
59 measures are listed below.

------------------------------------------------------------------------
Hospital IQR program measures
previously adopted for the FY 2015
Topic payment determination and
subsequent years
------------------------------------------------------------------------
Acute Myocardial Infarction (AMI) AMI-2 Aspirin prescribed at
Measures. discharge.
AMI-7a Fibrinolytic
(thrombolytic) agent received
within 30 minutes of hospital
arrival.
AMI-8a Timing of Receipt of
Primary Percutaneous Coronary
Intervention (PCI).
AMI-10 Statin Prescribed at
Discharge.
------------------------------------------------------------------------
Heart Failure (HF) Measures....... HF-1 Discharge
instructions.
HF-2 Evaluation of left
ventricular systolic function.
HF-3 Angiotensin Converting
Enzyme Inhibitor (ACE-I) or
Angiotensin II Receptor Blocker
(ARB) for left ventricular systolic
dysfunction.
------------------------------------------------------------------------
Stroke (STK) Measure Set.......... STK-1 VTE prophylaxis.
STK-2 Antithrombotic
therapy for ischemic
stroke.[dagger]
STK-3 Anticoagulation
therapy for Afib/flutter.[dagger]
STK-4 Thrombolytic therapy
for acute ischemic stroke.[dagger]
STK-5 Antithrombotic
therapy by the end of hospital day
2.[dagger]
STK-6 Discharged on
Statin.[dagger]
STK-8 Stroke
education.[dagger]
STK-10 Assessed for
rehab.[dagger]
------------------------------------------------------------------------
VTE Measure Set................... VTE-1 VTE
prophylaxis.[dagger]
VTE-2 ICU VTE
prophylaxis.[dagger]
VTE-3 VTE patients with
anticoagulation overlap
therapy.[dagger]
VTE-4 Patients receiving un-
fractionated Heparin with doses/
labs monitored by protocol.[dagger]
VTE-5 VTE discharge
instructions.[dagger]
VTE-6 Incidence of
potentially preventable
VTE.[dagger]
------------------------------------------------------------------------
Pneumonia (PN) Measures........... PN-3b Blood culture
performed in the emergency
department prior to first
antibiotic received in hospital.
PN-6 Appropriate initial
antibiotic selection.
------------------------------------------------------------------------
Surgical Care Improvement Project SCIP INF-1 Prophylactic
(SCIP) Measures. antibiotic received within 1 hour
prior to surgical incision.
SCIP INF-2: Prophylactic
antibiotic selection for surgical
patients.
SCIP INF-3 Prophylactic
antibiotics discontinued within 24
hours after surgery end time (48
hours for cardiac surgery).
SCIP INF-4: Cardiac surgery
patients with controlled 6AM
postoperative serum glucose.
SCIP INF-9: Postoperative
urinary catheter removal on post
operative day 1 or 2 with day of
surgery being day zero.
SCIP INF-10: Surgery
patients with perioperative
temperature management.
SCIP Cardiovascular-2:
Surgery Patients on a Beta Blocker
prior to arrival who received a
Beta Blocker during the
perioperative period
SCIP-VTE-2: Surgery
patients who received appropriate
VTE prophylaxis within 24 hours pre/
post surgery.
------------------------------------------------------------------------
Mortality Measures (Medicare Acute Myocardial Infarction
Patients). (AMI) 30-day mortality rate.
Heart Failure (HF) 30-day
mortality rate.
Pneumonia (PN) 30-day
mortality rate.
------------------------------------------------------------------------
Patients' Experience of Care HCAHPS survey (expanded to
Measures. include one 3-item care transition
set* and two new ``About You''
items).*
------------------------------------------------------------------------

[[Page 50785]]

Readmission Measures (Medicare Acute Myocardial Infarction
Patients). 30-day Risk Standardized
Readmission Measure.
Heart Failure 30-day Risk
Standardized Readmission Measure.
Pneumonia 30-day Risk
Standardized Readmission Measure.
30-day Risk Standardized
Readmission following Total Hip/
Total Knee Arthroplasty.*
Hospital-Wide All-Cause
Unplanned Readmission (HWR).*
------------------------------------------------------------------------
AHRQ Patient Safety Indicators Complication/patient safety
(PSIs) Composite Measures. for selected indicators
(composite).
------------------------------------------------------------------------
AHRQ PSI and Nursing Sensitive PSI-4 Death among surgical
Care. inpatients with serious treatable
complications.
------------------------------------------------------------------------
Structural Measures............... Participation in a
Systematic Database for Cardiac
Surgery.
Participation in a
Systematic Clinical Database
Registry for Stroke Care.
Participation in a
Systematic Clinical Database
Registry for Nursing Sensitive
Care.
Participation in a
Systematic Clinical Database
Registry for General Surgery.
------------------------------------------------------------------------
Healthcare-Associated Infections Central Line Associated
Measures. Bloodstream Infection.
Surgical Site Infection.
--SSI following Colon Surgery.
--SSI following Abdominal
Hysterectomy.
Catheter-Associated Urinary
Tract Infection.
MRSA Bacteremia.
Clostridium difficile (C.
difficile).
Healthcare Personnel
Influenza Vaccination.
------------------------------------------------------------------------
Surgical Complications............ Hip/Knee Complication:
Hospital-level Risk-Standardized
Complication Rate (RSCR) following
Elective Primary Total Hip
Arthroplasty.*
------------------------------------------------------------------------
Emergency Department (ED) ED-1 Median time from
Throughput Measures. emergency department arrival to
time of departure from the
emergency room for patients
admitted to the hospital.[dagger]
ED-2 Median time from admit
decision to time of departure from
the emergency department for
emergency department patients
admitted to the inpatient
status.[dagger]
------------------------------------------------------------------------
Prevention: Global Immunization Immunization for Influenza.
(IMM) Measures. Immunization for Pneumonia.
------------------------------------------------------------------------
Cost Efficiency................... Medicare Spending per
Beneficiary.
------------------------------------------------------------------------
Perinatal Care.................... PC-01 Elective delivery
prior to 39 completed weeks of
gestation.*/[dagger]
------------------------------------------------------------------------
* New or expanded measures/items for the FY 2015 payment determination
and subsequent years.
[dagger] Measure for electronic reporting via CEHRT in the Hospital IQR
Program (voluntary participation in CY 2014).

We received some comments on some of the measures adopted for the
FY 2015 payment determination and subsequent years.
Comment: One commenter believed that the Hospital-wide readmission
(HWR) measure cohort is too broad for adequate risk-adjustment and
risk-adjustment for readmission rates is inadequate overall.
Response: In reference to the commenter's concern about the cohort
being too broad for adequate risk-adjustment, we wish to clarify that
the HWR measure divides the broad hospital cohort into 5 categories for
risk-adjustment. The HWR measure is composed of 5 separate models--
cardiorespiratory, cardiovascular, general medicine, neurology and
surgery. This enables us to assess the risk factor profiles of the
conditions within each cohort to ensure that risk factors are similar
within cohort both in directionality and the strength of the
relationship with the outcome, for each of these specific cohorts.
Therefore, we believe that this cohort specific approach ensures
adequate risk adjustment for the readmission measure. We note that the
intent of readmission measures is to profile hospital quality and not
to maximize the prediction of hospital or patient readmission risk as
the commenter seems to imply.
Comment: One commenter was concerned about hospitals shifting care
to the ED or using more observation stay services in order to avoid
being penalized for readmissions and requests that the readmission
measures be accompanied by measures of ED and observation stay usage.
Response: We have continued to consider and evaluate stakeholder
concerns regarding the increased use of ED and observation stay use in
order to avoid readmissions. We take this issue very seriously and will
continue to monitor the usage of ED and observation stay services to
determine if other measures of ED and observation stay should be
reported alongside readmission measures.
b. Refinements to Existing Measures in the Hospital IQR Program
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27683 through
27684), we proposed to incorporate refinements for several measures
that are currently adopted in the Hospital IQR Program. These
refinements have either arisen out of the NQF endorsement maintenance
process, or during our internal efforts to harmonize measurement
approaches. The measure refinements include the following: (1)
Incorporation of the planned readmission algorithm in 30-day
readmission measures for AMI, HF, PN, THA/TKA, and Hospital-Wide
Readmission to match recent NQF endorsement maintenance decisions
beginning in 2013; (2) expansion of CLABSI and CAUTI measures to select
non-ICU locations in IPPS hospitals beginning with infections occurring
on

[[Page 50786]]

or after January 1, 2014 (consistent with NQF expansion of the measures
beyond ICUs); (3) updates to SCIP INF 4 to match recent NQF endorsement
maintenance decisions beginning with January 1, 2014 discharges; and
(4) an update to the MSPB measure to include Railroad Retirement Board
(RRB) beneficiaries beginning in 2014. These proposed refinements are
described in greater detail below.
(1) Incorporation of Planned Readmission Algorithm for 30-Day
Readmission Measures
In response to stakeholder comments, we have developed an algorithm
to identify readmissions that are likely to be planned as part of
ongoing medical or surgical treatment. Planned readmissions are
identified in claims data using the CMS Planned Readmission Algorithm
Version 2.1 which detects readmissions that are typically planned and
may occur within 30 days of discharge from the hospital. For more
information on the methodology used to identify planned readmissions,
and the list of planned diagnoses and procedures used in the algorithm,
we refer readers to the CMS Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html, as well as the
discussion of planned readmissions under section 3025 of the Affordable
Care Act in section V.G. of the preamble of this final rule. We
submitted this algorithm for NQF review during annual maintenance of
the AMI, HF, PN, and Total Hip/Total Knee Replacement readmission
measures as well as for the recently adopted Hospital Wide Readmission
measure.
NQF has endorsed the use of the algorithm for these measures, and
we proposed to incorporate the Planned Readmission Algorithm into the
AMI, HF, PN, and Total Hip/Knee Replacement readmission measures in
addition to the Hospital-Wide Readmission Measure beginning in 2013. We
invited public comment on this proposal.
Comment: Many commenters supported the inclusion of the planned
readmissions algorithm.
Response: We appreciate the commenters support for the readmissions
algorithm.
Comment: One commenter requested that the planned readmissions
algorithm for stroke include patent foramen ovale closure and
cranioplasty following a decompressive craniectomy.
Response: We thank the commenter for the suggestions. We clarify
that as part of the planned readmissions algorithm, patients who are
readmitted for a patent foramen ovale closure (AHRQ CCS 49--Other OR
heart procedures) or cranioplasty (AHRQ CCS 9--Other OR therapeutic
nervous system procedures) are already classified as planned
readmissions and will not count as readmissions in the measures.
Comment: Many commenters believed that CMS should exclude
readmissions unrelated to the initial reason for admission.
One commenter requested that CMS allow hospitals to indicate when a
readmission was planned. Another commenter requested that CMS allow
hospitals to indicate if a readmission was related so that these can be
excluded.
Response: We do not seek to differentiate between related and
unrelated readmissions because readmissions not directly related to the
index condition may still be a result of the care received during the
index hospitalization. For example, a patient hospitalized for stroke
who develops a hospital-acquired infection may ultimately be readmitted
for sepsis. It would be inappropriate to treat this readmission as
unrelated to the care the patient received during the index
hospitalization. Furthermore, the range of potentially avoidable
readmissions also includes those not directly related to the initial
hospitalization, such as those resulting from poor communication at
discharge or inadequate follow-up. Therefore, creating a comprehensive
list of potential complications related to the index hospitalization
would be arbitrary, incomplete, and, ultimately, impossible to
implement.
Generally, planned readmissions are not a signal of quality of
care. We have worked with experts in the medical community as well as
other stakeholders to carefully identify procedures and treatments that
should be considered ``planned'' and not counted as readmissions. In
the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27683), we proposed that
the measures identify planned readmissions by using an expanded
algorithm, which is a set of criteria for classifying readmissions as
planned using Medicare claims. This algorithm identifies admissions
that are typically planned and may occur within 30 days of discharge
from the hospital.
Comment: A few commenters urged CMS to continue researching
additional exclusions for planned readmissions.
Response: We are committed to continually updating the planned
readmissions algorithm. Our measures continually undergo maintenance to
determine the need for updated specifications and to monitor trends as
well as coding changes. We will continue to closely monitor the planned
readmissions algorithm and modify it as needed.
Comment: A few commenters requested that CMS incorporate
socioeconomic factors in its risk-adjustment methodology for outcome
measures.
Response: We have continued to consider and evaluate stakeholder
concerns regarding the influence of patient socioeconomic status on
readmission and mortality rates. We routinely monitor the impact of
socioeconomic status on hospitals' results and have consistently found
that hospitals that care for large proportions of patients of low
socioeconomic status are capable of performing well on our measures.
Our most recent analyses (Chartbook: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Downloads/MedicareHospitalQualityChartbook2012.pdf) once again confirmed this
finding. Many safety-net providers and teaching hospitals do as well or
better on the measures than hospitals without substantial numbers of
patients of low socioeconomic status. Our analyses also show that
adding SES to the risk-adjustment has a negligible impact on hospitals'
risk-standardized rates (p. 36 of the previously referenced Chartbook).
The risk-adjustment for clinical factors likely captures much of the
variation due to socioeconomic status, thus leading to more modest
impact of socioeconomic status on hospitals' results than stakeholders
expect.
We note that the goal of risk-adjustment is to account for factors
that are inherent to the patient at the time of admission, such as
severity of disease, so as to put hospitals on a level playing field.
The measures should not be risk-adjusted to account for differences in
practice patterns that lead to lower or higher risk for patients to be
readmitted or die. The measures aim to reveal differences related to
the patterns of care. The measures do not adjust for socioeconomic
status because the association between socioeconomic status and health
outcomes can be due, in part, to differences in the quality of health
care received by groups of patients with varying socioeconomic status.
The measures also do not adjust for socioeconomic status because we do
not want to hold hospitals to different standards for the outcomes of
their patients of low socioeconomic status.

[[Page 50787]]

Finally, we do not want to mask potential disparities or minimize
incentives to improve the outcomes of disadvantaged populations. This
approach is also consistent with the guidance from the NQF, which
states that risk models should not obscure disparities by adjusting for
factors associated with inequality (such as race or socioeconomic
status). However, we are committed to tracking this issue and will
continue to evaluate disparities in care and the impact of patients'
socioeconomic status on hospitals' rates.
After consideration of the public comments we received, we are
finalizing the proposed incorporation of planned readmission algorithm
for 30-day readmission measures.
(2) Expansion of Collection of CLABSI and CAUTI to Select Non-ICU
Locations
We proposed to expand the collection of the CAUTI and CLABSI
measures to include several non-ICU locations beginning with infections
occurring on or after January 1, 2014. Those proposed locations are
medical wards, surgical wards, and medical/surgical wards. This
expansion is consistent with the NQF re-endorsement update to these
measures allowing application of the measures beyond ICUs. We proposed
this expansion to allow hospitals that do not have ICU locations to use
the tools and resources of the NHSN for quality improvement and public
reporting efforts. We invited public comment on this proposal.
Comment: Some commenters supported the proposed expansion and
collection of the CLABSI and CAUTI measures to select non-ICU
locations. These commenters believed the prevalence of the use of
urinary and central venous line catheters outside the ICU setting is
significant, and this refinement would allow hospitals that do not have
ICU locations to use these tools and resources for quality improvement.
In addition, the refinements align with the updated NQF-endorsed
version. Commenters urged CMS to update the measure specifications in
the measure Specifications Manual accordingly.
Response: We thank the commenters' for their support. CDC is the
measure steward for the CLABSI and CAUTI measures and the technical
Specifications Manual will refer to the CDC site for the updated
measure specifications.
Comment: A few commenters did not support the expansion and
collection of CLABSI and CAUTI to select non-ICU locations for several
reasons. These commenters noted that collection beyond the ICU setting
is very burdensome and labor intensive because it would require manual
data collection for a potentially large number of patients each day
that they have a catheter device for the denominator.
These commenters recommended that CMS should: (1) Retain the
current specifications and confine data collection for CLABSI and CAUTI
to ICUs (where patients are at most risk) only within acute care
hospitals until more accurate surveillance definitions and validated
methods to more simply collect the data are available; (2) wait for the
CDC to obtain NQF endorsement for a revised version of the CLABSI
measure; and (3) focus on developing an electronically specified
hospital-wide measure that relies on ICD-10.
Response: Over 1,300 healthcare facilities nationwide already
collect and report CLABSI and CAUTI data from patient care locations
beyond ICUs. This reporting is prompted by State mandates, facility
participation in the current CMS 10th Scope of Work for the QIO program
(https://medicaring.org/2011/06/22/highlights-of-10th-sow-for-qios/),
and a number of existing regional collaborations. The commenter is
correct that the CDC is working to clarify the CAUTI definitions to
eliminate any confusion and inaccuracies in the determinations of
specified criteria. These clarifications are planned to be included in
the NHSN system as early as January 2014.
There were no further updates submitted to NQF by CDC at this time
for CLABSI definitions, so the only update being made by CDC to this
NQF measure is inclusion of the calculations to produce a reliability-
adjusted SIR. This is an addition and not a replacement to any metrics
already described in the existing approved measure, and does not change
any criteria or definitions for reporting CLABSIs. We also note that we
consider a change of this type to be a technical change to the measure,
rather than a substantive change requiring notice and comment
rulemaking. CDC analyses have shown that the SIR and its use of the
number of days catheters were used (catheter days) are reliable and
accurately represent the risk for patients who acquire catheter-
associated infections. Use of any other denominator, like number of
patients (patient days), may not appropriately evaluate the risk of
infection per patient. The NHSN definitions for CLABSI and CAUTI are a
more accurate and true representation of these infections as the
definitions focus on actual signs and symptoms collected from a patient
and not simply a number of codes attached to a patient stay for billing
purposes. Therefore, ICD-10 diagnosis codes, as is the case with the
current ICD-9-CM codes, would not be a suitable or acceptable
replacement for the NHSN HAI definitions.
Comment: Some commenters recommended delaying the expansion and
collection of CAUTI to select non-ICU locations, in order to give
hospitals more time to implement electronic collection of the
denominator data, expand best practices outside the ICU, and prepare
for data collection to accurately count and report device days. Some
commenters recommended allowing hospitals to have a trial collection
period.
Response: We acknowledge commenters' concerns about needing
additional time to expand collection efforts beyond the ICU for CLABSI
and CAUTI. Based upon these comments, we will defer the implementation
date of the CLABSI/CAUTI expansion to non-ICU settings by one year to
January 1, 2015. This 1-year deferred implementation date would give
hospitals time to test collection in non-ICU locations prior to the
January 1, 2015 implementation date.
After consideration of the public comments we received, we are
deferring the implementation date of the CLABSI/CAUTI expansion to non-
ICU settings to January 1, 2015.
(3) Refinement of SCIP-INF-4 to Match Refinements Made During NQF Re-
endorsement
The quality measure SCIP INF 4, Controlled 6AM Glucose for Cardiac
Surgery Patients (NQF 300), is an example of a measure that
has undergone extensive changes as a result of the NQF endorsement
maintenance process. The specifications have changed so substantially
that we proposed to adopt them in the proposed rule. Specifically, the
NQF Steering Committee voted to change the measure from controlled
glucose at 6AM to a more comprehensive measure, controlled glucose 18-
24 hours post-cardiac surgery. The revised specifications also require
corrective action to be documented if a post-operative glucose is over
180mg/dl. We proposed to adopt these revised specifications for SCIP-
INF-4 beginning with January 1, 2014 discharges and invited public
comment on this proposal. The revised specifications for the measure
can be found at https://www.qualityforum.org/QPS/0300.
Comment: Many commenters supported the proposed adoption of the NQF
changes that arose from the NQF endorsement maintenance process. Some
commenters believed the

[[Page 50788]]

specifications, once updated, would result in a more clinically
meaningful measure. One commenter requested CMS consider more glycemic
controlled-related measures in the future.
Response: We thank the commenters' support of our proposal and
suggestions. Once this final rule is published, we will publish an
addendum to the Specifications Manual to address any changes adopted in
the final rule.
Comment: One commenter noted that the 18-24 hours post-cardiac
surgery time frame should not be tied to the anesthesia end time.
Instead, the commenter requested use of a different time parameter by
which the receiving unit would clearly have documented the arrival of
the patient in the unit where the patient will likely remain throughout
that specified time frame. Another commenter stated that most of the
literature supports averaging blood glucose over the first one or two
days. The commenter, therefore, recommended reducing the 0600 target
glucose from 200 mg/dL to 180 mg/dL instead on post-operative day (POD)
1 and POD2. Another commenter asked if the term ``corrective action''
can be changed to ``documentation of clinical attempt of glucose
control.'' One commenter asked for clarification whether the guidelines
allow for exclusions when corrective actions are appropriately
administered and glucose remains elevated above the threshold of 200mg/
dL. Another commenter stated that the term ``controlled'' should be
defined and raised concerns that tight glycemic control in frail
elderly patients would contribute to decreased cognition and function.
Response: We adopted the measure refinement as endorsed by NQF. We
will consider whether some of the other suggestions made by commenters
regarding glucose target and terminology (for example, corrective
action and controlled) used in the measure should be changed or further
defined in order to encourage appropriate treatment while preventing
adverse outcomes as suggested by commenters. In response to the comment
about broadening the timeframe of the measure, anesthesia end time is a
standard data element already collected and reported by hospitals
participating in the Hospital IQR Program as part of the SCIP
performance measures. As a result, during re-endorsement, anesthesia
end time was used to define the start of the period for blood glucose
control. However, we will consider whether additional refinements
should be made to better define the 18 to 24 hour timeframe for the
measure.
In the past, we have received considerable feedback on the use of
0600, or 6 a.m., as the target for glucose control. This ``6 a.m.''
time does not take into account the time that the operation ended. For
example, if a patients' surgery did not end until midnight, hospitals
have noted difficulty in getting the blood sugar under control by 6
a.m. During re-endorsement, the NQF Technical Advisory Panel rejected
the use of the arbitrary time frame of 6 a.m. to evaluate glucose
control and recommended a fixed time of 18-24 hours after the end of
surgery to allow sufficient time to get the blood glucose under
control.
All technical details and exclusions for the revised measures will
be outlined in the inpatient technical Specifications Manual posted on
QualityNet on July 1, 2013 for discharges beginning on January 1, 2014.
After consideration of the public comments we received, we are
finalizing the proposed refinement of SCIP-INF-4 to match refinements
made during NQF re-endorsement.
(4) Refinement of Medicare Spending Per Beneficiary Measure (MSPB)
(a) Inclusion of Railroad Retirement Board Beneficiaries (RRB)
We proposed to refine the Medicare Spending per Beneficiary (MSPB)
measure previously finalized for the FY 2015 payment determination and
subsequent years. We proposed to include Railroad Retirement Board
(RRB) beneficiaries in the measure for the FY 2016 and subsequent
years' payment determinations. We do not consider this refinement to be
a substantive change. However, we proposed this refinement through
rulemaking because we explicitly stated in previous rulemaking that
these beneficiaries would be excluded from the measure (76 FR 51620).
Since that time, we have learned that we have complete claims data for
RRB beneficiaries, and believe that eligible MSPB episodes generated by
RRB hospital discharges should be included in the MSPB measure. We
finalized the details of MSPB episode construction and adjustment in
the FY 2012 IPPS/LTCH PPS final rule (76 FR 51618 through 51626). The
effect of including RRB beneficiaries on the MSPB ratio is minimal. For
the majority of hospitals, the change in their MSPB measure rates would
be small--between -0.01 and 0.01.
Comment: No commenters opposed including RRB. One commenter did not
have reservations about including RRB beneficiaries in the measure, and
one stated that CMS should ensure that including the RRB beneficiaries
is consistent with the measure specifications submitted to the NQF for
endorsement consideration. One commenter generally expressed support
for proposed refinements to existing Hospital IQR Program measures.
Response: We thank these commenters for their support of including
the RRB beneficiary population in the MSPB measure, and we agree that
the measure specifications should reflect their inclusion. We did not
exclude RRB beneficiary population on the NQF measure submission form,
and we explicitly stated in the submission that we could include RRB
beneficiaries without changing the measure methodology.
Comment: Several commenters expressed views regarding the use of
the MSPB measure in the Hospital IQR Program in general. Commenters
expressed concern that the measure did not adequately address hospital
efficiency and that hospitals require data in real time in order to
improve.
Response: This measure was finalized for inclusion in the Hospital
IQR Program in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51618-
51627). We addressed the question of whether the MSPB is a measure of
efficiency in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53586),
noting that it is consistent with existing approaches to measuring cost
in the healthcare setting. We appreciate the value of timely
performance information, which is why we provide hospitals with
extensive amounts of data on their performance on this measure as soon
as practicable, allowing time for claims to be processed, MSPB episodes
to be calculated, and reports to be generated. In late May 2013,
hospitals received the data on their performance during calendar year
2012. This followed the 3-month claim run period out finalized for the
measure. For a description of the extensive, hospital-specific data
that hospitals receive during the measure preview period, we refer
readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53588).
After consideration of the public comments we received, we are
finalizing the inclusion of RRB beneficiaries in the MSPB measure for
future Hospital IQR Program payment determinations.

[[Page 50789]]

(b) Incorporating Maryland Hospitals
We are considering how best to incorporate Maryland hospitals paid
under the waiver under section 1814(b)(3) of the Act into the MSPB
measure. The payments made to Maryland hospitals pose a unique
challenge to the payment standardization methodology currently used for
the MSPB measure. Currently, hospitalizations in Maryland hospitals
that are captured in the post-discharge window of the MSPB measure are
standardized by applying the hospital wage index to the labor-related
share of the IPPS payment, according to the methodology found on page
10 of the ``CMS Price Standardization'' document (https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1228772057350). This approach does not account for the absence of outlier
payments on Maryland claims. In order to make a comparison of Maryland
hospitals to other subsection (d) hospitals paid under the IPPS, in the
event that MSPB measure rates are calculated for Maryland hospitals in
the future, outliers would have to be imputed. If we were to include
Maryland hospitals in the MSPB measure in the future, we would do so
through future rulemaking.
Comment: A few commenters referred to calculation of base operating
DRG payment amounts for Maryland, stating that they should be
calculated as they are for all other IPPS hospitals.
Response: We wish to clarify that we do not calculate the MSPB
measure using base operating DRG payment amounts, but rather it is
based on standardized Medicare payment amounts for Part A and Part B
services received by Medicare beneficiaries during an MSPB episode
surrounding a hospitalization. We refer readers to the FY 2012 IPPS/
LTCH PPS final rule for further details of the measure's construction
(76 FR 51618 through 51627).
Comment: Several commenters expressed that we should collect and
publicly report data on Hospital Compare for as many hospitals as
possible, including Maryland hospitals.
Response: We thank these commenters for their input and will
consider it as we develop further policy on this issue.
Comment: One commenter noted a number of differences in the way
that Maryland hospital payments are calculated and requested an
opportunity to work with us to make the standardized allowed amounts
for Maryland hospitals more comparable to hospitals paid under the
IPPS.
Response: We thank this commenter for the input, and we will
consider it as we determine an appropriate standardization approach for
Maryland hospital payments.
6. Additional Hospital IQR Program Measures for the FY 2016 Payment
Determination and Subsequent Years
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27684 through
27694), we proposed to add five new risk-adjusted claims-based outcome
measures to the Hospital IQR Program for the FY 2016 payment
determination and subsequent years: (1) 30-day risk standardized COPD
Readmission; (2) 30-day risk standardized COPD Mortality; (3) 30-day
risk standardized Stroke Readmission; (4) 30-day risk standardized
Stroke Mortality; and (5) AMI payment per Episode of Care. In section
IX.A.7. of the preamble of this final rule, we also discuss our
proposal that hospitals may voluntarily report certain Hospital IQR
measures in an electronic format.
The proposed measures were included on a publicly available
document entitled ``List of Measures Under Consideration for December
1, 2012'' in compliance with section 1890A(a)(2) of the Act, and they
were reviewed by the MAP in its ``MAP Pre-Rulemaking Report: 2013
Recommendations on Measures Under Consideration by HHS,'' which has
been made available on the NQF Web site at https://www.qualityforum.org/Setting_Priorities/Partnership/Measure_Applications_Partnership.aspx. We considered the input and recommendations provided
by the MAP in selecting measures to propose for the Hospital IQR
Program.
For purposes of the Hospital IQR Program, section
1886(b)(3)(B)(IX)(aa) of the Act requires that any measure specified by
the Secretary must have been endorsed by the entity with a contract
under section 1890(a) of the Act. However, the statutory requirements
under section 1886(b)(3)(B)(IX)(bb) of the Act provide an exception
that, in the case of a specified area or medical topic determined
appropriate by the Secretary for which a feasible and practical measure
has not been endorsed by the entity with a contract under section
1890(a) of the Act, the Secretary may specify a measure that is not so
endorsed as long as due consideration is given to measures that have
been endorsed or adopted by a consensus organization identified by the
Secretary.
We received some general comments on the proposed measures.
Comment: One commenter noted that that claims data alone are not
sufficient to support quality measures such as the risk-adjusted
outcome measures.
Response: We appreciate the commenter's concern about the use of
claims data in quality measures; however, we feel that claims data are
sufficient for a number of reasons. The claims are used to identify the
cohort of included hospitalizations, assess the outcome and risk-
adjust. In order to identify the cohort of included hospitalizations
(for example, admissions for heart attack), claims are commonly used in
both quality measures and research. ICD-9 codes are generally
considered reliable sources for identifying key information such as the
principal discharge diagnosis to establish measure cohorts. Claims are
a highly valid source of outcome measurement, readmission or death, and
payment amount.
Stakeholders' specific concerns about claims data commonly relate
to the use of claims for risk-adjusting measures. The current and
proposed outcome measures have been developed in line with accepted
standards for measure development and with extensive input from the
clinical, scientific and stakeholder community to ensure the validity
of our risk-adjusted outcome measures. Furthermore, many similar
measures have undergone validation with medical-record data, which has
demonstrated that the results of measures that use claims instead of
medical record data for risk-adjustment have highly correlated
hospital-level results. This validation confirms that claims are an
adequate source of data needed for risk-adjustment of these outcome
measures.
We develop measures in accordance with national guidelines, and in
consultation with clinical and measurement experts, key stakeholders,
and the public. The current and proposed outcome measures are
consistent with the technical approach to outcomes measurement set
forth in the NQF guidance for outcomes measures, CMS' Measure
Management System, and the guidance articulated in the American Heart
Association scientific statement ``Standards for Statistical Models
Used for Public Reporting of Health Outcomes.'' Furthermore, many prior
administrative claims based outcome measures have been validated with
chart data and this validation demonstrated that hospital profiling is
similar, supporting the use of claims data for these measures.

[[Page 50790]]

Throughout measure development, we obtain expert and stakeholder
input via two mechanisms: First, through regular discussions with an
advisory working group, and second, through meetings with a national
Technical Expert Panel (TEP), a group of recognized experts and
stakeholders in relevant fields. We hold regular conference calls with
our working group throughout the measure development phase. The working
group includes clinicians and other professionals with expertise in
stroke, biostatistics, measure methodology, and quality improvement.
The working group meetings address key issues surrounding measure
development including detailed discussions regarding the pros and cons
of specific decisions (for example, defining the appropriate measure
cohort) to ensure the methodological rigor of the measure.
In addition to the working group, and in alignment with the CMS'
Measure Management System, we convene a TEP to provide input and
feedback during measure development. To create the TEP, we release a
public call for nominations and select individuals representing a range
of perspectives including those of physicians, consumers, hospitals,
and purchasers. We convene three TEP conference calls during the course
of measure development. In contrast to the working group meetings, the
TEP meetings follow a more structured format consisting of presentation
of key issues, relevant data, and our proposed approach. This
presentation is followed by open discussion of these issues with TEP
members.
Finally, we publicly post the measure specifications and a summary
of the TEP discussions and make a widely distributed call for public
comments. We collect these comments through the Measure Management
System Web site (https://www.cms.hhs.gov/apps/QMIS/publicComment.asp).
We summarize the public comments and post the verbatim comments on a
freely accessible Web site. We take the comments we receive into
consideration during the final stages of measure development. In
conclusion, we believe that all the above steps that occur during the
measure development process provide assurance that claims-based data
provide adequate information we need for claims-based measures.
Comment: One commenter supported the measurement of condition-
specific outcomes measures, such as mortality and readmissions, as the
data provides actionable quality improvement information.
Response: We appreciate the commenter's support for this aspect of
the program.
Comment: One commenter believed that CMS should educate hospitals
on the risk-adjustment variables and approach used for the measures.
Response: We are committed to ensuring that hospitals are fully
aware of the technical specifications of all quality measures. Prior to
implementing new outcome measures, we conduct dry runs of the measures
to familiarize hospitals with their discharge- and hospital-level data
and the measure methodology. In addition we publicly post the
methodology reports for the measures as well as frequently asked
questions (https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html).
We also have inboxes which hospitals can contact with any questions
they may have about the measures (CMSreadmissionmeasures@yale.edu and
CMSmortalitymeasures@yale.edu).
Comment: One commenter believed that CMS should monitor the
unintended consequences of the outcome measures such as the appropriate
use of palliative and hospice care.
Response: We appreciate this comment. Through prior informal
analysis, we learned that the use of codes to indicate hospice care is
inconsistent across hospitals and, therefore, raises the concern of how
accurately the current available data reflects appropriate use of
palliative or hospice care. We will, however, consider the feasibility
of monitoring the appropriate use of palliative and hospice care given
the current inconsistent use of codes by hospitals.
Comment: One commenter was concerned that CMS is not properly
monitoring the readmission measures to determine if there are
unintended consequences.
Response: We are committed to monitoring the measures and assessing
unintended consequences over time, such as the inappropriate shifting
of care, increased patient morbidity and mortality, and other negative
unintended consequences for patients. In order to monitor unintended
consequences we have a surveillance system and annually publish a
Chartbook (https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Downloads/MedicareHospitalQualityChartbook2012.pdf) which examines these issues.
Comment: One commenter did not support using the same measures in
both the Hospital IQR Program and the Hospital Readmissions Reduction
Program.
Response: We believe it is appropriate to align measurement across
pay for reporting and pay for performance programs such as the Hospital
IQR Program and Hospital Readmissions Reduction Program for various
reasons, including placing emphasis on quality issues in need of
improvement. To the extent that we target high-cost, high-volume areas
for quality improvement in more than one program, we would expect there
to be some amount of topical overlap among programs. In order to avoid
confusion among providers, we also prefer to use one measure on a
specific topic rather than measuring the same topic in two or more
different ways in different programs.
Comment: A few commenters requested that CMS specify measures for
all populations, not just Medicare patients.
Response: We appreciate the commenters' suggestion. To the extent
feasible and applicable, we will specify the measures for all patients
regardless of payers.
The proposed measures are described in greater detail below.
a. Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate
(RSRR) Following Chronic Obstructive Pulmonary Disease (COPD)
Hospitalization Measure (NQF 1891)
We proposed to include this NQF-endorsed measure in the Hospital
IQR Program beginning with the FY 2016 payment determination. The MAP
supports this measure. In 2007, MedPAC published a report to Congress
in which it identified the seven conditions associated with the most
costly potentially preventable readmissions; among these seven, COPD
ranked fourth.\54\ In 2008, 12.1 million U.S. adults were estimated to
have COPD resulting in approximately 672,000 hospital discharges.\55\
There is also evidence of variation in outcomes at hospitals for COPD
patients, supporting the finding that there are opportunities for
improving care. The median 30-day risk-standardized readmission rate
among Medicare fee-for-service (FFS) patients aged 65 or

[[Page 50791]]

older hospitalized for COPD in 2008 was 22.0 percent, and ranged from
18.33 percent-25.03 percent across 4,546 hospitals.\56\
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\54\ Committee MPA. Report to the Congress: Promoting Greater
Efficiency in Medicare. 2007.
\55\ American Lung Association. Trends in COPD (Chronic
Bronchitis and Emphysema): Morbidity and Mortality. 2010; Available
at: https://www.lungusa.org/finding-cures/our-research/trend-reports/copd-trend-report.pdf.
\56\ Grosso L.M., Lindenauer P., Wang C., et al. Hospital-level
30-day Readmission Following Admission for an Acute Exacerbation of
Chronic Obstructive Pulmonary Disease: Report prepared for the
Centers for Medicare & Medicaid Services. 2011; Available at: https://www.qualitynet.org/.
---------------------------------------------------------------------------

The AHRQ has identified COPD as an ambulatory-care-sensitive
condition (ACSC). ACSCs are conditions for which good outpatient care
can potentially prevent the need for hospitalization or for which early
intervention can prevent complications or more severe disease.\57\
Although COPD is an ACSC, readmission rates are also influenced by
inpatient care.
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\57\ AHRQ Quality Indicators. Fact Sheet: Prevention Quality
Indicators. 2006; Available at: https://qualityindicators.ahrq.gov/downloads/pqi/2006-Feb-PreventionQualityIndicators.pdf.
---------------------------------------------------------------------------

To better assess hospital care and care transitions for COPD
patients, we developed a hospital-level readmission measure for
patients hospitalized with an acute exacerbation of COPD. We proposed
this measure for use in the Hospital IQR Program as well as the
Hospital Readmissions Reduction Program. We discuss the measure
methodology in detail in the section of this final rule pertaining to
the Hospital Readmissions Reduction Program. We refer readers to
section IX.A.6.b. of the preamble of this final rule on COPD for
details of the measure specifications. Details on the technical
specifications of the measure can also be found on our Web site at:
(https://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
We invited public comment on this proposal.
Comment: One commenter believed that CMS should report COPD
readmission and mortality rates by gender.
Response: For public reporting, maintaining a single cohort has the
advantage of increasing sample size and providing the ability to detect
quality differences across hospitals. We will consider whether to look
at this issue further as part of ongoing surveillance efforts.
Comment: Many commenters requested CMS incorporate socioeconomic
factors in the risk-adjustment methodology.
Response: Commenters also raised this issue regarding our proposed
incorporation of planned readmission algorithm for 30-day readmission
measures in section IX.A.5.b.(1) of the preamble of this final rule and
we refer readers to our response in that section.
Comment: A few commenters requested that CMS implement the COPD
readmission measure in the Hospital IQR Program before simultaneously
proposing it for the Hospital Readmissions Reduction Program.
Response: We proposed and are finalizing using the COPD readmission
measure for the Hospital IQR Program and plan to publicly report data
in FY 2014. This will allow hospitals to gain experience with the
measure prior to implementation in both the Hospital IQR Program, and
the Hospital Readmissions Reduction Program. In addition, we are
committed to ensuring that hospitals are fully aware of the technical
specifications of all quality measures. Prior to implementing new
outcome measures, to the extent feasible, we conduct dry runs of the
measures to familiarize hospitals with their patient- and hospital-
level data and the measure methodology. The data provided to hospitals
during the dry run are confidential and will not be publicly reported.
In addition we publicly post the methodology reports for the measures
as well as frequently asked questions. We also have inboxes which
hospitals can contact us with any questions they may have about the
measures (CMSreadmissionmeasures@yale.edu and
CMSmortalitymeasures@yale.edu).
Comment: One commenter believed that CMS should add length of stay
data to the COPD mortality and readmission measures because length of
stay impacts risk of mortality and readmission.
Response: We recognize that length of stay affects risk of
mortality and readmission. This is why our mortality and readmission
measures use a standardized time period of 30-days in order to assess
performance across hospitals fairly. We are committed to monitoring the
measures and assessing unintended consequences over time, such as how
shifts in length of stay impact performance on the measures. In order
to monitor unintended consequences, we have a surveillance system and
annually publish a Chartbook (https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Downloads/MedicareHospitalQualityChartbook2012.pdf) which examines
these issues.
Comment: One commenter was concerned about the lack of risk
adjustment for environmental factors that may significantly affect
respiratory patients.
Response: During measure development, we conducted a targeted
literature review and consulted with several experts to explore risk
adjusting for levels of particulate matter an air pollutant associated
with short-term increases in morbidity and increased admission rates
among respiratory patients. We found that the literature suggests that
ambient levels of particulate matter affect short-term mortality and
admission rates for COPD (and for other cardiovascular and respiratory
conditions).^{58 59 60} Although important from a public health
standpoint, the increases in risk are relatively small. Further, the
strength and direction of the potential association between particulate
levels and the outcomes of mortality and readmission are influenced by
other factors, including temperature, humidity, seasonal variation, and
city-level factors such as smoking and air conditioning use rates.\61\
Finally, we did not find any studies regarding the effect of ambient
particulates on mortality and readmission rates among hospitalized
patients for COPD, and the effect of particulate matter on readmission
rates remains uncertain. Given the technical challenge of risk
adjusting for this pollutant, and our expectation that building
particulate levels into the model is not likely to significantly
improve the models' performance even with the best methods, we do not
plan to pursue adding air pollution variables to the models at this
time.
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\58\ Environmental Protection Agency. Review of the National
Ambient Air Quality Standards for Particulate Matter: Policy
Assessment of Scientific and Technical Information. December 2005.
\59\ Medina-Ramon M, Zanobetti A, Schwartz J. The effect of
ozone and PM10 on hospital admissions for pneumonia and
chronic obstructive pulmonary disease: a national multicity study.
American Journal of Epidemiology. 2006;163(6):579-588.
\60\ Dominici F, Peng RD, Bell ML, et al. Fine particulate air
pollution and hospital admission for cardiovascular and respiratory
diseases. Journal of the American Medical Association.
2006;295(10):1127-1134.
\61\ Medina-Ramon M, Zanobetti A, Schwartz J. The effect of
ozone and PM10 on hospital admissions for pneumonia and
chronic obstructive pulmonary disease: a national multicity study.
American Journal of Epidemiology. 2006;163(6):579-588.
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The purpose of risk-adjustment is to account for differences across
hospitals in factors unrelated to quality, such as patient
comorbidities, that may affect the outcome of mortality and
readmission. It is important to risk adjust for factors that could bias
the measure results (for example, could favor hospitals in low
pollution areas). Adjusting for environmental factors would make sense
if it were technically feasible and if it would improve the model by
reducing or eliminating a

[[Page 50792]]

potential bias. Variables for environmental factors are unlikely to
affect hospital-level risk-standardized rates. The studies to date
focus on the general non-hospitalized population, and it is not clear
how they apply to the patients in our models--that is, patients
hospitalized with an acute exacerbation of COPD. Experts believed the
effect of adjusting for particulate matter would likely be small or
negligible given that the model applies to patients already
hospitalized for COPD.
In addition, there are feasibility issues. Modeling the effect
appropriately would be complex. Our review of the issues suggests it
would be inappropriate to use ambient air quality levels as a risk
adjuster without also adjusting for other factors that affect the
strength and direction of the potential association between particulate
levels and the outcomes, including temperature, humidity, seasonal
variation, and city-level factors such as smoking and air conditioning
use rates. Given these challenges, and our expectation that building
particulate levels into the model is not likely to significantly
improve the models' performance even with the best methods, we do not
plan to pursue adding air pollution variables to the models at this
time.
After consideration of the public comments we received, we are
finalizing as proposed the Hospital 30-Day, all-cause, risk-
standardized readmission Rate (RSRR) following chronic obstructive
pulmonary disease (COPD) hospitalization measure for the FY 2016
payment determination and subsequent years.
b. Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR)
Following Chronic Obstructive Pulmonary Disease (COPD) Hospitalization
Measure (NQF 1893)
(1) Background
COPD affects as many as 24 million individuals in the United States
and is the nation's fourth leading cause of death. Between 1998 and
2008, the number of patients hospitalized annually for acute
exacerbations of COPD (AECOPD) increased by approximately 18
percent.^{62 63 64} Moreover, COPD is one of the top 20
conditions contributing to Medicare costs.\65\ Finally, there is
evidence of variation in outcomes at hospitals for COPD patients,
supporting the finding that there are opportunities for improving care.
The median 30-day risk-standardized mortality rate among Medicare FFS
patients aged 65 or older hospitalized for COPD in 2008 was 8.5
percent, and ranged from 5.9 percent to 13.5 percent across 4,537
hospitals.\66\
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\62\ National Heart L, and Blood Institute, The Morbidity &
Mortality: Chart Book on Cardiovascular, Lung and Blood Diseases.
2009; Available at: https://www.nhlbi.nih.gov/resources/docs/2009_ChartBook.pdf.
\63\ The Centers for Disease Control and Prevention. National
Center for Health Statistics Chronic Lower Respiratory Disease.
FastStats 2010; Available at: https://www.cdc.gov/nchs/fastats/copd.htm.
\64\ Agency for Healthcare Research and Quality. Healthcare Cost
and Utilization Project Statistics on Hospitals Stays. 2009;
Available at: https://hcupnet.ahrq.gov/.
\65\ Andrews RM. The National Hospital Bill: The Most Expensive
Conditions by Payer, 2006. Rockville: Agency for Healthcare Research
and Quality; 2008.
\66\ Grosso L.M., Lindenauer P., Wang C., et al. Hospital-level
30-day Mortality Following Admission for an Acute Exacerbation of
Chronic Obstructive Pulmonary Disease: Report prepared for the
Centers for Medicare & Medicaid Services. 2011; Available at: http:/
/www.qualitynet.org.
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We proposed to include a hospital 30-day, all-cause risk-
standardized rate of mortality following an admission for an AECOPD in
the Hospital IQR Program. The measure aims to address a prevalent and
costly health problem in the nation. In addition, the measure aligns
with our priority objectives to promote quality improvements leading to
successful transition of care for patients from acute care to
outpatient settings, and reducing short term, preventable mortality
rates.
We plan to implement this measure to encourage improvement of
outcomes by providing patients, physicians, and hospitals with
information about hospital-level, risk-standardized mortality rates
following hospitalization for an AECOPD. Clinical trials and
observational studies suggest that several aspects of care provided to
patients hospitalized for AECOPD can have significant effects on
mortality, thus supporting the essential construct of mortality as an
appropriate outcome to measure quality.^{67 68 69 70} Moreover,
by proposing an outcome measure, we intend to broaden the view of
quality of care that encompasses more than what can be captured by
merely measuring individual processes-of-care. Through outcome
measures, we can capture complex and critical aspects of care, such as
communication between providers, prevention of, and response to,
complications, patient safety and coordinated transitions to the
outpatient environment, all contribute to patient outcomes but are
difficult to measure by individual process measures.\71\ \72\
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\67\ Global strategy for Diagnosis M, and Prevention of COPD,
2009; Available at: https://www.goldcopd.org/.
\68\ National Institute for Health and Clinical Excellence.
Chronic Obstructive Pulmonary Disease: Management of Chronic
Obstructive Pulmonary Disease in Adults in Primary and Secondary
Care (Partial Update). National Collaborating Centre for Acute and
Chronic Conditions. Available at: https://www.nice.org.uk/nicemedia/live/13029/49397/49397.pdf.
\69\ Walters JA, PG Gibson, R Wood-Baker, M Hannay, EH Walters.
Systemic corticosteroids for acute exacerbations of chronic
obstructive pulmonary disease. Cochrane Database Syst Rev. 2009;
CD001288(1).
\70\ Lightowler JV, Wedzicha JA, Elliott MW, Ram FS. Non-
invasive positive pressure ventilation to treat respiratory Failure
resulting from exacerbations of chronic obstructive pulmonary
disease: Cochrane systematic review and meta-analysis. Bmj.
2003;326(7382).
\71\ Krumholz H, Normand S-L, Spertus JA, Shahian DM, Bradley
EH. Measuring Performance for Treating Heart Attacks and Heart
Failure: The Case for Outcomes Measurement. Health Affairs
2007;26:75-85.
\72\ Bradley EH, Herrin J, Elbel B, et al. Hospital Quality for
Acute Myocardial Infarction: Correlation Among Process Measures and
Relationship With Short-term Mortality. The Journal of the American
Medical Association 2006;296:72-8.
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[[Page 50793]]

publicly reported mortality measures (AMI, HF, and PN).
The measure assesses all-cause mortality not just COPD-specific
mortality for several reasons. First, limiting the measure to COPD-
related mortalities may limit the focus of efforts to improve care to a
narrow set of approaches (such as processes that will prevent a
recurrent exacerbation) as opposed to encouraging broader initiatives
aimed at improving the overall in-hospital care. Second, cause of death
may be unreliably recorded and it is often not possible to exclude
quality issues and accountability based on the documented cause of
mortality. For example, a COPD patient who develops a hospital-acquired
infection may ultimately die from sepsis. It would be inappropriate to
treat this death as unrelated to the care the patient received for
COPD. Finally, from a patient perspective, death is the outcome that
matters, regardless of cause.
(5) Cohort
COPD is a group of lung diseases characterized by airway
obstruction. Patients hospitalized for an AECOPD present with varying
degrees of severity ranging from a worsening of baseline symptoms
(dyspnea, cough, and/or sputum) to respiratory failure. To capture the
full spectrum of severity of patients hospitalized for an AECOPD, we
included patients with a principal diagnosis of COPD, as well as those
with a principal diagnosis of respiratory failure who had a secondary
diagnosis of an AECOPD. Requiring AECOPD as a secondary code helps to
identify respiratory failure due to COPD exacerbation versus another
condition (for example, heart failure). For detailed information on the
cohort definition please reference the COPD mortality technical report
on our Web site at: https://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
(6) Inclusion and Exclusion Criteria
The measure includes hospitalizations for patients 65 years or
older at the time of index admission and for whom there was a complete
12 months of FFS enrollment to allow for adequate risk-adjustment. The
measure excludes the following admissions from the measure cohort: (1)
Admissions for patients having a principal diagnosis of an AECOPD
during the index hospitalization who were transferred from another
acute care facility are excluded because the hospital where the patient
was initially admitted made critical acute care decisions (including
the decision to transfer and where to transfer); (2) admissions for
patients enrolled in the Medicare Hospice Program any time in the 12
months prior to the index hospitalization, including the first date of
the index admission are excluded because it is likely that these
patients are continuing to seek comfort care and their goal may not be
survival; and (3) admissions for patients that are discharged alive and
against medical advice are excluded because providers did not have the
opportunity to deliver full care and prepare the patient for discharge.
(7) Risk Adjustment
The measure adjusts for differences across hospitals in how at risk
their patients are for death relative to patients cared for by other
hospitals. Consistent with NQF guidelines, the model does not adjust
for socioeconomic status or race because risk-adjusting for these
characteristics would hold hospitals with a large proportion of
minority or low socioeconomic status patients to a different standard
of care than other hospitals. One goal of this measure is to illuminate
quality differences that such risk adjustment would obscure.
(8) Calculating the Risk-Standardized Mortality Ratio (RSMR)
The measure is calculated using hierarchical logistic modeling
(HLM). This approach appropriately accounts for the types of patients a
hospital treats (that is, hospital case mix), the number of patients it
treats, and the quality of care it provides. The HLM is an appropriate
statistical approach to measuring quality based on patient outcomes
when the patients are clustered within hospitals (and therefore the
patients' outcomes are not statistically independent) and the number of
eligible patients for the measure varies from hospital to hospital. As
noted above, the measure methodology defines hospital case mix based on
the clinical diagnoses provided in the hospital claims for their
patients' inpatient and outpatient visits for the 12 months prior to
the COPD hospitalization, as well as those present in the claims for
care at admission. The methodology, however, specifically does not
account for diagnoses present in the index admission that may indicate
complications rather than patient comorbidities.
The RSMR is calculated as the ratio of the number of predicted
deaths to the number of expected deaths and then the ratio is
multiplied by the national unadjusted mortality rate. The ratio is
greater than one for hospitals that have more deaths that would be
expected for an average hospital with similar cases and less than one
if the hospital has fewer deaths than would be expected for an average
hospital with similar cases. This approach is analogous to a ratio of
``observed'' or ``crude'' rate to an ``expected'' or risk-adjusted rate
used in other similar types of statistical analyses.
The RSMR is a point estimate--the best estimate of a hospital's
mortality rate based on the hospital's case mix. For displaying the
measure for the Hospital IQR Program, we computed an interval estimate,
which is similar to the concept of a confidence interval, to
characterize the level of uncertainty around the point estimate. We use
the point estimate and interval estimate to determine hospital
performance (for example, higher than expected, as expected, or lower
than expected). For more detailed information on the calculation
methodology please refer to our Web site at: https://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
We invited public comment on this proposal.
Comment: Some commenters supported the addition of the COPD
mortality measure to Hospital IQR Program.
Response: We appreciate the commenters' support for this measure.
Comment: Several commenters noted that the COPD mortality measure
may not be reliable.
Response: We use the same statistical approach to reliability for
the COPD mortality measure that we have established for our hospital
risk-adjusted outcome measures, including the mortality and
readmissions measures. Reliability is related to sample size. We
adopted a risk-adjustment modeling methodology for our outcome measures
that takes into account sample size. Although the commenter raised the
issue of reliability related to the COPD mortality measure that CMS
proposed for the Hospital IQR program, this issue was raised and
responded to in part in the FY 2013 IPPS/LTCH PPS final rule (77 FR
53379) in our discussion of the readmission measures for the Hospital
Readmissions Reduction Program. The response is set out below.
``We determined the 25-case threshold for public reporting based on
a reliability statistic that is calculated from the intercluster
correlation, a parameter of the model.''
In addition, we have thought carefully about how best to measure
quality for

[[Page 50794]]

small volume hospitals. Smaller hospitals do typically have less
certain estimates, because they have fewer cases for use in assessing
quality; that is a challenge inherent in outcome measurement. One
advantage of the statistical model we use for the measures is that it
allows for the inclusion of small hospitals while characterizing the
certainty of their estimates. The hierarchical logistic regression
model that we use to calculate the risk-standardized outcome measures
allows the inclusion of hospitals with relatively few observations, but
takes into account the uncertainty associated with sample size in
estimating their risk-standardized outcome rates. The model takes into
account the uncertainty in the estimate of outcome rates for small
volume hospitals by assuming that each hospital is a typically
performing hospital. It weighs that assumption along with the outcomes
for the particular hospital in calculating the outcome rate. Therefore,
the estimated outcome rates for smaller hospitals will likely be closer
to the national rate because the limited number of eligible cases in
the hospital tells little about that hospital's true outcome rate.
Comment: Several commenters requested that CMS incorporate
socioeconomic factors in its risk-adjustment methodology.
Response: Commenters also raised this issue regarding our proposed
incorporation of planned readmission algorithm for 30-day readmission
measures in section IX.A.5.b.(1) of the preamble of this final rule and
we refer readers to our response in that section.
Comment: A few commenters suggested that additional work is needed
to adequately explore the relationship between COPD 30-day risk
standardized mortality rates and 30-day readmission rates.
Response: We consider that hospital performance on mortality and
readmission measures represent different aspects of quality.
Researchers found that performance on risk-standardized mortality rates
was not strongly correlated with performance on risk-standardized
readmission rates for HF and not at all for AMI and pneumonia.\73\ We
appreciate the commenters' concern and will monitor the correlation for
COPD as part of our hospital quality surveillance.
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\73\ Krumholz HM, Lin Z, Keenan PS, et al. Relationship between
hospital readmission and mortality rates for patients hospitalized
with acute myocardial infarction, heart failure, or pneumonia. JAMA.
2013; 309(6):587-593.
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Comment: One commenter noted that the hospice exclusion is a crude
exclusion for the mortality measures and requested that CMS add
information about the desire of the patient to refuse CPR or other
potentially life-extending services to determine if mortality was in
fact an acceptable outcome for that patient.
Response: We appreciate this comment, and will continue to consider
options for identifying and removing from the measures patients who are
seeking comfort care only. The options available for identifying these
patients and excluding them from the mortality measures are limited and
each has tradeoffs. We appreciate the concern about the potential
effects of the current approach on clinical care, and will consider
this as we maintain the measures.
After consideration of the public comments we received, we are
finalizing as proposed the Hospital 30-Day, all-cause, risk-
standardized mortality rate (RSMR) following chronic obstructive
pulmonary disease (COPD) hospitalization measure for the FY 2016
payment determination and subsequent years.
c. Hospital 30-day, All-Cause Risk-Standardized Rate of Readmission
Following Acute Ischemic Stroke (Stroke Readmission) Measure
(1) Background
Stroke is an important and common diagnosis among Medicare
patients. Ischemic stroke affects hundreds of thousands of adults in
the United States each year and leaves many with new disability and at
increased risk for complications, recurrent stroke and clinical
deterioration.\74\ Hospital readmissions after stroke may result from
the progression of disease, but may also be an indicator of poor care.
Approximately 10 percent of stroke survivors will have a recurrent
stroke within a year and one out of four stroke patients will be
readmitted to the hospital.\75\ \76\ \77\ Moreover, stroke is one of
the top 20 conditions contributing to Medicare costs.\78\ Finally,
there is evidence of variation in outcomes at hospitals for stroke
patients, supporting the finding that there are opportunities for
improving care. The median 30-day risk-standardized readmission rate
among Medicare FFS patients aged 65 or older hospitalized for stroke in
2007 was 14.7 percent, and ranged from 11.6 percent to 19.4 percent
across 4,242 hospitals.\79\
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\74\ American Heart Association, Heart Disease and Stroke
Statistics--2012 Update. American Heart Association, Circulation
2012, 125:e2-e220.
\75\ Sacco RL, Hauser WA, Mohr JP, Foulkes MA. One[hyphen]year
outcome after cerebral infarction in whites, blacks, and Hispanics.
Stroke 1991;22:305[hyphen]11.
\76\ Andersen HE, Schultz[hyphen]Larsen K, Kreiner S,
Forchhammer BH, Eriksen K, Brown A. Can readmission after stroke be
prevented? Results of a randomized clinical study: a postdischarge
follow[hyphen]up service for stroke survivors. Stroke
2000;31:1038[hyphen]45.
\77\ Gooding J, Jette AM. Hospital readmissions among the
elderly. Journal of the American Geriatric Society
1985;33:595[hyphen]601.
\78\ Andrews RM. The National Hospital Bill: The Most Expensive
Conditions by Payer, 2006. Rockville: Agency for Healthcare Research
and Quality; 2008.
\79\ Bernheim S.M., Wang C., Wang Y., et al. Hospital
30[hyphen]Day Readmission Following Acute Ischemic Stroke
Hospitalization Measure: Report prepared for the Centers for
Medicare & Medicaid Services. 2010; Available at: https://
www.qualitynet.org.
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We proposed to include this non-NQF-endorsed hospital 30-day, all-
cause risk-standardized rate of readmission following acute ischemic
stroke measure in the Hospital IQR Program, under the exception
authority in section 1886(b)(3)(B)(IX)(bb) of the Act as previously
discussed in section IX.A.6. of the preamble to this final rule.
Although the proposed measure is not currently NQF-endorsed or MAP
supported, we considered other available measures that have been
endorsed or adopted by a consensus organization, and found no other
feasible and practical measures on this topic. We believe it is
imperative to adopt this measure as it aims to address a prevalent and
costly health problem in the nation. In addition, the measure aligns
with our priority objectives to promote quality improvements leading to
successful transition of care for patients from acute care to
outpatient settings, and reduce short term, preventable readmission
rates.
We plan to implement this measure to encourage improvement of
outcomes by providing patients, physicians, and hospitals with
information about hospital-level, risk-standardized readmission rates
following hospitalization for acute ischemic stroke. Studies have shown
stroke readmission to be related to quality of care, and that
improvements in care can reduce readmission rates.\80\ \81\ \82\
Moreover, by proposing an outcome measure, we intend to broaden the
view of quality of care that encompasses more

[[Page 50795]]

than what can be captured by merely measuring individual processes-of-
care. Through outcome measures, we can capture complex and critical
aspects of care, such as communication between providers, prevention
of, and response to, complications, patient safety and coordinated
transitions to the outpatient environment, all of which contribute to
patient outcomes but are difficult to measure by individual process
measures.\83\ \84\
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\80\ Jack BW, Chetty VK, Anthony D, et al. A Reengineered
Hospital Discharge Program to Decrease Rehospitalization. Annals of
Internal Medicine 2009;150:178[hyphen]88.
\81\ Naylor MD, Brooten D, Cambell R, et al. Comprehensive
Discharge Planning and Home Follow[hyphen]up of Hospitalized Elders:
A Randomized Clinical Trial. The Journal of the American Medical
Association 1999; 281:613[hyphen]20.
\82\ Bravata DM, Ho SY, Meehan TP, Brass LM, Concato J.
Readmission and death after hospitalization for acute ischemic
stroke: 5[hyphen]year follow[hyphen]up in the Medicare population.
Stroke 2007; 38:1899[hyphen]904.
\83\ Krumholz H, Normand S-L, Spertus JA, Shahian DM, Bradley
EH. Measuring Performance for Treating Heart Attacks and Heart
Failure: The Case for Outcomes Measurement. Health Affairs
2007;26:75-85.
\84\ Bradley EH, Herrin J, Elbel B, et al. Hospital Quality for
Acute Myocardial Infarction: Correlation Among Process Measures and
Relationship With Short-term Mortality. The Journal of the American
Medical Association 2006;296:72-8.
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The specifics of the measure methodology are included in the
measure methodology report we have posted on our Web site at: https://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. We refer readers to the
report for further details on the risk-adjustment statistical model.
(2) Overview of Measure
The measure is a 30-day, all-cause risk-standardized rate of
readmission following hospitalization for acute ischemic stroke to any
non-federal acute care hospital. The measure includes Medicare FFS
patients aged 65 or older admitted for an acute ischemic stroke and
assesses if the patient was readmitted within 30 days of discharge.
In general, the measure uses the same approach to risk-adjustment
and HLM methodology that is specified for our inpatient outcome
measures previously adopted for the Hospital IQR Program, including
AMI, HF, and PN readmission and mortality measures. For a discussion of
this methodology, we refer readers to our Web site at: https://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
Furthermore this measure, which is calculated using CMS claims or
administrative data, is validated by comparing it to a medical record
model in a matched cohort of admissions for which stroke medical record
data and administrative claims data are available.
(3) Data Sources
The proposed measure is claims-based and uses Medicare
administrative data that contain hospitalizations for fee-for-service
Medicare beneficiaries hospitalized with acute ischemic stroke.
(4) Outcome
The outcome for this measure is 30-day all-cause readmission
defined as an unplanned subsequent inpatient admission to any acute
care facility from any cause within 30 days of the admission date for
the index hospitalization. A number of studies have demonstrated that
improvements in care at the time of patient discharge can reduce 30-day
readmission rates.^{85 86 87} It is a timeframe in which a
readmission may reasonably be attributed to the hospital care and
transitional period to a non-acute setting.
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\85\ Jack BW, Chetty VK, Anthony D, et al. A Reengineered
Hospital Discharge Program to Decrease Rehospitalization. Annals of
Internal Medicine 2009;150:178-88.
\86\ Coleman EA, Parry C, Chalmers S, Min S-j. The Care
Transitions Intervention: Results of a Randomized Controlled Trial.
Archives of Internal Medicine 2006;166:1822-8.
\87\ Anderson C, Deepak BV, Amoateng-Adjepong Y, Zarich S.
Benefits of Comprehensive Inpatient Education and Discharge Planning
Combined With Outpatient Support in Elderly Patients With Congestive
Heart Failure. Congestive Heart Failure 2005;November-December:315-
21.
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The measure assesses all-cause unplanned readmission (excluding
planned readmissions) rather than only stroke-specific readmissions for
several reasons. First, from the patient perspective, readmission for
any reason is likely to be an undesirable outcome of care, even though
not all readmissions are preventable. Second, limiting the measure to
stroke-related readmissions may limit the focus of efforts to improve
care to a narrow set of approaches (such as processes that will prevent
recurrent stroke) as opposed to encouraging broader initiatives aimed
overall at improving the care within the hospital and transitions from
the hospital setting. Moreover, it is often hard to exclude quality
issues and accountability based on the documented cause of readmission,
for instance, a patient who came back with pneumonia may have aspirated
due to inadequate preventive measures and therefore we would not want
to discount such a readmission.
The measure does not count readmissions that are considered
planned. Planned readmissions are identified in claims data using the
CMS Planned Readmission Algorithm Version 2.1 which detects
readmissions that are typically planned and may occur within 30 days of
discharge from the hospital. For more information on the methodology
used to identify planned readmissions, and the list of planned
diagnoses and procedures used in the algorithm, please refer to on our
Web site at: https://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
The stroke readmission measure makes one modification to the planned
readmissions algorithm as it does not consider readmissions as planned
for patients who are readmitted for debridement of wound; infection or
burn (AHRQ's Clinical Classification Software procedure category 169).
Such treatments are commonly provided for decubitus ulcers that can
easily be unplanned readmissions following stroke care, because such
ulcers can complicate a stroke. The algorithm includes planned
readmissions for common related follow-up care for stroke patients (for
example, carotid endarterectomy) as well as readmissions which are
generally planned regardless of the original admission (for example, a
stroke patient readmitted for cholecystectomy). Unplanned readmissions
that fall within the 30-day post discharge timeframe from the index
admission are not counted as outcomes for the index admission if they
are preceded by a planned readmission.
(5) Cohort
The cohort of index hospital admissions included in the measure is
restricted to hospitalizations for ischemic stroke. The measure is
limited to ischemic stroke hospitalizations for several reasons. First,
ischemic strokes are the most common type of stroke, accounting for the
vast majority of stroke hospitalizations.\88\ Second, the etiology and
prognosis of ischemic stroke is quite different than that of
hemorrhagic stroke, so a combined cohort would be more heterogeneous.
This heterogeneity could make it more difficult to account for a
hospital's patient mix and lead to a less fair measure. Similarly,
patients with transient ischemic attacks (TIAs) are not included
largely due to concerns about inconsistency in the use of
administrative codes to define TIA and potential for inclusion of
patients without cerebrovascular conditions. For detailed information
on the cohort definition, we refer readers to the stroke readmission
technical report on our Web site at: https://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
---------------------------------------------------------------------------

\88\ Thom T, Haase N, Rosamond W, et al. Heart Disease and
Stroke Statistics-2006 Update: A Report From the American Heart
Association Statistics Committee and Stroke Statistics Subcommittee.
Journal of the American Heart Association 2006:85-151.

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[[Page 50796]]

(6) Inclusion and Exclusion Criteria
The measure includes hospitalizations for patients 65 years or
older at the time of index admission and for whom there was a complete
12 months of FFS enrollment to allow for adequate risk-adjustment. The
measure excludes the following admissions from the measure cohort: (1)
Admissions for patients who die during the initial hospitalization
because they are not eligible for readmission; (2) admissions for
patients having a principal diagnosis of stroke during the index
hospitalization and subsequently transferred to another acute care
facility are excluded because the measure's focus is on hospitals that
discharge patients to a non-acute setting (for example, to home or a
skilled nursing facility); (3) admissions for patients that are
discharged against medical advice are excluded because providers did
not have the opportunity to deliver full care and prepare the patient
for discharge; (4) admissions for patients without at least 30-days
post-discharge enrollment in Medicare FFS are excluded because the 30-
day readmission outcome cannot be assessed in this group; and (5)
additional stroke admissions for patients within 30 days of discharge
from an index stroke admission will be considered readmissions and not
additional index admissions.
(7) Risk Adjustment
The measure adjusts for differences across hospitals in how at risk
their patients are for readmission relative to patients cared for by
other hospitals. Consistent with NQF guidelines, the model does not
adjust for socioeconomic status or race because risk-adjusting for
these characteristics would hold hospitals with a large proportion of
minority or low socioeconomic patients to a different standard of care
than other hospitals. One goal of this measure is to illuminate quality
differences that such risk-adjustment would obscure.
(8) Calculating the Risk Standardized Readmission Ratio (RSRR)
The measure is calculated using HLM. This approach appropriately
accounts for the types of patients a hospital treats (that is, hospital
case mix), the number of patients it treats, and the quality of care it
provides. HLM is an appropriate statistical approach to measuring
quality based on patient outcomes when the patients are clustered
within hospitals (and therefore the patients' outcomes are not
statistically independent) and the number of eligible patients for the
measure varies from hospital to hospital. As noted above, the measure
methodology defines hospital case mix based on the clinical diagnoses
provided in the hospital claims for their patients' inpatient and
outpatient visits for the 12 months prior to the ischemic stroke
hospitalization, as well as those present in the claims for care at
admission. However, the methodology specifically does not account for
diagnoses present in the index admission that may indicate
complications rather than patient comorbidities. In addition, the
measure takes into account situations where patients initially present
at one ED but are then admitted to another hospital for their index
stroke hospitalization. The measure includes a risk-adjustment factor
to account for ED-transfer patients.
The RSRR is calculated as the ratio of the number of predicted
readmissions to the number of expected readmissions and then the ratio
is multiplied by the national unadjusted readmission rate. The ratio is
greater than one for hospitals that have more readmission that would be
expected for an average hospital with similar cases and less than one
if the hospital has fewer readmissions than would be expected for an
average hospital with similar cases. This approach is analogous to a
ratio of ``observed'' or ``crude'' rate to an ``expected'' or risk-
adjusted rate used in other similar types of statistical analyses.
The RSRR is a point estimate--the best estimate of a hospital's
readmission rate based on the hospital's case mix. For displaying the
measure for the Hospital IQR Program, we computed an interval estimate,
which is similar to the concept of a confidence interval, to
characterize the level of uncertainty around the point estimate. We use
the point estimate and interval estimate to determine hospital
performance (for example, higher than expected, as expected, or lower
than expected). For more detailed information on the calculation
methodology, we refer readers to our Web site at: https://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
We proposed to adopt this measure in the Hospital IQR Program for
the FY 2016 payment determination and subsequent years under the
exception authority in section 1886(b)(3)(B)(IX)(bb) of the Act as
previously discussed in section IX.A.6. of the preamble of this final
rule. Although the proposed measure is not currently NQF-endorsed or
MAP supported, we considered other available measures that have been
endorsed or adopted by the NQF, and were unable to identify any other
NQF-endorsed measures that assess stroke readmission with a standard
period of follow-up. We also are not aware of any other 30-day stroke
readmission measures that have been endorsed or adopted by a consensus
organization. The development of this measure went through the same
rigorous development process as the other publicly reported outcomes
measures and involved extensive input by stakeholders and clinical
experts. It follows the same scientific approach to evaluate hospital
performance as other Hospital IQR Program outcome measures. Finally, it
has been validated with medical record measures and shown to produce
similar hospital-level results. Accordingly, we proposed to adopt the
30-day stroke readmission measure under the Secretary's authority set
forth at section 1886(b)(3)(B)(IX)(bb) of the Act.
We invited public comment on this proposal.
Comment: Many commenters opposed the stroke readmission measure
because it is not NQF-endorsed.
Response: We submitted the 30-day Stroke Readmission and 30-day
Stroke Mortality Measures to the NQF for review during its 2012
Neurology Endorsement Maintenance Consensus Development Project. The
NQF Neurology steering committee convened three times to assess the CMS
stroke measures. The first time the Committee recommended the
readmission measure for endorsement (the vote was 13 to 9). After the
public comment period, the Steering Committee met for a second time to
discuss the issues raised by the commenters. The issues raised during
public comment were: (1) The lack of inclusion of the NIH Stroke Scale
(NIHSS) score as patient severity score for risk adjustment purposes;
(2) whether the measures are able to show variability among hospitals,
and room for improvement; and (3) hospitals perceived ability to
influence the readmission measure. The committee reassessed these
issues and concluded that the 30-day readmission measure met the four
NQF endorsement criteria--importance, scientific acceptability,
usability, and feasibility. However the committee voted 12-10 against
the endorsement of the readmission measure. The third time the
Committee met following a second round of public comment, they
discussed the issue of whether the readmission measure should be risk
adjusted for patient level SES factors. The Steering Committee
discussed these issues and decided not to re-vote on the

[[Page 50797]]

measures. For further information, we refer readers to the Official NQF
Report for this Consensus Development Project, located here: https://
www.qualityforum.org/Publications/2012/12/Neurology_Endorsement_
Maintenance__-Phase_I_Technical_Report.aspx.
We submitted the readmission and mortality measures for review by
the MAP in December 2012. While some members of the MAP supported use
of the measures in the Hospital IQR Program, in its Final Report to
HHS, the MAP did not support either the 30-day Stroke Readmission
Measure or the 30-day Stroke Mortality Measure, because the measures
did not receive NQF endorsement. We refer readers to the February 2013
MAP Pre-rulemaking recommendations located here: https://
www.qualityforum.org/Publications/2013/02/MAP_Pre-Rulemaking_Report_
_-February_2013.aspx.
In evaluating and selecting the 30-day acute ischemic stroke
readmission measure for inclusion in the Hospital IQR Program, we
considered whether there were other available measures that have been
endorsed or adopted by the NQF, and were unable to identify any other
NQF-endorsed measures that assess 30-day acute ischemic stroke
readmission. We also are not aware of any other measures of 30-day
acute ischemic stroke outcomes that have been endorsed or adopted by a
consensus organization. The development of the 30-day acute ischemic
stroke readmission measure went through the same rigorous development
process as the other publicly reported outcomes measures and involved
extensive input by stakeholders and clinical experts. This follows the
same scientific approach to evaluate hospital performance as other
Hospital IQR Program outcome measures. There are currently no stroke
outcome measures in the Hospital IQR Program to complement the process
of care and structural measures, yet stroke remains one of the top
causes of death, and hospitalization for Stroke is frequently followed
by readmission. This is why we proposed to adopt this measure for the
Hospital IQR Program under the Secretary's authority set forth at
section 1886(b)(3)(B)(IX)(bb) of the Act.
We appreciate and have heard the concerns of the stakeholders on
this issue. We are committed to working with the stakeholder
communities and to continuously refine our measures, which for the
stroke outcome measures includes risk adjusted patient severity. We
will work with the stroke communities and other stakeholders to seek
feasible ways to incorporate additional severity adjustment as
suggested. We note that stroke is the fifth leading cause of adult
mortality in the U.S., and therefore we believe it would be a
disservice to patients to delay inclusion of these current stroke
outcome measures in quality reporting and quality improvement
initiatives. We are committed to making these measures better and
working with stakeholders to do so.
Comment: Several commenters supported the addition of the stroke
readmission measure to Hospital IQR Program.
Response: We appreciate the commenters support for this measure.
Comment: A number of commenters expressed concerns that the stroke
readmission measure does not include risk adjustment for stroke
severity. Specifically a few commenters suggested that use of this
measure could hamper efforts to develop State-wide coordinated care
systems, since many stroke centers receive severe cases from other
providers' emergency departments. Commenters also stated that the
adoption of the measure may create disincentives for providers to
accept more severe stroke patients to try to avoid having high
readmission rates. Instead of the proposed measure, one commenter asked
CMS to develop a measure that accounts for stroke severity to enable
hospitals to put internal changes in action to reduce readmission rates
and improve quality of care for stroke patients. The same commenter
also noted that the vast majority of stroke readmissions are not
preventable.
Response: We appreciate these concerns and suggestions and will
continue to engage stakeholders on ways to incorporate stroke severity
into the risk-adjusted model for stroke outcome measures. Our goal is
to refine measures so that the measure results will better inform
hospitals on ways to improve quality of care for their patients.
We understand stakeholders' concerns that a measure of stroke
readmission that does not adequately adjust for stroke severity might
negatively impact the development of State-wide coordinated care
systems. During measure development, we attempted to address this
concern through validation of our measure. We compared the results of
our measure with medical record data that included a marker of stroke
severity. The correlation coefficient of the risk standardized
readmission rates from the administrative and medical record models is
0.99 and for the stroke mortality model (see the discussion of the
stroke mortality measure below), it was 0.80. Hospital performance on
both of the measures using two different data sources (that is,
administrative claims or medical records) was very similar. We believe
this analysis not only demonstrates the validity of the administrative
claims data for risk-adjustment, but also illustrates how assessment of
stroke severity using a method other than the NIHSS score can provide
meaningful data that enables hospitals to improve stroke quality of
care.
Regarding the concerns about the creation of a potential
disincentive to accept more severe stroke patients in transfer, we have
thought carefully about this measure's effect on tertiary care centers.
In order to confirm that the measure is fair to tertiary care centers,
we performed analyses during measure development and found that measure
performance for stroke centers is not different than that of non-stroke
center hospitals. Further, our measures continually undergo maintenance
to determine the need for: (1) Updated specifications; (2) responses to
concerns of stakeholders; and (3) measure refinement in response to
monitored trends. We will closely monitor this issue to ensure that
hospitals are appropriately caring for patients experiencing various
levels of stroke severity.
We would like to clarify that we do not assume all readmissions are
preventable. Our goal for the readmission measure is to identify
hospitals that seem to have excess readmissions above and beyond what
would be expected for their case mix. We believe that careful discharge
planning and instructions, communication with outpatient providers,
attention to patient safety and prevention of infections, are all
important for reducing readmissions. With these internal changes by
hospitals, we believe that these and other steps to reduce readmissions
will lead to hospitals having lower overall readmission rates and have
better rates on this measure. We stress that the measure is not
intended to drive hospitals to a zero readmission rate, but rather is
designed to encourage hospitals to identify opportunities to
systematically reduce readmission risks in their environment.
Comment: One commenter was concerned that the measure calculations
cannot be replicated/validated by hospitals by using solely their own
data.
Response: The measure would require access to 100 percent of
Medicare Part A and Part B claims for all Medicare Fee

[[Page 50798]]

for Service beneficiaries in order to truly replicate the calculations
that we perform for these measures. We realize that this type of data
access or analytic capacity may not be available to hospitals, and this
is why we provide hospitals with detailed information to help them
understand what the calculations were based on--including discharge
level comorbidities and dispositions, so that hospitals can verify the
accuracy of the calculations we provide.
Comment: One commenter suggested that any stroke outcome measures
used by the program should be properly developed, tested and risk-
adjusted. Some commenters requested that CMS begin collecting stroke
severity in the form of the NIHSS score and work to revise these
measures to include adjustment for stroke severity, prior to
implementation in the Hospital IQR Program.
Response: We appreciate these concerns and suggestions and will
continue to engage stakeholders on ways to incorporate stroke severity
into the stroke outcome measures. Our goal is to continuously refine
measures so that the measure results will better inform hospitals on
ways to improve quality of care for their patients.
We understand stakeholder concerns that the current stroke outcome
measures do not risk-adjust for stroke severity using the NIHSS score.
We believe the stroke outcome measures were effectively developed,
tested and risk-adjusted because we validated our claims-based risk
adjustment model against a clinical risk adjustment model that included
the National Stroke Project Stroke Severity Scale (NSPSSS), a marker of
patient severity other than the NIHSS score that correlates well with
the NIHSS.\89\ During development our aim was to: (1) Develop a
scientifically valid measure; (2) conduct development in a fully
transparent manner with multiple public comment periods; and (3)
acquire extensive input from the clinical community.
---------------------------------------------------------------------------

\89\ El Husseini,N.; Shea,K.J.; and Goldstein, L.B. (2011).
``Concerns for the Reliability and Validity of the National Stroke
Project Stroke Severity Scale.'' Cerebrovasc. Dis. Vol 32:426-430.
---------------------------------------------------------------------------

To address the concerns of validity, we performed a comparison of
the performance of the administrative claims model with the performance
of a clinical model that included the NSPSSS in a matched cohort of
admissions. Our analyses found that there was a high-level of agreement
between the claims-based model and the clinical model. The correlation
coefficients of the hospital risk standardized readmission rates
calculated using the claims based model and the clinical model were
0.99 for the readmission measure and 0.80 for the stroke mortality
measure. Hospital performance on the measures using the two different
data sources (that is, administrative claims or medical records) was
also very similar. We believe that these results demonstrate the
validity of our administrative claims based model for risk-adjustment,
because generally, clinical data from medical records are considered a
gold standard for comparison.
We appreciate and have heard the concerns of the stakeholders on
this issue. We are committed to working with the stakeholder
communities and to continuously refine our measures, which for the
stroke outcome measures includes risk adjusted patient severity. We
will work with the stroke communities and other stakeholders to seek
feasible ways to incorporate additional severity adjustment as
suggested. We must highlight that stroke is the fifth leading cause of
adult mortality in the U.S., and therefore we believe it would be a
disservice to patients to delay inclusion of these current stroke
outcome measures in quality reporting and quality improvement
initiatives. We are committed to making these measures better and
working with stakeholders to do so.
After consideration of the public comments we received, we are
finalizing as proposed the Hospital 30-day, all-cause risk-standardized
rate of readmission following acute ischemic stroke measure for FY 2016
payment determination and subsequent years.
d. Hospital 30-Day, All-Cause Risk-Standardized Rate of Mortality
Following an Admission for Acute Ischemic Stroke (Stroke Mortality)
Measure
(1) Background
Stroke is an important and common diagnosis among Medicare
patients. Stroke affects approximately 795,000 people each year in the
U.S. with high rates of mortality and morbidity. Stroke is the fourth
most common cause of death after heart disease, cancer, and chronic
lower respiratory disease.\90\ Moreover, stroke is one of the top 20
conditions contributing to Medicare costs.\91\ Finally, there is
evidence of variation in outcomes at hospitals for stroke patients,
supporting the finding that there are opportunities for improving care.
The median 30-day risk-standardized mortality rate among Medicare FFS
patients aged 65 or older hospitalized for stroke in 2007 was 15.3
percent, and ranged from 10.7 percent to 23.5 percent across 4,288
hospitals.\92\
---------------------------------------------------------------------------

\90\ American Heart Association, Heart Disease and Stroke
Statistics--2012 Update. American Heart Association, Circulation
2012, 125:e2-e220.
\91\ Andrews RM. The National Hospital Bill: The Most Expensive
Conditions by Payer, 2006. Rockville: Agency for Healthcare Research
and Quality; 2008.
\92\ Bernheim S.M., Wang C., Wang Y., et al. Hospital
30[hyphen]Day Mortality Following Acute Ischemic Stroke
Hospitalization Measure: Report prepared for the Centers for
Medicare & Medicaid Services. 2010; Available at: https://
www.qualitynet.org.
---------------------------------------------------------------------------

We proposed to include a non-NQF endorsed hospital 30-day, all-
cause risk-standardized rate of mortality following an admission for
acute ischemic stroke measure in the Hospital IQR Program, under the
exception authority in section 1886(b)(3)(B)(IX)(bb) of the Act as
previously discussed in section IX.A.6. of the preamble of this final
rule. Although the proposed measure is not currently NQF-endorsed or
MAP supported, we considered other available measures that have been
endorsed or adopted by a consensus organization, and found no other
feasible and practical measures on this topic. We believe it is
important to adopt this measure as it aims to address a prevalent and
costly health problem in the nation. In addition, the measure aligns
with our priority objectives to promote quality improvements leading to
successful transition of care for patients from acute care to
outpatient settings, and reducing short term, preventable mortality
rates.
We plan to implement this measure to encourage improvement of
outcomes by providing patients, physicians, and hospitals with
information about hospital-level, risk-standardized mortality rates
following hospitalization for acute ischemic stroke. Studies have shown
stroke mortality to be related to quality of care, and that there are
effective interventions that hospitals can adopt to reduce mortality
rates.\93\ \94\ Moreover, by proposing an outcome measure, we intend to
broaden the view of quality of care that encompasses more than what can
be captured by merely measuring individual processes-of-care. Through
outcome measures, we can capture complex and critical aspects of care,
such as communication between providers, prevention of, and response
to, complications, patient safety and

[[Page 50799]]

coordinated transitions to the outpatient environment, all of which
contribute to patient outcomes, but are difficult to measure by
individual process measures.\95\ \96\
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\93\ Fonarow GC, Reeves MJ, Zhao X, et al. Age-Related
Differences in Characteristics, Performance Measures, Treatment
Trends, and Outcomes in Patients With Ischemic Stroke. Journal of
the American Heart Association 2010;121:879-91.
\94\ Bravata DM, Wells CK, Lo AC, et al. Processes of Care
Associated With Acute Stroke Outcomes. Archives of Internal Medicine
2010;170:804-10.
\95\ Krumholz H, Normand S-L, Spertus JA, Shahian DM, Bradley
EH. Measuring Performance for Treating Heart Attacks and Heart
Failure: The Case for Outcomes Measurement. Health Affairs
2007;26:75-85.
\96\ Bradley EH, Herrin J, Elbel B, et al. Hospital Quality for
Acute Myocardial Infarction: Correlation Among Process Measures and
Relationship With Short-term Mortality. The Journal of the American
Medical Association 2006;296:72-8.
---------------------------------------------------------------------------

The specifics of the measure methodology are included in the
measure methodology report we have posted on our Web site at: https://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. We refer readers to the
report for further details on the risk-adjustment statistical model.
(2) Overview of Measure
The measure is a 30-day, all-cause risk-standardized rate of
mortality after admission for acute ischemic stroke to any non-federal
acute care hospital. The measure includes Medicare fee-for-service
patients aged 65 or older admitted for an acute ischemic stroke and
assesses if the patient died within 30 days of admission.
In general, the measure uses the same approach to risk-adjustment
and HLM methodology that is specified for our inpatient outcome
measures previously adopted for the Hospital IQR Program, including
AMI, HF, and PN readmission and mortality measures. For a discussion of
this methodology, we refer readers to our Web site at: https://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
Furthermore this measure, which is calculated using CMS claims or
administrative data, is validated by comparing it to a medical record
model in a matched cohort of admissions for which stroke medical record
data and administrative claim data are available.
(3) Data Sources
The proposed measure is claims-based and uses Medicare
administrative data that contain hospitalizations for Medicare FFS
beneficiaries hospitalized with acute ischemic stroke.
(4) Outcome
The outcome for this measure is 30-day all-cause mortality defined
as a death from any cause within 30 days of the admission date for the
index hospitalization. Thirty days is a standard time period used in
other measures of stroke mortality.\97\ \98\ It is a timeframe in which
a death may reasonably be attributed to the hospital care and
transitional period to a non-acute setting.
---------------------------------------------------------------------------

\97\ Saposnik G, Hill MD, O'Donnell M, Fang J, Hachinski V,
Kapral MK. Variables Associated With 7-Day, 30-Day, and 1-Year
Fatality After Ischemic Stroke. Journal of the American Heart
Association 2008;39.
\98\ Counsell C, Dennis M, McDowall M, Warlow C. Predicting
Outcome After Acute and Subacute Stroke: Development and Validation
of New Prognostic Models Journal of the American Heart Association
2002:1041-7.
---------------------------------------------------------------------------

The measure assesses all-cause mortality as opposed to stroke-
specific mortality for several reasons. First of all, limiting the
measure to stroke-related mortalities may limit the focus of efforts to
improve care to a narrow set of approaches (such as processes that will
prevent recurrent stroke) as opposed to encouraging broader initiatives
aimed at improving the overall care within the hospital. Second, cause
of death may be unreliably recorded and it is often impossible to
exclude quality issues and accountability based on the documented cause
of mortality. For example, a stroke patient who develops a hospital-
acquired infection may ultimately die from sepsis. It would be
inappropriate to treat this mortality as unrelated to the care the
patient received for stroke. Finally, from a patient perspective, death
is the outcome that matters, regardless of cause.
(5) Cohort
The cohort of index hospital admissions included in the measure is
restricted to hospitalizations for ischemic stroke. The measure is
limited to ischemic stroke hospitalizations for a few reasons. First,
ischemic strokes are the most common type of stroke, accounting for the
vast majority of stroke hospitalizations.\99\ Second, the causes and
prognosis of ischemic stroke are quite different than that of
hemorrhagic stroke, so a combined cohort would be more heterogeneous.
This heterogeneity could make it more difficult to account for a
hospital's patient mix and lead to a less fair measure. Similarly,
patients with TIAs are not included largely due to concerns about
inconsistency in the use of administrative codes to define TIA and
potential for inclusion of patients without cerebrovascular conditions.
For detailed information on the cohort definition please reference the
stroke mortality technical report on our Web site at: https://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
---------------------------------------------------------------------------

\99\ American Heart Association, Heart Disease and Stroke
Statistics--2012 Update. American Heart Association, Circulation
2012, 125:e2-e220.
---------------------------------------------------------------------------

[[Page 50800]]

hospital. As noted above, the measure methodology defines hospital case
mix based on the clinical diagnoses provided in the hospital claims for
their patients' inpatient and outpatient visits for the 12 months prior
to the stroke hospitalization, as well as those present in the claims
for care at admission. However, the methodology specifically does not
account for diagnoses present in the index admission that may indicate
complications rather than patient comorbidities. In addition, the
measure takes into account situations where patients initially present
at one ED, are then admitted to another hospital for their index stroke
hospitalization. The measure includes a risk-adjustment factor to
account for ED-transfer patients.
The RSMR is calculated as the ratio of the number of predicted
deaths to the number of expected deaths and then the ratio is
multiplied by the national unadjusted mortality rate. The ratio is
greater than one for hospitals that have more deaths that would be
expected for an average hospital with similar cases and less than one
if the hospital has fewer deaths than would be expected for an average
hospital with similar cases. This approach is analogous to a ratio of
an ``observed'' or ``crude'' rate to an ``expected'' or risk-adjusted
rate used in other similar types of statistical analyses.
The RSMR is a point estimate--the best estimate of a hospital's
mortality rate based on the hospital's case mix. For displaying the
measure for the Hospital IQR Program, we computed an interval estimate,
which is similar to the concept of a confidence interval, to
characterize the level of uncertainty around the point estimate. We use
the point estimate and interval estimate to determine hospital
performance (for example, higher than expected, as expected, or lower
than expected). For more detailed information on the calculation
methodology, we refer readers to our Web site at: https://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
We proposed to adopt this measure in the Hospital IQR Program for
the FY 2016 payment determination and subsequent years under the
exception authority in section 1886(b)(3)(B)(IX)(bb) of the Act as
previously discussed in section IX.A.6. of the preamble of this final
rule. Although the proposed measure is not currently NQF-endorsed or
MAP supported, we considered other available measures that have been
endorsed or adopted by the NQF, and were unable to identify any other
NQF-endorsed measures that assess stroke mortality with a standard
period of follow-up. We also are not aware of any other 30-day stroke
mortality measures that have been endorsed or adopted by a consensus
organization. The development of this measure went through the same
rigorous development process as the other publicly reported outcomes
measures and involved extensive input by stakeholders and clinical
experts. It follows the same scientific approach to evaluate hospital
performance as other Hospital IQR outcome measures. Finally, it has
been validated with medical record measures and shown to produce
similar hospital-level results. Accordingly, we proposed to adopt the
30-day stroke mortality measure under the Secretary's authority set
forth at section 1886(b)(3)(B)(IX)(bb) of the Act.
We invited public comment on this proposal.
Comment: Many commenters opposed the use of the stroke mortality
measure because it is not NQF-endorsed.
Response: We submitted the 30-day Stroke Mortality Measure to the
NQF for review during its 2012 Neurology Endorsement Maintenance
Consensus Development Project. The NQF Neurology Steering Committee
convened three times to assess the measure. At the first meeting, the
Committee strongly recommended the measure for endorsement (the vote
was 18 yes to 4 no). After the public comment period, the Steering
Committee met for a second time to discuss the issues raised by the
commenters. The issues raised during public comment were: (1) The
measure uses administrative data rather than clinical data; (2) most of
the severely disabled stroke patients are redirected to referral stroke
centers, which may result in excess mortality at those sites; (3)
unintended consequences--hospitals may selectively accept stroke
patients with mild or moderate strokes and may not want to accept more
severely ill patients; (4) the measure did not appear well validated;
and (5) the NIHSS score is not included in the risk-adjustment model
(The NIHSS is a tool used by healthcare providers to quantify the
impairment caused by a stroke such as level of consciousness, eye
movement, visual test, facial palsy, motor arm, motor leg, limb ataxia,
sensory, language, and speech, whereas the NSPSSS assesses the presence
of visual, speech, motor and sensory deficits for stroke patients.)
Commenters cited the findings of the JAMA article, Comparison of 30-Day
Mortality Models for Profiling Hospital Performance in Acute Ischemic
Stroke With vs Without Adjustment for Stroke Severity, by Fonarow, et
al. The Committee discussed these issues at length, especially the
results in the Fonarow article. The Steering Committee then voted again
on the measure. Votes on each of the four NQF criteria--importance,
scientific acceptability, usability, and feasibility--resulted in a
majority of high and moderate votes for the measure. For the overall
endorsement vote, however the Committee did not reach consensus (the
vote was split 11 yes to 11 no). The measure went out for a second
public comment period with additional testing information. We elected
to withdraw the stroke mortality measure from NQF review prior to the
third Steering Committee meeting. For further information, we refer
readers to the Official NQF Report for this Consensus Development
Project, located here: https://www.qualityforum.org/Publications/2012/
12/Neurology_Endorsement_Maintenance__-Phase_I_Technical_
Report.aspx.
We submitted the measures for review by the MAP in December 2012.
While some members of the MAP supported use of the measures in the
Hospital IQR Program, in their Final Report to HHS, the MAP did not
support the 30-day Stroke Mortality Measure because the measure did not
receive NQF endorsement. We refer readers to the February 2013 MAP Pre-
rulemaking recommendations located here: https://www.qualityforum.org/
Publications/2013/02/MAP_Pre-Rulemaking_Report__-February_
2013.aspx.
In evaluating and selecting this measure for inclusion in the
Hospital IQR Program, we considered whether there were other available
measures that have been endorsed or adopted by the NQF, and were unable
to identify any other NQF-endorsed measures that assess 30-day stroke
mortality. We also are not aware of any other measures of 30-day stroke
outcomes that have been endorsed or adopted by a consensus
organization. The development of this measure went through the same
rigorous development process as the other publicly reported outcomes
measures and involved extensive input by stakeholders and clinical
experts. This follows the same scientific approach to evaluate hospital
performance as other Hospital IQR Program outcome measures. There are
currently no stroke outcome measures in the Hospital IQR Program to
complement the process of care and structural measures, yet stroke
remains one of the top causes of death. This is why we proposed to
adopt this measure for the Hospital IQR Program

[[Page 50801]]

under the Secretary's authority set forth at section
1886(b)(3)(B)(IX)(bb) of the Act.
We appreciate and have heard the concerns of the stakeholders on
this issue. We are committed to working with the stakeholder
communities and to continuously refine our measures, which for the
stroke outcome measures includes risk adjusted patient severity. We
will work with the stroke communities and other stakeholders to seek
feasible ways to incorporate additional severity adjustment as
suggested. We must highlight that stroke is the fifth leading cause of
adult mortality in the U.S., and therefore we believe it would be a
disservice to patients to delay inclusion of these current stroke
outcome measures in quality reporting and quality improvement
initiatives. We are committed to making these measures better and
working with stakeholders to do so.
Comment: Some commenters supported the addition of the stroke
mortality measure to Hospital IQR Program.
Response: We appreciate the commenters' support.
Comment: Several commenters requested CMS consider excluding
hospice settings and levels of care for post discharge stroke patients.
Response: The stroke mortality measure excludes patients who are
enrolled in Medicare hospice on the day of admission or in the 12
months prior to the day of admission because the goal of the
hospitalization for these patients is likely not survival. However,
consistent with guidelines for health care quality outcome measures,
the 30-day measure does not exclude patients who transitioned to
hospice or palliative care during their hospital stay because such
transitions may be the result of quality failures that have led to poor
clinical outcomes; thus, excluding these patients could mask quality
problems. Moreover, the use of palliative care during a hospital stay
is not necessarily an indication that a patient is no longer seeking
life-sustaining measures. Palliative care is focused on providing
patients relief of symptoms. It is increasingly used by patients who
are not at the end of life and, therefore, should not be used to
exclude patients from a mortality measure.
Comment: A few commenters requested that CMS focus on an e-measure
for strokes which implements ICD-10 codes.
Response: We are currently expanding the use of e-measures and will
continue to examine the feasibility of converting existing measures
into e-measures. We are also committed to transitioning current
measures to ICD-10 once ICD-10 is fully implemented.
Comment: One commenter requested that the measure include Medicare
Advantage patients.
Response: We do not receive claims data for beneficiaries who are
enrolled in the Medicare Advantage Program. Therefore, the measure
cannot be calculated using claims paid under the Medicare Advantage
Program.
Comment: One commenter requested CMS develop a reporting mechanism,
similar to the present on admission (POA) flag, so that providers can
more accurately and properly report the care that they deliver to the
patient.
Response: We have implemented a POA coding requirement for primary
and secondary diagnoses on claims submitted for Part A services. We
currently do not use these codes in this measure. However, we
appreciate the recommendation for the use of POA flags and will
continue to evaluate whether they can be used as part of the stroke
mortality measure rate calculations.
Comment: One commenter requested CMS include the NQF 0467
measure--Acute Stroke Mortality Rate (AHRQ IQI 17) in the Hospital IQR
measure set instead of the stroke readmission and mortality measures.
Response: The NQF 0467 measure is a measure of inpatient
deaths only and does not include deaths which occur in the post-acute
timeframe. We believe it is important to not only measure inpatient
deaths but also those that occur in any setting during the 30-day
period after discharge, which are captured in the proposed measure.
This is because measuring only in-hospital deaths may result in the
unintended consequence of hospitals discharging patients
inappropriately in order to avoid being attributed with their death.
Comment: One commenter noted that the stroke mortality measure
model does not provide adequate discrimination between hospitals in
terms of performance citing a recent JAMA article which suggests that
hospitals can be classified as ``better than'' or ``worse than''
expected mortality when those hospitals should be classified as
``expected mortality'' if the risk adjustment does not include the
NIHSS.
Response: The article referenced by the commenter in the Journal of
the American Medical Association (JAMA) in 2012 is believed to be that
written by Fonarow et al.\100\ In this article, the authors compared
categorization or classification of hospitals as better than, no
different than, or worse than the national stroke rate using a 30-day
mortality model with and without the NIHSS score. Briefly, Fonarow et
al. created a 30-day mortality model thought to be identical to the
CMS/Yale 30-day acute ischemic stroke mortality model. Once they
created this model they added NIHSS score variables and categorized 782
hospitals using the model without the NIHSS score and with the NIHSS
score. Their analyses showed that 94 percent of the 782 hospitals that
were analyzed were classified or categorized identically by both models
(that is, model with and without the NIHSS score). The commenter noted
that Fonarow et al.'s article found that the model with the NIHSS score
classified 6 percent of the hospitals (that is, 45 of 782 hospitals)
differently from the model without the NIHSS score.
---------------------------------------------------------------------------

\100\ Fonarow, G.C.; Pan, W.; Saver, J.L. et al. (2012)
``Comparison of 30-Day Mortality Models for Profiling Hospital
Performance in Acute Ischemic Stroke with vs without Adjustment for
Stroke Severity. JAMA, vol. 308 No.3.
---------------------------------------------------------------------------

We believe the reclassification found in article is potentially
unreliable due to several limitations of this article. First over half
of the patients in the study did not have a measured NIHSS score. This
fact both undermines the findings in the article and provides evidence
that implementing a measure with the NIHSS score would not be feasible
in the near term. Second the measure analyzed within the article,
though described as being the same as the CMS measure actually differed
in important respects. The measure in the JAMA article lacks a risk
variable for Emergency Department (ED)-transfer patients. The ED
transfer variable included in the proposed measure is an important
variable that likely captures some of the differences in stroke
severity for patients treated in hospitals that are regional stroke
centers. In addition the measure in the JAMA article included a
different cohort of stroke patients other than Acute Ischemic Stroke
patients (the JAMA article included hemorrhagic patients), the risk-
adjustment includes different variables and is much less parsimonious
(has 87 variables). Third, the article did not allow evaluation of the
degree of differences between the results of the two models. A small
change in the estimates may change ranking without meaningfully
changing hospital results. The article does not provide information
about how similar the new estimates are to the CMS original estimates,
or whether the new estimates fall within the uncertainty of the
original estimates. Nor does the article present the

[[Page 50802]]

correlation between the original model results and new results for
hospitals.
We believe the proposed stroke outcome measures were effectively
developed, tested and risk adjust using the National Stroke Project
Stroke Severity Scale (NSPSSS), a marker of patient severity other than
but similar to the NIHSS score. The NIHSS is a tool used by healthcare
providers to quantify the impairment caused by a stroke such as level
of consciousness, eye movement, visual test, facial palsy, motor arm,
motor leg, limb ataxia, sensory, language, and speech. The NSPSSS
assesses the presence of visual, speech, motor and sensory deficits for
stroke patients. The NSPSSS correlates well with NIHSS. During the
measure development, we performed a comparison of the performance of
the administrative claims model with the performance of a medical
record model that included the NSPSSS. Our analysis found that the
models had a high-level of agreement. The correlation coefficient of
the hospital risk standardized readmission rates calculated from the
claims and the medical record risk-adjustment models is 0.99 and for
the stroke mortality model it was 0.80. These results demonstrated the
validity of the administrative claims data for risk-adjustment.
Hospital performance on the measures using two different data sources
(that is, administrative claims or medical records) was very similar.
The measures we have developed are scientifically valid measures,
developed in full transparency and with extensive input from the
clinical community. We believe these are the best measures possible
using available data and its implementation would encourage
improvements in quality and patient outcomes.
Comment: One commenter requested that measure performance be
reported more frequently, on a quarterly basis.
Response: We decided to use the proposed timeframe because it
balances the needs for the most recent claims and for sufficient time
to process the claims data and calculate the measures to meet the
program implementation timeline. Quarterly reporting of performance
data for the 30-day outcome measures will not allow sufficient
differentiation of performance. However, we will continue to explore
the feasibility of providing more frequent feedback on discharges to
hospitals.
After consideration of the public comments we received, we are
finalizing as proposed the Hospital 30-Day, all-cause risk-standardized
rate of mortality following an admission for acute ischemic stroke for
FY 2016 payment determination and subsequent years.
e. Hospital Risk-Standardized Payment Associated With a 30-day Episode-
of-Care for Acute Myocardial Infarction (AMI) Measure
(1) Background
Providing high-value care is an essential part of our mission to
provide better health care for individuals, better health for
populations, and lower costs for health care. In order to incentivize
innovation that promotes high-quality care at high value it is critical
to examine measures of payment and patient outcomes concurrently. There
is evidence of variation in payments at hospitals for AMI patients;
mean 30-day risk-standardized payment among Medicare FFS patients aged
65 or older hospitalized for AMI in 2008 was $20,207, and ranged from
$15,521 to $27,317 across 1,846 hospitals.\101\ However, high or low
payments to hospitals are difficult to interpret in isolation. Some
high payment hospitals may have better clinical outcomes when compared
with low payment hospitals while other high payment hospitals may not
have better outcomes. For this reason, the value of hospital care is
more clearly assessed when pairing hospital payments with hospital
quality. Therefore, we proposed to include a non-NQF-endorsed measure:
hospital risk-standardized payment associated with a 30-day episode-of-
care for acute myocardial infarction (AMI) in the Hospital IQR Program
under the exception authority in section 1886(b)(3)(B)(IX)(bb) of the
Act as previously discussed in section IX.A.6. of the preamble of this
final rule. Although the proposed measure is not currently NQF-
endorsed, we considered other available measures that have been
endorsed or adopted by a consensus organization, and found no other
feasible and practical measures on this topic. The MAP supports this
measure contingent on NQF-endorsement.
---------------------------------------------------------------------------

\101\ Kim N., Bernheim S.M., Ott L.S., et al. Hospital-level,
Risk-Standardized Payment Associated with a 30-Day Episode-of-Care
for AMI: Report prepared for the Centers for Medicare & Medicaid
Services. 2013; Available at: https://www.qualitynet.org.
---------------------------------------------------------------------------

We believe it is important to adopt this measure as it is aligned
with our 30-day AMI mortality measure and can also be paired with our
30-day AMI readmission measure. This would facilitate assessing
hospital value, because including this measure in the Hospital IQR
Program and publicly reporting it on Hospital Compare will allow
stakeholders to assess information about a hospital's quality and cost
of care for AMI. The measure reflects differences in the management of
care for patients with AMI both during hospitalization and immediately
post-discharge. AMI is a condition with substantial variation in costs
of care and, therefore, is an ideal condition for assessing relative
value for an episode-of-care that begins with an acute hospitalization.
By focusing on one specific condition, value assessments may provide
actionable feedback to hospitals and incentivize targeted improvements
in care.
(2) Rationale for Examining Payments for a 30-Day Episode-of-Care
When examining variation in payments, consideration of the episode-
of-care triggered by admission is meaningful for several reasons.
First, hospitalizations represent a brief period of illness that
requires ongoing management post-discharge and decisions made at the
admitting hospital affect payments for care in the immediate post-
discharge period. Second, attributing payments for a continuous
episode-of-care to admitting hospitals may reveal practice variations
in the full care of the illness that can result in increased payments.
Third, a 30-day preset window provides a standard observation period by
which to compare all hospitals. Lastly, the AMI payment measure is
intended to be paired with our 30-day AMI mortality and readmission
measures and capture payments for Medicare patients across all care
settings, services, and supplies, except for Medicare Part D (that is,
inpatient, outpatient, skilled nursing facility, home health, hospice,
physician/clinical laboratory/ambulance services, supplier Part B
items, and durable medical equipment, prosthetics/orthotics, and
supplies).
We have posted the measure methodology report on our Web site at:
https://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. We refer
readers to the report for further details on the risk adjustment
statistical model as well as the model results.
(3) Overview of the Measure
The AMI payment measure assesses hospital risk-standardized payment
associated with a 30-day episode-of-care for AMI for any non-federal
acute care hospital. The measure includes Medicare FFS patients aged 65
or older admitted for an AMI and calculates payments for these patients
over a 30-day episode-of-care beginning with the index admission. In
general, the

[[Page 50803]]

measure uses the same approach to risk-adjustment as our 30-day outcome
measures previously adopted for the Hospital IQR Program, including the
AMI, HF, and PN readmission and mortality measures. We refer readers to
our Web site at: https://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
(4) Data Sources
The proposed measure is claims-based and uses Medicare
administrative data that contain hospitalizations and payments for
Medicare FFS beneficiaries hospitalized with AMI.
(5) Outcome
The primary outcome of the AMI payment measure is the hospital-
level risk-standardized payment for an AMI episode-of-care. The measure
captures payments for Medicare patients across all care settings,
services, and supplies, except Part D. By risk-standardizing the
payment measure, we are able to adjust for case-mix at any given
hospital and compare a specific hospital's AMI payment to other
hospitals with the same case-mix. The analytic time frame for the AMI
payment measure begins with the index admission for AMI and ends 30
days post-admission.
In order to isolate payment variation that reflects practice
patterns rather than CMS payment adjustments, the AMI payment measure
excludes policy and geography payment adjustments unrelated to clinical
care decisions. We achieve this by ``stripping'' or ``standardizing''
payments for each care setting. Stripping refers to removing geographic
differences and policy adjustments in payment rates for individual
services from the total payment for that service. Standardizing refers
to averaging payments across geographic areas for those services where
geographic differences in payment cannot be stripped. Stripping and
standardizing the payment amounts allows for a fair comparison across
hospitals based solely on payments for decisions related to clinical
care of AMI.
(6) Cohort
We created the AMI payment measure cohort to be aligned with the
publicly reported AMI mortality measure cohort. Consistent with these
measures, the AMI payment measure includes hospitalizations with a
principal hospital discharge diagnosis of AMI using the International
Classification of Diseases, Ninth revision, Clinical Modification. A
full list of ICD-9-CM codes included in the final cohort can be found
in Appendix B of the technical report on our Web site at: https://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. An index hospitalization
is the initial AMI admission that triggers the 30-day episode-of-care
for this payment calculation. The measure includes only those
hospitalizations from short-stay acute care hospitals in the index
cohort and restricts the cohort to patients enrolled in FFS Medicare
Parts A and B (with no Medicare Advantage coverage).
(7) Inclusion and Exclusion Criteria
The AMI payment measure includes hospitalizations for patients 65
years or older at the time of index admission and for whom there was a
complete 12 months of FFS enrollment to allow for adequate risk
adjustment. The measure excludes the following admissions from the
measure cohort: (1) Admissions for patients with fewer than 30 days of
post-admission enrollment in Medicare because this is necessary in
order to identify the outcome (payments) in the sample over the
analytic period; (2) admissions for patients having a principal
diagnosis of AMI during the index hospitalization who were transferred
from another acute care facility are excluded, because the hospital
where the patient was initially admitted made the critical acute care
decisions (including the decision to transfer and where to transfer);
(3) admissions for AMI patients who were discharged on the same or next
day as the index admission and did not die or get transferred are
excluded, because it is unlikely these patients suffered a clinically
significant AMI; (4) admissions for patients enrolled in the Medicare
Hospice program any time in the 12 months prior to the index
hospitalization, including the first date of the index admission are
excluded, because it is likely that these patients are continuing to
seek comfort care and their goal may not be survival; (5) admissions
for patients who are discharged alive and against medical advice are
excluded because providers did not have the opportunity to deliver full
care and prepare the patient for discharge; (6) admissions for patients
transferred to or from federal or Veterans Administration hospitals are
excluded, because we do not have claims data for these hospitals; thus,
including these patients would systematically underestimate payments;
and (7) admissions without a DRG or DRG weight for the index
hospitalization are excluded, because we cannot calculate a payment for
these patients' index admission using the IPPS; this would
underestimate payments for the entire episode-of-care.
(8) Risk Adjustment
The measure adjusts for differences across hospitals in how
payments are affected by patient comorbidities relative to patients
cared for by other hospitals. Consistent with NQF guidelines, the model
does not adjust for socioeconomic status or race, because risk-
adjusting for these characteristics would hold hospitals with a large
proportion of minority or low socioeconomic status patients to a
different standard of care than other hospitals. One goal of this
measure is to illuminate quality differences that such risk-adjustment
would obscure.
(9) Calculating the Risk Standardized Payment (RSP)
The measure is calculated using hierarchical generalized linear
statistical models with a log link and an inverse Gaussian error
distribution. This approach appropriately models a positive,
continuous, right-skewed outcome like payment and also accounts for the
types of patients a hospital treats (that is, hospital case mix), the
number of patients it treats, and the quality of care it provides. The
hierarchical generalized linear model is an appropriate statistical
approach to measuring quality based on patient outcomes when the
patients are clustered within hospitals (and therefore the patients'
outcomes are not statistically independent) and sample sizes vary
across hospitals. As noted above, the measure methodology defines
hospital case mix based on the clinical diagnoses provided in the
hospital claims for their patients' inpatient and outpatient visits for
the 12 months prior to the AMI hospitalization, as well as those
present in the claims for care at admission. This methodology
specifically does not, however, account for diagnoses present in the
index admission that may indicate complications rather than patient
comorbidities.
The RSP is calculated as the ratio of predicted payments to
expected payments and then the ratio is multiplied by the national
unadjusted average payment for an episode-of-care. The ratio is greater
than one for hospitals that have higher payments than would be expected
for an average hospital with similar cases and less than one if the
hospital has lower payments than would be expected for an average
hospital with similar cases. This approach is analogous to a ratio of
``observed'' or ``crude'' rate to an

[[Page 50804]]

``expected'' or ``risk-adjusted'' rate used in other similar types of
statistical analyses.
The RSP is a point estimate--the best estimate of a hospital's
payment based on the hospital's case mix. For displaying the measure
for the Hospital IQR Program, we computed an interval estimate, which
is similar to the concept of a confidence interval, to characterize the
level of uncertainty around the point estimate, we use the point
estimate and interval estimate to determine hospital performance (for
example, higher than expected, as expected, or lower than expected).
For more detailed information on the calculation methodology, we refer
readers to our Web site at: https://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
We proposed to adopt the AMI payment measure in the Hospital IQR
Program for the FY 2016 payment determination and subsequent years
under the exception authority in section 1886(b)(3)(B)(IX)(bb) of the
Act as previously discussed in section IX.A.6. of the preamble of this
final rule. Although the proposed measure is not currently NQF-
endorsed, we considered available measures that have been endorsed or
adopted by the NQF, and we were unable to identify any measures that
assess hospital risk-standardized payment associated with a 30-day
episode-of-care for acute myocardial infarction. We also are not aware
of any other 30-day episode-of-care for acute myocardial infarction
measures that have been endorsed or adopted by a consensus
organization.
This measure is meant to be paired with our 30-day AMI mortality
and/or readmission measure in order for us to gain a better
understanding of the value of care for a hospital's patients and the
nation as a whole. We invited public comment on this proposal.
Comment: Many commenters opposed the adoption of the AMI payment
per episode of care measure because it is not NQF-endorsed.
Response: Although the proposed measure is not currently NQF-
endorsed, we considered other available measures that have been
endorsed or adopted by a consensus organization, and found no other
feasible and practical measures on this topic. The MAP supports this
measure contingent on NQF-endorsement. We believe it is important to
adopt this measure as it is aligned with our 30-day AMI mortality
measure and can also be paired with our 30-day AMI readmission measure.
This measure would facilitate assessing hospital quality, because
including this measure in the Hospital IQR Program and publicly
reporting it on Hospital Compare will allow stakeholders to assess
information about a hospital's quality and cost of care for AMI.
Therefore, we are adopting this hospital risk-standardized payment
associated with a 30-day episode-of-care for acute myocardial
infarction (AMI) in the Hospital IQR Program under the exception
authority in section 1886(b)(3)(B)(IX)(bb) of the Act as previously
discussed in section IX.A.6. of the preamble of this proposed rule.
There is evidence of variation in payments at hospitals for AMI
patients; mean 30-day risk-standardized payment among Medicare FFS
patients aged 65 or older hospitalized for AMI in 2008 was $20,207, and
ranged from $15,521 to $27,317 across 1,846 hospitals. However, high or
low payments to hospitals are difficult to interpret in isolation. Some
high payment hospitals may have better clinical outcomes when compared
with low payment hospitals while other high payment hospitals may not
have better outcomes. For this reason, the quality of hospital care is
more clearly assessed when pairing hospital payments with hospital
quality.
Comment: Some commenters noted that this measure is being proposed
as a hospital measure even though it reflects the actions of a
multitude of health care entities, many of which are often not within
hospitals' direct control. Costs within a 30-day episode of AMI care
cannot be attributed solely to hospitals.
Response: When considering payments to hospitals, we attributed
payments for a 30-day episode of care to the hospital since the episode
is triggered by admission to an inpatient hospitalization.
Hospitalizations represent a brief period of acute illness that
requires ongoing management post-discharge and hospitals are often
directly responsible for scheduling post-discharge follow-up. Therefore
decisions made at the admitting hospital affect not only the
hospitalization payments, but payments for care in the immediate post-
discharge period.
Comment: A few commenters were concerned that the AMI payment
measure is duplicative of CMS' bundled payment program. Commenters
questioned why CMS is not using CMS' AMI episode grouper for this
measure.
Response: The AMI payment measure is different from our Bundled
Payments for Care Improvement Initiative (BCPI) in several ways. If
providers wish to participate in the BPCI for AMI episode of care,
these episodes would be defined by DRGs and not ICD-9 codes.
The goal of the AMI payment measure is to provide information on
the value of care by comparing payments for an AMI episode of care with
performance on quality measures like CMS' 30-day readmission and
mortality measures. Thus, it is important that the patient cohorts are
as closely aligned as possible between payment and quality measures.
This would not be possible if we used the AMI episode grouper.
Comment: A few commenters requested clarification on the rationale
for proposing the AMI payment measure when the MSPB measure is already
in use and requested clarification regarding how the measure will be
paired with the AMI Mortality and Readmission measures. These
commenters believe the measure would be duplicative of the MSPB measure
if it were to be adopted into the Hospital VBP Program.
Response: The goal of the AMI payment measure is to provide
information on the value of care provided for a specific condition,
AMI, while the MSPB measure examines spending for all conditions. This
measure is meant to be paired with our 30-day AMI mortality and/or
readmission measure in order for us to gain a better understanding of
the value of care for a hospital's patients and the nation as a whole.
We plan to publicly report a single summary risk-standardized payment
(RSP) score for each hospital included in the measure.
We proposed the AMI payment measure for the Hospital IQR Program,
and at this time have not proposed to add it to the Hospital VBP
Program. Because the AMI payment measure is condition-specific, we
believe this measure would not be duplicative of the MSPB measure,
which is not condition-specific.
Comment: A few commenters believed that the minimum number of cases
for the AMI payment measure may not be reliable.
Response: We use the same approach to small numbers and reliability
for the AMI payment measure that we have established for our hospital
risk-adjusted outcome measures in general, including the mortality and
readmission measures. Reliability is related to sample size. We adopted
a risk-adjustment modeling methodology for our outcome measures that
takes into account sample size. Although the commenter raised the issue
of reliability related to the AMI payment measure, the issue was raised
and responded to in a previous rulemaking. We refer readers to the FY
2013 IPPS/LTCH PPS final rule (77 FR 53379) for our discussion of the
basis for selecting the

[[Page 50805]]

minimum number of cases for the readmission measures for the Hospital
Readmissions Reduction Program. We determined the 25-case threshold for
public reporting based on a reliability statistic that is calculated
from the intercluster correlation, a parameter of the model.
In addition, we have considered how best to measure quality for
small volume hospitals. Smaller hospitals do typically have less
certain (for example, less statistically reliable) estimates, because
they have fewer cases for use in assessing quality; that is a challenge
inherent in outcome measurement. One advantage of the statistical model
we use for the measures is that it allows for the inclusion of small
hospitals while characterizing the certainty of their estimates. The
hierarchical logistic regression model that we use to calculate the
risk-standardized outcome measures allows the inclusion of hospitals
with relatively few observations, but takes into account the
uncertainty associated with sample size in estimating their risk-
standardized outcome rates. The model takes into account the
uncertainty in the estimate of outcome rates for small volume hospitals
by assuming that each hospital is a typically performing hospital. It
weighs that assumption along with the outcomes for the particular
hospital in calculating the outcome rate. Therefore, the estimated
outcome rates for smaller hospitals will likely be closer to the
national rate because the limited number of eligible cases in the
hospital tells little about that hospital's true outcome rate.
Comment: One commenter supported the measure methodology.
Response: We appreciate the commenter's support for this aspect of
the measure methodology.
Comment: One commenter requested CMS provide hospitals with their
results before the AMI payment measure is added to Hospital IQR
Program.
Response: We strive to provide information to hospitals about new
claims-based measures whenever it is feasible for us to do so. We plan
to conduct a dry run prior to public reporting of the measure in which
we will provide hospitals with their results on the measure as well as
how payments for their patients are distributed among various post-
acute care settings.
Comment: One commenter was concerned that the AMI payment measure
does not adequately capture case mix and has not been validated.
Response: We have performed validation work to confirm the
scientific rigor of using claims data for risk adjustment in outcome
measures. We validated the AMI, HF, and pneumonia mortality and
readmission measures with models that use medical record-abstracted
data for risk adjustment. These analyses demonstrated that using claims
data produces estimated hospital-level risk-standardized mortality
rates (RSMRs) and risk-standardized readmission rates (RSRRs) that are
very similar to the rates estimated by models based solely on medical
record data. This high level of agreement in the results based on the
two different approaches supports the use of the claims-based models
for public reporting. Because the risk adjustment model for AMI payment
is similar to that used for mortality, we believe that this previous
validation study performed for the AMI, HF, and PN mortality and
readmissions measures that establishes their overall reliability also
supports that of the AMI payment measure.
Our approach to gathering risk factors for patients also mitigates
the potential limitations of claims data. Because not every diagnosis
is coded at every visit, we use claims data for the year prior to the
index admission, as well as secondary diagnosis codes during the index
admission, for risk adjustment.
Comment: One commenter noted the difference between the cost of
care for those cases in the 10th percentile and the 90th percentile is
small, especially when considering the cost of the admission is
included in the calculation. One commenter believed that the index
admission and readmissions are the largest drivers of payments for an
AMI episode of care and other care settings will contribute little if
any to hospital's total episode payments.
Response: The variation in the adjusted hospital-specific AMI 30-
day episode-of-care payment ranges from $15,251 to $27,317 across 1,846
hospitals. We believe that this variation is sufficient for assessing
differences in payment that arise from treating a patient with AMI.
While other conditions may exhibit greater relative and absolute
payment differences, assessing AMI payments remains important. This
importance is magnified when considering that AMI quality and outcome
measures are already being reported. The association between AMI
episode payments and quality/outcome measures is of importance to us.
While index admissions and readmissions are the most costly portions of
treating AMI patients, they are not the only care settings used by AMI
patients. In examining payments for AMI patients for a 30-day episode
of care we find that there is variation between providers with regards
to the types and amount of post-acute care used.
After consideration of the public comments we received, we are
finalizing as proposed the Hospital risk-standardized payment
associated with a 30-day episode-of-care for acute myocardial
infarction measure for the Hospital IQR Program for FY 2016 payment
determination and subsequent years.
In summary, we are adopting all of the Hospital IQR Program
measures adopted in previous payment determinations, with the exception
of seven measures (six chart-abstracted measures and 1 structural
measure) that we are removing and one measure we are suspending (one
chart-abstracted measure). We are finalizing five new claims-based
measures for a total of 57 measures for the FY 2016 payment
determination and subsequent years.
Set out below is a table showing both the previously adopted and
the new quality measures finalized in this final rule for the FY 2016
payment determination and subsequent years. This table does not include
suspended measures and removed measures.

----------------------------------------------------------------------------------------------------------------
Previously adopted hospital IQR Program measures and measures
Topic finalized in this final rule for the FY 2016 payment determination
and subsequent years
----------------------------------------------------------------------------------------------------------------
Acute Myocardial Infarction (AMI) Measures
----------------------------------------------------------------------------------------------------------------
AMI-7a Fibrinolytic (thrombolytic) agent received within
30 minutes of hospital arrival.
AMI-8a Timing of Receipt of Primary Percutaneous Coronary
Intervention (PCI).
----------------------------------------------------------------------------------------------------------------
Heart Failure (HF) Measures
----------------------------------------------------------------------------------------------------------------
HF-2 Evaluation of left ventricular systolic function.
----------------------------------------------------------------------------------------------------------------

[[Page 50806]]

Stroke Measure (STK) Set
----------------------------------------------------------------------------------------------------------------
STK-1 VTE prophylaxis.
STK-2 Antithrombotic therapy for ischemic stroke[dagger].
STK-3 Anticoagulation therapy for Afib/flutter[dagger].
STK-4 Thrombolytic therapy for acute ischemic
stroke[dagger].
STK-5 Antithrombotic therapy by the end of hospital day
2[dagger].
STK-6 Discharged on Statin[dagger].
STK-8 Stroke education[dagger].
STK-10 Assessed for rehab[dagger].
----------------------------------------------------------------------------------------------------------------
VTE Measure Set
----------------------------------------------------------------------------------------------------------------
VTE-1 VTE prophylaxis[dagger].
VTE-2 ICU VTE prophylaxis[dagger].
VTE-3 VTE patients with anticoagulation overlap
therapy[dagger].
VTE-4 Patients receiving un-fractionated Heparin with
doses/labs monitored by protocol[dagger].
VTE-5 VTE discharge instructions[dagger].
VTE-6 Incidence of potentially preventable VTE[dagger].
----------------------------------------------------------------------------------------------------------------
Pneumonia (PN) Measures
----------------------------------------------------------------------------------------------------------------
PN-6 Appropriate initial antibiotic selection.
----------------------------------------------------------------------------------------------------------------
Surgical Care Improvement Project (SCIP) Measures
----------------------------------------------------------------------------------------------------------------
SCIP INF-1 Prophylactic antibiotic received within 1 hour
prior to surgical incision.
SCIP INF-2: Prophylactic antibiotic selection for
surgical patients.
SCIP INF-3 Prophylactic antibiotics discontinued within
24 hours after surgery end time (48 hours for cardiac surgery).
SCIP INF-4: Cardiac surgery patients with controlled 6AM
postoperative serum glucose.
SCIP INF-9: Postoperative urinary catheter removal on
post operative day 1 or 2 with day of surgery being day zero.
SCIP Cardiovascular-2: Surgery Patients on a Beta Blocker
prior to arrival who received a Beta Blocker during the
perioperative period.
SCIP-VTE[dash]2: Surgery patients who received
appropriate VTE prophylaxis within 24 hours pre/post surgery.
----------------------------------------------------------------------------------------------------------------
Mortality Measures (Medicare Patients)
----------------------------------------------------------------------------------------------------------------
Acute Myocardial Infarction (AMI) 30-day mortality rate.
Heart Failure (HF) 30-day mortality rate.
Pneumonia (PN) 30-day mortality rate.
Stroke 30-day mortality rate.***
COPD 30-day mortality rate.***
----------------------------------------------------------------------------------------------------------------
Patients' Experience of Care Measures
----------------------------------------------------------------------------------------------------------------
HCAHPS survey (expanded to include one 3-item care
transition set * and two new ``About You'' items).*
----------------------------------------------------------------------------------------------------------------
Readmission Measures (Medicare Patients)
----------------------------------------------------------------------------------------------------------------
Acute Myocardial Infarction (AMI) 30-day Risk
Standardized Readmission Measure.
Heart Failure (HF) 30-day Risk Standardized Readmission
Measure.
Pneumonia (PN) 30-day Risk Standardized Readmission
Measure.
30-day Risk Standardized Readmission following Total Hip/
Total Knee Arthroplasty.*
Hospital-Wide All-Cause Unplanned Readmission (HWR).*
Stroke 30-day Risk Standardized Readmission.***
COPD 30-day Risk Standardized Readmission.***
----------------------------------------------------------------------------------------------------------------
AHRQ Patient Safety Indicators (PSIs) Composite Measures
----------------------------------------------------------------------------------------------------------------
Complication/patient safety for selected indicators
(composite).
----------------------------------------------------------------------------------------------------------------
AHRQ PSI and Nursing Sensitive Care
----------------------------------------------------------------------------------------------------------------
PSI-4 Death among surgical inpatients with serious
treatable complications.
----------------------------------------------------------------------------------------------------------------
Structural Measures
----------------------------------------------------------------------------------------------------------------
Participation in a Systematic Database for Cardiac
Surgery.
Participation in a Systematic Clinical Database Registry
for Nursing Sensitive Care.
Participation in a Systematic Clinical Database Registry
for General Surgery.
Safe Surgery Checklist Use.**
----------------------------------------------------------------------------------------------------------------

[[Page 50807]]

Healthcare-Associated Infections Measures
----------------------------------------------------------------------------------------------------------------
Central Line Associated Bloodstream Infection.
Surgical Site Infection.
--SSI following Colon Surgery.
--SSI following Abdominal Hysterectomy.
Catheter-Associated Urinary Tract Infection.
MRSA Bacteremia.
Clostridium difficile (C. difficile).
Healthcare Personnel Influenza Vaccination.
----------------------------------------------------------------------------------------------------------------
Surgical Complications
----------------------------------------------------------------------------------------------------------------
Hip/Knee Complication: Hospital-level Risk-Standardized
Complication Rate (RSCR) following Elective Primary Total Hip
Arthroplasty.*
----------------------------------------------------------------------------------------------------------------
Emergency Department (ED) Throughput Measures
----------------------------------------------------------------------------------------------------------------
ED-1 Median time from emergency department arrival to
time of departure from the emergency room for patients admitted
to the hospital[dagger].
ED-2 Median time from admit decision to time of departure
from the emergency department for emergency department patients
admitted to the inpatient status[dagger].
----------------------------------------------------------------------------------------------------------------
Prevention: Global Immunization (IMM) Measures
----------------------------------------------------------------------------------------------------------------
Immunization for Influenza.
----------------------------------------------------------------------------------------------------------------
Cost Efficiency
----------------------------------------------------------------------------------------------------------------
Medicare Spending per Beneficiary.
AMI Payment per Episode of Care.***
----------------------------------------------------------------------------------------------------------------
Perinatal Care
----------------------------------------------------------------------------------------------------------------
Elective delivery prior to 39 completed weeks of
gestation*/[dagger].
----------------------------------------------------------------------------------------------------------------
* New or expanded measures/items for FY 2015 payment determination and subsequent years.
** New measures for FY 2016 payment determination and subsequent years.
*** Measures finalized in this final rule for the FY 2016 payment determination and subsequent years.
[dagger] Measure for electronic reporting via CEHRT in the Hospital IQR Program (voluntary participation in CY
2014).

7. Electronic Clinical Quality Measures
We believe that collection and reporting of data through health
information technology will greatly simplify and streamline reporting
for many CMS quality reporting programs. Through electronic reporting,
hospitals will be able to leverage EHRs to capture, calculate, and
electronically submit quality data that is currently manually chart-
abstracted and submitted to CMS for the Hospital IQR Program. As we
noted in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51614), we
recognize the need to align and harmonize measures across hospital
quality reporting programs to minimize the reporting burden imposed on
hospitals. In the Medicare EHR Incentive Program Stage 2 final rule (77
FR 54083 through 54087), we finalized 29 clinical quality measures from
which hospitals must select at least 16 measures covering three domains
to report beginning in FY 2014. We anticipate that, as health
information technology evolves and infrastructure is expanded, we will
have the capacity to accept electronic reporting of many of the chart-
abstracted measures that are currently part of the Hospital IQR
Program.
Recently, we published in the Federal Register (78 FR 308 through
310) a Request for Information (RFI) entitled, ``Medicare Program;
Request for Information on Hospital and Vendor Readiness for Electronic
Health Records Hospital Inpatient Quality Data Reporting'' to gather
stakeholder feedback to determine the optimal timing and transition
strategy for adopting electronic reporting of quality measures by
hospitals participating in the Hospital IQR Program. The information
received in response to the RFI was considered as the requirements set
forth below were developed. In the FY 2014 IPPS/LTCH PPS proposed rule
(78 FR 27694 through 27695), we proposed an approach that begins to
align the Hospital IQR and Medicare EHR Incentive Programs by providing
hospitals currently participating in the Hospital IQR Program with the
option of electronically reporting a subset of measures.
We proposed that hospitals would be able to, on a voluntary basis,
electronically report 16 measures across four measure sets, (stroke
[STK], venous thromboembolism [VTE], emergency department [ED], and
perinatal care [PC]) in CY 2014 for the FY 2016 Hospital IQR Program
payment determination. These four measure sets are already included in
the Hospital IQR Program as chart-abstracted measures. The measures in
three of these four measure sets--STK, VTE, ED--(15 measures) are
already included in the Medicare EHR Incentive Program Electronic
Reporting Pilot for Eligible Hospitals and CAHs (76 FR 74489). With
regard to the perinatal care (PC) measure set, we stated in the 2013
IPPS/LTCH PPS final rule that we would consider electronic reporting
when the e-specification of the PC-01 measure became available. The
electronic specifications for these measures are included in the
electronic clinical quality measure library at: https://www.cms.gov/Regulations-and-Guidance/Legislation/EHRIncentivePrograms/eCQM_Library.html. We recognize that

[[Page 50808]]

PC-01 is a highly burdensome measure for hospitals to report via chart
abstraction. Also, we do not believe that the measures, in their
electronically specified form, are substantively different than they
are in their chart-abstracted form, although we recognized that the
EHR-based extraction methodology is different from the chart
abstraction data collection methodology.
We proposed to make electronic reporting voluntary in CY 2014. The
requirements for electronic reporting are discussed below in section
IX.A.9.d. of the preamble of this final rule. We invited public comment
on this proposal.
Comment: Most commenters expressed support for CMS efforts to align
quality measurement reporting programs, encouraged CMS to simplify
reporting periods as much as possible and urged CMS to continue to work
to align the Hospital IQR Program, Medicare EHR Incentive Program, and
all other federal quality reporting programs now and in the future.
Commenters suggested CMS consider the variety of health system settings
throughout the entire process of quality measurement when planning to
include measures for public reporting and value-based purchasing (VBP).
Response: We agree with the commenters and believe that aligning
various federal quality reporting programs will reduce provider
reporting burden and increase patient quality of care now and in the
future. We believe the optional electronic reporting will simplify
reporting periods by enabling hospitals to submit clinical quality
measures for both the Medicare EHR Incentive Program and the Hospital
IQR Program with one submission. We will take into consideration the
suggestion to consider the variety of health system settings throughout
the entire process of quality measurement when planning to include
measures for public reporting and value based purchasing.
Comment: One commenter found the proposed approach--collecting
electronic clinical quality measures--to be totally devoid of the
critical role the Hospital IQR Program plays in providing valid,
reliable and consistent data collection and reporting of measures for
both public reporting and pay for reporting programs.
Response: We appreciate the comment, but we disagree that the
collection of electronic clinical quality measures is devoid of the
critical role of the Hospital IQR Program. To align various federal
quality programs affecting hospitals, we believe it is important to
implement electronic measure reporting for hospitals. The movement to
adopt electronic measure reporting in the Hospital IQR Program will
ultimately lessen the reporting burden on hospitals and improve data
reliability.
Comment: A few commenters encouraged CMS to spend more time
planning for the transition to electronic measures for the Hospital IQR
Program and urged CMS to address the timeline under which electronic
clinical quality measures are developed and implemented.
Response: We have invested and will continue to invest in planning
for the transition to electronic clinical quality measures. We have
evaluated the electronic clinical quality measures' development and
implementation processes and expect to streamline these processes in
the near term. There is a well-established process whereby we work with
stakeholders to propose and finalize electronic clinical quality
measures. For additional details about these processes please see the
CMS electronic clinical quality measures resource at https://www.cms.gov/Regulations-and-Guidance/Legislation/EHRIncentivePrograms/ClinicalQualityMeasures.html and also see the Measures Management
Blueprint at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/MeasuresManagementSystemBlueprint.html.
Comment: One commenter requested CMS lay out its plan for the
current core measure topics (Acute Myocardial Infarction, Heart
Failure, Pneumonia, Surgical Care Improvement Process, and
Immunization) to provide healthcare organizations with enough lead time
to plan for and make necessary changes to existing electronic medical
record systems, hire appropriate staff, and address any issues as the
Hospital IQR Program shifts to electronic data abstraction.
Response: We understand the need to share the Hospital IQR Program
electronic measures strategy to provide vendors and providers with
enough lead time to plan for human resource and IT needs and we plan to
continue to address these issues as we transition to electronic
reporting of quality measures in the Hospital IQR Program. We intend to
consider the adoption of additional electronic measures in future
rulemaking.
Comment: One commenter requested that CMS clarify whether the
Stroke, VTE, ED, Perinatal, and Severe Sepsis measures will only be
allowed to be submitted from the electronic medical record or will
still be allowed to be reported via chart-abstraction under the
Hospital IQR Program for FY 2014 and FY 2015, and asked whether a
hospital's failure to submit will result in a 2 percentage point
reduction in its annual payment update.
Response: To clarify, the electronic submission of the Stroke, VTE,
ED, and PC measure data for the Hospital IQR Program in 2014 for the FY
2016 payment determination is voluntary, and hospitals can elect to
submit the data via chart abstraction instead. For the FY 2014 and FY
2015 payment determination, hospitals will submit via chart-abstraction
as previously finalized. We also note that the STK-1 measure need not
be reported as part of the STK measure set for those electronically
reporting because no electronic specification exists for STK-1. There
is no severe sepsis measure currently adopted for the Hospital IQR
Program.
Comment: Some commenters opposed requiring electronic submission of
Hospital IQR Program measures in 2015. Commenters recommended instead
that hospitals continue to electronically report measures on a
voluntary basis for the Hospital IQR Program. Commenters indicated that
this option would provide CMS with the time needed to collect evidence
from the hospitals that voluntarily reported in 2014 to understand
issues, lessons learned, and such and specify a date certain for the
start of required electronic clinical quality measures reporting for
the Hospital IQR Program. Commenters concluded that the proposal does
not provide CMS with the benefit of learning from experience from the
field.
Response: We understand several commenters had concerns regarding
our consideration to require mandatory electronic submission of
measures for the Hospital IQR Program in 2015. To address these
concerns, we plan to monitor electronic clinical quality measures
submissions and CMS system responses. The 2013 Medicare EHR Incentive
Program Electronic Reporting Pilot data (which will be submitted by
November 30, 2013) will be used to develop and test the electronic
clinical quality measures data collection process. This process will
inform our decisions regarding electronic reporting of certain Hospital
IQR measures in CY 2015 and beyond.
Comment: One commenter sought clarification regarding how hospitals
may participate in the EHR Incentive Program Pilot.
Response: The 2013 Medicare EHR Incentive Program Electronic
Reporting Pilot is a voluntary electronic reporting option hospitals
may use to satisfy the electronic clinical quality measures reporting
component for the Medicare

[[Page 50809]]

EHR Incentive Program. Participation in the pilot is highly encouraged
and allows hospitals an opportunity to pioneer efforts for submitting
clinical quality measures electronically. More information on the
pilot, including how to participate, can be found on the QualityNet Web
site at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1228771190900.
Comment: Several commenters requested that CMS evaluate the 2012
EHR Incentive Program Reporting Pilot data to determine the program's
challenges and lessons learned and urged CMS to extend the duration of
the pilot program. Commenters also urged CMS to work with vendors to
make the EHR Incentive Program Reporting Pilot a viable option for all
hospitals.
Response: The 2013 Medicare EHR Incentive Program Electronic
Reporting Pilot data (which will be submitted by November 30, 2013)
will be used to develop and test the electronic clinical quality
measures data collection process as well as the monitoring process. We
plan to share the lessons learned once the two-year pilot has
concluded. We will be looking for errors in data submissions to
identify potential problems--both systemic and hospital-specific. We
will analyze the pilot data to assess the consistency and reliability
of quality measure reporting and will leverage those insights to inform
electronic measure reporting policies. We do not plan to extend the
pilot beyond FY 2013 because the Medicare EHR Incentive Program has
established electronic reporting options for hospitals beginning in FY
2014.
Comment: Many commenters requested that CMS consider the impact of
the proposal to collect and use electronic clinical quality measures
data on the overall establishment of national performance rates for the
Hospital VBP Program. The commenters raised the concern that this
proposal might negatively impact the true national database displayed
on Hospital Compare and the benchmark values used to determine scoring
for the Hospital VBP Program if hospitals are allowed to submit
electronic measure data without fundamental statistical analysis to
substantiate the accuracy, reliability and validity of the data.
Response: We selected these four measure sets specifically to avoid
impact to the Hospital VBP Program and note that the four measure sets
are not included in the Hospital VBP Program. We do not intend to
utilize the CY 2014 electronically submitted data for any of these
measure sets to determine a hospital's baseline period for the Hospital
VBP Program, in part because the volume of data we are requesting--one
quarter of data--is insufficient to establish a baseline. We will
consider adopting electronically-submitted measures for the Hospital
VBP Program as the measures meet the program's statutory requirements.
Comment: One commenter supported the development of a central
portal for distribution of electronic measure specifications and
associated tools.
Response: We appreciate the comment and will take it into
consideration.
Comment: One commenter urged CMS to formally designate a single
national central external reference library for electronic clinical
quality measures.
Response: We believe the commenter is requesting CMS develop a
central repository of electronic quality measures similar to NQF's
repository of endorsed quality measures. We will consider this request
that we formally designate this type of repository for electronic
clinical quality measures.
Comment: A few commenters expressed concern that, as hospitals move
towards submitting electronic clinical quality measures and the amount
of quality measures increases, they face the difficulty of documenting
activities that are spread over multiple electronic systems that may
not yet be fully integrated. The commenters noted that since there is
not yet an EHR available that handles all facets of healthcare
delivery, hospitals will always run into this problem.
Response: We are aware of the challenges associated with moving
toward electronic quality measure reporting such as an increase in the
difficulty of documenting activities using multiple electronic systems
that may not yet be fully integrated. However, we believe that in the
long-run, electronic quality measure reporting from EHRs will benefit
patients and providers by decreasing the burden on providers of
reporting measures using the chart-abstraction method. We believe
electronic reporting will increase provider reporting efficiency and
reduce costs by decreasing paperwork.
Comment: Several commenters were concerned that electronic clinical
quality measures yield different performance rates than their chart-
abstracted counterpart measures and, urged CMS to postpone mandatory
electronic submission of measures to avoid reporting disparate results.
The commenters supported a standardized electronic measures vocabulary
to reduce the reporting burden and electronic collection of health care
quality information. The commenters also urged CMS to keep the
electronic clinical quality measures library current with clinical
practice and update the value sets as needed, based on changes to the
national vocabularies.
Response: We intend to use the voluntarily submitted measure data
to assess the differences in performance rates for electronically
submitted versus chart-abstracted data. We currently update electronic
specifications annually to reflect current clinical practice for
electronic clinical quality measures finalized in the Stage 2 final
rule (Table 10: 77 FR 54083 through 54087), which include the four
measure sets that we proposed to be electronically reported for the
Hospital IQR Program. Each CMS electronic clinical quality measure ID
identifies a root measure number plus a version number, which
corresponds with a specific version of electronic specifications with
the related value sets for each electronic clinical quality measure. We
work in conjunction with the National Library of Medicine (NLM) and
Office of the National Coordinator for Health Information Technology
(ONC) to update value sets as needed and to standardize vocabularies.
For more information on electronic specifications for electronic
clinical quality measures, please visit https://www.cms.gov/Regulations-and-Guidance/Legislation/EHRIncentivePrograms/Electronic_Reporting_Spec.html.
Comment: Several commenters agreed with CMS that measures used
should be endorsed by a multi-stakeholder organization because
consideration and input from a variety of stakeholders is necessary to
ensure efficient and optimized use of measurement in the multi-
dimensional process of health care delivery.
Response: We appreciate the comment and agree with the commenter.
We support measures approved through a multi-stakeholder consensus
development process such as that of NQF. NQF uses a formal ``Consensus
Development Process'' to evaluate and endorse consensus standards,
including performance measures, and is designed to consider the
interests of stakeholder groups from across the healthcare industry.
After consideration of all the public comments we received, we are
finalizing our proposal to allow optional electronic submission of the
STK, VTE, ED, and PC measure sets for the FY 2016 payment
determination. As we note above, the STK-1 measure need not be

[[Page 50810]]

reported as part of the STK measure set for those electronically
reporting because no electronic clinical quality measure exists for
STK-1. As further detailed in section IX.A.9.d. of the preamble of this
final rule, hospitals may electronically report one or more of these
four measure sets electronically.
8. Possible New Quality Measures and Measure Topics for Future Years
We anticipate that, as EHR technology evolves, hospitals will
electronically report all chart-abstracted clinical process of care and
HAI measures which are currently part of the Hospital IQR Program or
which have been proposed for adoption into the Program. As stated
above, we intend for the future direction of electronic quality measure
reporting to significantly reduce administrative burden on hospitals
under the Hospital IQR Program. We will continue to work with measure
stewards and developers to develop new measure concepts, and conduct
pilot, reliability, and validity testing. We believe that this proposal
will provide hospitals and CMS with the ability to test systems in CY
2014 in order to prepare for future required electronic reporting. We
believe this will simplify measure collection and submission for the
Hospital IQR Program, and will reduce the burden on hospitals to report
chart-abstracted measures.
We intend to propose that hospitals report additional electronic
measures in an effort to reduce the burden associated with reporting
chart abstracted measures and to continue to promote the adoption of
CEHRT.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27695), we
invited public comment on our intention to add 5 new measures to be
collected via EHRs in the future. The five new measures listed below
were reviewed by the MAP for inclusion in the Hospital IQR Program:
Severe Sepsis and Septic Shock Management Bundle NQF
0500 (MAP supported)
PC-02 Cesarean Section NQF 0471 (MAP supported)
PC-05 Exclusive Breast Milk Feeding NQF 0480 (MAP
supported)
Healthy Term Newborn NQF 0716 (MAP supported the
direction of this measure)
Hearing Screening Prior to Hospital Discharge NQF
1354 (MAP supported).
Comment: A few commenters supported the five measures that CMS
intends to collect via EHRs in the future. One commenter stated that
the five measures that CMS intended for e-reporting should be put on
hold until the experience with the reporting of the first set of e-
measures are available.
Many commenters strongly advocated that sepsis and septic shock
management saves lives and strongly recommended the implementation of
this measure no later than 2015. A few commenters were very concerned
that the severe sepsis and septic shock management and the Cesarean
section measures have not been specified, validated or NQF-endorsed as
e-measures and therefore, would not be conducive for e-reporting.
A few commenters supported the PC-05 Exclusive Breast Milk Feeding,
Healthy Term Newborn, and Hearing Screening Prior to Hospital Discharge
measures, and recommended the identification of the population through
the use of administrative codes rather than a combination of diagnoses.
One commenter did not support the PC-05 Exclusive Breast Milk Feeding
measure stating that the exclusion limitation of this measure that
requires a provider/lactation consultant to complete the documentation
is burdensome and does not match the EHR infrastructure and workflow.
One commenter did not support the Hearing Screening Prior to
Hospital Discharge measure which was believed to be more appropriate as
an outpatient measure.
Response: We thank the commenters for their input and we will take
them into consideration as we decide whether to collect these measures
via EHRs in the future.
Comment: In addition to suggestions regarding specific measures, we
also received many comments on the following measure topics:
Medication Reconciliation (NQF 0097), and
Medication Reconciliation Post-Discharge (NQF 0554)
Medication safety
MRSA surveillance testing
Surgical outcomes, including lower-extremity bypass
complications, ICU mortality and complications, elderly surgical
outcomes and colorectal surgery outcomes
Appropriate therapy for surgical prophylaxis
TJC Substance use measure set
TJC Tobacco treatment measure set
Participation in a systematic clinical database for
vascular treatment
Colorectal cancer screening
Oncology: Plan of care for pain
Urinary incontinence
Pain assessment
Hospital malnutrition: Nutrition screening and assessment
Registry-based CABG composite score
We thank the commenters for the comments and suggestions and will
take them into consideration for future measure selections.
9. Form, Manner, and Timing of Quality Data Submission
a. Background
Sections 1886(b)(3)(B)(viii)(I) and (II) of the Act state that the
applicable percentage increase for FY 2007 and each subsequent fiscal
year shall be reduced by 2.0 percentage points (or beginning with FY
2015, by one-quarter of such applicable percentage increase (determined
without regard to sections 1886(b)(3)(B)(ix), (xi), or (xii) of the
Act)) for any subsection (d) hospital that does not submit, to the
Secretary in accordance with this clause and in a form and manner, and
at a time, specified by the Secretary, data required to be submitted on
measures selected under this clause with respect to such a fiscal year.
For each Hospital IQR Program year, we require that hospitals submit
data on each measure in accordance with the measure's specifications
for a particular period of time. The data submission requirements,
Specifications Manual, and submission deadlines are posted on the
QualityNet Web site at: https://www.QualityNet.org/. Hospitals submit
quality data through the secure portion of the QualityNet (formerly
known as QualityNet Exchange) Web site (https://www.QualityNet.org).
This Web site meets or exceeds all current Health Insurance Portability
and Accountability Act requirements for security of protected health
information.
In order to participate in the Hospital IQR Program, hospitals must
meet specific procedural requirements. Hospitals choosing to
participate in the Hospital IQR Program must also meet specific data
collection, submission, and validation requirements.
b. Procedural Requirements for the FY 2016 Payment Determination and
Subsequent Years
The Hospital IQR Program procedural requirements are now codified
in regulation at 42 CFR 412.140. Hospitals should generally refer to
the regulation for participation requirements. In the FY 2014 IPPS/LTCH
PPS proposed rule (78 FR 27695 through 27696), however, we proposed to
make three changes to the procedural requirements.
We proposed to align the last date to withdraw with the final
submission deadline. The current withdrawal deadline is August 15 of
the fiscal year preceding the fiscal year for which a Hospital IQR
Program payment determination will be made. We proposed to change that
deadline to

[[Page 50811]]

May 15 prior to the start of the payment year affected in order to
align with the last submission quarter deadline. For example, if a
hospital wanted to withdraw from the program for the FY 2016 payment
determination, the hospital would need to complete the withdrawal by
May 15, 2015. We proposed to amend the language at 42 CFR 412.140(b) to
reflect this proposal. We proposed this change because we are striving
to provide more timely feedback to hospitals regarding their annual
payment update (APU) status. We do not believe this change would add
any additional burden to hospitals and it would provide CMS the ability
to make earlier participation decisions. We invited public comment on
this proposal.
Comment: Several commenters supported the administrative changes
proposed in the Hospital IQR Program.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing as proposed the alignment of the last day to withdraw with
the final submission deadline, May 15th. We are also amending our
regulations at Sec. 412.140(b) to reflect this policy.
In addition, we proposed two technical corrections to the
regulation text at 42 CFR 412.140. The first correction is to the title
of this section. The current title is ``Participation, Data Submission,
and Validation Requirements under the Hospital Inpatient Quality Review
(IQR) Program.'' This should state ``Participation, Data Submission,
and Validation Requirements Under the Hospital Inpatient Quality
Reporting (IQR) Program.'' The second technical correction is at
paragraph (a)(3) which states: ``Submit a completed Notice of
Participation Form to CMS if the hospital is participating in the
program for the first time, has previously withdrawn from the program
and would like to participate again, or has received a new CMS
Certification Number (CNN).'' We proposed to correct the acronym
``CNN'' to ``CCN.'' The proposed language would state: ``Submit a
completed Notice of Participation Form to CMS if the hospital is
participating in the program for the first time, has previously
withdrawn from the program and would like to participate again, or has
received a new CMS Certification Number (CCN).''
Comment: Several commenters supported the proposed technical
corrections.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing as proposed two technical corrections to the regulation text
at Sec. 412.140. The first correction is to the title of this section,
``Participation, Data Submission, and Validation Requirements Under the
Hospital Inpatient Quality Reporting (IQR) Program.'' The second
technical correction is to paragraph (a)(3) to ``Submit a completed
Notice of Participation Form to CMS if the hospital is participating in
the program for the first time, has previously withdrawn from the
program and would like to participate again, or has received a new CMS
Certification Number (CCN).''
c. Data Submission Requirements for Chart-Abstracted Measures
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53536 through
53537), for the FY 2015 payment determination and subsequent years, we
retained the 4\1/2\ months quarterly submission deadline for chart-
abstracted quality measures. We also retained the aggregate population
and sampling deadline of 4 months. Hospitals would continue to be
required to submit aggregate population and sample size counts to CMS
on a quarterly basis for Medicare and non-Medicare discharges for the
topic areas for which chart-abstracted data must be submitted (76 FR
51640 through 51641). We adopted the same 14-day period after the
aggregate population and sample size count deadline to submit the
required patient-level records. For the FY 2016 payment determination
and subsequent years, hospitals must submit data for four consecutive
calendar year discharge quarters. For example, for the FY 2016 payment
determination, the submission quarters are as follows: 1Q CY 2014, 2Q
CY 2014, 3Q CY 2014 and 4Q CY 2014. We also adopted this submission
deadline for the new chart-abstracted measure for FY 2016, Elective
Delivery Prior to 39 Completed Weeks Gestation: Percentage of Babies
Electively Delivered Prior to 39 Completed Weeks Gestation which is
collected via a Web Based Tool.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27696), for the
FY 2016 payment determination and subsequent years, we proposed to
clarify the submission deadline time. Although we have historically
stated that the submission deadline is 11:59 p.m., we have not
clarified which time zone. For the FY 2016 payment determination and
subsequent years we proposed to clarify that submissions to QualityNet
will be accepted until 11:59 p.m. Pacific time. We invited public
comment on this proposal.
Comment: Several commenters supported the proposed clarification.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing as proposed policy to reflect that submissions to QualityNet
will be accepted until 11:59 p.m. Pacific time.
d. Data Submission Requirements for Quality Measures That May be
Voluntarily Electronically Reported for the FY 2016 Payment
Determination
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27696 through
27698), we proposed the following approach to begin to align quality
measure reporting under the Hospital IQR and Medicare EHR Incentive
Programs. (We noted that this proposal, if finalized, does not
implement any statutory provisions of the HITECH Act or change any of
the existing regulatory provisions of the Medicare EHR Incentive
Program, which are the subject of section IX.E of the preamble of this
final rule, separate rulemaking, and public comment.) Under the
Hospital IQR Program, for the FY 2016 payment determination, we
proposed that hospitals may choose to either (1) electronically report
at least one quarter of CY 2014 quality measure data for each measure
in each of four Hospital IQR measure sets (STK, VTE, ED, and PC), or
(2) to continue reporting all of these measures using chart-abstracted
data for all four quarters of CY 2014. The proposal also stated, if a
hospital chose to electronically report the four measure sets, all of
the quality measures in those four measure sets must be electronically
reported for the same reporting quarter(s) although, as stated above,
the hospital would choose which quarter(s) to report.
We strongly recommended hospitals electronically report the 16
measures in these four measure sets in CY 2014, to provide hospitals
and CMS with the ability to test systems and adjust workflow in CY 2014
in order to prepare for required electronic reporting. We stated our
belief that this will simplify quality reporting and submission for the
Hospital IQR Program, and will reduce the reporting burden on
hospitals. To further incentivize hospitals to choose this option, we
stated our intent to use the electronically reported data to determine
whether the hospital has satisfied the Medicare EHR Incentive Program
clinical quality measure reporting requirement. We noted that the
hospital must also satisfy all other

[[Page 50812]]

requirements for the Medicare EHR Incentive Program.
We proposed different Hospital IQR Program data submission
deadlines for each quarter depending on whether the hospital is
submitting the data solely for the Hospital IQR Program (that is, if
the hospital does not want the data to be used to determine whether the
hospital has satisfied the Medicare EHR Incentive Program clinical
quality measure reporting requirement) or whether the hospital wishes
to submit the data for both the Hospital IQR Program and the Medicare
EHR Incentive Program. We proposed that, if a hospital chooses to
report the four measure sets electronically for the Hospital IQR
Program, but does not want the data to be used to determine whether the
hospital has satisfied the Medicare EHR Incentive Program clinical
quality measure reporting requirement, the reporting periods and
deadlines would be as follows:

Proposed FY 2016 Hospital IQR Program Chart-Abstracted Measure Reporting
Periods and Deadlines
------------------------------------------------------------------------
Discharge reporting periods Submission deadlines
------------------------------------------------------------------------
January 1, 2014-March 31, 2014....... August 15, 2014.
April 1, 2014-June 30, 2013.......... November 15, 2014.
July 1, 2014-September 30, 2014...... February 15, 2014.
October 1, 2013-December 31, 2014.... May 15, 2013.
------------------------------------------------------------------------

We proposed that if the hospital does not want us to use the
electronically reported data to also determine whether the hospital has
satisfied the Medicare EHR Incentive Program clinical quality measure
reporting requirement, we would modify this data submission schedule to
align the reporting periods and deadlines for the Hospital IQR and
Medicare EHR Incentive Programs. Specifically, we proposed that if a
hospital wants us to also use the electronically reported data to
determine whether the hospital has satisfied the Medicare EHR Incentive
Program clinical quality measure reporting requirement, the Medicare
EHR Incentive Program reporting periods and deadlines could be used to
satisfy the Hospital IQR Program requirements. The Medicare EHR
Incentive Program clinical quality measure reporting follows the
Federal fiscal year while the Hospital IQR Program follows the calendar
year. The table below lists the FY 2014 Medicare EHR Incentive Program
reporting periods and submission deadlines.

Medicare EHR Incentive Program Reporting Periods and Deadlines FY 2014
------------------------------------------------------------------------
Reporting periods Submission deadlines
------------------------------------------------------------------------
For eligible hospitals in their first July 1, 2014.
year of the Medicare EHR Incentive
Program--Any 90 consecutive days in FY
2014 prior to July 1, 2014.
For eligible hospitals that are beyond November 30, 2014.
their first year of the Medicare EHR
Incentive Program reporting
electronically--Any FY 2014 quarter, or
the entire FY 2014 (October 1, 2013-
September 30, 2014).
------------------------------------------------------------------------

We noted that the data submission deadline is November 30, 2014 for
hospitals that are beyond their first year of the Medicare EHR
Incentive Program (77 FR 54080). Accordingly, if such a hospital chose
to electronically report 3Q CY 2014 data under the Hospital IQR
Program, it would need to submit the data by November 30, 2014 (not
February 15, 2015) in order to also use that data to determine whether
the hospital has satisfied its Medicare EHR Incentive Program clinical
quality measurement requirement. In addition, we noted that, as noted
above, the hospital must also satisfy all other program requirements
established for the Medicare EHR Incentive Program.
We also noted that because of the difference in reporting
deadlines, we would not be able to use 4Q 2014 electronically submitted
Hospital IQR data for purposes of determining whether a hospital has
satisfied its Medicare EHR Incentive Program clinical quality
measurement requirement. We proposed that hospitals could still report
the data electronically to meet their Hospital IQR Program
requirements.
We proposed in section IX.E. of the preamble of the proposed rule
to extend the beginning of the electronic submission period to January
2, 2014 (78 FR 27745). We noted that, if the extended electronic
submission period is finalized, hospitals in their first year of
demonstrating meaningful use could also electronically submit the four
measure sets (STK, VTE, ED, and PC) for one quarter by July 1, 2014 to
meet the clinical quality measure reporting criteria for the Medicare
EHR Incentive Program as well as the Hospital IQR Program reporting
requirement for those measure sets. We also proposed that hospitals
choosing to report at least one quarter of quality measure data
electronically would not need to submit chart-abstracted quality
measure data for the other quarters in CY 2014 for these four measure
sets (STK, VTE, ED, and PC).
For hospitals choosing to report electronically in the Hospital IQR
Program, we proposed that hospitals submitting these four measure sets
electronically must use the Medicare EHR Incentive Program process for
electronically submitting quality measure data into QualityNet (for
EHR-based reporting). We proposed that Hospital IQR Program hospitals
follow the submission requirements finalized in the Medicare EHR
Incentive Program Stage 2 final rule (77 FR 54080) and utilize their
existing QualityNet account to submit electronic quality measure data.
We noted that specific submission procedures will be posted on the
QualityNet Web site at: https://www.qualitynet.org/.
We proposed to align with the case threshold exemption from the
Medicare EHR Incentive Program. This means that for each quality
measure for which hospitals do not have a minimum number of patients
that meet the patient population denominator criteria for the relevant
EHR reporting period, hospitals would have the ability to declare a
``case threshold exemption'' of five or fewer discharges. We stated
that our intent is to finalize the same process in both the

[[Page 50813]]

Medicare EHR Incentive Program and the Hospital IQR Program as further
detailed below.
In preparation for this transition to electronic quality measure
reporting under the Hospital IQR Program, we proposed that if a
hospital chooses to report the four measure sets (STK, VTE, ED, and PC)
electronically during CY 2014, the hospital's data would be extracted
from the Certified Electronic Health Record Technology (CEHRT) and
submitted to CMS using the Health Level Seven (HL7) Quality Reporting
Document Architecture (QRDA) Category I Revision 2 standard. Certified
EHR Technology is defined for the Medicare EHR Incentive Program at 42
CFR 495.4 and 45 CFR 170.102.
We recognized that a small percentage of Hospital IQR Program-
participating hospitals are not currently participating in the Medicare
EHR Incentive Program and that this proposal may not be applicable to
those hospitals. We stated that these hospitals should continue to
report the four measure sets using chart-abstraction. However, we noted
that greater adoption of CEHRT and reporting of quality measures
electronically across Medicare hospital quality reporting will reduce
the administrative burden on hospitals associated with the reporting of
chart-abstracted quality measures. This will help hospitals to meet
both Hospital IQR Program and Medicare EHR Incentive Program
requirements with a streamlined data submission to CMS.
We stated that, in the recent HHS ONC final rule regarding
standards, implementation specifications, and certification criteria
for health information technology (77 FR 54163 through 54292), HHS
adopted ``2014 Edition'' EHR certification criteria that will require
CEHRT to provide the capability to submit electronic clinical quality
measure data in the HL7 QRDA Category I standard to support patient-
level data submissions. We stated that we do not believe that our
proposal to use QRDA Category I (patient-level) data under the Hospital
IQR Program will create a new reporting burden for hospitals because we
already require hospitals to submit ``all-payer'' patient-level data
under the Hospital IQR Program.
We stated that the QRDA standard specifies the framework for
quality reporting, standardizes measure-defined data elements for
interoperability between organizations, and is used to transmit
clinical quality measure data needed to meet meaningful use (MU)
requirements under the Medicare EHR Incentive Program.
We proposed that we would not publicly report data collected from
hospitals choosing to report these four measure sets electronically in
CY 2014. After reviewing comments we received from our Request for
Information (RFI) entitled ``Medicare Program; Request for Information
on Hospital and Vendor Readiness for Electronic Health Records Hospital
Inpatient Quality Data Reporting'' (78 FR 308 through 310), it became
clear that we should consider not publicly reporting clinical quality
measure data submitted electronically for the four proposed measure
sets due to possible abnormalities in the data and/or the submission
process that may occur during the first year of electronic reporting to
CMS. We stated that this proposal will provide us time to assess the
data reported to determine the optimal timing and transition strategy
for electronic quality measure reporting by hospitals participating in
the Hospital IQR Program. However, we stated that we would like to
recognize hospitals that report electronically and invited public
comment on whether hospitals choosing electronic reporting of quality
measures would like to be acknowledged on the Hospital Compare Web site
as ``Pioneers'' in Medicare EHR-based reporting. We noted, however,
that the data results for Medicare EHR-based measures would not be
publicly reported.
We stated our concern that a large number of hospitals would not be
able to meet the Hospital IQR Program requirements for FY 2016 if we
proposed to require hospitals to electronically report the four measure
sets. Accordingly, we stated our belief that this proposal--providing
hospitals the opportunity for voluntary electronic submission of data
for one quarter of CY 2014 discharges--represents a balanced policy
that some hospitals will be able to take advantage of while ensuring
that the FY 2016 Hospital IQR Program requirements are attainable for
all participating hospitals. We stated that, as we move further toward
alignment of quality measures reporting among our reporting
initiatives, we intend to propose in the future to require hospitals to
report electronically specified quality measures.
We did not propose to validate any of the data that is
electronically reported for the FY 2016 Hospital IQR Program. However,
we shared the concern among hospitals, vendors, and other stakeholders
that there is a need to develop a comprehensive validation process that
applies to electronically reported data. We stated our intent to
develop and propose to adopt a data validation strategy for
electronically reported quality measure data in the FY 2015 IPPS/LTCH
PPS proposed rule. This strategy will be informed, in part, by comments
we receive in response to the proposed rule.
We invited public comment on these proposals.
Comment: Some commenters indicated that there are challenges with
hospital EHR adoption and the number of hospitals using electronic
clinical quality measures. A few commenters urged CMS to take a step
back and rearticulate the program goals and logic.
Response: We have conducted various outreach, education, and
communication activities with stakeholder communities, including
hospitals and vendors. We will continue to consider stakeholder
feedback in developing the electronic quality reporting strategy. We
have previously stated our commitment to align quality measurement and
reporting among our programs (for example, the Hospital IQR Program and
PQRS). We noted that our alignment efforts focus on several fronts
including using the same measures for different programs, standardizing
the measure development and electronic specification processes across
our programs, coordinating quality measurement stakeholder involvement
efforts, and identifying ways to minimize multiple submission
requirements and mechanisms. A longer-term vision would be hospitals
and clinicians reporting through a single, aligned mechanism for
multiple CMS programs (77 FR 54053).
We understand that, while there are some challenges with hospital
EHR adoption rates, there has also been tremendous progress over the
years. In March 2013, ONC reported, ``since the passage of the HITECH
Act in 2009, there has been strong growth in non-federal acute care
hospital adoption of EHR technology to meet Meaningful Use objectives.
. . . Hospital adoption rates for each of the 14 Meaningful Use Stage 1
Core objectives ranged from 72% to 94%. . . . These findings indicate
that acute care hospitals have made considerable progress since the
passage of the HITECH Act toward the goals of improving health and
health care through the use of advanced health information technology''
(https://www.healthit.gov/sites/default/files/oncdatabrief10final.pdf).
Comment: A few commenters wondered what, if any, potential impacts
there would be on hospital ICD-10 implementation and wondered whether
CMS provided algorithms for the electronic measures.
Response: We do not believe that there will be significant impacts
related

[[Page 50814]]

to ICD-10 implementation because the ICD-10 code sets have already been
included in the electronic specifications for the electronic clinical
quality measures. Also, the electronic specifications for the
electronic clinical quality measures are available to the public at the
electronic clinical quality measures library found at: https://www.cms.gov/Regulations-and-Guidance/Legislation/EHRIncentivePrograms/eCQM_Library.html. The code sets for all the electronic clinical
quality measures are available on the National Library of Medicine's
Value Set Authority Center (VSAC) at https://vsac.nlm.nih.gov.
Comment: A few commenters requested clarification regarding whether
or not hospitals report Hospital IQR Program measures using chart-
abstraction for the non-electronically reported measures. Commenters
urged CMS to recognize that hospitals will be required to continue to
report chart abstracted data to other national and State entities, such
as The Joint Commission, until all of the entities are in total
alignment with CMS efforts to electronically report quality measures.
Response: As discussed in more detail below, we are finalizing a
modified approach to voluntary electronic reporting. Under this
approach, hospitals that choose to engage in voluntary electronic
reporting should continue to report measures via chart abstraction
unless the measure is part of the measure set that the hospital reports
electronically. For example, if a hospital chooses to report the PC
measure set (which is currently comprised of one measure)
electronically, the hospital will be able to report that measure set
electronically for one of the following quarters (its choice)--CY Q1,
CY Q2 or CY Q3. If the hospital chooses to report more than one measure
set electronically, they must be all reported in the same calendar
quarter. For example, if a hospital choses to use voluntarily
electronic reporting for a CY quarter and then reports a different
measure set for a later CY quarter, the hospital would only receive
Hospital IQR credit for the first discharge quarter submitted; the
expectation is that the hospital would be submitting chart-abstraction
of a full calendar year for the latter measure set. All other chart-
abstracted measures, including the measures in the measure sets not
electronically reported will need to be reported via chart-abstraction
for all four quarters. If a hospital reports part of a measure set
electronically and the other part via chart abstraction, the hospital
will not receive Hospital IQR credit for the measure set. We understand
hospitals will continue to have to report chart-abstracted data to
other national and State entities, and we continue to discuss options
for electronic reporting alignment with various stakeholders.
In addition, we note that the STK-1 measure cannot be
electronically reported because electronic specifications have not been
developed for that measure. Therefore, if a hospital chooses to report
the STK measure set electronically, it would not need to report the
STK-1 measure via chart-abstracted measure to satisfy the Hospital IQR
Program reporting requirements.
Comment: Many commenters opposed the proposal to require electronic
reporting of Hospital IQR Program data in 2014 because of the
challenges associated with electronic measure specifications and the
EHR implementation and certification process.
Response: Hospitals are encouraged, but not required, to submit
electronic clinical quality measures for the Hospital IQR Program in
2014 for the FY 2016 Hospital IQR Program payment determination.
Through this voluntary process, hospitals and CMS will gain additional
experience with electronic reporting and any potential issues that may
result. We also encourage hospitals to continue submitting these
measures via chart-abstraction if they choose. This will enable the
most robust data set for the comparison. Since this proposal is
voluntary, we believe it provides hospitals the flexibility to
determine whether they are ready to submit electronically.
Comment: Some commenters urged CMS to allow hospitals to
voluntarily generate data using the specifications in the CMS/Joint
Commission measure manual, rather than using the methods and standards
finalized for the Medicare EHR Incentive Program, and report it to CMS
using the electronic submission mechanism. The commenters noted that
these data would be submitted in conformance with the requirements of
the Hospital IQR Program, and if submitted through the electronic
submission mechanism for at least one quarter, would count as
fulfilling the Meaningful Use requirements for clinical data
submission.
Response: We appreciate the suggestion and note that the electronic
submission of clinical quality measure data for the Hospital IQR
Program in 2014 is voluntary. We are finalizing our proposal to allow
hospitals to voluntarily submit measures electronically via the
Medicare EHR Incentive Program. If a hospital chooses this option, the
hospital will report the electronic clinical quality measures using the
methods and standards finalized for the Medicare EHR Incentive Program
(see the CMS and ONC final rules at 77 FR 53968 and 77 FR 54163,
respectively, for further details regarding the Medicare EHR Incentive
Program). This proposal does not preclude submitting the traditional
chart-abstracted measures to the Hospital IQR Program using the
specifications in the CMS/Joint Commission measure manual; however, the
hospital need not do so if it elects to report electronically.
Comment: A commenter questioned whether a hospital that does not
report PC-01 can still participate in the Medicare EHR Incentive
Program or whether the hospital has to report all 16 measures to be
eligible.
Response: Under the policy that we adopted for the Medicare EHR
Incentive Program, a hospital may be exempted from reporting on a
particular electronic clinical quality measure if the hospital seldom
has the types of cases addressed by that electronic clinical quality
measure. Specifically, a hospital that experiences 5 or fewer inpatient
discharges per quarter or 20 or fewer inpatient discharges per year
(Medicare and non-Medicare combined), as defined by an electronic
clinical quality measure's denominator population, would be exempted
from reporting on that electronic clinical quality measure (for further
explanation of the policy, see 77 FR 54080, 72988 through 72989). Under
this policy, it is possible that a hospital could qualify for an
exemption from reporting on PC-01 for the Medicare EHR Incentive
Program.
Comment: One commenter supported the CMS proposal to submit the
identified four measure sets electronically to satisfy a portion of the
Hospital IQR and EHR Incentive Program requirements.
Response: We thank the commenter for the support.
Comment: Many commenters opposed the proposal to submit the
identified four measure sets--16 measures total--electronically to CMS
noting that the policy would limit hospitals' choice in fulfilling
meaningful use requirements since, by identifying the 16 electronic
clinical quality measures, the policy would eliminate the choice
hospitals currently have to report any 16 of 29 electronic clinical
quality measures. Most commenters also noted that vendors are not
required to support all 29 measures and may not support the 16
identified in the proposed rule.

[[Page 50815]]

Response: We understand that hospitals prefer to have the
flexibility to choose from the list of 29 measures from Stage 2 of the
Medicare EHR Incentive Program. We have taken these comments into
consideration and are finalizing a modified policy as a result.
Specifically, we are finalizing a policy which permits hospitals, if
they choose this voluntary option, to select one or more of the four
measure sets (STK (except, as noted above, STK-1), ED, VTE, and PC) to
electronically report in CY 2014, instead of requiring hospital, if
they choose this option, to use electronic reporting for all four
measure sets. We believe that this modification allows enough
flexibility for hospitals to begin electronically reporting, if, for
example, a hospital's vendor does not support all of the measures in
the four measure sets originally proposed.
Comment: Commenters noted that Stage 2 of the Medicare EHR
Incentive Program requires hospitals to implement at least five
clinical decision support (CDS) tools in their EHRs that are related to
the electronic clinical quality measures they report for Meaningful
Use. Commenters suggested that CMS address this issue by eliminating
the requirement that CDS tools be related to electronic clinical
quality measures and allow hospitals to choose the CDS tools that best
help them achieve their individual quality improvement strategies and
goals.
Response: We disagree with the commenters' belief that this
proposal interferes with CDS tools implementation. Hospitals have the
flexibility to choose which CDS interventions to implement. It is
expected that hospitals will select clinical decision support
interventions to drive improvement in the delivery of care for the
high-priority health conditions relevant to their patient population.
We refer the commenters to the Medicare EHR Incentive Program Stage 2
final rule (77 FR 53995) for more information.
Comment: One commenter requested that CMS provide additional
details regarding where hospitals can find the measure failures and
whether this information is contained at CMS or in the CEHRT.
Response: We appreciate the request for additional details
regarding measure failures but cannot respond because we were unclear
of what was specifically meant by this comment given the lack of
context. We invite the commenter and others to join our EHR listservs
on QualityNet if the commenter has additional questions or would like
to learn more about electronic clinical quality measures in general.
Comment: With regard to the proposed 16 electronic clinical quality
measures, a few commenters requested more detail about how CMS intends
to use and store the data. In addition, several commenters wondered
whether CMS has the necessary infrastructure to accept electronic
clinical quality measures within the specified timeframe. One commenter
wanted more information about whether data would be retained for
unknown usage in the future.
Response: We intend to store the electronic data in the same manner
that we store the Hospital IQR Program chart-abstracted data, with
modifications to accept QRDA I data. We believe this infrastructure
will allow us to accept the electronic clinical quality measure data
submitted in CY 2014 for the Hospital IQR Program. We intend to retain
the data to analyze it for lessons learned, and we will use the data to
inform future policy decisions.
Comment: Some commenters did not support the initiative to label
hospitals ``Pioneers'' on the Hospital Compare Web site and suggested
that CMS develop an icon and name through focus group testing to
recognize hospitals that are submitting quality measure information
electronically.
Response: We appreciate the comment and will further evaluate the
name to be used to recognize these hospitals. We intend to recognize
hospitals that voluntarily report electronic clinical quality measures
electronically in CY 2014 for the Hospital IQR Program.
Comment: One commenter questioned why CMS finds it necessary to
create a special designation on the Hospital Compare Web site for
hospitals using CEHRTs given the public awareness of hospitals
participating in the Meaningful Use program. A commenter noted that the
purpose of Hospital Compare is to provide evidence-based quality and
performance information about hospitals to consumers and wonders
whether consumers may misinterpret the meaning of a special designation
and make healthcare decisions based on that rather than the hospital's
performance on evidence-based measures.
Response: Our intention in recognizing these hospitals is, in part,
to incentivize other hospitals to electronically report and, as a
result, increase the volume of electronic clinical quality measures
data we collect for validation testing purposes. We intend to clearly
indicate the purpose and meaning of the recognition on the Hospital
Compare Web site to avoid any potential confusion.
Comment: One commenter asked CMS to validate data derived
electronically from the EHR with the medical record in its totality.
The commenter suggested the data validation process should occur in the
FY 2015 reporting period and the level of data accuracy should be
ascertained prior to instituting required electronic reporting in the
FY 2016 payment determination or subsequent years. Some commenters also
noted the data submitted electronically for the FY 2016 Hospital IQR
Program would not be validated and wondered whether CMS intends to
develop a validation strategy for electronically reported quality
measure data in next year's IPPS rulemaking. Some commenters objected
to the adoption of baseline and performance periods for the Hospital
VBP Program that blend the results of both reporting modes until the
reliability and accuracy of measures reported using electronic
specifications has improved.
Many commenters supported CMS' proposal to withhold voluntarily
submitted electronic clinical quality measures data from public display
in CY 2014 due to possible abnormalities in the data or potential
issues associated with a new submission method. The commenters also
noted that it would not be fair to compare results for hospitals
reporting on chart-abstracted and electronic versions of the same
measures since measures manually abstracted benefit from the broader
context that is available in a chart. Commenters recommended that
additional research be conducted to address differences between
measures reported electronically and measures reported via chart-
abstraction before CMS mandates public reporting of electronic clinical
quality measure data through the Hospital IQR Program or other quality
reporting programs.
The majority of commenters, however, opposed CMS' proposal to
withhold the electronically reported data from publication on Hospital
Compare and instead urged CMS to publicly display it. These commenters
believed that withholding the data would undermine the intent of the
Hospital IQR Program and provide little insight into whether EHRs can
be used to effectively report comparable data for purposes of public
reporting in the future.
Response: We believe that the 2013 Medicare EHR Incentive Program
Electronic Reporting Pilot is beginning to address concerns regarding
data validity, and we invite participation in the 2013 Medicare EHR
Incentive Program Electronic Reporting Pilot. In

[[Page 50816]]

addition, we have worked with ONC to include more stringent
certification criteria for EHR products in order to increase data
consistency and reliability across providers and vendors. The
electronic clinical quality measures have been tested, and we are
working with the EHR vendor and provider communities to continuously
improve the electronic specifications. We do, however, understand the
concerns raised by commenters regarding data validity and public
reporting. After taking all of these considerations into account, we
are finalizing that we will make the electronically reported data
public on Hospital Compare if we deem that the data are accurate enough
to be publicly reported. In addition, we intend to develop and propose
a validation strategy for electronically reported quality measure data
in future rulemaking.
Comment: Several commenters suggested that CMS transition to
electronic reporting of clinical quality measures by maintaining the
intent of quality measures, testing tools designed to support
electronic clinical quality measures development, and field testing
measures prior to including them in a reporting program.
Response: We are continuing to work with partners and key
stakeholders to improve the tools used to develop electronic clinical
quality measures and methodologies to test electronic clinical quality
measures prior to adoption in our quality reporting programs.
Comment: Many commenters noted that electronic clinical quality
measures lack accuracy, testing, quality, validity, comparability with
chart-abstracted measures, and well-developed standards. The commenters
called for ``electronic specification stability'' before CMS adopts
electronic reporting for the Hospital IQR Program and noted that
electronic reporting does not currently produce complete information.
Some commenters urged CMS to reconsider the proposed acceptance of
hospital quality reporting data directly from EHRs until there has been
verification of data reliability and validity.
Response: We thank the commenters for their input. We are working
with the hospital and vendor communities to develop a robust validation
methodology. We continue to engage with external stakeholders by
requesting public comments regarding validation methodologies. Until we
receive quality data reported directly from EHRs, we will have limited
ability to perform data reliability and validity testing. By offering a
voluntary submission option, we anticipate that hospitals will submit
quality measure data directly from EHRs so that we have data for
reliability and validity testing.
Comment: A few commenters strongly supported continued engagement
with the provider and vendor communities through cooperative efforts
such as the eMeasures Learning Collaborative and its workgroups and
urged CMS and ONC to include the vendor community when working with
measure stewards and developers in the development of new measure
concepts and when pilot, reliability, and validity testing is
conducted. For example, commenters noted that in 2012, CMS launched the
eMeasures Learning Collaborative with the NQF, and the commenters
applauded this collective approach to effectively advise stakeholders
on the best eMeasures development, maintenance, and implementation
processes.
Response: We thank the commenters for their support. We plan to
continue to collaborate with multi-stakeholder groups and the ONC when
working with measure stewards and developers in the development of new
measure concepts and conducting pilot, reliability, and validity
testing.
Comment: Some commenters urged CMS and ONC to align efforts to
verify through demonstration projects the comparability of results of
manually abstracted measures with electronically specified/EHR
extracted measures. The commenters also called for a certification
requirement for third party auditors.
Response: Although we do not understand what the commenters mean
when referring to a ``third-party auditor,'' we do not believe that the
electronic clinical quality measures are substantively different from
their chart-abstracted forms. We are researching methodologies,
including consideration of demonstrations and/or pilots to develop data
validation strategies and are working with the hospital and vendor
communities.
Comment: A few commenters noted errors in the 2014 measure
specifications, the Cypress software used to certify electronic
clinical quality measures, and the certification test methods. These
commenters noted time pressures associated with the frequent updates
and changes to the ONC certification process over the past five months
since the tools and measure specifications became available. These
changes require vendors and providers to adopt new versions of
measures, resulting in time pressures for development, testing and
implementation/roll out to customers.
Response: We plan to continue to work with the ONC to address these
issues. We understand vendors are working hard to adopt new measure
specifications released by CMS and ONC.
Comment: A few commenters found the proposal focused more on the
electronic submission and less on the accuracy of the information and,
consequently, believed 2014 was too soon to assume electronic quality
measures are ready for validation. The commenters outlined an
alternative approach to allow hospitals to satisfy both programs
clinical quality measure reporting requirements when they pull quality
data from an EHR and allow a chart abstractor to validate that
information in the Hospital IQR Program specifications.
Response: We do not plan to validate electronic clinical quality
measure data, as part of the regular Hospital IQR validation program,
for the FY 2016 payment determination. We will, however, review the
accuracy of the electronic clinical quality measure data assessing it
for the electronic specification adherence before making it publicly
available. Further, we intend to use these submissions to inform the
development of a validation strategy that would apply to electronically
reported measure data in the future. We do not preclude hospitals from
using their EHRs to collect data for submitting chart-abstracted
measures under the Hospital IQR Program. We are working on a strategic
plan to identify the optimal transition while providing a flexible
voluntary option to electronically report measures in 2014. For
validation of electronic clinical quality measures, we are researching
methodologies to develop data validation strategies and are working
with the hospital and vendor communities. We have engaged external
stakeholders by requesting public comments regarding validation
methodologies through a Request for Information (RFI) published in
January 2013.
Comment: Some commenters were concerned that, although the measure
descriptions seem similar for both Meaningful Use and the Hospital IQR
Program (the measures have the same title, etc.), the measure
specifications and calculations were developed independently and are
not equivalent. The commenters requested that CMS consider this
variation and provide education and outreach to the provider community
to assist in this transition.
Response: We do not believe that the electronic clinical quality
measures are substantively different from their chart-

[[Page 50817]]

abstracted form. We believe that collection and reporting of data
through health information technology will greatly simplify and
streamline reporting for many CMS quality reporting programs. Through
electronic reporting, hospitals will be able to leverage EHRs to
capture, calculate, and electronically submit quality data that is
currently manually chart-abstracted and submitted to CMS for the
Hospital IQR Program. In addition, we provide a central location for
all clinical quality measure specifications and educational materials
for electronic clinical quality measures reporting which providers can
access (https://www.cms.gov/Regulations-and-Guidance/Legislation/EHRIncentivePrograms/eCQM_Library.html). We are moving in the
direction of expanding that resource to incorporate additional
electronic clinical quality measures resources. We intend to provide
outreach and education to hospitals for this transition in multiple
formats such as Webinars and FAQs.
Comment: A few commenters suggested that CMS work with an
independent evaluator to understand any variance that may result from
the electronic extraction of quality measure data from EHRs rather than
through manual chart abstraction.
Response: We appreciate the suggestion and will take this
recommendation into consideration as we further develop our electronic
reporting policies.
Comment: A few commenters expressed concern that the efficiency of
reporting should not be achieved at the expense of alienating
clinicians and hospitals by detracting from patient care.
Response: We agree with the commenters and will consider burden as
we develop our policy and methods.
Comment: Some commenters believed a hard cut-off between chart-
abstracted and electronic ``retooled'' measures was not practical in
the near term.
Response: We agree with commenters. We are engaged in a transition
from chart-abstracted reporting of measures to electronic reporting of
measures, and we anticipate that the transition to full electronic
measure reporting in the Hospital IQR Program will occur over a period
of time, rather than all at once.
Comment: One commenter identified a lack of alignment between the
electronic data submission deadlines and the timeline in the FY 2014
IPPS/LTCH PPS proposed rule. The commenter noted publication of the FY
2015 IPPS/LTCH PPS final rule would precede the data submission
deadline of November (in the proposed rule, November 30, 2014) and CMS
would not benefit from the experience. Therefore, commenter requested
that CMS align these timeframes in the future.
Response: We understand that the rulemaking cycle will overlap with
the voluntary electronic reporting period. However, we anticipate
having the opportunity to collect two quarters of electronic data from
hospitals that choose to report electronically. We encourage hospitals
to report data as early as possible in order to gain experience with
submitting measures via electronic specifications. We believe these two
quarters of data will provide us with a better understanding of the
data derived from submitting measures via electronic specifications. We
will also gain additional experience with the 2013 Medicare EHR
Incentive Program Electronic Reporting Pilot.
Comment: A few commenters raised concerns about the proposal to
require only one quarter's worth of data for hospitals reporting
Hospital IQR Program measures electronically, and believed that one
quarter of data does not provide a statistically valid sample and that
electronic data derived from CEHRTs may result in an inaccurate
assessment of a hospital's performance.
Response: We proposed one quarter of data for the purposes of
aligning with the reporting periods established for the Medicare EHR
Incentive Program. In addition, we believe that allowing a hospital
that chooses to report electronically to report one quarter of data
will reduce the reporting burden on the hospital. Also, this policy
creates an incentive for hospitals to participate in the voluntary
electronic clinical quality measure reporting for the Hospital IQR
Program.
Comment: A few commenters found the reporting timelines confusing
and questioned the rationale for proposing different reporting
timelines that vary depending on whether or not a hospital elected to
electronically report measures or to report measures using the standard
chart-abstracted method.
Response: The goal of the proposal was to synchronize the reporting
periods of the Hospital IQR and the Medicare EHR Incentive Programs to
reduce the reporting burden on hospitals. However, based on concerns of
these commenters, we are finalizing a policy that better aligns the
reporting deadlines under the two programs. We are finalizing that if a
hospital would like us to use the electronically reported Hospital IQR
data to determine whether the hospital has satisfied the Medicare EHR
Incentive Program clinical quality measure reporting requirement, it
must electronically report the data for CY Q1, CY Q2 or CY Q3 2014 by
November 30, 2014, or if the hospital is in its first year of
demonstrating meaningful use, electronically report CY 2014 Q1 or CY
2014 Q2 data by July 1, 2014. Due to the FY 2016 Hospital IQR Program
timeline and the desire to align with the Medicare EHR Incentive
Program submission timelines, we will not be able to accept
electronically specified measures during CY 2014 Q4 to determine
whether a hospital satisfies the Hospital IQR Program requirements.
This is the beginning of a multi-year process we seek to engage in to
align the timelines of multiple federal quality reporting programs.
Comment: A few commenters requested that CMS continue to adopt the
newest version of the HL7 standard used to specify the electronic
clinical quality measures within the quality reporting programs.
Response: We plan to continue to collaborate with our partners and
stakeholders to identify appropriate standards--including the HL7
standard--to be used for quality reporting.
Comment: Many commenters requested that CMS provide the process it
will use to develop and release new versions of electronic clinical
quality measures, their associated value sets and how CMS plans to
document the timeframe for which each HL7 version is active within the
applicable quality-reporting programs, including the Hospital VBP
Program.
Response: We understand the nature of the commenters' request and
plan to continue to collaborate with our partners and stakeholders to
identify appropriate standards and update existing standards for
quality reporting. We will also continue to collaborate with our
partners and stakeholders to identify the best manner in which to
communicate those standards.
Comment: Many commenters opposed CMS' proposal to restrict the data
standard to QRDA I and recommended that CMS allow hospitals to use
either the QRDA I or QRDA III standard. Commenters requested
clarification regarding why CMS made the determination that QRDA I is
feasible and QRDA III is not feasible. In addition, commenters urged
that if QRDA I is the policy choice for electronic quality data
submission, CMS must take all necessary steps to protect against
breaches of private health information through the use of CMS'
electronic reporting portal. Commenters also noted the QRDA standards
(categories I and III) are still in draft format and are not yet widely
used.

[[Page 50818]]

Therefore, there is little, if any, experience with or testing of these
standards. One commenter suggested that CMS align its data standard
with ONC's certification requirements for EHR technology. The
commenters noted that this approach would fully leverage CEHRTs which
allow both QRDA I and QRDA III.
Response: The QRDA category I specifies the framework for quality
reporting, standardizes measure-defined data elements for
interoperability between organizations, and is used to transmit
clinical quality measure data needed to meet Meaningful Use (MU)
requirements under the Medicare EHR Incentive Program. After reviewing
all the comments, we have decided to adopt the QRDA I reporting
standard for the Hospital IQR Program and may consider the QRDA III
standard in future rulemaking. We will adopt the QRDA I reporting
standard because it aligns with the current Hospital IQR Program
standard of collecting patient level data for chart-abstracted
measures. The Medicare EHR Incentive Program for hospitals has modified
in this final rule, section IX.E below, the clinical quality measure
reporting requirement for 2014 to accept only the QRDA I (release 2)
format for electronic reporting.
As noted above, hospitals will continue to submit quality data
through the secure portion of the QualityNet Web site (https://www.QualityNet.org). This Web site meets or exceeds all current Health
Insurance Portability and Accountability Act requirements for security
of protected health information. CMS will consider other options for
collecting clinical quality measurement data in future rulemaking.
Comment: One commenter requested more information regarding whether
CMS would make QRDA I details available for EHR developers who need to
understand if the feasibility assessment will change in 2015 and
beyond.
Response: We understand the concerns raised and, as feasibility
assessments are completed, we will make every effort to post the
information on a Web site such as https://www.QualityNet.org/. Currently
the Hospital IQR Program requires submission of chart-abstracted data
at the patient level (QRDA I equivalent), so our decision to accept
QRDA I is aligned with the method hospitals currently use to submit
chart-abstracted data for the same measures.
After consideration of the public comments we received, we are
finalizing a modified approach that will allow hospitals to voluntarily
report up to four measure sets (STK (with the exception of STK-1), ED,
VTE, and/or PC) electronically for the same quarter for FY 2016
Hospital IQR Program. Hospitals that choose this option will meet their
Hospital IQR reporting requirement with respect to each of these
measure sets if they report all the measures in that measure set (with
the exception of STK-1, if the hospital chooses that measure set)
electronically for one quarter.
We will take into account the measure set(s) reported
electronically for the Hospital IQR Program when we determine whether a
hospital has satisfied the clinical quality measure reporting component
of meaningful use for the Medicare EHR Incentive Program in FY 2014.
Specifically, if a hospital would like us to use the electronically
reported Hospital IQR data to determine whether the hospital has
satisfied the Medicare EHR Incentive Program clinical quality measure
reporting requirement, it must electronically report the data for CY
Q1, CY Q2 or CY Q3 2014 by November 30, 2014, or if the hospital is in
its first year of demonstrating meaningful use, electronically report
CY Q1 or CY Q2 2014 data by July 1, 2014. Due to the FY 2016 Hospital
IQR Program's 2016 payment determination timeline and the desire to
align with EHR Incentive Program submission timelines, we cannot accept
electronic submission of CY Q4 2014 data since EHR Incentive Program
data is required to be reported by November 30, 2014. The measures
electronically reported under the Hospital IQR Program will be
considered to determine whether the hospital has satisfied the Medicare
EHR Program clinical quality measure reporting requirement as long as
the hospital also satisfies all other program requirements under the
Medicare EHR Incentive Program. With the exception of the
electronically reported measures (for which only one quarter of
reporting would be necessary), all other Hospital IQR chart-abstracted
measures (including those that are electronically specified but not
chosen by the hospital for electronic reporting) must be reported via
chart-abstraction for all four quarters of 2014.
We are also finalizing that we will only publicly report the
electronically reported data on Hospital Compare if we determine the
data are accurate enough to be reported.
The chart below provides a summary of the finalized reporting
periods and electronic submission deadlines for the FY 2016 Hospital
IQR Program:

FY 2016 Hospital IQR Program Electronic Reporting Periods and Submission
Deadlines for Eligible Hospitals That Are Beyond Their First Year of the
Medicare EHR Incentive Program
------------------------------------------------------------------------
Discharge reporting periods Submission deadlines
------------------------------------------------------------------------
January 1, 2014-March 31, 2014...... November 30, 2014.
April 1, 2014-June 30, 2014......... November 30, 2014.
July 1, 2014-September 30, 2014..... November 30, 2014.
October 1, 2014-December 31, 2014... Not Applicable.
------------------------------------------------------------------------

As described in section IX.E of the preamble of this final rule, we
are also finalizing our proposal to extend the beginning of the
electronic submission period for the Medicare EHR Incentive Program to
January 2, 2014 and note that hospitals in their first year of
demonstrating meaningful use could also electronically submit the four
measure sets for one quarter by July 1, 2014 to meet the clinical
quality measure reporting criteria for the Medicare EHR Incentive
Program.
Hospitals choosing to report at least one quarter of quality
measure data electronically are not required, but are highly
encouraged, to also submit the same data via chart-abstraction. We
understand that many hospitals will be submitting chart-abstracted
quality measure data to The Joint Commission so the reporting burden
would not be increased. Hospitals will gain experience in understanding
the differences in the submission methods. Furthermore, for hospitals
who chose to voluntarily report electronically in the Hospital IQR
Program, we are finalizing that the hospitals will use the Medicare EHR
Incentive Program process for electronically submitting quality measure
data into QualityNet (for EHR-based reporting). We also note that

[[Page 50819]]

hospitals voluntarily submitting electronically specified clinical
quality measures will follow the submission requirements finalized in
the Medicare EHR Incentive Program Stage 2 final rule (77 FR 54088) and
in subsequent rulemaking. Hospitals voluntarily submitting
electronically specified clinical quality measures will utilize their
existing QualityNet account to submit electronic quality measure data.
If a hospital chooses to report one or more of the four measure sets
(STK (with the exception of STK-1), VTE, ED, and PC) electronically
during CY 2014, the hospital's data will be extracted from the CEHRT
and submitted to CMS using the Health Level Seven (HL7) Quality
Reporting Document Architecture (QRDA) Category I Revision 2 standard.
After consideration of the public comments we received, we are
finalizing our proposal to adopt the QRDA I reporting standard for
hospitals voluntarily submitting electronically specified clinical
quality measures to the Hospital IQR Program. We will not accept the
QRDA III reporting standard at this time; however, we will consider
this and other options in future rulemaking. The Hospital IQR Program
requires submission of chart-abstracted data at the patient level, so
our decision to accept QRDA I is aligned with the method hospitals
currently use to submit clinical quality measure data.
We intend to develop and propose a validation strategy for
electronically reported quality measure data in the FY 2015 IPPS/LTCH
PPS proposed rule. We are researching methodologies to develop data
validation strategies and are working closely with the hospital and
vendor communities to develop a robust validation methodology that will
complement the vendor certification process for electronic clinical
quality measures. We do not plan to validate, for purposes of meeting
Hospital IQR Program validation requirements, electronic clinical
quality measures voluntarily submitted to the Hospital IQR Program for
the FY 2016 payment determination.
We believe this proposal--providing hospitals the opportunity for
voluntary electronic submission of data for one quarter of CY 2014
discharges--represents a balanced policy that some hospitals will be
able to take advantage of while ensuring that the FY 2016 Hospital IQR
Program requirements are attainable for all participating hospitals. As
we move further toward alignment of quality measures reporting among
our reporting initiatives, we intend to propose in the future to
require hospitals to report electronically specified quality measures.
e. Sampling and Case Thresholds for the FY 2016 Payment Determination
and Subsequent Years
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51641), we
continued, for the FY 2015 payment determination and subsequent years,
the approach we adopted in the FY 2011 IPPS/LTCH PPS final rule (75 FR
50230) regarding hospital submission of population and sampling data.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53537), we did not make
any changes to these requirements. For the FY 2016 payment
determination and subsequent years, we did not propose to make any
changes to these requirements.
We strongly recommend that hospitals review the QIO Clinical
Warehouse Feedback Reports and the Hospital IQR Program Provider
Participation Reports that are available after patient-level data are
submitted to the QIO Clinical Warehouse. We generally update these
reports on a daily basis to provide accurate information to hospitals
about their submissions. These reports enable hospitals to ensure that
their data were submitted on time and accepted into the QIO Clinical
Warehouse.
f. HCAHPS Requirements for the FY 2017 Payment Determination and
Subsequent Years
In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50220), we adopted
the HCAHPS requirements for the FY 2013 and FY 2014 Hospital IQR
Program payment determinations.
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51641 through
51643), we made one change to these requirements. Beginning with
discharges occurring in third quarter CY 2011, we established that
hospitals will have about 13 weeks after the end of a calendar quarter
to submit HCAHPS data for that quarter to the QIO Clinical Warehouse.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53537 through
53538), for the FY 2016 Hospital IQR Program payment determination, we
continued these HCAHPS requirements.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27698 through
27700), for the FY 2017 payment determination and subsequent years, we
proposed to retain these requirements. Under these requirements, a
hospital must continuously collect and submit HCAHPS data in accordance
with the current HCAHPS Quality Assurance Guidelines and the quarterly
data submission deadlines, both of which are posted at https://www.hcahpsonline.org. In order for a hospital to participate in the
collection of HCAHPS data, a hospital must either: (1) Contract with an
approved HCAHPS survey vendor that will conduct the survey and submit
data on the hospital's behalf to the QIO Clinical Warehouse; or (2)
self-administer the survey without using a survey vendor provided that
the hospital attends HCAHPS training and meets Minimum Survey
Requirements as specified on the HCAHPS Web site at: https://www.hcahpsonline.org. A current list of approved HCAHPS survey vendors
can be found on the HCAHPS Web site. For the FY 2017 Hospital IQR
Program, the HCAHPS data would be based on discharges from January 1,
2015 through December 31, 2015.
Every hospital choosing to contract with a survey vendor must
provide the sample frame of HCAHPS-eligible discharges to its survey
vendor with sufficient time to allow the survey vendor to begin
contacting each sampled patient within 6 weeks of discharge from the
hospital. (We refer readers to the Quality Assurance Guidelines located
at https://www.hcahpsonline.org for details about HCAHPS survey
administration.) Hospitals are strongly encouraged to submit their
entire patient discharge list, excluding patients who had requested
``no publicity'' status or who are excluded because of State
regulations, in a timely manner to their survey vendor to allow
adequate time for sample creation, sampling, and survey administration.
We emphasize that hospitals must also provide the administrative data
that is required for HCAHPS in a timely manner to their survey vendor.
This includes the patient MS-DRG at discharge, or alternative
information that can be used to determine the patient's service line,
in accordance with the survey protocols in the most recent HCAHPS
Quality Assurance Guidelines.
We note that the HCAHPS Quality Assurance Guidelines require that
hospitals maintain complete discharge lists that indicate which
patients were eligible for the HCAHPS survey, which patients were not
eligible, and which patients were excluded, and the reason(s) for
ineligibility and exclusion. (We refer readers to the Quality Assurance
Guidelines located at https://www.hcahpsonline.org for details about
HCAHPS eligibility and sample frame creation.) In addition, the
hospital must authorize the survey vendor to submit data via My
QualityNet, the secure part of the QualityNet Web site, on the
hospital's behalf.
Hospitals must obtain and submit at least 300 completed HCAHPS
surveys in

[[Page 50820]]

a rolling four-quarter period unless the hospital is too small to
obtain 300 completed surveys. We wish to emphasize that the absence of
a sufficient number of HCAHPS eligible discharges is the only
acceptable reason for obtaining and submitting fewer than 300 completed
HCAHPS surveys in a rolling four quarter period. If a hospital obtains
fewer than 100 completed surveys, the hospital's HCAHPS scores will be
accompanied by an appropriate footnote on the Hospital Compare Web site
alerting the Web site users that the scores should be reviewed with
caution, as the number of surveys may be too low to reliably assess
hospital performance.
After the survey vendor submits the data to the QIO Clinical
Warehouse, we strongly recommend that hospitals employing a survey
vendor promptly review the two HCAHPS Feedback Reports (the Provider
Survey Status Summary Report and the Data Submission Detail Report) and
the HCAHPS Review and Correction Report that are available. These
reports enable a hospital to ensure that its survey vendor has
submitted the data on time, the data has been accepted into the QIO
Clinical Warehouse, and the data accepted into the QIO Clinical
Warehouse are complete and accurate.
In order to ensure compliance with HCAHPS survey and administration
protocols, survey vendors and hospitals that self-administer the HCAHPS
Survey must: (1) Meet HCAHPS Minimum Survey Requirements and Rules of
Participation presented in the current HCAHPS Quality Assurance
Guidelines; (2) adhere to the HCAHPS survey administration protocols
provided in the current HCAHPS Quality Assurance Guidelines and updated
through HCAHPS Bulletins and announcements on the official HCAHPS On-
Line Web site, https://www.hcahpsonline.org; and (3) participate in all
oversight activities. As part of the oversight process, during the
onsite visits or conference calls, the HCAHPS Project Team will review
the hospital's or survey vendor's survey systems and assess protocols
based upon the most recent HCAHPS Quality Assurance Guidelines. All
materials relevant to survey administration will be subject to review.
The systems and program review includes, but is not limited to: (a)
Survey management and data systems; (b) printing and mailing materials
and facilities; (c) telephone and Interactive Voice Response (IVR)
materials and facilities; (d) data receipt, entry and storage
facilities; and (e) written documentation of survey processes. As
needed, hospitals and survey vendors will be subject to follow-up site
visits or conference calls. We point out that the HCAHPS Quality
Assurance Guidelines state that hospitals should refrain from
activities that explicitly influence how patients respond on the HCAHPS
survey. If we determine that a hospital is not compliant with HCAHPS
program requirements, we may determine that the hospital is not
submitting HCAHPS data that meet the requirements of the Hospital IQR
Program.
We strongly recommend that hospitals approved to self-administer
the HCAHPS Survey attend both HCAHPS Introductory Training and HCAHPS
Update Training every year. The dates of HCAHPS training session are
announced on the HCAHPS On-Line Web site, https://www.hcahpsonline.org.
The HCAHPS Survey is available in official translations in several
languages other than English: Spanish (mail and telephone modes);
Chinese (mail mode); Russian (mail mode); and Vietnamese (mail mode).
All official translations of the HCAHPS Survey instrument are available
in the current HCAHPS Quality Assurance Guidelines. We strongly
encourage hospitals with a significant patient population that speaks
Spanish, Chinese, Russian or Vietnamese to offer the HCAHPS Survey in
those languages. We plan to offer an official translation of the HCAHPS
Survey in Portuguese (mail mode) in 2013. We encourage hospitals that
serve patient populations that speak languages other than those noted
to request CMS to create an official translation of the HCAHPS Survey
in those languages. Only the official translations of the HCAHPS Survey
instrument can be implemented.
We continue to strongly recommend that each new hospital
participate in an HCAHPS dry run, if feasible, prior to beginning to
collect HCAHPS data on an ongoing basis to meet Hospital IQR Program
requirements. New hospitals can conduct a dry run in the last month of
a calendar quarter. The dry run will give newly participating hospitals
the opportunity to gain first-hand experience collecting and
transmitting HCAHPS data without the public reporting of results. Using
the official survey instrument and the approved modes of administration
and data collection protocols, hospitals/survey vendors will collect
HCAHPS dry-run data and submit the data to My QualityNet, the secure
portion of QualityNet.
We wish to emphasize that, barring the exception that the hospital
is too small to obtain 300 completed surveys in a four-quarter period,
IPPS hospitals that do not meet the minimum 300 completed surveys
requirement may not be in compliance with the Hospital IQR Program's
requirement that hospitals submit quality data in the form, manner, and
time specified by the Secretary in order to receive the full APU. If we
become aware of specific cases in which a hospital has not met the
finalized HCAHPS survey protocols, we may determine that the hospital
has failed to meet the applicable APU requirement, and will reduce that
hospital's APU accordingly.
We proposed to codify the current guideline that approved HCAHPS
survey vendors and self-administering hospitals must fully comply with
all HCAHPS oversight activities, including allowing CMS and its HCAHPS
Project Team to perform site visits at hospitals' and survey vendors'
locations. We proposed to codify this survey requirement at Sec.
412.140(f)(1).
We proposed to codify the current guideline that CMS approves
survey vendor applicants to administer the HCAHPS survey for hospitals
clients when applicants have met the Minimum Survey Requirements and
Rules of Participation listed in the current HCAHPS Quality Assurance
Guidelines and adhere to the survey administration protocols provided
in the current HCAHPS Quality Assurance Guidelines and occasionally
updated through HCAHPS Bulletins and announcements on the official
HCAHPS On-Line Web site. We proposed to include this survey requirement
at Sec. 412.140(f)(2).
The absence of a sufficient number of HCAHPS eligible discharges is
the only acceptable reason for obtaining and submitting fewer than 300
completed HCAHPS surveys in a rolling four quarter period. Hospitals
and HCAHPS survey vendors should regularly check the official HCAHPS
Web site at https://www.hcahpsonline.org for new information and program
updates regarding the HCAHPS Survey, its administration, oversight and
data adjustments. We invited public comment on our proposal to continue
using these HCAHPS requirements for the FY 2016 payment determination
and subsequent years.
We did not receive any public comments on our Hospital IQR HCAHPS
proposal and are finalizing it as proposed, with some changes to the
proposed regulatory language.
g. Data Submission Requirements for Structural Measures for the FY 2015
and FY 2016 Payment Determinations
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51643 through
51644), beginning with FY 2013, we finalized the period of data
collection for which

[[Page 50821]]

hospitals will submit the required structural measure information once
annually for the structural measures via a Web-Based Measure Tool. We
finalized our proposal for FY 2014 for submission of structural
measures between April 1, 2013 and May 15, 2013 with respect to the
time period of January 1, 2012 through December 31, 2012. In the FY
2013 IPPS/LTCH PPS final rule (77 FR 53538 through 53539), we finalized
our proposal to continue this policy for the FY 2015 payment
determination and subsequent years.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27700), however,
in order to provide the more timely feedback to hospitals regarding APU
participation status, for the FY 2015 payment determination, we
proposed to change the date that structural measures will be submitted
from April 1 2014-May 15, 2014 to January 1, 2014-February 15 2014. For
the FY 2016 payment determination, we proposed that the period of data
collection for which hospitals will submit the required registry
participation information for the structural measures via a Web-Based
Measure Tool be between January 1, 2015 and February 15, 2015, with
respect to the time period of January 1, 2014 through December 31,
2014. These proposals will allow us to provide earlier feedback to
hospitals regarding APU status. We invited public comment on our
proposals.
Comment: A few commenters supported the proposals.
Response: We thank the commenters for their support.
Although some commenters generally supported this proposal, some
commenters did not support the proposal to move the deadline for the
Data Accuracy and Completeness Acknowledgement (DACA). It is our
experience that most hospitals complete the DACA and structural
measures at the same time. Because we are not finalizing our proposal
to move the deadline for the DACA to February 15th in this final rule
(we refer readers to section IX.A.11. of the preamble of this final
rule), we believe that moving the submission deadline for the
structural measures as proposed would require hospitals to complete
these requirements at different times and, as a result, create
unnecessary burden because it would be inconsistent with the DACA
submission deadline. In addition, because we are not finalizing the
DACA submission deadline change, we will not be able provide more
timely feedback to hospitals on whether they have satisfied the
Hospital IQR Program requirements for a particular year regardless of
whether the timeframe to report the structural measures is January 1,
2014-February 15, 2014 or April 1, 2014-May 15, 2014. For those
reasons, we are not finalizing this proposal, and the timeframe to
report the structural measures each year will be April 1, 2104-May 15,
2014, with respect to the preceding calendar year.
h. Data Submission and Reporting Requirements for Healthcare-Associated
Infection (HAI) Measures Reported via NHSN
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51644 through
51645), we adopted the data submission and reporting standard
procedures that have been set forth by CDC for NHSN participation in
general and for submission of the HAI measures to NHSN. The existing
data collection and submission timeframes for the HAI measures for the
FY 2015 payment determination and subsequent years align with the
submission timeframes for chart-abstracted measures with the exception
of Healthcare Provider Influenza Vaccination as defined below. The data
submission deadlines are posted on the QualityNet Web site at: https://www.QualityNet.org/.
Hospitals will have until the Hospital IQR Program final submission
deadline to submit their quarterly data for CLABSI, SSI, CAUTI, MRSA
Bacteremia and Clostridium difficile to NHSN. After the final Hospital
IQR Program submission deadline has occurred for each calendar quarter
of CY 2013, we will obtain the hospital-specific calculations that have
been generated by the NHSN for the Hospital IQR Program.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53539), we continued
the data submission and reporting standard procedures we adopted in the
FY 2012 IPPS/LTCH PPS final rule, with two exceptions discussed below,
for the FY 2015 payment determination and subsequent years.
The HAI measures that will be included in the FY 2016 payment
determination are included in the following chart:

----------------------------------------------------------------------------------------------------------------
FY 2016 payment determination: hospital associated infection measures (CDC's
Topic NHSN)
----------------------------------------------------------------------------------------------------------------
Central Line Associated Blood Stream Infection.
Surgical Site Infection.
Catheter-Associated Urinary Tract Infection.
MRSA Bacteremia.
Clostridium difficile.
Healthcare Provider Influenza Vaccination.
----------------------------------------------------------------------------------------------------------------

We realize that some hospitals may not have locations that meet the
NHSN criteria for CLABSI or CAUTI reporting, for example, when a
hospital has no ICUs. In the FY 2013 IPPS/LTCH PPS final rule (77 FR
53539), we provided an exception for the CLABSI and CAUTI measures for
hospitals that do not have an ICU, reducing the burden associated with
reporting to NHSN.
In addition, we recognize that some facilities may perform so few
procedures requiring surveillance under the SSI measure that the data
may not meaningfully assess the hospital's performance on the measure.
Therefore, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53539), we
provided an exception for these hospitals from the reporting
requirement in any given year if the hospital performed fewer than a
combined total of 10 colon and abdominal hysterectomy procedures in the
calendar year prior to the reporting year. For example, a hospital that
performed only 2 colon surgeries and 4 abdominal hysterectomies in CY
2013 is not required to report the SSI measure in CY 2014. We finalized
our proposal to provide hospitals with a single HAI exception form, to
be used for seeking an exception for any of the CLABSI, CAUTI and SSI
measures, which is available on QualityNet at: https://www.qualitynet.org/ Hospitals-Inpatient>Healthcare Associated
Infections (HAI). For the FY 2016 payment determination and subsequent
years, we did not propose to make any changes to these requirements and
exceptions.

[[Page 50822]]

In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51631-51633) we
finalized collection of the Healthcare Provider Influenza Vaccination
measure data from October 1 through March 31st to coincide with the flu
season. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27700),
because this measure is collected seasonally, we proposed to collect
this measure on May 15th of the calendar year for which the season
ends. For example, for the Healthcare Provider Influenza Vaccination
measure collection for vaccinations given from October 1, 2013 (or when
the vaccine becomes available)--March 31, 2014, the submission deadline
would be May 15, 2014. We invited public comment on this proposal.
Comment: A few commenters expressed concerns that differing
deadlines among CMS programs are confusing for submitters.
Response: We thank the commenters for informing us of their
concern. We have aligned several deadlines in recent years and will
continue to align deadlines as possible across programs.
Comment: Several commenters supported the May 15th deadline for the
Healthcare Provider Influenza Vaccination measure.
Response: We thank the commenters for their support.
After consideration of the public comments we received, for FY 2015
and subsequent years we are finalizing as proposed the submission
deadline of May 15 of the calendar year for which the season ends.
For the FY 2016 payment determination and subsequent years, we
proposed to require hospitals to report the Medicare Beneficiary ID
numbers to the NHSN system for all events reported for Medicare
beneficiaries. The NHSN system currently supports the voluntary
submission of this information, but we proposed to make it mandatory
for patients with Health Insurance Claim (HIC) numbers. We made this
proposal to better support our validation efforts to improve CMS and
hospitals' ability to correctly identify the sampled validation
episodes of care. We currently match medical records to NHSN data as
part of validation. With the information available for matching, we may
occasionally fail to match a reported event. By requiring that
hospitals report the HIC number when it is available, we increase our
confidence that records reported to NHSN will appropriately be matched
with the records we sample for validation. Because we cannot anticipate
in advance which records may be sampled for validation, we proposed to
require that hospitals provide this information for all reported events
during Hospital IQR data submission. We invited public comment on this
proposal.
Comment: Several commenters supported the proposal to add a
requirement to report the HIC numbers for those patients who have them
in order to enhance future validation efforts.
Response: We thank commenters for their support.
Comment: Several comments expressed concern about the burden
associated with adding the HIC number. Commenters observed that the HIC
number is not routinely included in databases used by infection control
practitioners to monitor infection, and that vendors may not be able to
accommodate this change in the timeframes established. One commenter
recommended that CMS work with infection control practitioners to
evaluate the feasibility of including the HIC number in the NHSN
database. One commenter expressed the opinion that this requirement
should not be adopted without analysis of its impact on workflow/burden
to hospitals, and that, if adopted, sufficient time should be provided
to allow facilities to appropriately resource and/or alter their
electronic data capture in order to meet this new requirement.
Response: We proposed this requirement to greatly enhance both
confidence and efficiency in achieving matches between events reported
to NHSN and events identified during validation. However, we recognize
that for some hospitals that do not maintain HIC number in their
laboratory IT system and do not yet have interoperable systems for
billing and laboratory data, this new requirement could be perceived as
burdensome. To address concerns that hospitals need time to complete
this set-up activity, we are finalizing that hospitals will be required
to report Medicare Beneficiary ID numbers to the NHSN system for all
events reported for Medicare beneficiaries, beginning with CY Q3 2014
events, which is the first quarter that we anticipate beginning to
validate HAIs for the FY 2017 annual payment determination.
Comment: One commenter noted that in their State, a Social Security
number is already required and is used to match NHSN cases to an all-
payer all claims database.
Response: Although we are aware that some States may already
require that providers report patient identifying information to NHSN,
we believe that our proposal will enable us to improve the accuracy of
the Hospital IQR validation process for all participating hospitals
nationwide. We also note that the NHSN system already includes an
optional field for the HIC number. Therefore, no NHSN infrastructure
must be changed to accommodate this requirement.
After consideration of the public comments we received, we are
finalizing that hospitals will be required to report Medicare
Beneficiary ID numbers to the NHSN system for all events reported for
Medicare beneficiaries, beginning with CY Q3 2014 events.
10. Modifications to the Validation Process for Chart-Abstracted
Measures Under the Hospital IQR Program
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27701 through
27709), for the FY 2015 payment determination and subsequent years, we
proposed some modifications to the validation requirements and methods
we finalized in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53539
through 53553). As described below, these proposals are intended to
strengthen the Hospital IQR Program by validating new HAI measures
while simultaneously decreasing burden relative to previous years.
The procedures to which we proposed to modify are organized into
the following sections: (a) Number and timing of quarters included in
validation; (b) selection of measures and sampling of charts to be
included in validation; (c) procedures for computing the validation
score; (d) selection of hospitals for validation of chart-abstracted
measures; and (e) procedures for submitting records for validation.
a. Timing and Number of Quarters Included in Validation
As finalized in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50219),
the quarters included in the validation effort for each year's Hospital
IQR Program payment determination are the 4th calendar quarter (October
through December) of the year that occurs 2 years before the payment
determination and the first 3 calendar quarters (January through
September) of the following calendar year. For example, as illustrated
below, for the FY 2015 payment determination, the quarters previously
finalized for inclusion in validation are the fourth quarter of CY 2012
through the third quarter of CY 2013. The first figure below shows the
timeline and steps associated with the Hospital IQR Program and the
subsequent steps in annual validation as previously finalized and as
proposed.

[[Page 50823]]

Section 1886(o)(1)(C)(ii)(I) of the Act precludes a hospital from
participating in the Hospital VBP Program for a fiscal year if the
hospital is subject to the payment reduction under the Hospital IQR
Program for that fiscal year. As illustrated in the figure, the process
previously finalized (75 FR 50219), yields the determination of a
hospital's Hospital IQR Program APU in August of every year. However,
to support the hospital's payment determination under the Hospital VBP
Program in a timely manner, the Hospital IQR APU determination must be
made by July 1 of each year. Therefore, we proposed the changes
discussed below.
For the FY 2015 payment determination and subsequent years, we
proposed to change this requirement to include in validation only the
4th quarter of the calendar year that occurs 2 years before the payment
determination and the first 2 calendar quarters (January through June)
of the following calendar year. As illustrated below, for the FY 2015
payment determination, the quarters proposed for inclusion in
validation are the fourth quarter of CY 2012 through the second quarter
of CY 2013; and for the FY 2016 payment determination, the quarters
proposed for inclusion in validation are the fourth quarter of CY 2013
through the second quarter of CY 2014.
For the FY 2016 payment determination and subsequent years, we also
proposed to change the validation requirement to include the 3rd and
4th calendar quarters of the year that occurs 2 years before the
payment determination is made and the 1st and 2nd quarters of the
subsequent year for validation. As discussed above, this timeframe
still allows an APU determination by July 1 each year. From an
operational standpoint, gathering data for the entire year is
preferable to gathering data for only three quarters. Also, we believe
that all four quarters of data that are used for the Hospital IQR and
VBP Programs should be checked for accuracy.
However, as described further below, we will not have built the
infrastructure needed to support the proposed HAI validation process by
the 3rd quarter of CY 2013. Therefore, for the FY 2016 payment
determination, we proposed to validate all measures except for HAIs
starting with 3rd quarter of CY 2013, and to initiate validation of
HAIs in the 4th quarter of CY 2013.

[[Page 50824]]

[GRAPHIC] [TIFF OMITTED] TR19AU13.018

We invited public comment on this proposal.
Comment: A commenter opposed this proposal because the commenter
believed that decreased sample size would result in more hospitals
failing to satisfy the validation requirement because of the narrow
margin of error.
Response: We thank the commenter for this feedback and wish to
clarify the impact of a decreased sample size on a hospital's ability
to satisfy the validation requirement. In the FY 2013 IPPS/LTCH PPS
final rule (77 FR 53551), we fixed the confidence level at 90 percent.
We use the upper bound of a two-tailed confidence interval. At any
given sample size and population value for the hospital's score, the
probability of failure is fixed at this confidence level. Because our
confidence level is fixed, the probability of a hospital failing also
does not change. However, decreasing the sample size would decrease our
detection rates for failing hospitals by increasing the probability
that a hospital would not fail (that is, its confidence interval will
include a score of 75 percent), when in fact the population (true)
score for the hospital was less than 75 percent. We believe that most
of our hospitals have very high reliability. For example, for the FY
2013 payment determination, half of all hospitals had a score of 95
percent or better. Therefore, we believe that cutting sample size for a
single year in order to make the necessary determinations in required
timeframes will not negatively impact hospitals or the program.
Comment: Several commenters supported CMS' proposals to change the

[[Page 50825]]

timing of the quarters of measure data it validates, as well as the
number of quarters included in order to make all payment determinations
by July 1 of each year.
Response: We thank these commenters for their support.
After consideration of the public comments we received, we are
finalizing this policy as proposed.
b. Selection of Measures and Sampling of Charts to be Included in
Validation
(1) Clinical Process of Care Measures
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53540 through
53550), for the FY 2015 payment determination and subsequent years, we
finalized separate processes for selecting and scoring for validation
of 21 chart-abstracted clinical process of care measures and three HAI
measures. The measures finalized for validation for clinical processes
of care were included in 6 measure sets: acute myocardial infarction
(AMI), heart failure (HF), pneumonia (PN), surgical care improvement
project (SCIP), emergency department (ED) and immunization (IMM) (77 FR
53541 through 53542).
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27703), for the
purposes of the FY 2016 payment determination and subsequent years, we
proposed to retain for validation 12 of the 21 chart-abstracted
clinical process of care measures and to suspend validation for the
remaining 9 chart-abstracted clinical process of care measures. With
respect to seven of the nine measures, we did not propose to include
them in the FY 2016 measure set.
However, we proposed to suspend validation of ED-1 and ED-2,
despite their proposed inclusion in the FY 2016 measure set, because we
do not operationally have the ability to validate electronically-
specified versions of these quality measures. We believe that
continuing to validate the measures only when they are reported via
chart-abstraction could create inequity in the validation process that
favors hospitals opting to report the measures electronically.
Therefore, we proposed to delete the ED measure set from the validation
process. We invited public comment on these proposals.
Comment: Several commenters emphasized the importance of validating
the ED measure set. One commenter stated that all Hospital IQR measures
should be validated for as long as they are publicly reported on
Hospital Compare. One commenter disagreed with CMS' proposal that the
ED measures should not be validated because CMS lacks validation
methods for Hospital IQR measures that are reported as electronically-
specified. This commenter argued that ED measures derived from
electronic specifications are as valid as ED measures derived via
chart-abstracted methods, and that dropping the ED measures from
validation would ``devalue'' these measures which are important
indicators of quality and efficiency in EDs. One commenter emphasized
the importance of developing validation methodologies for all
electronically-specified quality measures in the Hospital IQR Program,
but agreed with the logic for removing the measure set from the chart-
abstracted validation process.
Response: We recognize the importance of validating ED-1 and ED-2,
and anticipate that their removal from validation will be temporary
until we select an appropriate methodology for validating
electronically reported measures. We discuss our efforts to develop a
validation strategy in section IX.A.9.d. of the preamble of this final
rule.
Comment: Several comments supported the proposal to validate the
clinical process of care measures for AMI, HF, PN, SCIP and IMM in the
Hospital IQR Program. Some commenters expressed their understanding
that the measures proposed to be included in Hospital IQR Program
validation are measures which are retained in the program.
Response: We thank these commenters for their support. In addition,
in the FY 2014 IPPS/LTCH PPS proposed rule, we inadvertently mislabeled
the tag for the IMM-2 measure in the Table on 78 FR 27703 as
``Immunization for Pneumonia,'' instead of ``Immunization for
Influenza.'' We are clarifying that we are finalizing a requirement to
validate IMM-2, which we clarify is ``Immunization for Influenza.'' We
also clarify that we will not validate ``IMM-1 Immunization for
Pneumonia,'' beginning with the FY 2016 Hospital IQR Program because,
as explained in section IX.A.2.c.(3) of the preamble to this final rule
above, we have decided to suspend the measure.
After consideration of the public comments we received, we are
finalizing as proposed the removal of 9 measures from validation
including the 7 that have been suspended or removed from the Hospital
IQR Program and two ED measures.
Set out below are the 12 clinical process of care measures we are
finalizing for validation for the FY 2016 payment determination and
subsequent years. Please note that while the table only reflects the
information for the FY 2016 payment determination, these measures are
finalized for validation in subsequent years as well.

Hospital IQR Program Chart-Abstracted Clinical Process of Care Measures
Finalized for Validation for the FY 2016 Payment Determination
------------------------------------------------------------------------

-------------------------------------------------------------------------
Measure:
AMI-7a Fibrinolytic (thrombolytic) agent received within 30 minutes
of hospital arrival.
AMI-8a Timing of receipt of primary percutaneous coronary
intervention.
HF-2 Evaluation of left ventricular systolic function.
PN-6 Appropriate initial antibiotic selection.
SCIP INF-1 Prophylactic antibiotic received within 1 hour prior to
surgical incision.
SCIP INF-2: Prophylactic antibiotic selection for surgical patients.
SCIP INF-3 Prophylactic antibiotics discontinued within 24 hours
after surgery end time (48 hours for cardiac surgery).
SCIP INF-4: Cardiac surgery patients with controlled 6AM
postoperative serum glucose.
SCIP INF-9: Postoperative urinary catheter removal on postoperative
day 1 or 2 with day of surgery being day zero.
SCIP Cardiovascular-2: Surgery Patients on a Beta Blocker prior to
arrival who received a Beta Blocker during the perioperative
period.
SCIP-VTE-2: Surgery patients who received appropriate VTE
prophylaxis within 24 hours pre/post surgery.
------------------------------------------------------------------------
IMM-2 Immunization for influenza
------------------------------------------------------------------------

The process for sampling of clinical process of care cases
previously finalized for the FY 2015 payment determination and
subsequent years in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53540
through 53541) is as

[[Page 50826]]

follows. A sample of 15 records per quarter is to be drawn for
validation of the chart-abstracted clinical process of care measures
(77 FR 53540 through 53541). As finalized in the FY 2012 IPPS/LTCH PPS
final rule for the FY 2014 payment determination and subsequent years,
the sample is to include 3 records each sampled from among the AMI, HF,
PN, and SCIP measure sets, and 3 records to validate for both the ED
and IMM measure sets from among ``principal diagnoses and surgical
procedures not already included in the AMI, HF, PN, and SCIP
populations eligible for validation sampling in these four topic areas
(76 FR 51648).'' As finalized in the FY 2012 IPPS/LTCH PPS final rule,
the records sampled for AMI, HF, PN, and SCIP will also be validated
for ED/IMM (76 FR 51648); but as finalized in the FY 2013 IPPS/LTCH PPS
final rule, these cases will not be validated from among charts sampled
for HAI validation (77 FR 53540 through 53541).
We proposed to modify this process for the FY 2016 payment
determination and subsequent years in two ways. First, we proposed to
eliminate validation of the ED measure set for the reasons described
immediately above. Second, we proposed to change the requirement to
validate ED and IMM for all records included in the validation sample
for AMI, HF, PN, and SCIP (77 FR 53540 through 53541). When previously
finalized, this policy was intended for two purposes. When a patient
chart sampled for validation for AMI, HF, PN, or SCIP also had data
submitted to the warehouse for ED/IMM, we have been evaluating the
accuracy of the data submitted to the warehouse for ED and IMM and
including our assessment of accuracy in the validation score. In
addition, when a patient chart sampled for validation for AMI, HF, PN,
or SCIP did not include data submitted to the warehouse, our intention
in abstracting data on ED and IMM was to assess the extent to which
hospitals may have misdrawn the sample such that the ED and IMM data
reported to the warehouse was inaccurate. Although it was our intention
to use the data for both reasons, we have found it challenging to use
the data to evaluate inaccurate sampling and have not yet done so.
Therefore, for the FY 2016 payment determination and subsequent
years, we proposed to validate IMM for between 3 and 15 charts per
hospital per quarter. These include the 3 charts sampled for IMM from
among principal diagnoses and surgical procedures not already included
in the AMI, HF, PN, and SCIP populations eligible for validation
sampling in these four topic areas, and as many of the 12 charts
sampled for AMI, HF, PN, and SCIP populations as have IMM data
submitted to the warehouse. We invited public comment on this proposal.
Comment: One commenter supported this specific proposal, and no
commenters explicitly opposed it.
Response: We thank the commenter for the support.
After consideration of the public comment we received, we are
finalizing this policy as proposed.
(2) HAI Measures Included in the Current Validation Process
The three HAIs specified for chart-abstracted validation in the FY
2013 IPPS/LTCH PPS final rule (77 FR 53542), for FY 2015 payment
determination and subsequent years are CLABSI, CAUTI, and SSI for
patients undergoing abdominal hysterectomies and colon procedures. HAIs
are very rare events, which makes validating that they have been
reported accurately more challenging than validating the clinical
process of care measures. As previously finalized in the FY 2012 and FY
2013 IPPS/LTCH PPS final rules (76 FR 51645 through 51648 and 77 FR
53542 through 53548, respectively), for each HAI, we identify a set of
patient episodes of care which have a much higher probability of
containing a reportable HAI than others. Each quarter, we sample up to
12 of these candidates, request patient charts from hospitals to
determine whether or not an HAI occurred, and score these charts by
determining whether events were appropriately reported to NHSN.
Comment: Some commenters noted duplicated efforts between CMS and
State health departments regarding HAI validation. Some of these
commenters recommended that federal responsibility and funding for HAI
validation should be redirected from CMS to the CDC and States. These
commenters described the current and historical roles played by the CDC
and State health departments in preventing HAIs, mandating State HAI
reporting, providing training and education on NHSN definitions,
developing protocols, reporting, and analyzing HAI data. Commenters
also called attention to the CDC's CLABSI Validation Toolkit,\102\ a
guidance document for States. Some of these same commenters argued that
redirecting funds would result in a more efficient and effective
process because States are ``better equipped'' to perform validation
than CMS. One commenter acknowledged that having a uniform method for
validating all Hospital IQR Program measures ``seems most efficient,''
but asked CMS to consider whether HAIs warrant special attention.
Commenters also emphasized the need for more detailed educational
feedback and stronger communication and coordination between CMS and
other stakeholders, particularly the CDC's NHSN, State health
departments and infection control practitioners.
---------------------------------------------------------------------------

\102\ ``National Healthcare Safety Network (NHSN) Validation
Guidance and Toolkit 2012. Validation for Central Line-Associated
Bloodstream Infection (CLABSI) in ICUs,'' Centers for Disease
Control and Prevention, Atlanta, GA, 2013, https://www.cdc.gov/nhsn/toolkit/validation-clabsi/, last accessed July 3, 2013.
---------------------------------------------------------------------------

Response: We have the responsibility to ensure the validity of HAI
data reported to our Hospital IQR Program. Data from this program are
used to provide the public and other stakeholders with information
regarding the quality of care furnished by subsection (d) hospitals
throughout the nation. We are also collecting HAI data for the Hospital
VBP Program. Given the importance of ensuring that the data are
accurate, we believe that our validation process must be consistent
nationwide.
Although we recognize the role that many States are taking to
prevent HAIs, we do not intend to fund State efforts to conduct these
activities. We believe that State efforts in this area are best viewed
as complementary to our efforts to uniformly validate HAI data.
We understand that CDC and State health departments prefer on-site
validation methodologies. However, at a national level, on-site
validation is impractical because of the resources required. We
disagree that on-site validation is the only way to achieve valid
quality measurement systems. As discussed further below in this
section, we believe that removing ambiguities from NHSN's case
definitions will be far more effective for achieving objective
consistent reporting of HAI by all hospitals nationally than conducting
validation onsite.
We agree that hospitals need more detailed educational feedback.
Because NHSN data are not integrated into CMS's QualityNet System,
which hospitals use to submit clinical process of care data to the
Hospital IQR Program, the feedback available to hospitals in the first
year of HAI validation was less detailed than that available to
hospitals for the clinical process of care measures. However,
individual hospitals with questions were still able to request
educational feedback. We have already addressed this limitation by
storing more detailed information about abstractors' rationale for
judging a particular record to have included or not included a
reportable

[[Page 50827]]

HAI event beginning with validation of data for 4th quarter 2012
discharges. We anticipate that hospitals should begin receiving this
more detailed feedback shortly, and that this may address some of the
commenters' concerns about hospitals' educational needs. It should also
allow us to provide better aggregate information about common pitfalls
in reporting HAIs.
Regarding collaboration, CMS and CDC staff have worked closely for
more than two years to develop standardized approaches for validation
of NHSN-based Hospital IQR data. To the extent that collaboration with
other interested parties aligns with Hospital IQR Program goals while
reducing burden to subsection (d) hospitals, we encourage such efforts.
Comment: Commenters believed State health department staff were
better qualified to conduct validation than the CMS contractor because
of ``greater content expertise.'' One commenter requested information
on the knowledge and training of those individuals performing the HAI
data validation. Another commenter emphasized the knowledge of NHSN
protocols held by hospital infection control practitioners.
Response: We selected the Clinical Data Abstraction Center (CDAC)
contractor because it employs highly trained professionals with
extensive quality measurement experience developing and using
standardized objective protocols. All CDAC staff are highly experienced
medical records abstractors who undergo rigorous training and testing.
The CDAC has abstracted HAI data from medical records for HHS quality
measurement programs for approximately 10 years. In addition, the CDAC
also abstracts the HAI quality measure data used to evaluate the HHS
Partnership for Patients campaign.
The CDAC contractor is also familiar with NHSN protocols. CMS and
CDAC interact at least monthly and usually weekly with CDC staff to
request detailed technical assistance in all areas related to the
understanding and use of the NHSN protocol such that they can develop
and update standardized abstraction protocols for their staff. After
protocols are developed and before the implementation of any new
validation activity, CMS and CDC subject matter experts review all CDAC
materials. CDC trains CDAC supervisors and CMS staff on all newly
introduced and updated NHSN protocols. CDAC supervisors continuously
monitor their staff and provide routine feedback when they detect
abstractor errors regarding HAI protocols.
Comment: One commenter asked for a summary of findings from CMS'
prior validation of CLABSI reporting including lessons learned and the
accuracy of the surveillance in the ICUs for CLABSI based on data
submitted to CMS.
Response: We generally release quarterly validation scores to the
hospitals using a secure QualityNet report. We protect the
confidentiality of validation reports to provide hospitals with
feedback for their internal quality improvement efforts. We intend to
provide a national summary report on our 2012 CLABSI validation within
the next year.
From the first year, we identified some important lessons learned.
For example:
CDAC identified a lack of a standardized timeframe in both
CDAC and NHSN protocols for the presence of symptoms indicating
infection onset prior to central line placement. As a result, this was
a common reason why CDAC identified no infection when a hospital
reported one. By the time we reviewed these results, CDC had already
updated their protocols to reduce the subjectivity in their case
definitions and increase standardized timeframes.\103\ CDAC is in the
process of updating its validation protocols to align with these
revised case definitions and will make them publicly available. CMS and
CDC will continue to collaborate on additional standardization.
---------------------------------------------------------------------------

\103\ ``Central Line-Associated Bloodstream Infection Event''
https://www.cdc.gov/nhsn/pdfs/pscmanual/4psc_clabscurrent.pdf, April
1, 2013. Last accessed 7/7/2013.
---------------------------------------------------------------------------

When hospitals failed to report an event that CDAC thought
should have been reported, CDAC identified some cases in which there
was partial documentation that a particular infection was secondary to
another site (and therefore not a CLABSI), but for which all NHSN
criteria for this designation were not met.
Comment: One commenter agreed with CMS that identifying SSIs post-
discharge is important, but urged CMS to delay adoption of post-
discharge surveillance methods until the CDC is able to develop
recommendations related to this specific issue. The commenter suggested
that once the CDC is able to make these recommendations, the CMS
Conditions of Participation (CoPs) for post-discharge surveillance
could incorporate them.
Response: In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53545), we
raised the importance of identifying SSIs post-discharge for purposes
of quality reporting. For this reason, we finalized a process to
validate SSIs occurring post-discharge using claims data and medical
records. Hospital CoPs are separate from the Hospital IQR Program, and
we have not proposed any changes to CoPs. Rather, we described how we
would validate SSIs occurring post-discharge. Moreover, in the FY 2014
IPPS/LTCH PPS proposed rule, we proposed no changes to the general SSI
approach. We intend to share with our Survey and Certification Group
the commenter's recommendation that post-discharge surveillance be
incorporated into hospital CoPs for future consideration.
In order to identify candidate cases referenced above for CLABSI
and CAUTI, we also require hospitals to submit supplemental information
on certain patient episodes of care quarterly. In the FY 2012 and FY
2013 IPPS/LTCH PPS final rules (76 FR 51645 through 51648 and 77 53542
through 53548, respectively), we identified the supplemental
information to be provided and the types of patient episodes of care
for which this information is needed. We require hospitals to submit
this supplemental information in two separate ``Validation Templates''
according to formats specified on QualityNet. We require separate
CLABSI and CAUTI Validation Templates because different information is
required to identify candidate CLABSIs and candidate CAUTIs. For a
detailed discussion of these requirements, we refer readers to our Web
site at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1228760487021.
As stated in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51646),
for the FY 2012 payment determination and subsequent years, hospitals
are required to report positive blood cultures for intensive care unit
patients and are also required to ``self-identify intensive care unit
patients with a central venous catheter (CVC) that are on this blood
culture list.'' In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27703
through 27704), we proposed for the FY 2016 payment determination and
subsequent years to remove the requirement to note a CVC and replace it
with a requirement to note a ``central line.'' In other words, we
proposed to require that hospitals note on the CLABSI Validation
Template whether patients had a ``central line'' present at any time
during their hospital stay. We made this proposal to better align with
current NHSN definitions.
The FY 2012 IPPS/LTCH PPS final rule (76 FR 51646) also specified
which organisms should be reported on the

[[Page 50828]]

CLABSI Validation Template, which are also regarded as common
commensals (often referred to as skin contaminants), and where
hospitals could find an updated list of these commensals. This list is
updated annually. When we review the CLABSI Validation Templates for
the FY 2016 payment determination and subsequent years, we proposed to
apply the most up-to-date list available at the time of review. The
current list may be found at: https://www.cdc.gov/nhsn/XLS/master-organism-Com-Commensals-Lists.xlsx.
We also proposed for the FY 2016 payment determination and
subsequent years that hospitals must exclude from CAUTI Validation
Templates urine cultures with more than 2 organisms, even if they have
greater than or equal to 1,000 colony-forming units (CFUs)/ml. We made
this proposal because, when we finalized the requirement to include on
the CAUTI Validation Templates all urine cultures with greater than or
equal to 1,000 CFUs/ml (77 FR 53542 through 53545), our intention was
to identify urine cultures that conform to NHSN definitions for CAUTI.
Although these definitions vary, all require that there be no more than
2 organisms identified in the result (because multiple organisms often
indicate contamination).\104\ We invited public comment on this
proposal.
---------------------------------------------------------------------------

\104\ ``Catheter-Associated Urinary Tract Infection (CAUTI)
Event'' https://www.cdc.gov/nhsn/PDFs/pscManual/7pscCAUTIcurrent.pdf,
last accessed February 19, 2013.
---------------------------------------------------------------------------

Comment: Commenters supported our proposals to align CMS'
validation practice with CDC case definitions. Some commenters
supported CMS' HAI validation of CLABSI, CAUTI, and SSI generally
without mentioning these specific proposals.
Response: We thank these commenters for their support.
After consideration of the public comments we received, we are
finalizing these policies as proposed.
We proposed for the FY 2016 payment determination and subsequent
years to notify hospitals of future changes to the definition of
candidate HAI events through HAI Validation guidance documents to be
posted annually on QualityNet. As illustrated by several proposals
immediately above identifying places where CMS and NHSN are slightly
misaligned, we believe that these very detailed specifications may more
appropriately be addressed through sub-regulatory guidance than through
the rulemaking process. Therefore, we made this proposal to simplify
future proposed rules regarding validation, to ensure that we are able
to remain current with NHSN guidance and protocols, and to ensure that
hospitals are made aware of these updates. We invited public comment on
this proposal.
Comment: A few commenters supported this proposal. One commenter
expressed the need for closer collaboration with the CDC, infection
control practitioners, and the Association of Professionals in
Infection Control (APIC) when engaging in this subregulatory process.
Response: We will continue to consult with CDC as we have
historically in nearly every aspect of the Hospital IQR Program's HAI
validation plan. We will consider other collaborations as described
above in this section.
Comment: One commenter stated that if a subregulatory process is
used, hospitals should receive several notices pushed directly to
hospital leadership describing the guidance. CMS should not just rely
on line hospital staff to interpret the importance of the validation
process and ensure its accuracy. Hospital leadership should be included
in any changes to validation for any measure that significantly affects
a hospital's overall quality score.
Response: The Hospital IQR Program has a routine process for
education and outreach to notify hospital leadership and line staff of
important updates, such as when hospitals have been selected to
participate in validation activities. As part of this process, QIOs are
required to maintain a list of hospital contacts, including leadership
contacts, which the IQR program then uses for these updates. QIOs will
periodically contact hospitals to verify hospital staff contacts and to
keep them current. However, it is important for hospital staff to
notify their QIO whenever they have staff changes, especially those
that are in leadership roles so those contacts can be kept current. As
we already do for other key Hospital IQR Program requirements, we
intend to use this list to inform key contacts when critical changes to
NHSN validation requirements are posted on QualityNet.
After consideration of the public comments we received, we are
finalizing this policy as proposed.
For the FY 2016 payment determination and subsequent years, we also
proposed to exclude from HAI validation all patient episodes of care
with lengths of stay of more than 120 days. Patient episodes of care
involving lengths of stay over 120 days are very rare, accounting for
much less than one percent of the records submitted for Q1 2012 CLABSI
validation. Because medical records for patients with very long lengths
of stay may be tens of thousands of pages, the burden and costs of
validation to hospitals and CMS are disproportionate to the information
gained from their validation. In addition, this proposed change aligns
the HAI episode of care maximum length of stay with the Hospital IQR
Program's clinical process of care measures episode of care maximum
length of stay of 120 days as detailed in the Specifications Manual for
the National Hospital Inpatient Quality Measures (https://
www.qualitynet.org). We invited public comment on this proposal.
Comment: Some commenters supported this proposal. Commenters
expressed appreciation that CMS proposed policies to reduce validation
burden.
Response: We thank the commenters for the support.
After considering public comments we received, we are finalizing
this policy as proposed.
For the FY 2016 payment determination and subsequent years, we also
proposed to require each hospital to submit data without modifications
to the format within the Validation Template posted on QualityNet at
the beginning of each validation cycle. We believe this requirement is
needed based on our experience with the CLABSI Validation Template for
the FY 2013 payment determination. We have observed that many hospitals
enter the required data but alter the format of the downloadable
Validation Template. For example, hospitals may change the length or
format of a column or change its column name. Because our contractors
must process hundreds of these templates in a matter of weeks, even
minor alterations to formats of the data within the Template create
significant operational delays. We will continue to give hospitals
feedback on their Validation Templates prior to the submission
deadline. To assist hospitals in meeting this formatting requirement,
we will include formatting in future feedback. We invited public
comment on this proposal.
Comment: A commenter recommended that CMS test this process before
implementing it.
Response: We understand that the requirements to produce Validation
Templates are complex. However, these complex requirements were
finalized for CLABSI and CAUTI in the FY 2012 IPPS/LTCH PPS (76 FR
51646-51648) and FY 2013 IPPS/LTCH PPS final rules (77 FR 53542 through
53544), and hospitals have already successfully submitted them for
CLABSI for 5 quarters and for CAUTI for 1 quarter.

[[Page 50829]]

The additional requirements that we are finalizing in this final
rule are technical in nature, intended to reduce the operational delays
that are caused when hospitals alter the format of the Templates. We
are finalizing that this requirement be effective with Validation
Templates to be submitted beginning on May 1, 2014, which will give
hospitals 9 months to make any system changes necessary to comply. We
will also provide hospitals with education and feedback to assist them
in meeting the requirement.
Comment: A commenter supported this proposal.
Response: We appreciate this commenter's support.
After considering the public comments we received, we are
finalizing this policy as proposed.
(3) HAI Measures to be Added to the Validation Process
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27704 through
27706), for the FY 2016 payment determination and subsequent years, we
proposed to validate two new HAI measures: methicillin-resistant
Staphylococcus aureus (MRSA) bacteremia Laboratory-identified (LabID)
events and Clostridium difficile (CDI) LabID events. MRSA and CDI were
finalized for inclusion in the Hospital IQR Program in the FY 2012
IPPS/LTCH PPS final rule (76 FR 51629 through 51631) starting with the
FY 2015 payment determination. We proposed to validate MRSA and CDI
consistent with requirements under section 1886(b)(3)(B)(viii)(XI) of
the Act which requires us to establish a process to validate measures
included in the Hospital IQR Program as appropriate. We invited public
comment on this proposal.
Comment: A commenter stated that QualityNet does not function
reliably and questioned whether the system can handle the addition of
validation-related requirements.
Response: The commenter appears to be concerned that as we continue
to add validation-related requirements that use QualityNet, these
performance issues will negatively impact validation. We agree that
systems issues have created challenges for hospitals as well as for CMS
and its other contractors. We are taking the following steps to ensure
reliable access to QualityNet in the future. We are pursuing the use of
``Axway'', a secure file transfer product. When operational, hospitals
will be able to transfer files through either a Web-based portal or
direct from a client using secure file transfer protocol (FTP). We are
currently testing Axway and intend to make it available to hospitals in
the Hospital IQR Program within the next 12 to 18 months.
In the interim, we have archived large amounts of older data to
off-site storage facilities, which greatly improve QualityNet
performance. This will allow us to continue to use QualityNet until
Axway replaces the existing system.
Comment: Several commenters supported this proposal. One commenter
mentioned that it was important to validate these infections.
Response: We agree that it is important to validate MRSA and CDI,
which is why we are finalizing a policy to do so.
After consideration of the public comments we received, we are
finalizing this policy as proposed.
For MRSA and CDI validation, we proposed a process similar to that
for CLABSI and CAUTI for the FY 2016 payment determination and
subsequent years. Specifically, we proposed to require sampled
hospitals to provide to CMS or its contractor one list of final blood
cultures positive for MRSA and a second list of all final stool
specimens toxin positive for CDI. We note that although CMS only
publicly reports hospital-onset infections, CMS requires hospitals to
report both hospital and community-onset cases. We require hospitals to
report community-onset cases because NHSN employs this information in
risk-adjustment. Validation of MRSA and CDI requires confirmation that
both hospital and community-onset cases are reported correctly and
completely. Therefore, for the FY 2016 payment determination and
subsequent years, we proposed that both types of cases be included on
the MRSA and CDI Validation Templates.
For these payment determinations, we proposed to collect the
following information on the MRSA and CDI Validation Templates needed
to identify each candidate event: (1) Laboratory accession number,
collection date, and location; (2) necessary information to identify
the patient (that is, patient identifier, Medicare Beneficiary number
also known as the HIC number, sex, and date of birth); (3) the
patient's admission and discharge dates; and (4) necessary information
to identify the hospital (NHSN Facility ID, Provider ID/CCN, Hospital
Name and State, Contact Information for the Person Completing the
Template).
Draft versions of the proposed MRSA and CDI Validation Templates
were posted on the QualityNet Web site at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1228760487021 during the public comment period. We proposed this approach for
MRSA and CDI validation, because we believe that this is the best way
for us to systematically identify candidates that are likely to yield a
high proportion of cases that should have appropriately been reported
to NHSN. Consistent with the process we have been using for the CLABSI
and CAUTI Validation Templates, we proposed that quarterly submission
deadlines correspond to those for population and sampling data as
defined in section IX.A.9.e. of the preamble of the proposed rule. We
invited public comment on this proposal.
Comment: Commenters indicated that the time of specimen collection
was unnecessary even though it was included on the draft MRSA and CDI
Validation Templates.
Response: We agree that the time of collection is not a necessary
field. For this reason, we did not propose to require it on the MRSA
and CDI Validation Templates. We indicated the required fields on these
Templates with an asterisk, with others being optional. Time was
included as an optional field. The optional information may assist our
CDAC abstractors in locating the result in the medical record. In
addition, because we have proposed that hospitals should only send the
part of the record that documents the specimens collected, the optional
information might be of assistance to hospital medical records
personnel who may also use it to identify the right parts of the
medical records to submit for validation. This may be especially useful
if the staff who complete the Validation Templates and those who submit
medical records for validation work in different hospital departments.
Hospitals may choose whether to provide this information.
Comment: Commenters suggested that establishing whether there were
any hospital discharges for a particular patient in the last 28 days
should be part of validation. This information may affect how
community-onset cases are classified.
Response: We agree that the information about discharges in the
last 28 days would ideally be used for validation. The information
contributes to how CDC risk-adjusts the MRSA and CDI statistics
reported on Hospital Compare. However, in our first year of validation,
we sought to validate only reporting of the candidate event and the
date the event occurred, as these two pieces of information are most
relevant to assessing completeness of reporting hospital-onset cases
and accurately distinguishing hospital-onset from community-onset cases
reported to

[[Page 50830]]

NHSN. We believe that this validation effort is sufficiently ambitious
at this time. Because we are concerned about the hospital burden
related to validation, we will not yet be distinguishing among types of
community-onset cases. We will consider refinements to our validation
strategy in future rulemaking cycles.
Comment: One commenter stated that ``CMS is now proposing to
require sampled validation hospitals to provide additional lists (one
list of final blood cultures positive for MRSA and a second list of all
final stool specimens toxin positive for CDI).'' The commenter viewed
this proposal as ``prohibitively burdensome,'' and believes that it
should be delayed until ``it can be automated through EHRs.''
Response: Although we agree that the new Validation Templates for
MRSA and CDI will create some burden for hospitals that are selected
for validation, we do not believe that this burden is prohibitive or
outweighs our goal to properly validate these measures. Moreover, we
carefully considered ways to reduce the burden associated with this
requirement, and proposed that no hospital would be required to
complete more than 2 Validation Templates per quarter if selected for
validation in given year. Accordingly, we believe that this requirement
will not add a new burden to hospitals, as hospitals will either be
required to submit (1) MRSA and CDI Validation Templates or (2) CLABSI
and CAUTI Validation Templates, but not both sets.
Comment: Some commenters supported the use of Validation Templates.
One commenter noted support because hospitals are already familiar with
it.
Response: We thank the commenters for their support.
After consideration of the public comments we received, we are
finalizing this policy as proposed.
We recognize that the proposal to add two new HAI Validation
Templates has the potential to increase burden to individual hospitals
selected for validation. As finalized in the FY 2013 IPPS/LTCH PPS
final rule (77 FR 53551 through 53553), for the FY 2015 payment
determination and subsequent years, the annual validation sample
includes 400 randomly selected hospitals and up to 200 hospitals
sampled based on targeting criteria. To add these new Templates without
increasing burden for the FY 2016 payment determination and subsequent
years, we proposed to randomly assign half of hospitals to submit
templates for CLABSI and CAUTI validation and half of hospitals to
submit templates for MRSA and CDI validation. We believe this proposal
will limit hospital burden to that finalized in the FY 2013 IPPS/LTCH
PPS final rule, because no hospital would be required to submit more
than two templates per quarter.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53547 through
53548), we established a sample size of 12 records for HAI validation
per quarter for the FY 2015 payment determination and subsequent years.
Each quarterly sample is to be drawn from a list of patient episodes of
care for all three types of candidate HAIs (CLABSI, CAUTI, and SSI)
combined in one non-stratified sampling frame. For the FY 2016 payment
determination and subsequent years, we proposed to target separate
sampling strata for each type of HAI. We made this proposal because we
believe that having separate sampling targets for each infection will
better accommodate the very different incidence of different types of
HAI events, particularly for hospitals which are to be validated for
SSI, MRSA, and CDI. This proposal also supports the objective to
evaluate how well each HAI is reported to NHSN when considered across
all hospitals combined.

--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of
Number of records/ Number of
APU determination HAI Number of hospitals quarters quarter/ records per
hospital hospital
--------------------------------------------------------------------------------------------------------------------------------------------------------
FY 2015 (previously finalized)........... CLABSI, CAUTI, SSI combined..... Up to 600.................. 4 12 48
--------------------------------------------------------------------------------------------------------------------------------------------------------
In the preamble to the proposed rule
--------------------------------------------------------------------------------------------------------------------------------------------------------
FY 2015.................................. CLABSI, CAUTI, SSI combined..... Up to 600.................. 3 12 36
FY 2016.................................. CLABSI.......................... Up to 300.................. 3 5 15
FY 2016.................................. CAUTI........................... Up to 300.................. 3 5 15
FY 2016.................................. MRSA............................ Up to 300.................. 3 5 15
FY 2016.................................. CDI............................. Up to 300.................. 3 5 15
FY 2016.................................. SSI............................. Up to 600.................. 3 2 6
FY 2017 and subsequent years............. CLABSI.......................... Up to 300.................. 4 * 3.75 15
FY 2017 and subsequent years............. CAUTI........................... Up to 300.................. 4 * 3.75 15
FY 2017 and subsequent years............. MRSA............................ Up to 300.................. 4 * 3.75 15
FY 2017 and subsequent years............. CDI............................. Up to 300.................. 4 * 3.75 15
FY 2017 and subsequent years............. SSI............................. Up to 600.................. 4 * 1.5 6
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Within each hospital, quarterly targets are 3, 3, and 1 respectively for CLABSI, CAUTI, and SSI and 3, 3, and 1 respectively for MRSA, CDI, and SSI.
We will randomly allocate 2 additional records per hospital each quarter to meet the fractional case targets on average.

The sample sizes for each HAI proposed for the FY 2016 payment
determination are shown in the table above. For hospitals submitting
CLABSI and CAUTI templates, the infection-specific sample sizes per
hospital per quarter proposed are: 2 for SSI, 5 for CLABSI, and 5 for
CAUTI (12 per quarter). For hospitals submitting MRSA and CDI
Validation Templates, the infection-specific sample sizes per hospital
per quarter proposed are: 2 for SSI, 5 for MRSA, and 5 for CDI. For
each hospital, in each quarter, these cases would be drawn randomly
from each individual Validation Template (or from claims for SSI) from
among episodes of care containing at least one candidate event. Across
all hospitals and quarters combined, we are assuming that approximately
10 percent of patients with candidate CLABSI events had a CLABSI. This
will yield approximately 450 hospital discharges with actual events.
Assuming a design effect resulting from clustered data collection of no
more than 2, this will allow us to estimate accurate reporting (+/- 5
percentage points with 90 percent confidence) of CLABSI if it occurs
approximately 75 percent of the time. We developed sample size
requirements based on a 75 percent score to align with CMS requirements
for a 75 percent score to pass validation as specified in 42 CFR Sec.
412.140(d)(2), and using a two-

[[Page 50831]]

tailed 90 percent confidence interval as finalized in the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53551). Based on these statistics, we
believe this is the smallest sample size needed to meet the objective
of accurately evaluating how well hospitals report CLABSI data to NHSN.
Because we have less data on which to base sample size calculations
for CAUTI, MRSA bacteremia, and CDI than we have for CLABSI, we
proposed similar sample size targets for these 4 HAIs. By proposing
similar sample size requirements across these 4 HAIs for the FY 2016
payment determination and subsequent years, we assure that hospitals
will be required to submit the same number of records regardless of
which set of Validation Templates they are assigned to submit.
For SSI, the proposed sample size assumes that most hospitals will
not have more than 2 candidate SSIs per quarter. By sampling fewer SSI
cases over twice as many hospitals, we ensure that the sample size for
SSI validation is also adequate. Because SSI cases may be sampled
without the added submission requirement of a Validation Template, we
foresee no difficulty in requiring all hospitals sampled for validation
to provide information for SSI. We invited public comment on these
proposals.
Comment: A number of commenters supported the proposal to reduce
the number of records submitted per hospital, and minimizing the number
of Validation Templates required for each hospital. Commenters
expressed appreciation for the efforts to reduce burden and encouraged
us to consider additional ways in which we may reduce burden associated
with HAI validation, and to work more directly with stakeholders
including infection preventionists.
Response: We thank the commenters for their support, and
acknowledge the need to continue to look for ways to reduce burden
associated with HAI validation. We have discussed the issue of outreach
above in section IX.A.10.b.(2) of the preamble to this final rule.
Comment: One commenter believed that the proposal to split the
validation sample would only save time/cost for CMS, but not for
hospitals. The commenter opposed it because it would result in having
two different standards for validation.
Response: The proposal is intended to decrease burden for
hospitals. Instead of having to complete four Validation Templates,
each hospital only has to complete two. We agree that it is possible
that some hospitals might find it slightly easier to complete
requirements for one set of Validation Template requirements or the
other. We have no reason to believe that the process will be
inequitable for different hospitals. However, we will monitor this
concern, and consider changes in the future if we determine that one
group of hospitals appears more likely to pass validation than the
other.
After considering the comments received, we are finalizing the
policies describing the number of hospitals and number of cases to be
sampled for each HAI as proposed.
Within each hospital for each type of HAI event each quarter, a
random sample would be drawn from among patient episodes of care with
at least one candidate event identified from the Validation Template
(or claims data for SSI) to meet the targeted sample size. If there are
not enough cases in any stratum, we proposed for the FY 2016 payment
determination and subsequent years to reallocate those cases to any
stratum or strata that have more than enough cases to meet sample size
targets. We proposed to reallocate cases because different hospitals
may have different relative frequencies of each HAI. The proposed
reallocation process will give CMS the flexibility to meet sample size
quotas in the event that one hospital has more than enough candidate
MRSA events but not enough candidate CDI events and the next hospital
has more than enough candidate CDI events and not enough candidate MRSA
events. We invited public comment on this proposal.
We received no specific comments on this proposal, and are
finalizing this policy as proposed.
For the FY 2017 payment determination and subsequent years, we
proposed to reduce the quarterly HAI sample from 12 to 9. Please see
the chart above. This is to reflect the fact that we proposed to
collect data for 4 quarters instead of for 3 quarters starting with the
FY 2017 payment determination (section IX.A.10.a. of the preamble of
the proposed rule). When we distribute over 4 quarters, the 15 annual
patient charts each for CLABSI, CAUTI, MRSA, and CDI and 6 annual
patient charts each for SSI, the process produces fractions. We
proposed to request 9 patient charts by establishing quarterly targets
of 3, 3, and 1 respectively for CLABSI, CAUTI, and SSI and 3, 3, and 1
respectively for MRSA, CDI, and SSI, and then randomly allocating the
remaining 2 records to meet the hospital target of 9 HAIs for the
quarter. We invited public comment on these proposals.
Comment: A few commenters expressed views related to the small
proposed sample size. One commenter believed that the proposed HAI
validation strategy is ``statistically underpowered to detect
substandard performance.'' We interpret this statement to mean that the
sample size is to too small to meet the goal of detecting inaccurate
reporting of HAIs within each individual hospital.
Response: Although we agree with the commenter that our sample
sizes are small our goal is to validate the accuracy of Hospital IQR
data as a whole, with as little burden to hospitals as is possible to
achieve that goal. Therefore, when considering sample size for
individual hospitals, we did not evaluate the minimum sample size
needed to assess accuracy for HAIs alone. Because charts sampled for
the clinical process of care measures are scored for multiple measures,
the 96 charts per hospital per year proposed yields 180 separate
measures. We believe this is adequate to estimate the overall
reliability of the data with satisfactory accuracy and confidence. The
combined approach also accomplishes the task of validation with much
lower burden and cost than would be needed to meet the requirement
suggested by the commenter.
Our proposal acknowledged that for each individual hospital,
although we can detect overall reliability, it may be difficult to
detect errors for reportable HAIs alone. Therefore, we also are
finalizing below in section IX.A.10.d. of the preamble to this final
rule our proposal to target any hospital which failed to report to NHSN
at least half of actual HAI events detected as determined during the
previous year's validation effort.
To improve our program, we intend to analyze all the data across
all hospitals in the validation sample to examine reporting accuracy
and factors that influence it for individual HAIs. This will allow us
to provide feedback to all Hospital IQR participating hospitals
(whether or not included in the validation sample) about how to improve
their reporting process and provide an overall measure of accuracy for
the program.
Comment: One commenter argued that CMS' validation design differs
markedly from international standards. The commenter provided an
article detailing a recommended approach to ensuring adequate power
based on acceptance sampling methods

[[Page 50832]]

developed for quality control in manufacturing.\105\
---------------------------------------------------------------------------

\105\ Fortuna JA, Brenneman WA, Storli S, Birnbaum D, Brown KL.
The current state of validating the accuracy of clinical data
reporting: lessons to be learned from quality and process
improvement scientists. Infect Control Hosp Epidemiol.
2013;34(6):611-4.
---------------------------------------------------------------------------

Response: We found this article to be interesting and will consider
the extent to which it might be useful as we further develop our
validation policies.
After consideration of the public comments we received, we are
finalizing these policies as proposed.
c. Procedures for Scoring Records for Validation
We did not propose any changes to the procedures for scoring
records for validation for the clinical process of care measures for
the FY 2016 payment determination or subsequent years. This process was
described in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50226). In the
FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27706 through 27707),
however, we proposed changes to the procedures for scoring records for
validation of HAI measures.
(1) Scoring of CLABSI, CAUTI, and SSI
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53550 through
53551), for the FY 2015 payment determination and subsequent years, we
finalized a scoring approach considering all three HAI measures
simultaneously. In general, if hospitals have matched data on all three
HAIs, they would receive a score of 1, and if they have a mismatch on
one or more HAIs, they would receive a score of 0. For example, if a
patient had a CLABSI during an episode of care and no CAUTI or SSI and
the CLABSI was properly reported, the hospital received a score of 1
for that patient. We developed this approach primarily out of an
interest in maximizing the information available to us about CLABSI,
CAUTI, and SSI using the same set of records reviewed for all three
infections at once, and because we recognized that an individual
infection event could not simultaneously be attributed to more than one
cause, that is, a particular infection was either a primary CLABSI,
CAUTI, or SSI, but never all three at once. In addition, the records
were sampled from a single unduplicated frame. With a single sampling
frame for all three events, it was not always possible to determine in
advance which event to evaluate for a particular case. Moreover, it is
apparent that an event that was sampled because of a MRSA bacteremia
result does not need to be evaluated for CDI and vice-versa. For both
of these reasons, we proposed for the FY 2016 payment determination and
subsequent years, to evaluate and score each case only for the
infection for which it was sampled as having candidate events. For
example, episodes of care for patients on the CLABSI Validation
Template will be evaluated and scored only for CLABSI. We invited
public comment on this proposal.
Comment: Two commenters supported these changes. One of these
commenters supported the proposed individualized process for validating
each of the HAIs--CLABSI (ICUs), CAUTI (ICUs), and SSI (colon and
hysterectomy). For SSIs, the commenter agreed that utilizing two charts
will be necessary to provide a thorough review of the NHSN criteria.
The other commenter described the change in scoring as ``appropriate.''
Response: We appreciate the commenters' support.
After considering the public comments we received, we are
finalizing the policy to score each HAI individually as proposed.
We also proposed for the FY 2016 payment determination and
subsequent years to score charts selected for SSI, CLABSI, and CAUTI in
the manner that scoring was finalized for CLABSI in the FY 2012 IPPS/
LTCH PPS final rule (76 FR 51647). If the CDAC contractor reviews a
medical record and determines that patient had no CLABSI events and the
hospital reported no CLABSI to NHSN, the case will receive a score of
1. If the CDAC contractor determines that the patient had a CLABSI and
this was reported to NHSN, the case will also receive a score of 1. If
a mismatch occurs and the CDAC contractor determined that the patient
had no CLABSI when one is reported, or that the patient had a CLABSI
that was not reported, the hospital will receive a score of 0. If the
CMS quarterly validation process identified that 3 out of 4 total
sampled records accurately reported the presence of CLABSI or did not
report a CLABSI when none was present, then the hospitals' quarterly
CLABSI validation score would be \3/4\ or 75 percent. If two or more
infections are detected for a patient episode of care, the case may
receive separate scores for each event. For example, if one patient
episode of care included two CLABSIs, both of which were reported
correctly, and reported correctly for 2 of the remaining three records
evaluated for CLABSI, then the validation score for CLABSI that quarter
would be \4/5\ or 80 percent.
Comment: One commenter supported this specific proposal.
Response: We thank the commenter for this support.
After consideration of the public comments we received, we are
finalizing these policies as proposed.
(2) Scoring of MRSA and CDI
MRSA bacteremia and CDI, have very different reporting requirements
from other HAIs included in the Hospital IQR Program. The major
difference between the case definitions for MRSA and CDI relative to
other HAIs being reported as part of IQR is that MRSA and CDI are
laboratory-identified events that do not require extensive clinical
judgment on the part of the reporting hospital. If the laboratory
events and date of hospital admission are reported accurately, CDC
makes the determination as to whether the event was community or
hospital onset.
Our proposal entails evaluating each patient episode of care on a
minimum of two components, with a score of 1 for each matched component
and 0 for each mismatched component. We proposed to evaluate each
laboratory identified event on the following components: (1) Whether it
was reported to NHSN when it should have been reported; and (2) whether
the correct dates of admission and event were reported such that NHSN
correctly classified the event as hospital or community onset. Each of
these components contributes to an assessment of the accuracy and
completeness of the public reporting result that appears on Hospital
Compare, and each is important.
Because each candidate event will be scored on two different
components, scores will be reported in multiples of two. For example,
if a sampled patient episode of care has only one candidate event, and
1 out of 2 elements matched for that event, the total score for that
candidate event would be \1/2\. If a particular patient episode of care
contains multiple candidate events, that patient episode will be
evaluated on each of these events, increasing the number of possible
elements to be validated by 2, one for each candidate event evaluated.
The maximum number of events that we would validate for any episode of
care would be 4. Therefore, the maximum possible score for any one
patient episode of care would be 8 (2 x 4). NHSN has an automated
process to remove events that should not have been reported to NHSN if
they occurred within 14 days of a previous laboratory-identified event
for the same infection. Because NHSN excludes these events
automatically, we proposed for the FY 2016 payment determination and
subsequent years that hospitals will not be credited or penalized for
reporting or

[[Page 50833]]

failing to report an automatically excluded event. We invited public
comment on these proposals.
Comment: Two commenters suggested that CMS evaluate how well this
proposal functioned at the end of the first year.
Response: We are very committed to evaluating our process and will
take this suggestion into consideration.
Comment: Some commenters encouraged CMS to give each reportable
event only 1 point. The commenters argued that both the date and the
event must be reported correctly for hospitals to have an accurate
hospital-onset infection rate, and that both are relatively easy to
report.
Response: We agree with the comment that giving each reportable
event only 1 point is better than 2 points per case. This is because
both pieces of information--the laboratory event and the date for which
it occurred--contribute to the accuracy of reporting for a single case.
By adopting a final score of 1 point per candidate event, scoring will
more closely align with scoring for other HAI and clinical process of
care measures to be validated. As described in section IX.A.10.c.(1) of
this preamble, other HAIs receive a maximum of 1 point for each
candidate event within the same episode of care. Similarly, as
described in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50226), for
each clinical process of care measure evaluated, the maximum score
attainable for a measure is 1 point. We believe that for MRSA and CDI,
giving each reportable event 1 point, instead of 2 as proposed, is more
consistent with our policies.
Based on the public comments we received, we will provide hospitals
with only one point per candidate MRSA or CDI event. To receive a score
of 1/1 for each event for up to 4 events, hospitals must correctly
report both the laboratory event and the event date. Hospitals will
receive a score of 0/1 for each event if they either fail to report the
event or report the incorrect event date--in other words, if there is a
mismatch in data received. In the case when a hospital has no
reportable events, the hospital would receive a score of 1/1 if none
were reported to NHSN (a match), and a score of 0/1 if any were
reported to NHSN (a mismatch). We will provide hospitals with feedback
on correct reporting of both the infection and the event date via
QualityNet.
(3) Combined Scores
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53549), we finalized
the process for combining the clinical process of care and HAI
validation scores for the FY 2015 payment determination and subsequent
years scores by weighting them proportionate to the number of measures
validated in each group. We did not propose any changes to this
process. Using the finalized procedure for combining the clinical
process of care and HAI validation scores, the relative weights for the
FY 2016 payment determination would be 12/17 for the clinical process
of care measures included in validation and 5/17 for the HAI measures
included in validation.
As previously finalized in the FY 2013 IPPS/LTCH PPS payment rule
for the FY 2015 payment determination and subsequent years (77 FR
53551), we use the upper bound of a two-tailed 90 percent confidence
interval around the combined score to determine if a hospital passes or
fails validation. If this number is greater than or equal to 75
percent, then the hospital passes validation. We did not propose
changes to this methodology. We intend to post the specific formulas
used to compute the confidence interval on the QualityNet Web site at
least one year prior to computation as we have done in the past
(https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1138115987129). These formulas will continue to account appropriately for the
manner in which patient charts are sampled and scored for the measures
corresponding to the payment determination period.
Comment: A commenter supported the process for combining scores.
Response: We appreciate the commenter's support.
Comment: One commenter stated that denominators were too small and
would lead to unreliable results.
Response: We had difficulty understanding the commenter's concern
because the size of the denominator in the context of this policy does
not affect the reliability of results. We therefore wish to clarify
that this policy does not refer to a sample size, but rather reflects:
(1) The number of individual clinical process of care and HAI quality
reporting measures to be validated, and (2) the relative weights for
those measures. As we indicate above, each hospital will submit up to
96 charts and will have the opportunity to be evaluated up to 180
separate times.
We did not propose any policy changes and we are not finalizing any
changes to existing policy.
d. Procedures to Select Hospitals for Validation
In the FY 2013 IPPS/LTCH PPS final rule, for the FY 2015 payment
determination and subsequent years, we finalized an annual hospital
validation sample size of 400 randomly selected hospitals and a
supplemental sample of up to 200 hospitals to be selected for more
targeted validation (77 FR 53552 through 53553). The supplemental
sample of up to 200 hospitals will include all hospitals that fail
validation in the previous year and a random sample of hospitals
meeting certain targeting criteria for the FY 2015 payment
determination and subsequent years. The targeting criteria were
finalized in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53552 through
53553) for the FY 2016 payment determination and subsequent years. A
summary of these criteria is set out below.
Any hospital with abnormal or conflicting data patterns.
Any hospital with rapidly changing data patterns.
Any hospital that submits data to NHSN after the Hospital
IQR Program data submission deadline has passed.
Any hospital that joined the Hospital IQR Program within
the previous 3 years, and which has not been previously validated.
Any hospital that has not been randomly selected for
validation in any of the previous 3 years.
Any hospital that passed validation in the previous year,
but had a two-tailed confidence interval that included 75 percent.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27707), for the
FY 2016 payment determination and subsequent years, we proposed one
additional criterion for targeting as follows: any hospital which
failed to report to NHSN at least half of actual HAI events detected as
determined during the previous year's validation effort. We made this
proposal to increase incentives for properly reporting HAI events that
should have been reported to NHSN. To ensure a fair process for
validation scoring, we credit hospitals for following NHSN protocols
correctly. In this regard, hospitals receive credit for not reporting
to NHSN candidate HAI events that we determine were not actually events
and reporting candidate HAI events to NHSN that we determine were
actually HAI events. We anticipate that hospitals may receive credit
for not reporting many such candidate events. We believe it is
appropriate to pass hospitals for following NHSN protocols correctly by
not reporting non-events. However, we recognize that the Hospital VBP
Program might give hospitals an unintended incentive to underreport HAI
events because the lower their HAI

[[Page 50834]]

measure rates, the more points they will earn.
Therefore, we proposed to use evidence of severe under-reporting
(less than 50 percent) as a targeting criterion for supplemental
validation. In making this proposal, we recognize that the sample size
of events, which should have been reported to NHSN, may not be reliable
as it is a subset of the sample of 36 candidate HAI events per hospital
per year. For the 30 candidate CLABSI and CAUTI records selected each
year, we expect less than half of candidate events to be actual events.
We would not wish to fail hospitals based upon such a small sub-sample.
Instead, in such situations we would like to gather more data, which is
why we proposed to add a targeting criterion for hospitals that appear
to frequently under-report HAIs. We invited public comment on this
proposal.
Comment: A few commenters supported this proposal. Commenters
discussed incentives for accurate reporting. One commenter indicated
that in previous years they had recommended that CMS include targeting
criteria for hospital selection.
Response: CMS appreciates the support for our approach to target
hospitals potentially inaccurate reporting and also incentivize
accurate reporting.
After consideration of the public comments we received, we are
finalizing this policy as proposed.
e. Procedures for Submitting Records for Validation
(1) Separate Submission Requirements for MRSA Bacteremia and CDI
Validation
Under section 412.140(d)(1) of our regulations, a hospital must
submit to CMS a sample of patient charts that the hospital used for
purposes of data submission under the program. Historically, we have
requested the entire medical record where the content of the medical
record is defined under 42 CFR 482.24. In the FY 2014 IPPS/LTCH PPS
proposed rule (78 FR 27707 through 27708), for validation of the MRSA
bacteremia and CDI measures for the FY 2016 payment determination and
subsequent years, we proposed to require hospitals to submit only those
two specific parts of the medical record that are needed to validate
these measures. For each sampled chart, the two required parts are: (1)
All final positive blood cultures for MRSA and toxin-positive specimens
for CDI with specimen collection dates; and (2) all documentation of
the dates on which a patient was admitted to, transferred to, or
discharged from each location within the hospital during his/her stay.
We proposed to request only this information because it is all that CMS
needs to complete validation for these measures. Therefore, this
proposal will save CMS effort in completing validation, resulting in
more timely feedback to hospitals. In addition, we believe that this
more limited request may alleviate burden for many hospitals. Finally,
this proposal should reduce the cost to CMS in both photocopying and
shipping compared with submission of the entire patient chart. We
invited public comment on this proposal.
Comment: One commenter supported this proposal.
Response: We thank the commenter for this support.
After consideration of the public comments we received, we are
finalizing this policy as proposed.
(2) Secure Transmission of Electronic Versions of Medical Information
The current regulation at 42 CFR 412.140(d)(1) states:
``(d) Validation of Hospital IQR Program data. CMS may validate one
or more measures selected under section 1886(b)(3)(B)(viii) of the Act
by reviewing patient charts submitted by selected participating
hospitals. (1) Upon written request by CMS or its contractor, a
hospital must submit to CMS a sample of patient charts that the
hospital used for purposes of data submission under the program. The
specific sample that a hospital must submit will be identified in the
written request. A hospital must submit the patient charts to CMS or
its contractor within 30 days of the date identified on the written
request.''
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27708 through
27709), we proposed that this requirement may be met by employing
either of the following options each quarter: (1) A hospital may submit
paper medical records, which is the form in which CMS has historically
requested them; or (2) a hospital may securely transmit electronic
versions of medical information for the FY 2016 payment determination
and subsequent years. The intent of this proposal is to offer an
additional mode through which hospitals may meet the requirement to
submit patient charts. The content of the patient charts to be
submitted are defined at 42 CFR 482.24(c). We did not propose to change
the content of these charts (except for MRSA bacteremia and CDI as
discussed in section IX.A.10.e.(1) of the preamble of this final rule).
We proposed this change because hospitals are rapidly adopting EHR
systems as their primary source of information about patient care. Our
understanding is that as of December 2012, more than 4,000 hospitals,
including 77 percent of hospitals participating in the Hospital IQR
Program, had enrolled in the Medicare EHR Incentive Program.
Based on the instructions that we have historically provided with
written requests for records under 42 CFR 412.140(d)(1), hospitals have
only been able to submit this information in paper format. For records
stored electronically, hospitals expend additional resources printing
records onto paper that may be more efficiently transmitted
electronically. We pay hospitals at a rate of 12 cents per page, plus
shipping (70 FR 23667). In addition, the length of paper charts has
been increasing, and the paper used to submit these records has an
environmental impact. As shown in the table below, the average patient
chart based on the most recent available statistics from our CDAC
contractor, is much larger than when CMS began validating quality
reporting data.

------------------------------------------------------------------------
Approximate
IPPS/LTCH PPS final or proposed average page Citation
rule FY length
------------------------------------------------------------------------
Final 2006....................... 140 70 FR 47702
Final 2009....................... 150 73 FR 49075
Final 2012....................... 275 76 FR 51828
Proposed 2014.................... 410 .....................
------------------------------------------------------------------------

In examining the most recent statistics available, which are based
on records submitted for 2Q 2012, most of the increase in chart length
is attributable to including HAI charts in the sample; HAI charts are
on average 1,500 pages long,

[[Page 50835]]

but other inpatient chart lengths are also larger, now averaging about
300 pages. Therefore, the proposal to allow hospitals to choose between
submitting paper copy patient charts and securely transmitting
electronic versions of medical information has the potential for
significant reduction in administrative burden, cost, and environmental
impact. Furthermore, this potential for savings grows as the measures
selected for Hospital IQR Program chart validation increasingly focus
on HAIs.
We proposed for the FY 2016 payment determination and subsequent
years that those hospitals wishing to securely transmit electronic
versions of medical information to download or copy the digital image
of the patient chart onto CD, DVD, or flash drive and ship it following
instructions similar to those for shipping paper copies of patient
charts. The precise guidelines to achieve this process will be posted
on QualityNet and included with CMS' written requests for patient
charts. This proposal requires hospitals to use this single method for
secure transmission of electronic versions of medical information,
because it will enable us to efficiently process records and provide
timely feedback to hospitals. We recognize that there may be many other
methodologies under which transmission of electronic versions of
medical information might occur. After evaluating several different
potential approaches, we proposed the only one available at this time
that has been successfully tested. We will continue to develop and test
additional technologies for secure transmission of electronic versions
of medical information. We will notify hospitals through QualityNet as
we acquire any new capabilities for accepting electronic versions of
medical information, and to update available methodologies through
future payment rules. We invited public comment on this proposal.
Comment: Many commenters supported this proposal. Most of these
commenters encouraged CMS to consider a wider range of options for
transmitting electronic version of medical records for validation. One
commenter inquired why the methodology made available to hospitals by
Recovery Audit Contractors (RACs) was not being made available to
hospitals for Hospital IQR Program validation.
Response: We thank commenters for their support and for the
opportunity to further share our future plans regarding options for
submission of medical records for validation. CMS evaluated the
technology used by the RAC program, known as ESMD. We found that ESMD
was not a scalable option for our quality reporting programs. Among
ESMD's limitations are its resource-intensive hardware and software
requirements as well as the frequency of user complaints and problems.
In addition, ESMD requires the transmitter to either have its own
software or to submit records through an intermediary. The use of an
intermediary adds to the cost and complexity of this approach. Instead,
we are pursuing the use of ``Axway'' a secure file transfer product.
When operational, hospitals will be able to transfer files through
either a Web-based portal or direct from a client using secure file
transfer protocol (FTP). We are testing Axway now and intend to make it
available to hospitals in the Hospital IQR Program within the next 12
to 18 months.
Comment: One commenter expressed concern that medical records could
not be securely transmitted on CDs, DVDs, or flash drives without
encryption. The commenter further expressed the opinion that encryption
may prove ``more cumbersome'' than sending paper charts.
Response: We thank the commenter for the opportunity to clarify
that the shipping instructions ``similar'' to those for shipping paper
copies of patient charts would in fact include information on how to
encrypt the CDs and how to share this information with CDAC. As noted
above, we are exploring other options for secure transmission and
intend to make them available soon. In the meantime, any hospital that
finds it less cumbersome to send paper charts has the option of doing
so.
After consideration of the public comments we received, we are
finalizing this policy as proposed.
For the FY 2016 payment determination and subsequent years, we also
proposed to incentivize the electronic option by offering reimbursement
for the labor and supply costs of submitting electronic versions of
medical information. Because hospitals can choose between the current
paper and the proposed electronic option of submitting validation
records, we believe that this proposal does not increase cost or burden
to hospitals. We invited public comment on this proposal.
Comment: Some commenters supported this proposal. Two commenters
noted that CMS did not indicate what the reimbursement for medical
records submitted electronically would be.
Response: As stated in section XII.B.6. of the preamble of the FY
2014 IPPS/LTCH PPS proposed rule (78 FR 27749), the amount we proposed
to reimburse hospitals for the FY 2016 payment determination is $3.00
per patient chart.
After consideration of the public comments we received, we are
finalizing this policy as proposed.
11. Data Accuracy and Completeness Acknowledgement Requirements for the
FY 2015 Payment Determination and Subsequent Years
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53554), we finalized
our proposal to require hospitals to continue to electronically
acknowledge their data accuracy and completeness once annually. For the
FY 2015 payment determination and subsequent years, the submission
deadline finalized for the Data Accuracy and Completeness
Acknowledgement (DACA) was aligned with the final submission quarter
for each fiscal year. For example, for the FY 2015 payment
determination, the submission deadline for the Data Accuracy and
Completeness Acknowledgement is currently May 15, 2014, with respect to
the reporting period of January 1, 2013, through December 31, 2013.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27709), in order
to provide the timely feedback to hospitals regarding the APU status,
we proposed that for the FY 2015 payment determination and subsequent
years, we would collect the DACA in alignment with the 3rd quarter
submission deadline. This would mean, for example, the electronic
acknowledgement of data accuracy and completeness for the FY 2015
payment determination would be submitted between January 1, 2014 and
February 15, 2014, with respect to the reporting period of January 1,
2013 through December 31, 2013. We invited public comment on this
proposal.
Comment: Several commenters supported the proposed DACA
requirements.
Response: We thank the commenters for their support
Comment: A few commenters expressed concern that aligning the DACA
submission with the 3rd quarter submissions would not allow hospitals
the opportunity to ensure that data submitted in the 4th quarter was
accurate at the time of the DACA submission.
Response: We understand the commenters' concern, and agree that
signing the DACA prior to the 4th quarter would not allow hospitals the
opportunity to ensure complete and accurate data for the 4th quarter
prior to the DACA submission.

[[Page 50836]]

After consideration of the public comments we received, we not
finalizing our proposal.
12. Public Display Requirements for the FY 2016 Payment Determination
and Subsequent Years
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51650), we
continued, for the FY 2014 payment determination and subsequent years,
the approach we adopted in the FY 2011 IPPS/LTCH PPS final rule (75 FR
50230) for public display requirements for the FY 2012 payment
determination and subsequent years. In the FY 2013 IPPS/LTCH PPS final
rule (77 FR 53554), we did not make any changes to these requirements.
For the FY 2016 payment determination and subsequent years, we did not
propose to make any changes to these requirements. As previously stated
in section IX.A.9.d. of the preamble of this final rule, we proposed
that we would not publicly report data collected from hospitals
choosing to report the four measure sets (VTE, STK, ED and PC)
electronically in CY 2014.
We did not receive any public comments on this proposal and we are
therefore, finalizing the proposal. We note that, as discussed above,
hospital may voluntarily submit electronic data regarding one or more
of the measure sets, if they choose.
The Hospital IQR Program quality measures are typically reported on
the Hospital Compare Web site at: https://www.medicare.gov/hospitalcompare, but on occasion are reported on other CMS Web sites
such as https://www.cms.gov and/or https://data.medicare.gov. We require
that hospitals sign a Notice of Participation form when they first
register to participate in the Hospital IQR Program. Once a hospital
has submitted a form, the hospital is considered to be an active
Hospital IQR Program participant until such time as the hospital
submits a withdrawal form to CMS (72 FR 47360). Hospitals signing this
form agree that they will allow us to publicly report the quality
measures included in the Hospital IQR Program.
We will continue to display quality information for public viewing
as required by section 1886(b)(3)(B)(viii)(VII) of the Act. Before we
display this information, hospitals will be permitted to review their
information as recorded in the QIO Clinical Warehouse.
13. Reconsideration and Appeal Procedures for the FY 2015 Payment
Determination and Subsequent Years
The Hospital IQR Program reconsideration and appeals requirements
were adopted in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51650
through 51651) and are found at section 412.140(e) of our regulations.
The form for reconsiderations and a detailed description of the
reconsideration process are available on the QualityNet Web site at:
https://www.qualitynet.org/ > Hospitals-Inpatient > Hospital Inpatient
Quality Reporting Program > APU Reconsiderations. In the FY 2014 IPPS/
LTCH PPS proposed rule (78 FR 27709), we proposed to interpret this
requirement to allow for this form to be completed online via the
secure portion of the QualityNet Web site.
Comment: Several commenters supported the proposed interpretation.
Response: We thank the commenters for their support.
After consideration of the public comments we received, we are
finalizing as proposed, the policy to allow the reconsideration form to
be completed via an online module in QualityNet.
In the past, it has been CMS' process to allow hospitals with a
quarterly Overall Validation Result of <75 percent to request a review
by or appeal mismatched data element(s) to their State Quality
Improvement Organization (QIO). This process requires that the CDAC
contractor copy and ship all records for any hospital that receives an
overall validation score of <75 percent to the State QIO. In the past
two years, none of the mismatched appeals would have resulted in a
change to the final APU determination. As described at Sec. 412.140(e)
of our regulations, hospitals can also request a reconsideration of a
decision by CMS that the hospital has not met the requirements of the
Hospital IQR Program for a particular fiscal year. This includes
reconsideration on the basis that CMS concluded it did not meet the
validation requirements. We believe this process is redundant and, for
the FY 2015 payment determination and subsequent years, we proposed to
remove the quarterly appeal of mismatched data elements to the State
QIO. We invited public comment on this proposal.
Comment: Several commenters supported the proposed administrative
changes.
Response: We thank the commenters for their support.
After consideration of the public comments we received, we are
removing the quarterly appeal of mismatched data elements to the State
QIO from the Hospital IQR Program. We encourage hospitals that believe
there may be an error in validation to use our reconsideration and
appeals procedures described at Sec. 412.140(e) of our regulations.
14. Hospital IQR Program Extraordinary Circumstances Extensions or
Waivers
The Hospital IQR Program extraordinary circumstances disaster
extensions or waiver requirements were adopted in the FY 2012 IPPS/LTCH
PPS final rule (76 FR 51651 through 51652) and can be found at 42 CFR
Sec. 412.140(c)(2). In the FY 2012 IPPS/LTCH PPS final rule, we
explained the requirements for disaster extensions or waivers. The
forms and a detailed description of the extension or waiver process are
available on the QualityNet Web site at: https://www.qualitynet.org/ >
Hospitals-Inpatient>Hospital Inpatient Quality Reporting Program.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27709 through
27710), we proposed to allow for not only a CEO, but also other
hospital-designated personnel contact to complete and sign waiver/
extraordinary circumstances forms. This proposed change would allow
hospitals to designate an appropriate, non-CEO, contact at its
discretion. This individual would be responsible for the submission,
and would be the one signing the form.
In addition, we proposed to allow for this form to be completed
online via the secure portion of the QualityNet Web site.
We also proposed that we may grant a waiver or extension to
hospitals if we determine that a systemic problem with one of our data
collection systems directly affected the ability of the hospitals to
submit data. Because we do not anticipate that these types of systemic
errors will happen often, we do not anticipate granting a waiver or
extension on this basis frequently.
If we make the determination to grant a waiver or extension, we
proposed to communicate this decision through routine communication
channels to hospitals, vendors and QIOs by means of, for example,
memoranda, emails, and notices on the QualityNet Web site. We invited
public comment on these proposals.
Comment: Several commenters supported the proposed changes
regarding extraordinary circumstances extensions or waivers.
Response: We thank the commenters for their support.
After consideration of the public comments we received, we are
finalizing our proposals to allow hospitals to designate an
appropriate, non-CEO contact as the contact for the Extraordinary
Circumstances Extensions or Waivers requests. In addition, we are

[[Page 50837]]

finalizing our proposal to allow the Extraordinary Circumstances
Extensions or Waivers s form to be completed online. Lastly, we are
finalizing the proposal to allow CMS to grant a waiver or extension to
hospitals if we determine that a systemic problem with one of our data
collection systems directly affected the ability of the hospitals to
submit data.

B. PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program

1. Statutory Authority
Section 3005 of the Affordable Care Act added new subsections
(a)(1)(W) and (k) to section 1866 of the Act. Section 1866(k) of the
Act establishes a quality reporting program for a hospital described in
section 1886(d)(1)(B)(v) of the Act (referred to as a ``PPS-Exempt
Cancer Hospital'' or ``PCH''). Section 1866(k)(1) of the Act states
that, for FY 2014 and each subsequent fiscal year, a PCH shall submit
data to the Secretary in accordance with section 1866(k)(2) of the Act
with respect to such a fiscal year. Section 1866(k)(2) of the Act
provides that, for FY 2014 and each subsequent fiscal year, each
hospital described in section 1886(d)(1)(B)(v) of the Act shall submit
data to the Secretary on quality measures specified under section
1866(k)(3) of the Act in a form and manner, and at a time, specified by
the Secretary.
Section 1866(k)(3)(A) of the Act requires that any measure
specified by the Secretary must have been endorsed by the entity with a
contract under section 1890(a) of the Act, unless an exception under
section 1866(k)(3)(B) of the Act applies. The NQF currently holds this
contract. The NQF is a voluntary, consensus-based, standard-setting
organization with a diverse representation of consumer, purchaser,
provider, academic, clinical, and other health care stakeholder
organizations. The NQF was established to standardize healthcare
quality measurement and reporting through its consensus development
processes. We have generally adopted NQF-endorsed measures in our
reporting programs. However, section 1866(k)(3)(B) of the Act provides
an exception. Specifically, it provides that, in the case of a
specified area or medical topic determined appropriate by the Secretary
for which a feasible and practical measure has not been endorsed by the
entity with a contract under section 1890(a) of the Act, the Secretary
may specify a measure that is not so endorsed as long as due
consideration is given to measures that have been endorsed or adopted
by a consensus organization identified by the Secretary.
Under section 1866(k)(3)(C) of the Act, the Secretary was required
to publish the measure selection for PCHs no later than October 1,
2012, with respect to FY 2014.
Section 1866(k)(4) of the Act requires the Secretary to establish
procedures for making public the data submitted by PCHs under the PCHQR
Program. Such procedures must ensure that a PCH has the opportunity to
review the data that is to be made public with respect to the PCH prior
to such data being made public. The Secretary must report quality
measures of process, structure, outcome, patients' perspective on care,
efficiency, and costs of care that relate to services furnished by PCHs
on the CMS Web site.
2. Covered Entities
Section 1886(d)(1)(B)(v) of the Act excludes particular cancer
hospitals from payment under the IPPS. This final rule covers only
those PPS-excluded cancer hospitals meeting eligibility criteria
specified in 42 CFR 412.23(f).
3. Previously Finalized Quality Measures for PCHs for the FY 2014
Program and Subsequent Years
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53556 through
53561), we finalized five quality measures for the FY 2014 program and
subsequent years. Specifically, we finalized two of the CDC's NHSN-
based HAI quality measures (outcome measures): (1) Central Line-
Associated Bloodstream Infection (CLABSI); and (2) Catheter-Associated
Urinary Tract Infection (CAUTI). We also finalized three cancer-
specific process of care measures: (1) Adjuvant chemotherapy is
considered or administered within 4 months (120 days) of surgery to
patients under the age of 80 with AJCC III (lymph node positive) colon
cancer; (2) Combination chemotherapy is considered or administered
within 4 months (120 days) of diagnosis for women under 70 with AJCC
T1c, or Stage II or III hormone receptor negative breast cancer; and
(3) Adjuvant hormonal therapy.
The finalized measures are shown below.

PCHQR Program Measures Finalized in the FY 2013 IPPS/LTCH PPS Final Rule
for the FY 2014 Program and Subsequent Years
------------------------------------------------------------------------

------------------------------------------------------------------------
Safety and Healthcare-Associated Infections--HAI
------------------------------------------------------------------------
(NQF 0139) NHSN
Central Line-Associated Bloodstream
Infection (CLABSI) Outcome Measure
(NQF 0138) NHSN
Catheter-Associated Urinary Tract
Infections (CAUTI) Outcome Measure
------------------------------------------------------------------------
Clinical Process/Cancer-Specific Treatments
------------------------------------------------------------------------
(NQF 0223)
Adjuvant Chemotherapy is considered
or administered within 4 months
(120 days) of surgery to patients
under the age of 80 with AJCC III
(lymph node positive) colon cancer
(NQF 0559)
Combination Chemotherapy is
considered or administered within 4
months (120 days) of diagnosis for
women under 70 with AJCC T1c, or
Stage II or III hormone receptor
negative breast cancer
(NQF 0220)
Adjuvant Hormonal Therapy
------------------------------------------------------------------------

We did not propose to remove or replace any of the previously
finalized measures from the PCHQR Program for the FY 2015 program and
subsequent years. We discussed the collection requirements and
submission timeframes for these measures in the preamble of the FY 2013
IPPS/LTCH PPS final rule (77 FR 53563 through 53564).
4. Considerations in the Selection of the Quality Measures
Section 1866(k)(3)(A) of the Act requires that any measure
specified by the Secretary must have been endorsed by the entity with a
contract under section 1890(a) of the Act, unless section 1866(k)(3)(B)
of the Act applies. Section 1866(k)(3)(B) of the Act states that, in
the case of a specified area or medical topic determined appropriate by
the Secretary for which a feasible and practical measure has not been
endorsed

[[Page 50838]]

by the entity with a contract under section 1890(a) of the Act, the
Secretary may specify a measure that is not so endorsed as long as due
consideration is given to measures that have been endorsed or adopted
by a consensus organization identified by the Secretary.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53556), we indicated
that we have taken a number of principles into consideration when
developing measures for the PCHQR Program, and that many of these
principles are modeled on those we use for measure development under
the Hospital IQR Program:
Public reporting should rely on a mix of standards,
outcomes, process of care measures, and patient experience of care
measures, including measures of care transitions and changes in patient
functional status.
The measure set should evolve so that it includes a
focused core set of measures appropriate to cancer hospitals that
reflects the level of care and the most important areas of service
furnished by those hospitals. The measures should address gaps in the
quality of cancer care.
We also consider input solicited from the public through
rulemaking and public listening sessions.
We consider suggestions and input from a PCH Technical
Expert Panel (TEP), convened by a CMS measure development contractor,
which rated potential PCH quality measures for importance, scientific
soundness, usability, and feasibility. The TEP membership includes
health-care providers specializing in the treatment of cancer, cancer
researchers, consumer and patient advocates, disparities experts, and
representatives from payer organizations.
Like the Hospital IQR Program, the PCHQR Program also supports the
National Quality Strategy, national priorities, HHS Strategic Plans and
Initiatives, and CMS Strategic Plans, as well as takes into
consideration the recommendations of the MAP and strives for burden
reduction whenever possible.
We invited public comment on these considerations.
Comment: Some commenters expressed concern regarding the measures
CMS had proposed to adopt or continue using for the PCHQR Program.
These commenters believed that: (1) The previously finalized and newly
proposed measures are fragmented in nature and most of them only apply
to a small sub-set of the cancer population; (2) the majority of the
already finalized and newly proposed measures for the PCHQR Program are
process-of-care oriented and cannot accurately reflect the quality of
care at cancer centers; (3) some finalized and newly proposed measures
have not been used in the cancer population possibly limiting their
relevance and value for cancer hospitals; and (4) there are critical
gaps in the NQF-endorsed cancer measures (for example, functional
status, symptom management, survival and other outcomes). For example,
these commenters suggested that some of the proposed NQF-endorsed
measures assess a specific therapeutic regimen or treatment approach,
which would lock clinicians into one standard of care that may
represent suboptimal treatment.
To address these concerns, the commenters supported measure
selections to include care coordination, functional status, patient
safety, patient and caregiver experience with care, population/
community health, efficiency, and other outcomes of care that are
important to patients. These commenters urged CMS to work with cancer
centers to establish an effective quality reporting program that will
lead to meaningful improvements in cancer centers.
Response: We appreciate the commenters' opinions and
recommendations. We believe that both the previously finalized and
newly proposed measures address many critical domains identified in the
Department of Health and Human Services' National Quality Strategy,
including patient safety, efficiency, patient and family engagement,
and clinical outcomes, in addition to clinical processes of care. They
also assess many diagnosis, staging, and treatment modalities provided
at cancer centers, including chemotherapy, adjuvant treatments,
surgical care, and radiation therapy. However, we also recognize that
measurement gaps remain, and we intend to propose in the future to
adopt additional measures that assess the safety and efficiency of
diagnosis and treatment of cancer, measures that take into account
novel diagnostic and treatment modalities, measures that assess
symptoms and functional status, measures of appropriate disease
management and care coordination, measures that assess treatment of
less common cancers such as leukemia and lymphoma, and measures of
admissions for complications of cancer and treatment for cancer. In
addition, we will continually reassess and update measures used in the
PCHQR Program to ensure that they are consistent with optimal standards
of care.
5. New Quality Measures
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27711), for the
FY 2015 PCHQR Program and subsequent years, we proposed to adopt one
new measure: NHSN HAI measure of Surgical Site Infection (SSI).
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27711 through
27714), for the FY 2016 PCHQR Program and subsequent years, we proposed
to adopt 13 new measures: six measures of Surgical Care Improvement
Project (SCIP); six Clinical Process/Oncology Care Measures; and one
Patient Experience of Care measure (the HCAHPS Survey).
All 14 of these proposed measures are NQF-endorsed. Some address
inpatient care, and others address outpatient care. All of the measures
address treatment provided to cancer patients in PCH inpatient or
outpatient settings. In addition, the adoption of measures that apply
to more than one healthcare setting is one of our objectives in
promoting quality care consistently across all health care settings.
The 14 proposed measures are a subset of 19 measures that we included
on a publicly available document entitled ``List of Measures Under
Consideration for December 1, 2012'' in compliance with section
1890A(a)(2) of the Act. These measures were reviewed by the MAP, a
multi-stakeholder body convened by the NQF for the purpose of providing
input to HHS on the selection of measures, and the MAP's conclusions
can be found in the ``MAP Pre-Rulemaking Report: 2013 Recommendations
on Measures Under Consideration by HHS.'' The MAP Report can be
accessed at: https://www.qualityforum.org/Publications/2013/02/MAP_Pre-Rulemaking_Report__February_2013.aspx.
We considered the input and recommendations provided by the MAP in
selecting the 14 measures that we proposed for the PCHQR Program. Of
these 14 measures, the MAP supported the inclusion of 13 of them in the
PCHQR Program, and supported the direction of the proposed HCAHPS
measure, noting that additional experience with the survey is needed so
that the survey questions are applicable for use in the PCH settings.
Although we recognize that some stakeholders would prefer that we adopt
an experience of care measure developed specifically for the cancer
hospital setting, we believe that other stakeholders think HCAHPS is
appropriate for the cancer hospital setting, and are aware that
approximately 27 percent of PCHs are currently administering HCAHPS to

[[Page 50839]]

their patients. For these reasons, we believe that until a new patient
experience measure is developed specifically for the PCH setting, the
HCAHPS will provide valuable information to the public on the patient
experience of care in PCHs.
In addition, the proposed measures address the National Quality
Strategy domains of Patient Safety, Clinical Effectiveness, and Patient
Experience/Engagement, and further our goal of aligning measures across
programs because they are already in use in either the Hospital IQR
Program or the PQRS Program. We describe these proposed measures in
detail below.
Comment: Several commenters expressed concern that only two outcome
measures are proposed for FY 2015 and FY 2016 and encouraged CMS to
focus on developing meaningful outcome measures for the program, for
example measures of risk-adjusted, stage-specific survival curves for
various types of cancer. Commenters also supported the inclusion of
cancer-specific measures and encouraged CMS to validate formally any
non-cancer specific measures proposed for inclusion in the PCHQR
Program to ensure their applicability and usability for this program.
Response: We recognize the importance of outcome measures in
assessing quality of care and we are continually working with
contractors, clinical experts, and stakeholders to develop appropriate
measures. We agree that a robust measure set is one that evolves to
include a focused core set of measures appropriate to cancer hospitals
that reflects the level of care and the most important areas of service
furnished by these hospitals. The PCHQR Program measures also should
address gaps in the quality of cancer care.
Comment: One commenter recommended using existing registries and
data sources to expand and enhance quality reporting to minimize burden
on hospitals and physicians.
Response: We appreciate the commenter's suggestion. We strive to
minimize burden whenever possible and consider multiple data sources
and potential reporting mechanisms when considering a measure for
adoption. The current measure set includes measures that are collected
through registries.
a. New Measure for the FY 2015 Program and Subsequent Years--NHSN
Healthcare-Associated Infection (HAI) Measure: Surgical Site Infection
(SSI) (NQF 0753)
This NQF-endorsed American College of Surgeons/CDC harmonized
measure of surgical site infection (SSI) meets the measure selection
requirements at section 1866(k)(3)(A) of the Act, and expands upon the
existing Healthcare-Associated Infections (HAIs) measurement topic that
is part of the PCHQR Program. The measure addresses HAIs, a topic area
widely acknowledged by HHS, the Institute of Medicine, the National
Priorities Partnership and others as a high priority requiring
measurement and improvement. HAIs are among the leading causes of death
in the United States. The CDC estimates that as many as 2 million
infections are acquired each year in hospitals and that HAIs result in
approximately 90,000 deaths per year. It is estimated that more
Americans die each year from HAIs than from auto accidents and
homicides combined. HAIs not only put the patient at risk, but also
increase the days of hospitalization required for patients and add
considerable health care costs.
HAIs are largely preventable through interventions such as better
hygiene and advanced scientifically tested techniques for surgical
patients. Therefore, many health care consumers and organizations have
called for public disclosure of HAIs, arguing that public reporting of
HAI rates provides the information health care consumers need to choose
the safest hospitals, and give hospitals an incentive to improve
infection control efforts (75 FR 50201).
Detailed specifications for this proposed measure can be found at:
https://www.cdc.gov/nhsn/TOC_manual.html. This measure assesses the
incidence of surgical site infections following colon surgeries and
abdominal hysterectomies performed by PCHs and include laparoscopic
procedures. The measure rate is calculated as the Standardized
Infection Ratio for each procedure type. Adult patients 18 years and
older with deep incisional and organ space infections during the 30-day
postoperative period are included in the measure. This measure is risk-
adjusted and reported at the facility level. It is not specific to a
hospital ward or setting, rather it is applicable to all postoperative
patients who fall into the numerator criteria. The denominator is
calculated using logistic regression models, determining the expected
number of SSI's by facility and procedure type. We invited public
comment on this proposed SSI measure.
Comment: A few commenters believed this measure is important to
positive surgical outcomes and supported its addition to the PCHQR
Program. However, one commenter cautioned that CMS should exercise
discretion in publicly reporting the measure in the future. The
commenter pointed out that many cancer patients are immune-compromised
and therefore, are more susceptible to infections than other patients.
The commenter recommended engaging cancer centers to determine whether
stratifying SSI reporting by type of cancer may allow for a more
meaningful comparison of rates.
Response: We appreciate the commenters' support. We understand the
concern about differences in patient case mix between PCHs and acute
care hospitals. Like the CLABSI and CAUTI measures previously adopted
for this program, we believe that the SSI measure in its current form
is suitably risk-adjusted for the PCH setting. However, we will explore
with the CDC, the measure developer, whether further stratification of
the measure is feasible for future implementation.
Comment: A few commenters suggested modifications to the SSI
measure, including adding exceptions for patients who are discharged to
hospice care and for cancer hospital patients on palliative care
services, formally testing the measure in the cancer population, and
granting a reporting exception to any PCH performing fewer than 20
eligible colon and abdominal hysterectomy procedures in the preceding
calendar year.
Response: We appreciate the commenters' suggestions. As we noted,
we believe it is important to align our measures with the Hospital IQR
Program as much as possible to both streamline the programs and reduce
burden. At this time, the Hospital IQR Program uses a case minimum of
10 for the SSI measure (77 FR 53539). As we explained in the FY 2013
IPPS/LTCH PPS final rule, we chose a case minimum of 10 cases because
we believe 10 cases will be sufficiently meaningful for the results to
be publicly displayed while ensuring the availability of the most data
possible for public reporting (77 FR 53539). For detailed information
regarding the number of cases, we refer readers to the CDC
specification manual: https://www.cdc.gov/hai/ssi/ssi.html.
Comment: One commenter advocated that CMS and NHSN work with the
National Surgical Quality Improvement Program (NSQIP) to develop a
single set of specifications for the SSI measure. The commenter noted
the different data collection timeframes as an example to demonstrate
the need for alignment: NSQIP requires data collection for 90 days
while NHSN requires data collection for 30 days post-op for all
procedures related to breast cancer and

[[Page 50840]]

for craniotomies. The commenter noted that without such definition
alignments, both data sets will be less actionable and require extra
communication to enable practice and process changes.
Response: We agree that it is an important goal to achieve
alignment of measure specifications if a measure is being collected by
more than one entity. We also understand that both the CDC, which
operates the NHSN, and the American College of Surgeons (ACoS), which
operates the NSQIP, approve the NQF-endorsed SSI measure that we have
proposed to adopt for the PCHQR Program. Under the harmonized NQF
endorsed measure specifications, there is a 30-day follow up period for
SSIs after colon surgeries and abdominal hysterectomies, and our
understanding is that the NSQIP does not require 90-day follow up for
SSIs. Breast procedures and craniotomies are not included in the
harmonized NQF-endorsed SSI measure that we have proposed to adopt for
the PCHQR Program.
Comment: One commenter did not support the SSI measure CMS proposed
for FY 2015, because the commenter believed the proposed measure only
applies to highly specialized cancer centers.
Response: We disagree. As we stated in the proposed rule, this
measure is not specific to a hospital ward or setting, rather it is
applicable to all postoperative patients who fall into the numerator
criteria. The measure assesses the incidence of surgical site
infections following colon surgeries and abdominal hysterectomies
performed by PCHs and the measure includes laparoscopic procedures.
After consideration of the public comments we received, we are
finalizing the SSI measure as proposed for FY 2015 program and
subsequent years.
b. New Measures for the FY 2016 Program and Subsequent Years
(1) Surgical Care Improvement Project (SCIP) Measures
Measures from the Surgical Care Improvement Project (SCIP) have
been collected as part of the Hospital IQR Program for most subsection
(d) hospitals paid under the IPPS and reported on the Hospital Compare
Web site for a number of years, because they assess effective care for
patients undergoing surgery. In general, these measures are also
applicable to patients undergoing surgery in PCHs. In the FY 2014 IPPS/
LTCH PPS proposed rule (78 FR 27711 through 27712), we proposed to
adopt six NQF-endorsed, SCIP measures for the PCHQR Program beginning
with the FY 2016 program year. All six of the measures are NQF-endorsed
and therefore meet the selection requirements at section 1866(k)(3)(A)
of the Act.
In addition, all six of these measures were supported by the MAP
for inclusion in the PCHQR Program in its February 2013 pre-rulemaking
report to HHS located at: https://www.qualityforum.org/Setting_Priorities/Partnership/MAP_Final_Reports.aspx. Four of these
measures: SCIP--Inf 1 (NQF 0527); SCIP--Inf 2 (NQF
0528), SCIP--Inf 3 (NQF 0529); and SCIP--Inf 9 (NQF
0453) assess hospital performance with regard to infection
prevention practices. SCIP-Card-2 (NQF 0284) assesses the
continuity of beta blocker treatment during the perioperative period
for cardiac patients undergoing non-cardiac surgery. SCIP--VTE 2 (NQF
0218) assesses hospital performance regarding effective
preventive care for venous thromboembolism.
These measures are described below, and detailed measure
specifications for all six of these measures can be found in the
Hospital IQR Program Specifications Manual located at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1228772433589.
(A) SCIP--Inf 1: Prophylactic Antibiotics received Within 1 Hour Prior
to Surgical Incision (NQF 0527)
This measure assesses the percent of surgical patients with
prophylactic antibiotics initiated within one hour prior to surgical
incision. Patients who received vancomycin or a fluoroquinolone for
prophylactic antibiotics should have the antibiotics initiated within 2
hours prior to surgical incision. This measure addresses the National
Quality Strategy domain of Clinical Effectiveness, and complements the
proposed SSI measure.
(B) SCIP--Inf 2: Prophylactic Antibiotic Selection for Surgical
Patients (NQF 0528)
This measure assesses the percent of surgical patients who received
prophylactic antibiotics consistent with current guidelines (specific
to each type of surgical procedure). A goal of prophylaxis with
antibiotics is to use an agent that is safe, cost-effective, and has a
spectrum of action that covers most of the probable intraoperative
contaminants for the operation. This measure addresses the National
Quality Strategy domain of Clinical Effectiveness, and complements the
SSI measure.
(C) SCIP--Inf 3: Prophylactic Antibiotic Discontinuation within 24
Hours after Surgery End Time (NQF 0529)
This measure assesses the percentage of surgical patients whose
prophylactic antibiotics were discontinued within 24 hours after
Anesthesia End Time. A goal of prophylaxis with antibiotics is to
provide benefit to the patient with as little risk as possible. It is
important to maintain therapeutic serum and tissue levels throughout
the operation. Intraoperative re-dosing may be needed for long
operations. However, administration of antibiotics for more than 24
hours after the incision is closed offers no additional benefit to the
surgical patient. Prolonged administration increases the risk of
Clostridium difficile infection and the development of antimicrobial
resistant pathogens. This measure addresses the National Quality
Strategy domain of Clinical Effectiveness and complements the proposed
SSI measure.
(D) SCIP--Inf 9: Urinary Catheter Removed on Post-Operative Day 1 or
Post-Operative Day 2 with Day Surgery being Day Zero (NQF
0453)
This measure assesses the percent of surgical patients with a
urinary catheter removed on Postoperative Day 1 or Postoperative Day 2
with day of surgery being day zero. The risk of catheter-associated
urinary tract infection (UTI) increases with longer duration of
indwelling urinary catheterization. This measure complements the CAUTI
measure currently adopted for the PCHQR Program.
(E) SCIP--Card 2: Surgery Patients on Beta Blocker Therapy Prior to
Admission Who Received a Beta Blocker during the Perioperative Period
(NQF 0284)
This measure assesses the percent of surgery patients on beta
blocker therapy prior to arrival who received a beta blocker during the
perioperative period. The perioperative period for this measure is
defined as the day prior to surgery through postoperative day two, with
day of surgery being day zero. The American College of Cardiology/
American Heart Association promotes continuation of beta blocker
therapy in the perioperative period as a class I indication, and
accumulating evidence suggests that titration to maintain tight heart
rate control should be the goal. We believe that this measure targets
an important process of care, beta blocker administration for non-
cardiac surgery patients. Concerns regarding the

[[Page 50841]]

discontinuation of beta blocker therapy in the perioperative period
have existed for several decades. This measure addresses the National
Quality Strategy domain of Clinical Effectiveness.
(F) SCIP--VTE 2: Surgical Patients who Received Appropriate VTE
Prophylaxis within 24 Hours prior to Surgery to 24 Hours after Surgery
End Time (NQF 0218)
This measure assesses the percent of surgery patients who received
appropriate VTE prophylaxis within 24 hours prior to Anesthesia Start
Time to 24 hours after Anesthesia End Time. The frequency of VTE, which
includes deep vein thrombosis and pulmonary embolism, is related to the
type and duration of surgery, patient risk factors, duration and extent
of postoperative immobilization, and use or nonuse of prophylaxis.
Despite the evidence that VTE is one of the most common postoperative
complications and prophylaxis is the most effective strategy to reduce
morbidity and mortality, it is often underused. We believe that this
measure will encourage practices to reduce the risk of post-operative
complications associated with VTE. This measure addresses the National
Quality Strategy domain of Clinical Effectiveness.
We invited public comment on these six proposed SCIP measures.
Comment: Several commenters supported the six proposed SCIP
measures because they are NQF-endorsed and supported by MAP. A few
commenters opposed the inclusion of the six SCIP measures, because the
commenters believed that these proposed measures do not apply to PCHs.
Response: We appreciate the commenters' support of the proposed
measures. We believe that the six SCIP measures apply to patient care
furnished at both acute care hospitals and PCHs. The measures are
currently used in the Hospital IQR Program, in which they measure care
furnished to both cancer patients and non-cancer patients. Further, the
inclusion of these measures promotes alignment between the PCHQR and
Hospital IQR Program as many hospitals participating in the Hospital
IQR Program are already reporting these same measures, allowing
assessments of the quality of surgical care to be made in the same
manner across these two settings.
Comment: One commenter did not support the six proposed SCIP
measures because the measures address procedures that are performed
rarely at PCHs. The commenter was concerned that these chart-abstracted
measures would discourage PCHs from focusing on aspects of care that
are more relevant in the PCH setting. Some commenters encouraged CMS to
use current registries and claims data for reporting to minimize the
reporting burden on PCHs.
Response: While we recognize that resources are required to report
the measures, the same measures are already reported by the 3,900
hospitals that participate in the Hospital IQR Program. Furthermore,
these measures are also part of existing facility level accreditation
programs that many of the PCHs are already participating in, and for
that reason, we do not believe that the reporting of these data under
the PCHQR Program will pose a significant additional burden for those
PCHs. However, we appreciate the suggestion to use registries and
alternative data sources. We are working with the American College of
Surgeons National Cancer Data Base (NCDB) on the feasibility of
allowing three of the five measures finalized in the FY 2013 IPPS/LTCH
PPS final rule to be reported via registry in the future, and we also
intend to explore the feasibility of adopting future measures that can
be reported via registry.
Comment: Some commenters recommended that CMS delay adoption of the
six SCIP measures until: (1) Formal sampling may be performed at PCHs
to determine whether associated gaps in care exist; (2) we can ensure
that the measures are validated formally for use in the cancer
population; and, (3) a formal sampling methodology is developed for
reporting these measures, such as the existing methodology currently
used by the Hospital IQR Program, to decrease the burden placed on
PCHs.
Response: We appreciate the commenters' views. The SCIP measures
are important quality of care measures and are currently applied to
cancer patients across the country through inclusion in the Hospital
IQR Program. Furthermore, we believe that the measures are appropriate
for all surgical patients (including those that have cancer) that meet
the measure inclusion criteria and do not fall into any of the
exclusion categories. In response to comments regarding the reporting
burden, we will allow PCHs to report these measures using the same
sampling methodology that we currently allow for the reporting of the
same measures by subsection (d) hospitals under the Hospital IQR
Program (outlined in the specification manual https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1138115987129).
After consideration of the public comments we received, we are
finalizing the adoption of the SCIP measures for the FY 2016 PCHQR
Program and subsequent years, and will allow PCHs to report the
measures using the same sampling methodology that we currently allow
for the reporting of these measures under the Hospital IQR Program.
(2) Clinical Process/Oncology Care Measures
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27712 through
27714), we proposed to add to the PCHQR Program, for the FY 2016
program and subsequent years, six measures specific to assessing the
quality of medical treatment and staging of cancer by PPS-exempt cancer
hospitals. All six measures are specified and endorsed for outpatient
settings to evaluate the performance of a cancer treatment team. In
addition, all six of these measures are NQF-endorsed and address the
quality of outpatient cancer treatment provided at PCHs; therefore,
they meet the measure selection requirement at section 1866(k)(3)(A) of
the Act.
All six measures also are recommended as priorities for program
alignment in the PCHQR Program by the MAP in a June 2012 Final Report
entitled ``Performance Measurement Coordination Strategy for PPS-Exempt
Cancer Hospitals.'' In addition, the MAP in its 2013 Pre-Rulemaking
Final Report issued in February 2013 supports all six of the measures
for inclusion in the PCHQR Program. Both of these MAP reports can be
located at: https://www.qualityforum.org/Setting_Priorities/Partnership/MAP_Final_Reports.aspx.
Detailed specifications of these six proposed measures can be found
in Appendix A of the December 2012 NQF Cancer endorsement maintenance
project report at: https://www.qualityforum.org/Publications/2012/12/Cancer_Endorsement_Maintenance_2011.aspx. We invited public comment
on these six proposed clinical process/oncology care measures.
Comment: A few commenters supported the inclusion of cancer-
specific measures. A few commenters opposed the six clinical process/
oncology care measures because the commenters believed that these
proposed measures do not apply to PCHs. Some commenters encouraged
using current registries and data sources for reporting to minimize the
burden on PCHs.

[[Page 50842]]

Response: We appreciate the commenters' support. We believe that
the proposed clinical process/oncology care measures are relevant to
assessing the quality of care provided to cancer patients regardless of
setting. We appreciate the suggestion to use registries and alternative
data sources wherever possible and we are investigating the NCDB or
other cancer registry data for future measures.
Comment: One commenter requested that CMS delay the implementation
of these 6 clinical process/oncology care measures until a formal
sampling methodology is developed for reporting these measures to CMS
and more meaningful measures are considered for inclusion.
Response: We have directed our efforts to align our quality
reporting programs across settings, to the extent possible. For this
reason, we will allow PCHs to use the same sampling methodology as
specified in the specification manual for the Physicians Quality
Reporting System (PQRS) program found on the CMS Web site at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/PQRS/MeasuresCodes.html.
(A) Clinical Process/Oncology Care--Multiple Myeloma-Treatment with
Bisphosphonates (NQF 0380)
This measure assesses the percentage of patients aged 18 years and
older with a diagnosis of multiple myeloma, not in remission, for which
intravenous bisphosphonate therapy was prescribed or received within
the 12-month reporting period. This measure is intended to promote the
appropriate use of bisphosphonates to reduce morbidity and mortality in
multiple-myeloma patients. Bisphosphonates specifically decrease
osteoclast activity, thereby reducing bone pain and fractures in
patients with multiple myeloma.\106\ This measure addresses the
National Quality Strategy domain of Clinical Effectiveness.
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\106\ NQF. Cancer Endorsement Maintenance 2011.Candidate Review
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Comment: Some commenters did not support this measure, stating that
the drug has multiple side effects and would not be appropriate for
bone stem deterioration in all patients. The commenters stated that
there may be other drugs that work just as well, if not better. Another
commenter stated that the data collection for this measure would be
very labor intensive and burdensome. The commenter also questioned the
value of this measure given that performance is already high in terms
of providing guideline-based care. Another commenter stated that this
measure was intended for a physician setting and that CMS has
generalized it to apply to the PCH setting without appropriate testing.
The commenter urged CMS to delay implementation of this measure.
Response: After review of the public comments we received, we are
persuaded by the commenters that this measure is not appropriate to be
included in the PCHQR Program at this time. We acknowledge that
collecting this measure would be resource intensive, and we are
sensitive to the fact that new drugs are available for the same
therapeutic purpose. Based upon the concerns expressed by the
commenters, we have decided not to finalize this measure for the PCHQR
Program.
(B) Clinical Process/Oncology Care--Radiation Dose Limits to Normal
Tissues (NQF 0382)
This measure assesses the percentage of patients, regardless of
age, with a diagnosis of pancreatic or lung cancer receiving 3D
conformal radiation therapy with documentation in the medical record
that radiation dose limits to normal tissues were established prior to
the initiation of a course of 3D conformal radiation for a minimum of
two tissues. This measure is intended to assess the appropriate use of
3D conformal radiation therapy in the treatment of pancreatic and lung
cancers. Treatment is important due to the high rate of morbidity and
mortality associated with these cancers. For example, among cancers in
US adults, lung cancers are the leading cause of deaths in both men and
women. It is estimated from 2006--2008 rates that 6.94 percent of U.S.
men and women born today will be diagnosed with cancer of the lung and
bronchus at some time during their lifetime.\107\
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\107\ NQF. Cancer Endorsement Maintenance 2011.Candidate Review
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Regarding pancreatic cancer, there has been an increased frequency
of this cancer since 1998 of 0.8 percent in men and 1.0 percent in
women.\108\ Based on rates from 2006 through 2008, 1.45 percent of men
and women born today will be diagnosed with cancer of the pancreas at
some time during their lifetime. A major goal of radiation therapy is
the delivery of the desired dose distribution of radiation to target
tissue while limiting the radiation dose to the surrounding normal
tissues to an acceptable level.
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\108\ NQF. Cancer Endorsement Maintenance 2011.Candidate Review
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Patients treated with 3D conformal radiation therapy are often
subjected to radiation dose levels that exceed normal tissue tolerance.
Precise specification of maximum doses to be received by normal tissues
during radiation treatment planning is considered a best practice to
avoid delivering unnecessary radiation to patients.
Comment: A few commenters recommended that patients with metastatic
disease receiving palliative care and patients with short life
expectancy care be excluded from this measure.
Response: Although palliative care often differs from curative
cancer treatment, we are not aware of scientific evidence that patients
receiving 3D conformal radiation therapy for palliative care or with
short life expectancies should be exempt from dose limits. We believe
that the measure is appropriate as it is currently specified.
After consideration of the public comments we received, we are
finalizing the Clinical Process/Oncology Care--Radiation Dose Limits to
Normal Tissues measure for the FY 2016 program and subsequent years.
(C) Clinical Process/Oncology Care--Plan of Care for Pain (NQF
0383)
This measure assesses the percentage of visits for patients,
regardless of age, with a diagnosis of cancer currently receiving
chemotherapy or radiation therapy, who report having pain, with a
documented plan of care to address that pain. Pain is one of the most
common symptoms associated with cancer, occurring in approximately one
quarter of patients with newly diagnosed malignancies, one third of
patients undergoing treatment, and three quarters of patients with
advanced disease. Proper pain management is critical to achieving pain
control. ``Unrelieved pain denies [patients] comfort and greatly
affects their activities, motivation, interactions with family and
friends, and overall quality of life.'' \109\ This measure aims to
improve attention to pain management and requires a plan of care for
cancer patients who report having pain to allow for individualized
treatment

[[Page 50843]]

based on clinical circumstances and patient wishes.\110\ This measure
addresses the National Quality Strategy domain of Patient and Family
Engagement. This measure is intended to be paired with NQF
0384 below.
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\109\ NQF. Cancer Endorsement Maintenance 2011.Candidate Review
Consensus--Phase 1. Available at: https://www.qualityforum.org/Projects/Cancer_Endorsement_Maintenance_2011.aspx#t=2&s=&p=3%7C.
\110\ NQF. Cancer Endorsement Maintenance 2011.Candidate Review
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Comment: A few commenters appreciated CMS' intent in pairing the
Oncology: Plan of Care for Pain, and the Oncology: Pain Intensity
Quantified measures but did not support the measures. Commenters
believed that pain must be systematically assessed and treated in a
manner appropriate for the level of pain. Some commenters stated that
the definition for a plan of care in the ``Oncology: Plan of Care for
Pain'' measure is ambiguous, with no indication of which interventions
are appropriate for what type of patients or what level of pain
requires intervention. Commenters pointed out that pain fluctuates over
time. A commenter stated that from a patient's perspective, alleviation
of pain is more important than the documentation of its evaluation. The
commenter recommended the development of an outcome measure such as
measuring changes in clinically significant cancer-related pain scores.
Response: While we agree with many of the commenters' observations,
we believe the broad definition of a plan of care in the Clinical
process/Oncology care--Plan of care for pain measure would actually
promote individualized treatment for each patient. We recognize that
the alleviation of pain is the goal for both PCHs and patients and
developing an appropriate plan of care is a necessary step to reach
that goal. At the same time, we agree that an outcome measure of pain
would be useful and are exploring how to develop this type of measure
for the future.
Comment: One commenter recommended that CMS modify the measure so
that the numerator includes a minimum threshold for pain (for example,
3 or more on a 10-point scale) and the denominator includes visits
outside of chemotherapy and radiation therapy appointments (for
example, palliative care). The commenter also recommended that the term
``visit'' be well-defined.
Response: Consistent with National Comprehensive Cancer Network
guidelines, we believe that all patients who report pain, even those
with mild pain, should have a plan of care. This is reflected in the
denominator of the measure, which includes all patients who report
having pain. We agree that patients other than those receiving
radiation therapy or chemotherapy may benefit from plan of care for
treatment of pain, but the NQF-endorsed version of the measure does not
include other categories of patients at this time. We also believe that
many patients will benefit from our adoption of the measure as it is
currently specified. The term ``visit'' has a detailed definition in
the current specifications.\111\
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\111\ NQF. Cancer Endorsement Maintenance 2011.Candidate Review
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After consideration of the public comments we received, we are
finalizing the Clinical Process/Oncology Care--Plan of Care for Pain
measure for the FY 2016 program and subsequent years.
(D) Clinical Process/Oncology Care--Pain Intensity Quantified (NQF
0384)
This measure assesses the percentage of patient visits, regardless
of patient age, with a diagnosis of cancer currently receiving
chemotherapy or radiation therapy in which pain intensity is
quantified. As described above for the Oncology: Plan of Care for Pain
(NQF 0383) measure, pain is the most common symptom in cancer
patients and this measure is used in conjunction with NQF 0384
to encourage consistent assessment of pain intensity to better guide
the care of pain.\112\ This measure addresses the National Quality
Strategy domain of Patient and Family Engagement. Higher rates are
indicative of better performance. This measure is intended to be paired
with NQF 0383 above.
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\112\ NQF. Cancer Endorsement Maintenance 2011.Candidate Review
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Comment: A few commenters stated that there was ambiguity in the
measure specifications for the Oncology: Pain Intensity Quantified
measure which encompasses subjective interpretation, thereby
undermining efforts to collect reliably the measure data. Commenters
argued that the list of instrument examples included with the measure
specifications only captures general types of tools that could be used
and this could distract from substantive effort to alleviate cancer-
related pain.
Response: We disagree that the measure is subjective. The
determination of whether a physician or other health care provider has
used a tool is objective; the provider either used a tool or did not.
The option to choose among different types of tools allows providers to
individualize care for patients. It is not necessary for the tools to
be cancer-specific. The experience of pain is complex and it is not
realistic or appropriate to separate cancer-specific pain when the goal
is to support patients' comfort and quality of life. We believe that
measuring pain intensity by an appropriate method is a necessary step
to achieving pain management.
Comment: One commenter recommended that CMS modify this measure so
that the denominator includes visits outside of chemotherapy and
radiation therapy appointments (for example, palliative care).
Response: We believe that the measure is appropriate as it is
currently specified. We agree that patients other than those receiving
radiation therapy or chemotherapy may benefit from plan of care for
treatment of pain, but the NQF-endorsed version of the measure does not
include other categories of patients at this time. We also believe that
many patients will benefit from finalizing the measure as it is
currently specified.
After consideration of the public comments we received, we are
finalizing the Clinical Process/Oncology Care--Pain Intensity
Quantified measure for the FY 2016 program and subsequent years.
(E) Clinical Process/Oncology Care--Prostate Cancer-Avoidance of
Overuse Measure-Bone Scan for Staging Low-Risk Patients (NQF
0389)
This measure assesses the percentage of patients, regardless of
age, with a diagnosis of prostate cancer at low risk of recurrence
receiving interstitial prostate brachytherapy, or external beam
radiotherapy to the prostate, or radical prostatectomy, or cryotherapy,
who did not have a bone scan performed at any time since diagnosis of
prostate cancer.
Prostate cancer is the most commonly diagnosed cancer and the
second leading cause of cancer death in men over the age of 40 years in
the United States. Current guidelines and best practices do not
recommend bone scans for patients in the low risk stratum for prostate
cancer bony involvement. The goal of this measure is to reduce the use
of bone scans that are clinically unnecessary and reduce economic
burden to the patient and payer.\113\ This

[[Page 50844]]

measure addresses the National Quality Strategy domain of Clinical
Efficiency.
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\113\ NQF. Cancer Endorsement Maintenance 2011. Candidate Review
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Comment: One commenter stated that, as currently written, the
wording of the measure implies that a low-risk patient should never
receive a bone scan. The commenter stated that the measure
specifications must accommodate patients whose disease manifestations
warrant a bone scan (for example, short time to relapse, rapid PSA
doubling time), and the term ``at any time'' should be avoided.
Response: We agree with the commenter that the measure
specifications should allow for appropriate use of bone scans when they
are warranted. The current specifications of this measure account for
these circumstances through several measure ``exclusions'' that remove
otherwise low-risk patients with certain symptoms or physical findings
from the denominator, because they would warrant a bone scan, and we
agree that scans for these patients should not be counted as overuse.
Comment: One commenter recommended that CMS modify the measure so
that the numerator incorporates a literature-based period (for example,
imaging within X days of diagnosis).
Response: We believe the measure is appropriate as it is currently
specified. Bone scans are considered unnecessary for most low-risk
patients with prostate-cancer, no matter how long a patient might have
had prostate cancer. There is no scientific evidence that passage of
time alone, in the absence of a change in clinical status, would
indicate a valid reason for a bone scan.
After consideration of the public comments we received, we are
finalizing the Clinical Process/Oncology Care--Prostate Cancer-
Avoidance of Overuse Measure-Bone Scan for Staging Low-Risk Patients
measure for the FY 2016 PCHQR program and subsequent years.
(F) Clinical Process/Oncology Care--Prostate Cancer-Adjuvant Hormonal
Therapy for High-Risk Patients (NQF 0390)
This measure assesses the percentage of patients, regardless of
age, with a diagnosis of prostate cancer at high risk of recurrence
receiving external beam radiotherapy to the prostate, who were
prescribed adjuvant hormonal therapy (GnRH agonist or antagonist).
Prostate cancer is the most commonly diagnosed cancer and the second
leading cause of cancer death in men over the age of 40 years in the
United States. If patients are receiving external beam radiotherapy as
primary therapy, those patients that are designated as high risk may be
prescribed hormonal therapy. Adjuvant hormonal therapy in these
patients has been shown to increase the effectiveness of the
radiotherapy and may prolong survival. Further, the American Urological
Association and the National Comprehensive Cancer Network guidelines
recommend adjuvant hormonal therapy with radiotherapy for high-risk
prostate cancer patients for prolonged survival. This measure attempts
to encourage compliance with this guideline for this specific patient
population.\114\ This measure addresses the National Quality Strategy
domain of Clinical Effectiveness.
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\114\ NQF. Cancer Endorsement Maintenance 2011. Candidate Review
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Comment: One commenter recommended that CMS modify the measure so
that the numerator provides additional specifications to categorize
patients at ``high risk for recurrence'' and incorporates a literature-
based period (for example, treatment within X days of diagnosis).
Response: We believe that the measure is appropriate as it is
currently specified. The specification describes patients at ``high
risk for recurrence'' as having one or more of the following
characteristics: PSA > 20 mg/dL, Gleason score of 8 to 10, or
clinically localized stage T3a1. The measure requires that patients
receiving External Beam Radiation Therapy (EBRT) receive adjuvant
hormonal therapy at the same time (concurrently); therefore, the
measure already contains a time period for the adjuvant hormonal
therapy.
After consideration of the public comments we received, we are
finalizing the Clinical Process/Oncology Care--Prostate Cancer-Adjuvant
Hormonal Therapy for High-Risk Patients measure for the FY 2016 PCHQR
program and subsequent years.
(3) Patient Experience of Care Survey: HCAHPS
To advance patient safety and quality improvement in cancer
hospital settings, we proposed that for the FY 2016 program and
subsequent years, PCHs submit data on the HCAHPS Survey of patient
experience-of-care. We partnered with AHRQ to develop HCAHPS. The
HCAHPS Survey is the first national, standardized, publicly reported
survey of patients' experience of hospital care. HCAHPS, also known as
CAHPS[supreg] Hospital Survey, is a survey instrument and data
collection methodology for measuring patients' perceptions of their
hospital experience.
The HCAHPS Survey asks recently discharged patients 32 questions
about aspects of their hospital experience that they are uniquely
suited to address. The core of the survey contains 21 items that ask
``how often'' or whether patients experienced a critical aspect of
hospital care. The survey also includes four items to direct patients
to relevant questions, five items to adjust for the mix of patients
across hospitals, and two items that support Congressionally-mandated
reports (77 FR 53513 through 53515).
Ten HCAHPS measures (six summary measures, two individual items and
two global items) are currently publicly reported on the Hospital
Compare Web site (https://www.hospitalcompare.hhs.gov/) for each
hospital participating in the Hospital IQR Program. One new composite
item, ``Transition to post-hospital care,'' will be added to the
Hospital Compare Web site for the Hospital IQR Program once
participating hospitals have submitted four calendar quarters of data
on the three Care Transition Measure items that were added to the
HCAHPS Survey beginning with January 2013 discharges (77 FR 53513
through 53515).
Each of the six currently reported summary measures, or composites,
is constructed from two or three survey questions. The six composites
summarize how well doctors communicate with patients, how well nurses
communicate with patients, how responsive hospital staff are to
patients' needs, how well hospital staff helps patients manage pain,
how well the staff communicates with patients about medicines, and
whether key information is provided at discharge. The two individual
items address the cleanliness and quietness of patients' rooms, while
the two global items report patients' overall rating of the hospital,
and whether they would recommend the hospital to family and friends.
The HCAHPS Survey is administered to a random sample of adult
inpatients between 48 hours and 6 weeks after discharge. Patients
admitted in the medical, surgical and maternity care service lines are
eligible for the survey; the survey is not restricted to Medicare
beneficiaries. PCHs may use an approved survey vendor, or collect their
own HCAHPS data (if approved by CMS to do so). To accommodate
hospitals, HCAHPS can be implemented using one of four different survey
modes: mail; telephone; mail with telephone follow-up; or active
interactive voice recognition (IVR). Regardless of the mode used, the
PCH would be required

[[Page 50845]]

to make multiple attempts to contact patients.
PCHs may use the HCAHPS Survey alone, or include additional
questions after the 21 core items discussed above. PCHs must survey
patients throughout each month of the year, and PCHs participating in
the PCHQR Program must target at least 300 completed surveys over four
calendar quarters in order to attain the reliability criterion CMS has
set for publicly reported HCAHPS scores. The HCAHPS Survey is available
in official translations in several languages other than English:
Spanish (mail and telephone modes); Chinese (mail mode); Russian (mail
mode); and Vietnamese (mail mode). All official translations of the
HCAHPS Survey instrument are available in the current HCAHPS Quality
Assurance Guidelines. The survey itself and the protocols for sampling,
data collection, coding and file submission can be found in the current
HCAHPS Quality Assurance Guidelines manual, available on the HCAHPS On-
Line Web site located at: https://www.hcahpsonline.org.
We partnered with AHRQ to develop and test the HCAHPS Survey. AHRQ
carried out a rigorous and multi-faceted scientific process, including
a public call for measures; literature review; cognitive interviews;
consumer focus groups; stakeholder input; a three-State pilot test;
extensive psychometric analyses; consumer testing; and numerous small-
scale field tests. In addition, we provided three separate
opportunities for the public to comment on HCAHPS, and responded to
over 1,000 comments.
In May 2005, the HCAHPS Survey was NQF-endorsed and in December
2005 OMB gave its final approval for the national implementation of
HCAHPS for public reporting purposes. We implemented the HCAHPS Survey
for the Hospital IQR Program in October 2006 and the first public
reporting of HCAHPS results under that program occurred in March 2008.
The survey and its methodology are available on the HCAHPS On-Line Web
site located at: https://hcahpsonline.org and the survey results are
available on the Hospital Compare Web site at https://www.hospitalcompare.hhs.gov.
Currently, nearly 3,900 hospitals that participate in the Hospital
IQR Program publicly report their HCAHPS scores on Hospital Compare,
and about 27 percent of PCHs voluntarily administer the HCAHPs Survey.
We strongly encourage those PCHs that are currently submitting the
HCAHPS measure to continue their current data submission.
We invited public comment on our proposals to adopt the HCAHPS
measure beginning with the FY 2016 program year.
Comment: One commenter supported inclusion of the HCAHPS measure.
Response: We appreciate the commenter's support for the adoption of
the HCAHPS measure for PCHs.
Comment: Some commenters objected to the HCAHPS inclusion because
this tool has not yet been tested or NQF-endorsed for use in PCHs, and
it is limited to the inpatient population whereas the great majority of
PCH patients receive care in the outpatient setting. Commenters urged
rapid testing and adoption of a Cancer CAHPS survey.
Response: The HCAHPS Survey received the endorsement of the
National Quality Forum (NQF 0166) for use by acute care
hospitals. In addition, approximately 27 percent of PCHs currently
participate in HCAHPS on a voluntary basis.
We believe that the HCAHPS Survey is appropriate to measure
inpatients' experience of care in the PCH setting. The widespread
adoption of HCAHPS by acute care hospitals as resulted in benchmarks
that could be useful to PCHs in their quality improvement efforts. The
HCAHPS Survey looks at key facets of patient experience that are
relevant to PCHs, such as communication with patients, responsiveness
of staff, cleanliness and quietness of the hospital environment and
discharge instructions. We further note that PCHs have the option to
add their own supplemental items to the HCAHPS Survey, as explained in
the current HCAHPS Quality Assurance Guidelines, V8.0, which can be
found at https://www.hcahpsonline.org. PCHs treat patients on both an
inpatient and an outpatient basis, and we believe that the HCAHPS
Survey will provide a starting point to monitor patient experience of
care in PCHs. We are monitoring the development of other CAHPS tools
that may be appropriate for cancer care patients in the inpatient/
ambulatory settings.
Comment: One commenter indicated that although some PCHs may
currently use the HCAHPS Survey, posting on Hospital Compare will
compel the institution to agree to participation in the Hospital IQR
Program. Therefore, information that PCHs are exempt from reporting,
such as hospital readmission rates, will be posted. If this is correct,
commenter strongly urged the postponement of implementation of this
measure until operational challenges such as these have been resolved.
Response: PCHs are not required to submit any data under the
Hospital IQR Program because that program does not apply to PCHs.
However, we are aware that some PCHs currently submit HCAHPS data to
CMS on a voluntary basis, and we encourage PCHs to continue this
practice so that they can assess the experience of care of their
patients against the experience of care of subsection (d) hospital
patients. In addition, by voluntarily continuing to submit HCAHPS data
to CMS prior to the time when the data is due under the PCHQR Program,
PCHs will increase their familiarity with the HCAHPS Survey, its
implementation, data collection, and data submissions protocols.
Comment: One commenter recommended that CMS postpone adoption of
the HCAHPS measure until the development and testing of the cancer
CAHPS survey is complete. Another commenter supported MAP's
recommendation to submit the cancer module of the HCAHPS Survey for
endorsement as soon as possible. One commenter recommended further
testing to address the cancer population, palliative/end-of-life-care,
and to include outpatient services in the survey before inclusion in
the PCHQR Program.
Response: We continue to monitor AHRQ's development of a cancer
CAHPS survey. We understand that further development and more extensive
testing of this instrument are still needed. In the interim, we believe
that the HCAHPS Survey is an appropriate instrument to measure
inpatient experience of care in the PCH setting. As noted above, the
widespread adoption of HCAHPS by acute care hospitals has resulted in
benchmarks that could be useful to PCHs in their quality improvement
efforts. The HCAHPS Survey will allow a PCH to assess key facets of
patient experience that are relevant to hospitals, such as
communication with patients, responsiveness of staff, cleanliness and
quietness of the hospital environment and discharge instructions. While
the HCAHPS Survey was designed for the inpatient setting, it provides a
starting point to monitor inpatient experience of care in PCHs.
After consideration of the public comments received, we are
finalizing the HCAHPS measure for the FY 2016 program and subsequent
years.
(4) Summary of Measures
In addition to the five measures that we previously finalized for
the PCHQR Program, we are finalizing one new SSI measure for reporting
beginning with

[[Page 50846]]

the FY 2015 PCHQR Program. We are also finalizing six new SCIP, five
new Clinical Process/Oncology Care Measures and the HCAHPS Survey for
reporting beginning with the FY 2016 PCHQR Program. We discuss below
our finalized policies regarding the form, manner, and timing of data
collection for these measures. The tables below list the previously
finalized measures and the new finalized measures for the PCHQR Program
beginning with the FY 2015 PCHQR Program.

------------------------------------------------------------------------
Previously finalized measures for
Topic the PCHQR program beginning with the
FY 2014 program year
------------------------------------------------------------------------
Safety and Healthcare-Associated Infection--HAI
------------------------------------------------------------------------
(NQF 0139) NHSN
Central Line-Associated Bloodstream
Infection (CLABSI) Outcome Measure
(NQF 0138) NHSN
Catheter-Associated Urinary Tract
Infections (CAUTI) Outcome Measure
------------------------------------------------------------------------
Clinical Process/Cancer-Specific Treatments
------------------------------------------------------------------------
(NQF 0223)
Adjuvant Chemotherapy is Considered
or Administered Within 4 Months
(120 days) of Surgery to Patients
Under the Age of 80 with AJCC III
(lymph node positive) Colon Cancer
(NQF 0559)
Combination Chemotherapy is
Considered or Administered Within 4
Months (120 days) of Diagnosis for
Women Under 70 with AJCC T1c, or
Stage II or III Hormone Receptor
Negative Breast Cancer
(NQF 0220)
Adjuvant Hormonal Therapy
------------------------------------------------------------------------

------------------------------------------------------------------------
Previously Finalized Measures for
Topic the PCHQR Program Beginning with the
FY 2015 Program Year
------------------------------------------------------------------------
Safety and Healthcare-Associated Infection--HAI
------------------------------------------------------------------------
(NQF 0753)
Harmonized Procedure Specific
Surgical Site Infection (SSI)
Outcome Measure
------------------------------------------------------------------------

------------------------------------------------------------------------
Previously Finalized Measures for
Topic the PCHQR Program Beginning with the
FY 2016 Program Year
------------------------------------------------------------------------
SCIP
------------------------------------------------------------------------
(NQF 0218) Surgery
Patients who Received Appropriate
VTE Prophylaxis within 24 Hrs Prior
to Surgery to 24 Hrs After Surgery
End Time
(NQF 0453) Urinary
Catheter Removed on Post-Operative
Day 1 or Post-Operative Day 2 with
Day of Surgery Being Day Zero
(NQF 0527)
Prophylactic Antibiotic Received
Within 1 Hr Prior to Surgical
Incision
(NQF 0528)
Prophylactic Antibiotic Selection
for Surgical Patients
(NQF 0529)
Prophylactic Antibiotic
Discontinued Within 24 Hrs After
Surgery End Time
(NQF 0284) Surgery
Patients on Beta Blocker Therapy
Prior to Admission who Received a
Beta Blocker During the
Perioperative Period
------------------------------------------------------------------------
Clinical Process/Oncology Care Measures
------------------------------------------------------------------------
(NQF 0382)
Oncology-Radiation Dose Limits to
Normal Tissues
(NQF 0383)
Oncology: Plan of Care for Pain
(NQF 0384)
Oncology: Pain Intensity Quantified
(NQF 0390)
Prostate Cancer-Adjuvant Hormonal
Therapy for High-Risk Patients
(NQF 0389)
Prostate Cancer-Avoidance of
Overuse Measure-Bone Scan for
Staging Low-Risk Patients
------------------------------------------------------------------------
Patient Engagement/Experience of Care
------------------------------------------------------------------------
(NQF 0166) HCAHPS
------------------------------------------------------------------------

6. Possible New Quality Measure Topics for Future Years
We seek to develop a comprehensive set of quality measures to be
available for widespread use for informed decision-making and quality
improvement in the PPS-exempt cancer hospital setting. Therefore,
through future rulemaking, we intend to propose to adopt new or updated
measures, such as measures that assess the safety and efficiency of
diagnosis and treatment of cancer, measures that take into account
novel diagnostic and treatment modalities, measures that assess
symptoms and functional status, measures of appropriate disease
management and care coordination, and measures of admissions for
complications of cancer and treatment for cancer, that help us further
our goal of achieving better health care and improved health for
Medicare beneficiaries who obtain cancer services through the
widespread dissemination and use of performance information.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27715), we
welcomed public comment and suggestions for the following measure
domains: clinical quality of care, care coordination, patient safety,
patient and caregiver experience of care, population/community health,
and efficiency. These domains align with those of the National Quality
Strategy, and we believe that selecting measures to address these
domains will promote better cancer care while bringing the PCHQR
Program in line with other established quality reporting and pay for
performance programs such as the

[[Page 50847]]

Hospital IQR Program, the Hospital VBP Program, and the Hospital OQR
Program, and others within our purview.
Comment: One commenter recommended the inclusion of three MAP
recommended and NQF-endorsed measures: Oncology: Radiation dose limits
to normal tissue, prostate cancer; Adjuvant hormonal therapy for high-
risk patients, and prostate cancer; and Avoidance of overuse of bone
scan for staging low-risk patients. One commenter preferred the
adoption of more long-term, cancer-specific outcome measures as well as
measures for less common malignancies. One commenter recommended
inclusion of more outcome measures in areas such as survival, quality
of life, infection, VTE rates and mortality. One commenter suggested
that CMS take a leadership role in developing measures of particular
relevance to this reporting program, such as measures of risk-adjusted,
stage-specific survival curves for various types of cancer (for
example, lung, pancreas, liver, thyroid and esophagus, breast,
colorectal). Another commenter recommended a multi-drug resistant
organism (MDRO) measure.
Response: We appreciate the commenters' comments and suggestions,
and we will consider them as we develop and select future measures. A
CMS contractor has actively engaged stakeholders to discuss viable
strategies to develop valid and reliable measures in these domains.
7. Maintenance of Technical Specifications for Quality Measures
Many of the quality measures used in different Medicare and
Medicaid reporting programs are NQF-endorsed. As part of its regular
maintenance process for endorsed performance measures, the NQF requires
measure stewards to submit annual measure maintenance updates and
undergo maintenance of endorsement review every 3 years. In the measure
maintenance process, the measure steward (owner/developer) is
responsible for updating and maintaining the currency and relevance of
the measure and will confirm existing or minor specification changes to
NQF on an annual basis. NQF solicits information from measure stewards
for annual reviews and in order to review measures for continued
endorsement in a specific 3-year cycle.
Through NQF's measure maintenance process, NQF-endorsed measures
are sometimes updated to incorporate changes that we believe do not
substantively change the nature of the measure. We believe these types
of maintenance changes are distinct from more substantive changes to
measures that result in what are considered new or different measures,
and that they do not trigger the same agency obligations under the
Administrative Procedure Act.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53562), we adopted a
policy to use a subregulatory process to make nonsubstantive updates to
NQF-endorsed measures used for the PCHQR Program. We also said that we
expected to make the determination of what constitutes a substantive
versus a nonsubstantive change on a case-by-case basis, and provided
examples of the types of changes that would fall into each category. We
further said that the policies regarding what is considered substantive
versus nonsubstantive changes would apply to all PCHQR Program
measures.
The technical specifications for the HCAHPS patient experience of
care survey are contained in the current HCAHPS Quality Assurance
Guidelines manual, which is available at HCAHPS On-Line Web site,
https://www.hcahpsonline.org. As necessary, HCAHPS Bulletins are issued
to provide notice of changes and updates to technical specifications in
HCAHPS data collection systems. The specifications for the other
measures are posted in the Specifications Manual on the QualityNet Web
site at www.qualitynet.org.
The Specifications Manual contains links to measure specifications,
data abstraction information, data submission information, and other
information necessary for PCHs to participate in the PCHQR Program. We
maintain the technical specifications for the quality measures by
updating this Manual periodically as we continue to expand and update
our PCHQR Program. These updates include detailed instructions for PCHs
to use when collecting and submitting data on the required measures and
are accompanied by notifications to PCHQR Program-participating users,
providing sufficient time between the change and effective dates in
order to allow users to incorporate changes and updates to the measure
specifications into data collection systems. We also revise the
Specifications Manual and provide links to reflect measure changes
which are also posted on the QualityNet Web site at: https://www.QualityNet.org.
8. Public Display Requirements for the FY 2014 Program and Subsequent
Years
Section 1866(k)(4) of the Act requires the Secretary to establish
procedures for making the data submitted under the PCHQR Program
available to the public. Such procedures shall ensure that a PCH has
the opportunity to review the data that is to be made public with
respect to the hospital prior to such data being made public. Section
1866(k)(4) of the Act also provides that the Secretary shall report
quality measures of process, structure, outcome, patients' perspective
on care, efficiency, and costs of care that relate to services
furnished in such hospital on the CMS Web site.
In order to meet these requirements, in the FY 2013 IPPS/LTCH PPS
final rule (77 FR 53562 through 56563), we finalized our policy to
publicly display the submitted data on the Hospital Compare Web site
(https://www.hospitalcompare.hhs.gov/) and established a preview period
of 30 days prior to making such data public.
This year we have more information on the state of our systems'
capability and readiness. Therefore, in the FY 2014 IPPS/LTCH PPS
proposed rule (78 FR 27716), we proposed to display publicly in 2014
the data for the measures listed below:
Adjuvant Chemotherapy is considered or administered within
4 months (120 days) of surgery to patients under the age of 80 with
AJCC III (lymph node positive) colon cancer (NQF 0223); and
Combination Chemotherapy is considered or administered
within 4 months (120 days) of diagnosis for women under 70 with AJCC
T1c, or Stage II or III hormone receptor negative breast cancer (NQF
0559).
However, we proposed to defer the public reporting of the remaining
three finalized measures for the FY 2014 PCHQR Program. We are in the
process of testing and assessing data quality, including the
reliability and validity of the measure rates, and do not believe that
the data will be ready for public posting until sometime in the future.
We will provide more information in future rulemaking.
We invited public comment on these proposals.
Comment: Many commenters supported CMS' proposal to defer public
reporting of the measures in the program while we continue to test and
assess the quality of the data.
Response: We appreciate the commenters' support.
Comment: One commenter recommended that CMS defer public reporting
of the central line-associated blood stream infection (CLABSI) measure
for the PCHQR Program until the NQF-endorsed measure has been revised
to exclude infections unrelated to central line placement to avoid

[[Page 50848]]

erroneous conclusions about infection rates at PCHs.
Response: We work very closely with the measure developer, the CDC,
to provide meaningful public reporting data. The current CLABSI measure
is NQF-endorsed and in use by the CDC and other quality reporting
programs. Reporting on this measure will help to address the quality of
care provided in PCH setting. We believe it is important to collect
data on CLABSI because CLABSI can lead to severe complications that
interfere with the quality of life of cancer patients. Further, given
successful use of this measure in the Hospital IQR Program, we think
that the measure as it is currently specified by the CDC provides
sufficient information to allow meaningful public reporting.
Comment: One commenter commended CMS' efforts in including public
reporting requirements in the PCHQR Program because the commenter
believed that the public reporting of quality measure performance at a
centralized Web site will improve a beneficiary's ability to make
informed health care choices and will facilitate a PCH's ability to
improve the quality and efficiency of its care. The commenter
encouraged CMS to make the data for the additional finalized measures
for 2014 publicly available as quickly as possible.
Response: We appreciate the commenter's support. It is our goal to
ensure that the public obtains access to valid and reliable quality of
care measure data in a timely manner. We intend to make data on these
measures available to the public as soon as possible.
Comment: One commenter recommended that CMS require all PCHs to
display prominently the performance outcomes in patient areas in a
manner similar to what is required by the ESRD QIP.
Response: There are no performance score certificates in the PCHQR
Program, and PCHs are not evaluated based on performance. We will make
the data publicly available on the Hospital Compare Web site (https://www.hospitalcompare.hhs.gov/). Such public display of the quality
measure data will inform patients and their caregivers of the quality
of care provided at PCHs.
Comment: One commenter recommended that CMS exercise care in
publicly reporting the SSI measure because reporting the measure for
cancer patients presents different challenges than reporting the
measure for general acute care hospital patients.
Response: We appreciate the commenter's recommendation. At this
time, this measure is specified for use by NQF for all postoperative
patients. Therefore, we believe it is appropriate to use for
postoperative cancer patients.
After consideration of the public comments we received, we are
finalizing the public display requirements for the FY 2014 program and
subsequent years.
9. Form, Manner, and Timing of Data Submission for the FY 2015 Program
and Subsequent Years
a. Background
Section 1866(k)(2) of the Act requires that, beginning with the FY
2014 PCHQR Program, each PCH must submit to the Secretary data on
quality measures specified under section 1866(k)(3) of the Act in a
form and manner, and at a time as specified by the Secretary.
The complete data submission requirements and submission deadlines
for FY 2014 have been posted on the QualityNet Web site at: https://www.QualityNet.org. We also refer readers to the FY 2013 IPPS/LTCH PPS
final rule (77 FR 53563 through 535567) for more information.
b. Waivers From Program Requirements
In our experience with other quality reporting and/or performance
programs, we have noted occasions when providers have been unable to
submit required quality data due to extraordinary circumstances that
are not within their control (for example, natural disasters). We do
not wish to unduly increase their burden during these times. Therefore,
in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27716), we proposed
that, beginning with FY 2014, PCHs may request and we may grant waivers
with respect to the reporting of required quality data when
extraordinary circumstances beyond the control of the PCH warrant. When
waivers are granted, we will notify the respective PCH.
Under the proposed process, in the event of extraordinary
circumstances not within the control of the PCH, such as a natural
disaster, the PCH may request a reporting extension or a complete
waiver of the requirement to submit quality data for one or more
quarters. Such facilities would submit to CMS a request form that would
be made available on the QualityNet Web site. The following information
should be noted on the form:
The PCH's CCN;
The PCH's name;
Contact information for the PCH's CEO and any other
designated personnel, including name, email address, telephone number,
and mailing address (the address must be a physical address, not a post
office box);
The PCH's reason for requesting an extension or waiver;
Evidence of the impact of extraordinary circumstances,
including but not limited to photographs, newspaper and other media
articles; and
A date when the PCH will again be able to submit PCHQR
Program data, and a justification for the proposed date.
We proposed that the request form must be signed by the PCH's CEO
or designee, and must be submitted within 30 days of the date that the
extraordinary circumstances occurred. Following receipt of the request
form, we would: (1) Provide a written acknowledgement, using the
contact information provided in the request, to the CEO and any
additional designated PCH personnel, notifying them that the PCH's
request has been received; and (2) provide a formal response to the CEO
and any additional designated PCH personnel, using the contact
information provided in the request, notifying them of our decision.
This proposal does not preclude us from granting waivers or
extensions to PCHs that have not requested them when we determine that
an extraordinary circumstance, such as an act of nature (for example, a
hurricane or other natural disaster that could reasonably affect a
PCH's ability to compile or report data), affects an entire region or
locale. If we make the determination to grant a waiver or extension to
PCHs in a region or locale, we proposed to communicate this decision
through routine communication channels to PCHs and vendors, by means of
memoranda, emails, and notices on the QualityNet Web site, among other
means.
We invited public comment on this proposal.
Comment: One commenter supported CMS' proposal.
Response: We appreciate the commenter's support.
After consideration of the public comment we received, we are
finalizing the waiver and extension process for the PCHQR Program.
c. Reporting Periods and Submission Timelines for the Finalized SSI
Measure
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27716 through
27717), we proposed that PCHs report the proposed SSI measure beginning
with January 1, 2014 events. We believe that this date will provide
enough advance notice for PCHs to prepare to report the measure, and we
base this

[[Page 50849]]

belief on our experience gained from collecting the SSI measure for the
Hospital IQR Program.
We proposed to calculate the SSI measure rate for purposes of the
FY 2015 program year using data from the first quarter (Q1) of calendar
year (CY) 2014. We recognize that using data from only one quarter may
not provide a complete picture of the quality of care provided at a
PCH. However, our intent is to align the PCHQR reporting timeline with
the reporting timeline used by the Hospital IQR Program as well as to
leverage current IT infrastructure to minimize cost and burden.
We proposed to calculate the SSI measure rate for purposes of the
FY 2016 program year using data from the last three quarters (Q2, Q3,
and Q4) of CY 2014, and we proposed to calculate the SSI measure rate
for purposes of the FY 2017 program year using data from all four
quarters (Q1, Q2, Q3, and Q4) of CY 2015.
We proposed that PCHs submit the SSI measure data to the CDC
through the NHSN database. This is the same procedural/reporting
mechanism requirement used for the CLABSI and CAUTI measures we
finalized in FY 2013 IPPS/LTCH PPS final rule (77 FR 53563 through
53564). The data submission and reporting procedures have been set
forth by CDC for NHSN participation in general and for submission of
the SSI measure to NHSN. We refer readers to the CDC's Web site (https://www.cdc.gov/nhsn/) for detailed data submission and reporting
procedures. After the final submission deadline has passed, we will
obtain the PCH-specific calculations that have been generated by the
NHSN for the PCHQR Program.
As noted above, we proposed to adopt a quarterly submission process
for the SSI measure that uses a reporting mechanism that is the same as
the one finalized for the Hospital IQR Program (77 FR 53539). We have
successfully implemented this reporting mechanism in the Hospital IQR
Program, and we strongly believe that this type of data submission is
the most feasible option because PCHs are accustomed to reporting the
CAUTI and CLABSI measures to the NHSN this way.
We welcomed public comment on this proposal.
Comment: Some commenters supported the proposed data collection and
reporting proposals for the SSI measure.
Response: We appreciate the commenters' support.
Comment: One commenter recommended that CMS allow sampling rather
than chart abstraction whenever possible to reduce the reporting burden
on PCHs.
Response: As indicated in the SSI measure specifications, the SSI
measure applies to all postoperative patients who fall into the
numerator criteria. We believe that the reporting burden for this
measure is minimized because PCHs can submit aggregate denominator data
every quarter. We also note that PCHs are required to report patient-
level infection events only for potentially infected patients, not all
patients. PCHs are also required to summarize their population of all
eligible patients receiving the surgical procedures by submitting
aggregate level counts. We do not allow sampling because previous
experience in the Hospital IQR Program indicates that PCHs will report
relatively few patients with potential infections. We believe that
complete submission of all potential patient-level infection events is
necessary to perform risk adjustment and ensure sufficient reliability
for SSI publicly reported measure data.
Comment: One commenter recommended that CMS calculate measure rates
for the PCHQR Program based on a full year of data for purposes of
public reporting.
Response: We appreciate the commenter's recommendation. As noted
above, we are attempting to align the PCHQR reporting timeline with the
reporting timeline used by the Hospital IQR Program, with the goal that
we will collect and report a full year of data for the SSI measure
beginning FY 2017. We will continue to consider and strive to report,
whenever operationally possible, 12 months of data.
Comment: A few commenters recommended that CMS implement a vendor
certification program for the PCHQR Program that would allow PCHs to
reduce redundant data collection and streamline PCHQR Program
reporting.
Response: We believe the commenter is recommending that we
implement something similar to the approved survey vendor list we use
for the HCAHPS. For the HCAHPS, vendors must undergo rigorous training
on how to conduct the survey prior to being added to our list of
approved survey vendors. The reason we require hospitals to either
receive training on how to conduct the survey or use vendors from our
list who have been trained to conduct the survey is because the HCAHPS
requires patient and/or patient caregiver interface to gather
information on hospitalization experience of care. Therefore, human
factors influence demand that survey conductors are trained in survey
administration techniques in order to yield the most objective,
reliable data. We do not think that there is a need for such a process
for collecting the other measures which are gathered through chart
abstraction. PCHs, however, can use any reliable and reputable vendor
to meet their needs with non-HCAHPS data collection and submission. We
do not require that such vendors be CMS-approved to submit PCHQR
Program data.
After consideration of the public comments we received, we are
finalizing the reporting periods and submission timelines for the SSI
measure. The table below outlines the finalized reporting periods and
submission timeframes for the FY 2015, FY 2016, and FY 2017 programs.

Finalized SSI Measure Reporting Periods and Submission Timeframes for the FY 2015, FY 2016 and FY 2017 Programs
----------------------------------------------------------------------------------------------------------------
Program year (FY) Reporting periods (CY) Data submission deadlines
----------------------------------------------------------------------------------------------------------------
2015.................................... Q1 2014 events (January 1, August 15, 2014.
2014--March 31, 2014).
2016.................................... Q2 2014 events (April 1, 2014-- November 15, 2014.
June 30, 2014).
Q3 2014 events (July 1, 2014-- February 15, 2015.
September 30, 2014).
Q4 2014 events (October 1, May 15, 2015.
2014--December 31, 2014).
2017.................................... Q1 2015 events (January 1, August 15, 2015.
2015--March 31, 2015).
Q2 2015 events (April 1, 2015-- November 15, 2015.
June 30, 2015).
Q3 2015 events (July 1, 2015-- February 15, 2016.
September 30, 2015).
Q4 2015 events (October 1, May 15, 2016.
2015--December 31, 2015).
----------------------------------------------------------------------------------------------------------------

[[Page 50850]]

d. Exceptions to Reporting and Data Submission for HAI Measures (CAUTI,
CLABSI, and SSI)
Last year we finalized policies for the Hospital IQR Program
providing exceptions to the reporting and data submission requirements
for the CLABSI, CAUTI and SSI measures (77 FR 53539). We implemented
these exceptions because we realize that some hospitals may not have
locations that meet the NHSN criteria for CLABSI or CAUTI reporting and
that that some hospitals may perform so few procedures requiring
surveillance under the SSI measure that the data may not be meaningful
for Hospital Compare or sufficiently reliable to be utilized for a
program year. We also finalized last year the CLABSI and CAUTI measures
for the PCHQR Program starting with FY 2014 (77 FR 53557), but did not
propose to adopt the same exceptions for those measures. This year, in
the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27717), we proposed to
adopt the same exceptions to the CLABSI and CAUTI measures for PCHs,
which are outlined in CDC's specifications manual, because we realize
that some hospitals may not have locations that meet the NHSN criteria.
We refer readers to the CDC's specifications manual for more
information on location exceptions for the CAUTI \115\ and CLABSI.\116\
---------------------------------------------------------------------------

\115\ Catheter-Associated Urinary Tract Infection (CAUTI) Event
at https://www.cdc.gov/nhsn/pdfs/pscManual/7pscCAUTIcurrent.pdf.
\116\ Central Line-Associated Bloodstream Infection (CLABSI)
Event at: https://www.cdc.gov/nhsn/pdfs/pscmanual/4psc_clabscurrent.pdf.
---------------------------------------------------------------------------

In addition, as with the Hospital IQR Program, we recognize that
some PCHs may perform so few procedures requiring surveillance under
the proposed SSI measure that the data may not be meaningful for
Hospital Compare or sufficiently reliable to be utilized for quality
reporting purposes. We proposed to provide an exception for these PCHs
from the reporting requirement in any given year if the PCH performed
less than a combined total of 10 colon and abdominal hysterectomy
procedures in the calendar year prior to the reporting year.
We proposed to provide PCHs with a single HAI exception form, to be
used for seeking an exception for any of the CLABSI, CAUTI, and SSI
measures. This exception form will be available on QualityNet Web site.
We invited public comment on this proposal.
Comment: One commenter recommended that for the SSI measure, CMS
grant reporting exceptions to any hospital performing fewer than 20
eligible colon and abdominal hysterectomy procedures in the preceding
calendar year.
Response: We appreciate the commenter's recommendation. As we
noted, we believe it is important to align our measures with the
Hospital IQR Program as much as possible to both streamline the
programs and reduce provider burden. At this time, the Hospital IQR
Program uses a case minimum of 10 for the SSI measure (77 FR 53539). As
we explained in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53539), we
chose a case minimum of 10 because we believe 10 cases will be
sufficiently meaningful for the results to be publicly displayed while
ensuring the availability of the most data possible for public
reporting. For detailed information regarding the number of cases, we
refer readers to the CDC specification manual: https://www.cdc.gov/hai/ssi/ssi.html.
After consideration of the public comments we received, we are
finalizing the exceptions to reporting and data submission for the HAI
Measures (CAUTI, CLABSI, and SSI). PCHs will not be required to report
these measures if the PCH performed less than a combined total of 10
colon and abdominal hysterectomy procedures in the calendar year prior
to the reporting year. We are also finalizing the location exceptions
listed in the CDC's specifications manual.^{117 118}
---------------------------------------------------------------------------

\117\ Catheter-Associated Urinary Tract Infection (CAUTI) Event
at https://www.cdc.gov/nhsn/pdfs/pscManual/7pscCAUTIcurrent.pdf.
\118\ Central Line-Associated Bloodstream Infection (CLABSI)
Event at: https://www.cdc.gov/nhsn/pdfs/pscmanual/4psc_clabscurrent.pdf.
---------------------------------------------------------------------------

e. Reporting and Data Submission Requirements for the Finalized
Clinical Process/Oncology Care Measures
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27717 through
27718), we proposed that PCHs report the proposed clinical process/
oncology care measures beginning with January 1, 2015 discharges. We
believe that this date will provide enough advance notice for PCHs to
prepare to report the measures. We believe that this timeline provides
PCHs with sufficient time to prepare to report on the new measures. We
proposed to calculate the clinical process/oncology care measure rates
for purposes of the FY 2016 program year using data from the first
quarter (Q1) of CY 2015, and that PCHs submit aggregated data for each
measure for this quarter during a data submission window that will be
open from July 1 through August 15, 2015. We proposed to calculate the
clinical process/oncology care measure rates for purposes of the FY
2017 program year using data from the last three quarters (Q2, Q3, and
Q4) of CY 2015. We proposed that PCHs submit aggregated data for each
measure for each of these quarters during a data submission window that
will be open from July 1 through August 15, 2016. We proposed to
calculate the clinical process/oncology care measure rates for purposes
of the FY 2018 program year using data from the four quarters (Q1, Q2,
Q3, and Q4) of CY 2016. We proposed that PCHs submit aggregated data
for each measure for each of these quarters during a data submission
window that will be open from July 1 through August 15, 2017.
For data collection, we proposed that PCHs submit aggregate-level
data through the CMS Web-based Measures Tool. This proposal mirrors the
requirements we have finalized for the IPFQR Program (77 FR 53655).
PCHs would submit all the data required for a particular program year
once annually during the data submission windows we proposed above, and
would do so via the PCH section on the QualityNet secure Web site.
However, the data input forms on the QualityNet Web site for such
submission will require aggregate data for each separate quarter.
Therefore, PCHs will need to track and maintain quarterly records for
their data. We refer readers to FY 2013 IPPS/LTCH PPS final rule (77 FR
53655) for more information on the CMS Web-based aggregated data
collection tool used in the IPFQR Program, which we proposed to also
use in the PCHQR Program. We believe that this option is less
burdensome for PCHs than patient-level reporting.
We also recognize that aggregate level reporting has the potential
to result in less accurate measure rates than patient-level reporting;
however, we have assessed our infrastructure readiness to collect these
measures in the PCHQR Program and believe that an aggregate data
submission approach is the most feasible approach at this time.
We welcomed public comment on the proposed reporting periods and
data collection methods/modes for the clinical process/oncology care
measures.
Comment: One commenter recommended that CMS utilize sampling rather
than chart abstraction whenever possible to conduct PCHQR reporting to
reduce burden.
Response: We appreciate the commenter's recommendation. As we noted
earlier, we will allow PCHs to report the clinical process/oncology
care measures using the same sampling methodologies we allow to be used
to

[[Page 50851]]

report these measures under the PQRS Program. The methodologies can be
found in the PQRS manual at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/PQRS/MeasuresCodes.html. In
future years, we intend to work with the measure developer during the
measure maintenance period so that we may develop a sampling
methodology that is tailored to PCH settings.
Comment: One commenter recommended that CMS calculate measure rates
for the PCHQR Program based on a full year of data for purposes of
public reporting.
Response: A commenter also raised this issue regarding our proposed
reporting periods and timelines for the SSI measure in section
IX.B.9.c. of the preamble of this final rule and we refer readers to
our response in that section.
Comment: For the clinical process/oncology care measures, a few
commenters recommended that CMS implement a vendor certification
program for the PCHQR Program that would allow PCHs to reduce redundant
data collection and streamline PCHQR Program reporting.
Response: Commenters also raised this issue regarding our proposed
reporting periods and timelines for the SSI measure in section
IX.B.9.c. of the preamble of this final rule and we refer readers to
our response in that section.
After consideration of the public comments we received, we are
finalizing the reporting and data submission requirements for the
Clinical Process/Oncology Care Measures. The table below outlines the
finalized reporting periods and submission timeframes for the FY 2016,
FY 2017, and FY 2018 programs for the clinical process/oncology care
measures.

Finalized Clinical Process/Oncology Care Measures--Reporting Periods and Submission Timeframes for the FY 2016--
FY 2018 Programs
----------------------------------------------------------------------------------------------------------------
Program year (FY) Reporting periods (CY) Data submission deadlines
----------------------------------------------------------------------------------------------------------------
2016.............................. Q1 2015 discharges July 1, 2015-August 15, 2015.
(January 1, 2015--March
31, 2015).
2017.............................. Q2 2015 discharges (April July 1, 2016-August 15, 2016.
1, 2015--June 30, 2015).
Q3 2015 discharges (July
1, 2015--September 30,
2015).
Q4 2015 discharges
(October 1, 2015--
December 31, 2015).
2018.............................. Q1 2016 discharges July 1, 2017--August 15, 2017.
(January 1, 2016--March
31, 2016).
Q2 2016 discharges (April
1, 2016--June 30, 2016.
Q3 2016 discharges (July
1, 2016--September 30,
2016).
Q4 2016 discharges
(October 1, 2016--
December 31, 2016).
----------------------------------------------------------------------------------------------------------------

f. Reporting and Data Submission Requirements for the Finalized SCIP
Measures
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27718), we
proposed that PCHs report the proposed SCIP measures beginning with
January 1, 2015 discharges. We believe that this date will provide
enough advance notice for PCHs to prepare to report the measures, and
our belief is based on the experience gained from collecting the SCIP
measures for the Hospital IQR Program.
We proposed to calculate the SCIP measure rates for purposes of the
FY 2016 program year using patient-level data from the first quarter
(Q1) of CY 2015. We recognize that using data from only one quarter may
not provide a complete picture of the quality of care provided at a
PCH. However, our intent is to align the PCHQR Program's current
reporting timeline with the reporting timeline used by the Hospital IQR
Program, as well as to leverage the current IT infrastructure to
minimize cost and burden. We proposed to calculate the SCIP measure
rates for purposes of the FY 2017 program year using the last three
quarters (Q2, Q3, and Q4) of CY 2015. This will allow us to calculate
measure rates for FY 2018 using data from all four quarters (Q1, Q2,
Q3, and Q4) of CY 2016.
We proposed that PCHs submit patient-level data for each of the
SCIP measures to CMS through the QualityNet infrastructure. This is the
same procedural/reporting mechanism requirement used for collecting
Hospital IQR Program SCIP process of care measures. We have
successfully implemented this reporting mechanism in the Hospital IQR
Program and intend to use the same reporting mechanism to collect data
for the PCHQR Program. We proposed the patient-level data submission
approach for the SCIP measures so that we can compare the data being
submitted by PCHs with that being submitted by hospitals under the
Hospital IQR Program. We also believe that patient-level data will
provide us with more granular information that we can use to better
assess the quality of care provided at a PCH.
We welcomed public comment on the proposed reporting and submission
requirements for the proposed SCIP measures and welcomed feedback on
using patient-level versus other types of data submission.
Comment: Some commenters supported the proposed data collection and
reporting proposals for the SCIP measures.
Response: We appreciate the commenters' support.
Comment: Some commenters urged that, if adopted, CMS implement a
sampling methodology for reporting the SCIP measures. Commenters noted
that doing so would reduce burden.
Response: As we stated above, we will allow PCHs to report the SCIP
measures using the same sampling methodology that we currently allow
for the reporting of the same measures by subsection (d) hospitals
under the Hospital IQR Program (outlined in the specification manual
https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1138115987129).
Comment: One commenter requested that CMS provide clarification
regarding the use of an approved core measure vendor to meet the
reporting requirements for the SCIP measures.
Response: Commenters also raised this issue regarding our proposed
reporting periods and timelines for the SSI measure in section
IX.B.9.c. of the preamble of this final rule and we refer readers to
our response in that section.
Comment: For the SCIP measures, one commenter recommended that CMS
calculate measure rates for the PCHQR Program based on a full year of
data for purposes of public reporting.
Response: A commenters also raised this issue regarding our
proposed reporting periods and timelines for the SSI measure in section
IX.B.9.c. of the preamble of this final rule and we refer readers to
our response in that section.

[[Page 50852]]

Comment: For the SCIP measures, a few commenters recommended that
CMS implement a vendor certification program for the PCHQR Program that
would allow PCHs to reduce redundant data collection and streamline
PCHQR Program reporting.
Response: Commenters also raised this issue regarding our proposed
reporting periods and timelines for the SSI measure in section
IX.B.9.c. of the preamble of this final rule and we refer readers to
our response in that section.
After consideration of the public comments we received, we are
finalizing the reporting and data submission requirements for the SCIP
measures. The table below outlines the finalized reporting periods and
submission timeframes for the FY 2016, FY 2017, and FY 2018 programs.

Finalized SCIP Measures--Reporting Periods and Submission Timeframes for
the FY 2016--FY 2018 Programs
------------------------------------------------------------------------
Reporting periods
Program year (FY) (CY) Data submission deadlines
------------------------------------------------------------------------
2016................. Q1 2015 discharges August 15, 2015.
(January 1, 2015-
March 31, 2015).
2017................. Q2 2015 discharges November 15, 2015.
(April 1, 2015-June
30, 2015).
Q3 2015 discharges February 15, 2016.
(July 1, 2015-
September 30, 2015).
Q4 2015 discharges May 15, 2016.
(October 1, 2015--
December 31, 2015).
2018................. Q1 2016 discharges August 15, 2016.
(January 1, 2016--
March 31, 2016).
Q2 2016 discharges November 15, 2016.
(April 1, 2016--June
30, 2016).
Q3 2016 discharges February 15, 2017.
(July 1, 2016--
September 30, 2016).
Q4 2016 discharges May 15, 2017.
(October 1, 2016--
December 31, 2016).
------------------------------------------------------------------------

g. HCAHPS Requirements
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27719 through
27720), we proposed HCAHPS requirements that mirror those used for the
Hospital IQR Program (77 FR 53537 through 53538). Similarly, we
proposed that PCHs submit HCAHPS data in accordance with the current
HCAHPS Quality Assurance Guidelines and the quarterly data submission
deadlines, both of which are posted at https://www.hcahpsonline.org.
Like acute care hospitals that submit HCAHPS data under the Hospital
IQR Program, we proposed that PCHs will have approximately 13 weeks
after the end of a calendar quarter to submit HCAHPS data for that
quarter to the QIO Clinical Warehouse, also referred to as the ``HCAHPS
data warehouse.''
In order for a PCH to participate in the collection of HCAHPS data,
a PCH must either: (1) Contract with an approved HCAHPS Survey vendor
that will conduct the survey and submit data on the PCH's behalf to the
QIO Clinical Warehouse; or (2) self-administer the survey without using
a vendor provided that the PCH attends HCAHPS training and meets
Minimum Survey Requirements as specified on the HCAHPS Web site at:
https://www.hacahpsonline.org. A current list of approved HCAHPS Survey
vendors can be found on the HCAHPS Web site.
We proposed that a PCH which chooses to contract with a survey
vendor must provide the sample frame of HCAHPS-eligible discharges to
its survey vendor with sufficient time to allow the survey vendor to
begin contacting each sampled patient within 6 weeks of discharge from
the hospital. (We refer readers to the Quality Assurance Guidelines
located at https://www.hcahpsonline.org, for details about HCAHPS Survey
administration.) We would strongly encourage PCHs to submit their
entire patient discharge list, excluding patients who had requested
``no publicity'' status or who are excluded because of State
regulations, in a timely manner to their survey vendor to allow
adequate time for sample creation, sampling, and survey administration.
We emphasize that PCHs must also provide the administrative data that
is required for HCAHPS in a timely manner to their survey vendor. This
includes the patient's MS-DRG at discharge, or alternative information
that can be used to determine the patient's service line, in accordance
with the survey protocols in the most recent HCAHPS Quality Assurance
Guidelines.
We note that HCAHPS Quality Assurance Guidelines require that
hospitals maintain complete discharge lists that indicate which
patients were eligible for the HCAHPS Survey, which patients were not
eligible, which patients were excluded, and the reason(s) for
ineligibility and exclusion. (We refer readers to the Quality Assurance
Guidelines located at https://www.hcahpsonline.org for details about
HCAHPS eligibility and sample frame creation.) In addition, the PCH
must authorize the survey vendor to submit data via My QualityNet, the
secure part of the QualityNet Web site, on the PCH's behalf.
We proposed that the PCHs obtain and submit at least 300 completed
HCAHPS Surveys in a rolling four-quarter period unless the PCH is too
small to obtain 300 completed surveys. We proposed that the absence of
a sufficient number of HCAHPS-eligible discharges will be the only
acceptable reason for obtaining and submitting fewer than 300 completed
HCAHPS Surveys in a rolling four quarter period. We proposed that if a
PCH obtains fewer than 100 completed surveys, the PCH's scores will be
accompanied by an appropriate footnote on the Hospital Compare Web site
alerting the Web site users that the scores should be reviewed with
caution, as the number of surveys may be too low to reliably assess PCH
performance.
After the survey vendor submits the data to the QIO Clinical
Warehouse, we strongly recommend that PCHs employing a survey vendor
promptly review the two HCAHPS Feedback Reports (the Provider Survey
Status Summary Report and the Data Submission Detail Report) and the
HCAHPS Review and Correction Report that are available. These reports
will enable a PCH to ensure that its survey vendor has submitted the
data on time, the data has been accepted into the QIO clinical
Warehouse, and the data accepted into the QIO Clinical Warehouse are
complete and accurate.
In order to ensure compliance with HCAHPS Survey and administration
protocols, we proposed that PCHs and survey vendors must participate in
oversight activities, which will include onsite visits and/or
conference calls. During the oversight process, the HCAHPS Project Team
will review the PCH's or survey vendor's survey systems and assess
protocols based upon the most recent HCAHPS Quality Assurance
Guidelines. All materials relevant to survey administration will be
subject to review. The systems and

[[Page 50853]]

program review includes, but is not limited to: (a) Survey management
and data systems; (b) printing and mailing materials and facilities;
(c) telephone and Interactive Voice Response (IVR) materials and
facilities; (d) data receipt, entry and storage facilities; and (e)
written documentation of survey processes. As needed, hospitals and
survey vendors will be subject to follow-up site visits or conference
calls. We point out that the HCAHPS Quality Assurance Guidelines state
that hospitals should refrain from activities that explicitly influence
how patients respond on the HCAHPS Survey. We proposed that if we
determine that a PCH is not compliant with HCAHPS program requirements,
we may determine that the PCH is not submitting HCAHPS data that meet
the requirements of the PCHQR Program.
We strongly encouraged those PCHs that are currently administering
the HCAHPS Survey and submitting survey data to CMS to continue to do
so. We welcomed public comment on our proposed HCAHPS requirements for
PCHs.
Comment: One commenter did not support the HCAHPS reporting
proposals because this commenter did not support the adoption of the
HCAHPS Survey for the PCHQR Program.
Response: We believe that the HCAHPS Survey is an appropriate
instrument to measure inpatients' experience of care in the PCH
setting. The widespread adoption of HCAHPS by acute care hospitals has
resulted in benchmarks that could be useful to PCHs in their quality
improvement efforts. The HCAHPS Survey produces comparable measures of
key facets of patient experience that are relevant to PCHs, such as
communication with patients, responsiveness of staff, cleanliness and
quietness of the PCH environment and discharge instructions.
After consideration of the public comment we received, we are
finalizing the HCAHPS requirements as proposed. Below is a table
outlining the finalized HCAHPS reporting and data submission
requirements.

HCAHPS Measure--Reporting Periods and Submission Timeframes for the FY
2016--FY 2018 Programs
------------------------------------------------------------------------
Reporting periods
Program year (FY) (CY) Data submission deadlines
------------------------------------------------------------------------
2016................. Q2 2014 discharges October 1, 2014.
(April 1, 2014-June
30, 2014).
Q3 2014 discharges January 7, 2015.
(July 1, 2014-
September 30, 2014).
Q4 2014 discharges April 1, 2015.
(October 1, 2014-
December 31, 2014).
2017................. Q1 2015 discharges July 1, 2015.
(January 1, 2015-
March 31, 2015).
Q2 2015 discharges October 7, 2015.
(April 1, 2015-June
30, 2015).
Q3 2015 discharges January 6, 2016.
(July 1, 2015-
September 30, 2015).
Q4 2015 discharges April 6, 2016.
(October 1, 2015-
December 31, 2015).
2018................. Q1 2016 discharges July 6, 2016.
(January 1, 2016-
March 31, 2016).
Q2 2016 discharges October 5, 2016.
(April 1, 2016-June
30, 2016).
Q3 2016 discharges January 4, 2017.
(July 1, 2016-
September 30, 2016).
Q4 2016 discharges April 5, 2017.
(October 1, 2016-
December 31, 2016).
------------------------------------------------------------------------

C. Long-Term Care Hospital Quality Reporting (LTCHQR) Program

1. Statutory History
In accordance with section 1886(m)(5) of the Act, as added by
section 3004 of the Affordable Care Act, the Secretary established the
Long-Term Care Hospital Quality Reporting (LTCHQR) Program. Under the
LTCHQR Program, for the FY 2014 annual payment update (which we also
refer to as the ``payment determination'') and subsequent years, in the
case of an LTCH that does not submit data to the Secretary in
accordance with section 1886(m)(5)(C) of the Act with respect to such a
rate year, any annual update to a standard Federal rate for discharges
for the hospital during the rate year, and after application of section
1886(m)(3) of the Act, shall be reduced by two percentage points.
Section 1886(m)(5)(D)(iii) of the Act required the Secretary to
publish the selected measures for the LTCHQR Program that will be
applicable with respect to the FY 2014 payment determination no later
than October 1, 2012.
Under section 1886(m)(5)(D)(i) of the Act, the quality measures for
the LTCHQR Program are measures selected by the Secretary that have
been endorsed by an entity that holds a contract with the Secretary
under section 1890(a) of the Act, unless section 1886(m)(5)(D)(ii) of
the Act applies. This contract is currently held by the National
Quality Forum (NQF). Additional information regarding NQF and its
measure review processes is available at: https://www.qualityforum.org/Measuring_Performance/Measuring_Performance.aspx.
While as a general matter the Secretary must select endorsed
measures for the LTCHQR Program, section 1886(m)(5)(D)(ii) of the Act
provides that an exception may be made in the case of a specified area
or medical topic determined appropriate by the Secretary for which a
feasible and practical measure has not been endorsed by the entity that
holds a contract with the Secretary under section 1890(a) of the Act.
In such a case, section 1886(m)(5)(D)(ii) of the Act authorizes the
Secretary to specify a measure(s) that is not so endorsed, as long as
due consideration is given to measures that have been endorsed or
adopted by a consensus organization identified by the Secretary. The
LTCHQR Program was implemented in section VII.C. of the FY 2012 IPPS/
LTCH PPS final rule (76 FR 51743 through 51756).
2. General Considerations Used for Selection of Quality Measures for
the LTCHQR Program
We seek to promote higher quality and more efficient health care
for the beneficiaries we serve. Quality reporting programs, as well as
public reporting of that information, furthers such quality improvement
efforts. Quality measurement remains the key tool to the success of
these programs. Therefore, the selection of only the highest caliber of
measures remains a constant priority for CMS.
We seek to adopt measures for the LTCHQR Program that promote
better, safer, and more efficient care. Our measure development and
selection activities for the LTCHQR Program take into account national
priorities, such as those established by the National Priorities
Partnership (https://www.qualityforum.org/Setting_Priorities/NPP/National_Priorities_Partnership.aspx), HHS Strategic Plan (https://
www.hhs.gov/secretary/about/priorities/

[[Page 50854]]

priorities.html), and the National Quality Strategy (NQS) (https://www.ahrq.gov/workingforquality/nqs/nqs2011annlrpt.htm).
We must also consider input from the Measure Applications
Partnership (MAP) when selecting measures under the LTCHQR Program. The
MAP is composed of multi-stakeholder groups convened by our current
section 1890 contractor, the NQF. The NQF must convene these
stakeholders and provide us with the stakeholders' input on the
selection of certain categories of quality and efficiency measures as
part of a pre-rulemaking process described in section 1890A of the Act.
We, in turn, must take this input into consideration in selecting those
categories of measures. The NQF provided MAP input to CMS in February
of 2013, as required under section 1890A(a)(3) of the Act. This input
appears at: https://www.qualityforum.org/Setting_Priorities/Partnership/Measure_Applications_Partnership.aspx. Measures proposed
for the LTCHQR Program in the FY 2014 IPPS/LTCH PPS proposed rule (78
FR 27720 through 27734) were measures CMS included under its List of
Measures Under Consideration (MUC List) for December 1, 2012\119\, a
list CMS must make public by December 1 of each year, as part of the
pre-rulemaking process, as described in section 1890A(a)(2). The list
is discussed in the MAP Pre-Rulemaking Report available at: https://
www.qualityforum.org/Publications/2013/02/MAP_Pre-Rulemaking_Report_
_-February_2013.aspx (pp. 170-176). The MAP supported the direction
of each of the proposed measures described below, noting the measure
concepts as promising for several of them, and requiring further
testing and development.
---------------------------------------------------------------------------

\119\ Available at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=72363.
---------------------------------------------------------------------------

In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27724 through
27730), in the absence of any NQF-endorsed measures for the LTCH
setting and after due consideration to any measures that may have been
endorsed or adopted by a consensus organization, we proposed measures
that are fully supported by the MAP for the LTCHQR Program, or that
most closely align with the national priorities discussed in section
IX.C.2. of the preamble of this final rule. In the absence of the MAP's
full support, we have in some cases deemed it appropriate to propose
measures for which there is MAP support for the measure concept.
Further discussion of why a particular measure is high priority in the
LTCH setting is included for each proposed measure below.
In addition, to the extent practicable, we have for each proposed
measure that is not endorsed by the NQF or another consensus
organization, sought measures that have been recommended by multi-
stakeholder organizations, and/or been developed with the input of
providers, purchasers/payers, and a variety of other stakeholders.
While we did not invite public comments on the general
considerations used for selection of quality measures for the LTCHQR
Program, we received input from several commenters. We greatly
appreciate the commenters' views on our previously finalized policies.
Although we did not make any proposals in the FY 2014 IPPS/LTCH PPS
proposed rule on these topics or finalized policies, we will consider
all of these views for future rulemaking and program development. We
have responded, however, to a few comments in which commenters asked
only for a clarification related to an existing policy or measure. We
summarize these comments and our responses, below.
Comment: Several commenters encouraged CMS to refrain from adopting
measures into the LTCHQR Program, until after they have been endorsed
by the NQF for use in the LTCH setting. One commenter also encouraged
CMS to only include measures that have gone through the full NQF review
process, as this process is significantly more rigorous than the
expedited limited endorsement review process. Several commenters
expressed concerns regarding the expansion of existing measures from
other healthcare settings to the LTCH setting. These commenters
encouraged CMS to either develop new measures specifically for the LTCH
setting, or wait until measures have been re-specified and tested for
the LTCH setting, before applying for NQF endorsement and eventually
including these measures in the LTCHQR Program.
Response: We agree that the NQF endorsement process is an important
part of measure development. We have generally adopted NQF-endorsed
measures whenever possible. However, where such measures do not exist
for the LTCH setting, we may adopt measures that are not NQF-endorsed
under the Secretary's exception authority set out in section
1886(m)(5)(D)(ii) of the Act. When measures are not NQF-endorsed, we
actively work with NQF to re-specify and expand endorsement of these
measures to the LTCH setting. Given the critical quality and patient
safety issues we address in the LTCHQR Program, there have been times,
such as in the case of NQF 0678, Percent of Residents or
Patients with Pressure Ulcers That Are New or Worsened (Short-Stay),
that we have finalized an application of a quality measure for the
LTCHQR Program, while we were still working on re-specification, and
later obtained NQF endorsement for the expansion. We believe that the
NQF endorsement process is public and transparent and would encourage
LTCHs and stakeholders to participate in that process.
Comment: Several commenters noted that CMS should, in its selection
of measures, more closely align with the recommendations of MAP. These
commenters noted that the MAP did not recommend any of the measures
proposed for the FY 2017 and FY 2018 LTCHQR payment determinations and
subsequent years, but rather, ``supported the direction'' of these
measures and suggested that further testing and refinement is needed
prior to introducing these measures in the LTCHQR Program.
Response: We agree that MAP guidance is an important part of the
measure selection process. When the MAP supports only the direction of
a measure, we carefully consider how that measure will need to be
modified for expansion to the LTCH setting. However, while submission
of measures to the MAP and consideration of its recommendations are
part of our measure selection process, we also consider the input of
stakeholders, subject matter and industry experts through the technical
expert panels (TEPs) periodically convened by our measure development
contractor, as well as national healthcare priorities suggested by
groups such as MedPAC, and as set forth in the National Quality
Strategy.
Comment: Two commenters encouraged CMS to work more closely with
stakeholders to identify, select and modify quality measures to include
in the LTCHQR Program. The commenters encouraged CMS to work with LTCHs
to identify measures they currently use for quality reporting, to take
advantage of measures from stakeholders such as LTCH associations and
to use TEPs.
Response: We appreciate the commenters' suggestions and we stress
that we place a high value on stakeholder feedback when developing
quality measures. Throughout the measure selection process, we have
sought input from a variety of stakeholders, including technical
experts and LTCHs. A CMS Listening Session was held on November 15,

[[Page 50855]]

2010; Special Open Door Forums were held on December 6, 2010, September
21, 2011, and April 13, July 26, August 30, September 20, and October
18 of 2012; and our measure developer contractor convened LTCHQR TEPs
on January 31, July 6, September 27, and December 13 of 2011, and March
8 and November 7 of 2012. We will continue to solicit input from
stakeholders throughout the development and expansion of the LTCHQR
Program.
Comment: Several commenters expressed concern regarding the pace
with which items are being added to the LTCH CARE Data Set, and one
noted that this may require LTCHs to shift resources from prevention
activities to reporting activities.
Response: By building upon preexisting resources for data
collection and submission, we intend to foster alignment of LTCHQR
Program measures and measures in other quality reporting programs. This
should help to reduce the administrative burden related to data
collection and submission. We are aware that the initial setup and
acclimation to the data collection vehicle--the LTCH CARE Data Set--has
already occurred for a vast majority of LTCHs as part of the
implementation of an application of the measure Percent of Residents or
Patients with Pressure Ulcers That Are New or Worsened (Short-Stay)
(NQF 0678) for the LTCHQR Program for the FY 2014 payment
determination. Further, we anticipate that with the implementation of
the Percent of Residents or Patients Who Were Assessed and
Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) (NQF
0680) for the LTCHQR Program for the FY 2016 payment
determination, which we adopted in the FY 2013 IPPS/LTCH final rule,
LTCHs will be very familiar with the LTCH CARE Data Set through its use
for the LTCHQR Program by the time when LTCHs are required to submit
data on the new measures we included in the proposed rule. Therefore,
we believe the transition to reporting one additional measure via the
LTCH CARE Data Set may be less burdensome.
3. Process for Retention of LTCHQR Program Measures Adopted in Previous
Payment Determinations
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53614 through
53637), for the LTCHQR Program, we adopted a policy that once a quality
measure is adopted, it is retained for use in subsequent years, unless
otherwise stated. For the purpose of streamlining the rulemaking
process, when we initially adopt a measure for the LTCHQR Program for a
payment determination, this measure will be automatically adopted for
all subsequent years or until we propose to remove, suspend, or replace
the measure. For further information on how measures are considered for
removal, suspension, or replacement, we refer readers to that final
rule (77 FR 53614 and 53615).
4. Process for Adopting Changes to LTCHQR Program Measures
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53615 through
53616), we finalized our policy that if the NQF updates an endorsed
measure that we have adopted for the LTCHQR Program in a manner that we
consider to not substantively change the nature of the measure, we will
use a subregulatory process to incorporate those updates to the measure
specifications that apply to the LTCHQR Program. Examples of such
nonsubstantive changes could be updated diagnosis or procedure codes,
medication updates for categories of medications, changes to exclusions
to the patient population, or minor changes to definitions. Examples of
changes that we might consider to be substantive would be those in
which the changes are so significant that the measure is no longer the
same measure, or when a standard of performance assessed by a measure
becomes more stringent. Specific examples of what we might consider
substantive are changes in acceptable timing of medication, procedure/
process, or test administration, or expansion of the measure to a new
setting. The subregulatory process for nonsubstantive changes will
include revision of the LTCHQR Program Manual and posting of updates on
our LTCHQR Program Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/index.htm.
While we did not propose changes to this process for adopting
changes to LTCHQR Program measures, we received input from several
commenters. We greatly appreciate the commenters' views on these topics
and previously finalized measures. We will consider all of these views
for future rulemaking and program development. We summarize these
comments on existing policies and/or measures and our responses, below.
Comment: Several commenters recommended that CMS more clearly
define the process involved in adopting changes to LTCHQR Program
quality measures and allow for public comment before adopting,
changing, or removing approved measures, as minor changes to
definitions can result in a substantive change to a quality measure.
Many commenters noted that clear definitions are essential to the
successful implementation of quality measures in the LTCH setting. More
specifically, this commenter suggested that LTCHs must fully understand
the specifics of each measure and CMS must communicate the standards
for measuring quality measure performance and improvement. Further,
commenters suggested that the proposed quality measures be subject to
periodic review, including public comment. One commenter stated that
CMS did not provide clear information regarding the process by which
substantive changes will be made to quality measures.
Response: We appreciate these commenters' input and agree on the
importance of allowing for public comment as part of the process of
adopting changes to LTCHQR Program measures. Information on this
process, as well as the process by which substantial changes will be
made to quality measures, is described in the FY 2013 IPPS/LTCH PPS
final rule (77 FR 53615 through 53616). We will review these comments
and take them into consideration when considering future changes.
We agree that clear definitions are required for the successful
implementation of quality measures in the LTCH setting. When available,
we include detailed measure definitions in proposed rulemaking.
Following rulemaking, we will release the final technical data
submission specifications and updated LTCHQR Program Manual. We also
plan to offer ongoing training related to all CMS- and CDC-stewarded
measures adopted into the LTCHQR Program as we move forward in our
expansion of this program. We will continue to provide multiple
resources that include detailed measure information to continue the
successful implementation of the LTCHQR Program. We invite the public
to visit the LTCHQR Program Web site for future updates on our training
activities and ongoing activities we have undertaken as part of LTCHQR
Program implementation at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/.
We plan to provide specific information regarding the standards for
measuring quality measure performance and improvement. We have alerted
providers with letters of non-compliance for October 1, 2012 through
December 31, 2012 quarter for CAUTI,

[[Page 50856]]

CLABSI, and Pressure Ulcer quality measure data.
Regarding the suggestion that proposed quality measures be subject
to periodic review, we have outlined the criteria that it will use to
consider a quality measure for removal (77 FR 53614 through 53615). If
we consider a measure for removal, the public will be given the
opportunity to comment through the rulemaking process. In addition, we
participate in a periodic review of all NQF-endorsed measures by
submitting these measures for NQF maintenance review every three years.
5. Previously Adopted Quality Measures for the FY 2014 and FY 2015
Payment Determinations and Subsequent Years
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53616 through
53623), we retained the application of NQF 0678 to the LTCH
setting (initially adopted in the FY 2012 IPPS/LTCH PPS final rule (76
FR 51745 through 51750)) and adopted updated versions of NQF
0138 and NQF 0139, for the FY 2014 and FY 2015
payment determinations and subsequent years as listed in the following
table:

LTCHQR Program Quality Measures Finalized in the FY 2013 IPPS/LTCH PPS Final Rule for the FY 2014 and FY 2015
Payment Determinations and Subsequent Years
----------------------------------------------------------------------------------------------------------------
NQF Measure ID Measure title
----------------------------------------------------------------------------------------------------------------
NQF 0138................................... National Health Safety Network (NHSN) Catheter-associated
Urinary Tract Infection (CAUTI) Outcome Measure.
NQF 0139................................... National Health Safety Network (NHSN) Central line-
associated Blood Stream Infection (CLABSI) Outcome
Measure.
Application of NQF 0678.................... Percent of Residents with Pressure Ulcers That are New or
Worsened (Short-Stay).
----------------------------------------------------------------------------------------------------------------

We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR
53619 through 53623 and 53667 through 53672) for a discussion of the
data collection and submission methods for these measures for the FY
2014 payment determination and subsequent years and for references to
the descriptions of and specifications for these measures.
While CMS did not propose any changes in the FY 2014 IPPS/LTCH PPS
proposed rule to these previously adopted quality measures for the FY
2014 and FY 2015 payment determinations and subsequent years, CMS
received input from several commenters. We greatly appreciate the
commenters' views on these previously finalized policies, and will
consider all of these views for future rulemaking and program
development. We have responded below, however, to a few comments in
which commenters asked only for a clarification related to an existing
policy and/or measure.
Comment: One commenter suggested that the definition of the CAUTI
measure (NQF 0138) be broadened to include the entire
hospital, and not just intensive care unit (ICU) stays. Another
commenter expressed concern about the adaptation of the CAUTI measure
to the long-term care environment. Of particular concern is that LTCHs
may need resources to enroll, receive training, and educate staff on
CDC's NSHN basics, including surveillance definitions and processes.
Response: The CAUTI measure (NQF 0138), as currently
specified and finalized for the LTCHQR Program (77 FR 53616 through
53623), is applicable at the hospital level. It is not solely for ICU
stays. With respect to the concern of resources and training, before
the implementation of the LTCHQR Program, many LTCHs were already
submitting data to the CDC's National Health Safety Network (NHSN)
either voluntarily or as part of mandatory State reporting requirements
for HAIs. For these LTCHs, the burden related to coping with the
requirements of the LTCHQR Program was reduced because of pre-existing
familiarity with the NHSN submission process. Further, we provided free
training in May 2012, and both CDC and CMS have made extensive
resources available to support providers and other stakeholders with
the implementation of the LTCHQR Program. We plan to offer ongoing
training related to all CMS- and CDC-stewarded measures adopted into
the LTCHQR Program as we move forward in our expansion of this program.
Please continue to check the LTCHQR Program Web site for updates on our
training activities at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/.
Comment: One commenter noted that CAUTI rates would not be
comparable with different populations, as LTCHs comprise a very mixed
population.
Response: Under the LTCHQR Program, CAUTI data will be analyzed
solely for LTCHs. LTCHQR Program CAUTI data will not be compared to any
data collected from hospitals, IRFs, or SNFs Because of the patient
safety concerns CAUTIs pose to the patients with multiple comorbities
in the LTCH setting, the burden they create on the healthcare system as
well as available guidelines for prevention of CAUTIs, we continue to
believe the measure remains relevant for the LTCHQR Program and believe
it promotes awareness and encourages implementation of CAUTI prevention
and control procedures in the LTCH setting. Further measure information
is available on the NQF Web site at https://www.qualityforum.org/QPS/0138.
Comment: One commenter expressed concern regarding the changes that
have been made to the NHSN definition effective January 1, 2013. For
example, in the past, hospitals did not have to report CAUTIs when the
hospital determined that the CAUTI was not the primary site of
infection. With the recent change in definition, hospitals are now
required to report CAUTIs in addition to the primary infection.
Response: The CAUTI measure was previously finalized for the LTCHQR
Program for the FY 2014 payment determination in the FY 2012 IPPS/LTCH
PPS final rule (76 FR 51745 through 51747). For this measure,
facilities have never been able to state that a CAUTI was secondary to
another site of infection (unlike CLABSIs). According to the measure
steward (CDC), NHSN's definition of CAUTI did not change in 2013, and
the revised criteria in 2013 for what constitutes an healthcare-
associated infection (HAI) amounts to providing operational guidance--
already widely in use before the guidance was published--that makes
identifying and reporting HAIs more consistent across healthcare
facilities. There was no change in the NQF measure specification; the
CAUTI measure remains the same. As a result, CAUTI data reported for
infections occurring in 2013 can be compared to the CAUTI baseline
established using CAUTI data reported for infections occurring in 2012.
In short, there was no significant change in the measure and the
changes in HAI criteria have no bearing on reporting obligations.

[[Page 50857]]

Therefore, we do not believe that this should be addressed through
rulemaking, as the NQF measure remains fully endorsed and NQF measure
specifications criteria or the definition in the NHSN. Additional
information related to the change in HAI definition is available at
https://www.cdc.gov/nhsn/pdf/pscmanual/errata2013.pdf.
Comment: One commenter suggested that the definition of the CLABSI
measure (NQF 0139) be broadened to include the entire
hospital, and not just intensive care unit (ICU) stays. Another
commenter expressed concern about the adaptation of the CLABSI measure
to the long-term care environment. Of particular concern is that LTCHs
may need resources to enroll, receive training, and educate staff on
CDC's NSHN basics, including surveillance definitions and processes.
Response: The CLABSI measure (NQF 0139), as currently
specified and finalized for the LTCHQR Program in the FY 2013 IPPS/LTCH
PPS final rule (77 FR 53616 through 53623), is applicable at the
hospital level. It is not solely for ICU stays. With respect to the
concern of resources and training, before the implementation of the
LTCHQR Program, many LTCHs were already submitting data to the NHSN
either voluntarily or as part of mandatory State reporting requirements
for HAIs. For these LTCHs, the burden related to coping with the
requirements of the LTCHQR Program was reduced because of pre-existing
familiarity with the NHSN submission process. Further, we provided free
training in May 2012 and both CDC and CMS have made extensive resources
available to support LTCHs and other stakeholders with the
implementation of the LTCHQR Program.
Comment: One commenter noted that CLABSI rates would not be
comparable with different populations, as LTCHs comprise a very mixed
population.
Response: Under the LTCHQR Program, CLABSI data will be analyzed
solely for LTCHs. LTCHQR Program CLABSI data will not be compared to
any data collected from hospitals, IRFs, or SNFs. Because of the
patient safety problem posed by CLABSIs to the chronically ill patient
population in the LTCH setting, as well as its burden on the healthcare
system, we believe it is appropriate to adopt this measure for the
LTCHQR Program in order to promote awareness and encourage
implementation of CLABSI control procedures in the LTCH setting.
Further measure information is available on the NQF Web site at https://www.qualityforum.org/QPS/0139.
For comments received in response to the pressure ulcer measure, as
well as to our proposed revisions to this measure, please see section
IX.C.7.c of the preamble of this final rule.
6. Previously Adopted Quality Measures for the FY 2016 Payment
Determination and Subsequent Years
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53624 through
53636), we adopted two additional quality measures for the LTCHQR
Program for the FY 2016 payment determination and subsequent years, in
addition to the three previously adopted measures (CAUTI measure,
CLABSI measure, and Pressure Ulcer measure).
Set out below are the quality measures, both previously adopted
measures retained in the LTCHQR Program and measures adopted in FY 2013
IPPS/LTCH PPS final rule, for the FY 2016 payment determination and
subsequent years.

LTCHQR Program Quality Measures Finalized in the FY 2013 IPPS/LTCH PPS Final Rule for the FY 2016 Payment
Determination and Subsequent Years
----------------------------------------------------------------------------------------------------------------
NQF Measure ID Measure Title
----------------------------------------------------------------------------------------------------------------
NQF 0138................................... National Health Safety Network (NHSN) Catheter-associated
Urinary Tract Infection (CAUTI) Outcome Measure.*
NQF 0139................................... National Health Safety Network (NHSN) Central line-
associated Blood Stream Infection (CLABSI) Outcome
Measure.*
Application of NQF 0678.................... Percent of Residents with Pressure Ulcers That are New or
Worsened (Short-Stay).*
NQF 0680................................... Percent of Residents or Patients Who Were Assessed and
Appropriately Given the Seasonal Influenza Vaccine (Short-
Stay).**
NQF 0431................................... Influenza Vaccination Coverage among Healthcare
Personnel.**
----------------------------------------------------------------------------------------------------------------
* Adopted for the FY 2014 payment determination and subsequent years.
** Adopted for the FY 2016 payment determination and subsequent years.

For comments received in response to changes we proposed in the FY
2014 proposed rule relating to the Percent of Residents or Patients Who
Were Assessed and Appropriately Given the Seasonal Influenza Vaccine
(Short-Stay) (NQF 0680) measure, as well as general comments
on this measure, please see section IX.C.7.b. of the preamble of this
final rule.
For comments received in response to changes we proposed in the FY
2014 proposed rule relating to the Influenza Vaccination Coverage Among
Healthcare Personnel (NQF 0431) measure, please see section
IX.C.7.a. of the preamble of this final rule.
7. Revisions to Previously Adopted Quality Measures
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27721 through
27724), we proposed the following revisions to the quality measures we
have previously adopted for the LTCHQR Program.
a. Proposed Revisions for Influenza Vaccination Coverage Among
Healthcare Personnel (NQF 0431) for FY 2016 Payment
Determination and Subsequent Years
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53630 through 53631)
we finalized that for Influenza Vaccination Coverage among Healthcare
Personnel (NQF 0431), LTCHs should begin to submit data for
January 1, 2014, through December 31, 2014 (CY 2014) for the FY 2016
payment determination. There is unique seasonality in the timing of
influenza activity each year. The CDC, the steward of this measure,
notes (https://www.cdc.gov/flu/pastseasons/1213season.htm) that while
influenza activity most commonly peaks in January or February in the
United States, it can begin as early as October and can continue to
occur as late as May. The CDC recommends that people get vaccinated
against influenza as long as influenza viruses are circulating. Thus,
influenza vaccination season usually begins in early fall.
Therefore, we proposed that, for the LTCHQR Program, the Influenza
Vaccination Coverage among Healthcare Personnel measure (NQF
0431) have its

[[Page 50858]]

own reporting period to align with the influenza vaccination season,
which is defined by the CDC as October 1 (or when the vaccine becomes
available) through March 31. Instead of beginning data collection and
submission in the middle of the 2013-2014 influenza season, as is the
case when reporting begins on January 1, 2014 (as finalized in FY 2013
IPPS/LTCH PPS final rule), we proposed that data collection begin on
October 1, 2014, or when the influenza vaccine becomes available (as
defined by the CDC) and continue through March 31, 2015 for the 2014-
2015 influenza season. This change allows LTCHs to collect and report
data on influenza vaccination for the entirety of the 2014-2015
influenza season for the FY 2016 payment determination. This change is
presented in the following table for the FY 2016 and FY 2017 payment
determinations:

Timeline for Submission of LTCHQR Program Quality Data for the FY 2016
and FY 2017 Payment Determinations: NQF 0431 Influenza
Vaccination Coverage Among Healthcare Personnel
------------------------------------------------------------------------
Final submission Payment
Data collection timeframe deadlines determination
------------------------------------------------------------------------
October 1, 2014 (or when the May 15, 2015........ FY 2016.
influenza vaccine becomes
available)--March 31, 2015.
October 1, 2015 (or when the May 15, 2016........ FY 2017.
influenza vaccine becomes
available)--March 31, 2016.
------------------------------------------------------------------------

While LTCHs can enter information in CDC's NHSN (www.cdc.gov/nhsn/)
at any point during the influenza season for NQF 0431, data
submission is only required once per year, unlike the other measures
finalized for the LTCHQR Program that also utilize NHSN (CAUTI measure
NQF 0138 and CLABSI measure NQF 0139). For example,
LTCHs can choose to submit influenza vaccination data for NQF
0431 on a monthly basis. However, each time an LTCH submits
these data, it will be asked to provide a cumulative total of
vaccinations for the ``current'' influenza season. Thus, entering this
information at the end of the influenza season would yield the same
total number of vaccinations. The NHSN system will not track the
individual number of vaccinations on a monthly basis, but, rather, will
track the cumulative total of vaccinations for the ``current''
influenza season. Also, we note that the data collection period for
this measure is not 12 months, as with other measures, but is
approximately 6 months (October 1 (or when the vaccine becomes
available) through March 31). The final deadlines associated with
submitting data, approximately 45 days after the end of the data
collection timeframe for the FY 2016 payment determination and
subsequent years, remain consistent with other measures in the LTCHQR
Program, except that the other measures have quarterly data collection
periods, with submission deadlines approximately 45 days after the
close of each quarter.
We note that these changes are applicable only to NQF 0431
Influenza Vaccination Coverage among Healthcare Personnel, and not
applicable to any other LTCHQR Program measures, proposed or adopted,
unless explicitly stated. The specifications for this measure can be
found at https://www.cdc.gov/nhsn/PDFs/HPS-manual/vaccination/HPS-flu-vaccine-protocol.pdf. We invited public comments on our proposal to
revise the data collection and reporting timeline for this influenza
vaccination measure (NQF 0431) for the FY 2016 and FY 2017
payment determinations and subsequent years.
Comment: Several commenters expressed support for the proposed
revisions to the data collection and reporting timeline for the quality
measure Influenza Vaccination Coverage Among Healthcare Personnel (NQF
0431). Commenters were pleased that the new timeline would
align with the influenza season and allow LTCHs to collect and report
data on influenza vaccination for the entirety of the influenza season.
Response: We appreciate the commenters' support to revise the data
collection and reporting timeline for the Influenza Vaccination
Coverage Among Healthcare Personnel (NQF 0431) measure to
better align with the influenza season and account for the unique
seasonality in the timing of influenza activity each year.
After consideration of the public comments we received, we are
finalizing the proposed revision to the data collection and reporting
timeline for the Influenza Vaccination Coverage Among Healthcare
Personnel measure (NQF 0431) for the FY 2016 payment
determination and subsequent years.
b. Revisions for Percent of Residents or Patients Who Were Assessed and
Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) (NQF
0680) for the FY 2016 Payment Determination and Subsequent
Years
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53624 through
53627), we finalized that for NQF 0680, Percentage of
Residents or Patients Who Were Assessed and Appropriately Given the
Seasonal Influenza Vaccine (Short-Stay), LTCHs should begin to collect
and submit data on January 1, 2014, through December 31, 2014 (CY
2014), for the FY 2016 payment determination. This measure, stewarded
by CMS, will be collected using items included in the LTCH CARE Data
Set (Version 2.01).\120\ The LTCH CARE Data Set was approved on June
10, 2013, by the Office of Management and Budget in accordance with the
Paperwork Reduction Act (PRA); the OMB Control Number is 0938-1163.
Later in 2013, we will release the final technical data submission
specifications and updated LTCHQR Program Manual for the LTCH CARE Data
Set (Version 2.01) containing items related to NQF 0680.
Further, CMS and CDC have collaborated in the past with implementation
of the LTCHQR Program and will continue to collaborate on training
opportunities for providers.
---------------------------------------------------------------------------

\120\ The LTCH CARE Data Set Version 2.01 was approved on June
10, 2013 by OMB in accordance with the PRA. The OMB Control Number
is 0938-1163. Expiration Date June 30, 2016. Available at https://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRA-Listing-Items/CMS1252160.html.
---------------------------------------------------------------------------

In order to allow time and opportunity for LTCHs and vendors to
participate in CMS-sponsored training activities pertaining to the
implementation of the LTCH CARE Data Set (Version 2.01), as well as
time to plan for and incorporate changes into their data collection and
entry systems, we proposed to revise the previously finalized start
date of January 1, 2014 for collecting data for this measure to April
1, 2014. We also noted that for CY 2014, data collection will continue
through December 31, 2014. We proposed that data for admissions and
discharges for an LTCH during April 1, 2014, through December 31, 2014,
will be used for the FY 2016 payment determination. We also proposed
that data for January 1, 2015, through December 31, 2015 (CY 2015),
will be used for the FY 2017

[[Page 50859]]

payment determination. Further, we proposed that, thereafter, data for
January 1 through December 31 of each year will be used for subsequent
years. The proposed timeline is illustrated in the table below for the
FY 2016 and FY 2017 payment determinations.

Proposed Timeline for Submission of LTCHQR Program Quality Data for the
FY 2016 and FY 2017 Payment Determinations: NQF 0680 Percentage
of Residents or Patients Who Were Assessed and Appropriately Given the
Seasonal Influenza Vaccine
[Short-Stay]
------------------------------------------------------------------------
Payment
Data collection timeframes Submission deadlines determination
------------------------------------------------------------------------
April 1, 2014-June 30, 2014. August 15, 2014..... FY 2016.
July 1, 2014-September 30, November 15, 2014.
2014.
October 1, 2014-December 31, February 15, 2015.
2014.
January 1, 2015-March 31, May 15, 2015........ FY 2017.
2015.
April 1, 2015-June 30, 2015. August 15, 2015.
July 1, 2015-September 30, November 15, 2015...
2015.
October 1, 2015-December 31, February 15, 2016...
2015.
------------------------------------------------------------------------

Further, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27723),
we proposed that while an LTCH's compliance with reporting quality data
for NQF 0680 will be based on the calendar year, the measure
calculation and public reporting of this measure (once public reporting
is instated) will continue to be based on the influenza vaccination
season starting on October 1 (or when vaccine becomes available) and
ending on March 31 of the subsequent year. We also noted that, for
example, while data collection is based on April 1, 2014, through
December 31, 2014, for the FY 2016 payment determination, we will base
the calculation of the measure for public reporting purposes on the
2014-2015 influenza vaccination season (October 1, 2014 (or when the
vaccine becomes available)--March 31, 2015). Similarly for the
following year, CMS noted that we will base data collection on January
1, 2015, through December 31, 2015, for the FY 2017 payment
determination and calculation of the measure for public reporting
purposes on the 2015-2016 influenza vaccination season (October 1, 2015
(or when vaccine becomes available)--March 31, 2016).
All LTCHs will be required to collect data using the LTCH CARE Data
Set (Version 2.01).\121\ The Quality Improvement and Evaluation System
(QIES) Assessment Submission and Processing (ASAP) System will remain
the data submission mechanism for the LTCH CARE Data Set. Further
information on data submission of the LTCH CARE Data Set for the LTCHQR
Program Reporting using the QIES ASAP system is available at: https://www.qtso.com/ and https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCHTechnicalInformation.html.
---------------------------------------------------------------------------

\121\ The LTCH CARE Data Set Version 2.01 was approved on June
10, 2013 by OMB in accordance with the PRA. The OMB Control Number
is 0938-1163. Expiration Date June 30, 2016. Available on the Web
site at: https://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRA-Listing-Items/CMS1252160.html.
---------------------------------------------------------------------------

We noted that these changes are applicable only to the Percent of
Residents or Patients Who Were Assessed and Appropriately Given the
Seasonal Influenza Vaccine (Short-Stay) (NQF 0680) for the
LTCHQR Program, and not applicable to any other LTCHQR Program
measures, proposed or adopted, unless explicitly stated.
We invited public comments on our proposal to revise the data
collection and reporting timeline for this influenza vaccination
measure (NQF 0680) for the FY 2016 and FY 2017 payment
determinations and subsequent years.
Comment: Some commenters expressed support for the proposed
revisions to the data collection and reporting timelines for Percent of
Residents or Patients Who Were Assessed and Appropriately Given the
Seasonal Influenza Vaccine (Short-Stay) (NQF 0680). Commenters
believed that the proposed delay in the data collection and reporting
timeline would allow needed time for the LTCH community and vendors to
train, plan for and incorporate necessary changes into their data entry
systems, prior to beginning data collection. A few commenters also
appreciated that the proposed change in the timeline for calculation of
the measure would better align with the traditional influenza season.
However, several commenters recommended that CMS align the data
collection timeline for this measure to align with the data collection
timeline for the Influenza Vaccination Coverage Among Healthcare
Personnel measure (NQF 0431), resulting in a data collection
period of October 1, 2014 (or when the influenza vaccine becomes
available), through March 31, 2015, for the FY 2016 payment
determination and October 1, 2015 (or when the influenza vaccine
becomes available), through March 31, 2016, for the FY 2017 payment
determination. These commenters added that it was confusing to follow a
data collection period that does not correspond to the influenza
season, when CMS plans to base the measurement calculation and
subsequent public reporting of the measure on the influenza season
(October 1-March 31). In addition, commenters felt that having two
different data collection periods for the two influenza vaccination
measures (NQF 0680 and NQF 0431) is confusing and is
likely to lead to errors. One commenter noted concern that a data
collection start date of April 1, 2014, does not allow sufficient time
for LTCHs to prepare for and train their staff for data collection, and
noted a start date of October 1, 2014, would be more sufficient.
Response: We appreciate the commenters' support for our proposal to
revise the data collection and reporting timelines for Percent of
Residents or Patients Who Were Assessed and Appropriately Given the
Seasonal Influenza Vaccine (Short-Stay) (NQF 0680). We also
appreciate commenters' concerns with submitting data during a timeframe
that could be considered ``off season.'' Upon review of comments, and
in response to those comments, we have revised the data collection
timeframe to more closely align with the influenza vaccination season.
Starting with the 2014-2015 influenza season, we will require LTCHs to
collect data for all LTCH patients admitted or discharged between
October 1 and April 30. At this

[[Page 50860]]

point, our data reporting and submission infrastructure for the LTCH
CARE Data Set requires LTCHs to submit data on patient admissions and
discharges (or death) separately. As a result, allowing reporting
through April will allow us to capture the influenza vaccination status
of LTCH patients admitted in March and discharged in April. For
example, any patient admitted to an LTCH in March is automatically
included in the denominator of this measure. Requiring LTCHs to respond
to, and report quality data items related to the Patient Influenza
measure (0680) through April 30th of any given year will allow
LTCHs to show if those patients that were included in the denominator
were vaccinated. If we were only to require LTCHs to answer the Patient
Influenza items in the LTCH CARE Data Set through March 31st (as is
required for the Healthcare Personnel Vaccination measure (NQF
0431), those patient admitted, but not discharged prior to
March 31st would be excluded from the measure, and LTCHs would not
receive credit for any Influenza vaccinations administered to those
patients. Further, this revision will reduce the burden of data
collection changing it from the previously finalized year-round data
collection to seasonal data collection, which addresses concerns
regarding year-round data collection. Further guidance for data
collection will be released in the LTCHQR Program Manual and other
subregulatory mechanisms (such as the special open door forums,
provider training, etc.) later this year.
Comment: One commenter requested clarification regarding this
(Percent of Residents or Patients Who Were Assessed and Appropriately
Given the Seasonal Influenza Vaccine) quality measure. Specifically,
the commenter asked whether screening patients for the influenza
vaccine was required during the non-influenza season (April through
December).
Response: In order to fully capture all LTCH patients who were in
the LTCH during the influenza vaccination season, LTCHs will need to
screen patients for influenza vaccination status during the data
collection period of October 1st through April 30th only. However, for
purposes of measure calculation and public reporting, we will use data
collected and submitted beginning in October 1 of that year and ending
on March 31 of the following year. We will issue operational guidance
regarding the collection and submission of this data in the LTCH QR
Program Manual version 2.0, which will be finalized and released upon
publication of this rule.
Comment: A few commenters expressed concerns regarding patients who
were transferred to the LTCH from an acute inpatient facility.
Specifically, these commenters remarked that acute inpatient hospitals
paid under the IPPS are required to report on the vaccination status of
their patients as part of the Hospital IQR Program. As a result, these
commenters believed that the inclusion of the Percent of Residents or
Patients Who Were Assessed and Appropriately Given the Seasonal
Influenza Vaccine (Short-Stay) (NQF 0680) as part of the
LTCHQR Program is redundant, and expressed concerns that the inclusion
of the measure in both quality reporting programs could result in
duplicate vaccinations of the same patient leading to patient safety
concerns.
Response: We greatly appreciate the commenters' views on these
topics. Although we did not make proposals in the FY 2014 IPPS/LTCH PPS
proposed rule on some of the topics or inclusion of this finalized
measure in the LTCHQR Program, we are mindful of the concerns for
redundancy and duplicate vaccination of the same patient that could
result from the use of this measure in the Hospital IQR and LTCHQR
Programs. However, we wish to clarify that the items on the LTCH CARE
Data Set Version 2.01 for use in collecting data for the LTCHQR Program
and specifications for the Percent of Residents or Patients Who Were
Assessed and Appropriately Given the Seasonal Influenza Vaccine (short-
stay) measure directly address and alleviate these concerns.
Specifically, we note that item O0250 on LTCH CARE Data Set Version
2.01 and guidance provided in the Draft LTCHQR Program Manual Version
2.00 is designed to ensure LTCHs follow current clinical guidelines to
assess whether a patient should receive an influenza vaccine and to
ensure that, when clinically indicated, each patient only receives one
influenza vaccine, thus addressing patient safety concerns. For
patients who did not receive the influenza vaccine in the facility,
item O0250 allows LTCHs to indicate why a patient did not receive the
vaccine. Choices include: (1) Patient not in facility during this
year's influenza vaccination season; (2) Received outside of this
facility; (3) Not eligible--medical contraindication; (4) Offered and
declined; (5) Not offered; (6) Inability to obtain vaccine due to a
declared shortage; and (9) None of the above. These options are
designed to both ensure that influenza vaccinations occur within
clinical guidelines and, with regard to option number 2, that patients
are not vaccinated twice.
In addition, the specifications of this quality measure are
designed so that facilities will only vaccinate when the patient has
not already received the vaccination in another setting. Specifically,
the numerator statement of the measure separately reports (and gives
credit for): (1) Those who received the influenza vaccine during the
most recent influenza season, either in the facility or outside the
facility; (2) the number who were offered and declined the influenza
vaccine; or (3) the number who were ineligible due to
contraindication(s). LTCHs can report that a patient received the
vaccine at another facility prior to arriving at the LTCH and still
receive credit in the numerator. The use of this measure in the LTCHQR
Program assumes and supports ongoing efforts of LTCHs and acute care
hospitals for care coordination and sharing of clinical information
between health care settings as part of patient transfer and discharge
records.
Comment: One commenter recommended that the title of this measure
be updated to reflect its application to LTCH patients.
Response: We greatly appreciate the commenter's input. Although we
did not make proposals in the FY 2014 IPPS/LTCH PPS proposed rule on
this topic, we will consider this view for future rulemaking and
program development. We believe that the current title (which is the
same as the title of the measure we finalized in the FY 2013 IPPS/LTCH
PPS final rule) ``Percent of Residents or Patients Who Were Assessed
and Appropriately Given the Seasonal Influenza Vaccine (short-stay)''
(revised from the previous title ``Percent of Residents Who Were
Assessed and Appropriately Given the Seasonal Influenza Vaccine (short-
stay)'' to reflect expansion to the LTCH (and IRF) patient population
in addition to Skilled Nursing Facility/Nursing Home Short-Stay
residents) sufficiently reflects its applicability to the LTCH setting.
The addition of the word ``patients'' in the measure title was done at
the time of NQF review of this measure and endorsement by the NQF Board
of Directors on May 2, 2012, for the LTCH (and IRF) settings.
Comment: One commenter expressed concerns regarding the importance
of Percent of Residents or Patients Who Were Assessed and Appropriately
Given the Seasonal Influenza Vaccine (short-stay) (NQF 0680)
within the LTCH setting. This commenter suggested that given CMS'
limited resources, CMS should focus on measures that are most important
for the LTCH setting and have

[[Page 50861]]

the greatest impact on patients cared for in the LTCH setting.
Response: We greatly appreciate the commenter's view on this topic
and this previously finalized measure. We will consider this input for
future rulemaking and program development. We refer the commenter to
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53624 through 53625) for a
discussion of the importance, rationale, and relevance finalized for
this measure for the FY 2016 payment determination and subsequent
years, and for references to the description of and specifications for
this measure.
We recognize that there are many critical issues facing LTCHs and
their patients and additional appropriate quality measures that we
should consider for the LTCHQR Program. We continue to focus on
developing and implementing measures for our various quality reporting
programs that will have the greatest impact on patient populations
cared for in each setting. Further, we remain committed to identifying
quality measures in each quality reporting program, including the
LTCHQR Program, to align with the aims and priorities outlined in the
National Quality Strategy.\122\ In future years, we will continue to
identify and assess the relevance of both setting-specific and cross-
setting quality measures to strengthen our quality reporting programs,
including the LTCHQR Program.
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\122\ U.S. Department of Health and Human Services. 2011 Report
to Congress: National Strategy for Quality Improvement in Health
Care. Washington, DC: U.S. Department of Health and Human Services,
2011. Available at: https://www.ahrq.gov/workingforquality/nqs/nqs2011annlrpt.htm. Accessed on July 16, 2013.
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After consideration of the public comments we received, we are
finalizing a revised data collection and reporting timeline. Starting
with the 2014-2015 influenza vaccination season, data collection for
the Percent of Residents or Patients Who Were Assessed and
Appropriately Given the Seasonal Influenza Vaccine (short-stay) measure
(NQF 0680) will be required for any patient admitted or
discharged between October 1 and April 30. Submission deadlines for the
FY 2016 and FY 2017 payment determinations are illustrated in the table
below. However, we note that, as discussed above, similar timeframe and
deadlines apply to subsequent years. In addition, we are finalizing our
proposal that the measure calculation and public reporting of this
measure (once public reporting is instated) will be based on the
influenza vaccination season of the subsequent year.

Final Timeline for Submission of LTCHQR Program Quality Data for the FY
2016 and FY 2017 Payment Determinations: NQF 0680 Percentage of
Residents or Patients Who Were Assessed and Appropriately Given the
Seasonal Influenza Vaccine
[Short-Stay]
------------------------------------------------------------------------
Payment
Data collection timeframes Submission deadlines determination
------------------------------------------------------------------------
October 1, 2014-April 30, May 15, 2015........ FY 2016.
2015.
October 1, 2015-April 30, May 15, 2016........ FY 2017.
2016.
------------------------------------------------------------------------

c. Revisions for Percent of Residents or Patients With Pressure Ulcers
That Are New or Worsened (Short-Stay) (NQF 0678) for the FY
2015 Payment Determination and Subsequent Years
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51748 through
51750), we adopted an application of NQF 0678 Percent of
Residents with Pressure Ulcers That are New or Worsened (Short-Stay)
for the FY 2014 payment determination, and retained this application of
the measure in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53615
through 53619) for the FY 2015 payment determination and subsequent
years. We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR
51748 through 51750) for a discussion of the rationale, data collection
methods, and submission methods finalized for this measure for the FY
2014 payment determination and subsequent years, and for references to
the description and specifications of this measure.
At the time we completed our work on the FY 2013 IPPS/LTCH PPS
final rule, NQF 0678 was not yet NQF-endorsed for use in the
LTCH setting and was undergoing ad hoc review at the NQF for expansion
to the LTCH setting. As a result, we were only able to adopt an
application of the endorsed measure in our FY 2013 IPPS/LTCH PPS final
rule. NQF 0678 underwent review for expansion to the LTCH
setting by the NQF Consensus Standards Approval Committee (CSAC) on
July 11, 2012 and was subsequently ratified by the NQF Board of
Directors for expansion to the LTCH setting on August 1,
2012.^{123 124} The title of the measure was changed to Percent
of Residents or Patients with Pressure Ulcers that are New or Worsened
(Short-Stay) to reflect this expansion. Updated specifications,
reflecting the expansion are available on the NQF Web site at: https://www.qualityforum.org/QPS/0678.
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\123\ National Quality Forum, Consensus Standards Approval
Committee Wednesday, July 11, 2012. Transcript. Available on the Web
site at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=71612.
\124\ Press Release: NQF Removes Time-Limited Endorsement Status
for 13 Measures, Measures Now Have Endorsed Status. August 1, 2012.
Available on the Web site at: https://www.qualityforum.org/News_And_Resources/Press_Releases/2012/NQF_Removes_Time-Limited_Endorsement_for_13_Measures;--Measures--Now--Have--Endorsed--
Status.aspx.
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In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53615 through
53616), we stated that we would continue to use the rulemaking process
to adopt changes to measures when NQF review substantively changes the
measure. We stated that one example of a substantive change would be
the change the NQF makes to a previously endorsed measure when it
extends that measure to a new setting. In the FY 2014 IPPS/LTCH PPS
proposed rule (78 FR 27723 through 27724), because NQF 0678
has received endorsement for the LTCH setting, we proposed to adopt the
updated measure NQF 0678 Percent of Residents or Patients with
Pressure Ulcers that are New or Worsened (Short-Stay) for the FY 2015
payment determination and subsequent years.
This change would not alter the data collection, data submission,
or burden finalized in the FY 2013 IPPS/LTCH PPS final rule since there
have been no changes to the data elements in the LTCH CARE Data Set
(version 1.01), data submission system (QIES ASAP) and technical
submission specifications for the LTCH CARE Data Set used for this
measure for the FY 2015 payment determination. The only difference
between our previously finalized application of the measure (NQF
0678 Percent of Residents with Pressure

[[Page 50862]]

Ulcers that are New or Worsened (Short-Stay)) and this expanded measure
(NQF 0678 Percent of Residents or Patients with Pressure
Ulcers that are New or Worsened (Short-Stay)) is the change in name and
NQF-endorsed expansion of this measure to the LTCH (and IRF) patient
population in addition to Skilled Nursing Facility/Nursing Home Short-
Stay residents.
We invited public comment on this proposal to adopt NQF
0678 Percent of Residents or Patients with Pressure Ulcers
that are New or Worsened (Short-Stay) for the LTCHQR Program.
Comment: Several commenters were supportive of the CMS proposal to
adopt NQF 0678 Percent of Residents or Patients with Pressure
Ulcers that are New or Worsened (Short-Stay) for the LTCHQR Program.
Commenters commended CMS for completing the re-specification process
for this measure and applying for and receiving the NQF endorsement for
expansion of this measure to the LTCH (and IRF) settings.
Response: We appreciate the commenters' support and recognition of
the importance of our work to re-specify and expand this measure to the
LTCH setting and NQF endorsement for LTCH setting.
Comment: One commenter expressed concern regarding pressure ulcers
that develop at another facility during a 3-day interrupted stay. The
commenter mentioned that when a patient is discharged from an LTCH to
another facility, the LTCH is not able to control the care provided in
the other facility and does not have a professional responsibility for
the care of the patient. The commenter expressed that it is
unreasonable to impose a payment reduction on an LTCH, for a pressure
ulcer that occurs in another facility during a 3-day stay interruption.
In addition, this commenter believed that it would be misleading to the
public to report a pressure ulcer as having occurred at an LTCH, when
it was acquired at another facility during an interrupted stay. The
commenter recommended that CMS use a new data collection item to
capture information on whether a pressure ulcer is acquired during an
interrupted stay.
Response: We refer readers to our response to these specific
concerns in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53618).
Comment: A few commenters did not believe NQF 0678 Percent
of Residents or Patients with Pressure Ulcers that are New or Worsened
(Short-Stay) is an appropriate quality measure for the LTCH setting.
While these commenters recognized the importance of pressure ulcer
prevention and management, they believed that it was inappropriate for
CMS to implement a measure in the LTCH setting that was originally
developed for the nursing home setting. Two commenters recommended that
a more appropriate measure would be one that specifically measures
pressure ulcer healing. Commenters pointed out that many LTCHs have
expertise in wound healing and often admit patients in order to address
a non-healing wound. One commenter also recommended that CMS consider a
measure of hospital acquired infections of pressure ulcers or wounds.
Response: We greatly appreciate the commenters' views on the
appropriateness of the pressure ulcer measure in the LTCHQR Program. We
will consider all of these views for future rulemaking and program
development. Please note that the commenters' concerns regarding the
appropriateness of this measure in the LTCHQR Program were discussed in
detail when this measure was originally finalized in the FY 2012 IPPS/
LTCH PPS final rule. We refer readers to the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51748 through 51749) for a discussion of our
rationale for finalizing this measure for the FY 2014 payment
determination and subsequent years, and for references to the
description and specifications of this measure. Further, we wish to
clarify and reiterate that although this measure was originally
developed for the SNF/nursing home patient population, it has been re-
specified for the LTCH (and IRF) settings and undergone NQF review and
received NQF endorsement for expansion to the LTCH (and IRF) settings
on August 1, 2012. NQF endorsement of this measure demonstrates
appropriateness of this measure in the LTCH setting.
We appreciate the commenters' recommendations that CMS consider
additional quality measures related to pressure ulcers and is committed
to taking this input under consideration to inform our ongoing work on
further development and implementation of the LTCHQR Program.
Comment: One commenter expressed concern regarding the assumptions
made in the development, selection, and re-specification of this
measure. The commenter suggests that the measure does not take into
account unavoidable pressure ulcers, or ulcers that are not caused by
poor quality care. This commenter also pointed out that not all
pressure ulcers progress through the numeric stages that are included
in the data elements that LTCHs must report on and that worsening
should not be defined as a pressure ulcer which increases in stage.
Response: While we agree that some pressure ulcers are unavoidable,
clinical evidence suggests that many or most pressure ulcers can be
avoided through application of appropriate standards of care. We refer
readers to FY 2012 IPPS/LTCH PPS final rule for further discussion (76
FR 51749). However, the purpose of this measure is not to capture
whether or not a pressure ulcer is or is not avoidable. That is a
clinical determination outside of the scope of the measure. The measure
only reflects the number of Stage 2-4 pressure ulcers that are new or
worsened.
With regard to the commenters concern regarding the relationship
between pressure ulcers and poor quality care, we agree that poor
quality care cannot be determined solely by the pressure ulcer
measures. A determination of poor quality of care would require a full
medical chart and an assessment of whether or not the care given to a
specific patient was appropriate based on the clinical assessment of
the patient. This determination would be made by regulatory and
certifying bodies, and not via the LTCHQR Program.
Finally, pressure ulcer worsening and healing is complex and multi-
faceted, and takes into account several different factors including
(but not limited to) increased exudate, erythema, lack of
epithelialization, increase in surface area, continued degeneration of
tissue and comorbidities. For the purposes of the LTCHQR Program, we
define worsening of a wound as ``a pressure ulcer that has progressed
to a deeper level of tissue damage and is therefore staged at a higher
number using a numerical scale of 1-4 (using the staging assessment
classifications assigned to each stage; starting at stage 1, and
increasing in severity to stage 4) on a discharge assessment as
compared to the admission assessment.'' (Draft LTCHQR Program Manual
Version 2.00, page M-25, https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/Downloads/LTCH-QR-Program-Manual-v20-DRAFT.zip.) The staging system
used for this measure is a modified version of the National Pressure
Ulcer Advisory Panel (NPUAP) staging system, which has been tested for
validity, accuracy, clarity, succinctness, utility, and
discrimination.\125\
---------------------------------------------------------------------------

\125\ National Pressure Ulcer Advisory Panel. NPUAP Pressure
Ulcer Stages/Categories. Accessed June 28, 2013. Available: https://www.npuap.org/resources/educational-and-clinical-resources/npuap-pressure-ulcer-stagescategories/.

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[[Page 50863]]

After consideration of the public comments we received, we are
finalizing our proposal to adopt the expanded measure NQF 0678
Percent of Residents or Patients with Pressure Ulcers that are New or
Worsened (Short-Stay) for the LTCHQR Program for FY 2015 payment
determination and subsequent years.
8. New LTCHQR Program Quality Measures for the FY 2017 and FY 2018
Payment Determinations and Subsequent Years
a. Considerations in Updating and Expanding Quality Measures Under the
LTCHQR Program for the FY 2017 Payment Determination and Subsequent
Years
As noted in section IX.C.2. of the preamble of this final rule, we
consider input from the MAP (https://www.qualityforum.org/Setting_Priorities/Partnership/Measure_Applications_Partnership.aspx) in
selecting measures for the LTCHQR Program. Measures proposed for the
LTCHQR Program in the proposed rule were included on CMS' List of
Measures under Consideration for December 1, 2012 (MUC List), and
discussed in the MAP Pre-Rulemaking Report available at: https://
www.qualityforum.org/Publications/2013/02/MAP_Pre-Rulemaking_Report_
_-February_2013.aspx (pp. 170-176). MAP supported the direction of
each proposed measure.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27724 through
27730), in the absence of any NQF-endorsed measures for the LTCH
setting and after due consideration to any measures that may have been
endorsed or adopted by a consensus organization, we proposed measures
that are fully supported by the MAP for the LTCHQR Program, or that
most closely align with the national priorities discussed in section
IX.C.2. of the preamble of this final rule. In the absence of the MAP's
full support, we have in some cases deemed it appropriate to propose
measures for which there is MAP support for the measure concept.
Further discussion of why a particular measure is high priority in the
LTCH setting is included for each proposed measure below.
In addition, to the extent practicable, we have for each proposed
measure that is not endorsed by the NQF or another consensus
organization, sought measures that have been recommended by multi-
stakeholder organizations, and/or been developed with the input of
providers, purchasers/payers, and a variety of other stakeholders.
b. New LTCHQR Program Quality Measures for the FY 2017 Payment
Determination and Subsequent Years
We proposed the following three new quality measures for the LTCHQR
Program to affect the FY 2017 payment determination and subsequent
years:
(1) Quality Measure 1: National Healthcare Safety Network
(NHSN) Facility-Wide Inpatient Hospital-Onset Methicillin-Resistant
Staphylococcus aureus (MRSA) Bacteremia Outcome Measure (NQF
1716)
NQF 1716 is a standardized infection ratio (SIR) of
hospital-onset unique blood source MRSA laboratory-identified events
among all inpatients in the facility. It was adopted by the Hospital
IQR Program in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51630) for
the FY 2015 payment determination, with data collection having begun on
January 1, 2013. The measure was developed by the CDC and is NQF-
endorsed.
Methicillin-Resistant Staphylococcus aureus (S. aureus) (MRSA)
infections are caused by a strain of S. aureus bacteria that has become
resistant to antibiotics commonly used to treat these infections.
Between 2003 and 2004, an estimated 4.1 million persons in the United
States had nasal colonization with MRSA.\126\ In addition, in 2005 it
is estimated that there were 94,000 invasive MRSA infections in the
United States associated with about 18,000 deaths.\127\ Currently,
there are eight States that have implemented a MRSA Prevention
Collaborative.\128\ For Medicare populations, MRSA is a source of
increased cost, lengths of stay, morbidity and mortality, and can be a
consequence of poor quality of care.^{129 130}
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\126\ Gorwitz RJ, Kruszon-Moran D, McAllister SK, et al. Changes
in the prevalence of nasal colonization with Staphylococcus aureus
in the United States, 2001-2004. J Infect Dis2008; 197: 1226-34.
\127\ Department of Health and Human Services. National Action
Plan to Prevent Healthcare-Associated Infections: Roadmap to
Elimination. Available at https://www.hhs.gov/ash/initiatives/hai/infection.html.
\128\ Centers for Disease Control and Prevention. State Has
Implemented a MRSA Prevention Collaborative. Available at https://www.cdc.gov/hai/stateplans/states-w-MRSA-collaborative.html.
\129\ Centers for Disease Control and Prevention. People at Risk
of Acquiring MRSA Infections. Available at https://www.cdc.gov/mrsa/riskfactors/.
\130\ Centers for Disease Control and Prevention. Management of
Multidrug-Resistant Organisms in Healthcare Settings, 2006.
Available at https://www.cdc.gov/hicpac/pdf/guidelines/MDROGuideline2006.pdf.
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Older adults and patients in healthcare settings are most
vulnerable to MRSA infections, as these patients have weakened immune
systems. LTCHs are characterized by having highly acutely ill patients
with multiple comorbidities and longer lengths of stay, thereby making
LTCH patients at risk for acquisition of an antibiotic-resistant
infection like MRSA infection.\131\ According to analysis of ICD-9
codes reported on Medicare claims, LTCHs reported 5,853 cases of MRSA
in 2009. Present-on-admission (POA) indicators are not available on
LTCH claims; therefore, we are unable to say whether these conditions
are present on admission or acquired during the LTCH stay. Therefore,
it was not possible to determine which of these infections occurred in
the LTCH. However, we note that on the majority of claims, the primary
diagnosis is the admitting diagnosis and is considered to be present on
admission and therefore, the secondary diagnoses can be assumed to
provide a count of conditions that could have been acquired in the
LTCH.\132\ When it was assumed that a MRSA infection recorded in the
primary diagnosis code was likely present on admission and an MRSA
infection recorded in the secondary diagnosis code was acquired in the
LTCH, there were 5,826 reported cases that may have been acquired in
the LTCH.\133\ Further, healthcare-associated MRSA infections occur
frequently in patients who have invasive devices, such as catheters or
ventilators.\134\ We included the proposed MRSA measure in the December
1, 2012, MUC list. The MAP supported the direction of this
measure.\135\
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\131\ Furuno JP, Hebden JN, Standiford HC, et al. Prevalence of
methicillin-resistant Staphylococcus aureus and Acinetobacter
baumannii in a long-term acute care facility. Am J Infect Control
2008;36:468-71.
\132\ Centers for Medicare & Medicaid Services Center for
Medicare & Medicaid Innovation. Hospital Acquired Conditions (HAC)--
Report to Congress. Available at https://innovation.cms.gov/Files/x/HospAcquiredConditionsRTC.pdf.
\133\ Bernard SL, Dalton K, Lenfestey N F, Jarrett NM, Nguyen
KH, Sorensen AV, Thaker S, West ND. Study to support a CMS Report to
Congress: Assess feasibility of extending the hospital-acquired
conditions--present on admission IPPS payment policy to non-IPPS
payment environments. Prepared for the Centers for Medicare &
Medicaid Services (CMS Contract No. HHSM-500-T00007). 2011.
\134\ Centers for Disease Control and Prevention. Protect
Yourself from MRSA. Available at https://www.cdc.gov/features/mrsainhealthcare/.
\135\ National Quality Forum. Measure Applications Partnership
Pre-Rulemaking Report: 2013 Recommendations of Measures Under
Consideration by HHS: February 2013. Available at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=72738.
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We proposed to use the CDC's NHSN reporting and submission
infrastructure for reporting of the proposed NHSN

[[Page 50864]]

Facility-Wide Inpatient Hospital-onset MRSA Bacteremia Outcome Measure
(NQF 1716). CDC's NHSN is the data collection and submission
framework currently used for reporting the CAUTI (0138),
CLABSI (0139), and Influenza Vaccination Coverage among
Healthcare Personnel (0431) measures. Details related to the
procedures for using NHSN for data submission and information on
definitions, numerator data, denominator data, data analyses, and
measure specifications for the proposed NHSN Facility-Wide Inpatient
Hospital-onset MRSA Bacteremia Outcome Measure (NQF 1716) can
be found at: https://www.qualityforum.org/QPS/1716 and https://www.cdc.gov/nhsn/PDFs/pscManual/12pscMDRO_CDADcurrent.pdf. For January
2012 through January 2013, an estimated 42 LTCHs reported laboratory-
identified MRSA event data into NHSN.\136\ By building on the CDC's
NHSN reporting and submission infrastructure, we intend to reduce the
administrative burden related to data collection and submission for
this measure under the LTCHQR Program. We refer readers to section
IX.C.9. of the preamble of this final rule for more information on data
collection and submission. We invited public comment on this proposed
measure and data collection and submission for the proposed measure for
the FY 2017 payment determination and subsequent years.
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\136\ Data from CMS-CDC correspondence on February 1, 2013.
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Comment: A number of commenters expressed support of our proposal
to include NHSN Facility-wide Inpatient Hospital-onset MRSA Infection
Outcome Measure (NQF 1716), citing relevance of healthcare-
acquired infections to the LTCH setting. One commenter also
acknowledged the importance of MRSA prevention and control. One
commenter noted that healthcare-acquired infections are a common reason
for 30-day hospital readmission. Another commenter stated that pay-for-
reporting programs are an important mechanism for raising awareness of
conditions such as MRSA, especially when the data are publicly reported
and institutions can compare their performance against the performance
of other facilities. Two commenters appreciated the effort of CMS to
align LTCHQR Program measures with measures in other quality reporting
initiatives.
Response: We appreciate the commenters' recognition and support of
our efforts to adopt measures for the LTCHQR Program that emphasize
high-priority patient safety concerns and harmonize measures across
settings, when applicable.
Comment: Many commenters objected to the proposed MRSA SIR
healthcare-acquired infection measure, citing lack of NQF endorsement
for the LTCH setting. These commenters urge CMS to request formal NQF
review, using the Consensus Development Process, of this proposed
measure for the LTCH setting before deciding whether to adopt it for
the LTCHQR Program.
Many commenters objected to inclusion of MRSA SIR because they are
concerned that, while the proposed MRSA measure received a ``support
direction'' vote from the MAP, it was not granted full approval.
Commenters cited the MAP's conclusion that the measure is ``Not ready
for implementation,'' ``the measure concept is promising but requires
modification or further development,'' and the ``Measure should be
specified and tested for the LTCH setting.'' Commenters agreed with MAP
reviewers that the measure has not been adequately developed, specified
or tested in the LTCH setting.
Some commenters noted it is inappropriate to apply this measure to
the LTCH setting, which has more medically complex patients with acute
hospital needs, since it was developed for another setting. One
commenter noted that although a number of LTCHs voluntarily reported
MRSA data to the CDC's NHSN between January 2012 and January 2013, this
voluntary reporting activity does not constitute formal testing.
Commenters stated that it is essential that measures are rigorous
enough to produce credible results given that LTCHQR Program measure
scores will ultimately be publicly reported. Another commenter
suggested delaying the collection and submission of this measure until
such time as the data currently submitted to NHSN has been reviewed for
validity and reliability.
Response: The National Healthcare Safety Network (NHSN) Facility-
wide Inpatient Hospital-onset MRSA Outcome Measure was endorsed as NQF
1716 as of December 14, 2012, and is endorsed for use in
several settings, including LTCHs. Because of the scope of the patient
safety problem posed by MRSA to the chronically ill patient population
in the LTCH setting, as well as its burden on the healthcare system, we
believe it in the best interest of patients to adopt this measure for
the LTCHQR Program in order to promote awareness and encourage
implementation of MRSA control procedures in the LTCH setting. The CDC
states that rates will be calculated for this measure in the LTCH
setting (referred to as the Long-Term Acute Care [LTAC] setting by the
CDC's NHSN) until appropriate risk adjustment can be determined for an
SIR calculation. Data will be analyzed separately for the LTCHs so no
inappropriate comparisons will be made between LTCH and other
healthcare settings. The measure is on the list of NQF-endorsed
measures and can be found on the NQF Web site at https://www.qualityforum.org/QPS/1716.
We appreciate the commenters' input on finalizing a measure for
which the MAP supported direction. We note that we have taken the MAP's
input into consideration in selecting quality measures, as we are
required to do under section 1890(a)(4) of the Act. However, we are not
required to follow the MAP's recommendations, but to take them into
account when selecting measures for proposal. In addition to MAP input,
we take a variety of other factors into account in selecting measures.
In this instance, for example, the National Healthcare Safety Network
(NHSN) Facility-wide Inpatient Hospital-onset Methicillin-resistant
Staphylococcus aureus (MRSA) Bacteremia Outcome Measure (NQF
1716) is NQF-endorsed for the LTCH setting, an indication that
it is appropriate for LTCH patients. In addition, this measure is
appropriate in light of the fact that illness from MRSA most commonly
affects older adults in hospitals or in facilities with longer lengths
of stay. For the reasons listed above, this measure is appropriate for
LTCH patients.
Comment: Commenters also expressed strong concern that CMS' failure
to convene a TEP for any of the new proposed quality measures
demonstrates the questionable nature of the proposed measures. The
commenters believed that TEPs are integral to developing healthcare
setting appropriate quality measures.
Response: We appreciate the commenter's concern, and agree that
TEPs are an integral step for assessing a measure's appropriateness for
a care setting. The MRSA measure was evaluated by a TEP. The TEP
evaluated the measure on Importance, Scientific Soundness, Usability,
and Feasibility. The TEP indicated that MRSA was of high importance and
the measure was scientifically sound.
Comment: Several commenters suggested that inclusion of a POA code
for LTCH Medicare claims may help quantify the problem and avoid the
costly implementation of very labor-intensive data collection for MRSA

[[Page 50865]]

infections. One commenter expressed concern that the MRSA performance
data cited in the rule are based on 2009 Medicare claims data and that
CMS acknowledged that LTCH claims lack a POA indicator that would help
determine whether the MRSA was acquired before or during
hospitalization.
Response: Although Medicare claims data for LTCHs lack the POA
indicator, we believe that the data from our previous analysis provides
evidence that MRSA infections do occur within the LTCH setting.\137\
The data sources for the NQF endorsement of this measure do not rely on
claims data. (We refer readers to https://www.qualityforum.org/QPS/1716
for a list of data sources for this measure.)
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\137\ Centers for Medicare & Medicaid Services Center for
Medicare & Medicaid Innovation. Hospital Acquired Conditions (HAC)--
Report to Congress. Available at https://innovation.cms.gov/Files/x/HospAcquiredConditionsRTC.pdf.
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We agree that using a POA indicator would permit a claims-based
MRSA measure, which would not require LTCHs to collect data. However,
we previously considered implementation of a claims-based MRSA measure
for the Hospital IQR Program but found that it was not feasible to do
so in a valid and reliable manner. We believe that the very same issues
related to validity and reliability would apply in the LTCHQR Program,
since the programs are not distinguishable in any way that might affect
the reliability or validity of using a claims based-measure. As a
result, we do not believe at this time that it is feasible to implement
a claims-based MRSA measure for the LTCHQR Program. However, we will
continue to explore the feasibility of adding a POA indicator to LTCH
Medicare claims data.
We also note that the definition of MRSA Laboratory-identified
events (LabID events) (as required by this measure) allows laboratory
testing data to be used without clinical evaluation of the patient,
allowing for a much less labor-intensive method to track MRSA
infections. This provides a proxy infection measure of MRSA healthcare
acquisition, exposure burden, and infection burden based almost
exclusively on laboratory data and limited admission date data,
including patient care location. Further, we note that the definition
of MRSA LabID events (as required by this measure) specifically
addresses attribution through categorization of MRSA LabID events based
on date admitted to facility and date specimen collected, as well as by
the current date and prior dates of specimen collection. As specified
in the measure, Community-Onset (CO) is a LabID Event collected as an
outpatient or an inpatient <=3 days after admission to the facility
that is, days 1, 2, or 3 of admission), while Healthcare Facility-Onset
(HO) is defined as a LabID Event collected from a patient >3 days after
admission to the facility (that is, days 4 or later of admission). Data
from outpatient locations (for example, outpatient encounters) are not
included in this reporting of CO and HO Events. The CO definition
accounts for infections acquired outside the LTCH setting, either in
the community or in other healthcare settings. The measure to be used
for comparison is the hospital-onset unique blood source MRSA LabID
events among all inpatients in the facility. LabID events use NHSN
forms to collect all required data, using the definitions of each data
field.
Comment: Several commenters recommended that CMS delay the adoption
of this proposed measure until such time as LTCH personnel can be
trained in quality measure collection and submission procedures.
Commenters were concerned that hospitals and States had not had enough
time to develop the proper infrastructure to report these data, because
only three States currently require hospitals to report these data.
Commenters furthermore recommended development of robust training and
technical support for NHSN collection. One commenter recommended
delaying the proposed adoption of this measure until there is adequate
vendor support for hospitals to electronically interface with the NHSN
for reporting.
Response: As of May 15, 2013, based on CMS and CDC analysis of
first quarter (October 1-December 31, 2012) data reporting for CLABSI
and CAUTI measures, there is current and successful use of CDC's NHSN
reporting infrastructure by about 399 of the approximately 440
certified LTCHs. This widespread adoption of NHSN reporting in
certified LTCHs clearly indicates that training, technical and
infrastructure support for NHSN data collection has been adequate. By
utilizing CDC's NHSN for MRSA reporting, we intend to build upon LTCHs
ongoing experience with data reporting via NHSN, thus avoiding adding
in new systems and infrastructure requirements for the LTCHQR Program.
Comment: One commenter believed that the interpretation of MRSA
SIRs will be challenging because laboratory-based infection definitions
are confounded by differences in the sensitivity and mechanisms of
hospital testing procedures. This commenter was concerned that the
resulting difference in MRSA SIR measurement may unfairly portray
hospitals that use the more sensitive testing technology as having more
MRSA cases.
Response: Variability in sensitivities of MRSA test methods is not
a problem, as it is for C. difficile testing. For the purpose of this
measure, all standardized laboratory methods to identify MRSA are
acceptable for reporting. Therefore, test method is not included in the
risk adjustment for calculation of the MRSA SIR. Important factors that
are included in this calculation are facility bed size, medical school
affiliation, and admission prevalence rate.
After consideration of the public comments we received, we are
finalizing the MRSA SIR measure as proposed (NQF 1716) for the
FY 2017 payment determination and subsequent years.
(2) Quality Measure 2: National Healthcare Safety Network
(NHSN) Facility-Wide Inpatient Hospital-Onset Clostridium difficile
Infection (CDI) Outcome Measure (NQF 1717)
This measure is a standardized infection ratio (SIR) of hospital-
onset C. difficile-associated infection (CDI) Laboratory-identified
events among all inpatients in the facility, and was adopted by the
Hospital IQR Program in the FY 2012 IPPS/LTCH PPS final rule (76 FR
51630 through 51631) for the FY 2015 payment determination, with data
collection having begun on January 1, 2013. The measure was developed
by the CDC and is NQF-endorsed.
Clostridium difficile (C. difficile) can cause a range of serious
symptoms including diarrhea, serious intestinal conditions, sepsis, and
death.\138\ In the United States, C. difficile is responsible for an
estimated 337,000 infections and 14,000 deaths annually.\139\ Based on
the HHS National Action Plan to Prevent Healthcare-Associated
Infections, C. difficile rates have increased in recent years.\140\ The
CDC estimates that CDIs cost more than $1 billion in additional

[[Page 50866]]

health care costs each year.\141\ In recent years, CDIs have become
more frequent, more severe and more difficult to treat. Mortality rates
for CDIs are highest in elderly patients.\142\ Between 1996 and 2009,
rates of CDI among hospitalized patients aged 65 years and older
increased 200 percent, while deaths related to C. difficile increased
400 percent between 2000 and 2007, which is partly attributed to a
stronger germ strain.\143\ \144\ Further, an estimated 90 percent of
the C. difficile-related deaths occur in patients 65 and older. C.
difficile is a source of increased costs in patient care, lengths of
stay, morbidity and mortality, and can be a consequence of poor quality
of care for Medicare patients.\145\
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\138\ McDonald LC, Coignard B, Dubberke E, et al.
Recommendations for surveillance of Clostridium difficile-associated
disease. Infect Control Hosp Epidemiol 2007;28:140-145. Available
at: https://www.jstor.org/stable/pdfplus/10.1086/511798.pdf?acceptTC=true.
\139\ Centers for Disease Control and Prevention. Investigating
Clostridium difficile Infections Across the U.S. Available at https://www.cdc.gov/hai/eip/pdf/Cdiff-factsheet.pdf.
\140\ Department of Health and Human Services. National Action
Plan to Prevent Healthcare-Associated Infections: Roadmap to
Elimination. Available at https://www.hhs.gov/ash/initiatives/hai/infection.html.
\141\ Centers for Disease Control and Prevention. Making Health
Care Safer: Stopping C. difficile Infections. Available at: https://www.cdc.gov/VitalSigns/HAI/.
\142\ Centers for Disease Control and Prevention. Investigating
Clostridium difficile Infections Across the U.S. Available at:
https://www.cdc.gov/hai/eip/pdf/Cdiff-factsheet.pdf.
\143\ Centers for Disease Control and Prevention. QuickStats:
Rates of Clostridium difficile Infection Among Hospitalized Patients
Aged =65 Years,* by Age Group -- National Hospital
Discharge Survey, United States, 1996--2009.MMWR, 60(34); 1171.
Available at: https://www.cdc.gov/mmwr/preview/mmwrhtml/mm6034a7.htm.
\144\ Centers for Disease Control and Prevention. Making Health
Care Safer: Stopping C. difficile Infections. Available at: https://www.cdc.gov/VitalSigns/HAI/.
\145\ Dubberke ER, Reske KA, Olsen MA, McDonald LC, Fraser VJ.
Short- and long-term attributable costs of Clostridium difficile-
associated disease in nonsurgical inpatients. Clin Infect Dis 2008;
46:497-504. Available at: https://cid.oxfordjournals.org/content/46/4/497.long.
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Illness from C. difficile most commonly affects older adults in
hospitals or in facilities with longer lengths of stay, where germs
spread easily, antibiotic use is common, and people are especially
vulnerable to infection.\146\ Considering CDIs are increasing in LTCHs
and that the LTCH population is highly vulnerable to CDI, it is
important to measure these rates in LTCHs.\147\ According to analysis
of ICD-9 codes reported on Medicare claims, LTCHs reported 12,282 cases
of C. difficile-associated disease in 2009. POA indicators are not
available on LTCH claims, therefore we are unable to say whether these
conditions are present on admission or acquired during the LTCH stay.
Therefore, it was not possible to determine which of these infections
occurred in the LTCH. However, we note that on the majority of claims,
the primary diagnosis is the admitting diagnosis and is considered to
be present on admission and, therefore, the secondary diagnoses can be
assumed to provide a count of conditions that could have been acquired
in the LTCH.\148\ When it was assumed that a CDI recorded in the
primary diagnosis code was likely present on admission and a C.
difficile-associated infection recorded in the secondary diagnoses code
may have been acquired in the LTCH, there were 11,384 reported cases
that may have been acquired in the LTCH.\149\ In addition, there is
evidence that CDIs are preventable, and therefore surveillance and
measuring infection rates is important to reducing infections and
improving patient safety.
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\146\ Centers for Disease Control and Prevention. Frequently
Asked Questions about Clostridium difficile for Healthcare
Providers. Available at: https://www.cdc.gov/HAI/organisms/cdiff/Cdiff_faqs_HCP.html.
\147\ Goldstein EJC, Polonsky J, Touzani M, Citron DM. C.
difficile infection (CDI) in a long-term acute care facility (LTAC).
Anaerobe 2009;15:241-243. Available at: https://www.sciencedirect.com/science/article/pii/S1075996409001176.
\148\ Centers for Medicare & Medicaid Services Center for
Medicare & Medicaid Innovation. Hospital Acquired Conditions (HAC)--
Report to Congress. Available at: https://innovation.cms.gov/Files/x/HospAcquiredConditionsRTC.pdf.
\149\ Bernard SL, Dalton K, Lenfestey N F, Jarrett NM, Nguyen
KH, Sorensen AV, Thaker S, West ND. Study to support a CMS Report to
Congress: Assess feasibility of extending the hospital-acquired
conditions--present on admission IPPS payment policy to non-IPPS
payment environments. Prepared for the Centers for Medicare &
Medicaid Services (CMS Contract No. HHSM-500-T00007). 2011.
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Currently, there are three States that require hospitals to report
C. difficile data to NHSN. Fifteen States have implemented a C.
difficile Prevention Collaborative.\150\ The goal for this proposed C.
difficile measure is to provide a common mechanism (CDC's NHSN) for all
LTCHs to report and analyze these data that will inform infection
control staff of the impact of targeted prevention efforts. We included
the proposed C. difficile measure in the December 1, 2012, MUC list.
The MAP supported the direction of this measure.\151\
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\150\ Centers for Disease Control and Prevention. State Has
Implemented a C. diff Prevention Collaborative. Available at: https://www.cdc.gov/hai/stateplans/states-w-CDI-collaborative.html.
\151\ National Quality Forum. Measure Applications Partnership
Pre-Rulemaking Report: 2013 Recommendations of Measures Under
Consideration by HHS: February 2013. Available at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=72738.
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We proposed to use the CDC's NHSN reporting and submission
infrastructure for reporting of the proposed NHSN Facility-wide
Inpatient Hospital-onset Clostridium difficile Outcome Measure (NQF
1717). CDC's NHSN is the data collection and submission
framework currently used for reporting the CAUTI, CLABSI and Influenza
Vaccination Coverage among Healthcare Personnel measures. Similar to
the NHSN MRSA Bacteremia Outcome Measure we proposed above, details
related to the procedures for using NHSN for data submission and
information on definitions, numerator data, denominator data, data
analyses, and measure specifications for the proposed NHSN Facility-
wide Inpatient Hospital-onset Clostridium difficile Outcome Measure
(NQF 1717) can be found at: https://www.qualityforum.org/QPS/1717 and https://www.cdc.gov/nhsn/PDFs/pscManual/12pscMDRO_CDADcurrent.pdf. For January 2012 through January 2013, an estimated 46
LTCHs reported laboratory-identified C. difficile event data into
NHSN.\152\ By building on the CDC's NHSN reporting and submission
infrastructure, we intend to reduce the administrative burden related
to data collection and submission for this measure under the LTCHQR
Program.
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\152\ Data from CMS-CDC correspondence on February 1, 2013.
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We refer readers to section IX.C.9. of the preamble of this final
rule for more information on data collection and submission. We invited
public comment on this proposed measure and data collection and
submission for the proposed measure for the FY 2017 payment
determination and subsequent years.
Comment: A number of commenters supported the CMS proposal to
include NHSN Facility-wide Inpatient Hospital-onset Clostridium
difficile Infection (CDI) Outcome Measure (NQF 1717) in the
LTCHQR Program. Several commenters based their support on the relevance
of healthcare-acquired infections to the LTCH setting, and one
commenter noted that healthcare-acquired infections are a common reason
for 30-day hospital readmission. Another commenter expressed the
opinion that pay-for-reporting programs are an important mechanism for
raising awareness of conditions such as CDI, especially when the data
are publicly reported and institutions can compare their performance
against the performance of other facilities. Two commenters appreciated
the effort of CMS to align LTCHQR measures with other quality reporting
initiatives.
Response: We appreciate the commenters' support and recognition of
the importance of the expansion of the LTCHQR Program to include this
measure.
Comment: Many commenters objected to the proposed CDI measure,
citing lack of NQF endorsement for the LTCH setting. These commenters
urge CMS to request formal NQF review, using the Consensus Development
Process, of this proposed measure for the LTCH setting

[[Page 50867]]

before deciding whether to adopt it for the LTCHQR Program.
Many commenters strongly objected to inclusion of the CDI measure
because they are concerned that, while the proposed CDI measure
received a ``support direction'' vote from the MAP, it was not granted
full approval. Commenters cited the MAP's conclusions that the measure
is ``[n]ot ready for implementation,'' ``the measure concept is
promising but requires modification or further development,'' and the
``[m]easure should be specified and tested for the LTCH setting.'' The
commenters recognized the importance of CDI prevention and control, but
believed that it was inappropriate to apply a measure that was
developed for another setting to LTCHs given the more medically complex
and acute hospital needs of LTCH patients, and therefore agreed with
MAP reviewers that the measure has not been adequately developed,
specified or tested in the LTCH setting.
One commenter noted that although a number of LTCHs voluntarily
reported C. difficle data to the National Healthcare Safety Network
between January 2012 and January 2013, this voluntary reporting
activity does not constitute formal testing. Several commenters stated
that it is essential that the measures are rigorous enough to produce
credible results given that LTCHQR measure scores will ultimately be
publicly reported, and another commenter suggested delaying the
collection and submission of these measures until such time as the data
currently submitted to NHSN has been reviewed for validity and
reliability.
Response: The National Healthcare Safety Network (NHSN) Facility-
wide Inpatient Hospital-onset Clostridium difficile Infection (CDI)
Outcome Measure was endorsed as NQF 1717 as of December 14,
2012, and is endorsed for use in several settings, including the LTCH
setting. As with the MRSA SIR, because of the scope of the patient
safety problem posed by CDI to the very vulnerable LTCH population, as
well as its burden on the healthcare system, we believe it is in the
best interest of patients to adopt this measure in order to promote
awareness and encourage immediate implementation of CDI control
procedures within the LTCH setting. The measure is on the list of NQF-
endorsed measures and can be found on the NQF Web site at https://www.qualityforum.org/QPS/1717.
We appreciate the commenters' input on finalizing a measure for
which the MAP supported direction. We note that we have taken the MAP's
input into consideration in selecting quality measures, as we are
required to do under section 1890(a)(4) of the Act. However, we are not
required to follow the MAP's recommendations, but to take them into
account when selecting measures for proposal. In addition to MAP input,
we take a variety of other factors into account in selecting measures.
In this instance, for example, the National Healthcare Safety Network
(NHSN) Facility-wide Inpatient Hospital-onset Clostridium difficile
Infection (CDI) Outcome Measure (NQF 1717) is NQF-endorsed for
the LTCH setting, an indication that it is appropriate for LTCH
patients. In addition, this measure is appropriate in light of the fact
that illness from CDI most commonly affects older adults in hospitals
or in facilities with longer lengths of stay. For all of the reasons we
have discussed, we believe this measure is appropriate for LTCH
patients.
Comment: Commenters expressed strong concern that CMS' failure to
convene a TEP for any of the new proposed quality measures demonstrates
the questionable nature of the proposed measures.
Response: We agree that TEPs are an integral step for assessing a
measure's appropriateness for a care setting. The CDI measure was
evaluated by a TEP. The TEP evaluated the measure on Importance,
Scientific Soundness, Usability, and Feasibility. The TEP indicated
that CDI was of high importance and that the measure was scientifically
sound.
Comment: Several commenters suggested that inclusion of a POA code
for LTCH Medicare claims may help quantify the problem and avoid the
costly implementation of very labor-intensive data collection for C.
difficile infections. One commenter expressed concern that the CDI
performance data cited in the rule are based on 2009 Medicare claims
data and that CMS acknowledged that LTCH claims lack a POA indicator
that would help determine whether the CDI was acquired before or during
hospitalization.
Response: Although Medicare claims data for LTCHs lack the POA
indicator, we believe that the data from our previous analysis provides
evidence that CDIs do occur within the LTCH setting.\153\ Further, the
data sources for the NQF endorsement of this measure do not rely on
claims data. (We refer readers to https://www.qualityforum.org/QPS/1717
for a list of data sources for this measure.) We previously considered
implementation of a claims-based CDI measure for the Hospital IQR
Program, but found that it was not feasible to do so in a valid and
reliable manner and as a result, by extension, at this time, we do not
believe it is feasible to implement a claims-based MRSA measure for the
LTCHQR Program. We will continue to explore the feasibility of adding a
POA indicator to LTCH Medicare claims data.
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\153\ Centers for Medicare & Medicaid Services Center for
Medicare & Medicaid Innovation. Hospital Acquired Conditions (HAC)--
Report to Congress. Available at https://innovation.cms.gov/Files/x/HospAcquiredConditionsRTC.pdf.
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The definition of CDI LabID events inherently accounts for the
problem of attribution, through categorization of CDI LabID events
based on date admitted to facility and date specimen collected, as well
as by the current date and prior dates of specimen collection. As
specified in Community-Onset (CO) is a LabID Event collected as an
outpatient or an inpatient at most 3 days after admission to the
facility (that is, days 1, 2, or 3 of admission), while Community-Onset
Healthcare Facility-Associated (CO-HCFA) is defined as a CO LabID Event
collected from a patient who was discharged from the facility at most 4
weeks prior to current date of stool specimen collection. Data from
outpatient locations (for example, outpatient encounters) are not
included in this reporting. A Healthcare Facility-Onset (HO) is a LabID
event collected more than 3 days after admission to the facility (that
is, on or after day 4). Together, these definitions account for
infections acquired outside the LTCH setting, either in the community
or in other healthcare settings. The CDI measure is already in use in
the hospital inpatient setting, where similar concerns have been raised
and successfully addressed.
We also note that the definition of CDI LabID events (as required
by this measure) allows laboratory testing data to be used without
clinical evaluation of the patient, allowing for a much less labor-
intensive method to track CDIs. This provides a proxy infection measure
of CDI healthcare acquisition, exposure burden, and infection burden
based almost exclusively on laboratory data and limited admission date
data, including patient care location. LabID events use NHSN forms to
collect all required data, using the definitions of each data field.
Comment: Some commenters recommended that CMS delay the adoption of
this proposed measure until such time as LTCH personnel can be trained
in the quality measure collection and submission procedures. Commenters
were concerned that hospitals and states had not had enough time to
develop the proper

[[Page 50868]]

infrastructure to report these data, because only 3 States currently
require hospitals to report these data. Other commenters noted that the
burden of data collection must be considered in order to allow these
facilities to acquire the resources to focus on improvement efforts and
not completely on data collection and submission alone. Commenters
furthermore recommended development of robust training and technical
support for NHSN collection. One commenter recommended delaying the
proposed adoption of this measure until there is adequate vendor
support for hospitals to electronically interface with the NHSN for
reporting.
Response: As of May 15, 2013, based on CMS and CDC analysis of
first quarter (October 1-December 31, 2012) data reporting for CLABSI
and CAUTI measures, there is current and successful use of CDC's NHSN
reporting infrastructure by about 399 of the approximately 440
certified LTCHs. This widespread adoption of NHSN reporting in LTCHs
clearly indicates that training, technical and infrastructure support
for NHSN data collection has been adequate. By utilizing CDC's NHSN for
CDI reporting, we intend to build upon LTCHs ongoing experience with
data reporting via NHSN, thus avoiding adding in new systems and
infrastructure requirements for the LTCHQR Program.
Comment: Some commenters believed that the calculation of CDI SIRs
will be challenging because hospitals use testing mechanisms with
differing sensitivity to identify the presence of CDI. These commenters
were concerned that the resulting difference in CDI SIR measurement may
unfairly portray hospitals that use the more sensitive testing
technology as having more CDI cases.
Response: CDC acknowledges that differences in the sensitivity of
CDI laboratory testing methods make a difference in the numbers of CDI
events that hospitals identify and report. CDI laboratory event data is
a combination of laboratory results and admission/discharge/transfer
data. CDI facility-wide LabID event reporting is risk-adjusted by
facility bed size, medical school affiliation, and CO admission
prevalence rate. In addition, NHSN uses a question from the required
annual facility survey that asks about the type of CDI testing the lab
conducts and this information is used for additional risk-adjustment.
And, for improved accuracy of this test type representation, CDC will
be asking this question on a quarterly basis beginning in 2014.
Comment: Some commenters believed that the CDI SIR is an
inappropriate measure for use among LTCHs because LTCHs are not
sufficiently represented in baseline calculations. The commenters noted
that, in the NQF Measure submission and evaluation worksheet 5.0, dated
September 14, 2011, testing results in section 2b4.3 show that only 4
percent of the facilities used to construct the standard population
that reported their facility type were LTCHs. The commenters believed
that because the denominator identified in section 2a1.4, the
hospital's onset CDI LabID event rate for the same types of facilities
(obtained from the standard population) will be part of the
calculation, LTCHs would be judged against a standard population that
is only 4 percent LTCHs. The commenters argued that LTCHs should only
be judged against their peers, that is, other LTCHs, and that such a
peer comparison approach is even more important because a large risk
factor for CDI is the patient's length of stay. Commenters believed
that LTCHs would be at a distinct disadvantage since the average length
of stay for LTCH patients is greater than 25 days.
Response: We agree with the commenters regarding the importance of
statistically appropriate measures. The NQF Measure submission and
evaluation worksheet incorporated numbers that were available at that
time as a demonstration for the endorsement process. Calculations of
CDI SIR for the LTCHQR Program will be based on a standard population
that includes all reporting LTCHs, which after full implementation we
believe will number over 400. At this time, we do not intend to compare
LTCHs with any other hospital type.
Comment: Commenters noted that there are different types of
microbiology tests available to test for CDI, and that the variety of
tests available may result in up to a twofold difference in results.
Commenters expressed that the more sensitive CDI tests will capture
more true positives and that LTCHs that utilize these more expensive,
more sensitive tests (for example, nucleic acid tests) will be
penalized for ``showing a higher rate''.
Commenters also noted that certain tests for CDI can show positive
results for up to 6-9 weeks after the resolution of symptoms and
recommended that CMS conduct further research of the timeline
associated with duplicate positive CDI tests. Commenters also believed
that the measure should be defined to exclude repeat tests on the same
patient, in order to allow for confirmation of positive results.
Finally, commenters were concerned that there is a high probability of
an elderly patient who has diarrhea for an unrelated reason, falsely
testing positive for CDI, thus falsely elevating the rates.
Commenters recommended that CMS postpone this measure until further
testing is conducted regarding the varying sensitivities of the
multiple tests available that are needed to satisfy this measure, and
risk adjustment methodologies are developed to address this variation
for these variations. CMS should conduct further research of the
timeline associated with duplicate positive tests. Commenters also
recommended that CMS postpone the measure until an algorithm is
developed made available in all clinical laboratories that would help
LTCHs avoid scenarios in which an elderly patient presenting symptoms
for unrelated reasons also tests positive for C. difficile-associated
infection and, thus, falsely elevates hospital rates.
Response: We appreciate the commenters' concerns. However, we wish
to note that the CDC has taken into account repeat testing results by
building a 14-day algorithm into the protocol that requires users to
wait a full 14 days between positive results from the laboratory before
another CDI LabID event should be reported into the NHSN system for a
patient in a specific care location. Further, and in addition to the
14-day testing algorithm, the CDC defines recurrent CDI as a positive
test within 8 weeks of previous positive test. If a patient test
positive a second time within this timeframe, the infection is not
counted as a new infection. In addition to this protocol guidance, CDC
has posted recommended guidance on its Web site that is designed to
improve the diagnosis and management of CDI in adult patients. This
document includes first test and repeat testing guidance, in order to
standardize the process and minimize false-positive results.
After consideration of the public comments we received, we are
finalizing the CDI SIR measure National Healthcare Safety Network
(NHSN) Facility-wide Inpatient Hospital-onset Clostridium difficile
Infection (CDI) Outcome Measure (NQF 1717) as proposed for the
FY 2017 payment determination and subsequent years.
(3) Quality Measure 3: All-cause Unplanned Readmission Measure
for 30 days Post- Discharge from Long-Term Care Hospitals
LTCHs treat patients who, on average, are hospitalized 25 days or
greater with medically complex problems, including prolonged mechanical
ventilation or multiple organ failure. In 2011, as reported by MedPAC,
about 123,000 Medicare beneficiaries received care for

[[Page 50869]]

almost 140,000 LTCH stays in roughly 424 LTCHs nationwide, with
payments of $5.4 billion.\154\ For patients discharged from LTCH
settings, the unadjusted rate of readmission to LTCHs and IPPS
hospitals in the 30 days after an LTCH discharge was about 26 percent
in 2010 and 2011.\155\ With such a large proportion of patients being
readmitted to an acute level of care (that is, to either an LTCH or to
an IPPS hospital), we are interested in monitoring the rates for each
facility and reducing rates that are inappropriately high. Thus, we
proposed a risk-adjusted measure of readmission rates, the All-cause
Unplanned Readmission Measure for 30 days Post Discharge from Long-Term
Care Hospitals.
---------------------------------------------------------------------------

\154\ Medicare Payment Advisory Commission, Report to the
Congress: Medicare Payment Policy. Available at: https://www.medpac.gov/documents/Mar13_EntireReport.pdf, March 2013, see
Chapter 11, Long-term care hospital services, pg. 237-257.
\155\ RTI analysis of 2010-2011 Medicare MedPAR claims data
under CMS contract HHSM-500-2008-00021I.
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This measure will enhance efforts to promote patient safety, reduce
healthcare-associated infections, improve coordination of care and care
transitions, and reduce healthcare costs. Readmissions are costly to
the Medicare program and have been identified as sensitive to
improvements in coordination of care and discharge planning for
patients.\156\ Literature on readmissions is mainly focused on
discharges from short-term acute care hospitals. However, processes
that may affect readmission rates, such as discharge planning,
communications, and coordination, also occur at other inpatient
facilities.
---------------------------------------------------------------------------

\156\ Federal Register, Vol. 76, No. 160, Thursday, August 18,
2011/Rules and Regulations, IV.C.1.a.
---------------------------------------------------------------------------

While some readmissions are unavoidable, such as those resulting
from the inevitable progression of disease or worsening of chronic
conditions, readmissions may also result from poor quality of care or
inadequate transitions between care settings. Randomized controlled
trials in short-stay acute care hospitals have shown that improvement
in the following areas can directly reduce hospital readmission rates:
quality of care during the initial admission; improvement in
communication with patients, their caregivers and their clinicians;
patient education; pre-discharge assessment; and coordination of care
after discharge. Successful randomized trials have reduced 30-day
readmission rates by 20 to 40
percent,^{157 158 159 160 161 162 163} and a 2011 meta-analysis
of randomized clinical trials found evidence that interventions
associated with discharge planning helped to reduce readmission
rates,\164\ illustrating how hospitals may influence readmission rates
through best practices.
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\157\ Jack BW, Chetty VK, Anthony D, Greenwald JL, Sanchez GM,
Johnson AE, et al. A reengineered hospital discharge program to
decrease rehospitalization: a randomized trial. Ann Intern Med
2009;150(3):178-87.
\158\ Coleman EA, Smith JD, Frank JC, Min SJ, Parry C, Kramer
AM. Preparing patients and caregivers to participate in care
delivered across settings: the Care Transitions Intervention. J Am
Geriatr Soc 2004;52(11):1817-25.
\159\ Courtney M, Edwards H, Chang A, Parker A, Finlayson K,
Hamilton K. Fewer emergency readmissions and better quality of life
for older adults at risk of hospital readmission: a randomized
controlled trial to determine the effectiveness of a 24-week
exercise and telephone follow-up program. J Am Geriatr Soc
2009;57(3):395-402.
\160\ Garasen H, Windspoll R, Johnsen R. Intermediate care at a
community hospital as an alternative to prolonged general hospital
care for elderly patients: a randomised controlled trial. BMC Public
Health 2007;7:68.
\161\ Koehler BE, Richter KM, Youngblood L, Cohen BA, Prengler
ID, Cheng D, et al. Reduction of 30- day postdischarge hospital
readmission or emergency department (ED) visit rates in high-risk
elderly medical patients through delivery of a targeted care bundle.
J Hosp Med 2009;4(4):211- 218.
\162\ Naylor M, Brooten D, Jones R, Lavizzo-Mourey R, Mezey M,
Pauly M. Comprehensive discharge planning for the hospitalized
elderly. A randomized clinical trial. Ann Intern Med
1994;120(12):999- 1006.
\163\ Naylor MD, Brooten D, Campbell R, Jacobsen BS, Mezey MD,
Pauly MV, et al. Comprehensive discharge planning and home follow-up
of hospitalized elders: a randomized clinical trial. Jama
1999;281(7):613-20.
\164\ Naylor MD, Aiken LH, Kurtzman ET, Olds DM, Hirschman
KB.The Importance of Transitional Care in Achieving Health Reform.
Health Affairs 2011; 30(4):746-754.
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Because many studies have shown readmissions to be related to
quality of care, and that interventions have been able to reduce 30-day
readmission rates, we believe it is appropriate to include All-cause
Unplanned Readmission Measure for 30 days Post Discharge from Long-Term
Care Hospitals as a quality measure in the LTCHQR Program. Promoting
quality improvements leading to successful transitions of care for
patients moving from the LTCH setting to the community or another post-
acute care setting, and reducing preventable facility-wide readmission
rates, is consistent with the NQS aims of safer, better coordinated
care and lower costs.
Our approach to developing this measure is similar to the approach
we took in developing NQF-endorsed Hospital-Wide Risk-Adjusted All-
Cause Unplanned Readmission Measure (NQF 1789) (Hospital-Wide
Readmission or HWR measure) (https://www.qualityforum.org/QPS/1789),
finalized for the Hospital IQR Program in the FY 2013 IPPS/LTCH PPS
final rule (77 FR 53521 through 53528). We proposed to use the same
statistical approach, the same time window and a similar set of patient
characteristics. To the extent appropriate, the proposed LTCH measure
is being harmonized with this HWR measure (NQF 1789) \165\ and
other measures of readmission rates being developed or proposed for
post-acute care (PAC) settings, including the All-cause Unplanned
Readmission Measure for 30 days Post Discharge from Inpatient
Rehabilitation Facilities. This reflects MAP recommendations to promote
alignment across care settings.\166\
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\165\ QualityNet. Hospital-wide All-Cause Unplanned Readmission
(HWR) Measure. Available at https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1228772504318. As obtained on March 20, 2013.
\166\ National Quality Forum. Measure Applications Partnership
Pre-Rulemaking Report: 2013 Recommendations of Measures Under
Consideration by HHS: February 2013. Available at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=72738.
---------------------------------------------------------------------------

LTCH patients, on average, require long stays at a hospital level
of care and need care even after discharge. The setting chosen for
placement of the discharged patient, and coordination with caregivers
after discharge, are important for the stability of these patients. The
rate of readmission to an acute level of care (short- or long-term) for
such patients will be sensitive to appropriate discharge placement. The
All-cause Unplanned Readmission Measure for 30 days Post Discharge from
Long-Term Care Hospitals assesses return to short-stay acute care
hospitals or LTCHs within 30 days of discharge from an LTCH to the
community or another care setting of lesser intensity than an acute
care setting. Patient readmissions are tracked using Medicare FFS
claims data for 30 days after discharge, or the date of patient death
if the patient dies within 30 days of discharge.
In the Hospital IQR Program, two readmission measurement approaches
were taken: (1) Measures related to patients with specific medical
conditions, such as heart failure, pneumonia, and acute myocardial
infarction,\167\ and (2) a hospital-wide measure. In LTCHs, patients
tend to be complex and not easily classified into specific condition or
procedure types. In addition, LTCHs have relatively small numbers of
patients. Even ventilator patients, who are reasonably definable,

[[Page 50870]]

are not numerous enough to provide good, stable indicators of quality.
Therefore, a hospital-wide all-cause readmission measure reflects a
broader assessment of the quality of care in LTCHs, and may
consequently better promote quality improvement and inform consumers
about quality of care.
---------------------------------------------------------------------------

\167\ Refer to 77 FR 53377 and table on 77 FR 53531 for current
condition-specific readmission measures used in the Hospital IQR
Program, available at: https://www.gpo.gov/fdsys/pkg/FR-2012-08-31/pdf/2012-19079.pdf.
---------------------------------------------------------------------------

In applying the All-cause Unplanned Readmission Measure for 30 days
Post Discharge from Long-Term Care Hospitals, we will follow patients
for 30 days after the LTCH discharge date, or date of death if the
patient dies within the 30 day post-discharge period, using Medicare
FFS claims data. Because patients differ in morbidity and complexity,
the measure is risk-adjusted for patient case-mix. The measure also
excludes planned readmissions because these are not considered to be
indicative of poor quality care on the part of the LTCH.
A model developed by a CMS measure development contractor predicts
admission rates while accounting for patient demographics, primary
condition in the prior short stay, comorbidities, and a few other
patient factors. The use of such risk adjusters will account for case-
mix differences that affect patient readmission rates among facilities.
While estimating the predictive power of the patient characteristics,
the model also estimates a facility specific effect common to patients
treated at that facility. Similar to the Hospital IQR Program hospital-
wide readmission measure, the proposed LTCHQR Program measure is the
ratio of the number of risk-adjusted predicted unplanned readmissions
for each individual LTCH, including the estimated facility effect, to
the average number of risk-adjusted predicted unplanned readmissions
for the same patients treated at a facility with the average effect on
readmissions. A ratio above one indicates a higher than expected
readmission rate, or lower level of quality, while a ratio below one
indicates a lower than expected readmission rate, or higher level of
quality. (The construction of the Hospital IQR Program hospital-wide
measure and an NQF technical report outlining the findings of the
expedited review process for the Patient Outcomes:
All--Case Readmission Measures may be downloaded from: https://www.qualityforum.org/Publications/2012/07/Patient_Outcomes_All-Cause_Readmissions_Expedited_Review_2011.aspx.)
The patient population for the All-cause Unplanned Readmission
Measure for 30 days Post Discharge from Long-Term Care Hospitals
includes LTCH patients who:
Were discharged alive from the LTCH;
Had 12 months of Medicare Part A, fee-for-service coverage
prior to the LTCH stay;
Had 30 days of Medicare Part A, fee-for-service coverage
post discharge;
Had an acute care facility (IPPS, CAH, or psychiatric
hospital) stay within the 30 days prior to the LTCH stay; and
Were aged 18 years or above when admitted to the LTCH.
In this final rule, we are revising the terminology ``Had an IPPS
hospital stay within the 30 days prior to the LTCH stay'' we used in
the proposed rule and instead using ``Had an acute care facility (IPPS,
CAH, or psychiatric hospital) stay within the 30 days prior to the LTCH
stay'' to include acute care, including critical access hospitals
(CAHs), IPPS hospitals, and inpatient psychiatric hospitals and units
(IPFs). Patients from the IPPS and CAH settings with psychiatric
diagnoses are included in the measure. As a result, including patients
with an IPF stay for psychiatric diagnoses preceding the LTCH stay is
also appropriate. There were about 0.5 percent of such stays in the
measure using 2010-2011 data.
As in the Hospital IQR Program hospital-wide readmission measure,
patients with medical treatment for cancer are excluded. Studies of
this population that were reviewed for the Hospital IQR Program
readmission measure showed them to have a different trajectory of
illness and mortality than other patient populations.\168\ The measure
also excludes patients who were discharged against medical advice.
---------------------------------------------------------------------------

\168\ National Quality Forum. ``Patient Outcomes: All-Cause
Readmissions Expedited Review 2011''. July 2012. pp12.
---------------------------------------------------------------------------

Readmissions that are not included in the measure are:
Transfers from an LTCH to another LTCH or acute care
facility; and
Readmissions within the 30 day window that are usually
considered planned due to the nature of the procedures and principal
diagnoses of the readmission.
LTCH stays with data that are problematic. (The Medicare
data files occasionally have anomalous records that indicate a person
is in two facilities or stays that overlap in dates, or are otherwise
potentially erroneous or contradictory.)
The planned readmission list for the All-cause Unplanned
Readmission Measure for 30 days Post Discharge from Long-Term Care
Hospitals includes the planned procedures specified in the Hospital-
Wide All-Cause Unplanned Readmission (HWR) Measure (NQF 1789)
used in the Hospital IQR Program, plus other procedures that were
determined in consultation with a TEP. The list of procedures
considered planned may be found in the LTCH Readmissions Measure
Specifications file, which was made available for download at the time
of release of the proposed rule at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/. In addition to the list of planned procedures this file
includes a list of diagnoses, which, if found as the principal
diagnosis on the readmission claim, would indicate that the procedure
occurred during an unplanned readmission. Another readmission type that
is counted as planned for this measure is any readmission to a
psychiatric hospital or unit. This had not been explicitly noted in the
proposed rule.
A patient discharged from an LTCH is tracked until one of the
following occurs: (1) The 30-day period post-discharge ends; (2) the
patient dies; or, (3) the patient is readmitted to an acute level of
care (short- or long-term). If multiple readmissions occur, only the
first is considered for this measure. If the first readmission is
unplanned, it is counted as a readmission in the measure rate. The
occurrence of a planned readmission ends the 30-day window of the index
discharge from the LTCH.
Readmission rates are risk-adjusted for patient case-mix
characteristics, independent of quality. The risk adjusted model
accounts for demographic characteristics, principal diagnosis,
comorbidities, length of stay in the prior acute care facility,
critical care days in the prior acute care facility, number of acute
care facility stays in the prior year, and the occurrence of various
surgery types in the prior acute care facility stay.
In modeling LTCH readmissions, all patients are included in a
single model, an approach different from the five-cohort approach of
the Hospital IQR Program HWR measure, adapted to account for a
substantially smaller patient population in the LTCH setting. Separate
models for patient types, as was done for the Hospital IQR Program
measure, are not feasible. The number of cases is much smaller in the
LTCHs than in the IPPS hospitals and patients are generally not as
strongly characterized by one major admitting diagnosis or condition.
Patient characteristics are captured by diagnoses and prior surgeries,
with a

[[Page 50871]]

marker for prolonged mechanical ventilation also included.
Because there are approximately 120,000 LTCH admissions per year,
and approximately 110,000 of those admissions meet the criteria for
inclusion, the proposed measure will use a model that merges two years
of Medicare claims data. This approach is similar to that used by the
Hospital IQR Program condition-specific readmission measures, which use
three years of claims data (77 FR 53523). Merging multiple years of
data produces more precise estimates of the effects of all the risk
adjusters, and increases the sample size associated with each facility.
Larger patient samples are better able to meaningfully distinguish
facility performance.
Under the exception authority in section 1886(m)(5)(D)(ii) of the
Act, we proposed to use this measure in the LTCHQR Program. This
section provides that in the case of a specified area or medical topic
determined appropriate by the Secretary for which a feasible and
practical measure has not been endorsed by the entity with a contract
under section 1890(a) of the Act, the Secretary may specify a measure
that is not so endorsed as long as due consideration is given to
measures that have been endorsed or adopted by a consensus organization
identified by the Secretary. In the case of this measure, we did not
find a feasible or practical NQF-endorsed measure that would be
appropriate for the LTCH setting, or any other appropriate measure that
has been adopted or endorsed by an appropriate consensus organization.
The measure most similar in concept, and which has been endorsed by
NQF, is the CMS Hospital-Wide All-Cause Unplanned Readmission Measure
(NQF 1789) described below. This measure is for the short-term
acute stay hospitals.
In 2012, NQF endorsed two hospital-wide readmission measures, the
National Committee for Quality Assurance (NCQA) measure intended for
health plans, Plan All-Cause Readmissions (NQF 1768), and CMS'
Hospital-Wide All-Cause Unplanned Readmission Measure (HWR) (NQF
1789). The latter measure is the model for the All-cause
Unplanned Readmission Measure for 30 days Post Discharge from Long-Term
Care Hospital measure, we proposed in the FY 2014 IPPS/LTCH PPS
proposed rule. We selected the latter measure as the model for the LTCH
measure since it uses Medicare claims data and is in current use for
the Hospital IQR Program, while the former uses health plans data. This
measure was present on CMS' List of Measures Under Consideration for
MAP 2012 and the most recent MAP Pre-Rulemaking Report noted that
``readmission measures are also examples of measures that MAP
recommends be standardized across settings, yet customized to address
the unique needs of the heterogeneous Post-Acute Care (PAC)/LTC
population. The MAP has continually noted the need for care transition
measures in PAC/LTC performance measurement programs, and in 2013
supported the direction of this measure.\169\ The readmission measure
such as the one we proposed would address the need for an evidence-
based measure that could promote alignment across the care continuum
and PAC/LTC settings while ensuring appropriate risk adjustment to
accommodate uniqueness of the LTCH population.
---------------------------------------------------------------------------

\169\ National Quality Forum. Measure Applications Partnership
Pre-Rulemaking Report: 2013 Recommendations of Measures Under
Consideration by HHS: February 2013. Available at https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=72738.
---------------------------------------------------------------------------

We intend to seek NQF endorsement of the All-cause Readmission
Measure for 30 days Post Discharge from Long-Term Care Hospital. As
this is a claims-based measure not requiring reporting of new data by
LTCHs, this measure will not be used to determine LTCH reporting
compliance for the LTCHQR Program. We proposed to begin reporting
feedback to LTCHs on performance of this measure in CY 2016. The
initial feedback will be based on FY 2013 and FY 2014 Medicare claims
data related to LTCH readmissions. The readmission measure will be part
of the LTCH public reporting program once public reporting is instated.
We intend to provide details pertaining to public reporting, such as
LTCH preview of performance results of this measure, in our future
rulemaking.
We invited public comment on these proposals.
Comment: A number of commenters noted that the measure is not NQF-
endorsed and this NQF endorsement should occur before implementation.
Further, commenters noted the MAP did not fully support this measure.
Response: We are aware this measure is not yet NQF-endorsed. We
intend to submit this measure for NQF review for endorsement. We are
also aware that the MAP did not fully support this measure, but note
that but note that we have taken the MAP's input into consideration in
selecting quality measures, as we are required to do under section
1890(a)(4) of the Act. However, we are not required to follow the MAP's
recommendations, but to take them into account when selecting measures
for proposal. In addition to MAP input, we take a variety of other
factors into account in selecting measures. In this instance, for
example, the All-cause Unplanned Readmission Measure for 30 days Post-
Discharge from Long-Term Care Hospitals is appropriate in light of the
fact that such a large proportion of patients being readmitted to an
acute level of care (that is, to either an LTCH or to an acute care
facility). For the reasons listed above, this measure is appropriate
for LTCH patients. Further, we have the authority to finalize non-NQF
endorsed measures under the exception authority when NQF-endorsed
measures are not available or appropriate for a setting, as described
above. We proposed the readmissions measure under this exception
authority.
Comment: Some commenters suggested that the readmission measure be
created for only a few LTCH conditions.
Response: The initial set of readmission measures for short-term
acute hospitals took this condition-specific approach. There is also an
HWR measure for short-term acute care hospitals, which served as the
starting point for the development of the LTCH readmissions measure.
The HWR measure is NQF-endorsed.
There are a number of reasons not to use subsets of patients to
develop condition-specific readmissions measures for the LTCH setting.
First, LTCH stays number fewer than 150,000 per year. Therefore,
patient sample size for particular DRGs or even larger patient
subgroups would be relatively small. Second, the LTCH patient
population tends to have multiple comorbidities and are typically not
as distinctively classified into condition-specific categories as can
be done for the short-term acute care hospital patient population.
Third, the TEP convened by CMS' measure development contractor did not
recommend separating groups of patients or even stratifying the model
by patient types. The model includes indicators of the principal
diagnosis in the prior short-term acute care hospital setting. In
addition, we include an indicator in the model to adjust for the
important subgroup of LTCH patients on prolonged mechanical ventilation
in LTCHs. While making separate models for separate subgroups of
patients is not desirable for the LTCH population, the inclusion of
many characteristics of the patients, such as diagnoses, comorbidities,
surgeries, etc., does provide risk adjustment to account for patient
mix that varies across facilities.

[[Page 50872]]

Comment: Some commenters stated that the LTCH measure should be
made especially appropriate for and tailored for LTCHs.
Response: The risk-adjustment model has been customized for LTCHs
and includes predictors that are not present in the HWR model and a
customized planned readmissions list. There is harmonization with other
measures where reasonable and customization where appropriate. The
tailoring of the measure is in the inclusion of particular risk
adjustment variable types, such as the diagnoses, surgeries, intensive
care days in the prior acute stay, and counts of prior acute
admissions, as well as the statistical estimation of the effects of
these variables using data specific to LTCH stays.
Comment: One commenter suggested that, just as patients discharged
against medical advice (AMA) are not counted in the measure,
readmissions for patients deemed non-compliant with medical advice or a
discharge plan should not be counted in the measure.
Response: We believe the analogy to exclusion of discharges against
medical advice is inaccurate. The AMA discharges are readily
identifiable on claims submitted by LTCHs, the source of information
used in the measure. These cases are completely excluded from the
numerator and denominator. Non-compliance after discharge differs in
that it can occur in degrees and be either voluntary or involuntary,
such as when a patient does not have the assistance he or she needs to
comply appropriately. We do not believe there is a clear marker for the
point at which the patient should be excluded. We believe that the
identification of such patients would be impractical at this time. For
these reasons it is not possible to implement a non-compliance
exclusion at this time.
Comment: Some commenters believed that socioeconomic factors and
dual eligibility for Medicaid should be accounted for in the model as
well as other contextual factors.
Response: The inclusion of factors related to socioeconomic status
(SES) has been raised in the context of the Hospital IQR Program
measures and our policy in that program omits them as explicit risk
adjusters. Medicaid dual eligibility, which is related to income, is a
socioeconomic factor, and is also not accounted for explicitly in
Hospital IQR Program measures. The LTCH harmonizes with the other
readmission measures in that respect (the Hospital IQR and the proposed
IRFQR readmission measure). The effect of SES is similar in the case of
LTCHs to the effects in the IPPS setting and the reasoning for not
explicitly accounting for SES is similar. The effect of levels of SES
is captured to a great extent by other variables included in the model.
The proposed readmission measure is a risk-standardized readmission
measure that adjusts for case-mix differences based on the clinical
status of the patient at the time of admission to the hospital. That
is, they are risk-adjusted for certain key variables (for example, age,
sex, comorbid diseases and a history of repeat admissions) that are
clinically relevant and/or have been found to have strong relationships
with the outcome. To the extent that race or socioeconomic status
results in certain patient groups having a worse medical condition
profile, those factors are accounted for in the measure.
However, these measures are not specifically adjusted for factors
such as race, SES, or English language proficiency. We believe such
additional adjustments are not appropriate because the association
between such patient factors and health outcomes can be due, in part,
to differences in the quality of health care received by groups of
patients with varying race/language/SES. Differences in the quality of
health care received by certain racial and ethnic groups may be
obscured if the measures risk-adjust for race and ethnicity. In
addition, risk-adjusting for patient race, for instance, may suggest
that hospitals with a high proportion of minority patients are held to
different standards of quality than hospitals treating fewer minority
patients. We appreciate the concerns of hospitals that care for
disproportionately large numbers of disadvantaged populations. Our
analysis indicates that better quality of care is achievable regardless
of the demographics of the hospital's patients.
The issue of the quality of care available after discharge is of
concern to us and is being addressed by quality measures being proposed
across the spectrum of care. The issue is also related to our major
concern regarding the quality of transitions on discharge from the LTCH
and care coordination.
Comment: Some comments suggested that access to care in a
community, from accessibility of providers to transportation, could
affect readmission rates. They suggest that these factors be accounted
for so that facilities are not disadvantaged.
Response: We understand the concern about the effect of such
factors and will consider how they might be accounted for during our
future measure development efforts.
Comment: One commenter recommended adding discharges to an IRF or
IPF to the discharge destinations that serve as exclusions for the
proposed measure.
Response: We consider the IRF level of care for rehabilitation to
be a non-acute level for this measure. Discharges to this setting do
not serve as excluded cases and are treated the same as discharges to
skilled nursing facilities, home health care and to the community
without formal home health care. Direct discharges to an IPF are
excluded from the measure. Readmissions to an IPF that are detected
during the measure window are treated as planned and not counted in the
numerator of the measure.
Comment: Some commenters suggested exclusion of interrupted stays
in the measure and clarification of treatment of discharges to
collocated hospitals.
Response: The proposed measure requires that a patient who has been
discharged from an LTCH be considered for inclusion in the measure.
Admissions occurring during an LTCH stay are not part of the measure.
Interruptions may occur during the LTCH stay. Interruptions of 3 days
or less do not result in a claim with a discharge and charges for any
inpatient or outpatient treatment are sent to the LTCH. Stay
interruptions longer than 3 days may result in Medicare receiving a
separate bill from the other provider, though the patient is not
formally discharged from the LTCH. An interruption of 4 to 9 days to an
IPPS hospital is an example of this. There are also interrupted stays
in which the patient is discharged to an IRF or a SNF. Those
interruptions have longer defined spans. None of these is relevant for
this measure. The Medicare claim for the LTCH stay must be for a
discharged patient to be considered for inclusion in the measure. We
evaluate the discharge record as to whether it is to a lower level of
care. The rule for discharges to collocated hospitals depends on
whether an interruption rule applies. If the claim shows that the
patient is discharged to a collocated facility, not for an
interruption, the treatment of the LTCH stay for the quality measure
depends on the type of facility the patient is discharged to. The
standard exclusions pertain. The special payment provisions for LTCHs
that transfer more than 5 percent of cases to a collocated facility do
have a direct relation to the quality measure. Whether cases are
included in the measure depends the discharge claims observed in the
Medicare data.
Comment: Some commenters note that burn patients often need repeat
hospitalizations and that the model does not account for that.

[[Page 50873]]

Response: The LTCH model could not include severe burn patients as
a separate primary diagnosis group because the sample size in the
national data was too small. The burn patients are included in the skin
injury CCS diagnosis group. It was necessary to aggregate patient types
with small numbers to include them in the model. As a very small group,
such patients will have a small effect on the facility measure as a
whole, and it is better to aggregate patient types to get a
statistically significant average effect than to drop the small groups.
The groupings were reviewed by a physician as they were being created,
using clinical, sample size and estimated coefficients. In addition, we
note that the Hospital-Wide All-Cause Unplanned Readmission Measure
Final Technical Report (https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1228772504318) had enough sample size to look at the burn patients. This report
is in the NQF submission (NQF 1789). The readmission rate
following discharge from the IPPS setting was reported as average. To
the extent the commenter's concern is the number of readmissions that
might occur, both the HWR measure and the LTCH measure do not count the
number of readmissions in the post-discharge window, just the presence
of at least one unplanned readmission.
Comment: Some commenters wanted the list of planned readmissions to
be larger and/or that the countable readmissions include only those
related to the LTCH admission and/or those deemed preventable. One
commenter proposed that the LTCHs themselves could code the planned
readmissions.
Response: The issue of all-cause readmissions, as opposed to a more
focused set of readmission types, has been raised in other contexts,
such as the Hospital IQR measure. Section 2.2.3 of the technical report
in the HWR NQF Measure Submission Form for NQF 1789
explains our decision regarding this issue. The link is on the
QualityNet Web site.\170\ The same logic applies to the LTCH setting.
Discussions with technical experts have led to our preference in the
LTCH, as for the HWR measure, for using an all-cause measure rather
than a measure specific to a narrow set of conditions. The latter is
possible when the population being measured is narrowly defined and
certain complications are being targeted. For broader measures,
covering patients with multiple medical conditions, a narrow set of
readmission types is not desirable.
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\170\ QualityNet. Hospital-wide All-Cause Unplanned Readmission
(HWR) Measure. Available at https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1228772504318. As obtained on July 8, 2013.
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In addition, readmissions may be clinically related even if they
are not related to the principal diagnosis of the patient. One of the
primary purposes of the measure is to encourage improved transitions at
discharge and choice of discharge destination. Some readmissions can
occur that are less related to the primary condition being treated in
the LTCH than to the coordination of care post-discharge. For instances
where the readmission is likely random, such as a car accident, we
expect these events not to be systematically distributed among the
LTCHs. Therefore, we have chosen to reduce the all-cause readmission
set by excluding readmissions that are frequently planned or expected.
The Hospital IQR set of planned readmissions has been augmented for
LTCHs by further recommendations by technical experts in the field of
post-acute care. In 2010-2011 data, nearly 9 percent of readmissions
are considered planned.
As to the suggestion that LTCHs code the planned readmissions, many
of these do not occur during the LTCH stay and so could not be coded.
Some planned readmissions would be interruptions of a stay and not be
part of the measure. Some long interruptions could become discharges
and could be coded, in principle, but these discharges would not be
included in the measure because the readmission would have been a
direct discharge to the acute hospital. The remaining post-discharge
planned admissions that occur in the measure window are not under the
control of the LTCH to code. We intend to continue its measure
development work to further refine the planned readmission set after
implementation of the proposed measure.
Comment: Some commenters suggested that more than two years of data
be included in the measure to increase sample size.
Response: The two years of data for each report period is a
compromise between sample size and timeliness. In this case the total
number of LTCH stays in one year of national data is much smaller than
the number of IPPS stays. The HWR measure uses one year of data.
However, though the number of LTCH stays in the national data is small
relative to the IPPS stays, two years of data yield good sample sizes
at the LTCH level. In the 2010-2011 data, 95 percent of LTCHs have more
than 100 patients averaged in their measure. The number of stays at the
LTCH level is important for the precision of the LTCH measure. We do
not think that three years of data are needed and the measure can be
more current with 2 years.
Comment: Some commenters are concerned about the statistical power
of the model and specifically the C statistic.
Response: The C statistic is one of the statistical criteria used
in evaluating risk adjustment models. The acuity of patients in LTCHs
is not uniform, though it is concentrated at the higher end of the
spectrum. The relatively high readmission rate for LTCH patients post-
discharge indicates that differentiating among the patients who have
multiple medical conditions is challenging at the individual level. We
note, however, that the risk-adjusted rates for LTCHs are not being
compared to other facility types with a different patient mix. Though
the LTCH C statistic is not as high as in some patient populations with
a greater acuity span, the range of discrimination from the lowest to
highest deciles of probability of readmission for individuals is quite
good. The lowest decile has an average probability of an unplanned
readmission of about 13 percent; the average in the highest decile is
about 43 percent. The full range of patient readmission probabilities
in the observed data (2010-2011) ranges from about 5 percent to about
64 percent. The risk adjustment model has a wide range of
discrimination. In addition, other tests indicate the over- and under-
prediction values throughout the deciles of predicted probability are
good.
Comment: A few commenters requested that data for all patients be
made available to LTCHs to track the patients after discharge. One
commenter suggested monthly or quarterly transmissions of notices of
readmission and made the case that the identifiable data would be
HIPAA-compliant. Commenters also requested that historical rates be
made available to the facilities.
Response: We recognize the value for LTCHs being able to track
patients' readmissions to other hospitals in real time both for an
LTCH's internal quality improvement purpose and for validating our
readmission measure criteria. Further, we appreciate commenters request
for historical rates. We will consider whether it is operationally
possible to provide these data to LTCHs and whether sharing these data
would be consistent with patient privacy considerations. Further, we
note that the readmission rates will be made available to each LTCH
from the first dry run

[[Page 50874]]

year, prior to implementation of the readmission measure as part of the
LTCHQR Program.
Comment: A few commenters were concerned about the appropriateness
of a time window of 30 days post-discharge as a measure of readmission
rate.
Response: We have observed a continuous curve as readmissions
increase over time. There is no discontinuity on which to base a cut-
off point. The TEP has considered longer and shorter time intervals,
but did not find a clear case that the measures for facilities,
relative to each other, would vary meaningfully. A much shorter
interval would have fewer events, making each event relatively more
important in computing a rate. A much longer interval would bring in
more random events. The 30-day interval is an interval that harmonizes
with other measures and was found reasonable by the technical panel,
which included industry representation. We will include a graph of
readmissions over time as illustrative material in the final technical
specifications prior to measure implementation.
Comment: Two comments pointed out that LTCHs often discharge to
another provider and that the attribution of any readmission might not
belong to the LTCH because of limited control of the care at that
point.
Response: We have harmonized this measure with the other inpatient
readmission measures in this respect. Stays that result in a discharge
to another acute provider are not included in the measure. Patients
that are discharged to a lower level of care are those for which
attribution is made to the LTCH. There are two main considerations in
making this decision: (1) The discharging facility should be making a
best effort to discharge its patients to the best setting and provider
for the patients in the transition planning; and (2) it is intended the
discharging facility will be sharing responsibility with the admitting
provider for any readmission in the common part of their observation
windows. Measures are being developed for other providers that will
result in attribution of responsibility to these providers as well.
Comment: Some commenters expressed concern that CMS had not
convened a TEP for this measure and requested that one be convened.
Response: Our measure development contractor has convened several
meetings of a TEP (including representatives of the LTCH community).
During these meetings, TEP members were consulted to inform our measure
development efforts, including selection of the list of planned
readmissions.
Comment: One commenter expressed concern over burden of data
collection for the LTCH readmission measure.
Response: As we noted in the proposed rule and the measure
specifications, this measure is based on claims and enrollment data. We
do not require LTCHs to submit any data of a non-routine nature for the
purpose of this measure. Therefore, there is no additional data
collection or reporting burden associated with this measure.
Comment: One commenter requested that the statement in the measure
specification concerning definitions of planned readmissions be
explicitly stated in the rule.
Response: We included definitions of planned readmissions in the
draft LTCH Readmissions Measure Specifications file available for
download at the time of release of the proposed rule at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/. Generally, we include Web links to
measure specifications rather than including the specification in the
proposed or final rule.
Comment: One commenter wanted CMS to clarify that the LTCH stays
included in the measure are only for patients discharged to the
community or another setting of lesser intensity than an acute care
facility.
Response: We addressed this clearly in the proposed rule as well as
in the measure specifications. The measure excludes patients discharged
and directly admitted to an IPPS hospital, CAH or LTCH at the time of
an LTCH discharge. In addition, the measure excludes discharges against
medical advice (as noted in measure specifications).
After consideration of the public comments we received, we are
finalizing the All-cause Unplanned Readmission Measure for 30 days
Post-Discharge from Long-Term Care Hospitals, as proposed.
c. New LTCHQR Program Quality Measure for the FY 2018 Payment
Determination and Subsequent Years
We proposed one new quality measure, Application of the Percent of
Residents Experiencing One or More Falls with Major Injury (Long Stay)
(NQF 0674), for the LTCHQR Program for the FY 2018 payment
determination and subsequent years.
This NQF-endorsed measure is an outcome measure that reports the
percentage of residents (or patients for the LTCH setting) who
experienced falls with major injury over a 12-month period. This
measure was developed by CMS and is NQF-endorsed for the Nursing Home/
Skilled Nursing Facility setting. Similar to our measure development
work for the Pressure Ulcer measure (NQF 0678) and expansion
to the LTCH setting, we anticipate re-specifying and expanding this
measure to the LTCH setting through NQF ad hoc review and future
rulemaking.
Research indicates that fall-related injuries are the most common
cause of accidental death in people aged 65 and older, with
approximately 41 percent of accidental deaths annually.\171\ Rates
increase to 70 percent of accidental deaths amongst individuals ages 75
and older.\172\ In addition to death, falls can lead to fracture, soft
tissue or head injury, fear of falling, anxiety and depression.\173\
Research also indicates that approximately 75 percent of nursing
facility residents fall at least once a year, twice the rate of their
counterparts in the community.\174\ Similar data are not available for
the LTCH setting. Falls also represent a significant cost burden to the
entire health care system, with injurious falls accounting for 6
percent of medical expenses among those age 65 and older.\175\
---------------------------------------------------------------------------

\171\ Currie LM. Fall and injury prevention. Annu Rev Nurs Res.
2006;24:39-74.
\172\ Fuller GF. Falls in the elderly. Am Fam Physician. Apr 1
2000;61(7):2159-2168, 2173-2154.
\173\ Premier Inc. Causes of Falls. 2013. Available: https://www.premierinc.com/quality-safety/tools-services/safety/topics/falls/causes_of_falls.jsp.
\174\ Rubenstein LZ, Josephson KR, Robbins AS. Falls in the
nursing home. Ann Intern Med. 1994 Sep 15; 121(6):442-51.
\175\ Rubenstein LZ, Powers CM, MacLean CH. Quality indicators
for the management and prevention of falls and mobility problems in
vulnerable elders (ACOVE). Ann Intern Med. 2001 Oct 16;135(8 Pt
2):686-93.
---------------------------------------------------------------------------

According to analysis of ICD-9 codes reported on Medicare claims,
LTCHs reported 2,567 major injuries due to falls in 2009. POA
indicators are not available on LTCH claims; therefore, we are unable
to say whether these conditions are present on admission or acquired
during the LTCH stay. Therefore, it was not possible to determine which
of these falls occurred in the LTCH. However, we note that on the
majority of claims, the primary diagnosis is the admitting diagnosis
and is considered to be present on admission and therefore, the
secondary diagnoses can be assumed to provide a count of conditions
that could have been acquired in the LTCH.\176\ When it

[[Page 50875]]

was assumed that a fall recorded in the primary diagnosis code was
likely present on admission and that a fall recorded in the secondary
diagnosis code was acquired in the LTCH, there were 2,049 reported
injuries that may have been acquired in the LTCH.\177\
---------------------------------------------------------------------------

\176\ Centers for Medicare & Medicaid Services Center for
Medicare & Medicaid Innovation. Hospital Acquired Conditions (HAC)--
Report to Congress. Available at https://innovation.cms.gov/Files/x/HospAcquiredConditionsRTC.pdf.
\177\ Bernard SL, Dalton K, Lenfestey N F, Jarrett NM, Nguyen
KH, Sorensen AV, Thaker S, West ND. Study to support a CMS Report to
Congress: Assess feasibility of extending the hospital-acquired
conditions--present on admission IPPS payment policy to non-IPPS
payment environments. Prepared for the Centers for Medicare &
Medicaid Services (CMS Contract No. HHSM-500-T00007). 2011.
---------------------------------------------------------------------------

According to Morse (2002), 78 percent of falls are anticipated
physiologic falls. Anticipated physiological falls are falls amongst
individuals who scored high on a risk assessment scale, meaning their
risk could have been identified in advance of the fall.\178\ To date,
studies have identified a number of risk factors for falls.\179\ \180\
\181\ \182\ \183\ \184\ \185\ \186\ \187\ The identification of such
risk factors suggests the potential for health care facilities to
reduce and prevent the incidence of falls for their patients.
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\178\ Morse, J. M. (2002) Enhancing the safety of
hospitalization by reducing patient falls. Am J Infect Control 2002;
30(6): 376-80.
\179\ Rothschild JM, Bates DW, Leape LL. Preventable medical
injuries in older patients. Arch Intern Med. 2000 Oct 9;
160(18):2717-28.
\180\ Morris JN, Moore T, Jones R, et al. Validation of long-
term and post-acute care quality indicators. CMS Contract No: 500-
95-0062/T.O. 4. Cambridge, MA: Abt Associates, Inc., June
2003.
\181\ Avidan AY, Fries BE, James ML, Szafara KL, Wright GT,
Chervin RD. Insomnia and hypnotic use, recorded in the minimum data
set, as predictors of falls and hip fractures in Michigan nursing
homes. J Am Geriatr Soc. 2005 Jun; 53(6):955-62.
\182\ Fonad E, Wahlin TB, Winblad B, Emami A, Sandmark H. Falls
and fall risk among nursing home residents. J Clin Nurs. 2008 Jan;
17(1):126-34.
\183\ Currie LM. Fall and injury prevention. Annu Rev Nurs Res.
2006;24:39-74.
\184\ Ellis AA, Trent RB. Do the risks and consequences of
hospitalized fall injuries among older adults in California vary by
type of fall? J Gerontol A Biol Sci Med Sci. Nov 2001;56(11):M686-
692.
\185\ Chen XL, Liu YH, Chan DK, Shen Q, Van Nguyen H. Chin Med J
(Engl). Characteristics associated with falls among the elderly
within aged care wards in a tertiary hospital: a retrospective. 2010
Jul;123(13):1668-72.
\186\ Frisina PG, Guellnitz R, Alverzo J. A time series analysis
of falls and injury in the inpatient rehabilitation setting. Rehabil
Nurs. 2010 Jul-Aug;35(4):141-6, 166.
\187\ Lee JE, Stokic DS. Risk factors for falls during inpatient
rehabilitant. Am J Phys Med Rehabil. 2008 May;87(5):341-50; quiz
351, 422.
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In light of the evidence discussed above, we proposed an
application of the measure NQF 0674 Percent of Residents
Experiencing One or More Falls with Major Injury (Long Stay), for the
LTCHQR Program for the FY 2018 payment determination and subsequent
years.
We note that, while NQF 0674 is currently endorsed only
for long stay nursing home residents, we believe that an application of
this measure is highly relevant for the LTCH setting. As stated above,
many patients receiving care in the LTCH setting are elderly and are at
high risk for death and other injuries due to falls. A TEP convened by
our measure development contractor discussed potential quality measures
for the LTCH setting and stressed that falls with major injury are a
major concern in LTCH setting.
In section 1886(m)(5)(D)(ii) of the Act, the exception authority
provides that ``[i]n the case of a specified area or medical topic
determined appropriate by the Secretary for which a feasible and
practical measure has not been endorsed by the entity with a contract
under section 1890(a) of the Act, the Secretary may specify a measure
that is not so endorsed as long as due consideration is given to
measures that have been endorsed or adopted by a consensus organization
identified by the Secretary.'' We reviewed NQF's consensus endorsed
measures and were unable to identify any NQF-endorsed measures for
falls with major injury in the LTCH setting. We are unaware of any
other measures for falls with major injury that have been endorsed or
adopted by another consensus organization for the LTCH setting.
Therefore, we proposed to adopt an application of the NQF-endorsed
measure Percent of Residents Experiencing One or More Falls with Major
Injury (Long Stay) (NQF 0674) for use in the LTCH setting for
the LTCHQR Program under the Secretary's authority to select non-NQF-
endorsed measures. As mentioned previously, we are considering applying
for NQF review for endorsement of this measure to the LTCH setting as
part of the measure expansion process. Additional information regarding
NQF 0674, on which our application of the measure is based,
including measure specifications, is available at: https://www.qualityforum.org/QPS/0674. The use of different applications of the
same quality measure across multiple healthcare settings is also
consistent with the 2008 NQF steering committee recommendation that
``in the interest of standardization and minimizing the burden for
those implementing and using measures, measure harmonization is an
important consideration in evaluating and recommending measures for
endorsement.'' \188\ Data on NQF 0674 is currently collected
and reported on Nursing Home Compare as part of the Nursing Home
Quality Initiative.\189\
---------------------------------------------------------------------------

\188\ National Quality Forum (2008, December) National Voluntary
Consensus Standards for influenza and pneumococcal vaccinations.
Available from: https://www.qualityforum.org/Publications/2008/12/National_Voluntary_Consensus_Standards_for_Influenza_and_Pneumococcal_Immunizations.aspx.
\189\ Nursing Home Quality Initiative, Quality Measures.
December 2012. Available: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/NHQIQualityMeasures.html.
---------------------------------------------------------------------------

We proposed that data for the proposed application of NQF
0674 will be collected through the LTCH CARE Data Set,\190\
with submission through the QIES ASAP System, as described in the FY
2013 IPPS/LTCH PPS final rule (77 FR 53619 through 53621). For more
information on LTCHQR Program reporting using the QIES ASAP system, we
refer readers to the Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCHTechnicalInformation.html. We intend to revise the LTCH CARE Data
Set to include new items which assess the presence of falls and falls
with major injury. These new items will be applied to all LTCH patients
and will not distinguish between long stay versus short stay patients
since this categorization is not applicable to the LTCH setting.
---------------------------------------------------------------------------

\190\ The LTCH CARE Data Set Version 2.01 was approved on June
10, 2013 by OMB in accordance with the PRA. The OMB Control Number
is 0938-1163. Expiration Date June 30, 2016. Available at https://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRA-Listing-Items/CMS1252160.html.
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The items used for the application of the quality measure are based
on the items from the Minimum Data Set (MDS) 3.0, version 1.13.0 (1/17/
13) items J1800 (Any Falls Since Admission/Entry or Reentry or Prior
Assessment) and J1900A., B. and C. (Number of Falls (A. with no injury,
B. with injury (except major), C. with Major injury)) since Admission/
Entry or Reentry or Prior Assessment), available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/NHQIMDS30TechnicalInformation.html.
The calculation of the proposed application of the measure will be
based on item J1900C, Number of Falls with major injury, since
admission. The specifications and data elements for NQF 0674
are available in the MDS 3.0 Quality Measures User's Manual Version 6.0
available on our Web site at https://www.cms.gov/

[[Page 50876]]

Medicare/Quality-Initiatives-Patient-Assessment-Instruments/
NursingHomeQualityInits/MDS30RAIManual.html.
By building on the existing reporting and submission infrastructure
for LTCHs, (the LTCH CARE Data Set, which we began using for data
collection on October 1, 2012, for the Pressure Ulcer measure), we
intend to reduce the burden related to data collection and submission
for this measure under the LTCHQR Program. We refer readers to section
IX.C.9. of the preamble of this final rule for more information on data
collection and submission.
We invited public comment on this proposed measure and data
collection and submission for the proposed measure for the FY 2018
payment determination and subsequent years.
Comment: A few commenters supported the adoption of an Application
of the Percent of Residents Experiencing One or More Falls with Major
Injury (Long Stay) (NQF 0674) for the LTCHQR Program for the
FY 2018 payment determination and subsequent years. The commenters
expressed that falls with major injury are an important safety concern
in LTCHs, especially amongst frail and elderly patients, and this
measure would reinforce efforts of LTCHs to provide high quality care.
Response: We thank the commenters for their support of this measure
for the LTCHQR Program and agree that falls with major injury are an
important patient safety concern in LTCHs.
Comment: Several commenters expressed concerns regarding the
implementation of Percent of Residents Experiencing One or More Falls
with Major Injury (Long Stay) (NQF 0674) to the LTCH setting
prior to NQF endorsement and expansion to the LTCH setting. These
commenters stated that this measure was developed for the long-stay
nursing home population and that the patient populations in LTCHs and
nursing homes are very different due to the medically complex and acute
hospital needs of LTCH patients. Further, these commenters argued that
the measure has not been adequately developed, specified or tested for
the LTCH setting. While these commenters supported alignment and
harmonization across settings, they strongly encouraged CMS to obtain
NQF endorsement of this measure prior to expansion to the LTCH setting.
Further, one commenter stated that this measure should undergo full NQF
review, using the Consensus Development Process, rather than time-
limited review. The commenter also stated that although the MAP
supported the direction of the measure, but it concluded that the
measure was ``not ready for implementation,'' ``requires modification
or further development,'' and ``should be specified and tested for the
LTCH setting.'' Finally one commenter remarked that CMS should convene
a TEP, which includes experts from the LTCH setting to review the
applicability of this measure to that setting.
Response: Although we agree that LTCHs are different from nursing
homes in terms of medical complexity and patient needs, we do not agree
that the definition of falls with major injury as well as guidelines
for prevention of falls in health care settings is substantially
different across nursing homes versus LTCHs. We appreciate the
commenters' concerns regarding NQF endorsement and recognize that
obtaining NQF endorsement is an important step in the measure
development process. However, given the fact that falls with major
injury is an important patient safety concern in LTCHs, along with the
lack of availability of NQF endorsed measures for the LTCH setting, or
measures endorsed by any other consensus organizations, we proposed
this measure under the exception authority given to the Secretary in
section 1886(m)(5)(D)(ii) of the Act, that allows CMS to apply a
measure to the LTCH setting that is not NQF-endorsed for the LTCH
setting. While this measure is currently endorsed for the nursing home
setting, we believe the data collection items, measure definition and
measure specifications are applicable across multiple healthcare
settings, including the LTCH setting. In addition, our measure
development contractor has convened a TEP that provided feedback on
this measure and supported the importance of a quality measure to
address falls with major injury.
We appreciate the commenters' input on finalizing a measure for
which the MAP supported direction. We note that we have taken the MAP's
input into consideration in selecting quality measures, as we are
required to do under section 1890(a)(4) of the Act. However, we are not
required to follow the MAP's recommendations, but to take them into
account when selecting measures for proposal. In addition to MAP input,
we take a variety of other factors into account in selecting measures.
In this instance, for example, an application of the Percent of
Residents Experiencing One or More Falls with Major Injury (Long Stay)
measure (NQF 0674) is NQF-endorsed for the LTCH setting, an
indication that it is appropriate for LTCH patients. In addition, this
measure is appropriate in light of the fact that fall-related injury is
an important patient safety concern for LTCH patients. For the reasons
listed above, this measure is appropriate for LTCH patients.
Comment: One commenter expressed concern regarding the definition
of falls with major injury. The commenter suggests that CMS work with
LTCHs to establish common definitions of both falls and major injuries,
as there are currently inconsistencies of the definitions used across
facilities. The commenter expressed that the definitions need to be
developed for the specific needs of the LTCH population. In addition,
since LTCHs may care for long-term behavioral patients, falls will need
to relate separately to medical and behavioral patients treated in
those settings.
Response: We agree with the commenters that it is important to
develop definitions of both falls and major injury, and this goal
aligns with the NQF steering committee recommendation for measure
harmonization across settings.\191\ We believe that the definition of
falls with major injury should be harmonized across healthcare settings
since falls with major injury are setting-neutral concepts, should be
defined and applied in the same way to all patients across healthcare
settings, where appropriate, and that special exceptions to such
definitions should not be made based on a specific patient population
(such as behavioral patients). The definitions for these concepts were
carefully developed and tested in the nursing home setting and data
suggests both validity and reliability for the definitions included in
this measure.
---------------------------------------------------------------------------

\191\ National Quality Forum (2008, December) National Voluntary
Consensus Standards for influenza and pneumococcal vaccinations.
Available from: https://www.qualityforum.org/Publications/2008/12/National_Voluntary_Consensus_Standards_for_Influenza_and_Pneumococcal_Immunizations.aspx.
---------------------------------------------------------------------------

Although this measure was developed in nursing homes, and measure-
specific data analysis and data reporting falls with major injury among
the elderly has primarily been conducted in nursing homes, and while
LTCHs are not entirely identical to nursing homes, these two post-acute
settings have overlap in their patient populations and their risk
factors. A 2009 report prepared by RTI International found similarities
in age, race and illness severity across LTCHs and nursing homes
(https://aspe.hhs.gov/health/reports/09/pacihs/report.pdf). This study
also found that the location of a

[[Page 50877]]

PAC referral is sometimes made based on nonclinical factors such as
geographic availability and hospital affiliations. The similarities
between the facilities and the potential overlap in patients, along
with nonclinical factors that affect where a patient is treated, all
suggest that research regarding nursing home residents, the MDS 3.0,
and the use of quality measures in the nursing home setting, is
applicable to LTCHs and the LTCH CARE Data Set.
After consideration of the public comments we received, we are
finalizing our proposal to adopt the Application of the Percent of
Residents Experiencing One or More Falls with Major Injury (Long Stay)
(NQF 0674), for the LTCHQR Program for the FY 2018 payment
determination and subsequent years.
d. LTCHQR Program Quality Measures and Concepts Under Consideration for
Future Years Payment Determinations
We are considering the measures and measure topics in the table
below for future years in the LTCHQR Program. In the FY 2014 IPPS/LTCH
PPS proposed rule (78 FR 27730), we invited public comment on these
measures and measure topics, specifically comments regarding the
clinical importance, feasibility of data collection and implementation,
current use, and usability of data to inform quality improvements in
the LTCH setting.

Future Measures and Measure Topics Under Consideration for the LTCH
Quality Reporting Program
------------------------------------------------------------------------

-------------------------------------------------------------------------
National Quality Strategy Priority: Safety and Healthcare-Associated
Infections HAIs:
Surgical Site Infection.
Ventilator-Associated Event.
Ventilator Bundle.
National Quality Strategy Priority: Safety and Healthcare-Acquired
Conditions: Avoidable Adverse Events and Serious Reportable Events:
Manifestations of Poor Glycemic Control.
National Quality Strategy Priority: Effective Clinical Processes:
Severe Sepsis and Septic Shock: Management Bundle.
Application of Venous Thromboembolism Prophylaxis (NQF
0371).
Ventilator Weaning Rate.
National Quality Strategy Priority: Patient Safety.
Application of Hospital-Based Inpatient Psychiatric
Services (HBIPS)--2 Hours of Physical Restraint Use (NQF 0640).
Application of Percent of Residents Who Were Physically
Restrained (Long-Stay) (NQF 0687).
National Quality Strategy Priority: Patient and Caregiver-Centered Care:
Depression Assessment and Management.
Functional Change.
Application of HCAHPS (NQF 0166).
Application of Pain Management (for example, Percent of
Residents Who Self-Report Moderate to Severe Pain (Short-Stay) (NQF
0677)).
National Quality Strategy Priority: Communication and Coordination of
Care:
Application of Medication Reconciliation (NQF 0097).
Application of Medication Reconciliation Post-Discharge
(NQF 0554).
Reconciled Medication List Received by Discharged Patients
(NQF 0646).
Transition Record with Specified Elements Received by
Discharged Patients (NQF 0647).
Timely Transmission of Transition Record (NQF 0648).
------------------------------------------------------------------------

Comment: Several commenters expressed the need for a care
coordination measure. Commenters supported implementation of two care
coordination measures, the Hospital Consumer Assessment of Healthcare
Providers and Systems Survey (HCAHPS) and the Care Transition Measure
3-Question Survey (CTM-3). One commenter noted that it would be helpful
if CMS required a standardized LTCH patient satisfaction survey.
Another commenter specifically noted that in order for CMS to take the
lead in identifying palliative care measures appropriate for LTCHs, the
HCAHPS survey should be a high priority in continuing measure
development. One commenter advocated for the development and
implementation of an LTCH-specific HCAHPS, which would broaden the
survey to family members and surrogates if the patient is unable to
self-report. This commenter also suggested that the survey be
disseminated at the time of discharge to avoid having to locate the
patient later.
Response: We appreciate the commenters' support of these measures,
and we will take their comments into consideration in our measure
development efforts as well as in our ongoing efforts to identify and
propose appropriate measures for the LTCHQR Program in the future.
Comment: Two commenters encouraged CMS to consider implementing
palliative care-related measures into the LTCHQR Program. Both
commenters supported measures related to pain management, and one of
the commenters recommended that depression assessment and management
and functional change measures should continue to be priorities for
LTCHQR Program measure development. These commenters urged CMS to work
with measure developers to create and test these measures to be
specifically appropriate for the LTCH setting.
Response: We thank the commenters for the comments and suggestions
and will take these into consideration as we develop future measures
for the LTCHQR Program.
Comment: One commenter expressed specific support for the
Ventilator Weaning Rate measure and noted that it would serve as an
indication of how well the LTCH is able to remove CCI patients from
being dependent on ventilators. One commenter supported Surgical Site
Infection (SSI) and sepsis measures and recommended that they should
continue to be priorities in LTCHQR Program measure development. One
commenter proposed the inclusion of a malnutrition-related quality
measure for future use in the LTCHQR Program, as malnourishment can be
associated with many other areas of quality measurement that are
already implemented in the LTCHQR Program. The commenter suggested that
adding a malnourishment measure to the LTCHQR Program would address
this significant ``gap'' area and align

[[Page 50878]]

priorities and incentives across care settings.
Response: We appreciate the commenters' support of these measures
and we will take their comments into consideration as we develop future
measures for the LTCHQR Program.
Comment: One commenter suggested that CMS consider the MAP
recommendations to pursue measures of Experience of Care, Care
Planning, Implementing Patient/Family/Caregiver Goals, and Avoiding
Unnecessary Hospital and ED Admissions. The commenter encouraged CMS to
take the lead in identifying measures to address these concepts in the
LTCH setting.
Response: We will continue to work with the MAP as well as LTCH
stakeholders to identify measure concepts and measures that address HHS
priorities, align with quality initiatives in other settings, are
evidence-based, have a low probability of unintended adverse
consequences, and may drive quality improvement.
We thank the commenters for the comments and suggestions and we
will consider them as we develop future measures.
9. Form, Manner, and Timing of Quality Data Submission for the FY 2016
Payment Determination and Subsequent Years
a. Background
Section 1886(m)(5)(C) of the Act requires that, for the FY 2014
payment determination and subsequent years, each LTCH submit to the
Secretary data on quality measures specified by the Secretary and that
such data shall be submitted in a form and manner, and at a time,
specified by the Secretary. As required by section 1886(m)(5)(A)(i) of
the Act, for any LTCH that does not submit data in accordance with
section 1886(m)(5)(C) of the Act with respect to a rate year, the
Secretary will reduce any annual update to the standard Federal rate
for discharges for the hospital during the rate year by two percentage
points.
All LTCHs will be required to collect data using the LTCH CARE Data
Set (Version 2.01).\192\ The LTCH CARE Data Set (Version 2.01) was
approved on June 10, 2013, by the Office of Management and Budget in
accordance with the Paperwork Reduction Act (PRA); the OMB Control
Number is 0938-1163. Later in 2013, we will release the final technical
data submission specifications and updated LTCHQR Program Manual for
the LTCH CARE Data Set (Version 2.01) containing items related to NQF
0680. The Quality Improvement and Evaluation System (QIES)
Assessment Submission and Processing (ASAP) System will remain the data
submission mechanism for the LTCH CARE Data Set. Further information on
data submission of the LTCH CARE Data Set for the LTCHQR Program
Reporting using the QIES ASAP system is available at: https://www.qtso.com/ and https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCHTechnicalInformation.html.
---------------------------------------------------------------------------

\192\ The LTCH CARE Data Set Version 2.01 was approved on June
10, 2013 by OMB in accordance with the PRA. The OMB Control Number
is 0938-1163. Expiration Date June 30, 2016. Available on the Web
site at: https://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRA-Listing-Items/CMS1252160.html.
---------------------------------------------------------------------------

b. Finalized Timeline for Data Submission Under the LTCHQR Program for
the FY 2016 Payment Determination
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53636 through
53637), we finalized the data submission timeline for measures for the
FY 2016 payment determination. LTCHs are required to submit data on
LTCH admissions and discharges occurring from January 1, 2014 through
December 31, 2014 (CY 2014) for the FY 2016 payment determination. We
adopted this timeframe because we believe this will provide sufficient
time for LTCHs and CMS to put processes and procedures in place to meet
the additional quality reporting requirements. We also finalized in
this rule the quarterly submission deadlines for the FY 2016 payment
determination as approximately 45 days after the end of each quarter,
as outlined in the table below. This is the date by which all data
collected during that quarter must be submitted to CMS for measures
using the LTCH CARE Data Set and to CDC for measures using the CDC's
NHSN.

Finalized Timeline for Submission of LTCHQR Program Quality Data for the
FY 2016 Payment Determination
------------------------------------------------------------------------
Data collection timeframe: CY 2014 Submission deadline
------------------------------------------------------------------------
Q1 (January-March 2014)............. May 15, 2014.
Q2 (April-June 2014)................ August 15, 2014.
Q3 (July-September 2014)............ November 15, 2014.
Q4 (October-December 2014).......... February 15, 2015.
------------------------------------------------------------------------

c. Timeline for Data Submission for the NQF 0431 Influenza
Vaccination Coverage Among Healthcare Personnel Measure for the FY 2016
Payment Determination and Subsequent Years
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53630 through 53631)
we finalized the adoption of the Influenza Vaccination Coverage among
Healthcare Personnel (NQF 0431) measure for the FY 2016
payment determination. In the FY 2013 IPPS/LTCH PPS final rule (77 FR
53636) we also finalized the data collection period for the FY 2016
payment determination to be January 1, 2014 through December 31, 2014.
As noted in IX.C.7.a. of the preamble to the proposed rule, there is a
unique seasonality in the timing of influenza activity each year. The
CDC, the steward of this measure, recommends that people get vaccinated
against influenza as long as influenza viruses are circulating. We
proposed that, for the LTCHQR Program, the Influenza Vaccination
Coverage among Healthcare Personnel measure (NQF 0431) have
its own reporting period to align with the influenza vaccination
season, which is defined by the CDC as October 1 (or when the vaccine
becomes available) through March 31of the subsequent year for the
influenza season. This timeline is consistent with how the NQF
specifies this measure. Further details related to the procedures for
using the CDC's NHSN for data submission and measure specifications for
the Influenza Vaccination Coverage among Healthcare Personnel (NQF
0431) measure can be found at: https://www.qualityforum.org/QPS/0431 and https://www.cdc.gov/nhsn/LTACH/hcp-flu-vac/.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27731), we stated

[[Page 50879]]

that if our proposal in IX.C.7.a. of the preamble to the proposed rule
is finalized, LTCHs would be required to report data on the Influenza
Vaccination Coverage among Healthcare Personnel (NQF 0431)
measure from October 1, 2014 or the date on which the vaccine becomes
available, whichever occurs first, through March 31, 2015 for the 2014-
2015 influenza season for FY 2016 payment determination. We also
proposed that this October (or when vaccine becomes available) through
March reporting period for the Influenza Vaccination Coverage among
Healthcare Personnel (NQF 0431) measure would apply to the FY
2016 payment determination and subsequent years.
Comment: Several commenters provided input on the proposed data
collection and reporting timelines for NQF 0431, Influenza
Vaccination Coverage Among Healthcare Personnel.
Response: We refer readers to section IX.C.7.a. of the preamble of
this final rule for responses to the comments regarding the timelines
for this measure.
After consideration of the public comments we received (as
discussed in section IX.C.7.a. of the preamble of this final rule), we
are finalizing the data collection and reporting timeline for NQF
0431, Influenza Vaccination Coverage Among Healthcare
Personnel for the FY 2016 payment determination and subsequent years.
d. Timeline for Data Submission for the NQF 0680 Percent of
Residents or Patients Who Were Assessed and Appropriately Given the
Seasonal Influenza Vaccine (Short Stay) Measure for the FY 2016 Payment
Determination and Subsequent Years
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53624 through
53627), we finalized the adoption of the Percent of Residents or
Patients Who Were Assessed and Appropriately Given the Seasonal
Influenza Vaccine (Short Stay) (NQF 0680) measure for the FY
2016 payment determination. In the FY 2013 IPPS/LTCH PPS final rule (77
FR 53637) we also finalized the data collection period for the FY 2016
payment determination to begin January 1, 2014 and continue through
December 31, 2014. This measure will be collected using the LTCH CARE
Data Set. The LTCH CARE Data Set (version 2.01),\193\ the proposed data
collection instrument for this measure, was approved on June 10, 2013,
by the Office of Management and Budget in accordance with the Paperwork
Reduction Act (PRA); the OMB Control Number is 0938-1163.
---------------------------------------------------------------------------

\193\ The LTCH CARE Data Set Version 2.01 was approved on June
10, 2013 by OMB in accordance with the PRA. The OMB Control Number
is 0938-1163. Expiration Date June 30, 2016. Available at https://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRA-Listing-Items/CMS1252160.html.
---------------------------------------------------------------------------

We generally allow 9-12 months for LTCHs to comply with and
integrate the requisite changes to new versions of data sets into their
existing IT infrastructure, and to train staff members. In the FY 2014
IPPS/LTCH PPS proposed rule (78 FR 27731 through 277322), because
summer 2013 approval of the LTCH CARE Data Set version 2.01 would only
allow 6 months for LTCHs to put plans and procedures into place, we
proposed to move the start date for data collection of this measure to
April 1, 2014, instead of the previously finalized start date of
January 1, 2014. Data collection and submission of this measure will
continue through December 31, 2014, for the FY 2016 payment
determination. This proposed change would only affect CY 2014
reporting. We proposed that for all subsequent years this measure will
be collected on a calendar year basis beginning on January 1 and
continuing through December 31 of each year.
We invited public comment on these proposed data collection and
submission timeframes for NQF 0680 for the FY 2016 payment
determination.
Comment: Several commenters provided input on the proposed data
collection and reporting timelines for NQF 0680, Percent of
Residents or Patients Who Were Assessed and Appropriately Given the
Seasonal Influenza Vaccine (Short Stay). We present these comments, in
detail, in section IX.C.7.b. of the preamble of this final rule.
Response: We refer readers to section IX.C.7.b. of the preamble of
this final rule for responses to the comments regarding the timelines
for this measure.
After consideration of the public comments we received, we are
finalizing a revised data collection and reporting timeline. Starting
with the 2014-2015 influenza vaccination season, data collection for
the Percent of Residents or Patients Who Were Assessed and
Appropriately Given the Seasonal Influenza Vaccine (short-stay) measure
(NQF 0680), will be required for any patient admitted or
discharged between October 1 and April 30. Data collection and
submission deadlines for the FY 2016 payment determination are
illustrated in the table below. We note that similar deadlines apply in
subsequent years. In addition, we are finalizing our proposal that the
measure calculation and public reporting of this measure (once public
reporting is instated) will be based on the influenza vaccination
season. Further, we are also finalizing that the start date for LTCH
CARE Data Set Version 2.01 will be July 1, 2014 in place of April 1,
2014 allowing providers and vendors an additional 3-months to prepare
for the implementation of LTCH CARE Data Set Version 2.01, which
contains the data items that will be used by LTCHs to submit quality
measure data for this measure. The items for NQF 0680 on the
LTCH CARE Data Set Version 2.01 will be required starting on October 1,
2014.
Set out below are the data collection timelines and submission
deadlines for the FY 2016 payment determination.

Timeline for Data Collection of LTCHQR Program Quality Data for the FY
2016 Payment Determination
------------------------------------------------------------------------
NQF Measure ID Data collection timeframe
------------------------------------------------------------------------
NQF 0138*........................ January 1, 2014-December 31,
2014.
NQF 0139*........................ January 1, 2014-December 31,
2014.
NQF 0678*........................ January 1, 2014-December 31,
2014.
NQF 0680**....................... October 1, 2014-April 30,
2015.**
NQF 0431**....................... October 1, 2014 (or when
vaccine becomes available)-
March 31, 2015.**
------------------------------------------------------------------------
* The data collection period for this measure was finalized in the FY
2013 IPPS/LTCH PPS final rule.
** This data collection timeframe for this measure is finalized in this
final rule.

[[Page 50880]]

Timeline for Submission of LTCHQR Program Quality Data for the FY 2016
Payment Determination NQF 0138*, NQF 0139*, NQF 0678*
------------------------------------------------------------------------
Final submission deadlines for the
Data collection timeframe: CY 2014 LTCHQR Program FY 2016 payment
determination
------------------------------------------------------------------------
Q1 (January-March 2014)............. May 15, 2014.
Q2 (April-June 2014)................ August 15, 2014.
Q3 (July-September 2014)............ November 15, 2014.
Q4 (October-December 2014).......... February 15, 2015.
------------------------------------------------------------------------
* The data collection period for this measure was finalized in the FY
2013 IPPS/LTCH PPS final rule.

Timeline for Submission of LTCHQR Program Quality Data for the FY 2016
Payment Determination: NQF 0680 Percentage of Residents or
Patients Who Were Assessed and Appropriately Given the Seasonal
Influenza Vaccine (Short Stay)
------------------------------------------------------------------------
Final submission deadlines for the
Data collection timeframe LTCHQR Program FY 2016 payment
determination
------------------------------------------------------------------------
October 1, 2014-April 30, 2015...... May 15, 2015.
------------------------------------------------------------------------

Timeline for Submission of LTCHQR Program Quality Data for the FY 2016
Payment Determination: NQF 0431 Influenza Vaccination Coverage
Among Healthcare Personnel
------------------------------------------------------------------------
Final submission deadlines for the
Data collection timeframe LTCHQR Program FY 2016 payment
determination
------------------------------------------------------------------------
October 1, 2014 (or when vaccine May 15, 2015.
becomes available)-March 31, 2015.
------------------------------------------------------------------------

e. Timeline for Data Submission Under the LTCHQR Program for the FY
2017 Payment Determination
As previously stated, in the FY 2013 IPPS/LTCH PPS final rule (77
FR 53636 through 53637), we finalized the data submission timeline for
the FY 2016 payment determination. In the FY 2014 IPPS/LTCH PPS
proposed rule (78 FR 27732), for the FY 2017 payment determination, we
proposed to require data submission for the LTCHQR Program on all LTCH
admissions and discharges occurring January 1, 2015 through December
31, 2015 (CY 2015), with the exception of Influenza Vaccination among
Healthcare Personnel (NQF 0431). We proposed that the data
collection timeframe for this measure (NQF 0431) be in
alignment with the CDC measure specifications, because CDC is the
steward for this NQF-endorsed measure. We refer readers to section
IX.C.9.c. of the preamble of this final rule for additional information
on this measure's timelines.
We noted that the All-cause Unplanned Readmission Measure for 30
days Post-Discharge from Long-Term Care Hospitals is a Medicare claims-
based measure; therefore, no new data need to be collected or reported
by the facility. We will use CY 2013 and CY 2014 Medicare claims data
to calculate the All-cause Unplanned Readmission Measure for 30 days
Post-Discharge from Long-Term Care Hospitals.
For each quarter outlined in the table below during which the LTCHs
are required to collect data, we proposed final submission deadlines
occurring approximately 45 days after the end of any given quarter by
which all data collected during that quarter must be submitted. We
believe that this is a reasonable amount of time to allow LTCHs to
submit data and make any necessary corrections. We proposed these
timeframes because we believe this will provide sufficient time for CMS
and LTCHs to put processes and procedures in place to meet the quality
reporting requirements for quality measures (except for the
readmissions measure, which is a claims based measure, and therefore,
does not pose any requirements on LTCHs) under the LTCHQR Program.
We invited public comment on this proposal.
Comment: A few commenters supported the proposed timeline for data
submission under the LTCHQR Program for the FY 2017 payment
determination.
Response: We thank the commenters for their support of the proposed
timeline for data submission for FY 2017 payment determination.
Comment: One commenter expressed concern regarding the data
collection timeline for both the FY 2017 and FY 2018 payment
determinations and the burden of adding several quality measures over 2
years. This commenter remarked that LTCHs will need to acquire
additional resources to accommodate the needs of additional data
collection, as well as resources to focus on quality improvement issues
and noted concern that the limited existing resources at LTCHs will be
moved from prevention activities to reporting activities.
Response: As we stated in section IX.B.9. of the preamble of this
final rule, by building upon preexisting resources for data collection
and submission, we intend to foster alignment between measures that
help to reduce the administrative burden related to data

[[Page 50881]]

collection and submission. We are aware that the initial setup and
acclimation to the data collection process using the LTCH CARE Data Set
and QIES ASAP has occurred for a vast majority of LTCHs as part of the
implementation of the Pressure Ulcer measure (NQF 0678)
starting October 1, 2012, for the LTCHQR Program for the FY 2014
payment determination as well as the implementation of the Patient
Influenza Vaccination measure for the LTCHQR Program for the FY 2016
payment determination. Similarly, we are aware that the initial setup
and acclimation to the data collection process using the CDC's NHSN has
occurred for a vast majority of LTCHs as part of the implementation of
the CAUTI and CLABSI measures (NQF 0138 and NQF 0139)
starting October 1, 2012, for the LTCHQR Program. Therefore, we believe
the addition of measures that employ the LTCH CARE Data Set and QIES
ASAP or the CDC's NHSN for FY 2017 and FY 2018 may be less burdensome.
We also are aware of the need to improve quality of care for health
care services provided within the LTCH and other health care settings
while recognizing availability of limited resources. However, we
believe that the cost of quality reporting programs is outweighed by
the potential for gain in health and health care outcomes as well as
potential cost savings from preventing avoidable conditions such as:
Avoidable readmissions; HAIs such as CAUTI, CLABSI, C. Difficile and
MRSA infections; HACs such as pressure ulcers; and falls with major
injury.
After consideration of the public comments we received, we are
finalizing the timelines we proposed, as proposed for all measures
except NQF 0680, related to the measures affecting the FY 2017
payment determination. In this final rule, we revised the data
collection and submission timeline for the Percent of Residents or
Patients Who Were Assessed and Appropriately Given the Seasonal
Influenza Vaccine (short-stay) measure (NQF 0680). Data
collection for this measure will be required for any patient admitted
or discharged between October 1 and April 30. We refer readers to
section IX.C.9.b. of the preamble of this final rule for additional
information on this measure's timeline. The timelines for data
collection and submission for the measures for the FY 2017 payment
determination are listed in the following tables.

Timeline for Collection of Certain LTCHQR Program Quality Data for the
FY 2017 Payment Determination
------------------------------------------------------------------------
NQF Measure ID Data collection timeframe
------------------------------------------------------------------------
NQF 0138......................... January 1, 2015-December 31,
2015.
NQF 0139......................... January 1, 2015-December 31,
2015.
NQF 0678......................... January 1, 2015-December 31,
2015.
NQF 0680......................... October 1, 2015-April 30,
2016.
NQF 0431......................... October 1, 2015 (or when
vaccine becomes available)-
March 31, 2016.
NQF 1716......................... January 1, 2015-December 31,
2015.
NQF 1717......................... January 1, 2015-December 31,
2015.
------------------------------------------------------------------------

Timeline for Submission of LTCHQR Program Quality Data for the FY 2017
Payment Determination: NQF 0138, NQF 0139, NQF 0678, NQF 1716, NQF 1717
------------------------------------------------------------------------
Final submission deadlines for
Data collection timeframe: CY 2015 the LTCHQR Program FY 2017
payment determination
------------------------------------------------------------------------
Q1 (January-March 2015)................ May 15, 2015.
Q2 (April-June 2015)................... August 15, 2015.
Q3 (July-September 2015)............... November 15, 2015.
Q4 (October-December 2015)............. February 15, 2016.
------------------------------------------------------------------------

Timeline for Submission of LTCHQR Program Quality Data for the FY 2017
Payment Determination: NQF 0680 Percentage of Residents or
Patients Who Were Assessed and Appropriately Given the Seasonal
Influenza Vaccine (Short Stay)
------------------------------------------------------------------------
Final submission deadlines for the
Data collection timeframe LTCHQR Program FY 2017 payment
determination
------------------------------------------------------------------------
October 1 2015-April 30, 2016....... May 15, 2016.
------------------------------------------------------------------------

Timeline for Submission of LTCHQR Program Quality Data for the FY 2017
Payment Determination: NQF 0431 Influenza Vaccination Coverage
Among Healthcare Personnel
------------------------------------------------------------------------
Final submission deadlines for the
Data collection timeframe LTCHQR Program FY 2017 payment
determination
------------------------------------------------------------------------
October 1 2015 (or when vaccine May 15, 2016.
becomes available)-March 31, 2016.
------------------------------------------------------------------------

[[Page 50882]]

f. Timeline for Data Submission Under the LTCHQR Program for the FY
2018 Payment Determination
For measures for the FY 2018 payment determination, we proposed to
require data collection on LTCH discharges occurring from January 1,
2016, through December 31, 2016, with the exception of Influenza
Vaccination among Healthcare Personnel (NQF 0431). We proposed
that the data collection timeframe for this measure (NQF 0431)
be in alignment with measure specifications per advisement of the CDC,
the steward for this NQF-endorsed measure. LTCHs would follow the
proposed deadlines presented in the tables below to complete submission
of data for each quarter for each proposed measure for the FY 2018
payment determination. For each quarter outlined in the table below
during which LTCHs are required to collect data, we proposed a final
submission deadline occurring approximately 45 days after the end of
each quarter by which all data collected during that quarter must be
submitted. We believe that this is a reasonable amount of time to allow
LTCHs to submit data and make any necessary corrections.
We invited public comment on this proposal.
Comment: A few commenters support the proposed timeline for data
submission under the LTCHQR Program for FY 2018 payment determination.
Response: We thank the commenters for their support of the proposed
timeline for data submission for FY 2018 payment determination.
After consideration of the public comments we received, we are
finalizing, as proposed for all measures except for NQF 0680,
all timelines related to FY 2018. For NQF 0680, in this final
rule, we revised the data collection and submission timeline. Data
collection for this measure will be required for all patients admitted
or discharged from the LTCH between October 1 and April 30. We refer
readers to section IX.C.9.b. of the preamble of this final rule for
additional information on this measure's timeline. The timelines for
data collection and submission for the measures for the FY 2018 payment
determination are listed in the following tables.

Timeline for Data Collection of LTCHQR Program Quality Data for the FY
2018 Payment Determination
------------------------------------------------------------------------
NQF Measure ID Data collection timeframe
------------------------------------------------------------------------
NQF 0138......................... January 1, 2016-December 31,
2016.
NQF 0139......................... January 1, 2016-December 31,
2016.
NQF 0678......................... January 1, 2016-December 31,
2016.
NQF 0680......................... October 1, 2016-April 30,
2017.
NQF 0431......................... October 1, 2016 (or when
vaccine becomes available)-
March 31, 2017.
NQF 1716......................... January 1, 2016-December 31,
2016.
NQF 1717......................... January 1, 2016-December 31,
2016.
Application of NQF 0674.......... January 1, 2016-December 31,
2016.
------------------------------------------------------------------------

Timeline for Submission of LTCHQR Program Quality Data for the FY 2018
Payment Determination for All Measures Except 0431 Influenza
Vaccination Coverage Among Healthcare Personnel and 0680
Percentage of Residents or Patients Who Were Assessed and Appropriately
Given the Seasonal Influenza Vaccine (Short Stay)
------------------------------------------------------------------------
Final submission deadlines for the
Data collection timeframe: CY 2016 LTCHQR Program FY 2018 payment
determination
------------------------------------------------------------------------
Q1 (January-March 2016)............. May 15, 2016.
Q2 (April-June 2016)................ August 15, 2016.
Q3 (July-September 2016)............ November 15, 2016.
Q4 (October-December 2016).......... February 15, 2017.
------------------------------------------------------------------------

Timeline for Submission of LTCHQR Program Quality Data for the FY 2018
Payment Determination: 0680 Percentage of Residents or Patients
Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine
(Short Stay)
------------------------------------------------------------------------
Final submission deadlines for the
Data collection timeframe LTCHQR Program FY 2018 payment
determination
------------------------------------------------------------------------
October 1, 2016-April 30, 2017...... May 15, 2017.
------------------------------------------------------------------------

[[Page 50883]]

Timeline for Submission of LTCHQR Program Quality Data for the FY 2018
Payment Determination: NQF 0431 Influenza Vaccination Coverage
Among Healthcare Personnel
------------------------------------------------------------------------
Final submission deadlines for the
Data collection timeframe LTCHQR Program FY 2018 payment
determination
------------------------------------------------------------------------
October 1 2016 (or when vaccine May 15, 2017.
becomes available)-March 31, 2017.
------------------------------------------------------------------------

10. Public Display of Data Quality Measures for the LTCHQR Program
Under section 1886(m)(5)(E) of the Act, the Secretary is required
to establish procedures for making any quality data submitted by LTCHs
under section 1886(m)(5)(C) of the Act available to the public. Section
1886(m)(5)(E) of the Act requires that such procedures shall ensure
that a LTCH has the opportunity to review the data that is to be made
public with respect to its facility, prior to such data being made
public. The Act also requires that the Secretary report quality
measures that relate to services furnished in LTCHs on CMS' Internet
Web site. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53637), we
received and responded to public comment regarding the procedures we
could adopt for the public reporting of quality data under the LTCHQR
Program.
Currently, we are developing plans regarding the implementation of
these provisions. We appreciate the need for transparency into the
processes and procedures that will be implemented to allow for public
reporting of the LTCHQR Program data and to afford LTCHs the
opportunity to preview that data before it is made public. At this
time, we have not established procedures or timelines for public
reporting of data, but we intend to include related proposals in future
rulemaking. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27733),
we welcomed public comment on what we should consider when developing
future proposals related to public reporting of quality measures for
the LTCHQR Program.
Comment: One commenter urged CMS to publicly report the LTCHQR
Program data on the Hospital Compare Web site: https://www.medicare.gov/hospitalcompare. This commenter further noted that the lack of
established procedures or timelines for public reporting of these data
is inappropriate and does not reflect the commitment to accountability
and transparency CMS has shown in other quality reporting programs.
Response: We appreciate the need for accountability and
transparency for the LTCHQR Program similar to other quality reporting
programs. To this end, we are continuing to undertake efforts to
establish procedures and a timeline for the public reporting of data
for the LTCHQR Program. We will communicate this information through
future rulemaking.
Comment: Another commenter urged CMS to provide LTCHs with ample
time to review and make changes to their data before it is made
available to the public. A commenter suggested that an initial review
period greater than the typical 30-day period is critical for LTCHs.
Response: We are considering policies and procedures that would
allow LTCHs sufficient time to review their quality data prior to it
being made public.
Comment: One commenter urged CMS to seek input from stakeholders as
to the best way to ensure the data made public is easily understood by
providers and consumers.
Response: We appreciate the need to ensure that the data made
publicly available is easily understood by stakeholders such as the
providers and consumers. At this time, we are working to establish
procedures for public reporting, including procedures that provide the
opportunity for LTCHs to review their data before it is made public,
and will propose such procedures through future rulemaking allowing for
stakeholder input.
We thank the commenters for the input and suggestions, and we will
consider them as we develop proposals for public reporting of quality
measures in future rulemaking.
11. LTCHQR Program Submission Waiver Requirements for the FY 2015
Payment Determination and Subsequent Years
Our experience with other quality reporting programs has shown that
there are times when providers are unable to submit quality data due to
extraordinary circumstances beyond their control (for example, natural
or man-made disasters). We define a ``disaster'' as any natural or man-
made catastrophe which causes damages of sufficient severity and
magnitude to partially or completely destroy or delay access to medical
records and associated documentation. Natural disasters could include
events such as hurricanes, tornadoes, earthquakes, volcanic eruptions,
fires, mudslides, snowstorms, and tsunamis. Man-made disasters could
include such events as terrorist attacks, bombings, floods caused by
man-made actions, civil disorder, and explosions. A disaster may be
widespread and impact multiple structures or be isolated and impact a
single site only.
In certain instances of either natural or man-made disasters, an
LTCH may have the ability to conduct a full patient assessment, and
record and save the associated data either during or before the
occurrence of an extraordinary event. In this case, the extraordinary
event has not caused the facility's data files to be destroyed, but it
could hinder the LTCH's ability to meet the quality reporting program's
data submission deadlines. In this scenario, the LTCH would potentially
have the ability to report the data at a later date, after the
emergency circumstances have subsided. In such cases, a temporary
waiver of the LTCH's responsibility to report quality measure data may
be appropriate.
In other circumstances of natural or man-made disaster, an LTCH may
not have had the ability to conduct a full patient assessment, and
record and save the associated data before the occurrence of an
extraordinary event. In such a scenario, the facility does not have
data to submit to CMS as a result of the extraordinary event. We
believe that it is appropriate, in these situations, to grant a full
waiver of the reporting requirements.
We do not wish to penalize LTCHs in these circumstances or to
unduly increase their burden during these times. Therefore, in the FY
2014 IPPS/LTCH PPS proposed rule (78 FR 27733 through 27734), we
proposed a process, for the FY 2015 payment determination and
subsequent years, for LTCHs to request and for CMS to grant waivers
with respect to the reporting of required

[[Page 50884]]

quality data when there are extraordinary circumstances beyond the
control of the LTCHs. When a waiver is granted, an LTCH will not incur
payment reduction penalties for failure to comply with the requirements
of the LTCHQR Program. For LTCHQR Program reporting and submission of
quality measure data for the FY 2014 payment determination, we have
issued guidance on the waiver process via the LTCHQR Program Web site
at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/.
Under the proposed process for the FY 2015 payment determination
and subsequent years, an LTCH may request a waiver of the requirement
to submit quality data for one or more quarters. We proposed a process
that, in the event that an LTCH seeks to request a waiver for quality
reporting purposes for the FY 2015 payment determination and subsequent
years, the LTCH may request a waiver for one or more quarters by
submitting a written request to CMS. We proposed that the LTCH compose
a letter to CMS that documents the waiver request, with the information
below, and submit the letter to CMS via email to the LTCH Quality
Waiver mailbox at LTCHQRPReconsiderations@cms.hhs.gov.
We note that the subject of the email must read ``Disaster Waiver
Request'' and the letter must contain the following information:
LTCH CCN;
LTCH name;
CEO or CEO-designated personnel contact information
including name, telephone number, title, email address, and mailing
address (the address must be a physical address, not a post office
box);
LTCH's reason for requesting a waiver;
Evidence of the impact of extraordinary circumstances,
including but not limited to photographs, newspaper and other media
articles; and
A date when the LTCH believes it will be able to again
submit LTCHQR Program data and a justification for the proposed date.
We proposed that the letter documenting the disaster waiver request
be signed by the LTCH's CEO or CEO-designated personnel, and must be
submitted within 30 days of the date that the extraordinary
circumstances occurred. Following receipt of the letter, we would: (1)
Provide a written acknowledgement, using the contact information
provided in the letter, to the CEO or CEO-designated contact notifying
them that the request has been received; and (2) provide a formal
response to the CEO or any CEO-designated LTCH personnel, using the
contact information provided in the letter, indicating our decision.
This proposal does not preclude us from granting waivers to LTCHs
that have not requested them when we determine that an extraordinary
circumstance, such as an act of nature, affects an entire region or
locale. If we make the determination to grant a waiver to LTCHs in a
region or locale, we proposed to communicate this decision through
routine communication channels to LTCHs and vendors, including, but not
limited to, issuing memos, emails, and notices on https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/.
We invited public comment on this proposal.
Comment: Many commenters expressed support of CMS' proposal for the
inclusion of a waiver process in the LTCHQR Program to ensure that
LTCHs are not penalized in the event of an extraordinary circumstance
beyond the control of the LTCH.
Response: We thank commenters for their support.
Comment: One commenter noted the waiver policies of other quality
reporting programs and urged us to develop consistent waiver policies
for the LTCHQR Program waiver process with at least the following
elements: (1) a minimum of 30 days should be allowed after the
extraordinary event for submitting waivers; (2) a standardized form
should be provided for requesting waivers; (3) the waiver process
should be in addition to the payment reduction appeal process, however
the appeal process should allow for decisions that waive penalties
retroactively; and (4) CMS should be able to grant waivers without an
LTCH's request when the LTCH is located in an area impacted by a
natural disaster or other extraordinary situation. In addition, the
commenter recommended that CMS provide for a broad definition of
``extraordinary circumstances'' that allows for unanticipated
situations.
Response: We are aware that our other quality reporting programs
include an opportunity for providers to request a waiver due to the
occurrence of an extraordinary circumstance. It is our goal to align
our policies with those of existing quality reporting programs to the
extent appropriate for the LTCH setting. We will not be providing a
standard form for LTCH waiver requests at this time. However, we are
aware of the benefits of standardized forms for providers and for CMS,
and we intend to create such forms for waiver requests in the future.
In addition, we do allow 30 days from the date of the ``extraordinary
event'' during which an LTCH must submit their request for a waiver and
this process will be separate from the reconsideration and appeals
process proposed and finalized except for the FY 2014 payment
determination, which we explain in our next response. In response to
the commenter's statement that the CMS LTCH reconsideration process
should allow for decisions that waive penalties retroactively, it is
not clear to CMS to what penalties the commenter is referring. The CMS
reconsideration process only reviews decisions of non-compliance the
provider feels were made in error for one data reporting/submission
period. In addition, any APU reduction that results from a finding of
non-compliance takes place only after the provider has had a chance to
request reconsideration and receive a final determination based on that
request. Thus, there is no penalty which could be waived retroactively.
The CMS reconsideration process will only review determinations of non-
compliance made for a given FY's APU determination and not any previous
determinations. Finally, we proposed and are finalizing a disaster
waiver process for LTCHs in which we state that CMS may, in certain
circumstances, grant a disaster waiver to LTCHs in particular region of
the country that is affected by a natural disaster or extraordinary
event without a request from these LTCHs if it is deemed necessary.
Comment: Some commenters sought clarification as to why the
proposed waiver processes begin with the FY 2015 payment determination.
The commenters requested that the proposed policies be implemented in
time for the FY 2014 payment determination.
Response: This final rule will become effective October 1, 2013,
the start of FY 2014 and, by that time, the FY 2014 annual payment
determinations will be complete based on LTCHs compliance with the
reporting requirements outlined in the FY 2012 IPPS/LTCH PPS final
rule. As posted on the LTCHQR Program Web site, we made initial
compliance determinations for the FY 2014 payment determination and
issued notifications to non-compliant LTCHs in July 2013, at which time
each LTCH had the opportunity to request a reconsideration. Any request
for a waiver related to quality measure reporting and submission
required for October 1, 2012-December 31, 2012 would have needed to be
made through the FY 2014 reconsideration process as

[[Page 50885]]

CMS did not have a waiver process in place during that reporting
period. We will have already evaluated those reconsideration or waiver
requests related to FY 2014 APU determinations and will have already
made final payment determinations for FY 2014 in September 2013.
Therefore, it would not be appropriate to proposed and finalize a FY
2014 waiver process as any related payment determinations will be
complete prior to this rule becoming effective.
Furthermore, we would like to clarify that for purposes of the FY
2015 payment determination, because this final rule will become
effective October 1, 2013, any LTCH that experiences an extraordinary
circumstance on or after such date will be held to the requirement that
waiver requests be received by CMS within 30 days of the event
occurrence. If an extraordinary circumstance occurs prior to October 1,
2013 when this process and policy become final and effective, and if an
LTCH wishes to request a waiver from the FY 2015 reporting
requirements, the LTCH should communicate any extraordinary
circumstances that prevented them from submitting data related to the
FY 2015 APU during the reconsideration period for the FY 2015 payment
determination. That is, if CMS issues a finding of non-compliance and
the LTCH experienced an extraordinary event that prevented them from
submitting data, but had no waiver process available to them at that
time, the LTCH will need to use the reconsideration process in order to
communicate their circumstances to CMS. This is the same process
available to LTCHs to request a waiver from the reporting requirements
of the FY 2014 payment determination as CMS did not have a waiver
process in place during the reporting period affecting the FY 2014 APU
determination. Further details of the LTCHQR Program reconsideration
process can be found in this final rule and on the Program's Web site
at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/.
After consideration of the public comments we received, we are
finalizing the LTCHQR Program waiver process as proposed. LTCHs will
have 30 days after the date of an extraordinary circumstance, as
described above, to submit a waiver request to CMS via email that meets
all of the finalized requirements. In the event that any extraordinary
circumstance occurs prior to the effective date of this rule, October
1, 2013, LTCHs may utilize the FY 2015 reconsideration process to
request a waiver, as the FY 2015 waiver policy and process will not be
finalized and in effect until October 1, 2013. In addition, CMS may
also grant waivers to LTCHs that have not requested them if it is
determined that an extraordinary circumstances affects an entire region
or local. More information on the LTCHQR Program Waiver process and all
related announcements may be found on https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/.
12. LTCHQR Program Reconsideration and Appeals for the FY 2014 and FY
2015 Payment Determination and Subsequent Years
At the conclusion of any given quality data reporting and
submission period, we will review the data received from each LTCH
during that reporting period to determine if the LTCH has met the
quality data reporting requirements. LTCHs that are found to be non-
compliant with the reporting requirements set forth for that reporting
cycle will receive a reduction in the amount of 2.0 percentage points
to their annual payment update for the upcoming fiscal year.
a. LTCHQR Program Reconsideration and Appeals for the FY 2014 Payment
Determination
We are aware that some of our other quality reporting programs,
such as the Hospital IQR Program, include an opportunity for providers
to request a reconsideration of our initial non-compliance
determination. We are also aware, for the purposes of the LTCHQR
Program, that we recently made compliance determinations for the FY
2014 payment determinations and that there was a need for providers to
be able to request a reconsideration if their circumstances warranted.
We provided details pertaining to the reconsideration process, and the
mechanisms related to provider requests for reconsiderations of their
payment determination, such as filing requests, required content,
supporting documentation, and mechanisms of notification and final
determinations on the LTCHQR Program Web site in spring 2013 prior to
any LTCH's need for information on the CMS reconsideration process for
the FY 2014 payment determination and subsequent years at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/. CMS' subregulatory approach to the
FY 2014 reconsideration process was necessary, as any other form of the
reconsideration process that we might propose and finalize in this rule
would not be final and in effect until October 1, 2013. This would have
the effect of proposing and finalizing a FY 2014 process for
reconsiderations that should already be completed. For this reason, we
decided to post all information related to the FY 2014 reconsideration
process on the CMS LTCHQR Program Web site listed above. We note that
we are finalizing the policy that this subregulatory approach to the
reconsideration process will remain in effect until we can propose and
finalize a regulatory version of the reconsideration process in future
rulemaking.
We invited public comment on our subregulatory approach for
reconsideration and appeals for FY 2014 payment determination and
subsequent years.
Comment: Many commenters expressed support for CMS' FY 2014
reconsideration and appeals process.
Response: We thank commenters for their support of the inclusion of
reconsideration and appeals processes in the LTCHQR Program.
Comment: Some commenters suggested that the proposed
reconsideration and appeals processes should be made available to LTCHs
for the FY 2014 payment determination, citing that the proposals stated
that the processes would be applicable to the FY 2015 payment
determination and subsequent years.
Response: In the proposed rule, we communicated our intent to
provide guidance pertaining to the reconsideration process for the FY
2014 payment determination on the LTCHQR Program Web site in addition
to proposing processes for the FY 2015 payment determination. As posted
on the LTCHQR Program Web site, we made initial compliance
determinations for the FY 2014 payment determination and issued
notifications to non-compliant LTCHs in July 2013, at which time each
LTCH had the opportunity to request reconsideration. CMS considered
those requests and final payment determinations were made in September
2013. While we did not propose and finalize an LTCH reconsideration
process for FY 2014 we did make the process available to all LTCHs. We
note that the reconsideration process is voluntary and only one of
several processes in place, including the Provider Reimbursement Review
Board (PRRB) or federal court, that an LTCH can use to have the CMS
initial determination of non-compliance reevaluated.

[[Page 50886]]

Comment: One commenter stated that the proposed rule provided no
information on the FY 2014 reconsideration and appeals process and
instead referred readers to the LTCHQR Program Web page. The commenter
suggested that this process must be proposed and finalized through
regulation.
Response: We believe that we were justified in our subregulatory
approach to the FY 2014 reconsideration process. Please see previous
comment and response for a detailed explanation outlining our
intentions and subsequent actions regarding the FY 2014 reconsideration
process for LTCHs.
Comment: One commenter requested clarification as to CMS' authority
to require providers to go through a reconsideration process that is
not adopted through rulemaking before appealing to the PRRB referring
to our subregulatory approach to the implementation of the FY 2014 LTCH
reconsideration processes and procedures.
Response: While we provide a process for reconsideration should
LTCHs choose to request to use this process, we would like note a
change in policy. In the FY 2014 IPPS/LTCH PPS proposed rule, we stated
that LTCHs must first apply for reconsideration through CMS prior to
appealing our initial finding of non-compliance to the PRRB. In light
of this commenter's concern that CMS did not provide procedural details
of the reconsideration process through rulemaking and concern that CMS
ensure that sufficient outreach and education are available, we have
decided to continue with an LTCHQR Program reconsideration process that
is voluntary for the time being in order to fully address these
concerns. We are therefore only recommending that LTCHs use the
reconsideration process prior to appealing to the PRRB. We note that we
have had good success under the Hospital IQR Program with a process
that is very similar to the one we proposed for the LTCHQR Program.
Further, from the LTCH perspective, it allows for the opportunity to
resolve issues early in the process when we have dedicated resources to
considering all reconsideration requests before payment changes are
applied to LTCH's annual payment.
b. LTCHQR Program Reconsideration and Appeals for the FY 2015 Payment
Determination
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27734), to be
consistent with other established quality reporting programs and to
provide an opportunity for LTCHs to seek reconsideration of our initial
non-compliance decision, we proposed a process that will allow LTCHs to
request reconsiderations pertaining to the FY 2015 annual update and
subsequent annual updates.
As part of this process, LTCHs that are non-compliant with the
reporting requirements during a given reporting cycle will be notified
of that finding. The purpose of this notification is to put the LTCH on
notice of the following: (1) That the LTCH has been identified as being
non-compliant with the LTCHQR Program's reporting requirements for the
reporting cycle in question; (2) that the LTCH will be scheduled to
receive a reduction in the amount of two percentage points to the
annual payment update for the upcoming fiscal year; (3) that the LTCH
may file a request for reconsideration if they believe that the finding
of non-compliance is erroneous, or that if they were non-compliant,
they have a valid and justifiable excuse for this non-compliance; and
(4) that the LTCH must follow a defined process on how to file a
request for reconsideration, which will be described in the
notification.
Upon the conclusion of our review of each request for
reconsideration, we will render a decision. We may reverse our initial
finding of non-compliance if: (1) The LTCH provides proof of compliance
with all requirements during the reporting period; or (2) the LTCH
provides adequate proof of a valid or justifiable excuse for non-
compliance if the LTCH was not able to comply with requirements during
the reporting period. We will uphold our initial finding of non-
compliance if the LTCH cannot show any justification for non-
compliance. The full reconsideration request process is available at
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-QUality-Reporting-Reconsideration-and-Disaster-Wavier-Request.html.
We invited public comment on the proposed procedures for
reconsideration and appeals for FY 2015 payment determination and
subsequent years.
Comment: Many commenters expressed support for CMS' proposed
reconsideration and appeals process.
Response: We thank commenters for their support of the inclusion of
reconsideration and appeals processes in the LTCHQR Program.
Comment: One commenter noted the reconsideration processes for
other quality reporting programs and urged us to develop consistent
reconsideration policies for the LTCHQR Program with at least the
following elements: (1) A minimum of 30 days should be allowed after
the determination of reporting non-compliance to submit a request for
reconsideration; (2) a standardized form should be provided for
requesting reconsideration; (3) the appeal process should be in
addition to the waiver process, however the appeal process should allow
for decisions that waive penalties retroactively; (4) the regulations
should specifically state that an LTCH may file an appeal with the PRRB
if it is dissatisfied with the result of CMS' reconsideration, similar
to the provision at 42 CFR 412.434(c) for IPFs.
Response: We are aware that our other quality reporting programs
include an opportunity for providers to request reconsideration of the
reporting requirements for any given fiscal year's payment
determination. It is our goal to align our policies with those of
existing quality reporting programs to the extent appropriate for the
LTCH setting. To that end, we proposed and are finalizing a
reconsideration policy that does allow 30 days from the date of
notification for a LTCH to file a request for reconsideration. In
addition to this, the reconsideration process proposed and finalized in
this rule is separate from and in addition to the disaster waiver
process we proposed in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR
27733 through 277344) and are finalizing in section IX.C.11. of the
preamble of this final rule.
At this time, we will not be providing a standard form for LTCH
reconsideration requests. However, we are aware of the benefits of
standardized forms for providers and for CMS, and we intend to create
such forms for reconsideration requests in the future.
Further, we would like to clarify that LTCHs dissatisfied with CMS'
decision rendered at the reconsideration level may appeal to the PRRB
under 42 CFR Part 405, Subpart R. In the FY 2014 IPPS/LTCH PPS proposed
rule we stated that LTCHs that are dissatisfied with an initial CMS
determination of non-compliance must first apply for reconsideration
through CMS prior to appealing our initial finding of non-compliance to
the PRRB. In light of a commenter's concern that CMS did not provide
procedural details of the reconsideration process through rulemaking
and concern that CMS ensure that sufficient outreach and education are
available, we have decided to continue with an LTCHQR Program
reconsideration process that is voluntary for the time being in order
to fully address these concerns. We are therefore only recommending
that LTCHs use the reconsideration process prior to appealing to the
PRRB. We note

[[Page 50887]]

that we have had good success under the Hospital IQR Program with a
process that is very similar to the one we proposed for the LTCHQR
Program. Further, from the LTCH perspective, it allows for the
opportunity to resolve issues early in the process when we have
dedicated resources to considering all reconsideration requests before
payment changes are applied to LTCH's annual payment update, thereby
allowing for more efficient operations at the PRRB level.
Comment: One commenter requested that CMS specify a timeframe by
which CMS will render all reconsideration decisions. The commenter
suggested that CMS should make reconsideration decisions within 60 days
from the receipt of an LTCH's request for reconsideration.
Response: We will strive to render reconsideration decisions in a
timely manner. Reconsideration decisions will be issued prior to the
application of payment adjustment to LTCH's standard Federal rate for a
fiscal year. That is, we will assess an LTCH's compliance against
program requirements, issue non-compliance notification, and
communicate reconsideration decisions prior to October 1 annually.
Therefore, all reconsideration decisions will generally be made within
60 days of CMS' receipt of a reconsideration request for the applicable
fiscal year. We expect that the timeline for subsequent years' payment
determinations will be similar to the FY 2014 timeline currently
outlined on the reconsideration page of the LTCHQR Program Web site at
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/.
Comment: One commenter urged CMS to clearly set forth the process
and standards CMS will use to measure a LTCH's compliance with LTCHQR
Program reporting requirements in order to determine if a LTCH will
receive a full annual payment update.
Response: As we have noted in previous rulemaking, all previous and
current administrative and data submission requirements finalized
through rulemaking must be met in order for an LTCH to receive their
full annual payment update. All CMS quality data reporting requirements
are discussed in detail in our LTCH QR Program Manual available for
download on our LTCH QRP Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/.
Comment: One commenter suggested that the two-percentage point
reduction in payment to a LTCH's annual update for the upcoming fiscal
year should be stayed while a request for reconsideration is pending or
until the PRRB appeal is concluded.
Response: Any determination of non-compliance made through CMS'
initial review of data submitted by a provider, and subsequently upheld
through the CMS reconsideration process will result in a 2.0 percentage
point reduction to the provider's annual payment update. CMS will not
stay any payment reduction while an appeal of our initial decision is
pending review by an independent review board, such as the PRRB.
Comment: Several commenters suggested that CMS establish an appeal
process for the LTCHQR Program that would allow LTCHs to seek review of
any non-compliance determination to challenge the payment reduction.
These commenters also suggested that this process be similar to
established appeals processes of other quality reporting programs.
Response: We are aware that other quality reporting programs
include processes for providers to appeal a non-compliance
determination made by CMS. As stated above, LTCHs dissatisfied with our
initial finding of non-compliance, or a decision rendered at the CMS
reconsideration level may appeal the decision with the PRRB under 42
CFR Part 405, Subpart R. In the FY 2014 IPPS/LTCH PPS proposed rule we
stated that LTCHs that are dissatisfied with an initial CMS
determination of non-compliance must first apply for reconsideration
through CMS prior to appealing our initial finding of non-compliance to
the PRRB. We would like to clarify that we recommend, rather than
require, LTCHs use this order of appeals. We note that the CMS
reconsideration process is voluntary, and that we have had good success
with it under the Hospital IQR Program. Further, from the LTCH
perspective, it allows for the opportunity to resolve issues early in
the process when CMS has dedicated resources to considering all
reconsideration requests before payment changes are applied to LTCH's
annual payment, thereby allowing for more efficient operations at the
PRRB appeals level.
After consideration of the public comments we received, and with
the exception that the prescribed order of appeals CMS listed is
recommended rather than required, we are finalizing the FY 2015 LTCHQR
Program reconsideration and appeals processes as proposed. Annually, we
will notify LTCHs found to be non-compliant with the LTCHQR Program
reporting requirements that they may be subject to the two percentage
point reduction in their annual payment update. LTCHs may request a
reconsideration of this non-compliance determination. If an LTCH are
dissatisfied with our initial finding of non-compliance or a CMS
decision rendered at the reconsideration level, it can appeal the
decision with the PRRB under 42 CFR Part 405, Subpart R. An LTCH must
submit a request for reconsideration, as described above and in the
manner that is provided on the CMS Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/.

D. Inpatient Psychiatric Facilities Quality Reporting (IPFQR) Program

1. Statutory Authority
Section 1886(s)(4) of the Act, as added and amended by sections
3401(f) and 10322(a) of the Affordable Care Act, requires the Secretary
to implement a quality reporting program for inpatient psychiatric
hospitals and psychiatric units. Section 1886(s)(4)(A)(i) of the Act
requires that, for rate year (RY) 2014 and each subsequent rate year,
the Secretary shall reduce any annual update to a standard Federal rate
for discharges occurring during such rate year by 2.0 percentage points
for any inpatient psychiatric hospital or psychiatric unit that does
not comply with quality data submission requirements with respect to an
applicable rate year.
We note that section 1886(s)(4)(A)(i) of the Act uses the term
``rate year.'' Beginning with the annual update of the inpatient
psychiatric facility prospective payment system (IPF PPS) that took
effect on July 1, 2011 (RY 2012), we aligned the IPF PPS update with
the annual update of the ICD-9-CM codes, which are effective on October
1 of each year. The change allows for annual payment updates and the
ICD-9-CM coding update to occur on the same schedule and appear in the
same Federal Register document, thus making updating rules more
administratively efficient. To reflect the change to the annual payment
rate update cycle, we revised the regulations at 42 CFR 412.402 to
specify that, beginning October 1, 2012, the 12-month period of October
1 through September 30 is referred to as a fiscal year (FY) (76 FR
26435). For more information regarding this terminology change, we
refer readers to section III. of the RY 2012 IPF PPS final rule (76 FR
26434 through 26435). For purposes of

[[Page 50888]]

the discussion below, the term ``rate year'' and ``fiscal year'' both
refer to the period beginning October 1 and ending September 30. To
avoid any confusion that may be caused by using the term ``rate year''
with respect to the inpatient psychiatric hospitals and psychiatric
units quality reporting program, we will use the term ``fiscal year''
rather than ``rate year'' throughout this final rule, even when we are
referring to statutory provisions that refer to ``rate year.''
As provided in section 1886(s)(4)(A)(ii) of the Act, the
application of the reduction for failure to report under section
1886(s)(4)(A)(i) of the Act may result in an annual update of less than
0.0 percent for a fiscal year, and may result in payment rates under
section 1886(s)(1) of the Act being less than such payment rates for
the preceding year. In addition, section 1886(s)(4)(B) of the Act
requires that the application of the reduction to a standard Federal
rate update be noncumulative across fiscal years. Thus, any reduction
applied under section 1886(s)(4)(A) of the Act will apply only with
respect to the fiscal year rate involved and the Secretary shall not
take into account such reduction in computing the payment amount under
the system described in section 1886(s)(1) of the Act for subsequent
years.
Section 1886(s)(4)(C) of the Act requires that, for FY 2014
(October 1, 2013 through September 30, 2014) and each subsequent year,
each psychiatric hospital and psychiatric unit shall submit to the
Secretary data on quality measures as specified by the Secretary. Such
data shall be submitted in a form and manner, and at a time, specified
by the Secretary. Under section 1886(s)(4)(D)(i) of the Act, measures
selected for the quality reporting program must have been endorsed by
the entity with a contract under section 1890(a) of the Act. The
National Quality Forum (NQF) currently holds this contract. The NQF is
a voluntary, consensus-based, standard-setting organization with a
diverse representation of consumer, purchaser, provider, academic,
clinical, and other health care stakeholder organizations. The NQF was
established to standardize health care quality measurement and
reporting through its consensus development process. We generally
prefer to adopt NQF-endorsed measures in our reporting programs with
some exceptions as provided by law.
For purposes of the Inpatient Psychiatric Facilities Quality
Reporting (IPFQR) Program, section 1886(s)(4)(D)(ii) of the Act
provides that, in the case of a specified area or medical topic
determined appropriate by the Secretary for which a feasible and
practical measure has not been endorsed by the entity with a contract
under section 1890(a) of the Act, the Secretary may specify a measure
that is not so endorsed as long as due consideration is given to
measures that have been endorsed or adopted by a consensus organization
identified by the Secretary. Finally, pursuant to section
1886(s)(4)(D)(iii) of the Act, the Secretary shall publish the measures
applicable to the FY 2014 IPFQR Program no later than October 1, 2012.
Section 1886(s)(4)(E) of the Act requires the Secretary to
establish procedures for making public the data submitted by inpatient
psychiatric hospitals and psychiatric units under the IPFQR Program.
Such procedures must ensure that a facility has the opportunity to
review its data prior to such data being made public. The Secretary
must report quality measures that relate to services furnished by the
psychiatric hospitals and units on a CMS Web site.
2. Application of the Payment Update Reduction for Failure To Report
for the FY 2014 Payment Determination and Subsequent Years
Beginning in FY 2014, section 1886(s)(4)(A)(i) of the Act requires
the application of a 2.0 percentage point reduction to the applicable
annual update to a Federal standard rate for those psychiatric
hospitals and psychiatric units that fail to comply with the quality
reporting requirements implemented in accordance with section
1886(s)(4)(C) of the Act, as detailed below. The application of the
reduction may result in an annual update for a fiscal year that is less
than 0.0 percent and in payment rates for a fiscal year being less than
the payment rates for the preceding fiscal year. Pursuant to section
1886(s)(4)(B) of the Act, any such reduction is not cumulative and it
will apply only to the fiscal year involved. In the FY 2013 IPPS/LTCH
PPS final rule (77 FR 53678), we adopted requirements regarding the
application of the payment reduction to the annual update of the
standard Federal rate for failure to report data on measures selected
for the FY 2014 payment determination and subsequent years and added
new regulatory text at 42 CFR 412.424 to codify these requirements.
3. Covered Entities
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53645), we
established that the IPFQR Program's quality reporting requirements
cover those psychiatric hospitals and psychiatric units that are paid
under Medicare's IPF PPS (42 CFR 412.404(b)). Generally, psychiatric
hospitals and psychiatric units within acute care and critical access
hospitals that treat Medicare patients are paid under the IPF PPS. For
more information on the application of and exceptions to payments under
the IPF PPS, we refer readers to section IV. of the November 15, 2004
IPF PPS final rule (69 FR 66926). As we noted in the FY 2013 IPPS/LTCH
PPS final rule (77 FR 53645), we use the term ``inpatient psychiatric
facility'' (IPF) to refer to both inpatient psychiatric hospitals and
psychiatric units. This usage follows the terminology we have used in
the past in our IPF PPS regulations (42 CFR 412.402).
4. Considerations in Selecting Quality Measures
For purposes of the IPFQR Program, section 1886(s)(4)(D)(i) of the
Act requires that any measure specified by the Secretary must have been
endorsed by the entity with a contract under section 1890(a) of the
Act. However, the statutory requirements under section
1886(s)(4)(D)(ii) of the Act provide an exception that, in the case of
a specified area or medical topic determined appropriate by the
Secretary for which a feasible and practical measure has not been
endorsed by the entity with a contract under section 1890(a) of the
Act, the Secretary may specify a measure that is not so endorsed as
long as due consideration is given to measures that have been endorsed
or adopted by a consensus organization identified by the Secretary.
In implementing the IPFQR Program, our overarching objective is to
support the HHS National Quality Strategy's three-part aim of better
health care for individuals, better health for populations, and lower
costs for health care services: https://www.healthcare.gov/news/reports/quality03212011a.html#na. Implementation of the IPFQR Program will help
achieve the three-part aim by creating transparency around the quality
of care provided at IPFs to support patient decision-making and quality
improvement. Over time, the IPFQR Program will help align the goals for
quality measurement and improvement at IPFs with those of other
providers in the health care system.
We seek to collect data in a manner that balances the need for
information related to the full spectrum of quality performance and the
need to minimize the burden of data collection and reporting. We have
focused on measures that have high impact and support CMS

[[Page 50889]]

and HHS priorities for improved quality and efficiency of care provided
by IPFs. As we stated in the FY 2013 IPPS/LTCH PPS final rule (77 FR
53645 through 53646), we will use the following considerations for the
development and selection of measures:
Given the availability of well-validated measures and the
need to balance breadth with minimizing burden, the measures should
address, as fully as possible, the six domains of measurement that
arise from the six priorities of the National Quality Strategy (NQS):
Clinical care; person- and caregiver-centered experience and outcomes;
safety; efficiency and cost reduction; care coordination; and
community/population health.
Public reporting should rely on a mix of standards,
outcomes, process of care measures, and patient experience of care
measures, including measures of care transitions and changes in patient
functional status, with an emphasis on measurement as close to the
patient-centered outcome of interest as possible.
The measure sets should evolve so that they include a
focused set of measures appropriate to IPFs that reflects the level of
care and the most important areas of service and measures for IPFs as
well as measures addressing a core set of measure concepts that align
quality improvement objectives across all provider and supplier types
and settings.
Measures should address gaps in quality of inpatient
psychiatric care.
As part of our burden reduction efforts, we continuously
seek to weigh the relevance and utility of the measures compared to the
burden on IPFs submitting data under the IPFQR Program. As appropriate,
we will align our measures with other Medicare and Medicaid quality
programs and may consider how we can incorporate data reporting by
means of electronic reporting mechanisms, so that the collection of
performance information is part of care delivery.
To the extent practicable, measures used by CMS should be
nationally endorsed by a multi-stakeholder organization. Measures
should be aligned with best practices among other payers and the needs
of the end users of the measures. We take into account widely accepted
criteria established in medical literature. We consider suggestions and
input from technical expert panels (TEPs), convened by CMS contractors,
which evaluate IPFQR quality measures for importance, scientific
soundness, usability, and feasibility.
We also take into account national priorities and HHS Strategic
Plans and Initiatives:
HHS engaged a wide range of stakeholders to develop the
National Quality Strategy, as required by the Affordable Care Act,
which pursues three aims (better care, healthy people, and affordable
care) that establish a framework with six identifiable priorities
https://www.ahrq.gov/workingforquality/nqs/nqsfactsheet1.htm:
Ensuring that each person and family is engaged as
partners in their care.
Promoting effective communication and coordination
of care.
Promoting the most effective prevention and
treatment practices for the leading causes of mortality, starting with
cardiovascular disease.
Working with communities to promote wide use of
best practices to enable healthy living.
Making quality care more affordable for
individuals, families, employers, and governments by developing and
spreading new health care delivery models.
Making care safer by reducing harm caused in the
delivery of care.
We consider recommendations of the Measures Application
Partnership (MAP) for the inclusion of clinical quality measures https://www.qualityforum.org/MAP/. The MAP is a public-private partnership
convened by the NQF for the primary purpose of providing input to HHS
on selecting performance measures for quality reporting programs and
pay-for-reporting programs.
HHS is the United States Government's principal department
for protecting the health of all Americans. HHS accomplishes its
mission through programs and initiatives. The goals of the HHS
Strategic Plan for FYs 2010 through 2015 are: Strengthen Health Care;
Advance Scientific Knowledge and Innovation; Advance the Health,
Safety, and Well-Being of the American People; Increase Efficiency,
Transparency, and Accountability of HHS Programs; and Strengthen the
Nation's Health and Human Services Infrastructure and Workforce (https://www.hhs.gov/secretary/about/priorities.html). HHS will update this
strategic plan every 4 years and measure its progress in addressing
specific national problems, needs, or mission-related challenges.
HHS prioritizes policy and program interventions to address the
leading causes of death and disability in the United States, including
heart disease, cancer, stroke, chronic lower respiratory diseases,
unintentional injuries, and preventable behaviors. Initiatives such as
the HHS Action Plan to Reduce Healthcare-Associated Infections in
clinical settings and the Partnership for Patients exemplify these
programs.
5. Quality Measures for the FY 2015 Payment Determination and
Subsequent Years
a. Background
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53646 through
53652), we adopted the following six chart-abstracted IPF quality
measures for the FY 2014 payment determination and subsequent years
shown in the table below:

Previously Adopted IPFQR Program Quality Measures Beginning With the FY 2014 Payment Determination
----------------------------------------------------------------------------------------------------------------
National quality strategy priority NQF No. Measure ID Measure description
----------------------------------------------------------------------------------------------------------------
Patient Safety.......................... 0640 HBIPS-2 Hours of Physical Restraint
Use.
0641 HBIPS-3 Hours of Seclusion Use.
Clinical Quality of Care................ 0552 HBIPS-4 Patients Discharged on Multiple
Antipsychotic Medications.
0560 HBIPS-5 Patients Discharged on Multiple
Antipsychotic Medications with
Appropriate Justification.
Care Coordination....................... 0557 HBIPS-6 Post-Discharge Continuing Care
Plan Created.
0558 HBIPS-7 Post-Discharge Continuing Care
Plan Transmitted to Next Level
of Care Provider Upon
Discharge.
----------------------------------------------------------------------------------------------------------------

[[Page 50890]]

We note that, at the time of the finalization of the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53258), providers were using ICD-9-CM codes,
but as of October 1, 2014 ICD-10-CM codes will be in effect. We do not
at this time anticipate that this change will have substantive effects
on any measures.
Measures adopted for the IPFQR Program will remain in the quality
reporting program for all subsequent years unless specifically stated
otherwise (for example, through removal or replacement). In the FY 2014
IPPS/LTCH PPS proposed rule (78 FR 27737), we did not propose to remove
or replace any of the previously adopted measures from the IPFQR
Program or add any new measures to the IPFQR Program for the FY 2015
payment determination. We believe that keeping the same measures for
the FY 2015 payment determination will allow IPFs one additional year
during which they could ramp up recordkeeping and improve quality of
care on existing measures. We discussed the collection requirements and
submission timeframes for these measures in section VIII.F.7. of the
preamble of the FY 2013 IPPS/LTCH PPS final rule (77 FR 53654 through
53658).
Comment: One commenter expressed appreciation that CMS did not
propose additional data collection for the FY 2015 payment
determination, because it will allow IPFs to improve data collection
and documentation processes.
Response: We thank the commenter for its support.
Comment: In reference to the HBIPS-6 and HBIPS-7 measures, a
commenter stated that according to the instructions for chart-
abstraction for these two measures, even if a patient leaves Against
Medical Advice (AMA), providers are still required to offer a referral
to a next level-of-care provider. Therefore, currently, patients who
leave AMA are not automatically excluded from either HBIPS-6 or HBIPS-7
measures unless the patients refuse a referral. The commenter noted
that there was no hand-off of care involved and therefore, believed
uncomfortable to release a copy of the continuing plan of care (to any
providers) as this action could be construed as a HIPAA violation.
Based on the belief of potential HIPAA violations, the commenter
requested that patients with a discharge status of AMA be excluded from
HBIPS-6 and HBIPS-7.
Response: We do not believe there is a potential HIPAA violation
issue as we collect aggregate-level data and not patient-level data.
Furthermore, a HIPAA covered entity is permitted to make the disclosure
under HIPAA under the ``required by law'' provisions at 45 CFR
164.512(a). That is, if the reporting of that measure is mandatory,
``required by law'' is the applicable HIPAA basis for disclosure.
Comment: One commenter opposed the inclusion of HBIPS-4 because the
commenter believed that the assumption that any patient discharged on
multiple antipsychotic medications is an automatic indication of poor
practice is unwarranted, particularly for acute care psychiatric
facilities that treat distressed patients for a very short period.
Response: We disagree with the commenter's assumptions regarding
the measure. The intent of the measure is not to prevent all instances
of antipsychotic polytherapy, but rather to reduce the rate of
discharge on two or more routinely prescribed antipsychotics without
clinical justification. We acknowledge that circumstances, such as
shorter inpatient stays, may require hospitals to discharge a patient
on multiple antipsychotics. We believe that in these circumstances
patients should be discharged with an aftercare plan to transition to
monotherapy when clinically appropriate, and the facility should
coordinate with post-discharge care providers. We also acknowledge that
there are clinical circumstances when antipsychotic polytherapy may be
clinically appropriate.
b. New Quality Measures for the FY 2016 Payment Determination and
Subsequent Years
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27737 through
277340), we proposed three new measures for the FY 2016 payment
determination and subsequent years for the IPFQR Program. The measures
are: (1) SUB-1: Alcohol Use Screening (Submitted for NQF review); (2)
SUB-4: Alcohol & Drug Use: Assessing Status After Discharge (Submitted
for NQF review); and (3) Follow-Up After Hospitalization for Mental
Illness (FUH) (NQF 0576).
The three proposed measures were included in a publicly available
document entitled ``List of Measures under Consideration for December
1, 2012'' in compliance with section 1890A(a)(2) of the Act, and they
were reviewed by the MAP in its ``MAP Pre-Rulemaking Report: 2013
Recommendations on Measures Under Consideration by HHS,'' which is
available on the NQF Web site at https://www.qualityforum.org/Setting_Priorities/Partnership/Measure_Applications_Partnership.aspx. We
considered the input and recommendations provided by the MAP in
selecting measures to propose for the IPFQR Program at this time. The
MAP supported the inclusion of the third proposed measure in the IPFQR
Program, and supported the direction of the first two measures, noting
that their recommendation is contingent on NQF endorsement. The first
two measures were submitted to the NQF in 2012. Currently, the dates
for their review have not been established.
The first two of these measures have been developed by and are
maintained by The Joint Commission (TJC) (the measure steward) and the
third measure has been developed by and is maintained by the National
Committee for Quality Assurance (NCQA) (the measure steward). These
measures are appropriate for the purposes of assessing the quality of
inpatient psychiatric services and align with the National Quality
Strategy goals of promoting effective prevention and treatment
practices (clinical quality of care), and promoting effective
communication and coordination of care. Technical specifications for
measures ``SUB-1: Alcohol Use Screening'' and ``SUB-4: Alcohol & Drug
Use: Assessing Status After Discharge'' can be found on the TJC Web
site at: https://manual.jointcommission.org/bin/view/Manual/WebHome.
Technical specifications for the measure ``Follow-Up After
Hospitalization for Mental Illness'' (FUH) (NQF 0576) can
currently be found on the NCQA Web site at: https://www.ncqa.org/portals/0/Follow-Up%20After%20Hospitalization%20for%20Mental%20Illness.pdf.
The three proposed measures for FY 2016 and subsequent years are
described in more detail below.
(1) SUB-1: Alcohol Use Screening (NQF Review Pending)
Individuals with mental health conditions experience substance use
disorders (SUDs) at a much higher rate than the general population.
Individuals with the most serious mental illnesses have the highest
rates of such disorders. Co-occurring SUDs often go undiagnosed and,
without treatment, contribute to a longer persistence of disorders,
poorer treatment outcomes, lower rates of medication adherence, and
greater impairments to functioning. Accordingly, this proposed measure,
and the one immediately following, are intended to assess efforts by
IPFs to screen for the most common type of such disorder, alcohol
abuse, and to follow up after discharge with individuals who screen
positive for

[[Page 50891]]

alcohol abuse or who received a diagnosis of alcohol or drug disorder
during the inpatient stay.
In late 2008, TJC received funding from the Partnership for
Prevention and HHS' Substance Abuse and Mental Health Services
Administration (SAMHSA) to develop, specify, and test standardized
performance measures addressing alcohol screening and cessation
counseling. Four alcohol/substance use performance measures were pilot
tested in the spring/summer of 2010. The four alcohol/substance use
measures (SUB measure set) were approved as a core measure set for use
in TJC's accreditation programs (https://www.jointcommission.org/core_measure_sets.aspx). The SUB measures can be found in the TJC's
Specification Manual for National Hospital Inpatient Quality Measures
at: https://manual.jointcommission.org/bin/view/Manual/WebHome.
The SUB-1: Alcohol Use Screening proposed measure assesses the
number of patients 18 years of age and older who were screened for
alcohol use using a validated screening questionnaire for unhealthy
drinking during their inpatient stay, and is reported as a percentage.
The numerator includes the number of patients who were screened for
alcohol use using a validated screening questionnaire for unhealthy
drinking. The denominator includes the number of hospitalized
inpatients 18 years of age or older. Higher rates on the measure are
indicative of better performance. The measure excludes the following
populations: patients younger than 18, cognitively impaired patients,
and patients admitted for less than 1 day or greater than 120 days.
This measure is specified for collection through chart abstraction.
We proposed the form, manner, and timing of collection in section
IX.D.9. of the preamble of the proposed rule. Full specifications for
this measure are available at: https://manual.jointcommission.org/bin/view/Manual/WebHome.
The SUB-1: Alcohol Use Screening proposed measure meets the measure
selection exception requirements for the IPFQR Program under
1886(s)(4)(D)(ii) of the Act as discussed in Section 4 (Considerations
in Selecting Quality Measures) of this rule. Although the proposed
measure is not currently NQF-endorsed, we considered available measures
that have been endorsed or adopted by a consensus organization and
found no other feasible and practical measures on the topic of
substance use disorder screening for the inpatient population.
We invited public comment on this proposed measure.
Comment: Some commenters supported inclusion of the SUB-1 measure
because it promotes effective treatment practices, effective
communication, and care coordination, as well as the ability to address
issues of substance abuse. These commenters supported the proposed
start date of January 1, 2013. Another commenter supported adoption of
the SUB-1 measure because it promotes effective treatment and best
care. This commenter noted that data for this measure can be retrieved
by facilities, thereby promoting a standard of care that is within the
control of the organization. One commenter supported CMS' efforts in
recognizing the clinical importance of routinely screening patients
admitted for psychiatric conditions for risky alcohol use.
Response: We thank the commenters for their support of our
proposal. In response to the commenters who supported the adoption of
the SUB-1 measure with a reporting start date as of January 1, 2013, we
note that, as we stated in our proposal, the reporting start date for
the FY 2016 payment determination is January 1, 2014, and not January
1, 2013 as the commenters stated.
Comment: One commenter agreed with CMS' proposal to add the SUB-1
measure to the IPFQR Program, but urged that, since there has been no
reliability determination for such measure, we allow for a period of
public reporting before attaching measures to payment.
Response: We thank the commenter for the recommendation. We note
that the IPFQR Program is a pay-for-reporting and not a pay-for-
performance program. This means that IPFs that participate in the IPFQR
Program and meet its requirements will receive full payment.
Comment: Some commenters commended CMS for recognizing the clinical
importance of routinely screening patients admitted to hospitals for
psychiatric conditions for risky alcohol use. These commenters,
however, also raised concerns regarding the fact that TJC's four
substance use measures were developed and tested for use with all
hospitalized patients, while the SUB-1 measure would only be used for
IPF hospitals/units under the IPFQR Program.
Response: We thank the commenters for their support. Although the
SUB-1 measure was developed using all hospitalizations in general acute
care, we believe that SUB-1 is equally applicable to freestanding IPFs
and psychiatric units within acute care facilities because risky
alcohol use is an area of high comorbidity for populations hospitalized
in freestanding IPFs and populations hospitalized in psychiatric units
of general acute care facilities just as it is for all hospitalized
patients.
Comment: Some commenters indicated that the SUB-1 measure should be
adopted concurrently with SUB-2 (brief intervention) and SUB-3
(treatment initiation) measures in the IPFQR Program because these
measures are critical to providing quality care as screening and
intervention significantly reduce health risks and generate cost-
savings. Commenters recommended that CMS add all four SUB measures
because the measures are complementary to each other and are meant to
be used as an entire set by hospitals to evaluate four key processes
related to substance use.
Response: We thank the commenters for these suggestions for future
consideration. We did not elect to adopt both of the suggested measures
at this time due to concerns regarding the burden of chart-abstraction
should both the SUB-1 and SUB-4 measures be adopted. However, we will
consider whether this is still the case during future rulemaking
cycles.
Comment: One commenter sought clarification on the kind of
instrument to be used for alcohol screening with SUB-1.
Response: There is no specific instrument specified by the measure.
We believe that the assessment tool used may vary depending on age and
other characteristics of the patient. We refer readers to the following
document published by the National Institute on Alcohol Abuse and
Alcoholism (NIAAA) which lists commonly used screening and assessment
instruments, along with their scientific properties: https://pubs.niaaa.nih.gov/publications/AssessingAlcohol/index.pdf.
Comment: One commenter opposed inclusion of the proposed SUB-1
measure because collecting data for such measure would require
expenditure of significant resources from the facility because TJC does
not collect data for this measure. Another commenter indicated that it
does not have the capacity to report the SUB-1 measure because it does
not collect or report such data to TJC.
Response: While IPFs may not currently be collecting this measure,
we believe that our implementation timeline will allow sufficient time
for facilities to make the necessary infrastructure changes to begin
collecting and reporting the measure. In addition, although this
measure would add burden, we do not believe that the

[[Page 50892]]

burden concerns override the importance of collecting information on
such a measure. As we noted in this preamble, individuals with mental
health conditions experience substance use disorders (SUDs) at a much
higher rate than the general population. We also note that individuals
abusing alcohol comprise a subset of all individuals with mental health
conditions with SUDs. Individuals with the most serious mental
illnesses have the highest rates of such disorders. Co-occurring SUDs
often go undiagnosed and, without treatment, contribute to a longer
persistence of disorders, poorer treatment outcomes, lower rates of
medication adherence, and greater impairments to functioning. The SUB-1
measure is intended to assess efforts by IPFs to screen for the most
common type of such disorder, alcohol abuse, during the inpatient stay.
Accordingly, we believe that the commenters' burden concerns are
outweighed by the important role that such measure plays in patient
quality of care.
Comment: Some commenters opposed the inclusion of the proposed SUB-
1 measure because they believe that using a validated alcohol use
screening tool in an acute care, short-term treatment setting is
challenging and implies an IPF's ability to establish a treatment
option, which potentially may not be available in the aftercare
setting.
Response: We do not agree that use of an alcohol use screening tool
in acute care would be challenging because we have previously
implemented similar screening measures for other topics (such as
tobacco use) in the acute care settings, and did not receive reports of
implementation challenges in putting them in place. As we noted in the
description of SUB-1, individuals with mental health conditions
experience SUDs at a much higher rate than the general population, and
individuals with the most serious mental illnesses have the highest
rates of such disorders. The failure to identify and treat SUDs
potentially contributes to a longer persistence of disorders, poorer
treatment outcomes, lower rates of medication adherence, and greater
functional impairment. Accordingly, assessment of such disorders is an
important part of quality treatment planning in the IPF setting.
Further, discharge planning, care coordination, and follow-up after
hospitalization are critical in sustaining effective treatment that has
begun in the acute care setting. The possibility that necessary
treatment options may not exist in some circumstances does not justify
a failure to assess the need for them.
Comment: Some commenters disagreed with the definition of the SUB-1
measure and argued that, although blood alcohol level is equivalent to
screening for unhealthy alcohol use, one instance of excessive drinking
does not require post-hospitalization for alcohol treatment.
Response: We disagree with the commenter. We do not believe that a
blood alcohol level is equivalent to screening, or that it is
sufficient to assess unhealthy alcohol use--chronic or otherwise. The
measure is a screening measure, and therefore does not assess the need
for or require post-hospitalization treatment.
Comment: Some commenters urged CMS not to finalize the SUB-1
measure because it has not been endorsed by the NQF or supported by the
MAP.
Response: The MAP's assessment of SUB-1 was ``support direction.''
Recommendation of the measure by the MAP is contingent upon NQF
endorsement. We note that at a recent meeting (June 2013), the NQF
Behavioral Health Steering Committee recommended NQF endorsement of the
SUB-1 measure.
Comment: Some commenters opposed finalizing the SUB-1 measure
because they considered it to be very limited relative to the needs of
hospitalized psychiatric patients as this measure does not include: (1)
Patients who are using/abusing other substances; (2) what period of
use/abuse is being assessed; and (3) patients under 18 years of age. In
addition, these commenters argue that the measure does not specify when
the screening should be completed, whether IPFs should request data
from collateral sources, or the clinical credentials of the persons
permitted to complete the screening. These commenters recommended using
the HBIPS-1 measure instead because it contains a requirement for all
psychoactive substance use screening, in addition to alcohol use
screening, and covers the last 12 months of each patient's life. In
addition, IPFs have been using this measure since 2010.
Response: We believe that adoption of this measure will allow
future alignment in the general acute care setting. This alcohol use
screening measure is the first screening measure adopted by this
program for psychiatric inpatients, and represents an important first
step for this program. We recognize that the SUB-1 measure only
assesses alcohol use, and that screening for risky use/abuse of other
substances would be also be desirable. We intend to incorporate
substance use measures into the program in the future. We also clarify
that the SUB-1 measure does not require the collection of data from
collateral sources, or credentialing requirements. The primary focus of
the measure is to screen inpatients for unhealthy drinking. We also
agree that it may be preferable to include screening measures with a
broader age range and a distinct period during the inpatient stay
during which screening is performed. As suggested by commenters, we
will consider the HBIPS-1 measure as well as other substance use
screening measures for future rulemaking cycles.
Comment: One commenter did not support the SUB-1 measure because it
believed that CMS should not add chart-abstracted measures during the
transition to electronic measures.
Response: We support the adoption of EHRs, and will in the future
adopt electronic measures. In the interim, however, we think that there
is an immediate need to capture the quality of care provided to mental
health patients. Therefore, while we do not disagree with the commenter
in principle, we believe that the current needs of measuring quality of
care in the IPF setting cannot wait until a later time.
After consideration of the public comments we received, we are
finalizing this measure as proposed for the FY 2016 payment
determination and subsequent years.
(2) SUB-4: Alcohol and Drug Use: Assessing Status After Discharge (NQF
Review Pending)
The SUB-4: Alcohol and Drug Use proposed measure assesses whether
discharged patients are contacted between 7 and 30 days after hospital
discharge in order to collect post-discharge follow-up information
regarding their alcohol or drug use status. The measure applies to
patients 18 years of age or older who screened positive for alcohol
abuse, or who received a diagnosis of alcohol or drug disorder during
their inpatient stay. The numerator includes the number of discharged
patients that are contacted between 7 and 30 days after hospital
discharge and follow-up information regarding alcohol or drug use
status is collected. The denominator includes the number of discharged
patients 18 years of age and older who screened positive for alcohol
abuse or who received a diagnosis of alcohol or drug use disorder
during their hospital stay. Higher rates on the measure are indicative
of better performance.
The following patients are excluded from the measure:
Patients less than 18 years of age;
Patients who are cognitively impaired;

[[Page 50893]]

Patients who were not screened or refused to be screened
for alcohol use;
Patients who expired;
Patients who have a duration of stay less than or equal to
1 day or greater than 120 days;
Patients who do not screen positive for alcohol abuse;
Patients discharged to another hospital;
Patients who left against medical advice;
Patients discharged to another health care facility;
Patients discharged to home or other health care facility
for hospice care;
Patients who do not reside in the United States;
Patients who do not have a phone or cannot provide any
contact information;
Patients discharged to a detention facility, jail, or
prison; and
Patients who are readmitted within the follow-up time
frame.
This measure is specified for collection through chart abstraction.
We proposed the form, manner, and timing of collection in section
IX.D.9. of the preamble of the proposed rule. Full specifications for
this measure are available at: https://manual.jointcommission.org/bin/view/Manual/WebHome.
The SUB-4: Alcohol and Drug Use: Assessing Status After Discharge
proposed measure meets the measure selection exception requirements for
the IPFQR Program under section 1886(s)(4)(D)(ii) of the Act as
discussed in section IX.D.4. of the preamble of the proposed rule.
Because this measure is not currently NQF-endorsed, we considered other
available measures that have been endorsed or adopted by a consensus
organization. We found no other feasible and practical measures on the
topic of post-discharge alcohol and drug assessment for inpatients who
screened positive for substance abuse.
We invited public comment on this proposed measure.
Comment: Some commenters opposed the addition of the proposed SUB-4
measure for the following reasons:
They believed that there would be no added benefit to
patients because hospital staff are unable to answer patients' clinical
questions once patients leave the hospital.
They believed the measure to be beyond the scope of
psychiatric hospitals' responsibility.
They argued that many free-standing psychiatric facilities
do not currently submit the data to TJC, thus, making data collection
burdensome.
They asserted that sampling requirements for the measure
are incompatible with those of the HBIPS measures.
They asserted that measure collection will require hiring
and training new employees.
They believed that measure collection will require release
of information forms.
They believed that because the measure excludes patients
under 18 years of age, it may be of limited utility.
They argued that the measure will be financially
burdensome to IPFs.
They argued that IPFs have limited or no contact
information for some patients because IPF patients are a highly mobile
population and temporary addresses pose difficulties for conducting
follow-up.
Response: We thank the commenters for articulating their concerns
regarding this measure. We are aware that for some IPFs, this measure
requires a process for following up with individuals with substance use
disorders (SUDs) that may not now be in existence. Further, we are
sensitive to the difficulties that may be created concerning
differences between this measure and the other follow-up measure we
proposed--the Follow-Up After Hospitalization for Mental Illness (FUH)
measure. Most importantly, while the FUH measure only requires
assessment of whether discharged patients with mental illness had
contact with a specialty provider immediately after discharge, this
measure requires contacting and obtaining clinically-related
information from the patients themselves, a more difficult standard to
meet. We recognize the burden to both facilities and patients to
report, collect, and submit this information needed to report SUB-4 to
CMS. We also considered calculating SUB-4 using Medicare claims and
believe that this approach is not appropriate for this measure, since
detailed information about the patient's follow-up visit necessary to
calculate SUB-4 is not collected on Medicare claims. Accordingly, we
are not finalizing this measure for the IPFQR Program at this time. We
nevertheless will continue to explore the development and adoption of
measures that assess the status and treatment of all patients in the
period immediately following discharge, including those with SUDs.
Comment: Some commenters supported inclusion of the SUB-4 measure
because it promotes effective treatment practices, effective
communication, and care coordination, as well as addressing substance
abuse issues. These commenters supported the proposed start date.
Some commenters were supportive of the CMS proposal, but also
offered suggestions to risk-adjust the SUB-4 measure to: (1) Prevent
discrepancies in performance resulting from differences in patient
demographics; and (2) to allow for public reporting prior to attaching
measures to reimbursement since there has been no reliability
determination for this measure. One commenter urged CMS to exclude
halfway houses and voluntary community locations of care from this
measure because these facilities are not healthcare facilities. Some
commenters commended CMS for recognizing the clinical importance of
routinely screening patients admitted to hospitals for psychiatric
conditions for risky alcohol use, but raised concerns over the fact
that TJC's four substance use measures were developed and tested for
use with all hospitalized patients and SUB-4 would only be used for IPF
hospitals/units for the IPFQR Program.
Some commenters urged CMS to concurrently include SUB-2 (brief
intervention) and SUB-3 (treatment initiation) with SUB-4 in the IPFQR
final rule because these measures are critical to providing quality
care as screening and intervention significantly reduce health risks
and generate cost-savings. The commenters recommended that CMS add all
four SUB measures because the measures are complementary to each other
and are meant to be used as an entire set by hospitals to evaluate four
key processes related to substance use.
Response: We thank the commenters for supporting our proposal to
adopt SUB-4. However, we are not finalizing the SUB-4 measure for the
IPFQR Program at this time for the reasons we have described above. We
will refer the measure refinement suggestions to the measure steward,
and will consider the additional measures recommended by the commenters
for future rulemaking.
After consideration of the public comments we received, we are not
finalizing the SUB-4 measure for the FY 2016 payment determination and
subsequent years.
(3) Follow-Up After Hospitalization for Mental Illness (FUH) (NQF
0576)
Mental illness accounts for a very large disease burden and it is
estimated that half of first-time psychiatric patients are readmitted
within two years of hospital discharge. Continuity of treatment and
appropriate follow-up care and management of chronic diseases, such as
mental illnesses, are known to reduce the risk of repeated
hospitalizations. Proper follow-up treatment for psychiatric
hospitalization

[[Page 50894]]

can lead to improved quality of life for patients, families, and
society as a whole.
The Follow-Up After Hospitalization for Mental Illness measure
assesses the percentage of discharges for patients 6 years of age and
older who were hospitalized for treatment of selected mental health
disorders, and who subsequently had an outpatient visit or an intensive
outpatient encounter with a mental health practitioner, or received
partial hospitalization services. The measure separately identifies the
percentage of patients who received follow-up within 7 and 30 days of
discharge. The detailed technical specifications for this measure can
be found at: https://www.ncqa.org/portals/0/Follow-Up%20After%20Hospitalization%20for%20Mental%20Illness.pdf.
The measure is specified by the steward for either collection
through chart abstraction or calculation using claims-based data. We
considered using claims-based data for patients discharged from IPFs to
calculate the measure, and in the FY 2014 IPPS/LTCH PPS proposed rule
(78 FR 27738), we welcomed public feedback on this approach. However,
we proposed to collect chart-abstracted data for this measure in order
to maintain consistency with the approach used for existing measures in
the IPFQR Program, and solicited comment on this proposal. We also
considered using claims-based data for patients discharged from IPFs to
calculate the measure, and welcomed public feedback on this alternative
approach. We proposed the form, manner, and timing of collection in
section IX.D.9. of the preamble of the proposed rule.
The Follow-Up After Hospitalization for Mental Illness (FUH)
proposed measure meets the measure selection criteria under section
1886(s)(4)(D)(i) of the Act, because it is NQF-endorsed.
We invited public comment on this proposed measure.
Comment: Some commenters supported inclusion of the FUH measure
because it promotes effective treatment practices, effective
communication, and care coordination, as well as provides the ability
to address issues of substance abuse. These commenters supported the
proposed start date. Another commenter supported the FUH measure and
indicated that it has used it with some success to refer patients to
the next level of care. This commenter stated that case management is
needed for this measure. One commenter stated that the data for this
measure could be retrieved by facilities, thereby promoting a standard
of care that is within the control of the organization. One commenter
expressed concern that 7-30 days is not sufficient time for the FUH
measure, especially in rural hospitals where access to specialty
physicians is limited, thus making it difficult for patients to see the
physicians within 30 days of discharge. One commenter suggested CMS
require a uniform tool for collecting post-discharge information for
the FUH measure so that outcomes can be appropriately compared.
Response: We thank the commenters for supporting our proposal to
implement this measure in the IPFQR Program. We agree that effective
treatment is sustained and enhanced through case management activities
such as care coordination, provider communication, and follow up after
discharge. We may consider case management-related measures in the
future. The timeframe specified by this measure is a consensus-based
timeframe within which initial follow-up should occur. A specialty
physician is not required for the follow-up visit, and so rural
hospitals should not be adversely affected. We will consider for future
rulemaking the suggestion that we require a uniform tool for collecting
post-discharge information for this measure.
Comment: A number of commenters sought clarification on the patient
population criteria and exceptions and expressed other concerns about
the measure. One commenter inquired whether the FUH measure applies to
a patient enrolled in a Medicare Advantage plan with an insurance
carrier that is fully at risk. One commenter inquired whether the FUH
measure excludes patients who have been discharged to a non-CMS
reimbursable service such as an intermediate care facility for
individuals with mental retardation (ICF-MR), residential facility,
group home, or jail, or when the patient is readmitted. Another
commenter requested that CMS consider excluding homeless patients from
the FUH measure. Another commenter requested information regarding how
homeless patients or patients in shelters or boarding homes should be
contacted. Another commenter indicated that the FUH measure is not
appropriate for the ``forensic'' patient population because it is not
possible to track these patients once they are released from jail.
One commenter recommended risk-adjusting the FUH measure to prevent
discrepancies in performance resulting from differences in patient
demographics. One commenter requested clarification about who is
responsible for initiating follow-up for patients discharged from an
acute care facility to an extended treatment facility for drugs and
alcohol. This commenter was concerned that a patient who is currently
being treated in an extended treatment program may have restricted
contact. One commenter indicated that because a visit on the day of
discharge is acceptable to meet the FUH measure requirements, adopting
the measure may result in IPFs using same-day visits to meet the
requirements of the measure rather than encouraging IPFs to coordinate
care closely for follow-up treatment. One commenter noted that patients
who are not involuntarily committed and make the decision to leave
should not reflect poorly on the hospital.
Response: The FUH measure includes persons discharged to an
ambulatory care setting/home (including homeless beneficiaries, and
those discharged to a residential facility or group home). However, the
IPF patient population criteria and exceptions for the IPF FUH measure
would apply to these discharges. Therefore, we would exclude those
Medicare FFS beneficiaries who are transferred to another inpatient or
institutional setting (for example, another hospital, IPF, Skilled
Nursing Facility, ICF-MR, nursing home, jail/prison). Regarding partial
hospitalization or outpatient chemical dependency programs, these
services are not considered inpatient discharges, but rather are
outpatient services; and thus, are not part of IPF PPS or the IPFQR
Program. In addition, Medicare Advantage beneficiaries are not included
in the Medicare FFS program; therefore Medicare Advantage beneficiaries
are excluded from the FUH measure. The measure does not focus on the
forensic population, and since treatment of that population is covered
by the State rather than Medicare, these patients would not be included
in the measure.
We currently have no indication that same-day visits will be
employed to a greater extent to meet the measure requirement once the
measure is adopted, but we will monitor the measure for unintended
consequences and changes in utilization patterns. We feel that certain
disposition codes (involuntary commitment, left against medical advice)
may be used improperly should we exclude these discharges from the
measure, but will examine this issue further as well. We will consider
the suggestions for additional exclusions and for risk adjustment of
the IPF FUH measure.
Comment: A few commenters opposed the addition of the proposed

[[Page 50895]]

FUH measure because it was perceived to be incompatible with the
existing HBIPS measures. Some commenters stated that the FUH measure is
incompatible with existing HBIPS measures because it requires follow-up
at 7 and 30 days, whereas the timeframe for HBIPS is 12 months. The
commenters were also concerned that sampling is not allowed for the FUH
measure, but is allowed for the HBIPS measures. The commenters believed
these differences will impose burdens on facilities.
Response: We do not believe that the FUH measure is incompatible
with the HBIPS measure. We believe that the commenters misinterpreted
the collection and submission requirements for the HBIPs measures
currently in the IPFQR Program. Data for the HBIPS measures currently
included in the IPFQR Program (HBIPS 2 through 7) are collected
quarterly by IPFs. This information is then submitted to CMS once every
12 months via QualityNet. We acknowledge that the FUH measure's lack of
sampling may pose a burden, and in response to concerns about burden,
we are finalizing the adoption of this measure as a claims-based
measure.
Comment: Some commenters opposed the addition of the FUH measure
because it is specified for use by health plans and not IPFs.
Therefore, these commenters argued that requiring IPFs to provide such
data would impose great burden because they would need to develop
systems to capture such data. Other commenters stated that psychiatric
hospitals do not have such data. Some commenters indicated that
collecting information for this measure raises confidentiality concerns
and increases the risk of liability for hospitals. Other commenters
argued that the FUH measure would require IPFs to put forth additional
efforts to obtain Release of Information forms prior to patient
discharge. Some commenters opposed the FUH measure because it would
require psychiatric hospitals to reach out to aftercare providers to
obtain the information needed for the measure, and thus impose a burden
on IPFs. One commenter noted that the burden is further exacerbated
because the measure specifications do not allow for sampling.
One commenter noted that patients, rather than IPFs, should take
the lead in their follow-up care. Another commenter stated that IPFs
could not be responsible for what patients do post-discharge. This
commenter also noted that this measure is problematic because it relies
on patients being honest about their follow-up care. One commenter
recommended that CMS use claims/administrative data for the FUH
measure.
Response: Because we are finalizing this measure as claims-based
instead of chart-abstracted as we had initially proposed, IPFs would
not need to obtain any sort of release of information form. These forms
are not a requirement of the IPFQR Program or CMS, but we are aware
that many IPFs obtain them to comply with State, HITECH, and HIPAA
requirements, in order to contact aftercare providers to obtain
information on patient follow-up care status. Based upon the public
comments received above regarding burden and privacy concerns for FY
2016 payment determination and subsequent years, we are finalizing the
FUH measure with a change in order to alleviate these concerns. We will
calculate the measure using Part A and Part B claims data that are
already received by Medicare for payment purposes. This approach
requires no additional data collection or reporting by IPFs. However,
in the future, we will consider transitioning this measure to chart-
abstracted data collection, and will take these comments into account
should we do so.
After considering the public comments we received, we are
finalizing the FUH measure as a claims-based measure because we believe
it will reduce the burden to IPFs since we will calculate this measure
by linking Medicare FFS claims submitted by IPFs and subsequent
outpatient providers for Medicare FFS IPF discharges.
In summary, we are retaining all six of the chart-abstracted
measures previously adopted for the FY 2014 payment determination and
subsequent years. We are not removing or replacing any of the
previously adopted measures from the IPFQR Program or adding any new
measures to the IPFQR Program for the FY 2015 payment determination and
subsequent years.
For the FY 2016 payment determination and subsequent years, we are
adding one new chart-abstracted measure for the IPFQR Program: SUB-1:
Alcohol Use Screening (NQF review pending) as proposed. We are also
adding another new measure: Follow-Up After Hospitalization for Mental
Illness (FUH) (NQF 0576) with a change that data collection be
claims-based. This change will apply to the FY 2016 payment
determination and subsequent years, unless we change it through future
rulemaking.
We are finalizing the collection requirements for these measures in
section IX.D.9. of the preamble of this final rule. The table below
lists the previously adopted measures for the FY 2014 payment
determination and subsequent years and the additional measures for the
FY 2016 payment determination and subsequent years.

Previously Adopted Quality Measures and Quality Measures Adopted in This Final Rule for the IPFQR Program
----------------------------------------------------------------------------------------------------------------
National Quality Strategy Priority NQF No. Measure ID Measure description
----------------------------------------------------------------------------------------------------------------
Patient Safety..................... 0640...................... HBIPS-2 Hours of Physical
Restraint Use.*
0641...................... HBIPS-3 Hours of Seclusion Use.*
Clinical Quality of Care........... 0552...................... HBIPS-4 Patients Discharged on
Multiple Antipsychotic
Medications.*
0560...................... HBIPS-5 Patients Discharged on
Multiple Antipsychotic
Medications with
Appropriate
Justification.*
Care Coordination.................. 0557...................... HBIPS-6 Post-Discharge Continuing
Care Plan Created.*
0558...................... HBIPS-7 Post-Discharge Continuing
Care Plan Transmitted to
Next Level of Care
Provider Upon Discharge.*
Clinical Quality of Care........... Review Pending............ SUB-1 Alcohol Use Screening.**
0576...................... FUH Follow-Up After
Hospitalization for
Mental Illness.**
----------------------------------------------------------------------------------------------------------------
* Previously adopted quality measures for the FY 2014 payment determination and subsequent years.
** New quality measures adopted in this final rule for the FY 2016 payment determination and subsequent years.

[[Page 50896]]

c. Maintenance of Technical Specifications for Quality Measures
We will provide a user manual that will contain links to measure
specifications, data abstraction information, data submission
information, a data submission mechanism known as the Web-based Measure
Tool, and other information necessary for IPFs to participate in the
IPFQR Program. This manual will be posted on the QualityNet Web site
at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1228772250192. We will maintain the technical specifications for the quality
measures by updating this manual periodically and including detailed
instructions for IPFs to use when collecting and submitting data on the
required measures. These updates will be accompanied by notifications
to IPFQR Program participants, providing sufficient time between the
change and effective dates in order to allow users to incorporate
changes and updates to the measure specifications into data collection
systems.
Many of the quality measures used in different Medicare and
Medicaid reporting programs are NQF-endorsed. As part of its regular
maintenance process for NQF-endorsed performance measures, the NQF
requires measure stewards to submit annual measure maintenance updates
and undergo maintenance of endorsement review every 3 years. In the
measure maintenance process, the measure steward (owner/developer) is
responsible for updating and maintaining the currency and relevance of
the measure and will confirm existing or minor specification changes
with NQF on an annual basis. NQF solicits information from measure
stewards for annual reviews, and it reviews measures for continued
endorsement in a specific 3-year cycle.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53652), we stated
that the NQF regularly maintains its endorsed measures through annual
and triennial reviews, which may result in the NQF making updates to
the measures. We believe that it is important to have in place a
subregulatory process to incorporate nonsubstantive updates made by the
NQF into the measure specifications we have adopted for the IPFQR
Program so that these measures remain up-to-date.
Through NQF's measure maintenance process, NQF endorsed measures
are sometimes updated to incorporate changes that we believe do not
substantially change the nature of the measure. We believe these types
of maintenance changes are distinct from more substantive changes to
measures that result in what are considered new or different measures,
and that they do not trigger the same agency obligations under the
Administrative Procedure Act.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53653), we adopted a
policy to use a subregulatory process to make nonsubstantive updates to
NQF-endorsed measures used for the IPFQR Program. We also stated that
we expected to make the determination of what constitutes a substantive
versus a nonsubstantive change on a case-by-case basis, and provided
examples of the types of changes that would fall into each category.
Examples of nonsubstantive changes to measures might include
updated diagnosis or procedure codes, medication updates for categories
of medications, broadening of age ranges, and exclusions for a measure
(such as the addition of a hospice exclusion to the 30-day mortality
measures). We believe that non-substantive changes may include updates
to NQF-endorsed measures based upon changes to guidelines upon which
the measures are based. As stated in the FY 2013 IPPS/LTCH PPS final
rule, we will revise the Specifications Manual so that it clearly
identifies the updates and provide links to where additional
information on the updates can be found. We also will post the updates
on the QualityNet Web site at https://www.QualityNet.org. We will
provide sufficient lead time for facilities to implement the changes
where changes to the data collection systems would be necessary.
We will continue to use rulemaking to adopt substantive updates
made by the NQF to the endorsed measures we have adopted for the IPFQR
Program. Examples of changes that we might consider to be substantive
would be those in which the changes are so significant that the measure
is no longer the same measure, or when a standard of performance
assessed by a measure becomes more stringent (for example: changes in
acceptable timing of medication, procedure/process, or test
administration). Another example of a substantive change would be where
the NQF has extended its endorsement of a previously endorsed measure
to a new setting, such as extending a measure from the inpatient
setting to hospice.
We believe that the policy finalized in the FY 2013 IPPS/LTCH PPS
final rule adequately balances our need to incorporate non-substantive
NQF updates to NQF-endorsed IPFQR Program measures in the most
expeditious manner possible, while preserving the public's ability to
comment on updates that so fundamentally change an endorsed measure
that it is no longer the same measure that we originally adopted. We
also note that the NQF process incorporates an opportunity for public
comment and engagement in the measure maintenance process. These
policies regarding what is considered substantive versus non-
substantive apply to all measures in the IPFQR Program.
6. Request for Voluntary Information--IPF Assessment of Patient
Experience of Care
As indicated previously, we strive to address each of the six
priorities of the HHS National Quality Strategy in our quality
reporting programs. One priority area currently unaddressed in the
IPFQR Program is that of patient and family engagement and experience
of care. We included on our ``List of Measures under Consideration for
December 1, 2012,'' the measure ``Inpatient Consumer Survey of
Inpatient Behavioral Healthcare Services'' (NQF 0726). The MAP
provided input on this measure supporting its inclusion in the IPFQR
Program.
We believe that while the specific survey instrument incorporated
in that measure addressed an important area of quality care, and in the
FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27740), we did not propose
to adopt the measure at this time because of several issues. These
issues include potential reporting and information collection burdens
in a new program, and compatibility with the content and format of
other similar CMS beneficiary surveys. We intend to pursue the adoption
of a standardized measure of patient experience of care for the IPFQR
Program in the near future.
In an effort to proceed cautiously with the selection of an
assessment instrument and collection protocol, we instead proposed to
collect information from IPFs participating in the IPFQR Program
regarding whether the IPF assesses patient experience of inpatient
behavioral health services using a standardized instrument (Yes/No). We
would also ask those IPFs that answer ``Yes'' to indicate the name of
the survey that they administer. Submission of this information would
be voluntary and would not affect an IPF's FY 2016 payment
determination.
We will use information we collect from this request for voluntary
information to assess readiness of IPFs to report patient experience of
care

[[Page 50897]]

measure data in the IPFQR Program. We intend to propose to make this
request for voluntary information a mandatory measure in future
rulemaking.
Section IX.D.9. of the preamble of the proposed rule, which covered
the form, manner, and timing of data submissions, included our proposal
for collection requirements that would apply to any information IPFs
voluntarily submit. Section X.D.9. of the preamble of the proposed rule
also included more information about the request for voluntary
information.
We welcomed comments on this approach as well as recommendations
concerning future measurement of this domain, including recommendations
of specific instruments for surveying patient and family engagement and
experience of care in inpatient psychiatric settings.
Comment: Some commenters supported CMS' efforts to implement a
patient experience of care survey and offered to assist CMS to find
patient experience of care measures that are appropriate for
psychiatric settings. One commenter indicated that it is difficult to
obtain experience of care information from geriatric psychiatric
patients suffering from dementia and recommended using a readmission
measure to assess whether the patient has improved. One commenter
requested that when CMS selects a patient experience of care measure,
it consider excluding patients committed involuntarily, because their
views will be negatively influenced by the involuntary commitment. Some
commenters urged CMS to work with stakeholders before implementing this
measure to understand further the opportunities and challenges of
various survey tools. Other commenters indicated that they developed
their own surveys after determining that some of the questions in the
NRI survey were not relevant to their patient population.
Response: We recognize the challenges of measuring patient
experience of care, particularly for involuntary cases and geriatric
psychiatric patients suffering from dementia. We also recognize that
IPFs may have developed their own survey instruments, and we seek to
learn more about these instruments prior to requiring collection of a
patient experience of care survey for the IPFQR Program. For this
reason, we seek to implement this request for voluntary information
assessing whether IPFs currently assess patient experience of care, and
to learn from the opportunities and challenges that our stakeholders
have experienced.
After consideration of the public comments we received, we will
implement the Request for Voluntary Information--IPF Assessment of
Patient Experience of Care.
7. Request for Recommendations for New Quality Measures for Future
Years
We seek to develop a comprehensive set of quality measures to be
available for widespread use for informed decision-making and quality
improvement in the inpatient psychiatric setting. Therefore, through
future rulemaking, we intend to propose new measures that will help us
further our goal of achieving better health care and improved health
for Medicare beneficiaries who obtain inpatient psychiatric services,
through the widespread dissemination and use of performance
information.
We plan to continue developing a comprehensive set of quality
measures to be available for widespread use for informed decision-
making and quality improvement in IPFs. Accordingly, we are soliciting
recommendations concerning future measures to assess the domains that
arise from the six NQS priorities: clinical care; person- and
caregiver-centered experience and outcomes; safety; efficiency and cost
reduction; care coordination; and community/population health. This
approach will enhance better psychiatric care while bringing the IPFQR
Program in line with other established quality reporting and
performance improvement programs who also aim to align with the NQS
priorities such as the Hospital Inpatient Quality Reporting (IQR)
Program, the Hospital Outpatient Quality Reporting (OQR) Program, the
Hospital Value-Based Purchasing (VBP) Program, the End-Stage Renal
Disease Quality Incentive Program (ESRD QIP), and other CMS quality
programs. Recommendations for consideration of individual measures
should address the importance of the measure, its scientific evidence,
its relevance for quality improvement, and the feasibility of
collection and reporting.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27740), we
welcomed all recommendations related to any of the identified domains.
However, we stated that we are particularly interested in measure and
domain recommendations concerning: (1) Inpatient psychiatric treatment
and quality of care of geriatric patients and other adults,
adolescents, and children; (2) quality of prescribing for
antipsychotics and antidepressants; (3) readmissions; (4) access to
care; (5) screening for suicide and violence; and (6) screening and
treatment for nonpsychiatric, comorbid conditions for which patients
with mental or substance use disorders are at higher risk. In addition,
we sought recommendations on any other measures related to patient
experience of care and overall quality of care for IPFs.
We welcomed public comment on considerations of additional measure
topics for the IPFQR Program in future rulemaking.
Comment: In response to our request for comments we received the
following additional measure topic suggestions:
Suicide screening and violence
HBIPS-1
SUB-2
SUB-3
Readmission
Response: We thank the commenters for their suggestions for future
measure selection. We will take them into consideration for the IPFQR
Program.
8. Public Display Requirements for the FY 2014 Payment Determination
and Subsequent Years
Section 1886(s)(4)(E) of the Act requires the Secretary to
establish procedures for making the data submitted under the IPFQR
Program available to the public. Such procedures shall ensure that an
IPF has the opportunity to review the data that is to be made public
with respect to the IPF prior to such data being made public. In the FY
2013 IPPS/LTCH PPS final rule (77 FR 53653 through 53654), we finalized
our procedures for the FY 2014 payment determination and subsequent
years regarding public display. We previously finalized that the data
collected under the IPFQR Program would be displayed on a CMS Web site
and that public display would begin in the first quarter of the
calendar year following the respective payment determination year (77
FR 53654). Last year, we also finalized a 30-day preview period that
would allow IPFs to review their data before it became public. The
previously finalized preview period is September 20 through October 19
of the respective payment determination year (77 FR 53654).
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27740 through
27741), we proposed to change our finalized policies, however, in an
attempt to align the IPFQR Program preview and display periods with
that of the Hospital IQR Program. We proposed that for the FY 2014
payment determination and subsequent years, we would publicly display
the submitted data on a CMS Web site in April of each calendar year
following the start of the respective payment determination year.

[[Page 50898]]

In other words, the public display period for the FY 2014 payment
determination would be April 2014; the public display periods for the
FY 2015 and FY 2016 payment determinations would be April 2015 and
April 2016 respectively, and so forth.
We also proposed that the preview period for the FY 2014 payment
determination and subsequent years be modified to 30 days approximately
twelve weeks prior to the public display of the data. This is to align
with the Hospital IQR Program's preview and display periods and, as a
result, reduce burden to facilities.
We welcomed public comment on these proposals.
Comment: Many commenters supported our proposal to align the IPFQR
Program public reporting and display periods with that of the Hospital
IQR Program (April of each calendar year) and agreed that it will give
IPFs the opportunity to review the data that is to be made public prior
to its being made so.
Response: We thank commenters for their support.
Comment: One commenter believed that publicly reported quality data
should be updated more than once per year so that hospitals have more
current data in order to develop and track quality improvement.
Response: We agree with the commenter that continuous review of the
most current data is important to quality improvement. At this time,
however, we only require providers to input data for the IPFQR Program
once per year. Thus, it is not operationally possible for us to post
this data publicly on a quarterly basis. In addition, at this time, we
do not believe it is appropriate for us to require data entry on a more
frequent basis because this would impose a larger burden on IPFs. As
IPFs become more comfortable with the program, however, the frequency
of data entry may be less of a burden and may then be more appropriate.
We will consider requiring reporting more than once per year and
publicly reporting data on a more frequent basis for future rulemaking.
After consideration of the public comments we received, we are
finalizing the public display requirements for the FY 2014 payment
determination and subsequent years as proposed. Set out below is a
table that displays the new public display timeline. Although we have
listed the public display timeline only for the FYs 2014 through 2016
payment determinations, this policy applies to the FY 2014 payment
determination and subsequent years.

Public Display Timeline for the FY 2014 Payment Determination and
Subsequent Years
------------------------------------------------------------------------
Payment determination Reporting period Public display (calendar
year (fiscal year) (calendar year) year)
------------------------------------------------------------------------
2014................. Q4 2012 (October 1, April 2014.
2012-December 31,
2012).
Q1 2013 (January 1,
2013-March 31, 2013).
2015................. Q2 2013 (April 1, April 2015.
2013-June 30, 2013).
Q3 2013 (July 1, 2013-
September 30, 2013).
Q4 2013 (October 1,
2013-December 31,
2013).
2016................. Q1 2014 (January 1, April 2016.
2014-March 31, 2014).
Q2 2014 (April 1,
2014-June 30, 2014).
Q3 2014 (July 1, 2014-
September 30, 2014).
Q4 2014 (October 1,
2014-December 31,
2014).
------------------------------------------------------------------------

9. Form, Manner, and Timing of Quality Data Submission for the FY 2014
Payment Determination and Subsequent Years
a. Background
Section 1886(s)(4)(C) of the Act requires that, for the FY 2014
payment determination and each subsequent year, each IPF submit to the
Secretary data on quality measures as specified by the Secretary. Such
data shall be submitted in a form and manner, and at a time, specified
by the Secretary. As required by section 1886(s)(4)(A) of the Act, for
any IPF that fails to submit quality data in accordance with section
1886(s)(4)(C) of the Act, the Secretary will reduce any annual update
to a standard Federal rate for discharges occurring during such fiscal
year by 2.0 percentage points. The complete data submission
requirements, submission deadlines, and data submission mechanism,
known as the Web-Based Measure Tool, is posted on the QualityNet Web
site at: https://www.qualitynet.org/. The Web-Based Measure Tool is an
Internet database for IPFs to submit their aggregate data. In the FY
2013 IPPS/LTCH PPS final rule (77 FR 53654 through 53658), we required
that IPFs submit data in accordance with the specifications for the
appropriate proposed reporting periods to the Web-Based Measures Tool
found in the IPF section on the QualityNet Web site (https://www.qualitynet.org/).
b. Procedural Requirements
In order to participate in the IPFQR Program, in the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53654 through 53655), we required IPFs to
comply with certain procedural requirements. We have aligned these
procedural requirements with the Hospital IQR Program to avoid imposing
additional burden on providers and to increase efficiencies by virtue
of allowing providers to use similar submission requirements across
programs. Under these adopted policies, IPFs must--
Register with QualityNet before the IPF begins reporting,
regardless of the method used for submitting the data.
Identify a QualityNet Administrator who follows the
registration process located on the QualityNet Web site (https://www.qualitynet.org/).
Complete a Notice of Participation (NOP). IPFs that wish
to participate in the IPFQR Program must complete an online NOP.
Submission of a NOP is an indication that the IPF agrees to participate
in the IPFQR Program and public reporting of their measure rates. The
timeframe for completing the NOP is between January 1 and August 15
before each respective payment determination year. For example, for the
FY 2015 payment determination year, the timeframe for completing the
NOP is between January 1, 2014 and August 15, 2014.
Any IPF that receives a new CMS Certification Number (CCN)
on or after the beginning of the respective payment determination year
and wishes to participate in the IPFQR Program, but has not otherwise
submitted a NOP using the new CCN, must submit a completed NOP no later
than 180 days from the date identified as the open date (that is, the
Medicare acceptance date)

[[Page 50899]]

on the approved CMS Quality Improvement Evaluation System to
participate in the IPFQR Program.
Withdrawals from the IPFQR Program will be accepted no
later than August 15 before the beginning of each respective payment
determination year. We believe the August 15 deadline will give us
sufficient time to update payment determinations for each respective
year. For example, under current policies, the withdrawal period for
the FY 2015 payment determination year is between January 1, 2014 and
August 15, 2014. If in a given payment determination year, an IPF
withdraws from the program, it will receive a reduction of 2.0
percentage points to that year's applicable percentage increase. Once
an IPF has submitted an NOP, it is considered to be an active IPFQR
Program participant until such time as the IPF submits a withdrawal
form to CMS.
We determine if an IPF has complied with our data
submission requirements by validating each IPF's CCN and their
aggregated data submission on the QualityNet Web site.
IPFs must submit the aggregated numerator and denominator
data for all age groups, for all measures, to avoid the 2.0 percentage
point reduction.
c. Submission Requirements for the FY 2016 Payment Determination and
Subsequent Years
Currently, IPFs choosing to participate in the IPFQR Program must
meet the specific data collection and submission requirements as
described on the QualityNet Web site at https://www.qualitynet.org/ and
by TJC, the HBIPS measure steward (77 FR 53655). As we indicated in the
FY 2013 IPPS/LTCH PPS final rule, the specifications for the HBIPS
measures can be found on the TJC Web site at: https://manual.jointcommission.org/bin/view/Manual/WebHome.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27741 through
27742), for the FY 2016 payment determination, we proposed that, for
the proposed chart-abstracted measures listed in the preamble of the
proposed rule, participating IPFs meet the same specific data
collection and submission requirements when reporting quality measure
data. The specifications for the SUB-1 and SUB-4 measures can be found
on the TJC Web site at: https://www.jointcommission.org/specifications_manual_for_national_hospital_inpatient_quality_measures.aspx.
Please note, however, that we are not finalizing the SUB-4 measure in
this rule. The specifications for the FUH measure are posted on the
NCQA Web site at: https://www.ncqa.org/portals/0/Follow-Up%20After%20Hospitalization%20for%20Mental%20Illness.pdf. We note that
for the FUH measure, based on comments we received, we are finalizing
claims-based submission instead of chart-abstraction as we proposed;
therefore, the chart-abstraction requirements described herein apply
only to the SUB-1 measure.
We finalized a policy in the FY 2013 IPPS/LTCH PPS final rule (77
FR 53655 through 53656) requiring that IPFs submit aggregate data on
measures on an annual basis via the Web-Based Measures Tool found in
the IPF section on the QualityNet Web site. While this policy applies
on an annual basis beginning in FY 2014, it is listed under a sub-
heading labeled ``Reporting and Submission Requirements for the FY 2014
Payment Determination'' (77 FR 53655). To avoid reader confusion, we
clarify that these reporting and submission requirements finalized in
the FY 2013 IPPS/LTCH PPS final rule apply to all subsequent years
unless we change our policy through future rulemaking. It is our intent
to require that IPFs submit aggregate data on measures on an annual
basis via the Web-Based Measures Tool found in the IPF section on the
QualityNet Web site for the FY 2014 payment determination and
subsequent years.
The data input forms on the QualityNet Web site for such submission
will require aggregate data for each separate quarter. Therefore, IPFs
will need to track and maintain quarterly records for their data.
Comment: One commenter objected to the submission deadline for the
HBIPS measures, arguing that hospitals are not clear on expectations
for data entry into the Web-based tool, which has yet to become
operational. In addition, this commenter opposed the use of non-
validated data for pay-for-performance programs.
Response: We would like to clarify that the IPFQR Program is a pay-
for-reporting and not, as the commenter indicated, a pay-for-
performance program. Last year, we finalized the measures amid
overwhelming support from the public. We have held several Webinars
listed on QualityNet to inform the public on program requirements.
Although, as we noted, non-validated data may have some shortcomings,
we believe that asking IPFs to acknowledge the accuracy and
completeness of the data they submit will mitigate this problem. For
more information, we refer readers to the IPFQR Program discussion in
section VIII.F. of FY 2013 IPPS/LTCH PPS final rule (77 FR 53655
through 53656).
Comment: One commenter inquired whether Releases of Information
forms are required to track data on behalf of CMS.
Response: We thank the commenter for seeking clarification. We
believe the commenter is asking whether a release of information form--
an institutional form that many hospitals require upon releasing
sensitive patient information--is necessary for the IPFQR Program. The
release of information form is not applicable to the IPFQR Program
because we are collecting aggregate-level data, which do not contain
sensitive patient information.
Comment: Some commenters sought clarification as to how the
specifications of the proposed Follow-Up After Hospitalization for
Mental Illness measure, which require that the denominator list data
for 11 months, align with our requirement that measures be reported by
quarter. Some commenters sought clarification as to how the FUH measure
would be converted since it is specified for annual and not monthly
reporting.
Response: As we have noted earlier in this preamble, based on
comments received, we are finalizing the FUH measure with a change that
it initially be collected as a claims-based measure, which will remove
the need for IPFs to collect, calculate, and submit chart-abstracted
data. We will calculate this measure utilizing Part A and Part B claims
data, in accordance with measure specifications. To allow for the lag
in claims submission, for the FY 2016 payment determination and
subsequent years, we will calculate the measure for the period from
July 1 of the year immediately preceding the reporting period for
chart-abstracted measures to June 30 of the following year. Thus, the
first FUH measure calculation period for the FY 2016 payment
determination would be from July 1, 2013 to June 30, 2014.
Comment: Some commenters sought clarification on whether separate
rates would be expected for different payers for the FUH measure since
the measure specifications require that the data reported is payer-
specific, whereas our proposal seeks data on ``all payers.''
Response: As we have noted earlier in this rule, based on comments
received, for the FY 2016 payment determination and subsequent years,
we are finalizing the FUH measure with a change that it initially be
collected as a claims-based measure. We will collect the data from
Medicare Part A and Part B claims.

[[Page 50900]]

Comment: One commenter inquired as to what will be accepted as
``proof'' of follow-up for the FUH measure.
Response: As we have noted earlier in this rule, based on comments
received, we are finalizing the FUH measure with a change that it
initially be collected as a claims-based measure; thus, there is no
``proof'' of follow-up for the FUH submission requirements.
Comment: One commenter opposed the addition of the proposed
measures because developing, improving and testing the integrity of a
data process can take up to a year. Another commenter recommended
postponing the implementation of the newly proposed measures until FY
2015 because these measures are new for many facilities and the data
collection for the initial six measures only began in October 2012.
Response: We note that, contrary what the commenter suggested
above, the measures will first apply to the FY 2016 payment
determination and that the reporting period does not start until
January 1, 2014. Since we are only finalizing one new chart-abstracted
measure, we believe that facilities will have sufficient time to
prepare for data collection and submission.
With respect to the NCQA's FUH measure, we proposed all-payer Web-
based collection to maintain consistency throughout the measures we
have selected for the IPFQR Program, but welcomed comments for
alternative forms of data submission. Based on the public comments we
received, we are finalizing that for the FY 2016 payment determination
and subsequent years we will collect FUH measure using claims-based
data.
After consideration of the public comments we received, we are
finalizing the Submission Requirements for the FY 2016 Payment
Determination and Subsequent Years policy for SUB-1 as proposed. For
the FUH measure, we are finalizing a claims-based data collection and a
reporting period for the FY 2016 payment determination and subsequent
years, as illustrated for the FY 2016 payment determination in the
table below.

Reporting Period for the Follow-Up After Hospitalization for Mental
Illness Measure for the FY 2016 Payment Determination
------------------------------------------------------------------------
Payment determination Reporting period Public display (calendar
year (fiscal year) (calendar year) year)
------------------------------------------------------------------------
2016................. July 1, 2013-June 30, April 2016.
2014.
------------------------------------------------------------------------

As noted earlier in the preamble, NQF 0726 ``Inpatient
Consumer Survey of Inpatient Behavioral Healthcare Services'' is a
patient experience measure covering information not measured by
existing program measures. While we are not adopting NQF 0726
at this time, we are finalizing our proposal to request voluntary
information about survey administration, asking whether IPFs assess
patient experience of inpatient behavioral health services using a
standardized instrument. IPFs would only have to provide a ``yes'' or
``no'' response. We will also ask those IPFs that answer ``yes'' to
indicate which survey they administer. We proposed that this
information be collected through a Web-Based Collection Tool.
We invited public comment on the proposed submission requirements.
We did not receive any comments on the submission proposals and are
finalizing the requirement that facilities provide their voluntary
information about survey administration via the Web-based tool as
proposed.
d. Reporting Requirements for the FY 2016 Payment Determination and
Subsequent Years
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53655 through
53657), we established reporting periods and submission timeframes for
the FY 2014, FY 2015, and FY 2016 payment determinations, but we did
not require any data validation approach. However, we encouraged the
IPFs to use a validation method and conduct their own analysis. Our
recommendations remained the same in the FY 2014 IPPS/LTCH PPS proposed
rule (78 FR 27742). In future years, should we modify the program to
require patient-level data, we will consider proposals for an
appropriate validation method using rulemaking.
Although in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53655
through 53657) we adopted policies for the FY 2014 payment
determination and subsequent years, we only listed quality reporting
periods and submission timeframes for the FY 2014, FY 2015, and FY 2016
payment determinations. We explained that the reporting periods for the
FY 2014 and FY 2015 payment determinations were 6 and 9 months,
respectively, to allow us to achieve a 12 month (calendar year)
reporting period for the FY 2016 payment determination. We also
indicated that the submission timeframe is between July 1 and August 15
within the same calendar year that marks the beginning of the
appropriate payment determination year. We have included this
information in the table below.

Quality Reporting Periods and Submission Timeframes for the FY 2014 Payment Determination and Subsequent Years
----------------------------------------------------------------------------------------------------------------
Reporting period for
Payment determination services provided (calendar Data submission timeframe
(fiscal year) year)
----------------------------------------------------------------------------------------------------------------
2014......................... Q4 2012 (October 1, 2012- July 1, 2013-August 15, 2013.
December 31, 2012).
Q1 2013 (January 1, 2013-
March 31, 2013).
2015......................... Q2 2013 (April 1, 2013-June July 1, 2014-August 15, 2014.
30, 2013).
Q3 2013 (July 1, 2013-
September 30, 2013).
Q4 2013 (October 1, 2013-
December 31, 2013).
2016......................... Q1 2014 (January 1, 2014- July 1, 2015-August 15, 2015.
March 31, 2014).
Q2 2014 (April 1, 2014-June
30, 2014).
Q3 2014 (July 1, 2014-
September 30, 2014).

[[Page 50901]]

Q4 2014 (October 1, 2014-
December 31, 2014).
----------------------------------------------------------------------------------------------------------------

To avoid reader confusion, we are reiterating that the policy we
adopted for the FY 2016 payment determination also applies to the FY
2017 payment determination and subsequent years, unless we change it
through future rulemaking.
e. Population, Sampling, and Minimum Case Threshold for the FY 2016
Payment Determination and Subsequent Years
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53657 through
53658), for the FY 2014 payment determination and subsequent years, we
finalized our policy that participating IPFs must meet specific
population, sample size, and minimum reporting case threshold
requirements as specified in TJC's Specifications Manual. We also
indicated that the Specifications Manual for the measures is updated at
least twice a year (and may be updated more often as necessary), and
IPFs must follow the requirements in the most recent manual, which can
be found on the TJC Web site at: https://manual.jointcommission.org/bin/view/Manual/WebHome.
We also finalized our policy that the target population for the
quality measures includes all patients, not solely Medicare
beneficiaries, to improve quality of care. We believe it is important
to require IPFs to submit measures on all patients because quality
improvement is of industry-wide importance and should not be focused
exclusively on a certain subset of patients. In addition, we need this
scope of data in order to be able to assess the quality of care being
provided to Medicare beneficiaries.
We also finalized our policy that IPFs that have no data to report
for a given measure must enter zero for the population and sample
counts. For example, an IPF that has no hours of physical restraint use
(HBIPS-2) to report for a given quarter is still required to submit a
zero for its quarterly aggregate population for HBIPS-2 in order to
meet the reporting requirement. We believe it is important for IPFs to
submit data on all measures even when the population size for a given
measure is zero or small because it provides us with the opportunity to
identify, assess, and evaluate the baseline for the number of cases for
each measure in future years. This will also assist us in determining
the minimum case threshold for future years in the rule. In cases where
the measure rates are calculated based on low caseloads, when the
submitted data are publicly displayed on the QualityNet Web site, we
will clearly note that the affected measure rates were calculated based
on low caseloads that may affect the result.
For the HBIPS measures, which we finalized in the FY 2013 IPPS/LTCH
PPS final rule (77 FR 53657 through 53658), we will continue to apply
our finalized policies for population, sampling, and minimum case
threshold outlined above. For the measures we proposed for the FY 2016
payment determination and subsequent years, we proposed that IPFs
follow the sampling and population requirements as specified by the
appropriate measure steward as outlined below.
The most recent version of the Specifications Manual, including the
sampling and population information for the SUB measures, can be found
on the TJC Web site at: https://www.jointcommission.org/specifications_manual_for_national_hospital_inpatient_quality_measures.aspx. We
note that IPFs are required to report data only for inpatient
discharges treated by the IPF, not for acute care hospital discharges
that are not treated and billed by the IPFs.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27743), we
proposed that there will be no sampling required for the FUH measure--
IPFs are expected to submit all data. We proposed that IPFs follow the
population requirements outlined at: https://www.ncqa.org/portals/0/Follow-Up%20After%20Hospitalization%20for%20Mental%20Illness.pdf.
We invited public comment on this proposal.
Comment: Some commenters opposed the proposed FUH measure because
it would require IPFs to reach out to aftercare providers to obtain the
information needed for the measure, thus imposing a burden on
psychiatric hospitals. One commenter noted that the burden is further
exacerbated because the measure specifications do not allow for
sampling.
Response: As we have noted, based on comments received, we are
finalizing the FUH measure with a change that it be collected initially
as a claims-based measure, which removes the need for IPFs to collect,
calculate and submit the data. IPF's are currently required to sign an
IPFQR participation form that allows us to publicly report all IPFQR
measures, including the FUH measure. However, as we consider
transitioning this measure to a chart-abstracted measure in the future,
we will take these comments into account.
Comment: Some commenters opposed our proposal to add SUB-1 to the
IPFQR Program because they believed that the specifications for SUB-1
differ from those required for the HBIPS measures. For example,
sampling requirements are different for SUB-1 and the HBIPS measures
and chemical dependency units are included in the global population for
SUB-1 but excluded from HBIPS. The commenters believed that these
differences would require hospitals to modify their processes for data
collection thus increasing the burden on facilities.
Response: Although there may be sampling and population differences
between SUB-1 and HBIPS measures that may require IPFs to modify their
data collection processes, we believe that the important role that SUB-
1 plays in quality improvement far outweighs burden concerns. As we
have explained in this preamble, individuals with mental health
conditions experience substance use disorders (SUDs) at a much higher
rate than the general population. Individuals with the most serious
mental illnesses have the highest rates of such disorders. Co-occurring
SUDs often go undiagnosed and, without treatment, contribute to a
longer persistence of disorders, poorer treatment outcomes, lower rates
of medication adherence, and greater impairments to functioning.
Accordingly, we believe that SUB-1 plays an important role in assessing
efforts by IPFs to screen for the most common type of such disorder,
alcohol abuse.
After consideration of the public comments we received, with
respect to the SUB-1 measure, we are finalizing the reporting and
submission

[[Page 50902]]

requirements as proposed for the FY 2016 payment determination and
subsequent years. IPFs must ensure that all the reporting and
submission requirements are followed by their vendors (if data are
submitted by vendors on their behalf), because IPFs remain responsible
for all submitted data regardless if data are submitted by a vendor or
by the entity/organization themselves. Based on the public comments we
received, for the FY 2016 payment determination and subsequent years we
are finalizing the FUH measure with a change that it be collected as a
claims-based measure, subject to the measure specifications and
reporting periods described above.
f. Data Accuracy and Completeness Acknowledgement (DACA) Requirements
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53658), we finalized
our DACA policy for the FY 2014 payment determination and subsequent
years. We stated that IPFs must acknowledge their data accuracy and
completeness once annually using a form provided on the QualityNet Web
site. To affirm that the data provided to meet the IPFQR Program data
submission requirements are accurate and complete to the best of an
IPF's knowledge, an IPF is required to submit the DACA form. We will
provide a link to this form once IPFs have completed entry of all
aggregated measure data. Data submission is not complete until the IPF
submits the DACA form. In the FY 2013 IPPS/LTCH PPS final rule (77 FR
53658), we listed the DACA deadlines for the FY 2014, FY 2015, and FY
2016 payment determinations only, even though our finalized policy was
for the FY 2014 payment determination and subsequent years. Set out in
the table below are the DACA deadlines we listed in the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53658).

Data Accuracy and Completeness Acknowledgment (DACA) Deadlines for the
FY 2014 Payment Determination and Subsequent Years
------------------------------------------------------------------------
Payment Reporting period for Data accuracy and
determination services provided completeness
(fiscal year) (calendar year) acknowledgement deadline
------------------------------------------------------------------------
2014................. Q4 2012 (October 1, August 15, 2013.
2012-December 31,
2012).
Q1 2013 (January 1,
2013-March 31, 2013).
2015................. Q2 2013 (April 1, August 15, 2014.
2013-June 30, 2013).
Q3 2013 (July 1, 2013-
September 30, 2013).
Q4 2013 (October 1,
2013-December 31,
2013).
2016................. Q1 2014 (January 1, August 15, 2015.
2014-March 31, 2014).
Q2 2014 (April 1,
2014-June 30, 2014).
Q3 2014 (July 1, 2014-
September 30, 2014).
Q4 2014 (October 1,
2014-December 31,
2014).
------------------------------------------------------------------------

To avoid reader confusion, we are reiterating that the DACA
finalized policies listed above will continue to apply for the FY 2014
payment determination and subsequent years unless and until we change
such policies through our rulemaking process. Thus, we will continue
with our adopted policy that the deadline for submission of both
measure data and the DACA form is no later than August 15 prior to the
applicable IPFQR Program payment determination year.
We have summarized the pertinent IPFQR Program dates in the table
below with regard to data reporting periods, submission deadlines, DACA
deadlines, and public display periods.

Data Accuracy and Completeness Acknowledgment (DACA) Deadlines for the FY 2014 Payment Determination and Subsequent Years
--------------------------------------------------------------------------------------------------------------------------------------------------------
Reporting period for
Payment determination services provided (calendar Submission timeframe DACA Deadline Public display
(fiscal year) year)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2014........................ Q4 2012 (October 1, 2012- July 1, 2013-August 15, August 15, 2013.................. April 2014.
December 31, 2012). 2013.
Q1 2013 (January 1, 2013-
March 31, 2013).
2015........................ Q2 2013 (April 1, 2013-June July 1, 2014-August 15, August 15, 2014.................. April 2015.
30, 2013). 2014.
Q3 2013 (July 1, 2013-
September 30, 2013).
Q4 2013 (October 1, 2013-
December 31, 2013).
2016........................ Q1 2014 (January 1, 2014- July 1, 2015-August 15, August 15, 2015.................. April 2016.
March 31, 2014). 2015.
Q2 2014 (April 1, 2014-June
30, 2014).
Q3 2014 (July 1, 2014-
September 30, 2014).
Q4 2014 (October 1, 2014-
December 31, 2014).
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 50903]]

Again, we have listed information until the FY 2016 payment
determination, but these deadlines apply to the FY 2014 payment
determination and subsequent years.
We did not receive any public comments on this issue.
10. Reconsideration and Appeals Procedures for the FY 2014 Payment
Determination and Subsequent Years
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53658 through
53659), we adopted a reconsideration process whereby IPFs can request a
reconsideration of their payment update reduction in the event an IPF
believes that its annual payment update has been incorrectly reduced
for failure to report quality data under the IPFQR Program. We codified
the reconsideration procedures that IPFs must follow at 42 CFR 412.434.
We instituted an annual reconsideration process similar to the Hospital
IQR Program (74 FR 43892). We do not utilize reconsideration policies
and procedures related to the Hospital IQR Program validation
requirement because the IPFQR Program does not currently include an
annual validation requirement for IPFs.
We did not receive any public comments on this process.
11. Waivers From Quality Reporting Requirements for the FY 2014 Payment
Determination and Subsequent Years
In our experience with other quality reporting and/or performance
programs, we have noted occasions when participants have been unable to
submit required quality data due to extraordinary circumstances that
are not within their control (for example, natural disasters). It is
our goal to avoid penalizing IPFs in such circumstances or to unduly
increase their burden during these times. Therefore, in the FY 2013
IPPS/LTCH PPS final rule (77 FR 53659 through 53660), we adopted a
policy that, for the FY 2014 payment determination and subsequent
years, IPFs may request and we may grant waivers with respect to the
reporting of required quality data when extraordinary circumstances
beyond the control of the IPF may warrant. When waivers are granted,
IPFs will not incur payment reductions for failure to comply with the
requirements of the IPFQR Program.
Under the process, in the event of extraordinary circumstances not
within the control of the IPF, such as a natural disaster, the IPF may
request a reporting extension or a complete waiver of the requirement
to submit quality data for one or more quarters. Such IPFs would submit
a request form to CMS available on the QualityNet Web site at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier3&cid=1228772379030.
This process does not preclude us from granting waivers or
extensions to IPFs that have not requested them when we determine that
an extraordinary circumstance, such as an act of nature (for example, a
hurricane or other natural disaster that could reasonably affect an
IPF's ability to compile or report data), affects an entire region or
locale. If we make the determination to grant a waiver or extension to
IPFs in a region or locale, we will communicate this decision through
routine communication channels to IPFs and vendors, by means of
memoranda, emails, and notices on the QualityNet Web site, among other
means.
We did not receive any public comments on this issue.
12. Electronic Health Records (EHRs)
Under the current and proposed chart-abstracted quality measures,
IPFs cannot use EHRs (also referred to as electronic medical records)
for data collection because the current and proposed measures will be
submitted as aggregate data. However, we encourage IPFs to take steps
towards adoption of EHRs that will allow for reporting of clinical
quality data from EHRs directly to a CMS repository. We encourage IPFs
that are implementing, upgrading, or developing EHR systems to ensure
that the technology obtained, upgraded, or developed conforms to
standards adopted by HHS. Although the IPFQR Program is in its initial
implementation stages, we recommend that IPFs ensure that their EHR
systems accurately capture quality data and that, ideally, such systems
provide point-of-care decision support that promotes optimal levels of
clinical performance.
In the future, we will continue to work with standard-setting
organizations and other entities to explore processes through which
EHRs could speed the collection of data and minimize the resources
necessary for quality reporting.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53660), we responded
to public comments on the adoption of EHRs for the IPFQR Program in the
future and in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27744), we
again invited public comment on this issue.
We did not receive any public comments on this issue.

E. Electronic Health Record (EHR) Incentive Program and Meaningful Use
(MU)

1. Background
The HITECH Act (Title IV of Division B of the ARRA, together with
Title XIII of Division A of the ARRA) authorizes incentive payments
under Medicare and Medicaid for the adoption and meaningful use of
certified EHR technology (CEHRT). Eligible hospitals and critical
access hospitals (CAHs) may qualify for these incentive payments under
Medicare (as authorized under sections 1886(n) and 1814(l) of the Act,
respectively) if they successfully demonstrate meaningful use of CEHRT,
which includes reporting on clinical quality measures (CQMs) using
CEHRT.
The set of CQMs from which eligible hospitals and CAHs will report
under the EHR Incentive Program beginning in FY 2014 is listed in Table
10 of the EHR Incentive Program Stage 2 final rule (77 FR 54083 through
54087). The subset of CQMs that we proposed for voluntary electronic
reporting in the Hospital IQR Program in section IX.A.7. of the
preamble to the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27694
through 27695) is included in Table 10 of the EHR Incentive Program
Stage 2 final rule.
We continue to believe there are important synergies with respect
to the two programs. We believe the financial incentives under the EHR
Incentive Program for the adoption and meaningful use of CEHRT by
eligible hospitals and CAHs will encourage the adoption and use of
CEHRT for the anticipated electronic reporting of CQMs under the
Hospital IQR Program. We expect that the electronic submission of
quality data from EHRs under the EHR Incentive Program will provide a
foundation for establishing the capacity of hospitals to send, and for
CMS to receive, CQMs via CEHRT for certain Hospital IQR Program
measures.
2. Expanded Electronic Submission Period for CQMs
Section 1886(n)(3)(B)(iii) of the Act requires that, in selecting
CQMs for and establishing the form and manner of reporting for the EHR
Incentive Program, the Secretary shall seek to avoid redundant or
duplicative reporting with reporting otherwise required. To the extent
that CQMs are included in both the Hospital IQR Program and the EHR
Incentive Program, we expect that the Hospital IQR Program would
transition to using CEHRT rather than manual chart abstraction. The
beginning of this transition is described in section IX.A.7.

[[Page 50904]]

of the preamble to this final rule with the voluntary electronic
reporting in CY 2014 of up to 16 electronic clinical quality measures
in the Hospital IQR Program, which are also included in the set of CQMs
from which hospitals will report for the EHR Incentive Program
beginning in FY 2014 (77 FR 54083 through 54087). By allowing voluntary
electronic reporting in CY 2014 of the electronic clinical quality
measures being finalized under the Hospital IQR Program, hospitals, if
they choose to submit all 16 electronic clinical quality measures in
the Hospital IQR Program, would be able to submit once and fulfill the
CQM component of MU as well as the reporting requirement for those
measures in the Hospital IQR Program.
In the EHR Incentive Program Stage 2 final rule (77 FR 54049
through 54051), for CQM data that is submitted electronically beginning
in 2014, we established the submission period as the 2 months
immediately following the end of the fiscal year (October 1 through
November 30 for eligible hospitals and CAHs). In response to feedback
we have received through various forums, we proposed in the FY 2014
IPPS/LTCH PPS proposed rule (78 FR 27745) to open the submission period
for electronically submitted files on January 2. This will allow for
better alignment with the Hospital IQR Program. The proposed expanded
submission period would allow more flexibility for eligible hospitals
and CAHs to start submitting earlier and more frequently, as patients
who fit the denominator criteria of the CQMs that the hospitals will
submit are discharged. As established in the EHR Incentive Program
Stage 2 final rule, the submission period would end on November 30, and
eligible hospitals that are demonstrating MU for the first time in the
year immediately preceding any payment adjustment year must submit by
July 1. This proposal would not change the reporting periods for CQMs
established in the EHR Incentive Program Stage 2 final rule (77 FR
54051).
Comment: Several commenters supported the expansion of the
submission period for hospitals beginning in 2014. Specifically, the
commenters believed that allowing hospitals to start submitting files
earlier and more frequently could help prevent a bottleneck of uploads
during the two months following the federal FY.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, and for the
reasons set forth above, we are finalizing the policy as proposed.
Beginning in FY 2014, the submission period for CQM data submitted
electronically for the Medicare EHR Incentive Program will begin on
January 2 and will end on November 30. As an example, the submission
period for the reporting periods that occur in FY 2014 will begin on
January 2, 2014 and end on November 30, 2014. As established in the
Stage 2 final rule, eligible hospitals that are demonstrating MU for
the first time in the year immediately preceding any payment adjustment
year must submit no later than July 1.
In the Stage 2 final rule, we established the reporting periods for
CQMs in FY 2014 for hospitals that have previously demonstrated
meaningful use (77 FR 54050 through 54051). We stated that a hospital
may choose to report CQM data for the full FY 2014, or alternatively,
it may choose to report CQM data for the three-month FY quarter that is
its EHR reporting period for the meaningful use objectives and
measures. With this change to expand the submission period, we also
consider it likely that some hospitals may prefer to report CQM data
for a certain quarter and report the meaningful use objectives and
measures for a different quarter. Furthermore, because there are
different methods of submitting CQM data and meaningful use objectives
and measures, it is also possible that a technical problem could arise
for a submission of CQM data that would not affect a hospital's
submission of meaningful use objectives and measures, or vice versa. To
provide additional flexibility for hospitals in light of the expanded
submission period, we will accept reporting periods of different
quarters for CQMs and for meaningful use objectives and measures, as
long as the quarters are within FY 2014.
We also proposed, beginning in FY 2014, to allow eligible hospitals
and CAHs that are demonstrating meaningful use for the first time to
report CQMs by attestation or through the electronic reporting methods
that we establish for the EHR Incentive Program. We noted that in the
EHR Incentive Program Stage 2 final rule (77 FR 54049 through 54051),
we finalized a policy that first-time meaningful EHR users would be
required to report CQMs through attestation. This proposal would change
that policy to allow more flexibility for eligible hospitals and CAHs
to choose between reporting by attestation or electronically in their
first year of MU. For further explanation of reporting CQMs by
attestation or electronically under the EHR Incentive Program, we
referred readers to the discussion of reporting methods in the EHR
Incentive Program Stage 2 final rule (77 FR 54087 through 54089).
Regardless of the reporting method selected, however, the July 1
deadline for avoiding the Medicare payment adjustments will remain the
same, as established in the EHR Incentive Program Stage 2 final rule
(77 FR 54049 through 54051). We emphasized that to avoid a payment
adjustment under Medicare, eligible hospitals demonstrating MU for the
first time in the year immediately preceding any payment adjustment
year must complete their submission of CQM data by July 1.
We noted that although reporting CQM data by attestation would
still be an option for first-time meaningful users under the EHR
Incentive Program, it would not fulfill any Hospital IQR Program
requirements. We welcomed public comment on this proposal.
We did not receive any public comments on this proposed policy and
are finalizing the policy as proposed for the reasons explained above.
Beginning in FY 2014, eligible hospitals and CAHs that are
demonstrating meaningful use for the first time may report CQMs by
attestation or through the electronic reporting methods that we
establish for the EHR Incentive Program. Regardless of the option
selected, eligible hospitals that are demonstrating MU for the first
time in the year immediately preceding any payment adjustment year must
successfully meet all of the requirements to be a meaningful EHR user
by July 1 to avoid the payment adjustment. We also clarify that if a
hospital is demonstrating meaningful use for the first time in FY 2014
and chooses to report CQMs electronically, it must report for a three-
month quarter in FY 2014 rather than any continuous 90-day period in FY
2014. Hospitals that would prefer to report CQMs for any continuous 90-
day period may do so by attestation.
As explained in section IX.A.9.d. of the preamble to this final
rule, our general intention is to align electronic reporting of quality
data under the Medicare EHR Incentive Program and the Hospital IQR
Program. While the Hospital IQR Program is allowing for voluntary
electronic reporting of quality measures in 2014, to meet the
requirement, a hospital that is voluntarily electronically reporting
its quality measure data must do so for a three-month quarter within
2014 that also meets the reporting deadlines in the Medicare EHR
Incentive program.
3. Quality Reporting Data Architecture Category III (QRDA-III) Option
in 2014
In the EHR Incentive Program Stage 2 final rule (77 FR 54088), we
finalized two options for eligible hospitals and

[[Page 50905]]

CAHs to electronically submit CQMs beginning in FY 2014 under the
Medicare EHR Incentive Program. Option 1 was to electronically submit
aggregate-level CQM data using QRDA-III. Option 2 was to electronically
submit using a method similar to the Hospital IQR Program electronic
reporting pilot, which used QRDA-I (patient-level data). We also stated
in that final rule that, consistent with section 1886(n)(3)(B)(ii) of
the Act, in the event the Secretary does not have the capacity to
receive CQM data electronically, eligible hospitals and CAHs that are
beyond their first year of meaningful use may continue to report
aggregate CQM results through attestation.
We noted in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27745)
that we have determined that the electronic submission of aggregate-
level data using QRDA-III will not be feasible in 2014 for eligible
hospitals and CAHs under the Medicare EHR Incentive Program. Thus, for
the 2014 reporting period under the Medicare EHR Incentive Program,
eligible hospitals and CAHs would have the option to continue to report
aggregate CQM results through attestation. We stated that we will
reassess this policy for the 2015 and future reporting periods. We
noted that submissions of aggregate CQM data via attestation would not
satisfy the reporting requirements for the Hospital IQR Program. We
also noted that this policy does not apply to the Medicaid EHR
Incentive Program. Therefore, the States may still require the
submission of QRDA-III files to fulfill the CQM reporting requirements
for hospitals that participate in the Medicaid EHR Incentive Program.
As described in section IX.A.9.d. of the preamble of this final
rule, the Hospital IQR Program intends to continue its policy to accept
patient-level data as it transitions to electronic reporting. In order
to remain aligned with the Hospital IQR Program, and because over 82
percent of hospitals that participate in the Hospital IQR Program are
already meaningful users, we strongly recommend that hospitals that are
eligible to participate in both programs electronically submit up to 16
electronic clinical quality measures identified by the Hospital IQR
Program in section IX.A.7. of the preamble of this final rule. We
believe that keeping the two programs aligned will ultimately reduce
reporting burden for hospitals. We believe that the extension of the
submission period as finalized above will also help the electronic
submission process for hospitals. We welcomed public comment on this
proposal.
Comment: A few commenters stated that CMS should accept QRDA-III
files from hospitals, including one commenter who noted that many EHR
vendors are only prepared to support QRDA-III submission. Some of those
commenters referenced examples of CMS eligible professional (EP)
quality reporting programs that plan on accepting QRDA-III files
beginning in the 2014 program year. Several commenters requested that
CMS clarify why it does not have the capacity to accept QRDA-III files
from hospitals.
Response: All CEHRT that is certified to the 2014 Edition
certification criteria adopted by ONC should have the capability to
electronically submit either QRDA-I or QRDA-III formats. EHR products
that are certified to the certification criterion under 45 C.F.R. Sec.
170.314(c)(3) for electronic submission must be tested for and pass
both QRDA-I and QRDA-III formats in order to be certified for this
criterion. Therefore, any eligible hospital or CAH that has implemented
CEHRT should have the capability to submit both QRDA-I and QRDA-III
files.
The CQMs and their respective electronic specifications are
different for hospitals and EPs. Therefore, we cannot use the same
infrastructure to accept and process quality data submitted by
hospitals and EPs. Since the Hospital IQR Program has historically
accepted and will continue to accept patient-level data, we will use
the electronic reporting pilots from 2012 and 2013, which included
electronic reporting via QRDA-I, as the basis for aligned reporting in
2014 for the Medicare EHR Incentive Program and the Hospital IQR
Program. As we stated in the proposed rule, we will allow eligible
hospitals and CAHs to submit aggregate CQM data for the EHR Incentive
Program via attestation. However, CQM results submitted by attestation
would not count towards submission for the Hospital IQR Program.
Comment: One commenter requested clarification on whether hospitals
would be required to submit both aggregate CQM results via attestation
and patient-level data electronically via QRDA-I or if the hospital
would be able to select one of these methods.
Response: If the hospital would like to electronically report all
16 CQMs identified by the Hospital IQR Program and would like for its
submission to also count for its CQM component of MU, the hospital
could electronically submit those 16 CQMs via QRDA-I for both programs.
For Hospital IQR Program purposes, if the hospital would like to report
on a different set of 16 CQMs from the list of 29 CQMs finalized for
eligible hospitals and CAHs in Table 10 of the EHR Incentive Program
Stage 2 final rule (77 FR 54083 through 54087) than those identified by
the Hospital IQR Program for voluntary electronic reporting, the
hospital could electronically report 16 CQMs via QRDA-I for the
Medicare EHR Incentive Program, but would need to submit the remainder
of those measures via chart-abstraction to fulfill the Hospital IQR
Program requirements. If the hospital would like to submit aggregate
CQM data for the Medicare EHR Incentive Program by attestation, then
the CQMs that will be reported to the Hospital IQR Program would need
to be submitted separately.
After consideration of the public comments we received, and for the
reasons set forth above, we are finalizing the policy as proposed. For
the Medicare EHR Incentive Program, eligible hospitals and CAHs may
report their CQMs electronically using QRDA-I (patient-level data) or
via attestation (aggregate-level data). We note again that reporting
via attestation would not count towards the reporting requirements for
the Hospital IQR Program.
4. Case Number Threshold Exemption--Requirements Regarding Data
Submission
In the EHR Incentive Program Stage 2 final rule (77 FR 54080), we
established a case number threshold exemption policy for eligible
hospitals and CAHs that experience a low volume of cases addressed by
certain CQMs, and stated that hospitals seeking an exemption under the
policy must submit aggregate population and sample size data in the
same manner as required in the Hospital IQR Program. Our intent was to
reduce the burden on hospitals that participate in both programs so
they would only need to submit this information once. However, we have
determined that this information could be captured in QualityNet for
both the EHR Incentive Program and the Hospital IQR Program during the
process of electronically submitting CQMs. In the FY 2014 IPPS/LTCH PPS
proposed rule (78 FR 27746), we proposed to require that the aggregate
population data be entered into QualityNet (for EHR-based reporting)
during the process of electronically submitting CQMs. We noted that
sample size data are not required for electronically submitted CQMs.
We noted that, in general, the submission deadline for the
aggregate population data is the same as the submission deadline for
CQMs (November 30). For eligible hospitals in

[[Page 50906]]

their first year of demonstrating MU, the aggregate population data
would need to be submitted no later than July 1 for hospitals that seek
to invoke the case number threshold exemption, as this data would be
needed to determine whether the eligible hospital met the CQM reporting
requirements for MU.
We did not receive any public comments on this proposed policy, and
for the reasons set forth above, we are finalizing the policy as
proposed. Beginning in FY 2014 for the Medicare EHR Incentive Program,
the aggregate population data will be entered into QualityNet (for EHR-
based reporting) during the process of electronically submitting CQMs.

X. Change to the Medicare Hospital Conditions of Participation (CoPs)
Relating to the Administration of Pneumococcal Vaccines

Among the regulations at 42 CFR Part 482 governing the Conditions
of Participation (CoPs) for hospitals to participate in the Medicare
program, we have established a condition for Nursing Services under
Sec. 482.23. Included in the standards for the nursing services
condition is a standard for the preparation and administration of
drugs. Section 482.23(c)(3) contains the following provision: ``With
the exception of influenza and pneumococcal polysaccharide [emphasis
added] vaccines, which may be administered per physician-approved
hospital policy after an assessment of contraindications, orders for
drugs and biologicals must be documented and signed by a practitioner
who is authorized to write orders in accordance with State law and
hospital policy, and who is responsible for the care of the patient as
specified under Sec. 482.12(c).'' At the time that this CoP standard
was originally promulgated (October 2, 2002), and for several years
thereafter, the pneumococcal polysaccharide vaccine (PPSV or Pneumovax
23[supreg], Merck) was the only pneumococcal vaccine approved for adult
use. In developing the original standard, it was not the Agency's
intention to specify a particular type or brand of pneumococcal
vaccine. Instead, the Agency wanted to allow hospitals the flexibility
to have a policy where nurses could administer influenza and
pneumococcal vaccines without a prior practitioner order and only after
assessing patients for any contraindications to the vaccines being
administered.
However, we recently became aware of another pneumococcal vaccine
(pneumococcal conjugate vaccine (PCV) or Prevnar 13[supreg], Pfizer),
which received FDA approval for adult use in December 2011. We believe
that the availability of another FDA-approved pneumococcal vaccine may
have the potential for causing confusion in the hospital community at
large by our use of the term ``polysaccharide'' as a distinguisher for
the pneumococcal vaccine in the hospital CoP standard. Indeed, it has
come to our attention that some hospitals may be using only the
polysaccharide type of pneumococcal vaccine because they believe they
are not permitted under the CoPs to stock and use any other type of
pneumococcal vaccine. However, the Advisory Committee on Immunization
Practices (ACIP) recommends that certain groups receive PPSV23, and
others are recommended to receive both PPSV23 and PCV13. As we
discussed in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27746), we
believe the proposed change would allow for the inclusion of all
pneumococcal vaccines approved for use now and in the future. With two
types of pneumococcal vaccines currently approved for use with adults
and recommended by the ACIP for certain populations based on age,
medical condition, smoking, and other considerations, we also believe
that patient access to the pneumococcal vaccine would potentially
improve because hospitals would now possess the freedom and flexibility
to stock and use both vaccines as recommended by the ACIP.
Therefore, in the FY 2014 IPPS/LTCH PPS proposed rule, we proposed
to amend the regulatory language at Sec. 482.23(c)(3) to delete the
term ``polysaccharide''. We stated that this proposed deletion would
allow a hospital to include any type of pneumococcal vaccine as part of
its physician-approved policy for administration by nurses without a
prior practitioner order, provided the vaccine has been approved by the
FDA and recommended for use by the ACIP. In addition, we stated that
this proposed change would give hospitals the added flexibility to
include the administration of any pneumococcal vaccines that are
approved in the future by the FDA for administration under this CoP
standard.
Comment: Commenters supported CMS' rationale for the proposed
changes. The commenters agreed that the proposed changes would provide
hospitals with the flexibility to include the administration of any
pneumococcal vaccines that are currently approved and those that may be
approved in the future by the FDA for administration. One commenter
recommended that the proposed changes be made effective immediately
upon publication of the final rule.
Response: We appreciate the commenters' support. We share the
common goal of improving patient access to pneumococcal vaccines and
eliminating confusion in the hospital community about the type of
pneumococcal vaccines that hospitals may stock and use. With regard to
the recommendation for the effective date, we do not believe that an
effective date of October 1, 2013, which is the general effective date
for this IPPS final rule, will delay beneficiaries from receiving
necessary vaccines. Further, we believe that the delay will allow
hospitals time to evaluate their policies, if necessary, and obtain a
supply of pneumococcal conjugate vaccine. We also note that either type
of pneumococcal vaccine can be administered with a physician's order.
Therefore, for the reasons set forth above, we are finalizing,
without change, our proposal to remove the term ``polysaccharide'' from
the regulatory language at Sec. 482.23(c)(3).

XI. Payment Policies Related to Patient Status

A. Background

In the CY 2013 Outpatient Prospective Payment System (OPPS)/
Ambulatory Surgical Center (ASC) proposed rule (77 FR 45155 through
45157) and final rule with comment period (77 FR 68426 through 68433),
we expressed concern about recent increases in the length of time that
Medicare beneficiaries spend as hospital outpatients receiving
observation services. We also solicited and summarized public comments
on potential policy changes we could make to improve clarity and
consensus among providers, Medicare, and other stakeholders regarding
the relationship between admissions decisions and appropriate Medicare
payment, such as when a Medicare beneficiary is appropriately admitted
to a hospital as an inpatient. (In this section, the term ``hospital''
includes critical access hospitals (CAHs) unless otherwise specified.
Although the term ``hospital'' does not generally include CAHs, section
1861(e) of the Act provides that the term ``hospital''' includes CAHs
if the context otherwise requires. We believe it is appropriate to
apply the final policies in this section of this final rule to CAHs as
well as all other hospitals. In addition, in this section, the term
``inpatient'' means an inpatient of a hospital unless otherwise
specified.)
Observation care is a well-defined set of specific, clinically
appropriate

[[Page 50907]]

services, which include ongoing short-term treatment, assessment, and
reassessment before a decision can be made regarding whether patients
will require further treatment as hospital inpatients or if they are
able to be discharged from the hospital (Section 20.6, Chapter 6 of the
Medicare Benefit Policy Manual (MBPM) (Pub. 100-02)). In recent years,
the number of cases of Medicare beneficiaries receiving observation
services for more than 48 hours, while still small, has increased from
approximately 3 percent in 2006 to approximately 8 percent in 2011.
This trend concerns us because of the potential financial impact on
Medicare beneficiaries, and we have published educational materials for
beneficiaries to inform them of their respective liabilities as a
hospital outpatient or inpatient.\194\ Beneficiaries who are treated
for extended periods of time as hospital outpatients receiving
observation services may incur greater financial liability than they
would if they were admitted as hospital inpatients. They may incur
financial liability for Medicare Part B copayments, the cost of self-
administered drugs that are not covered under Part B, and the cost of
post-hospital SNF care because section 1861(i) of the Act requires a
prior 3-day hospital inpatient stay for coverage of post-hospital SNF
care under Medicare Part A. In contrast, as a hospital inpatient under
Medicare Part A, a beneficiary pays a one-time deductible for all
inpatient services provided during the first 60 days in the hospital of
the benefit period for the year. Therefore, an inpatient deductible
does not necessarily apply to all hospitalizations in the year.
Medicare Part A coinsurance applies after the 60th day in the hospital.
---------------------------------------------------------------------------

\194\ CMS Pamphlets: ``Are You a Hospital Inpatient or
Outpatient? If You Have Medicare Ask'', CMS Product No. 11435,
Revised, February 2011; ``How Medicare Covers Self-Administered
Drugs Given in Hospital Outpatient Settings,'' CMS Product No.
11333, Revised, February 2011.
---------------------------------------------------------------------------

In the CY 2013 OPPS/ASC proposed rule and final rule with comment
period (77 FR 45155 and 77 FR 68426, respectively) and in a proposed
rule entitled, ``Medicare Program; Part B Inpatient Billing in
Hospitals'' that went on display at the Office of the Federal Register
on March 13, 2013 and was issued in the Federal Register on March 18,
2013 (78 FR 16632) (referred to in this final rule as the ``Part B
Inpatient Billing proposed rule''), we discussed how the trend towards
the provision of extended observation services may be attributable in
part to hospitals' concerns about their ability to receive payment from
Medicare under Part B when a Part A hospital inpatient claim is denied
because a Medicare review contractor determines that the inpatient
admission was not reasonable and necessary under section 1862(a)(1)(A)
of the Act. Under longstanding Medicare policy, in these situations,
hospitals could only receive payment for a limited set of largely
ancillary inpatient services under Part B. We stated that we have heard
from various stakeholders that hospitals appear to be responding to the
financial risk of admitting Medicare beneficiaries for inpatient stays
that may later be denied upon contractor review by electing to treat
beneficiaries as outpatients receiving observation services, often for
long periods of time, rather than admitting them as inpatients. In
response to the CY 2013 OPPS/ASC proposed rule and final rule with
comment period, the hospital community expressed a belief that
Medicare's standards for hospital inpatient admission are not clear,
and that, as a result, Medicare's medical review criteria for Part A
hospital inpatient claims are inappropriately applied.
To address these issues, we recently proposed several
clarifications and changes in Medicare's policies regarding payment of
hospital inpatient services under Part B, Medicare's definition of a
hospital ``inpatient,'' inpatient admission guidelines, and Medicare's
medical review criteria for inpatient stays. First, in the Part B
Inpatient Billing proposed rule (78 FR 16632), we proposed to revise
our Part B inpatient payment policy to allow payment under Part B for
all hospital services that were furnished and would have been
reasonable and necessary if the beneficiary had been treated as a
hospital outpatient, rather than admitted to the hospital as an
inpatient. We proposed that this policy would apply when a Medicare
Part A hospital inpatient claim is denied or when a hospital
determines, through utilization review after a beneficiary has been
discharged, that the inpatient admission was not reasonable and
necessary and that the beneficiary should have received hospital
outpatient services rather than hospital inpatient services. We
proposed to continue applying the timely filing restriction to the
billing of all Part B inpatient services, under which claims for Part B
services must be filed within 1 year from the date of service. In
addition, we addressed several issues related to administrative appeals
and beneficiary liability.
In addition to evaluating our policy related to Medicare Part B
inpatient payment following denials of Part A hospital inpatient claims
on the basis that the inpatient admission was not reasonable and
necessary or following a hospital self-audit, we also considered
whether we could provide more clarity regarding the relationship
between hospital inpatient admission decisions and Medicare payment. In
the CY 2013 OPPS/ASC final rule with comment period (77 FR 68426
through 68433), we discussed revising hospital inpatient status
criteria as one of several policy clarifications or changes suggested
by stakeholders to improve our policies governing when a Medicare
beneficiary should be admitted as an inpatient, and how hospitals
should be paid by Medicare for the associated costs they incur.
Specifically, stakeholders suggested that we redefine ``inpatient''
using parameters other than the current requirements of medical
necessity and a physician order, such as using the beneficiary's length
of stay at the hospital.
Currently, a beneficiary's length of stay may be a factor in
determining whether he or she should be admitted as an inpatient to the
hospital, but it is not the only factor for this determination. Our
current manual instructions state that, typically, the decision to
admit a beneficiary as an inpatient should be made within 24 to 48
hours of observation care, and that expectation of an overnight stay
may be a factor in the admission decision (Section 20.6, Chapter 6 and
Section 10, Chapter 1 of the MBPM). We state that physicians should use
a 24-hour or overnight period as a benchmark, that is, they should
order admission for patients who are expected to need hospital care for
24 hours or overnight, or more, and treat other patients on an
outpatient basis. We state that, generally, a beneficiary is considered
an inpatient if formally admitted as an inpatient with the expectation
that he or she will remain at least overnight, whether or not the
beneficiary is later discharged or transferred and is not present
overnight. We instruct that in only rare and exceptional cases do
reasonable and necessary outpatient observation services in the
hospital span more than 48 hours.
Nevertheless, our longstanding policy consistently has been that we
do not define or pay under Medicare Part A for inpatient admissions
solely on the basis of the length of time the beneficiary actually
spends in the hospital. Rather, we rely on the physician to use his or
her clinical judgment and evaluation of the patient's needs to make the
determination. We have stated in our manual guidance that the inpatient
admission decision is a complex

[[Page 50908]]

medical judgment that should take into consideration many factors, such
as the patient's medical history and medical needs, the types of
facilities available to inpatients and outpatients, the hospital's
bylaws and admission policies, the relative appropriateness of
treatment in the inpatient and outpatient settings, patient risk of an
adverse event, and other factors described in the MBPM provisions. The
physician or other practitioner responsible for a patient's care at the
hospital also is responsible for deciding whether the patient should be
admitted as an inpatient.
We believe that our existing inpatient admission criteria are valid
and appropriately reflect that the decision to admit a patient as a
hospital inpatient is a complex medical judgment that can be made only
after the physician has considered a number of factors. However, upon
evaluating the suggestions of stakeholders who requested that we
provide more clarity in the definition of ``inpatient'' using
parameters other than those that we currently use, we recognized that
it would be helpful to address what the requirements are for Medicare
Part A payment and when a beneficiary should be admitted as a hospital
inpatient. Toward that end, in the FY 2014 IPPS/LTCH PPS proposed rule
(78 FR 27644 through 27650), we clarified that a beneficiary becomes a
hospital inpatient if formally admitted pursuant to the order of a
physician (or other qualified practitioner as provided in the proposed
regulations) in accordance with the hospital conditions of
participation (CoPs), and that, as a condition of Medicare payment
under Part A for such an admission, the order must be documented in the
medical record. However, the order must be supported by objective
medical information for purposes of the Part A payment determinations.
During Medicare contractor review of an inpatient admission,
documentation in the medical record is evaluated in conjunction with
the physician order and the physician certification that is also
required for payment of hospital inpatient services under section
1814(a) of the Act and 42 CFR 424.13.
In the FY 2014 IPPS/LTCH PPS proposed rule, we also proposed a new
benchmark for purposes of medical review of hospital inpatient
admissions, based on how long the beneficiary is expected to remain in
the hospital. Under our proposal, beneficiaries who are expected to
remain in the hospital to receive medically necessary care surpassing
2-midnights after the initiation of care are generally appropriate for
inpatient admission and inpatient hospital payment. As such, Medicare's
review contractors would consider all time after the initiation of care
at the hospital in applying the benchmark that hospital inpatient
admissions are generally reasonable and necessary for beneficiaries who
are expected to require more than 1 Medicare utilization day (defined
by encounters crossing 2 ``midnights'') in the hospital receiving
medically necessary services. Reviewers would also adopt a presumption
that a medically necessary stay surpassing 2 midnights after being
admitted as an inpatient was appropriately provided as an inpatient
service. If a hospital is found to be abusing this 2-midnight
presumption for nonmedically necessary inpatient hospital admissions
and payment (in other words, the hospital is systematically prolonging
the provision of care to surpass the 2-midnight timeframe), CMS review
contractors would disregard the 2-midnight presumption when conducting
review of that hospital. Similarly, we proposed that review contractors
would generally determine that hospital services spanning less than 2
midnights should have been provided on an outpatient basis, unless
there is clear documentation in the medical record supporting the
physician's order and expectation that the beneficiary would require
care spanning more than 2 midnights or the beneficiary is receiving a
service or procedure designated by CMS as inpatient-only under 42 CFR
419.22(n).
We received approximately 392 timely pieces of correspondence
containing public comments on the Part B Inpatient Billing proposed
rule, and approximately 192 timely pieces of correspondence containing
public comments on the proposals in the FY 2014 IPPS/LTCH PPS proposed
rule on hospital inpatient admission guidelines and medical review. We
received public comments from hospital and physician associations,
individual hospitals and physicians, other health care professionals,
case management associations, rehabilitative and long-term care
facilities, beneficiaries, consumer and beneficiary advocacy
organizations, attorneys, Recovery Audit Contractors (RACs) and other
interested parties. The policies addressed in these two proposed rules
are interrelated and were designed to work together to reduce the
frequency of extended observation care when it may be inappropriately
furnished and provide payment to hospitals for the reasonable and
necessary services they provide to inpatients. Accordingly, in this
final rule we discuss the public comments we received in response to
each of the proposed rules, and we provide our final policies for each
rule after consideration of the public comments received. First, we
address Part B hospital inpatient billing, followed by a discussion of
Medicare's hospital inpatient admission guidelines and medical review
criteria.

B. Payment of Part B Hospital Inpatient Services

1. Payable Part B Inpatient Services
In our proposed rule on Part B inpatient billing in hospitals (CMS-
1455-P, 78 FR 16635), we discussed that in an increasing number of
cases, hospitals that have appealed Part A inpatient claims that were
denied because the inpatient admission was not reasonable and necessary
have received partially favorable decisions from the Medicare Appeals
Council or Administrative Law Judges (ALJs). While upholding the
Medicare review contractor's determination that the inpatient admission
was not reasonable and necessary, the Medicare Appeals Council and ALJ
decisions have ordered payment of the services as if they were rendered
at an outpatient or ``observation level'' of care. These decisions
effectively require Medicare to issue payment for all Part B services
that would have been payable had the beneficiary originally been
treated as an outpatient (rather than an inpatient), instead of payment
for only the limited set of Part B inpatient services that are
designated in the MBPM, Chapter 6, Section 10. Moreover, these
decisions have required such payment regardless of whether the
subsequent hospital claim for payment under Part B is submitted within
the otherwise applicable time limit for filing Part B claims. These
Medicare Appeals Council and ALJ decisions providing for payment of all
reasonable and necessary Part B services under the circumstances
described previously are contrary to our longstanding policies that
permit billing for only a limited list of Part B inpatient services and
require that the services be billed within the usual timely filing
restrictions (we refer readers to Section 10, Chapter 6 of the MBPM; 63
FR 47560; 65 FR 18444; 66 FR 44698 through 44699; 66 FR 59891 through
59893, and 59915; and 75 FR 73449, 73627). While decisions issued by
the Medicare Appeals Council and ALJs do not establish Medicare payment
policy, we are bound to effectuate each individual decision. The
increasing number of these types of decisions has

[[Page 50909]]

created numerous operational difficulties.
After reviewing the public comments we received in response to the
CY 2013 OPPS/ASC proposed rule, considering the most efficient way to
effectuate the Medicare Appeals Council and ALJ decisions referenced
earlier in this section, and further assessing our Part B inpatient
payment policy, we concurrently issued the proposed rule CMS-1455-P and
CMS Ruling 1455-R (78 FR 16614, hereinafter referred to as the Ruling).
The Ruling established a standard process for effectuating these
Medicare Appeals Council and ALJ decisions and handling claims and
appeals while CMS considers how to best address this issue going
forward. The Ruling also addressed the scope of administrative review
in these and other, similar cases. Until the proposed rule could be
finalized, CMS, through the Ruling, acquiesced in the approach taken in
the aforementioned Medicare Appeals Council and ALJ decisions on the
issue of subsequent Part B billing following the denial of a Part A
hospital inpatient claim on the basis that the inpatient admission was
not reasonable and necessary. The Ruling was intended as an interim
measure until we finalize the policies in this final rule to address
the issues raised by these decisions going forward.
Specifically, the Ruling provides that when a Part A claim for a
hospital inpatient admission is denied by a Medicare review contractor
because the inpatient admission was determined not reasonable and
necessary, the hospital may submit a subsequent Part B inpatient claim
for more services than just those listed in Section 10, Chapter 6 of
the MBPM, to the extent the services furnished were reasonable and
necessary. The hospital may submit a Part B inpatient claim for payment
for the Part B services that would have been payable to the hospital
had the beneficiary originally been treated as an outpatient rather
than admitted as an inpatient, except when those services specifically
require an outpatient status. The Ruling only applies to denials of
claims for inpatient admissions that were not reasonable and necessary;
it does not apply to any other circumstances in which there is no
payment under Part A, such as when a beneficiary exhausts Part A
benefits for hospital services or is not entitled to Part A. Under the
Ruling, Part B inpatient and Part B outpatient claims that are filed
later than 1-calendar year after the date of service will not be
rejected as untimely by Medicare's claims processing system as long as
the corresponding denied Part A inpatient claim was filed timely in
accordance with 42 CFR 424.44, consistent with the directives of the
Medicare Appeals Council and ALJ decisions to which we are acquiescing.
The Ruling also provided that the Part A to Part B (A/B) Rebilling
Demonstration would be discontinued, and we communicated to hospitals
and contractors the details regarding termination of the A/B Rebilling
Demonstration and implementation of Part B billing under the Ruling.
The Ruling was effective on its date of issuance and applies to
Part A hospital inpatient claims that were denied by a Medicare review
contractor because the inpatient admission was determined not
reasonable and necessary, as long as the denial was made: (1) While the
Ruling is in effect; (2) prior to the effective date of the Ruling, but
for which the timeframe to file an appeal has not expired; or (3) prior
to the effective date of the Ruling, but for which an appeal is
pending. The Ruling does not apply to Part A hospital inpatient claim
denials for which the timeframe to appeal expired, and it does not
apply to inpatient admissions determined by the hospital to be not
reasonable and necessary (for example, through utilization review or
other self-audit). The policy announced in the Ruling superseded any
other statements of policy on the issue of Part B inpatient billing
following the denial by a Medicare review contractor of a Part A
inpatient hospital claim because the inpatient admission was not
reasonable and necessary (although hospital outpatient services would
have been reasonable and necessary). We stated that the Ruling remains
in effect until the effective date of the regulations that finalize
proposed rule CMS-1455-P. The proposed rule CMS-1455-P proposed
revisions to our Part B payment policy that would apply prospectively
from the effective date of the final regulations and would differ in
some respects from the provisions of the Ruling, the purpose of which
is to effectuate the Medicare Appeals Council and ALJ decisions. In
section XI.B.7. of the preamble of this final rule, we discuss how the
Ruling will apply in relation to the effective date of this final rule.
In the Part B Inpatient Billing proposed rule (78 FR 16636), we
stated that, after reviewing the statutory and regulatory basis of our
existing Part B inpatient payment policy, we believed that, under
section 1832 of the Act, Medicare should pay for all Part B services
that would have been reasonable and necessary (except for services that
specifically require an outpatient status) if the hospital had treated
the beneficiary as a hospital outpatient rather than treating the
beneficiary as an inpatient, when Part A payment cannot be made for a
hospital inpatient claim because the inpatient admission is determined
not reasonable and necessary under section 1862(a)(1)(A) of the Act.
Therefore, we proposed to revise our existing policy to allow payment
for additional Part B inpatient services than Medicare currently allows
when CMS, a Medicare review contractor, or a hospital determines after
discharge that payment cannot be made under Medicare Part A because a
hospital inpatient admission was not reasonable and necessary, provided
the statutorily required timeframe for submitting claims is not
expired, as discussed in section XI.B.8. of the preamble of this final
rule. We stated that the hospital would recode the reasonable and
necessary services that were furnished as Medicare Part B services, and
bill them on a Part B inpatient claim (78 FR 16636). We stated
specifically in the proposed rule that the proposed policy would not
apply to any other circumstances in which there is no payment under
Part A, such as when a beneficiary exhausts Part A benefits for
hospital services or is not entitled to Part A (78 FR 16636).
Specifically, we proposed to revise our Part B inpatient payment
policy to allow payment of all hospital services that were furnished
and would have been reasonable and necessary if the beneficiary had
been treated as a hospital outpatient, rather than admitted to the
hospital as an inpatient, except for those services specifically
requiring an outpatient status. We proposed to exclude from Part B
inpatient payment all services that by statute, Medicare definition, or
standard Healthcare Common Procedure Coding System (HCPCS) code
definition are defined as outpatient services, including outpatient
diabetes self-management training services (DSMT) defined in section
1861(qq) of the Act; outpatient physical therapy services; outpatient
speech-language pathology services; and outpatient occupational therapy
services (PT/SLP/OT or ``therapy'' services) defined in section
1833(a)(8) of the Act; hospital outpatient visits (including emergency
department visits); and observation services (HCPCS codes G0378
(Hospital observation service, per hour) and G0379 (Direct referral for
hospital observation care)) (78 FR 16636). We reasoned that these
services are, by definition, provided to hospital outpatients and not
inpatients. Hospitals could only submit claims for

[[Page 50910]]

Part B inpatient services that were furnished to inpatients in
accordance with their Medicare and HCPCS code definitions, and in
accordance with Medicare coverage and payment rules (78 FR 16636).
We stated in the proposed rule (78 FR 16637) that the proposals in
the proposed rule would not change the existing 3-day payment window
policy, which provides that if there is no Part A coverage for the
inpatient stay, services provided to the beneficiary prior to the point
of admission in the 3 calendar day (or 1 calendar day for a non-IPPS
hospital) payment window prior to the hospital inpatient admission may
be separately billed to Part B as the outpatient services that they
were (42 CFR 412.2(c)(5), 412.405, 412.540, 412.604(f), and
413.40(c)(2); MCPM, Chapter 3 Section 40.3, and Chapter 4 Section
10.12). We stated that hospitals could only submit claims for Part B
outpatient services that are reasonable and necessary and submitted in
accordance with Medicare coverage and payment rules. In accordance with
section 1833(e) of the Act, hospitals must furnish information as may
be necessary in order to determine the amounts due for the services
billed on a Part B outpatient claim for services provided in the 3-day
(1-day for non-IPPS hospitals) payment window prior to the inpatient
admission (78 FR 16637 through 16638). We discuss our proposed policy
for payment of Part B outpatient services furnished in this payment
window prior to the inpatient admission in section XI.B.2. of the
preamble of this final rule.
Comment: One commenter recommended that, under section
1861(s)(2)(B) of the Act, CMS expand the scope of Part B inpatient
payment for circumstances other than reasonable and necessary inpatient
claim denials that are currently listed in Chapter 6, Section 10, of
the MBPM, for which payment of only ancillary Part B services is
available. The commenter noted that these include circumstances in
which: (1) Some days of an otherwise covered inpatient stay are denied
because those days were not medically necessary; (2) no Part A
prospective payment is made at all for the hospital stay because of
patient exhaustion of benefit days before admission; and (3) the
patient was not otherwise eligible for or entitled to coverage under
Part A. The commenter argued that Medicare should pay for the Part B
inpatient services under the benefit category described by section
1861(s)(2)(B) of the Act (hospital services incident to physicians'
services provided to outpatients) for all hospital inpatients,
regardless of the reason for which Part A payment is not made for all
or part of their inpatient stay.
The commenter believed that to not cover the expanded scope of
payable services for beneficiaries with denied days within approved
admissions, exhausted hospital benefits, and entitlement only to Part B
is arbitrary and punitive to beneficiaries and the secondary payers,
including Medicaid, that are liable for payment for these services. The
commenter also believed it will cause stakeholders confusion that CMS
did not propose any regulation text providing payment of only a limited
set of Part B inpatient services in these other circumstances listed in
the MBPM.
Response: We appreciate the commenter's feedback. We note that we
stated in the proposed rule that our proposed policy would only apply
to denials of claims for inpatient admissions that are not reasonable
and necessary, and would not apply to any other circumstances in which
there is no payment under Part A, such as when a beneficiary exhausts
Part A benefits for hospital services or is not entitled to Part A at
all. The proposed rule was intended to address the policy for billing
reasonable and necessary Part B services when Part A coverage is not
available because the inpatient admission was not reasonable and
necessary, which is different from scenarios in which a beneficiary has
exhausted or is not entitled to Part A benefits.
Comment: Many commenters objected to the proposed exclusion of
outpatient therapy services from payment as Part B inpatient services
when a Part A hospital inpatient claim is denied because the inpatient
admission was not reasonable and necessary. Some commenters believed
that these inpatient therapy services should be paid under section
1833(a)(8)(B) of the Act. Other commenters noted that CMS proposed to
exclude inpatient therapy services from payment because they are
defined as strictly outpatient services. These commenters described a
number of clinical circumstances in which therapy services are commonly
and appropriately furnished to hospital inpatients, and argued that
Medicare should therefore pay for them when furnished to a hospital
inpatient as well as to an outpatient. Several commenters noted that
therapy services are currently listed as payable Part B inpatient
services for reasonable and necessary hospital inpatient claim denials
as well as exhausted Part A benefits days and other circumstances in
Chapter 6, Section 10 of the MBPM. These commenters requested a clearer
explanation regarding why we proposed to exclude therapy services from
Part B inpatient payment.
In addition, several commenters recommended that if Medicare
finalizes payment of Part B inpatient therapy services for the
reasonable and necessary hospital inpatient claim denials, they should
be excluded from the annual, per beneficiary limitations on incurred
therapy expenses under Part B, commonly referred to as ``therapy
caps,'' applied by section 1833(g) of the Act.
Response: We appreciate the commenters' concerns and the
information they provided about the circumstances in which therapy
services are provided to hospital inpatients. We understand that
physical therapy services, speech-language pathology services, and
occupational therapy services are payable under Part B in certain
circumstances when they are provided to hospital inpatients. Section
1861(p) of the Act contemplates that these services could be provided
to hospital inpatients when it defines the term ``outpatient physical
therapy services'' as including services that are furnished to an
outpatient or those ``furnished to an individual as an inpatient of a
hospital or extended care facility.'' Sections 1861(g) and 1861(ll) of
the Act adopt this definition for outpatient occupational therapy
services and outpatient speech-language pathology services,
respectively. In addition, as commenters noted, therapy services have
long been on the list of payable Part B inpatient services that may be
billed following the reasonable and necessary denial of a hospital
inpatient admission for payment under Part A. Accordingly, we agree
with commenters and believe Medicare should continue paying for these
Part B inpatient therapy services furnished to hospital inpatients
whose admissions are determined not reasonable and necessary for
payment under Medicare Part A when these services are billed on Part B
inpatient claims. We note that therapy services can also be paid as
Part B outpatient services if they were provided in the 3-day (1-day
for non-IPPS hospitals) payment window prior to the inpatient admission
(we refer readers to section XI.B.2. of the preamble of this final
rule) and are billed on a Part B outpatient claim.
In addition, while we agree with commenters that we should pay for
these therapy services, we do not believe they should be excluded from
the annual limitations on per beneficiary incurred expenses, commonly
referred to as the ``therapy

[[Page 50911]]

caps,'' as the commenters suggested. Rather, we believe we also must
apply the therapy caps and all other Part B coverage and payment rules
to hospital inpatient therapy services paid under Part B. Accordingly,
if billed to Medicare Part B, therapy services furnished to hospital
inpatients whose admissions are determined not reasonable and necessary
for payment under Medicare Part A will be subject to the Part B therapy
caps under section 1833(g) of the Act, the therapy caps exceptions
process, the manual medical review process, and all other requirements
for payment and coverage of therapy services under Part B (for example,
functional status reporting requirements). The therapy caps under
section 1833(g) of the Act apply to all therapy services described
under section 1861(p) of the Act, which includes inpatient therapy
services furnished to a hospital inpatient whose inpatient admission is
determined not reasonable and necessary. As such, it is appropriate to
apply the therapy caps to these services. This approach is also
consistent with the requirement that Part B inpatient services must be
furnished in accordance with Medicare's coverage and payment rules
under Part B in order for Part B payment to be made. Applying the
therapy caps is consistent with our current payment policy for Part B
inpatient therapy services that are paid under Chapter 6, Section 10 of
the MPBM, for example when a beneficiary exhausts his or her benefits
under Part A, which are subject to the Part B therapy caps and related
policies, including all other requirements for payment and coverage of
therapy services under Part B (for example, Functional Reporting
requirements).
In the CY 2014 MPFS proposed rule (78 FR 43332 through 43334), we
proposed to subject therapy services that are furnished by a CAH to the
therapy caps and related policies, the exceptions process, and the
manual medical review process beginning on January 1, 2014. If we
finalize this proposal to apply the therapy caps to therapy services
furnished by CAHs, we will subject therapy services furnished to a CAH
inpatient during a stay that is denied for Part A payment as not
reasonable and necessary and that are subsequently billed as Part B
inpatient services to the therapy caps, as we do for all other
hospitals. The CY 2014 MPFS final rule is expected to be released on or
around November 1, 2013.
Comment: Several commenters recommended that IRFs and LTCHs be
eligible to bill Part B inpatient services following a reasonable and
necessary Part A inpatient claim denial. They also believed that
inpatient therapy services should be payable under Part B to IRFs and
LTCHs when their Part A claims are denied because inpatient admission
was not reasonable and necessary. The commenters reasoned that these
facilities should be paid for Part B inpatient therapy because they
furnish a large volume of therapy services (according to commenters,
therapy and room and board represent almost the entire volume of IRF
services).
Response: We did not propose to exclude IRFs, LTCHs or other
hospitals from payment of the proposed Part B inpatient services. As we
discussed above, in our final policy we are providing for payment of
inpatient therapy services furnished in IRFs, LTCHs and other hospitals
under Part B when Part A payment cannot be made because the inpatient
admission is determined not reasonable and necessary, and the
beneficiary should have been treated as a hospital outpatient rather
than an inpatient.
Comment: Many commenters objected to the proposed exclusion from
Part B inpatient payment of observation services, hospital outpatient
visits, and other services that are defined strictly as outpatient
services or require an outpatient status. These commenters presented
various arguments expressing the belief that observation services
should be paid because they are fundamentally the same as or can serve
as a substitute for inpatient care. Several commenters stated that some
contractors have made it clear that observation status can serve as a
substitute for inpatient admission in many cases, despite CMS' policy
that inpatient admission and observation are not substitutes and that,
for some patients, inpatient admission may be necessary even for care
of short duration. Several other commenters stated that the
administrative appeal decisions that have ordered payment at an
outpatient or ``observation level'' of care support payment of
observation services in all cases. They believed that the appeal
decisions ordered payment for all services, including observation
services, under Part B as a substitute for inpatient care, because the
care was provided and met the requirements of observation billing.
These commenters stated that the law requires payment of all reasonable
and necessary services on an outpatient basis, including observation
services, and that CMS' proposed exclusion of observation is
unsupported by law and contrary to agency precedent.
Some commenters stated that the inpatient admission order should be
considered to suffice for observation as well as for inpatient
services. They noted that, in most cases, an order for inpatient
services does exist, inpatient and observation patients occupy the same
routine beds, the same types of tests are administered, and the same
level of nursing care is provided. Several commenters were concerned
that excluding services such as observation services will not provide
adequate payment for the nursing care provided.
Some commenters recommended that CMS create new codes for billing
the services that require an outpatient status so that they can be
billed to Part B for inpatients. Commenters stated that many services
can be provided on either an inpatient or an outpatient basis, and
there is no reason that observation could not be treated in the same
manner, even if doing so requires a change in the definition of the
service that does not restrict it to outpatient billing.
However, other commenters recognized a difference between
outpatient or observation services, and inpatient services. They stated
that observation is an outpatient service and does not belong on an
inpatient claim, that room and board should not be ``converted'' to
observation charges, and that observation is an action requiring an
order and for which (in these cases) there was no order. In the public
comments to the proposed rule on inpatient admission guidelines
(section XI.C. of the preamble of this final rule), many commenters
stated that there was a marked difference between observation or
outpatient services and inpatient services, even when furnished in the
same bed in the emergency department. The commenters stated that at the
time of inpatient admission, in many cases the patient remains in the
emergency or other outpatient area of the hospital but an entirely new
team comes to that area to provide inpatient services once they are
ordered.
Response: We do not believe that observation services and inpatient
services are the same services. As we discussed above, the purpose of
outpatient observation services is to determine whether or not an
inpatient admission is needed. Once a patient has been admitted for
inpatient services, observation services are no longer medically
necessary. Therefore, observation services would not be furnished to a
hospital inpatient such that they would need to be billed for the time
the beneficiary spent as an inpatient as Part B inpatient services
following a Part A claim denial.

[[Page 50912]]

As we stated in the proposed rule, according to our longstanding
policy, hospitals may only submit claims for Part B outpatient and Part
B inpatient services that are reasonable and necessary in accordance
with Medicare coverage and payment rules. This is not new guidance. We
have long provided that, ``in accordance with the general Medicare
requirements for services furnished to beneficiaries and billed to
Medicare, even in Condition Code 44 situations, hospitals may not
report observation services using HCPCS code G0378 (Hospital
observation service, per hour) for observation services furnished
during a hospital encounter prior to a physician's order for
observation services. Medicare does not permit retroactive orders or
the inference of physician orders'' (MCPM Chapter 1, Section 50.3.2).
We agree with the commenters that observation services must be ordered
by a physician, as must all hospital outpatient services. In this
section of the MBPM, we stated in particular that the clock time begins
at the time that observation services are initiated in accordance with
a physician's order As we discuss in section XI.B.2. of the preamble of
this final rule, hospitals can (and we proposed that they could
continue to) bill Medicare for observation services that were ordered
and furnished as outpatient services in the 3-day (1-day for non-IPPS
hospitals) payment window prior to the inpatient admission, provided
there was a valid order and all other payment rules were met. However,
we have long excluded billing and payment of observation services for
the time a beneficiary spends as a hospital inpatient, even when
condition code 44 permits a patient change to outpatient during the
hospital stay (much less when the patient status remains inpatient).
Similarly, outpatient DSMT services are payable when furnished to
an outpatient in the 3-day (1-day for non-IPPS hospitals) payment
window and billed on a Part B outpatient (13x) claim, but would not be
payable if furnished to inpatients and billed on a Part B inpatient
(12x) claim. Outpatient DSMT services are defined as services
``provided in an outpatient setting'' in section 1861(qq) of the Act,
and therefore should not be furnished to hospital inpatients. The
regulation at 42 CFR 414.63(e)(2) stipulates that outpatient DSMT
services can be paid only if the beneficiary ``[i]s not receiving
services as an inpatient in a hospital, SNF, hospice, or nursing
home.''
Outpatient visits such as emergency department visits also would
not be furnished to a hospital inpatient such that they would need to
be billed to Part B following a Part A claim denial for the time the
beneficiary spent as an inpatient. Outpatient visits may be furnished
in the 3-day (1-day for non-IPPS hospitals) payment window prior to the
inpatient admission, in which case they may be billed as the outpatient
services that they were on the Part B outpatient claim, in accordance
with current policy.
Therefore, we are finalizing our proposal to exclude observation
services, outpatient DSMT, and hospital outpatient visits from payment
as Part B inpatient services when the inpatient admission is determined
not reasonable and necessary for Part A payment and the hospital bills
Part B. However, we emphasize that we do not believe these services
should be furnished to inpatients and, therefore, would not need to be
billed on a Part B inpatient claim. To the extent these services are
furnished to outpatients in the 3-day (1-day for non-IPPS hospitals)
payment window preceding inpatient admission, they may be billed on a
Part B outpatient claim following the denial of the inpatient admission
as not reasonable and necessary, as long as all other applicable
Medicare coverage and payment rules are met. These hospital outpatient
services could be billed on a Part B outpatient (13x) claim, but would
not be payable if furnished to inpatients and billed on a Part B
inpatient (12x) claim.
Comment: One commenter asked how to bill Part B for certain
services with differences in coding requirements for Part A and Part B
claims. In particular, the commenter stated that, for Part A claims, a
hospital may not need to record the start and stop time of infusions
and injections, but would have to submit that information when billing
under Part B.
Response: The start and stop times for an infusion are expected
parts of the medical record, regardless of the patient's status. The
hospital may only bill Part B for the duration of services that are
supported in the medical record. If additional services requiring
coding guidance are brought to our attention, we will provide
instructions in the subregulatory guidance that we will be issuing for
this final rule.
Comment: Several commenters requested that CMS clearly define and
list the services and/or revenue codes that will be payable as Part B
inpatient services. Several commenters asked what additional services
may be excluded from Part B inpatient payment because they require an
outpatient status.
Response: At this time, approximately 15,000 HCPCS codes and
approximately 500 revenue codes are payable under Part B, and hospitals
choose the appropriate revenue codes under which they bill services to
Part B. Given that the vast majority of Part B services will be
finalized as payable Part B inpatient services, we believe it is most
administratively feasible to list the few services that are excluded
from payment rather than list all procedures or revenue codes that are
payable. In our final policy, the only services we are excluding from
payment when furnished to hospital inpatients and billed on a Part B
inpatient claim following a reasonable and necessary Part A inpatient
claim denial are observation services, outpatient DSMT, and hospital
outpatient visits, including emergency department visits. We note that,
to the extent these services are furnished to outpatients in the 3-day
(1-day for non-IPPS hospitals) payment window preceding inpatient
admission, they may be billed on a Part B outpatient claim following
the denial of the inpatient Part A claim as not reasonable and
necessary, if all other applicable Medicare coverage and payment rules
are met. We also note that if, in our continued experience, we find
that other services require an outpatient status or do not meet Part B
coverage or payment definitions, we will propose to exclude these
services from Part B inpatient payment in future rulemaking. However,
at this time, we are not aware of any services other than those listed
above that should be excluded.
After consideration of the public comments we received, we are
finalizing our proposal to exclude observation services, outpatient
DSMT, and hospital outpatient visits from Part B inpatient payment.
These services should only be furnished to hospital outpatients, and
therefore, we do not believe hospitals will need to bill these services
on Part B inpatient claims. If these services are furnished to a
hospital outpatient during the 3-day (1-day for non-IPPS hospitals)
payment window preceding a hospital inpatient admission that is later
denied for Part A payment, as long as Part B coverage and payment rules
are met, the services may be billed on a Part B outpatient claim if the
Part B coverage and payment rules are met. We are not finalizing our
proposed policy to exclude therapy services from Part B inpatient
payment following Part A hospital inpatient reasonable and necessary
claim denials. Accordingly, hospitals may continue to bill for therapy
services on a Part B

[[Page 50913]]

inpatient claim when these services are furnished to inpatients, and
the hospital's Part A claim is denied because the inpatient admission
was not reasonable and necessary and the beneficiary should have been
treated as a hospital outpatient rather than a hospital inpatient.
We proposed that we would implement this provision in proposed new
42 CFR 414.5, entitled ``Hospital inpatient services paid under
Medicare Part B when a Part A hospital inpatient claim is denied
because the inpatient admission was not reasonable and necessary, but
hospital outpatient services would have been reasonable and necessary
in treating the beneficiary.'' The claims for Part B inpatient and Part
B outpatient services would have to be submitted within the timely
filing period (we discuss the time limits for filing claims in section
XI.B.8. of the preamble of this final rule). To ensure the accuracy and
appropriateness of payment under Part A, we proposed that this policy
would apply if a Medicare Part A claim for inpatient hospital services
is denied because the inpatient admission was not reasonable and
necessary, or if a hospital determines under Medicare's utilization
review requirements in section 1861(e)(6)(1) and 1861(k) of the Act and
42 CFR 482.30 (42 CFR 485.641 for CAHs) after discharge that the
hospital inpatient admission was not reasonable and necessary, and that
the beneficiary should have received hospital outpatient rather than
hospital inpatient services (hereinafter referred to as the hospital
``self-audit'' for purposes of this final rule). In this circumstance,
we proposed to continue requiring the hospital to submit a ``no pay/
provider liable'' Part A claim indicating that the provider is liable
under section 1879 of the Act for the cost of Part A services (we refer
readers to section 40.2.2(E), Chapter 3, of the MCPM). Submission of
this Part A claim indicates that the provider is assuming financial
liability for the denied items or services on the Part A claim
consistent with section 1879 of the Act (and acknowledging that the
beneficiary is not financially liable under section 1879 of the Act)
for the cost of the Part A items and services. Submitting the provider-
liable Part A claim also cancels any claim that may have already been
submitted by the hospital for payment under Part A. The hospital could
then submit an inpatient claim for payment under Part B for all
services that would have been reasonable and necessary if the
beneficiary had been treated as a hospital outpatient rather than
admitted as a hospital inpatient, except for those services
specifically requiring an outpatient status. This claim would have to
be submitted within the timely filing period. We stated that we
believed providing for additional payment under Part B when a hospital
determines itself that an inpatient admission was not reasonable and
necessary but hospital outpatient services would have been reasonable
and necessary would reduce improper payments under Part A, and would
reduce the administrative costs of appeals for both hospitals and the
Medicare program.
Comment: Several of the commenters asked whether hospitals could
bill Part B inpatient services following a hospital self-audit that
occurs prior to discharge.
Response: We did not propose any changes to our policies governing
patient status changes and inpatient admission reviews prior to
hospital discharge. Under Medicare's ``Condition Code 44'' policy, if a
hospital's utilization review committee determines prior to discharge
that a beneficiary should have been treated as a hospital outpatient
rather than an inpatient and if certain conditions are met, the
beneficiary's status may be changed to outpatient and the entire
hospital encounter may be billed as an outpatient stay on a Part B
outpatient claim (MCPM, Chapter 1, Section 50.3). The change in patient
status from inpatient to outpatient must be made prior to discharge or
release, while the beneficiary is still a patient of the hospital; the
hospital could not have submitted a claim to Medicare for the inpatient
admission; the practitioner responsible for the care of the patient and
the utilization review committee must both concur with the decision;
and the concurrence of the practitioner responsible for the care of the
patient and the utilization review committee must be documented in the
patient's medical record.
Comment: Some commenters were supportive of the proposal to allow
Part B inpatient billing pursuant to a hospital self-audit, as it would
promote real time self-monitoring and filing of Part B claims within
the timely filing limit. Some commenters supported the proposal because
it would allow additional Part B payment when the inpatient admission
error is discovered after discharge, in comparison to the current
restriction under the Condition Code 44 rules where full Part B payment
is only made if the medical necessity determination and change in
patient status to outpatient is made prior to discharge or release.
However, some commenters asked CMS to clarify whether it was
proposing a self-audit process that would have to conform to the
utilization review rules under the CoPs, notably physician concurrence,
beneficiary notification, and other aspects related to continuation of
an inpatient stay. These commenters stated that hospitals conduct
internal reviews other than utilization review, and asked if the
inpatient stay could be rebilled if the error is discovered as part of
another type of review. Some of the commenters stated that
beneficiaries do not need to be notified of the hospital's
determination that the inpatient admission was not reasonable and
necessary (as required under the CoPs) because if the hospital bills
Part B and the beneficiary liability under Part A is less than under
Part B, the beneficiary's liability can be waived. One commenter asked
CMS to confirm that it was proposing a process that would conform to
the CoP rules because the commenter did not believe the CoPs allowed
self-audit to be conducted after discharge.
Response: We thank the commenters for their support. We agree with
the commenters that applying the Part B inpatient billing process in
cases of self-audit will promote self-monitoring, proper payment, and
increase Part B billing closer to the date of service, resulting in
less confusion for the beneficiary and a greater number of Part B
claims filed within the timely filing limits. We also agree that a
significant benefit of the final rule to hospitals is the ability to
receive full Part B payment if the determination is made after
discharge that the beneficiary should have been treated as a hospital
outpatient instead of admitted as a hospital inpatient. Currently there
are no requirements in the CoPs or interpretive guidance indicating
that review of admissions must be performed prior to discharge.
We did not propose and are not finalizing a policy that would allow
hospitals to bill Part B following an inpatient reasonable and
necessary self-audit determination that does not conform to the
requirements for utilization review under the CoPs. We do not agree
with the commenters that beneficiaries need not be notified of a
hospital's determination that the inpatient admission was not
reasonable and necessary. Part B billing pursuant to such a
determination may result in an increase in financial liability for some
beneficiaries which hospitals may not be able to ``waive'' or forego
attempting to collect (we refer readers to sections XI.B.5 and B.6. of
the preamble of this final rule). We believe that the CoP rules for
beneficiary notification and physician involvement in hospital

[[Page 50914]]

utilization review decisions are important for maintaining beneficiary
rights, consistent with 42 CFR 482.13. We received many public comments
from beneficiaries, beneficiary advocacy organizations, and law firms
representing beneficiaries, recommending that we strengthen beneficiary
notification and appeal rights for Part B inpatient billing (addressed
in sections XI.B.5. and B.6. of the preamble of this final rule). In
addition, we received several public comments from physician
associations expressing concern that hospitals often change a patient's
status from inpatient to outpatient without the physician's knowledge.
We reiterate that hospitals must follow our policies requiring
physician involvement and concurrence in hospital decisions regarding
patient status and the medical necessity of hospital inpatient
admissions under the Condition Code 44 rules and the CoPs. The
Interpretive Guidelines for hospital utilization review under the CoPs
are provided on the CMS Web site at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/som107ap_a_hospitals.pdf#page312.
Comment: Some commenters asked whether the ``no pay/provider-
liable'' Part A claim and the Part B claims could be submitted
simultaneously and whether a formal Medicare Part A denial is a
prerequisite to Part B inpatient billing.
Response: The ``no pay/provider liable'' claim must be present in
the claims system in order for the subsequent Part B claim(s) to
process. In order to pay the Part B services, CMS has to verify that a
valid Part A denial exists in claims history. If both the ``no pay/
provider-liable'' Part A claim and the Part B claim(s) are submitted
simultaneously, the Part A and Part B claims would overlap as
duplicates in the processing system. A decision must be made regarding
the Part A claim denial before a subsequent claim can be submitted. In
accordance with our current claims processing rules for payment of Part
B hospital services following hospital Part A inpatient reasonable and
necessary claim denials, once the Part A claim denial is posted in the
claims history, the Part B claim(s) can be submitted.
Comment: One commenter stated that hospital billing to Part B based
on self-audit should be rare, and any hospital that uses this process
on a consistent basis should be audited. In addition, the commenter
stated that because utilization reviews should be timely, the Part B
claims resulting from these reviews should be within the timely filing
period.
Response: As we stated for the Condition Code 44 policy (MCPM,
Chapter 1, Section 50.3.1), changes in patient status from inpatient to
outpatient should be few because hospitals should have case management
and other staff available at all times to assist the physician in
making the appropriate initial admission decision. Use of Condition
Code 44 or Part B inpatient billing pursuant to hospital self-audit is
not intended to serve as a substitute for adequate staffing of
utilization management personnel or for continued education of
physicians and hospital staff about each hospital's existing policies
and admission protocols. As education and staffing efforts continue to
progress, inappropriate admission decisions, and the need for hospitals
to correct inappropriate admissions or report Condition Code 44, should
become increasingly rare. In section XI.C. of the preamble of this
final rule, we finalize changes in our hospital inpatient admission
guidelines and medical review criteria to help clarify on the front end
when hospitals and physicians should admit beneficiaries as inpatients,
with the goal of reducing inappropriate hospital admissions, hospital
inpatient claim denials, and Part B billing following Part A hospital
inpatient claim denials or hospital self-audit.
We are finalizing our proposal that payment of Part B inpatient
services may be made if a hospital determines under Sec. 482.30(d) or
Sec. 485.641 after a beneficiary is discharged that the beneficiary's
inpatient admission was not reasonable and necessary, and the
beneficiary should have been treated as a hospital outpatient rather
than admitted as an inpatient, provided the beneficiary is enrolled in
Medicare Part B and that the hospital submits the Part B inpatient
claim by the deadline for timely filing (discussed later in this
section).
a. Part B Inpatient Services Paid Under the Hospital OPPS
We proposed that we would pay for Part B inpatient services that
are paid under the OPPS (except those requiring an outpatient status)
under proposed new Sec. 414.5(a)(1), ``If a Medicare Part A claim for
inpatient hospital services is denied because the inpatient admission
was not reasonable and necessary, or if a hospital determines under
Sec. 482.30(d) or Sec. 485.641 after a beneficiary is discharged that
the beneficiary's inpatient admission was not reasonable and necessary,
the hospital may be paid for the following Part B inpatient services
that would have been reasonable and necessary if the beneficiary had
been treated as a hospital outpatient rather than admitted as an
inpatient, provided the beneficiary is enrolled in Medicare Part B: (1)
Services described in Sec. 419.21(a) that do not require an outpatient
status'' (78 FR 16636). We proposed to exclude payment of services
under the OPPS such as observation services and hospital outpatient
visits (including emergency department visits) that, by definition,
require an outpatient status.
b. Services Excluded From Payment Under the OPPS
For the proposed Part B inpatient services furnished by the
hospital that are not paid under the OPPS, but rather under some other
Part B payment methodology, we proposed that when the inpatient
admission is determined not reasonable and necessary, Part B inpatient
payment would be made under the respective Part B fee schedules or
prospectively determined rates for which payment is made for these
services when provided to hospital outpatients (78 FR 16637; 65 FR
18442 and 18443). As provided in 42 CFR 419.22, the services for which
payment is made under other payment methodologies are as follows:
Outpatient therapy services described in section
1833(a)(8) of the Act.
Ambulance services, as described in section 1861(v)(1)(U)
of the Act, or, if applicable, the fee schedule established under
section 1834(l) of the Act;
Except as provided in 42 CFR 419.2(b)(11), prosthetic
devices, prosthetics, prosthetic supplies, and orthotic devices;
Except as provided in 42 CFR 419.2(b)(10), durable medical
equipment supplied by the hospital for the patient to take home;
Clinical diagnostic laboratory services;
Effective December 8, 2003, screening mammography services
and effective January 1, 2005, diagnostic mammography services; and
Effective January 1, 2011, annual wellness visit providing
personalized prevention plan services as defined in 42 CFR 410.15.
We proposed to provide payment of these OPPS-excluded services in
42 CFR 414.5(a)(2) through (a)(7) as follows:
Ambulance services, as described in section 1861(v)(1)(U)
of the Act, or, if applicable, the fee schedule established under
section 1834(l) of Act.
Except as provided in Sec. 419.2(b)(11), prosthetic
devices,

[[Page 50915]]

prosthetics, prosthetic supplies, and orthotic devices.
Except as provided in Sec. 419.2(b)(10), durable medical
equipment supplied by the hospital for the patient to take home.
Clinical diagnostic laboratory services.
Effective December 8, 2003, screening mammography services
and effective January 1, 2005, diagnostic mammography services.
Effective January 1, 2011, annual wellness visits
providing personalized prevention plan services as defined in Sec.
410.15 of this chapter.
In our review of the current regulations governing payment of Part
B inpatient services, we noted an oversight in 42 CFR 419.22 that
outpatient DSMT services, which are described in section 1861(qq) of
the Act and 42 CFR 414.63 and are paid under the MPFS, were never
excluded from OPPS payment along with all other physician services.
Because the statute defines these services as outpatient services,
Sec. 414.63(e)(2) stipulates that outpatient DSMT services can be paid
only if the beneficiary ``[i]s not receiving services as an inpatient
in a hospital, SNF, hospice, or nursing home.'' Therefore, under our
proposal, these services would not be payable Part B inpatient
services, although they would be payable Part B outpatient services if
furnished in the 3-day (1-day for on-IPPS hospitals) payment window
prior to the inpatient admission. However, based on our review of the
regulations, we proposed a technical correction to clarify that
outpatient DSMT services are excluded from OPPS payment. We proposed
that this correction would appear in Sec. 419.22(u). In addition, we
noted a typographical error in paragraph (j), which should cross
reference Sec. 419.2(b)(11) rather than Sec. 419.22(b)(11). We
proposed a technical correction to delete the erroneous ``Sec.
419.22(b)(11)''' and replace with ``Sec. 419.2(b)(11)'''. Also we
noted that Sec. 419.22(h) excludes ``outpatient''' therapy services
from the OPPS. Section 1833(t)(1)(B)(iv) of the Act specifically states
that ``the term `covered OPD services' . . . (iv) does not include any
therapy services described in subsection (a)(8)''' and section
1833(a)(8) describes outpatient therapy services furnished by a
hospital to a hospital outpatient or a hospital inpatient who is
entitled to benefits under Part A but has either exhausted or is not so
entitled to such benefits. In order to more clearly follow the
statutory language defining covered OPD services, we proposed to
replace the words ``outpatient therapy''' with ``therapy''' in Sec.
419.22(h) so that it reads, ``Therapy services described in section
1833(a)(8) of the Act.''
We did not receive any public comments on the fee schedules or
prospectively determined rates under which the proposed Part B
inpatient services would be paid. After consideration of the public
comments we received, we are finalizing new Sec. 414.5(a) with the
addition of paragraph (a)(2) to provide for payment of physical
therapy, speech-language pathology, and occupational therapy services.
We are revising Sec. 419.22(h) by removing the phrase ``Outpatient
therapy'' and adding in its place the phrase ``Physical therapy
services, speech-language pathology services and occupational therapy
services described in section 1833(a)(8) for which payment is made
under the fee schedule described in section 1834(k) of the Act'' to be
consistent with the exclusion language in section 1833(t)(1)(B)(iv) of
the Act.
In the proposed rule, based on our review of the regulations, we
noted that outpatient DSMT was not excluded from OPPS payment as are
other services paid under the MPFS. We proposed a correction to exclude
them under 42 CFR 419.22, which lists hospital services excluded from
payment under the OPPS. We did not receive any public comments on our
proposed correction. Therefore, we are finalizing the addition of new
paragraph (u) to Sec. 419.22 as proposed, to read: ``The following
services are not paid for under the hospital outpatient prospective
payment system . . . (u) Outpatient diabetes self-management
training.''
We are finalizing our proposed technical correction of a
typographical error in paragraph (j) of Sec. 419.22, which should
cross-reference Sec. 419.2(b)(11), rather than Sec. 419.22(b)(11).
In our review of the regulations, we had further noted that the
headings of Sec. 419.21 and Sec. 419.22 describe the ``hospital
outpatient'' services that are subject to (in Sec. 419.21) or excluded
from payment under (in Sec. 419.22) the OPPS. To more appropriately
describe the services that are payable under these regulations under
the OPPS, we proposed to amend the titles of these sections by removing
the term ``outpatient.'' We did not receive any public comments on this
proposal. Therefore, we are finalizing amendments to revise the title
of Sec. 419.21 to read, ``Hospital services subject to the outpatient
prospective payment system'' and to revise the title of Sec. 419.22 to
read, ``Hospital services excluded from payment under the hospital
outpatient prospective payment system.''
2. Payment of Part B Outpatient Services in the 3-Day Payment Window
In the Part B Inpatient Billing proposed rule (78 FR 16637 through
16638), we explained that the proposals in the proposed rule would not
change the 3-day payment window policy, which requires payment for
certain outpatient services provided to a beneficiary on the date of an
inpatient admission or during the 3 calendar days (or 1 calendar day
for a hospital that is not paid under the IPPS) prior to the date of an
inpatient admission to be bundled (that is, included) with the payment
for the beneficiary's inpatient admission, if those outpatient services
are provided by the admitting hospital or an entity that is wholly
owned or wholly operated by the admitting hospital (42 CFR 412.2(c)(5),
412.405, 412.540, 412.604(f), and 413.40(c)(2); MCPM Section 40.3,
Chapter 3 and Section 10.12, Chapter 4). The current policy applies to
all diagnostic outpatient services and nondiagnostic (that is,
therapeutic) services that are related to the inpatient stay. As stated
in the MCPM, Section 10.12, Chapter 4, in the event that there is no
Part A coverage for the inpatient stay, reasonable and necessary
services provided to the beneficiary prior to the point of admission
may be separately billed to Part B as the outpatient services that they
were. We proposed that this policy would continue to apply where Part A
payment is not available because the hospital inpatient admission is
determined not reasonable and necessary. The Part B outpatient claims
for the outpatient services provided in the 3-day (or 1-day for a non-
IPPS hospital) payment window would be subject to the usual timely
filing restrictions and not be considered adjustment claims.
We explained that hospitals may only submit claims for Part B
outpatient services that are reasonable and necessary in accordance
with Medicare coverage and payment rules. In accordance with section
1833(e) of the Act, hospitals must furnish information as may be
necessary in order to determine the amounts due for the services billed
on a Part B outpatient claim for services rendered in the 3-day (or 1-
day for non-IPPS hospitals) payment window prior to the inpatient
admission.
Comment: Many commenters seemed to misunderstand the proposal to
exclude certain services from payment as Part B inpatient services, and
believed CMS was also proposing to

[[Page 50916]]

exclude these services from payment as Part B outpatient services in
the 3-day (1-day for non-IPPS hospitals) payment window. Several
commenters asked us to clarify why the proposed regulation text only
addressed payment of Part B inpatient services, and did not specify
payment of Part B outpatient services furnished in the 3-day (1-day for
non-IPPS hospitals) payment window prior to the inpatient admission.
Other commenters believed CMS was proposing to allow payment of all
rebilled services as Part B outpatient services by changing the
beneficiary's status for the entire hospital stay to outpatient.
Response: For outpatient services provided to a beneficiary on the
date of an inpatient admission or during the 3-calendar day (or 1-
calendar day for a non-IPPS hospital) payment window prior to the date
of an inpatient admission, we proposed the same payment policy and
claims process that we provide for under current policy (MCPM, Chapter
4, Section 50.3; MCPM Chapter 4, Section 10.12 and Chapter 3, Section
40.3), that we used in the A/B Rebilling Demonstration, and that we
required under the Ruling (78 FR 16614 through 16617). As we stated in
the Ruling (78 FR 16617), ``the beneficiary's patient status remains
inpatient as of the time of inpatient admission and is not changed to
outpatient, because the beneficiary was formally admitted as an
inpatient and there is no provision to change a beneficiary's status
after she/he is discharged from the hospital. The beneficiary is
considered an outpatient for services billed on the Part B outpatient
claim, and is considered an inpatient for services billed on the Part B
inpatient claim.'' Under existing policy, all reasonable and necessary
outpatient services furnished in the 3-day (or 1-day for non-IPPS
hospitals) payment window, including those requiring an outpatient
status, may be billed on the 13x (Part B outpatient) type of bill
(TOB). Services furnished after the time of the inpatient admission
must be billed on the 12x (Part B inpatient) TOB. Billing the Part B
services according to the patient's status supports proper payment and
clarifies the patient's status for determining skilled nursing facility
coverage, and Medicare inpatient days for IPPS payments (we refer
readers to section XI.B.11. of the preamble of this final rule). As
explained above, those services that require an outpatient status and
that cannot be billed on a 12x claim--observation services, outpatient
hospital visits, and outpatient DSMT--are payable if they were
furnished to an outpatient during the 3-day (1-day for non-IPPS
hospitals) payment window preceding the inpatient admission and are
billed on a Part B outpatient (13x) claim.
Our proposed regulation text did not specify payment of Part B
hospital outpatient services following a Part A hospital inpatient
claim denial for medical necessity of the admission, because these Part
B services are already payable under other relevant Part B regulations
for payment of outpatient services in accordance with Chapter 4,
Section 10.12 of the MCPM. However, given the significant confusion
among the commenters about this issue, we are incorporating this manual
provision into our final regulation text, providing payment of Part B
outpatient services provided in the 3-day (1-day for non-IPPS
hospitals) payment window prior to the inpatient admission.
Specifically, we are adding new paragraph (b) under Sec. 414.5 stating
that, ``If a Medicare Part A claim for inpatient hospital services is
denied because the inpatient admission was not reasonable and
necessary, or if a hospital determines under Sec. 482.30(d) of this
chapter or Sec. 485.641 of this chapter after a beneficiary is
discharged that the beneficiary's inpatient admission was not
reasonable and necessary, the hospital may be paid for hospital
outpatient services described in Sec. 412.2(c)(5), Sec. 412.405,
Sec. 412.540, Sec. 412.604(f), or Sec. 413.40(c)(2) of this chapter
furnished to the beneficiary prior to the point of inpatient admission
(that is, the inpatient admission order).'' In addition, we are
deleting the term ``inpatient'' from the phrase ``hospital inpatient
services'' in the proposed title of Sec. 414.5, to indicate that this
section of the regulations addresses payment of both hospital
outpatient and hospital inpatient services. The final title reads,
``Hospital services paid under Medicare Part B when a Part A hospital
inpatient claim is denied because the inpatient admission was not
reasonable and necessary, but hospital outpatient services would have
been reasonable and necessary in treating the beneficiary.''
Comment: Several commenters disagreed with the proposal to require
hospitals to bill two claims for payment of Part B inpatient and Part B
outpatient services. Some commenters recommended that CMS allow all
Part B services to be billed on the 13x TOB because they believed the
MACs will fail to apply the rules correctly for the 12x TOB because
they will be unable to distinguish the reason there was no Part A
coverage (exhausted Part A benefits versus denial of inpatient
admission for lack of medical necessity) and, therefore, the amount of
allowable Part B payment. Some commenters suggested that CMS create a
condition code that would distinguish the various reasons for Part B
inpatient billing.
Other commenters expressed the opinion that requiring both the 12x
TOB and 13x TOB would be burdensome either because the accounting
systems available to most hospitals do not have a means of easily
separating charges furnished within a 24-hour period (presumably when
the beneficiary has both outpatient and inpatient charges on the day of
admission), or because splitting charges generally between the
outpatient services in the 3-day payment window and the inpatient
services provided during the inpatient stay is not standard operating
procedure and would require hospitals to reprogram their billing
systems. Other commenters believed that CMS will need to provide
guidance on recoding services with differences in coding requirements
for Part A and Part B claims. Some commenters stated that CMS should
use information supplemented to the Part A claim to issue Part B
payment, rather than requiring the submission of any Part B claims. The
commenters suggested that supplemental payers and beneficiaries will
have a greater number of claims to process if Medicare requires two
Part B claims. Some commenters recommended either including all charges
on the 12x TOB using the claims procedures that they believe CMS
employed in the A/B Rebilling Demonstration, or creating a new bill
type that would identify inpatient reasonable and necessary denials and
allow all Part B services to remain on the same claim.
Response: In the A/B Rebilling Demonstration, CMS used the claims
process that is required under existing policy and that was proposed in
the proposed rule (that is, requiring a Part B inpatient claim for
services furnished after the time of inpatient admission, and a Part B
outpatient claim for services furnished in the 3-day (1-day for non-
IPPS hospitals) payment window prior to the inpatient admission (78 FR
16636 through 16638). In this process, because the beneficiary is an
outpatient prior to the time of inpatient admission, and the services
furnished during that time period are outpatient services, they must be
billed on a 13x Part B outpatient TOB. Because the beneficiary remains
an inpatient from the time of inpatient admission, and the services
billed after the time of admission are inpatient services, CMS requires
that these services be billed on a Part B inpatient 12x TOB and does
not

[[Page 50917]]

allow outpatient services such as observation to be billed on this
claim.
As we stated in the proposed rule, in accordance with section
1833(e) of the Act, hospitals must furnish information as may be
necessary in order to determine the amounts due for the services billed
on a Part B outpatient or a Part B inpatient claim (78 FR 16636 and
16638). Because the inpatient services are bundled for payment rather
than itemized on the original Part A claim, only the hospital can
distinguish which services among those that were furnished would have
been reasonable necessary if the hospital had treated the beneficiary
on an outpatient basis. Only the hospital can provide this information
to Medicare by itemizing the reasonable and necessary services on the
subsequent Part B claim(s). In addition, Part B outpatient claims will
not be required in situations other than when the beneficiary received
outpatient services prior to being admitted as an inpatient.
The alternative to separating the services provided before and
after the inpatient admission on two claims would involve the creation
of a complex system of modifiers to specify timing relative to the
order for the services on a single claim. This would be considerably
more burdensome than creating two claims. For example, requiring a
separate outpatient claim will enable hospitals to distinguish the
outpatient services they furnished in the 3-day (1-day for non-IPPS
hospitals) payment window from the inpatient services furnished,
allowing payment of services that are defined as strictly outpatient
services in the 3-day payment window.
We are not sure what informational format the commenter was
referring to in the suggestion to allow for supplementation of the Part
A claim. It seems that a ``supplementation'' process would require all
Part B line item detail in addition to header information to allow the
supplemental file to link to the original Part A claim. Although this
would be administratively confusing because a Part B inpatient claim is
a replacement for a Part A claim, not a supplement, the more
operationally significant consideration is that the effort of creating
a new Part B claim is no different (and may in fact be less) than the
effort involved in creating a supplement but with the added necessity
of linking a supplement to the primary Part A claim data.
We are finalizing our proposed policies on the 3-day (1-day for
non-IPPS hospitals) payment window and the required Part B claims.
However, we also are evaluating the Medicare claims system to ensure
that it distinguishes among the reasons that Part A coverage was not
available and provides the appropriate payment. We will issue
additional guidance in the future with claims specifications for
billing Part B inpatient services under this final rule, such as
distinguishing the reason for the Part A claim denial.
3. Applicability: Types of Hospitals
We proposed that all hospitals billing Part A services would be
eligible to bill the proposed Part B inpatient services, including
short-term acute care hospitals paid under the IPPS, hospitals paid
under the OPPS, LTCHs, IPFs, IRFs, CAHs, children's hospitals, cancer
hospitals, and Maryland waiver hospitals. We proposed that hospitals
paid under the OPPS would continue billing the OPPS for Part B
inpatient services. We proposed that hospitals that are excluded from
payment under the OPPS in 42 CFR 419.20(b) would be eligible to bill
Part B inpatient services under their non-OPPS payment methodologies.
Comment: One commenter asked whether Maryland waiver hospitals
would be eligible for the proposed Part B inpatient billing policies.
Another commenter asked CMS to clarify whether the reference to section
1861(e) of the Act (78 FR 16632) was intended to exclude IPFs from our
proposed policies.
Response: Under section 1814(b) of the Act, hospitals in the State
of Maryland are subject to a waiver from the Medicare payment
methodologies under which they would otherwise be paid. Under the
demonstration that forms the basis of the statutory framework of the
Maryland hospital Medicare payment system, only the hospitals' payment
methodology was waived. All other Medicare requirements generally
apply; therefore, from a billing perspective, we believe Maryland
waiver hospitals should be treated the same as nonwaiver hospitals for
purposes of Part B inpatient billing.
Our reference to section 1861(e) of the Act was intended to specify
that CAHs were included in the proposed policies, not that IPFs or
other non-IPPS hospitals would be excluded. We see no reason to exclude
any non-IPPS hospitals from Part B inpatient billing in the
circumstances addressed in this final rule, and we are applying the
final rule policies to all hospitals and CAHs.
In the CY 2002 OPPS proposed rule (66 FR 44698 through 44699) and
final rule (66 FR 59891 through 59893), we recognized that certain
hospitals do not submit claims for outpatient services under Medicare
Part B, either because they do not have outpatient departments or
because they have outpatient departments but submit no claims to
Medicare Part B (for example, state psychiatric hospitals). When the
OPPS was implemented, the only claims these hospitals would ever have
submitted for Part B payment would have been for the ancillary services
designated as ``Part B Only'' services. These hospitals were concerned
about the administrative burden and prohibitive costs they would incur
if they were to change their billing systems to accommodate OPPS
requirements solely to receive payment for Part B Only (Part B
inpatient) services. Under our policy of limited (ancillary) Part B
inpatient billing following a reasonable and necessary Part A claim
denial, the cost to these hospitals of implementing claims systems to
bill Part B inpatient services to the OPPS would have been greater than
the payments they could have received for the services. In response to
this concern, we revised 42 CFR 419.22 by adding paragraph (r), which
provides that services defined in 42 CFR 419.21(b) that are furnished
to inpatients of hospitals that do not submit claims for outpatient
services under Medicare Part B are excluded from payment under the
OPPS. We provided an exception under which, rather than billing Part B
inpatient services under the OPPS, hospitals would bill these services
under the hospital's pre-OPPS payment methodology, for example at
reasonable cost or the per diem payment rate, unless the services were
subject to a payment methodology that was established prior to the
OPPS. We solicited public comments from these hospitals regarding the
types of Part B inpatient services they anticipated billing Medicare
under our proposal for payment of additional Part B services (78 FR
16638). If, under our proposed policies, the Part B inpatient services
payable to these hospitals would largely be limited to the ancillary
services they currently bill Medicare, these hospitals would continue
billing Part B inpatient services under the current exception. However,
we stated that if we received public comments indicating that hospitals
subject to the exception in 42 CFR 419.22(r) would be eligible and seek
payment for additional Part B inpatient services under this proposed
rule, we would consider finalizing a policy to require these hospitals
to bill the OPPS because, unlike under existing policy, their eligible
payments would likely outweigh the cost of implementing billing systems
specific to the OPPS. To reflect such a policy, we

[[Page 50918]]

stated that we would delete paragraph (r) of Sec. 419.22(r) and
redesignate paragraphs (s) and (t) as paragraphs (r) and (s),
respectively.
We did not receive any public comments regarding Part B inpatient
billing by hospitals subject to the existing exception in Sec.
419.22(r). Therefore, we are not finalizing a policy in the final rule
to require these hospitals to bill the OPPS for Part B inpatient
services that are typically paid under the OPPS. We intend to monitor
the volume of Part B claims submitted for payment by these hospitals,
and may propose in future rulemaking to require them to begin billing
the OPPS based on the Part B inpatient services they bill.
5. Beneficiary Liability Under Section 1879 of the Act
As discussed in the Part B Inpatient Billing proposed rule (78 FR
16639), prior to the issuance of CMS Ruling CMS 1455-R (as described in
section XI.B.1. of the preamble of this final rule), our policy
previously allowed for billing of only a limited set of Part B
inpatient services rather than all Part B services following the
reasonable and necessary denial of a Part A inpatient claim. Under the
policy being adopted in this final rule, we recognize that allowing
hospitals to bill for additional Part B inpatient services could create
a unique liability issue for Medicare beneficiaries that did not
previously exist.
When a Part A inpatient admission is denied as not reasonable and
necessary under section 1862(a)(1)(A) of the Act, or a hospital submits
a ``provider liable/no-pay'' claim (following a self-audit as described
in section XI.B.3. of the preamble of this rule) indicating that the
hospital has determined that an inpatient admission is not reasonable
and necessary, a determination of financial liability for the
noncovered inpatient admission is made in accordance with section 1879
of the Act. The Medicare contractor determines whether the hospital and
the beneficiary knew, or could have reasonably been expected to know,
that the services were not covered. If neither the hospital nor the
beneficiary knew, or could reasonably have been expected to know, that
the services were not covered, then Medicare makes payment for the
denied services. However, because hospitals are expected to have
knowledge of our coverage and payment rules, hospitals are often
determined liable under section 1879 of the Act for the cost of the
noncovered items and services furnished. In addition, unless the
beneficiary had knowledge of noncoverage in advance of the provision of
services (typically through a Hospital-Issued Notice of Noncoverage
(HINN)), the beneficiary will not be financially liable for the denied
Part A services in accordance with section 1879 of the Act.
Following a denial of a Part A inpatient admission as not
reasonable and necessary and a determination that the beneficiary was
not financially liable in accordance with section 1879 of the Act, the
hospital is required to refund any amounts paid by the beneficiary
(such as deductible and copayment amounts) for the services billed
under Part A (42 CFR 411.402). The beneficiary would have no out-of-
pocket cost in this scenario. However, as we explained in the proposed
rule, if the hospital subsequently submits a timely Part B claim after
the Part A claim is denied, the financial protections afforded under
section 1879 of the Act to limit liability for the denied Part A claim
cannot also be applied to limit liability for the covered services
filed on the Part B claim. The beneficiary (who may previously have had
no out-of-pocket costs for the denied Part A claim) is responsible for
applicable deductible and copayment amounts for Medicare covered
services, and for the cost of items or services never covered (or
always excluded from coverage) under Part B of the program. If,
however, a hospital does not bill under Part B in a timely manner, in
accordance with section 1866(a)(1)(A)(i) of the Act, the hospital may
not charge the beneficiary for the costs related to the Part B items
and services furnished, if the beneficiary would otherwise be entitled
to have Part B payment made on his or her behalf. Finally, in instances
where the beneficiary is not enrolled in Medicare Part B, we encouraged
hospitals and beneficiaries to recognize the importance of billing
supplemental insurers and pursuing an appeal of the Part A inpatient
claim denial, as appropriate.
As we stated in the proposed rule, we do not believe that the
existing beneficiary liability notices used in the Medicare fee-for-
service program (the HINN and Advance Beneficiary Notice of Noncoverage
(ABN)) are applicable or relevant for the Part B inpatient billing
process described in the proposed rule to alert beneficiaries to the
possible change in deductible and cost-sharing if a Part A inpatient
claim is denied and a Part B claim is subsequently submitted. These
notices must be given prior to the provision of an item or service that
is expected to be denied, and cannot be issued retroactively (that is,
after the receipt of the post-payment Part A inpatient claim denial).
Instead, we proposed to conduct an educational campaign and issue
materials that address various aspects of this final rule, including
raising beneficiary awareness that certain denied Part A inpatient
hospital services may be covered under Part B of the program.
Comment: Many commenters recommended that beneficiaries should be
held harmless for the Part B cost-sharing and that patients should not
be charged for provider error in admitting the patient inappropriately.
Other commenters suggested that beneficiaries should be responsible for
cost-sharing on the Part A claim but not responsible for anything
beyond that amount if a Part B claim is submitted, similar to how the
cost-sharing was handled under the A/B rebilling demonstration project.
Response: We agree that beneficiaries should not be charged for
unexpected costs of a service denied as not reasonable and necessary.
The limitation on liability provision in section 1879 of the Act
(``Limitation on Liability of Beneficiary Where Medicare Claims Are
Disallowed'') protects beneficiaries from financial liability for
certain denials and requires that providers refund any amounts
collected for denied services, including coinsurance and deductible
amounts, where the provider is determined to be liable for the denied
services (42 CFR 411.402). However, in the case of a provider
furnishing covered services that are payable by Medicare, beneficiaries
are responsible for the applicable coinsurance and deductible (sections
1833(b) and 1833(t)(8) of the Act). We do not have authority to waive
this statutory requirement in order to hold beneficiaries harmless from
their cost-sharing obligations for covered Part B services. The
commenters who suggested this approach are referring to the A/B
rebilling demonstration project that ended March 13, 2013. Under the
demonstration project, which was conducted prior to the issuance of the
proposed rule and CMS Ruling 1455-R, hospitals were prohibited from
collecting from beneficiaries coinsurance and deductible amounts
related to covered Part B services billed to the program if these cost-
sharing amounts under Part B exceeded the amount of the Part A
inpatient deductible. We were able to waive the statutory requirements
regarding beneficiary responsibility for coinsurance and deductibles
and hold beneficiaries harmless from any additional Part B cost-sharing
under the authority granted in section 402(b) of the Social Security
Amendments of 1967 (42 U.S.C 1395b-1) but this waiver authority applies
only to experiments and demonstration projects conducted

[[Page 50919]]

under section 402(a) of that statute. We do not have similar authority
to change or waive such requirements under our general rulemaking
authority. Therefore, we cannot adopt the commenters' recommendations
to hold beneficiaries harmless for the financial responsibility related
to Part B coinsurance and deductible for covered claims.
Comment: Several commenters suggested that CMS permit the hospital
to retain amounts collected for the inpatient deductible related to the
Part A claim and offset any amount that may need to be collected under
Part B for the applicable coinsurance and deductible. The commenters
stated that hospitals would then refund amounts where the amount to be
collected related to the Part B claim(s) was less than the amount to be
refunded for the Part A claim.
Response: If a Part A claim for an inpatient stay is denied as not
reasonable and necessary and the hospital, but not the beneficiary, is
determined to be financially liable for the cost of the denied Part A
services pursuant to section 1879 of the Act, the hospital is
prohibited from collecting any amounts for the denied Part A services
from the beneficiary and must refund any amounts previously collected.
Failure to refund the amounts incorrectly collected may subject the
hospital to an indemnification action pursuant to section 1879(b) of
the Act and 42 CFR 411.402. We will issue subregulatory guidance about
how this refund should occur when there is both a Part A refund owed to
and a Part B liability owed from the beneficiary.
Comment: Several commenters opined that the proposal to conduct an
education campaign to alert beneficiaries to the potential changes in
cost-sharing if a claim for a Part A inpatient admission is denied and
subsequently rebilled under Part B was inadequate. These commenters
recommended that CMS consider requiring hospitals to issue an
additional standardized notice or a Frequently Asked Questions (FAQ)
sheet regarding Part B inpatient billing to all inpatients prior to
admission or after discharge, or adding information on Part B inpatient
billing to the existing Important Message from Medicare (IM).
Response: In the proposed rule, we explained that we intend to
conduct an educational campaign to ensure that beneficiaries are aware
of the on-going review of inpatient claims and the potential financial
liability resulting from a Part A claim denial with subsequent Part B
billing. We support the commenters' intent to inform beneficiaries.
However, we believe that providing all beneficiaries with an additional
notice or FAQ sheet on admission would likely create undue confusion
and concern for beneficiaries. Beneficiaries already receive many
notices and papers on hospital admission, and it is unlikely that a
beneficiary's admission will be subject to the Part B billing
procedures described in this rule. We believe that the commenters'
recommended approach to provide all inpatients with a standard notice
regarding post-discharge claims processing issues is excessive and
unwarranted. In addition, delivery of this information on admission
would violate our general approach to notice delivery, which is to
provide information at a time when it is applicable to the situation
and needed by the beneficiary. The commenters' recommended timing of
notice delivery, in most cases, would be well in advance of when a
beneficiary might need the information and would negatively impact its
utility.
In addition, we believe that adding information to the IM on Part B
inpatient billing or rebilling is not a feasible option. The IM, an
information collection approved by the Office of Management and Budget
(OMB), is used to inform and advise beneficiaries regarding discharge
appeal rights and the steps to take if they believe that their
discharge is premature, in accordance with section 1866(a)(1)(M) of the
Act. It would be inappropriate to include information about claims
processing policies on this notice and would likely be confusing to
beneficiaries because the decision to submit a Part B inpatient claim
is not a discharge. While there is existing statutory and regulatory
authority to enforce hospital compliance with the existing IM notice
requirements, we are unaware of existing authority that would enforce
compliance or penalize noncompliance with either revisions to the IM or
any separate notice requirement for hospitals to notify the beneficiary
before submitting a Part B inpatient claim.
Our longstanding educational strategies promote informed
beneficiaries, and we believe that educating beneficiaries before
entering the hospital and providing relevant information when it is
needed is the best approach. By providing knowledge of hospital billing
considerations in advance of their stay, beneficiaries with concerns
about the appropriateness of a Part A inpatient hospitalization can
discuss these issues with their physicians before or on admission.
Information on Part B inpatient billing will be added to the annual
Medicare & You publication and the existing publication, Are You a
Hospital Inpatient or Outpatient? If You Have Medicare--Ask! (CMS
Product No. 11435). We also will review other existing CMS publications
and include information where appropriate. In addition, for those
beneficiaries specifically affected by a Part A hospital inpatient
claim denial that may be subject to Part B billing or a Part B claim
submission for hospital inpatient services subsequent to a Part A claim
denial, contractors will include new messages on the Medicare Summary
Notice (MSN) to inform them of the action. These newly created MSN
messages explain that the hospital may submit the claim under Part B
and that different cost-sharing may apply. In this manner, we will
incorporate the commenters' suggestion on the timing of post-discharge
delivery of information regarding billing under Part B for inpatient
hospital services, consistent with our approach to delivering notices
at a time when the information is most relevant.
For these reasons, we are not adopting the commenters'
recommendations to require delivery of an additional standardized
notice or a Frequently Asked Questions (FAQ) sheet to inpatients prior
to admission or after discharge, or to amend the existing Important
Message from Medicare. However, we will continue to monitor the
effectiveness of our efforts to inform and educate beneficiaries and
may consider other options such as targeted beneficiary notice in
future rulemaking.
Comment: One commenter stated that the proposed rule subverts
longstanding demand billing policy established subsequent to the
settlement agreement in Sarrassat v. Sullivan (1989 WL 208444
(N.D.Cal.)). The commenter objected to CMS' proposal requiring
hospitals to submit a ``no-pay'' Part A claim with a Part B claim for
inpatient and/or outpatient services when hospitals self-audit and
determine that the claim(s) should be submitted under Part B. The
commenter explained that beneficiaries subject to the Sarrassat
settlement agreement have the right to request a demand bill for a Part
A coverage determination.
Response: We appreciate the comments submitted on this issue.
However, the terms of the settlement agreement in Sarrassat applied to
patients in SNFs, not hospitals. Nevertheless, we believe our proposed
policy in cases of hospital self-audits requiring submission of a ``no-
pay'' Part A claim with the hospital's Part B claim(s) does not
undermine demand billing policies. With demand billing, beneficiaries
have the right to request

[[Page 50920]]

claim submission and receive an official Medicare claim decision even
when a provider believes that items and services furnished will not be
covered. This right is not affected by the provisions of the proposed
rule. In the case of a self-audit by the hospital, if the hospital
determines the admission is covered under Part B rather than Part A, it
will submit a Part B claim along with a ``no-pay'' Part A claim, and
the contractor will make initial determinations on those claims. The
beneficiary retains the right to an official Medicare decision on
payment for the claim submitted by the hospital. Should the beneficiary
dispute the initial determination by the contractor that the services
are properly payable under Part B, the beneficiary may file an appeal
of the Part B claim under the existing procedures in 42 CFR Part 405,
Subpart I (76 FR 16640) and assert such concerns.
For these reasons, we are not adopting the commenters'
recommendations and are finalizing the provisions of the proposed rule
requiring the submission of a ``no-pay'' Part A claim with a Part B
claim for inpatient and/or outpatient services when hospitals self-
audit and determine that the claim(s) should be submitted as under Part
B without modification.
6. Applicable Beneficiary Liability: Hospital Services
In the Part B Inpatient Billing proposed rule (78 FR 16639), we
stated that increasing the number of billable Part B inpatient services
could affect beneficiary liability. In accordance with statute,
beneficiary cost-sharing under Part A is different (and, in some cases,
may be less) than under Part B. The CY 2013 Medicare Part A inpatient
deductible and coinsurance amounts, which are set in accordance with
statute, were recently announced in a notice published in the Federal
Register on November 21, 2012 (77 FR 69848 through 69850). Under Part
A, a beneficiary pays a one-time deductible for all hospital inpatient
services provided during the first 60 days in the hospital of the
benefit period for a year; therefore, an inpatient deductible does not
necessarily apply to all hospitalizations. The Medicare Part A
coinsurance only applies after the 60th day in the hospital. When the
Part A claim is denied because the inpatient admission is determined to
be not reasonable and necessary, the beneficiary is entitled to refunds
of any amounts he or she paid to the hospital for the Part A claim if
the hospital, but not the beneficiary, is held financially responsible
for denied services under section 1879 of the Act (42 CFR 411.402.)
However, under our proposed policy, beneficiaries would continue to be
liable for their usual Part B financial liability.
We stated in the proposed rule that beneficiaries would be liable
for Part B copayments for each hospital Part B outpatient or Part B
inpatient service and for the full cost of drugs that are usually self-
administered, which section 1861(s)(2)(B) of the Act does not include.
We noted that self-administered drugs are typically covered under
Medicare Part D, and beneficiaries who have Part D coverage may submit
a claim to their Part D plan for reimbursement of these costs. If a
beneficiary must receive the self-administered drug from a hospital,
rather than a community pharmacy, he or she would likely be subject to
higher out-of-pocket costs due to the hospital pharmacy's status as a
non-network pharmacy. Hospital billing systems, Part D reimbursement
rates, and drug utilization review requirements make it difficult for
hospitals to participate as a Part D network provider for these drugs.
Therefore, if coverage is available, consistent with 42 CFR 423.124(b),
beneficiaries would be responsible for the difference between the Part
D plan's allowance and the hospitals' charges, and the difference may
be significant.
Therefore, under our proposed Part B payment policy, some
beneficiaries who are entitled to coverage under both Part A and Part B
may have a greater financial liability for hospital services compared
to current policy, as they would be liable for additional Part B
services billed when the inpatient admission is determined not
reasonable and necessary. Accordingly, we solicited public comments on
whether we should consider additional policies to mitigate or prevent
this potential additional liability for beneficiaries.
Comment: Most commenters asserted that changing beneficiary
liability for hospital services after discharge, especially up to
several years later, is inappropriate and unfair. Many commenters
stated that while the proposed rule helps hospitals financially, it
would financially harm low-income and other beneficiaries, and
beneficiary advocates recommended that the proposal not be finalized
for this reason. Hospitals believed it would be administratively
burdensome and harmful to patient relations to bill beneficiaries for
changes in liability after their discharge and without advance notice.
Beneficiary advocates focused on beneficiaries' right to informed
consent, involvement in their plan of care, and advance knowledge of
liabilities, similar to the public comments we received in response to
the CY 2013 OPPS/ASC final rule with comment period (77 FR 68432). To
address these issues, the commenters recommended the following:
Changes in cost-sharing should be waived as in the A-B
rebilling demonstration, or Medicare should pay 100 percent of approved
charges. In return, the hospital would agree not to charge the
beneficiary for the cost of self-administered drugs.
Alternatively, beneficiaries could be held harmless for
any additional cost-sharing above their cost-sharing for the Part A
denied services.
Hospitals should have discretion in beneficiary billing
policies, so long as the policies are applied consistently across all
payers and patients.
One commenter requested that CMS clarify that hospitals must bill
beneficiaries for Part B cost-sharing. Several commenters expressed
concerns about being able to bill beneficiaries for Part B cost-sharing
many years after the services were provided. The commenters stated
that, in some cases, beneficiaries may have moved or may have died, and
collecting the coinsurance/deductible from the beneficiary would prove
difficult or impossible.
Response: We understand and appreciate the commenters' concerns.
However, CMS does not have authority to limit beneficiary liability for
Part B covered services. As we discussed in section XI.B.5. of the
preamble of this final rule, beneficiary liability is governed under
section 1879 of the Act. Under this section, the beneficiary is
typically not liable for costs associated with a Part A inpatient
service denied as not reasonable and necessary, and CMS has authority
to indemnify, if necessary, the beneficiary for any cost, including the
deductible and coinsurance, paid to the hospital (and to then treat
this indemnification as an overpayment to the hospital). However, CMS
does not have authority under section 1879 or any other section of the
Act to adjust costs to the beneficiary associated with a properly filed
Part B inpatient claim. Similarly, CMS does not have authority under
the statute to ``waive'' cost sharing liability or liability for the
cost of drugs that are usually self-administered as we had under the A/
B Rebilling Demonstration, nor does CMS have authority to ``make up''
for the beneficiary's liability by paying 100 percent of the Part B
charges or allowed amounts to hospitals.
For beneficiaries enrolled in Part B, we understand that the issue
of whether hospitals are required to bill the

[[Page 50921]]

beneficiaries for their Part B liabilities is governed by the
beneficiary inducement and anti-kickback laws and, therefore, falls
under the jurisdiction of the Office of the Inspector General (OIG). We
refer the commenters to the OIG regarding whether hospitals are
required to bill these beneficiaries for their Part B liabilities.
For beneficiaries not enrolled in Part B, hospitals should bill
Part B to ensure the claim enters the coordination of benefits cross-
over process in the event the beneficiary has coverage under a
supplemental or secondary insurance plan (we refer readers to section
XI.B.10. of the preamble of this final rule).
Comment: A few commenters noted that beneficiary liability amounts
under Part B that hospitals are unable to recover will become bad debt
under Medicare's payment rules.
Response: We agree that if a hospital is unable to recover
beneficiary liability payments for covered Part B services, those
amounts may become hospital Medicare bad debt. The hospital may claim
uncollected copayments for covered Part B inpatient services as bad
debt in accordance with the provisions of 42 CFR 413.89.
7. Applicable Beneficiary Liability: Skilled Nursing Facility Services
As discussed in section XI.A. of the preamble of this final rule,
the increased use of hospital observation services has a number of
implications in terms of a beneficiary's financial liability, one of
which involves the ability to qualify for Part A coverage of
posthospital SNF care. SNF coverage is affected because a hospital's
observation services are considered outpatient rather than inpatient
services, and section 1861(i) of the Act requires a qualifying 3-day
inpatient hospital stay for Part A SNF coverage. The importance of a
beneficiary's status as a hospital ``inpatient'' in terms of qualifying
for posthospital SNF coverage has also generated concerns about the
need to clarify any potential implications that the inpatient rebilling
policy may have in this area. The following discussion presents a
summary of the comments that we received on this topic, and our
responses.
Comment: Several commenters expressed concern about the financial
liability to patients or SNFs in cases where a patient had a 3-day
qualifying inpatient stay and transferred to the SNF for Part A
services, but the qualifying inpatient stay was subsequently denied and
determined to be not medically necessary. Commenters suggested that
there has been little direction from CMS regarding the financial
liability to the beneficiary or the SNF if the qualifying Part A
inpatient stay was determined to be not medically necessary.
Response: The Part B inpatient billing policy finalized in this
rule would not change CMS' longstanding policy regarding the financial
liability of the beneficiary or the SNF in situations where the
inpatient hospital stay is subsequently denied after SNF admission.
Under this policy, the 3-day inpatient hospital stay which
qualifies a beneficiary for ``posthospital'' SNF benefits need not
actually be Medicare-covered, as long as it is medically necessary. In
this particular context, section 20.1 of the Medicare Benefit Policy
Manual, Chapter 8 (available online at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/bp102c08.pdf), includes the
following in its discussion of the SNF benefit's qualifying inpatient
hospital stay requirement:
``. . . the qualifying hospital stay must have been medically
necessary. Medical necessity will generally be presumed to exist. When
the facts that come to the intermediary's attention during the course
of its normal claims review process indicate that the hospitalization
may not have been medically necessary, it will fully develop the case,
checking with the attending physician and the hospital, as appropriate.
The intermediary will rule the stay unnecessary only when
hospitalization for 3 days represents a substantial departure from
normal medical practice'' (emphasis added).
The ``substantial departure from normal medical practice'' language
was developed specifically to target those rare situations where the 3-
day stay is clearly unnecessary by any reasonable standard. For
example, the MAC could determine that a hospital stay was medically
unnecessary for purposes of qualifying for post-hospital SNF coverage
in situations where the care is so clearly unnecessary that it appears
that the patient was admitted to the hospital solely for the purpose of
attempting to qualify the beneficiary inappropriately for
``posthospital'' SNF benefits. Thus, a beneficiary's SNF coverage is
not necessarily invalidated by a retroactive denial of the qualifying
hospital stay, as long as the care provided during that hospital stay
can still meet the relatively broad definition of medical necessity
described above. Accordingly, the denial of the hospital stay itself
would affect coverage of the related SNF stay only in those instances
where it is further determined that ``hospitalization for 3 days
represents a substantial departure from normal medical practice.'' As
discussed above, for purposes of qualifying for SNF coverage, an
inpatient hospital stay that is retroactively denied after SNF
admission could still meet the relatively broad definition of medical
necessity set forth in the manual provision cited above.
In addition, the status of the beneficiaries themselves does not
change from inpatient to outpatient under the Part B inpatient billing
policy. Therefore, even if the admission itself is determined to be not
medically necessary under this policy, the beneficiary would still be
considered a hospital inpatient for the duration of the stay--which, if
it occurs for the appropriate duration, would comprise a ``qualifying''
hospital stay for SNF benefit purposes so long as the care provided
during the stay meets the broad definition of medical necessity
described above. This is consistent with the applicable statutory
language in section 1861(i) of the Act which, in defining ``post-
hospital'' SNF services, requires the beneficiary to be a hospital
``inpatient for not less than 3 consecutive days'', and the
implementing regulations at 42 CFR 409.30(a)(1), which require
``medically necessary inpatient hospital . . . care''.
Comment: Commenters expressed concern that the proposed rule was
not sufficient to reduce the trend toward more and longer observation
stays and that increasing observation stays would continue to harm
beneficiaries and prevent access to Medicare covered post-acute
services. Commenters suggested that the best way to provide
beneficiaries access to needed post-hospital skilled nursing facility
care is for CMS to count all days in observation toward the 3-day
inpatient hospital stay requirement for Medicare covered post-hospital
SNF care. Commenters suggested either modifying or eliminating the 3-
day requirement itself, or adjusting the definition of ``inpatient'' to
include beneficiaries receiving observation services. Regarding the
latter, one commenter cited the previous solicitation of public comment
in the SNF PPS proposed rule for FY 2006 on the feasibility of making
such an adjustment in the inpatient definition (70 FR 29099) as
evidence that we have the authority to make this kind of modification
administratively. While acknowledging that we ultimately declined to
adopt this approach in the FY 2006 SNF PPS final rule (70 FR 45050),
the commenter noted CMS' expressed intention to continue to review this
issue, and urged CMS to

[[Page 50922]]

consider once again the feasibility of taking such an action now.
Response: While we appreciate commenters' concerns regarding the
trend toward more and longer observation stays and the impact of this
on coverage of post-hospital SNF care, we believe that the policies
finalized in this final rule regarding Part B inpatient billing and
medical review of inpatient hospital admissions adequately address this
issue. As reflected in the proposed rule, we share the concerns of
commenters regarding the increases in the length of time that Medicare
beneficiaries spend receiving observation services, and the proposed
rule was intended to address those concerns. In the Part B Inpatient
Billing proposed rule, and again in the IPPS proposed rule, we
acknowledged concerns that hospitals appear to be responding to the
financial risk of admitting Medicare beneficiaries for inpatient stays
that might later be denied upon contractor review by electing to treat
beneficiaries as outpatients receiving observation services, rather
than admitting them as inpatients. As one step to address these
concerns, we proposed revisions to Part B inpatient billing policy in
the Part B Inpatient Billing proposed rule. To further address these
concerns, in the FY 2014 IPPS/LTCH PPS proposed rule, we aimed to
provide greater clarity regarding inpatient admission decisions and
Medicare payment by, among other things, addressing medical review
criteria for Medicare payment of inpatient admissions under Medicare
Part A. We believe that the policies reflected in the proposed rules
and adopted in this final rule appropriately address the concerns
expressed by stakeholders by lowering the risk associated with
inpatient stays and denials of inpatient stays.
The commenters suggested other approaches to addressing the effect
of extended observation stays on SNF coverage (that is, eliminating the
SNF benefit's qualifying 3-day hospital stay requirement, counting days
spent in observation specifically toward meeting that requirement, or
adjusting the definition of inpatient itself to include beneficiaries
receiving observation services). We have previously discussed similar
suggestions in the FY 2006 SNF PPS proposed rule (70 FR 29098-29100)
and final rule (70 FR 45050-45051), and we continue to have the same
concerns with those approaches as we expressed in the FY 2006 proposed
and final rules. Moreover, as discussed above, we believe that the
policies finalized in this FY 2014 IPPS final rule regarding Part B
inpatient billing and medical review of inpatient hospital admissions
appropriately address the issue of extended observation stays.
8. Time Limits for Filing Claims
Sections 1814(a)(1), 1835(a), and 1842(b)(3)(B) of the Act
establish time limits for filing Medicare Part A and B claims. The
regulations at 42 CFR 424.44 implement those sections of the Act and
require that all claims for services furnished on or after January 1,
2010, be filed within 1-calendar year after the date of service unless
an exception applies. In the November 29, 2010 final rule with comment
period titled, ``Medicare Program; Payment Policies under the Physician
Fee Schedule and Other Revisions to Part B for CY 2011'' (75 FR 73627)
in which Sec. 424.44 was modified, commenters requested that we create
an exception to the time limits for filing claims so that hospitals are
permitted to file inpatient Part B only claims for any inpatient cases
that are retrospectively reviewed by a Medicare Recovery Audit
Contractor (RAC) or other review entity and determined not to be
medically necessary in an inpatient setting. Commenters requested that
an exception be created at Sec. 424.44(b) to allow for the billing of
Part B inpatient and Part B outpatient claims when there is no coverage
under Part A for a hospital stay. We stated in the Part B Inpatient
Billing proposed rule (78 FR 16639 through 16640) that for the reasons
discussed in the November 29, 2010 final rule, we declined to create
such an exception and we continued to believe that was the correct
decision.
Under CMS Ruling 1455-R (78 FR 16614), we adopted (although we did
not endorse) the views of the Medicare Appeals Council and many ALJs
that subsequent Part B rebilling is allowed after the timely filing
period has expired. The Ruling states that subsequent Part B inpatient
and Part B outpatient claims that are filed later than 1-calendar year
after the date of service are not to be rejected as untimely by
Medicare's claims processing system as long as the original
corresponding Part A inpatient claim was filed timely in accordance
with 42 CFR 424.44. We stated that the Ruling would remain in effect
until the effective date of final regulations that result from the
proposed rule. At that time, we stated that this final rule would
supersede the Ruling's treatment of claims that providers file later
than 1-calendar year after the date of service.
Accordingly, in the Part B Inpatient Billing proposed rule (78 FR
16639), we proposed a new Sec. 414.5(b) that would require that claims
for billed Part B inpatient services be rejected as untimely when those
Part B claims are filed later than 1-calendar year after the date of
service. Our proposal would treat these Part B claims as new claims
subject to the timely filing requirements, instead of as adjustment
claims. We stated that this is consistent with longstanding Medicare
policy because an adjustment claim supplements information on a claim
that was previously submitted without changing the fundamental nature
of that original claim. In these Part B claim situations, however, the
fundamental nature of the originally filed claim is changed completely
(from a Part A claim to a Part B claim).
Therefore, in order to remove any ambiguity, we stated that if the
rule was finalized as proposed, billed Part B inpatient claims would be
rejected as untimely when those Part B claims are filed later than 1-
calendar year after the date of service. Moreover, because it is the
responsibility of providers to correctly submit claims to Medicare by
coding services appropriately, we stated that it is important to note
that the exception located at Sec. 424.44(b)(1), which extends the
time for filing a claim if failure to meet the deadline was caused by
error or misrepresentation of an employee, contractor, or agent of HHS
(commonly referred to as the ``administrative error'' exception) would
not apply in situations where a provider bills the originally submitted
Part A claim incorrectly. Finally, we reminded providers that, in
accordance with 42 CFR 405.926(n), determinations that a provider
failed to submit a claim timely are not appealable.
Over 300 commenters on the Part B Inpatient Billing proposed rule
objected to the proposal that claims for billed Part B inpatient
services would be rejected as untimely when those Part B claims are
filed later than 1-calendar year after the date of service. One
commenter supported the proposal.
Comment: A majority of the commenters proposed that CMS waive,
remove, eliminate, or not apply the 1-calendar year time limit to file
claims to billed Part B services. Commenters stated that it was both
unlawful and fundamentally unfair to apply the 1-calendar year time
limit to file claims to billed Part B services in situations when a
Medicare contractor denies a Part A claim on the ground that although
the medical care was reasonable and necessary, the inpatient admission
was not. Commenters stated that applying the 1-calendar year time limit
to file claims to billed Part B services was particularly troubling
because RACs may audit claims for services with dates

[[Page 50923]]

of service within the prior 3 years, and claims typically reviewed by
the RAC are more than 1 year old. In addition, commenters stated that
there is no time limit by which a RAC must complete its review of
claims requested for review. Commenters contended that the 1-calendar
year time limit to file Part B services could easily expire before the
RAC review of the Part A inpatient claim is completed or before it has
even begun. Commenters believed the proposed rule's time limit to file
claims leaves few, if any, of a hospital's denied Part A claims
eligible for billing. Therefore, commenters proposed that CMS waive,
remove, eliminate, or not apply the 1-calendar year time limit to
claims for medically necessary Part B inpatient services that were
furnished by hospitals.
Response: Although we agree that RACs may audit claims with dates
of service within the prior 3 years, we disagree with the commenters
that there is no time limit by which a RAC must complete its review of
claims requested for review. Medicare requires RACs to complete their
complex reviews of claims within 60 days from receipt of the medical
record documentation.
We also disagree that it is unlawful and fundamentally unfair to
apply the 1-calendar year time limit to file claims to billed Part B
services in situations when a Medicare contractor denies a Part A claim
on the ground that although the medical care was reasonable and
necessary, the inpatient admission was not. Sections 1835(a) and
1842(b)(3)(B) of the Act require that all Part B claims for services be
filed within 1-calendar year after the date of service.
Although we have the ability to create exceptions to the 1-calendar
year time limit to file claims, the existing exceptions at Sec.
424.44(b)(1)-(4) were created because providers, suppliers, and
beneficiaries, through no fault of their own, would be disadvantaged by
strict application of the 1-calendar year timely filing requirements.
Hospitals in this type of billing situation (unlike in the situations
addressed by the existing exceptions) have the ability to avoid being
disadvantaged by the 1-calendar year time limit to file claims and by
any subsequent RAC audit if they bill correctly by following Medicare's
guidelines for hospital inpatient admissions.
Furthermore, we disagree that it is unlawful and fundamentally
unfair to apply the 1-calendar year time limit to file claims for Part
B services, because hospitals are responsible for determining whether
the submission of a Part A or Part B claim is appropriate within the
applicable timeframe. In order to assist hospitals in making those
claim determinations and to make the billing process as fair as
possible for hospitals, we revised the hospital inpatient admissions
guidelines and external medical review criteria for those admissions.
In section XI.C. of the preamble of this final rule, we clarify those
guidelines and believe this guidance provides additional clarity. The
guidance and review criteria should reduce the volume of this type of
Part A claim denial and the need for hospitals to rebill under Part B.
Therefore, because hospitals are responsible for correctly submitting
claims to Medicare by coding services in accordance with the hospital
inpatient admission guidelines and because sections 1835(a) and
1842(b)(3)(B) of the Act require that all Part B claims for services be
filed within 1-calendar year after the date of service, we were not
persuaded to modify the rule based on these comments.
Comment: A number of commenters proposed that the time limit to
file claims requirements should be equal to, comparable to, or aligned
with, the RAC review timeframes. Commenters stated that it was
unreasonable that RACs have an audit review period of 3 years from the
date of service, and hospitals only have 1 calendar year from the date
of service to bill medically necessary Part B services that were
furnished. Commenters stated that it is impossible for a hospital to
file a Part B claim within 1 calendar year of the date of service when
the Part A claim denial occurs after the timely filing period expired.
Response: We disagree with the commenters that it is unreasonable
that Medicare does not align the RAC audit review time periods with the
1-calendar year time limit to file claims. Sections 1835(a) and
1842(b)(3)(B) of the Act require that all Part B claims for services be
filed within 1-calendar year after the date of service. In addition,
section 1893(h)(4)(B) of the Act indicates that recovery and audit
activities (with respect to Medicare payments) may be conducted
retrospectively for a period of not more than 4 fiscal years prior to
the current fiscal year. Medicare has instructed RACs not to attempt to
identify any overpayment or underpayment more than 3 years past the
date of the initial determination made on the claim. Although we have
the ability to create exceptions to the 1-calendar year time limit to
file claims, the existing exceptions at Sec. 424.44(b)(1) through
(b)(4) were created because providers, suppliers, and beneficiaries
through no fault of their own would be disadvantaged by strict
application of the 1-calendar year timely filing requirements.
Hospitals in this type of billing situation (unlike in the situations
addressed by the existing exceptions) have the ability to avoid being
disadvantaged by the 1-calendar year time limit to file claims and by
any subsequent RAC audit if they bill correctly by following Medicare's
guidelines for hospital inpatient admissions.
In order to assist hospitals in making those claim determinations
and to make the billing process as fair as possible for hospitals, we
revised the hospital inpatient admissions guidelines and external
medical review criteria for those admissions. In section XI.C. of the
preamble of this final rule, we clarify those guidelines and believe
this guidance provides additional clarity. The guidance and review
criteria should reduce the volume of this type of Part A claim denial
and the need for hospitals to rebill under Part B. Therefore, we are
not reducing the 4-fiscal year timeframe further or creating a new
exception to the 1-calendar year time limit to file claims for this
type of billing situation, and are not modifying the rule based on
these comments.
Comment: Several commenters stated that finalizing the proposed
rule with a 1-calendar year time limit to file claims will not lessen
the steady stream of hospital appeals. The commenters stated that
hospitals will continue to fully appeal to all levels any Part A claim
denials because of hospitals' inability to meet the 1-calendar year
time limit to file Part B claims.
Response: We believe the revised guidelines for hospital inpatient
admissions and external medical review criteria for those admissions
published in section XI.C. of the preamble of this final rule are clear
and should reduce the volume of Part A claim denials and appeals. We
expect these guidelines to reduce the volume of Part A claim denials
and subsequent appeals because these guidelines provide additional
clarification regarding the circumstances under which a beneficiary
should be admitted as an inpatient and of the criteria that will be
used during the medical review process. Although we believe our
previous guidelines were clear, we believe the revised guidelines will
promote greater shared or mutual understanding between hospitals,
physicians, and Medicare's medical review contractors. That is, the
likelihood that hospitals or physicians will have a different
understanding than Medicare's medical review contractors of what
constitutes an appropriate inpatient stay will be significantly reduced
as a result of the

[[Page 50924]]

guidelines published in section XI.C. of the preamble of in this final
rule. As a result, we anticipate a significant reduction in the volume
of Part A claim denials and appeals. Therefore, we are not modifying
our proposal based on these comments.
Comment: A number of commenters proposed that CMS permanently adopt
the interim time limit to file claims policy in the CMS 1455-R Ruling.
The commenters believed that hospitals should have 180 days from the
date of receipt of the final or binding unfavorable appeal decision (or
subsequent dismissal notice) of the denied Part A claim to submit a
Part B claim.
Response: In the CMS 1455-R Ruling, we stated that until final
regulations could be issued, we were temporarily adopting, but not
endorsing, the views of the Medicare Appeals Council and many ALJs that
subsequent Part B billing is supported by concepts of adjustment
billing. However, as we indicated in the proposed rule, consistent with
longstanding Medicare policy, an adjustment claim supplements
information on a previously submitted claim without changing the
fundamental nature of the original claim. The concept of adjustment
billing employed by the Medicare Appeals Council and many ALJs, and
supported by the commenters, is inconsistent with longstanding Medicare
policy because, in these situations, the nature of the original claim
is fundamentally changed from a Part A claim to a Part B claim. When
this type of Part A claim denial occurs and a hospital subsequently
submits a Part B claim for the denied services, the hospital is
submitting a new Part B claim (it is not adjusting the original Part A
claim). Because hospitals are responsible for determining whether
submission of a Part A or Part B claim is appropriate within the
applicable timeframe, permanently adopting the concept of adjustment
billing used in the CMS 1455-R Ruling would allow hospitals to avoid
the responsibility of correctly submitting claims to Medicare.
Therefore, we were not persuaded to modify the rule based on these
comments.
However, because the Medicare Appeals Council and many ALJs did not
consider our longstanding policy (that Part A claims cannot be adjusted
into Part B claims) to be clear and because many commenters considered
our timely filing proposal in the proposed rule to be unfair, we will
permit hospitals to follow the Part B billing timeframes established in
the Ruling after the effective date of this rule, provided (1) the Part
A claim denial was one to which the Ruling originally applied; or (2)
the Part A inpatient claims has a date of admission before October 1,
2013, and is denied after September 30, 2013 on the grounds that
although the medical care was reasonable and necessary, the inpatient
admission was not. We believe our decision is fair to all relevant
stakeholders.
Comment: A number of commenters proposed that hospitals should be
able to obtain full Part B payment for billed medically necessary Part
B services through an adjustment claim process. The commenters stated
that, under existing Medicare procedures, hospitals can make changes to
a filed claim using an adjustment bill process, and those adjustment
bills are not subject to the time limit to file claims restrictions. In
addition, the commenters stated that ALJs and the Departmental Appeals
Board (DAB) agreed that the principles of administrative finality
supersede timely filing rules in this context and these principles
permit an adjustment to be made to the Part A claim. The commenters
stated that the services for which hospitals are seeking reimbursement
are the same services which were originally submitted for payment. The
commenters stated that hospitals are willing to provide the information
necessary to obtain full Part B payment through an adjustment process,
and this process can be designed by Medicare to fit the needs of this
particular situation. Therefore, the commenters proposed that hospitals
should be permitted to obtain full Part B payment for billed medically
necessary Part B services through an adjustment claim process.
Response: As we stated in the proposed rule, consistent with
longstanding Medicare policy, an adjustment claim supplements
information on a previously submitted claim without changing the
fundamental nature of the original claim. However, under the concept of
adjustment billing advocated by the commenters, the nature of the
original claim is fundamentally changed when the claim is changed from
a Part A claim to a Part B claim because Part A and Part B have
different legal structures, regulations, payment methodologies, claims
processing systems, and coding structures. In addition, because
hospitals are responsible for determining whether submission of a Part
A or Part B claim is appropriate within the applicable timeframe,
permanently adopting the concept of adjustment billing so that
hospitals can change claims from Part A claims to Part B claims would
allow hospitals to avoid their responsibility to correctly submit
claims to Medicare. Therefore, because Part A claims cannot be adjusted
into Part B claims and hospitals are responsible for determining
whether submission of a Part A or Part B claim is appropriate within
the applicable timeframe, we were not persuaded to modify the rule
based on these comments.
Comment: A few commenters proposed that CMS use the existing
authority under the Affordable Care Act to create an exception to the
time limits for filing claims so that hospitals and physicians are
permitted to file Part B claims when Part A claims are retrospectively
reviewed by RACs and determined not to be reasonable and necessary in
an inpatient setting. The commenters proposed, for example, that
hospitals be permitted to file claims for Part B services no later than
30 days after the date of the final appeal decision, or be permitted to
file Part B claims 180 days after the date the contractor communicates
its decision that the Part A inpatient admission was denied, or that
Medicare should reset the timely filing period to allow the submission
of Part B claims following an appeal of a denied claim that was
reviewed by a RAC or ALJ determination.
Response: Although we have the ability to create exceptions to the
1-calendar year time limit to file claims, the existing exceptions at
Sec. 424.44(b)(1) through (b)(4) were created because providers,
suppliers, and beneficiaries, through no fault of their own, would be
disadvantaged by strict application of the 1-calendar year timely
filing requirements. Hospitals in this type of billing situation
(unlike in the situations addressed by the existing exceptions) have
the ability to avoid being disadvantaged by the 1-calendar year time
limit to file claims and by RAC audits if they bill correctly by
following Medicare's guidelines for hospital inpatient admissions.
Furthermore, hospitals are responsible for determining whether
submission of a Part A or Part B claim is appropriate within the
applicable timeframe. Therefore, we are not modifying the rule based on
these comments.
Comment: Many commenters proposed that CMS change the time limit to
file a Part B claim from 1-calendar year after the date of service to 1
year or 120 days from the date of denial of the Part A claim, or if the
hospital appeals, 120 or 180 days after the unfavorable decision. The
commenters stated that this proposal matches the current
redetermination

[[Page 50925]]

and reconsideration filing timeframes and allows hospitals to bill and
be paid for medically necessary care that was incorrectly billed under
Part A.
Response: Sections 1835(a) and 1842(b)(3)(B) of the Act require
that all Part B claims for services be filed within 1 calendar year
after the date of service. Because the law requires Part B claims be
filed within 1-calendar year after the date of service, we do not have
the legal authority to change that timeframe to the date of denial of
the Part A claim or from the date of a final or binding appeal decision
as proposed by the commenters.
Although we have the ability to create exceptions to the 1-calendar
year time limit to file claims, the existing exceptions at Sec.
424.44(b)(1) through (b)(4) were created because providers, suppliers,
and beneficiaries, through no fault of their own, would be
disadvantaged by strict application of the 1-calendar year timely
filing requirements. Hospitals in this type of billing situation
(unlike in the situations addressed by the existing exceptions) have
the ability to avoid being disadvantaged by the 1-calendar year time
limit to file claims and by RAC audits if they bill correctly by
following Medicare's guidelines for hospital inpatient admissions.
Therefore, we are not modifying the rule based on these comments.
Comment: Several commenters proposed that the time limit to file
claims be based on the date of any decision point in the review or
appeal process of the Part A claim. The commenters proposed, for
example, that a 120 or 180 day time limit to file a Part B claim could
start on the date the Part A claim is denied, or a 1 year time limit to
file a Part B claim could start on the date the final appeal was
adjudicated. Commenters stated that because Recovery Auditors (formerly
known as RACs) and other contractors have a longer recovery and audit
review period, contractors have an incentive to review older claims so
there is no possibility to bill the Part B claims within the timely
filing period.
Response: We agree that the law permits Recovery Auditors to
identify any overpayment or underpayment more than 1-calendar year past
the date of the initial determination made on the claim. Pursuant to
section 1893(h)(4)(B) of the Act, Recovery Auditors have the authority
to conduct recovery and audit activities (with respect to Medicare
payments) retrospectively for a period of not more than 4 fiscal years
prior to the current fiscal year. Medicare, though, has instructed
Recovery Auditors not to attempt to identify any overpayment or
underpayment more than 3 years past the date of the initial
determination made on the claim, and Recovery Auditors currently select
claims with the highest probability of error within the 3-year span.
We acknowledge provider concern and are also releasing revised
admission guidance and medical review criteria. This provides
physicians with a clear benchmark for determining the appropriateness
of an inpatient admission. We note that a significant number of the
claims submitted improperly, and subsequently reviewed and recouped,
are for elective or minor surgical procedures. We expect the majority
of such improper payments to be resolved with the implementation of the
2-midnight instruction. In addition, review contractors are instructed
in the final rule that inpatient hospital claims with lengths of stay
greater than 2 midnights after the formal admission following the order
will be presumed generally appropriate for Part A payment and will not
be the focus of medical review efforts absent evidence of systematic
gaming, abuse, or delays in the provision of care in an attempt to
qualify for the 2-midnight presumption.
Moreover, sections 1835(a) and 1842(b)(3)(B) of the Act require
that all Part B claims for services be filed within 1-calendar year
after the date of service. Because the law requires Part B claims be
filed within 1-calendar year after the date of service, we do not have
the legal authority to change that timeframe to the date of any
decision point in the review or appeal process of the Part A claim.
Although we have the ability to create exceptions to the 1-calendar
year time limit to file claims, the existing exceptions at Sec.
424.44(b)(1)-(4) were created because providers, suppliers, and
beneficiaries, through no fault of their own, would be disadvantaged by
strict application of the 1-calendar year timely filing requirements.
Hospitals in this type of billing situation (unlike in the situations
addressed by the existing exceptions) have the ability to avoid being
disadvantaged by the 1-calendar year time limit to file claims and by
Recovery Auditor audits if they bill correctly by following Medicare's
guidelines for hospital inpatient admissions. Therefore, we are not
modifying the rule based on these comments.
Comment: A few commenters stated that hospitals have the option to
proceed through a 5-stage appeal process and that if the full period of
time is taken for each level of appeal, the appeals process for the
denied Part A claim can take more than 2 years. Therefore, the
commenters proposed that the time limit to file claims not apply to the
billed Part B claim if the Part A claim was filed timely and the Part A
claim appeal process was initiated timely.
Response: Hospitals are responsible for determining whether
submission of a Part A or Part B claim is appropriate within the
applicable timeframe. In order to assist hospitals in making those
claim determinations and to make the billing process as fair as
possible for hospitals, we revised the hospital inpatient admissions
guidelines and external medical review criteria for those admissions.
We clarify in section XI.C. of the preamble of this final rule those
guidelines and believe this guidance provides additional clarity.
Although we have the ability to create exceptions to the 1-calendar
year time limit to file claims, the existing exceptions at Sec.
424.44(b)(1) through (b)(4) were created because providers, suppliers,
and beneficiaries, through no fault of their own, would be
disadvantaged by strict application of the 1-calendar year timely
filing requirements. Hospitals in this type of billing situation
(unlike in the situations addressed by the existing exceptions) have
the ability to avoid being disadvantaged by the 1-calendar year time
limit to file claims and by RAC audits if they bill correctly by
following Medicare's guidelines for hospital inpatient admissions.
Comment: Commenters stated that because Medicare allowed rebilling
under the RAC demonstration program and the Part A to B demonstration
program and because ALJ rulings indicate that Medicare's contractors
have the authority to address the overall claim at the time of
reopening, Medicare has acknowledged that rebilling post denial or post
appeal is feasible. Several commenters proposed that CMS consider the
denied Part A claim as a reopened claim and that the only time
constraint should be based on the appeal timeline or be 1 year from the
date of reopening.
Response: We temporarily permitted billing of claims to Medicare
Part B beyond 1-calendar year after the date of service in the RAC
demonstration program and the Part A to B demonstration program because
those programs were limited in scope and experimental in nature. Those
programs were used to gather information regarding the feasibility and
potential usefulness of such billing practices. They are not precedent
setting Medicare billing programs. Longstanding Medicare policy
prohibits such billing because hospitals are responsible for

[[Page 50926]]

determining whether submission of a Part A or Part B claim is
appropriate within the applicable timeframe.
In addition, Part A claims cannot be reopened and ``adjusted'' into
Part B claims because the Medicare claims processing systems changes
that would be required in order to implement those types of adjustments
(from Part A to Part B) are impossible for Medicare's systems
maintainers to implement and sustain. If a Part A claim was reopened
and subsequently rebilled or ``adjusted'' so that the Part B services
are billed on that reopened claim, the nature of the original claim
fundamentally changes from a Part A claim to a Part B claim. Besides
being contrary to longstanding Medicare policy, it is impossible for
Medicare to establish and sustain a claim processing system that
changes Part A claims into Part B claims because Parts A and B have
different legal structures, regulations, payment methodologies, and
coding structures. Therefore, we were not persuaded to modify the rule
based on these comments.
Comment: Several commenters proposed that the time limit to file
claims not apply to rebilled Part B claims based on the concept of
equitable tolling. The commenters stated that courts have determined
that the concept of equitable tolling applies when a party has been
induced or even tricked into allowing a filing deadline to pass. The
commenters stated hospitals file tens of thousands of claims each year,
and it would be impossible for a hospital to determine which of these
claims, even though originally paid by a Medicare contractor, will be
singled out later by a RAC (up to 3 years after the date of service)
and denied. The commenters believed hospitals are essentially being
induced into missing the timely filing deadline for the Part B claims
and, therefore, the commenters believed equitable tolling should apply
to allow hospitals to bill the Part B claims.
Response: The existing exceptions at Sec. 424.44(b)(1) through
(b)(4) were created because providers, suppliers, and beneficiaries,
through no fault of their own, would be disadvantaged by strict
application of the 1-calendar year time limit to file claims. Hospitals
in this type of billing situation (unlike in the situations addressed
by the existing exceptions) have the ability to avoid being
disadvantaged by the 1-calendar year time limit to file claims and by
RAC audits if they bill correctly by following Medicare's guidelines
for hospital inpatient admissions.
We disagree that hospitals are being induced or tricked into
missing the 1-calendar year time limit to file Part B claims because
hospitals are responsible for determining whether the submission of a
Part A or Part B claim is appropriate within the applicable timeframe.
Hospitals make Part A or Part B claim determinations by themselves; we
do not make those determinations for hospitals nor do we induce or
trick hospitals into filing Part A claims. We assist hospitals in
making claim determinations and make the billing process as fair as
possible by providing hospitals with clear hospital inpatient admission
guidelines and external medical review criteria for those admissions.
Although we believe our previous guidelines were clear, we believe
the revised guidelines presented in section XI.C. of the preamble of
this final rule will promote greater shared or mutual understanding
between hospitals, physicians, and Medicare's medical review
contractors. That is, the likelihood that hospitals or physicians will
have a different understanding than Medicare's medical review
contractors of what constitutes an appropriate inpatient stay will be
significantly reduced as a result of these revised guidelines. As a
result, we anticipate a significant reduction in the volume of Part A
claim denials and appeals. Therefore, we are not modifying the rule
based on these comments.
Comment: Several commenters stated that many Medicare contractors
are not able to properly acknowledge receipt of a hospital's Part A
claim appeal withdrawal and are not ready to accept Part B claims
pursuant to the interim policy in Ruling CMS-1455-R. The commenters
proposed that the time limits to file claims not be applied to any Part
A claim appeal a hospital withdraws prior to implementation of this
final rule. The commenters believed that all claims with a date of
service prior to the effective date of the final rule should be
governed by the policies in Ruling CMS-1455-R, regardless of whether
any administrative proceedings concerning such claims take place after
the effective date of the final rule. Another commenter asked whether a
hospital that withdraws a Part A claim appeal while the interim policy
in the Ruling is in effect, but the Medicare contractor does not
respond until after the effective date of the final rule, will be able
to bill under Part B for that claim. Another commenter asked whether a
hospital that withdraws a Part A claim appeal and the Medicare
contractor responds while the interim policy in the Ruling is still in
effect, have to bill the Part B claim prior to the effective date of
the final rule. Another commenter asked whether a Part A claim that is
denied while the interim policy in the Ruling is in effect and the
hospital decides to bill under Part B for that claim has to be filed
before the effective date of the final rule. Another commenter asked
whether a hospital can withdraw an appeal of the Part A claim after the
effective date of the final rule if the Part A claim was denied while
the interim policy in the Ruling was in effect. Another commenter asked
whether a Part B claim that was submitted while the interim policy in
the Ruling was in effect, but was not adjudicated by the Medicare
contractor before the effective date of this final rule, will be
processed in accordance with the interim policy of the Ruling.
Response: Because the Medicare Appeals Council and many ALJs did
not consider our longstanding policy (that Part A claims cannot be
adjusted into Part B claims) to be clear and because many commenters
considered our timely filing proposal in the proposed rule to be
unfair, we will permit hospitals to follow the Part B billing
timeframes established in the Ruling after the effective date of this
rule, provided (1) the Part A claim denial was one to which the Ruling
originally applied; or (2) the Part A inpatient claims has a date of
admission before October 1, 2013, and is denied after September 30,
2013 on the grounds that although the medical care was reasonable and
necessary, the inpatient admission was not. We believe that this
decision addresses the commenters' concerns and that our decision is
fair to all relevant stakeholders.
Comment: Two commenters proposed that the 1-calendar year time
limit to file claims should apply in situations where the provider's
self-audit results in submitting a Part B claim after a Part A claim
was initially submitted.
Response: As stated above, hospitals are responsible for
determining whether submission of a Part A or Part B claim is
appropriate within the applicable timeframe, and hospitals may self-
audit and correct this type of Part A billing error. If a hospital
self-audits and discovers that it mistakenly filed (and received
payment for) a Part A claim, the hospital must return that Part A
payment (including refunding any Part A cost sharing amounts collected
from the beneficiary or from a third party on behalf of the
beneficiary) and may file (and receive payment for) the Part B claim as
long as that Part B claim is filed within 1-calendar year after the
date of service. It is unnecessary to modify the rule based on these
comments because the comments are consistent with the proposed rule.

[[Page 50927]]

Comment: One commenter stated that CMS should coordinate the time
limit to file claims with Medigap plans timely filing requirements.
Response: Section 1882(c)(3)(A) of the Act obligates a Medigap plan
to make a payment determination on the basis of the information
contained in Medicare's electronic notice to the Medigap plan. We
believe this requirement overrides any timely filing requirement that a
Medigap plan may have and obligates the Medigap plan to make payment
when a beneficiary incurs a new cost-sharing obligation (for example,
when a hospital submits a new Part B claim that is processed and paid
by Medicare). Therefore, we are not modifying the final rule based on
this comment.
Comment: One commenter proposed that claims for Part B inpatient
services be rejected as untimely when those Part B claims are filed
later than 1 calendar year after the date of service, the date of Part
A claim denial, or the date of the binding unfavorable decision on
appeal of a Part A denied claim, whichever is longer.
Response: Sections 1835(a) and 1842(b)(3)(B) of the Act require
that all Part B claims for services be filed within 1-calendar year
after the date of service. Because the Act requires Part B claims be
filed within 1-calendar year after the date of service, we do not have
the legal authority to change that timeframe to the various timeframes
suggested by the commenter.
Although we have the ability to create exceptions to the 1-calendar
year time limit to file claims, the existing exceptions at Sec.
424.44(b)(1) through (b)(4) were created because providers, suppliers,
and beneficiaries, through no fault of their own, would be
disadvantaged by strict application of the 1-calendar year timely
filing requirements. Hospitals in this type of billing situation
(unlike in the situations addressed by the existing exceptions) have
the ability to avoid being disadvantaged by the 1-calendar year time
limit to file claims and by RAC audits if they bill correctly by
following Medicare's guidelines for hospital inpatient admissions.
Therefore, we are not modifying the rule based on this comment.
Comment: One commenter supported the proposed rule.
Response: We appreciate the commenter's support.
In summary, although we have the ability to create exceptions to
the 1-calendar year time limit to file claims, the existing exceptions
at Sec. 424.44(b)(1)-(4) were created because providers, suppliers,
and beneficiaries, through no fault of their own, would be
disadvantaged by strict application of the 1-calendar year timely
filing requirements. Hospitals in this type of billing situation
(unlike in the situations addressed by the existing exceptions) have
the ability to avoid being disadvantaged by the 1-calendar year time
limit to file claims and by RAC audits if they bill correctly by
following Medicare's guidelines for hospital inpatient admissions.
In order to assist hospitals in making those claim determinations
and to make the billing process as fair as possible for hospitals, we
revised the hospital inpatient admissions guidelines and external
medical review criteria for those admissions. In section XI.C. of the
preamble of this final rule, we clarify those guidelines and believe
this guidance provides additional clarity. The guidance and review
criteria should reduce the volume of this type of Part A claim denial
and the need for hospitals to rebill under Part B. Therefore, we are
not reducing the 4-fiscal year recovery and audit timeframe further or
creating a new exception to the 1-calendar year time limit to file
claims for this type of billing situation, and are not modifying the
rule.
We are finalizing the regulatory text of new Sec. 414.5(c) as
proposed. (This text was proposed as Sec. 414.5(b) but has been
redesignated as Sec. 414.5(c) in this final rule.) However, we are
modifying what we stated in the preamble of the proposed rule regarding
the applicability of the CMS-1455-R Ruling and this final rule to
certain situations. Specifically, hospitals are permitted to follow the
Part B billing timeframes established in the CMS-1455-R Ruling
regarding appeals and the submission of Part B claims after the
effective date of the final rule, provided (1) the Part A inpatient
claim denial was one to which the Ruling originally applied; or (2) the
Part A inpatient claim has a date of admission before October 1, 2013
(the effective date of this final rule), and is denied after September
30, 2013, on the grounds that the medical care was reasonable and
necessary, but the inpatient admission was not. Therefore, we are
finalizing new Sec. 414.5(c), but we will continue to apply the Ruling
to the situations described above.
9. Appeals Procedures
As explained in the Part B Inpatient Billing proposed rule (78 FR
16640), and in CMS Ruling 1455-R, issued concurrently with the proposed
rule (78 FR 16614), if a hospital is dissatisfied with an initial or
revised determination by a Medicare contractor to deny a Part A claim
for an inpatient admission as not reasonable and necessary, the
hospital may either submit Part B inpatient or outpatient claims
(consistent with this proposed rule) or file a request for appeal of
the denied Part A claim in accordance with the procedures in 42 CFR
Part 405, Subpart I. In order to prevent duplicate billing and payment,
a hospital may not have simultaneous requests for payment for the same
services provided to a single beneficiary on the same dates of service
(IOM Pub. 100-4, Chapter 1, section 120). This includes requests for
payment under both Medicare Part A and Part B. Thus, we explained that
if a hospital chooses to submit a Part B claim for payment following
the denial of an inpatient admission on a Part A claim, the hospital
cannot also maintain its request for payment for the same services on
the Part A claim (including an appeal of the Part A claim). In this
situation, before the hospital submits a Part B claim, it must ensure
that there is no pending appeal request on the Part A claim. (A pending
appeal means an appeal for which there is no final or binding decision
or dismissal.) We proposed that if the hospital has filed a Part A
appeal, the appeal must be withdrawn, or the decision must be final or
binding, before the Part B claim can be processed. If a hospital
submits a Part B claim for payment without withdrawing its appeal
request, the Part B claim would be denied as a duplicate. In addition,
once a Part B claim is filed, there would be no further appeal rights
available with respect to the Part A claim. However, the hospital and
beneficiary would have appeal rights with respect to an initial
determination made on the Part B claim under existing policies set
forth at 42 CFR Part 405, Subpart I.
We also proposed that if a beneficiary files an appeal of a Part A
inpatient admission denial, a hospital cannot utilize the Part B
billing process proposed in this rule to extinguish a beneficiary's
appeal rights. Therefore, the hospital's submission of a Part B claim
would not affect a beneficiary's pending appeal or right to appeal the
Part A claim. If a beneficiary has a pending Part A appeal for an
inpatient admission denial, any claims rebilled under Part B by the
hospital would be denied as duplicates by the Medicare contractor. As
we explained in the Part B Inpatient Billing proposed rule (78 FR
16640), in order for the Part B claim(s) to be processed, the Part A
appeal must be final or binding, or dismissed following a request for
withdrawal. For example, if a beneficiary receives an unfavorable
reconsideration on a Part A inpatient claim and does not file a

[[Page 50928]]

timely request for hearing before an administrative law judge (ALJ),
the reconsideration decision becomes binding. At that point, the
hospital could submit a Part B claim, provided it either is a claim
controlled by the provisions of CMS Ruling 1455-R, or it is a claim
that has been filed within 12 months from the date of service (proposed
42 CFR 414.5(b) and 42 CFR 424.44).
We also explained in the proposed rule that beneficiaries who are
not enrolled in Medicare Part B may be liable for the cost of items and
services associated with a hospital stay when billed under the Part B
billing process proposed in the proposed rule. We believe that some
beneficiaries who are not enrolled in Medicare Part B may have other
health insurance that might pay for some or all of the Part B items and
services. If a beneficiary is not enrolled in Medicare Part B, we
encouraged hospitals to submit a Part B claim to Medicare before
billing the beneficiary so that, when appropriate, the beneficiary's
supplemental insurer receives the claim.
In the proposed rule and in CMS Ruling 1455-R, we explained the
scope of review of an appeals adjudicator in the context of our
proposed Part B billing policy. As noted in CMS Ruling 1455-R, a large
number of recent appeal decisions for Part A inpatient admission claim
denials by Medicare review contractors affirmed the Part A inpatient
admission denial, but ordered that payment be issued as if services
were provided at the outpatient or ``observation'' level of care under
Medicare Part B. These decisions ordered payment under Part B (or
consideration of payment for services furnished that the contractor
determined to be covered and payable under Part B) even though a Part B
claim had not been submitted for payment. We also explained that
hospitals are solely responsible for submitting claims for items and
services provided to beneficiaries and determining whether submission
of a Part A or Part B claim is appropriate. Once a hospital submits a
claim, the Medicare contractor makes an initial determination and
determines any payable amount (42 CFR 405.904(a)(2)). Under existing
Medicare policy, if such a determination is appealed, an appeals
adjudicator's scope of review is limited to the claim(s) that are
before them on appeal, and such adjudicators may not order payment for
items or services that have not yet been billed or have not yet
received an initial determination. (We refer readers to sections
1869(a)(3)(B)(i), 1869(b)(1)(A), and 1869(c)(3)(B)(i) of the Act and 42
CFR 405.920, 405.940, 405.948, 405.954, 405.960, 405.968, 405.974,
405.1000, 405.1032, 405.1100, 405.1112, and 405.1128 of the
regulations.) For example, if a hospital submits an appeal of a
determination that a Part A inpatient admission was not reasonable and
necessary, the only issue before the adjudicator is the propriety of
the Part A claim, not an issue involving any potential Part B claim the
hospital has not yet filed. In making a decision on that Part A claim,
an appeals adjudicator may not develop information, or make a finding,
with respect to a Part B claim that does not exist.
Thus, under the billing processes described in the proposed rule,
if a hospital appeals a Part A inpatient admission denial and receives
a decision indicating that payment may not be made under Part A,
appeals adjudicators may not order payment for items and services not
yet billed under Part B. Rather, payment for items and services that
may be covered under Part B may only be made in response to a Part B
claim submitted by the hospital that is timely filed, as proposed under
proposed 42 CFR 414.5(b) and 42 CFR 424.44.
Comment: Many commenters expressed concerns about CMS'
clarification of the scope of review of an appeals adjudicator during
appeals of Part A inpatient admission claim denials in the context of
Part B billing, and requested that CMS remove the restriction. Many
commenters characterized the clarification of the scope of review as a
change or restriction on an adjudicator's existing scope of review and
commented that CMS does not have the authority to limit the scope of
review. One commenter suggested that CMS conduct a comprehensive
assessment of the impact of reducing adjudicator authority,
specifically the ALJ, and publish such an assessment for comment before
making any changes. Other commenters expressed concerns about the scope
of review, asserting that it is only at the ALJ level where a fair and
comprehensive review of the RAC's denial takes place, that ALJs and
other adjudicators should be able to order equitable remedies, and that
favorable decisions issued by ALJs are accorded little or no
precedential value by RACs because RACs deny substantially similar
claims without regard to previous ALJ decisions.
Response: As explained in the proposed rule and in CMS Ruling 1455-
R, a large number of recent appeal decisions for Part A inpatient
admission claim denials by Medicare review contractors have affirmed
the Part A inpatient admission denial, but ordered that payment be
issued as if services were provided at the outpatient or
``observation'' level of care under Medicare Part B. In these cases,
appeals adjudicators made decisions with respect to payment, and in
some cases, coverage, regarding services that are paid under Medicare
Part B, even though a Part B claim had not been submitted by the
provider. As we explained, hospitals are solely responsible for
submitting claims for items and services provided to beneficiaries and
determining whether submission of a Part A or Part B claim is
appropriate. Following the submission of a claim by a hospital, the
Medicare contractor makes an initial determination regarding coverage
and determines any payable amount (42 CFR 405.904(a)(2)), and if that
determination is appealed, appeals adjudicators make findings with
respect to the contractor's initial determination on the specific claim
submitted by the hospital.
We disagree with the commenters who characterized our explanation
of the scope of review during appeals of Part A inpatient admission
claim denials in the context of Part B billing as a restriction of an
adjudicator's existing scope of review. As explained in the proposed
rule and in CMS Ruling 1455-R, existing Medicare policy provides that
an appeals adjudicator's scope of review is limited to the initial
determination(s) made on the claim(s) that are before them on appeal
(sections 1869(a)(3)(B)(i), 1869(b)(1)(A), and 1869(c)(3)(B)(i) of the
Act; 42 CFR 405.920, 405.940, 405.948, 405.954, 405.960, 405.968,
405.974, 405.1000, 405.1032, 405.1100, 405.1112, and 405.1128 of the
regulations). This policy has been in place since 2005 with the
publication of the interim final rule with comment period, ``Medicare
Program: Changes to the Medicare Claims Appeals Procedures'' (70 FR
11420).\195\ Adjudicators may not order payment for items or services
that have not yet been billed or have not yet received an initial
determination. As evidenced by the numerous decisions which reached
issues of coverage and/or payment for services under Part B

[[Page 50929]]

when no Part B claim was filed, we believe it is necessary to clarify
that such findings are premature and, consistent with longstanding
policy, can only be made following submission of a Part B claim by a
hospital.
---------------------------------------------------------------------------

\195\ In addition, we note that prior to the 2005 amendments to
the fee-for-service claims appeals process, an appeals adjudicator's
scope of review was similarly limited to the initial
determination(s) made on the claim(s) before them on appeal. We
refer readers to 42 CFR 405.715 (for Part A reconsiderations); 42
CFR 405.807(a) and 405.810 (for Part B review determinations); 42
CFR 405.821 (for Part B hearing officer hearings); 42 CFR 405.720
and 405.855 and 20 CFR 404.906(a) (for ALJ hearings); 20 CFR 404.967
(for Appeals Council review).
---------------------------------------------------------------------------

As we explained in the proposed rule, it is the responsibility of
the hospital to determine whether a Part A or Part B claim should be
submitted for the items and services furnished to the patient (78 FR
16640). Based on the claim submitted to the Medicare contractor, the
contractor issues an initial determination with respect to coverage and
payment for the items and/or services on the claim. That initial
determination may then be appealed with adjudicators making findings
with respect to the contractor's initial determination on the claim. As
noted previously, this is an explanation of a longstanding policy
merely applied to the context of our Part B inpatient billing policy,
and is not a new restriction on the scope of review. Therefore, we do
not believe it is necessary to undertake an impact assessment on this
aspect of the proposed rule.
We believe each level of the appeals process provides appellants
with a fair, independent, and comprehensive review of the issues raised
in the appeal. Contractor personnel who were involved in the initial
determination are precluded from making decisions related to the
redetermination (42 CFR 405.948). At the reconsideration level, CMS
contracts with organizations that are independent of claims processing
contractors. At both levels of appeal (the redetermination and
reconsideration), appellants are able to submit evidence and arguments
to support their position that the initial determination was incorrect
and contractors consider that information in issuing their respective
decisions. In addition, when the medical necessity of items or services
is at issue during the reconsideration, the Qualified Independent
Contractor (QIC) utilizes a panel of physicians or health care
professionals to review the facts and circumstances in the case. We
believe these processes demonstrate that all levels in the appeals
process, including those that precede the ALJ level, offer appellants a
fair, independent, and comprehensive review of the issues related to
the claim(s) submitted.
We also disagree with commenters that suggested ALJs and other
appeals adjudicators should be able to order equitable remedies in
their decisions. Appeals adjudicators in the administrative process
have decisional independence in their decision-making. However, appeals
adjudicators do not issue decisions that include equitable remedies in
the context of Medicare claims appeals. Adjudicators review the
contractor's initial determination(s) on the claim for items and
services furnished to a beneficiary, and issue a decision with respect
to that initial determination. For example, a QIC reviews initial
determinations, and its decision must either reverse or affirm (in
whole or in part) the initial determination including the
redetermination that is before them (section 1869(c)(3)(B)(i) of the
Act; 42 CFR 405.974(a)). ALJs issue decisions that include findings of
fact, conclusions of law and reasons for the decision based on the
evidence offered at the hearing or otherwise admitted into the hearing
record (42 CFR 405.1046(a)). Furthermore, QICs and ALJs and the
Medicare Appeals Council are bound by Medicare laws, regulations, CMS
Rulings, and national coverage determinations and give substantial
deference to CMS program guidance and local coverage determinations to
the extent such policies are applicable in the appeal (42 CFR
405.968(b), 405.1060(b)(1) and (c), 405.1062, and 405.1063). Neither
the Medicare statute nor the Secretary's implementing regulations grant
ALJs or other adjudicators the authority to order equitable remedies.
The Secretary exercises her authority to administer this administrative
review scheme--which includes ALJs and other adjudicators--by
proceeding through notice-and-comment rulemaking. The scope of review
in the appeals process, the limitations on decisions, and the
authorities that bind adjudicators are set forth in regulation, and
beyond that there is no residual authority of ALJs or other
adjudicators to grant relief (equitable or otherwise) in excess of that
which is authorized by the Medicare statute and regulations. Given the
scope of review in the appeals process, the limitations on decisions
set forth in the regulations, and the authorities that bind
adjudicators, we do not believe adjudicators are authorized to order
equitable remedies as suggested by the commenters.
Finally, in the final rule, ``Medicare Program: Changes to the
Medicare Claims Appeals Procedures'' (74 FR 65296, 65327), we declined
to afford precedential weight to ALJ or Medicare Appeals Council
decisions. We explained that coverage and liability determinations on
Medicare claims are largely unique to the specific set of facts in a
given case, and requiring precedential authority or deference to
certain decisions would prove extremely difficult. Similarly, as noted
in the public comments received on the Part B Inpatient Billing
proposed rule, the decision to admit a patient as an inpatient involves
unique, complex issues that require clinical judgment of the treating
physician. For these reasons, we continue to believe it would be
inappropriate to afford precedential weight or require deference to
appeals decisions on inpatient admissions even in situations where the
admissions involve a similar set of facts or issues.
Accordingly, we are not adopting the commenters' recommendations
with respect to expanding an appeals adjudicator's scope of review.
Comment: One commenter objected to CMS' clarification regarding the
scope of review, suggesting that it is based on an unnecessary
distinction made between Part A and Part B claims review, processing,
and appeals. The commenter suggested that changes in the structure of
Medicare contracts and the appeals process support the notion that
adjudicators should be able to determine whether services are payable
under Title XVIII as a whole rather than as Part A and Part B services.
Response: Although contracting reform consolidated contractors so
that a single contractor processes both Part A and Part B claims, and
appeals process revisions created a uniform appeals process for Part A
and Part B claims, the distinction between Part A and Part B coverage
and payment schemes is still relevant and necessary. This is
illustrated by the separate entitlement, eligibility, enrollment,
benefits, and programs that continue to exist under Title XVIII, as
well as the separate claims requirements and systems necessary to
process such claims, and distinct trust funds that provide funding for
the different parts of the program. In addition, our contracting scheme
for QICs allocates second level appeals workload along benefit lines,
acknowledging the differences in the benefits and the clinical
expertise required for processing appeals under the different parts of
the Medicare program. More importantly, however, appeal rights as
established in section 1869 of the Act flow from the initial
determination made by a contractor in response to the submission of a
valid claim. (We refer readers to sections 1869(a)(3)(B)(i),
1869(b)(1)(A), and 1869(c)(3)(B)(i) of the Act.) Consistent with the
statutory requirements and our longstanding policy, contractors will
continue to make initial determinations for items and services under
Part A in response to submission of a Part A claim, and initial
determinations for

[[Page 50930]]

items and services under Part B in response to submission of a Part B
claim.
For these reasons, we are not adopting the commenters'
recommendations to expand an appeals adjudicator's scope of review.
Comment: Several commenters requested that hospitals be permitted
to seek and receive Part B payments by filing claims while also
pursuing an appeal of the Part A claim.
Response: We appreciate the suggestions made by the commenters,
requesting the opportunity to submit Part B claims while pursuing
appeals of the Part A denials. We proposed that hospitals must choose
between seeking payment under Part B by submitting a Part B claim for
the items and services furnished to the beneficiary, or by pursuing an
appeal of the Part A claim that was denied. We explained that the two
actions cannot be pursued simultaneously, as this would result in the
hospital inappropriately seeking duplicate payment for items or
services furnished to the beneficiary. Allowing hospitals to appeal the
denied claim and submit Part B claims simultaneously would also result
in additional administrative burden and cost to the program, and would
impose an additional administrative burden on hospitals and
beneficiaries. For example, if the hospital submits a Part B claim
under the process described in this rule, and receives payment for that
claim while simultaneously pursuing its appeal of the Part A denial, in
situations where the hospital is successful in challenging the denial
of the Part A claim, several additional administrative actions would be
required of Medicare, the hospital, and the beneficiary. In order to
prevent duplicate payment, the Medicare contractor would be required to
initiate an overpayment action to recover any payments made on the Part
B claim before effectuating the Part A appeal decision. In addition,
hospitals would be required to refund any cost-sharing amounts
collected from beneficiaries for the Part B claim, and would need to
collect the Part A cost-sharing that was previously refunded following
the initial Part A denial. We believe the administrative burden and the
prohibition of making duplicate payment necessitate that we prohibit
hospitals from submitting Part B claims while an appeal of the Part A
claim denial is in progress. We acknowledge the financial impact that
may result from collection of overpayments for denied claims. However,
providers may request relief from recovery while a reconsideration or
redetermination is pending under the limitation of recoupment
provisions in 42 CFR 405.379. In addition, if recovery is in process,
providers experiencing financial difficulties may work with contractors
to establish an extended repayment schedule.
For these reasons, we are not adopting the commenters'
recommendations to allow providers to simultaneously submit Part B
claims and pursue appeals of the Part A denials, and are finalizing the
provisions of the proposed rule without modification.
Comment: One commenter questioned whether a hospital would receive
payment on a Part A claim if the claim was denied and the beneficiary
successfully appealed that Part A claim denial.
Response: If a beneficiary appealed a Part A claim denial and the
denial was reversed on appeal, the decision would be effectuated and
the provider would receive payment on the Part A claim.
10. Coordination of Benefits With Supplemental Insurers
Currently, CMS automatically transfers or ``crosses over'' Medicare
adjudicated professional and institutional claims to a variety of
entities for coordination of benefits (COB) purposes. We collectively
term these entities ``supplemental insurers'' for ease of reference.
These entities include private insurers that offer ``Medicare
supplemental'' (or Medigap) policies, as defined in section 1882(g)(1)
of the Act. Other entities, such as employer-sponsored retiree plans,
multiemployer welfare trusts, TRICARE For Life, the Federal Employees
Health Benefits Plan (FEHBP), and State Medicaid agencies, also provide
secondary or, in some cases, tertiary coverage for beneficiaries after
their Medicare coverage.
As mentioned in the Part B Inpatient Billing proposed rule (78 FR
16639), most supplemental insurers sign national agreements with
Medicare to facilitate our claims crossover process, more formally
known as the ``Coordination of Benefits Agreement'' (or COBA) process.
Through these national agreements, supplemental insurers indicate which
types of Medicare claims they wish to receive via the COBA process and
which types they wish to exclude. Within the context of this rule,
hospitals will want to be aware that, in addition to inpatient hospital
claims, the majority of supplemental insurers currently also accept
hospital inpatient Part B claims (12x type of bill claims) and
outpatient hospital claims (including 13x type of bill claims) through
the COBA process. Most supplemental insurers elect not to receive fully
denied Medicare claims via that process. However, several employer-
sponsored retiree plans currently do accept fully denied claims via the
COBA process, provided Medicare beneficiaries have some payment
liability remaining on those claims.
Comment: Several commenters who addressed supplemental insurers and
the Medicare claims crossover process were concerned about the
importance of ensuring that CMS provides early and continuous
communications with supplemental payers to ensure that benefits are
coordinated correctly.
Response: As mentioned in the Part B Inpatient Billing proposed
rule, we will communicate with all supplemental insurers to ensure they
know what additional services beyond those termed ``ancillary'' will
now be included under the TOB 12x designation. We also will ensure that
supplemental insurers become aware of how they can identify any new
cost-sharing elements within these claims when crossed over to them.
Our principle communications method is an email broadcast ListServ,
known as ``COBVA,'' to which all supplemental insurers subscribe. We
also will update the COBA Implementation User Guide, which is available
on the COBA Web site at: https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/COBA-Trading-Partners/Coordination-of-Benefits-Agreements/Coordination-of-Benefits-Agreement-page.html, to include
this information. In addition, where possible, we will provide
supplemental insurers with a few mock claim examples to illustrate how
the changes arising from this rule will be reflected in their crossover
claims.
Comment: One commenter indicated that the current Medicare
crossover process was insufficient to ensure that providers do not face
substantial administrative burden and increased bad debt by having to
bill their patients' supplemental insurance plans or programs for
balances owed following Medicare's payment determination.
Response: We understand that the COBA crossover process does not
always relieve providers from having to file claims with their
patients' supplemental insurers. The Medicare crossover process is
voluntary and, therefore, not every insurer nationwide participates.
However, as noted above, we know that the majority of supplemental
insurers accept institutional claims (including Part A inpatient and
Part B outpatient facility claims) via the COBA crossover process. In
addition, some supplemental insurers agree to accept fully denied
claims if the beneficiary may be held liable for any

[[Page 50931]]

portion of the denied claims by the provider.
Comment: Within the context of Medicare denying a Part A inpatient
hospital claim as not being reasonable and medically necessary, several
commenters questioned whether hospitals would be required to submit a
hospital Part B claim to Medicare prior to billing a Medigap, employer-
sponsored, or other supplemental insurers or whether filing those
claims with those entities would be the responsibility of Medicare
beneficiaries.
Response: Medigap insurers will not make payment unless there has
been a formal Medicare determination on a claim. Our understanding is
that other coverage is likely to require this as well. To avoid denial
decisions from supplemental insurers, hospitals should first bill their
Part B claim to their designated A/B MAC. To the greatest extent
possible, hospitals should avoid imposing a filing burden on their
patients, Medicare beneficiaries.
Comment: One commenter questioned whether Medicare will cross over
to Part B for beneficiaries who do not have Part B coverage.
Response: The commenter appears to be referring to a situation
where a Medicare beneficiary is not enrolled in Medicare Part B but has
an employer-sponsored retiree policy that provides him or her with
medical coverage. If the employer plan agrees to accept the fully
denied hospital outpatient claim as a claim for benefits through the
COBA crossover process, Medicare has the capability to send the claim.
Comment: One commenter questioned whether supplemental insurers
will be able to distinguish between Part A inpatient crossover claims
denied due to a post-payment review indicating that the inpatient stay
was not medically necessary and other Part A inpatient crossover claims
that are denied due to benefits exhaustion.
Response: We believe that supplemental insurers will be able to
differentiate between these denial situations as evidenced on the
crossover claims they receive on the basis of the Claim Adjustment
Reason Codes (CARCs) and Claim Adjustment Segment (CAS) Group Codes
used on the affected claims.
Comment: Several commenters questioned whether hospitals would be
required to provide refunds to supplemental insurers for any amounts
the insurers paid for Part A inpatient hospital admissions that were
later determined not to be reasonable and necessary, while other
commenters indicated that hospitals would need better guidance from CMS
to know if they would need to refund payments to supplemental insurers
in this situation.
Response: Following a denial of a claim for a Part A inpatient
admission as not reasonable and necessary, and a determination that the
hospital, and not the beneficiary, is financially liable for the denied
claim, in accordance with section 1879 of the Act, the hospital is
required to refund any amounts paid by or on behalf of the beneficiary
(such as deductible and copayment amounts) for the services billed
under Part A (42 CFR 411.402). If this refund is not made, the Medicare
program indemnifies the beneficiary or authorized representative for
any amounts paid, including deductible and coinsurance, by, or on
behalf of, the beneficiary. Any indemnification payments made by
Medicare are considered an overpayment to the hospital. Accordingly, in
order to avoid incurring an overpayment, hospitals should refund any
cost-sharing amount to a supplemental insurer.
The following comments and responses specifically address
standardized Medicare Supplemental Health Insurance Policies (Medigap
Policies) as defined in section 1882(g)(1) of the Act.
Comment: A few commenters expressed concern that Medicare
supplement insurance carriers may be subject to an increased liability
to cover additional Part B costs in the form of increased copayments
and cost-sharing for insulin and oral and topical drugs and that the
additional cost incurred by the carriers could lead to greater
financial liability for beneficiaries in the form of increased premiums
for beneficiaries.
Response: Oversight of premium rates and increases for standardized
Medicare Supplemental Insurance Policies is not within CMS' purview.
That authority rests with the Commissioner of each State's department
of insurance. However, we note that, as discussed above, the carriers
will be entitled to a refund of payments made with respect to Part A.
Comment: A few commenters recommended that CMS mandate that all
supplemental plans be liable for the Part B copayment and deductible on
these rebilled claims for their members, regardless of their internal
policies on timely filing.
Response: It is unnecessary to mandate copayment and deductible
liability for standardized Medicare Supplement Policies because section
1882(c)(3)(A) of the Act already requires Medicare Supplemental Health
Insurance Carriers to ``accept a notice under section 1842(h)(3)(B) of
the Act as a claim form for benefits under such policy in lieu of any
claim form otherwise required and agree to make a payment determination
on the basis of the information contained in such notice.'' In
addition, section 6(A) of the NAIC Model Regulation for Medicare
Supplement Insurance states that ``no policy or certificate may be
advertised, solicited, or issued for delivery in this state as a
Medicare supplement policy if the policy or certificate contains
limitations or exclusions on coverage that are more restrictive than
those of Medicare'' (74 FR 18813).
11. Public Comments on Other Issues
We received public comments on several other issues related to, but
not directly addressed, by the proposed policies and related
discussions contained in the Part B Inpatient Billing proposed rule.
a. Application to Disproportionate Share Hospital (DSH) Payments,
Indirect Medical Education (IME), Graduate Medical Education (GME)
Payments, and Other IPPS Adjustments
Comment: Three commenters stated that it was unclear whether the
patient days for the Part B inpatient stays remain in the Medicare DSH
calculations and in the denominator of the Medicare GME calculations.
Specifically, the commenters noted that both the Medicare DSH
calculation and the direct GME calculation use the hospital's count of
Part A inpatient days and total inpatient days, and that because these
Part B inpatient days would be reflected in the denominator but
excluded from the numerator, it would be harmful to hospitals. Another
commenter pointed out that Medicare payment for DSH is calculated in
part using Medicare inpatient and total inpatient days reported by
hospitals on the Medicare cost report. This commenter was not clear if
the Medicare days related to the ``no pay/provider'' liable Part A
claims would be included or excluded from the DSH calculations. The
commenter requested that CMS clarify its policy in this regard and
permit hospitals to either include or exclude Medicare inpatient days
from both the numerator and denominator of these calculations. A third
commenter was concerned about unintended consequences for the Medicare
DSH adjustment.
Response: We appreciate the commenters' request for clarification.
The Medicare DSH payment adjustment is calculated as the sum of two
fractions, the SSI ratio and the Medicaid fraction. As defined at
section 1886(d)(5)(F)(vi)(I) of the Act and at 42 CFR 412.106(b)(2),

[[Page 50932]]

the SSI ratio is the number of patient days furnished to patients who
were entitled to both Medicare Part A (including Medicare Advantage
(Part C)) and SSI divided by the total number of days associated with
discharges of patients who were entitled to Medicare Part A (including
Medicare Advantage (Part C)). As defined at section
1886(d)(5)(F)(vi)(II) of the Act and at 42 CFR 412.106(b)(4), the
Medicaid fraction is the number of patient days for which patients were
eligible for Medicaid but not entitled to Medicare Part A, divided by
the total number of patient days.
We note that in the CMS Ruling 1455-R, we stated, ``For the Part B
claims billed under this Ruling the beneficiary's patient status
remains inpatient as of the time of inpatient admission and is not
changed to outpatient . . .'' (78 FR 16617). We note that even though
the inpatient claim was rebilled under Part B after being denied
payment under Part A due to lack of medical necessity, the beneficiary
for whom that claim was made was entitled to benefits under Part A
during the inpatient stay. Therefore, as long as the patient status for
a stay remains inpatient, under current policy and practice, the days
associated with the inpatient stay rebilled under Part B are included
in the numerator (when the beneficiary was also entitled to SSI) and
the denominator for the SSI ratio and are reflected in the denominator
of the Medicaid fraction of the DSH calculation.
As we noted in the FY 2011 IPPS/LTCH PPS final rule, there are
three databases used to generate the SSI ratios: the SSI eligibility
data file, the Medicare Enrollment Database, and the Medicare Provider
Analysis and Review file (MedPAR). In that rule, we described the
process by which we determine if patient days are for Medicare
beneficiaries entitled to SSI, and we noted that hospitals submit
claims to Medicare for inpatient services provided to Medicare
beneficiaries and these claims are eventually accumulated in the MedPAR
database. This database allows us to calculate the number of Medicare
inpatient hospital days (that is, the denominator of the SSI ratio), a
subset of which are Medicare SSI days (that is, the numerator of the
SSI ratio) (75 FR 50277 through 50285). Currently, the MedPAR file
includes all inpatient hospital claims, including those that were
denied on the basis of medical necessity. In 2004, following notice-
and-comment rulemaking, we amended our regulations to provide that all
patient days for individual Medicare Part A beneficiaries, whether or
not Medicare actually paid for those days, are included in the
Medicare-SSI fraction (69 FR 49098 through 49099 and 42 CFR
412.106(b)(2)). Thus, MedPAR utilizes length of stay to generate the
SSI day count, rather than using ``covered days'' (that is, days for
which Medicare Part A makes a payment). Each record contained in the
MedPAR file represents a beneficiary stay in an inpatient hospital
(where discharged), and it may include one claim, or it may include
multiple claims. Because such claims remain in the MedPAR, and MedPAR
is used to calculate the numerator and denominator of the SSI ratio,
inpatient claims that are rebilled under Part B will remain included in
the determination of the SSI ratio. This practice is consistent with 42
CFR 412.106(b)(2)(i), which states that, for the purpose of the DSH SSI
calculation, ``CMS determines the number of patient days that . . . are
furnished to patients who during that month were entitled to . . .
Medicare Part A.'' We note that these patients remain entitled to
benefits under Part A for the months at issue, even though no payment
may be made for a claim because the inpatient status was not reasonable
and necessary for these particular claims. This is also consistent with
42 CFR 412.106(a)(1)(ii) which states that ``the number of patient days
in a hospital includes only those days attributable to units or wards
of the hospital providing acute care services generally payable under
the [inpatient] prospective payment system,'' and IPPS-level acute care
services are generally being provided in the units or wards those
patients were staying, despite the fact that no IPPS payment may
ultimately be made for those particular claims.
In addition, we note that currently on Worksheet S-3, Part I,
column 8 of the Medicare cost report (CMS Form 2552-10), hospitals are
required to report the number of inpatient days for all classes of
patients and this is used to determine the total days for the Medicaid
fraction. The total inpatient days from Worksheet S-3, Part I, column
8, are derived from the hospital's census and, therefore, include
inpatient days denied under Part A and rebilled under Part B.
Therefore, we are clarifying, as requested by the commenters, that
patient days for inpatient claims rebilled under Part B will continue
to be included in the numerator (where the beneficiary was also
entitled to SSI) and denominator of the SSI ratio and denominator of
the Medicaid fraction for purposes of Medicare DSH calculations. Even
though the inpatient claim was rebilled under Part B after being denied
payment under Part A due to lack of medical necessity, the beneficiary
for whom that claim was made was entitled to benefits under Part A
during the inpatient stay.
Direct GME payments are calculated using three variables: the
hospital's per resident amount (PRA); the number of FTE residents a
hospital is training subject to its FTE cap and the 3-year rolling
average; and the hospital's Medicare patient load. ``Medicare patient
load''' is defined at 42 CFR 413.75(b) as ``with respect to a
hospital's cost reporting period, the total number of hospital
inpatient days during the cost reporting period that are attributable
to patients for whom payment is made under Medicare Part A divided by
total hospital inpatient days. In calculating inpatient days, inpatient
days in any distinct part of the hospital furnishing a hospital level
of care are included and nursery days are excluded.''
With regard to the calculation of Medicare patient load used to
calculate direct GME payments, we agree that, under current policy,
Part B inpatient days are reflected in the denominator but are excluded
from the numerator. Currently, the numerator is derived from Worksheet
S-3, Part I, column 6, in which Medicare paid Part A days are reported,
based on the Medicare paid Part A days accumulated in the hospital's
Provider Statistical & Reimbursement Report (PS&R). That is, once a
claim in denied, for whatever reason (such as lack of medical necessity
or if a beneficiary exhausts Part A benefits), the days associated with
that claim are not reflected in the numerator (Worksheet S-3, Part I,
column 6) of the Medicare patient load. This is consistent with the
definition of ``Medicare patient load'' at 42 CFR 413.75(b), which
states that the ratio is based on ``. . . the total number of hospital
inpatient days during the cost reporting period that are attributable
to patients for whom payment is made under Medicare Part A divided by
total hospital inpatient days'' (emphasis added). However, similar to
the denominator used in the Medicaid fraction for DSH, the denominator
of the Medicare patient load ratio is currently calculated from
Worksheet S-3, Part I, column 8 of the Medicare cost report. The total
inpatient days from Worksheet S-3, Part I, column 8, are derived from
the hospital's census and, therefore, include inpatient days denied
under Part A and rebilled under Part B. Therefore, we are clarifying
that inpatient days for inpatient claims denied under Part A and
rebilled under Part B are excluded from the numerator of direct GME
Medicare patient load but

[[Page 50933]]

are included in the denominator. Accordingly, by continuing with
current practices, we recognize that depending on the volume of claims
that are denied for medical necessity that a hospital chooses to re-
bill under Part B, teaching hospitals could experience a decline in
their direct GME Medicare patient load calculation and experience
reduced direct GME payments.
Comment: One commenter stated that the proposal to allow patients
to maintain inpatient status while rebilling under Part B ``has effects
on hospitals beyond payment for the services rendered.''
Response: We agree with the commenter and have endeavored to
provide clarification as requested specifically by other commenters on
these effects. We note that other inpatient hospital policies rely on
either the number of inpatient days or a ratio of Medicare inpatient
days to total inpatient days to determine eligibility or payment. One
example of another policy possibly affected by rebilling under Part B
is in section V.E.2. of the preamble of this final rule, in connection
with our policy to include labor and delivery inpatient days of
maternity patients admitted as inpatients for direct GME Medicare
utilization and other Medicare purposes. The example we provided is
with regard to a hospital's eligibility for SCH status. A hospital can
be classified as an SCH if it is located more than 35 miles from other
like hospitals or is located in a rural area (as defined at 42 CFR
412.64) and meets one of the conditions listed in the regulations at 42
CFR 412.92(a). In determining whether a nearby hospital is a like
hospital, CMS compares the total inpatient days of the SCH applicant
hospital with the total inpatient days of the nearby hospital. If the
total inpatient days of the nearby hospital are greater than 8 percent
of the total inpatient days reported by the SCH applicant hospital, the
nearby hospital is considered a like hospital for purposes of
evaluating the applicant hospital's eligibility for SCH status.
Therefore, including these days as inpatient days may impact the count
of inpatient days for both the SCH applicant hospital and the nearby
hospital and may affect the applicant hospital's eligibility for SCH
status.
Comment: One commenter noted that the relative weights should be
revised on a timely basis to reflect the elimination of short-stay
cases. The commenter believed that nonshort-stay inpatient cases are
underpaid insofar as the short-stay cases have been included in the
calculation of the relative weights. Another commenter requested that
CMS consider establishing a different payment methodology, such as a
different outlier payment, to address these cases.
Response: We agree that the relative weights should reflect any
movement of cases between the inpatient setting and the outpatient
setting on a timely basis in accordance with the methodologies set
forth in the Addendum to this final rule and note that, for each
Federal fiscal year, we use the most recent complete year of claims
data for charges and cost report data for CCRs to develop relative
weights. We disagree as a general premise that the nonshort-stay
inpatient cases are underpaid insofar as the short-stay cases are
included because the MS-DRG system is a system of averages. The
relative weights are intended to reflect relative resource use, and
while some short-stay cases may have relatively lower resource use in a
given MS-DRG, others may have higher resource use in that MS-DRG.
Furthermore, relative weights reflect all of the cases that are
included in a particular MS-DRG and MS-DRG classifications are
established and updated in accordance with the process set forth in
section II. of the preamble of this final rule. This process takes into
consideration clinical coherence and resource use. We refer readers to
the FY 2013 IPPS/LTCH PPS final rule for further information on the
criteria for determining whether a subgroup of cases warrants creation
of a CC or an MCC subgroup within a base MS-DRG (77 FR 53305) and point
out that they do not include length of stay.
However, we understand the viewpoint that the types and numbers of
patients that hospitals admit as inpatient cases could change in the
future in unforeseen ways as a result of this rulemaking. If we see a
pattern of increasing volume of short-stay cases, we may further
consider whether payment policy changes are necessary to reflect their
potentially lower resource usage.
Comment: One commenter believed that hospitals should not be
subject to ``documentation and coding rate reductions'' in the future
as denied short-stay cases migrate from an inpatient setting to an
outpatient setting. The commenter stated that ``arithmetic alone will
force the average inpatient case mix index to increase and hospitals
should not be penalized.''
Response: We separately discuss the finalization of our proposal to
make an adjustment to the standardized amount, hospital-specific
payment amounts, and Puerto Rico-specific standardized amount in order
to offset the additional estimated IPPS expenditures associated with
the inpatient admission guidelines and medical review criteria
finalized and discussed in greater detail in section XI.C. of the
preamble of this final rule. We believe the commenter may be
erroneously associating the relationship between the recalibration of
the relative weights and its effect on aggregate IPPS payments with the
adjustment to offset the additional estimated IPPS expenditures
associated with this policy. As discussed in section II.H. of the
preamble of this final rule, we normalized the recalibrated MS-DRG
relative weights by an adjustment factor so that the average case
relative weight after recalibration is equal to the average case
relative weight prior to recalibration. However, as we discuss in
section II.A.4.a. of the Addendum to this final rule, equating the
average case relative weight after recalibration to the average case
weight before recalibration does not necessarily achieve budget
neutrality with respect to aggregate payments to hospitals because
payments to hospitals are affected by factors other than average case
relative weight. Accordingly, to the extent that in any given year
short-stay cases shift to outpatient or outpatient cases shift to
inpatient, the relative weights are recalibrated and budget neutrality
is applied so that aggregate expenditures do not increase or decrease
as a result of these shifts in cases. Therefore, the relative weights
will ensure that the relativity of the cases that result from the
change in utilization due to the final policy is appropriate in a
budget neutral fashion. However, it will not offset the change in
utilization, which the final adjustment to offset these additional
estimated expenditures is intended to do.
b. Application to Beneficiary Utilization Days Under Medicare Part A
Comment: Commenters asked CMS to clarify whether the inpatient days
billed by the hospital would count towards beneficiaries' limit on
utilization of inpatient days for the Part A benefit period, described
in section 1812(a) of the Act.
Response: Under section 1812 of the Act, Medicare Part A will pay
for up to 150 days per inpatient hospital stay. If a Part A claim is
denied because the hospital inpatient admission was not reasonable and
necessary, Medicare Part A will not pay for the claim. In these
circumstances--where Medicare Part A is not making payment for
particular inpatient claims--we do not believe it would be appropriate
to charge the beneficiary's utilization under Part A. Therefore, we are
not deducting the days associated with the inpatient

[[Page 50934]]

hospital stays billed under Part B from a beneficiary's 150 utilization
days for inpatient hospital services paid under Part A when no Part A
payment is made for that inpatient hospital stay. We note that when the
inpatient hospital stay is paid under Part B, the hospital stay remains
inpatient from the time of admission and may continue to count towards
qualification for skilled nursing facility coverage, and the
beneficiary is liable for the Part B inpatient charges.
c. Applicability to the Medicare Advantage (MA) Program
Comment: Several commenters asked whether the proposed Part B
billing policies would apply to Medicare Advantage (MA) hospitals or
plans. They noted that the proposed rule only contemplates Medicare
Part A claims denials as eligible for the proposed Part B inpatient
billing. However, one commenter stated that the Affordable Care Act
required that RAC reviews be expanded to Part C and Part D, to
encompass the MA program. The commenter believed that the ability to
submit ``adjusted'' claims after a contractor denial or self-audit
denial should apply to MA just as it does for Medicare Part A, because
the RACs will be denying Part C inpatient stays as not reasonable and
necessary.
Response: The proposed and final rules do not apply in the MA
context, with one exception. In the MA program, hospitals are paid by
MA organizations, which typically would prior authorize coverage of any
non-emergency hospitalization. Also, to the extent the MA organization
makes payment for a stay that does not meet Medicare coverage
standards, it does not necessarily follow that the stay would not
otherwise be covered under the MA plan, and even if it is not covered,
and an attempt were made to recover payments, the payments would go to
the MA organization, not the Medicare Trust Funds. Therefore, RACs and
MACs do not perform review for such potential errors. If an MA
organization does have a payment dispute with a hospital, however, it
would be free to apply the same principles applied in the final rule
regarding payment of Part B services to a hospital where a stay is not
covered under Part A. However, as in the Medicare fee-for-service
program, appeals adjudicators in the MA program are limited in their
scope of review and may only review the submitted claim. In the context
of a Part C out-of-network provider that billed inpatient services,
review is limited to whether the MA plan was obligated to pay for the
billed inpatient services. Similar to the Part A context, the provider
has not billed for outpatient services, and therefore, there is no
appealable organization determination on those services.
MA organizations and their stakeholders may also refer questions to
their Part C account managers and other Part C staff at CMS. It would
be helpful to CMS to understand more about any particular circumstances
in which Part C hospitals and MA organizations believe the provisions
of the final rule on Part B hospital inpatient billing following Part A
reasonable and necessary inpatient denials might apply.
Comment: One commenter asked whether hospitals must bill
beneficiaries enrolled in MA plans for the Part B liabilities
associated with rebilling, just as non-MA plans must bill
beneficiaries. The commenter believed beneficiaries should be held
harmless if an MA nonparticipating hospital bills Part B, particularly
a non-participating MA hospital.
Response: As we stated in section XI.B.6. of the preamble of this
final rule, we believe that the issue of whether or not the hospital
has an obligation to bill the beneficiary is governed by the
beneficiary inducement and anti-kickback laws that fall under the
purview of the OIG. Therefore, we refer the commenters (and other
stakeholders) to the OIG for guidance on this matter.
12. Regulatory Impact Analysis: Final Part B Inpatient Payment Policy
a. Statement of Need
Our final policy on payment of Part B inpatient services is needed
to address Medicare payment policy when a Part A hospital inpatient
claim is denied because the inpatient admission was not reasonable and
necessary, but hospital outpatient services would have been reasonable
and necessary to treat the beneficiary.
b. Overall Impact
We have examined the impacts of our final policy as required by
Executive Order 12866 on Regulatory Planning and Review (September 30,
1993), Executive Order 13563 on Improving Regulation and Regulatory
Review (January 18, 2011), the Regulatory Flexibility Act (RFA)
(September 19, 1980, Pub. L. 96-354), section 1102(b) of the Social
Security Act, section 202 of the Unfunded Mandates Reform Act of 1995
(UMRA) (March 22, 1995, Pub. L. 104-4), Executive Order 13132 on
Federalism (August 4, 1999), and the Contract with America Advancement
Act of 1996 (Pub. L. 104-121) (5 U.S.C. 804(2)).
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Executive
Order 13563 emphasizes the importance of quantifying both costs and
benefits, of reducing costs, of harmonizing rules, and of promoting
flexibility. Our final rule policy on Part B inpatient payment has been
designated as an ``economically'' significant rule under section
3(f)(1) of Executive Order 12866 and a major rule under the Contract
with America Advancement Act of 1996 (Pub. L. 104-121). Accordingly,
the final rule policy has been reviewed by the Office of Management and
Budget. We have prepared a regulatory impact analysis that, to the best
of our ability, presents the costs and benefits of our final policy.
The RFA requires agencies to analyze options for regulatory relief
of small entities, if a rule has a significant impact on a substantial
number of small entities. For purposes of the RFA, we estimate that
most hospitals are small entities as that term is used in the RFA. For
purposes of the RFA, most hospitals are considered small businesses
according to the Small Business Administration's size standards with
total revenues of $34.5 million or less in any single year. We estimate
that this final rule policy may have a significant impact on
approximately 2,004 hospitals with voluntary ownership. For details,
see the Small Business Administration's ``Table of Small Business Size
Standards'' at https://www.sba.gov/content/table-small-business-size-standards.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 604 of the RFA. For
purposes of section 1102(b) of the Act, we define a small rural
hospital as a hospital that is located outside of a metropolitan
statistical area and has 100 or fewer beds. We estimate that this final
rule may have a significant impact on approximately 694 small rural
hospitals.
Section 202 of the Unfunded Mandates Reform Act of 1995 also
requires that agencies assess anticipated costs and benefits before
issuing any rule whose mandates require spending in any 1 year of $100
million in 1995 dollars, updated annually for inflation. In 2013, that
threshold level is currently

[[Page 50935]]

approximately $141 million. Our final policy on Part B inpatient
payment does mandate requirements for the private sector.
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a final rule that imposes
substantial direct costs on state and local governments, preempts state
law, or otherwise has federalism implications. We have examined the
provisions of our final rule policy in accordance with Executive Order
13132, federalism, and have determined that it will not have a
substantial direct effect on State, local or tribal governments,
preempt State law, or otherwise have a federalism implication, with the
exception of Medicaid expenditures discussed below. As reflected in
Table 1 of this final rule, we estimate that Medicare expenditures will
increase for services furnished in governmental hospitals (including
State and local governmental hospitals). The analyses we have provided
in this section of the final rule demonstrate that this final rule is
consistent with the regulatory philosophy and principles identified in
Executive Order 12866, the RFA, and section 1102(b) of the Act.
c. Estimated Impacts of the Final Part B Inpatient Payment Policy
(1) Estimated Impact on Medicare Program Expenditures
In this section, we provide the estimated impact of our final
policy to provide payment for additional Part B inpatient services on
Medicare benefit expenditures over the next 5 years. Column (3) of
Table 1 shows the estimated impacts of this final policy, relative to
an estimated increase in baseline expenditures that will result from
the effectuation of recent decisions by the Medicare Appeals Council
and ALJs on Medicare Part A to Part B ``rebilling'' (in this section
referred to as the ``appeal decisions'').
In Part B Inpatient Billing proposed rule (78 FR 16635), we
discussed that in an increasing number of cases, hospitals that have
appealed Part A inpatient reasonable and necessary claim denials to
ALJs and the Medicare Appeals Council have received decisions upholding
the Medicare review contractor's determination that the inpatient
admission was not reasonable and necessary, but ordering payment of the
services as if they were provided at an outpatient or ``observation
level'' of care. These decisions effectively require Medicare to issue
payment for all Part B services that would have been payable had the
beneficiary originally been treated as a hospital outpatient, instead
of limiting payment to only the set of Part B inpatient services
heretofore designated in the Medicare Benefit Policy Manual. Further,
the appeal decisions have required payment regardless of whether the
subsequent hospital Part B claim is submitted within the otherwise
applicable time limit for filing claims. These appeal decisions were
contrary to CMS' longstanding policies permitting payment for only a
limited list of Part B inpatient services, and requiring that the
services be billed within the usual timely filing restrictions. While
these appeal decisions do not establish Medicare payment policy, CMS'
contractors are bound to effectuate each individual decision. In the
Part B Inpatient Billing proposed rule, we estimated the impacts of
CMS' instructions to contractors for effectuating the appeal decisions
that have been issued.
To resolve the discrepancy between Medicare's historical policy and
the decisions made by the Medicare Appeals Council and ALJs, we issued
CMS Ruling 1455-R (78 FR 16614) concurrent with the Part B Inpatient
Billing proposed rule. In the Ruling, we provided an interim Part B
payment policy until we could establish a final policy through notice
and comment rulemaking. The Ruling established a standard process for
effectuation of the appeal decisions through payment of additional Part
B inpatient (rather than Part B outpatient or ``observation level'')
services than Medicare previously allowed in order to address the
approach taken by the appeal decisions. Under the Ruling, in
acquiescence to the appeal decisions, we did not apply the timely
filing limitations in 42 CFR 424.44 to the subsequent claims for Part B
services, but rather afforded the hospital 180 days from the date of
receipt of a final or binding appeal decision, or 180 days from the
date of receipt of the Part A initial determination or revised
determination if there is no pending appeal, to file its Part B
claim(s). Under the Ruling, hospitals are not required to appeal the
Part A claim denial prior to billing Part B. Therefore, in the Part B
Inpatient Billing proposed rule, we estimated the added cost for the
Ruling in addition to the cost of effectuating the appeal decisions.
The key differences between the Part B inpatient payment policy of
the Ruling and our final policy in this final rule are: (1) the final
policy applies the timely filing restriction that applied prior to the
Ruling to Part B inpatient claims rebilled after the Part A reasonable
and necessary claim denial (that is, the Part B inpatient claims will
only be paid if they are billed within 12 months of the date of
service, which, as described previously, is not the case for the
subsequent Part B inpatient claims billed under the Ruling); and (2)
the final policy applies when hospitals determine through self-audit
that an inpatient admission is not reasonable and necessary, discussed
in section XI.B. of the preamble of this final rule (also subject to
timely filing). As we stated in the proposed rule, our proposal to
apply the timely filing restriction in accordance with our policy prior
to the Ruling resulted in estimated savings to the Medicare program.
Comment: Several stakeholders asked whether hospitals that had Part
A claim denials subject to the Ruling are allowed to submit Part B
claims for those services consistent with the requirements of the
Ruling after the effective date of the final rule. In other words, the
commenters asked whether hospitals that had Part A claim denials
subject to the Ruling were allowed (after the effective date of the
final rule) to submit Part B claims for those services 180 days from
withdrawal or adjudication of an appeal upholding the Part A reasonable
and necessary denial.
Response: The Ruling permits Part B inpatient payment as described
previously for Part A hospital inpatient claims that were denied by a
Medicare review contractor because the inpatient admission was
determined not reasonable and necessary, as long as the denial was
made: (1) While the Ruling is in effect; (2) prior to the effective
date of the Ruling, but for which the timeframe to file an appeal has
not expired; or (3) prior to the effective date of the Ruling, but for
which an appeal is pending. Because hospitals are responsible for
correctly submitting claims to Medicare by coding services in
accordance with the hospital inpatient admission instructions, we are
finalizing our timely filing policy as proposed. However, we are
modifying what we stated in the proposed rule (78 FR 16640) regarding
the applicability of the Ruling and this final rule. We state in this
final rule that the timely filing requirement in Sec. 414.5(c) will
not supersede the Ruling's treatment of Part A claim denials to which
the Ruling originally applied. Hospitals are permitted to follow the
provisions in the Ruling regarding appeals and submission of Part B
claims after the effective date of this final rule, provided (i) the
Part A inpatient claim denial was one to which the Ruling originally
applied, or (ii) the Part A inpatient

[[Page 50936]]

claim has a date of admission before October 1, 2013 (the effective
date of this final rule), and is denied after September 30, 2013, on
the grounds that though inpatient services were not reasonable and
necessary, hospital outpatient services would have been reasonable and
necessary.
Table 1 below shows the estimated impact of our final Part B
inpatient payment policies. The amounts are shown in millions for CYs
2013 through 2017. We estimate the cost of the appeal decisions in
Column (1), the Ruling CMS-1455-R (applied as described above) in
Column (2), our final Part B inpatient payment policy in Column (3),
and the estimated total impact in Column (4). The estimates for each
column assume that the policy in the preceding column is already in
place. Specifically, the estimated cost for the Ruling is relative to a
baseline that includes the effect of the appeal decisions. Similarly,
the estimated costs of our final Part B inpatient payment policy are in
relation to a baseline that includes both the appeal decisions and the
Ruling in place.
We assumed short-stay inpatient utilization will increase by 1
percent as a result of the appeal decisions because hospitals are able
to rebill after an appeal. (There are currently no controls in place to
monitor hospitals for changes in their inpatient growth trend and/or
error rate.) In addition, we assumed short-stay inpatient utilization
will increase by an additional 3 percent under the Ruling because
hospitals can rebill under Part B without the expense of an appeal. Due
to the timely filing restrictions and lower Part B payment rate for
rebilling, we estimate that there will be no increase in any inpatient
utilization resulting from the final policy to restrict inpatient Part
B billing to the timely filing requirement of 12 months from the date
of service, relative to circumstances prior to the appeal decisions.
The 12-month timely filing restriction imposed by this final rule will
greatly limit the circumstances in which a hospital can rebill and
thereby substantially reduce the number of Part B inpatient claims
rebilled by hospitals, largely offsetting the higher costs arising from
the appeal decisions and the Ruling.

Table 1--Estimated Impact on Medicare Program Expenditures for Hospital Services
[Current year dollars (in millions)]
----------------------------------------------------------------------------------------------------------------
Part B inpatient
billing with 12-
Calendar year Appeal decisions CMS ruling 1455-R month timely filing Total impact
restriction
(1) (2) (3) (4)
----------------------------------------------------------------------------------------------------------------
2013 $290 $560 $0 $850
2014 410 770 -1,060 120
2015 410 780 -1,080 120
2016 430 830 -1,160 100
2017 460 870 -1,260 70
----------------------------------------------------------------------------------------------------------------

We note that the actual costs or savings will depend substantially
on possible changes in behavior by hospitals, and such behavioral
changes cannot be anticipated with certainty. The estimates are
especially sensitive to the assumed utilization changes in inpatient
and outpatient utilization. While we believe that these assumptions are
reasonable, relatively small changes will have a disproportionate
effect on the estimated net costs.
(2) Estimated Impact on Beneficiaries
In our regulatory impact analysis for the Part B Inpatient Billing
proposed rule (78 FR 16643), we estimated an aggregate increase in
beneficiary out-of-pocket expenses for Parts A and B services.
Comment: As we discussed in section XI.B.6. of the preamble of this
final rule, many public comments expressed concern regarding the
estimated impact on beneficiary financial liability of our proposed
Part B inpatient payment policies. Many commenters stated that the
proposed policies would financially harm low-income and other
beneficiaries. One commenter recommended that CMS analyze the impact of
the proposed policies on Medicaid to the extent that there may be
additional Medicaid expenditures on behalf of dually eligible
beneficiaries for Part B copayments. Similarly, given that many
beneficiaries have secondary or supplemental insurance, the commenter
recommended that the impact analysis address the extent to which these
insurers will incur additional costs for Part B copayments and for
drugs that are usually self-administered. The commenter also
recommended that CMS include in its impact analysis an estimate of the
cost of noncovered drugs that are usually self-administered, using the
noncovered drug charges reported on Part B hospital claims in revenue
codes 250 to 257 and 630 to 633.
Response: We addressed the public comments regarding beneficiary
liability for Part B inpatient services in detail in section XI.B.6. of
the preamble of this final rule. In Table 2 below, we provide an
estimate of the impact on beneficiary out-of-pocket costs for Part A
and Part B services, resulting from the appeal decisions, the Ruling,
and our final Part B inpatient payment policy. These changes are mainly
the result of the changes in beneficiary cost-sharing when inpatient
services are paid under Part B rather than under Part A. The amounts
are shown in millions for CYs 2013 through 2017.
We considered using the noncovered pharmacy revenue center charges
to estimate the cost of drugs that are usually self-administered and,
therefore, not covered under Part B. We did not use the noncovered
pharmacy revenue center charges because these charges include drugs
that are not covered for other reasons (for example, investigational
drugs, and drugs that are non-covered by local coverage decisions). In
addition, there is no requirement that hospitals must report outpatient
services that are not covered by Medicare and billed directly to the
patient. We do not believe that we can draw reasonable cost estimates
for self-administered drugs from the available Part B claims data.
We provide an estimate below of the impact on Medicaid
expenditures. Because of the variability in employer-sponsored or other
supplemental insurance policies, we did not estimate impacts on these
insurers.

[[Page 50937]]

Table 2--Estimated Impact on Beneficiaries' Out-of-Pocket Expenses for Part A and Part B Services
[Current year dollars (in millions)]
----------------------------------------------------------------------------------------------------------------
Calendar year Part A Part B Total
----------------------------------------------------------------------------------------------------------------
Appeal Decisions
----------------------------------------------------------------------------------------------------------------
2013 $20 $20 $40
2014 30 30 60
2015 30 30 60
2016 30 30 60
2017 30 30 60
----------------------------------------------------------------------------------------------------------------
CMS Ruling 1455-R
----------------------------------------------------------------------------------------------------------------
2013 50 -40 10
2014 80 -60 20
2015 80 -60 20
2016 80 -60 20
2017 90 -70 20
----------------------------------------------------------------------------------------------------------------
Final Part B Inpatient Billing With 12-Month Timely Filing Restriction Policy
----------------------------------------------------------------------------------------------------------------
2013 0 0 0
2014 -100 40 -60
2015 -100 40 -60
2016 -110 50 -60
2017 -110 50 -60
----------------------------------------------------------------------------------------------------------------
Total
----------------------------------------------------------------------------------------------------------------
2013 70 -20 50
2014 0 20 20
2015 0 20 20
2016 0 20 20
2017 0 20 20
----------------------------------------------------------------------------------------------------------------
Note: Totals do not necessarily equal the sums of rounded components.

(3) Effects on the Medicaid Program
The impact to Medicaid expenditures is due to the change in
beneficiary cost-sharing when cases shift between inpatient and
outpatient (shown in Table 2 above), and approximately 15 to 20 percent
of Medicare beneficiaries are dually eligible for Medicaid. As such,
our best estimate of the impact on Medicaid, given limited information,
is that approximately 15 to 20 percent of the change in beneficiary
cost-sharing represents the impact on Medicaid. For the final rule
policy on Part B inpatient payment, the estimated impact is roughly up
to $10 million in 2013 and up to $4 million in subsequent years.
(4) Effects on Other Providers
Our final policy will not affect providers other than hospitals.
d. Alternatives Considered
Under our final policy, all hospitals and CAHs are eligible to bill
Part B inpatient services when a Part A claim is denied because the
inpatient admission was not reasonable and necessary but hospital
outpatient services would have been reasonable and necessary. We
solicited public comments regarding a potential policy to require that
hospitals currently not billing the OPPS for Part B inpatient services
under 42 CFR 419.22(r) (those with no outpatient departments, or that
have outpatient departments but submit no claims to Medicare Part B) to
now bill the OPPS for Part B services that are payable under the OPPS.
We did not finalize this policy because we did not receive any public
comments on this issue indicating that these hospitals' likely payments
under the final Part B inpatient policy will continue to outweigh their
costs of implementing billing systems specific to the OPPS. We intend
to monitor the volume of Part B claims submitted for payment by these
hospitals, and may propose in future rulemaking to require them to
begin billing the OPPS based on the Part B inpatient services they
bill.
e. Accounting Statement and Table
Whenever a rule is considered a significant rule under Executive
Order 12866, we are required to develop an Accounting Statement. This
statement must state that we have prepared an accounting statement
showing the classification of the expenditures associated with our
final rule provisions. The accounting statement table for the final
Part B inpatient payment policy is presented in section IV.C. of the
Appendix to this final rule.
f. Conclusion
The analysis provided in this section of this final rule provides a
Regulatory Impact Analysis for our Part B inpatient payment final
policies. In accordance with the provisions of Executive Order 12866,
this rule was reviewed by the Office of Management and Budget.
13. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995, we are required to
provide 60-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval. In
order to fairly evaluate whether an information collection should be
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act
of 1995 requires that we solicit comment on the following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.

[[Page 50938]]

The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
We solicited public comment on each of these issues for applicable
sections of the Part B Inpatient Billing proposed rule that contained
information collection requirements (ICRs) as follows:
With regard to the proposed payment of Medicare Part B inpatient
services discussed in section II.B. of the Part B Inpatient Billing
proposed rule (and in section XI.B. of the preamble of this final
rule), the medical recordkeeping requirement associated with the
services billed on Part B inpatient claims during the inpatient stay is
exempt from the PRA in accordance with 5 CFR 1320.3(b)(2). The same
holds for recordkeeping associated with the services billed on a Part B
outpatient claim for services provided in the 3-day payment window
prior to the inpatient admission. We believe that the time, effort, and
financial resources necessary to comply with the aforementioned
recordkeeping requirements would be incurred by persons in the normal
course of their activities and, therefore, considered to be usual and
customary business practices.
With regard to the appeals of proposed payment of Medicare Part B
inpatient services, the appeals information collection activity
discussed in section II.H. of the Part B Inpatient Billing proposed
rule (and in section XI.B.9. of the preamble of this final rule) is
exempt from the requirements of the Paperwork Reduction Act because it
is associated with an administrative action (5 CFR 1320.4(a)(2) and
(c)).
We did not receive any public comments on these medical
recordkeeping requirements or appeals information collection activity.
The finalized aforementioned provisions do not impose any new or
revised reporting or recordkeeping requirements and would not impose
any new or revised burden estimates.

C. Admission and Medical Review Criteria for Hospital Inpatient
Services Under Medicare Part A

1. Background
As we discussed in section XI.A. of the preamble of this final
rule, in response to concerns about the provision of observation
services for increasingly long periods of time albeit in a small
percentage of cases, and in response to stakeholders' concerns about
the clarity and appropriateness of Medicare's hospital inpatient
admission and medical review guidelines, we proposed several
clarifications and changes in policy in the FY 2014 IPPS/LTCH PPS
proposed rule (78 FR 27644 through 27650). In this section of this
final rule, we discuss the public comments we received in response to
our proposals and provide our final policies after consideration of the
public comments we received.
2. Requirements for Physician Orders
a. Statutory Basis, Relationship to Physician Certification, and Timing
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27646 through
27647), we clarified that a beneficiary becomes a hospital inpatient if
formally admitted as such pursuant to a physician order for hospital
inpatient admission. While the requirement for a physician order for
hospital inpatient admission has long been clear in the hospital CoPs,
we proposed to state explicitly in our payment regulations that
admission pursuant to this order is the means whereby a beneficiary
becomes a hospital inpatient and, therefore, is required for payment of
hospital inpatient services under Medicare Part A. We stated that a
beneficiary becomes a hospital inpatient when admitted as such after a
physician (or other qualified practitioner as provided in the
regulations) orders inpatient admission in accordance with the CoPs,
and that Medicare pays under Part A for such an admission if the order
is documented in the medical record. We stated that the order must be
supported by objective medical information for purposes of the Part A
payment determinations.
Accordingly, we proposed new 42 CFR 412.3(a), which states, ``For
purposes of payment under Medicare Part A, an individual is considered
an inpatient of a hospital, including a critical access hospital, if
formally admitted as an inpatient pursuant to an order for inpatient
admission by a physician or other qualified practitioner in accordance
with this section and Sec. Sec. 482.24(c), 482.12(c), and
485.638(a)(4)(iii) of this chapter for a critical access hospital.'' We
stated that this physician order must be present in the medical record
and be supported by the physician admission and progress notes, in
order for the hospital to be paid for hospital inpatient services under
Medicare Part A (78 FR 27647).
In addition, in the proposed rule, we discussed the statutory
requirement for certification of hospital inpatient services for
payment under Medicare Part A. The certification requirement for
inpatient services other than psychiatric inpatient services is found
in section 1814(a)(3) of the Act, which provides that Medicare Part A
payment will only be made for such services ``which are furnished over
a period of time, [if] a physician certifies that such services are
required to be given on an inpatient basis.'' The regulation
implementing this requirement is found at 42 CFR 424.13(a).
The requirement for certification and recertification of inpatient
psychiatric services as a condition of payment are found in section
1814(a)(2) of the Act and 42 CFR 424.14. We did not propose to exclude
any hospitals from our proposed clarification of the requirement for
the physician order and physician certification for Part A payment of
hospital inpatient services.
Comment: One commenter asked CMS to clarify what is meant by
physician ``certification.'' Some commenters believed that CMS did not
articulate a statutory authority for requiring the physician order as a
condition of Part A payment. The commenters stated that the proposed
rule implied that the physician order requirement flows from section
1814(a)(3) of the Act, which sets forth conditions and limitation on
payment, one of which is a requirement for a physician certification
that inpatient hospital services furnished over a period of time are
required on an inpatient basis for such individual's medical treatment.
Other commenters assumed that, in the proposed rule, CMS was equating
the physician order with the physician certification that is required
for payment under section 1814(a)(3) of the Act, stating that in the
Social Security Amendments of 1967 to this section of the Act, Congress
found that admission ``orders'' are not required for Medicare payment
because hospital admissions are almost always medically necessary.
These commenters objected to the proposal to clarify that inclusion
of the inpatient admission order in the medical record is a condition
of payment. The commenters acknowledged that the hospital CoPs already
require as a health and safety measure that the inpatient admission
decision be made upon the ``recommendation'' of a physician. However,
they believed it would be duplicative to also require an order as a
condition of payment, and were concerned that the requirement would
become the basis for hospital liability under the False Claims Act. One
commenter stated that CMS' proposal crossed the line in dictating the
practice

[[Page 50939]]

of medicine. Some commenters believed that CMS proposed a new
requirement that is not supported in the statute and is contrary to
longstanding practice under the Medicare program. These commenters
argued that the statutory reference to services furnished ``over a
period of time'' as well as the regulation's lack of any specific
deadline for physician certifications in nonoutlier cases indicate that
no certification is required for short-stay cases.
In support of their argument, the commenters cited the legislative
history of section 1814(a)(3) of the Act, which they interpret to apply
only to certain long-term stays. They noted that, in the Social
Security Amendments of 1967, Congress amended the statutory language
from requiring physician certification of hospital inpatient services
to requiring physician certification only for ``inpatient hospital
services . . . which are furnished over a period of time.'' Moreover,
the commenters cited congressional reports \196\ explaining this
statutory change by stating that it ``eliminate[d] the requirement for
hospital insurance payments that there be a physician's certification
of medical necessity with respect to admissions to hospitals which are
neither psychiatric nor tuberculosis institutions'' and that such a
certification is required ``only in cases of hospital stays of extended
duration.'' The commenters suggested that the House report also
explains the reason for the change, stating that ``admissions to
general hospitals are almost always medically necessary and the
requirement for a physician's certification of this fact results in
largely unnecessary paperwork'' (H.R. Rep. No. 90-544, at 38 (1967)).
Based upon all of the above factors, the commenters argued that, since
1967, the agency has not had authority to require a physician order as
a condition of payment for hospital inpatient stays other than extended
stays.
---------------------------------------------------------------------------

\196\ S. Rep. No. 90-744, at 239 (1967), H.R. Rep. No. 90-544,
at 149 (1967).
---------------------------------------------------------------------------

Response: We do not agree that these arguments mandate the
conclusion that the physician certification requirement only applies to
long-stay cases. The statute does not define ``over a period of time,''
and further provides that ``such certification shall be furnished only
in such cases, and with such frequency, and accompanied by such
supporting material . . . as may be provided by regulations.'' By this
language, Congress explicitly delegated authority to the agency to
elucidate this provision of the statute by regulation. Accordingly, CMS
is authorized to interpret the statutory phrase ``over a period of
time'' so long as its interpretation is not arbitrary, capricious, or
manifestly contrary to statute (Chevron U.S.A. Inc. v. Natural
Resources Defense Council, 467 U.S. 837 (1984)).
Section 424.13 of the regulations does not contain any length-of-
time restrictions on the applicability of the certification
requirement. Instead, Sec. 424.13(a) provides that Medicare Part A
payment will only be made for inpatient hospital services (other than
inpatient psychiatric services) if a physician certifies or recertifies
``the need for continued hospitalization of the patient for medical
treatment or medically required inpatient diagnostic study.''
Therefore, in its implementing regulations, CMS interpreted the
statute's requirement of a physician certification for inpatient
hospitals services furnished ``over a period of time'' to apply to all
inpatient admissions. While this is not the only possible
interpretation of the statute, we believe that it is a permissible
interpretation.
We recently reiterated our requirement of a physician order for all
inpatient admissions in the preamble to the CY 2012 Medicare Physician
Fee Schedule final rule. In a discussion regarding whether services
furnished to a patient who is at the hospital overnight, but for less
than 24 hours, should be billed as outpatient or inpatient services,
CMS stated that ``[u]nless a treating physician has written an order to
admit the patient as an inpatient, the patient is considered for
Medicare purposes to be a hospital outpatient, not an inpatient'' (76
FR 73106). In addition, the CoPs illustrate that CMS' policy requires a
physician order in order to justify inpatient hospitalization
(including inpatient psychiatric hospitalizations). Under 42 CFR
482.12(c)(2), a hospital's governing body must ensure that ``[p]atients
are admitted to the hospital only on the recommendation of a licensed
practitioner permitted by the State to admit patients to a hospital.''
In addition, Sec. 482.24(c) requires that a patient's medical record
``contain information to justify admission and continued
hospitalization.''
We also have indicated our current policy and its applicability to
all types of hospitals in our subregulatory guidance. In the MBPM,
Chapter 1, Section 10, we define an inpatient as ``a person who has
been admitted to a hospital for bed occupancy for purposes of receiving
inpatient services.'' This section further explains that ``[g]enerally,
a patient is considered an inpatient if formally admitted as inpatient
with an expectation that he or she will remain at least overnight and
occupy a bed even though it later develops that the patient can be
discharged or transferred to another hospital and not actually use a
hospital bed overnight.'' In addition, Section 10 provides that ``[t]he
physician or other practitioner responsible for a patient's care at the
hospital is also responsible for deciding whether the patient should be
admitted as an inpatient.''
CMS' policy is also reflected in the Medicare Claims Processing
Manual (MCPM) (Pub. 100-04), Chapter 3, Section 40.2.2(K), which
discusses the circumstance where a patient is admitted to an inpatient
hospital, but dies or is discharged before being assigned to a room.
Certainly, this circumstance would not qualify as a long stay, but CMS
still requires a physician order to justify the admission, stating that
``[a] patient of an acute care hospital is considered an inpatient upon
issuance of written doctor's orders to that effect.'' Finally, Chapter
4 of the Medicare General Information, Eligibility, and Entitlement
Manual also addresses the certification requirement. Section 10 of
Chapter 4 provides that ``[p]ayments may be made for covered hospital
services only if a physician certifies and recertifies to the medical
necessity for the services at designated intervals of the hospital
inpatient stay.'' As members of the hospital community have noted in
the past, this section also states that ``[f]or patients admitted to a
general hospital . . . a physician certification is not required at the
time of admission.'' However, this merely means that the certification
need not be contemporaneous with the admission, rather than indicating
that no certification is required.
Therefore, our longstanding policy, as reflected in our regulations
and other guidance, has been that a physician order is required for all
inpatient hospital admissions, regardless of the length of stay. We
believe that this policy is a legally supportable interpretation of
section 1814(a) of the Act. In order to clarify this policy going
forward, we are finalizing Sec. 412.3(a) to include the proposed
language as well as the provision we described in the proposed rule (78
FR 27647) that the order must be present in the medical record and
supported by the physician admission and progress notes. We are adding
this preamble language from the proposed rule to the regulation text to
improve clarity and provide consistency with our policy on medical
review of inpatient admissions (section XI.C.3. of the preamble of this
proposed rule) that,

[[Page 50940]]

while the physician order and the physician certification are required
for all inpatient hospital admissions in order for payment to be made
under Part A, the physician order and the physician certification are
not considered by CMS to be conclusive evidence that an inpatient
hospital admission or service was medically necessary. Rather, the
physician order and physician certification are considered along with
other documentation in the medical record.
As finalized, Sec. 412.3(a) reads: ``For purposes of payment under
Medicare Part A, an individual is considered an inpatient of a
hospital, including a critical access hospital, if formally admitted as
an inpatient pursuant to an order for inpatient admission by a
physician or other qualified practitioner in accordance with this
section and Sec. Sec. 482.24(c), 482.12(c), and 485.638(a)(4)(iii) of
this chapter for a critical access hospital. This physician order must
be present in the medical record and be supported by the physician
admission and progress notes, in order for the hospital to be paid for
hospital inpatient services under Medicare Part A. In addition to these
physician orders, inpatient rehabilitation facilities also must adhere
to the admission requirements specified in Sec. 412.622 of this
chapter.'' (We discuss the application of these final policies to IRFs
in section XI.C.2.c. of the preamble of this final rule.)
To provide further clarity and to more closely mirror the
authorizing statutory language, we are deleting the word ``continued''
and adding the word ``inpatient'' before the phrase ``medical
treatment'' in Sec. 424.13(a)(2), to reflect that the content of the
certification of inpatient services (other than inpatient psychiatric
services) includes the reason for inpatient hospital services. The
amended paragraph reads, ``(a) Content of certification and
recertification. Certification begins with the order for inpatient
admission. Medicare Part A pays for inpatient hospital services (other
than inpatient psychiatric facility services) only if a physician
certifies and recertifies the following:
(1) That the services were provided in accordance with Sec. 412.3
of this chapter
(2) The reasons for either--
(i) Hospitalization of the patient for inpatient medical treatment
or medically required inpatient diagnostic study; or
(ii) Special or unusual services for cost outlier cases (under the
prospective payment system set forth in subpart F of Part 412 of this
chapter).''
We believe this language better reflects the statutory content of
the certification required by section 1814(a)(3) of the Act ``[t]hat
such services are required to be given on an inpatient basis for such
individual's medical treatment, or that inpatient diagnostic study is
medically required and such services are necessary for such purpose.''
We note that the particular elements of the certification, for
example, the order for inpatient services and documentation of the
reason for continued hospitalization (diagnosis) should be documented
within the medical record. Therefore, we are not finalizing any new
documentation requirements. The existing provisions in Sec. 424.11
continue to apply, for example paragraphs (b) and (c) which provide
that no specific procedures or forms are required for certification and
recertification statements. The provider may adopt any method that
permits verification. The certification and recertification statements
may be entered on forms, notes, or records that the appropriate
individual signs, or on a special separate form. Except as provided for
delayed certifications, there must be a separate signed statement for
each certification or recertification. The succeeding sections of Part
424, subpart B set forth specific information required for different
types of services. If that information is contained in other provider
records, such as physicians' progress notes, it need not be repeated.
It will suffice for the statement to indicate where the information is
to be found.
To clarify the relationship between the physician order and the
physician certification, we are adding new 42 CFR 412.3(c) which states
that ``The physician order also constitutes a required component of the
physician certification of the medical necessity of hospital inpatient
services under Part 424 of this chapter.'' Similarly, we are revising
paragraph (a) of Sec. 424.13 to include in the content of the
certification for inpatient hospital services (other than inpatient
psychiatric services): ``(1) [t]hat the services were provided in
accordance with Sec. 412.3 of this chapter [the order].'' We are
adding parallel provisions in 42 CFR 424.14(b) and 424.15(a) to include
in the content of the physician certification for payment of inpatient
psychiatric services and inpatient CAH services, respectively, that the
services were provided in accordance with Sec. 412.3. We discuss
additional rules for certification that apply to inpatient services
furnished in IRFs in section XI.C.2.c. of the preamble of this final
rule.
To further clarify the relationship between the physician order and
the physician certification, and our requirement that, like the order,
the certification applies to all hospital inpatient admissions (not
just extended stays), we are adding new provisions to the regulations
regarding timing of the certification. In Sec. 424.13, we are
providing that the certification must be signed and documented in the
medical record prior to the hospital discharge (except for
recertifications of extended stays, which are required earlier). We are
redesignating existing paragraphs (b) through (g) of Sec. 424.13 as
paragraphs (c) through (h), respectively, in order to add a new
paragraph (b). We are requiring under new Sec. 424.13(b) that, for
inpatient services other than inpatient psychiatric services: ``For all
hospital inpatient admissions, the certification must be completed,
signed, and documented in the medical record prior to discharge. For
outlier cases under subpart F of Part 412 of this chapter that are not
subject to the PPS, the certification must be signed and documented in
the medical record and as specified in paragraphs (e) through (h) of
this section.''
For inpatient psychiatric services, we are adding the phrase ``and
must be completed and documented in the medical record prior to
discharge'' at the end of Sec. 424.14(d)(1) so that the paragraph
reads, ``Certification is required at the time of admission or as soon
thereafter as is reasonable and practicable, and must be completed and
documented in the medical record prior to discharge.'' We will continue
to provide under paragraph (d)(2) of Sec. 424.14 that the first
recertification is required as of the 12th day of hospitalization.
Subsequent recertifications are required at intervals established by
the utilization review committee (on a case-by-case basis if it so
chooses), but no less frequently than every 30 days.
Like other components or elements of the physician certification,
the physician order reflects affirmation by the ordering practitioner
that hospital inpatient services are medically necessary. However, the
order serves the unique purpose of initiating the inpatient admission
and documenting the physician's (or other qualified practitioner as
provided in the regulations) intent to admit the patient, which impacts
its required timing. Therefore we are specifying in new paragraph (d)
of Sec. 412.3 that ``The physician order must be furnished at or
before the time of the inpatient admission'' (unlike the rest of the
certification which may be completed prior to discharge, except for the
outlier

[[Page 50941]]

extended stays described in Sec. 424.13(e) through (g)). Similarly, we
are providing in the regulations on the certification that the
certification begins with the order for inpatient admission. We are
adding this as the new first sentence in Sec. Sec. 424.13(a),
424.14(a), and 424.15(b) for CAHs. Also, we are including a conforming
amendment in new paragraph (d)(5) of Sec. 424.11 that, for hospital or
CAH hospital inpatient services, a delayed certification may not extend
past discharge. The existing delayed certification provisions in
existing Sec. 424.11(d)(3) and (d)(4) will continue to apply, but only
for certification of the outlier extended stay cases described in Sec.
424.13(e) through (g).
To clarify that the rules for timing of certification and
recertification for ``cases not subject to the PPS'' in redesignated
paragraphs (e) through (h) of Sec. 424.13 apply only to IPPS outlier
cases, we are adding the word ``outlier'' prior to the phrase ``subject
to the PPS'' in paragraphs (e), (f), (g), and (h).
We are finalizing two conforming amendments in the regulation text
governing physician certification. In Sec. 424.11(e)(2), we are
removing the reference ``Sec. 424.13(c)'' and adding in its place
``Sec. 424.13(d)'' as redesignated. Similarly, we are amending Sec.
424.16(a) by removing the reference ``Sec. 424.13(e)'' and adding it
its place ``subpart B of this Part''.
Comment: Several commenters asked what Medicare's payment rules
would be regarding verbal inpatient admission orders. For example, the
commenters asked whether the hospital could submit a Part A claim based
upon a verbal order that is not documented in the medical record at the
time the claim is submitted. In addition, the commenters asked how CMS
defines ``prompt'' authentication of orders, or address verbal order
``read-back'' processes.
Response: Because the physician order is required as a condition of
payment, if the order is not documented in the medical record, the
hospital should not submit a claim for Part A payment. A verbal order
is a temporary administrative convenience for the physician and
hospital staff but it is not a substitute for a properly documented and
authenticated order for inpatient admission. A verbal order must be
properly countersigned by the practitioner who gave the verbal order.
We intend to further discuss and develop our requirements regarding
verbal orders for inpatient admission in our subregulatory guidance.
The CoPs regarding verbal orders were carefully developed over a period
time, and we believe we should take additional time to consider and
potentially coordinate the CoP and payment rules.
Comment: Some commenters believed that, while the order should be
documented in the medical record as a best practice, documentation of
the order should not be required if it is unintentionally omitted. They
believed that the order is a technicality that should not serve as a
condition of payment. The commenters stated that if the order to admit
is missing, yet the physician intent and physician recommendation to
admit to inpatient can clearly be derived from the medical record, for
example if a medically necessary inpatient-only service was furnished,
the contractor should consider these rather than requiring the
physician order as a technical requirement for medical necessity and
payment.
Response: The admission order is evidence of the decision by the
physician (or other practitioner who can order inpatient services) to
admit the beneficiary to inpatient status. In very rare circumstances,
the order to admit may be missing or defective (that is, illegible or
incomplete), yet the intent, decision, and recommendation of the
physician (or other practitioner who can order inpatient services) to
admit the beneficiary as an inpatient can clearly be derived from the
medical record. In these rare situations, we have provided contractors
with discretion to determine that this information constructively
satisfies the requirement that the hospital inpatient admission order
be present in the medical record. However, in order for the
documentation to provide acceptable evidence to support the hospital
inpatient admission, thus satisfying the requirement for the physician
order, there can be no uncertainty regarding the intent, decision, and
recommendation by the physician (or other practitioner who can order
inpatient services) to admit the beneficiary as an inpatient, and no
reasonable possibility that the care could have been adequately
provided in an outpatient setting. This narrow and limited alternative
method of satisfying the requirement for documentation of the inpatient
admission order in the medical record should be extremely rare, and may
only be applied at the discretion of the medical review contractor.
Even in those circumstances, all requirements for the other components
of the physician certification must be met.
Comment: Several commenters asked CMS to clarify whether, when a
beneficiary would become an inpatient under the proposed policies,
inpatient status would be conferred retroactive to the beginning of the
hospital stay. One commenter recommended that the patient become
inpatient after the physician writes the order and the patient starts
receiving care based on those orders, whether or not it is in a bed on
an inpatient nursing unit, a holding bed in the emergency department or
another location, or whether the patient is sent to imaging or the
operating room first. One commenter questioned what CMS meant by the
term ``outpatient status.'' Another commenter questioned CMS' current
definition of ``inpatient,'' stating it is not defined in the Act. The
commenter stated that, at the time of the law's passage, the meaning of
``inpatient'' was obvious and universal. The commenter stated that a
patient that stays in a hospital is an inpatient, whereas a patient
that goes home after treatment, or after a limited recovery period such
as a few hours, is an outpatient.
Response: As explained in the proposed rule, in response to
concerns and suggestions of stakeholders, we aimed to provide more
clarity regarding hospital inpatient admissions and Medicare payment.
Toward those ends, in the FY 2014 IPPS/LTCH PPS proposed rule, we
addressed medical review criteria and proposed to codify in regulation
our longstanding policy (as reflected in manual provisions) that a
patient becomes an inpatient when formally admitted as such pursuant to
a physician order. CMS' definition of ``inpatient'' has been upheld in
litigation. Landers v. Leavitt, 545 F.3d 98 (2\d\ Cir. 2008). We did
not propose policy changes regarding the definition of ``inpatient'' or
inpatient status. In contrast to a hospital inpatient, we have defined
a hospital outpatient in the MBPM, Chapter 6, Section 20, as ``a person
who has not been admitted by the hospital as an inpatient but is
registered on the hospital records as an outpatient and receives
services (rather than supplies alone) from the hospital or CAH.''
This final rule provides that a beneficiary is considered a
hospital inpatient following formal admission ``pursuant to'' the
hospital inpatient admission order. We included the phrase ``pursuant
to'' in recognition that, in most cases, the beneficiary is formally
admitted and becomes a hospital inpatient concurrent with the physician
order to admit to inpatient. However, in cases such as elective
surgeries where the inpatient admission order is written as far as
several weeks in advance, the beneficiary is not considered an
inpatient until the time of formal admission at the hospital for the

[[Page 50942]]

inpatient services. In this example, the beneficiary is admitted and
becomes an inpatient pursuant to the physician's order and could not be
admitted without it, although there may be a time lag between when the
order to admit is written and the time of formal admission. The
physician order cannot be effective retroactively. In this final rule,
we are not changing our definition of a ``hospital inpatient.''
Inpatient status only applies prospectively, starting from the time the
patient is formally admitted pursuant to a physician order for
inpatient admission, in accordance with our current policy.
Comment: Several commenters expressed the opinion that physicians
should not have to divide their attention between providing patient
care and understanding Medicare's admission rules, which the commenters
viewed as mere billing distinctions. Some commenters believed that CMS
should allow physicians to delegate the determination of patient status
to the hospital or its utilization review committee, while the
physician focuses on ordering and providing the necessary clinical
care. Further, some commenters stated that this is their current
practice. Some commenters commented that their current processes
provide for admission ``to case management'' or ``to utilization
review'' rather than specifying inpatient admission.
Response: As we discussed above, many public comments from
physicians indicated that they believed the physician should be
involved in the determination of patient status, and we agree. To
reinforce this policy and reduce confusion among hospitals,
beneficiaries, and physicians on the differences between outpatient
observation and inpatient services, we are providing in this final rule
that the order for inpatient admission must specify admission ``to or
as an inpatient.'' In previous discussions, stakeholders have indicated
that often physician orders only specify admission to a certain
location in the hospital (for example, ``Admit to Tower 7'') or do not
clarify whether the physician's intent is to ``admit'' the beneficiary
for outpatient observation services or for hospital inpatient services.
Therefore, we are providing that, for payment of hospital inpatient
services under Medicare Part A, the order must specify the admitting
practitioner's recommendation to admit ``to inpatient,'' ``as an
inpatient,'' ``for inpatient services,'' or similar language specifying
his or her recommendation for inpatient care. In addition, as discussed
in the proposed rule (78 FR 27646), we remind hospitals that patients
are admitted to the hospital only on the recommendation of a physician
or licensed practitioner permitted by the State to admit patients to a
hospital, provided that the practitioner, either a physician or other
licensed practitioner, has been granted such privileges by the hospital
to do so. Hospitals and physicians routinely must work together to
comply with billing, coding, and admission rules not just for Medicare,
but also for Medicaid and private payers.
b. Authorization to Sign the Physician Order
We proposed new regulation provisions in 42 CFR 412.3(b) which
state that, as a condition of payment, the order must be furnished by a
qualified and licensed practitioner who has admitting privileges at the
hospital as permitted by State law, and who is responsible for the
inpatient care of the patient at the hospital. The practitioner could
not delegate the decision (order) to another individual who is not
responsible for the care of that patient, is not authorized by the
State to admit patients, or has not been granted admitting privileges
applicable to that patient by the hospital's medical staff.
Comment: Commenters in the physician and Medicare contractor
medical review communities generally supported the proposal to require
the inpatient admission order, and to provide that it could not be
delegated to another individual who does not possess the authority to
order inpatient admission in his or her own right. In addition, some
commenters representing hospitals did not object to this requirement
because it is already standard practice. However, the commenters
described a number of situations in which the ordering practitioner
would appropriately not be the individual who takes responsibility for
the inpatient care of the beneficiary, or for the entirety of the
inpatient care. According to the commenters, these included emergency
department physicians, hospitalists and other types of physicians in
group practices who care for patients in the hospital, and residents
working under the supervision of attending physicians. The commenters
requested that if CMS finalizes a requirement for the inpatient order
as a condition of Part A payment, CMS should allow it to be issued by
any physician in the hospital who is knowledgeable about the
beneficiary's condition and has admitting privileges at the hospital.
Response: We agree with the commenters that it would be appropriate
to allow practitioners who may not be responsible for the inpatient
hospital care of the beneficiary but are otherwise qualified to admit
patients at that hospital and are knowledgeable about the case to order
the inpatient admission. Therefore, we are deleting the proposed
language in paragraph (b) of Sec. 412.3 that would have required the
order to be issued by a practitioner who is responsible for the
inpatient care of the patient at the hospital. We are replacing this
language with new language to specify that, although the ordering
practitioner need not be responsible for the patient's inpatient care,
he or she must be knowledgeable about the patient's hospital course,
medical plan of care, and current condition.
We are finalizing all of the other proposed qualifications in
paragraph (b) of Sec. 412.3 for the ordering practitioner. The final
language reads, ``(b) The order must be furnished by a qualified and
licensed practitioner who has admitting privileges at the hospital as
permitted by State law, and who is knowledgeable about the patient's
hospital course, medical plan of care, and current condition. The
practitioner may not delegate the decision (order) to another
individual who is not authorized by the State to admit patients, or has
not been granted admitting privileges applicable to that patient by the
hospital's medical staff.'' We discuss the application of these final
policies to IRFs in section XI.C.2.c . of the preamble of this final
rule.
c. Applicability to Inpatient Rehabilitation Facilities (IRFs)
We note that IRFs that are excluded from the IPPS and paid under
the IRF prospective payment system (IRF PPS) specified in 42 CFR
412.1(a)(3) have certain requirements in 42 CFR 412.622(a)(3), (a)(4),
and (a)(5) that govern an inpatient admission to an IRF. These
requirements specify the admission criteria that must be documented in
the medical record for an IRF admission of a Medicare Part A fee-for-
service beneficiary to be considered reasonable and necessary under
section 1862(a)(1) of the Act. For example, the documentation
requirements contained in these regulations specify that a
comprehensive preadmission screening must be conducted and must serve
as the basis for the initial determination of whether or not the
patient meets the requirements for admission to an IRF. A
rehabilitation physician, defined as a licensed physician with
specialized training and experience in rehabilitation, must document
that he or she has reviewed and concurs with the preadmission screening
prior to the

[[Page 50943]]

admission. However, we note that Chapter 1, Section 110.1.4 of the MBPM
also specifies that, at the time each Medicare Part A fee-for-service
patient is admitted to an IRF, a physician must generate admission
orders for the patient's care.
Therefore, although the required physician orders discussed in
section XI.C.2.a. of the preamble of this final rule apply to all
inpatient hospital admissions, including inpatient admissions to an
IRF, they do not determine the timing of an IRF admission, nor are they
used to determine whether the IRF admission was reasonable and
necessary. These determinations are governed by the requirements in
Sec. Sec. 412.622(a)(3), (4), and (5) of the regulations. To clarify
this, we have included a provision under new Sec. 412.3 in this final
rule that the IRF requirements at Sec. 412.622 also must be met in
order for the IRF to be paid for hospital inpatient services under
Medicare Part A. However, due to the aforementioned inherent
differences in the operation of and beneficiary admission to IRFs, such
providers are excluded from the 2-midnight admission guidelines and
medical review instruction, as provided under XI.C.3. of the preamble
of this final rule.
3. Inpatient Admission Guidelines
CMS is authorized under section 1893 of the Act to implement the
Medicare Integrity Program to conduct medical review of claims and
ensure appropriateness of Medicare payment. Medicare review
contractors, such as Medicare Administrative Contractors (MACs),
Recovery Auditors (formerly known as the Recovery Audit Contractors, or
RACs), the Comprehensive Error Rate Testing (CERT) Contractor, and
other review contractors are hired by CMS to review claims on a pre-
payment or post- payment basis to determine whether a claim should be
paid or denied or whether a payment was properly made under Medicare
payment rules. Following documentation reviews, many claim denials are
made or improper payments identified because either--
The claim was incorrectly coded (for example, the provider
did not appropriately assign the individual or grouper inpatient and/or
outpatient coding for the care documented); or
The services were not medically necessary (that is, the
review indicates that the services billed were not reasonable and
necessary based upon Medicare payment policies or that the
documentation was insufficient to support the medical necessity of the
services billed).
CMS developed the CERT program to calculate the annual Medicare FFS
program improper payment rate. The CERT program considers any claim
that was paid when it should have been denied or paid at another amount
(including both overpayments and underpayments) to be an improper
payment. Hospital claim errors are identified more frequently for
shorter lengths of stay. In 2012, the CERT contractor found that
Medicare Part A inpatient hospital admissions for 1-day stays or less
had an improper payment rate of 36.1 percent. The improper payment rate
decreased significantly for 2-day or 3-day stays, which had improper
payment rates of 13.2 percent and 13.1 percent, respectively. The
improper payment rate further decreased to 8 percent for those
beneficiaries who were treated as hospital inpatients for 4 days.
Hospital claim errors are identified more frequently for shorter
lengths of stay. The majority of improper payments under Medicare Part
A for short-stay inpatient hospital claims have been due to
inappropriate patient status (that is, the services furnished were
reasonable and necessary, but should have been furnished on a hospital
outpatient, rather than hospital inpatient, basis). Inpatient hospital
short-stay claim errors are frequently related to minor surgical
procedures or diagnostic tests. In such situations, the beneficiary is
typically admitted as a hospital inpatient after the procedure is
completed, monitored overnight as an inpatient, and discharged from the
hospital in the morning. Medicare review contractors typically find
that while the underlying services provided were reasonable and
necessary, the inpatient hospitalization following the procedure was
not (that is, the services following the procedure should have been
provided on an outpatient basis).
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27644 through
27650), we sought to clarify our longstanding policy on how Medicare
review contractors review inpatient hospital admissions for payment
under Medicare Part A. We also issued proposed guidance to physicians
and hospitals regarding when a hospital inpatient admission should be
ordered for Medicare beneficiaries. In this final rule we discuss the
public comments we received in response to our proposals relating to
admission guidance and medical review and provide our final policies
after considerations of those public comments.
a. Correct Coding Reviews
We did not propose any changes to coding review strategies for
hospital claims. Reviewers will continue to ensure that the correct
codes were applied and are supported by the medical record
documentation.
b. Complete and Accurate Documentation
When conducting complex medical review, we proposed that Medicare
review contractors would continue to employ clinicians to review
practitioner documented procedures and ensure that they are supported
by the submitted medical record documentation. Such has been the case
for complex medical review as historically performed, and will continue
to be the case per this final rule instruction.
c. Medical Necessity Reviews
(1) Physician Order and Certification
In the proposed rule (78 FR 27647), we proposed to codify in 42 CFR
412.46(b) the longstanding requirement that medical documentation must
support the physician's order and certification, as prescribed by CMS
Ruling 93-1. Under the proposed new paragraph (b) titled ``Physician's
order and certification regarding medical necessity,'' CMS reiterated
that ``No presumptive weight shall be assigned to the physician's order
under Sec. 412.3 or the physician's certification under Subpart B of
Part 424 of this chapter in determining the medical necessity of
inpatient hospital services under section 1862(a)(1) of the Act. A
physician's order and certification will be evaluated in the context of
the evidence in the medical record.'' We also stated that current
requirements for practitioner documentation of services ordered and
furnished would remain unchanged. That is, while the physician order
and the physician certification are required for all inpatient hospital
admissions in order for payment to be made under Part A, the physician
order and the physician certification are not considered by CMS to be
conclusive evidence that an inpatient hospital admission or service was
medically necessary. Rather, the physician order and physician
certification are considered along with other documentation in the
medical record.
Comment: Some commenters disagreed with the proposal for reviewing
the physician order and certification in accord with the documentation
in the medical record. Rather, the commenters suggested that an
assumption of medical necessity for the inpatient stay would more

[[Page 50944]]

appropriately stem from the physician order to admit to inpatient,
particularly due its requirement for admission purposes.
Response: Satisfying the requirements regarding the physician order
and certification alone does not guarantee Medicare payment. Rather, in
order for payment to be provided under Medicare Part A, the care must
also be ``reasonable and necessary,'' as specified under section
1862(a)(1) of the Act. In addition, section 1869(a) of the Act provides
that determinations regarding entitlement to benefits are under the
authority of the Secretary. As stated in our proposed rule, the
instruction for reviewers to account for all documentation in the
medical record, in addition to the actual order for inpatient
admission, is consistent with statutory instruction and our prior
policy as outlined in Medicare Ruling 93-1, and is being codified for
transparency and consistency.
Comment: Commenters requested that CMS define what constitutes
``objective medical information,'' which is required to support the
order for a hospital inpatient admission.
Response: We appreciate the commenters' suggestions that additional
documentation guidelines would be helpful. We will consider them as we
develop implementation instructions and manual revisions.
(2) Inpatient Hospital Admission Guidelines
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27648), we
indicated that longstanding Medicare policy has recognized that there
are certain situations in which a hospital inpatient admission is
rarely appropriate. We have stated in the MBPM that when a beneficiary
receives a minor surgical procedure or other treatment in the hospital
that is expected to keep him or her in the hospital for only a few
hours (less than 24), the services should be provided as outpatient
hospital services, regardless of the hour the beneficiary comes to the
hospital, whether he or she uses a bed, and whether he or she remains
in the hospital past midnight (Section 10, Chapter 1 of the MBPM). In
applying this benchmark, we have been clear that this instruction does
not override the clinical judgment of the physician to keep the
beneficiary at the hospital, to order specific services, or to
determine appropriate levels of nursing care or physical locations
within the hospital. Rather, this instruction provided a benchmark to
ensure that all beneficiaries received consistent application of their
Part A benefit to whatever clinical services were medically necessary.
Due to persistently large improper payment rates in short-stay
hospital inpatient claims, and in response to requests to provide
additional guidance regarding the proper billing of those services, we
proposed to modify and clarify our general rule and provide at Sec.
412.3(c)(1) that, in addition to services designated by CMS as
inpatient only (which are appropriate for inpatient admission without
regard to duration of care), surgical procedures, diagnostic tests, and
other treatments would be generally appropriate for inpatient admission
and inpatient hospital payment under Medicare Part A when the physician
expects the beneficiary to require a stay that crosses at least 2
midnights and admits the beneficiary to the hospital based upon that
expectation. Conversely, when a beneficiary enters a hospital for a
surgical procedure not specified by Medicare as inpatient only under
Sec. 419.22(n), a diagnostic test, or any other treatment, and the
physician expects to keep the beneficiary in the hospital for only a
limited period of time that does not cross 2 midnights, the services
would be generally inappropriate for payment under Medicare Part A.
This would be the case regardless of the hour that the beneficiary came
to the hospital or whether the beneficiary used a bed.
In the proposed rule, we provided inpatient hospital admission
guidance specifying that a physician or other qualified practitioner
(herein we will refer to the physician, with the understanding that
this can also pertain to another qualified practitioner) should order
admission if he or she expects that the beneficiary's length of stay
will exceed a 2-midnight benchmark or if the beneficiary requires a
procedure specified as inpatient-only under Sec. 419.22. We proposed
that the starting point for this 2-midnight instruction would be when
the beneficiary is moved from any outpatient area to a bed in the
hospital in which additional hospital services would be provided. We
also sought public comment regarding alternative methods of calculating
the start time for the 2-midnight instruction.
In the proposed rule, we stated that the judgment of the physician
and the physician's order for inpatient admission should be based on
the expectation of care surpassing 2 midnights, with both the
expectation of time and the determination of the underlying need for
medical care at the hospital supported by complex medical factors such
as history and comorbidities, the severity of signs and symptoms,
current medical needs, and the risk of an adverse event. We also
indicated that, in accordance with current policy, factors that may
result in an inconvenience to a beneficiary or family would not justify
an inpatient hospital admission. The factors that lead a physician to
admit a particular beneficiary based on the physician's clinical
expectation are significant clinical considerations and must be clearly
and completely documented in the medical record. Because of the
relationship that develops between a physician and his or her patient,
the physician is in a unique position to incorporate complete medical
evidence in a beneficiary's medical records, and has ample opportunity
to explain in detail why the expectation of the need for care spanning
at least 2 midnights was appropriate in the context of that
beneficiary's acute condition. We stated in the proposed rule that a
reasonable expectation of a stay crossing 2 midnights, which is based
on complex medical factors and is documented in the medical record,
will provide the justification needed to support medical necessity of
the inpatient admission, regardless of the actual duration of the
hospital stay and whether it ultimately crosses 2 midnights. As such,
we acknowledged in the proposed rule that there may be an unforeseen
circumstance that results in a shorter beneficiary stay than the
physician's expectation of surpassing 2 midnights. We stated that we
would expect that the majority of such inpatient hospital admissions
would occur when an inpatient hospital admission is appropriately
ordered, but a beneficiary's transfer or death interrupts the
beneficiary's hospital stay that would have otherwise spanned at least
2 midnights. Therefore, we provided in proposed Sec. 412.3(c)(2), that
``If an unforeseen circumstance, such as beneficiary death or transfer,
results in a shorter beneficiary stay than the physician's expectation
of at least 2 midnights, the patient may be considered to be
appropriately treated on an inpatient basis, and the hospital inpatient
payment may be made under Medicare Part A.'' We indicated that
documentation in the medical record of such a circumstance would be
required for purposes of supporting whether the inpatient hospital
admission was reasonable and necessary for Medicare Part A payment. In
addition, we explained that the physician must certify that inpatient
hospital services were medically necessary in accordance with section
1814(a) of the Act and 42 CFR Part 424, Subpart B.

[[Page 50945]]

Comment: Commenters pointed to CMS' guidance that time should not
be the leading factor in the decision to admit a beneficiary and that
the decision should rely on the physician's clinical judgment and
evaluation of the beneficiary's needs based on the severity of illness,
the intensity or complexity of care, and the predictability of high-
risk adverse outcomes. The commenters stated that there are many
beneficiaries who stay in a hospital for less than 2 midnights but
still require an inpatient level of care.
Response: In our existing guidance, we stated that the decision to
admit a patient as an inpatient is a complex medical decision based on
many factors, including the risk of an adverse event during the period
considered for hospitalization, and an assessment of the services that
the beneficiary will need during the hospital stay. The crux of the
medical decision is the choice to keep the beneficiary at the hospital
in order to receive services or reduce risk, or discharge the
beneficiary home because they may be safely treated through
intermittent outpatient visits or some other care. Our previous
guidance also provided for a 24-hour benchmark, instructing physicians
that, in general, beneficiaries who need to stay at the hospital less
than 24 hours should be treated as outpatients, while those requiring
care greater than 24 hours may usually be treated as inpatients. Our
proposed 2-midnight benchmark, which we now finalize, simply modifies
our previous guidance to specify that the relevant 24 hours are those
encompassed by 2 midnights. While the complex medical decision is based
upon an assessment of the need for continuing treatment at the
hospital, the 2-midnight benchmark clarifies when beneficiaries
determined to need such continuing treatment are generally appropriate
for inpatient admission or outpatient care in the hospital.
Contrary to the commenters' suggestion, we do not refer to ``level
of care'' in guidance regarding hospital inpatient admission decisions.
Rather, we have consistently provided physicians with the
aforementioned time-based admission framework to effectuate appropriate
inpatient hospital admission decisions. This is supported by recent
findings by the Office of Inspector General (OIG) (OIG, Hospitals' Use
of Observation Stays and Short Inpatient Stays for Medicare
Beneficiaries, OEI-02-12-00040, July 2013). The OIG found that the
reasons for short inpatient stays and for outpatient observation stays
were often the same. They further noted that the relative use of short
inpatient stays versus outpatient observation stays varied widely
between hospitals, consistent with medical review findings that
identical beneficiaries may receive identical services as either
inpatients or outpatients in different hospitals. We believe that this
supports our proposed continuation of our existing policy that there
are no prohibitions against a patient receiving any individual service
as either an inpatient or an outpatient, except for those services
designated by the Outpatient Prospective Payment System (OPPS)
Inpatient-Only list as inpatient-only services. We further believe that
this supports our proposed policy that the physician is expected to
continue to use his or her complex clinical judgment in determining
whether a beneficiary needs to stay at the hospital, what services and
level of nursing care (for example, low-level, monitored, or one-on-
one) the beneficiary will need, and what location (unit) is most
appropriate. This does not require that the physician memorize complex
billing or utilization guidelines; rather, the physician should
generally order an inpatient admission when he or she has determined
either that the beneficiary requires care at the hospital that is
expected to transcend at least 2 midnights or that it will involve a
procedure designated by the OPPS Inpatient-Only list as an inpatient-
only procedure.
Comment: Commenters asserted that making a time-based prediction is
difficult for the physician. They stated that making such a
determination is contradictory to medical professionals' training,
which is centered on the assessment of patients and the development of
treatment plans, as opposed to focusing on the utilization review
process. The commenters also stated that predicting length of stay is
difficult because individual patients respond differently to care
provided. Commenters suggested that a physician often does not have
enough information about a patient at the onset of treatment to make an
informed decision regarding anticipated length of stay. For example, a
hospitalist admitting a beneficiary through the emergency department
likely will not be familiar with the patient and may not have access to
extensive medical history documentation on which to make a decision.
Commenters suggested that beneficiaries with unknown or uncertain
diagnoses should be kept under observation status until their diagnosis
and course of treatment become clear. At that point, the commenters
added, the hospital would be in the best position to determine the
length of treatment, make the decision to admit to inpatient status, or
discharge the patient home.
Response: It has been longstanding Medicare policy to require
physicians to admit a beneficiary as a hospital inpatient based on
their expected length of stay. However, we recognized when we published
our definition of observation services that long-term predictions are
inherently more difficult than short-term predictions. Therefore, we
revised our guidance to indicate that, when it was difficult to make a
reasonable prediction, the physician should not admit the beneficiary
but should place the beneficiary in observation as an outpatient. As
new information becomes available, the physician must then reassess the
beneficiary to determine if discharge is possible or if it is evident
that an inpatient stay is required. We believe that this principle
still applies and have reiterated this in the final rule. For those
hospital stays in which the physician cannot reliably predict the
beneficiary to require a hospital stay greater than 2 midnights, the
physician should continue to treat the beneficiary as an outpatient and
then admit as an inpatient if and when additional information suggests
a longer stay or the passing of the second midnight is anticipated.
Comment: Commenters pointed out that although the proposal is
framed as a presumption, the proposed rule, would, in effect,
inappropriately establish a per se rule that inpatient admissions that
are not expected to last at least 2 midnights are not medically
reasonable and necessary (unless the beneficiary is receiving an
inpatient-only service or procedure). The commenters stated that the
proposed rule offers no legal or medical support for the idea that a 1-
day stay that is expected to be a 1-day stay is not medically
reasonable and necessary as an inpatient admission. Other commenters
requested that CMS clarify that no per se rule would be created that
inpatient payment is always inappropriate following procedures not on
the inpatient-only list.
Response: The proposed rule did not create a per se standard;
rather, consistent with historical instruction, the proposed rule
continues the use of a benchmark to ensure a uniform understanding of
the circumstances under which an inpatient admission should be ordered
or when the care should be provided on an outpatient basis. This common
standard is not a per se rule but a necessary reference to ensure
similar beneficiary cost-sharing and hospital reimbursement for similar

[[Page 50946]]

care. The 2-midnight benchmark, rather, provides that hospital stays
expected to last less than 2 midnights are generally inappropriate for
inpatient hospital admission and Part A payment absent rare and unusual
circumstance to be further detailed in sub-regulatory instruction. In
applying this benchmark, we have been clear that this instruction does
not override the clinical judgment of the physician to keep the
beneficiary at the hospital, to order specific services, or to
determine appropriate levels of nursing care or physical locations
within the hospital. Rather, this instruction provides a benchmark to
ensure that all beneficiaries received consistent application of their
Part A benefit to whatever clinical services were medically necessary.
Comment: Commenters urged CMS to consider situations that result in
a shorter beneficiary stay than the physician's expectation of care
transcending 2 midnights. The commenters stated that in the proposed
rule, CMS indicated that it would expect that the majority of such
cases to be due to beneficiary death or transfer. Commenters expressed
concern that these exceptions are too restrictive and urged CMS to
recognize other exceptions, such as when a beneficiary leaves against
medical advice (AMA) before reaching the 2-midnight benchmark, when the
beneficiary improves more rapidly than expected, or when the
beneficiary requires care in the intensive care unit (ICU). One
commenter inquired whether a beneficiary who receives intensive
services and expires prior to crossing 2 midnights would automatically
be classified as appropriately outpatient.
Response: We appreciate industry feedback, and believe the rule, as
finalized, provides for sufficient flexibility because of its basis in
the physician's expectation of a 2-midnight stay. Such would include
situations in which the beneficiary improves more rapidly than the
physician's reasonable, documented expectation. Such unexpected
improvement may be provided and billed as inpatient care, as the
regulation is framed upon a reasonable and supportable expectation, not
the actual length of care, in defining when hospital care is
appropriate for inpatient payment. We do not believe beneficiaries
treated in an intensive care unit should be an exception to this
standard, as our 2-midnight benchmark policy is not contingent on the
level of care required or the placement of the beneficiary within the
hospital. In addition, while we did not specify the situation in which
a beneficiary leaves AMA as an exception under the proposed rule, we
acknowledge that an AMA departure is usually an unexpected event and
that an inpatient admission could still be appropriate provided that
the medical record demonstrates a reasonable expectation of a 2-
midnight stay when the admission order is written. As we develop our
manual guidance to implement this proposed rule, we will identify those
unusual situations in which we expect that the 2 midnight benchmark
does not apply.
Comment: Commenters voiced concerns that the use of observation
would increase under the proposed policy, regardless of CMS' intent to
reduce the incidence of long observation stays. Some commenters
believed that if the physician would have to predict a greater than 2
midnight stay, only the sickest individuals and those receiving
procedures on the inpatient-only list would be admitted as inpatients,
while many more beneficiaries would be placed in observation so as to
avoid an inaccurate length of stay determination and subsequent short-
stay audits. Other commenters believed that because an increase in
observation stays will happen, many hospital stays that would generally
be appropriate for an inpatient admission under CMS' current 24-hour
guidance would now be generally inappropriate for Part A payment unless
the 2-midnight benchmark is met. Commenters voiced concern that the
increase in observation will lead to a strain in outpatient beds and
resources, leading the hospitals to use inpatient beds for
beneficiaries in outpatient status who need more intense monitoring
than is currently available in outpatient areas without a proportionate
increase in outpatient reimbursement from Medicare. Commenters also
urged CMS to recalibrate its outpatient payment so that hospitals will
be adequately compensated for handling the increase in observation
cases, particularly for those stays requiring complex monitoring and
intervention. The commenters believed that as beneficiaries have the
potential for greater cost-sharing for an observation stay than an
inpatient stay, this may lead to greater financial liability for
beneficiaries.
Response: While previous guidance provided a 24-hour benchmark to
be used in making inpatient admission decisions, we now specify that
the 24 hours relevant to inpatient admission decisions are those
encapsulated by 2 midnights. As we provide in this final rule, we
expect that the decision to admit the beneficiary should be based on
the cumulative time spent at the hospital beginning with the initial
outpatient service. In other words, if the physician makes the decision
to admit after the beneficiary arrived at the hospital and began
receiving services, he or she should consider the time already spent
receiving those services in estimating the beneficiary's total expected
length of stay. For example, if the beneficiary has already passed 1
midnight as an outpatient observation patient or in routine recovery
following outpatient surgery, the physician should consider the 2
midnight benchmark met if he or she expects the beneficiary to require
an additional midnight in the hospital. This means that the decision to
admit becomes easier as the time approaches the second midnight, and
beneficiaries in medically necessary hospitalizations should not pass a
second midnight prior to the admission order being written. The
potential increase in very short (less than 2 midnights) observation
stays should be balanced by a significant decrease in long (2 midnights
or more) observation stays. Because we expect that this revision should
virtually eliminate the use of extended observation, we also anticipate
it will concurrently limit beneficiary cost-sharing for outpatient
services. We are not expecting any change in the utilization of
specific beds or facilities, as the expectation of the duration of
needed care is independent of the beneficiary's location at the
hospital.
Comment: One commenter inquired about the appropriate use of
Condition Code 44 in a situation when the physician expected a stay
that met the 2-midnight standard but the beneficiary experienced an
unanticipated recovery.
Response: We refer commenters to the instruction provided at
section XI.B. of the preamble of this rule, in which we expanded on
Condition Code 44 requirements and application. Under this section, we
state that providers may continue to change patient status to
outpatient during the hospital stay upon meeting the Condition Code 44
requirements. However, we note that Condition Code 44 is not to be used
for unexpected events because, as described above, those situations can
remain appropriately inpatient. Thus, a beneficiary who experiences an
unexpected recovery during a medically necessary stay should not be
converted to an outpatient but should remain an inpatient if the 2-
midnight expectation was reasonable at the time the inpatient order was
written, but unexpectedly the stay did not fully transpire. In
contrast, Condition Code 44 is specifically for the situation when the
utilization review or management committee determines that the
physician has not appropriately

[[Page 50947]]

admitted a patient and the physician concurs that the status should be
converted to outpatient prior to beneficiary discharge.
Comment: Commenters indicated that inpatient-only procedures that
require a 1-day length of stay would be affected by this proposed
policy and may not be adequately reimbursed under Medicare Part B. The
commenters requested that CMS specify that all services on the
inpatient-only list should automatically be deemed to meet inpatient
service criteria, even if the beneficiary is in the hospital for less
than 2 midnights. Conversely, another commenter suggested that
excluding inpatient-only procedures, which may or may not require 2-
midnight stays, contradicts a time-based policy.
Response: In the proposed rule, we stated that procedures on the
OPPS inpatient-only list are always appropriately inpatient, regardless
of the actual time expected at the hospital, so long as the procedure
is medically necessary and performed pursuant to a physician order and
formal admission. Procedures designated as inpatient-only are deemed
statutorily appropriate for inpatient payment at Sec. 419.22(n). As
such, we believe that inpatient-only procedures are appropriate for
exclusion from the 2-midnight benchmark. Under this final rule,
inpatient-only procedures currently performed as inpatient 1-day
procedures will continue to be provided as inpatient 1-day procedures,
and therefore this rule will not result in any change in status or
reimbursement.
Comment: Commenters recommended that CMS remove the 2-midnight
guidance for certain procedures, allowing physicians to continue
admitting as inpatient high risk, complex beneficiaries who are to
undergo a surgery with added complexity, regardless of the expected
length of stay. The commenters stated that many Medicare beneficiaries
have multiple comorbidities, and the execution of seemingly simple
procedures may require more pre-, intra-, and post-operative services
than would be necessary for younger or healthier patients, even when
there is no expectation that the beneficiary will require a stay of at
least 2 midnights. Commenters added that the provision of such services
may exceed the level of care typically associated with observation
care. Other commenters suggested that CMS explicitly preclude from
further review any services that are not typically available in an
outpatient setting, such as telemetry.
Response: We agree with commenters that factors such as the
procedures being performed and the health status of the beneficiary are
important considerations in the decision to keep the beneficiary in the
hospital. However, as we note above, the beneficiary's required ``level
of care'' is not part of the guidance regarding hospital inpatient
admission decisions. Rather, we provide physicians with a 2-midnight
admission framework to effectuate appropriate inpatient hospital
admission decisions. More specifically, we have stipulated that factors
such as the procedures being performed and the beneficiary's condition
and comorbidities apply when the physician formulates his or her
expectation regarding the need for hospital care, while the decision of
whether to admit a beneficiary as an inpatient or keep as an outpatient
is based upon the physician's expectation of the beneficiary's required
length of stay. In this rule, we have not identified any circumstances
where the 2-midnight benchmark restricts the physician to a specific
pattern of care, as we have specified that the 2-midnight benchmark,
like the previous 24-hour benchmark, does not prevent the physician
from providing any service at any hospital regardless of the expected
duration of the service. Rather, this policy provides guidance on when
the hospitalized beneficiary is appropriate for coverage under Part A
benefits as an inpatient, and when the hospitalized beneficiary should
receive that treatment as a registered outpatient subject to Part B
benefits. On the other hand, we also specify that certain procedures
may have intrinsic risks, recovery impacts or complexities that would
cause them to be appropriate for inpatient coverage under Part A
regardless of the expected length of hospital time a specific physician
expects a particular patient to require. We believe that the OPPS
Inpatient-Only List identifies those procedures and we have proposed
that this is a specific exception to the generally applicable 2
midnight benchmark. We may also specify other potential exceptions to
the generally applicable benchmark as we revise our manuals to
implement this proposed rule.
Comment: Commenters recommended that the risk of an adverse event
as being a determinant in the inpatient admission decision should be
removed, qualified as ``high'' or ``unreasonable,'' or narrowly defined
to only include risks during the beneficiary's course of treatment that
can be addressed or managed by the hospital. The commenters pointed to
past trends of inconsistency in the use of risk as a factor in the
inpatient admission decision by hospitals and appeal entities.
Commenters suggested that, at most, the beneficiary's risk of morbidity
or mortality should be a factor considered when making the decision of
whether the keep the beneficiary in the hospital or send the
beneficiary home, not when determining the appropriate patient status
as inpatient or outpatient.
Response: We believe that, due to the nature of the Medicare
population, coexisting or concurrent medical conditions are a frequent
occurrence. As a result, admission decisions centered around risk must
relate to current disease processes or presenting symptoms, and not
merely be part of the beneficiary's benign or latent past medical
history. We note that ``risk'' in common usage describes an
unacceptable probability of an adverse outcome, as in ``risky
behavior.'' We reiterate our stance that the decision to hospitalize a
beneficiary is a complex medical decision made by the physician in
consideration of various risk factors, including the beneficiary's age,
disease processes, comorbidities, and the potential impact of sending
the beneficiary home. It is up to the physician to make the complex
medical decision of whether the beneficiary's risk of morbidity or
mortality dictates the need to remain at the hospital because the risk
of an adverse event would otherwise be unacceptable under reasonable
standards of care, or when the beneficiary may be discharged home. If
the resultant length of stay for medically necessary hospitalization is
expected to surpass 2 midnights, the physician should admit the patient
as an inpatient.
Comment: Commenters pointed out that the complexity of caring for
the elderly beneficiary and the limited access to resources in the
community continues to be challenging. While a beneficiary may not meet
the screening criteria for an inpatient admission, the beneficiary's
complex needs and lack of access to medical therapies outside the
hospital require the admitting physician to make a judgment as to
whether such patients are in greater danger of serious illness or death
if they are discharged than if they are admitted, and may result in the
hospital being unable to release a beneficiary into the community.
Conversely, a commenter wanted to remind CMS that convenience factors
or nonmedically necessary care violate the Social Security Act, which
excludes custodial care from Medicare coverage.
Response: While we will not dictate the hospital or physician
admission decision, we also note that Medicare is statutorily
prohibited under section

[[Page 50948]]

1862(a)(1)(A) of the Act from paying for services that are not
reasonable and necessary. Therefore, we have identified so-called
``social admissions'' and admissions to avoid inconvenience as
inappropriate from Medicare payment per the aforementioned statutory
exclusion. This is consistent with current manual instructions. We will
look for opportunities to offer additional guidance addressing these
types of medical necessity decisions as we update our policy manuals.
Comment: Commenters requested that CMS provide clarification for
how hospitals receiving beneficiaries from another hospital should make
the admission decision under the proposed policy.
Response: We recognize that, in addition to the occurrence of
unexpected transfers out of a hospital, there are a number of possible
scenarios involving transfers into a hospital that that may impact the
length of stay determination under this policy. We noted in the
proposed rule that an unexpected transfer out of the sending hospital
is one reason why an inpatient stay that lasts less than 2 midnights
may still be appropriately inpatient. Due to the complexity of the
possible transfer scenarios, we believe that explicit guidance should
be reserved for manual instruction. Drafting these instructions will be
one of the highest priorities as we develop our implementation
instructions.
Comment: Commenters pointed out that, under this proposal, the
distinction between inpatient and outpatient may come down to small
time discrepancies. For example, a beneficiary whose hospital stay
begins shortly before midnight and lasts just over 48 hours will be
considered an inpatient because the stay will cross 2 midnights, while
a beneficiary whose hospital stay begins shortly after midnight and
lasts just under 48 hours will be considered an outpatient because the
stay will only cross 1 midnight.
Response: The application of 2 midnights was proposed for the
purpose of providing both consistency and clarity. We have expected and
continue to expect that physicians will make the decision to keep a
beneficiary in the hospital when clinically warranted and will order
all appropriate treatments and care in the appropriate location based
on the beneficiary's individual medical needs. We also expect that
physicians will apply the revised benchmark as they have previously
applied the existing benchmark, providing any medically necessary
services in an inpatient status whenever the benchmark is met and in
all other instances providing identical services to patients staying at
the hospital in a day or overnight outpatient status. While we have
historically referenced a 24-hour benchmark, we now specify that the 24
hours relevant to inpatient admission decisions are those encapsulated
by 2 midnights. This distinction is consistent with our application of
Medicare utilization days, which are based on the number of midnights
crossed. Medicare charges beneficiaries for utilization days and pays
hospitals for utilization days when it applies per diem adjustments,
such as the transfer adjustment. A beneficiary who is admitted just
before midnight and discharged 36 hours later is currently charged 2
utilization days, while a beneficiary admitted just after midnight is
charged 1 day. In addition, the use of 2 midnights is an easy concept
for beneficiaries to understand in assessing the appropriateness of
their assigned status, associated coverage, and impacts.
Comment: Commenters provided alternate proposals for guiding
inpatient admissions and medical review. Some commenters suggested that
physicians are not apprised of admission criteria, but rather the
medical treatment necessary for the beneficiary, and suggested that
case management be permitted to make inpatient admission
determinations, which could be concurred or nonconcurred to by the
treating physician. Conversely, other commenters believed the physician
was most apprised of the patient condition and, therefore, the need for
inpatient admission or care spanning 2 midnights. As such, some
commenters believed the physician order should trigger a presumption of
appropriate payment for medical review purposes. One commenter
suggested good faith protections for facilities in strict adherence to
their hospital comprised utilization review plan. Another commenter
disagreed with the need for any change to the current medical review
policy.
Response: In the proposed rule, we focused on clarifying and
modifying the distinction between hospitalization as an outpatient and
hospitalization as an inpatient. While the proposed approach arose out
of significant consideration for provider impact, ease in
implementation and operationalization, we will assess commenter
feedback falling within the scope of CMS' policy in implementing
changes to our manual provisions.
Comment: Commenters requested further guidance to clarify what
criteria support a reasonable and necessary inpatient admission. The
commenters' suggested sources of such guidance included evidence-based
guidelines offered through the Agency for Healthcare Research and
Quality (AHRQ) National Guidelines Clearinghouse and the various
medical specialty societies and commercial hospital screening
guidelines. Some commenters also suggested that inpatient admissions be
deemed reasonable and necessary based on the use of such sources.
Another commenter indicated that a time-based policy contradicts CMS
instructions contained in the Program Integrity Manual pertaining to
the use of screening tools as part of the review of inpatient hospital
claims. Regardless of the criteria chosen, commenters iterated that CMS
and its contractors must update existing inpatient admission guidance
and policies to ensure consistency in application by all Medicare
review contractors. Commenters also inquired whether providers would
have the opportunity to comment on any additional guidance that will be
created to implement this rule.
Response: Medicare review contractors must abide by CMS policies in
conducting payment determinations, but are permitted to take into
account evidence-based guidelines or commercial utilization tools that
may aid such a decision. We also acknowledge that this type of
information may be appropriately considered by the physician as part of
the complex medical judgment that guides his or her decision to keep a
beneficiary in the hospital and formulation of the expected length of
stay. As we update our manuals and take additional steps to implement
this rule, we anticipate using our usual processes to develop and
release subregulatory guidance such as manual instructions and
educational materials, which may include open door forums, regional
meetings, correspondence and other ongoing interactions with
stakeholders; and that our contractors will continue to involve local
entities as they implement these rules.
Comment: Several commenters indicated that CMS should delay
enforcement of the revised admissions criteria until a time after
October 1, 2013, due to the significant system changes and educational
efforts that will be required. Some commenters indicated that CMS
should use this delay in order to conduct further research and
collaborate with providers, while others suggested that CMS conduct a
thorough analysis of current payment policy and planned payment reforms
that could affect inpatient admission decisions, including those

[[Page 50949]]

with implications for patient safety, quality, and beneficiary cost-
sharing, before finalizing its guidance. Other commenters suggested
that claim reviews for inpatient stays of greater than 2 midnights
should continue without evidence of gaming for a period of time
following implementation of the new policy to ensure that hospitals are
properly billing under the revised criteria. The commenters stated that
after that time has passed, reviews of inpatient stays longer than 2
midnights would be based on evidence of overutilization.
Response: We proposed only a change in the inpatient admissions
benchmark from an hourly expectation (24 hours) to a daily (2-
midnights) expectation. We do not believe that delays in implementation
are necessary or desirable, and we expect, through collaboration with
stakeholders, to develop additional guidance and instruction as part of
that implementation.
Comment: Commenters questioned the applicability of the proposed
rule to differing types of hospital facilities. Commenters specifically
requested clarity regarding application of the rule to IRFs and IPFs.
Commenters further asserted that this distinction may conflict with
State laws requiring inpatient admissions post 24 hours, and such
States should be granted exception.
Response: In the proposed rule, our reference to section 1861(e) of
the Act was intended to specify that CAHs were included in the proposed
policies, not that we were proposing that IPFs or other non-IPPS
hospitals should be excluded. Having considered the public comments to
the proposed rule, we believe that all hospitals, LTCHs, and CAHs, with
the exception of IRFs, would appropriately be included in our final
policies regarding the 2-midnight admission guidance and medical review
criteria for determining the general appropriateness of inpatient
admission and Part A payment. Due to the inherent differences in the
operation of and beneficiary admissions to IRFs, such providers must be
excluded from the aforementioned admission guidelines and medical
review instruction. We disagree with the commenters' assertion that the
2-midnight admission and medical review policies conflict with existing
state laws regarding observation. The 2-midnight benchmark does not
prohibit physicians from ordering inpatient admission in accordance
with state law; rather, this policy indicates when Medicare payment
will be deemed appropriate. To the extent that State law requires
admission in situations where Medicare payment would not be
appropriate, providers should work with their States to resolve those
discrepancies.
Comment: Commenters indicated that the proposed policy, which
clarifies when a beneficiary becomes an inpatient, promotes the
integrity and accuracy of the 340B program. They stated that the 340B
program creates an incentive for hospitals to keep beneficiaries in
observation status for the purpose of obtaining the deeply discounted
340B acquisition price that would otherwise by unavailable. Thus, they
added, the 340B spread creates a financial incentive for 340B hospitals
to keep beneficiaries in outpatient/observation status for the sole
purpose of administering drugs.
Response: We appreciate the observation of the commenters and
concur that this policy promotes consistent application of an inpatient
status to all stakeholders.
(3) Medical Review of Inpatient Hospital Admissions Under Part A
Under this revised policy, services designated by the OPPS
Inpatient-Only list as inpatient-only, would continue to be appropriate
for inpatient hospital admission and payment under Medicare Part A. In
addition, surgical procedures, diagnostic tests, and other treatments
would be generally deemed appropriate for inpatient hospital admission
and payment under Medicare Part A when the physician expects the
patient to require a stay that crosses at least 2 midnights and admits
the patient to the hospital based upon that expectation. We proposed,
and are now finalizing, two distinct, though related, medical review
policies, a 2-midnight presumption and a 2-midnight benchmark. Under
the 2-midnight presumption, inpatient hospital claims with lengths of
stay greater than 2 midnights after the formal admission following the
order will be presumed generally appropriate for Part A payment and
will not be the focus of medical review efforts absent evidence of
systematic gaming, abuse or delays in the provision of care in an
attempt to qualify for the 2-midnight presumption (that is, inpatient
hospital admissions where medically necessary treatment was not
provided on a continuous basis throughout the hospital stay and the
services could have been furnished in a shorter timeframe).
Beneficiaries should not be held in the hospital absent medically
necessary care for the purpose of meeting the 2-midnight benchmark.
Review contractors will also continue to assess claims in which the
beneficiary span of care after admission crosses 2 midnights:
To ensure the services provided were medically necessary;
To ensure that the stay at the hospital was medically
necessary;
To validate provider coding and documentation as
reflective of the medical evidence;
When the CERT Contractor is directed to do so under the
Improper Payments Elimination and Recovery Improvement Act of 2012
(Pub. L. 112-248); or
If directed by CMS or other authoritative governmental
entity (including but not limited to the HHS Office of Inspector
General and Government Accountability Office).
Conversely, under this revised policy, CMS' medical review efforts
will focus on inpatient hospital admissions with lengths of stay
crossing only 1 midnight or less after admission (that is, only 1
Medicare utilization day, as defined in 42 CFR 409.61 and implemented
in the MBPM, Chapter 3, Section 20.1). As previously described, such
claims have traditionally demonstrated the largest proportion of
inpatient hospital improper payments under Medicare Part A. If the
physician admits the beneficiary as an inpatient but the beneficiary is
in the hospital for less than 2 midnights after the order is written,
CMS and its medical review contractors will not presume that the
inpatient hospital status was reasonable and necessary for payment
purposes, but may instead evaluate the claim pursuant to the 2-midnight
benchmark. Medicare review contractors will (a) evaluate the physician
order for inpatient admission to the hospital, along with the other
required elements of the physician certification, (b) the medical
documentation supporting the expectation that care would span at least
2 midnights, and (c) the medical documentation supporting a decision
that it was reasonable and necessary to keep the patient at the
hospital to receive such care, in order to determine whether payment
under Part A is appropriate.
In their review of the medical record, Medicare review contractors
will consider complex medical factors that support a reasonable
expectation of the needed duration of the stay relative to the 2-
midnight benchmark. Both the decision to keep the beneficiary at the
hospital and the expectation of needed duration of the stay are based
on such complex medical factors as beneficiary medical history and
comorbidities, the severity of signs and symptoms, current medical
needs, and the risk (probability) of an adverse event occurring during
the

[[Page 50950]]

time period for which hospitalization is considered. In other words, if
it was reasonable for the physician to expect the beneficiary to
require a stay lasting 2 midnights, and that expectation is documented
in the medical record, inpatient admission is generally appropriate,
and payment may be made under Medicare Part A; this is regardless of
whether the anticipated length of stay did not transpire due to
unforeseen circumstances such as beneficiary death or transfer (so long
as the physician's order and certification requirements also are met).
As discussed above, an inpatient admission is appropriate and Part A
payment may also be made in the case of services on Medicare's
inpatient-only list, regardless of the expected length of stay.
Comment: Some commenters shared concerns regarding the proposed
method of calculating the length of stay for purposes of the 2-midnight
benchmark, beginning when the beneficiary is moved from any outpatient
area to a bed in the hospital in which the additional hospital services
will be provided. Commenters noted that hospital capacity issues can
lead to situations in which a beneficiary is boarded in the emergency
department until a bed becomes available, which can be hours after the
admission order is written. In other instances, the commenters added,
an inpatient admission may be planned after a surgical procedure and
the beneficiary becomes an inpatient when he or she reports to the
operating room for preoperative assessment and preparation. Commenters
pointed out that if the clock does not start until beneficiary movement
to another area of the hospital occurs, the beneficiary may not meet
the 2-midnight benchmark although he or she was receiving treatment in
the hospital for greater than 2 midnights. Commenters provided various
alternate suggestions for when the clock should start. Many commenters
suggested that CMS start the clock the earliest of: (1) When the
physician writes an order for admission or observation; (2) when the
beneficiary is treated in the emergency department; or (3) when the
beneficiary is placed in a bed for observation. Other commenters
suggested that the clock should begin when the beneficiary meets
inpatient admission criteria or when the nursing intake notes specify
the time the beneficiary is admitted to the floor and is put in a bed.
Regardless of the decision CMS made on this point, commenters requested
that clarification be provided on when the inpatient order should be
written and how the time should be counted for medical review purposes.
Response: We agree with the concerns noted by commenters, and are
revising the proposed rule accordingly. In this final rule, we specify
that the ordering physician may consider time the beneficiary spent
receiving outpatient services (including observation services,
treatments in the emergency department, and procedures provided in the
operating room or other treatment area) for purposes of determining
whether the 2-midnight benchmark is expected to be met and therefore
inpatient admission is generally appropriate. For beneficiaries who do
not arrive through the emergency department or are directly receiving
inpatient services (for example, inpatient admission order written
prior to admission for an elective admission or transfer from another
hospital), the starting point for medical review purposes will be from
the time the patient starts receiving any services after arrival at the
hospital. We emphasize that the time the beneficiary spent as an
outpatient before the inpatient admission order is written will not be
considered inpatient time, but may be considered by physicians in
determining whether a patient should be admitted as an inpatient, and
during the medical review process for the limited purpose of
determining whether the 2-midnight benchmark was met and therefore
payment is generally appropriate under Part A. Claims in which a
medically necessary inpatient stay spans at least 2 midnights after the
beneficiary is formally admitted as an inpatient will be presumed
appropriate for inpatient admission and inpatient hospital payment and
will generally not be subject to medical review of the inpatient
admission, absent evidence of systematic gaming, abuse, or delays in
the provision of care in an attempt to qualify for the 2-midnight
presumption.
Comment: Commenters requested clarification regarding the
distinction between inpatient time and outpatient time for purposes of
meeting the 2-midnight benchmark, specifically for those beneficiaries
who are first treated in observation status and then later as hospital
inpatients pursuant to a physician's order. Commenters recommended that
CMS consider observation care to count toward the 2-midnight rule when
complications arise that lead to previously unanticipated extended care
in accord with requirements for skilled nursing facility eligibility.
Response: As noted above, we will allow the physician to consider
time spent in the hospital as an outpatient in making their inpatient
admission decision. This is consistent with CMS existing instructions
and medical review guidance, which allow physicians and Medicare review
contractors to account for the beneficiary's medical history and
physical condition prior to the inpatient admission decision.
Therefore, if upon beneficiary presentation, the physician is unable to
make an evaluation and corresponding expected length of stay
determination, the physician may first monitor the beneficiary in
observation or continue to perform diagnostics in the outpatient arena.
If the beneficiary's medical needs and condition after 1 midnight in
outpatient status dictate the need for an additional midnight within
the hospital receiving medically necessary care, the physician may
consider the care in the outpatient setting when making his or her
admission decision. Medicare review contractors would similarly apply
the 2-midnight benchmark to all time spent within the hospital
receiving medically necessary services in their claim evaluation.
We reiterate that the physician order, the remaining elements of
the physician certification, and formal inpatient admission remain the
mandated means of inpatient admission. While outpatient time may be
accounted for in application of the 2-midnight benchmark, it may not be
retroactively included as inpatient care for skilled nursing care
eligibility or other benefit purposes. Inpatient status begins with the
admission based on a physician order.
Comment: Commenters expressed concern about the additional scrutiny
that 1-day inpatient hospital stays would undergo under this policy.
Commenters also were particularly interested in how the review
contractors would review inpatient stays that lasted less than 2
midnights, including whether current review criteria would continue to
be utilized for such reviews. The commenters requested that CMS define
situations in which a hospital stay lasting less than 2 midnights would
properly qualify as inpatient.
Response: If the physician admits the beneficiary as an inpatient
but the beneficiary is in the hospital for less than 2 midnights after
the admission begins, CMS and the Medicare review contractors will not
presume that the inpatient hospital admission was reasonable and
necessary for payment purposes, but will apply the 2-midnight benchmark
in conducting medical review. In making their determination of whether
the inpatient admission is appropriate, Medicare review

[[Page 50951]]

contractors will evaluate: (a) The physician order for inpatient
admission to the hospital, along with the other required elements of
the physician certification; (b) the medical documentation supporting
that the order was based on an expectation of need for care spanning at
least 2 midnights; and (c) the medical documentation supporting a
decision that it was reasonable and necessary to keep the patient at
the hospital to receive such care. In their review of the medical
record, Medicare review contractors will consider complex medical
factors that support a reasonable expectation of the needed duration of
the stay relative to the 2-midnight benchmark. These include such
factors as beneficiary medical history and comorbidities, the severity
of signs and symptoms, current medical needs, and the risk of an
adverse event.
Comment: Commenters asserted that the proposed rule penalizes
efficiency, as those hospitals that are able to treat beneficiaries in
less than 2 midnights will be able to admit fewer beneficiaries than
those less efficient hospitals who do not have the same resources.
Other commenters expressed concern that the new proposed policy would
encourage hospitals to hold beneficiaries in the hospital solely for
the purpose of meeting the 2-midnight presumption and avoid audits of
their claims. The commenters stated that consequences of such practices
on the beneficiaries could include prolonged exposure to additional
medical risks and would also lead to increased costs to the Medicare
program, due to medically unnecessary time in the hospital. Conversely,
some commenters indicated that they did not believe that hospitals
would not hold patients for longer than necessary to meet inpatient
requirements.
Response: We have noted that the decision to admit is based on an
expectation of medically necessary care transcending 2 midnights
resulting from the practitioner's consideration of the beneficiary's
condition and medical needs. We will monitor all hospitals for
intentional or unwarranted delays in the provision of care, which may
result in increased inpatient admissions secondary to the 2 midnight
instruction. We are also cognizant of concerns related to unnecessarily
elongated hospital admissions, and will be monitoring for such patterns
of systemic delays indicative of fraud or abuse. If a hospital is
unnecessarily holding beneficiaries to qualify for the 2-midnight
presumption, CMS and/or its contractors may conduct review on any of
its inpatient claims, including those which surpassed 2 midnights after
admission.
Comment: One commenter stated that while it is reasonable that a
medically necessary hospital stay crossing 2 midnights may be
appropriately billed as inpatient, there should be no presumption that
such a 2-midnight stay was itself medically necessary simply because a
patient was in the hospital 2 consecutive nights. The commenter stated
that the proposed rule includes a requirement that review will only be
permitted when the error rate is sufficient to warrant auditing
activity; however, the audit that would establish this error would
itself be precluded under CMS' presumption. The commenter stated that,
alternatively, data analysis of the claims should remain the foundation
for selection of claims for medical record review to determine whether
the documentation supports the claim as billed. The commenter believed
that a presumption of medical necessity based on the time a beneficiary
stays in the hospital places the Medicare trust fund and taxpayers at
risk.
Response: We note that it was not our intent to suggest that a 2-
midnight stay was presumptive evidence that the stay at the hospital
was necessary; rather, only that if the stay was necessary, it was
appropriately provided as an inpatient stay. We have discussed in
response to other comments that, in accordance with our statutory
obligations, some medical review is always necessary to ensure that
services provided are reasonable and necessary, and that we will
continue to review these longer stays for the purposes of monitoring,
determining correct coding, and evaluating the medical necessity for
the beneficiary to remain at the hospital, irrespective of the
inpatient or outpatient ``status'' to which the beneficiary was
assigned. In addition, claims that evidence that a hospital is
effectuating systematic abuse of the 2-midnight presumption, such as
unexplained delays in the provision of care or aberrancies in billing,
may be subject to medical review despite surpassing 2 midnights after
admission.
Comment: Commenters requested that CMS provide guidance on what
would constitute ``abuse'' or ``gaming'' for this review purpose. Some
commenters were concerned that enabling Medicare review contractors to
make these determinations would unravel the presumption if the
contractors had incentives to identify erroneous claims. Other
commenters believed that Medicare contractors, who have expertise in
utilization review and Medicare data, should be tasked with identifying
providers that are gaming or abusing the system for purposes of meeting
the 2-midnight presumption. Comments also suggested that CMS examine
hospitals' utilization review process rather than rely on claim
outputs. Commenters also urged CMS to be clear that audits will occur
only if a pattern is detected.
Response: In the proposed rule, we stated that patient status
reviews for inpatient admissions with lengths of stay greater than 2
midnights after admission would typically be conducted if we suspect
that a provider is using the 2-midnight presumption to effectuate
systematic abuse or gaming. We have elaborated on our review plans
above and summarize by stating that while we have a statutory
obligation to ensure that all services are medically necessary and
correctly paid, we believe that these changes in our benchmarks and the
additional guidance accompanying them will allow us to reduce the
administrative burden of reviews. We will do this by reviewing stays
spanning at least 2 midnights after admission for the purpose of
monitoring and responding to patterns of incorrect DRG assignments,
inappropriate or systemic delays, and lack of medical necessity for the
stay at the hospital, but not for the purpose of routinely denying
payment for such inpatient admissions on the basis that the services
should have been provided on an outpatient basis. We expect to shift
our attention to the smaller anticipated volume of 0 and 1 day short
stays and then, to the extent that facilities correctly apply the
proposed benchmark, away from short stays to other areas with
persistently high improper payment rates.
Comment: Commenters voiced concerns that while CMS proposed that
those inpatient hospital admissions meeting the 2-midnight benchmark
would be generally appropriate for Part A payment, there is no
guarantee that the Medicare contractors would follow this guidance.
Some commenters expressed apprehension that the time-based policy would
not result in fewer reviews, as the policy stated that contractors
could review whether the physician's expectation was reasonable, while
others thought the doors would be opened to more hospital claim audits
focusing on the need for the beneficiary to stay in the hospital for
greater than 2 midnights. Commenters also sought assurance from CMS
that reviews would be conducted based on the information the physician
had available at the time he or she developed the expectation of a 2-
midnight stay and wrote the order pursuant to that expectation.

[[Page 50952]]

Response: We acknowledge that it is very important that clear and
consistent instructions are provided to facilities, physicians, and
Medicare review contractors. We intend to quickly develop
implementation instructions, manual guidance, and additional education
to ensure that all entities receive initial and ongoing guidance in
order to promote consistent application of these changes and repeatable
and reproducible decisions on individual cases. We intend to ensure
that our instructions to providers and reviewers alike emphasize that
the decision to admit should be based on and evaluated in respect to
the information available to the admitting practitioner at the time of
the admission.
After consideration of the public comments we received, we are
including in this final rule several revisions and clarifications to
the proposed policy. First, we are finalizing at Sec. 412.3(e)(1) the
2-midnight benchmark as proposed at Sec. 412.3(c)(1), that services
designated by the OPPS Inpatient-Only list as inpatient-only would
continue to be appropriate for inpatient hospital admission and payment
under Medicare Part A. In addition, surgical procedures, diagnostic
tests, and other treatments would be generally deemed appropriate for
inpatient hospital admission and payment under Medicare Part A when the
physician expects the patient to require a stay that crosses at least 2
midnights and admits the patient to the hospital based upon that
expectation. We proposed at Sec. 412.3(c)(2), and are finalizing at
Sec. 412.3(e)(2), that if an unforeseen circumstance, such as
beneficiary death or transfer, results in a shorter beneficiary stay
than the physician's expectation of at least 2 midnights, the patient
may still be considered to be appropriately treated on an inpatient
basis, and the hospital inpatient payment may be made under Medicare
Part A. We proposed, and are now finalizing, two distinct, although
related, medical review policies, a 2-midnight benchmark and a 2-
midnight presumption. The 2-midnight benchmark represents guidance to
admitting practitioners and reviewers to identify when an inpatient
admission is generally appropriate for Medicare coverage and payment,
while the 2-midnight presumption directs medical reviewers to select
claims for review under a presumption that the occurrence of 2
midnights after admission appropriately signifies an inpatient status
for a medically necessary claim. The starting point for the 2-midnight
benchmark will be when the beneficiary begins receiving hospital care
on either an inpatient basis or outpatient basis. That is, for purposes
of determining whether the 2-midnight benchmark will be met and,
therefore, whether inpatient admission is generally appropriate, the
physician ordering the admission should account for time the
beneficiary spent receiving outpatient services such as observation
services, treatments in the emergency department, and procedures
provided in the operating room or other treatment area. From the
medical review perspective, while the time the beneficiary spent as an
outpatient before the admission order is written will not be considered
inpatient time, it may be considered during the medical review process
for purposes of determining whether the 2-midnight benchmark was met
and, therefore, whether payment is generally appropriate under Part A.
For beneficiaries who do not arrive through the emergency department or
are directly receiving inpatient services (for example, inpatient
admission order written prior to admission for an elective admission or
transfer from another hospital), the starting point for medical review
purposes will be when the beneficiary starts receiving services
following arrival at the hospital. We proposed that both the decision
to keep the patient at the hospital and the expectation of needed
duration of the stay would be based on such factors as beneficiary
medical history and comorbidities, the severity of signs and symptoms,
current medical needs, and the risk of an adverse event. In this final
rule, we now are clarifying that risk (or probability) of an adverse
event relates to occurrences during the time period for which
hospitalization is considered.
We are finalizing that inpatient hospital claims with lengths of
stay greater than 2 midnights after the formal admission following the
order will be presumed generally appropriate for Part A payment and
will not be the focus of medical review efforts absent evidence of
systematic gaming, abuse, or delays in the provision of care in an
attempt to qualify for the 2-midnight presumption. We also are
clarifying in this final rule how we will instruct contractors to
review inpatient stays spanning less than 2 midnights after admission.
Such claims would not be subject to the presumption that services were
appropriately provided during an inpatient stay rather than an
outpatient stay because the total inpatient time did not exceed 2
midnights. However, upon medical review, the time spent as an
outpatient will be counted toward meeting the 2-midnight benchmark that
the physician is expected to apply to determine the appropriateness of
the decision to admit. In other words, even though the inpatient
admission was for only 1 Medicare utilization day, medical reviewers
will consider the fact that the beneficiary was in the hospital for
greater than 2 midnights following the onset of care when making the
determination of whether the inpatient stay was reasonable and
necessary. For those admissions in which the basis for the physician
expectation of care surpassing 2 midnights is reasonable and well-
documented, reviewers may apply the 2-midnight benchmark to incorporate
all time receiving care in the hospital. We will continue to use our
existing monitoring and audit authority, such as the CERT program, to
ensure that our review efforts focus on those subsets of claims with
the highest error rates and reduce the administrative burden for those
subsets that have demonstrated compliance with our clarified and
modified guidance.
4. Impacts of Changes in Admission and Medical Review Criteria
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27649 through
27650), we discussed our actuaries' estimate that our proposed 2-
midnight policy (referred to in this final rule as the 2-midnight
benchmark and the 2-midnight presumption) would increase IPPS
expenditures by approximately $220 million. These additional
expenditures result from an expected net increase in hospital inpatient
encounters due to some encounters spanning more than 2 midnights moving
to the IPPS from the OPPS, and some encounters of less than 2 midnights
moving from the IPPS to the OPPS. Specifically, our actuaries examined
FY 2009 through FY 2011 Medicare claims data for extended hospital
outpatient encounters and shorter stay hospital inpatient encounters
and estimated that approximately 400,000 encounters would shift from
outpatient to inpatient and approximately 360,000 encounters would
shift from inpatient to outpatient, causing a net shift of 40,000
encounters. These estimated shifts of 400,000 encounters from
outpatient to inpatient and 360,000 encounters from inpatient to
outpatient represent a significant portion of the approximately 11
million encounters paid under the IPPS. The net shift of 40,000
encounters represents an increase of approximately 1.2 percent in the
number of shorter stay hospital inpatient encounters paid under the
IPPS. Because shorter stay hospital inpatient encounters currently
represent approximately 17 percent of the IPPS expenditures, our
actuaries estimated

[[Page 50953]]

that 17 percent of IPPS expenditures would increase by 1.2 percent
under our proposed policy. These additional expenditures are partially
offset by reduced expenditures from the shift of shorter stay hospital
inpatient encounters to hospital outpatient encounters. Our actuaries
estimated that, on average, the per encounter payments for these
hospital outpatient encounters would be approximately 30 percent of the
per encounter payments for the hospital inpatient encounters. In light
of the widespread impact of the proposed 2-midnight policy on the IPPS
and the systemic nature of the issue of inpatient status and improper
payments under Medicare Part A for short-stay inpatient hospital
claims, we stated our belief that it is appropriate to use our
exceptions and adjustments authority under section 1886(d)(5)(I)(i) of
the Act to propose to offset the estimated $220 million in additional
IPPS expenditures associated with the proposed policy. This special
exceptions and adjustment authority authorizes us to provide ``for such
other exceptions and adjustments to [IPPS] payment amounts . . . as the
Secretary deems appropriate.' '' We proposed to reduce the standardized
amount, the hospital-specific rates, and the Puerto Rico-specific
standardized amount by 0.2 percent.
Comment: Commenters generally did not support the proposed -0.2
percent payment adjustment. Comments included the following assertions:
CMS actuaries' estimated increase in IPPS expenditures of $220 million
was unsupported and insufficiently explained to allow for meaningful
comment; CMS did not provide sufficient rationale for the use of our
exceptions and adjustments authority under section 1886(d)(5)(I)(i) of
the Act; CMS should not be adjusting the IPPS payment rates for
expected shifts in utilization between inpatient and outpatient; CMS
did not take into account the impact of the Part B Inpatient Billing
proposed rule in developing its estimates; CMS should provide parallel
treatment regarding the financial impact of both the medical review
policy in the FY 2014 IPPS/LTCH PPS proposed rule and the policies in
the Part B Inpatient Billing proposed rule and offset and restore the
$4.8 billion dollar reduction to hospital payments over 5 years
contained in the Part B Inpatient Billing proposed rule; and CMS'
proposed policy was a coverage decision and CMS should not adjust IPPS
rates for coverage decisions.
Response: We disagree with commenters who indicated that our
actuaries' estimated increase in IPPS expenditures of $220 million was
unsupported and insufficiently explained to allow for meaningful
comment. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27649), we
specifically discussed the methodology used and the components of the
estimate. Our actuaries examined FY 2009 to FY 2011 claims data. Based
on this examination, we stated the number of encounters our actuaries
estimated would shift from inpatient to outpatient (360,000) and the
number of encounters they estimated would shift from outpatient to
inpatient (400,000). We described the methodology we used to translate
this net shift of 40,000 encounters into our $220 million estimate,
including an estimate of the increase these 40,000 encounters represent
in shorter stay hospital inpatient encounters (1.2 percent), the share
that expenditures for shorter stay hospital inpatient encounters
represent of IPPS expenditures (17 percent), and our estimate of the
payment difference between OPPS and IPPS for these encounters (OPPS
payment for these encounters was estimated to be 30 percent of the IPPS
payment for these encounters). In addition to the opportunity to
comment on the estimate, any component of the estimate, or the
methodology, commenters had an opportunity to provide alternative
estimates for us to consider.
In determining the estimate of the number of encounters that would
shift from outpatient to inpatient, our actuaries examined outpatient
claims for observation or a major procedure. Claims not containing
observation or a major procedure were excluded. The number of claims
spanning 2 or more midnights based on the dates of service that were
expected to become inpatient was approximately 400,000. This estimate
did not include any assumption about outpatient encounters shorter than
2 midnights potentially becoming inpatient encounters.
In determining the estimate of the number of encounters that would
shift from inpatient to outpatient, our actuaries examined inpatient
claims containing a surgical MS-DRG. Claims containing medical MS-DRGs
were excluded. The number of claims spanning less than 2 midnights
based on the length of stay that were expected to become outpatient,
after excluding encounters that resulted in death or transfers, was
approximately 360,000.
The estimates of the shifts in encounters as described above were
primarily based on FY 2011 Medicare inpatient and outpatient claims
data. However, our actuaries also examined FY 2009 and FY 2010 Medicare
inpatient and outpatient claims data and found the results for the
earlier years were consistent with the FY 2011 results.
While there is a certain degree of uncertainty surrounding any cost
estimate, our actuaries have determined that the methodology, data, and
assumptions used are reasonable for the purpose of estimating the
overall impact of our proposed policy. We note that the assumptions
used for purposes of reasonably estimating the overall impact in FY
2014 should not be construed as absolute statements about every
individual encounter. For example, we fully expect that not every
single surgical MS-DRG encounter spanning less than 2 midnights will
shift to outpatient and that not every single outpatient observation
stay or major surgical encounter spanning more than 2 midnights will
shift to inpatient.
We also disagree with commenters who indicated that we did not
provide sufficient rationale for the use of our exceptions and
adjustments authority under section 1886(d)(5)(I)(i) of the Act. We
discussed that the issue of patient status has a substantial impact on
improper payments under Medicare Part A for short-stay inpatient
hospital claims, citing the fact that the majority of improper payments
under Medicare Part A for short-stay inpatient hospital claims have
been due to inappropriate patient status. In 2012, for example, the
CERT contractor found that inpatient hospital admissions for 1-day
stays or less had a Part A improper payment rate of 36.1 percent. The
improper payment rate decreased significantly for 2-day or 3-day stays,
which had improper payment rates of 13.2 percent and 13.1 percent,
respectively. We stated that we believed the magnitude of these
national figures demonstrates that issues surrounding the appropriate
determination of a beneficiary's patient status are not isolated to a
few hospitals. We also noted that the RAs had recovered more than $1.6
billion in improper payments because of inappropriate beneficiary
patient status. While we agree with commenters that our exceptions and
adjustments authority should not be routinely used in the IPPS system,
we believe that the systemic and widespread nature of this issue
justifies an overall adjustment to the IPPS rates and such an
adjustment is authorized under section 1886(d)(5)(I)(i) of the Act.
For similar reasons, while we generally agree with commenters that
it is not necessary to routinely estimate utilization shifts to ensure
appropriate IPPS payments, this is a unique situation. Policy
clarifications such as

[[Page 50954]]

this do not usually result in utilization shifts of sufficient
magnitude and breadth to significantly impact the IPPS. In this
situation, we believe it would be inappropriate to ignore such a
utilization shift in the development of the IPPS payment rates.
With respect to the comments that we did not take into account the
impact of the Part B Inpatient Billing proposed rule in developing our
estimates, we note that our actuaries did take those impacts into
account in developing our proposed adjustment. Our estimate of the net
shift in FY 2014 encounters between inpatient and outpatient would have
been substantially higher in the absence of the policies discussed in
the Part B Inpatient Billing proposed rule, in particular the
discussion of timely filing. Specifically, in the absence of the timely
filing requirement, there would be fewer inpatient encounters estimated
to become outpatient encounters, which would have resulted in a larger
cost than our estimated $220 million.
With respect to the comment that CMS should provide parallel
treatment regarding the financial impact of the medical review policy
in the FY 2014 IPPS/LTCH PPS proposed rule and the interrelated Part B
Inpatient Billing proposed rule by offsetting and restoring the
estimated $4.8 billion dollar reduction to hospital payments contained
in that rule, we note that, although we estimated a decrease in
expenditures as a result of our proposed Part B inpatient billing
policy, this decrease in expenditures is offset by the costs of the
significant number of related administrative appeal decisions as well
as CMS Ruling 1455-R, which allows hospitals to seek payment of Part B
inpatient services on claims filed outside the timely filing period. As
discussed in greater detail in the Regulatory Impact Analysis in the
Part B Inpatient Billing proposed rule (78 FR 16643), the combined
impact of the appeals decisions, CMS Ruling 1455-R, and Part B
inpatient billing policy, to which the 12-month timely filing
requirement applies, is an estimated cost to the Medicare program of
$1.03 billion over the CY 2013 to CY 2017 time period. We estimate in
the Regulatory Impact Analysis of the final Part B inpatient payment
policy in this final rule that the combined impact of the appeals
decisions, CMS Ruling 1455-R, and the Part B inpatient billing policy
will cost the Medicare program $1.260 billion over the CY 2013 to CY
2017 time period.
Finally, we disagree with those comments asserting that the
modification and clarification of our current instructions regarding
the circumstances under which Medicare will generally pay for a
hospital inpatient admission in order to improve hospitals' ability to
make appropriate admission decisions are actually coverage decisions in
the context of this adjustment. As we clearly stated in the FY 2014
IPPS/LTCH PPS proposed rule (78 FR 27648), we will continue to review
individual claims to ensure the hospital services furnished to
beneficiaries are ``reasonable and necessary for the diagnosis or
treatment of illness or injury or to improve the functioning of a
malformed body member,'' as required by section 1862(a)(1) of the Act.
Any hospital service determined to be not reasonable or necessary may
not be paid under Medicare Part A or Part B. In the context of this
adjustment, these are not new hospital services.
Our actuaries continue to estimate there will be approximately $220
million in additional expenditures resulting from our 2-midnight
benchmark and 2-midnight presumption medical review policies. This net
increase in hospital inpatient encounters is due to some encounters
spanning more than 2 midnights moving to the IPPS from the OPPS, and
some encounters of less than 2 midnights moving from the IPPS to the
OPPS. Therefore, after consideration of the comments we received, and
for the reasons described above, we are finalizing a reduction to the
standardized amount, the hospital-specific rates, and the Puerto Rico-
specific standardized amount of -0.2 percent to offset the additional
$220 million in expenditures.

XII. MedPAC Recommendations

Under section 1886(e)(4)(B) of the Act, the Secretary must consider
MedPAC's recommendations regarding hospital inpatient payments. Under
section 1886(e)(5) of the Act, the Secretary must publish in the annual
proposed and final IPPS rules the Secretary's recommendations regarding
MedPAC's recommendations. We have reviewed MedPAC's March 2013 ``Report
to the Congress: Medicare Payment Policy'' and have given the
recommendations in the report consideration in conjunction with the
policies set forth in this final rule. MedPAC recommendations for the
IPPS for FY 2014 are addressed in Appendix B to this final rule.
For further information relating specifically to the MedPAC reports
or to obtain a copy of the reports, contact MedPAC at (202) 653-7226,
or visit MedPAC's Web site at: https://www.medpac.gov.

XIII. Other Required Information

A. Requests for Data From the Public

In order to respond promptly to public requests for data related to
the prospective payment system, we have established a process under
which commenters can gain access to raw data on an expedited basis.
Generally, the data are now available on compact disc (CD) format.
However, many of the files are available on the Internet at: https://
www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/
AcuteInpatientPPS/. We listed the data files and the cost for
each file, if applicable, in the FY 2014 IPPS/LTCH PPS proposed rule
(78 FR 27746 through 27748).
Commenters interested in discussing any data used in constructing
the proposed rule or this final rule should contact should contact
Nisha Bhat at (410) 786-5320.

B. Collection of Information Requirements

1. Statutory Requirement for Solicitation of Comments
Under the Paperwork Reduction Act of 1995, we are required to
provide 60-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval. In
order to fairly evaluate whether an information collection should be
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act
of 1995 requires that we solicit comment on the following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27748 through
27755), we solicited public comment on each of these issues for the
following sections of this document that contain information collection
requirements (ICRs). We discuss and respond to any public comments we
received in the relevant sections.
2. ICRs for Add-On Payments for New Services and Technologies
Section II.I.1. of the preamble of the proposed rule and this final
rule discusses add-on payments for new

[[Page 50955]]

services and technologies. Specifically, this section states that
applicants for add-on payments for new medical services or technologies
for FY 2015 must submit a formal request. A formal request includes a
full description of the clinical applications of the medical service or
technology and the results of any clinical evaluations demonstrating
that the new medical service or technology represents a substantial
clinical improvement. In addition, the request must contain a
significant sample of the data to demonstrate that the medical service
or technology meets the high-cost threshold.
We believe the burden associated with this requirement is exempt
from the PRA under 5 CFR 1320.3(c), which defines the agency collection
of information subject to the requirements of the PRA as information
collection imposed on 10 or more persons within any 12-month period.
This information collection does not impact 10 or more entities in a
12-month period. In FYs 2008, 2009, 2010, 2011, 2012, 2013, and FY
2014, we received 1, 4, 5, 3, 3, 5, and 5 applications, respectively.
We did not receive any public comments regarding this information
collection.
3. ICRs for the Occupational Mix Adjustment to the FY 2014 Index
(Hospital Wage Index Occupational Mix Survey)
Section III.F. of the preamble of the proposed rule (78 FR 27554
through 27555) and this final rule discusses the occupational mix
adjustment to the proposed and final FY 2014 wage index, respectively.
While the preamble of these rules does not contain any new ICRs, we
note that there is an OMB approved information collection request
associated with the hospital wage index.
Section 304(c) of Public Law 106-554 amended section 1886(d)(3)(E)
of the Act to require CMS to collect data at least once every 3 years
on the occupational mix of employees for each short-term, acute care
hospital participating in the Medicare program in order to construct an
occupational mix adjustment to the wage index. We collect the data via
the occupational mix survey.
The burden associated with this information collection requirement
is the time and effort required to collect and submit the data in the
Hospital Wage Index Occupational Mix Survey to CMS. The aforementioned
burden is subject to the PRA; it is currently approved under OCN 0938-
0907.
4. Hospital Applications for Geographic Reclassifications by the MGCRB
Section III.H.2. of the preamble of the proposed rule (78 FR 27557
through 27558) and this final rule discusses proposed and final
revisions, respectively, to the wage index based on hospital
redesignations. As stated in that section, under section 1886(d)(10) of
the Act, the MGCRB has the authority to accept short-term IPPS hospital
applications requesting geographic reclassification for wage index or
standardized payment amounts and to issue decisions on these requests
by hospitals for geographic reclassification for purposes of payment
under the IPPS.
The burden associated with this application process is the time and
effort necessary for an IPPS hospital to complete and submit an
application for reclassification to the MGCRB. While this requirement
is subject to the PRA, the associated burden was previously approved
under OCN 0938-0573. However, the information collection expired on
December 31, 2011. We are currently seeking to reinstate the
information collection and, as required by the PRA, will announce
public notice and comment periods in the Federal Register separate from
this rulemaking.
5. ICRs for Application for GME Resident Slots
The information collection requirements associated with the
preservation of resident cap positions from closed hospitals, addressed
under section V.J.3. of this preamble, are not subject to the Paperwork
Reduction Act, as stated in section 5506 of the Affordable Care Act.
6. ICRs for the Hospital Inpatient Quality Reporting (IQR) Program
The Hospital IQR Program (formerly referred to as the Reporting
Hospital Quality Data for Annual Payment (RHQDAPU) Program) was
originally established to implement section 501(b) of the MMA, Public
Law 108-173. This program expanded our voluntary Hospital Quality
Initiative. The Hospital IQR Program originally consisted of a
``starter set'' of 10 quality measures. The collection of information
associated with the original starter set of quality measures was
previously approved under OMB control number 0938-0918. All of the
information collection requirements previously approved under OMB
control number 0938-0918 have been combined with the information
collection request previously approved under OMB control number 0938-
1022. We will no longer be using the OMB control number 0938-0918.
We added additional quality measures to the Hospital IQR Program
and submitted the information collection request to OMB for approval.
This expansion of the Hospital IQR measures was part of our
implementation of section 5001(a) of the DRA. Section
1886(b)(3)(B)(viii)(III) of the Act, added by section 5001(a) of the
DRA, requires that the Secretary expand the ``starter set''' of 10
quality measures that were established by the Secretary as of November
1, 2003, to include measures ``that the Secretary determines to be
appropriate for the measurement of the quality of care furnished by
hospitals in inpatient settings.'' The burden associated with these
reporting requirements was previously approved under OMB control number
0938-1022.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53666), we stated
that, for the FY 2016 payment determinations and subsequent years
updates, we are seeking OMB approval for a revised information
collection request using the same OMB control number (0938-1022). In
the revised request we will add the 5 claims-based measures that are
finalized in this final rule: (1) 30-day risk standardized COPD
Readmission; (2) 30-day risk standardized COPD Mortality; (3) 30-day
risk standardized Stroke Readmission; (4) 30-day risk standardized
Stroke Mortality; and (5) AMI payment per Episode of Care. We are also
finalizing the removal of six chart-abstracted measures: (1) PN 3b:
Blood Culture Performed in the Emergency Department Prior to First
Antibiotic Received in the Hospital; (2) HF 1: Discharge Instructions;
and (3) AMI-2: Aspirin Prescribed at Discharge; (4) AMI-10: Statin
Prescribed at Discharge; (5) HF-3: ACEI or ARB for LVSD; and (6) SCIP-
Inf-10: Surgery Patients with Perioperative Temperature Management as
well as one structural measure, Systematic Clinical Database Registry
for Stroke Care. We are suspending collection of IMM 1: Immunization
for Pneumonia.
Because claims-based measures can be calculated based on data that
are already reported to the Medicare program for payment purposes, we
believe no additional information collection will be required from the
hospitals. However, we do believe there will be a reduction in the
burden associated with the removal of six chart-abstracted measures,
suspension of one chart-abstracted measures, and removal of one
structural measure. We estimate a reduction in burden associated with
data collection for chart-abstracted measures and associated forms. For
the

[[Page 50956]]

FY 2015 payment determination, we estimated that the burden for chart
abstracted measures and associated forms for each hospital is 1,900
hours annually. For the FY 2016 payment determination, we estimate the
burden to be 1,775 hours annually per hospital. We estimate the total
burden for chart abstraction and structural measures for the
approximately 3,300 Hospital IQR Program-participating hospitals to be
5.86 million hours.
To support the validation of two additional HAI measures, we also
are finalizing our proposal to add two new HAI Validation Templates for
a total of four Validation Templates to be completed by hospitals
selected for annual validation. To add these new Templates without
increasing burden for the FY 2016 payment determination and subsequent
years, we are finalizing our proposal to randomly assign one-half of
the hospitals to submit templates for CLABSI and CAUTI validation and
one-half of the hospitals to submit templates for MRSA and CDI
validation. We believe this approach will limit hospital burden
because, of the 600 potential, total hospitals selected for annual
validation, only up to 300 hospitals would be required to submit for
MRSA and CDI validation and up to 300 hospitals would be required to
submit for CLABSI and CAUTI validation. We estimate completion of the
CLABSI and CAUTI validation templates will take approximately 20 hours
each quarter. We estimate completion of the MRSA and CDI validation
templates will take approximately 16 hours each quarter. As finalized
for the FY 2016 payment determination, HAI validation will include 3
quarters of data. Therefore, we estimate the total burden for HAI
validation to be 60 hours for hospitals validated for CLABSI and CAUTI
and 48 hours for hospitals validated for MRSA and CDI. We estimate the
total burden for validation templates for the 600 Hospital IQR
participating hospitals selected for validation to be 32,000 hours.
Utilizing the estimates above, we estimate an overall reduction in
burden from the FY 2015 estimate of 6.3 million hours annually to 5.9
million hours annually for the FY 2016 payment determination year. This
burden estimate includes both newly added measures and measure sets and
those for which we are requesting renewal. It excludes the burden
associated with the NHSN and HCAHPS measures, both of which are
submitted under separate OMB numbers.
Previously, we required hospitals to provide 12 patient charts per
quarter per hospital for HAI validation and 15 patient charts per
quarter per hospital for validation of clinical process of care
measures, for a total of 27 charts per quarter per hospital and 108
charts per year per hospital. For the FY 2016 payment determination and
subsequent years, we are finalizing our proposal to reduce this
requirement by 12 charts per hospital per year.
In addition, we are finalizing our proposal that the requirement to
submit patient charts for validation of Hospital IQR Program data may
be met by employing either of the following options each quarter: (1) A
hospital may submit paper medical records, which is the form in which
we have historically requested them; or (2) a hospital may securely
transmit electronic versions of medical information for the FY 2016
payment determination and subsequent years. The intent of this
electronic option is to offer an additional mode through which
hospitals may meet the requirement to submit patient charts. To support
this electronic option, which has the potential to reduce burden, cost,
and environmental impact, we also are finalizing our proposal for the
FY 2016 payment determination and subsequent years to reimburse
hospitals for submission of electronic versions of medical information.
We are finalizing a reimbursement rate of $3.00 per chart for
validation for the FY 2016 payment determination. In formulating this
number we took into account the following considerations:
Cost estimates are for retrieval of records and not for
the maintenance of electronic health records systems, which are
supported by CMS by other means.
The activities associated with submitting an electronic
version of a patient medical record include downloading, verifying, and
copying records, which must be done for every record separately, and
packaging and encrypting CDs or DVDs which must be done only once per
DVD or CD sent.
We assume that an average patient record will be 412 pages
in length, that the average capacity of a DVD of 45,000 pages, and that
all 27 records submitted in a quarter will fit on one DVD most of the
time.
Based on time and motion studies conducted by our
contractor, we estimate that for records of average lengths, the
minimum labor time is between 1 and 2 minutes per record.
To acknowledge that some records may be so large that they
require their own DVD, and that some systems may be slower than others,
we also estimated a maximum labor of about 12 minutes per record.
Averaging these two estimates, we achieve an average of
less than 7 minutes of labor per record.
The labor performed can be accomplished by a combination
of staff equivalent to a GS-5 administrative secretary and a GS-5
information technologist, earning within the middle range for this
grade, which in 2013 was $38,616 per year. Assuming, 2,080 hours in a
work year, we achieve an hourly rate of $18.57 per hour.
Applying OMB Circular A-76, we assumed overhead of 36.25
percent, for a fully burdened labor rate of $25.30 per hour.
The labor cost associated with each record is $2.95.
Supply costs are limited to DVDs and packaging. DVDs cost
$20 per 100, or 20 cents per DVD. A protective shipping container also
costs 20 cents each.
If a hospital submits all records on the same DVD, supply
costs will equal approximately 1.4 cents per DVD. If a hospital submits
one DVD per record, supply costs will equal approximately 40 cents per
record. Averaging these costs results in 21 cents per record.
Adding supplies to labor yields a total cost of $3.16 per
record.
Rounding to the nearest whole dollar yields $3.00 per
record.
For the FY 2016 payment determination, we also are encouraging
hospitals to voluntarily submit up to 16 measures electronically for
the Hospital IQR Program in a manner that would permit eligible
hospitals to align Hospital IQR Program requirements with some
requirements under the Medicare EHR Incentive Program. We estimate that
the total burden associated with the electronic quality measure
reporting option will be similar to the burden outlined for hospitals
in the EHR Incentive Program Stage 2 final rule (77 FR 53968 through
54162). As established in that final rule, beginning in FY 2014,
hospitals that are beyond their first year of meaningful use must
electronically report a total of 16 clinical quality measures covering
at least three domains using CEHRT that has been certified to the 2014
Edition certification criteria.
By allowing hospitals to submit data that could be used to satisfy
the requirements for both programs, each hospital that participates in
the proposed voluntary electronic quality measure reporting option and
electronically reports on the maximum of 16 electronic clinical quality
measures could realize a reduction in burden for the Hospital IQR
Program of approximately 800 hours. This estimate assumes an annual
collection burden for

[[Page 50957]]

chart-abstracted Stroke, VTE and PC-01 to be a combined 816 hours
annually per hospital over 4 quarters and an estimated 2.66 hours to
submit those measures electronically for one quarter. Since the ED
measures are a subset of the global measure set that also includes the
Immunization measures, which will continue to be collected via chart
abstraction, we do not believe there will be a significant reduction in
burden for electronic submission of the ED-1 and ED-2 measures.
In accordance with the estimates in the Medicare EHR Incentive
Program Stage 2 final rule, we believe it will take a hospital
approximately 2 hours and 40 minutes to select, prepare, and
electronically submit a maximum of 16 electronic clinical quality
measures using CEHRT. In addition, in accordance with the Medicare EHR
Incentive Program Stage 2 final rule, we believe an individual with
commensurate skills will submit electronic clinical quality measures on
behalf of the hospital at a rate of approximately $59.00 per hour.
Therefore, we believe it will cost a hospital approximately $156.94
($59.00 x 2.66 hours) to report 16 electronic clinical quality measures
in CY 2014 (77 FR 54133). Additional information about the chart
abstraction burden is detailed in section XIII.B.6. of the preamble to
the proposed rule and this final rule.
7. ICRs for PPS-Exempt Cancer Hospital Quality Reporting (PCHQR)
Program
As discussed in section IX.B. of the preamble of the proposed rule
and this final rule, section 1866(k) of the Act requires, for purposes
of FY 2014 and each subsequent fiscal year, that a hospital described
in section 1886(d)(1)(B)(v) of the Act (a PPS-exempt cancer hospital,
or a PCH) submit data in accordance with section 1866(k)(2) of the Act
with respect to such fiscal year. In the FY 2013 IPPS/LTCH PPS final
rule, we implemented the PCHQR Program to comply with the statutory
mandate and in an effort to improve the quality of care for inpatient
cancer patients. It is our aim and goal to encourage PCHs to furnish
high quality care in a manner that is effective and meaningful, while
remaining mindful of the reporting burden created by the implementation
of this new program. Therefore, we intend to reduce and avoid
duplicative reporting efforts, whenever possible, by leveraging
existing infrastructure.
In the FY 2013 IPPS/LTCH PPS final rule, for the FY 2014 program
year, we adopted five NQF-endorsed quality measures, two of which were
developed by the CDC and three of which were developed by the American
College of Surgeons' Commission on Cancer (ACoS/CoC) and discussed the
information collection requirements for these measures.

----------------------------------------------------------------------------------------------------------------
Topic Quality measures
----------------------------------------------------------------------------------------------------------------
Cancer-Specific Treatments.................. Adjuvant Chemotherapy is considered or administered within 4
months (120 days) of surgery to patients under the age of 80 with
AJCC Stage III (lymph node positive) colon cancer (NQF 0223).
Combination Chemotherapy is considered or administered within 4
months (120 days) of diagnosis for women under 70 with AJCC T1c,
or Stage II or III hormone receptor negative Breast Cancer (NQF
0559).
Adjuvant Hormonal Therapy (NQF 0220).
Healthcare Acquired Infections (HAIs)....... National Healthcare Safety Network (NHSN) Central Line-Associated
Bloodstream Infection (CLABSI) Outcome Measure (NQF 0139).
National Healthcare Safety Network (NHSN) Catheter-Associated
Urinary Tract Infection (CAUTI) Outcome Measure (NQF 0138).
----------------------------------------------------------------------------------------------------------------

In this final rule, we are finalizing our program policy that PCHs
submit data on 1 additional measure beginning with FY 2015 and 12
additional measures beginning with FY 2016 (as listed below), for a
total of 18 measures (5 previously adopted plus 13 new measures). As
indicated in the preamble to this rule, we have decided not to finalize
our proposal to adopt the Multiple Myeloma-Treatment with
Bisphosphonates (NQF 0380) measure. The tables below sets
forth the new measures finalized in this final rule for the FY 2015 and
FY 2016 programs and subsequent years.

----------------------------------------------------------------------------------------------------------------
NQF
Measure domain Endorsement Measure name
number
----------------------------------------------------------------------------------------------------------------
New Measure for the FY 2015 Program and Subsequent Years
----------------------------------------------------------------------------------------------------------------
Patient Safety...................... 0753 Harmonized Procedure Specific Surgical Site Infection
(SSI) Outcome Measure.
----------------------------------------------------------------------------------------------------------------
New Measures for the FY 2016 Program and Subsequent Years
----------------------------------------------------------------------------------------------------------------
Surgical Care Improvement Project 0218 Surgery Patients Who Received Appropriate VTE Prophylaxis
(SCIP). within 24 Hrs Prior to Surgery to 24 Hrs After Surgery
End Time.
0284 Surgery Patients on Beta Blocker Therapy Prior to
Admission Who Received a Beta Blocker during the
Perioperative Period.
0453 Urinary Catheter Removed on Post-Operative Day 1 or Post-
Operative Day 2 with Day Surgery Being Day Zero.
0527 Prophylactic Antibiotic Received Within 1 Hr Prior to
Surgical Incision.
0528 Prophylactic Antibiotic Selection for Surgical Patients.
0529 Prophylactic Antibiotic Discontinued Within 24 Hrs After
Surgery End Time.
Clinical Process/OncologyCare....... 0382 Oncology-Radiation Dose Limits to Normal Tissues.
0383 Oncology: Plan of Care for Pain.
0384 Oncology: Pain Intensity.
0390 Prostate Cancer-Adjuvant Hormonal Therapy for High-Risk
Patients.
0389 Prostate Cancer-Avoidance of Overuse Measure-Bone Scan for
Staging Low-Risk Patients.

[[Page 50958]]

Patient Engagement/Patient 0166 HCAHPS Patient Experience of Care Survey.
Experience of Care.
----------------------------------------------------------------------------------------------------------------

We believe that requiring PCHs to submit data on these additional
measures will not prove burdensome. PCHs have familiarity with and
experience reporting quality data to CMS during the initial year of the
PCHQR program. Therefore, we believe that because a majority of PCHs
have demonstrated the ability to report these measures, the reporting
requirements we are finalizing will not significantly impact PCHs.
The anticipated burden on these PCHs consists of the following:
training of appropriate staff members on how to use the NHSN for the
reporting of the SSI measure, CMS (QualityNet) for the reporting of the
SCIP measures, and the CMS Web Measures Tool for the reporting of the
clinical process/oncology care measures; the time required for
collection and aggregation of data; and the time required for reporting
of the data by the PCH's representative; and the time required to
participate in administering the HCAHPS Survey and collecting HCAHPS
data. We have taken into account all these elements in our burden
calculation.
We estimate that 11 PCHs will submit data on approximately 63,468
cancer cases annually. It will require, on average, 9 hours for a PCH
to abstract the information from medical records and submit such
information for each case. The time required to administer the HCAHPS
Survey is likely to be lower than the time for chart abstraction.
However, the same method was used to ensure a high-end estimate so that
facilities will not experience a higher burden than estimated. In
addition, sampling was not considered for this reason. Therefore, this
burden represents the ``worst-case scenario'' of what would be required
of each facility. Based on these assumptions, we estimate that the
annual hourly burden on each PCH for the collection, submission, and
training of personnel for submitting all quality measure data would be
approximately 51,930 hours.
We received the following comments on our burden analysis.
Comment: Some commenters expressed concern with the inequality of
program implementation requirements imposed on PCHs under the PCHQR
Program as compared with the requirements imposed on subsection (d)
hospitals under the Hospital IQR Program. For example, one commenter
suggested that it would take less than one FTE to implement the
Hospital IQR Program measures for FY 2014, but PCHs would need to hire
26 to 28 FTEs to implement the PCHQR Program requirements for FY 2015
and FY 2016.
Response: We note that the burden calculations for the Hospital IQR
Program that we performed for purposes of the FY 2014 IPPS/LTCH
proposed and final rule include only the new measures adopted for a
given payment year (for example, the burden for FY 2016 and FY 2017 is
calculated by using only those measures finalized for each respective
year), whereas the burden calculations for the PCHQR Program that we
performed for purposes of the FY 2014 IPPS/LTCH proposed and final rule
include all measures we have adopted since the program's inception
beginning with FY 2014 program year. Therefore, we believe that the
difference in our calculation methodology, as opposed to the actual
burden, accounts for the commenters' observations. In addition, since
we lack PCH-specific data, we have calculated the burden to PCHs on a
worst case scenario basis and made our calculations by assuming PCHs
would report on all measures for all cases. We are reasonably certain
that the burden imposed on PCHs will not actually be as great as what
we have calculated for the following reasons: (1) About 27 percent of
the PCHs are currently voluntarily administering the HCAHPS Survey,
which means that for some PCHs there will be no additional burden to
report on this measure for all cases; (2) our experience with the
Hospital IQR Program indicates that only a very small fraction of cases
are SCIP cases, which means that PCHs will not have to report on these
measures for all cases; (3) the sampling methodology for the SCIP
measures requires that PCHs use only 10 percent of the patient
population size,\197\ which means that PCHs' reporting burden for the
SCIP measures will be reduced by approximately 90 percent because of
sampling method applied; (4) our experience with the Hospital IQR
Program indicates that only a very small fraction of cases are HAI
cases, which means that PCHs will not have to report on these measures
for all cases; and (5) with the exception of the pain-related measures
(Oncology: Plan of Care for Pain and Oncology: Pain Intensity
Quantified) the other three oncology measures are specific to subsets
of cancer patient populations,\198\ which means that PCHs will not have
to report on these measures for all cases.
---------------------------------------------------------------------------

\197\ See the specifications manual at: https://www.qualitynet.org/dcs/ContentServer?pagename=QnetPublic%2FPage%2FQnetTier2&cid=1138115987129.
\198\ The Oncology-Radiation Dose Limits to Normal Tissues
measure applies only to lung and pancreatic cancer patients, the
Prostate Cancer-Adjuvant Hormonal Therapy for High-Risk Patients
applies to prostate cancer patients, at high risk of recurrence,
receiving external beam radiotherapy who were prescribed adjuvant
hormonal therapy, and the Prostate Cancer-Avoidance of Overuse
Measure-Bone Scan for Staging Low-Risk Patients applies to prostate
cancer patients at low risk of recurrence receiving certain kinds of
therapy.
---------------------------------------------------------------------------

Despite these factors, however, perhaps over-conservatively, we
calculated the burden by assuming that PCHs would submit measure data
on all cases. For the reasons cited above, we believe that the
estimated burden we provided is an extreme, worst-case scenario
calculation. We chose to calculate the burden using this methodology
because we thought it more prudent to over-rather than under-estimate.
The Hospital IQR Program is a well-established program with several
years' worth of data on which we can draw to provide burden estimations
and infer, as we did above, how the number of cases may play out.
Although we can draw similarities between the Hospital IQR Program's
SCIP and HAI cases as a percentage of the overall patient population,
we chose not to use concrete numbers from the Hospital IQR Program
given the differences between the patient populations in the PCHQR and
Hospital IQR Programs. As the PCHQR Program matures and we gather more
PCH-specific data, we will provide more precise burden calculations
that are closer to the real burden that PCHs will face.
Comment: Some commenters opposed the burden estimates because we
did not propose to allow sampling with respect to the collection of
data on the clinical process/oncology care and SCIP measures.
Response: We thank commenters for their comments. We note that in
this final rule, we are finalizing a policy that

[[Page 50959]]

allows PCHs to use sampling methodologies to report the SCIP and the
clinical process/oncology care measures. We believe that these sampling
methodologies will decrease the PCHs' reporting burden because PCHs
will not have to perform chart-abstraction on all cases. For the SCIP
measures, we will allow PCHs to use the same sampling methodology that
we currently allow subsection (d) hospitals to use to report the SCIP
measures under the Hospital IQR Program (outlined in the specification
manual https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1138115987129). For the clinical process/oncology care measures, we will allow
PCHs to use the sampling methodologies we allow for the reporting of
these measures under the PQRS Program, and this sampling methodology
can be found in the PQRS manual at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/PQRS/MeasuresCodes.html.
Comment: One commenter recommended that CMS consider the relative
value and associated burden of reporting measures. In particular, the
commenter recommended that CMS consider the appropriateness of cancer-
specific measures, particularly outcome measures.
Response: We thank the commenter for these comments and will
consider other measures (that is, outcome measures) relevant to the PCH
settings in future years. As we indicated earlier in the preamble, we
believe that the measures we have selected will help improve the
quality of care for PCH patients. Our measures address critical
components of PCH quality care, including oncology, prostate cancer
care, surgical processes of care that should be followed in PCHs, and
patient experience of PCH care. We believe that the value added by
requiring PCHs to submit data on these measures far outweighs the
burden.
Comment: One commenter recommended we consider implementing a
sampling protocol, similar to the Hospital IQR Program, to minimize
burden.
Response: As we explain above, we are allowing PCHs to use sampling
methodologies for the SCIP and the clinical process/oncology care
measures.
8. ICRs for the Hospital Value-Based Purchasing (VBP) Program
In section V.H. of the preamble of the proposed rule and this final
rule, we discuss requirements for the Hospital VBP Program.
Specifically, in this final rule, we are adopting three new measures
for the FY 2016 Hospital VBP Program, including IMM-2: Influenza
Immunization, CAUTI, and the Surgical Site Infection (SSI) measure. We
also are adopting CLABSI, a measure that we finalized for FY 2015 but
did not readopt at that time for the FY 2016 Hospital VBP Program.
In addition, we are adopting the three 30-day mortality measures
for the FYs 2017 through 2019 programs and the AHRQ PSI composite
measure for the Hospital VBP Program for FYs 2017 and 2018.
All of these additional measures are required for the Hospital IQR
Program; therefore, their inclusion in the Hospital VBP Program does
not result in any additional burden because the Hospital VBP Program
uses data that are required for the Hospital IQR Program.
9. ICRs for the Long-Term Care Hospital Quality Reporting (LTCHQR)
Program
In section IX.C. of the preamble of this final rule, we discuss the
requirements for the LTCHQR Program, established by section 1886(m)(5)
of the Act, which was added to the Act by section 3004 of the
Affordable Care Act.
In the FY 2013 IPPS/LTCH PPS final rule, we finalized the adoption
of five quality measures for use in the LTCHQR Program for the FY 2016
payment determination and subsequent years. These measures are: (1)
NHSN Catheter-Associated Urinary Tract Infection (CAUTI) Outcome
Measure (NQF 0138); (2) NHSN Central Line-Associated Blood
Stream Infection (CLABSI) Outcome Measure (NQF 0139); (3)
Application of Percent of Residents with Pressure Ulcers that are New
or Worsened (Short Stay) (NQF 0678); (4) Percent of Residents
or Patients Who Were Assessed and Appropriately Given the Seasonal
Influenza Vaccine (Short-Stay) (NQF 0680); and (5) Influenza
Vaccination Coverage Among Healthcare Personnel (NQF 0431).
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53630 through
53631), we finalized that for Influenza Vaccination Coverage Among
Healthcare Personnel (NQF 0431), LTCHs should begin to submit
data from January 1, 2014 through December 31, 2014 (CY 2014) for the
FY 2016 payment determination. However, there is unique seasonality in
the timing of influenza activity each year. To account for this, we are
finalizing our proposal that, for the LTCHQR Program, this measure (NQF
0431) will have a reporting period that aligns with the
influenza vaccination season. The influenza vaccination season is
defined by the CDC as October 1 (or when the vaccine becomes available)
through March 31 of the following year. This change would allow LTCHs
to collect data on Healthcare Personnel influenza vaccination for the
entirety of the 2014-2015 influenza season for the FY 2016 payment
determination based on the period of October 1 (or when the vaccine
becomes available) through March 31. This change would allow LTCHs to
collect data on this measure using the same period for future influenza
seasons for each of the subsequent years.
While LTCHs can enter information in NHSN at any point during the
influenza season for NQF 0431, data submission is only
required once per year, unlike the other measures finalized for the
LTCHQR Program that utilize CDC's NHSN (CAUTI measure NQF 0138
and CLABSI measure NQF 0139). LTCHs can choose to submit
Healthcare Personnel influenza vaccination data on an incremental basis
(for example, on a monthly basis), or just once a year. The final
deadlines associated with submitting data, approximately 45 days after
the end of the data collection timeframe for the FY 2016 payment
determination, remain consistent across measures. Thus, the deadline
for submission of data for NQF 0431 would be approximately 45
days after March 31, or May 15.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53624 through
53627), we finalized that for NQF 0680, Percentage of
Residents or Patients Who Were Assessed and Appropriately Give the
Seasonal Influenza Vaccine (Short-Stay), LTCHs should begin to collect
and submit data on January 1, 2014 through December 31, 2014 (CY 2014)
for the FY 2016 payment determination. This measure, stewarded by CMS,
will be collected using items included in the LTCH Continuity
Assessment Record and Evaluation (CARE) Data Set (Version 2.01)
approved by the Office of Management and Budget (OMB) on June 10, 2013
under the Paperwork Reduction Act.\199\ The OMB control number is 0938-
1163. Later in 2013, we will release the final technical data
submission specifications and updated LTCHQR Program Manual with
guidance on the completion of the LTCH CARE Data Set (Version 2.01)
containing items related to NQF 0680.
---------------------------------------------------------------------------

\199\ The LTCH CARE Data Set Version 2.01 was approved on June
10, 2013 by OMB in accordance with the PRA. The OMB Control Number
is 0938-1163. Expiration Date June 30, 2016.
---------------------------------------------------------------------------

In order to better align this measure (NQF 0680) with the
influenza season

[[Page 50960]]

(as described earlier for NQF 0431), in light of public
comments and to allow time and opportunity for LTCHs and vendors to
participate in CMS-sponsored training activities pertaining to the
implementation of the LTCH CARE Data Set (Version 2.01), as well as
time to plan for and incorporate changes into their data collection and
entry systems, we are finalizing the data collection period for this
measure to October 1, 2014 through April 30, 2015. This change accounts
for the unique seasonality of the influenza season, as defined by the
CDC as October 1 (or when the vaccine becomes available) through March
31 of the following year. At this point, our data reporting and
submission infrastructure for the LTCH CARE Data Set requires LTCHs to
submit data on patient admissions and discharges (or death) separately.
As a result, allowing reporting through April will allow us to capture
the influenza vaccination status of LTCH patients admitted in March and
discharged in April.
We are changing the timeline for data submission for NQF
0680 to admissions and discharges in an LTCH from October 1,
2014 through April 30, 2015, for the FY 2016 payment determination. We
are revising and finalizing our timeline for data collection and
submission for the FY 2017 payment determination to October 1, 2015
through April 30, 2016. Thereafter, data for October 1 through April 30
will be used for subsequent years.
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51748 through
51750), we adopted an application of NQF 0678 Percent of
Residents with Pressure Ulcers That are New or Worsened (Short-Stay)
for the FY 2014 payment determination, and retained this application of
the measure in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53615
through 53619) for the FY 2015 payment determination and subsequent
years. We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR
51748 through 51750) for a discussion of the rationale, data collection
methods, and submission methods finalized for this measure for the FY
2014 payment determination and subsequent years, and for references to
the description and specifications of this measure.
At the time we completed our work on the FY 2013 IPPS/LTCH PPS
final rule, we were only able to adopt an application of the endorsed
measure in our final version of the FY 2013 rule. NQF 0678 was
subsequently ratified by the NQF Board of Directors for expansion to
the LTCH setting on August 1, 2012.\200\ \201\ Because NQF
0678 has received endorsement for the LTCH setting, we are now
finalizing our proposal to adopt the updated measure NQF 0678
Percent of Residents or Patients with Pressure Ulcers that are New or
Worsened (Short-Stay) for the FY 2015 payment determination and
subsequent years. This measure will continue to be collected using
items included in the LTCH CARE Data Set (Version 1.01) for CY 2013 and
for the first quarter of CY 2014. Further, starting April 1, 2014, this
measure is proposed to be collected using items included in the LTCH
CARE Data Set (LCDS) (Version 2.01). While LTCHs will be using a new
version \202\ of the LCDS to continue reporting this measure, the data
items used to collect data for this measure will remain the same.
---------------------------------------------------------------------------

\200\ National Quality Forum, Consensus Standards Approval
Committee Wednesday, July 11, 2012. Transcript. Available on the Web
site at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=71612.
\201\ Press Release: NQF Removes Time-Limited Endorsement Status
for 13 Measures, Measures Now Have Endorsed Status. August 1, 2012.
Available on the Web site at: https://www.qualityforum.org/News_And_Resources/Press_Releases/2012/NQF_Removes_Time-Limited_Endorsement_for_13_Measures;--Measures--Now--Have--Endorsed--
Status.aspx
\202\ The LTCH CARE Data Set Version 1.01 was approved on April
24, 2012 by OMB in accordance with the PRA. The OMB Control Number
is 0938-1163. Expiration Date April 30, 2013. FRN 78 21955 through
21956, published April 12, 2013, solicits public comment on
additions and updates to the LTCH CARE Data Set. https://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRA-Listing-Items/CMS1252160.html.
---------------------------------------------------------------------------

The changes we described to the reporting periods for two measures
(NQF 0431 and NQF 0680) and the updated NQF-endorsed
pressure ulcer measure (NQF 0678) are not for new measures. We
do not believe that these changes will result in any additional
reporting burden on LTCHs.
In section IX.C.8.b. of the preamble of this final rule, we are
finalizing our proposal to add three additional measures for use in the
LTCHQR Program for the FY 2017 payment determination and subsequent
years. These measures are: (1) National Healthcare Safety Network
(NHSN) Facility-Wide Inpatient Hospital-Onset Methicillin-Resistant
Staphylococcus Aureus (MRSA) Bacteremia Outcome Measure (NQF
1716); (2) National Healthcare Safety Network (NHSN) Facility-
Wide Inpatient Hospital-onset Clostridium Difficile Infection (CDI)
Outcome Measure (NQF 1717); and (3) All-Cause Unplanned
Readmission Measure for 30-Days Post Discharge from Long-Term Care
Hospitals.
For the FY 2017 payment determination, in addition to the CAUTI,
CLABSI, and Influenza Vaccination Coverage Among Healthcare Personnel
measures, we are finalizing our proposal that LTCHs would report
quality data related to the MRSA and CDI measures to the CDC's NHSN
data submission system (https://www.cdc.gov/nhsn/). The NHSN is a
secure, Internet-based healthcare associated infection tracking system
that is maintained and managed by CDC.
There are currently approximately 440 LTCHs in the United States
paid under the CMS LTCH PPS and, according to the CDC, as of May 15,
2013, over 413 of these LTCHs already submit CAUTI and CLABSI data to
the CDC's NHSN. We believe that any burden increase related to
complying with the LTCHQR Program requirements for submission of the
MRSA and CDI measures will be minimal for those LTCHs that are already
familiar with the NHSN submission process, for several reasons. First,
these LTCHs have already completed initial setup and have become
familiar with reporting data in the NHSN system due to the requirement
to report CAUTI and CLABSI measures beginning on October 1, 2012 for
the FY 2014 payment determination, and are continuing to report for CY
2013 for the FY 2015 payment determination. Second, due to their
participation in a wide range of mandatory reporting and quality
improvement programs, as of January 2013, there are approximately 42
LTCHs reporting MRSA measure data and approximately 46 LTCHs reporting
CDI measure data into the NHSN. Third, there has been no change in the
registration and training requirements for LTCHs that are already
acquainted with the NHSN. Therefore, we believe that most LTCHs should
be very comfortable using the NHSN for continuing with the reporting of
data for CAUTI and CLABSI measures for CY 2014 for the FY 2016 payment
determination and for submission of the finalized MRSA and CDI measures
for CY 2015 for the FY 2017 payment determination. Further, we believe
that by the time data collection and reporting for NQF 0431
begin for the FY 2016 payment determination (October 1, 2014 or when
vaccine becomes available for the 2014-2015 influenza vaccination
season), a vast majority of LTCHs should be very comfortable using the
NHSN.
The most significant burden associated with these quality measures
is the time and effort associated with collecting and submitting the
data on

[[Page 50961]]

the CAUTI, CLABSI, Influenza Vaccination Coverage among Healthcare
Personnel, MRSA, and CDI measures for LTCHs that are not currently
reporting any measures data into the CDC's NHSN system.
There are currently approximately 440 LTCHs in the United States
paid under the CMS LTCH PPS. We estimate that each LTCH will execute
approximately 12 NHSN submissions (6 CAUTI events and 6 CLABSI events)
per month (144 events per LTCH annually). This equates to a total of
approximately 63,360 submissions of HAI data to NHSN from all LTCHs per
year. We estimate that each NHSN assessment will take approximately 25
minutes to complete. This time estimate consists of 10 minutes of
clinical time (for example, nursing time) needed to collect the
clinical data and 15 minutes of clerical time necessary to enter the
data into the NHSN database. Based on this estimate, we expect each
LTCH will expend 300 minutes (5 hours) per month and 60 hours per year
reporting to NHSN.
Therefore, the total estimated annual hourly burden on all LTCHs
for reporting CAUTI and CLABSI events to NHSN is 26,400 hours. The
estimated cost per submission is estimated at $12.07. These costs are
estimated using an hourly wage for a registered nurse of $41.59 and a
medical billing clerk/data entry person of $15.59 (U.S. Bureau of Labor
Statistics data) (please note that we have corrected the hourly rate of
a medical billing clerk/data entry person from $20.57, which was in our
proposed rule, to a correct hourly rate of $15.59). Therefore, we
estimate that the annual cost per each LTCH will be $1,559 and the
total yearly cost to all LTCHs for the submission of CAUTI and CLABSI
data to NHSN will be $686,136.\203\ While these requirements are
subject to the Paperwork Reduction Act, we believe the associated
burden hours are accounted for in the information collection request
currently approved under OMB control number 0920-0666.
---------------------------------------------------------------------------

\203\ Nursing Time--24 hours @ $41.59 per hour = $998.16;
$998.16 x 440 LTCHs = approximately $439,190; Administrative Time--
36 hours @ $15.59 per hour = $561.24; $561.24 x 440 LTCHs =
approximately $246,946; TOTAL = $439,190 + $246,946 = $686,136.
---------------------------------------------------------------------------

We estimate that each LTCH will execute only one NHSN submission
per year (total number of vaccinations) as required by the CDC for the
NHSN-reported Influenza Vaccination Coverage among Healthcare Personnel
measure (NQF 0431). This equates to a total of approximately
440 submissions of vaccination data to NHSN from all LTCHs per year. We
estimate that each NHSN submission will take approximately 15 minutes
to complete. This time estimate consists of 15 minutes of clerical time
necessary to enter the data into the NHSN database. Based on this
estimate, we expect each LTCH will expend 15 minutes per year reporting
to NHSN. Therefore, the total estimated annual burden on all LTCHs in
the United States for reporting this measure to NHSN is 110 hours. The
estimated cost per submission is estimated at $3.90. The cost is
estimated using an hourly wage for a medical billing clerk/data entry
person of $15.59 (U.S. Bureau of Labor and Statistics data). We
estimate the annual cost per each LTCH will be $3.90 and the total
yearly cost to all LTCHs for the submission of the Influenza Coverage
among Healthcare Personnel measure (NQF 0431) will be $1,716.
Similar to the submission of CAUTI and CLABSI data, we estimate
that each LTCH will execute approximately 12 NHSN submissions (6 MRSA
events and 6 C. Difficile events) per month (144 events per LTCH
annually). This equates to a total of approximately 63,648 submissions
of HAI data to NHSN from all LTCHs per year. We estimate that each NHSN
assessment will take approximately 25 minutes to complete. This time
estimate consists of 10 minutes of clinical time (for example, nursing
time) needed to collect the clinical data and 15 minutes of clerical
time necessary to enter the data into the NHSN. Based on this estimate,
we expect each LTCH will expend 300 minutes (5 hours) per month and 60
hours per year reporting to NHSN.
The total estimated annual hourly burden on all LTCHs in the United
States for reporting MRSA and CDI data to NHSN is 26,400 hours. The
estimated cost per submission is estimated at $12.07. These costs are
estimated using an hourly wage for a registered nurse of $41.59 and a
medical billing clerk/data entry person of $15.59 (U.S. Bureau of Labor
Statistics data). Therefore, we estimate that the annual cost per each
LTCH will be $1,739 and the total yearly cost to all LTCHs for the
submission of MRSA and CDI data to NHSN will be $686,136.\204\
---------------------------------------------------------------------------

\204\ Nursing Time--24 hours @ $41.59 per hour = $998.16;
$998.16 x 440 LTCHs = approximately $439,190; Administrative Time--
36 hours @ $15.59 per hour = $561.24; $561.24 x 440 LTCHs =
approximately $246,946; TOTAL = $439,190 + $246,946 = $686,136.
---------------------------------------------------------------------------

We estimate that the total annual cost to all LTCHs for submission
of NHSN data will be $1,373,988 or $3,123 per LTCH annually.
We are finalizing our proposal to adopt the updated measure NQF
0678 Percent of Residents or Patients with Pressure Ulcers
that are New or Worsened (Short-Stay) for the FY 2015 payment
determination and subsequent years. This change would not alter the
data collection, data submission, or burden finalized in the FY 2013
IPPS/LTCH PPS final rule and PRA package for LTCH CARE Data Set
(Version 1.01) \205\ since there have been no changes to the data
elements, data submission system (QIES ASAP) and technical submission
specifications for the LTCH CARE Data Set used for this measure for CY
2013 and for the first quarter of CY 2014. The only difference between
the previously finalized measure and the measure finalized in this
final rule is the change in name and NQF-endorsed expansion of this
measure to the LTCH (and IRF) patient populations in addition to
Skilled Nursing Facility/Nursing Home Short-Stay residents. Therefore,
the burden on LTCHs for reporting of data for NQF 0678 remains
unchanged.\206\
---------------------------------------------------------------------------

\205\ The LTCH CARE Data Set Version 1.01 was approved on April
24, 2012 by OMB in accordance with the PRA. The OMB Control Number
is 0938-1163. Expiration Date April 30, 2013. FRN 78 21955 through
21956, published April 12, 2013, solicits public comment on
additions and updates to the LTCH CARE Data Set. https://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRA-Listing-Items/CMS1252160.html.
\206\ The LTCH CARE Data Set Version 1.01 was approved on April
24, 2012 by OMB in accordance with the PRA. The OMB Control Number
is 0938-1163. Expiration Date April 30, 2013. FRN 78 21955 through
21956, published April 12, 2013, solicits public comment on
additions and updates to the LTCH CARE Data Set. https://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRA-Listing-Items/CMS1252160.html.
---------------------------------------------------------------------------

In order to allow time and opportunity for LTCHs and vendors to
participate in CMS-sponsored training activities pertaining to the
implementation of the LTCH CARE Data Set (Version 2.01), as well as
time to plan for and incorporate changes into their data collection and
entry systems, we are finalizing our proposal to revise the previously
finalized start date for Percent of Residents or Patients Who Were
Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short-
Stay) (NQF 0680) of January 1, 2014 to April 1, 2014. For CY
2014, data collection will continue through December 31, 2014. We are
finalizing our proposal that data for admissions and discharges for an
LTCH during April 1, 2014 through December 31, 2014 will be used for
the FY 2016 payment determination. Three items are included on the LTCH
CARE Data Set Version 2.01 for this measure. For purposes unrelated to
the measures we are finalizing in this rule, we have also

[[Page 50962]]

removed several items from the administrative, functional status, and
skin conditions sections of the LTCH CARE Data Set Version 1.01 to
create the LTCH CARE Data Set Version 2.01,\207\ so we anticipate that
increase in burden due to the addition of items for NQF 0680
will be minimal. Later in 2013, we will release the final data
submission specifications and updated LTCHQR Program Manual for the
LTCH CARE Data Set (Version 2.01) containing items related to NQF
0680.
---------------------------------------------------------------------------

\207\ The LTCH CARE Data Set Version 2.01 was approved on June
10, 2013 by OMB in accordance with the PRA. The OMB Control Number
is 0938-1163. Expiration Date June 30, 2016. https://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRA-Listing-Items/CMS1252160.html.
---------------------------------------------------------------------------

As previously mentioned, there are currently approximately 440
LTCHs paid under the CMS LTCH PPS. We estimate that the total number of
LTCH discharges per year is 202,050 \208\ (134,700 Medicare
beneficiaries and 67,350 non-Medicare beneficiaries). Therefore, the
total number of discharges estimated for each LTCH is 457 annually and
38 monthly. We estimate that the total number of assessment records
submitted using the LTCH CARE Data Sets (LCDS) by all LTCHs per year is
404,100 which equates to a total of 914 total LCDS submissions for each
LTCH on an annual basis. The average number of LCDS submitted by each
LTCH on a monthly basis is 76.
---------------------------------------------------------------------------

\208\ MedPAC Report to Congress, March 2012, page 261. Available
at: https://www.medpac.gov/documents/Mar12_EntireReport.pdf.
---------------------------------------------------------------------------

We estimate that the total time required to complete an LCDS per
patient to be approximately 32 minutes,\209\ which includes 11 minutes
for the admission assessment, 11 minutes for the discharge assessment
and 10 minutes for data entry. Therefore, each LTCH will spend
approximately 1,216 minutes per month, or approximately 20.27 hours per
month submitting the LCDS. We expect each LTCH to spend approximately
243 hours per year engaged in data collection and submission of the
LCDS. Therefore, the total estimated burden to all LTCHs for reporting
the LCDS is 106,920 hours per year.\210\
---------------------------------------------------------------------------

\209\ This time estimate includes the time required to complete
both the required and voluntary questions on the LTCH CARE Data Set.
\210\ 32 minutes/form x 38 forms per LTCH per month = 1,216
minutes per LTCH per month; 1,216 minutes/60 minutes per hour =
20.27 hours per LTCH per month; 20.27 hours per LTCH per month x 12
months/year = 243 hours per each LTCH/year; 243 hours/each LTCH per
year x 440 LTCHs in U.S. = 106,920 hrs/all LTCHs/year.
---------------------------------------------------------------------------

We estimate that the total annual cost to each LTCH will be
approximately $6,751 to submit the LCDS. That estimate is based on the
hourly wage for a registered nurse to complete the LCDS at $41.59 per
hour and for an administrative assistant to transmit the LCDS at
$15.59.\211\ As previously stated, we estimate a total of 457 annual
discharges (914 LCDS submissions) for each LTCH on an annual basis and
that it will take 22 minutes total (11 minutes each) to complete the
admissions and discharge assessments per patient. That is, 10,054
minutes of time, or 167.57 hours, that a registered nurse in each LTCH
will spend completing the LCDS annually. For a registered nurse to
spend 167.57 hours per year completing the LCSDs at a rate of $41.59
per hour, the associated cost for each LTCH will be approximately
$6,969 and, for approximately 440 LTCHs, a total of $3,066,360 nursing
wages per year.
---------------------------------------------------------------------------

\211\ The mean hourly wage of $15.59 per hour for a Medical
Secretary was obtained from the U.S. Bureau of Labor Statistics. We
refer readers to: https://www.bls.gov/oes/current/oes436013.htm.
---------------------------------------------------------------------------

Similarly, we previously estimated that it will take approximately
10 minutes per patient for data entry by an administrative assistant,
resulting in approximately 4,570 minutes that each LTCH will spend
transmitting the LCDS per year, or 76 administrative hours per year. At
an hourly rate of $15.59, that equates to approximately $1,154 for each
LTCH and $507,954 for all LTCHs per year. Therefore, we estimate that
the total annualized cost to each LTCH will be approximately $6,751 and
$2,971,250 to all LTCHs.
We believe the associated burden hours are accounted for in the
information collection request approved on June 10, 2013 under OMB
control number 0938-1163.
We also are finalizing our proposal to add the All-Cause Unplanned
Readmission Measure for 30 days Post Discharge from Long-Term Care
Hospitals measure which we do not believe would increase LTCH burden
because it is a Medicare FFS claims-based measure and does not require
reporting of data other than submission of Medicare FFS claims data
(LTCHs submit these data to CMS for payment purposes).
In section IX.C.8.c. of the preamble of this final rule, we are
finalizing our proposal to add one additional quality measure
(application of the Percent of Residents Experiencing One or More Falls
with Major Injury (Long Stay) (NQF 0674)) for use in the
LTCHQR Program for the FY 2018 payment determination and subsequent
years. We are finalizing our proposal that LTCHs report data for an
application of the Percent of Residents Experiencing One or More Falls
with Major Injury (Long Stay) (NQF 0674) measure beginning
January 1, 2016. It is our intent to foster alignment between measures
by expanding preexisting data collection and submission methods to
reduce the administrative burden related to data collection and
submission. This measure will be collected using the LTCH CARE Data
Set. The items used for this measure will be based on the two items
from the Minimum Data Set (MDS) 3.0, version 1.13.0 (1/17/13): items
J1800 (Any Falls Since Admission/Entry or Reentry or Prior Assessment)
and J1900A., B. and C. (Number of Falls (A. with no injury, B. with
injury (except major), C. with Major injury)) since Admission/Entry or
Reentry or Prior Assessment), available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/NHQIMDS30TechnicalInformation.html. The
calculation of the application of the measure will be based on item
J1900C, Number of Falls with major injury, since admission/entry or
reentry or prior assessment. The specifications and data elements for
NQF 0674 are available in the MDS 3.0 Quality Measures User's
Manual Version 6.0 available on our Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/MDS30RAIManual.html.
We believe that the initial registration for use of the LTCH CARE
Data Set, along with any necessary training, occurred for most LTCHs
prior to the reporting of the Pressure Ulcer measure, which began on
October 1, 2012. Therefore, we believe the burden will be minimal
related to the addition of this quality measure into the LTCH CARE Data
Set.
Therefore, we do not expect the addition of the Application of NQF
0674 Percent of Residents Experiencing One or More Falls with
Major Injury (Long Stay) measure to increase the burden substantially.
Further, LTCHs will have been reporting data for the LTCHQR Program
using the LTCH CARE Data Set for more than 2 years by the time the data
collection begins for this measure.
At this time, we have not completed the revision of the information
collection instrument (LTCH CARE Data Set) that LTCHs would be required
to submit to report the finalized measure (NQF 0674) for the
FY 2018 payment determination and subsequent years. Because the forms
are still under

[[Page 50963]]

development, we cannot make a complete burden estimate at this time for
the inclusion of the Application of Percent of Residents Experiencing
One or More Falls with Major Injury (Long Stay) measure in the LTCH
CARE Data Set. Once the forms are available, we will prepare and submit
the required information collection request, which will fully set forth
the anticipated burden to LTCHs as a result of the new data items that
must be added to the LTCH CARE Data Set.
Comment: One commenter noted that the CARE Tool 2.0 must be
significantly enhanced to accommodate collection of data on the
proposed quality measures.
Response: In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51753
through 51756), we finalized use of the LTCH CARE Data Set for
collection of data on an application of NQF 0678, Percent of
Residents or Patients With Pressure Ulcers That Are New or Worsened
(Short-Stay). In the FY2013 IPPS/LTCH PPS final rule (77 FR 53624
through 53627), we finalized use of the LTCH CARE Data Set to collect
data for NQF 0680, Percentage of Residents or Patients Who
Were Assessed and Appropriately Given the Seasonal Influenza Vaccine
(Short-Stay). To accommodate the collection of data on NQF
0680, we revised the LTCH CARE Data Set (Version 1.01) to
include additional items. The revised LTCH CARE Data Set (Version 2.01)
was approved by the Office of Management and Budget on June 10, 2013
(OMB Control Number 0938-1163).
To accommodate the collection of data on NQF 0674, the
LTCH CARE Data Set (Version 2.01) will be revised to include items from
other, standardized and clinically established data sets, including but
not limited to the MDS 3.0 and CARE tool. With each revision, we will
solicit public comment on the proposed LTCH CARE Data Set through the
PRA approval process, which provides for the publication of two PRA
notices in the Federal Register. The first notice is followed by a 60-
day comment period. The second notice is followed by a 30-day comment
period.
Comment: As noted in section IX.C.2. of the preamble of this final
rule, several commenters expressed concern regarding the pace with
which items are being added to the LTCH CARE Data Set, and one noted
that this may require LTCHs to shift resources from prevention
activities to reporting activities. One commenter, in expressing
concern with the amount of time provided for adopting the proposed MRSA
and CDI measures, suggested that CMS look carefully at the growing
burden that the LTCHQR Program is generating, suggesting that CMS
significantly underestimates the burden of these measures, particularly
for smaller LTCHs with lower average daily census.
Response: By building upon preexisting resources for data
collection and submission, we intend to foster alignment of LTCHQR
Program measures and measures in other quality reporting programs. This
should help to reduce the administrative burden related to data
collection and submission. We anticipate that the initial setup and
acclimation to the data collection by the LTCH CARE Data Set will have
already occurred with the adoption of the Pressure Ulcer measure for
the LTCHQR Program for the FY 2014 payment determination as well as the
Patient Influenza Vaccination measure for the LTCHQR Program for the
FY2015 payment determination. Therefore, we believe the transition to
reporting one additional measure via the LTCH CARE Data Set may be less
burdensome.
With respect to the burden placed on LTCHs by quality measure
reporting, a burden estimate is required by NQF and carefully
considered during their endorsement process. We recognize that the
LTCHQR Program carries a certain level of burden, but also feel that
this level of burden is justified in light of the benefits to patients
in terms of patient safety, as well as by the health care system in
terms of efficiency and cost. We also took into account the impact of
data collection and submission on LTCH staff by adopting a policy of
phased quality measure implementation and reporting. We have gradually
introduced new measures and designed collection and submission
requirements that are meant to provide sufficient time for all
Medicare-certified LTCHs to adjust to and comply with LTCHQR Program
requirements.
Comment: Several commenters expressed concern over the burden
estimate included in the PRA package for the LTCH CARE Data Set
(Version 2.01), which represents (approximately) a 300 percent increase
over the burden estimate for the LTCH CARE Data Set (Version 1.01).
Response: On May 15, 2013, the LTCHQR Program completed the
submission timeframe for the first quarter of measure reporting. As a
result, we have become more familiar with the burden of this program
and have now received feedback from LTCHs about the time burden
associated with the completion of the LTCH CARE Data Set. We also have
considered feedback from LTCHs in the form of public comments to the FY
2014 IPPS/LTCH PPS proposed rule, questions during Open Door forums,
and LTCH helpdesk inquiries. LTCHs have stated that we had
underestimated the amount of time that is required of the LTCH staff to
complete the LTCH CARE Data Set on each LTCH patient.
In response to the feedback received, we have significantly revised
our burden estimates. For example, in our previous PRA package burden
estimate we estimated burden based solely on LTCH yearly discharges of
Medicare beneficiaries. The revised burden estimate includes yearly
LTCH discharges of both Medicare and non-Medicare patients, because we
require data submission on all payers, and not solely on Medicare
patients. In addition, the original burden calculation only took into
account one assessment per patient (admission), while the revised
estimate includes two assessment records per patient (admission and
discharge).
While the burden calculation for this PRA submission has increased
significantly compared to our original calculation, we believe that the
calculation now more accurately reflects the burden associated with
implementing collection of the quality measures. We provided the public
with an opportunity to comment on the burden estimate and the LTCH CARE
Data Set Version 2.01 as part of the PRA package. The PRA package for
the LTCH CARE Data Set (Version 2.01) has been approved by the Office
of Management and Budget. For a complete discussion on the current LTCH
CARE Data Set Version 2.01 burden estimate, we refer readers to the PRA
package approved by OMB on June 10, 2013.\212\
---------------------------------------------------------------------------

\212\ The LTCH CARE Data Set Version 2.01 was approved on June
10, 2013 by OMB in accordance with the PRA. The OMB Control Number
is 0938-1163. Expiration Date June 30, 2016.
---------------------------------------------------------------------------

Comment: Several commenters believed that the amount of information
that LTCHs are being required to collect exceeds the minimum amount of
reporting necessary to accomplish the quality improvement purpose. The
commenters believed that several measures require the disclosure of
identifiable information that is not reasonably related to the LTCHQR
Program.
Response: LTCHs will only be required to complete a subset of the
data elements that comprise the LTCH CARE Data Set. For the purposes of
this discussion, we have separated the items which make up the LTCH
CARE Data Set into three categories and have deemed them to be either
required or

[[Page 50964]]

voluntary. These elements are: (1) A limited set of administrative
items that are necessary in order to identify each LTCH and properly
attribute patients to it for purposes of calculating the measure rate;
(2) the data elements necessary to populate the measures being
collected, consistent with the NQF-endorsed specifications for that
measure; (3) the data elements necessary to enable us to validate that
the measure's data elements were accurately reported. All other data
elements on the LTCH CARE Data Set can be completed on a voluntary
basis, but will have no impact on the measure rate calculations or on
our determination of whether the LTCH has met the reporting
requirements under the LTCHQR Program. We will post on the CMS Web site
a detailed matrix that identifies which data elements will be required
and which will be voluntary. This matrix will also be incorporated into
the final LTCHQR Program Manual, which will be posted on CMS LTCHQR
Program Web site and available for download at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/.
Comment: Several commenters questioned the requirement for LTCHs to
collect data on all patients, not just Medicare patients, and argue
that the improvement in the quality of care provided to Medicare
patients does not require collection of data on non-Medicare patients.
The commenters propose that if CMS chooses to continue collection of
data on non-Medicare patients, this data should be de-identified.
Response: With respect to the inclusion of non-Medicare
beneficiaries in the LTCHQR Program, we believe delivery of high-
quality care to all patients in the LTCH setting is imperative.
Collecting such quality data on all patients in the LTCH setting
supports our goal to ensure high quality care for Medicare
beneficiaries. It provides us with the data to inform the public with
the most robust and accurate reflection of quality of care and patient
outcomes in the LTCH setting. Therefore, for non-claims-based measures,
in order to facilitate and ensure that high-quality care is delivered
to Medicare beneficiaries in the LTCH setting, we require that quality
data be collected on all LTCH patients, regardless of payer. Since its
implementation date (October 1, 2012), our policy for the LTCHQR
Program requires data collection and submission requirements on all
patients, regardless of payer and we did not propose any changes to
this policy in the FY 2014 proposed rule. We appreciate the suggestion
that data on non-Medicare patients be de-identified, and we will
consider this view for future rulemaking and program development.
Comment: One commenter encouraged CMS to invest in enhanced
information systems for LTCHs, to enable less burdensome data
collection.
Response: We are continually working to address policy and funding
issues related to safer care, better outcomes, and the efficient use of
resources.
10. ICRs for the Inpatient Psychiatric Facilities Quality Reporting
(IPFQR) Program
In section VIII.F. of the preamble of the FY 2013 IPPS/LTCH PPS
final rule, we discussed the implementation of the Inpatient
Psychiatric Facilities Quality Reporting (IPFQR) Program pursuant to
the Secretary's authority under section 1886(s)(4) of the Act. We
previously adopted six measures for the FY 2014 IPFQR Program payment
determination and subsequent years. In section IX.D. of the preamble of
this final rule, we are finalizing our policies that, for the FY 2016
payment determination and subsequent years, IPFs must submit aggregate
data on one additional measure (SUB-1: Alcohol Use Screening), for a
total of seven measures. We note that, at this time, we have decided
not to finalize SUB-4. Also, although we proposed to use chart-
abstraction, we are finalizing claims-based data collection for the
Follow-Up After Hospitalization for Mental Illness (FUH) measure, which
reduces the burden on IPFs. In addition, we are finalizing a request
for voluntary information.
To reduce the burden on IPFs, we are not making changes to the
administrative, reporting or submission requirements for the existing
six measures previously finalized in last year's final rule (77 FR
53654 through 53657). However, there will be new reporting and
submission requirements associated with the new SUB-1 measure and the
request for voluntary information for the FY 2016 payment determination
and subsequent years.
We believe that the new measures will help improve the quality of
care provided by IPFs as we work to make quality data more transparent
to the public. As required by the Act, we will share the information
collected under the IPFQR Program with the public. These data will be
displayed on the CMS Web site.
We have estimated the burden associated with IPFs complying with
the requirements of the IPFQR Program. Because claims-based measures
can be calculated based on data that are already reported to the
Medicare program for payment purposes, we believe no additional
information collection will be required from the IPFs for the new FUH
measure. In our burden estimate calculation, we have included the time
that would be spent for: (1) The submission of voluntary information;
(2) chart abstraction; and (3) training personnel on the collection of
chart-abstracted data, aggregation of the data, and for protocols to
submit the aggregate-level data through QualityNet. We estimate that
the annual hourly burden on each IPF for the collection, submission,
and training of personnel for submitting all quality measures,
including 30 minutes needed for the voluntary submission, is
approximately 761 hours in a year for each IPF. Therefore, the average
hourly burden on each IPF is approximately 63 hours per month. At this
time, we have no way to estimate how many IPFs will participate in the
program. Therefore, we cannot estimate the aggregate impact.

List of Subjects

42 CFR Part 412

Administrative practice and procedure, Health facilities, Medicare,
Puerto Rico, Reporting and recordkeeping requirements.

42 CFR Part 413

Health facilities, Kidney diseases, Medicare, Puerto Rico,
Reporting and recordkeeping requirements.

42 CFR Part 414

Administrative practice and procedure, Health facilities, Health
professions, Kidney diseases, Medicare, Reporting and recordkeeping
requirements.

42 CFR Part 419

Hospitals, Medicare, Reporting and recordkeeping requirements.

42 CFR Part 424

Emergency medical services, Health facilities, Health professions,
Medicare.

42 CFR Part 482

Grant program--health, Hospitals, Medicaid, Medicare, Reporting and
recordkeeping requirements.

42 CFR Part 485

Grant programs--health, Health facilities, Medicaid, Medicare,
Reporting and recordkeeping requirements.

42 CFR Part 489

Health facilities, Medicare, Reporting and recordkeeping
requirements.

[[Page 50965]]

For the reasons stated in the preamble of this final rule, the
Centers for Medicare & Medicaid Services is amending 42 CFR Chapter IV
as follows:

PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL
SERVICES

0
1. The authority citation for Part 412 continues to read as follows:

Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh), and sec. 124 of Public Law 106-113 (113
Stat. 1501A-332).

0
2. A new Sec. 412.3 is added to read as follows:

Sec. 412.3 Admissions.

(a) For purposes of payment under Medicare Part A, an individual is
considered an inpatient of a hospital, including a critical access
hospital, if formally admitted as an inpatient pursuant to an order for
inpatient admission by a physician or other qualified practitioner in
accordance with this section and Sec. Sec. 482.24(c), 482.12(c), and
485.638(a)(4)(iii) of this chapter for a critical access hospital. This
physician order must be present in the medical record and be supported
by the physician admission and progress notes, in order for the
hospital to be paid for hospital inpatient services under Medicare Part
A. In addition to these physician orders, inpatient rehabilitation
facilities also must adhere to the admission requirements specified in
Sec. 412.622 of this chapter.
(b) The order must be furnished by a qualified and licensed
practitioner who has admitting privileges at the hospital as permitted
by State law, and who is knowledgeable about the patient's hospital
course, medical plan of care, and current condition. The practitioner
may not delegate the decision (order) to another individual who is not
authorized by the State to admit patients, or has not been granted
admitting privileges applicable to that patient by the hospital's
medical staff.
(c) The physician order also constitutes a required component of
physician certification of the medical necessity of hospital inpatient
services under subpart B of Part 424 of this chapter.
(d) The physician order must be furnished at or before the time of
the inpatient admission.
(e)(1) Except as specified in paragraph (e)(2) of this section,
when a patient enters a hospital for a surgical procedure not specified
by Medicare as inpatient only under Sec. 419.22(n) of this chapter, a
diagnostic test, or any other treatment, and the physician expects to
keep the patient in the hospital for only a limited period of time that
does not cross 2 midnights, the services are generally inappropriate
for inpatient admission and inpatient payment under Medicare Part A,
regardless of the hour that the patient came to the hospital or whether
the patient used a bed. Surgical procedures, diagnostic tests, and
other treatment are generally appropriate for inpatient admission and
inpatient hospital payment under Medicare Part A when the physician
expects the patient to require a stay that crosses at least 2
midnights. The expectation of the physician should be based on such
complex medical factors as patient history and comorbidities, the
severity of signs and symptoms, current medical needs, and the risk of
an adverse event. The factors that lead to a particular clinical
expectation must be documented in the medical record in order to be
granted consideration.
(2) If an unforeseen circumstance, such as a beneficiary's death or
transfer, results in a shorter beneficiary stay than the physician's
expectation of at least 2 midnights, the patient may be considered to
be appropriately treated on an inpatient basis, and hospital inpatient
payment may be made under Medicare Part A.

0
3. Section 412.46 is revised to read as follows:

Sec. 412.46 Medical review requirements.

(a) Physician acknowledgement. (1) Basis. Because payment under the
prospective payment system is based in part on each patient's principal
and secondary diagnoses and major procedures performed, as evidenced by
the physician's entries in the patient's medical record, physicians
must complete an acknowledgement statement to this effect.
(2) Content of physician acknowledgement statement. When a claim is
submitted, the hospital must have on file a signed and dated
acknowledgement from the attending physician that the physician has
received the following notice:
Notice to Physicians: Medicare payment to hospitals is based in
part on each patient's principal and secondary diagnoses and the major
procedures performed on the patient, as attested to by the patient's
attending physician by virtue of his or her signature in the medical
record. Anyone who misrepresents, falsifies, or conceals essential
information required for payment of Federal funds, may be subject to
fine, imprisonment, or civil penalty under applicable Federal laws.
(3) Completion of acknowledgement. The acknowledgement must be
completed by the physician at the time that the physician is granted
admitting privileges at the hospital, or before or at the time the
physician admits his or her first patient. Existing acknowledgements
signed by physicians already on staff remain in effect as long as the
physician has admitting privileges at the hospital.
(b) Physician's order and certification regarding medical
necessity. No presumptive weight shall be assigned to the physician's
order under Sec. 412.3 or the physician's certification under Subpart
B of Part 424 of the chapter in determining the medical necessity of
inpatient hospital services under section 1862(a)(1) of the Act. A
physician's order or certification will be evaluated in the context of
the evidence in the medical record.

0
4. Section 412.64 is amended--
0
a. Adding a new paragraph (d)(1)(v).
0
b. In the introductory text of paragraph (h)(4), removing the date
``October 1, 2013'' and adding in its place the date ``October 1,
2014''.
0
c. In paragraph (h)(4)(vi), removing the date ``October 1, 2013'' and
adding in its place the date ``October 1, 2014''.
The addition reads as follows:

Sec. 412.64 Federal rates for inpatient operating costs for Federal
fiscal year 2005 and subsequent fiscal years.

* * * * *
(d) * * *
(1) * * *
(v) For fiscal year 2014, the percentage increase in the market
basket index less a multifactor productivity adjustment (as determined
by CMS) and less 0.3 percentage point for prospective payment hospitals
(as defined in Sec. 413.40(a) of this chapter) for hospitals in all
areas.
* * * * *

Sec. 412.101 [Amended]

0
5. Section 412.101 is amended by--
0
a. In paragraph (b)(2)(i), removing the term ``FY 2013'' and adding in
its place the term ``FY 2014.''
0
b. In paragraph (b)(2)(ii), removing the phrase ``For FY 2011 and FY
2012,'' and adding in its place the phrase ``For FY 2011, FY 2012, and
FY 2013,''.
0
c. In paragraph (c)(1), removing the term ``FY 2013'' and adding in its
place the term ``FY 2014.''
0
d. In paragraph (c)(2) introductory text, removing the phrase ``For FY
2011 and FY 2012,'' and adding in its place the phrase ``For FY 2011,
FY 2012, and FY 2013,''.
0
e. In paragraph (d), removing the term ``FY 2013'' and adding in its
place the term ``FY 2014.''

[[Page 50966]]

0
6. Section 412.106 is amended by adding new paragraphs (f), (g), and
(h) to read as follows:

Sec. 412.106 Special treatment: Hospitals that serve a
disproportionate share of low-income patients.

* * * * *
(f) Empirically justified Medicare DSH payments. Effective for
discharges on or after October 1, 2013, the amounts otherwise payable
to a hospital under paragraph (d) of this section are reduced by 75
percent.
(g) Additional payment for uncompensated care. (1) Payment rules.
Hospitals that qualify for payments under this section for fiscal year
2014 and each subsequent year, will receive an additional amount equal
to the product of the following three factors:
(i) Factor 1. For FY 2014 and each subsequent fiscal year, a factor
equal to the difference between:
(A) The most recently available estimates, as calculated by CMS'
Office of the Actuary, of the aggregate amount of payments that would
be made to such hospitals under paragraphs (a) through (e) of this
section if paragraph (f) of this section did not apply for the fiscal
year; and
(B) The most recently available estimates, as calculated by CMS'
Office of the Actuary, of the aggregate amount of payments that are
made to such hospitals pursuant to paragraph (f) of this section for
the fiscal year.
(ii) Factor 2. For each of fiscal years 2014, 2015, 2016, and 2017,
a factor equal to 1 minus the percent change in the percent of
individuals under the age of 65 who are uninsured (and subtracting from
the factor 0.1 percentage point for fiscal year 2014 and 0.2 percentage
point for each of fiscal years 2015, 2016, and 2017), as determined by
comparing:
(A) 18 percent, the percent of such individuals who are uninsured
in 2013, based on the March 20, 2010 estimate of the ``Insured Share of
the Nonelderly Population Including All Residents'' by the
Congressional Budget Office; and
(B) The percent of such individuals who are uninsured in the
applicable fiscal year, based on the most recent estimate of the
``Insured Share of the Nonelderly Population Including All Residents''
by the Congressional Budget Office available at the time of development
of the annual final rule for the hospital inpatient prospective payment
system.
(iii) Factor 3. A factor equal to the percent, for each inpatient
prospective payment system hospital, that represents the quotient of:
(A) The amount of uncompensated care for such hospital as estimated
by CMS.
(B) The aggregate amount of uncompensated care as estimated by CMS
for all hospitals that are estimated to receive a payment under this
section.
(C) For fiscal year 2014, CMS will base its estimates of the amount
of hospital uncompensated care on the most recent available data on
utilization for Medicaid and Medicare SSI patients, as determined by
CMS in accordance with paragraphs (b)(2)(i) and (b)(4) of this section.
(iv) The final values for each of the three factors are determined
for each fiscal year at the time of development of the annual final
rule for the hospital inpatient prospective payment system, and these
values are used for both interim and final payment determinations.
(2) Preclusion of administrative and judicial review. There is no
administrative or judicial review under sections 1869 or 1878 of the
Act, or otherwise, of the following:
(i) Any estimate of the Secretary for the purpose of determining
the factors in paragraph (g)(1) of this section; and
(ii) Any period selected by the Secretary for such purposes.
(h) Manner and timing of payments. (1) Interim payments are made
during the payment year to each hospital that is estimated to be
eligible for payments under this section at the time of the annual
final rule for the hospital inpatient prospective payment system,
subject to the final determination of eligibility at the time of cost
report settlement for each hospital.
(2) Final payment determinations are made at the time of cost
report settlement, based on the final determination of each hospital's
eligibility for payment under this section.

Sec. 412.108 [Amended]

0
7. Section 412.108 is amended by--
0
a. In paragraph (a)(1) introductory text, removing the phrase ``before
October 1, 2012'' and adding in its place the phrase ``before October
1, 2013''.
0
b. In paragraph (c)(2)(iii) introductory text, removing the phrase
``before October 1, 2012'' and adding in its place the phrase ``before
October 1, 2013''.

0
8. Section 412.140 is amended by--
0
a. Revising the section heading.
0
b. Revising paragraph (a)(3) introductory text.
0
c. Revising paragraph (b).
0
d. Adding a new paragraph (f).
The revisions and addition read as follows:

Sec. 412.140 Participation, data submission, and validation
requirements under the Hospital Inpatient Quality Reporting (IQR)
Program.

(a) * * *
(3) Submit a completed Notice of Participation Form to CMS if the
hospital is participating in the program for the first time, has
previously withdrawn from the program and would like to participate
again, or has received a new CMS Certification Number (CCN).
* * * * *
(b) Withdrawal from the Hospital IQR Program. CMS will accept
Hospital IQR Program withdrawal forms from hospitals on or before--
(1) Prior to the FY 2016 payment determination, August 15 of the
fiscal year preceding the fiscal year for which a Hospital IQR
determination will be made.
(2) Beginning with the FY 2016 payment determination, May 15 of the
fiscal year preceding the fiscal year for which a Hospital IQR payment
determination will be made.
* * * * *
(f) Patient experience of care data (HCAHPS survey). HCAHPS is the
Hospital Consumer Assessment of Healthcare Providers and Systems survey
that measures patient experience of care after a recent hospital stay.
(1) Approved HCAHPS survey vendors and self-administering hospitals
must fully comply with all HCAHPS oversight activities, including
allowing CMS and its HCAHPS Project Team to perform site visits at the
hospitals' and survey vendors' company locations.
(2) CMS approves an application for an entity to administer the
HCAHPS survey as an approved HCAHPS survey vendor on behalf of one or
more hospitals when an applicant has met the Minimum Survey
Requirements and Rules of Participation that can be found on the
official HCAHPS On-Line Web site, and agree to comply with the current
survey administration protocols that can be found on the official
HCAHPS On-Line Web site. An entity must be an approved HCAHPS survey
vendor in order to administer and submit HCAHPS data to CMS on behalf
of one or more hospitals.

0
9. Section 412.150 is amended by adding a new paragraph (c) to read as
follows:

Sec. 412.150 Basis and scope of subpart.

* * * * *
(c) Section 1886(p) of the Act requires the Secretary to establish
an adjustment to hospital payments for hospital-acquired conditions, or
a Hospital-

[[Page 50967]]

Acquired Condition Reduction Program, under which payments to
applicable hospitals are adjusted to provide an incentive to reduce
hospital-acquired conditions, effective for discharges beginning on
October 1, 2014. The rules for determining the payment adjustment under
the Hospital-Acquired Condition Reduction Program are specified in
Sec. Sec. 412.170 and 412.172.

0
10. Section 412.152 is amended by revising the definition of ``Base
operating DRG payment amount'' to read as follows:

Sec. 412.152 Definitions for the Hospital Readmissions Reduction
Program.

* * * * *
Base operating DRG payment amount is the wage-adjusted DRG
operating payment plus any applicable new technology add-on payments
under subpart F of this part. This amount is determined without regard
to any payment adjustments under the Hospital Value-Based Purchasing
Program, as specified under Sec. 412.162. This amount does not include
any additional payments for indirect medical education under Sec.
412.105, the treatment of a disproportionate share of low-income
patients under Sec. 412.106, outliers under subpart F of this part,
and a low volume of discharges under Sec. 412.101. With respect to a
sole community hospital that receives payments under Sec. 412.92(d) or
a Medicare-dependent, small rural hospital that receives payments under
Sec. 412.108(c) for FY 2013, this amount also does not include the
difference between the hospital-specific payment rate and the Federal
payment rate determined under subpart D of this part. With respect to a
hospital that is paid under section 1814(b)(3) of the Act, this amount
is an amount equal to the wage adjusted DRG payment amount plus new
technology payments that would be paid to such hospitals, absent the
provisions of section 1814(b)(3) of the Act.
* * * * *

0
11. Section 412.154 is amended by revising paragraph (d)(2) to read as
follows:

Sec. 412.154 Payment adjustments under the Hospital Readmissions
Reduction Program.

* * * * *
(d) * * *
(2)(i) Maryland's annual report to the Secretary and request for
exemption from the Hospital Readmissions Reduction Program must be
resubmitted and reconsidered annually.
(ii) Beginning with the FY 2015 program year--
(A) The State must submit a preliminary report to CMS no later than
January 15 of each year for the Secretary to consider, through the
annual proposed rule, its exemption from the Hospital Readmissions
Reduction Program for the upcoming Federal fiscal year.
(B) The State must submit a final report to CMS no later than June
1 of each year for the Secretary to consider, through the annual final
rule, its exemption from the Hospital Readmissions Reduction Program in
the upcoming Federal fiscal year.
(C) The reports required under paragraphs (d)(2)(ii)(A) and
(d)(2)(ii)(B) of this section must include information as specified by
CMS.
* * * * *

0
12. Section 412.160 is amended by revising the definitions of
``Achievement threshold'' and ``Benchmark'' to read as follows:

Sec. 412.160 Definitions for the Hospital Value-Based Purchasing
(VBP) Program.

* * * * *
Achievement threshold (or achievement performance standard) means
the median (50th percentile) of hospital performance on a measure
during a baseline period with respect to a fiscal year, for Hospital
VBP Program measures other than the Medicare Spending per Beneficiary
measure, and the median (50th percentile) of hospital performance on a
measure during the performance period with respect to a fiscal year,
for the Medicare Spending per Beneficiary measure.
* * * * *
Benchmark means the arithmetic mean of the top decile of hospital
performance on a measure during the baseline period with respect to a
fiscal year, for Hospital VBP Program measures other than the Medicare
Spending per Beneficiary measure, and the arithmetic mean of the top
decile of hospital performance on a measure during the performance
period with respect to a fiscal year, for the Medicare Spending per
Beneficiary measure.
* * * * *

0
13. An undesignated center heading and new Sec. Sec. 412.170 and
412.172 are added under Subpart I to read as follows:

Payment Adjustments Under the Hospital-Acquired Condition Reduction
Program

Sec. Sec. 412.170 Definitions for the Hospital-Acquired Condition
Reduction Program.

As used in this section and Sec. 412.172, the following
definitions apply:
Applicable hospital is a hospital described in section
1886(d)(1)(B) of the Act (including a hospital in Maryland that is paid
under the waiver under section 1814(b)(3) of the Act and that, absent
the waiver specified by section 1814(b)(3) of the Act, would have been
paid under the hospital inpatient prospective payment system) as long
as the hospital meets the criteria specified under Sec. 412.172(e).
Applicable period is, with respect to a fiscal year, the 2-year
period (specified by the Secretary) from which data are collected in
order to calculate the total hospital-acquired condition score under
the Hospital-Acquired Condition Reduction Program.
Hospital-acquired condition is a condition as described in section
1886(d)(4)(D)(iv) of the Act and any other condition determined
appropriate by the Secretary that an individual acquires during a stay
in an applicable hospital, as determined by the Secretary.

Sec. 412.172 Payment adjustments under the Hospital-Acquired
Condition Reduction Program.

(a) Scope. This section sets forth the requirements for determining
the payment adjustments under the Hospital-Acquired Condition Reduction
Program for hospitals that meet the criteria described under paragraph
(e) of this section.
(b) Payment adjustment. With respect to all discharges from an
applicable hospital occurring during FY 2015 or a subsequent year, the
amount of payment under this section, or section 1814(b)(3) of the Act
as applicable, for such discharges during the fiscal year will be equal
to 99 percent of the amount of payment that would otherwise apply to
these discharges under this section or section 1814(b)(3) of the Act
(determined after the application of the payment adjustment under the
Hospital Readmissions Reduction Program under Sec. 412.154 and the
adjustment made under the Hospital Value-Based Purchasing Program under
Sec. 412.162 and section 1814(l)(4) of the Act but without regard to
section 1886(p) of the Act).
(c) Hospitals paid under section 1814(b)(3) of the Act (certain
Maryland hospitals). CMS will determine whether to exempt Maryland
hospitals that are paid under section 1814(b)(3) of the Act and not
under the hospital inpatient prospective payment system from the
application of the payment adjustments under this section. The State
must submit an annual report to CMS that describes how a similar
program to reduce hospital-acquired conditions in

[[Page 50968]]

that State achieves or surpasses the measured results in terms of
health outcomes and cost savings for the Hospital-Acquired Conditions
Reduction Program as applied to hospitals described in section
1886(d)(1)(B) of the Act.
(1) CMS will establish criteria for evaluation of Maryland's annual
report to determine whether the State will be exempted from the
application of the payment adjustments under this section for a given
fiscal year.
(2) Maryland's annual report and request for exemption from the
Hospital-Acquired Condition Reduction Program must be resubmitted and
reconsidered annually.
(d) Risk adjustment. In carrying out the provisions of paragraph
(e) of this section, CMS will establish and apply an appropriate risk-
adjustment methodology.
(e) Criteria for applicable hospitals. (1) General. With respect to
a subsection (d) hospital, CMS will identify the top quartile of all
subsection (d) hospitals with respect to hospital-acquired conditions
as measured during the applicable period.
(2) Use of total hospital-acquired condition scores. CMS will use
total hospital-acquired condition scores to identify applicable
hospitals. CMS will identify the 25 percent of hospitals with the
highest total scores.
(3) Methodology for calculating total hospital-acquired condition
scores. CMS will calculate the total hospital-acquired condition scores
by weighing the selected measures according to the established
methodology.
(f) Reporting of hospital-specific information. CMS will make
information available to the public regarding hospital-acquired
condition rates of all hospitals under the Hospital-Acquired Condition
Reduction Program.
(1) CMS will provide each hospital with confidential hospital-
specific reports and discharge level information used in the
calculation of its total hospital-acquired condition score.
(2) Hospitals will have a period of 30 days after the receipt of
the information provided under paragraph (f)(1) of this section to
review and submit corrections for the hospital-acquired condition
domain score for each condition that is used to calculate the total
score for the fiscal year.
(3) The administrative claims data used to calculate a hospital's
total hospital-acquired condition score for a condition for a fiscal
year are not subject to review and correction under paragraph (f)(2) of
this section.
(4) CMS will post the total hospital-acquired condition score, the
domain score, and the score on each measure for each hospital on the
Hospital Compare Web site.
(g) Limitations on review. There is no administrative or judicial
review under Sec. 412.170 and this section for the following:
(1) The criteria describing applicable hospitals.
(2) The applicable period.
(3) The specification of hospital-acquired conditions.
(4) The provision of reports to hospitals and the information made
available to the public.

0
14. Section 412.523 is amended by--
0
a. Revising the introductory text of paragraph (c)(3).
0
b. Adding paragraph (c)(3)(x).
0
c. Redesignating paragraph (c)(4) as paragraph (c)(5).
0
d. Adding a new paragraph (c)(4).
The additions read as follows:

Sec. 412.523 Methodology for calculating the Federal prospective
payment rates.

* * * * *
(c) * * *
(3) Computation of the standard Federal rate. Subject to the
provisions of paragraph (c)(4) of this section, the standard Federal
rate is computed as follows:
* * * * *
(x) For long-term care hospital prospective payment system fiscal
year beginning October 1, 2013, and ending September 30, 2014. The
standard Federal rate for the long-term care hospital prospective
payment system beginning October 1, 2013, and ending September 30,
2014, is the standard Federal rate for the previous long-term care
hospital prospective payment system fiscal year updated by 1.7 percent,
and further adjusted, as appropriate, as described in paragraph (d) of
this section.
(4) For fiscal year 2014 and subsequent fiscal years--
(i) In the case of a long-term care hospital that does not submit
quality reporting data to CMS in the form and manner and at a time
specified by the Secretary, the annual update to the standard Federal
rate specified in paragraph (c)(3) of this section is further reduced
by 2.0 percentage points.
(ii) Any reduction of the annual update to the standard Federal
rate under paragraph (c)(4)(i) of this section will apply only to the
fiscal year involved and will not be taken into account in computing
the annual update to the standard Federal rate for a subsequent fiscal
year.
* * * * *

PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR
END-STAGE RENAL DISEASE SERVICES; OPTIONAL PROSPECTIVELY DETERMINED
PAYMENT RATES FOR SKILLED NURSING FACILITIES

0
15. The authority for Part 413 continues to read as follows:

Authority: Secs. 1102, 1861(v)(1)(A), and 1871 of the Social
Security Act (42 U.S.C. 1302, 1395x(v)(1)(A), and 1395hh).

0
16. In Sec. 413.78, amend paragraphs (g)(2) introductory text,
(g)(2)(ii), (g)(2)(iii), (g)(3)(i), and (3)(ii) (two places), by
removing the term ``nonhospital'' and adding ``nonprovider'' in its
place.

PART 414--PAYMENT FOR PART B MEDICAL AND OTHER HEALTH SERVICES

0
17. The authority for Part 414 continues to read as follows:

Authority: Secs. 1102, 1871, and 1881(b)(l) of the Social
Security Act (42 U.S.C. 1302, 1395hh, and 1395rr(b)(l)).

0
18. Subpart A is amended by adding Sec. 414.5 to read as follows:

Sec. 414.5 Hospital services paid under Medicare Part B when a Part A
hospital inpatient claim is denied because the inpatient admission was
not reasonable and necessary, but hospital outpatient services would
have been reasonable and necessary in treating the beneficiary.

(a) If a Medicare Part A claim for inpatient hospital services is
denied because the inpatient admission was not reasonable and
necessary, or if a hospital determines under Sec. 482.30(d) of this
chapter or Sec. 485.641 of this chapter after a beneficiary is
discharged that the beneficiary's inpatient admission was not
reasonable and necessary, the hospital may be paid for any of the
following Part B inpatient services that would have been reasonable and
necessary if the beneficiary had been treated as a hospital outpatient
rather than admitted as an inpatient, provided the beneficiary is
enrolled in Medicare Part B:
(1) Services described in Sec. 419.21(a) of this chapter that do
not require an outpatient status.
(2) Physical therapy services, speech-language pathology services,
and occupational therapy services.
(3) Ambulance services, as described in section 1861(v)(1)(U) of
the Act, or, if applicable, the fee schedule established under section
1834(l) of Act.
(4) Except as provided in Sec. 419.2(b)(11) of this chapter,
prosthetic

[[Page 50969]]

devices, prosthetics, prosthetic supplies, and orthotic devices.
(5) Except as provided in Sec. 419.2(b)(10) of this chapter,
durable medical equipment supplied by the hospital for the patient to
take home.
(6) Clinical diagnostic laboratory services.
(7)(i) Effective December 8, 2003, screening mammography services;
and
(ii) Effective January 1, 2005, diagnostic mammography services.
(8) Effective January 1, 2011, annual wellness visit providing
personalized prevention plan services as defined in Sec. 410.15 of
this chapter.
(b) If a Medicare Part A claim for inpatient hospital services is
denied because the inpatient admission was not reasonable and
necessary, or if a hospital determines under Sec. 482.30(d) of this
chapter or Sec. 485.641 of this chapter after a beneficiary is
discharged that the beneficiary's inpatient admission was not
reasonable and necessary, the hospital may be paid for hospital
outpatient services described in Sec. 412.2(c)(5), Sec. 412.405,
Sec. 412.540, or Sec. 412.604(f) of this chapter or Sec.
413.40(c)(2) of this chapter that are furnished to the beneficiary
prior to the point of inpatient admission (that is, the inpatient
admission order).
(c) The claims for the Part B services filed under the
circumstances described in this section must be filed in accordance
with the time limits for filing claims specified in Sec. 424.44(a) of
this chapter.

PART 419--PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL OUTPATIENT
DEPARTMENT SERVICES

0
19. The authority citation for Part 419 continues to read as follows:

Authority: Secs. 1102, 1833(t), and 1871 of the Social Security
Act (42 U.S.C. 1302, 13951(t), and 1395hh).

0
20. Section 419.21 is amended by revising the section heading to read
as follows:

Sec. 419.21 Hospital services subject to the outpatient prospective
payment system.

* * * * *

0
21. Section 419.22 is amended by--
0
a. Revising the section heading.
0
b. Revising paragraph (h).
0
c. In paragraph (j), removing the cross-reference ``Sec.
419.22(b)(11)'' and adding in its place ``Sec. 419.2(b)(11)''.
0
d. Adding paragraph (u).
The revisions and addition read as follows:

Sec. 419.22 Hospital services excluded from payment under the
hospital outpatient prospective payment system.

* * * * *
(h) Physical therapy services, speech-language pathology services,
and occupational therapy services described in section 1833(a)(8) of
the Act for which payment is made under the fee schedule described in
section 1834(k) of the Act.
* * * * *
(u) Outpatient diabetes self-management training.

PART 424--CONDITIONS FOR MEDICARE PAYMENT

0
22. The authority citation for Part 424 continues to read as follows:

Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1032 and 1395hh).

0
23. Section 424.11 is amended by--
0
a. Revising paragraph (d).
0
b. In paragraph (e)(2), removing the cross-reference ``Sec.
424.13(c)'' and adding in its place ``Sec. 424.13(d)''.
The revision reads as follows:

Sec. 424.11 General procedures.

* * * * *
(d) Timeliness. (1) The succeeding sections of this subpart also
specify the timeframes for certification and for initial and subsequent
recertifications.
(2) A hospital or SNF may provide for obtaining a certification or
recertification earlier than required by these regulations or vary the
timeframe (within the prescribed outer limits) for different diagnostic
or clinical categories.
(3) Delayed certification and recertification statements are
acceptable when there is a legitimate reason for delay. (For instance,
the patient was unaware of his or her entitlement when he or she was
treated.) Delayed certification and recertification statements must
include an explanation of the reasons for the delay.
(4) A delayed certification may be included with one or more
recertifications on a single signed statement.
(5) For all inpatient hospital or critical access hospital
inpatient services, including inpatient psychiatric facility services,
a delayed certification may not extend past discharge.
* * * * *

0
24. Section 424.13 is revised to read as follows:

Sec. 424.13 Requirements for inpatient services of hospitals other
than inpatient psychiatric facilities.

(a) Content of certification and recertification. Certification
begins with the order for inpatient admission. Medicare Part A pays for
inpatient hospital services (other than inpatient psychiatric facility
services) only if a physician certifies and recertifies the following:
(1) That the services were provided in accordance with Sec. 412.3
of this chapter.
(2) The reasons for either--
(i) Hospitalization of the patient for inpatient medical treatment
or medically required inpatient diagnostic study; or
(ii) Special or unusual services for cost outlier cases (under the
prospective payment system set forth in subpart F of Part 412 of this
chapter).
(3) The estimated time the patient will need to remain in the
hospital.
(4) The plans for posthospital care, if appropriate.
(b) Timing of certification. For all hospital inpatient admissions,
the certification must be completed, signed, and documented in the
medical record prior to discharge. For outlier cases under subpart F of
Part 412 of this chapter that are not subject to the PPS, the
certification must be signed and documented in the medical record and
as specified in paragraphs (e) through (h) of this section.
(c) Certification of need for hospitalization when a SNF bed is not
available. (1) The physician may certify or recertify need for
continued hospitalization if he or she finds that the patient could
receive proper treatment in a SNF but no bed is available in a
participating SNF.
(2) If this is the basis for the physician's certification or
recertification, the required statement must so indicate; and the
certifying physician is expected to continue efforts to place the
patient in a participating SNF as soon as a bed becomes available.
(d) Signatures.--(1) Basic rule. Except as specified in paragraph
(d)(2) of this section, certifications and recertifications must be
signed by the physician responsible for the case, or by another
physician who has knowledge of the case and who is authorized to do so
by the responsible physician or by the hospital's medical staff.
(2) Exception. If the intermediary requests certification of the
need to admit a patient in connection with dental procedures, because
his or her underlying medical condition and clinical status or the
severity of the dental procedures require hospitalization, that
certification may be signed by the dentist caring for the patient.
(e) Timing of certifications and recertifications: Outlier cases
not subject to the prospective payment system (PPS).
(1) For outlier cases that are not subject to the PPS,
certification is

[[Page 50970]]

required no later than as of the 12th day of hospitalization. A
hospital may, at its option, provide for the certification to be made
earlier, or it may vary the timing of the certification within the 12-
day period by diagnostic or clinical categories.
(2) The first recertification is required no later than as of the
18th day of hospitalization.
(3) Subsequent recertifications are required at intervals
established by the UR committee (on a case-by-case basis if it so
chooses), but no less frequently than every 30 days.
(f) Timing of certification and recertification: Outlier cases
subject to PPS. For outlier cases subject to the PPS, certification is
required as follows:
(1) For day outlier cases, certification is required no later than
1 day after the hospital reasonably assumes that the case meets the
outlier criteria, established in accordance with Sec. 412.80(a)(1)(i)
of this chapter, or no later than 20 days into the hospital stay,
whichever is earlier. The first and subsequent recertifications are
required at intervals established by the UR committee (on a case-by-
case basis if it so chooses) but not less frequently than every 30
days.
(2) For cost outlier cases, certification is required no later than
the date on which the hospital requests cost outlier payment or 20 days
into the hospital stay, whichever is earlier. If possible,
certification must be made before the hospital incurs costs for which
it will seek cost outlier payment. In cost outlier cases, the first and
subsequent recertifications are required at intervals established by
the UR committee (on a case-by-case basis if it so chooses).
(g) Recertification requirement fulfilled by utilization review.
(1) At the hospital's option, extended stay review by its UR committee
may take the place of the second and subsequent recertifications
required for outlier cases not subject to PPS and for PPS day-outlier
cases.
(2) A utilization review that is used to fulfill the
recertification requirement is considered timely if performed no later
than the seventh day after the day the recertification would have been
required. The next recertification would need to be made no later than
the 30th day following such review; if review by the UR committee took
the place of this recertification, the review could be performed as
late as the seventh day following the 30th day.
(h) Description of procedures. The hospital must have available on
file a written description that specifies the time schedule for
certifications and recertifications, and indicates whether utilization
review of long-stay cases fulfills the requirement for second and
subsequent recertifications of all outlier cases not subject to PPS and
of PPS day outlier cases.

0
25. Section 424.14 is amended by revising paragraphs (a), (b), (d)(1),
and (e) to read as follows:

Sec. 424.14 Requirements for inpatient services of inpatient
psychiatric facilities.

(a) Requirements for certification and recertification: General
considerations. Certification begins with the order for inpatient
admission. The content requirements differ from those for other
hospitals because the care furnished in inpatient psychiatric
facilities is often purely custodial and thus not covered under
Medicare. The purpose of the statements, therefore, is to help ensure
that Medicare pays only for services of the type appropriate for
Medicare coverage. Accordingly, Medicare Part A pays for inpatient
services in an inpatient psychiatric facility only if a physician
certifies and recertifies the need for services consistent with the
requirements of this section, as appropriate.
(b) Content of certification. The physician must certify--
(1) That inpatient psychiatric services were required for treatment
that could reasonably be expected to improve the patient's condition,
or for diagnostic study.
(2) That the inpatient psychiatric services were provided in
accordance with Sec. 412.3 of this chapter.
* * * * *
(d) * * *
(1) Certification is required at the time of admission or as soon
thereafter as is reasonable and practicable, and must be completed and
documented in the medical record prior to discharge.
* * * * *
(e) Other requirements. Inpatient psychiatric facilities must also
meet the requirements set forth in Sec. 424.13(c), (d), (g), and (h).

0
26. Section 424.15 is revised to read as follows:

Sec. 424.15 Requirements for inpatient CAH services.

(a) Medicare Part A pays for inpatient CAH services only if a
physician certifies that the individual may reasonably be expected to
be discharged or transferred to a hospital within 96 hours after
admission to the CAH, and that the services are provided in accordance
with Sec. 412.3 of this chapter.
(b) Certification begins with the order for inpatient admission.
The certification must be completed, signed, and documented in the
medical record prior to discharge.

Sec. 424.16 [Amended]

0
27. In Sec. 424.16, paragraph (a) is amended by removing the reference
``Sec. 424.13(e)'' and adding it its place ``subpart B of this Part''.

PART 482--CONDITIONS OF PARTICIPATION FOR HOSPITALS

0
28. The authority citation for Part 482 continues to read as follows:

Authority: Secs. 1102, 1871, and 1881 of the Social Security Act
(42 U.S.C. 1302, 1395hh, and 1395rr), unless otherwise noted.

0
29. Section 482.23 is amended by revising paragraph (c)(3) to read as
follows:

Sec. 482.23 Condition of participation: Nursing services.

* * * * *
(c) * * *
(3) With the exception of influenza and pneumococcal vaccines,
which may be administered per physician-approved hospital policy after
an assessment of contraindications, orders for drugs and biologicals
must be documented and signed by a practitioner who is authorized to
write orders in accordance with State law and hospital policy, and who
is responsible for the care of the patient as specified under Sec.
482.12(c).
* * * * *

PART 485--CONDITIONS OF PARTICIPATION: SPECIALIZED PROVIDERS

0
30. The authority citation for Part 485 continues to read as follows:

Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395(hh)).

0
31. Section 485.620 is amended by revising paragraph (a) to read as
follows:

Sec. 485.620 Condition of participation: Number of beds and length of
stay.

(a) Standard: Number of beds. Except as permitted for CAHs having
distinct part units under Sec. 485.647, the CAH maintains no more than
25 inpatient beds. Inpatient beds may be used for either inpatient or
swing-bed services.
* * * * *

0
32. Section 485.635 is amended by revising paragraphs (a)(3)(vii),
(b)(1), and (c)(1) to read as follows:

Sec. 485.635 Condition of participation: Provision of services.

(a) * * *
(3) * * *
(vii) Procedures that ensure that the nutritional needs of
inpatients are met

[[Page 50971]]

in accordance with recognized dietary practices and the orders of the
practitioner responsible for the care of the patients, and that the
requirement of Sec. 483.25(i) of this chapter is met with respect to
inpatients receiving posthospital SNF care.
* * * * *
(b) * * *
(1) General: (i) The CAH provides those diagnostic and therapeutic
services and supplies that are commonly furnished in a physician's
office or at another entry point into the health care delivery system,
such as a low intensity hospital outpatient department or emergency
department. These CAH services include medical history, physical
examination, specimen collection, assessment of health status, and
treatment for a variety of medical conditions.
(ii) The CAH furnishes acute care inpatient services.
* * * * *
(c) * * *
(1) The CAH has agreements or arrangements (as appropriate) with
one or more providers or suppliers participating under Medicare to
furnish other services to its patients, including--
(i) Services of doctors of medicine or osteopathy;
(ii) Additional or specialized diagnostic and clinical laboratory
services that are not available at the CAH; and
(iii) Food and other services to meet inpatients' nutritional needs
to the extent these services are not provided directly by the CAH.
* * * * *

PART 489--PROVIDER AGREEMENTS AND SUPPLIER APPROVAL

0
33. The authority citation for Part 489 continues to read as follows:

Authority: Secs. 1102 1819, 1820(E), 1861, 1864(M), 1866, 1869,
and 1871 of the Social Security Act (42 U.S.C. 1302, 1395i-3, 1395x,
1395aa(m), 1395cc, 1395ff, and 1395(hh)).

0
34. The paragraph heading of Sec. 489.24(f) is revised to read as
follows:

Sec. 489.24 Special responsibilities of Medicare hospitals in
emergency cases.

* * * * *
(f) Recipient hospital responsibilities. * * *
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.773,
Medicare--Hospital Insurance; Program No. 93.774, Medicare--
Supplementary Medical Insurance Program; and Program No. 93.778,
Medical Assistance)

Dated: July 29, 2013.
Marilyn Tavenner,
Administrator, Centers for Medicare & Medicaid Services.
Dated: July 30, 2013.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.

Note: The following Addendum and Appendixes will not appear in
the Code of Federal Regulations.

Addendum--Schedule of Standardized Amounts, Update Factors, and Rate-
of-Increase Percentages Effective With Cost Reporting Periods Beginning
On or After October 1, 2013 and Payment Rates for LTCHs Effective for
Discharges Occurring On or After October 1, 2013

I. Summary and Background

In this Addendum, we are setting forth a description of the
methods and data we used to determine the prospective payment rates
for Medicare hospital inpatient operating costs and Medicare
hospital inpatient capital-related costs for FY 2014 for acute care
hospitals. We also are setting forth the rate-of-increase
percentages for updating the target amounts for certain hospitals
excluded from the IPPS for FY 2014. We note that, because certain
hospitals excluded from the IPPS are paid on a reasonable cost basis
subject to a rate-of-increase ceiling (and not by the IPPS), these
hospitals are not affected by the figures for the standardized
amounts, offsets, and budget neutrality factors. Therefore, in this
final rule, we are establishing the rate-of-increase percentages for
updating the target amounts for certain hospitals excluded from the
IPPS that are effective for cost reporting periods beginning on or
after October 1, 2013.
In addition, we are setting forth a description of the methods
and data we used to determine the standard Federal rate that will be
applicable to Medicare LTCHs for FY 2014.
In general, except for SCHs and hospitals located in Puerto
Rico, for FY 2014, each hospital's payment per discharge under the
IPPS is based on 100 percent of the Federal national rate, also
known as the national adjusted standardized amount. This amount
reflects the national average hospital cost per case from a base
year, updated for inflation.
SCHs are paid based on whichever of the following rates yields
the greatest aggregate payment: The Federal national rate
(including, as finalized in section V.E.3. of the preamble to this
final rule, uncompensated care payments under section 1886(r)(2) of
the Act); the updated hospital-specific rate based on FY 1982 costs
per discharge; the updated hospital-specific rate based on FY 1987
costs per discharge; the updated hospital-specific rate based on FY
1996 costs per discharge; or the updated hospital-specific rate
based on FY 2006 costs per discharge.
We note that section 606 of the American Taxpayer Relief Act of
2012 (ATRA) extended the MDH program from the end of FY 2012 (that
is, for discharges occurring before October 1, 2012) to the end of
FY 2013 (that is, for discharges occurring before October 1, 2013).
Under prior law, the MDH program was to be in effect through the end
of FY 2012 only. Absent additional legislation further extending the
MDH program, the MDH program will expire for discharges beginning in
FY 2014. Therefore, due to the expiration of the MDH program
beginning with FY 2014, we are not including hospitals that are
currently MDHs (until October 1, 2013) in our update of the
hospital-specific rates for FY 2014.
For hospitals located in Puerto Rico, the payment per discharge
is based on the sum of 25 percent of an updated Puerto Rico-specific
rate based on average costs per case of Puerto Rico hospitals for
the base year and 75 percent of the Federal national rate. (We refer
readers to section II.D.2. of this Addendum for a complete
description.)
As discussed below in section II. of this Addendum, we are
making changes in the determination of the prospective payment rates
for Medicare inpatient operating costs for acute care hospitals for
FY 2014. In section III. of this Addendum, we discuss our policy
changes for determining the prospective payment rates for Medicare
inpatient capital-related costs for FY 2014. In section IV. of this
Addendum, we are setting forth our changes for determining the rate-
of-increase limits for certain hospitals excluded from the IPPS for
FY 2014. In section V. of this Addendum, we discuss policy changes
for determining the standard Federal rate for LTCHs paid under the
LTCH PPS for FY 2014. The tables to which we refer in the preamble
of this final rule are listed in section VI. of this Addendum and
are available via the Internet.

II. Changes to Prospective Payment Rates for Hospital Inpatient
Operating Costs for Acute Care Hospitals for FY 2014

The basic methodology for determining prospective payment rates
for hospital inpatient operating costs for acute care hospitals for
FY 2005 and subsequent fiscal years is set forth under Sec. 412.64.
The basic methodology for determining the prospective payment rates
for hospital inpatient operating costs for hospitals located in
Puerto Rico for FY 2005 and subsequent fiscal years is set forth
under Sec. Sec. 412.211 and 412.212. Below we discuss the factors
we are using for determining the prospective payment rates for FY
2014.
In summary, the standardized amounts set forth in Tables 1A, 1B,
and 1C that are listed and published in section VI. of this Addendum
(and available via the Internet) reflect--
Equalization of the standardized amounts for urban and
other areas at the level computed for large urban hospitals during
FY 2004 and onward, as provided for under section
1886(d)(3)(A)(iv)(II) of the Act.
The labor-related share that is applied to the
standardized amounts and Puerto Rico-specific standardized amounts
to give the hospital the highest payment, as provided for under
sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act.
An update of 1.7 percent for all areas (that is, the FY
2014 estimate of the market

[[Page 50972]]

basket rate-of-increase of 2.5 percent less an adjustment of 0.5
percentage point for MFP and less 0.3 percentage point), as required
by section 1886(b)(3)(B)(i) of the Act, as amended by sections
3401(a) and 10319(a) of the Affordable Care Act. For hospitals that
fail to submit data, in a form and manner, and at the time,
specified by the Secretary relating to the quality of inpatient care
furnished by the hospital, pursuant to section 1886(b)(3)(B)(viii)
of the Act, the update is -0.3 percent (that is, the FY 2014
estimate of the market basket rate-of-increase of 2.5 percent, less
2.0 percentage points for failure to submit data under the Hospital
IQR Program, less an adjustment of 0.5 percentage point for MFP, and
less 0.3 percentage point).
An update of 1.7 percent to the Puerto Rico-specific
standardized amount (that is, the FY 2014 estimate of the market
basket rate-of-increase of 2.5 percent less an adjustment of 0.5
percentage point for MFP and less 0.3 percentage point), in
accordance with section 1886(d)(9)(C)(i) of the Act, as amended by
section 401(c) of Public Law 108-173, which sets the update to the
Puerto Rico-specific standardized amount equal to the applicable
percentage increase set forth under section 1886(b)(3)(B)(i) of the
Act.
An adjustment to the standardized amount to ensure
budget neutrality for DRG recalibration and reclassification, as
provided for under section 1886(d)(4)(C)(iii) of the Act.
An adjustment to ensure the wage index changes are
budget neutral, as provided for under section 1886(d)(3)(E)(i) of
the Act. We note that section 1886(d)(3)(E)(i) of the Act requires
that when we compute such budget neutrality, we assume that the
provisions of section 1886(d)(3)(E)(ii) of the Act (requiring a 62
percent labor-related share in certain circumstances) had not been
enacted.
An adjustment to ensure the effects of geographic
reclassification are budget neutral, as provided for under section
1886(d)(8)(D) of the Act, by removing the FY 2013 budget neutrality
factor and applying a revised factor.
An adjustment to ensure the effects of the rural
community hospital demonstration program required under section 410A
of Public Law 108-173, as amended by sections 3123 and 10313 of
Public Law 111-148, which extended the demonstration program for an
additional 5 years, are budget neutral as required under section
410A(c)(2) of Public Law 108-173.
An adjustment to remove the FY 2013 outlier offset and
apply an offset for FY 2014, as provided for under section
1886(d)(3)(B) of the Act.
As discussed below and in section II.D. of the preamble
of this final rule, a recoupment to meet the requirements of section
631 of ATRA to adjust the standardized amount to offset the
estimated amount of the increase in aggregate payments as a result
of not completing the prospective adjustment authorized under
section 7(b)(1)(A) of Public Law 110-90 until FY 2013.
As discussed below and in section XI.C. of the preamble
of this final rule, an adjustment to offset the cost of the policy
on admission and medical review criteria for hospital inpatient
services under Medicare Part A.
Beginning in FY 2008, we applied the budget neutrality
adjustment for the rural floor to the hospital wage indices rather
than the standardized amount. As we did for FY 2013, for FY 2014,
consistent with current law, we are continuing to apply the rural
floor budget neutrality adjustment to hospital wage indices rather
than the standardized amount. Also, consistent with section 3141 of
the Affordable Care Act, instead of applying a State level rural
floor budget neutrality adjustment to the wage index, we are
applying a uniform, national budget neutrality adjustment to the
proposed FY 2014 wage index for the rural floor. We note that, in
section III.G.2.b. of the preamble to this final rule, we are
extending the imputed floor policy (both the original methodology
and alternative methodology) for one additional year, through
September 30, 2014.
Therefore, for this final rule, we are continuing to include the
imputed floor (calculated under the original and alternative
methodologies) in calculating the uniform, national rural floor
budget neutrality adjustment, which will be reflected in the FY 2014
wage index.

A. Calculation of the Adjusted Standardized Amount

1. Standardization of Base-Year Costs or Target Amounts

In general, the national standardized amount is based on per
discharge averages of adjusted hospital costs from a base period
(section 1886(d)(2)(A) of the Act), updated and otherwise adjusted
in accordance with the provisions of section 1886(d) of the Act. For
Puerto Rico hospitals, the Puerto Rico-specific standardized amount
is based on per discharge averages of adjusted target amounts from a
base period (section 1886(d)(9)(B)(i) of the Act), updated and
otherwise adjusted in accordance with the provisions of section
1886(d)(9) of the Act. The September 1, 1983 interim final rule (48
FR 39763) contained a detailed explanation of how base-year cost
data (from cost reporting periods ending during FY 1981) were
established for urban and rural hospitals in the initial development
of standardized amounts for the IPPS. The September 1, 1987 final
rule (52 FR 33043 and 33066) contains a detailed explanation of how
the target amounts were determined and how they are used in
computing the Puerto Rico rates.
Sections 1886(d)(2)(B) and 1886(d)(2)(C) of the Act require us
to update base-year per discharge costs for FY 1984 and then
standardize the cost data in order to remove the effects of certain
sources of cost variations among hospitals. These effects include
case-mix, differences in area wage levels, cost-of-living
adjustments for Alaska and Hawaii, IME costs, and costs to hospitals
serving a disproportionate share of low-income patients.
In accordance with section 1886(d)(3)(E) of the Act, the
Secretary estimates, from time-to-time, the proportion of hospitals'
costs that are attributable to wages and wage-related costs. In
general, the standardized amount is divided into labor-related and
nonlabor-related amounts; only the proportion considered to be the
labor-related amount is adjusted by the wage index. Section
1886(d)(3)(E) of the Act requires that 62 percent of the
standardized amount be adjusted by the wage index, unless doing so
would result in lower payments to a hospital than would otherwise be
made. (Section 1886(d)(9)(C)(iv)(II) of the Act extends this
provision to the labor-related share for hospitals located in Puerto
Rico.)
For FY 2014, we are rebasing and revising the national and
Puerto Rico-specific labor-related and nonlabor-related shares from
the percentages established for FY 2013. Specifically, under section
1886(d)(3)(E) of the Act, the Secretary estimates from time to time
the proportion of payments that are labor-related: ``The Secretary
shall adjust the proportion, (as estimated by the Secretary from
time to time) of hospitals' costs which are attributable to wages
and wage-related costs, of the DRG prospective payment rates. . .
.'' We refer to the proportion of hospitals' costs that are
attributable to wages and wage-related costs as the ``labor-related
share.'' For FY 2014, as discussed in section IV.B.4. of the
preamble of this final rule, we are establishing a labor-related
share of 69.6 percent for the national standardized amounts and 63.2
percent for the Puerto Rico-specific standardized amount. Consistent
with section 1886(d)(3)(E) of the Act, we are applying the wage
index to a labor-related share of 62 percent for all IPPS hospitals
whose wage index values are less than or equal to 1.0000. For all
IPPS hospitals whose wage indices are greater than 1.0000, we are
applying the wage index to a labor-related share of 69.6 percent of
the national standardized amount. For FY 2014, all Puerto Rico
hospitals have a wage index less than 1.0 because the average hourly
rate of every hospital in Puerto Rico divided by the national
average hourly rate (the sum of all salaries and hours for all
hospitals in the 50 United States and Puerto Rico) results in a wage
index below 1.0000. Therefore, the national labor-related share will
be 62 percent because the wage index for all Puerto Rico hospitals
is less than 1.0.
When we divide the average hourly rate of every hospital in
Puerto Rico by the Puerto Rico-Specific national average hourly rate
(the sum of all salaries and hours for all hospitals only in Puerto
Rico), we determine a Puerto Rico Specific wage index above or below
1.0000, depending on the hospital. For hospitals located in Puerto
Rico, we are applying a labor-related share of 63.2 percent if its
Puerto Rico-specific wage index is greater than 1.0000. For
hospitals located in Puerto Rico whose Puerto-Rico specific wage
index values are less than or equal to 1.0000, we are applying a
labor share of 62 percent.
The standardized amounts for operating costs appear in Tables
1A, 1B, and 1C that are listed and published in section VI. of the
Addendum to this final rule and are available via the Internet.

2. Computing the Average Standardized Amount

Section 1886(d)(3)(A)(iv)(II) of the Act requires that,
beginning with FY 2004 and thereafter, an equal standardized amount
be computed for all hospitals at the level computed for large urban
hospitals during FY 2003, updated by the applicable percentage
update. Section 1886(d)(9)(A)(ii)(II) of the

[[Page 50973]]

Act equalizes the Puerto Rico-specific urban and rural area rates.
Accordingly, we are calculating the FY 2014 national standardized
amount and Puerto Rico-specific rate irrespective of whether a
hospital is located in an urban or rural location.

3. Updating the Average Standardized Amount

Section 1886(b)(3)(B) of the Act specifies the applicable
percentage increase used to update the standardized amount for
payment for inpatient hospital operating costs. We note that, in
compliance with section 404 of the MMA, in this final rule, we are
replacing the FY 2006-based IPPS operating and capital market
baskets with the revised and rebased FY 2010-based IPPS operating
and capital market baskets for FY 2014. As discussed in section V.A.
of the preamble of this final rule, in accordance with section
1886(b)(3)(B) of the Act, as amended by section 3401(a) of the
Affordable Care Act, we are reducing the FY 2014 applicable
percentage increase (which is based on IHS Global Insight, Inc.'s
(IGI's) second quarter 2013 forecast of the FY 2010-based IPPS
market basket) by the MFP adjustment (the 10-year moving average of
MFP for the period ending FY 2014) of 0.5 percent, which is
calculated based on IGI's second quarter 2013 forecast.
In addition, in accordance with section 1886(b)(3)(B)(i) of the
Act, as amended by sections 3401(a) and 10319(a) of the Affordable
Care Act, we are further updating the standardized amount for FY
2014 by the estimated market basket percentage increase less 0.3
percentage point for hospitals in all areas. Sections
1886(b)(3)(B)(xi) and (xii) of Act, as added and amended by sections
3401(a) and 10319(a) of the Affordable Care Act, further state that
these adjustments may result in the applicable percentage increase
being less than zero. The percentage increase in the market basket
reflects the average change in the price of goods and services
comprising routine, ancillary, and special care unit hospital
inpatient services. Based on IGI's 2013 second quarter forecast of
the hospital market basket increase (as discussed in Appendix B of
this final rule), the most recent forecast of the hospital market
basket increase for FY 2014 is 2.5 percent. Therefore, for FY 2014,
the update to the average standardized amount is 1.7 percent for
hospitals in all areas (that is, the FY 2014 estimate of the market
basket rate-of-increase of 2.5 percent less an adjustment of 0.5
percentage point for MFP and less 0.3 percentage point). For
hospitals that do not submit quality data pursuant to section
1886(b)(3)(B)(viii) of the Act, the estimated update to the
operating standardized amount is -0.3 percent (that is, the FY 2014
estimate of the market basket rate-of-increase of 2.5 percent, less
2.0 percentage points for failure to submit data under the Hospital
IQR Program, less an adjustment of 0.5 percentage point for MFP, and
less 0.3 percentage point). The standardized amounts in Tables 1A
through 1C that are published in section VI. of this Addendum and
that are available via the Internet reflect these differential
amounts.
Section 401(c) of Public Law 108-173 amended section
1886(d)(9)(C)(i) of the Act and states that, for discharges
occurring in a fiscal year (beginning with FY 2004), the Secretary
shall compute an average standardized amount for hospitals located
in any area of Puerto Rico that is equal to the average standardized
amount computed under subclause (I) for FY 2003 for hospitals in a
large urban area (or, beginning with FY 2005, for all hospitals in
the previous fiscal year) increased by the applicable percentage
increase under subsection (b)(3)(B) for the fiscal year involved.
Therefore, the update to the Puerto Rico-specific operating
standardized amount is subject to the applicable percentage increase
set forth under section 1886(b)(3)(B)(i) of the Act, as amended by
sections 3401(a) and 10319(a) of the Affordable Care Act (that is,
the same update factor as for all other hospitals subject to the
IPPS). Accordingly, we are establishing an applicable percentage
increase to the Puerto Rico-specific standardized amount of 1.7
percent.
Although the update factors for FY 2014 are set by law, we are
required by section 1886(e)(4) of the Act to recommend, taking into
account MedPAC's recommendations, appropriate update factors for FY
2014 for both IPPS hospitals and hospitals and hospital units
excluded from the IPPS. Section 1886(e)(5)(A) of the Act requires
that we publish our proposed recommendations in the Federal Register
for public comment. Our recommendation on the update factors is set
forth in Appendix B of this final rule.

4. Other Adjustments to the Average Standardized Amount

As in the past, we are adjusting the FY 2014 standardized amount
to remove the effects of the FY 2013 geographic reclassifications
and outlier payments before applying the FY 2014 updates. We then
apply budget neutrality offsets for outliers and geographic
reclassifications to the standardized amount based on FY 2014
payment policies.
We do not remove the prior year's budget neutrality adjustments
for reclassification and recalibration of the DRG relative weights
and for updated wage data because, in accordance with sections
1886(d)(4)(C)(iii) and 1886(d)(3)(E) of the Act, estimated aggregate
payments after updates in the DRG relative weights and wage index
should equal estimated aggregate payments prior to the changes. If
we removed the prior year's adjustment, we would not satisfy these
conditions.
Budget neutrality is determined by comparing aggregate IPPS
payments before and after making changes that are required to be
budget neutral (for example, changes to MS-DRG classifications,
recalibration of the MS-DRG relative weights, updates to the wage
index, and different geographic reclassifications). We include
outlier payments in the simulations because they may be affected by
changes in these parameters.
In order to appropriately estimate aggregate payments in our
modeling, we make several inclusions and exclusions so that the
appropriate universe of claims and charges are included. We discuss
IME Medicare Advantage payment amounts, fee-for-service only claims,
and charges for anti-hemophilic blood factor and organ acquisition
below.
First, consistent with our methodology established in the FY
2011 IPPS/LTCH PPS final rule (75 FR 50422 through 50433), because
IME Medicare Advantage payments are made to IPPS hospitals under
section 1886(d) of the Act, we believe these payments must be part
of these budget neutrality calculations. However, we note that it is
not necessary to include Medicare Advantage IME payments in the
outlier threshold calculation or the outlier offset to the
standardized amount because the statute requires that outlier
payments be not less than 5 percent nor more than 6 percent of total
``operating DRG payments,'' which does not include IME and DSH
payments. We refer readers to the FY 2011 IPPS/LTCH PPS final rule
for a complete discussion on our methodology of identifying and
adding the total Medicare Advantage IME payment amount to the budget
neutrality adjustments.
Second, consistent with the methodology in the FY 2012 IPPS/LTCH
PPS final rule, in order to ensure that we capture only fee-for-
service claims, we are only including claims with a ``Claim Type''
of 60 (which is a field on the MedPAR file that indicates a claim is
a fee-for-service claim).
Third, consistent with our methodology established in the FY
2011 IPPS/LTCH PPS final rule (75 FR 50422 through 50423), we
examined the MedPAR file and removed pharmacy charges for anti-
hemophilic blood factor (which are paid separately under the IPPS)
with an indicator of ``3'' for blood clotting with a revenue code of
``0636'' from the covered charge field for the budget neutrality
adjustments. We also removed organ acquisition charges from the
covered charge field for the budget neutrality adjustments because
organ acquisition is a pass-through payment not paid under the IPPS.
The Bundled Payments for Care Improvement (BPCI) initiative,
developed under the authority of section 3021 of the Affordable Care
Act (codified at section 1115A of the Act), is comprised of four
broadly defined models of care, which link payments for multiple
services beneficiaries receive during an episode of care. Under the
BPCI initiative, organizations enter into payment arrangements that
include financial and performance accountability for episodes of
care. On January 31, 2013, CMS announced the health care
organizations selected to participate in the BPCI initiative. For
additional information on the BPCI initiative, we refer readers to
the CMS Center for Medicare and Medicaid Innovation's Web site at:
https://innovation.cms.gov/initiatives/Bundled-Payments/.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53341 through
53343), for FY 2013 and subsequent fiscal years, we finalized a
methodology to treat hospitals that participate in the BPCI
initiative the same as prior fiscal years for the IPPS payment
modeling and rate setting process (which includes recalibration of
the MS-DRG relative weights, ratesetting, calculation of the budget
neutrality factors, and the impact analysis) without regard to a
hospital's participation within these bundled payment

[[Page 50974]]

models (that is, as if they are not participating in those models
under the BPCI initiative). Therefore, for FY 2014, we are
continuing to include all applicable data from subsection (d)
hospitals participating in BPCI Models 1, 2, and 4 in our IPPS
payment modeling and ratesetting calculations. We refer the reader
to the FY 2013 IPPS/LTCH PPS final rule for a complete discussion on
our final policy for the treatment of hospitals in the BPCI
initiative in our ratesetting process.
The Affordable Care Act established the Hospital Readmissions
Reduction Program and the Hospital VBP Program which adjust payments
to certain IPPS hospitals beginning with discharges on or after
October 1, 2012. Because the adjustments made under these programs
affect the estimation of aggregate IPPS payments, in this final
rule, consistent with our methodology established in the FY 2013
IPPS/LTCH PPS final rule (77 FR 53687 through 53688), we believe it
is appropriate to include adjustments for these programs within our
budget neutrality calculations. We discuss the treatment of these
two programs in the context of budget neutrality adjustments below.
Section 1886(q) of the Act establishes the ``Hospital
Readmissions Reduction Program'' effective for discharges from an
``applicable hospital'' beginning on or after October 1, 2012, under
which payments to those hospitals under section 1886(d) of the Act
are reduced to account for certain excess readmissions. Under the
Hospital Readmissions Reduction Program, for discharges beginning on
October 1, 2012 discharges from an ``applicable hospital'' are paid
at an amount equal to the product of the ``base operating DRG
payment amount'' and an ``adjustment factor'' that accounts for
excess readmissions for the hospital for the fiscal year plus any
applicable add-on payments. We refer readers to section V.G. of the
preamble of this final rule for full details of our implementation
of the Hospital Readmissions Reduction Program. We also note that
the Hospital Readmissions Reduction Program provided for under
section 1886(q) of the Act is not budget neutral.
Section 1886(o) of the Act requires the Secretary to establish a
Hospital VBP Program under which, for discharges beginning on
October 1, 2012, value-based incentive payments are made in a fiscal
year to eligible subsection (d) hospitals that meet performance
standards established for a performance period for that fiscal year.
As specified under section 1886(o)(7)(B)(i) of the Act, these value-
based incentive payments are funded by a reduction applied to each
eligible hospital's base-operating DRG payment amount, for each
discharge occurring in the fiscal year. As required by section
1886(o)(7)(A) of the Act, the total amount of allocated funds
available for value-based incentive payments with respect to a
fiscal year is equal to the total amount of base-operating DRG
payment reductions, as estimated by the Secretary. In a given fiscal
year, hospitals may earn a value-based incentive payment amount for
a fiscal year that is greater than, equal to, or less than the
reduction amount, based on their performance on quality measures
under the Hospital VBP Program. Thus, the Hospital VBP Program is
estimated to have no net effect on overall payments. We refer
readers to section V.H. of the preamble of this final rule for full
details regarding the Hospital VBP Program.
Both the hospital readmissions payment adjustment (reduction)
and the hospital VBP payment adjustment (redistribution) are applied
on a claim-by-claim basis by adjusting, as applicable, the base-
operating DRG payment amount for individual subsection (d)
hospitals, which affects the overall sum of aggregate payments on
each side of the comparison within the budget neutrality
calculations. For example, when we calculate the budget neutrality
factor for MS-DRG reclassification and recalibration of the relative
weights, we compare aggregate payments estimated using the prior
year's GROUPER and relative weights to estimated payments using the
new GROUPER and relative weights. (We refer readers to section
II.4.a. of this Addendum for full details.) Other factors, such as
the DSH and IME payment adjustments, are the same on both sides of
the comparison because we are only seeking to ensure that aggregate
payments do not increase or decrease as a result of the changes of
MS-DRG reclassification and recalibration.
In order to properly determine aggregate payments on each side
of the comparison, for FY 2014 and subsequent years, we are
continuing to apply the hospital readmissions payment adjustment and
the hospital VBP payment adjustment on each side of the comparison
consistent with the methodology we adopted in the FY 2013 IPPS/LTCH
PPS final rule (77 FR 53687 through 53688). That is, we are applying
the readmissions payment adjustment factor and the hospital VBP
payment adjustment factor on both sides of our comparison of
aggregate payments when determining all budget neutrality factors
described in section II.A.4. of this Addendum.
For the purpose of calculating the FY 2014 readmissions payment
adjustment factors, we are using excess readmission ratios and
aggregate payments for excess readmissions based on admissions from
the prior fiscal year's applicable period because hospitals have had
the opportunity to review and correct these data before the data
were made public under the policy we adopted regarding the reporting
of hospital-specific readmission rates, consistent with section
1886(q)(6) of the Act. For this final rule, we are calculating the
readmissions payment adjustment factors using excess readmission
ratios and aggregate payments for excess readmissions based on
admissions from the finalized applicable period for FY 2014 as
hospitals have had the opportunity to review and correct these data
under our policy regarding the reporting of hospital-specific
readmission rates consistent with section 1886(q)(6) of the Act. We
discuss our policy regarding the reporting of hospital-specific
readmission rates for FY 2014 in section V.G.3.f. of the preamble of
this final rule. (For additional information on our general policy
for the reporting of hospital-specific readmission rates, consistent
with section 1886(q)(6) of the Act, we refer readers to the FY 2013
IPPS/LTCH PPS final rule (77 FR 53399 through 53400).)
In addition, for this final rule, for the purpose of modeling
aggregate payments when determining all budget neutrality factors,
we are using proxy hospital VBP payment adjustment factors for FY
2014 that are based on data from a historical period because
hospitals have not yet had an opportunity to review and submit
corrections for their data from the FY 2014 performance period. (For
additional information on our policy regarding the review and
correction of hospital-specific measure rates under the Hospital VBP
Program, consistent with section 1886(o)(10)(A)(ii) of the Act, we
refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53578
through 53581), the CY 2012 OPPS/ASC final rule with comment period
(76 FR 74544 through 74547), and the Hospital Inpatient VBP final
rule (76 FR 26534 through 26536).)
The Affordable Care Act also establishes a new section 1886(r)
of the Act that modifies the methodology for computing the Medicare
DSH payment adjustment beginning in FY 2014. Beginning in FY 2014,
IPPS hospitals receiving DSH payment adjustments will receive an
empirically justified Medicare DSH payment of 25 percent of the
amount they previously would have received under the current
statutory formula under section 1886(d)(5)(F) of the Act for the
Medicare DSH payment adjustment. In accordance with section
1886(r)(2) of the Act, the remaining amount, equal to an estimate of
75 percent of what otherwise would have been paid as Medicare DSH
payments, reduced to reflect changes in the percentage of
individuals under age 65 who are uninsured, will be available to
make additional payments to Medicare DSH hospitals based on their
share of the total amount of uncompensated care reported by Medicare
DSH hospitals for a given time period. In order to properly
determine aggregate payments on each side of the comparison for
budget neutrality, prior to FY2014, we included estimated Medicare
DSH payments on both sides of our comparison of aggregate payments
when determining all budget neutrality factors described in section
II.A.4. of this Addendum.
To do this for FY 2014 and subsequent years, we are including
estimated empirically justified Medicare DSH payments that will be
paid in accordance with section 1886(r)(1) of the Act and are also
including estimates of the additional uncompensated care payments
made to hospitals receiving Medicare DSH as described by section
1886(r)(2) of the Act. That is, we are considering estimated
empirically justified Medicare DSH payments at 25 percent of what
would otherwise be paid and also the estimated additional
uncompensated care payments for hospitals receiving Medicare DSH on
both sides of our comparison of aggregate payments when determining
all budget neutrality factors described in section II.A.4. of this
Addendum.
We note that, when calculating total payments for budget
neutrality, to determine total payments for SCHs we model total
hospital-specific rate payments and total

[[Page 50975]]

federal rate payments and then include whichever one of the total
payments are greater. As discussed in section V.E.3.f. of the
preamble to this final rule and below, we are finalizing a
methodology under which we will take into consideration
uncompensated care payments in the comparison of payments under the
Federal rate and the hospital-specific rate for SCHs. Therefore, we
included estimated uncompensated care payments in this comparison.

a. Recalibration of MS-DRG Relative Weights and Updated Wage Index--
Budget Neutrality Adjustment

Section 1886(d)(4)(C)(iii) of the Act specifies that, beginning
in FY 1991, the annual DRG reclassification and recalibration of the
relative weights must be made in a manner that ensures that
aggregate payments to hospitals are not affected. As discussed in
section II.H. of the preamble of this final rule, we normalized the
recalibrated MS-DRG relative weights by an adjustment factor so that
the average case relative weight after recalibration is equal to the
average case relative weight prior to recalibration. However,
equating the average case relative weight after recalibration to the
average case relative weight before recalibration does not
necessarily achieve budget neutrality with respect to aggregate
payments to hospitals because payments to hospitals are affected by
factors other than average case relative weight. Therefore, as we
have done in past years, we are making a budget neutrality
adjustment to ensure that the requirement of section
1886(d)(4)(C)(iii) of the Act is met.
Section 1886(d)(3)(E)(i) of the Act requires us to update the
hospital wage index on an annual basis beginning October 1, 1993.
This provision also requires us to make any updates or adjustments
to the wage index in a manner that ensures that aggregate payments
to hospitals are not affected by the change in the wage index.
Section 1886(d)(3)(E)(i) of the Act requires that we implement the
wage index adjustment in a budget neutral manner. However, section
1886(d)(3)(E)(ii) of the Act sets the labor-related share at 62
percent for hospitals with a wage index less than or equal to 1.0,
and section 1886(d)(3)(E)(i) of the Act provides that the Secretary
shall calculate the budget neutrality adjustment for the adjustments
or updates made under that provision as if section 1886(d)(3)(E)(ii)
of the Act had not been enacted. In other words, this section of the
statute requires that we implement the updates to the wage index in
a budget neutral manner, but that our budget neutrality adjustment
should not take into account the requirement that we set the labor-
related share for hospitals with wage indices less than or equal to
1.0 at the more advantageous level of 62 percent. Therefore, for
purposes of this budget neutrality adjustment, section
1886(d)(3)(E)(i) of the Act prohibits us from taking into account
the fact that hospitals with a wage index less than or equal to 1.0
are paid using a labor-related share of 62 percent. Consistent with
current policy, for FY 2014, we are adjusting 100 percent of the
wage index factor for occupational mix. We describe the occupational
mix adjustment in section III.F. of the preamble of this final rule.
For FY 2014, to comply with the requirement that MS-DRG
reclassification and recalibration of the relative weights be budget
neutral for the Puerto Rico standardized amount and the hospital-
specific rates, we used FY 2012 discharge data to simulate payments
and compared aggregate payments using the FY 2013 labor-related
share percentages, the FY 2013 relative weights, and the FY 2013
pre-reclassified wage data and applied the FY 2014 hospital
readmissions payment adjustments and estimated FY 2014 hospital VBP
payment adjustments to aggregate payments using the FY 2013 labor-
related share percentages, the FY 2014 relative weights, and the FY
2013 pre-reclassified wage data and applied the same hospital
readmissions payment adjustments and estimated hospital VBP payment
adjustments. Based on this comparison, we computed a budget
neutrality adjustment factor equal to 0.997989. As discussed in
section IV. of this Addendum, we also are applying the MS-DRG
reclassification and recalibration budget neutrality factor of
0.997989 to the hospital-specific rates that are effective for cost
reporting periods beginning on or after October 1, 2013.
In order to meet the statutory requirements that we do not take
into account the labor-related share of 62 percent when computing
wage index budget neutrality, it was necessary to use a three-step
process to comply with the requirements that MS-DRG reclassification
and recalibration of the relative weights and the updated wage index
and labor-related share have no effect on aggregate payments for
IPPS hospitals. We first determined a MS-DRG reclassification and
recalibration budget neutrality factor of 0.997989 (by using the
same methodology described above to determine the MS-DRG
reclassification and recalibration budget neutrality factor for the
Puerto Rico standardized amount and hospital-specific rates).
Secondly, to compute a budget neutrality factor for wage index and
labor-related share changes, we used FY 2012 discharge data to
simulate payments and compared aggregate payments using the FY 2014
relative weights and the FY 2013 pre-reclassified wage indices,
applied the FY 2013 labor-related share of 68.8 percent to all
hospitals (regardless of whether the hospital's wage index was above
or below 1.0) and applied the FY 2014 hospital readmissions payment
adjustment and the FY 2014 estimated hospital VBP payment adjustment
when estimating aggregate payments using the FY 2014 relative
weights and the FY 2014 pre-reclassified wage indices, applied the
labor-related share for FY 2014 of 69.6 percent to all hospitals
(regardless of whether the hospital's wage index was above or below
1.0), and applied the same FY 2014 hospital readmissions payment
adjustments and estimated FY 2014 hospital VBP payment adjustments.
In addition, we applied the MS-DRG reclassification and
recalibration budget neutrality factor (derived in the first step)
to the rates that were used to simulate payments for this comparison
of aggregate payments from FY 2013 to FY 2014. By applying this
methodology, we determined a budget neutrality factor of 0.999947
for changes to the wage index. Finally, we multiplied the MS-DRG
reclassification and recalibration budget neutrality factor of
0.997989 (derived in the first step) by the budget neutrality factor
of 0.999947 for changes to the wage index (derived in the second
step) to determine the MS-DRG reclassification and recalibration and
updated wage index budget neutrality factor of 0.997936.

b. Reclassified Hospitals--Budget Neutrality Adjustment

Section 1886(d)(8)(B) of the Act provides that certain rural
hospitals are deemed urban. In addition, section 1886(d)(10) of the
Act provides for the reclassification of hospitals based on
determinations by the MGCRB. Under section 1886(d)(10) of the Act, a
hospital may be reclassified for purposes of the wage index.
Under section 1886(d)(8)(D) of the Act, the Secretary is
required to adjust the standardized amount to ensure that aggregate
payments under the IPPS after implementation of the provisions of
sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the Act are equal
to the aggregate prospective payments that would have been made
absent these provisions. We note that the wage index adjustments
provided for under section 1886(d)(13) of the Act are not budget
neutral. Section 1886(d)(13)(H) of the Act provides that any
increase in a wage index under section 1886(d)(13) shall not be
taken into account in ``applying any budget neutrality adjustment
with respect to such index'' under section 1886(d)(8)(D) of the Act.
To calculate the budget neutrality factor for FY 2014, we used FY
2012 discharge data to simulate payments and compared total IPPS
payments with FY 2014 relative weights, FY 2014 labor-related share
percentages, and FY 2014 wage data prior to any reclassifications
under sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the Act and
applied the FY 2014 hospital readmissions payment adjustments and
the estimated FY 2014 hospital VBP payment adjustments to total IPPS
payments with FY 2014 relative weights, FY 2014 labor-related share
percentages, and FY 2014 wage data after such reclassifications and
applied the same hospital readmissions payment adjustments and the
estimated hospital VBP payment adjustments. Based on these
simulations, we calculated an adjustment factor of 0.990718 to
ensure that the effects of these provisions are budget neutral,
consistent with the statute.
The FY 2014 budget neutrality adjustment factor was applied to
the standardized amount after removing the effects of the FY 2013
budget neutrality adjustment factor. We note that the FY 2014 budget
neutrality adjustment reflects FY 2014 wage index reclassifications
approved by the MGCRB or the Administrator.

c. Rural Floor Budget Neutrality Adjustment

As noted above, as discussed in section III.G. 2.b. of the
preamble of this final rule, in the FY 2012 IPPS/LTCH PPS final
rule, we extended the imputed floor calculated under the original
methodology through FY 2013 (76 FR 51594). In the FY 2013 IPPS/LTCH
PPS final rule, we established an alternative

[[Page 50976]]

methodology for calculating the imputed floor and established a
policy that the minimum wage index value for an all-urban state
would be the higher of the value determined under the original
methodology or the value computed using the alternative methodology
(77 FR 53368 through 53369). We make an adjustment to the wage index
to ensure that aggregate payments to hospitals after implementation
of the rural floor under section 4410 of the BBA (Pub.L. 105-33) and
the imputed floor under Sec. 412.64(h)(4) of the regulations are
not affected. In addition, we note in section III.G.2.b. of the
preamble of this final rule, we are extending the imputed floor
using the higher of the value determined under the original
methodology or the alternative methodology for FY 2014. Consistent
with the methodology for treating the imputed floor, similar to the
methodology we used in the FY 2013 IPPS/LTCH PPS final rule (77 FR
53368 through 53369), we included this alternative methodology for
computing the imputed floor index in the calculation of the uniform,
national rural floor budget neutrality adjustment for FY 2014. Also,
consistent with section 3141 of the Affordable Care Act and as
discussed in section III.G. of the preamble of this final rule, the
budget neutrality adjustment for the rural and imputed floors is a
national adjustment to the wage index.
Since FY 2012, there has been one hospital in rural Puerto Rico.
Therefore, similar to our calculation in the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51593 and 51788) and the FY 2013 IPPS/LTCH PPS
final rule (77 FR 53689), for FY 2014, we are calculating a national
rural Puerto Rico wage index (used to adjust the labor-related share
of the national standardized amount for hospitals located in Puerto
Rico which receive 75 percent of the national standardized amount)
and a rural Puerto Rico-specific wage index (which is used to adjust
the labor-related share of the Puerto Rico-specific standardized
amount for hospitals located in Puerto Rico that receive 25 percent
of the Puerto Rico-specific standardized amount). Because this rural
Puerto Rico hospital still has no established wage data, our
calculation is based on the policy adopted in the FY 2008 IPPS final
rule with comment period (72 FR 47323). A complete discussion
regarding the computation of the rural Puerto Rico wage index can be
found in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51594).
To calculate the national rural floor and imputed floor budget
neutrality adjustment factor and the Puerto Rico-specific rural
floor budget neutrality adjustment factor, we used FY 2012 discharge
data and FY 2014 post-reclassified national and Puerto Rico-specific
wage indices to simulate IPPS payments. First, we compared the
national and Puerto Rico-specific simulated payments without the
national rural floor and imputed floor and Puerto Rico-specific
rural floor applied to the national and Puerto Rico-specific
simulated payments with the national rural floor and imputed floor
and Puerto Rico-specific rural floor applied to determine the
national rural budget neutrality adjustment factor of 0.990150 and
the Puerto Rico-specific budget neutrality adjustment factor of
0.990897. The national adjustment was applied to the national wage
indices to produce a national rural floor budget neutral wage index
and the Puerto Rico-specific adjustment was applied to the Puerto
Rico-specific wage indices to produce a Puerto Rico-specific rural
floor budget neutral wage index.
Comment: Many commenters opposed the continued application of a
nationwide rural floor budget neutrality adjustment. One commenter
noted that, under the current rural floor policy, all hospitals in
Massachusetts are eligible for the rural floor due to one rural
hospital that results in an approximate 4.4 percent increase in
payments for Massachusetts hospitals, which creates a disparity for
other hospitals around the country. The commenter also noted that,
under the rural floor policy, hospitals in Connecticut will receive
an increase of approximately 4.9 percent in payments due to the
rural floor. The commenters believed that a nationwide rural floor
budget neutrality adjustment initiates a policy that unfairly skews
Medicare payments, thus reducing payments to thousands of hospitals
while benefiting less than 5 percent of hospitals. The commenter
requested that CMS reverse this ``misguided and harmful policy.''
Another commenter noted that a change to the nationwide rural floor
budget neutrality adjustment would require legislative action but
urged CMS to ``contemplate any and all other options within its
authority to mitigate the impact of the policy or counter one
state's attempt to manipulate the Medicare payment system.'' Another
commenter stated that hospitals nationwide are struggling with
reduced payments and impending cuts and believed that ``scarce
funding should reward value and efficiency in health care and not be
diverted based on artful manipulation of obscure payment formulas.''
Response: We thank the commenters for their comments and share
the concerns of the commenters. Section 3141 of the Affordable Care
Act (Pub. L. 111-148) requires that a national budget neutrality
adjustment be applied in implementing the rural floor so CMS cannot
change this policy. The commenter did not suggest any alternatives
to contemplate to mitigate the impact of this policy and CMS does
not believe that it currently has the authority to implement
alternatives to mitigate the impact. Therefore, barring a
legislative change by Congress, we are unable to change the rural
floor budget neutrality adjustment from a national to statewide
adjustment.
Comment: One commenter stated that ``CMS should consider
implementing a policy for both IPPS and OPPS that would result in
only hospitals in rural areas being included in the statewide rural
floor wage index used for urban hospitals in areas with wage indexes
that are lower than the statewide rural wage index.'' The commenter
believed that such a policy would prevent urban hospitals from
reclassifying to rural status simply to improve the rural wage index
which might be used as a floor for urban hospitals in lower wage
areas of a State. The commenter added that it believed that CMS has
the regulatory authority to make such a policy change without the
need for legislation.
Response: We thank the commenter for its comments. As the
commenter requested, we will consider the commenter's suggestion in
future rulemaking.

d. Case-Mix Budget Neutrality Adjustment

Below we summarize the recoupment adjustment to the FY 2014
payment rates, as required by section 631 of ATRA, to account for
the increase in aggregate payments as a result of not completing the
prospective adjustment authorized under section 7(b)(1)(A) of Public
Law 110-90 until FY 2013. We refer readers to section II.D. of the
preamble of this final rule for a complete discussion regarding our
policies finalized in this final rule and previously finalized
policies (including our historical adjustments to the payment rates)
relating to the effect of changes in documentation and coding that
do not reflect real changes in case-mix. We note that section II.D.
of the preamble of this final rule also includes a discussion on
documentation and coding effects that occurred through FY 2010,
including the request for public comments in the FY 2014 IPPS/LTCH
PPS proposed rule as to whether any portion of the proposed -0.8
percent recoupment adjustment discussed below should be reduced and
instead applied as a prospective adjustment for the cumulative MS-
DRG documentation and coding effect through FY 2010.

(1) Recoupment or Repayment Adjustment Authorized by Section 631 of the
American Taxpayer Relief Act of 2012 (ATRA) to the National
Standardized Amount

Section 631 of the ATRA amended section 7(b)(1)(B) of Public Law
110-90 to require the Secretary to make a recoupment adjustment
totaling $11 billion by FY 2017. Our actuaries estimate that if CMS
were to fully account for the $11 billion recoupment required by
section 631 of ATRA in FY 2014, a onetime -9.3 percent adjustment to
the standardized amount would be necessary. It is often our practice
to delay or phase-in rate adjustments over more than 1 year, in
order to moderate the effect on rates in any 1 year. Therefore,
consistent with the policies that we have adopted in many similar
cases, we are applying a -0.8 percent adjustment to the standardized
amount in FY 2014. We note that, as section 631 of the ATRA
instructs CMS to make a recoupment adjustment only to the
standardized amount, this adjustment will not apply to the Puerto
Rico-specific rate.

e. Adjustment to Offset the Cost of the Policy on Admission and Medical
Review Criteria for Hospital Inpatient Services Under Medicare Part A

As discussed previously in section XI.C. of the preamble of this
final rule, we are finalizing, as proposed, our proposal to revise
our Part B inpatient billing policy to allow payment of all hospital
services that were furnished and would have been reasonable and
necessary if the beneficiary had been treated as an outpatient,
rather than admitted to the hospital as an inpatient, except for
those services specifically requiring an outpatient status. This
policy will apply when CMS or a Medicare review contractor
determines that the hospital admission was

[[Page 50977]]

not reasonable and necessary or when a hospital determines after a
beneficiary has been discharged that the beneficiary should have
received hospital outpatient services rather than hospital inpatient
services. We are also finalizing our policy to continue applying the
timely filing restriction to the billing of all Part B inpatient
services, under which claims for Part B services must be filed
within 1 year from the date of service. As we discuss in section
XI.C. of the preamble of this final rule, in addition to evaluating
our policy related to Part B inpatient billing following denials of
Part A inpatient claims on the basis that the inpatient admission
was not reasonable and necessary or following self-audit, we also
believe that it is important to provide more clarity regarding the
relationship between inpatient admission decisions and Medicare
payment. Toward that end, in section XI.C. of the preamble of this
final rule, we are clarifying that a beneficiary becomes a hospital
inpatient when formally admitted following the physician order for
hospital inpatient admission, and will also clarify when we believe
that hospital inpatient admissions are reasonable and necessary
based on how long beneficiaries have spent, or are reasonably
expected to spend, in the hospital as inpatients. Under our final
policy, Medicare's external review contractors will presume that
hospital inpatient admissions are reasonable and necessary for
beneficiaries who require more than one Medicare utilization day
(defined by encounters crossing 2 ``midnights'') in the hospital
receiving medically necessary services. Similarly, we will presume
that generally services spanning less than 2 midnights should have
been provided on an outpatient basis, unless there is clear
physician documentation in the medical record supporting the
physician's order and expectation that the beneficiary required an
inpatient level of care. (For a complete discussion on our inpatient
admission guidelines, including our time-based presumption of
medical necessity for hospital inpatient services based on the
beneficiary's length of stay as part of our medical review criteria
for payment of hospital inpatient services under Medicare Part A, we
refer readers to section XI.C. of this final rule.)
Our actuaries project a net increase in IPPS expenditures as a
result of the policy that medical review of inpatient admissions
will include a presumption that hospital inpatient admissions are
reasonable and necessary for beneficiaries who require more than 1
Medicare utilization day (defined by encounters crossing 2
``midnights'') in the hospital receiving medically necessary
services after inpatient admission, discussed in section XI.C. of
the preamble of this final rule (as summarized above). These
additional expenditures result from an expected net increase in
hospital inpatient encounters due to some encounters spanning more
than 2 midnights moving to the IPPS from the OPPS, and some
encounters of less than 2 midnights moving from the IPPS to the
OPPS. In making this projection, the actuaries analyzed Medicare
claims data for extended hospital outpatient encounters and shorter
stay hospital inpatient encounters, and estimated the number of
encounters that are expected to shift from outpatient to inpatient
and vice versa (that is, the number that are expected to shift from
inpatient to outpatient). In section XI.C.4. of the preamble of this
final rule, we discuss that our actuaries estimate that this
projected net increase in inpatient encounters will increase IPPS
expenditures by approximately $220 million. In light of the
widespread impact on the IPPS of the policy and the systemic nature
of the issue, we believe that it is appropriate to use our
exceptions and adjustments authority under section 1886(d)(5)(I)(i)
of the Act to offset the estimated $220 million in additional IPPS
expenditures associated with this policy by reducing the national
standardized amount, the Puerto Rico-specific standardized amount,
and hospital-specific rates by 0.2 percent (or a 0.998 adjustment).
We refer readers to section XI.C. of the preamble of this final rule
for a complete discussion on this adjustment to offset the estimated
cost of the time-based presumption of medical necessity for hospital
inpatient services based on the beneficiary's length of stay as part
of our medical review criteria for hospital inpatient services under
Medicare Part A.

f. Rural Community Hospital Demonstration Program Adjustment

As discussed in section V.K. of the preamble of this final rule,
section 410A of Public Law 108-173 originally required the Secretary
to establish a demonstration program that modifies reimbursement for
inpatient services for up to 15 small rural hospitals. Section
410A(c)(2) of Public Law 108-173 requires that ``[i]n conducting the
demonstration program under this section, the Secretary shall ensure
that the aggregate payments made by the Secretary do not exceed the
amount which the Secretary would have paid if the demonstration
program under this section was not implemented.''
Sections 3123 and 10313 of the Affordable Care Act extended the
demonstration program for an additional 5-year period, and allowed
up to 30 hospitals to participate in 20 States with low population
densities determined by the Secretary. (In determining which States
to include in the expansion, the Secretary is required to use the
same criteria and data that the Secretary used to determine the
States for purposes of the initial 5-year period.) In the FY 2013
IPPS/LTCH PPS final rule (77 FR 53449 through 53453), in order to
achieve budget neutrality, we adjusted the national IPPS rates by an
amount sufficient to account for the added costs of this
demonstration program as described in section IV.K. of that final
rule. In other words, we applied budget neutrality across the
payment system as a whole rather than merely across the participants
of this demonstration program, consistent with past practice. We
stated that we believe that the language of the statutory budget
neutrality requirement permits the agency to implement the budget
neutrality provision in this manner. The statutory language requires
that ``aggregate payments made by the Secretary do not exceed the
amount which the Secretary would have paid if the demonstration . .
. was not implemented,'' but does not identify the range across
which aggregate payments must be held equal.
For FY 2014, we are adjusting the national IPPS payment rates
according to the same methodology that we used for FY 2013, as set
forth in section V.K. of the preamble of this final rule, to account
for the estimated additional costs of the demonstration program for
FY 2014. For this final rule, the estimated amount of this
adjustment to the national IPPS payment rates for FY 2014 is
$46,549,861. We note that we proposed that if updated data became
available prior to the publication of the FY 2014 IPPS/LTCH PPS
final rule, we would use that data, to the extent appropriate, to
estimate the costs of the demonstration program in FY 2014.
Therefore, the estimated budget neutrality offset amount changed in
this final rule to reflect the updated data.
In addition, we proposed that if settled cost reports for all of
the demonstration hospitals that participated in the applicable
fiscal year (2007, 2008, 2009 or 2010) were made available prior to
the FY 2014 IPPS/LTCH PPS final rule, we would incorporate into the
FY 2014 budget neutrality offset amount any additional amounts by
which the final settled costs of the demonstration in any of these
years (as described previously) exceeded the budget neutrality
offset amount applicable to such year as finalized in the respective
year's IPPS final rule. Because finalized cost reports for FY 2007
have become available since the publication of the proposed rule, we
are including in the budget neutrality offset amount for FY 2014 the
amount by which the final settled costs of the demonstration program
for FY 2007 (as shown in the finalized cost reports for hospitals
that participated in the demonstration program in FY 2007) exceeded
the budget neutrality offset amount that was finalized in the FY
2007 IPPS final rule. This amount is $6,039,880.
Therefore, the total amount that will be applied to the FY 2014
national IPPS rates as an offset to account for the additional costs
of the demonstration program is the sum of these two amounts--
$52,589,741. Accordingly, using the most recent data available to
account for the estimated costs of the demonstration program, for FY
2014, we computed a factor of 0.999415 for the rural community
hospital demonstration program budget neutrality adjustment that
will be applied to the IPPS standard Federal payment rate. We
anticipate that finalized cost reports for FYs 2008, 2009, 2010, and
2011 will be available prior to the FY 2015 IPPS/LTCH PPS proposed
rule.

g. Outlier Payments

Section 1886(d)(5)(A) of the Act provides for payments in
addition to the basic prospective payments for ``outlier'' cases
involving extraordinarily high costs. To qualify for outlier
payments, a case must have costs greater than the sum of the
prospective payment rate for the DRG, any IME and DSH payments, any
new technology add-on payments, and the ``outlier threshold'' or
``fixed-loss'' amount (a dollar amount by which the costs of a case
must exceed payments in order to qualify for an outlier payment). We
refer to the sum of the

[[Page 50978]]

prospective payment rate for the DRG, any IME and DSH payments, any
new technology add-on payments, and the outlier threshold as the
outlier ``fixed-loss cost threshold.'' To determine whether the
costs of a case exceed the fixed-loss cost threshold, a hospital's
CCR is applied to the total covered charges for the case to convert
the charges to estimated costs. Payments for eligible cases are then
made based on a marginal cost factor, which is a percentage of the
estimated costs above the fixed-loss cost threshold. The marginal
cost factor for FY 2014 is 80 percent, the same marginal cost factor
we have used since FY 1995 (59 FR 45367).
In accordance with section 1886(d)(5)(A)(iv) of the Act, outlier
payments for any year are projected to be not less than 5 percent
nor more than 6 percent of total operating DRG payments (which does
not include IME and DSH payments) plus outlier payments. When
setting the outlier threshold, we compute the 5.1 percent target by
dividing the total operating outlier payments by the total operating
DRG payments plus outlier payments. We do not include any other
payments such as IME and DSH within the outlier target amount.
Therefore, it is not necessary to include Medicare Advantage IME
payments in the outlier threshold calculation. Section 1886(d)(3)(B)
of the Act requires the Secretary to reduce the average standardized
amount by a factor to account for the estimated proportion of total
DRG payments made to outlier cases. Similarly, section
1886(d)(9)(B)(iv) of the Act requires the Secretary to reduce the
average standardized amount applicable to hospitals located in
Puerto Rico to account for the estimated proportion of total DRG
payments made to outlier cases. More information on outlier payments
may be found on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/outlier.html.

(1) FY 2014 Outlier Fixed-Loss Cost Threshold

In the FY 2014 IPPS/LTCH PPS proposed rule, we stated that in
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53691 through 53696), we
received comments from the public concerning our methodology for
calculating the outlier threshold. Specifically, many commenters
expressed concern that CMS is still not reaching the 5.1 percent
target for outlier payments and believed there is still room for
improvement. The commenters made various suggestions to improve the
current methodology used to calculate the outlier threshold. In that
final rule we responded that we appreciate the commenters providing
multiple alternative methodologies to adjust the CCRs used in our
outlier fixed-loss cost threshold. Due to the many options the
commenters presented, we stated that the most prudent approach was
to study the merits of each methodology and, if appropriate, make a
proposal in the FY 2014 IPPS/LTCH PPS proposed rule if we believed
that making a change to our current methodology would improve our
methodology for projecting the outlier fixed-loss cost threshold.
Since publication of the FY 2013 IPPS/LTCH PPS final rule, we have
studied the merits of the commenters' suggestions to improve the
outlier threshold methodology. In the proposed rule, we proposed the
following outlier threshold methodology for FY 2014 with revisions
from the prior fiscal year.
As we have done in the past, to calculate the proposed FY 2014
outlier threshold, we simulated payments by applying proposed FY
2014 payment rates and policies using cases from the FY 2012 MedPAR
file. Therefore, in order to determine the proposed FY 2014 outlier
threshold, we inflated the charges on the MedPAR claims by 2 years,
from FY 2012 to FY 2014. Since FY 2005, we have used the same
methodology to inflate charges. For FY 2014 and subsequent years, we
proposed to further refine our current methodology which uses more
recent data that reflect the rate-of-change in hospital charges
under the new outlier policy. In the FY 2005 IPPS final rule (69 FR
49277), to compute the 1-year average annualized rate-of-change in
charges per case, we stated that we were taking the unprecedented
step of comparing the average charge per case from the most recent 6
month period of charge data available to the average charge per case
from the same 6 month period from the prior year rather than using a
full year of charge data. At that time, we noted that we adopted
this methodology to calculate the outlier threshold for FY 2005 as a
result of the special circumstances surrounding the revisions to the
outlier payment methodology; specifically the exceptionally high
rate of hospital charge inflation that was reflected in the data for
FYs 2001, 2002, and 2003. We also noted that we would continue to
consider other methodologies for determining charge inflation when
calculating the outlier threshold in the future. We refer the reader
to the FY 2005 IPPS final rule for a complete discussion on this
methodology.
For FY 2014, if we had proposed to continue to use our current
methodology that we adopted in FY 2005, we would have computed the
1-year average annualized rate-of-change in charges per case by
comparing the last quarter of FY 2011 in combination with the first
quarter of FY 2012 (July 1, 2011, through December 31, 2011) to the
last quarter of FY 2012 in combination with the first quarter of FY
2013 (July 1, 2012, through December 31, 2012). This rate-of-change
was 4.7 percent (1.046908) or 9.6 percent (1.096016) over 2 years.
After 9 years of using the same methodology, the special
circumstances of the exceptionally high rate of hospital charge
inflation that was reflected in the data for FYs 2001, 2002, and
2003 may not be as applicable. We believe the policies that we
implemented in the FY 2003 Outlier final rule (outlier
reconciliation and no longer assigning the statewide average CCR for
those hospitals that fall below a CCR floor) have helped control
inflation of hospital charges.
Therefore, instead of comparing periods of the most recent 6
months of charge data, we proposed to adopt a new methodology to
compare periods of 1-year of the most recent charge data in order to
inflate charges. We stated that we believe a methodology that is
based on 1-year of charge data will provide a more stable measure to
project the average charge per case since a 6 month measure
inherently uses fewer claims than a 1-year measure, which makes it
more susceptible to fluctuations in the average charge per case as a
result of any significant charge increases or decreases by
hospitals. Under this new proposed methodology, to compute the 1-
year average annualized rate-of-change in charges per case for FY
2014, we proposed to compare the second quarter of FY 2011 through
the first quarter of FY 2012 (January 1, 2011, through December 31,
2011) to the second quarter of FY 2012 through the first quarter of
FY 2013 (January 1, 2012, through December 31, 2012). This rate-of-
change was 4.8 percent (1.048458) or 9.9 percent (1.099264) over 2
years.
Comment: Many commenters supported the use of the most recent 1-
year period of charge data instead of the most recent 6 months of
charge data to inflate charges.
Response: We appreciate the commenters' support and are
finalizing, as proposed, the policy to use the most recent 1-year
period of charge data for the reasons stated above. We refer readers
to the discussion below for complete details concerning our final
outlier threshold methodology.
As we have done in the past, we proposed to establish the
proposed FY 2014 outlier threshold using hospital CCRs from the
December 2012 update to the Provider-Specific File (PSF)--the most
recent available data at the time of the proposed rule. For FY 2014,
we also proposed to continue to apply an adjustment factor to the
CCRs to account for cost and charge inflation (as explained below).
In the FY 2007 IPPS final rule (71 FR 48150), we worked with the
Office of Actuary to develop the current methodology used to adjust
the CCRs. We have used this same methodology to adjust the CCRs from
FY 2007 through FY 2013.
Over the years, many commenters have stated that our current
methodology is unnecessary complicated. In addition, as mentioned
above, in the FY 2013 IPPS/LTCH PPS final rule, commenters made
various suggestions to improve the current methodology used to
calculate the outlier threshold and we stated that we would study
the merits of each methodology and, if appropriate, make a proposal
in the FY 2014 IPPS/LTCH PPS proposed rule if we believe making a
change to our current methodology would improve our projection of
the outlier fixed-loss cost threshold. In that same final rule, some
commenters suggested the use of historical CCR data from the PSF to
compute a rate-of-change in CCRs. Under this approach, the
commenters compared the national average case-weighted operating and
capital CCR from the most recent update of the PSF to the national
average case-weighted operating and capital CCR from the same period
of the prior year. The commenters stated that although this
adjustment would be based on 1 year's data, the commenters believed
that the use of historical data to adjust the CCRs is consistent
with CMS' estimation of charge inflation.
After reviewing the commenters' suggestion, we agree that the
use of historical data to adjust the CCRs is simpler and is
consistent with CMS' estimation of charge inflation.

[[Page 50979]]

Therefore, for FY 2014, we proposed to adjust the CCRs from the
December 2012 update of the PSF by comparing the percentage change
in the national average case-weighted operating CCR and capital CCR
from the December 2011 update of the PSF to the national average
case-weighted operating CCR and capital CCR from the December 2012
update of the PSF. We note that we used total transfer-adjusted
cases from FY 2012 to determine the national average case-weighted
CCRs for both sides of the comparison. We stated that we believe it
is appropriate to use the same case count on both sides of the
comparison as this will produce the true percentage change in the
average case-weighted operating and capital CCR from one year to the
next without any effect from a change in case count on different
sides of the comparison.
Using the proposed methodology above, we calculated a December
2011 operating national average case-weighted CCR of 0.303178 and a
December 2012 operating national average case-weighted CCR of
0.295049. We then calculated the percentage change between the two
national operating case-weighted CCRs by subtracting the December
2011 operating national average case-weighted CCR from the December
2012 operating national average case-weighted CCR and then dividing
by the December 2011 national operating average case-weighted CCR.
This resulted in a national operating CCR adjustment factor of
0.973187.
We used the same methodology proposed above to also adjust the
capital CCRs. Specifically, we calculated a December 2011 capital
national average case-weighted CCR of 0.025994 and a December 2012
capital national average case-weighted CCR of 0.0249373. We then
calculated the percentage change between the two national capital
case-weighted CCRs by subtracting the December 2011 capital national
average case-weighted CCR from the December 2012 capital national
average case-weighted CCR and then dividing by the December 2011
capital national average case-weighted CCR. This resulted in a
national capital CCR adjustment factor of 0.959337.
Consistent with our methodology in the past and as stated in the
FY 2009 IPPS final rule (73 FR 48763), we stated that we continue to
believe it is appropriate to apply only a 1-year adjustment factor
to the CCRs. On average, it takes approximately 9 months for a
fiscal intermediary or MAC to tentatively settle a cost report from
the fiscal year end of a hospital's cost reporting period. The
average ``age'' of hospitals' CCRs from the time the fiscal
intermediary or the MAC inserts the CCR in the PSF until the
beginning of FY 2009 is approximately 1 year. Therefore, as stated
above, we believe a 1-year adjustment factor to the CCRs is
appropriate.
Comment: One commenter matched the CCRs from the proposed rule
impact file to the December 2012 PSF and found that 221 providers
did not match. The commenter noted that it calculated a weighted
mean deviation of -4.7 percent, which is greater than the historical
average deviation from the years 2008 through 2013 which ranged from
-0.3 percent to 3.4 percent. The commenter concluded that the -4.7
percent weighted mean deviation demonstrates that CMS used
significantly outdated CCRs to make projections for the FY 2014
fixed-loss threshold. The commenter recommended that this error be
rectified in the final rule, which will result in a substantially
reduced threshold for the final rule. In addition, the commenter
recommended that CMS use the most recently updated PSF file for the
final rule.
Response: With regard to the commenter's finding 221 providers
with CCRs from the proposed rule impact file that did not match the
December 2012 PSF, we note that we apply the following edits to
providers' CCRs in the PSF. We believe these edits are appropriate
in order to accurately model the outlier threshold. We first search
for Indian Health providers and those providers assigned the
statewide average CCR from the current fiscal year. We then replace
these CCRs with the statewide average CCR for the upcoming fiscal
year. We also assign the statewide average CCR (for the upcoming
fiscal year) to those providers that have no value in the CCR field
in the PSF. We believe that the edits above are the reason why the
commenter found 221 providers that had CCRs in the impact file that
did not match the CCRs in the December 2012 PSF. With regard to the
comment concerning the weighted mean deviation, we believe this
measure can fluctuate depending on the pool of providers whose PSF
CCR is replaced with the statewide average CCR for the upcoming
fiscal year. We believe we have accurately calculated and applied
these statewide average CCRs and will continue to monitor any large
variances (to the weighted mean deviation) in the future. With
regard to using the most recently updated PSF file for the final
rule, we respond to a similar comment below.
Comment: Many commenters supported the proposed revised
methodology to adjust hospital CCRs used in the calculation of the
outlier fixed-loss cost threshold.
Response: We appreciate the commenters' support and are
finalizing, as proposed, to use the methodology above to adjust
hospital CCRs in the calculation of the outlier fixed-loss cost
threshold.
As stated above, for FY 2014, we applied the proposed FY 2014
rates and policies using cases from the FY 2012 MedPAR files in
calculating the proposed outlier threshold.
As discussed in section III.B.3. of the preamble to the FY 2011
IPPS/LTCH PPS final rule (75 FR 50160 and 50161) and in section
III.G.3. of the preamble of this final rule, in accordance with
section 10324(a) of the Affordable Care Act, beginning in FY 2011,
we created a wage index floor of 1.00 for all hospitals located in
States determined to be frontier States. We noted that the frontier
State floor adjustments will be calculated and applied after rural
and imputed floor budget neutrality adjustments are calculated for
all labor market areas, in order to ensure that no hospital in a
frontier State will receive a wage index lesser than 1.00 due to the
rural and imputed floor adjustment. In accordance with section
10324(a) of the Affordable Care Act, the frontier State adjustment
will not be subject to budget neutrality, and will only be extended
to hospitals geographically located within a frontier State.
However, for purposes of estimating the proposed outlier threshold
for FY 2014, it was necessary to apply this provision by adjusting
the wage index of those eligible hospitals in a frontier State when
calculating the outlier threshold that results in outlier payments
being 5.1 percent of total payments for FY 2014. If we did not take
into account this provision, our estimate of total FY 2014 payments
would be too low, and, as a result, our proposed outlier threshold
would be too high, such that estimated outlier payments would be
less than our projected 5.1 percent of total payments.
As we did in establishing the FY 2009 outlier threshold (73 FR
57891), in our projection of FY 2014 outlier payments, we proposed
not to make any adjustments for the possibility that hospitals' CCRs
and outlier payments may be reconciled upon cost report settlement.
We stated that we continue to believe that, due to the policy
implemented in the June 9, 2003 Outlier final rule (68 FR 34494),
CCRs will no longer fluctuate significantly and, therefore, few
hospitals will actually have these ratios reconciled upon cost
report settlement. In addition, it is difficult to predict the
specific hospitals that will have CCRs and outlier payments
reconciled in any given year. We also noted that reconciliation
occurs because hospitals' actual CCRs for the cost reporting period
are different than the interim CCRs used to calculate outlier
payments when a bill is processed. Our simulations assume that CCRs
accurately measure hospital costs based on information available to
us at the time we set the outlier threshold. For these reasons, we
proposed not to make any assumptions about the effects of
reconciliation on the outlier threshold calculation.
Comment: One commenter was concerned that CMS did not consider
outlier reconciliation in the development of the outlier threshold.
The commenter stated that CMS did not provide any objective data
concerning the number of hospitals that have been subject to outlier
reconciliation and the amounts recovered. The commenter further
stated that, in February 2003, the Secretary signed an emergency
interim final regulation that would have corrected the outlier
threshold and included outlier reconciliation payments (in the
calculation of the outlier threshold) but that rule was not issued
because of objections from the Office of Management and Budget. The
commenter asserted that if it was possible to account for outlier
reconciliation payments at the initial implementation of the outlier
reconciliation policy in the calculation of the threshold, it should
be possible to do so 10 years later. The commenter also searched
cost reports from the HCRIS database for the years 2003 through 2009
(Form CMS-2552-96) and, based on these data, provided its estimate
of the annual amounts recovered by CMS through reconciliation which
totaled $85,797,699. The commenter believed that these data can be
used to provide a baseline and trend information to assess whether
outlier reconciliation is a significant factor to be considered in
the development of the

[[Page 50980]]

outlier threshold. The commenter noted that it was unable to extract
outlier reconciliation payment information from cost reports filed
under Form CMS-2552-10; the commenter was puzzled as to why this
data was not being captured. The commenter also requested that CMS
disclose in the final rule and future rulemaking the amount CMS has
recovered through reconciliation by year.
Response: We received a similar comment in response to the
policies presented in last year's rule, and we appreciate the
commenter, again, informing us of its concern regarding our policy
of not including outlier reconciliation within the development of
the outlier fixed-loss cost threshold. The commenter provided data
from HCRIS that demonstrated total outlier reconciliation payments
from 2003-2009 was $85,797,699, which equates to approximately
$12,256,814 annually. We do not believe that this relatively small
annual amount would have an impact on the outlier threshold because
total outlier payments are approximately $4.3 billion. Further, with
regard to the interim final rule referenced by the commenter that
would have adjusted the outlier threshold by accounting for payment
changes due to outlier reconciliation, that rule was never finalized
or implemented. As stated in prior final rules, we continue to
believe that, due to the policy implemented in the June 9, 2003
outlier final rule (68 FR 34494), CCRs will no longer fluctuate
significantly and, therefore, few hospitals will actually have these
ratios reconciled upon cost report settlement as demonstrated by the
total outlier payments provided by the commenter. In addition, it is
difficult to predict the specific hospitals that will have CCRs and
outlier payments reconciled in any given year. We also note that
reconciliation occurs because hospitals' actual CCRs for the cost
reporting period are different than the interim CCRs used to
calculate outlier payments when a bill is processed. Our simulations
assume that CCRs accurately measure hospital costs based on
information available to us at the time we set the outlier
threshold. For these reasons, we proposed and are again finalizing
our policy not to make any assumptions about the effects of
reconciliation on the outlier threshold calculation.
Also, outlier reconciliation is a function of the cost report
and Medicare contractors record the outlier reconciliation amount on
each provider's cost report (and are not required to report these
data to CMS outside of the cost report settlement process).
Therefore, the outlier reconciliation data that the commenter is
requesting should be publicly available through the cost report.
With regard to the commenter not being able to retrieve outlier
reconciliation payments for cost reports filed under Form CMS-2552-
10, we will follow up with our information system team to ensure
this information is readily available to the public. Since the
effective date of Change Request 7192 on April 1, 2011, we have
approved the reconciliation of outlier payments for some hospitals.
Other hospitals that were flagged for outlier reconciliation are
still under review for approval. In addition, some hospitals flagged
for outlier reconciliation may experience a delay in reconciling
their outlier payments due to circumstances that prevent the
Medicare contractor from finalizing the hospital's cost report (such
as other payments that may need to be reconciled aside from outlier
payments).
As described in sections V.G. and V.H., respectively, of the
preamble of this final rule, sections 1886(q) and 1886(o) of the Act
establish the Hospital Readmissions Reduction Program and the
Hospital VBP Program, respectively. We do not believe it is
appropriate to include the hospital VBP payment adjustments and the
hospital readmissions payment adjustments in the outlier threshold
calculation or the outlier offset to the standardized amount.
Specifically, consistent with our definition of the base operating
DRG payment amount for the Hospital Readmissions Reduction Program
under Sec. 412.152 and the Hospital VBP Program under Sec.
412.160, outlier payments under section 1886(d)(5)(A) of the Act are
not affected by these payment adjustments. Therefore, outlier
payments would continue to be calculated based on the unadjusted
base DRG payment amount (as opposed to using the base-operating DRG
payment amount adjusted by the hospital readmissions payment
adjustment and the hospital VBP payment adjustment). Consequently,
we proposed to exclude the hospital VBP payment adjustments and the
hospital readmissions payment adjustments from the calculation of
the outlier fixed-loss cost threshold.
Using this proposed methodology, we proposed an outlier fixed-
loss cost threshold for FY 2014 equal to the prospective payment
rate for the DRG, plus any IME and DSH payments, and any add-on
payments for new technology, plus $24,140.
In the proposed rule, we noted that the proposed FY 2014
threshold was higher than the FY 2013 final outlier threshold of
$21,821. We stated that we believe that the decrease in DSH payments
due to the implementation of section 1886(r)(1) of the Act
contributed to a higher proposed fixed-loss outlier threshold for FY
2014. We noted that the additional payments based on uncompensated
care made to hospitals receiving Medicare DSH under section
1886(r)(2) of the Act were not taken into consideration when
determining outlier payments because we did not propose to make this
payment on a per discharge basis. However, when computing a claim by
claim outlier threshold, we calculate DSH payments under section
1886(d)(5)(F) of the Act with the reduction required under section
1886(r)(1) (the original DSH amount multiplied by 0.25). Therefore,
we stated that we believe that, decreasing DSH payments decreases
total payments in typical cases, which are used to compute the claim
by claim outlier threshold thus leading to an increase in outlier
payments. This requires that we raise the outlier threshold to
decrease the amount of outlier dollars expended in order to reach
the 5.1 percent target.
Comment: Many commenters opposed CMS' proposal not to include
payments under section 1886(r)(2) of the Act (from here on referred
to as uncompensated care payments) in the calculation of the fixed-
loss outlier threshold.
One commenter stated that by ignoring uncompensated care
payments in the calculation of outlier determinations (the outlier
fixed loss cost threshold and payments), CMS is assuming there will
be a 75-percent cut to DSH payments while, under section 1886(r)(2)
of the Act, approximately 88 percent of the amount cut will be paid
back to hospitals. Therefore, the commenter believed the outlier
fixed-loss cost threshold is overstated and requested that the
threshold be adjusted to reflect these additional payments.
Another commenter stated that CMS did not calculate the
threshold with regard to a 100 percent DSH adjustment rather than a
25 percent DSH adjustment because CMS proposed that some of the DSH
payment will not be made on a claim by claim basis. The commenter
explained that if CMS agrees to include uncompensated care payments
on the claim, CMS should make outlier determinations that include
those payments. The commenter also provided several reasons why
outlier determinations should include uncompensated care payments
regardless of whether uncompensated care payments are included on
the claim. Firstly, the commenter stated that allowing the mechanics
of DSH payments to affect outlier determinations is unfair to non-
DSH hospitals. The commenter explained that, by reducing the amount
of DSH payments included in the outlier calculation, non-DSH
hospitals would see their claim by claim outlier thresholds rise,
resulting in fewer cases that would qualify for outlier payments;
this would result in a reduction in payments to these non-DSH
hospitals solely because Congress changed the DSH payment
methodology (in order to better target payments under that
subsection to hospitals with high rates of uncompensated care) and
CMS proposed to alter the mechanics for making DSH payments to DSH
hospitals by including only the empirically justified DSH payments
on the claim. Other commenters had similar concerns. The commenter
also noted that there is no indication in section 3133 of the
Affordable Care Act or section 1886(d)(5)(A) of the Act that
Congress intended such a result. The commenter asserted that whether
CMS chooses to make the additional uncompensated care payments
through the claims processing system or some other mechanism, it
should not create fundamental payment changes in other components of
the PPS system, absent some evidence that Congress intended such an
impact.
Secondly, the commenter cited sections 1886(d)(5)(A) and 1886(r)
of the Act and stated that it is the commenter's view that these
sections compel all amounts attributable to DSH to be part of
outlier determinations whether or not such amounts are paid on a per
claim basis. The commenter explained that section 1886(d)(5)(A) of
the Act provides that ``a subsection (d) hospital may request
additional payments in any case where charges, adjusted to cost, . .
. exceed the sum of the applicable DRG prospective payment rate plus
any amounts payable under subparagraphs (B) and (F) plus a fixed
dollar amount determined by the Secretary.'' The commenter noted
that subparagraph

[[Page 50981]]

(F)(i) was amended by section 3133 of the Affordable Care Act to
provide that payments under the subparagraph are ``[s]ubject to to
subsection (r).'' Additionally, the commenter stated that within
subsection (r), subparagraph (d)(5)(F) is referenced both with
regard to ``Empirically Justified DSH payments'' in subparagraph
(r)(1) and the ``Additional Payment'' under subparagraph (r)(2). The
commenter concluded that it seems logical that both such payments,
which are part of the overall DSH payment adjustment, would have to
be considered in the aggregate for purposes of outlier
determinations.
The commenter suggested three different methodologies to account
for changes to Medicare DSH payments in outlier determinations. The
first was to multiply the empirically justified Medicare DSH payment
by 4, which resulted in a fixed-loss cost threshold of $20,950. The
commenter believed that this approach is very simple and is similar
to the second approach. The second approach assigns the
uncompensated care payments to hospitals and discharges based on the
operating cost for each case, which results in a fixed-loss cost
threshold of $20,939. The final method allocates the uncompensated
care payments to all cases equally, which results in a fixed-loss
cost threshold of $22,028. The commenter stated that it expressed no
specific preferences regarding the methods described above, but
noted that the consensus of its members was that the final
methodology is more reflective of how uncompensated care payments
should occur through the claims processing system.
Response: As discussed in section V.E.3.f. of the preamble of
this final rule, for FY 2014, we are finalizing a process to
distribute interim uncompensated care payments on a per-discharge
basis through our claims processing system, with a reconciliation of
the hospital's total uncompensated care payment at cost report
settlement. The estimated per-discharge uncompensated care amount is
based on the amount we have finalized to distribute for a fiscal
year divided by the average number of discharges, or claims, in the
most recently available 3 full-years in the fiscal year Medicare
claims dataset. For FY 2014 payments, we will use the average number
of claims from the most recent 3 years of MedPAR claims data, FY
2010, FY 2011 and FY 2012, as this is the most recently available
data on hospital utilization. As discussed in section V.E.3.f. of
the preamble of this final rule, we believe that distributing
uncompensated care payments on a per-discharge basis would allow
these payments to be taken into consideration for the comparison of
payments under the Federal rate and the hospital-specific rate for
SCHs. We refer readers to section V.E.3. of the preamble of this
final rule for a complete discussion of the Medicare DSH payment
adjustment and the new uncompensated care payments.
Consistent with the policy above to make uncompensated care
payments on a per-discharge basis through our claims processing
system, we agree that uncompensated care payments should be
considered in outlier determinations. We also agree that to the
extent section 1886(r) of the Act modifies the existing DSH payment
methodology under section 1886(d)(5)(F), the new uncompensated care
payment under section 1886(r)(2), like the empirically justified
Medicare DSH payment under section 1886(r)(1), may be considered an
amount payable under section 1886(d)(5)(F) of the Act such that it
would be reasonable to include the payment in the outlier
determination under section 1886(d)(5)(A). We also agree with the
commenter's third suggested methodology to allocate an estimated
per-discharge uncompensated care payment amount to all cases for the
hospitals eligible to receive the uncompensated care payment amount
in the calculation of the outlier fixed-loss cost threshold
methodology. We believe this method to be superior to the other two
methods suggested because we believe it most closely approximates
the inclusion of all of the uncompensated care payments in
determining the fixed-loss threshold. We believe that the
commenter's first suggested methodology of multiplying the
empirically justified Medicare DSH payment by 4 results in the
inclusion of a higher amount of uncompensated care payments in the
determination of the fixed-loss threshold than will actually be
paid. This approach fails to account for the statutory requirement
that total uncompensated care payments are not equal to 75 percent
of the amount that would otherwise be paid as DSH payment
adjustments but rather the amount is reduced by Factor 2 in order to
reflect changes in the rate of uninsurance as a result of the
implementation of the Affordable Care Act. Similarly, we believe
that the commenter's second methodology of assigning uncompensated
care payments based on the operating costs of a case could also lead
to a different amount of uncompensated care payments being included
in the determination of the fixed-loss threshold than is actually
paid. Uncompensated care payments are calculated independently of
operating costs and assigning these payments on such a basis would
not necessarily allocate them appropriately. We believe that
allocating an eligible hospital's estimated uncompensated care
payment to all cases equally in the calculation of the outlier
fixed-loss cost threshold would best approximate the amount we would
pay in uncompensated care payments during the year because, when we
make claim payments to a hospital eligible for such payments, we
will make estimated per-discharge uncompensated care payments to all
cases equally. Furthermore, we believe that using the estimated per-
claim uncompensated care payment amount to determine outlier
estimates provides predictability as to the amount of uncompensated
care payments included in the calculation of outlier payments. To
determine outlier payments in the claims processing system,
beginning with discharges on or after October 1, 2013, we will
include estimated uncompensated care payments in the claim-by-claim
outlier threshold calculation used to make outlier payments. Below
we discuss our computation of the final outlier fixed loss cost
threshold for FY 2014 and how we include uncompensated care
payments.
Comment: One commenter recommended that CMS maintain the outlier
threshold at $21,821, which is the threshold that CMS finalized for
FY 2013. The commenter explained that CMS has a history of
projecting inaccurately the percentage of inpatient PPS payments
that would qualify for outlier payments and an increase to the
fixed-loss outlier threshold would result in a lesser number of
cases that would qualify for outlier payments. Another commenter had
the same concerns and believed the outlier threshold was simply too
high. An additional commenter noted that, for some hospitals, DSH
payments (at 75 percent of DSH) represent 5 to 7 percent of total
Medicare payments. The commenter was unclear how a 5 to 7 percent
decrease in Medicare payments necessitates a 10-percent increase in
the fixed-loss outlier threshold from the prior fiscal year. The
commenter recommended that CMS review and reconsider raising the
threshold by 10 percent; the commenter also believed a more
reasonable increase to the fixed loss outlier threshold is in the 5-
percent range. Another commenter recommended a small increase to the
fixed-loss threshold in light of the concerns above.
One commenter noted that CMS is proposing to increase the
outlier threshold by 10 percent for FY 2014. The commenter noted
that, in order for hospitals to maintain this payment stream,
hospitals are incentivized to increase charges by 10 percent. As a
result, the commenter requested that CMS reevaluate and lower the
final fixed-loss outlier threshold so hospitals can keep charge
inflation as neutral as possible.
Response: As noted above, section 1886(d)(5)(A)(iv) of the Act
requires outlier payments to be not less than 5 percent nor more
than 6 percent of total estimated or projected payments. Therefore,
we cannot adopt the commenters' suggestion to maintain the FY 2013
outlier fixed-loss cost threshold for FY 2014 because setting a
threshold that is based on the current fiscal year for the coming
fiscal year is inconsistent with the statute. When we calculate the
threshold, we use the latest data that is available at the time of
the proposed and final rule. Also, for FY 2014, as discussed above,
we refined the calculation of the outlier fixed-loss cost threshold
in order that outlier payments will meet the 5.1 percent target. We
cannot put a cap on the increase or decrease of the outlier
threshold nor can we arbitrarily lower the threshold as the
commenters requested, as this would also be inconsistent with the
statute.
Comment: One commenter was concerned that, with each rulemaking,
the final outlier threshold established by CMS is always
significantly lower than the threshold set forth in the proposed
rule. The commenter speculated that this may occur due to the use of
updated CCRs and other data in calculating the final rule threshold.
As a result, the commenter emphasized the need for CMS to use the
most recent data available when calculating the outlier threshold.
The commenter stated that, with regard to the current rulemaking,
CMS used data from the December 2012 PSF in the proposed rule,

[[Page 50982]]

when the March 2013 PSF was available at the time the proposed rule
was issued. Using the March 2013 PSF, the commenter calculated an
outlier threshold of $23,542 (compared to the threshold in the
proposed rule of $24,140, which used the December 2012 PSF).
Response: CMS' historical policy is to use the best available
data when setting the payment rates and factors in both the proposed
and final rules. Sometimes there are variables that change between
the proposed and final rule due to the availability of more recent
data, such as the charge inflation factor and the CCR adjustment
factors that can cause fluctuations in the threshold amount. Other
factors such as changes to the wage indexes and market basket
increase can also cause the outlier fixed-loss cost threshold to
fluctuate between the proposed rule and the final rule each year. We
use the latest data that is available at the time of the proposed
and final rule, such as the most recent update of MedPAR claims data
and CCRs from the most recent update of the PSF. With regard to the
commenter noting the availability of the March 2013 PSF at the time
the proposed rule was issued, this file was not available when we
calculated the proposed outlier fixed-loss cost threshold as part of
the development of the proposed rule. Therefore, for the proposed
rule, we used the latest update available, which was the December
2012 PSF. If we were to wait for the March 2013 PSF to become
available, this would cause further delay of publication of the
proposed rule which could possibly cause CMS to miss the statutory
requirement of issuing the final rule 60 days prior to the upcoming
fiscal year.
Comment: Many commenters appreciated CMS' efforts to refine the
calculation of the outlier threshold. The commenters recommended
that CMS continue to monitor the new fixed-loss outlier threshold
methodology to determine if it has, in fact, improved accuracy.
Response: We appreciate the commenters for their support and
agree with the commenters to monitor the new methodology to
determine if it has, in fact, improved accuracy.
Below we discuss our methodology to calculate the final outlier
fixed-loss cost threshold for FY 2014. As discussed above, we are
finalizing our proposal to refine the methodology by using the most
recent one year period of charge data instead of the most recent 6
months of charge data to inflate charges. We also are revising our
methodology to adjust hospital CCRs in the calculation of the
outlier fixed-loss cost threshold. Finally, we agree with the
commenters that the new uncompensated care payments under section
1886(r)(2) of the Act should be included in the calculation of the
outlier fixed-loss cost threshold.
As we have done in the past, to calculate the final FY 2014
outlier threshold, we simulated payments by applying FY 2014 payment
rates and policies using cases from the FY 2012 MedPAR file.
Therefore, in order to determine the final FY 2014 outlier
threshold, we inflated the charges on the MedPAR claims by 2 years,
from FY 2012 to FY 2014. We note that when we calculate the outlier
fixed-loss cost threshold, for SCHs, we model total hospital-
specific rate payments and total federal rate payments and then
exclude from the outlier threshold calculation those SCHs whose
hospital-specific rate payments are greater than their Federal rate
payments, as these hospitals will not receive outlier payments. As
discussed above, we are finalizing a policy to take into
consideration uncompensated care payments in the comparison of
payments under the Federal rate and the hospital-specific rate for
SCHs. Therefore, we included estimated uncompensated care payments
in this comparison (and then excluded from the outlier threshold
calculation those SCHs whose hospital-specific rate payments were
greater than their Federal rate payments). For FY 2014 and
subsequent years, as discussed above, we are finalizing our proposal
to refine our current methodology which uses more recent data that
reflect the rate-of-change in hospital charges under the new outlier
policy. As discussed above, instead of comparing periods of the most
recent 6 months of charge data, we are finalizing our proposal to
adopt a new methodology to inflate charges that use periods of 1-
year of the most recent charge data. We believe a methodology that
is based on 1-year of charge data will provide a more stable measure
to project the average charge per case because a 6-month measure
inherently uses fewer claims than a 1-year measure, which makes it
more susceptible to fluctuations in the average charge per case as a
result of any significant charge increases or decreases by
hospitals. Under this new methodology, to compute the 1-year average
annualized rate-of-change in charges per case for FY 2014, we
compare the third quarter of FY 2011 through the second quarter of
FY 2012 (April 1, 2011, through March 31, 2011) to the third quarter
of FY 2012 through the second quarter of FY 2013 (April 1, 2012,
through March 31, 2013). This rate-of-change was 4.7 percent
(1.047329) or 9.7 percent (1.096898) over 2 years.
As we have done in the past, we are establishing the final FY
2014 outlier threshold using hospital CCRs from the March 2013
update to the Provider-Specific File (PSF)--the most recent
available data at the time of this final rule. For FY 2014, we are
also continuing to apply an adjustment factor to the CCRs to account
for cost and charge inflation (as explained below). Instead of using
our prior methodology that was developed with the Office of Actuary
to adjust the CCRs, for FY 2014 and subsequent years, we are
finalizing as proposed to adjust the CCRs from the March 2013 update
of the PSF by comparing the percentage change in the national
average case-weighted operating CCR and capital CCR from the March
2013 update of the PSF to the national average case-weighted
operating CCR and capital CCR from the March 2012 update of the PSF.
We note that we used total transfer-adjusted cases from FY 2012 to
determine the national average case-weighted CCRs for both sides of
the comparison. As stated in the proposed rule, we believe it is
appropriate to use the same case count on both sides of the
comparison as this will produce the true percentage change in the
average case-weighted operating and capital CCR from one year to the
next without any effect from a change in case count on different
sides of the comparison.
Using the methodology adopted above, we calculated a March 2012
operating national average case-weighted CCR of 0.302317 and a March
2013 operating national average case-weighted CCR of 0.292106. We
then calculate the percentage change between the two national
operating case-weighted CCRs by subtracting the March 2012 operating
national average case-weighted CCR from the March 2013 operating
national average case-weighted CCR and then dividing by the March
2012 national operating average case-weighted CCR. This resulted in
a national operating CCR adjustment factor of 0.966224.
We used the same methodology above to also adjust the capital
CCRs. Specifically, we calculated a March 2012 capital national
average case-weighted CCR of 0.025993 and a March 2013 capital
national average case-weighted CCR of 0.025013. We then calculated
the percentage change between the two national capital case-weighted
CCRs by subtracting the March 2012 capital national average case-
weighted CCR from the March 2013 capital national average case-
weighted CCR and then dividing by the March 2012 capital national
average case-weighted CCR. This resulted in a national capital CCR
adjustment factor of 0.964524.
Consistent with our methodology in the past and as stated in the
FY 2009 IPPS final rule (73 FR 48763), we continue to believe it is
appropriate to apply only a 1-year adjustment factor to the CCRs. On
average, it takes approximately 9 months for a fiscal intermediary
or MAC to tentatively settle a cost report from the fiscal year end
of a hospital's cost reporting period. The average ``age'' of
hospitals' CCRs from the time the fiscal intermediary or the MAC
inserts the CCR in the PSF until the beginning of FY 2009 is
approximately 1 year. Therefore, as stated above, we believe a 1-
year adjustment factor to the CCRs is appropriate.
As stated above, for FY 2014, we applied the final FY 2014 rates
and policies using cases from the FY 2012 MedPAR files in
calculating the final outlier threshold.
As noted above, for purposes of estimating the final outlier
threshold for FY 2014, it was necessary to apply the frontier State
adjustment by adjusting the wage index of those eligible hospitals
in a frontier State when calculating the outlier threshold that
results in outlier payments being 5.1 percent of total payments for
FY 2014. If we did not take into account this provision, our
estimate of total FY 2014 payments would be too low, and, as a
result, our final outlier threshold would be too high, such that
estimated outlier payments would be less than our projected 5.1
percent of total payments.
As discussed above, in our projection of FY 2014 outlier
payments, we did not make any adjustments for the possibility that
hospitals' CCRs and outlier payments may be reconciled upon cost
report settlement. Also, as stated above, we do not believe it is
appropriate to include the hospital VBP payment adjustments and the
hospital readmissions payment adjustments in the

[[Page 50983]]

outlier threshold calculation or the outlier offset to the
standardized amount. Consequently, we excluded the hospital VBP
payment adjustments and the hospital readmissions payment
adjustments from the calculation of the outlier fixed-loss cost
threshold.
As discussed above, we included estimated uncompensated care
payments in the computation of the final outlier fixed-loss cost
threshold. Specifically, we used the estimated per-discharge
uncompensated care payments to hospitals eligible for the
uncompensated care payment for all cases in the calculation of the
outlier fixed-loss cost threshold methodology.
Using this methodology, we calculated a final outlier fixed-loss
cost threshold for FY 2014 equal to the prospective payment rate for
the MS-DRG, plus any IME, empirically justified Medicare DSH
payments, estimated uncompensated care payment, and any add-on
payments for new technology, plus $21,748.
We note that the final FY 2014 threshold is lower than the FY
2014 proposed outlier threshold of $24,140. We believe that taking
into consideration uncompensated care payments in the calculation of
the outlier threshold contributed to a lower final fixed-loss
outlier threshold for FY 2014.

(2) Other Changes Concerning Outliers

As stated in the FY 1994 IPPS final rule (58 FR 46348), we
establish an outlier threshold that is applicable to both hospital
inpatient operating costs and hospital inpatient capital-related
costs. When we modeled the combined operating and capital outlier
payments, we found that using a common threshold resulted in a lower
percentage of outlier payments for capital-related costs than for
operating costs. We project that the thresholds for FY 2014 will
result in outlier payments that will equal 5.1 percent of operating
DRG payments and 6.07 percent of capital payments based on the
Federal rate.
In accordance with section 1886(d)(3)(B) of the Act, we are
reducing the FY 2014 standardized amount by the same percentage to
account for the projected proportion of payments paid as outliers.
The outlier adjustment factors that will be applied to the
standardized amount based on the FY 2014 outlier threshold are as
follows:

------------------------------------------------------------------------
Operating
standardized Capital
amounts federal rate
------------------------------------------------------------------------
National................................ 0.948995 0.939255
Puerto Rico............................. 0.943455 0.932305
------------------------------------------------------------------------

We are applying the outlier adjustment factors to the FY 2014
rates after removing the effects of the FY 2013 outlier adjustment
factors on the standardized amount.
To determine whether a case qualifies for outlier payments, we
apply hospital-specific CCRs to the total covered charges for the
case. Estimated operating and capital costs for the case are
calculated separately by applying separate operating and capital
CCRs. These costs are then combined and compared with the outlier
fixed-loss cost threshold.
Under our current policy at Sec. 412.84, we calculate operating
and capital CCR ceilings and assign a statewide average CCR for
hospitals whose CCRs exceed 3.0 standard deviations from the mean of
the log distribution of CCRs for all hospitals. Based on this
calculation, for hospitals for which the fiscal intermediary or MAC
computes operating CCRs greater than 1.186 or capital CCRs greater
than 0.173, or hospitals for which the fiscal intermediary or MAC is
unable to calculate a CCR (as described under Sec. 412.84(i)(3) of
our regulations), statewide average CCRs are used to determine
whether a hospital qualifies for outlier payments. Table 8A listed
in section VI. of this Addendum (and available only via the
Internet) contains the statewide average operating CCRs for urban
hospitals and for rural hospitals for which the fiscal intermediary
or MAC is unable to compute a hospital-specific CCR within the above
range. Effective for discharges occurring on or after October 1,
2013, these statewide average ratios will replace the ratios posted
on our Web site at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY-2013-IPPS-Final-Rule-Home-Page-Items/FY2013-Final-Rule-Tables.html. Table 8B listed in section VI.
of this Addendum (and available via the Internet) contains the
comparable statewide average capital CCRs. Again, the CCRs in Tables
8A and 8B will be used during FY 2014 when hospital-specific CCRs
based on the latest settled cost report are either not available or
are outside the range noted above. Table 8C listed in section VI. of
this Addendum (and available via the Internet) contains the
statewide average total CCRs used under the LTCH PPS as discussed in
section V. of this Addendum.
We finally note that we published a manual update (Change
Request 3966) to our outlier policy on October 12, 2005, which
updated Chapter 3, Section 20.1.2 of the Medicare Claims Processing
Manual. The manual update covered an array of topics, including
CCRs, reconciliation, and the time value of money. We encourage
hospitals that are assigned the statewide average operating and/or
capital CCRs to work with their fiscal intermediary or MAC on a
possible alternative operating and/or capital CCR as explained in
Change Request 3966. Use of an alternative CCR developed by the
hospital in conjunction with the fiscal intermediary or MAC can
avoid possible overpayments or underpayments at cost report
settlement, thus ensuring better accuracy when making outlier
payments and negating the need for outlier reconciliation. We also
note that a hospital may request an alternative operating or capital
CCR ratio at any time as long as the guidelines of Change Request
3966 are followed. In addition, as mentioned above, we published an
additional manual update (Change Request 7192) to our outlier policy
on December 3, 2010, which also updated Chapter 3, Section 20.1.2 of
the Medicare Claims Processing Manual. The manual update outlines
the outlier reconciliation process for hospitals and Medicare
contractors. To download and view the manual instructions on outlier
reconciliation, we refer readers to the CMS Web site: https://www.cms.hhs.gov/manuals/downloads/clm104c03.pdf.

(3) FY 2012 and FY 2013 Outlier Payments

In the FY 2013 IPPS final rule (77 FR 53697 through 53698), we
stated that, based on available data, we estimated that actual FY
2012 outlier payments would be approximately 5.0 percent of actual
total MS-DRG payments. This estimate was computed based on
simulations using the FY 2011 MedPAR file (discharge data for FY
2011 claims). That is, the estimate of actual outlier payments did
not reflect actual FY 2012 claims, but instead reflected the
application of FY 2012 payment rates and policies to available FY
2011 claims.
Our current estimate, using available FY 2012 claims data, is
that actual outlier payments for FY 2012 were approximately 4.87
percent of actual total MS-DRG payments. Thus, the data indicate
that, for FY 2012, the percentage of actual outlier payments
relative to actual total payments is lower than we projected for FY
2012. Consistent with the policy and statutory interpretation we
have maintained since the inception of the IPPS, we do not make
retroactive adjustments to outlier payments to ensure that total
outlier payments for FY 2012 are equal to 5.1 percent of total MS-
DRG payments.
We currently estimate that, using the latest CCRs from the March
2013 update of the PSF, actual outlier payments for FY 2013 will be
approximately 4.77 percent of actual total MS-DRG payments,
approximately 0.33 percentage point lower than the 5.1 percent we
projected when setting the outlier policies for FY 2013. This
estimate of 4.77 percent is based on simulations using the FY 2012
MedPAR file (discharge data for FY 2012 claims).
Comment: One commenter believed it is critical for CMS to
accurately calculate prior year actual outlier payment estimates.
The commenter was concerned with CMS' estimate of FY 2012 outlier
payments at 5.47 percent. The commenter attempted to validate CMS
analysis and determined that the FY 2012 outlier payout was 4.86
percent. The commenter stated that the starting point for any
assessment of the need to change methods to develop the outlier
threshold will be informed by how successful prior methods were in
actually meeting the target through actual payments.

[[Page 50984]]

Response: We thank the commenter for bringing this issue to our
attention. In the proposed rule, we inadvertently used CCRs from FY
2011 in our estimate of the FY 2012 outlier payments. For this final
rule, we corrected this error and determined an estimated FY 2012
outlier payment that is nearly identical to the commenters. We
believe the refinements made to the calculation of the FY 2014
outlier threshold will help ensure that outlier payments meet the
5.1 percent target.

5. FY 2014 Standardized Amount

The adjusted standardized amount is divided into labor-related
and nonlabor-related portions. Tables 1A and 1B listed and published
in section VI. of this Addendum (and available via the Internet)
contain the national standardized amounts that we are applying to
all hospitals, except hospitals located in Puerto Rico, for FY 2014.
The Puerto Rico-specific amounts are shown in Table 1C listed and
published in section VI. of this Addendum (and available via the
Internet). The amounts shown in Tables 1A and 1B differ only in that
the labor-related share applied to the standardized amounts in Table
1A is the labor-related share of 69.6 percent, and Table 1B is 62
percent. In accordance with sections 1886(d)(3)(E) and
1886(d)(9)(C)(iv) of the Act, we are applying a labor-related share
of 62 percent, unless application of that percentage would result in
lower payments to a hospital than would otherwise be made. In
effect, the statutory provision means that we will apply a labor-
related share of 62 percent for all hospitals whose wage indices are
less than or equal to 1.0000.
In addition, Tables 1A and 1B include the standardized amounts
reflecting the applicable percentage increase of 1.7 percent for FY
2014, and an update of -0.3 percent for hospitals that fail to
submit quality data consistent with section 1886(b)(3)(B)(viii) of
the Act.
Under section 1886(d)(9)(A)(ii) of the Act, the Federal portion
of the Puerto Rico payment rate is based on the discharge-weighted
average of the national large urban standardized amount (this amount
is set forth in Table 1A). The labor-related and nonlabor-related
portions of the national average standardized amounts for Puerto
Rico hospitals for FY 2014 are set forth in Table 1C listed and
published in section VI. of this Addendum (and available via the
Internet). This table also includes the Puerto Rico standardized
amounts. The labor-related share applied to the Puerto Rico-specific
standardized amount is the labor-related share of 63.2 percent, or
62 percent, depending on which provides higher payments to the
hospital. (Section 1886(d)(9)(C)(iv) of the Act, as amended by
section 403(b) of Public Law 108-173, provides that the labor-
related share for hospitals located in Puerto Rico be 62 percent,
unless the application of that percentage would result in lower
payments to the hospital.)
The following table illustrates the changes from the FY 2013
national standardized amount. The second column shows the changes
from the FY 2013 standardized amounts for hospitals that satisfy the
quality data submission requirement and, therefore, receive the full
update of 1.7 percent. The third column shows the changes for
hospitals receiving the reduced update of -0.3 percent. The first
row of the table shows the updated (through FY 2013) average
standardized amount after restoring the FY 2013 offsets for outlier
payments, demonstration budget neutrality, the geographic
reclassification budget neutrality, and the retrospective
documentation and coding adjustment under section 7(b)(1)(B) of
Public Law 110-90. The MS-DRG reclassification and recalibration
wage index budget neutrality factors are cumulative. Therefore,
those FY 2013 factors are not removed from this table.

Comparison of FY 2013 Standardized Amounts to the FY 2014 Standardized Amount With Full and Reduced Update
----------------------------------------------------------------------------------------------------------------
Full update (1.7 Reduced update (-
Full update (1.7 percent); wage 0.3 percent);
percent); wage index is less wage index is Reduced update (-0.3
index is greater than or equal to greater than percent); wage index is
than 1.0000; 1.0000; labor/ 1.0000; labor/ less than or equal to
labor/non-labor non-labor share non- labor 1.0000; labor/non- labor
share percentage percentage (62/ share percentage share percentage (62/38)
(69.6/30.4) 38) (69.6/30.4)
----------------------------------------------------------------------------------------------------------------
FY 2013 Base Rate after
removing:
1. FY 2013 Geographic
Reclassification Budget
Neutrality (0.991276).
2. FY 2013 Rural Community
Hospital Demonstration
Program Budget Neutrality
(0.999677).
3. Cumulative FY 2008, FY Labor: $4,176.63 Labor: $3,720.56 Labor: $4,176.63 Labor: $3,720.56
2009, FY 2012, FY 2013 Nonlabor: Nonlabor: Nonlabor: Nonlabor: $2,280.34
Documentation and Coding $1,824.27. $2,280.34. $1,824.27.
Adjustment as Required
under Sections 7(b)(1)(A)
and 7(b)(1)(B) of Public
Law 110-90 (0.9478).
4. FY 2013 Operating
Outlier Offset (0.948999).
FY 2014 Update Factor......... 1.017........... 1.017........... 0.997........... 0.997
FY 2014 MS-DRG Recalibration 0.997936........ 0.997936........ 0.997936........ 0.997936
and Wage Index Budget
Neutrality Factor.
FY 2014 Reclassification 0.990718........ 0.990718........ 0.990718........ 0.990718
Budget Neutrality Factor.
FY 2014 Rural Community 0.999415........ 0.999415........ 0.999415........ 0.999415
Demonstration Program Budget
Neutrality Factor.
FY 2014 Operating Outlier 0.948995........ 0.948995........ 0.948995........ 0.948995
Factor.
Adjustment to Offset the Cost 0.998........... 0.998........... 0.998........... 0.998
of the Policy on Admission
and Medical Review Criteria
for Hospital Inpatient
Services under Medicare Part
A.

[[Page 50985]]

Cumulative Factor: FY 2008, FY 0.9403.......... 0.9403.......... 0.9403.......... 0.9403
2009, FY 2012, and FY 2013
Documentation and Coding
Adjustment as Required under
Sections 7(b)(1)(A) and
7(b)(1)(B) of Public Law 110-
90 and Documentation and
Coding Recoupment Adjustment
as required under Section 631
of the American Taxpayer
Relief Act of 2012.
Final National Standardized Labor: $3,737.71 Labor: $3,329.57 Labor: $3,664.21 Labor: $3,264.10
Amount for FY 2014. Nonlabor: Nonlabor: Nonlabor: Nonlabor: $2,000.57
$1,632.57. $2,040.71. $1,600.46.
----------------------------------------------------------------------------------------------------------------

The following table illustrates the changes from the FY 2013
Puerto Rico-specific payment rate for hospitals located in Puerto
Rico. The second column shows the changes from the FY 2013 Puerto
Rico specific payment rate for hospitals with a Puerto Rico-specific
wage index greater than 1.0000. The third column shows the changes
from the FY 2013 Puerto Rico specific payment rate for hospitals
with a Puerto Rico-specific wage index less than 1.0000. The first
row of the table shows the updated (through FY 2013) Puerto Rico-
specific payment rate after restoring the FY 2013 offsets for Puerto
Rico-specific outlier payments, rural community hospital
demonstration program budget neutrality, and the geographic
reclassification budget neutrality. The MS-DRG recalibration budget
neutrality factor is cumulative and is not removed from this table.

Comparison of FY 2013 Puerto Rico-Specific Payment Rate to the FY 2014 Puerto Rico-Specific Payment Rate
----------------------------------------------------------------------------------------------------------------
Update (1.7 percent);
wage index is greater
than 1.0000; labor/ Update (1.7 percent); wage index is less
non-labor share than or equal to 1.0000; labor/non-labor
percentage (63.2/ share percentage (62/38)
36.8)
----------------------------------------------------------------------------------------------------------------
FY 2013 Puerto Rico Base Rate, after removing:
1. FY 2013 Geographic Reclassification
Budget Neutrality (0.991276).
2. FY 2013 Rural Community Hospital
Demonstration Program Budget Neutrality
(0.999677).
3. FY 2013 Puerto Rico Operating Outlier Labor: $1,700.33..... Labor: $1,668.05
Offset (0.944760). Nonlabor: $990.07.... Nonlabor: $1,022.35
FY 2014 Update Factor......................... 1.017................ 1.017
FY 2014 MS-DRG Recalibration Budget Neutrality 0.997989............. 0.997989
Factor.
FY 2014 Reclassification Budget Neutrality 0.990718............. 0.990718
Factor.
FY 2014 Rural Community Hospital Demonstration 0.999415............. 0.999415
Program Budget Neutrality Factor.
FY 2014 Puerto Rico Operating Outlier Factor.. 0.943455............. 0.943455
Adjustment to Offset the Cost of the Policy on 0.998................ 0.998
Admission and Medical Review Criteria for
Hospital Inpatient Services under Medicare
Part A.
Final Puerto Rico-Specific Payment Rate for FY Labor: $1,608.90..... Labor: $1,578.35
2014. Nonlabor: $936.82.... Nonlabor: $967.37
----------------------------------------------------------------------------------------------------------------

B. Adjustments for Area Wage Levels and Cost-of-Living

Tables 1A through 1C, as published in section VI. of this
Addendum (and available via the Internet), contain the labor-related
and nonlabor-related shares that we used to calculate the
prospective payment rates for hospitals located in the 50 States,
the District of Columbia, and Puerto Rico for FY 2014. This section
addresses two types of adjustments to the standardized amounts that
are made in determining the prospective payment rates as described
in this Addendum.

1. Adjustment for Area Wage Levels

Sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act require
that we make an adjustment to the labor-related portion of the
national and Puerto Rico prospective payment rates, respectively, to
account for area differences in hospital wage levels. This
adjustment is made by multiplying the labor-related portion of the
adjusted standardized amounts by the appropriate wage index for the
area in which the hospital is located. In section III. of the
preamble of this final rule, we discuss the data and methodology for
the FY 2014 wage index.

2. Adjustment for Cost-of-Living in Alaska and Hawaii

Section 1886(d)(5)(H) of the Act provides discretionary
authority to the Secretary to make ``such adjustments . . . as the
Secretary deems appropriate to take into account the unique
circumstances of hospitals located in Alaska and Hawaii.'' Higher
labor-related costs for these two States are taken into account in
the adjustment for area wages described above. To account for higher
nonlabor-related costs for these two States, we multiply the
nonlabor-related portion of the standardized amount for hospitals
located in Alaska and Hawaii by an

[[Page 50986]]

adjustment factor. For FY 2011 and in prior fiscal years, we used
the most recent cost-of-living adjustment (COLA) factors obtained
from the U.S. Office of Personnel Management (OPM) Web site at:
https://www.opm.gov/oca/cola/rates/asp to update this nonlabor
portion.
In the FY 2013 IPPS/LTCH PPS proposed and final rules (77 FR
28145 through 28146 and 77 FR 53700 through 53701, respectively), we
explained that statutory changes transitioned the Alaska and Hawaii
COLAs to locality pay. We further explained that, beginning in FY
2012, as OPM transitioned away from COLAs, we continued to use the
same ``frozen'' COLA factors that were used to adjust payments in FY
2011 (based on OPM's 2009 COLA factors) to adjust the nonlabor-
related portion of the standardized amount for hospitals located in
Alaska and Hawaii while we explored alternatives for updating the
COLA factors in the future. In the FY 2013 IPPS/LTCH PPS final rule,
for FY 2013, we continued to use the same COLA factors used to
adjust payments in FY 2012 (which are based on OPM's 2009 COLA
factors). We also established a methodology to update the COLA
factors for Alaska and Hawaii that were published by OPM every 4
years (at the same time as the update to the labor-related share of
the IPPS market basket), beginning in FY 2014. We refer readers to
the FY 2013 IPPS/LTCH PPS proposed and final rules for additional
background and a detailed description of this methodology (77 FR
28145 through 28146 and 77 FR 53700 through 53701, respectively).
For FY 2014, we proposed to update the COLA factors published by
OPM for 2009 (as these are the last COLA factors OPM published prior
to transitioning from COLAs to locality pay) using the methodology
that we finalized in the FY 2013 IPPS/LTCH PPS final rule. Under our
proposal, we proposed COLA factors for FY 2014 for the three
specified urban areas of Alaska (Anchorage, Fairbanks and Juneau) of
1.23; for the City and County of Honolulu, the County of Kauai, the
County of Maui, the County of Kalawao, and ``All other'' areas of
Alaska of 1.25; and for the County of Hawaii of 1.19. For additional
details on our proposal, we refer readers to the FY 2014 IPPS/LTCH
PPS proposed rule (77 FR 27770 through 27771). We did not receive
any public comments on our proposed COLA factors for FY 2014 and,
therefore, are adopting them as final in this final rule without
modification. The development of the COLA factors for FY 2014 is
described below.
For FY 2014, we are updating the COLA factors for Alaska and
Hawaii published by OPM for 2009 (as these are the last COLA factors
OPM published prior to transitioning from COLAs to locality pay)
using the methodology that we finalized in the FY 2013 IPPS/LTCH PPS
final rule. Specifically, under our methodology, we are using a
comparison of the growth in the Consumer Price Indices (CPIs) in
Anchorage and Honolulu relative to the growth in the overall CPI as
published by the Bureau of Labor Statistics (BLS) to update the COLA
adjustment factors for all areas in Alaska and Hawaii, respectively.
As discussed in the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 28145
through 28146), because BLS publishes CPI data for only Anchorage,
Alaska and Honolulu, Hawaii, our methodology for updating the COLA
factors uses a comparison of the growth in the CPIs for those cities
relative to the growth in the overall CPI to update the COLA
adjustment factors for all areas in Alaska and Hawaii, respectively.
We believe that the relative price differences between these cities
and the United States (as measured by the CPIs mentioned above) are
generally appropriate proxies for the relative price differences
between the ``other areas'' of Alaska and Hawaii and the United
States.
The CPIs for ``All Items'' that BLS publishes for Anchorage,
Alaska, Honolulu, Hawaii, and for the average U.S. city are based on
a different mix of commodities and services than is reflected in the
nonlabor-related share of the IPPS market basket. As such, under the
methodology we established to update the COLA factors, we calculated
a ``reweighted CPI'' using the CPI for commodities and the CPI for
services for each of the geographic areas to mirror the composition
of the IPPS market basket nonlabor-related share. The current
composition of BLS' CPI for ``All Items'' for all of the respective
areas is approximately 40 percent commodities and 60 percent
services. However, the nonlabor-related share of the IPPS market
basket is comprised of approximately 60 percent commodities and 40
percent services. Therefore, under the methodology we established in
the FY 2013 IPPS/LTCH PPS final rule, we have created reweighted
indexes for Anchorage, Alaska, Honolulu, Hawaii, and the average
U.S. city using the respective CPI commodities index and CPI
services index and applying the approximate 60/40 weights from the
IPPS market basket. We believe that this methodology is appropriate
because we would continue to make a COLA adjustment for hospitals
located in Alaska and Hawaii by multiplying the nonlabor-related
portion of the standardized amount by a COLA factor.
Under the COLA factor update methodology we established in the
FY 2013 IPPS/LTCH PPS final rule, we further exercised our
discretionary authority to adjust payments made to hospitals located
in Alaska and Hawaii by incorporating a 25-percent cap on the CPI-
updated COLA factors used to adjust the nonlabor-related portion of
the standardized amounts, which is consistent with a statutorily
mandated 25-percent cap that was applied to OPM's published COLA
factors. We believe that this is appropriate because our CPI-updated
COLA factors for FY 2014 use the 2009 OPM COLA factors as a basis.
In addition, we are continuing to establish COLA factors that are
rounded to 2 decimal places, which is consistent with the number of
decimal places in the 2009 OPM COLA factors that are used as the
basis for calculating the FY 2014 COLA factors. This policy also
will maintain consistency with the rounding used for the 25-percent
cap on the COLA factors (that is, a COLA factor of no more than
1.25).
Applying this methodology, we are establishing the COLA factors
for FY 2014 that will adjust the nonlabor-related portion of the
standardized amount for hospitals located in Alaska and Hawaii as
shown in the table below.

FY 2014 Cost-of-Living Adjustment Factors: Alaska and Hawaii Hospitals
------------------------------------------------------------------------
Cost of living
Area adjustment factor
------------------------------------------------------------------------
Alaska:
City of Anchorage and 80-kilometer (50-mile) 1.23
radius by road..................................
City of Fairbanks and 80-kilometer (50-mile) 1.23
radius by road..................................
City of Juneau and 80-kilometer (50-mile) radius 1.23
by road.........................................
Rest of Alaska................................... 1.25
Hawaii:
City and County of Honolulu...................... 1.25
County of Hawaii................................. 1.19
County of Kauai.................................. 1.25
County of Maui and County of Kalawao............. 1.25
------------------------------------------------------------------------

Each of the COLA factors was calculated using data through 2012
as these are the latest historical CPI data published by the BLS.
The reweighted CPI for Honolulu, Hawaii grew faster than the
reweighted CPI for the average U.S. city over the time period from
2009 to 2012, with a growth rate of 8.9 percent and 8.3 percent,
respectively. As a result, for FY 2014, we calculated COLA factors
for the City and County of Honolulu, the County of Kauai, the County
of Maui, and the County of Kalawao to be 1.26 compared to the FY
2013 COLA factor of 1.25. However, as stated above, our COLA factor
update methodology caps COLA factors at

[[Page 50987]]

1.25. In addition, the COLA factor calculated for the County of
Hawaii for FY 2014 is 1.19 compared to the FY 2013 COLA factor of
1.18.
The reweighted CPI for Anchorage, Alaska grew slower than the
reweighted CPI for the average U.S. city over the time period from
2009 to 2012, with a growth rate of 8.0 percent and 8.3 percent,
respectively. However, applying this slower relative growth rate to
the FY 2009 COLA factors for each of the Alaska areas results in no
change to the COLA factors for the Alaska areas for FY 2014 (1.25
for ``All other'' areas of Alaska and 1.23 for the three specified
urban areas of Alaska (Anchorage, Fairbanks and Juneau)) as compared
to the FY 2013 COLA factors.

C. Calculation of the Prospective Payment Rates

General Formula for Calculation of the Prospective Payment Rates for FY
2014

In general, the operating prospective payment rate for all
hospitals paid under the IPPS located outside of Puerto Rico, except
SCHs, for FY 2014 equals the Federal rate (which includes
uncompensated care payments). (As noted above, due to the expiration
of the MDH program, beginning with FY 2014, we are not including
MDHs in our discussion of the update of the hospital-specific rates
for FY 2014.)
SCHs are paid based on whichever of the following rates yields
the greatest aggregate payment: The Federal national rate (which, as
finalized in section V.E.3. of the preamble of this final rule,
includes uncompensated care payments); the updated hospital-specific
rate based on FY 1982 costs per discharge; the updated hospital-
specific rate based on FY 1987 costs per discharge; the updated
hospital-specific rate based on FY 1996 costs per discharge; or the
updated hospital-specific rate based on FY 2006 costs per discharge
to determine the rate that yields the greatest aggregate payment.
The prospective payment rate for SCHs for FY 2014 equals the
higher of the applicable Federal rate, or the hospital-specific rate
as described below. The prospective payment rate for hospitals
located in Puerto Rico for FY 2014 equals 25 percent of the Puerto
Rico-specific payment rate plus 75 percent of the applicable
national rate.

1. Federal Rate

The Federal rate is determined as follows:
Step 1--Select the applicable average standardized amount
depending on whether the hospital submitted qualifying quality data
(full update for hospitals submitting quality data; update including
a -2.0 percent adjustment for hospitals that did not submit these
data).
Step 2--Multiply the labor-related portion of the standardized
amount by the applicable wage index for the geographic area in which
the hospital is located or the area to which the hospital is
reclassified.
Step 3--For hospitals in Alaska and Hawaii, multiply the
nonlabor-related portion of the standardized amount by the
applicable cost-of-living adjustment factor.
Step 4--Add the amount from Step 2 and the nonlabor-related
portion of the standardized amount (adjusted, if applicable, under
Step 3).
Step 5--Multiply the final amount from Step 4 by the relative
weight corresponding to the applicable MS-DRG (Table 5 listed in
section VI. of this Addendum and available via the Internet).
The Federal rate as determined in Step 5 may then be further
adjusted if the hospital qualifies for either the IME or DSH
adjustment. In addition, for hospitals that qualify for a low-volume
payment adjustment under section 1886(d)(12) of the Act and 42 CFR
412.101(b), the payment in Step 5 would be increased by the formula
described in section V.C. of the preamble of this final rule. The
base-operating DRG payment amount may be further adjusted by the
hospital readmissions payment adjustment and the hospital VBP
payment adjustment as described under sections 1886(q) and 1886(o)
of the Act, respectively. Finally, we add the uncompensated care
payment to the total claim payment amount. We note that, as
finalized above, we take uncompensated care payments into
consideration when calculating outlier payments.

2. Hospital-Specific Rate (Applicable Only to SCHs)

a. Calculation of Hospital-Specific Rate

Section 1886(b)(3)(C) of the Act provides that SCHs are paid
based on whichever of the following rates yields the greatest
aggregate payment: The Federal rate (which, as finalized in section
V.E.3. of the preamble of this final rule, includes uncompensated
care payments); the updated hospital-specific rate based on FY 1982
costs per discharge; the updated hospital-specific rate based on FY
1987 costs per discharge; the updated hospital-specific rate based
on FY 1996 costs per discharge; or the updated hospital-specific
rate based on FY 2006 costs per discharge to determine the rate that
yields the greatest aggregate payment. For a more detailed
discussion of the calculation of the hospital-specific rates, we
refer readers to the FY 1984 IPPS interim final rule (48 FR 39772);
the April 20, 1990 final rule with comment period (55 FR 15150); the
FY 1991 IPPS final rule (55 FR 35994); and the FY 2001 IPPS final
rule (65 FR 47082). We also refer readers to section V.E. of the
preamble of this final rule for a complete discussion on DSH and
uncompensated care payments.

b. Updating the FY 1982, FY 1987, FY 1996 and FY 2006 Hospital-Specific
Rate for FY 2013

Section 1886(b)(3)(B)(iv) of the Act provides that the
applicable percentage increase applicable to the hospital-specific
rates for SCHs equals the applicable percentage increase set forth
in section 1886(b)(3)(B)(i) of the Act (that is, the same update
factor as for all other hospitals subject to the IPPS). Because the
Act sets the update factor for SCHs equal to the update factor for
all other IPPS hospitals, the update to the hospital-specific rates
for SCHs is subject to the amendments to section 1886(b)(3)(B) of
the Act made by sections 3401(a) and 10319(a) of the Affordable Care
Act. Accordingly, the applicable percentage increase to the
hospital-specific rates applicable to SCHs is 1.7 percent (that is,
the FY 2014 estimate of the market basket rate-of-increase of 2.5
percent less an adjustment of 0.5 percentage point for MFP and less
0.3 percentage point) for hospitals that submit quality data or -0.3
percent (that is, the FY 2014 estimate of the market basket rate-of-
increase of 2.5 percent, less 2.0 percentage points for failure to
submit data under the Hospital IQR Program, less an adjustment of
0.5 percentage point for MFP, and less 0.3 percentage point) for
hospitals that fail to submit quality data. For a complete
discussion of the applicable percentage increase applicable to the
hospital-specific rates for SCHs, we refer readers to section V.A.
of the preamble of this final rule.
In addition, because SCHs use the same MS-DRGs as other
hospitals when they are paid based in whole or in part on the
hospital-specific rate, the hospital-specific rate is adjusted by a
budget neutrality factor to ensure that changes to the MS-DRG
classifications and the recalibration of the MS-DRG relative weights
are made in a manner so that aggregate IPPS payments are unaffected.
Therefore, a SCH's hospital-specific rate is adjusted by the MS-DRG
reclassification and recalibration budget neutrality factor of
0.997989, as discussed in section III. of this Addendum. The
resulting rate is used in determining the payment rate an SCH will
receive for its discharges beginning on or after October 1, 2013. We
note that, in this final rule, for FY 2014, we are not making a
documentation and coding adjustment to the hospital-specific rate.
We refer readers to section II.D. of the preamble of this final rule
for a complete discussion regarding our finalized policies and
previously finalized policies (including our historical adjustments
to the payment rates) relating to the effect of changes in
documentation and coding that do not reflect real changes in case-
mix. We note that section II.D. of the preamble of this final rule
also includes a discussion on documentation and coding effects that
occurred through FY 2010, including the request for public comments
in the FY 2014 IPPS/LTCH PPS proposed rule as to whether any portion
of the -0.8 percent recoupment adjustment discussed in section
II.D.6. of the preamble of this final rule should be reduced and
instead applied as a prospective adjustment for the cumulative MS-
DRG documentation and coding effect through FY 2010.

c. Adjustment to Offset the Cost of the Admission and Medical Review
Criteria for Hospital Inpatient Services Under Medicare Part A Policy
and Clarification

[[Page 50988]]

of 0.2 percent (or a 0.998 adjustment) to the IPPS rates, including
the FY 2014 hospital-specific rate for SCHs, to offset our estimate
of the increase in IPPS payments. We refer readers to section XI.C.
of the preamble of this final rule for a complete discussion of our
policy on admission and medical review criteria for hospital
inpatient services under Medicare Part A.

3. General Formula for Calculation of Prospective Payment Rates for
Hospitals Located in Puerto Rico Beginning on or After October 1, 2013,
and Before October 1, 2014

Section 1886(d)(9)(E)(iv) of the Act provides that, effective
for discharges occurring on or after October 1, 2004, hospitals
located in Puerto Rico are paid based on a blend of 75 percent of
the national prospective payment rate and 25 percent of the Puerto
Rico-specific rate.

a. Puerto Rico-Specific Rate

The Puerto Rico-specific prospective payment rate is determined
as follows:
Step 1--Select the applicable average standardized amount
considering the applicable wage index (obtained from Table 1C
published in section VI. of this Addendum and available via the
Internet).
Step 2--Multiply the labor-related portion of the standardized
amount by the applicable Puerto Rico-specific wage index.
Step 3--Add the amount from Step 2 and the nonlabor-related
portion of the standardized amount.
Step 4--Multiply the amount from Step 3 by the applicable MS-DRG
relative weight (obtained from Table 5 listed in section VI. of this
Addendum and available via the Internet).
Step 5--Multiply the result in Step 4 by 25 percent.

b. National Prospective Payment Rate

The national prospective payment rate is determined as follows:
Step 1--Select the applicable average standardized amount.
Step 2--Multiply the labor-related portion of the standardized
amount by the applicable wage index for the geographic area in which
the hospital is located or the area to which the hospital is
reclassified.
Step 3--Add the amount from Step 2 and the nonlabor-related
portion of the national average standardized amount.
Step 4--Multiply the amount from Step 3 by the applicable MS-DRG
relative weight (obtained from Table 5 listed in section VI. of this
Addendum and available via the Internet).
Step 5--Multiply the result in Step 4 by 75 percent.
The sum of the Puerto Rico-specific rate and the national
prospective payment rate computed above equals the prospective
payment for a given discharge for a hospital located in Puerto Rico.
This rate is then further adjusted if the hospital qualifies for
either the IME or DSH adjustment.
Finally, we add the uncompensated care payment to the total
claim payment amount. We note that, as finalized above, we take
uncompensated care payments into consideration when calculating
outlier payments.

c. Adjustment to Offset the Cost of the Admission and Medical Review
Criteria for Hospital Inpatient Services Under Medicare Part A Policy
and Clarification

As discussed previously, in section XI.C. of the preamble of
this final rule, our actuaries project additional IPPS expenditures
will result from our policy that medical review of inpatient
admissions will include a presumption that hospital inpatient
admissions are reasonable and necessary for beneficiaries who
require more than 1 Medicare utilization day (defined by encounters
crossing 2 ``midnights'') in the hospital receiving medically
necessary services after inpatient admission (which is presented in
section XI.C. of the preamble of this final rule). We believe that
it is appropriate to use our exceptions and adjustments authority
under section 1886(d)(5)(I)(i) of the Act to apply reductions of 0.2
percent (or a 0.998 adjustment) to the IPPS rates, including the FY
2014 national standardized amount and the Puerto Rico standardized
amount, to offset our estimate of the increase in IPPS payments. We
refer readers to section XI.C. of the preamble of this final rule
for a complete discussion of our policy on admission and medical
review criteria for hospital inpatient services under Medicare Part
A.

III. Changes to Payment Rates for Acute Care Hospital Inpatient
Capital-Related Costs for FY 2014

The PPS for acute care hospital inpatient capital-related costs
was implemented for cost reporting periods beginning on or after
October 1, 1991. Effective with that cost reporting period, over a
10-year transition period (which extended through FY 2001) the
payment methodology for Medicare acute care hospital inpatient
capital-related costs changed from a reasonable cost-based
methodology to a prospective methodology (based fully on the Federal
rate).
The basic methodology for determining Federal capital
prospective rates is set forth in the regulations at 42 CFR 412.308
through 412.352. Below we discuss the factors that we used to
determine the capital Federal rate for FY 2014, which is effective
for discharges occurring on or after October 1, 2013.
The 10-year transition period ended with hospital cost reporting
periods beginning on or after October 1, 2001 (FY 2002). Therefore,
for cost reporting periods beginning in FY 2002, all hospitals
(except ``new'' hospitals under Sec. 412.304(c)(2)) are paid based
on the capital Federal rate. For FY 1992, we computed the standard
Federal payment rate for capital-related costs under the IPPS by
updating the FY 1989 Medicare inpatient capital cost per case by an
actuarial estimate of the increase in Medicare inpatient capital
costs per case. Each year after FY 1992, we update the capital
standard Federal rate, as provided at Sec. 412.308(c)(1), to
account for capital input price increases and other factors. The
regulations at Sec. 412.308(c)(2) also provide that the capital
Federal rate be adjusted annually by a factor equal to the estimated
proportion of outlier payments under the capital Federal rate to
total capital payments under the capital Federal rate. In addition,
Sec. 412.308(c)(3) requires that the capital Federal rate be
reduced by an adjustment factor equal to the estimated proportion of
payments for exceptions under Sec. 412.348. (We note that, as
discussed in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53705),
there is generally no longer a need for an exceptions payment
adjustment factor.) However, in limited circumstances, an additional
payment exception for extraordinary circumstances is provided for
under Sec. 412.348(f) for qualifying hospitals. Therefore, in
accordance with Sec. 412.308(c)(3), an exceptions payment
adjustment factor may need to be applied if such payments are made.
Section 412.308(c)(4)(ii) requires that the capital standard Federal
rate be adjusted so that the effects of the annual DRG
reclassification and the recalibration of DRG weights and changes in
the geographic adjustment factor (GAF) are budget neutral.
Section 412.374 provides for blended payments to hospitals
located in Puerto Rico under the IPPS for acute care hospital
inpatient capital-related costs. Accordingly, under the capital PPS,
we compute a separate payment rate specific to hospitals located in
Puerto Rico using the same methodology used to compute the national
Federal rate for capital-related costs. In accordance with section
1886(d)(9)(A) of the Act, under the IPPS for acute care hospital
operating costs, hospitals located in Puerto Rico are paid for
operating costs under a special payment formula. Effective October
1, 2004, in accordance with section 504 of Public Law 108-173, the
methodology for operating payments made to hospitals located in
Puerto Rico under the IPPS was revised to make payments based on a
blend of 25 percent of the applicable standardized amount specific
to Puerto Rico hospitals and 75 percent of the applicable national
average standardized amount. In conjunction with this change to the
operating blend percentage, effective with discharges occurring on
or after October 1, 2004, we also revised the methodology for
computing capital payments made to hospitals located in Puerto Rico
to be based on a blend of 25 percent of the Puerto Rico capital rate
and 75 percent of the national capital Federal rate (69 FR 49185).

A. Determination of the Federal Hospital Inpatient Capital-Related
Prospective Payment Rate Update

In the discussion that follows, we explain the factors that we
used to determine the capital Federal rate for FY 2014. In
particular, we explain why the FY 2014 capital Federal rate
increases approximately 0.9 percent, compared to the FY 2013 capital
Federal rate. As discussed in the impact analysis in Appendix A to
this final rule, we estimate that capital payments per discharge
will increase 1.6 percent during that same period. Because capital
payments constitute about 10 percent of hospital payments, a percent
change in the capital Federal rate yields only about a 0.1 percent
change in actual payments to hospitals.

1. Projected Capital Standard Federal Rate Update

a. Description of the Update Framework

Under Sec. 412.308(c)(1), the capital standard Federal rate is
updated on the basis of an

[[Page 50989]]

analytical framework that takes into account changes in a capital
input price index (CIPI) and several other policy adjustment
factors. Specifically, we adjust the projected CIPI rate-of-increase
as appropriate each year for case-mix index-related changes, for
intensity, and for errors in previous CIPI forecasts. The update
factor for FY 2014 under that framework is 0.9 percent based on the
best data available at this time. The update factor under that
framework is based on a projected 1.2 percent increase in the
revised and rebased FY 2010-based CIPI (discussed in more detail in
section IV.D. of the preamble of this final rule), a 0.0 percentage
point adjustment for intensity, a 0.0 percentage point adjustment
for case-mix, a 0.0 percentage point adjustment for the FY 2012 DRG
reclassification and recalibration, and a forecast error correction
of -0.3 percentage point. As discussed below in section III.C. of
this Addendum, we continue to believe that the CIPI is the most
appropriate input price index for capital costs to measure capital
price changes in a given year. We also explain the basis for the FY
2014 CIPI projection in that same section of this Addendum. Below we
describe the policy adjustments that we are applying in the update
framework for FY 2014.
The case-mix index is the measure of the average DRG weight for
cases paid under the IPPS. Because the DRG weight determines the
prospective payment for each case, any percentage increase in the
case-mix index corresponds to an equal percentage increase in
hospital payments.
The case-mix index can change for any of several reasons:
The average resource use of Medicare patients changes
(``real'' case-mix change);
Changes in hospital documentation and coding of patient
records result in higher-weighted DRG assignments (``coding
effects''); and
The annual DRG reclassification and recalibration
changes may not be budget neutral (``reclassification effect'').
We define real case-mix change as actual changes in the mix (and
resource requirements) of Medicare patients as opposed to changes in
documentation and coding behavior that result in assignment of cases
to higher-weighted DRGs, but do not reflect higher resource
requirements. The capital update framework includes the same case-
mix index adjustment used in the former operating IPPS update
framework (as discussed in the May 18, 2004 IPPS proposed rule for
FY 2005 (69 FR 28816)). (We no longer use an update framework to
make a recommendation for updating the operating IPPS standardized
amounts as discussed in section II. of Appendix B to the FY 2006
IPPS final rule (70 FR 47707).)
For FY 2014, we are projecting a 0.5 percent total increase in
the case-mix index. We estimated that the real case-mix increase
will also equal 0.5 percent for FY 2014. The net adjustment for
change in case-mix is the difference between the projected real
increase in case-mix and the projected total increase in case-mix.
Therefore, as we proposed, the net adjustment for case-mix change in
FY 2014 is 0.0 percentage point.
The capital update framework also contains an adjustment for the
effects of DRG reclassification and recalibration. This adjustment
is intended to remove the effect on total payments of prior year's
changes to the DRG classifications and relative weights, in order to
retain budget neutrality for all case-mix index-related changes
other than those due to patient severity of illness. Due to the lag
time in the availability of data, there is a 2-year lag in data used
to determine the adjustment for the effects of DRG reclassification
and recalibration. For example, we have data available to evaluate
the effects of the FY 2012 DRG reclassification and recalibration as
part of our update for FY 2014. We estimate that FY 2012 DRG
reclassification and recalibration resulted in no change in the
case-mix when compared with the case-mix index that would have
resulted if we had not made the reclassification and recalibration
changes to the DRGs. Therefore, as we proposed, we are making a 0.0
percentage point adjustment for reclassification and recalibration
in the update framework for FY 2014.
The capital update framework also contains an adjustment for
forecast error. The input price index forecast is based on
historical trends and relationships ascertainable at the time the
update factor is established for the upcoming year. In any given
year, there may be unanticipated price fluctuations that may result
in differences between the actual increase in prices and the
forecast used in calculating the update factors. In setting a
prospective payment rate under the framework, we make an adjustment
for forecast error only if our estimate of the change in the capital
input price index for any year is off by 0.25 percentage point or
more. There is a 2-year lag between the forecast and the
availability of data to develop a measurement of the forecast error.
A forecast error of -0.3 percentage point was calculated for the FY
2014 update. That is, current historical data indicate that the
forecasted FY 2012 rate-of-increase of the FY 2006-based CIPI (1.5
percent) used in calculating the FY 2012 update factor slightly
overstated the actual realized FY 2012 price increases of the FY
2006-based CIPI (1.2 percent) by 0.3 percentage point because the
prices associated with both the depreciation and interest cost
categories grew more slowly than anticipated. Historically, when
forecast error of the CIPI is greater than 0.25 percentage point in
absolute terms, it is reflected in the update recommended under this
framework. Therefore, as we proposed, we are making a -0.3
percentage point adjustment for forecast error in the update for FY
2014.
Under the capital IPPS update framework, we also make an
adjustment for changes in intensity. Historically, we calculated
this adjustment using the same methodology and data that were used
in the past under the framework for operating IPPS. The intensity
factor for the operating update framework reflected how hospital
services are utilized to produce the final product, that is, the
discharge. This component accounts for changes in the use of
quality-enhancing services, for changes within DRG severity, and for
expected modification of practice patterns to remove noncost-
effective services. Our intensity measure is based on a 5-year
average.
We calculate case-mix constant intensity as the change in total
cost per discharge, adjusted for price level changes (the CIPI for
hospital and related services) and changes in real case-mix. Without
reliable estimates of the proportions of the overall annual
intensity increases that are due, respectively, to ineffective
practice patterns and the combination of quality-enhancing new
technologies and complexity within the DRG system, we assume that
one-half of the annual increase is due to each of these factors. The
capital update framework thus provides an add-on to the input price
index rate of increase of one-half of the estimated annual increase
in intensity, to allow for increases within DRG severity and the
adoption of quality-enhancing technology.
In this final rule, we are continuing to use a Medicare-specific
intensity measure that is based on a 5-year adjusted average of cost
per discharge for FY 2014 (we refer readers to the FY 2011 IPPS/LTCH
PPS final rule (75 FR 50436) for a full description of our Medicare-
specific intensity measure). Specifically, for FY 2014, we are using
an intensity measure that is based on an average of cost per
discharge data from the 5-year period beginning with FY 2006 and
extending through FY 2011. Based on these data, we estimated that
case-mix constant intensity declined during FYs 2006 through 2011.
In the past, when we found intensity to be declining, we believed a
zero (rather than a negative) intensity adjustment was appropriate.
Consistent with this approach, because we estimate that intensity
declined during that 5-year period, we believe it is appropriate to
continue to apply a zero intensity adjustment for FY 2014.
Therefore, as we proposed, we are making a 0.0 percentage point
adjustment for intensity in the update for FY 2014.
Above, we described the basis of the components used to develop
the 0.9 percent capital update factor under the capital update
framework for FY 2014 as shown in the table below.

CMS FY 2014 Update Factor to the Capital Federal Rate
------------------------------------------------------------------------

------------------------------------------------------------------------
Capital Input Price Index*...................................... 1.2
Intensity....................................................... 0.0
Case-Mix Adjustment Factors:
Real Across DRG Change...................................... -0.5
Projected Case-Mix Change................................... 0.5
-------
Subtotal................................................ 1.2
Effect of FY 2012 Reclassification and Recalibration............ 0.0
Forecast Error Correction....................................... -0.3
-------
Total Update............................................ 0.9
------------------------------------------------------------------------
*The capital input price index is based on the revised and rebased FY
2010-based CIPI discussed in section IV.D. of the preamble of this
final rule.

b. Comparison of CMS and MedPAC Update Recommendation

In its March 2013 Report to Congress, MedPAC did not make a
specific update recommendation for capital IPPS payments

[[Page 50990]]

for FY 2014. (We refer readers to MedPAC's Report to the Congress:
Medicare Payment Policy, March 2013, Chapter 3.)

2. Outlier Payment Adjustment Factor

Section 412.312(c) establishes a unified outlier payment
methodology for inpatient operating and inpatient capital-related
costs. A single set of thresholds is used to identify outlier cases
for both inpatient operating and inpatient capital-related payments.
Section 412.308(c)(2) provides that the standard Federal rate for
inpatient capital-related costs be reduced by an adjustment factor
equal to the estimated proportion of capital-related outlier
payments to total inpatient capital-related PPS payments. The
outlier thresholds are set so that operating outlier payments are
projected to be 5.1 percent of total operating IPPS DRG payments.
For FY 2013, we estimated that outlier payments for capital will
equal 6.38 percent of inpatient capital-related payments based on
the capital Federal rate in FY 2013. Based on the thresholds as set
forth in section II.A. of this Addendum, we estimate that outlier
payments for capital-related costs would equal 6.07 percent for
inpatient capital-related payments based on the capital Federal rate
in FY 2014. Therefore, we are applying an outlier adjustment factor
of 0.9393 in determining the capital Federal rate for FY 2014. Thus,
we estimate that the percentage of capital outlier payments to total
capital Federal rate payments for FY 2014 will be slightly lower
than the percentage for FY 2013.
The outlier reduction factors are not built permanently into the
capital rates; that is, they are not applied cumulatively in
determining the capital Federal rate. The FY 2014 outlier adjustment
of 0.9393 is a 0.33 percent change from the FY 2013 outlier
adjustment of 0.9362. Therefore, the net change in the outlier
adjustment to the capital Federal rate for FY 2014 is 1.0033
(0.9393/0.9362). Thus, the outlier adjustment will increase the FY
2014 capital Federal rate by 0.33 percent compared to the FY 2013
outlier adjustment.

3. Budget Neutrality Adjustment Factor for Changes in DRG
Classifications and Weights and the GAF

Section 412.308(c)(4)(ii) requires that the capital Federal rate
be adjusted so that aggregate payments for the fiscal year based on
the capital Federal rate after any changes resulting from the annual
DRG reclassification and recalibration and changes in the GAF are
projected to equal aggregate payments that would have been made on
the basis of the capital Federal rate without such changes. Because
we implemented a separate GAF for Puerto Rico, we apply separate
budget neutrality adjustments for the national GAF and the Puerto
Rico GAF. We apply the same budget neutrality factor for DRG
reclassifications and recalibration nationally and for Puerto Rico.
Separate adjustments were unnecessary for FY 1998 and earlier
because the GAF for Puerto Rico was implemented in FY 1998.
To determine the factors for FY 2014, we compared (separately
for the national capital rate and the Puerto Rico capital rate)
estimated aggregate capital Federal rate payments based on the FY
2013 MS-DRG classifications and relative weights and the FY 2013 GAF
to estimated aggregate capital Federal rate payments based on the FY
2013 MS-DRG classifications and relative weights and the FY 2014
GAFs. To achieve budget neutrality for the changes in the national
GAFs, based on calculations using updated data, we are applying an
incremental budget neutrality adjustment factor of 0.9997 for FY
2014 to the previous cumulative FY 2013 adjustment factor of 0.9904,
yielding an adjustment factor of 0.9900 through FY 2014. For the
Puerto Rico GAFs, we are applying an incremental budget neutrality
adjustment factor of 0.9990 for FY 2014 to the previous cumulative
FY 2013 adjustment factor of 1.0095, yielding a cumulative
adjustment factor of 1.0084 through FY 2014.
We then compared estimated aggregate capital Federal rate
payments based on the FY 2013 MS-DRG relative weights and the FY
2014 GAFs to estimated aggregate capital Federal rate payments based
on the cumulative effects of the FY 2014 MS-DRG classifications and
relative weights and the FY 2014 GAFs. The incremental adjustment
factor for DRG classifications and changes in relative weights is
0.9990 both nationally and for Puerto Rico. The cumulative
adjustment factors for MS-DRG classifications and changes in
relative weights and for changes in the GAFs through FY 2014 are
0.9881 nationally and 1.0076 for Puerto Rico. (We note that all the
values are calculated with unrounded numbers.) The GAF/DRG budget
neutrality adjustment factors are built permanently into the capital
rates; that is, they are applied cumulatively in determining the
capital Federal rate. This follows the requirement under Sec.
412.308(c)(4)(ii) that estimated aggregate payments each year be no
more or less than they would have been in the absence of the annual
DRG reclassification and recalibration and changes in the GAFs.
The methodology used to determine the recalibration and
geographic adjustment factor (GAF/DRG) budget neutrality adjustment
is similar to the methodology used in establishing budget neutrality
adjustments under the IPPS for operating costs. One difference is
that, under the operating IPPS, the budget neutrality adjustments
for the effect of geographic reclassifications are determined
separately from the effects of other changes in the hospital wage
index and the MS-DRG relative weights. Under the capital IPPS, there
is a single GAF/DRG budget neutrality adjustment factor (the
national capital rate and the Puerto Rico capital rate are
determined separately) for changes in the GAF (including geographic
reclassification) and the MS-DRG relative weights. In addition,
there is no adjustment for the effects that geographic
reclassification has on the other payment parameters, such as the
payments for DSH or IME.
The cumulative adjustment factor accounts for the MS-DRG
reclassifications and recalibration and for changes in the GAFs. It
also incorporates the effects on the GAFs of FY 2014 geographic
reclassification decisions made by the MGCRB compared to FY 2013
decisions. However, it does not account for changes in payments due
to changes in the DSH and IME adjustment factors.

4. Capital Federal Rate for FY 2014

For FY 2013, we established a capital Federal rate of $425.49
(77 FR 53706). We are establishing an update of 0.9 percent in
determining the FY 2014 capital Federal rate for all hospitals. In
addition, as discussed in greater detail in section IV.C. of the
preamble of this final rule, we are making a reduction of 0.2
percent to the capital IPPS rates, to offset the estimated
additional IPPS expenditures that are projected to result from our
policy on admission and medical review criteria for hospital
inpatient services under Medicare Part A.
As a result of the 0.9 percent update, the budget neutrality
factors, and the 0.2 percent reduction to offset the estimated
additional IPPS expenditures projected to result from our policy on
admission and medical review criteria for hospital inpatient
services discussed above, we are establishing a national capital
Federal rate of $429.31 for FY 2014. The national capital Federal
rate for FY 2014 was calculated as follows:
The FY 2014 update factor is 1.009, that is, the update
is 0.9 percent.
The FY 2014 budget neutrality adjustment factor that is
applied to the capital Federal rate for changes in the MS-DRG
classifications and relative weights and changes in the GAFs is
0.9987.
The FY 2014 outlier adjustment factor is 0.9393.
An adjustment factor of 0.9980 (that is, a reduction of
0.2 percent) to offset the estimated additional IPPS expenditures
that are projected to result from our policy on admission and
medical review criteria for hospital inpatient services under
Medicare Part A.
(We note that, as discussed in section VI.D. of the preamble of
this final rule, we are not making an additional MS-DRG
documentation and coding adjustment to the capital IPPS Federal
rates for FY 2014.)
Because the capital Federal rate has already been adjusted for
differences in case-mix, wages, cost-of-living, indirect medical
education costs, and payments to hospitals serving a
disproportionate share of low-income patients, we are not making
additional adjustments in the capital Federal rate for these
factors, other than the budget neutrality factor for changes in the
MS-DRG classifications and relative weights and for changes in the
GAFs. (As noted previously in this section, there is no need for an
exceptions payment adjustment budget neutrality factor in
determining the FY 2014 capital Federal rate.)
We are providing the following chart that shows how each of the
factors and adjustments for FY 2014 affects the computation of the
FY 2014 national capital Federal rate in comparison to the FY 2013
national capital Federal rate. The FY 2014 update factor has the
effect of increasing the capital Federal rate by 0.9 percent
compared to the FY 2013 capital Federal rate. The GAF/DRG budget
neutrality adjustment factor has the effect of decreasing the
capital Federal rate by 0.13 percent. The FY 2014 outlier adjustment
factor has the effect of increasing the capital Federal rate by 0.33
percent

[[Page 50991]]

compared to the FY 2013 capital Federal rate. The adjustment to
account for the estimated additional IPPS expenditures that are
projected to result from our policy on admission and medical review
criteria for hospital inpatient services under Medicare Part A has
the effect of decreasing the capital Federal rate by 0.2 percent
compared to the FY 2013 capital Federal rate. The combined effect of
all the changes will increase the national capital Federal rate by
1.90 percent compared to the FY 2013 national capital Federal rate.

Comparison of Factors and Adjustments: FY 2013 Capital Federal Rate and FY 2014 Capital Federal Rate
----------------------------------------------------------------------------------------------------------------
FY 2013 FY 2014 Change Percent change
----------------------------------------------------------------------------------------------------------------
Update Factor \1\................... 1.0120 1.0090 1.0090 0.90
GAF/DRG Adjustment Factor \1\....... 0.9998 0.9987 0.9987 -0.13
Outlier Adjustment Factor \2\....... 0.9362 0.9393 1.0033 0.33
Adjustment for admission and medical N/A 0.9980 0.9980 -0.20
review criteria \3\................
Capital Federal Rate................ $425.49 $429.31 1.0190 1.90
----------------------------------------------------------------------------------------------------------------
\1\ The update factor and the GAF/DRG budget neutrality adjustment factors are built permanently into the
capital Federal rates. Thus, for example, the incremental change from FY 2013 to FY 2014 resulting from the
application of the 0.9987 GAF/DRG budget neutrality adjustment factor for FY 2014 is a net change of 0.9987
(or -0.13 percent).
\2\ The outlier reduction factor is not built permanently into the capital Federal rate; that is, the factor is
not applied cumulatively in determining the capital Federal rate. Thus, for example, the net change resulting
from the application of the FY 2014 outlier adjustment factor is 0.9393/0.9362, or 1.0033 (or 0.33 percent).
\3\ The adjustment to account for the estimated additional IPPS expenditures that are projected to result from
our policy on admission and medical review criteria for hospital inpatient services under Medicare Part A
(discussed in section VI.C. of the preamble of this final rule).

In this final rule, we also are providing the following chart
that shows how the final FY 2014 capital Federal rate differs from
the proposed FY 2014 capital Federal rate as presented in the FY
2014 IPPS/LTCH PPS proposed rule.

Comparison of Factors and Adjustments: Proposed FY 2014 Capital Federal Rate and Final FY 2014 Capital Federal
Rate
----------------------------------------------------------------------------------------------------------------
Proposed Final Change Percent change
----------------------------------------------------------------------------------------------------------------
Update Factor....................... 1.0090 1.0090 1.0000 0.00
GAF/DRG Adjustment Factor........... 0.9988 0.9987 0.9999 -0.01
Outlier Adjustment Factor........... 0.9451 0.9393 0.9938 -0.62
Adjustment for admission and medical 0.9980 0.9980 1.0000 0.00
review criteria....................
Capital Federal Rate................ $432.03 $429.31 0.9937 -0.63
----------------------------------------------------------------------------------------------------------------

6. Special Capital Rate for Puerto Rico Hospitals

Section 412.374 provides for the use of a blended payment system
for payments made to hospitals located in Puerto Rico under the PPS
for acute care hospital inpatient capital-related costs.
Accordingly, under the capital PPS, we compute a separate payment
rate specific to hospitals located in Puerto Rico using the same
methodology used to compute the national Federal rate for capital-
related costs. Under the broad authority of section 1886(g) of the
Act, beginning with discharges occurring on or after October 1,
2004, capital payments made to hospitals located in Puerto Rico are
based on a blend of 25 percent of the Puerto Rico capital rate and
75 percent of the capital Federal rate. The Puerto Rico capital rate
is derived from the costs of Puerto Rico hospitals only, while the
capital Federal rate is derived from the costs of all acute care
hospitals participating in the IPPS (including Puerto Rico).
To adjust hospitals' capital payments for geographic variations
in capital costs, we apply a GAF to both portions of the blended
capital rate. The GAF is calculated using the operating IPPS wage
index, and varies depending on the labor market area or rural area
in which the hospital is located. We use the Puerto Rico wage index
to determine the GAF for the Puerto Rico part of the capital-blended
rate and the national wage index to determine the GAF for the
national part of the blended capital rate.
Because we implemented a separate GAF for Puerto Rico in FY
1998, we also apply separate budget neutrality adjustment factors
for the national GAF and for the Puerto Rico GAF. However, we apply
the same budget neutrality adjustment factor for MS-DRG
reclassifications and recalibration nationally and for Puerto Rico.
The budget neutrality adjustment factors for the national GAF and
for the Puerto Rico GAF, and the budget neutrality factor for MS-DRG
reclassifications and recalibration (which is the same nationally
and for Puerto Rico) is discussed above in section III.A.3. of this
Addendum.
In computing the payment for a particular Puerto Rico hospital,
the Puerto Rico portion of the capital rate (25 percent) is
multiplied by the Puerto Rico-specific GAF for the labor market area
in which the hospital is located, and the national portion of the
capital rate (75 percent) is multiplied by the national GAF for the
labor market area in which the hospital is located (which is
computed from national data for all hospitals in the United States
and Puerto Rico).
For FY 2013, the special capital rate for hospitals located in
Puerto Rico was $207.25 (77 FR 53707). With the changes we are
making to the other factors used to determine the capital Federal
rate (including the adjustment to account for the estimated
additional IPPS expenditures that are projected to result from our
policy on admission and medical review criteria for hospital
inpatient services under Medicare Part A (discussed in section IX.C.
of the preamble of this final rule)), the FY 2014 special capital
rate for hospitals in Puerto Rico is $209.82.

B. Calculation of the Inpatient Capital-Related Prospective
Payments for FY 2014

For purposes of calculating payments for each discharge during
FY 2014, the capital Federal rate is adjusted as follows: (Standard
Federal Rate) x (DRG weight) x (GAF) x (COLA for hospitals located
in Alaska and Hawaii) x (1 + DSH Adjustment Factor + IME Adjustment
Factor, if applicable). The result is the adjusted capital Federal
rate.
Hospitals also may receive outlier payments for those cases that
qualify under the thresholds established for each fiscal year.
Section 412.312(c) provides for a single set of thresholds to
identify outlier cases for both inpatient operating and inpatient
capital-related payments. The outlier thresholds for FY 2014 are in
section II.A. of this Addendum. For FY 2014, a case would qualify as
a cost outlier if the cost for the case plus the (operating) IME and
DSH payments (including both the empirically justified Medicare DSH
payment and the estimated uncompensated care payment, as discussed
in section II.A.4.g.(1) of this Addendum) is greater than the
prospective payment rate for the MS-DRG plus the fixed-loss amount
of $21,748.
Currently, as provided under Sec. 412.304(c)(2), we pay a new
hospital 85

[[Page 50992]]

percent of its reasonable costs during the first 2 years of
operation unless it elects to receive payment based on 100 percent
of the capital Federal rate. Effective with the third year of
operation, we pay the hospital based on 100 percent of the capital
Federal rate (that is, the same methodology used to pay all other
hospitals subject to the capital PPS).

C. Capital Input Price Index

1. Background

Like the operating input price index, the capital input price
index (CIPI) is a fixed-weight price index that measures the price
changes associated with capital costs during a given year. The CIPI
differs from the operating input price index in one important
aspect--the CIPI reflects the vintage nature of capital, which is
the acquisition and use of capital over time. Capital expenses in
any given year are determined by the stock of capital in that year
(that is, capital that remains on hand from all current and prior
capital acquisitions). An index measuring capital price changes
needs to reflect this vintage nature of capital. Therefore, the CIPI
was developed to capture the vintage nature of capital by using a
weighted-average of past capital purchase prices up to and including
the current year.
We periodically update the base year for the operating and
capital input price indexes to reflect the changing composition of
inputs for operating and capital expenses. As we proposed, in this
final rule, we are rebasing and revising the CIPI to a FY 2010 base
year to reflect the more current structure of capital costs in
hospitals. A complete discussion of this rebasing is provided in
section IV.D. of the preamble of this final rule. The CIPI was last
rebased to FY 2006 in the FY 2010 IPPS/RY 2010 LTCH PPS final rule
(74 FR 44021).

2. Forecast of the CIPI for FY 2014

Based on the latest forecast by IHS Global Insight, Inc. (second
quarter of 2013), we are forecasting the FY 2010-based CIPI to
increase 1.2 percent in FY 2014. This reflects a projected 1.9
percent increase in vintage-weighted depreciation prices (building
and fixed equipment, and movable equipment), and a projected 2.8
percent increase in other capital expense prices in FY 2014,
partially offset by a projected 2.3 percent decline in vintage-
weighted interest expenses in FY 2014. The weighted average of these
three factors produces the forecasted 1.2 percent increase for the
FY 2010-based CIPI as a whole in FY 2014.

IV. Changes to Payment Rates for Excluded Hospitals: Rate-of-Increase
Percentages for FY 2014

Historically, certain hospitals and hospital units excluded from
the prospective payment system received payment for inpatient
hospital services they furnished on the basis of reasonable costs,
subject to a rate-of-increase ceiling. An annual per discharge limit
(the target amount as defined in Sec. 413.40(a)) was set for each
hospital or hospital unit based on the hospital's own cost
experience in its base year, and updated annually by a rate-of-
increase percentage. The updated target amount for that period was
multiplied by the Medicare discharges during that period and applied
as an aggregate upper limit (the ceiling as defined in Sec.
413.40(a)) on total inpatient operating costs for a hospital's cost
reporting period. Prior to October 1, 1997, these payment provisions
applied consistently to certain categories of excluded providers,
which included rehabilitation hospitals and units (now referred to
as IRFs), psychiatric hospitals and units (now referred to as IPFs),
LTCHs, children's hospitals, and cancer hospitals.
Payments for services furnished in children's hospitals and
cancer hospitals that are excluded from the IPPS continue to be
subject to the rate-of-increase ceiling based on the hospital's own
historical cost experience. (We note that, in accordance with Sec.
403.752(a), RNHCIs are also subject to the rate-of-increase limits
established under Sec. 413.40 of the regulations.)
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27777), we
proposed that the FY 2014 rate-of-increase percentage for updating
the target amounts for the 11 cancer hospitals, children's
hospitals, and RNHCIs would be the estimated percentage increase in
the FY 2014 IPPS operating market basket, in accordance with
applicable regulations at Sec. 413.40. As described in section IV.
of the preamble of the proposed rule, we proposed to revise and
rebase the IPPS operating market basket to a FY 2010 base year.
Therefore, we proposed to use the percentage increase in the FY
2010-based IPPS operating market basket to update the target amounts
for children's hospitals, 11 cancer hospitals, and RNHCIs for FY
2014 and subsequent fiscal years. Accordingly, we proposed that the
FY 2014 rate-of-increase percentage to be applied to the target
amount for these cancer hospitals, children's hospitals, and RNHCIs
would be the FY 2014 percentage increase in the FY 2010-based IPPS
operating market basket. Based on IHS Global Insight, Inc.'s 2013
first quarter forecast, we estimated that the FY 2010-based IPPS
operating market basket update for FY 2014 was 2.5 percent (that is,
the estimate of the market basket rate-of-increase). However, we
proposed that if more recent data became available for the final
rule, we would use them to calculate the IPPS operating market
basket update for FY 2014. Therefore, based on IHS Global Insight,
Inc.'s 2013 second quarter forecast, with historical data through
the 2013 first quarter, we estimate that the final FY 2010-based
IPPS operating market basket update for FY 2014 is 2.5 percent (that
is, the estimate of the market basket rate-of-increase). For cancer
and children's hospitals and RNHCIs, the final FY 2014 rate-of-
increase percentage that will be applied to the FY 2013 target
amounts in order to determine the final FY 2014 target amount is 2.5
percent.
IRFs, IPFs, and LTCHs were previously paid under the reasonable
cost methodology. However, the statute was amended to provide for
the implementation of prospective payment systems for IRFs, IPFs,
and LTCHs. In general, the prospective payment systems for IRFs,
IPFs, and LTCHs provide transitioning periods of varying lengths of
time during which a portion of the prospective payment was based on
cost-based reimbursement rules under 42 CFR Part 413 (certain
providers do not receive a transition period or may elect to bypass
the transition as applicable under 42 CFR Part 412, Subparts N, O,
and P.) We note that all of the various transitioning periods
provided for under the IRF PPS, the IPF PPS, and the LTCH PPS have
ended.
The IRF PPS, the IPF PPS, and the LTCH PPS are updated annually.
We refer readers to section VIII. of the preamble of this final rule
and section V. of the Addendum to this final rule for the update
changes to the Federal payment rates for LTCHs under the LTCH PPS
for FY 2014. The annual updates for the IRF PPS and the IPF PPS are
issued by the agency in separate Federal Register documents.

V. Updates to the Payment Rates for the LTCH PPS for FY 2014

A. LTCH PPS Standard Federal Rate for FY 2014

1. Background

In section VIII. of the preamble of this final rule, we discuss
our updates to the payment rates, factors, and specific policies
under the LTCH PPS for FY 2014.
Under Sec. 412.523(c)(3)(ii) of the regulations, for LTCH PPS
rate years beginning RY 2004 through RY 2006, we updated the
standard Federal rate annually by a factor to adjust for the most
recent estimate of the increases in prices of an appropriate market
basket of goods and services for LTCHs. We established this policy
of annually updating the standard Federal rate because, at that
time, we believed that was the most appropriate method for updating
the LTCH PPS standard Federal rate for years after the initial
implementation of the LTCH PPS in FY 2003. Therefore, under Sec.
412.523(c)(3)(ii), for RYs 2004 through 2006, the annual update to
the LTCH PPS standard Federal rate was equal to the previous rate
year's Federal rate updated by the most recent estimate of increases
in the appropriate market basket of goods and services included in
covered inpatient LTCH services.
In determining the annual update to the standard Federal rate
for RY 2007, based on our ongoing monitoring activity, we believed
that, rather than solely using the most recent estimate of the LTCH
PPS market basket update as the basis of the annual update factor,
it was appropriate to adjust the standard Federal rate to account
for the effect of documentation and coding in a prior period that
was unrelated to patients' severity of illness (71 FR 27818).
Accordingly, we established under Sec. 412.523(c)(3)(iii) that the
annual update to the standard Federal rate for RY 2007 was zero
percent based on the most recent estimate of the LTCH PPS market
basket at that time, offset by an adjustment to account for changes
in case-mix in prior periods due to the effect of documentation and
coding that were unrelated to patients' severity of illness. For RY
2008 through FY 2011, we also made an adjustment for the effect of
documentation and coding that was unrelated to patients' severity of
illness in establishing the annual update to the standard Federal
rate as set forth in the

[[Page 50993]]

regulations at Sec. Sec. 412.523(c)(3)(iv) through (c)(3)(vii). For
FYs 2012 and 2013, we updated the standard Federal rate by the most
recent estimate of the LTCH PPS market basket at that time,
including additional statutory adjustments required by section
1886(m)(3)(A) of the Act as set forth in the regulations at
Sec. Sec. 412.523(c)(3)(viii) through (c)(3)(ix).
Section 1886(m)(3)(A) of the Act, as added by section 3401(c) of
the Affordable Care Act, specifies that, for rate year 2010 and each
subsequent rate year, any annual update to the standard Federal rate
shall be reduced:
For rate year 2010 through 2019, by the other
adjustment specified in section 1886(m)(3)(A)(ii) and (m)(4) of the
Act; and
For rate year 2012 and each subsequent year, by the
productivity adjustment described in section 1886(b)(3)(B)(xi)(II)
of the Act (which we refer to as ``the multifactor productivity
(MFP) adjustment'') as discussed in section VIII.C.2.b. of the
preamble of this proposed rule.
Section 1886(m)(3)(B) of the Act provides that the application
of paragraph (3) of section 1886(m) of the Act may result in the
annual update being less than zero for a rate year, and may result
in payment rates for a rate year being less than such payment rates
for the preceding rate year. (As noted in section VIII.C.2.b. of the
preamble of this final rule, the annual update to the LTCH PPS
occurs on October 1 and we have adopted the term ``fiscal year''
(FY) rather than ``rate year'' (RY) under the LTCH PPS beginning
October 1, 2010. Therefore, for purposes of clarity, when discussing
the annual update for the LTCH PPS, including the provisions of the
Affordable Care Act, we use the term ``fiscal year'' rather than
``rate year'' for 2011 and subsequent years.)
For FY 2013, consistent with our historical practice, we
established an update to the LTCH PPS standard Federal rate based on
the full estimated LTCH PPS market basket increase of 2.6 percent
and the 0.8 percentage point reductions required by sections
1886(m)(3)(A)(i) and 1886(m)(3)(A)(ii) with 1886(m)(4)(C) of the
Act. Accordingly, at Sec. 412.523(c)(3)(ix) of the regulations, we
established an annual update of 1.8 percent to the standard Federal
rate for FY 2013 (77 FR 53708 through 53711 and 53481).
For FY 2014, as discussed in greater detail in section
VIII.C.2.e. of the preamble of this final rule, we are establishing
an annual update to the LTCH PPS standard Federal rate based on the
full estimated increase in the LTCH PPS market basket, less the MFP
adjustment consistent with section 1886(m)(3)(A)(i) of the Act, and
less the 0.3 percentage point required by sections 1886(m)(3)(A)(ii)
and (m)(4)(D) of the Act. In addition, as discussed in greater
detail in section VIII.C.2.c., beginning in FY 2014, the annual
update is further reduced by 2.0 percentage points for LTCHs that
fail to submit quality reporting data in accordance with the LTCHQR
Program under section 1886(m)(5) of the Act.
Specifically, in this final rule, based on the best available
data, we are establishing an annual update to the standard Federal
rate of 1.7 percent provided the LTCH submits quality reporting data
for FY 2014 in accordance with the LTCHQR Program under section
1886(m)(5) of the Act, which is based on the full estimated increase
in the LTCH PPS market basket of 2.5 percent, less the MFP
adjustment of 0.5 percentage point consistent with section
1886(m)(3)(A)(i) of the Act, and less the 0.3 percentage point
required by sections 1886(m)(3)(A)(ii) and (m)(4)(D) of the Act. As
discussed in greater detail in section VIII.C.2.c., for LTCHs that
fail to submit quality reporting data for FY 2014 in accordance with
the LTCHQR Program, the annual update is further reduced by 2.0
percentage points as required by section 1886(m)(5) of the Act.
Accordingly, we are establishing an annual update to the LTCH PPS
standard Federal rate of -0.3 percent for LTCHs that fail to submit
quality reporting data for FY 2014. This is calculated based on the
full estimated increase in the LTCH PPS market basket of 2.5
percent, less a MFP adjustment of 0.5 percentage point, less an
additional adjustment of 0.3 percentage point required by the
statute, and less 2.0 percentage points for failure to submit
quality reporting data as required by section 1886(m)(5) of the Act.

2. Development of the FY 2014 LTCH PPS Standard Federal Rate

We continue to believe that the annual update to the LTCH PPS
standard Federal rate should be based on the most recent estimate of
the increase in the LTCH PPS market basket, including any statutory
adjustments. Consistent with our historical practice, for FY 2014,
we applied the annual update to the LTCH PPS standard Federal rate
from the previous year. In determining the standard Federal rate for
FY 2014, we also are making certain regulatory adjustments.
Specifically, we are applying an adjustment factor under the second
year of the 3-year phase-in of the one-time prospective adjustment
to the standard Federal rate under Sec. 412.523(d)(3), as discussed
in greater detail in section VIII.C.3. of the preamble of this final
rule. In addition, in determining the FY 2014 standard Federal rate,
we are applying a budget neutrality adjustment factor for the
changes related to the area wage adjustment (that is, changes to the
wage data and labor-related share) in accordance with Sec.
412.523(d)(4).
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53708 through
53710 and 53481), we established an annual update to the LTCH PPS
standard Federal rate of 1.8 percent for FY 2013 based on the full
estimated LTCH PPS market basket increase of 2.6 percent, less the
MFP adjustment of 0.7 percentage point consistent with section
1886(m)(3)(A)(i) of the Act and less the 0.1 percentage point
required by sections 1886(m)(3)(A)(ii) and (m)(4)(C) of the Act.
Accordingly, at Sec. 412.523(c)(3)(ix), we established an annual
update to the standard Federal rate for FY 2013 of 1.8 percent. That
is, we applied an update factor of 1.018 to the FY 2012 Federal rate
of $40,222.05 to determine the FY 2013 standard Federal rate.
Effective December 29, 2012, we also adjusted the standard Federal
rate for FY 2013 by the one-time prospective adjustment factor for
FY 2013 of 0.98734 under Sec. 412.523(d)(3)(ii) (this adjustment
was not applied to payments for discharges occurring before December
29, 2012, consistent with the statute). Furthermore, for FY 2013, we
applied an area wage level budget neutrality factor of 0.999265 to
the standard Federal rate to ensure that any changes to the area
wage level adjustment (that is, the annual update of the wage index
values and labor-related share) would not result in any change
(increase or decrease) in estimated aggregate LTCH PPS payments.
Consequently, we established a standard Federal rate for FY 2013 of
$40,397.96 (calculated as $40,222.05 x 1.018 x 0.98734 x 0.999265).
Furthermore, consistent with the statute, the one-time prospective
adjustment factor of 0.98734 applied to the standard Federal rate
for FY 2013 is not applied to payments for discharges occurring
before December 29, 2012. Therefore, payment for discharges
occurring on or after October 1, 2012, and on or before December 28,
2012, does not reflect that adjustment and instead are paid based on
a standard Federal rate of $40,915.95 (calculated as $40,397.96
divided by 0.98734).
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27778), we
proposed to establish an annual update to the LTCH PPS standard
Federal rate of 1.8 percent (that is, an update factor of 1.018) for
FY 2014, based on the full estimated increase in the LTCH PPS market
basket of 2.5 percent, less the MFP adjustment of 0.4 percentage
point, consistent with section 1886(m)(3)(A)(i) of the Act, and less
the 0.3 percentage point required by sections 1886(m)(3)(A)(ii) and
(m)(4)(D) of the Act, provided the LTCH submits quality data in
accordance with the LTCHQR Program under section 1886(m)(5) of the
Act. Therefore, under Sec. 412.523(c)(3)(x), we proposed to apply a
factor of 1.018 to the FY 2013 standard Federal rate of $40,397.96
to determine the FY 2014 standard Federal rate. These factors were
based on IGI's first quarter 2013 forecast, which were the best
available data at that time. Consistent with our historical practice
of using the best available data, we also proposed that if more
recent data became available to determine the market basket estimate
or the MFP adjustment, we would use such data for the final rule, if
appropriate (78 FR 27666). For LTCHs that fail to submit quality
reporting data for FY 2014 under the LTCHQR Program, under Sec.
412.523(c)(3)(x) in conjunction with Sec. 412.523(c)(4), we
proposed to reduce the annual update to the LTCH PPS standard
Federal rate by an additional 2.0 percentage points consistent with
section 1886(m)(5) of the Act. Therefore, we proposed to establish
an annual update to the LTCH PPS standard Federal rate of -0.2
percent (that is, 1.8 percent minus 2.0 percentage points = -0.2
percent or an update factor of 0.9980) for FY 2014 for LTCHs that
fail to submit quality reporting data for FY 2014 under the LTCHQR
Program. We also proposed that the standard Federal rate for FY 2014
would be further adjusted by an adjustment factor of 0.98734 for FY
2014 under the second year of the 3-year phase-in of the one-time
prospective adjustment at Sec. 412.523(d)(3)(ii). In addition, for
FY 2014, we proposed to apply an area wage level budget neutrality
factor of 1.000433 to the standard Federal

[[Page 50994]]

rate to ensure that any changes to the area wage level adjustment
(that is, the annual update of the wage index values and labor-
related share) will not result in any change (increase or decrease)
in estimated aggregate LTCH PPS payments. Accordingly, we proposed
to establish a standard Federal rate of $40,622.06 (calculated as
$40,397.96 x 1.018 x 0.98734 x 1.000433) for discharges occurring in
FY 2014, provided the LTCH submits quality reporting data for FY
2014 in accordance with the LTCHQR Program under section 1886(m)(5)
of the Act. For LTCHs that fail to submit quality reporting data for
FY 2014 in accordance with the LTCHQR Program under section
1886(m)(5) of the Act, we proposed to establish a standard Federal
of $39,823.99 (calculated as $40,397.96 x 0.998 x 0.98734 x
1.000433) for discharges occurring in FY 2014.
In this final rule, we are establishing an annual update to the
LTCH PPS standard Federal rate of 1.7 percent (that is, an update
factor of 1.017) for FY 2014, based on the full estimated increase
in the LTCH PPS market basket of 2.5 percent, less the MFP
adjustment of 0.5 percentage point, consistent with section
1886(m)(3)(A)(i) of the Act, and less the 0.3 percentage point
required by sections 1886(m)(3)(A)(ii) and (m)(4)(D) of the Act,
provided the LTCH submits quality data in accordance with the LTCHQR
Program under section 1886(m)(5) of the Act. Therefore, under Sec.
412.523(c)(3)(x), we are applying a factor of 1.017 to the FY 2013
standard Federal rate of $40,397.96 (as established in the FY 2013
IPPS/LTCH PPS final rule (77 FR 53710)) to determine the FY 2014
standard Federal rate. For LTCHs that fail to submit quality
reporting data for FY 2014 under the LTCHQR Program, under Sec.
412.523(c)(3)(x) in conjunction with Sec. 412.523(c)(4), we are
reducing the annual update to the LTCH PPS standard Federal rate by
an additional 2.0 percentage points consistent with section
1886(m)(5) of the Act. Therefore, we are establishing an annual
update to the LTCH PPS standard Federal rate of -0.3 percent (that
is, 1.7 percent minus 2.0 percentage points = -0.3 percent or an
update factor of 0.9970) for FY 2014 for LTCHs that fail to submit
quality reporting data for FY 2014 under the LTCHQR Program. We also
are establishing that the standard Federal rate for FY 2014 is
further adjusted by an adjustment factor of 0.98734 for FY 2014
under the second year of the 3-year phase-in of the one-time
prospective adjustment at Sec. 412.523(d)(3)(ii). In addition, for
FY 2014, we are applying an area wage level budget neutrality factor
of 1.0010531 to the standard Federal rate to ensure that any changes
to the area wage level adjustment (that is, the annual update of the
wage index values and labor-related share) will not result in any
change (increase or decrease) in estimated aggregate LTCH PPS
payments. Accordingly, we are establishing a standard Federal rate
for FY 2014 of $40,607.31 (calculated as $40,397.96 x 1.017 x
0.98734 x 1.0010531) for discharges occurring on or after October 1,
2013, and on or before September 30, 2014, provided the LTCH submits
quality reporting data for FY 2014 in accordance with the LTCHQR
Program under section 1886(m)(5) of the Act. For LTCHs that fail to
submit quality reporting data for FY 2014 in accordance with the
LTCHQR Program under section 1886(m)(5) of the Act, we are
establishing a standard Federal rate for FY 2014 of $39,808.74
(calculated as $40,397.96 x 0.997 x 0.98734 x 1.0010531) for
discharges occurring on or after October 1, 2013, and on or before
September 30, 2014.

B. Adjustment for Area Wage Levels Under the LTCH PPS for FY 2014

1. Background

Under the authority of section 123 of the BBRA as amended by
section 307(b) of the BIPA, we established an adjustment to the LTCH
PPS standard Federal rate to account for differences in LTCH area
wage levels at Sec. 412.525(c). The labor-related share of the LTCH
PPS standard Federal rate is adjusted to account for geographic
differences in area wage levels by applying the applicable LTCH PPS
wage index. The applicable LTCH PPS wage index is computed using
wage data from inpatient acute care hospitals without regard to
reclassification under section 1886(d)(8) or section 1886(d)(10) of
the Act.
When we implemented the LTCH PPS, we established a 5-year
transition to the full area wage index level adjustment. The area
wage level adjustment was completely phased-in for cost reporting
periods beginning in FY 2007. Therefore, for cost reporting periods
beginning on or after October 1, 2006, the applicable LTCH wage
index values are the full LTCH PPS wage index values calculated
based on acute care hospital inpatient wage index data without
taking into account geographic reclassification under section
1886(d)(8) and section 1886(d)(10) of the Act. For additional
information on the phase-in of the area wage level adjustment under
the LTCH PPS, we refer readers to the August 30, 2002 LTCH PPS final
rule (67 FR 56015 through 56019) and the RY 2008 LTCH PPS final rule
(72 FR 26891).

2. Geographic Classifications/Labor Market Area Definitions

As discussed in the August 30, 2002 LTCH PPS final rule, which
implemented the LTCH PPS (67 FR 56015 through 56019), in
establishing an adjustment for area wage levels, the labor-related
portion of an LTCH's Federal prospective payment is adjusted by
using an appropriate wage index based on the labor market area in
which the LTCH is located. Specifically, the application of the LTCH
PPS area wage level adjustment at existing Sec. 412.525(c) is made
on the basis of the location of the LTCH in either an urban area or
a rural area as defined in Sec. 412.503. Currently under the LTCH
PPS at Sec. 412.503, an ``urban area'' is defined as a Metropolitan
Statistical Area (which would include a metropolitan division, where
applicable) as defined by the Executive OMB and a ``rural area'' is
defined as any area outside of an urban area.
In the RY 2006 LTCH PPS final rule (70 FR 24184 through 24185),
in regulations at Sec. 412.525(c), we revised the labor market area
definitions used under the LTCH PPS effective for discharges
occurring on or after July 1, 2005, based on the Executive OMB's
CBSA designations, which are based on 2000 Census data. We made this
revision because we believe that the CBSA-based labor market area
definitions will ensure that the LTCH PPS wage index adjustment most
appropriately accounts for and reflects the relative hospital wage
levels in the geographic area of the hospital as compared to the
national average hospital wage level. We note that these are the
same CBSA-based designations implemented for acute care hospitals
under the IPPS at Sec. 412.64(b) (69 FR 49026 through 49034). (For
further discussion of the CBSA-based labor market area (geographic
classification) definitions currently used under the LTCH PPS, we
refer readers to the RY 2006 LTCH PPS final rule (70 FR 24182
through 24191).) We have generally updated the LTCH PPS CBSA-based
labor market area definitions annually since they were adopted for
RY 2006 when updates from OMB were available (73 FR 26812 through
26814, 74 FR 44023 through 44204, and 75 FR 50444 through 50445).
In OMB Bulletin No. 10-2, issued on December 1, 2009, OMB
announced that the CBSA changes in that bulletin would be the final
update prior to the 2010 Census of Population and Housing. We
adopted those changes under the LTCH PPS in the FY 2011 IPPS/LTCH
PPS final rule (75 FR 50444 through 50445), effective beginning
October 1, 2010, and adopted their continued use for FY 2012 and FY
2013 (76 FR 51808 and 77 FR 53710, respectively). In the FY 2013
IPPS/LTCH PPS final rule, we explained that in 2013 OMB planned to
announce new area delineations based on its 2010 standards and the
2010 Census data and, therefore, for the FY 2013 LTCH area wage
level adjustment, we would continue to use the same labor market
areas that we adopted for FY 2012 (77 FR 53710). In fact, on
February 28, 2013, OMB issued OMB Bulletin No. 13-01, announcing
revisions to the delineation of Metropolitan Statistical Areas,
Micropolitian Statistical Areas, and Combined Statistical Areas, and
guidance on uses of the delineation of these areas. A copy of this
bulletin may be obtained at https://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b-13-01.pdf. According to OMB, this
bulletin provides the delineations of all Metropolitan Statistical
Areas, Metropolitan Divisions, Micropolitan Statistical Areas,
Combined Statistical Areas, and New England City and Town Areas in
the United States and Puerto Rico based on the standards published
in the Federal Register on June 28, 2010 (75 FR 37246 through 37252)
and Census Bureau data.
In order to implement these changes for the LTCH PPS (as in the
case of the IPPS, as discussed in section III.B. of the preamble of
this final rule), it is necessary to identify the new area
designations for each county and hospital in the country. While the
revisions OMB published on February 28, 2013, are not as sweeping as
the changes OMB announced in 2003, the February 28, 2013 bulletin
does contain a number of significant changes. For example, there are
new CBSAs, urban counties that have become rural, rural counties
that have become urban, and existing CBSAs that have been split
apart.
Because the update was not issued until February 28, 2013, and
the changes made by

[[Page 50995]]

the update and their ramifications must be extensively reviewed and
verified, we were unable to undertake such a lengthy process before
publication of the FY 2014 proposed rule. As we explained in the FY
2014 IPPS/LTCH PPS proposed rule (77 FR 27779), by the time the
update was issued, that proposed rule was in the advanced stages of
development. We had already developed the FY 2014 proposed LTCH PPS
wage indexes based on the previous OMB definitions that are
currently used under the LTCH PPS. We noted that CMS was faced with
a similar situation 10 years ago, when OMB announced changes
resulting from the 2000 Census in June 2003. At that time, CMS
proposed and implemented the changes under the IPPS for FY 2005,
followed by the adoption under the LTCH PPS in RY 2006 (as noted
previously). Similarly, to allow for sufficient time to assess the
new changes and their ramifications, consistent with the approach
proposed under the IPPS (discussed in section III.B. of the preamble
of this proposed rule), we intend to propose the adoption of the
newest CBSA designations and the corresponding changes to the wage
index based on those CBSA changes under the LTCH PPS for FY 2015
through notice and comment rulemaking. Therefore, for FY 2014, we
proposed to continue to use the same labor market areas that were
used under the LTCH PPS for FY 2013 (77 FR 53710) as we assess the
new changes to the CBSA designations and their effect on LTCH PPS
payments.
We did not receive any public comments specifically on our
proposal to continue to use the same labor market areas that were
used under the LTCH PPS for FY 2013 with the intention of proposing
the adoption of the newest CBSA designations under the LTCH PPS for
FY 2015 through notice and comment rulemaking. Accordingly, we are
adopting this proposal as final without modification. We note that
we received several public comments in support of this proposed
approach under the IPPS, which we discuss in section III.B. of the
preamble of this final rule.
For FY 2014, therefore, we are using the same labor market areas
that are being used under the LTCH PPS for FY 2013 (77 FR 53710) as
we assess the new changes to the CBSA designations and their effect
on LTCH PPS payments. This is consistent with the approach being
taken under the IPPS, and as noted previously, the LTCH PPS
currently uses the same CBSA-based designations implemented for
acute care hospitals under the IPPS. We refer readers to the RY 2006
LTCH PPS final rule (70 FR 24182 through 24191) for further
information on the CBSA-based labor market area definitions
currently used under the LTCH PPS. In addition, we refer readers to
the FY 2005 IPPS final rule (69 FR 49026 through 49032) for those
interested in learning about the issues that may need to be
addressed in developing a proposal to implement the latest OMB
update to the CBSA designations for FY 2015, and some of the policy
decisions that may need to be taken into consideration in the
development of such a proposal.

3. LTCH PPS Labor-Related Share

Under the adjustment for differences in area wage levels at
Sec. 412.525(c), the labor-related share of an LTCH's PPS Federal
prospective payment is adjusted by the applicable wage index for the
labor market area in which the LTCH is located. The LTCH PPS labor-
related share currently represents the sum of the labor-related
portion of operating costs (Wages and Salaries, Employee Benefits,
Professional Fees: Labor-Related, Administrative and Business
Support Services, and All-Other: Labor-Related Services) and a
labor-related portion of capital costs using the applicable LTCH PPS
market basket. (Additional background information on the historical
development of the labor-related share under the LTCH PPS and the
development of the RPL market basket can be found in the RY 2007
LTCH PPS final rule (71 FR 27810 through 27817 and 27829 through
27830) and the FY 2012 IPPS/LTCH PPS final rule (76 FR 51766 through
51769 and 51808).)
For FY 2013, we revised and rebased the market basket used under
the LTCH PPS by adopting the newly created FY 2009-based LTCH-
specific market basket. In addition, we determined the labor-related
share for FY 2013 as the sum of the FY 2013 relative importance of
each labor-related cost category of the FY 2009-based LTCH-specific
market basket. Specifically, we determined the LTCH PPS labor-
related share for FY 2013 based on the relative importance of the
labor-related share of operating costs (Wages and Salaries, Employee
Benefits, Professional Fees: Labor-Related, Administrative and
Business Support Services, and All Other: Labor-Related Services)
and the labor-related share of capital costs of the LTCH-specific
market basket based on FY 2009 data, as we believed these were the
best data available to reflect the cost structure of LTCHs. In the
FY 2013 IPPS/LTCH PPS final rule (77 FR 53477 through 53479 and
53710 through 53711), we established a labor-related share under the
LTCH PPS for FY 2013 of 63.096 percent based on IGI's second quarter
2012 forecast of the FY 2009-based LTCH-specific market basket for
FY 2013, as these were the most recent available data at that time
that reflected the cost structure of LTCHs. (For additional details
on the development of the LTCH PPS labor-related share for FY 2013,
we refer readers to section VII.C.3.f. of the preamble of the FY
2013 IPPS/LTCH PPS final rule.)
Consistent with our historical practice, in the FY 2014 IPPS/
LTCH PPS proposed rule (77 FR 27779 through 27780), we proposed to
determine the LTCH PPS labor-related share for FY 2014 based on the
proposed FY 2014 relative importance of each labor-related cost
category, which would reflect the different rates of price change
for these cost categories between the base year (FY 2009) and FY
2014. Specifically, based on IGI's first quarter 2013 forecast of
the FY 2009-based LTCH-specific market basket, we proposed a labor-
related share under the LTCH PPS for FY 2014 of 62.717 percent. In
addition, we proposed that if more recent data become available, we
would use those data in determining the labor-related share under
the LTCH PPS for FY 2014 in the final rule.
Comment: Several commenters requested that CMS explain why the
FY 2014 LTCH PPS proposed labor-related share (62.717 percent) is
significantly different than the FY 2014 IPPS proposed labor-related
share (69.6 percent) and the FY 2014 IRF PPS proposed labor-related
share (69.658 percent). Furthermore, the commenters stated that if
the primary difference is the use of separate market baskets, CMS
should explain whether this was considered at the time the LTCH-
specific market basket was adopted for the LTCH PPS.
Response: As the commenters suggested, the labor-related share
for LTCHs is lower than the labor-related shares for IPPS hospitals
and IRFs because of differences in the base year cost weights of the
specific market baskets that are used for each PPS. The market
basket cost weights that are used to derive the LTCH labor-related
share are based on FY 2009 Medicare cost report data from LTCHs. The
IPPS proposed labor-related share is derived using the proposed FY
2010-based IPPS market basket cost weights (based on Medicare cost
report data from IPPS hospitals) and the IRF proposed labor-related
share is derived using the FY 2008-based RPL market basket cost
weights (based on Medicare cost report data from IRFs, IPFs, and
LTCHs).
When we finalized the use of the LTCH-specific market basket in
the FY 2013 IPPS/LTCH final rule (77 FR 53478 through 53479), we
stated that the principal factors contributing to the difference in
the labor-related shares between the FY 2009-based LTCH-specific
market basket and the FY 2008-based RPL market basket were the base
year cost weight differences found in two specific categories: Wages
and Salaries, and Benefits. We stated that the lower share of costs
attributable to wages and salaries, and benefits found in the FY
2009-based LTCH-specific market basket was a direct result of
incorporating cost data exclusively from LTCHs, as opposed to
incorporating cost report data from freestanding IRFs, freestanding
IPFs, and LTCHs combined (as is the case in the RPL market basket).
Similarly, the IPPS labor-related share is based primarily on IPPS
Medicare cost report data and would reflect the cost structure of
IPPS hospitals. We continue to believe, as stated in the FY 2013
IPPS/LTCH PPS final rule, that a labor-related share for LTCHs that
is based on Medicare cost report data obtained exclusively from the
universe of LTCH providers appropriately reflects the national
average cost structures of LTCHs, and appropriately identifies the
labor-related share for use under the LTCH PPS.
Comment: Several commenters stated that CMS should consider
whether the methodology for adjusting the LTCH labor-related share
should be modified now that the LTCH PPS no longer uses the RPL
market basket.
Response: We believe that the methodology for determining the
labor-related share is technically appropriate as it estimates the
proportion of LTCH costs that are labor-intensive and vary with, or
are influenced by, the local labor market. The methodology for
determining the proposed LTCH labor-related share for FY 2014 is the
same general method

[[Page 50996]]

as used to derive the FY 2014 IRF PPS proposed labor-related share,
as well as the labor-related shares for other Medicare prospective
payment systems such as the IPF PPS and the SNF PPS. That is, the
labor-related share is equal to the sum of the relative importance
of each labor-related cost category in the LTCH market basket. We
calculate the labor-related relative importance for FY 2014 in four
steps. First, we compute the FY 2014 price index level for the total
market basket and each cost category of the market basket. Second,
we calculate a ratio for each cost category by dividing the FY 2014
price index level for that cost category by the total market basket
price index level. Third, we determine the FY 2014 relative
importance for each cost category by multiplying this ratio by the
base year (FY 2009) weight. Finally, we add the FY 2014 relative
importance for each of the labor related cost categories. The
purpose of the relative importance is to capture the different rates
of price change for each of the market basket cost categories
between the base year (FY 2009 for LTCHs) and FY 2014. Therefore, to
the extent an individual price proxy for a specific cost category is
projected to grow faster from FY 2009 to FY 2014 relative to the
proxies for other cost categories, the relative importance for that
category in FY 2014 will be higher than the base year cost weight in
FY 2009.
After consideration of the public comments we received,
consistent with our historical practice, as we proposed, we are
determining the LTCH PPS labor-related share for FY 2014 based on
the FY 2014 relative importance of each labor-related cost category,
and reflects the different rates of price change for these cost
categories between the base year (FY 2009) and FY 2014. For this
final rule, we are determining the LTCH PPS labor-related share for
FY 2014 based on IGI's second quarter 2013 forecast of the FY 2009-
based LTCH-specific market basket as this is currently the best
available data.
The table below shows the FY 2014 labor-related share relative
importance using IGI's second quarter 2013 forecast of the FY 2009-
based LTCH-specific market basket. The sum of the relative
importance for FY 2014 for operating costs (Wages and Salaries,
Employee Benefits, Professional Fees: Labor-related, Administrative
and Business Support Services, and All Other: Labor-related
Services) is 58.317 percent. We are establishing that the portion of
capital-related costs that is influenced by the local labor market
continues to be estimated to be 46 percent. Because the relative
importance for capital-related costs is 9.174 percent of the FY
2009-based LTCH-specific market basket in FY 2014, we are taking 46
percent of 9.174 percent to determine the labor-related share of
capital-related costs for FY 2014, which results in 4.220 percent
(0.46 x 9.174). We then add that 4.220 percent for the capital-
related cost amount to the 58.317 percent for the operating cost
amount to determine the total labor-related share for FY 2014.
Therefore, under the broad authority conferred upon the Secretary by
section 123 of the BBRA, as amended by section 307(b) of BIPA, to
determine appropriate adjustments under the LTCH PPS, we are
establishing a labor-related share under the LTCH PPS in FY 2014 of
62.537 percent. This labor-related share is determined using the
same methodology as employed in calculating all previous LTCH labor-
related shares.

FY 2014 Labor-Related Share Relative Importance Based on the FY 2009-
Based LTCH-Specific Market Basket
------------------------------------------------------------------------
FY 2014
Labor[dash]related
share relative
importance
------------------------------------------------------------------------
Wages and Salaries.................................. 45.012
Employee Benefits................................... 8.094
Professional Fees: Labor-Related.................... 2.207
Administrative and Business Support Services........ 0.499
All Other: Labor-Related Services................... 2.505
-------------------
Subtotal........................................ 58.317
Labor-Related Portion of Capital Costs (46%)........ 4.220
-------------------
Total Labor-Related Share................... 62.537
------------------------------------------------------------------------

4. LTCH PPS Wage Index for FY 2014

Historically, under the LTCH PPS, we have established LTCH PPS
wage index values calculated from acute care IPPS hospital wage data
without taking into account geographic reclassification under
sections 1886(d)(8) and 1886(d)(10) of the Act (67 FR 56019). The
area wage level adjustment established under the LTCH PPS is based
on an LTCH's actual location without regard to the urban or rural
designation of any related or affiliated provider.
In the FY 2013 LTCH PPS final rule (77 FR 53711 through 53712),
we calculated the FY 2013 LTCH PPS wage index values using the same
data used for the FY 2013 acute care hospital IPPS (that is, data
from cost reporting periods beginning during FY 2009), without
taking into account geographic reclassification under sections
1886(d)(8) and 1886(d)(10) of the Act, as these were the most recent
complete data available at that time. In that same final rule, we
indicated that we computed the FY 2013 LTCH PPS wage index values
consistent with the urban and rural geographic classifications
(labor market areas) and consistent with the pre-reclassified IPPS
wage index policy (that is, our historical policy of not taking into
account IPPS geographic reclassifications in determining payments
under the LTCH PPS). As with the IPPS wage index, wage data for
multicampus hospitals with campuses located in different labor
market areas (CBSAs) are apportioned to each CBSA where the campus
(or campuses) are located. We also continued to use our existing
policy for determining wage index values in areas where there are no
IPPS wage data.
Consistent with our historical methodology, to determine the
applicable wage index values under the LTCH PPS for FY 2014, under
the broad authority conferred upon the Secretary by section 123 of
the BBRA, as amended by section 307(b) of the BIPA, to determine
appropriate adjustments under the LTCH PPS, as we proposed, we are
using wage data collected from cost reports submitted by IPPS
hospitals for cost reporting periods beginning during FY 2010,
without taking into account geographic reclassification under
sections 1886(d)(8) and 1886(d)(10) of the Act. We are using FY 2010
data because these data are the most recent complete data available.
These are the same data used to compute the FY 2014 acute care
hospital inpatient wage index, as discussed in section III. of the
preamble of this final rule. (For our rationale for using IPPS
hospital wage data as a proxy for determining the wage index values
used under the LTCH PPS, we refer readers to the FY 2010 IPPS/RY
2010 LTCH PPS final rule (74 FR 44024 through 44025).)
As we proposed, the FY 2014 LTCH PPS wage index values were
computed consistent with the urban and rural geographic
classifications (labor market areas) discussed above in section
V.B.2. of the Addendum to this final rule and consistent with the
pre-reclassified IPPS wage index policy (that is, our historical
policy of not taking into account IPPS geographic reclassifications
under sections 1886(d)(8) and 1886(d)(10) of the Act in determining
payments under the LTCH PPS). As with the IPPS wage index, wage data
for multicampus hospitals with campuses located in different labor
market areas (CBSAs) are apportioned to each CBSA where the campus
or campuses are located (as discussed in section III.G. of the
preamble of this final rule). Furthermore, in determining the FY
2014 LTCH PPS wage index values in this final rule, as we proposed,
we are continuing to use our existing policy for determining wage
index values in areas where there are no IPPS wage data. We
established a methodology for determining LTCH PPS wage index values
for areas that have no IPPS wage data in the RY 2009 LTCH PPS final
rule, and we are continuing to use this methodology for FY 2014. (We
refer readers to the RY 2009 LTCH PPS final rule (73 FR 26817
through 26818) for an explanation of and rationale for our policy
for determining LTCH PPS wage index values for areas that have no
IPPS wage data.)
There are currently no LTCHs located in labor areas without IPPS
hospital wage data (or IPPS hospitals) for FY 2014. However, we
calculated LTCH PPS wage index values for such an area using our
established methodology in the event that, in the future, an LTCH
should open in one of those areas. Under our existing methodology,
the LTCH PPS wage index value for urban CBSAs with no IPPS wage data
is determined by using an average of all of the urban areas within
the State, and the LTCH PPS wage index value for rural areas with no
IPPS wage data is determined by using the unweighted average of the
wage indices from all of the CBSAs that are contiguous to the rural
counties of the State.
Based on the FY 2010 IPPS wage data that we used to determine
the FY 2014 LTCH PPS wage index values in this final rule, there are

[[Page 50997]]

no IPPS wage data for the urban area Hinesville-Fort Stewart, GA
(CBSA 25980). Consistent with the methodology discussed above and as
we proposed, we calculated the FY 2014 wage index value for CBSA
25980 as the average of the wage index values for all of the other
urban areas within the State of Georgia (that is, CBSAs 10500,
12020, 12060, 12260, 15260, 16860, 17980, 19140, 23580, 31420,
40660, 42340, 46660 and 47580), as shown in Table 12A, which is
listed in section VI. of the Addendum to this final rule and
available via the Internet on the CMS Web site). We note that, as
IPPS wage data are dynamic, it is possible that urban areas without
IPPS wage data will vary in the future.
Based on FY 2010 IPPS wage data that we are using to determine
the FY 2014 LTCH PPS wage index values in this final rule, there are
no rural areas without IPPS hospital wage data. Therefore, it was
not necessary to use our established methodology to calculate an
LTCH PPS wage index value for rural areas with no IPPS wage data for
FY 2014. We note that, as IPPS wage data are dynamic, it is possible
that rural areas without IPPS wage data will vary in the future.
The FY 2014 LTCH wage index values that will be applicable for
LTCH discharges occurring on or after October 1, 2013, through
September 30, 2014, are presented in Table 12A (for urban areas) and
Table 12B (for rural areas), which are listed in section VI. of the
Addendum of this final rule and available via the Internet on the
CMS Web site.

5. Budget Neutrality Adjustment for Changes to the Area Wage Level
Adjustment

Historically, the LTCH PPS wage index and labor-related share
are updated annually based on the latest available data. Under Sec.
412.525(c)(2), any changes to the wage index values or labor-related
share are made in a budget neutral manner such that estimated
aggregate LTCH PPS payments are unaffected; that is, will be neither
greater than nor less than estimated aggregate LTCH PPS payments
without such changes to the area wage level adjustment. Under this
policy, we determine an area wage level adjustment budget neutrality
factor that will be applied to the standard Federal rate to ensure
that any changes to the area wage level adjustment are budget
neutral such that any changes to the wage index values or labor-
related share will not result in any change (increase or decrease)
in estimated aggregate LTCH PPS payments. Accordingly, under Sec.
412.523(d)(4), we apply an area wage level adjustment budget
neutrality factor in determining the standard Federal rate, and we
also established a methodology for calculating an area wage level
adjustment budget neutrality factor. (For additional information on
the establishment of our budget neutrality policy for changes to the
area wage level adjustment, we refer readers to the FY 2012 IPPS/
LTCH PPS final rule (76 FR 51771 through 51773 and 51809).)
For FY 2014, in accordance with Sec. 412.523(d)(4), as we
proposed, we are applying an area wage level adjustment budget
neutrality factor to adjust the standard Federal rate to account for
the estimated effect of the proposed adjustments or updates to the
area wage level adjustment under Sec. 412.525(c)(1) on estimated
aggregate LTCH PPS payments using the methodology we established in
the FY 2012 IPPS/LTCH PPS final rule (76 FR 51773). Specifically, we
determined an area wage level adjustment budget neutrality factor
that is applied to the standard Federal rate under Sec.
412.523(d)(4) for FY 2014 using the following methodology:
Step 1--We simulated estimated aggregate LTCH PPS payments using
the FY 2013 wage index values (as established in Tables 12A and 12B
listed in the Addendum to the FY 2013 IPPS/LTCH PPS final rule and
available via the Internet on the CMS Web site) and the FY 2013
labor-related share of 63.096 percent (as established in the FY 2013
IPPS/LTCH PPS final rule (77 FR 53477 through 53479 and 53710
through 53711).
Step 2--We simulated estimated aggregate LTCH PPS payments using
the FY 2014 wage index values (as shown in Tables 12A and 12B listed
in the Addendum to this final rule and available via the Internet on
the CMS Web site) and the FY 2014 labor-related share of 62.537
percent (based on the latest available data as discussed previously
in section V.B.3. of this Addendum).
Step 3--We calculated the ratio of these estimated total LTCH
PPS payments by dividing the estimated total LTCH PPS payments using
the FY 2013 area wage level adjustments (calculated in Step 1) by
the estimated total LTCH PPS payments using the FY 2014 area wage
level adjustments (calculated in Step 2) to determine the area wage
level adjustment budget neutrality factor for FY 2014.
Step 4--We then applied the FY 2014 area wage level adjustment
budget neutrality factor from Step 3 to determine the FY 2014 LTCH
PPS standard Federal rate after the application of the FY 2014
annual update (discussed in section V.A.2. of the Addendum to this
final rule). For this final rule, using the steps in the methodology
described above, we determined a FY 2014 area wage level adjustment
budget neutrality factor of 1.0010531. Accordingly, in section
V.A.2. of the Addendum to this final rule, to determine the FY 2014
LTCH PPS standard Federal rate, we are applying an area wage level
adjustment budget neutrality factor of 1.0010531, in accordance with
Sec. 412.523(d)(4). The FY 2014 LTCH PPS standard Federal rate
shown in Table 1E of the Addendum to this final rule reflects this
adjustment factor.

C. LTCH PPS Cost-of-Living Adjustment for LTCHs Located in Alaska
and Hawaii

Under Sec. 412.525(b), a cost-of-living adjustment (COLA) is
provided for LTCHs located in Alaska and Hawaii to account for the
higher costs incurred in those States. Specifically, we apply a COLA
to payments to LTCHs located in Alaska and Hawaii by multiplying the
nonlabor-related portion of the standard Federal payment rate by the
applicable COLA factors established annually by CMS. Higher labor-
related costs for LTCHs located in Alaska and Hawaii are taken into
account in the adjustment for area wage levels described above.
As discussed in the FY 2013 IPPS/LTCH PPS final rule (77 FR
53481 through 53482 and 53712 through 53713), historically, we used
the most recent updated COLA factors obtained from the U.S. Office
of Personnel Management (OPM) Web site at https://www.opm.gov/oca/cola/rates.asp to adjust the LTCH PPS payments for LTCHs located in
Alaska and Hawaii. Statutory changes have transitioned the Alaska
and Hawaii COLAs to locality pay (phased in over a 3-year period
beginning in January 2010, with COLA rates being frozen as of
October 28, 2009, and then proportionately reduced to reflect the
phase-in of locality pay). We explained that we did not believe it
was appropriate to use either the 2010 or 2011 reduced COLA factors
to adjust the nonlabor-related portion of the standard Federal rate
for LTCHs located in Alaska and Hawaii for Medicare payment
purposes. In addition, we believe that it was appropriate to use
``frozen'' COLA factors to adjust payments, while we explored
alternatives for updating the COLA factors in the future.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53712 through
53713), we continued to use the same ``frozen'' COLA factors used in
FY 2012 to adjust the nonlabor-related portion of the standard
Federal rate for LTCHs located in Alaska and Hawaii in FY 2013 under
Sec. 412.525(b). In that same final rule, we also established a
methodology to update the COLA factors for Alaska and Hawaii, every
4 years (at the same time as the update to the labor-related share
of the IPPS market basket), beginning in FY 2014. The methodology we
established to update the COLA factors is based on a comparison of
the growth in the CPIs for Anchorage, Alaska and Honolulu, Hawaii
relative to the growth in the CPI for the average U.S. city as
published by the Bureau of Labor Statistics (BLS). As also explained
in that same final rule, we believe that using these updated COLA
factors will appropriately adjust the nonlabor-related portion of
the standard Federal rate for LTCHs located in Alaska and Hawaii.
(For additional details on the methodology we established in the FY
2013 IPPS/LTCH PPS final rule to update the COLA factors for Alaska
and Hawaii beginning in FY 2014, we refer readers to section
VII.D.3. of the preamble of that final rule (77 FR 53481 through
53482).)
For FY 2014, we proposed to update the COLA factors published
for Alaska and Hawaii by OPM for 2009 (as these are the last COLA
factors OPM published prior to transitioning from COLAs to locality
pay) using the methodology that we finalized in the FY 2013 IPPS/
LTCH PPS final rule. Under our proposal, we proposed COLA factors
for FY 2014 for the three specified urban areas of Alaska
(Anchorage, Fairbanks and Juneau) of 1.23; for the City and County
of Honolulu, the County of Kauai, the County of Maui, the County of
Kalawao, and ``All other'' areas of Alaska of 1.25; and for the
County of Hawaii of 1.19. For additional details on our proposal, we
refer readers to the FY 2014 IPPS/LTCH PPS proposed rule (77 FR
27781 through 27782). We did not receive any public comments on our
proposed COLA factors for FY 2014, and are adopting them as final in
this final rule without modification. The development of the FY 2014
COLA factors for Alaska and Hawaii is described below.

[[Page 50998]]

In this final rule, for FY 2014, under the broad authority
conferred upon the Secretary by section 123 of the BBRA, as amended
by section 307(b) of the BIPA, to determine appropriate adjustments
under the LTCH PPS, we are updating the COLA factors published by
OPM for 2009 (as these are the last COLA factors OPM published prior
to transitioning from COLAs to locality pay) using the methodology
that we finalized in the FY 2013 IPPS/LTCH PPS final rule for
purposes of making a COLA for LTCHs located in Alaska and Hawaii
under Sec. 412.525(b). Specifically, the methodology uses a
comparison of the growth in the CPIs for Anchorage, Alaska and
Honolulu, Hawaii relative to the growth in the CPI for the average
U.S. city as published by the BLS. As discussed in that same final
rule (77 FR 53481 through 53482), because BLS publishes CPI data for
only Anchorage, Alaska and Honolulu, Hawaii, our methodology uses a
comparison of the growth in the Consumer Price Indices (CPIs) for
those cities relative to the growth in the overall CPI to update the
COLA factors for all areas located in Alaska and Hawaii,
respectively. We believe that the relative price differences between
these cities and the United States (as measured by the CPIs
mentioned above) are generally appropriate and necessary proxies for
the relative price differences between the ``other areas'' of Alaska
and Hawaii and the United States.
The ``CPI for All Items'' that BLS publishes for Anchorage,
Honolulu, and for the average U.S. city are based on a different mix
of commodities and services than is reflected in the nonlabor-
related share of the IPPS market basket. We note that the mix of
commodities and services for the nonlabor-related share based on the
LTCH market basket is similar to that of the nonlabor-related share
of the IPPS market basket. As such, under the methodology we
established to update the COLA factors, we calculated a ``reweighted
CPI'' using the CPI for commodities and the CPI for services for
each of the geographic areas to mirror the composition of the IPPS
market basket nonlabor-related share.
The current composition of BLS' CPI for All Items for all of the
respective areas is approximately 40 percent commodities and 60
percent services. However, the nonlabor-related share of the IPPS
market basket is comprised of approximately 60 percent commodities
and 40 percent services. Therefore, under the methodology we
established in the FY 2013 IPPS/LTCH PPS final rule we have created
reweighted indexes for Anchorage, Alaska and Honolulu, Hawaii, and
the average U.S. city using the respective CPI commodities index and
CPI services index and applying the approximate 60/40 weights from
the proposed IPPS market basket. We believe that this method of
reweighting is appropriate because we would continue to make a COLA
for LTCHs located in Alaska and Hawaii by multiplying the nonlabor-
related portion of the LTCH PPS standard Federal rate by a COLA
factor.
Under the COLA factor update methodology we established in the
FY 2013 IPPS/LTCH PPS final rule, we further exercised our
discretionary authority to adjust payments made to LTCHs located in
Alaska and Hawaii by incorporating a 25-percent cap on the CPI-
updated COLA factors used to adjust the nonlabor-related portion of
the LTCH PPS standard Federal rate, which is consistent with a
statutorily mandated 25-percent cap that was applied to OPM's
published COLA factors. We believe that this is appropriate because
our CPI-updated COLA factors for FY 2014 uses the 2009 OPM COLA
factors as a basis. In addition, we are continuing to establish COLA
factors that are rounded to 2 decimal places, which is consistent
with the number of decimal places in the 2009 OPM COLA factors that
are used as the basis for calculating the FY 2014 COLA factors. This
policy will also maintain consistency with the rounding used for the
25-percent cap on the COLA factors (that is, a COLA factor of no
more than 1.25).
Applying this methodology, we are establishing the COLA factors
for FY 2014 that will adjust the nonlabor-related portion of the
standard Federal rate for LTCHs located in Alaska and Hawaii as
shown in the table below.

Cost-of-Living Adjustment Factors for Alaska and Hawaii Hospitals under
the LTCH PPS for FY 2014
------------------------------------------------------------------------

------------------------------------------------------------------------
Alaska:
City of Anchorage and 80-kilometer (50[dash]mile) 1.23
radius by road.....................................
City of Fairbanks and 80-kilometer (50[dash]mile) 1.23
radius by road.....................................
City of Juneau and 80-kilometer (50[dash]mile) 1.23
radius by road.....................................
All other areas of Alaska........................... 1.25
Hawaii:
City and County of Honolulu......................... 1.25
County of Hawaii.................................... 1.19
County of Kauai..................................... 1.25
County of Maui and County of Kalawao................ 1.25
------------------------------------------------------------------------

Each of the COLA factors was calculated using data through 2012,
as these are the latest historical CPI data published by the BLS.
The reweighted CPI for Honolulu, Hawaii grew faster than the
reweighted CPI for the average U.S. city over the time period from
2009 to 2012, with a growth rate of 8.9 percent and 8.3 percent,
respectively. As a result, for FY 2014, we calculated COLA factors
for the City and County of Honolulu, the County of Kauai, the County
of Maui, and the County of Kalawao to be 1.26 compared to the FY
2013 COLA factor of 1.25. However, as stated above, our COLA factor
update methodology caps the COLA factors at 1.25. In addition, the
COLA factor calculated for the County of Hawaii for FY 2014 is 1.19
compared to the FY 2013 COLA factor of 1.18.
The reweighted CPI for Anchorage, Alaska grew slower than the
reweighted CPI for the average U.S. city over the time period from
2009 to 2012, with a growth rate of 8.0 percent and 8.3 percent,
respectively. However, applying this slower relative growth rate to
the FY 2009 COLA factors for each of the Alaska areas results in no
change to the COLA factors for the Alaska areas for FY 2014 (1.25
for ``All other areas of Alaska'' and 1.23 for the three specified
urban areas of Alaska (Anchorage, Fairbanks, and Juneau) as compared
to the FY 2013 COLA factors.

D. Adjustment for LTCH PPS High-Cost Outlier (HCO) Cases

1. Background

Under the broad authority conferred upon the Secretary by
section 123 of the BBRA as amended by section 307(b) of the BIPA, in
the regulations at Sec. 412.525(a), we established an adjustment
for additional payments for outlier cases that have extraordinarily
high costs relative to the costs of most discharges. We refer to
these cases as high cost outliers (HCOs). Providing additional
payments for outliers strongly improves the accuracy of the LTCH PPS
in determining resource costs at the patient and hospital level.
These additional payments reduce the financial losses that would
otherwise be incurred when treating patients who require more costly
care and, therefore, reduce the incentives to underserve these
patients. We set the outlier threshold before the beginning of the
applicable rate year so that total estimated outlier payments are
projected to equal 8 percent of total estimated payments under the
LTCH PPS.
Under Sec. 412.525(a) in the regulations (in conjunction with
Sec. 412.503), we make outlier payments for any discharges if the
estimated cost of a case exceeds the adjusted LTCH PPS payment for
the MS-LTC-DRG plus a fixed-loss amount. Specifically, in accordance
with Sec. 412.525(a)(3) (in conjunction with Sec. 412.503), we
make an additional payment for an HCO case that is equal to 80
percent of the difference between the estimated cost of the patient
case and the outlier threshold, which is the sum of the adjusted
Federal prospective payment for the MS-LTC-DRG and the fixed-loss
amount. The fixed-loss amount is the amount used to limit the loss
that a hospital will incur under the outlier policy for a case with
unusually high costs. This results in Medicare and the LTCH sharing
financial risk in the treatment of extraordinarily costly cases.
Under the LTCH

[[Page 50999]]

PPS HCO policy, the LTCH's loss is limited to the fixed-loss amount
and a fixed percentage of costs above the outlier threshold
(adjusted MS-LTC-DRG payment plus the fixed-loss amount). The fixed
percentage of costs is called the marginal cost factor. We calculate
the estimated cost of a case by multiplying the Medicare allowable
covered charge by the hospital's overall hospital cost-to-charge
ratio (CCR).
Under the LTCH PPS HCO policy at Sec. 412.525(a), we determine
a fixed-loss amount, that is, the maximum loss that an LTCH can
incur under the LTCH PPS for a case with unusually high costs before
the LTCH will receive any additional payments. We calculate the
fixed-loss amount by estimating aggregate payments with and without
an outlier policy. The fixed-loss amount results in estimated total
outlier payments being projected to be equal to 8 percent of
projected total LTCH PPS payments. Currently, MedPAR claims data and
CCRs based on data from the most recent Provider-Specific File (PSF)
(or from the applicable statewide average CCR if an LTCH's CCR data
are faulty or unavailable) are used to establish a fixed-loss
threshold amount under the LTCH PPS.

2. Determining LTCH CCRs Under the LTCH PPS

a. Background

The following is a discussion of CCRs that are used in
determining payments for HCO and SSO cases under the LTCH PPS, at
Sec. 412.525(a) and Sec. 412.529, respectively. Although this
section is specific to HCO cases, because CCRs and the policies and
methodologies pertaining to them are used in determining payments
for both HCO and SSO cases (to determine the estimated cost of the
case at Sec. 412.529(d)(2)), we are discussing the determination of
CCRs under the LTCH PPS for both of these types of cases
simultaneously.
In determining both HCO payments (at Sec. 412.525(a)) and SSO
payments (at Sec. 412.529), we calculate the estimated cost of the
case by multiplying the LTCH's overall CCR by the Medicare allowable
charges for the case. In general, we use the LTCH's overall CCR,
which is computed based on either the most recently settled cost
report or the most recent tentatively settled cost report, whichever
is from the latest cost reporting period, in accordance with Sec.
412.525(a)(4)(iv)(B) and Sec. 412.529(f)(4)(ii) for HCOs and SSOs,
respectively. (We note that, in some instances, we use an
alternative CCR, such as the statewide average CCR in accordance
with the regulations at Sec. 412.525(a)(4)(iv)(C) and Sec.
412.529(f)(4)(iii), or a CCR that is specified by CMS or that is
requested by the hospital under the provisions of the regulations at
Sec. 412.525(a)(4)(iv)(A) and Sec. 412.529(f)(4)(i).) Under the
LTCH PPS, a single prospective payment per discharge is made for
both inpatient operating and capital-related costs. Therefore, we
compute a single ``overall'' or ``total'' LTCH-specific CCR based on
the sum of LTCH operating and capital costs (as described in Section
150.24, Chapter 3, of the Medicare Claims Processing Manual (Pub.
100-4)) as compared to total charges. Specifically, an LTCH's CCR is
calculated by dividing an LTCH's total Medicare costs (that is, the
sum of its operating and capital inpatient routine and ancillary
costs) by its total Medicare charges (that is, the sum of its
operating and capital inpatient routine and ancillary charges).

b. LTCH Total CCR Ceiling

Generally, an LTCH is assigned the applicable statewide average
CCR if, among other things, an LTCH's CCR is found to be in excess
of the applicable maximum CCR threshold (that is, the LTCH CCR
ceiling). This is because CCRs above this threshold are most likely
due to faulty data reporting or entry, and CCRs based on erroneous
data should not be used to identify and make payments for outlier
cases. Therefore, under our established policy, generally, if an
LTCH's calculated CCR is above the applicable ceiling, the
applicable LTCH PPS statewide average CCR is assigned to the LTCH
instead of the CCR computed from its most recent (settled or
tentatively settled) cost report data.
In the proposed rule, using our established methodology for
determining the LTCH total CCR ceiling (described above), based on
IPPS total CCR data from the December 2012 update of the PSF, we
proposed to establish a total CCR ceiling of 1.254 under the LTCH
PPS for FY 2014 in accordance with Sec. 412.525(a)(4)(iv)(C)(2) for
HCOs and Sec. 412.529(f)(4)(iii)(B) for SSOs. Consistent with our
historical policy of using the best available data, we also proposed
that if more recent data became available, we would use such data to
establish a total CCR ceiling for FY 2014 in the final rule. We did
not receive any public comments on our proposals related to
determining the LTCH total CCR ceiling for FY 2014, and are adopting
them as final, without modification, in this final rule.
In accordance with Sec. 412.525(a)(4)(iv)(C)(2) for HCOs and
Sec. 412.529(f)(4)(iii)(B) for SSOs, in this final rule, using our
established methodology for determining the LTCH total CCR ceiling
(described above), based on IPPS total CCR data from the March 2013
update of the PSF, we are establishing a total CCR ceiling of 1.305
under the LTCH PPS that will be effective for discharges occurring
on or after October 1, 2013 through September 30, 2014.

c. LTCH Statewide Average CCRs

Our general methodology established for determining the
statewide average CCRs used under the LTCH PPS is similar to our
established methodology for determining the LTCH total CCR ceiling
(described above) because it is based on ``total'' IPPS CCR data.
Under the LTCH PPS HCO policy at Sec. 412.525(a)(4)(iv)(C) and the
SSO policy at Sec. 412.529(f)(4)(iii), the fiscal intermediary or
MAC may use a statewide average CCR, which is established annually
by CMS, if it is unable to determine an accurate CCR for an LTCH in
one of the following circumstances: (1) new LTCHs that have not yet
submitted their first Medicare cost report (for this purpose,
consistent with current policy, a new LTCH is defined as an entity
that has not accepted assignment of an existing hospital's provider
agreement in accordance with Sec. 489.18); (2) LTCHs whose CCR is
in excess of the LTCH CCR ceiling; and (3) other LTCHs for whom data
with which to calculate a CCR are not available (for example,
missing or faulty data). (Other sources of data that the fiscal
intermediary or MAC may consider in determining an LTCH's CCR
include data from a different cost reporting period for the LTCH,
data from the cost reporting period preceding the period in which
the hospital began to be paid as an LTCH (that is, the period of at
least 6 months that it was paid as a short-term, acute care
hospital), or data from other comparable LTCHs, such as LTCHs in the
same chain or in the same region.)
In the proposed rule, using our established methodology for
determining the LTCH statewide average CCRs, based on the most
recent complete IPPS total CCR data from the December 2012 update of
the PSF, we proposed LTCH PPS statewide average total CCRs for urban
and rural hospitals that would be effective for FY 2014 in Table 8C
listed in section VI. of the Addendum to that proposed rule and
available via the Internet. We did not receive any public comments
on our proposals related to determining the LTCH PPS statewide
average CCRs for FY 2014, and are adopting them as final, without
modification, in this final rule.
Consistent with our historical practice of using the best
available data, in this final rule, using our established
methodology for determining the LTCH statewide average CCRs, based
on the most recent complete IPPS ``total CCR'' data from the March
2013 update of the PSF, we are establishing LTCH PPS statewide
average total CCRs for urban and rural hospitals that will be
effective for discharges occurring on or after October 1, 2013
through September 20, 2014, in Table 8C listed in section VI. of the
Addendum to this final rule (and available via the Internet). All
areas in the District of Columbia, New Jersey, and Rhode Island are
classified as urban. Therefore, there are no rural statewide average
total CCRs listed for those jurisdictions in Table 8C. This policy
is consistent with the policy that we established when we revised
our methodology for determining the applicable LTCH statewide
average CCRs in the FY 2007 IPPS final rule (71 FR 48119 through
48121) and is the same as the policy applied under the IPPS. In
addition, although Connecticut has areas that are designated as
rural, there are no short-term, acute care IPPS hospitals or LTCHs
located in those areas as of March 2013. Therefore, consistent with
our existing methodology, we are using the national average total
CCR for rural IPPS hospitals for rural Connecticut in Table 8C
listed in section VI. of the Addendum to this final rule (and
available via the Internet).
In addition, consistent with our existing methodology, in
determining the urban and rural statewide average total CCRs for
Maryland LTCHs paid under the LTCH PPS, we are continuing to use, as
a proxy, the national average total CCR for urban IPPS hospitals and
the national average total CCR for rural IPPS hospitals,
respectively. We are using this proxy because we believe that the
CCR data in the PSF for Maryland hospitals may not be entirely
accurate (as discussed in

[[Page 51000]]

greater detail in the FY 2007 IPPS final rule (71 FR 48120)).

d. Reconciliation of LTCH HCO and SSO Payments

We note that under the LTCH PPS HCO policy at Sec.
412.525(a)(4)(iv)(D) and the LTCH PPS SSO policy at Sec.
412.529(f)(4)(iv), the payments for HCO and SSO cases, respectively,
are subject to reconciliation. Specifically, any reconciliation of
outlier payments is based on the CCR that is calculated based on a
ratio of cost-to-charge data computed from the relevant cost report
determined at the time the cost report coinciding with the discharge
is settled. For additional information, we refer readers to sections
150.26 through 150.28 of the Medicare Claims Processing Manual (Pub.
100-4) as added by Change Request 7192 (Transmittal 2111; December
3, 2010) and the RY 2009 LTCH PPS final rule (73 FR 26820 through
26821).

3. Establishment of the LTCH PPS Fixed-Loss Amount for FY 2014

When we implemented the LTCH PPS, as discussed in the August 30,
2002 LTCH PPS final rule (67 FR 56022 through 56026), under the
broad authority of section 123 of the BBRA as amended by section
307(b) of BIPA, we established a fixed-loss amount so that total
estimated outlier payments are projected to equal 8 percent of total
estimated payments under the LTCH PPS. To determine the fixed-loss
amount, we estimate outlier payments and total LTCH PPS payments for
each case using claims data from the MedPAR files. Specifically, to
determine the outlier payment for each case, we estimate the cost of
the case by multiplying the Medicare covered charges from the claim
by the LTCH's CCR. Under Sec. 412.525(a)(3) (in conjunction with
Sec. 412.503), if the estimated cost of the case exceeds the
outlier threshold, we make an outlier payment equal to 80 percent of
the difference between the estimated cost of the case and the
outlier threshold (that is, the sum of the adjusted Federal
prospective payment for the MS-LTC-DRG and the fixed-loss amount).
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53715), we
presented our policies regarding the methodology and data we used to
establish the fixed-loss amount of $15,408 for FY 2013. In the FY
2014 IPPS/LTCH PPS proposed rule (78 FR 27784), we proposed to
continue to use our existing methodology to calculate the fixed-loss
amount for FY 2014 (based on the data and the rates and policies
presented in that proposed rule) in order to maintain estimated HCO
payments at the projected 8 percent of total estimated LTCH PPS
payments. Consistent with our historical practice of using the best
data available, in determining the fixed-loss amount for FY 2014, we
proposed to use the most recent available LTCH claims data and CCR
data, that is, LTCH claims data from the December 2012 update of the
FY 2012 MedPAR file and CCRs from the December 2012 update of the
PSF, as these data were the most recent complete LTCH data available
at that time.
Comment: One commenter noted that the year-to year-establishment
of the LTCH PPS high-cost outlier fixed-loss threshold amounts has
generally resulted in high-cost outlier payments that are estimated
to be less than the 8.0 percent of total LTCH PPS payments required
under the regulations. The commenter pointed out that in the
proposed rule, CMS stated that the high-cost outlier fixed-loss
threshold amount established for FY 2013 is projected to ``fall
short'' of the 8.0 percent of total LTCH PPS payment target. Because
the commenter believed that CMS' current methodology for
establishing the annual high-cost outlier fixed-loss threshold
amount is not adequate and requires correction, the commenter
requested that CMS provide for both ``retrospective and prospective
corrective actions'' for high-cost outlier payments in FY 2014,
stating that in analogous situations (such as documentation and
coding) where CMS has determined its past payment rates were
inaccurate, it has instituted corrective payment adjustments in
future years payment rates. Specifically, the commenter recommended
that CMS implement a positive adjustment in FY 2014 to retroactively
account for the cumulative year-to-year underpayment of the 8.0
percent high-cost outlier target. The commenter also recommended
that, in the absence of demonstrating that it is able to improve the
accuracy of the establishment of high-cost outlier fixed-loss
threshold amounts, CMS should prospectively revise (that is,
decrease) the fixed-loss threshold amount for FY 2014 and subsequent
years to correct for its ``average error rate'' in past years. The
commenter did not provide any specific recommendations for how these
``retrospective and prospective corrective'' adjustments should be
determined. In addition, the commenter did not provide its own
analysis of the estimated level of high-cost outlier payments under
the LTCH PPS.
Response: The commenter correctly pointed out that we currently
project that high-cost outlier payments will be approximately 7.0
percent of the estimated total LTCH PPS payments in FY 2013. We wish
to clarify that this estimate of FY 2013 LTCH PPS payments is only a
projected estimate and it is based on payment simulations using FY
2013 claims data, adjusted for estimates of inflation, as these are
currently the most recent available claims data. Precise figures on
actual outlier payments for a given fiscal year cannot be determined
until well after that fiscal year ends. As a result, we do not
believe that we currently have sufficient data to make a meaningful
adjustment to the outlier threshold at this time. However, in light
of the concerns raised by the commenter, we intend to analyze
estimated actual FY 2013 high-cost outlier payments once sufficient
data are available. Because we proposed to continue to use our
existing methodology to calculate the fixed-loss amount for FY 2014
and the commenter did not provide any specific adjustments to our
existing methodology, we are not making any changes to our existing
methodology to calculate the fixed-loss amount for FY 2014 in this
final rule. However, we intend to explore potential adjustments to
improve the accuracy of our methodology for the annual establishment
of the fixed-loss amount that could be proposed and adopted in the
future through notice-and-comment rulemaking.
We are not adopting the commenter's suggestion to make
``retrospective and prospective corrective actions'' for high-cost
outlier payments in FY 2014 to account for the cumulative year-to-
year high-cost outlier underpayment, or to correct for the ``average
error rate'' in the fixed-loss amounts in past years. As we have
articulated on numerous occasions (primarily in the IPPS context,
which has a similar high-cost outlier policy as there is under the
LTCH PPS), we believe that an important goal of any PPS is
predictability and, therefore, we believe that the fixed-loss
outlier threshold should be projected based on the best available
historical data and should not include retrospective or prospective
``corrective'' adjustments. A retrospective or prospective
``corrective'' adjustment to the fixed-loss outlier threshold would
affect all hospitals subject to the LTCH PPS, thereby undercutting
the predictability of the system as a whole (68 FR 34502). In
addition, the payment simulations that we use to determine the
outlier threshold factor in all payments and policies would affect
actual payments for the fiscal year at hand in order to ensure
accuracy when determining outlier payments that are projected to be
8.0 percent of total LTCH PPS payments. Including a ``corrective
adjustment factor'' that is not relative to the current fiscal year
does not lend greater accuracy to the estimate of payments that are
projected to be 8.0 percent of total LTCH PPS payments (70 FR
47495). We also note that our high-cost outlier policies under a PPS
are intended to reimburse hospitals for treating extraordinarily
costly cases and outlier payments are intended to approximate the
marginal cost of providing care above the outlier fixed-loss cost
threshold. Any adjustment to the outlier threshold or Federal rate
in a given year to account for ``overpayments'' or ``underpayments''
of high-cost outliers in other years would result in us making
outlier payments that were not directly related to the actual cost
of furnishing care in extraordinarily costly cases (70 FR 47495).
Consistent with our historical high-cost outlier policies and the
goals of a prospective payment system, for the reasons discussed
above, we do not believe that it is appropriate to make retroactive
adjustments to high-cost outlier payments to ensure that total
outlier payments in a past year are equal to the estimated
``target,'' and we are not adopting the commenters suggestion to
make ``retrospective and prospective corrective'' adjustments in
determining high-cost outlier payments in FY 2014.
Therefore, in this final rule, for FY 2014, in general, we are
continuing to use our existing methodology to calculate a fixed-loss
amount for FY 2014 using the best available data that will maintain
estimated HCO payments at the projected 8 percent of total estimated
LTCH PPS payments (based on the rates and policies presented in this
final rule). Specifically, for this final rule, we are using LTCH
claims data from the March 2013 update of the FY 2012 MedPAR file
and CCRs from the March 2013 update of the PSF to determine a fixed-
loss amount that will result in estimated outlier payments projected
to be equal to 8 percent of total

[[Page 51001]]

estimated payments in FY 2014 because these data are the most recent
complete LTCH data available at this time. (For additional detail on
the rationale for setting the HCO payment ``target'' at 8 percent of
total estimated LTCH PPS payments, we refer readers to the FY 2003
LTCH PPS final rule (67 FR 56022 through 56024).) Using our existing
methodology, we are establishing a fixed-loss amount of $13,314 for
FY 2014.
Under the broad authority of section 123(a)(1) of the BBRA and
section 307(b)(1) of BIPA, we are establishing a fixed-loss amount
of $13,314 for FY 2014. Therefore, we are making an additional
payment for an HCO case that is equal to 80 percent of the
difference between the estimated cost of the case and the outlier
threshold (the sum of the adjusted Federal LTCH payment for the MS-
LTC-DRG and the fixed-loss amount of $13,314). We also note that the
fixed-loss amount of $13,314 for FY 2014 is lower than the FY 2013
fixed-loss amount of $15,408, and the proposed FY 2014 fixed-loss
amount of $14,139. The decrease from the proposed FY 2014 fixed-loss
amount ($14,139) to the final FY 2014 fixed-loss amount ($13,314) is
primarily due to updated CCRs for many LTCHs between the December
2012 update of the PSF (used to determine the proposed FY 2014
fixed-loss amount) and the March 2013 update of the PSF (used to
determine the final FY 2014 fixed-loss amount). Specifically, we
found that over 30 percent of LTCHs had a CCR update between the
December 2012 update of the PSF and the March 2013 update of the
PSF, which results in an overall decrease in the average LTCH CCR of
approximately 0.7 percent from the CCRs we used to determine the
proposed FY 2014 fixed-loss outlier threshold. CCRs from the March
2013 update of the PSF reflect much more recent hospital-specific
data, including CCRs from LTCHs' most recent tentatively settled
cost report. In many cases, for part of FY 2014, MACs will determine
actual outlier payment amounts using the same CCRs that are in the
March 2013 update of the PSF.
Because the estimated cost of the case used in determining HCO
payments is calculated by multiplying the LTCH's CCR by the Medicare
allowable charges for the case, an overall decrease in the average
CCRs generally results in lower estimated costs and, therefore,
lower outlier payments. As a result, based on our payment
simulations using the most recent available data at this time, the
decrease in the fixed-loss amount for FY 2014 is necessary to
maintain the existing requirement that estimated outlier payments
would equal 8 percent of estimated total LTCH PPS payments. (As
noted above, for further information on the existing 8 percent HCO
``target'' requirement, we refer readers to the August 30, 2002 LTCH
PPS final rule (67 FR 56022 through 56024).) Maintaining the fixed-
loss amount at the current level will result in HCO payments that
are less than the current regulatory 8-percent requirement because a
higher fixed-loss amount would result in fewer cases qualifying as
outlier cases. In addition, maintaining the higher fixed-loss amount
will result in a decrease in the amount of the additional payment
for an HCO case because the maximum loss that an LTCH must incur
before receiving an HCO payment (that is, the fixed-loss amount)
would be larger. For these reasons, we believe that lowering the
fixed-loss amount is appropriate and necessary to maintain that
estimated outlier payments would equal 8 percent of estimated total
LTCH PPS payments as required under Sec. 412.525(a).

4. Application of Outlier Policy to SSO Cases

As we discussed in the August 30, 2002 final rule (67 FR 56026),
under some rare circumstances, an LTCH discharge could qualify as an
SSO case (as defined in the regulations at Sec. 412.529 in
conjunction with Sec. 412.503) and also as an HCO case. In this
scenario, a patient could be hospitalized for less than five-sixths
of the geometric average length of stay for the specific MS-LTC-DRG,
and yet incur extraordinarily high treatment costs. If the estimated
costs exceeded the HCO threshold (that is, the SSO payment plus the
fixed-loss amount), the discharge is eligible for payment as an HCO.
Therefore, for an SSO case in FY 2014, the HCO payment will be 80
percent of the difference between the estimated cost of the case and
the outlier threshold (the sum of the fixed-loss amount of $13,314
and the amount paid under the SSO policy as specified in Sec.
412.529).

E. Computing the Adjusted LTCH PPS Federal Prospective Payments for
FY 2014

Section 412.525 sets forth the adjustments to the LTCH PPS
standard Federal rate. Under Sec. 412.525(c), the standard Federal
rate is adjusted to account for differences in area wages by
multiplying the labor-related share of the standard Federal rate by
the applicable LTCH PPS wage index (FY 2014 values are shown in
Tables 12A and 12B listed in section VI. of the Addendum of this
final rule and are available via the Internet). The standard Federal
rate is also adjusted to account for the higher costs of LTCHs
located in Alaska and Hawaii by the applicable COLA factors (the
proposed FY 2014 factors are shown in the chart in section V.C. of
this Addendum) in accordance with Sec. 412.525(b). In this final
rule, we are establishing a standard Federal rate for FY 2014 of
$40,607.31 (provided the LTCH submits quality reporting data for FY
2014 in accordance with the LTCHQR Program under section 1886(m)(5)
of the Act), as discussed above in section V.A.2. of the Addendum to
this final rule. We illustrate the methodology to adjust the LTCH
PPS Federal standard rate for FY 2014 in the following example:
Example: During FY 2014, a Medicare patient is in an LTCH
located in Chicago, Illinois (CBSA 16974) and discharged on January
1, 2014. The FY 2014 LTCH PPS wage index value for CBSA 16974 is
1.0418 (obtained from Table 12A listed in section VI. of the
Addendum of this final rule and available via the Internet on the
CMS Web site). The Medicare patient is classified into MS-LTC-DRG 28
(Spinal Procedures with MCC), which has a relative weight for FY
2014 of 1.6227 (obtained from Table 11 listed in section VI. of the
Addendum of this final rule and available via the Internet on the
CMS Web site). The LTCH submitted quality reporting data for FY 2014
in accordance with the LTCHQR Program under section 1886(m)(5) of
the Act.
To calculate the LTCH's total adjusted Federal prospective
payment for this Medicare patient in FY 2014, we computed the wage-
adjusted Federal prospective payment amount by multiplying the
unadjusted FY 2014 standard Federal rate ($40,607.31, for LTCHs that
submit quality reporting data for FY 2014 in accordance with the
LTCHQR Program under section 1886(m)(5) of the Act) by the labor-
related share (62.537 percent) and the wage index value (1.0418).
This wage-adjusted amount was then added to the nonlabor-related
portion of the unadjusted standard Federal rate (37.463 percent;
adjusted for cost of living, if applicable) to determine the
adjusted Federal rate, which was then multiplied by the MS-LTC-DRG
relative weight (1.6227) to calculate the total adjusted Federal
LTCH PPS prospective payment for FY 2014 ($67,615.96). The table
below illustrates the components of the calculations in this
example.

------------------------------------------------------------------------

------------------------------------------------------------------------
Unadjusted Standard Federal Prospective Payment Rate $40,607.31
(provided the LTCH submits quality data in
accordance with the LTCHQR Program under section
1886(m)(5) of the Act)..............................
Labor-Related Share.................................. x 0.62537
------------------
Labor-Related Portion of the Federal Rate............ = $25,394.59
Wage Index (CBSA 16974).............................. x 1.0418
------------------
Wage-Adjusted Labor Share of Federal Rate............ = $26,456.08
Nonlabor-Related Portion of the Federal Rate + $15,212.72
($40,607.31 x 0.37463)..............................
------------------
Adjusted Federal Rate Amount......................... = $41,668.80
MS-LTC-DRG 28 Relative Weight........................ x 1.6227
------------------
Total Adjusted Federal Prospective Payment....... = $67,615.96
------------------------------------------------------------------------

[[Page 51002]]

VI. Tables Referenced in this Final Rule and Available Only through the
Internet on the CMS Web site

This section lists the tables referred to throughout the
preamble of this final rule and in this Addendum. In the past, a
majority of these tables were published in the Federal Register as
part of the annual proposed and final rules. However, similar to FYs
2012 and 2013, for the FY 2014 rulemaking cycle, the IPPS and LTCH
tables will not be published as part of the annual IPPS/LTCH PPS
proposed and final rulemakings and will be available only through
the Internet. Specifically, IPPS Tables 2, 3A, 3B, 4A, 4B, 4C, 4D,
4E, 4F, 4J, 5, 6B, 6G, 6H, 6I, 6J, 6K, 7A, 7B, 8A, 8B, 9A, 9C, 10,
15, and 16A and LTCH PPS Tables 8C, 11, 12A, 12B, 13A, and 13B will
be available only through the Internet. IPPS Tables 1A, 1B, 1C, and
1D, and LTCH PPS Table 1E, displayed at the end of this section,
will continue to be published in the Federal Register as part of the
annual proposed and final rules. As discussed in section II.G.9. and
11. of the preamble of this final rule, Tables 6A and 6C through 6F
will not be issued with this FY 2014 final rule because there are no
new, revised, or deleted ICD-9-CM diagnosis codes and no revised or
deleted procedures codes. As discussed in section V.C. of the
preamble of this final rule, effective FY 2014 and forward, the low-
volume hospital definition and payment adjustment methodology under
section 1886(d)(12) of the Act returns to the pre-Affordable Care
Act definition and payment adjustment methodology (we refer readers
to section V.C. for complete details on the low-volume hospital
payment adjustment). Therefore, we are no longer including a table
(previously Table 14) in this final rule that lists the low-volume
payment adjustments.
Readers who experience any problems accessing any of the tables
that are posted on the CMS Web sites identified below should contact
Michael Treitel at (410) 786-4552.
The following IPPS tables for this FY 2014 final rule are
available only through the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/. Click on the link on the left side of
the screen titled, ``FY 2014 IPPS Final Rule Home Page'' or ``Acute
Inpatient--Files for Download''.

Table 2.--Acute Care Hospitals Case-Mix Indexes for Discharges
Occurring in Federal Fiscal Year 2012; Hospital Wage Indexes for
Federal Fiscal Year 2014; Hospital Average Hourly Wages for Federal
Fiscal Years 2012 (2008 Wage Data), 2013 (2009 Wage Data), and 2014
(2010 Wage Data); and 3-Year Average of Hospital Average Hourly
Wages
Table 3A.--FY 2014 and 3-Year* Average Hourly Wage for Acute Care
Hospitals in Urban Areas by CBSA
Table 3B.--FY 2014 and 3-Year* Average Hourly Wage for Acute Care
Hospitals in Rural Areas by CBSA
Table 4A.--Wage Index and Capital Geographic Adjustment Factor (GAF)
for Acute Care Hospitals in Urban Areas by CBSA and by State--FY
2014
Table 4B.--Wage Index and Capital Geographic Adjustment Factor (GAF)
for Acute Care Hospitals in Rural Areas by CBSA and by State--FY
2014
Table 4C.--Wage Index and Capital Geographic Adjustment Factor (GAF)
for Acute Care Hospitals That Are Reclassified by CBSA and by
State--FY 2014
Table 4D.--States Designated as Frontier, with Acute Care Hospitals
Receiving at a Minimum the Frontier State Floor Wage Index; Urban
Areas with Acute Care Hospitals Receiving the Statewide Rural Floor
or Imputed Floor Wage Index--FY 2014
Table 4E.--Urban CBSAs and Constituent Counties for Acute Care
Hospitals--FY 2014
Table 4F.--Puerto Rico Wage Index and Capital Geographic Adjustment
Factor (GAF) for Acute Care Hospitals by CBSA--FY 2014
Table 4J.--Out-Migration Adjustment for Acute Care Hospitals--FY
2014
Table 5.--List of Medicare Severity Diagnosis-Related Groups (MS-
DRGs), Relative Weighting Factors, and Geometric and Arithmetic Mean
Length of Stay--FY 2014
Table 6B.--New Procedure Codes--FY 2014
Table 6G.--Additions to the CC Exclusions List--FY 2014
Table 6H.--Deletions from the CC Exclusions List--FY 2014
Table 6I.--Major CC List--FY 2014
Table 6J.--Complete CC List--FY 2014
Table 6K.--Complete List of CC Exclusions--FY 2014
Table 7A.--Medicare Prospective Payment System Selected Percentile
Lengths of Stay: FY 2012 MedPAR Update--March 2013 GROUPER V30.0 MS-
DRGs
Table 7B.--Medicare Prospective Payment System Selected Percentile
Lengths of Stay: FY 2012 MedPAR Update--March 2013 GROUPER V31.0 MS-
DRGs
Table 8A.--FY 2014 Statewide Average Operating Cost-to-Charge Ratios
(CCRs) for Acute Care Hospitals (Urban and Rural)
Table 8B.--FY 2014 Statewide Average Capital Cost-to-Charge Ratios
(CCRs) for Acute Care Hospitals
Table 9A.--Hospital Reclassifications and Redesignations--FY 2014
Table 9C.--Hospitals Redesignated as Rural under Section
1886(d)(8)(E) of the Act--FY 2014
Table 10.--New Technology Add-On Payment Thresholds \1,2\ for
Applications for FY 2015
Table 15.--FY 2014 Readmissions Adjustment Factors
Table 16A.--Updated Proxy Hospital Inpatient Value-Based Purchasing
(VBP) Program Adjustment Factors for FY 2014

The following LTCH PPS tables for this FY 2014 final rule are
available only through the Internet on the CMS Web site at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/ under the list item for
Regulation Number CMS-1599-F.

Table 8C.--FY 2014 Statewide Average Total Cost-to-Charge Ratios
(CCRs) for LTCHs (Urban and Rural)
Table 11.--MS-LTC-DRGs, Relative Weights, Geometric Average Length
of Stay, Short-Stay Outlier (SSO) Threshold, and ``IPPS Comparable
Threshold'' for Discharges Occurring from October 1, 2013 through
September 30, 2014 under the LTCH PPS
Table 12A.--LTCH PPS Wage Index for Urban Areas for Discharges
Occurring from October 1, 2013 through September 30, 2014
Table 12B.--LTCH PPS Wage Index for Rural Areas for Discharges
Occurring from October 1, 2013 through September 30, 2014
Table 13A.--Composition of Low-Volume Quintiles for MS-LTC-DRGs--FY
2014
Table 13B.--No-Volume MS-LTC-DRG Crosswalk for FY 2014

Table 1A--National Adjusted Operating Standardized Amounts, Labor/Nonlabor (69.6 Percent Labor Share/30.4
Percent Nonlabor Share If Wage Index Is Greater Than 1)--FY 2014
----------------------------------------------------------------------------------------------------------------
Full Update (1.7 Percent) Reduced Update (-0.3 Percent)
----------------------------------------------------------------------------------------------------------------
Labor-related Nonlabor-related Labor-related Nonlabor-related
----------------------------------------------------------------------------------------------------------------
$3,737.71 $1,632.57 $3,664.21 $1,600.46
----------------------------------------------------------------------------------------------------------------

Table 1B--National Adjusted Operating Standardized Amounts, Labor/Nonlabor (62 Percent Labor Share/38 Percent
Nonlabor Share If Wage Index Is Less Than Or Equal To 1)--FY 2014
----------------------------------------------------------------------------------------------------------------
Full Update (1.7 Percent) Reduced Update (-0.3 Percent)
----------------------------------------------------------------------------------------------------------------
Labor-related Nonlabor-related Labor-related Nonlabor-related
----------------------------------------------------------------------------------------------------------------
$3,329.57 $2,040.71 $3,264.10 $2,000.57
----------------------------------------------------------------------------------------------------------------

[[Page 51003]]

Table 1C--Adjusted Operating Standardized Amounts For Puerto Rico, Labor/Nonlabor (National: 62 Percent Labor
Share/38 Percent Nonlabor Share Because Wage Index Is Less Than Or Equal To 1; Puerto Rico: 63.2 Percent Labor
Share/36.8 Percent Nonlabor Share If Wage Index Is Greater Than 1 Or 62 Percent Labor Share/38 Percent Nonlabor
Share If Wage Index Is Less Than Or Equal To 1--FY 2014
----------------------------------------------------------------------------------------------------------------
Rates if wage index is greater than 1 Rates if wage index is less
---------------------------------------------- than or equal to 1
Standardized amount -------------------------------
Labor Nonlabor Labor Nonlabor
----------------------------------------------------------------------------------------------------------------
National \1\...................... Not Applicable....... Not Applicable....... $3,329.57 $2,040.71
Puerto Rico....................... $1,608.90............ $936.82.............. 1,578.35 967.37
----------------------------------------------------------------------------------------------------------------
\1\ For FY 2014, there are no CBSAs in Puerto Rico with a national wage index greater than 1.

Table 1D--Capital Standard Federal Payment Rate--FY 2014
----------------------------------------------------------------------------------------------------------------
Rate
----------------------------------------------------------------------------------------------------------------
National.............................................. $429.31
Puerto Rico........................................... 209.82
----------------------------------------------------------------------------------------------------------------

Table 1E--LTCH Standard Federal Prospective Payment Rate--FY 2014
------------------------------------------------------------------------
Full update (1.7 Reduced update* (-
percent) 0.3 percent)
------------------------------------------------------------------------
Standard Federal Rate........... $40,607.31 $39,808.74
------------------------------------------------------------------------
* For LTCHs that fail to submit quality reporting data for FY 2014 in
accordance with the LTCH Quality Reporting (LTCHQR) Program, the
annual update is reduced by 2.0 percentage points as required by
section 1886(m)(5) of the Act.

Appendix A: Economic Analyses

I. Regulatory Impact Analysis

A. Introduction

We have examined the impacts of this final rule as required by
Executive Order 12866 on Regulatory Planning and Review (September
30, 1993), Executive Order 13563 on Improving Regulation and
Regulatory Review (February 2, 2011) the Regulatory Flexibility Act
(RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) of the
Social Security Act, section 202 of the Unfunded Mandates Reform Act
of 1995 (March 22, 1995, Pub. L. 104-4), Executive Order 13132 on
Federalism (August 4, 1999), and the Congressional Review Act (5
U.S.C. 804(2)).
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that
maximize net benefits (including potential economic, environmental,
public health and safety effects, distributive impacts, and equity).
Executive Order 13563 emphasizes the importance of quantifying both
costs and benefits, of reducing costs, of harmonizing rules, and of
promoting flexibility. A regulatory impact analysis (RIA) must be
prepared for major rules with economically significant effects ($100
million or more in any 1 year).
We have determined that this final rule is a major rule as
defined in 5 U.S.C. 804(2). We estimate that the changes for FY 2014
acute care hospital operating and capital payments will redistribute
amounts in excess of $100 million to acute care hospitals. The
applicable percentage increase to the IPPS rates required by the
statute, in conjunction with other payment changes in this final
rule, will result in an estimated $498 million increase in FY 2014
operating payments (or 0.5 percent change) and an estimated $134
million increase in FY 2014 capital payments (or 1.6 percent
change). These changes are relative to payments made in FY 2013. The
impact analysis of the capital payments can be found in section I.K.
of this Appendix. In addition, as described in section I.L. of this
Appendix, LTCHs are expected to experience an increase in payments
by $72 million in FY 2014 relative to FY 2013.
Our operating impact estimate includes the -0.8 percent
documentation and coding adjustment applied to the IPPS standardized
amount, which represents part of the recoupment required under
section 631 of the ATRA. It includes the -0.2 percent adjustment
applied to the IPPS standardized amount, the hospital-specific rate,
and the Puerto Rico-specific rate to offset the cost of the policy
on admission and medical review criteria for hospital inpatient
services under Medicare Part A. In addition, our operating payment
impact estimate includes the 1.7 percent hospital update to the
standardized amount (which includes the estimated 2.5 percent market
basket update less 0.5 percentage point for the multifactor
productivity adjustment and less 0.3 percentage point required under
the Affordable Care Act). The estimates of IPPS operating payments
to acute care hospitals do not reflect any changes in hospital
admissions or real case-mix intensity, which will also affect
overall payment changes.
The analysis in this Appendix, in conjunction with the remainder
of this document, demonstrates that this rule is consistent with the
regulatory philosophy and principles identified in Executive Orders
12866 and 13563, the RFA, and section 1102(b) of the Act. This final
rule will affect payments to a substantial number of small rural
hospitals, as well as other classes of hospitals, and the effects on
some hospitals may be significant.

B. Need

This final rule is necessary in order to make payment and policy
changes under the Medicare IPPS for Medicare acute care hospital
inpatient services for operating and capital-related costs as well
as for certain hospitals and hospital units excluded from the IPPS.
This final rule also is necessary to make payment and policy changes
for Medicare hospitals under the LTCH PPS payment system.

C. Objectives of the IPPS

The primary objective of the IPPS is to create incentives for
hospitals to operate efficiently and minimize unnecessary costs
while at the same time ensuring that payments are sufficient to
adequately compensate hospitals for their legitimate costs in
delivering necessary care to Medicare beneficiaries. In addition, we
share national goals of preserving the Medicare Hospital Insurance
Trust Fund.
We believe that the changes in this final rule will further each
of these goals while maintaining the financial viability of the
hospital industry and ensuring access to high quality health care
for Medicare beneficiaries. We expect that these changes will ensure
that the outcomes of the prospective payment systems are reasonable
and equitable while avoiding or minimizing unintended adverse
consequences.

D. Limitations of Our Analysis

The following quantitative analysis presents the projected
effects of our policy

[[Page 51004]]

changes, as well as statutory changes effective for FY 2014, on
various hospital groups. We estimate the effects of individual
policy changes by estimating payments per case while holding all
other payment policies constant. We use the best data available,
but, generally, we do not attempt to make adjustments for future
changes in such variables as admissions, lengths of stay, or case-
mix.

E. Hospitals Included in and Excluded From the IPPS

The prospective payment systems for hospital inpatient operating
and capital-related costs of acute care hospitals encompass most
general short-term, acute care hospitals that participate in the
Medicare program. There were 31 Indian Health Service hospitals in
our database, which we excluded from the analysis due to the special
characteristics of the prospective payment methodology for these
hospitals. Among other short-term, acute care hospitals, 45 such
hospitals in Maryland remain excluded from the IPPS pursuant to the
waiver under section 1814(b)(3) of the Act.
As of March 2013, there were 3,407 IPPS acute care hospitals
included in our analysis. This represents approximately 55 percent
of all Medicare-participating hospitals. The majority of this impact
analysis focuses on this set of hospitals. There also are
approximately 1,328 CAHs. These small, limited service hospitals are
paid on the basis of reasonable costs rather than under the IPPS.
IPPS-excluded hospitals and units include IPFs, IRFs, LTCHs, RNHCIs,
children's hospitals, and 11 cancer hospitals, which are paid under
separate payment systems. Changes in the prospective payment systems
for IPFs and IRFs are made through separate rulemaking. Payment
impacts for these IPPS-excluded hospitals and units are not included
in this final rule. The impact of the update and policy changes to
the LTCH PPS for FY 2014 is discussed in section I.L. of this
Appendix.

F. Effects on Hospitals and Hospital Units Excluded From the IPPS

As of March 2013, there were 97 children's hospitals, 11 cancer
hospitals, and 18 RNHCIs being paid on a reasonable cost basis
subject to the rate-of-increase ceiling under Sec. 413.40. (In
accordance with Sec. 403.752(a) of the regulation, RNHCIs are paid
under Sec. 413.40.) Among the remaining providers, 234
rehabilitation hospitals and 898 rehabilitation units, and 437
LTCHs, are paid the Federal prospective per discharge rate under the
IRF PPS and the LTCH PPS, respectively, and 472 psychiatric
hospitals and 1,155 psychiatric units are paid the Federal per diem
amount under the IPF PPS. As stated above, IRFs and IPFs are not
affected by the rate updates discussed in this final rule. The
impacts of the changes on LTCHs are discussed in section I.L. of
this Appendix.
For children's hospitals, the 11 cancer hospitals, and RNHCIs,
the update of the rate-of-increase limit (or target amount) is the
estimated FY 2014 percentage increase in the IPPS operating market
basket, consistent with section 1886(b)(3)(B)(ii) of the Act, and
Sec. Sec. 403.752(a) and 413.40 of the regulations. As discussed in
section IV. of the preamble of this final rule, we are rebasing the
IPPS operating market basket to a FY 2010 base year. Therefore, we
are using the percentage increase in the FY 2010-based IPPS
operating market basket to update the target amounts for FY 2014 and
subsequent years for children's hospitals, the 11 cancer hospitals,
and RNHCIs that are paid based on reasonable costs subject to the
rate-of-increase limits. Consistent with current law, based on IHS
Global Insight, Inc.'s 2013 second quarter forecast of the FY 2010-
based market basket increase, we are estimating that the FY 2014
update based on the IPPS operating market basket is 2.5 percent
(that is, the current estimate of the market basket rate-of-
increase). However, the Affordable Care Act requires an adjustment
for multifactor productivity (currently estimated to be 0.5
percentage point for FY 2014) and a 0.3 percentage point reduction
to the market basket update resulting in a 1.7 percent applicable
percentage increase for IPPS hospitals subject to a reduction of 2.0
percentage points if the hospital fails to submit quality data under
rules established by the Secretary in accordance with section
1886(b)(3)(B)(viii) of the Act. Children's hospitals, the 11 cancer
hospitals, and RNCHIs that continue to be paid based on reasonable
costs subject to rate-of-increase limits under Sec. 413.40 of the
regulations are not subject to the reductions in the applicable
percentage increase required under the Affordable Care Act.
Therefore, for RNHCIs, children's hospitals, and the 11 cancer
hospitals paid under Sec. 413.40 of the regulations, the update is
the percentage increase in the FY 2014 IPPS operating market basket,
estimated at 2.5 percent, without the reductions required under the
Affordable Care Act.
The impact of the update in the rate-of-increase limit on those
excluded hospitals depends on the cumulative cost increases
experienced by each excluded hospital since its applicable base
period. For excluded hospitals that have maintained their cost
increases at a level below the rate-of-increase limits since their
base period, the major effect is on the level of incentive payments
these excluded hospitals receive. Conversely, for excluded hospitals
with cost increases above the cumulative update in their rate-of-
increase limits, the major effect is the amount of excess costs that
will not be paid.
We note that, under Sec. 413.40(d)(3), an excluded hospital
that continues to be paid under the TEFRA system and whose costs
exceed 110 percent of its rate-of-increase limit receives its rate-
of-increase limit plus the lesser of: (1) 50 percent of its
reasonable costs in excess of 110 percent of the limit, or (2) 10
percent of its limit. In addition, under the various provisions set
forth in Sec. 413.40, hospitals can obtain payment adjustments for
justifiable increases in operating costs that exceed the limit.

G. Quantitative Effects of the Policy Changes Under the IPPS for
Operating Costs

1. Basis and Methodology of Estimates

In this final rule, we are announcing policy changes and payment
rate updates for the IPPS for FY 2014 for operating costs of acute
care hospitals. The FY 2014 updates to the capital payments to acute
care hospitals are discussed in section I.K. of this Appendix.
Based on the overall percentage change in payments per case
estimated using our payment simulation model, we estimate that total
FY 2014 operating payments will increase by 0.5 percent compared to
FY 2013. In addition to the applicable percentage increase, this
amount reflects the FY 2014 recoupment adjustment for documentation
and coding described in section II.D. of the preamble of this final
rule and the adjustment to offset the cost of the policy on
admission and medical review criteria for hospital inpatient
services under Medicare Part A: A -0.8 percent recoupment adjustment
to the IPPS national standardized amounts for the documentation and
coding adjustment and a -0.2 percent adjustment to the IPPS national
standardized amount, the Puerto Rico-specific rate and the hospital-
specific rate for the policy on admission and medical review
criteria. The impacts do not reflect changes in the number of
hospital admissions or real case-mix intensity, which will also
affect overall payment changes.
We have prepared separate impact analyses of the changes to each
system. This section deals with the changes to the operating
inpatient prospective payment system for acute care hospitals. Our
payment simulation model relies on the most recent available data to
enable us to estimate the impacts on payments per case of certain
changes in this final rule. However, there are other changes for
which we do not have data available that will allow us to estimate
the payment impacts using this model. For those changes, we have
attempted to predict the payment impacts based upon our experience
and other more limited data.
The data used in developing the quantitative analyses of changes
in payments per case presented below are taken from the FY 2012
MedPAR file and the most current Provider-Specific File (PSF) that
is used for payment purposes. Although the analyses of the changes
to the operating PPS do not incorporate cost data, data from the
most recently available hospital cost reports were used to
categorize hospitals. Our analysis has several qualifications.
First, in this analysis, we do not make adjustments for future
changes in such variables as admissions, lengths of stay, or
underlying growth in real case-mix. Second, due to the
interdependent nature of the IPPS payment components, it is very
difficult to precisely quantify the impact associated with each
change. Third, we use various data sources to categorize hospitals
in the tables. In some cases, particularly the number of beds, there
is a fair degree of variation in the data from the different
sources. We have attempted to construct these variables with the
best available source overall. However, for individual hospitals,
some miscategorizations are possible.
Using cases from the FY 2012 MedPAR file, we simulated payments
under the operating IPPS given various combinations of payment
parameters. As described above, Indian Health Service hospitals and
hospitals in Maryland were excluded from the simulations. The impact
of payments under

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the capital IPPS, or the impact of payments for costs other than
inpatient operating costs, are not analyzed in this section.
Estimated payment impacts of the capital IPPS for FY 2014 are
discussed in section I.K. of this Appendix.
We discuss the following changes below:
The effects of the application of the documentation and
coding adjustment, the adjustment to offset the costs of the policy
on admission and medical review criteria and the applicable
percentage increase (including the market basket update, the
multifactor productivity adjustment and the applicable percentage
reduction in accordance with the Affordable Care Act) to the
standardized amount and hospital-specific rates.
The effects of the changes to the relative weights and
MS-DRG grouper, including the methodology to calculate the MS-DRG
cost based relative weights using 19 departmental CCRs instead of
the current 15 departmental CCRs.
The effects of the changes in hospitals' wage index
values reflecting updated wage data from hospitals' cost reporting
periods beginning during FY 2010, compared to the FY 2009 wage data
and the changes in the labor related share from 68.8 percent for FY
2013 to 69.6 percent for FY 2014 for hospitals with a wage index
greater than 1.0.
The effects of the recalibration of the MS-DRG relative
weights as required by section 1886(d)(4)(C) of the Act, including
the wage and recalibration budget neutrality factors.
The effects of the geographic reclassifications by the
MGCRB as of publication of this final rule that will be effective
for FY 2014.
The effects of the rural floor and imputed floor with
the application of the national budget neutrality factor applied to
the wage index.
The effects of the frontier State wage index adjustment
under the statutory provision that requires that hospitals located
in States that qualify as frontier States cannot have a wage index
less than 1.0. This provision is not budget neutral.
The effects of the implementation of section
1886(d)(13) of the Act, as added by section 505 of Public Law 108-
173, which provides for an increase in a hospital's wage index if
the hospital qualifies by meeting a threshold percentage of
residents of the county where the hospital is located who commute to
work at hospitals in counties with higher wage indexes.
The effects of the policies for implementation of the
Hospital Readmissions Reduction Program under section 1886(q) of the
Act, as added by section 3025 of the Affordable Care Act, that
adjusts hospital's base operating DRG amount by an adjustment factor
to account for a hospital's excess readmissions.
The effects of the expiration of the special payment
status for MDHs under section 606 of the ATRA under which MDHs that
currently receive the higher of payments made under the Federal
standardized amount or the payments made under the Federal
standardized amount plus 75 percent of the difference between the
Federal standardized amount and the hospital-specific rate will be
paid based on the Federal standardized amount starting in FY 2014.
The effects of the implementation of section 3133 of
the Affordable Care Act that reduces Medicare DSH payments to 25
percent of what hospitals had been previously paid under section
1886(d)(5)(F) of the Act and establishes an additional payment to be
made to hospitals that receive DSH payments for their relative share
of the total amount of uncompensated care.
The total estimated change in payments based on the FY
2014 policies relative to payments based on FY 2013 policies that
include the applicable percentage increase of 1.7 percent (or 2.5
percent market basket update with a reduction of 0.5 percentage
point for the multifactor productivity adjustment, and a 0.3
percentage point reduction, as required under the Affordable Care
Act).
To illustrate the impact of the FY 2014 changes, our analysis
begins with a FY 2013 baseline simulation model using: the FY 2014
applicable percentage increase of 1.7 percent and the documentation
and coding recoupment adjustment of 0.8 percent to the Federal
standardized amount and the adjustment 0.2 percent to the Federal
standardized amount, the hospital-specific rate, and the Puerto
Rico-specific rate for the policy on admission and medical review
criteria; the FY 2013 MS-DRG GROUPER (Version 30.0); the most
current CBSA designations for hospitals based on OMB's MSA
definitions; the FY 2013 wage index; and no MGCRB reclassifications.
Outlier payments are set at 5.1 percent of total operating MS-DRG
and outlier payments for modeling purposes.
Section 1886(b)(3)(B)(viii) of the Act, as added by section
5001(a) of Public Law 109-171, as amended by section 4102(b)(1)(A)
of the ARRA (Pub. L. 111-5) and by section 3401(a)(2) of the
Affordable Care Act (Pub. L. 111-148), provides that, for FY 2007
and each subsequent year, the update factor will include a reduction
of 2.0 percentage points for any subsection (d) hospital that does
not submit data on measures in a form and manner and at a time
specified by the Secretary. (Beginning in FY 2015, the reduction is
one-quarter of such applicable percentage increase determined
without regard to section 1886(b)(3)(B)(ix), (xi), or (xii) of the
Act.) At the time that this impact was prepared, 46 hospitals did
not receive the full market basket rate-of-increase for FY 2013
because they failed the quality data submission process or did not
choose to participate. For purposes of the simulations shown below,
we modeled the payment changes for FY 2014 using a reduced update
for these 46 hospitals. However, we do not have enough information
at this time to determine which hospitals will not receive the full
update factor for FY 2014.
Each policy change, statutory or otherwise, is then added
incrementally to this baseline, finally arriving at an FY 2014 model
incorporating all of the changes. This simulation allows us to
isolate the effects of each change.
Our final comparison illustrates the percent change in payments
per case from FY 2013 to FY 2014. Three factors not discussed
separately have significant impacts here. The first factor is the
update to the standardized amount. In accordance with section
1886(b)(3)(B)(i) of the Act, we are updating the standardized
amounts for FY 2014 using an applicable percentage increase of 1.7
percent. This includes our forecasted IPPS operating hospital market
basket increase of 2.5 percent with a reduction of 0.5 percentage
point for the multifactor productivity adjustment and a 0.3
percentage point reduction as required under the Affordable Care
Act. (Hospitals that fail to comply with the quality data submission
requirements would receive an update of -0.3 percent (this update
includes the 2.0 percentage point reduction for failure to submit
these data)). Under section 1886(b)(3)(B)(iv) of the Act, the
updates to the hospital-specific amounts for SCHs also are equal to
the applicable percentage increase, or 1.7 percent. In addition, we
are updating the Puerto Rico-specific amount by an applicable
percentage increase of 1.7 percent.
A second significant factor that affects the changes in
hospitals' payments per case from FY 2013 to FY 2014 is the change
in hospitals' geographic reclassification status from one year to
the next. That is, payments may be reduced for hospitals
reclassified in FY 2013 that are no longer reclassified in FY 2014.
Conversely, payments may increase for hospitals not reclassified in
FY 2013 that are reclassified in FY 2014.
A third significant factor is that we currently estimate that
actual outlier payments during FY 2013 will be 4.8 percent of total
MS-DRG payments. When the FY 2013 final rule was published, we
projected FY 2013 outlier payments would be 5.1 percent of total MS-
DRG plus outlier payments; the average standardized amounts were
offset correspondingly. The effects of the lower than expected
outlier payments during FY 2013 (as discussed in the Addendum to
this final rule) are reflected in the analyses below comparing our
current estimates of FY 2013 payments per case to estimated FY 2014
payments per case (with outlier payments projected to equal 5.1
percent of total MS-DRG payments).

2. Analysis of Table I

Table I displays the results of our analysis of the changes for
FY 2014. The table categorizes hospitals by various geographic and
special payment consideration groups to illustrate the varying
impacts on different types of hospitals. The top row of the table
shows the overall impact on the 3,407 acute care hospitals included
in the analysis.
The next four rows of Table I contain hospitals categorized
according to their geographic location: All urban, which is further
divided into large urban and other urban; and rural. There are 2,485
hospitals located in urban areas included in our analysis. Among
these, there are 1,370 hospitals located in large urban areas
(populations over 1 million), and 1,115 hospitals in other urban
areas (populations of 1 million or fewer). In addition, there are
922 hospitals in rural areas. The next two groupings are by bed-size
categories, shown separately for urban and rural hospitals. The
final groupings by geographic location are by

[[Page 51006]]

census divisions, also shown separately for urban and rural
hospitals.
The second part of Table I shows hospital groups based on
hospitals' FY 2014 payment classifications, including any
reclassifications under section 1886(d)(10) of the Act. For example,
the rows labeled urban, large urban, other urban, and rural show
that the numbers of hospitals paid based on these categorizations
after consideration of geographic reclassifications (including
reclassifications under sections 1886(d)(8)(B) and 1886(d)(8)(E) of
the Act that have implications for capital payments) are 2,496;
1,380; 1,116; and 911, respectively.
The next three groupings examine the impacts of the changes on
hospitals grouped by whether or not they have GME residency programs
(teaching hospitals that receive an IME adjustment) or receive
Medicare DSH payments, or some combination of these two adjustments.
There are 2,380 nonteaching hospitals in our analysis, 785 teaching
hospitals with fewer than 100 residents, and 242 teaching hospitals
with 100 or more residents.
In the DSH categories, hospitals are grouped according to their
DSH payment status, and whether they are considered urban or rural
for DSH purposes. The next category groups together hospitals
considered urban or rural, in terms of whether they receive the IME
adjustment, the DSH adjustment, both, or neither.
The next five rows examine the impacts of the changes on rural
hospitals by special payment groups (SCHs, RRCs, and former MDHs).
There were 207 RRCs, 330 SCHs, 187 former MDHs, and 124 hospitals
that are both SCHs and RRCs, and 11 hospitals that were former MDHs
and RRCs.
The next series of groupings are based on the type of ownership
and the hospital's Medicare utilization expressed as a percent of
total patient days. These data were taken from the FY 2011 or FY
2010 Medicare cost reports.
The next two groupings concern the geographic reclassification
status of hospitals. The first grouping displays all urban hospitals
that were reclassified by the MGCRB for FY 2014. The second grouping
shows the MGCRB rural reclassifications. The final category shows
the impact of the policy changes on the 15 cardiac hospitals.
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a. Effects of the Hospital Update, Documentation and Coding Adjustment
and Adjustment for the Policy on Admission and Medical Review Criteria
(Column 2)

As discussed in section II.D. of the preamble of this final
rule, this column includes the hospital update, including the 2.5
percent market basket update, the reduction of 0.5 percentage point
for the multifactor productivity adjustment, and the 0.3 percentage
point reduction in accordance with the Affordable Care Act. In
addition, this column includes the FY 2014 documentation and coding
recoupment adjustment of -0.8 percent on the national standardized
amount as part of the recoupment required by section 631 of the
ATRA. Finally, we are applying a -0.2 percent adjustment to offset
the cost of the policy on admission and medical review criteria for
hospital inpatient services under Medicare Part A that is applied to
the national standardized amount, the hospital-specific rate, and
the Puerto Rico specific rate. As a result, we are making a 0.7
percent update to the national standardized amount.
This column also includes the 1.5 percent update to the
hospital-specific rates, which includes the 1.7 percent for the
hospital update and -0.2 percent adjustment to offset the cost of
the policy on admission and medical review criteria for hospital
inpatient services under Medicare Part A.
Overall, hospitals will experience a 0.7 percent increase in
payments primarily due to the effects of the hospital update and
documentation and coding adjustment on the national standardized
amount. Hospitals that are paid under the hospital-specific rate,
namely SCHs, will experience a 1.5 percent increase in payments;
therefore, hospital categories with SCHs paid under the hospital-
specific rate will experience increases in payments of more than 0.7
percent.

b. Effects of the Changes to the MS-DRG Reclassifications and Relative
Cost-Based Weights With Recalibration Budget Neutrality (Column 3)

Column 3 shows the effects of the changes to the MS-DRGs and
relative weights with the application of the recalibration budget
neutrality factor to the standardized amounts. Section
1886(d)(4)(C)(i) of the Act requires us annually to make appropriate
classification changes in order to reflect changes in treatment
patterns, technology, and any other factors that may change the
relative use of hospital resources. Consistent with section
1886(d)(4)(C)(iii) of the Act, we are calculating a recalibration
budget neutrality factor to account for the changes in MS-DRGs and
relative weights to ensure that the overall payment impact is budget
neutral.
As discussed in section II.E. of the preamble of this final
rule, the FY 2014 MS-DRG relative weights will be 100 percent cost-
based and 100 percent MS-DRGs. For FY 2014, the MS-DRGs are
calculated using the FY 2012 MedPAR data grouped to the Version 31.0
(FY 2014) MS-DRGs. In addition, for FY 2014, we are moving from 15
departmental CCRs to 19 departmental CCRs to calculate the cost-
based relative weights. The four additional CCRs of implantable
devices, CT scan, MRI, and cardiac catheterization have generally
increased the relative weight values for surgical MS-DRGs and
decreased the relative weight values for medical MS-DRGs. The
methodology to calculate the relative weights and the
reclassification changes to the GROUPER are described in more detail
in section II.H. of the preamble of this final rule.
The ``All Hospitals'' line in Column 3 indicates that changes
due to the MS-DRGs and relative weights will result in a 0.0 percent
change in payments with the application of the recalibration budget
neutrality factor of 0.997989 on to the standardized amount.
Hospital categories that generally treat more surgical cases than
medical cases will experience increases in their payments due to the
changes to the relative weight methodology. Rural hospitals will
experience a 0.4 percent decrease in payments because rural
hospitals tend to treat fewer surgical cases than medical cases,
while teaching hospitals with more than 100 residents will
experience an increase in payments by 0.1 percent as those hospitals
treat more surgical cases than medical cases.

c. Effects of the Wage Index Changes (Column 4)

Column 4 shows the impact of updated wage data and the change to
the labor-related share with the application of the wage budget
neutrality factor. Section 1886(d)(3)(E) of the Act requires that,
beginning October 1, 1993, we annually update the wage data used to
calculate the wage index. In accordance with this requirement, the
wage index for acute care hospitals for FY 2014 is based on data
submitted for hospital cost reporting periods beginning on or after
October 1, 2009 and before October 1, 2010. The estimated impact of
the updated wage data and the labor-related share on hospital
payments is isolated in Column 4 by holding the other payment
parameters constant in this simulation. That is, Column 4 shows the
percentage change in payments when going from a model using the FY
2013 wage index, based on FY 2009 wage data, the FY 2013 labor-
related share of 68.8 percent and having a 100-percent occupational
mix adjustment applied, to a model using the FY 2014 pre-
reclassification wage index with the labor-related share of 69.6
percent, also having a 100-percent occupational mix adjustment
applied, based on FY 2010 wage data (while holding other payment
parameters such as use of the Version 31.0 MS-DRG GROUPER constant).
The occupational mix adjustment is based on the 2010 occupational
mix survey.
In addition, the column shows the impact of the application of
the wage budget neutrality to the national standardized amount. In
FY 2010, we began calculating separate wage budget neutrality and
recalibration budget neutrality factors, in accordance with section
1886(d)(3)(E) of the Act, which specifies that budget neutrality to
account for wage changes or updates made under that subparagraph
must be made without regard to the 62 percent labor-related share
guaranteed under section 1886(d)(3)(E)(ii) of the Act. Therefore,
for FY 2014, we are calculating the wage budget neutrality factor to
ensure that payments under updated wage data and the labor-related
share of 69.6 percent are budget neutral without regard to the lower
labor-related share of 62 percent applied to hospitals with a wage
index less than or equal to 1.0. In other words, the wage budget
neutrality is calculated under the assumption that all hospitals
receive the higher labor-related share of the standardized amount.
The wage budget neutrality factor is 0.999947, and the overall
payment change is zero percent.
Column 4 shows the impacts of updating the wage data using FY
2010 cost reports. Overall, the new wage data and the labor-related
share, combined with the wage budget neutrality adjustment, will
lead to a 0.0 percent change for all hospitals as shown in Column 4.
In looking at the wage data itself, the national average hourly
wage increased 2.4 percent compared to FY 2013. Therefore, the only
manner in which to maintain or exceed the previous year's wage index
was to match or exceed the national 2.4 percent increase in average
hourly wage. Of the 3,395 hospitals with wage data for both FYs 2013
and 2014, 1,575, or 46.4 percent, will experience an average hourly
wage increase of 2.4 percent or more.
The following chart compares the shifts in wage index values for
hospitals due to changes in the average hourly wage data for FY 2014
relative to FY 2013. Among urban hospitals, none will experience an
increase or decrease of more than 5 percent. Among rural hospitals,
none will experience an increase or decrease of more than 5 percent.
However, 919 rural hospitals will experience increases or decreases
of less than 5 percent, while 2,476 urban hospitals will experience
increases or decreases of less than 5 percent. These figures reflect
changes in the ``pre-reclassified, occupational mix-adjusted wage
index,'' that is, the wage index before the application of
geographic reclassification, the rural and imputed floors, the out-
migration adjustment, and other wage index exceptions and
adjustments. (We refer readers to sections III.G.2. through III.I.
of the preamble of this final rule for a complete discussion of the
exceptions and adjustments to the wage index.) We note that the
``post-reclassified wage index'' or ``payment wage index,'' the wage
index that includes all such exceptions and adjustments (as
reflected in Tables 2, 4A, 4B, 4C, and 4F of the Addendum to this
final rule, which are available via the Internet on the CMS Web
site) is used to adjust the labor-related share of a hospital's
standardized amount, either 69.6 percent or 62 percent, depending
upon whether a hospital's wage index is greater than 1.0 or less
than or equal to 1.0. Therefore, the pre-reclassified wage index
figures in the chart below may illustrate a somewhat larger or
smaller change than will occur in a hospital's payment wage index
and total payment.
The following chart shows the projected impact of changes in the
average hourly wage data for urban and rural hospitals.

[[Page 51017]]

------------------------------------------------------------------------
Number of hospitals
Percentage change in area wage index values -------------------------
Urban Rural
------------------------------------------------------------------------
Increase more than 10 percent................. 0 0
Increase more than 5 percent and less than 10 0 0
percent......................................
Increase or decrease less than 5 percent...... 2,476 919
Decrease more than 5 percent and less than 10 0 0
percent......................................
Decrease more than 10 percent................. 0 0
------------------------------------------------------------------------

d. Combined Effects of the MS-DRG and Wage Index Changes (Column 5)

Section 1886(d)(4)(C)(iii) of the Act requires that changes to
MS-DRG reclassifications and the relative weights cannot increase or
decrease aggregate payments. In addition, section 1886(d)(3)(E) of
the Act specifies that any updates or adjustments to the wage index
are to be budget neutral. We computed a wage budget neutrality
factor of 0.999947 and a recalibration budget neutrality factor of
0.997989 (which is applied to the Puerto Rico-specific standardized
amount and the hospital-specific rates). The product of the two
budget neutrality factors is the cumulative wage and recalibration
budget neutrality factor. The cumulative wage and recalibration
budget neutrality adjustment is 0.997936, or approximately -0.21
percent, which is applied to the national standardized amounts.
Because the wage budget neutrality and the recalibration budget
neutrality are calculated under different methodologies according to
the statute, when the two budget neutralities are combined and
applied to the standardized amount, the overall payment impact is
not necessarily budget neutral. In this final rule, we are
estimating that the changes in the MS-DRG relative weights and
updated wage data with wage and budget neutrality applied will
result in a 0.1 percent change in payments.

e. Effects of MGCRB Reclassifications (Column 6)

Our impact analysis to this point has assumed acute care
hospitals are paid on the basis of their actual geographic location
(with the exception of ongoing policies that provide that certain
hospitals receive payments on other bases than where they are
geographically located). The changes in Column 6 reflect the per
case payment impact of moving from this baseline to a simulation
incorporating the MGCRB decisions for FY 2014 which affect
hospitals' wage index area assignments.
By Spring of each year, the MGCRB makes reclassification
determinations that will be effective for the next fiscal year,
which begins on October 1. The MGCRB may approve a hospital's
reclassification request for the purpose of using another area's
wage index value. Hospitals may appeal denials of MGCRB decisions to
the CMS Administrator. Further, hospitals have 45 days from
publication of the IPPS proposed rule in the Federal Register to
decide whether to withdraw or terminate an approved geographic
reclassification for the following year.
The overall effect of geographic reclassification is required by
section 1886(d)(8)(D) of the Act to be budget neutral. Therefore,
for purposes of this impact analysis, we are applying an adjustment
of 0.990718 to ensure that the effects of the reclassifications
under section 1886(d)(10) of the Act are budget neutral (section
II.A. of the Addendum to this final rule). Geographic
reclassification generally benefits hospitals in rural areas. We
estimate that the geographic reclassification will increase payments
to rural hospitals by an average of 1.7 percent. By region, all the
rural hospital categories, with the exception of one rural Puerto
Rico hospital, will experience increases in payments due to MGCRB
reclassifications.
Table 9A listed in section VI. of the Addendum to this final
rule and available via the Internet on the CMS Web site reflects the
reclassifications for FY 2014.

f. Effects of the Rural and Imputed Floor, Including Application of
National Budget Neutrality (Column 7)

As discussed in section III.B. of the preamble of the FY 2009
IPPS final rule, the FY 2010 IPPS/RY 2010 LTCH PPS final rule, the
FYs 2011, 2012, and 2013 IPPS/LTCH PPS final rules, and this final
rule, section 4410 of Public Law 105-33 established the rural floor
by requiring that the wage index for a hospital in any urban area
cannot be less than the wage index received by rural hospitals in
the same State. We apply a uniform budget neutrality adjustment to
the wage index. In addition, the imputed floor, which is also
included in the calculation of the budget neutrality adjustment to
the wage index, was extended in FY 2012 for 2 additional years. In
the past, only urban hospitals in New Jersey received the imputed
floor. As discussed in the FY 2013 IPPS/LTCH PPS final rule (77 FR
53369), we established an alternative temporary methodology for the
imputed floor, which resulted in an imputed floor for Rhode Island
for FY 2013. For FY 2014, we are extending the imputed rural floor,
as calculated under the original methodology and the alternative
methodology.
The Affordable Care Act requires that we apply one rural floor
budget neutrality factor to the wage index nationally, and the
imputed floor is part of the rural floor budget neutrality factor
applied to the wage index nationally. We have calculated a FY 2014
rural floor budget neutrality factor to be applied to the wage index
of 0.990150, which will reduce wage indexes by 0.99 percent.
Column 7 shows the projected impact of the rural floor and
imputed floor with the national rural floor budget neutrality factor
applied to the wage index. The column compares the post-
reclassification FY 2014 wage index of providers before the rural
floor and imputed floor adjustment and the post-reclassification FY
2014 wage index of providers with the rural floor and imputed floor
adjustment. Only urban hospitals can benefit from the rural and
imputed floors. Because the provision is budget neutral, all other
hospitals (that is, all rural hospitals and those urban hospitals to
which the adjustment is not made) will experience a decrease in
payments due to the budget neutrality adjustment that is applied
nationally to their wage index.
We estimate that 424 hospitals benefit from the rural and
imputed floors while the remaining 2,983 IPPS hospitals in our model
have their wage index reduced by the rural floor budget neutrality
adjustment of 0.990150 (or 0.99 percent). We project that, in
aggregate, rural hospitals will experience a 0.3 percent decrease in
payments as a result of the application of the rural floor budget
neutrality because the rural hospitals do not benefit from the rural
floor, but have their wage indexes downwardly adjusted to ensure
that the application of the rural floor is budget neutral overall.
We project hospitals located in other urban areas (populations of 1
million or fewer) will experience a 0.1 percent increase in payments
because those providers benefit from the rural floor. Urban
hospitals in the New England region can expect a 4.3 percent
increase in payments primarily due to the application of the rural
floor in Massachusetts and Connecticut. All 60 urban providers in
Massachusetts are expected to receive the rural floor wage index
value, including rural floor budget neutrality, of 1.3052 increasing
payments, overall, to Massachusetts by an estimated $168 million.
During most past years, there have been no IPPS hospitals located in
rural areas in Massachusetts. There was one urban IPPS hospital that
was reclassified to rural Massachusetts (under section 1886(d)(8)(E)
of the Act) which established the Massachusetts rural floor, but the
wage index resulting from that hospital's data was not high enough
for any urban hospital to benefit from the rural floor policy.
However, for the FY 2012 wage index, the rural floor for
Massachusetts was established by the conversion of a CAH to an IPPS
hospital that is geographically located in rural Massachusetts. The
rural floor in Massachusetts continues to be set by the wage index
of the hospital in rural Massachusetts that converted from CAH to
IPPS status. We estimate that Massachusetts hospitals will receive
approximately a 5.5 percent increase in IPPS payments due to the
application of the rural floor in FY 2014. In addition, 19 out of 32
hospitals in Connecticut will increase payments to those rural floor
hospitals by $70 million (and, overall, increase payments to the
State by an estimated $65 million).
Urban Puerto Rico hospitals are expected to experience a 0.0
percent change in

[[Page 51018]]

payments as a result of the application of a Puerto Rico rural floor
with the application of the Puerto Rico rural floor budget
neutrality adjustment. Urban Puerto Rico hospitals will receive a
rural floor as a result of a one IPPS hospital located in rural
Puerto Rico setting the rural floor. We are applying a rural floor
budget neutrality factor to the Puerto Rico-specific wage index of
0.990897 or -0.9 percent. The Puerto Rico-specific wage index
adjusts the Puerto Rico-specific standardized amount, which
represents 25 percent of payments to Puerto Rico hospitals. The
increases in payments experienced by the urban Puerto Rico hospitals
that benefit from a rural floor are offset by the decreases in
payments by the nonrural floor urban Puerto Rico hospitals that have
their wage indexes downwardly adjusted by the rural floor budget
neutrality adjustment. As a result, overall, urban Puerto Rico
hospitals will experience a 0.0 percent change in payments due to
the application of the rural floor with rural floor budget
neutrality.
There are 25 hospitals out of the 65 hospitals in New Jersey
that benefit from the extension of the imputed floor and will
receive the imputed floor wage index value, including the rural
floor budget neutrality, of 1.1133, which we estimate will increase
payments to those imputed floor hospitals by $29 million (the State,
overall, will see an increase in payments of approximately $14
million). Four Rhode Island hospitals will benefit from the imputed
rural floor calculated under the alternative methodology and receive
an additional $3.5 million (the State, overall, will receive an
additional $1.7 million).
In response to a public comment addressed in the FY 2012 IPPS/
LTCH PPS final rule (76 FR 51593), we are providing the payment
impact of the rural floor and imputed floor with budget neutrality
at the State level. Column 1 of the table below displays the number
of IPPS hospitals located in each State. Column 2 displays the
number of hospitals in each State that will receive the rural floor
or imputed floor wage index for FY 2014. Column 3 displays the
percentage of total payments each State will receive or contribute
to fund the rural floor and imputed floor with national budget
neutrality. The column compares the post-reclassification FY 2014
wage index of providers before the rural floor and imputed floor
adjustment and the post-reclassification FY 2013 wage index of
providers with the rural floor and imputed floor adjustment. Column
4 displays the estimated payment amount that each State will gain or
lose due to the application of the rural floor and imputed floor
with national budget neutrality.
Comment: Commenters expressed appreciation for the detailed
impact analyses provided in the FY 2014 IPPS/LTCH PPS proposed rule.
One commenter requested CMS to include an impact table of the rural
floor for FY 2015 rule, after the new OMB MSA data are incorporated
into our analysis.
Response: We appreciate the comments on the analysis in the
proposed rule (78 FR 27795 through 27796) and will take this request
into consideration for future rulemaking.
Comment: Several commenters requested that, for the final rule,
CMS include additional analyses related to the national rural floor
budget neutrality. The commenters suggested that those analyses
include an updated State-by-State impact table that includes the
cumulative impact of the rural floor under the IPPS and OPPS, and
shows 2 years of the redistribution and a table that projects the
estimated 10-year State-specific effects of continuing the current
policy.
Response: We acknowledge the commenters' requests for additional
analyses on the rural floor budget neutrality policy. We note that
the IPPS and OPPS impacts analyses are conducted on different claims
data with a different set of providers and set of modeling
assumptions; therefore, we cannot logically combine the IPPS and
OPPS payment impacts of the rural floor to present in one State-by-
State table. Commenters may request to see the OPPS impacts of the
rural floor policy through the public comment period for the CY 2014
OPPS/ASC proposed rule that closes on September 6, 2013. In
addition, we are unable to provide a State-by-State impact with 2-
year or 10-year projections of the rural floor because the rural
floor is based on wage data that are updated annually. Therefore, we
believe it would be difficult to accurately portray the rural floor
in 10-year projections. We have updated our State-by-State rural
floor budget neutrality impact analysis for the FY 2014 IPPS/LTCH
PPS final rule.

FY 2014 IPPS Estimated Payments Due to Rural Floor and Imputed Floor With National Budget Neutrality
----------------------------------------------------------------------------------------------------------------
Percent change
in payments due
Number of to application
Number of hospitals of rural floor Difference (in
State hospitals receiving rural and imputed millions)
floor or floor with
imputed floor budget
neutrality
(1) (2) (3) (4)
----------------------------------------------------------------------------------------------------------------
Alabama................................. 93 3 -0.5 -7.9
Alaska.................................. 6 4 3.3 4.7
Arizona................................. 57 7 -0.3 -5.3
Arkansas................................ 45 0 -0.5 -5.2
California.............................. 309 182 1 94.1
Colorado................................ 46 6 0.1 1.3
Connecticut............................. 32 19 4.2 65.4
Delaware................................ 6 0 -0.6 -2.4
Washington, D.C......................... 7 0 -0.6 -2.6
Florida................................. 168 7 -0.4 -29.7
Georgia................................. 107 0 -0.5 -12.7
Hawaii.................................. 14 0 -0.4 -1.2
Idaho................................... 14 0 -0.4 -1.2
Illinois................................ 127 1 -0.6 -27.4
Indiana................................. 89 0 -0.5 -12.8
Iowa.................................... 34 0 -0.2 -2.3
Kansas.................................. 55 0 -0.4 -3.7
Kentucky................................ 65 1 -0.5 -8.3
Louisiana............................... 99 3 -0.5 -6.7
Maine................................... 20 0 -0.5 -2.4
Massachusetts........................... 61 60 5.5 167.6
Michigan................................ 95 0 -0.5 -22.4
Minnesota............................... 51 0 -0.5 -9.4
Mississippi............................. 65 1 -0.5 -5.3

[[Page 51019]]

Missouri................................ 77 0 -0.4 -10.9
Montana................................. 12 4 -0.1 -0.4
Nebraska................................ 23 0 -0.4 -2.5
Nevada.................................. 24 19 1.7 11.2
New Hampshire........................... 13 9 1.9 8.6
New Jersey.............................. 64 25 0.4 13.8
New Mexico.............................. 25 0 -0.3 -1.5
New York................................ 166 0 -0.6 -47.7
North Carolina.......................... 87 0 -0.4 -12.6
North Dakota............................ 6 1 -0.3 -0.8
Ohio.................................... 137 7 -0.4 -16.9
Oklahoma................................ 86 2 -0.5 -5.6
Oregon.................................. 33 0 -0.5 -4.5
Pennsylvania............................ 157 11 -0.5 -21.0
Puerto Rico............................. 52 13 0 0.0
Rhode Island............................ 11 4 0.5 1.7
South Carolina.......................... 57 5 -0.3 -5.4
South Dakota............................ 19 0 -0.3 -1.0
Tennessee............................... 97 18 -0.3 -7.6
Texas................................... 324 3 -0.5 -32.2
Utah.................................... 32 0 -0.3 -1.5
Vermont................................. 6 0 -0.4 -0.8
Virginia................................ 78 1 -0.4 -10.7
Washington.............................. 49 5 -0.1 -2.4
West Virginia........................... 30 1 -0.4 -3.3
Wisconsin............................... 66 2 -0.5 -8.0
Wyoming................................. 11 0 -0.2 -0.2
----------------------------------------------------------------------------------------------------------------

g. Effects of the Application of the Frontier State Wage Index (Column
8)

Section 10324(a) of Affordable Care Act requires that we
establish a minimum post-reclassified wage-index of 1.00 for all
hospitals located in ``frontier States.'' The term ``frontier
States'' is defined in the statute as States in which at least 50
percent of counties have a population density less than 6 persons
per square mile. Based on these criteria, four States (Montana,
North Dakota, South Dakota, and Wyoming) are considered frontier
States and 46 hospitals located in those States will receive a
frontier wage index of 1.0000. Although Nevada is also, by
definition, a frontier State and was assigned a frontier floor value
of 1.0000 for FY 2012, its FY 2013 rural floor value of 1.0256 was
greater and, therefore, was the State's minimum wage index for FY
2013. For FY 2014, its post-reclassification wage index is also
above 1.0000, hospitals located in Nevada will not experience a
change in payment as a result of this provision. Overall, this
provision is not budget neutral and is estimated to increase IPPS
operating payments by approximately $60 million or approximately 0.1
percent.

h. Effects of the Wage Index Adjustment for Out-Migration (Column 9)

Section 1886(d)(13) of the Act, as added by section 505 of
Public Law 108-173, provides for an increase in the wage index for
hospitals located in certain counties that have a relatively high
percentage of hospital employees who reside in the county, but work
in a different area with a higher wage index. Hospitals located in
counties that qualify for the payment adjustment are to receive an
increase in the wage index that is equal to a weighted average of
the difference between the wage index of the resident county, post-
reclassification and the higher wage index work area(s), weighted by
the overall percentage of workers who are employed in an area with a
higher wage index. There are 250 providers that will receive the
out-migration wage adjustment in FY 2014. This out-migration wage
adjustment is not budget neutral, and we estimate the impact of
these providers receiving the out-migration increase to be
approximately $22 million.

i. Effects of the Expiration of MDH Special Payment Status (Column 10)

Column 10 shows our estimate of the changes in payments due to
the expiration of MDH status, a nonbudget neutral payment provision.
MDH status had previously expired for FY 2013 under section 3124 of
the Affordable Care Act, but was extended for an additional year
through FY 2013 under section 606 of the ATRA. Hospitals that
qualified to be MDHs receive the higher of payments made under the
Federal standardized amount or the payments made under the Federal
standardized amount plus 75 percent of the difference between the
Federal standardized amount and the hospital-specific rate (a
hospital-specific cost-based rate). Because this provision was not
budget neutral, the expiration of this payment provision results in
a 0.2 percent decrease in payments overall. There are currently 198
MDHs and MDH/RRCs, of which 118 are estimated to be paid under the
blended payment of the Federal standardized amount and hospital-
specific rate for FY 2013. Because those 118 MDHs will no longer
receive the blended payment and will be paid only under the Federal
standardized amount in FY 2014, it is estimated that those hospitals
will experience an overall decrease in payments of approximately
$175 million.

j. Effects of the Reductions under the Hospital Readmissions Reduction
Program (Column 11)

Column 11 shows our estimates of the effects of the policies for
reductions in payments under the Hospital Readmissions

[[Page 51020]]

Reduction Program, which was established under section 3025 of the
Affordable Care Act. The Hospital Readmissions Reduction Program
requires a reduction to a hospital's base operating DRG payments to
account for excess readmissions, which is based on a hospital's
risk-adjusted readmission rate during a 3-year period for three
applicable conditions: Acute Myocardial Infarction, Heart Failure,
and Pneumonia. This provision is not budget neutral. A hospital's
readmission adjustment is the higher of a ratio of the hospital's
aggregate payments for excess readmissions to their aggregate
payments for all discharges, or a floor, which has been defined in
statute as 0.98 (or a 2.0 percent reduction) for FY 2014. A
hospital's base operating DRG payment (that is, wage-adjusted DRG
payment amount, as discussed in section V.G. of the preamble of this
final rule) is the portion of the IPPS payment subject to the
readmissions payment adjustment (DSH, IME, outliers and low-volume
add-on payments are not subject to the readmissions adjustment). In
this final rule, we estimate that 2,225 hospitals will have their
base operating DRG payments reduced by their hospital-specific
readmissions adjustment, resulting in a 0.2 percent decrease, or
approximately $227 million, in payments to hospitals overall for FY
2014 relative to no provision.
Rural west south central hospitals and hospitals with high
Medicare utilization of over 65 percent will experience the highest
decreases of 0.5 percent. Puerto Rico hospitals show a zero percent
change in payments because they are exempt from the provision. Urban
non-DSH hospitals and urban DSH hospitals will experience 0.2
percent decrease in payments under the Hospital Readmissions
Reduction Program.

k. Effects of the Changes to Medicare DSH Payments (Column 12)

Column 12 shows the effects of the implementation of adjustments
to Medicare DSH payments made under section 3133 of the Affordable
Care Act. Under section 3133, hospitals that are eligible to receive
Medicare DSH payments will receive 25 percent of the amount they
previously would have received under the current statutory formula
for Medicare DSH payments. The remainder, equal to an estimate of 75
percent of what otherwise would have been paid as Medicare DSH
payments, reduced to reflect changes in the percentage of
individuals under age 65 who are uninsured and additional statutory
adjustments, will become available to make additional payments to
each hospital that qualifies for Medicare DSH payments. Each
Medicare DSH hospital will receive an additional payment based on
its estimated share of the total amount of uncompensated care for
all Medicare DSHs. The reduction to Medicare DSH payments is not
budget neutral.
We are establishing that the amount to be distributed on the
basis of uncompensated care, which is 75 percent of what otherwise
would have been paid for Medicare DSH payment adjustments (that is,
Factor 1), is adjusted to 94.3 percent of that amount for changes in
the percentage of individuals under age 65 who are uninsured and
additional statutory adjustments (that is, Factor 1 multiplied by
Factor 2). As a result, we project that the reduction of Medicare
DSH payments, together with the introduction of the new
uncompensated care payment, will reduce payments overall by 0.4
percent as compared to Medicare DSH payments prior to the
implementation of section 3133 of the Affordable Care Act. This is
less of a reduction to payments than what had been estimated in the
FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27797) because we are
finalizing that Factor 2, the changes in the percentage of
individuals under age 65 who are uninsured and additional statutory
adjustments, is based on a fiscal year estimate of uninsurance, as
opposed to a calendar year estimate of uninsurance. The Factor 2
that had been proposed in the FY 2014 IPPS/LTCH PPS proposed rule
was 88.8 percent, while the Factor 2 that we are finalizing in this
final rule is 94.3 percent, which is less of a reduction to the
total amount of payments made for uncompensated care as compared to
the proposed rule. The uncompensated care payment has redistributive
effects based on a disproportionate share hospital's low income
insured patient days (sum of Medicaid patient days and Medicare SSI
patient days) relative to all disproportionate share hospitals
Medicaid patient days and Medicare SSI patient days, and the payment
amount is not tied to a hospital's discharges.
Urban and rural hospitals located in the Middle Atlantic will
experience larger increases of 0.4 percent and 0.8 percent,
respectively. Government hospitals and hospitals with low Medicare
utilization (Medicare days are less than 25 percent of total
inpatient day) will experience some of the largest increases in
payments of 0.9 percent and 3.7 percent respectively.

l. Effects of All FY 2014 Changes (Column 13)

Column 13 shows our estimate of the changes in payments per
discharge from FY 2013 and FY 2014, resulting from all changes
reflected in this final rule for FY 2014. It includes combined
effects of the previous columns in the table.
The average increase in payments under the IPPS for all
hospitals is approximately 0.5 percent for FY 2014 relative to FY
2013. As discussed in section II.D. of the preamble of this final
rule, this column includes the FY 2014 documentation and coding
recoupment adjustment of -0.8 percent on the national standardized
amount as part of the recoupment required under section 631 of the
ATRA. In addition, this column includes the annual hospital update
of 1.7 percent to the national standardized amount. This annual
hospital update includes the 2.5 percent market basket update, the
reduction of 0.5 percentage point for the multifactor productivity
adjustment, and the 0.3 percentage point reduction under section
3401 of the Affordable Care Act. Finally, it includes the -0.2
percent adjustment of the national standardized amount, the
hospital-specific payment rate, and the Puerto Rico-specific rate to
offset the costs of the policy on admission and medical review
criteria for hospital inpatient services under Medicare Part A. As
described in Column 2, the annual hospital update, combined with the
documentation and coding adjustment and the adjustment to offset the
cost of the policy on admission and medical review criteria for
hospital inpatient services under Medicare Part A, will result in a
0.7 percent increase in payments in FY 2014 relative to FY 2013.
Column 5 shows an increase in payments by 0.1 percent due to the
effects of the cumulative DRG and wage budget neutrality. Column 8
describes an estimated 0.1 percent increase in payments due to the
frontier State wage index. Column 10 describes the estimated 0.2
percent decrease in payments due to the expiration of the MDH status
under section 606 of the ATRA. Column 11 shows the estimated 0.2
percent decrease in payments due to the reductions in payments under
the Hospital Readmissions Reduction Program, which reduce a
hospital's base operating DRG payments by a readmission adjustment
factor based on a hospital's performance on readmissions for
specified conditions. Column 12 shows the estimated 0.4 percent
decrease in Medicare DSH payments due to the changes made under
section 3133 of the Affordable Care Act, which reduces Medicare DSH
payments by 75 percent and redistributes the remainder, equal to an
estimate of 75 percent of what otherwise would have been paid as
Medicare DSH payments, reduced to reflect changes in the percentage
of individuals under age 65 who are uninsured, to each hospital that
qualifies for Medicare DSH payments as an uncompensated care payment
based on the hospital's relative share of the total amount of
uncompensated care. The impact of moving from our estimate of FY
2013 outlier payments, 4.8 percent, to the estimate of FY 2014
outlier payments, 5.1 percent, will result in an increase of 0.3
percent in FY 2014 payments relative to FY 2013. There also might be
interactive effects among the various factors comprising the payment
system that we are not able to isolate. For these reasons, the
values in Column 13 may not equal the sum of the estimated
percentage changes described above.
Overall payments to hospitals paid under the IPPS are estimated
to increase by 0.5 percent for FY 2014. Much of the payment changes
among the hospital categories are largely attributed to the
reduction in Medicare DSH payment adjustments and the redistribution
of a portion of the Medicare DSH payments as an additional payment
for a hospital's relative uncompensated care amount. Hospitals in
urban areas will experience a 0.7 percent increase in payments per
discharge in FY 2014 compared to FY 2013. Hospital payments per
discharge in rural areas are estimated to decrease by 1.6 percent in
FY 2014 as compared to FY 2013 largely due to the expiration of MDH
status and reductions to Medicare DSH payments.

3. Impact Analysis of Table II

Table II presents the projected impact of the changes for FY
2014 for urban and rural hospitals and for the different categories
of hospitals shown in Table I. It compares the estimated average
payments per discharge for FY 2013 with the average payments per
discharge for FY 2014, as calculated under our models. Thus, this
table presents, in terms of the average dollar amounts paid per

[[Page 51021]]

discharge, the combined effects of the changes presented in Table I.
The estimated percentage changes shown in the last column of Table
II equal the estimated percentage changes in average payments per
discharge from Column 13 of Table I.

Table II--Impact Analysis of Changes for FY 2014 Acute Care Hospital Operating Prospective Payment System
[Payments per discharge]
----------------------------------------------------------------------------------------------------------------
Average FY 2013 Average FY 2014
Number of payment per payment per All FY 2014
hospitals discharge discharge changes
(1) (2) (3) (4)
----------------------------------------------------------------------------------------------------------------
All Hospitals........................... 3,407 10,897 10,948 0.5
By Geographic Location:
Urban hospitals..................... 2,485 11,308 11,385 0.7
Large urban areas................... 1,370 11,982 12,106 1
Other urban areas................... 1,115 10,487 10,508 0.2
Rural hospitals..................... 922 8,137 8,007 -1.6
Bed Size (Urban):
0-99 beds........................... 624 8,716 8,850 1.5
100-199 beds........................ 767 9,542 9,550 0.1
200-299 beds........................ 462 10,251 10,299 0.5
300-499 beds........................ 420 11,643 11,722 0.7
500 or more beds.................... 212 13,827 13,973 1.1
Bed Size (Rural):
0-49 beds........................... 341 6,602 6,428 -2.6
50-99 beds.......................... 326 7,598 7,345 -3.3
100-149 beds........................ 151 7,911 7,865 -0.6
150-199 beds........................ 59 8,928 8,860 -0.8
200 or more beds.................... 45 9,866 9,811 -0.6
Urban by Region:
New England......................... 120 12,375 12,426 0.4
Middle Atlantic..................... 318 12,377 12,628 2
South Atlantic...................... 375 10,301 10,356 0.5
East North Central.................. 395 10,497 10,531 0.3
East South Central.................. 149 9,869 9,900 0.3
West North Central.................. 166 11,109 11,150 0.4
West South Central.................. 373 10,341 10,391 0.5
Mountain............................ 156 11,611 11,792 1.6
Pacific............................. 382 14,438 14,363 -0.5
Puerto Rico......................... 51 5,593 7,932 41.8
Rural by Region:
New England......................... 23 10,933 10,653 -2.6
Middle Atlantic..................... 69 8,694 8,597 -1.1
South Atlantic...................... 165 7,809 7,672 -1.8
East North Central.................. 119 8,333 8,218 -1.4
East South Central.................. 171 7,450 7,257 -2.6
West North Central.................. 99 8,695 8,636 -0.7
West South Central.................. 181 7,058 6,894 -2.3
Mountain............................ 65 9,091 9,157 0.7
Pacific............................. 29 11,024 11,021 0.0
Puerto Rico......................... 1 2,799 2,918 4.2
By Payment Classification:
Urban hospitals..................... 2,496 11,295 11,374 0.7
Large urban areas................... 1,380 11,971 12,094 1.0
Other urban areas................... 1,116 10,461 10,485 0.2
Rural areas......................... 911 8,296 8,165 -1.6
Teaching Status:
Nonteaching......................... 2,380 9,132 9,114 -0.2
Fewer than 100 residents............ 785 10,686 10,743 0.5
100 or more residents............... 242 15,910 16,128 1.4
Urban DSH:
Non-DSH............................. 690 9,471 9,538 0.7
100 or more beds.................... 1,569 11,743 11,816 0.6
Less than 100 beds.................. 331 8,057 8,193 1.7
Rural DSH:
SCH................................. 265 8,176 8,118 -0.7
RRC................................. 228 9,080 8,980 -1.1
100 or more beds.................... 29 7,230 7,256 0.4
Less than 100 beds.................. 295 6,465 6,215 -3.9
Urban teaching and DSH:
Both teaching and DSH............... 826 12,848 12,966 0.9
Teaching and no DSH................. 136 10,497 10,632 1.3
No teaching and DSH................. 1,074 9,634 9,640 0.1

[[Page 51022]]

No teaching and no DSH.............. 460 9,061 9,140 0.9
Special Hospital Types:
RRC................................. 207 9,375 9,281 -1.0
SCH................................. 330 8,837 8,822 -0.2
Former MDH.......................... 187 6,904 6,185 -10.4
SCH and RRC......................... 124 9,958 9,993 0.3
Former MDH and RRC.................. 11 9,052 7,621 -15.8
Type of Ownership:
Voluntary........................... 1,943 11,053 11,102 0.4
Proprietary......................... 900 9,739 9,699 -0.4
Government.......................... 542 11,686 11,880 1.7
Medicare Utilization as a Percent of
Inpatient Days:
0-25................................ 450 14,649 15,395 5.1
25-50............................... 2,011 11,082 11,080 0.0
50-65............................... 736 8,856 8,811 -0.5
Over 65............................. 139 7,374 7,116 -3.5
FY 2014 Reclassifications by the
Medicare Geographic Classification
Review Board:
All Reclassified Hospitals.......... 669 10,264 10,268 0.0
Non-Reclassified Hospitals.......... 2,738 11,075 11,139 0.6
Urban Hospitals Reclassified........ 359 11,065 11,128 0.6
Urban Nonreclassified Hospitals, FY 2,084 11,375 11,459 0.7
2014:..............................
All Rural Hospitals Reclassified FY 310 8,639 8,523 -1.4
2014:..............................
Rural Nonreclassified Hospitals FY 552 7,462 7,315 -2.0
2014:..............................
All Section 401 Reclassified 49 9,838 9,675 -1.7
Hospitals:.........................
Other Reclassified Hospitals 61 7,826 7,579 -3.2
(Section 1886(d)(8)(B))............
Specialty Hospitals
Cardiac specialty Hospitals......... 15 11,699 11,878 1.5
----------------------------------------------------------------------------------------------------------------

H. Effects of Other Policy Changes

1. Effects of Policy on MS-DRGs for Preventable HACs, Including
Infections

In section II.F. of the preamble of this final rule, we discuss
our implementation of section 1886(d)(4)(D) of the Act, which
requires the Secretary to identify conditions that are: (1) High
cost, high volume, or both; (2) result in the assignment of a case
to an MS-DRG that has a higher payment when present as a secondary
diagnosis; and (3) could reasonably have been prevented through
application of evidence-based guidelines. For discharges occurring
on or after October 1, 2008, hospitals will not receive additional
payment for cases in which one of the selected conditions was not
present on admission, unless, based on data and clinical judgment,
it cannot be determined at the time of admission whether a condition
is present. That is, the case will be paid as though the secondary
diagnosis were not present. However, the statute also requires the
Secretary to continue counting the condition as a secondary
diagnosis that results in a higher IPPS payment when doing the
budget neutrality calculations for MS-DRG reclassifications and
recalibration. Therefore, we will perform our budget neutrality
calculations as though the payment provision did not apply, but
Medicare will make a lower payment to the hospital for the specific
case that includes the secondary diagnosis. Thus, the provision
results in cost savings to the Medicare program.
We note that the provision will only apply when one or more of
the selected conditions are the only secondary diagnosis or
diagnoses present on the claim that will lead to higher payment.
Medicare beneficiaries will generally have multiple secondary
diagnoses during a hospital stay, such that beneficiaries having one
MCC or CC will frequently have additional conditions that also will
generate higher payment. Only a small percentage of the cases will
have only one secondary diagnosis that would lead to a higher
payment. Therefore, if at least one nonselected secondary diagnosis
that leads to higher payment is on the claim, the case will continue
to be assigned to the higher paying MS-DRG and there will be no
Medicare savings from that case. In addition, as discussed in
section II.F.3. of the preamble of this final rule, it is possible
to have two severity levels where the HAC does not affect the MS-DRG
assignment or for an MS-DRG not to have severity levels. In either
of these circumstances, the case will continue to be assigned to the
higher paying MS-DRG and there will be no Medicare savings from that
case.
The HAC payment provision went into effect on October 1, 2008.
Our savings estimates for the next 5 fiscal years are shown below:

------------------------------------------------------------------------
Savings (in
Year millions)
------------------------------------------------------------------------
FY 2014............................................... $26
FY 2015............................................... 28
FY 2016............................................... 30
FY 2017............................................... 33
FY 2018............................................... 36
------------------------------------------------------------------------

In section V.I. of the preamble of this final rule, we are
implementing the HAC Reduction Program. We refer readers to section
I.H.6. of this Appendix A for a discussion of the impact of this
implementation.

2. Effects of Policy Relating to New Medical Service and Technology
Add-On Payments

In section II.I. of the preamble to this final rule, we discuss
three applications (KcentraTM, Argus[supreg] II Retinal
Prosthesis System and the Zilver[supreg] PTX[supreg] Drug Eluting
Peripheral Stent) for add-on payments for new medical services and
technologies for FY 2014, as well as the status of the new
technology that was approved to receive new technology add-on
payments in FY 2013. We note that two of the applications (the
NeuroPace Responsive Neurostimulator System (RNS) System and the
Abbott Vascular MitraClip[supreg] System) discussed in the proposed
rule did not receive FDA approval by the July 1 deadline as required
by the regulations at 42 CFR 412.87(c). Therefore,

[[Page 51023]]

we did not review these two applications in this final rule.
As explained in the preamble to this final rule, add-on payments
for new medical services and technologies under section
1886(d)(5)(K) of the Act are not required to be budget neutral. As
discussed in section II.I.4. of the preamble of this final rule, we
are approving all three applications for new technology add-on
payments for FY 2014. As we proposed, in this final rule, we also
are continuing to make new technology add-on payments in FY 2014 for
Voraxaze[supreg], DificidTM, and the Zenith[supreg] F.
Graft (because all these technology are still within the 3-year
anniversary of the product's entry onto the market). We note that
new technology add-on payments per case are limited to the lesser
of: (1) 50 percent of the costs of the new technology; or (2) 50
percent of the amount by which the costs of the case exceed the
standard MS-DRG payment for the case. Because it is difficult to
predict the actual new technology add-on payment for each case, our
estimates below are based on the increase in add-on payments for FY
2014 as if every claim that would qualify for a new technology add-
on payment would receive the maximum add-on payment. Based on the
applicant's estimate from FY 2013, we currently estimate that new
technology add-on payments for Voraxaze[supreg] will increase
overall FY 2014 payments by $6,300,000. Based on the applicant's
estimate from FY 2013, we currently estimate that new technology
add-on payments for DificidTM will increase overall FY
2014 payments by $34,839,784. Based on the applicant's estimate from
FY 2013, we currently estimate that new technology add-on payments
for the Zenith[supreg] F. Graft will increase overall FY 2014
payments by $4,085,750. Based on the applicant's estimate for FY
2014, we currently estimate that new technology add-on payments for
KcentraTM will increase overall FY 2014 payments by
$5,449,888 (maximum add on payment of $1,587.50 * 3,433 patients).
Based on the applicant's estimate for FY 2014, we currently estimate
that new technology add-on payments for the Argus[supreg] II Retinal
Prosthesis System will increase overall FY 2014 payments by
$3,601,437 (maximum add on payment of $72,028.75 * 50 patients).
Based on the applicant's estimate for FY 2014, we currently estimate
that new technology add-on payments for the the Zilver[supreg]
PTX[supreg] Drug Eluting Peripheral Stent will increase overall FY
2014 payments by $20,463,000 (maximum add on payment of $1,705.25 *
12,000 patients).

3. Effects of the Payment Adjustment for Low-Volume Hospitals for FY
2014

In section V.C. of the preamble to this final rule, we discuss
the provisions of the ATRA (Pub. L. 112-240) that extended for an
additional year, through FY 2013, the temporary changes to the low-
volume hospital definition and the methodology for determining the
payment adjustment made by the Affordable Care Act for FYs 2011 and
2012. In accordance with section 1886(d)(12) of the Act, beginning
with FY 2014, the low-volume hospital definition and payment
adjustment methodology revert back to the statutory requirements
that were in effect prior to the amendments made by the Affordable
Care Act. Therefore, effective for FY 2014 and subsequent years, in
order to qualify as a low-volume hospital, a subsection (d) hospital
must be more than 25 road miles from another subsection (d) hospital
and have less than 200 discharges (that is, less than 200 discharges
total, including both Medicare and non-Medicare discharges) during
the fiscal year.
Based on FY 2012 claims data (March 2013 update of the MedPAR
file), we estimate that approximately 592 hospitals qualify as a
low-volume hospital in FY 2013, and with the statutory changes to
the low-volume hospital payment adjustment for FY 2014, we estimate
only approximately 6 hospitals will continue to qualify as a low-
volume hospital in FY 2014. We project that the expiration of the
temporary changes to the low-volume hospital definition and the
payment adjustment methodology made by the Affordable Care Act and
extended by the ATRA will result in a decrease in payments of
approximately $266 million in FY 2014 as compared to the payments
these hospitals would have otherwise received in FY 2014 in the
absence of the statutory changes to the low-volume hospital payment
adjustment for FY 2014. This estimate accounts for our projection of
the 6 IPPS low-volume hospitals remaining in FY 2014 that will
continue to receive a low-volume hospital payment adjustment of an
additional 25 percent.

4. Effects of Extension of the MDH Program through FY 2013

In section V.F. of the preamble of this final rule, we briefly
discuss the statutory extension of the MDH program through FY 2013
made by section 606 of the ATRA. We refer readers to a March 7, 2013
notice that we published in the Federal Register to announce the
extension of the MDH program for FY 2013 in accordance with this
ATRA provision, where we also stated the impact on Medicare
expenditures of the statutory extension (78 FR 14689).

5. Effects of Changes under the FY 2014 Hospital Value-Based Purchasing
(VBP) Program

Section 1886(o)(1)(B) of the Act directs the Secretary to begin
making value-based incentive payments under the Hospital VBP Program
to hospitals that meet performance standards during the performance
period for discharges occurring on or after October 1, 2012. These
incentive payments will be funded for FY 2014 through a reduction to
the FY 2014 base operating DRG payment for each discharge of 1.25
percent, as required by section 1886(o)(7)(B) of the Act. The
applicable percentage for FY 2014 is 1.25 percent, for FY 2015 is
1.5 percent, for FY 2016 is 1.75 percent, and for FY 2017 and
subsequent years is 2 percent. We are required to ensure that the
total amount available for value-based incentive payments is equal
to the total amount of reduced payments for all hospitals for the
fiscal year, as estimated by the Secretary.
We finalized numerous policies related to the FY 2014 Hospital
VBP Program in the CY 2012 OPPS/ASC final rule with comment period
(76 FR 74527 through 74547) and the FY 2013 IPPS/LTCH PPS final rule
(77 FR 53567 through 53614), including an additional measure in the
Clinical Process of Care domain, minimum numbers of cases and
measures for the Outcome domain, performance and baseline periods
for FY 2014 measures, performance standards, domain weighting, and
requirements for the review and corrections processes. We also refer
readers to the Hospital Inpatient VBP Program final rule (76 FR
26495 through 26511) where we finalized three 30-day mortality
measures, to be placed in the new Outcome domain for the FY 2014
Hospital VBP Program.
In section V.H. of the preamble of this final rule, we estimate
the available pool of funds for value-based incentive payments in
the FY 2014 Hospital VBP Program, which, in accordance with section
1886(o)(7)(C)(ii) of the Act, will be 1.25 percent of base operating
DRG payments, or a total of approximately $1.1 billion. This
estimated available pool for FY 2014 is based on the historical pool
of hospitals that were eligible to participate in the FY 2013
Hospital VBP Program and the payment information from the March 2013
update to the FY 2012 MedPAR file.
The estimated impacts of the FY 2014 Hospital VBP Program by
hospital characteristic, found in the table below, are based on
historical TPSs. We used the FY 2013 Hospital VBP Program TPSs to
calculate the proxy adjustment factors used for this impact
analysis. These are the most recently available scores that
hospitals were given an opportunity to review and correct. The proxy
adjustment factors use estimated annual base operating DRG payment
amounts derived from the March 2013 update to the FY 2012 MedPAR
file. The proxy adjustment factors can be found in Table 16A
associated with this final rule (available on the CMS Web site). The
impact analysis shows that, for the FY 2014 Hospital VBP Program,
the number of hospitals that will receive an increase in base
operating DRG payment amount is slightly higher than the number of
hospitals that will receive a decrease. Approximately 44 percent of
hospitals would have a change in base operating DRG payment amount
that is between -0.2 percent and +0.2 percent. Among urban
hospitals, those in the West South Central region will have the
highest average increase in base operating DRG payment amount, and
among rural hospitals, those in the East North Central region will
have the highest average increase in base operating DRG payment
amount. Both urban and rural hospitals in the Middle Atlantic and
Pacific will receive an average decrease in base operating DRG
payment amount. As the percent of disproportionate share (DSH)
payments increases, we see a decrease in base operating DRG payment
amount, while as the Medicare utilization (MCR) percent increases,
we see an increase in base operating DRG payment amount. Nonteaching
hospitals will have an average positive adjustment to the base
operating DRG payment amount, and teaching hospitals will have an
average decrease in base operating DRG payment amount. The table,
``Impact Analysis of Base Operating DRG Payment Amount Changes
Resulting

[[Page 51024]]

from the FY 2014 Hospital VBP Program'' below reflects two changes,
as compared to the corresponding table in the proposed rule. First,
the table now lists the straight averages of percent change in the
base operating DRG payment amount, while the proposed rule displayed
case-weighted averages. Second, the variable used to identify
teaching hospitals has been updated to the IME adjustment factor for
Operating PPS (TCHOP), while the proposed rule used the transfer
adjusted cases under Grouper V30, for Medicare Advantage cases
submitted by teaching hospitals that receive a Fee-For-Service IME
payment (IME--CASETA30).

Impact Analysis of Base Operating DRG Payment Amount Changes Resulting
From the FY 2014 Hospital VBP Program
------------------------------------------------------------------------
Number of Average (in
hospitals percent)
------------------------------------------------------------------------
BY GEOGRAPHIC LOCATION:
All Hospitals....................... 2,984 0.023
Large Urban..................... 1,226 0.018
Other Urban..................... 1,015 0.048
Rural Area...................... 740 -0.003
Urban hospitals..................... 2,241 0.032
0-99 beds....................... 465 0.180
100-199 beds.................... 717 -0.001
200-299 beds.................... 435 0.017
300-499 beds.................... 421 -0.023
500 or more beds................ 203 -0.050
Rural hospitals..................... 740 -0.003
0-49 beds....................... 162 0.058
50-99 beds...................... 324 -0.042
100-149 beds.................... 150 0.007
150-199 beds.................... 57 0.009
200 or more beds................ 47 0.003
BY REGION:
Urban By Region..................... 2,241 0.032
New England..................... 113 -0.004
Middle Atlantic................. 295 -0.064
South Atlantic.................. 356 0.072
East North Central.............. 373 0.046
East South Central.............. 129 0.021
West North Central.............. 155 0.104
West South Central.............. 314 0.117
Mountain........................ 155 0.043
Pacific......................... 351 -0.040
Rural By Region..................... 740 -0.003
New England..................... 21 0.015
Middle Atlantic................. 64 -0.139
South Atlantic.................. 143 0.005
East North Central.............. 117 0.090
East South Central.............. 114 0.014
West North Central.............. 85 0.003
West South Central.............. 114 -0.022
Mountain........................ 54 -0.044
Pacific......................... 28 -0.075
BY MCR PERCENT:
0-25................................ 288 0.016
25-50............................... 1,715 0.026
50-65............................... 853 0.018
Over 65............................. 79 0.038
BY DSH PERCENT:
0-25................................ 1,429 0.085
25-50............................... 1,257 -0.008
50-65............................... 157 -0.070
Over 65............................. 138 -0.226
BY TEACHING STATUS:
Teaching............................ 995 -0.027
Non-Teaching........................ 1,986 0.048
------------------------------------------------------------------------

We have provided the updated impact analysis for this FY 2014
IPPS/LTCH PPS final rule; however, actual FY 2014 Hospital VBP
Program TPSs will not be reviewed and corrected by hospitals until
after the FY 2014 IPPS/LTCH PPS final rule has been published.
Therefore, the same historical universe of eligible hospitals and
corresponding TPSs from the FY 2013 Hospital VBP Program was used
for the updated impact analysis. As noted above, the updated impact
analysis for this final rule reflects estimated annual base
operating DRG payment amount changes based on the March 2013 update
to the FY 2012 MedPAR file.

6. Effects of Implementation of the HAC Reduction Program

In section V.I. of the preamble of this final rule, we are
establishing measures, scoring, and a risk adjustment methodology to
implement the FY 2015 payment reduction under the HAC Reduction
Program. Section 1886(p) of the Act, as added under section 3008(a)
of the Affordable Care Act, establishes an adjustment to hospital
payments for HACs, or a HAC Reduction program, under which payments
to applicable hospitals are adjusted to provide an incentive to
reduce HACs, effective for

[[Page 51025]]

discharges beginning on October 1, 2014 and for subsequent program
years.
We note that there is no payment impact for FY 2014. For FY
2015, we are presenting the overall impact of the HAC Reduction
Program provision along with other IPPS payment provision impacts in
section I.G. of this Appendix A. The tables and analyses that we are
presenting below show the distributional effect of the measures and
scoring system for this program included in this final rule.
We note that we intend to finalize a Total HAC Score methodology
that assigns weights for Domain 1 and Domain 2 at 35 percent and 65
percent, respectively. Based on this methodology, the table below
presents data on the proportion of hospitals, by structural
characteristic, in the worst performing quartile based on the 35/65
weighting scheme.
The data for this simulation are derived from the AHRQ PSI
results based on Medicare fee-for-service (FFS) discharges from July
2009 through June 2011, using the enrollment database ``PARA''
variable to identify Medicare FFS discharges and version 4.4 of the
AHRQ software. The CDC measure results were used based on results
posted on the Hospital Compare Web site in December 2012. To analyze
the results by hospital characteristic, the hospital characteristics
as reported in the American Hospital Association 2010 survey data
and the FY 2013 impact file were used. Of the 3,468 hospitals
included in this analysis, 3,339 hospitals were included for bed
size, teaching status, and ownership; 3,458 hospitals were included
for urbanicity; 3,414 hospitals were included in the
disproportionate share percentage (DSH); and 3,468 hospitals were
included for region. These differences in denominator are due to the
source of the hospital characteristic data.
The percentages indicate how many hospitals at each level of a
characteristic would be penalized by the scoring approach. For
example, in regards to bed size, 18.1 percent of hospitals (or 119
hospitals) with fewer than 50 beds would be subject to a payment
adjustment, 26.6 percent of hospitals (or 181 hospitals) with a bed
size range of 50-99 would be subject to a payment adjustment, 22.8
percent of hospitals (or 204 hospitals) with a bed size range of
100-199 would be subject to a payment adjustment, 26.0 percent of
hospitals (or 133 hospitals) with a bed size range of 200-299 would
be subject to a payment adjustment, 26.5 percent of hospitals (or 71
hospitals) with a bed size range of 300-399 would be subject to a
payment adjustment, 29.6 percent of hospitals (or 37 hospitals) with
a bed size range of 400-499 would be subject to a payment
adjustment, and 36.6 percent of hospitals (or 75 hospitals) with a
bed size range of 500 plus would be subject to a payment adjustment.
With regard to the teaching status characteristic of hospitals
in the worst performing quartile, 48.6 percent of hospitals (or 134
hospitals) that are teaching facilities would be subject to a
payment adjustment, and 22.4 percent (or 686 hospitals) that are
nonteaching facilities would be subject to a payment adjustment.
With regard to the ownership characteristic of hospitals in the
worst performing quartile, 25.2 percent of hospitals (or 511
hospitals) that are non-profit facilities would be subject to a
payment adjustment, 26.5 percent of hospitals (or 148 hospitals)
that are government facilities would be subject to a payment
adjustment, and 21.3 percent (or 161 hospitals) that are for-profit
facilities would be subject to a payment adjustment.
With regard to the disproportionate share percentage (DSH)
characteristic, 19.4 percent (or 145 hospitals) that are not DSH
facilities would be subject to a payment adjustment, 22.6 percent
(or 149 hospitals) that are DSH Quartile 1 facilities would be
subject to a payment adjustment, 22.6 percent (or 150 hospitals)
that are DSH Quartile 2 facilities would be subject to a payment
adjustment, 27.8 percent (or 186 hospitals) that are DSH Quartile 3
facilities would be subject to a payment adjustment, and 29.7
percent (or 200 hospitals) that are DSH Quartile 4 facilities would
be subject to a payment adjustment.
With regard to regional characteristic of hospitals in the worst
performing quartile, 22.4 percent (or 32 hospitals) that are located
in the New England region would be subject to a payment adjustment,
26.4 percent (or 103 hospitals) that are located in the Mid-Atlantic
region would be subject to a payment adjustment, 24.9 percent (or
131 hospitals) that are located in the East North Central region
would be subject to a payment adjustment, 25.8 percent (or 71
hospitals) that are located in the West North Central region would
be subject to a payment adjustment, 26.0 percent (or 152 hospitals)
that are located in the South Atlantic region would be subject to a
payment adjustment, 20.1 percent (or 66 hospitals) that are located
in the East South Central region would be subject to a payment
adjustment, 21.9 percent (or 124 hospitals) that are located in the
West South Central region would be subject to a payment adjustment,
24.2 percent (or 58 hospitals) that are located in the Mountain
region would be subject to a payment adjustment, and 25.3 percent
(or 105 hospitals) that are located in the Pacific region would be
subject to a payment adjustment.

Proportion of Hospitals in the Worst Performing Quartile (>75th Percentile) of the Total HAC Score by Hospital
Characteristic and by Simulation With the 35/65 Weighting Scheme
----------------------------------------------------------------------------------------------------------------
Hospital characteristics Simulation with the 35/65
--------------------------------------------------------------------------------- weighting scheme in worst
performing quartile
Number of -------------------------------
Characteristic hospitals Percent Number of
hospitals Percent
----------------------------------------------------------------------------------------------------------------
Bed Size:
<50......................................... 656 19.6 119 18.1
50-99....................................... 680 20.4 181 26.6
100-199..................................... 893 26.7 204 22.8
200-299..................................... 512 15.3 133 26.0
300--399.................................... 268 8.0 71 26.5
400--499.................................... 125 3.7 37 29.6
500+........................................ 205 6.1 75 36.6
Teaching Status:
Teaching.................................... 276 8.3 134 48.6
NonTeaching................................. 3,063 91.7 686 22.4
Ownership:
Non-Profit.................................. 2,026 60.7 511 25.2
Government.................................. 558 16.7 148 26.5
For-Profit.................................. 755 22.6 161 21.3
Urbanicity:
Urban....................................... 2,493 72.1 639 25.6
Rural....................................... 965 27.9 201 20.8
Disproportionate Share Percentage:
Non-DSH..................................... 749 21.9 145 19.4
DSH Quartile 1.............................. 658 19.3 149 22.6
DSH Quartile 2.............................. 665 19.5 150 22.6

[[Page 51026]]

DSH Quartile 3.............................. 669 19.6 186 27.8
DSH Quartile 4.............................. 673 19.7 200 29.7
Region:
New England................................. 143 4.1 32 22.4
Mid-Atlantic................................ 390 11.2 103 26.4
East North Central.......................... 526 15.2 131 24.9
West North Central.......................... 275 7.9 71 25.8
South Atlantic.............................. 584 16.8 152 26.0
East South Central.......................... 329 9.5 66 20.1
West South Central.......................... 566 16.3 124 21.9
Mountain.................................... 240 6.9 58 24.2
Pacific..................................... 415 12.0 105 25.3
----------------------------------------------------------------------------------------------------------------

7. Effects of the Policy Changes Relating to Payments for GME and IME

In section V.J.2. of the preamble of this final rule, we discuss
our policy to include labor and delivery days in the Medicare
utilization calculation. We are establishing, consistent with the
inpatient day counting rules for DSH as clarified in the FY 2010
IPPS/RY 2010 LTCH PPS final rule, that effective for cost reporting
periods beginning on or after October 1, 2013, for purposes of
applying the Medicare utilization ratio, we will include labor and
delivery inpatient days in the numerator (to the extent that there
are any labor and delivery inpatient days associated with Medicare
beneficiaries), and all labor and delivery inpatient days in the
denominator (associated with all inpatients of the hospital). In
addition to payments for direct GME, we believe this policy also
will affect other Medicare policies where either the number of
inpatient days or a ratio of Medicare inpatient days to total
inpatient days is used to determine eligibility or payment. However,
this policy will not impact Medicare payments calculated on a
reasonable cost basis for routine inpatient services, which are
apportioned in accordance with 42 CFR 413.53(a)(1). We believe that
including labor and delivery days in the Medicare utilization
calculation will result in a savings of approximately $19 million
for FY 2014. We note that the projected savings of $19 million
included in this final rule are somewhat higher than the projected
savings of $15 million included in the FY 2014 IPPS/LTCH PPS
proposed rule because there were a greater number of teaching
hospitals included in the data used for the purpose of determining
the impact of this finalized policy.
As discussed in section V.J.3. of the preamble of this final
rule, in accordance with section 5506 of the Affordable Care Act
which instructs the Secretary to establish a process to increase the
FTE resident caps for other hospitals based upon the FTE resident
caps in teaching hospitals that closed ``on or after a date that is
2 years before the date of enactment'' (that is March 23, 2008), we
notify the public of the closure of two teaching hospitals and the
initiation of another round of the section 5506 application and
selection process to redistribute FTE resident slots. We are
initiating ``Round 6'' of section 5506, to redistribute the FTE
resident slots of Cooper Green Mercy Hospital in Birmingham, AL,
which closed on January 1, 2013, and Sacred Heart Hospital in
Chicago, IL, which closed July 20, 2013. We are using this final
rule as a vehicle to initiate another round of the section 5506
application and selection process, which is an ongoing provision
triggered each time a teaching hospital closes. Therefore, there is
no impact for this provision.
In section V.J.4. of the preamble of this final rule, we are
establishing that another IPPS or IPPS-excluded hospital may not
count the resident(s) training at the CAH for IME and/or direct GME
purposes, even if that hospital is paying for the residents' salary
and fringe benefits. Specifically, we are establishing that,
effective for portions of cost reporting periods occurring on or
after October 1, 2013, a hospital may not claim the FTE residents
that are training at a CAH for IME and/or direct GME purposes.
However, under policies that were applicable prior to October 1,
2013 and that continue to apply on and after October 1, 2013, the
CAH may incur the costs of training the FTE residents for the time
that the FTE residents rotate to the CAH, and receive payment based
on 101 percent of its Medicare reasonable costs under 42 CFR 413.70.
We do not believe that there is any financial impact of this
policy, as we are not precluding all Medicare payment for residents
training at CAHs. Rather, we are precluding payment to one group of
providers (that is, hospitals), but continuing to allow payment to
another group (that is, CAHs). Under the previous policy, either a
hospital could receive IME and direct GME payment for the time spent
by residents training at a CAH if the hospital incurred the cost of
that training, or the CAH could receive payment under Sec. 413.70
if the CAH incurred the training cost. Under the policy finalized in
this rule, hospitals will no longer be allowed to receive IME and
direct GME payment for the costs associated with training residents
at a CAH. However, CAHs can continue to receive payment under Sec.
413.70 for the allowable costs associated with training residents at
a CAH in approved residency training programs.
In section V.J.5. of the preamble of this final rule, we discuss
the provisions of section 711 of the Medicare Modernization Act
(Pub. L. 108-173) which amended section of 1886(h)(2)(D)(iv)(I) of
the Act to freeze annual CPI-U updates to hospital-specific PRAs for
direct GME payment purposes for those PRAs that exceed the ceiling
for FYs 2004 through 2013. Therefore, the ``freeze'' for PRAs that
exceed the ceiling expires beginning in FY 2014. That is, for cost
reporting periods beginning on or after October 1, 2013, the usual
full CPI-U update, as determined under 42 CFR 413.77(c)(1) will
apply to all PRAs for direct GME payment purposes. We note that we
are not establishing any policies related to this provision in this
final rule. We are merely providing notice to the public that a
statutory provision will no longer apply in FY 2014.

8. Effects of Implementation of Rural Community Hospital Demonstration
Program

In section V.K. of the preamble of this final rule, we discuss
our implementation of section 410A of Public Law 108-173, as
amended, which requires the Secretary to conduct a demonstration
that would modify reimbursement for inpatient services for up to 30
rural community hospitals. Section 410A(c)(2) requires that ``[i]n
conducting the demonstration program under this section, the
Secretary shall ensure that the aggregate payments made by the
Secretary do not exceed the amount which the Secretary would have
paid if the demonstration program under this section was not
implemented.'' As discussed in section V.K. of the preamble of this
final rule, in the IPPS final rules for each of the previous 9
fiscal years, we have estimated the additional payments made by the
program for each of the participating hospitals as a result of the
demonstration. In order to achieve budget neutrality, we are
adjusting the national IPPS rates by an amount sufficient to account
for the added costs of this demonstration. In

[[Page 51027]]

other words, we are applying budget neutrality across the payment
system as a whole rather than across the participants of this
demonstration. The language of the statutory budget neutrality
requirement permits the agency to implement the budget neutrality
provision in this manner. The statutory language requires that
``aggregate payments made by the Secretary do not exceed the amount
which the Secretary would have paid if the demonstration . . . was
not implemented'' but does not identify the range across which
aggregate payments must be held equal.
We are adjusting the national IPPS rates according to the
methodology set forth elsewhere in this final rule. The adjustment
to the national IPPS rates to account for estimated demonstration
cost for FY 2014 for the 7 ``pre-expansion'' participating hospitals
that are currently participating in the demonstration and the 15
additional hospitals participating as a result of the expansion of
the demonstration under the Affordable Care Act is $46,549,861. In
addition, in this FY 2014 final rule, because the finalized cost
reports for hospitals participating in the demonstration in FY 2007
have become available, we are incorporating into the FY 2014 budget
neutrality offset amount the amount by which the final settled costs
of the demonstration for FY 2007 exceeded the budget neutrality
offset amount applicable to that year as finalized in the respective
year's IPPS final rule. The amount is $6,039,880. Therefore, the
total adjustment to the national IPPS rates for FY 2014 is the sum
of these two amounts, or $52,589,741. We intend to incorporate into
the FY 2015 final rule the amounts by which the cost of the
demonstration program for hospitals participating in the
demonstration for FYs 2008 through 2011 and the amounts that were
offset by the budget neutrality adjustment for these years, assuming
that these finalized cost reports become available.

9. Effects of the Extended Effective Date for Policy on Hospital
Services Furnished under Arrangements

In section V.M. of the preamble of this final rule, we discuss
our change in the implementation date of our revised policy, as
outlined in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51711) under
which we limit the circumstances under which a hospital may furnish
services to Medicare beneficiaries ``under arrangements.'' We are
changing the implementation date of the requirement to be effective
for services provided on or after January 1, 2015 (instead of
effective with cost reporting periods beginning on or after October
1, 2013). Because there are hospitals in the midst of significant
building projects that, when completed, will enable the hospital to
provide routine services in compliance with the requirements of this
revised policy, we believe that it is appropriate to further delay
the effective date. We expect that, with the additional time before
the revised ``under arrangement'' policy becomes effective,
hospitals will complete the work needed to ensure compliance with
the new requirement. Effective for services provided on or after
January 1, 2015, all hospitals will need to be in full compliance
with the revised policy for services furnished under arrangement. We
have determined that the impact of this effective date change would
be negligible.

I. Effects of Policy Relating to the Furnishing of Acute Care
Inpatient Services by CAHs

In section VII.C. of the preamble of this final rule, we discuss
our policy to revise the requirements under the CoPs for CAHs to
specify that CAHs must provide acute care inpatient services. We
estimate that the costs to CAHs to implement this policy will be
minimal.
Comment: One commenter expressed concern about the impact a
requirement to furnish acute care inpatient services could have upon
operational capacity and necessary workforce needs of many CAHs.
Response: We appreciate this comment, but we believe the
evidence strongly suggests that most CAHs will not experience an
increase in operational costs, including costs relating to
workforce. The vast majority of CAHs, approximately 99 percent,
already are providing acute care inpatient services. Therefore, we
believe most CAHs will view these revisions to the regulatory text
as a clarification confirming their usual and customary business
practices.

J. Effects of Changes to the CoPs for Hospitals Relating to the
Administration of Pneumococcal Vaccines

In section X. of the preamble of this final rule, we discuss our
policy to amend the standard under the CoPs for hospitals relating
to the administration of pneumococcal vaccine by nursing staff. We
are deleting the term ``polysaccharide'' vaccine in the standard to
allow hospitals to include any type of pneumococcal vaccine as part
of its physician-approved policy for administration by nurses
without a prior practitioner order.
While we expect this change to have a positive effect on
hospitals by providing them with additional regulatory flexibility
in this area, it is difficult to estimate this positive effect in
terms of actual cost savings for hospitals. We believe that the
change will carry the additional benefit of improving patient access
to pneumococcal vaccines if hospitals choose to exercise the
potential regulatory flexibility and purchase and stock more than
one type of pneumococcal vaccine as a result. This benefit will be
particularly apparent if there were a shortage of one type of the
pneumococcal vaccine in the future. In conclusion, while we cannot
estimate any cost savings that will result from this change, we are
confident that it will not impose any burden on hospitals.

K. Effects of Changes in the Capital IPPS

1. General Considerations

For the impact analysis presented below, we used data from the
March 2013 update of the FY 2012 MedPAR file and the March 2013
update of the Provider-Specific File (PSF) that is used for payment
purposes. Although the analyses of the changes to the capital
prospective payment system do not incorporate cost data, we used the
March 2013 update of the most recently available hospital cost
report data (FYs 2010 and 2011) to categorize hospitals. Our
analysis has several qualifications. We use the best data available
and make assumptions about case-mix and beneficiary enrollment as
described below.
Due to the interdependent nature of the IPPS, it is very
difficult to precisely quantify the impact associated with each
change. In addition, we draw upon various sources for the data used
to categorize hospitals in the tables. In some cases (for instance,
the number of beds), there is a fair degree of variation in the data
from different sources. We have attempted to construct these
variables with the best available sources overall. However, it is
possible that some individual hospitals are placed in the wrong
category.
Using cases from the March 2013 update of the FY 2012 MedPAR
file, we simulated payments under the capital IPPS for FY 2013 and
FY 2014 for a comparison of total payments per case. Any short-term,
acute care hospitals not paid under the general IPPS (for example,
Indian Health Service hospitals and hospitals in Maryland) are
excluded from the simulations.
The methodology for determining a capital IPPS payment is set
forth at Sec. 412.312. The basic methodology for calculating
capital IPPS payments in FY 2014 is as follows:

(Standard Federal Rate) x (DRG weight) x (GAF) x (COLA for hospitals
located in Alaska and Hawaii) x (1 + DSH Adjustment Factor + IME
adjustment factor, if applicable).

In addition to the other adjustments, hospitals may also receive
outlier payments for those cases that qualify under the threshold
established for each fiscal year. We modeled payments for each
hospital by multiplying the capital Federal rate by the GAF and the
hospital's case-mix. We then added estimated payments for indirect
medical education, disproportionate share, and outliers, if
applicable. For purposes of this impact analysis, the model includes
the following assumptions:
We estimate that the Medicare case-mix index will
increase by 0.5 percent in both FYs 2013 and 2014.
We estimate that Medicare discharges will be
approximately 12.4 million in FY 2013 and 12.6 million in FY 2014.
The capital Federal rate was updated beginning in FY
1996 by an analytical framework that considers changes in the prices
associated with capital-related costs and adjustments to account for
forecast error, changes in the case-mix index, allowable changes in
intensity, and other factors. As discussed in section III.A.1.a. of
the Addendum to this final rule, the update is 0.90 percent for FY
2014.
In addition to the FY 2014 update factor, the FY 2014
capital Federal rate was calculated based on a GAF/DRG budget
neutrality adjustment factor of 0.9987, an outlier adjustment factor
of 0.9393, and an adjustment factor of 0.9980 to offset the
estimated additional IPPS expenditures that are projected to result
from our policy on admission and medical review criteria for
hospital inpatient services under Medicare Part A, as discussed in
section VI.C. of the preamble of this final rule.

[[Page 51028]]

2. Results

We used the actuarial model described above to estimate the
potential impact of our changes for FY 2014 on total capital
payments per case, using a universe of 3,407 hospitals. As described
above, the individual hospital payment parameters are taken from the
best available data, including the March 2013 update of the FY 2012
MedPAR file, the March 2013 update to the PSF, and the most recent
cost report data from the March 2013 update of HCRIS. In Table III,
we present a comparison of estimated total payments per case for FY
2013 and estimated total payments per case for FY 2014 based on the
FY 2014 payment policies. Column 2 shows estimates of payments per
case under our model for FY 2013. Column 3 shows estimates of
payments per case under our model for FY 2014. Column 4 shows the
total percentage change in payments from FY 2013 to FY 2014. The
change represented in Column 4 includes the 0.90 percent update to
the capital Federal rate and other changes in the adjustments to the
capital Federal rate. The comparisons are provided by: (1)
Geographic location; (2) region; and (3) payment classification.
The simulation results show that, on average, capital payments
per case in FY 2014 are expected to increase as compared to capital
payments per case in FY 2013. The capital Federal rate for FY 2014
will increase approximately 0.9 percent as compared to the FY 2013
capital Federal rate. Overall, across all hospitals, the changes to
the GAFs are expected to have no net effect on capital payments.
However, regionally, the effects of the changes to the GAFs on
capital payments are consistent with the projected changes in
payments due to changes in the wage index (and policies affecting
the wage index) as shown in Table I in section I.G. of this
Appendix.
We are estimating a slight increase in outlier payments in FY
2014 as compared to FY 2013. This is primarily because of the
decrease to the outlier fixed-loss amount (discussed in section
II.A.4.f. of the Addendum to this final rule).
The net impact of these changes is an estimated 1.6 percent
change in capital payments per case from FY 2013 to FY 2014 for all
hospitals (as shown below in Table III).
The geographic comparison shows that, on average, all hospitals
are expected to experience an increase in capital IPPS payments per
case in FY 2014 as compared to FY 2013. These expected increases are
primarily due to the increase in the capital Federal rate, as well
as small projected increases in outlier payments. These increases
are somewhat offset in all but a few regions by the projected
decrease in payments because of the GAFs. Capital IPPS payments per
case for large urban hospitals are estimated to increase 1.7
percent, while capital IPPS payments per case for other urban
hospitals are estimated to increase 1.6 percent. Rural hospitals, on
average, are expected to experience a 0.9 percent increase in
capital payments per case from FY 2013 to FY 2014. The primary
factors contributing to the difference in the projected increase in
capital IPPS payments per case for urban hospitals as compared to
rural hospitals are a decrease in capital payments to rural
hospitals due to changes to the GAF and a relatively lower projected
increase in capital payments to rural hospitals due to the changes
to the MS-DRG relative weights.
The comparisons by region show that the estimated increases in
capital payments per case from FY 2013 to FY 2014 in urban areas
ranges from a 2.4 percent increase for the Middle Atlantic urban
region to a 1.0 percent increase for the Mountain urban region. For
rural regions (excluding Puerto Rico), the Pacific rural region is
expected to experience the largest increase in capital IPPS payments
per case of 2.3 percent, while the East South Central rural region
is projected to have a 0.5 percent increase in capital payments per
case. Unlike other urban and rural regions where changes in the GAFs
contribute to a decrease in capital payments, the changes in the
GAFs contribute to the expected increase in capital IPPS payments
per case for the Pacific urban and rural regions, as well as the
Middle Atlantic and New England urban regions. The influences of the
GAFs to increase payments more or less than the average estimated
increase are consistent with the changes in the wage index for
hospitals located in these areas, as discussed in section I. of this
Appendix. In contrast to other rural regions, the larger than
average projected increase in payments (5.2 percent) for the Puerto
Rico rural region is primarily due to changes in the MS-DRG relative
weights.
Hospitals of all types of ownership (that is, voluntary
hospitals, government hospitals, and proprietary hospitals) are
estimated to experience an increase in capital payments per case
from FY 2013 to FY 2014. The increase in capital payments for both
government and proprietary hospitals is estimated at 1.4 percent,
and voluntary hospitals are estimated to experience a 1.7 percent
increase in capital payments per case from FY 2013 to FY 2014.
Section 1886(d)(10) of the Act established the MGCRB. Hospitals
may apply for reclassification for purposes of the wage index for FY
2014. Reclassification for wage index purposes also affects the GAFs
because that factor is constructed from the hospital wage index. To
present the effects of the hospitals being reclassified as of the
publication of this final rule for FY 2014, we show the average
capital payments per case for reclassified hospitals for FY 2014.
Urban reclassified hospitals are expected to experience the largest
increase in capital payments of 2.0 percent, whereas urban
nonreclassified hospitals are expected to experience an increase of
1.6 percent. The estimated percentage increase for rural
reclassified hospitals is 1.5 percent. However, rural
nonreclassified hospitals are expected to experience a 0.1 percent
decrease in capital payments per case. Other reclassified hospitals
(that is, hospitals reclassified under section 1886(d)(8)(B) of the
Act) are expected to experience a 1.3 percent increase in capital
payments from FY 2013 to FY 2014.

Table III--Comparison of Total Payments per Case
[FY 2013 Payments Compared to FY 2014 Payments]
----------------------------------------------------------------------------------------------------------------
Number of Average FY 2013 Average FY 2014
hospitals payments/case payments/case Change
----------------------------------------------------------------------------------------------------------------
By Geographic Location:
All hospitals................... 3,407 815 828 1.6
Large urban areas (populations 1,370 902 917 1.7
over 1 million)................
Other urban areas (populations 1,115 792 805 1.6
of 1 million of fewer).........
Rural areas..................... 922 563 568 0.9
Urban hospitals................. 2,485 852 866 1.6
0-99 beds................... 624 712 716 0.6
100-199 beds................ 767 737 747 1.4
200-299 beds................ 462 786 798 1.5
300-499 beds................ 420 868 883 1.7
500 or more beds............ 212 1,015 1,035 2.0
Rural hospitals................. 922 563 568 0.9
0-49 beds................... 341 457 459 0.3
50-99 beds.................. 326 516 520 0.8
100-149 beds................ 151 559 564 0.7
150-199 beds................ 59 627 635 1.3
200 or more beds............ 45 675 684 1.3
By Region:
Urban by Region................. 2,485 852 866 1.6

[[Page 51029]]

New England................. 120 928 947 2.1
Middle Atlantic............. 318 899 920 2.4
South Atlantic.............. 375 785 795 1.2
East North Central.......... 395 815 827 1.4
East South Central.......... 149 741 751 1.4
West North Central.......... 166 854 865 1.3
West South Central.......... 373 786 795 1.2
Mountain.................... 156 889 897 1.0
Pacific..................... 382 1,063 1,087 2.3
Puerto Rico................. 51 383 390 1.9
Rural by Region................. 922 563 568 0.9
New England................. 23 762 777 1.9
Middle Atlantic............. 69 580 586 1.1
South Atlantic.............. 165 545 549 0.6
East North Central.......... 119 584 590 1.0
East South Central.......... 171 516 519 0.5
West North Central.......... 99 595 603 1.2
West South Central.......... 181 502 505 0.6
Mountain.................... 65 616 622 1.0
Pacific..................... 29 722 738 2.3
Puerto Rico................. 1 198 208 5.2
By Payment Classification:
All hospitals................... 3,407 815 828 1.6
Large urban areas (populations 1,380 901 916 1.7
over 1 million)................
Other urban areas (populations 1,116 791 804 1.6
of 1 million or fewer).........
Rural areas..................... 911 572 577 0.7
Teaching Status:
Non-teaching................ 2,380 698 707 1.2
Fewer than 100 Residents.... 785 802 815 1.6
100 or more Residents....... 242 1,145 1,169 2.1
Urban DSH:
100 or more beds........ 1,569 872 886 1.7
Less than 100 beds...... 331 619 628 1.4
Rural DSH:
Sole Community (SCH/ 265 531 532 0.3
EACH)..................
Referral Center (RRC/ 228 627 633 1.0
EACH)..................
Other Rural:
100 or more beds.... 29 525 522 -0.5
Less than 100 beds.. 295 461 463 0.3
Urban teaching and DSH:
Both teaching and DSH....... 826 942 959 1.8
Teaching and no DSH......... 136 836 852 1.9
No teaching and DSH......... 1,074 736 746 1.4
No teaching and no DSH...... 460 771 779 1.1
Rural Hospital Types:
Non special status hospitals 2,371 857 871 1.6
RRC/EACH.................... 73 774 794 2.6
SCH/EACH.................... 37 752 765 1.6
SCH, RRC and EACH........... 17 775 802 3.5
Hospitals Reclassified by the
Medicare Geographic Classification
Review Board:
FY2014 Reclassifications:
All Urban Reclassified...... 359 833 849 2.0
All Urban Non-Reclassified.. 2,084 859 872 1.6
All Rural Reclassified...... 310 600 609 1.5
All Rural Non-Reclassified.. 552 512 512 -0.1
Other Reclassified Hospitals 53 554 561 1.3
(Section 1886(d)(8)(B))....
Type of Ownership:
Voluntary................... 1,943 829 843 1.7
Proprietary................. 900 736 746 1.4
Government.................. 542 846 857 1.4
Medicare Utilization as a Percent of
Inpatient Days:
0-25........................ 450 1,020 1,040 2.0
25-50....................... 2,011 831 845 1.6
50-65....................... 736 681 690 1.3
Over 65..................... 139 548 553 0.9
----------------------------------------------------------------------------------------------------------------

[[Page 51030]]

L. Effects of Payment Rate Changes and Policy Changes under the
LTCH PPS

1. Introduction and General Considerations

In section VIII. of the preamble of this final rule and section
V. of the Addendum to this final rule, we set forth the annual
update to the payment rates for the LTCH PPS for FY 2014. In the
preamble of this final rule, we specify the statutory authority for
the provisions that are presented, identify those policies, and
present rationales for our decisions as well as alternatives that
were considered. In this section of Appendix A to this final rule,
we discuss the impact of the changes to the payment rate, factors,
and other payment rate policies related to the LTCH PPS that are
presented in the preamble of this final rule in terms of their
estimated fiscal impact on the Medicare budget and on LTCHs.
Currently, there are 425 LTCHs included in this impacts
analysis, which includes data for 81 nonprofit (voluntary ownership
control) LTCHs, 326 proprietary LTCHs, and 18 LTCHs that are
government-owned and operated. (We note that although there are
currently approximately 440 LTCHs, for purposes of this impact
analysis, we excluded the data of all inclusive rate providers and
the LTCHs that are paid in accordance with demonstration projects,
consistent with the development of the FY 2014 MS-LTC-DRG relative
weights (discussed in section VIII.B.3.c. of the preamble of this
final rule)). In the impact analysis, we used the payment rate,
factors, and policies presented in this final rule, including the
1.7 percent annual update for LTCHs that submit quality data in
accordance with section 1886(m)(5)(C) of the Act, which is based on
the full estimated increase of the LTCH PPS market basket and the
reductions required by sections 1886(m)(3) and (m)(4) of the Act,
the second year phase of a one-time prospective adjustment factor of
0.98734 (approximately -1.3 percent), the update to the MS-LTC-DRG
classifications and relative weights, the update to the wage index
values and labor-related share, and the best available claims and
CCR data to estimate the change in payments for FY 2014. (As
discussed in section VIII.C. of the preamble of this final rule, in
accordance with section 1886(m)(5)(C) of the Act, for LTCHs that
fail to submit quality data, the annual update to the LTCH PPS
standard Federal rate is reduced by 2.0 percentage points beginning
in FY 2014.)
The standard Federal rate for FY 2013 is $40,397.96. However,
consistent with the statute, the payment for FY 2013 discharges
occurring on or before December 28, 2012 does not reflect the one-
time prospective adjustment under Sec. 412.523(d)(3) of the
regulations, and such discharges are paid based on a standard
Federal rate of $40,915.95 (77 FR 53710). For FY 2014, we are
establishing a standard Federal rate of $40,607.31, which reflects
the 1.7 percent annual update to the standard Federal rate, and the
area wage budget neutrality factor of 1.0010531 to ensure that the
changes in the wage indexes and labor-related share do not influence
aggregate payments, and the second year of the phase-in of the one-
time prospective adjustment factor of 0.98734. We note that the
factors described above to determine the FY 2014 standard Federal
rate are applied to the FY 2013 Federal standard rate set forth
under section Sec. 412.523(c)(3)(ix)(A) (that is, $40,397.96).
Based on the best available data for the 425 LTCHs in our
database, we estimate that the annual update to the standard Federal
rate for FY 2014 (discussed in section V.A.2. of the Addendum to
this final rule) and the changes to the area wage adjustment for FY
2014 (discussed in section V.B. of the Addendum to this final rule),
in addition to an estimated increase in high cost outlier (HCO)
payments will result in an increase in estimated payments from FY
2013 of approximately $72 million. Based on the 425 LTCHs in our
database, we estimate that the FY 2014 LTCH PPS payments will be
approximately $5.610 billion, as compared to estimated FY 2013 LTCH
PPS payments of approximately $5.538 billion. Because the combined
distributional effects and estimated changes to the Medicare program
payments are over approximately $100 million, this final rule is
considered a major economic rule, as defined in this section. We
note that the approximate $72 million for the projected increase in
estimated aggregate LTCH PPS payments from FY 2013 to FY 2014 does
not reflect changes in LTCH admissions or case-mix intensity in
estimated LTCH PPS payments, which also will affect overall payment
changes. (We note that this impact does not include an estimate
effect of the 2.0 percentage points reduction to the annual update
to the LTCH PPS standard Federal rate for LTCHs that fail to submit
quality data, as required by section 1886(m)(5)(C) of the Act,
because we have not determined at this time which, if any, LTCHs
failed to submit the requisite quality data for FY 2014 under the
LTCH Quality Reporting Program.)
The projected 1.3 percent increase in estimated payments per
discharge from FY 2013 to FY 2014 is attributable to several
factors, including the 1.7 percent annual update to the standard
Federal rate, the one-time prospective adjustment factor for FY 2014
of 0.98734 (approximately -1.3 percent), and projected increases in
estimated HCO payments. As Table IV shows, the change attributable
solely to the annual update to the standard Federal rate (1.7
percent), including the one-time prospective adjustment factor for
FY 2014 under the second year of the phase-in (approximately -1.3
percent), is projected to result in an increase of 0.4 percent in
payments per discharge from FY 2013 to FY 2014, on average, for all
LTCHs. We note, the estimated change in payments solely attributable
to the annual update to the standard Federal rate does not take into
account that the one-time prospective adjustment to the standard
Federal rate for FY 2013 under Sec. 412.523(d)(3) is not applied to
payments for discharges occurring before December 29, 2012,
consistent with the statute (and, therefore, are paid based on a
relatively higher rate). The change in payments solely attributable
to the annual update to the standard Federal rate for FY 2014 will
be a smaller increase in payments relative to the pre-December 29,
2012 LTCH payment rates (approximately 0.1 percent instead of 0.4
percent). In addition to the 1.7 percent annual update for FY 2014
and the -1.3 percent one-time prospective adjustment factor for FY
2014, this estimated increase in aggregate LTCH PPS payments of 0.2
percent also includes estimated payments for SSO cases that are paid
using special methodologies that are not affected by the annual
update to the standard Federal rate. Therefore, for some hospital
categories, the projected increase in payments based on the standard
Federal rate is less than the 0.4 percent annual update for FY 2014.
Because we are applying an area wage level budget neutrality
factor to the standard Federal rate, the annual update to the wage
data and labor-related share does not impact the increase in
aggregate payments. In addition, we note that the updates to the
standard Federal rate to determine the estimated effects described
above were applied to the FY 2013 standard Federal rate set forth
under section Sec. 412.523(c)(3)(ix)(A) (that is, $40,397.96).
As discussed in section V.B. of the Addendum to this final rule,
we are updating the wage index values for FY 2014 based on the most
recent available data. In addition, we are decreasing the labor-
related share from 63.096 percent to 62.537 percent under the LTCH
PPS for FY 2014, based on the most recent available data on the
relative importance of the labor-related share of operating and
capital costs based on the FY 2009-based LTCH-specific market
basket. We also are applying an area wage level budget neutrality
factor of 1.0010531, which increases the standard Federal rate by
approximately 0.1 percent. Therefore, the changes to the wage data
and labor-related share do not result in a change in estimated
aggregate LTCH PPS payments.
Table IV below shows the impact of the payment rate and the
policy changes on LTCH PPS payments for FY 2014 presented in this
final rule by comparing estimated FY 2013 payments to estimated FY
2014 payments. The projected increase in payments per discharge from
FY 2013 to FY 2014 is 1.3 percent (shown in Column 8). This
projected increase in payments is attributable to the impacts of the
change to the standard Federal rate (0.4 percent in Column 6) and
the effect of the estimated increase in payments for HCO cases and
SSO cases (1.0 percent and 0.2 percent, respectively). That is,
estimated total HCO payments are projected to increase from FY 2013
to FY 2014 in order to ensure that the estimated HCO payments will
be 8 percent of the total estimated LTCH PPS payments in FY 2014. An
analysis of the most recent available LTCH PPS claims data (that is,
FY 2012 claims data from the March 2013 update of the MedPAR file)
indicates that the FY 2013 HCO threshold of $15,408 (as established
in the FY 2013 IPPS/LTCH PPS final rule) may result in HCO payments
in FY 2014 that fall below the estimated 8 percent. Specifically, we
currently estimate that HCO payments will be approximately 7.0
percent of the estimated total LTCH PPS payments in FY 2013. We
estimate that the impact of the increase in HCO payments will result
in

[[Page 51031]]

approximately a 1.0 percent increase in estimated payments from FY
2013 to FY 2014, on average, for all LTCHs. Furthermore, in
calculating the estimated increase in payments from FY 2013 to FY
2014 for HCOs, we increased estimated costs by the applicable market
basket percentage increase as projected by our actuaries. This
increase in estimated costs also results in a projected increase in
SSO payments of approximately 0.2 percent relative to last year. The
net result of these projected changes in HCO and SSO payments in FY
2014 is an estimated change in aggregate payments of 1.2 percent. We
note that estimated payments for all SSO cases comprise
approximately 12 percent of the estimated total LTCH PPS payments,
and estimated payments for HCO cases comprise approximately 8
percent of the estimated total FY 2014 LTCH PPS payments. Payments
for HCO cases are based on 80 percent of the estimated cost of the
case above the HCO threshold, while the majority of the payments for
SSO cases (approximately 58 percent) are based on the estimated cost
of the case.
As we discuss in detail throughout this final rule, based on the
most recent available data, we believe that the provisions of this
final rule relating to the LTCH PPS will result in an increase in
estimated aggregate LTCH PPS payments and that the resulting LTCH
PPS payment amounts will result in appropriate Medicare payments.

2. Impact on Rural Hospitals

For purposes of section 1102(b) of the Act, we define a small
rural hospital as a hospital that is located outside of an urban
area and has fewer than 100 beds. As shown in Table IV, we are
projecting a 0.9 percent increase in estimated payments per
discharge for FY 2014 as compared to FY 2013 for rural LTCHs that
will result from the changes presented in this final rule, as well
as the effect of estimated changes to HCO and SSO payments. This
estimated impact is based on the data for the 28 rural LTCHs in our
database (out of 425 LTCHs) for which complete data were available.
The estimated increase in LTCH PPS payments from FY 2013 to FY
2014 for rural LTCHs (0.9 percent) is less than the national average
increase (1.3 percent). The estimated increase in LTCH PPS payments
from FY 2013 to FY 2014 for rural LTCHs is primarily due to the
increase to the standard Federal rate. However, rural LTCHs are
experiencing slightly lower increases than the national average due
to decreases in their wage index for FY 2014 compared to FY 2013.

3. Anticipated Effects of LTCH PPS Payment Rate Changes and Policy
Changes

a. Budgetary Impact

Section 123(a)(1) of the BBRA requires that the PPS developed
for LTCHs ``maintain budget neutrality.'' We believe that the
statute's mandate for budget neutrality applies only to the first
year of the implementation of the LTCH PPS (that is, FY 2003).
Therefore, in calculating the FY 2003 standard Federal rate under
Sec. 412.523(d)(2), we set total estimated payments for FY 2003
under the LTCH PPS so that estimated aggregate payments under the
LTCH PPS were estimated to equal the amount that would have been
paid if the LTCH PPS had not been implemented.
As discussed above in section I.L.1. of this Appendix, we
project an increase in aggregate LTCH PPS payments in FY 2014
relative to FY 2013 of approximately $72 million based on the 425
LTCHs in our database.

b. Expiration of Statutory Delay of Full Implementation of the 25-
Percent Threshold Payment Adjustment Policy and 1-Year Extension

As discussed in section VIII.D. of the preamble of this final
rule, the statutory delay of the full application of the 25-percent
threshold payment adjustment for LTCHs under Sec. 412.534 and Sec.
412.536 expired for cost reporting periods beginning on or after
July 1, 2012, or October 1, 2012, as applicable. As explained in
section VIII.D. of the preamble of this final rule, we established a
1-year regulatory extension of the statutory moratorium for cost
reporting periods beginning on or after October 1, 2012, and before
October 1, 2013 (and for discharges occurring on or after October 1,
2012, through the end of the cost reporting period of LTCHs with
cost reporting periods beginning on or after July 1, 2012, and
before September 30, 2012). We are not extending the regulatory
moratorium, therefore, it will expire for certain LTCHs for cost
reporting periods beginning on or after October 1, 2013, and as
discussed in section VIII.D. of the preamble of this final rule. We
currently estimate that the expiration of this moratorium will
result in a reduction of approximately $90 million in LTCHs PPS
payments in FY 2014. We note that our current estimate of the impact
of the expiration of moratorium on the full application of the 25-
percent threshold payment adjustment policy is significantly lower
than our estimate presented in the FY 2014 IPPS/LTCH PPS proposed
rule (78 FR 27498). Based on the best available data at that time,
we estimated that the expiration of moratorium on the full
application of the 25-percent threshold payment adjustment policy
would result in a reduction in payments of approximately $190
million to LTCHs in FY 2014.
Comment: Based on its own analysis of the 25-percent threshold
payment adjustment policy, one commenter believed that we may not
have appropriately applied all adjustments under the 25-percent
threshold payment adjustment policy in our estimate of the impact
presented in the FY 2014 IPPS/LTCH PPS proposed rule. As a result,
the commenter asserted that the estimated $190 million decrease in
payments to LTCHs in FY 2014 was overstated. Specifically, the
commenter believed that LTCH discharges that qualify for exclusion
from the 25-percent threshold payment adjustment policy because
Medicare payments for those patients included a high cost outlier
payment to the hospital prior to admission to the LTCH may have been
mistakenly included as patients subject to the 25-percent threshold
payment adjustment. Therefore, the commenter requested that we
review our estimated impact of the 25-percent threshold payment
adjustment policy for the final rule.
Response: Upon review of the payment model that was used to
estimate the impact of the expiration of the moratorium on the full
application of the 25-percent threshold payment adjustment policy
for the proposed rule, we determined that the commenter is correct.
We did inadvertently treat LTCH discharges for which Medicare made a
high cost outlier payment to the hospital for the patient's stay
prior to admission to the LTCH as being subject to a payment
adjustment under the 25-percent threshold payment adjustment policy,
which resulted in an overstatement in the projected decrease in
payments to LTCHs that would result from the payment adjustment. We
appreciate the commenter bringing this inadvertent error to our
attention and have made the necessary correction to the payment
model we used to estimate the impact of the expiration of the
moratorium on the full application of the 25-percent threshold
payment adjustment policy for this final rule. In addition to that
correction, we also updated the actuarial assumptions regarding
Medicare utilization that were used in the calculation of our
projected impact, including a projected decrease in Medicare Part A
Fee-For-Service (FFS) enrollment. Incorporating the high cost
outlier correction to our payment model along with the updated
actuarial assumptions regarding Medicare utilization results in a
significant change to our estimated impact of the full application
of the 25-percent threshold payment adjustment policy on LTCH PPS
payments in FY 2014 from the proposed rule (a $190 million decrease)
to this final rule (a $90 million decrease).

c. Impact on Providers

The basic methodology for determining a per discharge LTCH PPS
payment is set forth under Sec. 412.515 through Sec. 412.536. In
addition to the basic MS-LTC-DRG payment (the standard Federal rate
multiplied by the MS-LTC-DRG relative weight), we make adjustments
for differences in area wage levels, the COLA for LTCHs located in
Alaska and Hawaii, and SSOs. Furthermore, LTCHs may also receive HCO
payments for those cases that qualify based on the threshold
established each year.
To understand the impact of the changes to the LTCH PPS payments
presented in this final rule on different categories of LTCHs for FY
2014, it is necessary to estimate payments per discharge for FY 2013
using the rates, factors (including the FY 2013 GROUPER (Version
30.0), and relative weights and the policies established in the FY
2013 IPPS/LTCH PPS final rule (77 FR 53458 through 53502 and 53708
through 53716). It is also necessary to estimate the payments per
discharge that will be made under the LTCH PPS rates, factors,
policies, and GROUPER (Version 31.0) for FY 2014 (as discussed in
section VIII. of the preamble of this final rule and section V. of
the Addendum to this final rule). These estimates of FY 2013 and FY
2014 LTCH PPS payments are based on the best available LTCH claims
data and other factors, such as the application of inflation factors
to estimate costs for SSO and HCO cases in each year. We also
evaluated the change in estimated FY 2013 payments to estimated FY
2014 payments (on a per discharge basis) for each category of LTCHs.

[[Page 51032]]

We are establishing a standard Federal rate for FY 2014 of
$40,607.31 that includes the 1.7 percent annual update, the area
wage budget neutrality factor of 1.0010531, and the one-time
prospective adjustment to the standard Federal rate for FY 2014 of
0.98734 (approximately -1.3 percent).
Hospital groups were based on characteristics provided in the
OSCAR data, FY 2009 through FY 2011 cost report data in HCRIS, and
PSF data. Hospital groups included the following:
Location: large urban/other urban/rural.
Participation date.
Ownership control.
Census region.
Bed size.
To estimate the impacts of the payment rates and policy changes
among the various categories of existing providers, we used LTCH
cases from the FY 2012 MedPAR file to estimate payments for FY 2013
and to estimate payments for FY 2014 for 425 LTCHs. We believe that
the discharges based on the FY 2012 MedPAR data for the 425 LTCHs in
our database, which includes 326 proprietary LTCHs, provide
sufficient representation in the MS-LTC-DRGs containing discharges
for patients who received LTCH care for the most commonly treated
LTCH patients' diagnoses.

d. Calculation of Prospective Payments

For purposes of this impact analysis, to estimate per discharge
payments under the LTCH PPS, we simulated payments on a case-by-case
basis using LTCH claims from the FY 2012 MedPAR files. For modeling
estimated LTCH PPS payments for FY 2013, we used the FY 2013
standard Federal rate (that is, $40,915.95 used to make payments for
LTCH discharges occurring on or after October 1, 2012 through
December 28, 2012, and $40,397.96 for discharges occurring on or
after December 29, 2012 through September 30, 2013).
For modeling estimated LTCH PPS payments for FY 2014, we used
the FY 2014 standard Federal rate of $40,607.31, which includes the
one-time prospective adjustment of 0.98734 for FY 2014 for the
second year of the 3-year phase-in. The FY 2014 standard Federal
rate of $40,607.31 includes the application of an area wage level
budget neutrality factor of 1.0010531 (as discussed in section
V.B.5. of the Addendum to this final rule). Furthermore, in modeling
estimated LTCH PPS payments for both FY 2013 and FY 2014 in this
impact analysis, we applied the FY 2013 and the FY 2014 adjustments
for area wage levels and the COLA for LTCHs located in Alaska and
Hawaii. Specifically, we adjusted for differences in area wage
levels in determining estimated FY 2013 payments using the current
LTCH PPS labor-related share of 63.096 percent (77 FR 53711) and the
wage index values established in the Tables 12A and 12B listed in
the Addendum to the FY 2013 IPPS/LTCH PPS final rule (which are
available via the Internet (77 FR 53717)). We also applied the FY
2013 COLA factors shown in the table in section V.C. of the Addendum
to that final rule (77 FR 53713) to adjust the FY 2013 nonlabor-
related share (36.904 percent) for LTCHs located in Alaska and
Hawaii. Similarly, we adjusted for differences in area wage levels
in determining the estimated FY 2014 payments using the FY 2014 LTCH
PPS labor-related share of 62.537 percent and the FY 2014 wage index
values presented in Tables 12A and 12B listed in section VI. of the
Addendum to this final rule (and available via the Internet). We
also applied the FY 2014 COLA factors shown in the table in section
V.C. of the Addendum to this final rule to the FY 2014 nonlabor-
related share (37.463 percent) for LTCHs located in Alaska and
Hawaii.
As discussed above, our impact analysis reflects an estimated
change in payments for SSO cases, as well as an estimated increase
in payments for HCO cases (as described in section V.D. of the
Addendum to this final rule). In modeling payments for SSO and HCO
cases in FY 2014, we applied an inflation factor of 4.9 percent
(determined by OACT) to estimate the costs of each case using the
charges reported on the claims in the FY 2012 MedPAR files and the
best available CCRs from the March 2013 update of the PSF.
Furthermore, in modeling estimated LTCH PPS payments for FY 2014 in
this impact analysis, we used the FY 2014 fixed-loss amount of
$13,314 (as discussed in section V.D. of the Addendum to this final
rule).
These impacts reflect the estimated ``losses'' or ``gains''
among the various classifications of LTCHs from FY 2013 to FY 2014
based on the payment rates and policy changes presented in this
final rule. Table IV illustrates the estimated aggregate impact of
the LTCH PPS among various classifications of LTCHs.
The first column, LTCH Classification, identifies the
type of LTCH.
The second column lists the number of LTCHs of each
classification type.
The third column identifies the number of LTCH cases.
The fourth column shows the estimated payment per
discharge for FY 2013 (as described above).
The fifth column shows the estimated payment per
discharge for FY 2014 (as described above).
The sixth column shows the percentage change in
estimated payments per discharge from FY 2013 to FY 2014 due to the
annual update to the standard Federal rate (as discussed in section
V.A.2. of the Addendum to this final rule), including the second
year of the phase-in of the one-time prospective adjustment factor
for FY 2014. (As noted previously, the estimate payment changes
shown in this column do not take into account that the one-time
prospective adjustment to the standard Federal rate for FY 2013
under Sec. 412.523(d)(3) is not applied to payments for discharges
occurring before December 29, 2012, consistent with the statute.)
The seventh column shows the percentage change in
estimated payments per discharge from FY 2013 to FY 2014 for changes
to the area wage level adjustment (that is, the wage indexes and
labor-related share), including the application of an area wage
level budget neutrality factor, (as discussed in section V.B. of the
Addendum to this final rule.
The eighth column shows the percentage change in
estimated payments per discharge from FY 2013 (Column 4) to FY 2014
(Column 5) for all changes (and includes the effect of estimated
changes to HCO and SSO payments).

Table IV--Impact of Payment Rate and Policy Changes to LTCH PPS Payments for FY 2014
[Estimated FY 2013 payments compared to estimated FY 2014 payments]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Percent change
in estimated
Percent change payments per
in estimated discharge from Percent change
Average FY Average FY payments per FY 2013 to FY in payments
Number of Number of LTCH 2013 LTCH PPS 2014 LTCH PPS discharge from 2014 for per discharge
LTCH Classification LTCHs PPS cases payment per payment per FY 2013 to FY changes to the from FY 2013
case case \1\ 2014 for the area wage to FY 2014 for
annual update level all changes
to the Federal adjustment \4\
rate \2\ with budget
neutrality \3\
(1) (2) (3) (4) (5) (6) (7) (8)
--------------------------------------------------------------------------------------------------------------------------------------------------------
ALL PROVIDERS........................... 425 140,888 $39,308 $39,816 0.4 0.0 1.3
BY LOCATION:
RURAL............................... 28 6,562 34,978 35,304 0.4 -0.2 0.9
URBAN............................... 397 134,326 39,519 40,036 0.4 0.0 1.3
LARGE............................... 198 77,789 41,475 42,066 0.4 0.1 1.4
OTHER............................... 199 56,537 36,827 37,243 0.4 -0.1 1.1

[[Page 51033]]

BY PARTICIPATION DATE:
BEFORE OCT. 1983.................... 16 5,662 35,125 35,633 0.4 0.0 1.4
OCT. 1983-SEPT. 1993................ 44 17,322 41,877 42,476 0.4 0.1 1.4
OCT. 1993-SEPT. 2002................ 183 64,278 38,650 39,076 0.4 -0.1 1.1
OCTOBER 2002 and AFTER.............. 182 53,626 39,707 40,285 0.4 0.1 1.5
BY OWNERSHIP TYPE:
VOLUNTARY........................... 81 19,540 39,436 40,136 0.4 0.0 1.8
PROPRIETARY......................... 326 118,352 39,176 39,645 0.4 0.0 1.2
GOVERNMENT.......................... 18 2,996 43,684 44,446 0.4 -0.1 1.7
BY REGION:
NEW ENGLAND......................... 14 7,287 35,077 35,550 0.4 0.1 1.3
MIDDLE ATLANTIC..................... 30 8,389 41,642 42,355 0.4 0.4 1.7
SOUTH ATLANTIC...................... 61 18,169 41,544 42,039 0.4 -0.1 1.2
EAST NORTH CENTRAL.................. 70 20,473 40,487 41,068 0.4 0.0 1.4
EAST SOUTH CENTRAL.................. 31 8,813 39,444 40,016 0.4 -0.1 1.4
WEST NORTH CENTRAL.................. 26 6,521 39,500 40,032 0.4 -0.3 1.3
WEST SOUTH CENTRAL.................. 136 50,357 35,181 35,496 0.4 -0.2 0.9
MOUNTAIN............................ 32 7,055 42,904 43,500 0.4 -0.3 1.4
PACIFIC............................. 25 13,824 48,456 49,371 0.3 0.6 1.9
BY BED SIZE:
BEDS: 0-24.......................... 25 2,723 34,215 34,417 0.4 -0.3 0.6
BEDS: 25-49......................... 202 47,011 38,477 38,943 0.4 0.0 1.2
BEDS: 50-74......................... 117 37,910 40,133 40,733 0.4 0.0 1.5
BEDS: 75-124........................ 46 22,720 41,224 41,781 0.4 0.1 1.4
BEDS: 125-199....................... 22 16,152 38,293 38,676 0.4 -0.2 1.0
BEDS: 200 +......................... 13 14,372 38,924 39,447 0.4 0.1 1.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Estimated FY 2014 LTCH PPS payments based on the payment rate and policy changes presented in the preamble and the Addendum to this final rule.
\2\ Percent change in estimated payments per discharge from FY 2013 to FY 2014 for the annual update to the standard Federal rate and the one-time
prospective adjustment factor for FY 2014 as discussed in section V.A.2. of the Addendum to this final rule. Note, this column does not take into
account that the one-time prospective adjustment to the standard Federal rate for FY 2013 under Sec. 412.523(d)(3) is not applied to payments for
discharges occurring before December 29, 2012, consistent with the statute (and therefore, are paid based on a relatively higher rate).
\3\ Percent change in estimated payments per discharge from FY 2013 to FY 2014 for changes to the area wage level adjustment under Sec. 412.525(c) (as
discussed in section V.B. of the Addendum to this final rule).
\4\ Percent change in estimated payments per discharge from FY 2013 LTCH PPS (shown in Column 4) to FY 2014 LTCH PPS (shown in Column 5), including all
of the changes presented in the preamble and the Addendum to this final rule. Note, this column, which shows the percent change in estimated payments
per discharge for all changes, does not equal the sum of the percent changes in estimated payments per discharge for the annual update to the standard
Federal rate (column 6) and the changes to the area wage level adjustment with budget neutrality (Column 7) due to the effect of estimated changes in
both estimated payments to SSO cases that are paid based on estimated costs and aggregate HCO payments (as discussed in this impact analysis), as well
as other interactive effects that cannot be isolated.

e. Results

Based on the most recent available data for 425 LTCHs, we have
prepared the following summary of the impact (as shown above in
Table IV) of the LTCH PPS payment rate and policy changes presented
in this final rule. The impact analysis in Table IV shows that
estimated payments per discharge are expected to increase 1.3
percent, on average, for all LTCHs from FY 2013 to FY 2014 as a
result of the payment rate and policy changes presented in this
final rule, including an estimated increase in HCO payments. This
estimated 1.3 percent increase in LTCH PPS payments per discharge
from the FY 2013 to FY 2014 for all LTCHs (as shown in Table IV) was
determined by comparing estimated FY 2014 LTCH PPS payments (using
the payment rate and policies discussed in this final rule) to
estimated FY 2013 LTCH PPS payments (as described above in section
I.L.1. of this Appendix).
We are establishing a standard Federal rate of $40,607.31 for FY
2014. Specifically, we are updating the standard Federal rate for FY
2014 by 1.7 percent, which is based on the latest estimate of the
LTCH PPS market basket increase (2.5 percent), the reduction of 0.5
percentage point for the MFP adjustment, and the 0.3 percentage
point reduction consistent with sections 1886(m)(3) and (m)(4) of
the Act. In addition, we are applying a one-time prospective
adjustment factor for FY 2014 of 0.98734 (approximately -1.3
percent) to the standard Federal rate for the second year of the 3-
year phase-in. We note that consistent with the statute, the one-
time prospective adjustment to the standard Federal rate for FY 2013
is not applied to payments for discharges occurring before December
29, 2012. Therefore, payments for FY 2013 discharges occurring on or
before December 28, 2012, are paid based on a standard Federal rate
that does not reflect that adjustment (and, therefore, are paid
based on a relatively higher rate).
We noted earlier in this section that, for most categories of
LTCHs, as shown in Table IV (Column 6), the payment increase due to
the 1.7 percent annual update to the standard Federal rate and the
application of the one-time prospective adjustment for FY 2014 of
approximately -1.3 percent for the second year of the 3-year phase-
in is projected to result in approximately a 0.4 percent increase in
estimated payments per discharge for all LTCHs from FY 2013 to FY
2014. (As noted previously, the estimate payment changes shown in
this column were determined based on the FY 2013 standard Federal
rate of $40,915.95, and do not take into account that the one-time
prospective adjustment to the standard Federal rate for FY 2013
under Sec. 412.523(d)(3) is not applied to payments for discharges
occurring before December 29, 2012, consistent with the statute.)

[[Page 51034]]

In addition, our estimate of the changes in payments due to the
update to the standard Federal rate also reflects estimated payments
for SSO cases that are paid using special methodologies that are not
affected by the update to the standard Federal rate. For these
reasons, we estimate that payments may increase by less than 0.4
percent for certain hospital categories due to the annual update to
the standard Federal rate and the application of the second phase of
the one-time prospective adjustment for FY 2014.

(1) Location

Based on the most recent available data, the vast majority of
LTCHs are located in urban areas. Only approximately 7 percent of
the LTCHs are identified as being located in a rural area, and
approximately 5 percent of all LTCH cases are treated in these rural
hospitals. The impact analysis presented in Table IV shows that the
average percent increase in estimated payments per discharge from FY
2013 to FY 2014 for all hospitals is 1.3 percent for all changes.
For rural LTCHs, the percent change for all changes is estimated to
be 0.9 percent, while for urban LTCHs, we estimate the increase
would be 1.3 percent. Large urban LTCHs are projected to experience
an increase of 1.4 percent in estimated payments per discharge from
FY 2013 to FY 2014, while other urban LTCHs are projected to
experience an increase of 1.1 percent in estimated payments per
discharge from FY 2013 to FY 2014, as shown in Table IV.

(2) Participation Date

LTCHs are grouped by participation date into four categories:
(1) Before October 1983; (2) between October 1983 and September
1993; (3) between October 1993 and September 2002; and (4) October
2002 and after. Based on the most recent available data, the
categories of LTCHs with the largest percentage of LTCH cases
(approximately 46 percent) are in hospitals that began participating
in the Medicare program between October 1993 and September 2002, and
hospitals that began participating in the Medicare program October
2002 and after, and they are projected to experience a 1.1 and 1.5
percent in estimated payments per discharge from FY 2013 to FY 2014,
respectively, as shown in Table IV.
Approximately 4 percent of LTCHs began participating in the
Medicare program before October 1983, and these LTCHs are projected
to experience a slightly higher than average percent increase (1.4
percent) in estimated payments per discharge from FY 2013 to FY
2014, as shown in Table IV. Approximately 10 percent of LTCHs began
participating in the Medicare program between October 1983 and
September 1993. These LTCHs are also projected to experience a 1.4
percent increase in estimated payments from FY 2013 to FY 2014.

(3) Ownership Control

LTCHs are grouped into three categories based on ownership
control type: voluntary, proprietary, and government. Based on the
most recent available data, approximately 19 percent of LTCHs are
identified as voluntary (Table IV). We expect that LTCHs in the
voluntary category will experience a higher than the average
increase (1.8 percent) in estimated FY 2014 LTCH PPS payments per
discharge as compared to estimated payments in FY 2013 primarily
because we project the estimated increase in HCO payments to be
higher than the average increase for these LTCHs. The majority
(nearly 77 percent) of LTCHs are identified as proprietary and these
LTCHs are projected to experience slightly below the national
average increase (1.2 percent) in estimated payments per discharge
from FY 2013 to FY 2014. Finally, government-owned and operated
LTCHs are expected to experience a larger than average increase in
payments of 1.7 percent in estimated payments per discharge from FY
2013 to FY 2014.

(4) Census Region

Estimated payments per discharge for FY 2014 are projected to
increase for LTCHs located in all regions in comparison to FY 2013.
Of the 9 census regions, we project that the increase in estimated
payments per discharge will have the largest positive impact on
LTCHs in the Middle Atlantic and Pacific regions (1.7 percent and
1.9 percent, respectively as shown in Table IV). The estimated
percent increase in payments per discharge from FY 2013 to FY 2014
for those regions is largely attributable to the changes in the area
wage level adjustment.
In contrast, LTCHs located in the South Atlantic and West South
Central regions are projected to experience the smallest increase in
estimated payments per discharge from FY 2013 to FY 2014. The lower
than national average estimated increase in payments of 1.2 percent
for LTCHs in the South Atlantic and 0.9 percent for LTCHs in the
West South Central region is primarily due to estimated decreases in
payments associated with the changes to the area wage level
adjustment.

(5) Bed Size

LTCHs are grouped into six categories based on bed size: 0-24
beds; 25-49 beds; 50-74 beds; 75-124 beds; 125-199 beds; and greater
than 200 beds. Most bed size categories are projected to receive
either a slightly higher or slightly lower than average increase in
estimated payments per discharge from FY 2013 to FY 2014. We project
that small LTCHs (0-24 beds) will experience a 0.6 percent increase
in payments, mostly due to decreases in the area wage level
adjustment, while large LTCHs (200+ beds) will experience a 1.3
percent increase in payments. LTCHs with between 50 and 74 beds are
expected to experience an above average increase in payments per
discharge from FY 2013 to FY 2014 (1.5 percent).

4. Effect on the Medicare Program

As noted previously, we project that the provisions of this
final rule will result in an increase in estimated aggregate LTCH
PPS payments in FY 2014 relative to FY 2013 of approximately $72
million (or approximately 1.3 percent) for the 425 LTCHs in our
database. In addition, the effects of the expiration of the
regulatory moratorium on the full application of the 25-percent
threshold payment adjustment policy effective for cost reporting
periods beginning or after October 1, 2013 (as discussed in section
VIII.D. of the preamble of this final rule) will result in a payment
reduction of approximately $90 million to LTCHs.

5. Effect on Medicare Beneficiaries

Under the LTCH PPS, hospitals receive payment based on the
average resources consumed by patients for each diagnosis. We do not
expect any changes in the quality of care or access to services for
Medicare beneficiaries under the LTCH PPS, but we continue to expect
that paying prospectively for LTCH services will enhance the
efficiency of the Medicare program.

M. Effects of Requirements for Hospital Inpatient Quality Reporting
(IQR) Program

In section IX.A. of the preamble of this final rule, we discuss
our requirements for hospitals to report quality data under the
Hospital IQR Program in order to receive the full annual percentage
increase for the FY 2016 payment determination. Information is not
available to determine the precise number of hospitals that would
not meet the requirements to receive the full annual percentage
increase for the FY 2016 payment determination. At the time that the
analysis was prepared, 77 hospitals did not receive the full annual
percentage increase for the FY 2014 payment determination.
We estimate that the total burden associated with the voluntary
electronic quality measure reporting option will be similar to the
burden outlined for hospitals in the Medicare EHR Incentive Program
Stage 2 final rule (77 FR 53968 through 54162). However, by allowing
hospitals to submit data for a maximum of four measure sets (16
measures) that could be used to satisfy the requirements for both
programs, each hospital that participates in the voluntary
electronic quality measure reporting option could realize a
reduction in burden of up to approximately 800 hours. This estimate
assumes an annual collection burden for chart-abstracted Stroke, VTE
and PC-01 to be a combined 816 hours annually per hospital and an
estimated 2.66 hours to submit those measures electronically for one
quarter. Since the ED measures are a subset of the global measure
set that also includes the Immunization measures, which will
continue to be collected via chart-abstraction, we do not believe
there will be a significant reduction in burden for electronic
submission of the ED-1 and ED-2 measures.
We are finalizing our proposals related to validation, including
submission of and payment for secure electronic versions of medical
information for validation for the FY 2016 payment determination and
subsequent years, as described in the ICRs for the Hospital IQR
Program, and these changes will result in a cost savings to CMS of
approximately $1.3 million.

N. Effects of Requirements for the PPS-Exempt Cancer Hospital
Quality Reporting (PCHQR) Program for FY 2014

In section IX.B. of the preamble of this final rule, we discuss
our policies for FYs 2015 and 2016 for the quality data reporting
program for PPS-exempt cancer hospitals (PCHs), which we refer to as
the PCHQR Program. The PCHQR Program is authorized under section
1866(k) of the Act, which was added by section 3005 of the
Affordable Care

[[Page 51035]]

Act. The quality reporting requirements affect all PCHs
participating in Medicare. In the FY 2013 IPPS/LTCH PPS final rule
(77 FR 53556 through 53561), we adopted five quality measures for
the FY 2014 payment determination and subsequent years.
In this final rule, we are finalizing our program policy that
PCHs submit data on 1 additional measure beginning with the FY 2015
program and 12 additional measures beginning with the FY 2016
program, for a total of 18 measures. We did not make changes to the
reporting requirements that we have previously finalized for the
five measures we first adopted beginning with the FY 2014 PCHQR
Program.
The anticipated burden to these PCHs consists of the following:
training of appropriate staff members on how to use the NSHN for the
reporting of the SSI measure, CMS (QualityNet) for the reporting of
the SCIP measures, and the CMS Web Measures Tool for the reporting
of the clinical process/oncology care measures; the time required
for collection and aggregation of data; and the time required for
the reporting of data by the PCH's representative.
In addition, in order for a PCH to participate in the collection
of HCAHPS data, a PCH must either: (1) Contract with an approved
HCAHPS survey vendor that will conduct the survey and submit data on
the PCH's behalf to the QIO Clinical Warehouse; or (2) self-
administer the survey without using a vendor, provided that the PCH
attends HCAHPS training. Finally, all PCHs that do not already
report data under the PCHQR Program will need to register with
QualityNet, identify a QualityNet administrator, complete an online
Notice of Participation form, and learn the CMS contractor's and the
CDC's collection mechanism in order to submit data for those
measures.
One of our priorities is to help achieve better health and
better health care for individuals through collection of valid,
reliable, and relevant measures of quality health care data. Such
data can be displayed publicly and used to further the development
of health care quality, which, in turn, helps to further our
objectives and goals. Health care organizations can use their health
care quality data for many purposes such as in their risk management
programs, health care acquired infection prevention programs and
research and development of medical programs, among others.
We will share the information collected under the PCHQR Program
with the public as is required under the statute. These data will be
displayed on the Hospital Compare Web site. The goals of making
these data available to the public in a public user-friendly and
relevant format, include, but are not limited to: (1) Keeping the
public informed of the quality of care that is being provided in
PCHs as a whole; (2) keeping the public informed of the quality of
care being provided in specific PCHs; (3) allowing the public to
compare and contrast the data about specific PCHs, thus enabling the
public to make informed health care decisions regarding PCHs; and
(4) providing information about current trends in health care. There
are many other public uses for these quality data concerning PCHs.
Further, keeping the public informed of quality of care provided in
health care has always been of high priority to CMS.
We also seek to align the PCHQR Program measures and reporting
requirements with current HHS high priority conditions and topics
and to ultimately provide a comprehensive assessment of the quality
of health care delivered in a variety of settings.

O. Effects of Requirements for the LTCH Quality Reporting (LTCHQR)
Program for FY 2014 through FY 2018

In section IX.C. of the preamble of this final rule, we discuss
the implementation of section 3004(a) of the Affordable Care Act,
which added section 1886(m)(5) to the Act. Section 1886(m)(5) of the
Act provides that, for rate year 2014 and each subsequent year, any
LTCH that does not submit data to the Secretary in accordance with
section 1886(m)(5)(C) of the Act will receive a 2.0 percentage point
reduction to the annual update to the standard Federal rate for
discharges for the hospital during the applicable fiscal year. The
initial requirements for this LTCHQR Program were finalized in
section VII.C. of the FY 2012 IPPS/LTCH PPS final rule (76 FR 51743
through 51756).
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51839 through
51840), we estimated that only a few LTCHs would not receive the
full payment update in any fiscal year because they did not submit
data under the LTCHQR Program. We believe that the above statement
made in the FY 2012 IPPS/LTCH PPS final rule remains valid. Data
collection for the LTCHQR Program began October 1, 2012. We are now
able to verify, following this first quarter (October 1, 2012-
December 31, 2012) of data collection and submission, that a
majority of CMS-certified LTCHs are submitting quality data to the
LTCHQR Program. We believe that a majority of LTCHs will continue to
collect and submit data for the FY 2015 payment determination and
subsequent years because they will continue to view the LTCHQR
Program as an important step in improving the quality of care
patients receive in the LTCHs.
As discussed in section VIII.D.3. of the preamble of the FY 2013
IPPS/LTCH PPS final rule, for the FY 2015 payment determination and
subsequent years, we retained the three quality measures that were
finalized for use in the LTCHQR Program in the FY 2012 IPPS/LTCH PPS
final rule, with some modifications. These measures are: (1) NHSN
Catheter-Associated Urinary Tract Infections (CAUTI) Outcome Measure
(NQF 0138); (2) NHSN Central Line Catheter-Associated Blood
Stream Infection Event (CLABSI) Outcome Measure (NQF 0139);
and (3) an Application of the Percent of Residents or Patients with
Pressure Ulcers That Are New or Worsened (Short-Stay) (NQF
0678). In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51780
through 51781), we estimated that the total yearly cost to all LTCHs
that are paid under the LTCH PPS to report these data (including
NHSN registration and training for the CAUTI and CLABSI quality
measures, data submission for all three measures, and monitoring
data submission) will be approximately $756, 326. We adopted this
same burden estimate in the FY 2013 IPPS/LTCH PPS final rule.
As part of its endorsement maintenance process under NQF's
Patient Safety Measures Project (https://www.qualityforum.org/projects/patient_safety_measures.aspx), the NQF reviewed the CAUTI
and CLABSI measures that we adopted in the FY 2012 IPPS/LTCH PPS
final rule. As a result of this review, the NQF expanded the scope
of its endorsement to include additional care settings, including
LTCHs. In the FY 2013 IPPS/LTCH PPS final rule, we adopted the CAUTI
and CLABSI measures in their expanded form for the FY 2014 payment
determination and subsequent years.
We did not believe that the total burden estimate of $756,326
that we made in the FY 2012 IPPS/LTCH PPS final rule would be
affected by this expansion of the CAUTI and CLABSI measures. We made
this statement because these expanded measures were the same
measures we adopted in the FY 2012 IPPS/LTCH PPS final rule, except
that the measure names had been changed and the scope of NQF
endorsement expanded so as to be applicable to the LTCH setting. The
expanded CAUTI and CLABSI measures made no changes to the way that
data were to be collected and reported by LTCHs. Thus, the use of
the expanded CAUTI and CLABSI measures continued to place no
additional financial burden on LTCHs. In addition, we believed that
this financial burden should remain relatively stable over the first
several years of this LTCHQR Program, subject to normal inflationary
increases, such as increased labor wage rates.
As discussed in section VIII.D.4.b. of the preamble of the FY
2013 IPPS/LTCH PPS final rule, for the FY 2016 payment determination
and subsequent years, we added two additional quality measures to
the LTCHQR Program. These quality measures are: (1) Percent of
Residents or Patients Who Were Assessed and Appropriately Given the
Seasonal Influenza Vaccine (Short-Stay) (NQF 0680); and (2)
Influenza Vaccination Coverage Among Healthcare Personnel (NQF
0431). LTCHs will submit data for the staff immunization
measure to the CDC's NHSN. Details related to the use of NHSN for
data submission and information on definitions, numerator data,
denominator data, data analyses, and measure specifications for the
Influenza Vaccination Coverage among Healthcare Personnel (NQF
0431) measure can be found at https://www.cdc.gov/nhsn/LTACH/hcp-flu-vac/.
Data for the patient influenza vaccination measure will be
collected using the LTCH CARE Data Set Version 2.01, and we confirm
that the new data item set consists of 3 additional items added to
the LTCH CARE Data Set Version 1.01, creating Version 2.01 of the
LTCH CARE Data Set. These items are harmonized with data elements
(O0250: Influenza Vaccination Status) from the Minimum Data Set
(MDS) 3.0.\213\ The LTCH

[[Page 51036]]

CARE Data Set Version 2.01 was approved by the Office of Management
and Budget (OMB) on June 10, 2013 under the Paperwork Reduction Act
(PRA).\214\ The OMB control number is 0938-1163. The specifications
and data elements for this measure are available in the CMS Long-
Term Care Hospital Quality Reporting Program Manual Version 2.0
(Draft, May 2013) available on our Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/Downloads/LTCH-QR-Program-Manual-v20-DRAFT.zip.
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\213\ Centers for Medicare & Medicaid Services. MDS 3.0 Item
Subsets V1.10.4 for the April 1, 2012 Release. Retrieved from
https://www.cms.gov/NursingHomeQualityInits/30_NHQIMDS30TechnicalInformation.asp.
\214\ The LTCH CARE Data Set Version 2.01 was approved on June
10, 2013 by OMB in accordance with the PRA. The OMB Control Number
is 0938-1163. Expiration Date June 30, 2016.
---------------------------------------------------------------------------

On May 15, 2013, the LTCHQR Program ended the submission
timeframe for the first quarter of quality measure reporting. As a
result, we have become more familiar with the burden of this
program. We have now received feedback from LTCH providers about the
time burden associated with the completion of the LTCH CARE Data
Set. We have considered feedback from LTCHs in the form of public
comments to the most recent LTCH proposed rule (FY 2014 IPPS/LTCH
PPS proposed rule), questions during Open Door forums, and LTCH
helpdesk inquiries. LTCHs have stated that we had underestimated the
amount of time that is required of the LTCH staff to complete the
LTCH CARE Data Set on each LTCH patient.
In response to the feedback received, we have significantly
revised our burden estimates. For example, in our previous PRA
package burden estimate ($756,326 and 26,100 annual hours for all
LTCHs) we estimated burden based solely on LTCH yearly discharges of
Medicare beneficiaries, while the revised burden estimate
($2,971,250 and 212,160 annual hours for all LTCHs) has been updated
to reflect the requirement that LTCHs submit data for yearly LTCH
discharges of both Medicare and non-Medicare patients. CMS has
always required LTCHs to submit quality data on both Medicare and
non-Medicare patients, however, we did not include estimates
encompassing all payers into our proposed rule. In addition, the
original burden calculation ($756,326 and 26,100 annual hours for
all LTCHs) only took into account one assessment per patient
(admission), while the revised estimate ($2,971,250 and 212,160
annual hours for all LTCHs) has been updated to reflect the
requirement that LTCHs submit two assessment records per patient
(admission and discharge).
While the burden calculation for this PRA submission has
increased significantly compared to our original calculation, we
believe that the calculation now more accurately reflects the burden
associated with implementing data collection and submission, as
mandated by section 1886(m)(5) of the Act. For a complete discussion
on the current LTCH CARE Data Set version 2.01 burden estimate, we
refer readers to the PRA package approved by OMB on June 10,
2013.\215\
---------------------------------------------------------------------------

\215\ The LTCH CARE Data Set Version 2.01 was approved on June
10, 2013 by OMB in accordance with the PRA. The OMB Control Number
is 0938-1163. Expiration Date June 30, 2016.
---------------------------------------------------------------------------

In sections IX.C.8.b. and c. of the preamble to this final rule,
we are finalizing our proposal to adopt four new quality measures
for inclusion in the LTCHQR Program: (1) NHSN Facility-Wide
Inpatient Hospital-Onset Methicillin-resistant Staphylococcus aureus
(MRSA) Bacteremia Outcome Measure (NQF 1716); (2) NHSN
Facility-Wide Inpatient Hospital-Onset Clostridium Difficile (C.
Difficile) Outcome Measure (NQF 1717); (3) All-Cause
Unplanned Readmission Measure for 30 Days Post-Discharge from Long-
Term Care Hospitals; and (4) Application of Percent of Residents
Experiencing One or More Falls with Major Injury (Long-Stay) (NQF
0674). The first three measures will apply to the FY 2017
payment determination and subsequent years. The fourth measure will
apply to the FY 2018 payment determination and subsequent years.
Of the measures listed above, we believe that the first two
measures (NHSN Facility-Wide Inpatient Hospital-Onset Methicillin-
resistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure
(NQF 1716) and NHSN Facility-Wide Inpatient Hospital-Onset
Clostridium Difficile (C. Difficile) Outcome Measure (NQF
1717)) will only minimally increase burden on LTCHs. These
two measures are reported through the CDC's NHSN. LTCHs are familiar
with the submission of quality data using this system as they began
submitting required quality data through NHSN on October 1, 2012 for
the CAUTI and CLABSI measures. The third measure (All-Cause
Unplanned Readmission Measure for 30 Days Post-Discharge from Long-
Term Care Hospitals) is a Medicare FFS claims-based measure, and
therefore will not increase the reporting burden of LTCHs. Lastly,
we believe the fourth measure (application of Percent of Residents
Experiencing One or More Falls with Major Injury (Long-Stay) (NQF
0674) will also have a minimal impact on the reporting
burden, as calculated for the LTCH CARE Data Set Version 2.01
approved by the Office of Management and Budget (OMB) in accordance
with the Paperwork Reduction Act (PRA).\216\ This measure will be
collected using the LTCH CARE Data Set to which a total of two
questions will be added in order to allow CMS to collect the data
necessary to calculate this measure.
---------------------------------------------------------------------------

\216\ The LTCH CARE Data Set Version 2.01 was approved on June
10, 2013 by OMB in accordance with the PRA. The OMB Control Number
is 0938-1163. Expiration Date June 30, 2016.
---------------------------------------------------------------------------

The public comments that we received addressing burden and data
collection associated with the LTCHQR Program are addressed in
sections IX.C. and XIII.B.9. of the preamble of this final rule,
where we discuss in detail the information collection requirements
and the burden associated with those requirements.

P. Effects of Changes to the Requirements for the Inpatient
Psychiatric Facilities Quality Reporting (IPFQR) Program

In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53644), we
finalized policies to implement the Inpatient Psychiatric Facilities
Quality Reporting (IPFQR) Program. One goal of the IPFQR Program is
to implement the statutory requirements of section 1886(s)(4) of the
Act, as added by sections 3401(f) and 10322(a) of the Affordable
Care Act. In addition, one of our priorities is to help achieve
better health and better health care for individuals through
collection of valid, reliable, and relevant measures of quality
health care data. Such data will be publicly posted and, thus,
available for use in furthering the development of health care
quality, which, in turn, helps to further our objectives and goals.
IPFs can use such health care quality data for many purposes such as
in their risk management programs, patient safety and quality
improvement initiatives and research and development of mental
health programs, among others.
In section IX.D. of the preamble of this final rule, we are
finalizing our proposal that, for the FY 2016 payment determination
and subsequent years, IPFs must submit aggregate data on one
additional chart-abstracted measure (SUB-1: Alcohol Use Screening),
for a total of 7 chart-abstracted measures. We note that, at this
time, we have decided to not finalize SUB-4 (Alcohol & Drug Use:
Assessing Status After Discharge). Although we proposed to use
chart-abstraction, we are finalizing claims-based data collection
for the Follow-Up After Hospitalization for Mental Illness (FUH)
measure, which reduces burden on IPFs. In addition, we are
finalizing a request for voluntary information. We did not make
changes to the administrative, reporting or submission requirements
for the existing six measures previously finalized in last year's
rule (77 FR 53654 through 53657). However, there will be new
reporting and submission requirements associated with the two
additional measures and request for voluntary information for the FY
2016 payment determination and subsequent years.

II. Alternatives Considered

This final rule contains a range of policies. It also provides
descriptions of the statutory provisions that are addressed,
identifies the finalized policies, and presents rationales for our
decisions and, where relevant, alternatives that were considered.

III. Overall Conclusion

1. Acute Care Hospitals

Table I of section I.G. of this Appendix demonstrates the
estimated distributional impact of the IPPS budget neutrality
requirements for the MS-DRG and wage index changes, and for the wage
index reclassifications under the MGCRB. Table I also shows an
overall increase of 0.5 percent in operating payments. As discussed
in section I.G. of this Appendix, we estimate that operating
payments will increase by approximately $498 million in FY 2014
relative to FY 2013. However, when we account for the impact of the
changes in Medicare DSH payments and the impact of the new
additional payments based on uncompensated care in accordance with
section 3133 of the Affordable Care Act, based on estimates provided
by the CMS Office of the Actuary, consistent with our policy
discussed in section V.E. of the preamble of this final rule, we
estimate that

[[Page 51037]]

operating payments would increase by approximately $1.3 billion
relative to FY 2013. In addition, we estimate a savings of $26
million associated with the HACs policies in FY 2014, which is an
additional $2 million in savings as compared to FY 2013. We estimate
that the expiration of the expansion of low-volume hospital payments
in FY 2014 under section 605 of the ATRA will result in a decrease
in payments of approximately $268 million. We estimate new
technology payments will increase payments by $29 million in FY
2014. We estimate that the finalized policy to include labor and
delivery patient days in the patient day utilization calculation for
GME payments will decrease payments to providers by $19 million.
Finally, we estimate that the policies related to validation,
including submission of and payment for secure electronic versions
of medical information for validation for the FY 2016 payment
determination and subsequent years, as described in the ICRs for the
Hospital IQR Program in section XII.B.6. of the preamble of this
final rule, will result in a cost savings to CMS of approximately
$1.3 million. These estimates, combined with our FY 2014 operating
estimate of $1.3 billion, result in an estimated increase of
approximately $1.1 billion for FY 2014. We estimate that hospitals
will experience a 1.6 percent increase in capital payments per case,
as shown in Table III of section I.I. of this Appendix. We project
that there will be a $134 million increase in capital payments in FY
2014 compared to FY 2013. The cumulative operating and capital
payments would result in a net increase of approximately $1.2
billion to IPPS providers. The discussions presented in the previous
pages, in combination with the rest of this final rule, constitute a
regulatory impact analysis.

2. LTCHs

Overall, LTCHs are projected to experience an increase in
estimated payments per discharge in FY 2014. In the impact analysis,
we are using the rates, factors, and policies presented in this
final rule, including updated wage index values and relative
weights, and the best available claims and CCR data to estimate the
change in payments under the LTCH PPS for FY 2014. Accordingly,
based on the best available data for the 423 LTCHs in our database,
we estimate that FY 2014 LTCH PPS payments will increase
approximately $72 million relative to FY 2013 as a result of the
payment rates and factors presented in this final rule. In addition,
we estimate that the expiration of the moratorium on the full
application of the ``25-percent threshold'' payment adjustment
policy under current law, beginning with cost reporting period
beginning on or after October 1, 2013 as discussed in section
VIII.D. of the preamble of this final rule, will result in a
reduction in LTCH PPS payments of $90 million. Additionally, costs
to LTCHs associated with the completion of the data for the LTCHQR
Program is estimated to be $2.97 million.

IV. Accounting Statements and Tables

A. Acute Care Hospitals

As required by OMB Circular A-4 (available at https://www.whitehouse.gov/omb/circulars/a004/a-4.pdf), in Table V below, we
have prepared an accounting statement showing the classification of
the expenditures associated with the provisions of this final rule
as they relate to acute care hospitals. This table provides our best
estimate of the change in Medicare payments to providers as a result
of the changes to the IPPS presented in this final rule. All
expenditures are classified as transfers to Medicare providers.
The costs to the Federal Government associated with the policies
in this final rule are estimated at $1.2 billion.

Table V--Accounting Statement: Classification of Estimated Expenditures
under the IPPS from FY 2013 to FY 2014
------------------------------------------------------------------------
Category Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers............ $1.2 billion.
From Whom to Whom......................... Federal Government to IPPS
Medicare Providers.
------------------------------------------------------------------------

B. LTCHs

As discussed in section I.L. of this Appendix, the impact
analysis of the payment rates and factors presented in this final
rule under the LTCH PPS, in conjunction with the estimated payment
impact of the moratorium on the full application of the ``25-percent
threshold'' payment adjustment policy under current law, is
projected to result in a decrease in estimated aggregate LTCH PPS
payments in FY 2014 relative to FY 2013 of approximately $18 million
based on the data for 423 LTCHs in our database that are subject to
payment under the LTCH PPS. Therefore, as required by OMB Circular
A-4 (available at https://www.whitehouse.gov/omb/circulars/a004/a-4.pdf), in Table VI below, we have prepared an accounting statement
showing the classification of the expenditures associated with the
provisions of this final rule as they relate to the changes to the
LTCH PPS. Table VI provides our best estimate of the estimated
decrease in Medicare payments under the LTCH PPS as a result of the
payment rates and factors and other provisions presented in this
final rule based on the data for the 425 LTCHs in our database. All
expenditures are classified as transfers to Medicare providers (that
is, LTCHs). Lastly, we present the costs to LTCHs associated with
the completion of the data for the LTCHQR Program at $2.97 million.
The savings to the Federal Government associated with the
policies for LTCHs in this final rule is estimated at $18 million.

Table VI--Accounting Statement: Classification of Estimated Expenditures
From the FY 2013 LTCH PPS to the FY 2014 LTCH PPS
------------------------------------------------------------------------
Category Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers............ -$18 million.
From Whom to Whom......................... Federal Government to LTCH
Medicare Providers.
------------------------------------------------------------------------
Category Costs
------------------------------------------------------------------------
Annualized Monetized Costs for LTCHs to $2.97 million.
Submit Quality Data.
------------------------------------------------------------------------

C. Part B Inpatient Hospital Services

The following accounting statement shows the classification of
the expenditures associated with our final policy to provide payment
for additional Part B inpatient services as discussed in section XI.
of the preamble in this final rule.

TABLE VII--Accounting Statement: Classification of Estimated Medicare
and Beneficiaries' Out-of-Pocket Expenditures for the 12-Month Timely
Filing Restriction Policy *
[In millions of 2013 dollars]
------------------------------------------------------------------------

------------------------------------------------------------------------
Category Transfers
------------------------------------------------------------------------
Annualized Monetized Units Discount Rate Period Covered
Transfers.
------------------------------------------
7% 3% CYs 2013-2017.
-$830 -$851 ...............
------------------------------------------------------------------------
From/To Federal Government to Hospitals
------------------------------------------------------------------------
Annualized Monetized Units Discount Rate Period Covered
Transfers.
------------------------------------------
7% 3% CYs 2013-2017.

[[Page 51038]]

-$42 -$43
------------------------------------------------------------------------
From/To Beneficiaries to Hospitals
------------------------------------------------------------------------
* These amounts are based on the conversion to constant year dollars of
the 12-month timely filing policy impact of this final rule.

V. Regulatory Flexibility Act (RFA) Analysis

The RFA requires agencies to analyze options for regulatory
relief of small entities. For purposes of the RFA, small entities
include small businesses, nonprofit organizations, and small
government jurisdictions. We estimate that most hospitals and most
other providers and suppliers are small entities as that term is
used in the RFA. The great majority of hospitals and most other
health care providers and suppliers are small entities, either by
being nonprofit organizations or by meeting the SBA definition of a
small business (having revenues of less than $7.5 million to $34.5
million in any 1 year). (For details on the latest standards for
health care providers, we refer readers to page 33 of the Table of
Small Business Size Standards for NAIC 622 found on the SBA Web site
at: https://www.sba.gov/contractingopportunities/sizestandardtopics/tableofsize/.)
For purposes of the RFA, all hospitals and other providers and
suppliers are considered to be small entities. Individuals and
States are not included in the definition of a small entity. We
believe that the provisions of this final rule relating to acute
care hospitals would have a significant impact on small entities as
explained in this Appendix. Because we lack data on individual
hospital receipts, we cannot determine the number of small
proprietary LTCHs. Therefore, we are assuming that all LTCHs are
considered small entities for the purpose of the analysis in section
I.L. of this Appendix. Medicare fiscal intermediaries and MACs are
not considered to be small entities. Because we acknowledge that
many of the affected entities are small entities, the analysis
discussed throughout the preamble of this final rule constitutes our
regulatory flexibility analysis. In the FY 2014 IPPS/LTCH PPS
proposed rule, we solicited public comments on our estimates and
analysis of the impact of our proposals on those small entities. Any
public comments that we received and our responses are presented
throughout this final rule.

VI. Impact on Small Rural Hospitals

Section 1102(b) of the Social Security Act requires us to
prepare a regulatory impact analysis for any proposed or final rule
that may have a significant impact on the operations of a
substantial number of small rural hospitals. This analysis must
conform to the provisions of section 603 of the RFA. With the
exception of hospitals located in certain New England counties, for
purposes of section 1102(b) of the Act, we define a small rural
hospital as a hospital that is located outside of an urban area and
has fewer than 100 beds. Section 601(g) of the Social Security
Amendments of 1983 (Pub. L. 98-21) designated hospitals in certain
New England counties as belonging to the adjacent urban area. Thus,
for purposes of the IPPS and the LTCH PPS, we continue to classify
these hospitals as urban hospitals. (We refer readers to Table I in
section I.G. of this Appendix for the quantitative effects of the
final policy changes under the IPPS for operating costs.)

VII. Unfunded Mandates Reform Act Analysis

Section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L.
104-4) also requires that agencies assess anticipated costs and
benefits before issuing any rule whose mandates require spending in
any 1 year of $100 million in 1995 dollars, updated annually for
inflation. In 2013, that threshold level is approximately $141
million. This final rule will not mandate any requirements for
State, local, or tribal governments, nor will it affect private
sector costs.

VIII. Executive Order 12866

In accordance with the provisions of Executive Order 12866, the
Executive Office of Management and Budget reviewed this final rule.

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

I. Background

Section 1886(e)(4)(A) of the Act requires that the Secretary,
taking into consideration the recommendations of MedPAC, recommend
update factors for inpatient hospital services for each fiscal year
that take into account the amounts necessary for the efficient and
effective delivery of medically appropriate and necessary care of
high quality. Under section 1886(e)(5) of the Act, we are required
to publish update factors recommended by the Secretary in the
proposed and final IPPS rules, respectively. Accordingly, this
Appendix provides the recommendations for the update factors for the
IPPS national standardized amount, the Puerto Rico-specific
standardized amount, the hospital-specific rate for SCHs, and the
rate-of-increase limits for certain hospitals excluded from the
IPPS, as well as LTCHs. In prior years, we have made a
recommendation in the IPPS proposed rule and final rule for the
update factors for the payment rates for IRFs and IPFs. However, for
FY 2014, we plan to include the Secretary's recommendation for the
update factors for IRFs and IPFs in separate Federal Register
documents at the time that we announce the annual updates for IRFs
and IPFs. We also discuss our response to MedPAC's recommended
update factors for inpatient hospital services.

II. Inpatient Hospital Update for FY 2014

A. FY 2014 Inpatient Hospital Update

Section 1886(b)(3)(B) of the Act, as amended by sections 3401(a)
and 10319(a) of the Affordable Care Act, sets the applicable
percentage increase under the IPPS for FY 2014 as equal to the rate-
of-increase in the hospital market basket for IPPS hospitals in all
areas, subject to a reduction of 2.0 percentage points if the
hospital fails to submit quality data under rules established by the
Secretary in accordance with section 1886(b)(3)(B)(viii) of the Act,
and then subject to an adjustment based on changes in economy-wide
productivity and an additional reduction of 0.3 percentage point.
Sections 1886(b)(3)(B)(xi) and (b)(3)(B)(xii) of the Act, as added
by section 3401(a) of the Affordable Care Act, state that the
application of the multifactor productivity adjustment and the
additional FY 2014 adjustment of 0.3 percentage point may result in
the applicable percentage increase being less than zero.
We note that, in compliance with section 404 of the MMA, in
section IV. of this final rule, we are replacing the FY 2006-based
IPPS operating and capital market baskets with revised and rebased
FY 2010-based IPPS operating and capital market baskets for FY 2014.
In accordance with section 1886(b)(3)(B) of the Act, as amended by
section 3401(a) of the Affordable Care Act, in section V.A.1. of the
preamble of the FY 2014 IPPS/LTCH PPS proposed rule, we proposed a
multifactor productivity (MFP) adjustment (the 10-year moving
average of MFP for the period ending FY 2014) of 0.4 percent.
Therefore, based on IHS Global Insight Inc.'s (IGI's) first quarter
2013 forecast of the proposed FY 2010-based IPPS market basket, we
proposed an applicable percentage increase to the FY 2013 operating
standardized amount of 1.8 percent (that is, the proposed FY 2014
estimate of the market basket rate-of-increase of 2.5 percent less
an adjustment of 0.4 percentage point for economy-wide productivity
(MFP) and less 0.3 percentage point) for hospitals in all areas,
provided the hospital submits quality data in accordance with
section 1886(b)(3)(B)(viii) of the Act and our rules. For hospitals
that fail to submit quality data, we proposed an applicable
percentage increase to the operating standardized amount of -0.2
percent (that is, the FY 2014 estimate of the market basket rate-of-
increase of 2.5 percent less 2.0 percentage points for failure to
submit quality data, less an adjustment of 0.4 percentage point for
MFP, and less an additional adjustment of 0.3 percentage point). We
also proposed that if

[[Page 51039]]

more recent data become subsequently available (for example, a more
recent estimate of the market basket and MFP adjustment), we would
use such data, if appropriate, to determine the FY 2014 market
basket update and MFP adjustment in the final rule.
For this final rule, in accordance with section 1886(b)(3)(B) of
the Act, as amended by section 3401(a) of the Affordable Care Act,
in section V.A.1. of the preamble of this final rule, we are making
an MFP adjustment (the 10-year moving average of MFP for the period
ending FY 2014) of 0.5 percent. Based on IHS Global Insight Inc.'s
(IGI's) second quarter 2013 forecast of the FY 2010-based IPPS
market basket, we are making an applicable percentage increase to
the FY 2013 operating standardized amount of 1.7 percent (that is,
the FY 2014 estimate of the market basket rate-of-increase of 2.5
percent less an adjustment of 0.5 percentage point for MFP and less
0.3 percentage point) for hospitals in all areas, provided the
hospital submits quality data in accordance with section
1886(b)(3)(B)(viii) of the Act and our rules. For hospitals that
fail to submit quality data, we are making an applicable percentage
increase to the operating standardized amount of -0.3 percent (that
is, the FY 2014 estimate of the market basket rate-of-increase of
2.5 percent less 2.0 percentage points for failure to submit quality
data, less an adjustment of 0.5 percentage point for MFP, and less
an additional adjustment of 0.3 percentage point).

B. Update for SCHs for FY 2014

Section 1886(b)(3)(B)(iv) of the Act provides that the FY 2014
applicable percentage increase in the hospital-specific rate for
SCHs equals the applicable percentage increase set forth in section
1886(b)(3)(B)(i) of the Act (that is, the same update factor as for
all other hospitals subject to the IPPS). Therefore, the update to
the hospital specific rate for SCHs is subject to section
1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a) and
10319(a) of the Affordable Care Act. Accordingly, we are making an
applicable percentage increase to the hospital-specific rate
applicable to SCHs of 1.7 percent for hospitals that submit quality
data or -0.3 percent for hospitals that fail to submit quality data.

C. FY 2014 Puerto Rico Hospital Update

Section 401(c) of Public Law 108-173 amended section
1886(d)(9)(C)(i) of the Act and states that, for discharges
occurring in a fiscal year (beginning with FY 2004), the Secretary
shall compute an average standardized amount for hospitals located
in any area of Puerto Rico that is equal to the average standardized
amount computed under subclause (I) for FY 2003 for hospitals in a
large urban area (or, beginning with FY 2005, for all hospitals in
the previous fiscal year) increased by the applicable percentage
increase under subsection (b)(3)(B) for the fiscal year involved.
Therefore, the update to the Puerto Rico-specific operating
standardized amount is subject to the applicable percentage increase
set forth in section 1886(b)(3)(B)(i) of the Act as amended by
sections 3401(a) and 10319(a) of the Affordable Care Act (that is,
the same update factor as for all other hospitals subject to the
IPPS). Accordingly, we are making an applicable percentage increase
to the Puerto Rico-specific standardized amount of 1.7 percent.

D. Update for Hospitals Excluded from the IPPS

Section 1886(b)(3)(B)(ii) of the Act is used for purposes of
determining the percentage increase in the rate-of-increase limits
for children's and cancer hospitals. Section 1886(b)(3)(B)(ii) of
the Act sets the percentage increase in the rate-of-increase limits
equal to the market basket percentage increase. In accordance with
Sec. 403.752(a) of the regulations, RNHCIs are paid under the
provisions of Sec. 413.40, which also use section 1886(b)(3)(B)(ii)
of the Act to update the percentage increase in the rate-of-increase
limits.
Currently, children's hospitals, PPS-excluded cancer hospitals,
and RNHCIs are among the remaining three types of hospitals still
paid under the reasonable cost methodology, subject to the rate-of-
increase limits. In this final rule, for FY 2014 and subsequent
fiscal years, the rate-of-increase percentage applicable to the
target amount for children's hospitals, PPS-excluded cancer
hospitals, and RNHCIs is the percentage increase in the revised and
rebased FY 2010-based IPPS operating market basket. Accordingly, the
FY 2014 rate-of-increase percentage that will be applied to the
target amount for cancer hospitals, children's hospitals, and RNHCIs
is the FY 2014 percentage increase in the revised and rebased FY
2010-based IPPS operating market basket. For this final rule, the
current estimate of the FY 2014 IPPS operating market basket
percentage increase is 2.5 percent.

E. Update for LTCHs for FY 2014

Section 123 of Public Law 106-113, as amended by section 307(b)
of Public Law 106-554 (and codified at section 1886(m)(1) of the
Act), provides the statutory authority for updating payment rates
under the LTCH PPS.
As discussed in section V.A. of the Addendum to this final rule,
we are establishing an update to the LTCH PPS standard Federal rate
for FY 2014 based on the full LTCH PPS market basket increase
estimate (for this final rule, estimated to be 2.5 percent), subject
to an adjustment based on changes in economy-wide productivity and
an additional reduction required by sections 1886(m)(3)(A)(ii) and
(m)(4)(D) of the Act, provided the LTCH submits quality data in
accordance with section 1886(m)(5)(C) of the act and our rules.
Beginning in FY 2014, in accordance with the LTCHQR Program under
section 1886(m)(5) of the Act, we are reducing the annual update to
the LTCH PPS standard Federal rate by 2.0 percentage points for
failure of a LTCH to submit quality data. The MFP adjustment
described in section 1886(b)(3)(B)(xi)(ii) of the Act is currently
estimated to be 0.5 percent for FY 2014. In addition, section
1886(m)(3)(A)(ii) of the Act requires that any annual update for FY
2014 be reduced by the ``other adjustment'' at section 1886(m)(4)(D)
of the Act, which is 0.3 percentage point. Therefore, based on IGI's
second quarter 2013 forecast of the FY 2014 market basket increase,
we are making an annual update to the LTCH PPS standard Federal rate
of 1.7 percent (that is, the current FY 2014 estimate of the market
basket rate-of-increase of 2.5 percent less an adjustment of 0.5
percentage point for MFP and less 0.3 percentage point), provided
the LTCH submits quality data in accordance with the LTCHQR Program
under section 1886(m)(5)(C) of the Act. Accordingly, we are applying
an update factor of 1.017 in determining the LTCH PPS standard
Federal rate for FY 2014 provided the LTCH submits quality data in
accordance with section 1886(m)(5)(C) of the Act and our rules. For
LTCHs that fail to submit quality data, we are making an annual
update to the LTCH PPS standard Federal rate of -0.3 percent (that
is, the FY 2014 estimate of the market basket rate-of increase of
2.5 percent less an adjustment of 0.5 percentage point for MFP, less
an additional adjustment of 0.3 percentage point, and less 2.0
percentage points for failure to submit quality data) by applying an
update factor of 0.997 in determining the LTCH PPS standard Federal
rate for FY 2014. Furthermore, we are making an adjustment for the
second year of the 3-year phase-in of the one-time prospective
adjustment to the standard Federal rate under Sec. 412.523(d)(3) by
applying a factor of 0.98734 (or approximately -1.3 percent) in FY
2014, consistent with current law.

III. Secretary's Recommendations

MedPAC is recommending an inpatient hospital update equal to one
percent for FY 2014. MedPAC's rationale for this update
recommendation is described in more detail below. As mentioned
above, section 1886(e)(4)(A) of the Act requires that the Secretary,
taking into consideration the recommendations of MedPAC, recommend
update factors for inpatient hospital services for each fiscal year
that take into account the amounts necessary for the efficient and
effective delivery of medically appropriate and necessary care of
high quality. Consistent with current law, we are recommending an
applicable percentage increase to the standardized amount of 1.7
percent (that is, the FY 2014 estimate of the market basket rate-of-
increase of 2.5 percent less an adjustment of 0.5 percentage point
for MFP and less 0.3 percentage point). We are recommending that the
same applicable percentage increase apply to SCHs and the Puerto
Rico-specific standardized amount.
In addition to making a recommendation for IPPS hospitals, in
accordance with section 1886(e)(4)(A) of the Act, we are
recommending update factors for certain other types of hospitals
excluded from the IPPS. Consistent with our policies for these
facilities, we are recommending an update to the target amounts for
children's hospitals, cancer hospitals, and RNHCIs of 2.5 percent.
For FY 2014, consistent with policy set forth in section VIII.
of the preamble of this final rule, we are recommending an update of
1.7 percent (that is, the current FY 2014 estimate of the market
basket rate-of-increase

[[Page 51040]]

of 2.5 percent less an adjustment of 0.5 percentage point for MFP
and less 0.3 percentage point) to the LTCH PPS standard Federal
rate.

IV. MedPAC Recommendation for Assessing Payment Adequacy and Updating
Payments in Traditional Medicare

In its March 2013 Report to Congress, MedPAC assessed the
adequacy of current payments and costs, and the relationship between
payments and an appropriate cost base. MedPAC recommended an update
to the hospital inpatient rates equal to 1.0 percent. MedPAC expects
Medicare margins to remain low in 2013. At the same time, MedPAC's
analysis finds that efficient hospitals have been able to maintain
positive Medicare margins while maintaining a relatively high
quality of care. MedPAC also recommended that Congress should
require the Secretary to use the difference between the increase of
the applicable percentage increase under the IPPS for FY 2014 and
MedPAC's recommendation of a 1.0 percent update to gradually recover
past overpayments due to documentation and coding changes.
Response: With regard to MedPAC's recommendation of an update to
the hospital inpatient rates equal to 1 percent, for FY 2014, as
discussed above, sections 3401(a) and 10319(a) of the Affordable
Care Act amended section 1886(b)(3)(B) of the Act. Section
1886(b)(3)(B) of the Act, as amended by these sections, sets the
requirements for the FY 2014 applicable percentage increase.
Therefore, we are making an applicable percentage increase for FY
2014 of 1.7 percent, provided the hospital submits quality data,
consistent with these statutory requirements.
With regard to MedPAC's recommendation that Congress should
require the Secretary to use the difference between the increase of
the applicable percentage increase under the IPPS for FY 2014 and
MedPAC's recommendation of a 1.0 percent update to gradually recover
past overpayments due to documentation and coding changes, we refer
readers to section II.D. of the preamble of this final rule for a
complete discussion of the FY 2014 documentation and coding
adjustment. We note that section 631 of the ATRA amended section
7(b)(1)(B) of Public Law 110-90 to require the Secretary to make a
recoupment totaling $11 billion by 2017. This adjustment represents
the amount of the increase in aggregate payments as a result of not
completing the prospective adjustment authorized under section
7(b)(1)(A) of Public Law 110-90 until FY 2013. Our actuaries
estimate that if CMS were to fully account for the $11 billion
recoupment required by section 631 of the ATRA in FY 2014, a -9.3
percent adjustment to the standardized amount would be necessary.
MedPAC estimates that a -2.4 percent adjustment made in FY 2014, and
not removed until FY 2018, also would recover the required
recoupment amount. It is often our practice to delay or phase in
rate adjustments over more than 1 year, in order to moderate the
effect on rates in any one year. Therefore, consistent with the
policies that we have adopted in many similar cases, we are making a
-0.8 percent adjustment to the standardized amount in FY 2014.
We also note that, because the operating and capital prospective
payment systems remain separate, we are continuing to use separate
updates for operating and capital payments. The update to the
capital rate is discussed in section III. of the Addendum to this
final rule.

[FR Doc. 2013-18956 Filed 8-2-13; 4:15 pm]
BILLING CODE 4120-01-P

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